ABN to Cut 400 Jobs After First-Quarter Profit Drops 17%

ABN Amro Group NV, the third-biggest Dutch lender, plans to cut about 400 additional jobs after first-quarter profit tumbled 17 percent.

Net income fell to 415 million euros ($534 million) from 503 million euros a year earlier, the Amsterdam-based bank said today. Results were boosted by a 223 million-euro release on impaired Greek government-backed corporate loans. Operating profit slid 34 percent to 539 million euros.

ABN Amro is seeking to cut costs, reduce reliance on its home market and bolster earnings by expanding operations such as private banking and energy and commodities finance. The state-owned bank said today it plans to eliminate positions in its commercial and merchant-banking unit on top of an earlier announced 2,350 job reductions.

“The first quarter of 2013 can be qualified as a difficult quarter,” Chairman Gerrit Zalm said in the statement. “As unemployment is still on the rise and no economic growth in the Netherlands is expected for 2013, we remain cautious for the remainder of the year.”

The lender plans to implement its latest round of job cuts by the end of 2015, said Arien Bikker, a spokesman for ABN Amro. The reductions are the last related to the integration of ABN Amro and Fortis’s former Dutch banking assets after the Dutch state took control of the businesses in 2008, Chief Financial Officer Jan van Rutte told reporters today.

Fewer Jobs

The lender expects job numbers to drop by 1 percent to 3 percent a year structurally as it modernizes information technology and as clients increasingly switch to banking by Internet or mobile phone, it said in its 2012 annual report. ABN Amro had 22,926 employees at the end of the first quarter.

ABN Amro’s net interest income increased by 5 percent to 1.31 billion euros from the year-ago period, while fee and commission income rose 2 percent to 412 million euros. Other non-interest income, including earnings from markets, derivative transactions and hedging, swung to a loss of 8 million euros from a positive 275 million euros a year earlier.

Impairments, excluding the release on Greek bonds, rose by 39 percent to 259 million euros, mainly on mortgage, consumer and small business loan portfolios. Impairments on home loans increased to 21 basis points from 10 basis points in the first quarter of 2012, ABN said.

The Dutch economy contracted for a third straight quarter in the three months through March, extending a recession, the Dutch statistics bureau said earlier this week. The jobless rate rose to 8.2 percent in April, the highest in at least a decade, from 8.1 percent in the previous month.

Falling Prices

House prices have plunged by about 20 percent since 2008. They might not start to recover until 2014, according to ABN Amro estimates. Mortgage lending by Dutch banks is equivalent to about 90 percent of the country’s economy, double the average in the euro area, the central bank said in April.

ABN Amro had 153 billion euros in mortgage loans in the first quarter, with an average loan-to-value ratio of 82 percent. That was unchanged from year-end as the declining house prices were offset by additional repayments by customers with increased risk awareness. Loans exceeded property values in 21 percent of the outstanding mortgage values as of March 31, ABN Amro said.

Impairments in 2013 will probably remain higher the rest of the year, and may equal the 1.3 billion euros reported last year, Chief Risk Officer Wietze Reehoorn said today.

The bank’s core Tier 1 ratio, a measure of financial strength, was at 11.6 percent at the end of the first quarter, down from 12.1 percent in the previous quarter.

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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