ABN Amro Group NV, the state-owned lender that includes Fortis’s former Dutch banking assets, said third-quarter profit was almost erased by writedowns on Greek corporate loans and notes.
Underlying profit, excluding costs related to the breakup and integration of the former Fortis and ABN assets, fell to 9 million euros ($12 million) from 443 million euros in the year-earlier period, the Amsterdam-based lender said in a statement today. The firm also cut its holdings of Belgian and Italian government debt by 1.6 billion euros during the quarter.
Results included a 408 million-euro writedown on ABN Amro’s holdings of 1.4 billion euros in Greek government-guaranteed corporate loans. ABN inherited the portfolio, including loans to public transportation companies, in 2010 as part of the separation process from its previous owners. The lender said it remains “cautious” for the remainder of the year as it expects economic growth in the Netherlands to turn negative.
“Uncertainty as a result of the sovereign-debt crisis and the impact thereof on the European economy, caused us to impair part of the 1.4 billion-euro Greek government-guaranteed corporate exposures,” Chief Executive Officer Gerrit Zalm said. “The deterioration of the situation in Greece may diminish the quality of the guarantee.”
Fall in Fees
Profit was also eroded by a drop in fee and commission income as clients traded less and an increase in loan impairments in ABN Amro’s corporate and merchant-banking unit. Provisions in the fourth quarter may increase further, Chief Risk Officer Wietze Reehoorn told reporters on conference call today.
ABN cut its holdings of Belgian government bonds to 1 billion euros in the third quarter, down from 1.6 billion euros at the end of June, while its position in Italian bonds was reduced by 1 billion euros to 300 million euros. The debt was sold at a loss of about 30 million euros, Reehoorn said.
Belgian bonds had increased in ABN Amro’s holdings and liquidity buffer, Chief Financial Officer Jan van Rutte said, partly because the lender acts as a primary dealer for the Belgian government. At the end of 2010, the firm held 2.6 billion euros in Belgian debt, compared with 8.9 billion euros in Dutch state bonds and total sovereign holdings of 21.2 billion euros.
ABN Amro had a liquidity buffer, or “safety cushion in the event of severe liquidity stress” of 43.3 billion euros at the end of September, mainly consisting of cash, government bonds and residential mortgage-backed securities, the bank said.
The Netherlands bought Fortis’s Dutch banking and insurance units and its stake in ABN Amro Holding NV in 2008 after the company ran out of short-term funding. Following a 30 billion-euro bailout, Dutch Finance Minister Jan Kees de Jager has indicated he plans to sell ABN Amro shares in 2014 at the earliest, preferably through a stock exchange listing.
Royal Bank of Scotland Group Plc, Spain’s Banco Santander SA and Fortis bought ABN Amro in 2007 for about 72 billion euros in the world’s biggest banking takeover.