ABN Amro Raises Financial Targets as Public Offering Nears

Updated on

ABN Amro Group NV, the nationalized Dutch lender that last month posted its most profitable quarter since 2010, raised its financial targets ahead of its planned initial public offering.

The company is now projecting a fully loaded common equity Tier 1 ratio of between 11.5 percent and 13.5 percent, up from 11.5 percent to 12.5 percent. The target for return on equity, a measure of profitability, was increased to 10 percent to 13 percent "in the coming years" from 9 percent to 12 percent, according to a statement.

ABN Amro also said it aims to pay out 50 percent of profit in 2017 in dividends, up from 40 percent this year. Its cost-income ratio target of 56 percent to 60 percent by 2017 remains unchanged, despite pressure from regulatory developments, the bank said.

“It’s not only the success of ABN, but also the strong improvement of the Dutch macroeconomic climate and housing market,” said Matthias de Wit, an analyst at KBC Securities in Brussels.

Charges for impaired loans fell 90 percent in the second quarter from a year earlier as the Dutch economy strengthened after returning to growth last year. The bank reported an underlying net income of 600 million euros ($670 million), almost twice what it was a year earlier.

The strong results could lead to a higher valuation for what is already likely to be the biggest financial IPO in Europe since the 2008 financial crisis.

Dutch Finance Minister Jeroen Dijsselbloem said in May that the government would proceed with plans to sell 20 percent to 30 percent of the bailed-out lender this year.

The government estimates ABN Amro is worth 15 billion euros, meaning the IPO may raise as much as 4.5 billion. The state spent more than 20 billion euros to rescue the bank.

ABN Amro was formed after the government took over the Dutch banking and insurance units of Fortis Bank. The Belgian lender had joined a 72 billion-euro takeover of ABN Amro Holding NV with Royal Bank of Scotland Group Plc and Banco Santander SA in 2007. The deal, the largest financial services takeover ever, turned sour during the credit crunch a year later, leading to the loss of thousands of jobs.

The lender was reorganized into its current form in July 2010, shrinking to a fraction of its former size and focusing on its home market.