ABN Amro Victim of Bad Timing as Market Rout Dents Profit

  • Profit falls 13 percent in first full quarter since re-listing
  • Loan impairments fall by 250 million euros on rising economy

ABN Amro Group NV, the Dutch lender nationalized after an ill-timed takeover eight years ago, was hit by turbulent trading that dented profit during its first full quarter back on the market.

Earnings from fees and commissions charged on transactions and other services fell 7 percent in the three months through March, the state-controlled Dutch lender said in a statement on Wednesday. That undercut net income, which declined 13 percent to 475 million euros ($541 million) from a year earlier.

The government sold 23 percent of ABN Amro in an initial public offering in late November, just before the slowdown in China and a drop in oil prices sent markets into a tailspin. The stock has declined 15 percent this year, compared with 22 percent for the STOXX Europe 600 Banks Index. The shares were down 3 percent to 17.46 euros at 3:58 p.m. in Amsterdam.

While income fell, operating expenses rose 8 percent from a year ago, reflecting 98 million euros in contributions to the country’s bank resolution fund and its deposit guarantee plan. The ratio of costs to income jumped to about 67 percent from 56 percent.

“We need to make our organization more agile, efficient and cost-effective,” Chief Executive Officer Gerrit Zalm said in the statement. The bank will provide more details on cost cuts when it updates its strategy and targets in the second half of the year, he said.

Chief Financial Officer Kees van Dijkhuizen, speaking in a conference call with reporters later Wednesday, said the bank is looking to reduce expenses across the company.

Development of ABN Amro’s stock since the Dutch bank returned to market in November 2015

“ABN Amro results are a bit messy, but we believe that trends in the core banking operations are in line,” said Albert Ploegh, an analyst at ING Groep NV with a buy rating on the stock.

Net interest income was unchanged at 1.5 billion euros from last year. Return on equity, a measure of profitability, fell to 11.1 percent from 14.1 percent a year ago.

With the stock up just 1.5 percent since the bank’s comeback, the government may hold off before selling more shares. Finance Minister Jeroen Dijsselbloem has said he hopes to dispose of the bank through a series of sales before his term ends in 2017. But officials have also made clear that would depend on market conditions.

The bank reported 37.1 billion euros in loans to businesses in energy, commodities and shipping, compared with 38 billion euros at the end of 2015. Undrawn commitments account for about 5.9 billion euros of the exposure, the bank said.

A mainly domestic lender, ABN Amro was once one of the world’s largest banks. It fell prey in 2007 to a 72-billion-euro takeover by a consortium including Royal Bank of Scotland Group Plc and Banco Santander SA. The deal, the industry’s largest, proved disastrous when the financial crisis erupted in 2008. The Dutch government spent about 22 billion euros to rescue the bank, recouping 3.8 billion euros in last year’s IPO.

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