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ABN Amro First in Europe Hit by Big Virus-Linked Trade Loss

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ABN Amro First in Europe Hit by Big Virus-Linked Trade Loss

  • Trading has been rare positive for banks amid high volatility
  • Single U.S. client caused $250 million pretax-loss for bank
The ABN Amro NV logo sits on the bank's headquarter office complex in the Zuidas financial district in Amsterdam, Netherlands, on Wednesday, April  10, 2019. The Netherlands will become the first country with a AAA credit rating to issue a green bond with the sale of a 20-year security next month. Photograper: Marlene Awaad/Bloomberg
The ABN Amro NV logo sits on the bank's headquarter office complex in the Zuidas financial district in Amsterdam, Netherlands, on Wednesday, April 10, 2019. The Netherlands will become the first country with a AAA credit rating to issue a green bond with the sale of a 20-year security next month. Photograper: Marlene Awaad/Bloomberg Photographer: Marlene Awaad/Bloomberg
The ABN Amro NV logo sits on the bank's headquarter office complex in the Zuidas financial district in Amsterdam, Netherlands, on Wednesday, April  10, 2019. The Netherlands will become the first country with a AAA credit rating to issue a green bond with the sale of a 20-year security next month. Photograper: Marlene Awaad/Bloomberg
Photographer: Marlene Awaad/Bloomberg

ABN Amro Bank NV became the first European lender hurt by a major trading loss stemming from the coronavirus crisis, with a single U.S. client responsible for a $250 million pretax hit to its clearing business.

The Amsterdam-based bank will book a net loss of about $200 million in the first quarter after the client failed to meet risk and margin requirements amid market volatility caused by the pandemic, it said in a statement on Thursday.

Trading has been one of the rare bright spots for European banks since the crisis exploded globally. An increase in market turmoil has led to record volumes for investment banks in the first quarter, though most will still report year-on-year profit declines for the period due to other effects of the pandemic, Citigroup Inc. said this week.

Read More: Europe Banks’ Record Trading May Be Last Gasp Before Bleak Year

“I expect to see more large one-off hits, even though investment banking overall is likely to post good results in the first quarter due to more trading activity,” Jason Kalamboussis, an analyst at KBC Group NV, said by email. KBC has a sell rating on ABN Amro.

ABN Amro Clearing plays a key role in the world’s trading markets, functioning as a global link between exchanges, counterparties and investors. The loss announced Thursday was the biggest one-time hit in the history of the clearing business at the lender.

ABN Amro declined as much as 6.9% in Amsterdam trading and was down 6.2% as of 3:55 p.m. The STOXX Europe Banks Index was little changed.

Volatile markets especially boosted trading in rates, equities and currencies Citigroup said. ABN Amro said the client who caused the losses had a strategy involving trading U.S. options and futures and failed to meet the risk and margin requirements “following extreme stress and dislocations in U.S. markets.” ABN Amro Clearing closed out the positions of the client.

A sharp increase in margin calls has been one of the early symptoms of the coronavirus crisis as asset values seesawed and brokers scrambled for cash. The rise could expose more banks to one-off losses from client failures like the one that hit ABN Amro. Sectors such as mortgage bonds and over-the-counter derivatives have been among the hardest hit.

The first months of this year were going to be tough for the Dutch Bank even without the one-off charge. Fourth-quarter earnings significantly missed estimates amid impairments at its corporate and investment bank and its new chief executive officer, Robert Swaak, will have to deal with uncertain liabilities including investigations in the Netherlands and Germany.

(Adds impact of rising margin calls from eighth paragraph)