ABN Amro to Cut About 2,800 Jobs as Investment Bank Shrinks
(Bloomberg) -- ABN Amro Bank NV plans to cut about 2,800 jobs over four years as the Dutch lender retreats from large parts of its investment bank and digitization allows it to operate with a smaller staff.
The company plans to reduce costs by about 700 million ($840 million) by 2024 to 4.7 billion euros. The workforce will shrink by about 15%, with most reductions to start in 2022, Chief Executive Officer Robert Swaak said in an investor update on Monday.
In August, Swaak announced plans to cut a third of the lender’s business with corporate clients, dropping company finance outside of Europe and exiting trade and commodity financing altogether. ABN Amro posted losses in the first half after taking hits on individual corporate clients before returning to profit in the third quarter.
While the bank stuck with its policy of paying out at least 50% of profit in dividends, it said shareholder remuneration above that will now be done via share buybacks rather than the dividend payments it has made in previous years.
ABN Amro said its common equity Tier 1 ratio, a measure of financial strength, needs to be higher than 15% before it considers share buybacks. That’s disappointing, given that level is a full two percentage points above the bank’s current CET1 target, Mediobanca analyst Robin van den Broek said.
ABN Amro fell as much as 6.5% in Amsterdam trading and was down 6.1% as of 11:56 a.m. The stock has declined by 44% this year.
Costs are expected to rise to 5.3 billion euros next year from 5.1 billion euros in 2020 “due to an increase in regulatory levies, anti-money laundering costs and strategic investments,” the bank said. It sees about 300 million euros in strategic investments and a restructuring provision of around 150 million euros through 2023. In August, the bank estimated cost cuts of about 800 million euros over the four-year period.
ABN Amro said it aims to have a return on equity of 8% by 2024 and 10% in the longer term, though that’s subject to interest rates rising to more normal levels, it said. That’s more cautious than its previous target of 10%-13% without caveats.
While the threshold for buybacks “makes sense,” the bank might be better served deploying extra capital on small acquisitions “or indeed a merger with Volksbank to follow the Spanish domestic M&A path,” KBC analyst Jason Kalamboussis said in a note.
The bank said it will focus on wealthy clients and medium-to-large corporations in the Netherlands as well as boosting market share in mortgages and lending to small- and medium-sized businesses. In Northwest Europe, it seeks to bolster lending in the energy and digital sectors. ABN Amro is open to bolt-on acquisitions, especially in private banking, it said.
The bank plans to sell and lease back its headquarters building in Amsterdam’s pricey Zuidas business district in 2021, expecting to book a gain from the sale. At the same time, it will redevelop its second main office in a lower-cost part of the city as a base for more than 10,000 employees.
©2020 Bloomberg L.P.