ABN Amro Shares Fall on Weak Lending Income, Cautious Outlook

ABN Amro NV fell in Amsterdam trading after reporting its lowest income from lending in six years and giving a cautious outlook for the economy and a return to paying dividends.

Net interest income declined to 1.47 billion euros ($1.7 billion) in the third quarter, the least since 2014, as its corporate loan book shrank and new mortgages slowed, the Amsterdam-based lender said in a statement on Wednesday. The shares declined as much as 6%.

ABN Amro was plagued in the first half by loan losses on large individual files at the corporate banking unit, resulting in group losses for the bank. Chief Executive Officer Robert Swaak, who announced a plan in August to cut a third of the lender’s business with corporate clients, will present a strategic update at the end of this month.

The bank is “cautious” about the outlook for the Dutch economy given the continuing impact of the Covid-19 crisis, Swaak said in the statement. Paying a dividend on 2019 earnings “will be considered prudently” at the end of this year, taking into account the European Central Bank’s position and ABN Amro’s outlook, the CEO said.

The lender’s market share of new mortgage production in the Netherlands fell as it “maintained strict pricing discipline in a competitive market,” it said. With more than 146 billion euros in total, Dutch mortgages are ABN Amro’s biggest loan book.

ABN Amro was 4.2% lower at 8.21 euros as of 10:14 a.m. The stock has declined 49% this year, giving the bank a market value of 7.7 billion euros.

Return to Profit

Net income totaled 301 million euros ($356 million), better than the estimate of 110 million euros, as the lender kept provisions low and the company booked a one-off gain from the sale of a property in France. Provisions totaled 270 million euros in the third quarter, lower than estimates of 547 million euros.

“I hope that investors will be realistic about ABN Amro’s new targets,” Chief Financial Officer Clifford Abrahams said in a Bloomberg TV interview. While the bank is on track to meet its overall cost cutting targets, it will miss its full year goals for the cost-to-income ratio as well as for return on equity, he said.

Operating costs totaled 1.36 billion euros, which was slightly better than expected. ABN Amro said it’s on track to meet its cost savings target for the year.

In August, the bank said it will stop providing corporate finance outside Europe and exit trade and commodity financing altogether, meaning as many as 800 jobs will be slashed over three to four years. Meanwhile, the lender aims to modestly grow in its corporate banking business in northwest Europe.

Vaccine Optimism

The news about a new Covid-19 vaccine coming to the market “should give a lift so sentiment and confidence -- and people’s ability to plan,” Abrahams said in a separate a call. “Those are important developments but it’s way to early for us to change our outlook for the way we run the business.”

ABN Amro is currently under investigation by the Dutch public prosecutor over alleged failures to check on clients and report suspicious transactions. The bank didn’t give an update on the probe on Wednesday, but said it continues to invest in improving customer monitoring, with 3,400 employees currently committed to those activities.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.