ABN Amro Weighed Down by Costs, Writedowns 

(Bloomberg) --

Robert Swaak will have his work cut out for him when he takes over as chief executive officer of ABN Amro Bank NV in April.

The state-owned lender on Wednesday pushed back an expected decision to change its dividend policy, after fourth-quarter earnings significantly missed estimates amid impairments at its corporate and investment bank. As if that wasn’t enough, the bank warned of uncertain liabilities as a German tax evasion probe adds to a Dutch investigation of its alledged failures to check on clients.

Shares of ABN Amro fell the most in almost five months on the slew of bad news, underscoring the challenge for Swaak, the former head of consultant PwC in the Netherlands who will take over in April. The third CEO in a row who hasn’t risen through the bank’s ranks, he’ll need to consider ABN Amro’s prospects as an independent bank as legal challenges mount and negative interest rates add to a slew of homegrown issues.

Shares of ABN Amro fell as much as 7.3% and traded 6.9% lower at 1:00 p.m. in Amsterdam. The slump in the stock -- it’s now down about 28% over the past year -- may make it harder for the government to keep selling down the 56% stake that it still holds after a bailout during the financial crisis.

Fourth-quarter net income of was 316 million euros ($344 million), compared with an average estimate of 376 million euros. The state-controlled lender said negative interest rates weighed on profit while its cost-to-income ratio remained above the bank’s medium-term target.

ABN Amro, which had promised a dividend update at the end of the year, cited looming legal risks and regulatory changes to explain its decision to maintain a payout equal to 62% of “sustainable profit.” It said it will provide an update on the policy in the second half.

Wrong Timing

While the market will be disappointed over the unchanged policy, the dividend decision makes sense, KBC analyst Jason Kalamboussis said by email. “Delivering or promising better payouts would have been the wrong timing after such a poor quarter.”

The bank’s key Tier 1 capital ratio stood at 18.1%, which is considered high compared with European peers. ABN Amro has long faced criticism for preferring a high capital buffer over more generous payouts to shareholders.

Compliance costs continue to be high as the bank invests in its vetting of clients. ABN Amro spent about 400 million euros improving controls in 2019 and expects to pay a similar amount this year, Chief Financial Officer Clifford Abrahams said on Bloomberg Television.

Abrahams also said the bank’s return on equity is within its range, albeit on the lower end. ABN Amro is “feeling comfortable” from a capital point of view.

To contact the reporter on this story: Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Christian Baumgaertel

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