ABN Amro Fails to Impress at First Investor Day Since 2015 IPO

(Bloomberg) -- ABN Amro Group NV’s first investor day since its IPO three years ago failed to impress after the bank held back from telling shareholders how much they might receive in extra dividends and only slightly increased a profitability target.

The main change to the bank’s goals is to push its cost-to-income ratio -- a measure of profitability -- below 55 percent within four years, while again promising investors that it will decide on a higher payout at the end of the year. The bank also said it sees little loan growth for at least two years.

Once one of the world’s largest banks, ABN refocused on its consumer lending business in the Netherlands after it was bailed out in 2009. Since then, its goal has been become a stable lender with a high dividend payout. Investor expectations for higher returns were raised earlier this year with capital levels among the strongest of European banks.

“The whole story now will rest on cost reductions and distributions,” said Jason Kalamboussis, an analyst at KBC Securities. “It will be core for ABN Amro with full-year results to establish a high payout level.”

ABN Amro dropped as much as 3.9 percent in Amsterdam trading and was down 3.1 percent at 22.20 euros as of 1:30 p.m. The stock is down about 17 percent this year compared with a 25.4 percent decline for the Stoxx Europe banks index.

Capital Buffer

Key to the bank’s payout policy is its capital buffer. The Amsterdam-based bank has one of the strongest capabilities to absorb losses of any European bank with a CET1 ratio of about 18.6 percent. Even with regulatory changes that could affect this figure, it’s still targeting a range of between 17.5 percent and 18.5 percent. The metric is set to drop under new accounting rules that require a higher buffer of mortgages, its biggest revenue source.

ABN said it’s “well-placed to consider additional dividends,”reiterating a message it frequently made during third-quarter earnings. The bank has set aside 60 percent of profit so far this year for dividends and last year paid out 50 percent of profit.

An anonymous group of 21 ABN Amro employees expressed their concern over the bank’s strategy in a letter in June. Chief Executive Officer Kees van Dijkhuizen blamed dissatisfaction within the bank partly on “disappointment” that some people “didn’t get the job they wanted” after the bank reshuffled and cut positions at the top.

While the Dutch economy and its housing market are doing well, ABN Amro has been losing mortgage-market share to competitors. Interest income on residential mortgages was stable as both average volumes and margins remained broadly flat, it said in its third-quarter earnings report.

“This target for 2022 is helpful, but could be too far out for the market to care,” Mediobanca analyst Robin van den Broek wrote in a note. The investor day statement “seems to include some promises for the future, but is unlikely to lead to better expectation in the short-term,” he said.

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