ABN AMRO's 2018 Profit Hit By Client Remediation Costs

Tom Burroughes Group Editor London 13 February 2019

ABN AMRO's 2018 Profit Hit By Client Remediation Costs

Costs associated with a customer remediation programme hit results for last year, although the bank says it is on course to achieve its targets for 2020.

Netherlands-listed ABN AMRO, whose services include private banking, today reported a 17 per cent year-on-year fall in profit for the 2018 calendar year due to costs associated with a customer due diligence remediation programme and higher loan impairments. It also reported a 42 per cent slide in the final three months of 2018 from a year earlier.

The bank said it is on course to meet its 2020 financial targets and has strengthened its capital structure. As a result, the bank proposes an additional dividend payment on top of the targeted 50 per cent of sustainable profit. It proposes to pay a final dividend of €0.8 per share ($0.91), taking the proposed total dividend for last year to €1.45 per share.

The bank’s cost/income ratio stood at 58.8 per cent at the end of 2018, narrowing from 60.1 per cent a year before.

The bank noted that its 2017 results were boosted by the sale of its Asian private banking business.

ABN AMRO said its CET1 ratio – a standard way of measuring its capital buffer – stood at 18.4 per cent.

Shares in the bank fell about 1.5 per cent from the open today. 

Source: ABN AMRO

Explaining the customer due diligence remediation cost, a spokesperson for the bank said it is speeding up its remediation of KYC activities on legacy files in its corporate banking (small- and medium-sized enterprise) business and in its credit card business.

“Currently some 1,000 full-time employees are employed in the bank to perform our gatekeeper role. With the €85 million provision we will add some 400 FTEs to this task,” the spokesperson said. 

“With respect to customer due diligence, we are taking our gatekeeper role of the financial system very seriously. We have a good foundation in place and we have already made numerous steps to make our compliance with the law more effective and remedy shortcomings,” the spokesperson added.

ABN AMRO said it is simplifying its structure and boost capital buffers by a legal merger of two entities: ABN AMRO Bank NV and ABN AMRO Group NV. 

The proposed merger aims to improve regulatory capital ratios (including the leverage ratio), improve how the organisations are run and cut administrative costs. 

The move will mean that ABN AMRO Group ceases to exist. Shareholders in that entity become shareholders in ABN AMRO Bank and depositary receipts represent shares in ABN AMRO Bank and retain the listing on Euronext Amsterdam. Holders of debt instruments continue to hold instruments issued by ABN AMRO Bank. A legal merger has no other material effects, ABN AMRO said in a statement today. 

A legal merger is subject to customary regulatory and shareholder approvals.

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