Financial Results

Underlying Profit Gains At ABN AMRO; Private Bank Profit Falls On Higher Expenses

Tom Burroughes Group Editor Dubai 9 November 2015

Underlying Profit Gains At ABN AMRO; Private Bank Profit Falls On Higher Expenses

Higher expenses helped hit private banking profits for the lender in the third quarter although figures for the first nine months of 2015 rose from a year ago. The parent group's underlying profit gained.

Netherlands-headquartered ABN AMRO, which recently signalled it is to shortly re-enter full private ownership when the government sells its stake via an IPO, today reported an underlying profit of €509 million ($548.2 million) for the three months to end-September, a 13 per cent year-on-year increase.

The underlying profit excludes special items.

Operating income rose 5 per cent year-on-year to €2.109 billion; operating expenses rose 8 per cent to €1.234 billion, the bank said in a statement.

Across the bank, the cost/income ratio was 59 per cent, up from 57 per cent a year earlier.

Private banking
On the private banking side of the business, the underlying profit for the third quarter fell 43 per cent year-on-year to €28 million. Net interest income in Q3 fell 1 per cent year-on-year to €147 million; net fee and commission income rose 7 per cent to €149 million; total operating income rose 3 per cent to €314 million.

For the first nine months of 2015, the private banking arm’s underlying profit advanced €43 million year-on-year to €188 million. The increase was mainly driven by higher operating income and lower loan impairments, partly offset by higher expenses.

The cost/income ratio for private banking "increased significantly" to 86 per cent in the third quarter of 2015, the bank said.

Client assets decreased by €14.8 billion in the third quarter to €191.3 billion at 30 September 2015. The decrease was due mainly to lower market performance as a result of the negative sentiment on the stock markets. France contributed €29 billion and Germany contributed €33 billion to the international client assets in Q3 2015.

There was a net new asset outflow of €3.3 billion in the third quarter of 2015, mainly driven by the outflow of custody assets of a single client. This was only partly offset by the positive impact of transfers of retail banking clients and referrals from corporate banking to private banking.

The banking group is gearing up to float on the stock exchange in one of the largest European IPOs since the financial crisis, which saw it bailed out by the Dutch state in October 2008. The Netherlands government intends to sell shares as soon as the final quarter of this year. The government has said it may sell as much as 30 per cent of ABN AMRO in 2015.

The bank and government have been thought to be considering a share float for some time, conditional on the state of the market and general readiness of the bank.

ABN AMRO’s private bank is a significant player and among moves in recent years, bought the onshore German private banking business of Credit Suisse, completing the purchase in 2014. Bank executives told WealthBriefing last year that plans to float the whole Dutch group were on track. Such a move, if or when it goes ahead, will see it gain a march on the UK’s Royal Bank of Scotland, which was nationalised by the UK government around the same time amid the financial crisis.

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