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ABN Amro profit hurt by low interest rates, rising impairments

AMSTERDAM (Reuters) – Dutch bank ABN Amro (ABNd.AS) reported on Wednesday fourth-quarter net income that missed analysts’ estimates, hurt by lower interest income and higher impairments.

FILE PHOTO: ABN AMRO logo is seen at the headquarters in Amsterdam, Netherlands May 14, 2019. REUTERS/Piroschka van de Wouw/File Photo

ABN Amro posted flat quarterly net income of 316 million euros ($345 million) compared with the same period the year before. Analysts polled by the company had on average predicted a rise to 429 million euros.

Impairments jumped 51% to 314 million euros, mainly due to write-offs by the bank’s corporate division on loans in the offshore energy sector.

Meanwhile, interest income slipped 3%, as low interest rates continued to put pressure on its deposit margins.

ABN Amro last month was the first of the three dominant banks in the Netherlands to scrap all interest payments on retail deposits. It also said it would start to charge interest on deposits over 2.5 million euros.

High impairments on corporate loans in 2018 had already led ABN to limit trade and commodity finance operations in the offshore energy, diamond and shipping sectors, but Chief Executive Officer Kees van Dijkhuizen said more measures were probably needed.

“We’ll have to review the business again this year”, he said.

COMPLIANCE

The lender gave no update on the investigation Dutch prosecutors started last September into ABN’s alleged failings to detect money laundering and to report suspicious transactions.

The bank said it had now dedicated over 2,000 employees to the fight against money laundering, as it was forced to add staff after years of job cuts.

Costs of client oversight will continue to rise, Van Dijkhuizen said, but are expected to be offset by savings made through digitalization of services and better use of information technology.

“We expect costs to be around 5.1 billion euros in 2020 and below 5 billion euros thereafter”, the CEO said.

Total operating expenses amounted to 5.28 billion euros in 2019, taking the bank’s cost-to-income ratio up to 61.2% from 58.8% a year earlier.

ABN’s capital ratio remained relatively strong at 18.1% at the end of 2019.

But Van Dijkhuizen said there were too many uncertainties surrounding the bank to consider an increase in dividend, citing the prosecutors’ investigation and rising regulatory costs.

Since its bailout by the Dutch state in 2008, ABN has refocused on the Dutch market, cutting thousands of jobs in the process. The bank was re-privatized in 2015, but the Dutch state still owns 56% of the shares.

Reporting by Bart Meijer; Editing by Shounak Dasgupta and Mark Potter

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