ABN Amro to cut 1,500 jobs as net profit rises

Bloomberg

ABN Amro Group NV, the state-controlled Dutch lender that returned to the stock market last year, reported a 19 percent jump in third-quarter profit and said it would cut 1,500 jobs as it steps up cost reductions.
Underlying net income, which strips out one-time items, rose to 607 million euros ($652 million) from 509 million euros a year earlier, the Amsterdam-based company said in a statement on Wednesday. That beat the 454 million-euro average of six analyst estimates compiled by Bloomberg. ABN Amro, which was nationalized during the 2008 financial crisis, said the job cuts are needed to offset rising costs and finance 400 million euros in additional spending on innovation and digital technology by 2020. The lender, which is still 77 percent owned by the Dutch government, last week named finance chief Kees van Dijkhuizen, 60, to succeed outgoing Chief Executive Officer Gerrit Zalm.
“Operating income is growing much less than it did in the last couple of years so indeed cost control is very important,” Van Dijkhuizen, who will assume his new role in February, said in an interview on Bloomberg Television. Before announcing his departure, Zalm had set out plans in a memo to cut as many as 1,375 jobs by 2020 as increasing competition, regulatory pressures and low interest rates crimp earnings at European banks.

Costs Rise
Operating income during the quarter rose 5.4 percent to 2.22 billion euros, trailing the 11 percent increase in operating expenses to 1.37 billion euros. Impairment charges on loans and income tax expense fell.
The cost-income ratio, a measure of efficiency, worsened to 61.8 percent at the end of the third quarter from 58.5 percent a year ago. The lender said it aims to reach a ratio of 56 percent to 58 percent by 2020.
ABN Amro’s shares declined 2.5 percent to 21.26 euros at 9:49 a.m. in Amsterdam. They have gained 2.8 percent this year, compared with a 12 percent decline in the 44-member STOXX 600 Banks Index. The bank is up 20 percent since selling shares at 17.75 euros in the initial public offering in November of last year.
ABN Amro, which employed 26,500 people last year, said its total workforce is expected to decline by 13 percent to 23,000 by 2020. The bank will book a provision of 150 million euros to 175 million euros for the new job cuts in the fourth quarter. The Dutch government has said it plans to gradually exit its holding in ABN Amro, after selling a 23 percent stake in the IPO. Van Dijkhuizen has
a mandate to help complete the
privatization.