ABN Amro’s first-quarter profit plunges on fragile fee income

Bloomberg

ABN Amro Group NV reported a 13 percent decline in profit after its first full quarter as a listed company coincided with a market rout, crimping revenue from fees and commissions, and said it is considering additional cost cuts.
Net income fell to €475 million ($541 million) from €543 million a year ago, the state-controlled Dutch lender said in a statement on Wednesday. That beat €418 million, the average of five analyst estimates compiled by Bloomberg.
“We need to make our organization more agile, efficient and cost-effective,” Chief Executive Officer Gerrit Zalm said in the statement. The bank will provide more details on cost cuts when it updates its strategy and targets in the second half of the year, he said.
The three months through March included 98 million euros in regulatory levies, compared with none a year earlier. Net fee and commission income fell 7 percent to 435 million euros from a year ago. That was offset in part by loan impairments, which were almost nonexistent at 2 million euros, driven by a recovering Dutch
economy. However, the loan
impairments were 252 million euros a year ago andhe shares dipped 0.7 percent to 17.88 euros in Amsterdam.
“The recurring revenues were marginally less due to commission income, but this is more than compensated by lower expenses,” Cor Kluis, an analyst at Rabobank with a buy rating on the stock, said by e-mail. “In total, marginally better recurring results than expected.”
Net interest income was unchanged at 1.5 billion euros from last year. Return on equity, a measure of profitability, fell to 11.1 percent from 14.1 percent a year ago.
Nationalised during the 2008 financial crisis, ABN Amro returned to the market in November just before the slowdown in China and declining oil prices provoked a global selloff. The stock has gained 1.5 percent since the listing, compared with a decline of more than 25 percent in the STOXX Europe 600 Banks Index.
The turmoil could delay plans to sell more shares of the bank. Finance Minister Jeroen Dijsselbloem has said that he seeks a gradual sale of ABN Amro shares and that he hopes to complete a full sale before his term ends in 2017.
The government sold 23 percent of ABN Amro in an initial public offering in November, raising 3.8 billion euros.
Disastrous Takeover
ABN Amro has undergone a complete makeover since falling prey in 2007 to a 72-billion-euro takeover, the financial services industry’s largest ever, by a consortium including the Royal Bank of Scotland Group Plc and the Banco Santander SA.
Dutch state spent almost 22 billion euros to rescue the bank during the 2008 financial crisis.
Under government ownership, ABN Amro went from being one of the world’s largest banks to a consumer lender focused on the Netherlands. NLFI, a state entity that controls nationalized financial companies on behalf of the Dutch government, owns 77 percent of ABN Amro.
Net interest income was unchanged at 1.5 billion euros from last year. Return on equity, a
measure of profitability, fell to 11.1 percent from 14.1 percent a year ago.
ABN Amro Bank is a Dutch state-owned bank with headquarters in Amsterdam.
It is the third-largest bank in the Netherlands and was re-established, in its current form in 2009, following the acquisition and break-up of the original ABN AMRO by a banking consortium.

consisting of Royal Bank of Scotland Group, Santander Group and Fortis.