ABN Amro reported a net profit of €960m in the second quarter of 2017. Net interest income increased by €17m while net fee and commission income, at €418m, was down 3% from €431m in the second quarter of 2016. Total issued debt decreased by €5.8bn, to €75.5bn at June 30, 2017, mainly due to the redemption of €5.2bn in certificates of deposits and commercial paper and €400m in bonds and notes issued, with the movements in these debt instruments related to a continuous process of redemption and issuance of long-term and short-term funding, according to the bank.
Total wholesale funding stood at €87bn as of the end of June, down from €92.6bn at the end of March (December 31, 2016: €92.5bn). Wholesale funding included €32.4bn of senior unsecured medium-term notes, up from €31.8bn in the previous quarter but slightly down from €32.8bn at the end of December.
The cumulative change in fair value of structured notes attributable to a change in credit risk amounted to a loss of €11m in the first half of 2017 (full-year 2016: €13m). For all financial liabilities designated at fair value through profit or loss, the amount that the bank would contractually be required to pay at maturity was €1.5bn at June 30, 2017 (December 31, 2016: €1.5bn).
Subordinated liabilities increased by €800m to €12bn at June 30, 2017, compared with €11.2bn at December 31, 2016. This increase was mainly driven by an issued subordinated loan, for the nominal amount of US$1.5bn at a rate of 4.4%, with a first call date of March 2023, offset by accrued and paid interest of €0.5bn, according to the bank.
In 2015, ABN started a review, at the request of both the Netherlands Authority for the Financial Markets and the Dutch Ministry of Finance, to determine whether the bank had acted in accordance with its duty of care obligations with respect to the sale of interest rate derivatives to Small and Medium-Size (SME) clients. The scope of the procedures was extended after continuing discussions with AFM and the independent reviewer on the application of the Uniform Recovery Framework and, as a result, the settlement will take longer than expected, As a result, the existing provision for project costs (€55m recorded in the fourth quarter of 2016) was increased by €54m. In addition, the provision for client compensation is reviewed every quarter. In the second quarter of 2017, this resulted in a €15m addition.
The provision for SME derivatives-related issues amounted to €576m at June 30, 2017, which consists of total client compensation (€534m) and project costs (€109m), after payments already made for both elements.
'The 2017 second quarter result, a net profit of €960m, benefited from a book gain of €200m on the sale of Private Banking Asia and the refinement of two risk models,' said Kees van Dijkhuizen (pictured), chief executive officer of ABN, in a statement. 'The underlying trend in the second quarter was generally positive, also supported by continued growth of the Dutch economy.'
ABN was re-established in 2009 in its current form, following the acquisition and break-up of the original ABN by a banking consortium led by Royal Bank of Scotland, which took on the bank's structured products book. Since then, ABN's newly established structured product desk issued 52 structured notes to retail investors in the Netherlands, of which four products are still live. However, in 2014, the bank announced it would stop selling equity derivatives and its own structured products following a review of its markets division, which was selling structured products to clients worldwide.
Click the link to view the ABN Amro interim report & second quarter 2017 report.
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