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AMSTERDAM (Reuters) - ABN Amro, the Netherlands' largest domestic lender, reported on Wednesday a 29 percent rise in first-quarter net profits to 615 million euros ($683 million), with a growing loan book and better margins reflecting a strong Dutch economy.
The results were better than expected, but the share price, up 13 percent so far this year, fell amid a wider sell-off and as analysts questioned ABN's prospects for further improvement.
The shares were down 3.2 percent at 23.59 euros at 0900 GMT, when the Stoxx Europe 600 banking sector index was down 0.32 percent.
Analysts polled for Reuters had on average expected a net profit of 516 million euros in the three months ended March 31, up from the 475 million euros made in the same period last year.
Chief Executive Kees van Dijkhuizen attributed the earnings improvement to a growing loan book and lower rates paid on customer deposits.
With nearly 50 percent of its loan book linked to the real estate market, ABN benefited from a construction boom and strong price gains in the Dutch housing market, and unusually low levels of defaults.
KBC analyst Matthias de Wit described the results as "lukewarm," with profits strong but worries growing that the bank will be unable to maintain margins in the current low interest rate environment, notably on Dutch mortgages.
Dijkhuizen, who had been CFO at the bank until he assumed the top job in January, has undertaken a pruning of senior management over the past five months, cutting the executive board to just three people and reducing the executive committee to nine from 19.
He also cut the third layer of managers to 63 from 90.
On Monday ABN Amro named as its new CFO Clifford Abrahams, an appointment which Dijkhuizen said reflected an intent to raise ABN's international profile and look beyond the Netherlands again.
Abrahams is a Briton with a background in mergers and acquisitions at Morgan Stanley and British insurer Aviva Plc and is currently chief financial officer at Dutch insurer Delta Lloyd, which has just been taken over by larger rival NN Group.
Dijkhuizen also told reporters on a conference call the bank hopes to expand its private banking business, Europe's third-largest, by selective acquisitions.
But ABN continues to hold high levels of capital while it awaits new rules from the Basel Committee of banking regulators on asset risk weightings, with its core capital adequacy ratio standing at 16.9 percent of risk-adjusted assets at the end of March, down from 17 percent at the end of December.
Dijkhuizen said that waiting for decisions from Basel has been "frustrating" but the bank would not make any major decisions on dividends, share buybacks or acquisitions "until there is more clarity".
Since ABN Amro was bailed out by the Dutch state in 2008, the company has strongly refocused its operations and orientation on the Dutch market, which now accounts for 79 percent of its business.
The bank was re-privatized in 2015, but is still 70 percent owned by the Dutch state.
Dijkhuizen said in February he would seek modest growth in international lending, focusing on commodities, renewable energy, food supply chain and utility providers.
($1 = 0.9008 euros)
Reporting by Toby Sterling; Editing by Greg Mahlich