AMSTERDAM (Reuters) - ABN Amro’s quarterly net profit plunged by a fifth and fell short of expectations and the Dutch bank also warned that slowing economic growth and low interest rates could hit future earnings.
Chief Executive Kees van Dijkhuizen said the impact of those factors could become more apparent after interest income fell 6% in the first three months of the year.
“The Dutch economy is still doing relatively well, but growth is weakening and that will bite. We also expect interest rates to remain very low for a long time,” Van Dijkhuizen said on Wednesday.
“We will continue our cost saving efforts, while looking for ways to increase revenues”, he added.
ABN said the decline in first quarter net profit to 478 million euros was mainly due to incidental gains on equity investments made in the previous year. Analysts had forecast a figure of 500 million euros on average in a Reuters poll.
ABN Amro, which since its bailout by the Dutch state in 2008 has refocused its operations on its domestic market, last year said it would limit trade and commodity finance operations in the offshore energy, diamond and shipping sectors, to improve profitability.
Rising regulatory fees and falling interest income pushed up ABN’s cost-to-income ratio to 63.8% in the quarter.
Van Dijkhuizen said the ratio would fall below 60% in the remainder of the year, and reiterated the bank’s goal of getting it down to 56-58% next year.
ABN Amro shares were down 2.5% at 18.75 euros at 0845 GMT in Amsterdam. The shares were floated at a price of 17.75 euros in Nov. 2015.
“Cost control remains adequate, but cannot match the top line shortfall,” said KBC Securities analyst Jason Kalamboussis.
Loan impairments, which dragged down ABN’s earnings in the last three months of 2018, declined 51% to 102 million euros, as the bank wound down part of its corporate banking activities.
The bank said its core capital adequacy ratio slipped to 18% at the end of March, from 18.4% three months earlier.
ABN aims to keep capital buffers elevated as new banking regulations, known as Basel IV, look set to significantly shrink them once they fully come into effect.
The bank will, however, lower its target range for the ratio from its current level of 17.5-18.5% later this year, Van Dijkhuizen said, as part of the Basel IV effects are now already reflected in the numbers.
($1 = 0.8922 euros)
Reporting by Bart Meijer; Editing by Sherry Jacob-Phillips and Keith Weir