ABN AMRO Bank N : Quarterly Report Q2 2019 ​ (PDF 587 KB)

Interim Report & Quarterly Report

Second quarter 2019

ABN AMRO Bank N.V.

ABN AMRO Bank N.V.

About this report

Introduction

This Quarterly Report presents ABN AMRO's results for the second quarter of 2019, the interim report for 2019 and the Condensed consolidated Interim Financial Statements for 2019. The report provides a quarterly business and financial review as well as risk, funding, liquidity and capital disclosures.

Presentation of information

The Condensed consolidated Interim Financial Statements in this report have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union (EU) and are reviewed by our external auditor. Some disclosures in the Risk, funding & capital information section of this report are part of the Condensed consolidated Interim Financial Statements and are labelled as 'reviewed' in the respective tables or headings.

This report is presented in euros (EUR), which is ABN AMRO's presentation currency, rounded to the nearest million (unless otherwise stated). All annual averages in this report are based on month-end figures. Management does not believe these month-end averages present trends that are materially different from those that would be presented

by daily averages. Certain figures in this report may not tally exactly due to rounding. Furthermore, certain percentages in this document have been calculated using rounded figures.

On 29 June 2019, ABN AMRO Bank N.V. merged with its parent company ABN AMRO Group N.V. As a result of the merger, ABN AMRO Group N.V. ceased to exist. The activities of ABN AMRO Group N.V. have been integrated into and continued in ABN AMRO Bank N.V. As a result, the figures presented in this Interim Report & Quarterly Report represent figures for ABN AMRO Bank N.V.

To download this report or to obtain more information, please visit us at abnamro.com/ir or contact us at [e-mail]. In addition to this report, ABN AMRO provides an analyst and investor call presentation, a roadshow booklet and a factsheet regarding the Q2 2019 results.

1

Introduction

review Financial

segment by Results

informationcapital&&fundingRisk,

2019 Statements Financial Interim

Other

Executive Board Report  /Figures at a glance

Figures at a glance

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Introduction

Net profit1	Return on equity2,3	Earnings per share4
(in millions)	Target range is 10-13 (in %)	(in EUR)

review Financial

1,000
800	688	738			693
600				478
400			316
200
	Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

20
16	14.4			13.6
13.5
12			9.2
8		6.0
4
Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

1.0
0.8	0.71	0.74			0.71
0.6				0.48
0.4			0.31
0.2
	Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

segment by Results

Cost/income ratio

2020 target range is 56-58 (in %)

Cost of risk2	Net interest margin
(in bps)	(in bps)

100
80
					70.2	63.8
60	55.1	52.9			56.4
40
20
		Q2 18		Q3 18	Q4 18		Q1 19		Q2 19

CET15

(end-of-period, in %)

Target range is 17.5-18.5 (in %)

45
36
27			27
22
				18
18		15		15
9
	Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

Total capital ratio6

(end-of-period, in %)

200
180		167		170
164	163
160
160
140
120
Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

Leverage ratio (CDR)5,6

(end-of-period, in %)

information capital & funding Risk,

25
20	18.3	18.6	18.4	18.0	18.0
15
10
5
	Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

30	26.3	26.6			25.9
	26.3	25.8
24	22.1	22.3	22.1	21.7
18
12
6
	Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

5
4	4.3	4.1	4.3	4.1	4.4 4.2	4.3	4.1	4.2
3
2
1
	Q2 18	Q3 18	Q4 18	Q1 19	Q2 19

2019 Statements Financial Interim

1. Comparative figures 2018 have been restated. Please refer to note 1 of the Interim Financial Statements.
2. Calculation based on annualised figures.
3. Annualised profit for the period excluding coupons attributable to AT1 capital securities and results attributable to non-controlling interests divided by the average equity attributable to the owners of the company excluding AT1 capital securities.
4. Profit for the period excluding coupons attributable to AT1 capital securities and results attributable to non-controlling interests divided by the average outstanding and paid-up ordinary shares.
5. As from Q1 2019 profits attributable to owners of the parent company, excluding AT1 capital securities, are no longer added to CET1 capital. If H1 2019 profits attibutable to owners
   of the parent company, excluding AT1 capital securities, had been added based on last year's 62% pay out ratio, the CET1 ratio would be 0.4 percentage point higher in Q2 2019 and the leverage ratio would be 0.1 percentage point higher in Q2 2019.
6. The grey bars represent the previously published figures of the former ABN AMRO Group N.V.

Other

ABN AMRO Bank Interim Report & Quarterly Report second quarter 2019

Executive Board Report  /Message from the CEO

Message from the CEO

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Introduction

ABN AMRO reported strong results this past quarter, with a net profit of EUR 693 million, reflecting higher net interest income, continued solid operational performance and moderate impairments. The Dutch economy continues to perform well, even though the economic and interest rate outlook is becoming more challenging as interest rates came down further in the last quarter. We remain focused on our targets in this challenging environment.

We are making good progress in further embedding our strategy, which has a key focus on sustainability. We were therefore very pleased that ABN AMRO was named Western Europe's Best Bank for Sustainable Finance by Euromoney, recognising that every part of the bank is looking to have an environmental or social purpose. We also received the award for The Netherlands' Best Investment Bank for local leadership, emphasising our strong local market position. Our focus on sustainability both in terms of profitability and our impact on the environment, was also commended. We will continue to implement our plans to reduce our RWAs and further improve profitability at Corporate & Institutional Banking to an ROE of more than 10%, and are progressing well on this front.

We are focusing on an effortless and data-driven customer experience. We are strengthening our lead in video banking at Retail Banking and are extending this service to all businesses. Video banking drives operational efficiencies and at the same time helps improve customer satisfaction. In the second quarter, our mortgage market share improved to 17% while maintaining pricing discipline. We expect the improvement in market share to continue in the next quarter. To offer our clients mortgages at

long fixed interest rates, we launched a fund for 30-year mortgages, enabling us to benefit from strong demand for long-term mortgages in the Dutch market.

We are building a future-proof bank and have started transforming I&T into small teams, combining operations and development. Together with further automation, this will accelerate time-to-market and improve efficiency.

We have finalised the sale of Stater and our private banking activities in the Channel Islands and remain open to bolt-on acquisitions within our geographical footprint.

We welcome the plans of the Dutch government to jointly combat financial crime and achieve broader cooperation between banks, law enforcement and regulators on both a national and European level. After our announcement at Q4 on detecting financial crime, we centralised and bolstered our customer due diligence (CDD) activities. More than 1,000 people are currently fully committed

to this, and this number will increase substantially in the next few years. Recently, the Dutch central bank (DNB) determined that we are to review all our retail clients in the Netherlands. Consequently, we will undertake further measures and extend our CDD remediation programme, for which we have made an additional provision of

EUR 114 million. In general, across the bank we will take all remedial actions necessary to ensure full compliance with legislation. Sanctions, such as an instruction, fines, may be imposed by the authorities.

Our Q2 2019 net profit was EUR 693 million, including the proceeds from the sale of Stater and the CDD remediation programme provision in Retail Banking. Net interest income was strong, in spite of the low interest rate environment. Costs were lower, excluding the provision for CDD at Retail Banking, owing to cost-saving programmes and reflecting solid operational performance. Impairments were lower than last year and well below the through-the-cycle average of 25-30 basis points.

The overall credit quality trend in our loan book remained positive. The cost/income ratio was 56.4% and return on equity (ROE) was 13.6%. If regulatory levies were to be divided equally over the year, return on equity and the cost/income ratio in Q2 would have been 58.7% and 12.5% respectively. Our capital position remains strong, with a CET1 ratio of 18.0% (18.4% if H1 2019 profits attributable to shareholders are added based on a

62% pay-out1). The Basel IV CET1 ratio remained largely unchanged versus year-end 2018, excluding H1 2019 profit. ABN AMRO Bank has become the reporting entity since

review Financial

segment by Results

information capital & funding Risk,

2019 Statements Financial Interim

Other

1 Dividend pay-out 2018.

ABN AMRO Bank Interim Report & Quarterly Report second quarter 2019

Executive Board Report  /Message from the CEO

4

Introduction

the legal merger was finalised. This merger has benefited the leverage ratio, which stood at 4.2% in Q2. We are strongly capitalised and well positioned to manage the transition through TRIM and Basel IV.

Regulators are focusing on capital regulation, including Basel IV, TRIM (the assessment and harmonisation of internal RWA models), provision reviews and NPE, the industry-wideNon-Performing Exposure guidance, and we saw the effects of this during the past quarter. We expect further regulatory impact going forward. We actively engage with the regulator and our capital management reflects the current economic and regulatory outlook as well as our approach to sustainable dividends. The interim dividend has been set at EUR 0.60 per share, a 50% pay-out of sustainable profit, which is in line with last year. We are within the capital target range and expect to be well placed to consider additional distributions of above 50% of sustainable profit at full year results.

Interest rates continued to come down in the last quarter, predominantly impacting deposit margins. As client rates are close to zero, it will be increasingly difficult to offset the decline and over time margin pressure will increase further. We are taking action by focusing on margins, developing revenue opportunities and strict cost discipline, despite rising regulatory and compliance costs.

In June, I announced that I would not serve a new term of office following the end of my current term, which will expire in April 2020. I remain fully committed to further accelerating the bank's strategy and pursuing our purpose together with our employees and clients in the months ahead.

Kees van Dijkhuizen

CEO of ABN AMRO Bank N.V.

review Financial

segment by Results

information capital & funding Risk,

2019 Statements Financial Interim

Other

ABN AMRO Bank Interim Report & Quarterly Report second quarter 2019