Dutch bank ABN Amro has reported a remarkable 83% growth in net profit for the second quarter, outperforming analysts' expectations.
However, the bank has indicated that it will not achieve its 2024 cost saving target due to factors including rising inflation and ongoing anti-money laundering (AML) measures.
ABN Amro revealed that it anticipates being unable to meet its 2024 cost goal of €4.7 billion ($5.16 billion) due to the spillover of investments from 2023, elevated inflation rates, and the gradual reduction of AML-related expenses. CEO Robert Swaak emphasized the challenges they are encountering in ensuring that AML activities remain sustainable and compliant with regulatory requirements.
"We are making good progress on our AML client file remediation which we expect to finalise in 2023. Beyond 2023 more effort is required than expected to ensure that our ongoing AML activities are at a sustainable and adequate level and meet regulatory requirements. The Dutch central bank has been informed about these developments and is closely monitoring our progress," the quarterly report stated.
The bank's net profit for the second quarter reached €870 million, surpassing analyst forecasts that had predicted a net profit of €570 million. However, the adjustment to the cost target prompted a decline in ABN Amro's shares by 2.5%, after falling by as much as 3% in early trading.
Ferdinand Vaandrager, CFO of ABN Amro, stressed the need for the banking sector to improve profitability and returns, acknowledging that recent gains still place the bank below the threshold of generating value.
The unexpected 40% windfall tax on banks approved by Italy for 2023 led to a downturn in European bank shares, raising concerns about investor appetite for euro zone assets. ABN Amro's Common Equity Tier 1 (CET1) ratio, a measure of capital strength, decreased from 15.5% to 14.9% over the past year.
Despite the challenges, ABN Amro has maintained an interim dividend of €0.62 per share in line with its established policy. The bank plans to reassess and update its financial targets later in the fourth quarter.
By fLEXI tEAM