ABN Amro plans to cut 250 jobs in its corporate and investment bank, its worst performing unit, as the majority state-owned Dutch bank continues to shrink back to its domestic market.
The bank, which is 56 per cent owned by the Dutch government, said the fresh restructuring of its corporate and investment bank would retrench from some internationally focused businesses, such as trade finance and commodity finance, and from more cyclical areas.
“Corporate and institutional banking is facing both cyclical and long-term challenges,” said Kees van Dijkhuizen, chief executive. “The return on equity of CIB as a whole does not meet the group return on equity target, as income growth in certain activities has not offset risk-weighted assets growth, impairments and costs.”
Citing the additional challenges of higher capital requirements introduced by global banking supervisors in the latest changes to the so-called Basel committee rules, Mr van Dijkhuizen said the bank was seeking to adapt a more capital efficient model of distributing products rather than keeping them on its balance sheet.
He said the bank would cut 10 per cent of the 2,571 staff in its corporate and investment bank and reduce risk-weighted assets in the unit by €5bn to €34bn. Costs in the unit will be reduced by €80m, or about a quarter, and it will take a €50m restructuring provision.
Shares in ABN, which have fallen 10 per cent in the past three months, rose more than 4 per cent to €24.30 in early trading on Wednesday.
Mr van Dijkhuizen fuelled hopes of a share buy-back or special dividend after the bank’s common equity tier one ratio — a key benchmark of balance sheet strength — increased from 17.6 to 18.3 per cent in the second quarter.
“We expect capital generation to continue, improving our position to distribute capital in addition to the targeted dividend payout of 50 per cent of sustainable profit,” he said.
ABN reported quarterly net profits of €688m, down 28 per cent from the same period last year when it was boosted with the proceeds of selling its Asian private bank and a write-back of unused provisions for bad loans.
Its return on equity was 12.5 per cent in the first six months of the year, down from 16.7 per cent in the same period last year.
Maxence Le Gouvello Du Timat, analyst at Jefferies, said the bank’s new restructuring plan “seems rational and reachable” and it had produced “sound results but we don’t see the stock outperforming the sector.” ABN is due to present a strategic update to investors on November 16.
Royal Bank of Scotland, Fortis and Santander teamed up in 2007 to acquire ABN and break it up in an ill-judged €71bn takeover bid — the biggest ever for a bank — shortly before the financial crisis struck, leaving the Dutch government to bail out the remaining domestic lender.
Since it was privatised in 2016, shares in ABN have risen by a fifth — outperforming rivals such as ING — amid persistent speculation that it could be the target of a takeover bid.
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