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Impairments Surge Hit ABN AMRO Results; Group Cuts CIB Operations

Tom Burroughes, Group Editor , London, 13 August 2020

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The group is cutting its corporate and institutional banking arm, shedding trade and commodity finance activities, and focusing some operations only on European clients. The bank said it wants to focus on areas where it can achieve scale.

ABN AMRO, the Netherlands-based group which offers private banking among its services, said yesterday that it had logged a second-quarter loss of €5 million ($5.9 million), sliding from a €693 million profit a year earlier and hit by a surge in impairment charges. It also announced cuts to its corporate and institutional banking arm, shedding some business entirely.

Operating income fell by 15 per cent on a year ago to €1.985 billion, but rose by 3 per cent on the previous three months. Operating costs fell by 8 per cent to €1.198 billion, it said in a statement. Impairment charges surged to €703 million in Q2 from €129 million a year earlier.

At the end of June ABN AMRO had a Common Equity Tier 1 ratio – a standard international yardstick of a bank’s capital buffer – of 17.3 per cent, as measured under the Basel III accords.

The group gave few financial details of its private banking business.

Cutbacks
The firm said that its corporate and institutional banking arm will focus on clients in Northwest Europe and Clearing will exit all non-European corporate banking activities. Trade and commodity finance activities will cease and the natural resources and transportation and the logistics arm will focus on European clients only. 

The bank also said that “stricter lending criteria and credit limits have been set to also contribute to a moderate risk profile.”

The corporate and investment banking arm will be split into core and non-core activities. The non-core activities (around 45 per cent of CIB’s client loans, representing about 35 per cent of CIB’s risk-weighted assets and over 10 per cent of total RWA) are expected to be wound down in the next three to four years. 

Around 800 full-time equivalent staff currently work in non-core activities, Robert Swaak, ABN AMRO’s chief executive, said. 

The wind-down of non-core activity is subject to regulatory approval and should be capital accretive over time.

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