ABN Amro shares fell 6% on Wednesday following its latest quarterly earnings report.
The company reported net income of €674 million, driven by net interest income, fee income and low cost of risk. ABN Amro noted that business dynamics remain good.
However, the stock fell as the CET1 ratio disappointed investors. The ratio is a key indicator of a bank’s financial strength and stability, comparing core capital to risk-weighted assets. At ABN Amro, it fell to 13.8% compared to 15.0% a year ago.
Elsewhere, the company’s mortgage portfolio grew by €0.8 billion and its corporate loan portfolio by €0.3 billion, with net interest income continuing to be strong as Amro continued to benefit from the current interest rate environment. In addition, commission income was higher, which was due to “good performance across all client divisions.”
“Our capital position remains strong with a Basel III CET1 ratio of 13.8% and a Basel IV CET1 ratio of around 14%. We continue to focus on optimizing our capital position and are fully committed to generating and returning excess capital. shareholders, coupled with targeted growth,” said Robert Swaak, CEO of ABN Amro.
At the beginning of May, the company completed its third share buyback program worth €500 million, which was announced in February.
Following the report, UBS analysts said ABN reported strong first-quarter results from a profit perspective. However, the fall in CET1 is an “unexpected headwind to the capital return story.”
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Meanwhile, analysts at RBC Capital said ABN’s “encouraging operating trends in the first quarter of ’24 are overshadowed by capital constraints.”
The B3 CET1 rate of 13.8% missed the consensus percentage of 14.3%, and the B4 CET1 rate of 14%, down from 15% in the fourth quarter of 2023, is “now much closer to the 2026 target of 13.5%.” , which leaves less room for further development.” capital distribution, but this may simply be a temporary effect as ABN previously focused on the pros and cons of its capital path,” RBC analysts said.