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ABN Amro: Q1 2020 Loss on Lower Income and Jump in Provisions

ABN Amro Bank N.V. (ABN Amro or the Bank) reported a net loss of EUR 395 million in Q1 2020, compared to a gain of EUR 478 million in Q1 2019. The drop was primarily driven by lower revenue and significant loan loss provisions of EUR 1.1 billion in this quarter, reflecting the deterioration in economic conditions due to the COVID-19 pandemic and the decline in oil price.

The ongoing revenue pressure from the low interest rate environment continues. ABN Amro's income before provisions and taxes was down 17.3% year-on-year (YoY) to EUR 624 million in spite of operating expenses further decreasing according to plan. Net interest income, which is the Bank's main contributor to operating income, was down by -2.9% YoY, mainly due to ongoing margin pressure, particularly on the deposit side. Net fee and commission income was up 5.8% YoY benefitting from increased trading flows, while other income was EUR 135 million lower YoY, impacted by fair value adjustments. Operating expenses were down 2.0% YoY to EUR 1,300 million, despite increased AML-related costs. The Bank remains on track with regard to its cost target of around EUR 5.1 billion in 2020.

At the same time, ABN Amro experienced a significant increase in loan loss provisions. The Bank's impairment charges increased to EUR 1.1 billion in Q1 2020, compared to EUR 0.1 billion in Q1 2019. This was driven by two exceptional client files (clearing and commodity finance), and upfront provisioning for sectors most impacted by COVID-19 and the decline in oil price. In this context, the Bank announced more de-risking is to come in CIB, making it a key short-term priority. Overall, ABN Amro expects its cost of risk to be around 90 bps of average customer lending for 2020. ABN Amro has also provided guidance that exposures of approximately EUR 22 billion are immediately impacted by the COVID-19 outbreak and the oil price decline.