EUR 850.00 For Business Accounts Only

Morningstar | ABN’s First-Half Net Income In Line With Our Expectations; FVE Maintained

No-moat ABN’s first-half 2018 net income decreased by 19% to EUR 1.3 billion, mainly caused by the PB Asia divestment sale proceeds and the effect of the impairment releases in first-half 2017. On the core revenue side, net interest income increased by 4% due to an incidental release of penalty fees, volume growth and improved margins on corporate loans, and higher mortgage penalty fees, while net fee and commission income declined 4%. We maintain our fair value estimate of EUR 29 per share, along with our no-moat rating.

Operating cost for the period decreased by 4% year over year, mainly due to a 6% decrease in personnel expenses and a 2% decrease in other expenses. Impairment charges stood at EUR 134 million this quarter versus a EUR 96 million impairment release in the second quarter of 2017, mainly attributed to industry impairment in the commercial banking division. This is above our expectations, as we were expecting asset-quality improvement to continue and the reversal to remain.

Management announced plans to shrink the corporate and institutional banking division to ensure the business will deliver returns meeting the group’s return on equity target. The focus is to reduce global sectors, such as trade and commodity finance, and highly cyclical sectors, such as global transportation and natural resources, which will result in a staff reduction of 10% and a restructuring provision expected at around EUR 50 million.