ABN Amro profit rises on lower charges

ABN AMRO, the state-owned rump of the former leading Dutch-based international bank, has reported a jump in underlying net profit thanks to higher interest income, lower charges and a gain on its debt buy-back.

However, after some 1.4bn euros (£1.2bn) in costs arising from the mandatory sale of part of the Dutch commercial bank, separation, integration and restructuring, it had a net loss of 627m, compared with a profit of 325m a year ago.

The group is now made up of the ABN AMRO and Fortis Dutch retail banking activities, as well as commercial and merchant banking services for Dutch firms, and private banking units in 13 countries with a growth focus on Asia.

"ABN AMRO is well on its way to improve the reported and underlying profitability of the bank as synergies will start to emerge from now on and integration costs will start to decline," chief executive Gerrit Zalm, a former finance minister, said in a statement.

"ABN AMRO Bank and Fortis Bank Nederland merged on 1 July 2010. It is very encouraging to see the positive reactions so far from staff and customers alike," he added.

The bank said loan impairments fell 47 percent on the back of an improving Dutch economy, while impairments on the mortgage portfolio were marginally lower. Staff numbers were down 10 per cent.

Shareholders equity increased by 2.9bn euros to 11.7bn, primarily the result of the conversions of 2.6 billion of mandatory convertible securities held by the Dutch state into equity and the remaining state capital injection of 490 million.

The state has all of the ordinary shares and most of the preference shares. The banking group ABRGPA.UL has many listed and tradeable debt instruments from notes to perpetuals.

The Dutch state pumped about 24 billion euros into the local ABN AMRO and Fortis entities after the dramatic failure of a three-pronged hostile takeover of ABN AMRO in 2007 by Royal Bank of Scotland (RBS.L), Fortis and Banco Santander (SAN.MC).

Their bid trumped an agreed bid by Barclays backed by Bank of America, but the funding costs proved too high in the ensuing economic downturn and credit crisis.

The Dutch group has roots going back to 1720 and only five years ago had a global network including a big US presence but was frustrated in efforts to expand in Italy.

The bank said it carefully monitored new regulatory developments like Basel III.

"Based upon the current preliminary guidelines of Basel III and the quality of ABN AMRO's capital basis, ABN AMRO is relatively well positioned for Basel III," it said.

The bank was slated to be privatised in 2011 or later.