The private banking arm of Dutch lender ABN Amro had a lacklustre performance in Q4 2020, with outflows in its home market as a result of lowering the threshold for negative interest rates.
The group too suffered with an annual loss of €45m and scrapped its dividend distribution for 2020.
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Private banking highlights
The division’s profit for the three-month-period ended December 2020 was €31m, down 34% from €46m in the same quarter last year.
Operating income at the unit fell 7% to €280m from €302m. Net interest income of €154m was 3% lower than the previous year, weighed down by ongoing pressure on deposit margins.
Net fee and commission income of €130m dropped slightly from the prior year but improved from the previous quarter, driven by higher asset management fees owing to positive stock market developments.
Operating expenses dipped 1% to €234m from €236m.
Client assets increased since Q3 2020. The bank attributed this growth to the increased value of securities as a result of positive stock market developments.
Net new assets were €1bn negative in the quarter.
Group performance
In Q4 2020, the group registered a net profit of €54m, which was down 83% from €316m in the prior year but surpassed estimates.
Operating income dropped 14% to €1.8bn from €2.1bn while operating expenses rose 1% year-on-year to €1.4bn.
Pressure on deposit margins in a low interest rate environment and lower average corporate loan volumes due to the wind-down of the CIB non-core portfolio led to a 15% decrease in net interest income to €1.35bn from €1.58bn.
However, the bank’s impairment charges decreased 30% to €220m from €314m. The bank anticipates the impairments to drop further this year.
Of the €220m impairments in the final quarter of 2020, around €169m was linked to the economic impact of the Covid-19 pandemic as well as related oil price developments.
ABN Amro CEO Robert Swaak said: “Net interest income continued to be impacted by pressure on deposit margins and lower corporate loan volumes, partly due to the wind-down of CIB non-core. We delivered on a EUR 1.1 billion cost programme, reaching our cost target of EUR 5.1 billion for 2020 (excluding restructuring provisions for the CIB wind-down).
“The financial results for 2020 were marked by the impact of Covid-19 and large exceptional client files. We closed the year with a modest loss of EUR 45 million. The resulting ROE for 2020 was an unsatisfactory -0.8% and the cost/income ratio was 66%. Excluding CIB non-core, ROE was around 5%.”
