ABN Amro Beats Profit Estimates, Cites Share Buyback Talks

(Bloomberg) --

ABN Amro Bank NV reported third-quarter profit that beat estimates as the Dutch lender released money it had stashed for doubtful loans and said it’s in talks with its regulator about buying back stock.

The bank, based in Amsterdam, saw net income jump 14% from a year earlier to 343 million euros. That was higher than the 261 million-euro average estimate of analysts surveyed by Bloomberg.

Banks are taking a rosier view of the creditworthiness of borrowers as pandemic-struck economies reopen after massive government support helped clients get through the lockdowns. That has left ABN Amro and fellow lenders in the delicate position of boosting shareholder payouts without drawing the ire of the European Central Bank, which eased conditions for lenders during the health crisis.

Given a “benign” environment for credit, the bank released 12 million euros of reserves for doubtful loans, after stashing 270 million euros in the year earlier period. The bank also said the outlook for the full year improved, saying provisions are set to drop to about zero. 

The ECB’s top supervisory official, Andrea Enria, warned banks this month not to “jump the gun in terms of releasing provisions and create profitability now that they could regret later.”

ABN Amro said it has retained 380 million euros of reserves that function as a “management overlay” to reflect uncertainty after government support measures ended.  

The bank, which has one of the highest financial strength levels among European banks, said it is “in a constructive dialogue” with its regulator on returning funds to investors via share buybacks after it reports 2021 results next year.

Dutch banks have seen their reputation suffer after bailouts in the financial crisis and a series of scandals in subsequent years. ABN Amro suffered a setback this year in repairing its image after it was found to not have sufficiently followed market rates when setting interest for revolving consumer loans with floating rates. The bank took a 217 million-euro charge to compensate clients in the quarter.

ABN Amro Chief Executive Officer Robert Swaak is also winding down large parts of its investment bank activities to focus on retail and commercial banking. The bank’s earnings in the prior-year quarter were hit by 153 million euros of overhaul charges, mainly from the investment bank.

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