ABN Amro shares fall on lack of buyback news as Q2 earnings beat estimates

ABN Amro Bank NV shares fell Aug. 9 after it failed to provide an update on its share buyback plans.

Shares at the third-largest Dutch bank were trading 2.62% lower around 1:00 p.m. Amsterdam time.

The bank needs time to review its capital framework before deciding on further share buybacks, CEO Robert Swaak said during an Aug. 9 earnings call. Its existing framework was developed in 2020, with a number of variables that have since changed or been adjusted, Swaak said.

ABN Amro's next capital framework update will be announced in its fourth-quarter earnings release, scheduled for Feb. 14, 2024, when the bank plans to also issue a buyback update, the CEO said. "We still remain committed to capital return," Swaak said.

The delayed buyback announcement means additional capital distributions in the second half of 2023 are "very unlikely," UBS analysts said in an Aug. 9 note.

ABN Amro has said it will pay an interim dividend of €0.62 per share for the current year. The dividend is higher than expected, yet "some may be disappointed at the lack of further extraordinary capital return," the UBS analysts said.

Strong Q2

The bank booked a second-quarter net profit of €870 million, well above the €570 million mean consensus analyst estimate, company filings show. Operating income came in at €2.22 billion, also above the consensus estimate of €2.16 billion. The results were driven by strong net interest income and loan loss provision releases.

Outlook

The bank expects asset quality to remain solid in 2023 with through-the-cycle cost of risk estimated at 0.20% of average loans.

Interest rate tailwinds may weaken amid deposit mix shifts and increased competition for deposits, interim CFO Ferdinand Vaandrager said. ABN Amro has seen a move to time deposits, while current account volumes have declined.

The pass-through of higher rates to depositors, known as the deposit beta, has remained low, at 20%, Vaandrager noted.

Costs will come in at €5.2 billion in 2023, compared to the €5.3 billion previously expected, ABN Amro said. The bank warned it would not be able to meet its €4.7 billion cost target in 2024 due to inflationary pressures, higher investments in 2023 and a slower-than-anticipated reduction of costs in the bank's anti-money laundering program.