ABN Amro takes share price knock after weaker-than-expected Q3 lending income

Shares in ABN Amro Bank NV fell sharply after its reported third-quarter lending income missed estimates.

The Dutch lender's net interest income — the difference between interest revenue and interest expenses — reached €1.53 billion for the quarter, lower than the €1.63 billion average analysts' estimates compiled by the bank. The result was down 5% from the previous quarter, mainly due to deposit migration to higher yielding products, a shift to other income, limited asset margin pressure and lower trading results, CEO Robert Swaak told analysts during the bank's earnings presentation.

The bank expects most of the deposit migration to take place in 2023 and then slow down in 2024, Swaak said.

"Although we cannot predict how our [deposit] margins will develop, our current view is that [net interest income] may recover a good part of this quarter's decline during 2024," the executive said.

Its shares were down nearly 9% as of midday Amsterdam time.

ABN Amro, which has been under pressure to return more money to investors, did not provide an update on its capital distribution plans. Swaak said this will depend in part on the effects of strategic decisions made in the last two-and-a-half years. Executives said more details will be given when the lender presents its updated financial targets and capital framework with its fourth-quarter results.

CFO Ferdinand Vaandrager, meanwhile, said there is "more upside [for distributions] than downside from current levels."

The bank's third-quarter profit ticked up 2% to €759 million from a year ago, helped by high other income and impairment releases. The bank also benefited from a strong demand for credit, with its mortgage and corporate loan books increasing by about €400 million and €300 million, respectively, and its market share in mortgages rising to 15%.

For the January to September period, its profit rose 42% to €2.15 billion.

Nine-month operating expenses fell 8% to €3.77 billion. ABN Amro said it now expects full-year costs to be between €5.1 billion and €5.2 billion, versus previously lowered guidance of €5.2 billion.

"While we remain committed to cost discipline, we expect higher costs for data capabilities, further digitalization of processes and sustainable finance regulation in the coming year," Swaak said.