ABN Amro profit up over 55% to €1.9 billion due to rising interest rates

One of the largest banks in the Netherlands, ABN Amro, saw profits last year rise by more than half compared to a year earlier. The bank saw its net profits reach nearly 1.9 billion euros, up from 1.2 billion euros in 2021. The bank said it intends to reward shareholders, including the Dutch State.

Rising interest rates were a key factor in the financial group’s performance. The interest rates mean ABN Amro can earn wider margins on savings that people have deposited with the bank. Its income on interest has also increased.

Growth has also been seen in the bank’s mortgage portfolio in recent months, while costs fell across the board as a result of previously initiated reorganization moves. ABN Amro now also thinks it is in a strong enough position to reward its shareholders, which it will do by paying out dividends, and by buying back outstanding shares valued at half a billion euros.

The latter a sizeable amount of money will go to the Dutch treasury. The Netherlands holds will maintain its stake of 56.3 percent, and will only sell off those shares necessary to maintain that level of ownership. The Dutch State has been the majority shareholder in ABN Amro since the bank was nationalized during the 2008 credit crisis.

It is estimated that the treasury will earn 281.5 million euros in cash by selling off shares at the current price. The Netherlands is also in the process of receiving a dividend from the bank of 0.99 euros per share, or 505.9 million euros in total. About a third of that was paid last autumn, according to RTL Nieuws.

What also helped ABN Amro’s profit jump was that the annual figures for 2021 still were strongly affected by one-off items. The bank concluded a settlement of 480 million euros with the Public Prosecution Service for shortcomings in combating money laundering. A substantial amount of money was also set aside to compensate customers who had paid too high interest on a loan. The bank also earned over 300 million euros for closing the sale of its head office that year, NOS noted.

Due to the high inflation of recent times, there is still a risk that some of the bank’s customers could find themselves into trouble, but according to ABN Amro it is not yet necessary to earmark money for a fund to cover loans that may not be repaid. There has been a slight increase in companies newly referred to the department tasked with handling businesses in financial trouble. The increase was “not significant,” said CEO Robert Swaak.

The bank remains cautious when it comes to estimating the long-term impact of inflation. Specifically in the Netherlands, high interest rates will continue to put pressure on the housing market, Swaak indicated. But there are also positive developments, he said. For example, the labor market in the Netherlands is still very strong and the impact of inflation has been somewhat limited because many people kept a higher level of savings during the coronavirus pandemic, according to Swaak.