Higher interest rates push ABN Amro's 2023 profit to €2.7 billion - second-highest ever

A fourth-quarter profit of 545 million euros lifted Dutch bank ABN Amro’s 2023 earnings to 2.7 billion euros. The total is the second highest in the bank’s history. The bank announced it will launch a third share buyback round on Thursday to snap up another 500 million euros of its depository receipts and ordinary shares over the next four months.

Like other banks, ABN Amro benefited from the rapidly rising interest rates. It generated more income on loans while spending relatively less on interest on savings because these rates rose less quickly. While the interest income was lower in the last two quarters than in the first half of the year, the bank achieved a strong net interest income of 6.3 billion euros in 2023. It expects similar results for this year.

ABN Amro faced higher costs in quarter four due to further investments in data capabilities and digitalization of processes, but the overall costs for 2023 decreased, CEO Robert Zwaak said. The bank also benefited from impairment releases - money the bank had previously set aside to cover bad loans that came free.

“All client units delivered better results,” Zwaak said, adding that it confirms ABN Amro’s strategy of “being a personal bank in the digital age, serving clients in segments where we have scale.” The bank will continue on this path, focusing on “attractive segments where we can grow profitably, bringing convenience into the daily lives of our clients and expertise when it matters.”

According to Zwaak, the economic prospects remain uncertain. On the positive side, inflation appears to be gradually decreasing, and unemployment in the Netherlands remains low. But there are also many risks. There is a slight increase in the number of bankruptcies and companies needing help from the special management department. Zwaak is also worried about the climate crisis and the geopolitical situation. “I remain concerned about the ongoing uncertainty in the geopolitical environment, especially in Ukraine and the Middle East,” he said.

Despite facing similar challenges in 2023, ABN Amro had a solid year, Zwaak said. The results were good enough that the bank can send more money to shareholders through another share buyback round starting on February 15.

The bank said that the results will lead executives to propose a dividend of 89 cents per share this year. The share buyback program will end no later than June. The bank’s stock traded at 13.435 euros per share at the end of trading on the Euronext Amsterdam exchange on Tuesday. The price jumped immediately above 14.15 euros at the opening bell on Wednesday.

“The capital required for the announced share buyback program has been reserved and is already excluded from year-end capital ratios. The repurchased shares will be canceled following the completion of the share buyback,” the bank wrote.

The Dutch State’s stake in the company, held by NLFI, will continue to reduce to 40 percent despite the share buyback round. “NLFI will participate in the buyback pro-rata on the basis of a 40% interest via off-market transactions, thereby avoiding an increase in its relative stake in the company,” the bank noted.

“The purpose of the share buyback program is to reduce the share capital of ABN Amro,” the bank wrote in a statement. Its common equity tier 1 (CET1) ratio stood at 14.3 percent at the end of the year. This should increase to 15 percent after the dividend is paid out and the buyback program is completed.