ABN Amro profit declines

August 16, 2001 Posted: 1024 GMT

LONDON (CNN) -- Rising costs and weak financial markets clipped ABN Amro's second-quarter profit, which fell 21 percent, the Dutch bank said on Thursday.

After-tax profit, excluding one-time items, declined to 671 million ($615 million), or 0.44 a share, from 851 million, or 0.57 a share, a year earlier. Net interest revenue rose 18 percent to 2.66 billion.

Including a one-time profit of 952 million from the sale of European American Bank to Citibank, the company posted net profit of 1.6 billion. ABN sold EAB after buying ING Group's U.S. investment banking arm for $275 million.

ABN's decline in profit came as no surprise after earlier profit warnings and diminishing earnings at rivals, such as Europe's largest bank Deutsche Bank (FDBK), Societe Generale (PGLE) and BNP Paribas (PBNP).

Profits from investment banks, which advise clients on mergers, acquisitions and share offerings, have declined as world markets buckled under the weight of a U.S.-led economic slowdown.

The company said operating expenses rose 11.1 percent to 3.6 billion in the three months to June 30, from 3.25 billion in the first quarter of 2001. it blamed that increase on the integration of recent acquisitions � Michigan National Corp, Alleghany and the ING Barings unit in the U.S.

Earlier this year, faced with a big drop in profit in its home market, ABN announced plans to cut 7,000 jobs, including 770 at its corporate banking unit in Holland. Branch closures and job cuts are expected to save the bank 500 million to 600 million from 2004, the bank said in February.

ABN Chief Executive Rijkman Groenink said on Thursday the bank would "give priority to further strengthening our retail and asset gathering (asset management) franchises." The strategy has already been adopted by its European rivals, which have baulked at the cost of building their own investment banking units.

The Wholesale Clients unit, which includes investment banking, would remain part of its strategy. "However our aspirations with respect to it must be in line with the reality of the situation," Groenink said.

ABN is no longer forecasting 19 percent sales growth at its wholesale unit for the period 2001-2004. The bank expects zero market growth in 2002 but forecast the wholesale unit will outgrow the market by at least two percent.

Note: Search results will open in a new browser window