Post on 26-Dec-2015
ABN AMRO reports record net profit Full Year Results 2003
4 February 2004
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Record net profit of EUR 3,161 mln and proposed dividend up 5 cents
Compared to the full year results 2002
Net profit up by 31.1%
Broad based revenue growth (2.8%)
Record high operating result (EUR 6,208 mln)
Provisioning down (-24.8%)
Substantial improvement in efficiency ratio to 67.0%
Tier 1 ratio (8.15%) beats target for year
Increase in total dividend to EUR 0.95
Intention to withdraw Dutch preference shares
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Record high 2003 operating result, even when adjusting for one-offs
Adjusted for one-
offs, the operating
result amounts to
EUR 6,047 mln.
This is a record high.
Adjusted for one-
offs, the net profit is
EUR 3,048 mln
(+27.0% y-o-y)
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Efficiency ratio (%)
Efficiency ratio is trending down, due to improvement in nearly all BUs
The efficiency ratio of BU NL was positively affected by one-offs, while the efficiency ratio of BU PC was negatively
affected by one-offs in 2003. On an adjusted basis, the efficiency ratio of both BUs shows a downward trend
40
50
60
70
80
90
100
Group BU NA BU NL BU Brazil BU RoW WCS BU PC BU AM
2001 2002 2003
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Highlights of 2003
Continued client focus Increased customer satisfaction
in BU NL. Higher client
revenues in WCS
Selective divestitures and acquisitions to
increase long-term growth prospects
Business mix optimisation
Value of ABN AMRO Brand Rebranding
Optimise Corporate Governance Nomination rules SB and MB, abolishment of
Stichting Prioriteit
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Intention to withdraw Dutch preference shares
New Corporate Governance Code (the Tabaksblat code)
We will apply all principles of the code and implement all but a few best practice provisions
We will report extensively on these issues in our 2003 Annual Report and we will have a discussion on our corporate governance during the General Meeting of Shareholders
We will withdraw our defence mechanism. In this regard it is our intention to withdraw the Dutch preference shares on repayment of the nominal value and accrued dividend over 2004
Operating Performance
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4.0
5.0
6.0
7.0
2002 2003
Reported operating result FX effect
16.0
17.0
18.0
19.0
20.0
2002 2003
Reported revenues FX effect
FY operating result increased by 24% at constant exchange rates
Revenues, adjusted for currency effect, increased by 12.4% in 2003 vs 2002
Operating result, adjusted for currency effect, increased by 24.0% in 2003 vs 2002
12.4%
2.8% 13.8%
24.0%
Net profit, adjusted for currency movements, increased by 41.7%
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Revenues Q4 2003
Highest ever quarterly profit
Revenues were slightly up, despite the end of the refinancing boom in the US
Operating expenses were up due higher bonus accruals in WCS, the implementation of the new collective labour agreement in BU Brazil, and the acquisition of Sudameris
Operating result down, but net profit reached record high level in Q4
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 4,861 4,827 0.7 2.8
Expenses 3,333 3,195 4.3 (1.9)
Operating result 1,528 1,632 (6.4) 13.8
Net profit 857 832 3.0 31.1
Efficiency ratio 68.6% 66.2%
WCS30.7%
PC5.3%
AM2.9%
Other8.0%
C&CC53.1%
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BU NL has performed well in a recessionary environment
Revenues were stable when adjusted for EUR 120 mln revenue related to the release of credit spreads overaccrued in Amstel securitisation vehicle
Improvement in customer satisfaction, particularly in both mass affluent segments and SME
Expenses were up by 4.5% due to streamlining initiatives (EUR 23 mln)
Adjusted for incidentals, the operating result was down by 3.1%
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 910 790 15.2 7.6
Expenses 656 628 4.5 (1.4)
Operating result 254 162 56.8 48.9
Net profit 121 63 92.1 52.0
Efficiency ratio 72.1% 79.5%
Revenues Q4 2003
Commissions 15.5%
Other 0.3%
Interest84.2%
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% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 942 1,144 (17.7) (0.3)
Expenses 570 593 (3.9) (2.1)
Operating result 372 551 (32.5) 1.6
Net profit 219 300 (27.0) 12.0
Efficiency ratio 60.5% 51.8%
BU NA results are in line with expectations
The US dollar depreciated on average by 6.4% against the Euro during Q4
In local currency terms:
Revenues were down by 11.8% due to a 30% decrease in mortgage revenue and a USD 25 mln addition to the mortgage liability reserve
Expenses are up by 2.8% due to USD 20.5 mln one-off costs and the impact of FAS 91
Revenues Q4 2003
Interest59.0%
Other 22.2%
Trading3.3%
Commissions 15.5%
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Volume growth in BU Brazil is gaining momentum
The Brazilian real depreciated by 4.9% against the Euro compared to Q4
Operating and net result of Sudameris amounted EUR 24 mln and EUR 7 mln
In local currency and excluding the impact of Sudameris:
Revenues decreased by 7.8% as a result of declining interest income on the investment portfolio
Expenses increased by 12.6% due to collective labour agreement
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 463 447 3.6 (2.4)
Expenses 326 262 24.4 (10.7)
Operating result 137 185 (25.9) 16.0
Net profit 64 85 (24.7) (47.3)
Efficiency ratio 70.4% 58.6%
Revenues Q4 2003
Trading2.4%
Interest75.1%
Commissions 14.5%
Other 8%
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Integration of Sudameris is ahead of plan
Management presentation and road shows throughout the country immediately after completion
HR, Treasury, Finance and Risk Management under the responsibility of BU Brazil management
Annualised synergies of EUR 14 mln realised in 2003
18 working groups have been delegated the authority to further manage the integration
Integration costs in 2004 will lead to temporary deterioration of the efficiency ratio
Annual synergies of BRL 300 mln per annum as of 2005
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Results C&CC RoW are driven by strong performance of Bouwfonds
Bouwfonds: revenues up by 4.7% due to mortgage refinancing and better margins. Operating result stable due to investments in special projects and performance based compensation
NGM: improvement in Asian economic environment led to release of Net Interest Income accruals
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 268 251 6.8 (2.5)
Expenses 189 153 23.5 (4.3)
Operating result 79 98 (19.4) 0.8
Net profit 47 72 (34.7) 12.9
Efficiency ratio 70.5% 61.0%
Revenues FY 2003
Bouwfonds & other50%
NGM Europe19%
NGM Asia31%
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C&CC revenues were flat due to balanced business mix
Limited revenue decrease as EUR 120 mln revenue in BU NL offset decline in US mortgage revenues (-30.7% in local currency)
Operating expenses increased led by incidentals in BU NL (EUR 23 mln) and BU NA (EUR 17 mln) and performance-based compensation at Bouwfonds
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 2,583 2,632 (1.9) 1.5
Expenses 1,741 1,636 6.4 (3.6)
Operating result 842 996 (15.5) 10.8
Net profit 451 520 (13.3) 6.0
Efficiency ratio 67.4% 62.2%
Revenues Q4 2003
Netherlands35.2%
RoW10.4%
Brazil17.9%
NA36.5%
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WCS is on track to deliver positive EP for 2004
Strong increase in revenues across nearly all BUs, reflecting benefits of client-led strategy. Benefits of client approach are also underlined by client satisfaction surveys, which show continued improvement.
Expenses up due to higher bonuses following improved results in third and fourth quarter, investments in BU FM and restructuring costs in BUs WoCa and Equities.
Operating result up by 6.4%. Adjusted for FX, operating result was up by 10%
Commitment of positive EP was achieved for second consecutive quarter.
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 1,491 1,360 9.6 (0.1)
Expenses 1,210 1,096 10.4 (3.5)
Operating result 281 264 6.4 21.0
Net profit 163 134
Efficiency ratio 81.2% 80.6%
Revenues Q4 2003Other7%
Interest31%
Commisions25%
Trading37%
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BU Private Clients delivers strong revenue growth
Substantial increase of revenues largely attributable to increased volumes on the
back of improved customer sentiment and the implementation of focused sales
initiatives
Expenses flat, reflecting the success of cost measures taken during the year
Net profit up by 73%, partly due to tax reliefs in several jurisdictions
Revenues Q4 2003
Interest37.8%
Commissions 49.4%
Trading2.7%
Other 10.1%
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Higher performance fees in Asset Management support Q4 results
Revenues up on the back of higher performance fees and improved market conditions
Expenses increase, partly driven by alignment of performance based compensation
with improved result in fourth quarter and incidentals
Adjusted for currency movements, AuM up by 2.6% to EUR 160 bn compared to the
level of AuM at the end of the third quarter
% change
(EUR mln) Q4 03 Q3 03Q4 03/Q3 03
fy 03/fy 02
Revenues 142 125 13.6 (6.2)
Expenses 112 96 16.7 (5.9)
Operating result 30 29 3.4 (7.4)
Net profit 21 19 10.5 (5.6)
Efficiency ratio 78.9% 76.8%
Revenues Q4 2003
Other 1.3%
Trading1.3%
Commissions 96.6%
Interest0.8%
Asset Quality and Capital
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Overall quality of the portfolio remains solid
Overall provisioning slightly up in Q4
WCS provisioning increases due to exposure to Parmalat. The quality of the portfolio has further improved in the fourth quarter
In C&CC, provisioning is stable. Provisioning in BU NA is down and stable in BU NL and BU Brazil. Provisioning in RoW is slightly up.
Overall quality of the portfolio remains solid.
Annualised provisions / RWA (%)
0.0%
0.5%
1.0%
1.5%
2.0%
2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03
C&CC WCS ABN AMRO
Loan Loss Provisions per SBUs (EUR mln)
SBU Yr 02 1Q03 2Q03 3Q03 4Q03 Yr 03
C&CC 881 181 217 205 214 817
WCS 742 156 83 54 106 399
PCAM 13 3 2 3 1 9
Total 1,695 343 305 303 323 1,274
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BU NL provisioning remains high due to SME portfolio
BU NL commercial portfolio by clientBU NL total portfolio
Provisions in 2004 expected to be
similar as in 2003, with a peak in
the first half
C&CC SME portfolio
Commercial32%
Consumer68%
Corporate Clients
53%SME47%
46.7% 48.9% 47.3% 47.6% 47.7%
47.1%50.6% 52.1% 52.1% 51.5%
6.2%0.5% 0.6% 0.3% 0.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec. 02 Mar. 03 Jun. 03 Sep. 03 Dec. 03
UCR 1,2,3 UCR >=4 Not Rated
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Our Tier 1 target of at least 8% has been reached ahead of schedule
Tier 1 ratio improvement to 8.15% due to high level of retained earnings
Our core Tier 1 reached a level of 5.91%, close to 2004 target of at least 6.0% The gearing ratio decreased for the seventh consecutive quarter to 27.5%
Tier 1 and core Tier 1 are expected to be at least 8.25% and 6.0% by end 2004
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Expected net USD profit for 2004 and 2005 is fully hedged
Our expected net USD profit for 2004 and 2005 has been fully hedged
In view of improvement of our capital ratios and structural weakness of USD, we have decided to end our full Tier 1 hedging strategy
Strategic Update and Outlook
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Multi-regional strategy A multi-regional strategy with a focus on commercial and
retail banking, supported by an international wholesale franchise. We aim to improve our shareholder returns by:
1. Creating value for our clients by offering high-quality financial solutions that best meet their needs and long-term goals
2. Focusing on consumer and commercial clients in chosen home markets, selected wholesale clients with an emphasis on Europe, as well as financial institutions and private clients
3. Leveraging our advantaged product and people capabilities to the benefit of all our client bases
4. Sharing expertise and operational excellence across the Group
5. Creating ‘fuel for growth’ by optimally allocating capital and talent
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This strategy has led to improved performance and value creation
Peer Group TRS Tracker 2001 -2004 Peer Group TRS Tracker 2002 -2005
ABN AMRO: #13 ABN AMRO: #7
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Three months average price ABN AMRO:1 January 2001 : EUR 25.6929 January : EUR 18.57
Three months average price ABN AMRO:1 January 2002 : EUR 17.8153229 January 2002 : EUR 18.57
Peer Group Top 5 Peer Group Median ABN AMRO Peer Group Top 5 Peer Group Median ABN AMRO
29 January 2004 29 January 2004
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Focus on group synergies is a key priority for 2004
Increasing focus on realisation of revenue and cost
synergies driven by:
New MB governance structure increases Group focus
Creating of Group Business Team to build a broader leadership and
further encourage cross-SBU initiatives
Creating Group Shared Services to realise operating efficiency and
further cost savingsGSS will look at opportunities for additional synergies in the following areas: – Procurement– Transaction Processing– IT InfrastructureMore details will be given in Q2 2004
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C&CC will continue to deliver underlying growth in 2004
In Brazil, the decrease of interest rates will spur significant loan growth.
In the Netherlands, increasing client satisfaction will generate revenue growth (excl. extraordinary result of EUR 231 mln in 2003) in spite of economic weakness
C&CC RoW will benefit from organic growth in NGM
In the US, growth of commercial banking will partly offset the fall out of the mortgage refinancing boom
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Net profit outlook for BU NA remains valid
The outlook for 2004 – net profit lower by EUR 150 mln to EUR 250 mln compared to 2003 – remains valid,...
Assumptions:- Expected market origination volume 2004 to be USD 1.4 trillion
- Therefore no refinancing
- Stable market share for BU NA (approx. 4.0 to 4.5%)
- Margins below 30 basis points
- Commercial loan growth
… despite new mortgage initiatives to further develop our profitable mortgage franchise
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WCS will show substantial growth
WCS revenues are expected to increase on the back of further improvements across all client and product BUs– We expect a continuing increase in market share with our P&K clients
– Higher revenues from the BU FM are based on specific new initiatives in Credit, Rates and FX activities as well as continuing benefits from repricing in PMG
– Higher revenues from the BU WoCa expected from enhanced offer, geographic and client focus and cost efficient delivery
– The BU Equities and BU Corporate Finance are well positioned to benefit from better market conditions. The BU Equities will also benefit from investments in derivatives
– Private Equity will benefit from increased exit opportunities
Structural approach to cost savings provides cushion to invest further in core clients and product franchises
Provisioning is expected to trend lower
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BU Private Clients continues to build up its on-shore network
ABN AMRO Private Clients ranks among the world’s top 10, with EUR 102 bn assets under Administration (AuA)
In the Netherlands, we are the clear market leader
In France, we are the leading foreign private bank, well positioned after restructuring completed in 2003
In Germany, we are building a leading position via the integration of former AAPC Germany, Delbrück (acquired in 2003) and BethmannMaffei (acquired in 2004), operating as Delbrück BethmannMaffei
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During and beyond 2004, we expect significant organic growth in Asia
India - Total clients Greater China - Total Clients
88.0%
Greater China includes Taiwan and Hong Kong
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200,000
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400,000
500,000
600,000
700,000
2002 2003
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2002 2003
35.0%
338,000
635,000
500,000
675,000
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2004 Outlook
“We expect 2004 to be better than 2003 with a continuing improvement in our operating performance and net profit (albeit at a slower pace).”
“Based on our 2003 results and our confidence in 2004, we will propose to shareholders to increase the final dividend from 45 to 50 euro cents, leading to a total dividend of 95 euro cents for the year.”
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In conclusion, we are well geared for future growth
Demographics in Asia and Europe
Long-term focus
Group synergies
Customer focus
Leveraging our international network
Long-term shareholder value