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Strong operating performance driven by strict cost controlSecond quarter results 2002
8 August 2002
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Strong operating performance driven by strict cost control
First half 2002 performance:
Revenues flat (+0.4%)
Operating expenses are trending down (-2.1%)
Operating result up (6.9%)
Provisioning was driven up by an unprecedented level of corporate defaults due to perceived fraudulent practices
Efficiency ratio improved by 1.8% to 71.0%
Tier 1 ratio up to 7.15%, a 0.6% increase compared to the first half 2001
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Restructuring decisions have begun to pay off in first half of 2002
Overall revenues down in the first half of 2002, with more stable
flow revenues mitigating the downturn in volatile businesses
Cost base reflects the positive impact of the restructuring
decisions, particularly TOPS and US domestic closures
Expenses have come down sharply and we expect it to fall by an
additional 5% in the second half of 2002
Aggressive capital management has remained a key theme.
Target of RWA reduction of EUR 20 bn will be achieved by year
end. A further EUR 10 bn reduction is targeted by 2004
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WCS will continue to sharpen its strategic focus
Client-led, integrated wholesale bank with a European focus
Focus on profitable Financial Institutions and Large Cap Clients
Grow our strong Global Financial Markets and Loan Product businesses
through integrated delivery of value-added Debt and Treasury products
Position our strong Global Transaction Services franchise for growth
through delivery of an integrated suite of Working Capital products
Reposition our Corporate Finance and Equities businesses to deliver
positive operating results by focusing on our positions of strength
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Focus Equities and Corporate Finance on positions of strength
Cost base of Corporate Finance and Equities has been reduced by
over 30% since Q2 2001
Further reductions coming in the second half of 2002 from both our
US restructuring and actions announced today
A 400 to 500 headcount reduction will be implemented without
additional restructuring charge
Equities and Corporate Finance will focus on existing positions of
strength
Committed to profitability in 2003 without relying on market recovery
Operating performance
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Interest53%
Commissions 26%
Trading8%
Other 13%
Operating performance of the second quarter was good
Revenues held up remarkably well despite the weak economy
Expenses have continued to come down, driven by WCS and BU US
Efficiency ratio has further improved
Revenues Q2 2002
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Good performance in C&CC was driven by all franchises
Revenues stable
Expenses higher due to incidentals in BU NL
Strong performance despite adverse currency movements
Operating result Q2 2002
Brazil15%
Netherlands13%
US63%
RoW9%
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Interest73%
Commissions 21%
Trading1%
Other 5%
BU NL restructuring is on track
Revenues increased due to higher net interest revenue
Expenses up due to incidentals but staff costs trending down
Conversion of the branch network is on track. Target of EUR 400 mln
annual cost savings as of 2004 is maintained
Revenues Q2 2002
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Interest56%
Commissions 16%
Trading3%
Other 25%
BU US posted another quarter of growth and improved efficiency
Revenues went up by 7.1% in local currency: mortgage origination stabilised, value of mortgage servicing rights increased
Expenses came down due to strict cost control and lower mortgage related expenses
Revenues Q2 2002
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Interest74%
Commissions 16%
Other 10%
Strong performance in BU Brazil despite market volatility
Revenues were up 1.4% in local currency
In local currency, expenses were up 10.1% driven by higher staff costs and automation costs related to the opening of new branches
Effective tax rate is an integral part of the BU operating efficiency.
Net profit increased by 68.2% to EUR 143 mln
Revenues Q2 2002
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PC and AM were affected by difficult market conditions
PC commissions and asset values were down, particularly in France and International Private Banking. Operating performance was affected by higher expenses, in part due to further investments in the Dutch franchise
Resilient AM revenues despite the significant reduction in the value of AuM and associated revenues, in line with market conditions. Costs were contained enabling AM to deliver a satisfactory operating performance
Revenues Q2 2002
Interest27%
Other 4%
Commissions 68%
Trading1%
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WCS improved its operating performance despite weak markets
Modest decline in revenues due in part to stable flow business
Expenses sharply down, driven by TOPS, strict cost control and the closure of US Equity & Corporate Finance domestic business
Operating result and efficiency ratio improved significantly
Interest39%
Trading22%
Other 4%
Commissions 35%
Revenues Q2 2002
Asset Quality and Capital
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Unprecedented level of corporate failures drove provisioning up
Provisioning rose sharply due to
an unprecedented level of
corporate failures triggered by
perceived fraudulent practices
Decrease expected in HY02,
barring any force majeure
Slightly higher level for the year
assumed due to Q2 levels
Quality of the portfolio remains
satisfactory
0.0%
0.5%
1.0%
1.5%
2.0%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
C&CC WCS Group
Annualised provisions / RWA
Provisioning (EUR mln)
SBU 1Q01 2Q01 1Q02 2Q02 YTD 02
C&CC 176 220 255 231 486
WCS 92 40 111 345 456
PCAM 3 -1 1 0 1Total Group 267 253 390 582 972
(%)
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Tier 1 has improved despite Brazil
Adverse currency movements have impacted Tier 1 solvency
The impact of Brazil was 19 basis points in the second quarter
The capital release from RWA reduction in WCS has improved Tier 1 ratio
(EUR bn) 30 06 02 31 12 0130 06 02/ 31 12 01
% change
30 06 02/30 06 01
Total assetsShareholders’ equityGroup capitalRisk-weighted assets
Tier 1 ratioTotal capital ratio
607.511.0231.3
250.5
7.15%10.80%
597.411.7934.0
273.4
7.03%10.91%
1.7(6.5)(7.9)(8.4)
(1.2)(4.5)(9.8)
(12.4)
Outlook
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Outlook unchanged
Given the level of corporate failures in the second quarter, we have assumed a slightly higher level of provisioning for the year
We expect net profit, excluding extraordinary items, to be in line with 2001
Interim dividend stable at EUR 0.45 per ordinary share
AppendicesSecond quarter 2002 results
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Pensions Accounting policy migrated to US GAAP on 1 January 2002. US
GAAP allows the spreading of potential increases of the annual
pension costs
Accrued benefit cost is fully accounted for in the liabilities under
provisions
Annual pension costs would have to increase as and when
unrecognised net actuarial gains / (losses) are greater than 10% of
the Projected Benefit Obligation
Any increase would be spread over the average remaining service
term - 11 years at present
Update on WCS
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We will build on our strength in Treasury and Debt products and ...
Enhance our ability to meet key clients’ needs by providing an integrated
offer to include capital raising, capital management and risk advisory
Achieve this objective by combining our structuring and origination
capabilities in Loan Products with our distribution capabilities in Global
Financial Markets
Build upon and profitably grow our strong positions in primary marketsEurobonds (No. 7)Euro denominated DCM(No. 3)European Asset Backed Securitisation (No. 2)Global Loan syndication (top 10 rankings in Healthcare, Utilities, Telecom, Oil & Gas)EMEA Project Finance (No. 9)
Source: Euromoney, IFR, Project Finance magazine, Loanware
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… our strength in Working Capital products
Expand the scope of GTS to deliver an integrated and tailored
approach to the working capital needs of our clients
Provide corporate treasurers with range of working capital
products designed to reduce working capital cycle and enhance
overall returns
Leverage our advantage product range and network reach to grow
our market-leading positionsGlobal Cash & Payments (No. 4)Global Foreign Exchange position (No. 8)Global Custody (No. 6 in w/ Mellon)
Source: Euromoney, IFR, Project Finance magazine, Loanware
Currency variations and hedging
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Impact of currency variations on Group performance
Revenues
Expenses
Operating result
Pre-tax profit
(241)
(136)
(105)
(75)
Reported change (%)
Currency impact
(Eur mln)
Organic growth (%)
4.7
2.1
11.2
(12.8)
(0.4)
(1.9)
3.4
(20.6)
Q2 02 / Q1 02
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Impact of currency variations on BU US performance
Revenues
Expenses
Operating result
Pre-tax profit
(100)
(49)
(51)
(40)
Reported change (%)
Currency impact
(Eur mln)
Organic growth (%)
7.1
(1.1)
16.4
16.4
(1.4)
(8.9)
7.2
(7.2)
Q2 02 / Q1 02
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Impact of currency variations on BU Brazil performance
Revenues
Expenses
Operating result
Pre-tax profit
(88)
(62)
(26)
(15)
Reported change (%)
Currency impact
(Eur mln)
Organic growth (%)
3.7
10.7
(10.1)
(22.2)
(12.7)
(6.8)
(24.3)
(34.4)
Q2 02 / Q1 02
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Overview of the currency hedging Overview of the currency hedging policypolicy
USD BRL Other CCY
Capitalhedge
Ratio hedge Not possible Selectivelyapplied
Ratio hedge Applied Not possible(exc. USD)
See capitalhedge
Profit hedge Fully hedgedin 2002 & 2003
Mitigated andPartial
hedging
Selectivelyapplied
Brazil: cross border and sovereign risk
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Brazilian cross border risk is largely mitigated
Brazil, Mexico and Chile are the largest contributors
Extensive use of risk mitigants is sought and achieved when dealing with Brazilian counterparts
Mitigated exposure includes trade deals, transactions covered by credit default swaps and
political risk insurance
Cross borderexposure
Exc. Mitigatedexposure
(EUR bn) Ytd 02 FY 01 Ytd 02 FY 01
Latin America 7.7 8.4 3.7 4.0
Brazil 3.8 4.1 1.1 1.2
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Overview of the portfolio of government securities of BU Brazil
Portfolio is locally funded and invested in Brazilian real denominated notes
Portfolio breakdown
NB: currency linked notes are notes denominated in Brazilian real
Trading11%
Investment23%
Commercial66%
Asset quality and provisioning
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Optimal Tier 1 & 2 ratios are a function of several factors
Optimal capital structure is a function of cash-flows and asset quality
Sustainability of the income stream
Asset quality and levels of provisioning
Effective tax rate
Pay out ratio (policy is 45 to 50%)
Proportion of cash dividend (approx. 40%)
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ABN AMRO has high coverage ratios
Operations are cash generative
Cash-flow is sustainable
Historically, pay out ratio and cash proportion of dividend have led to a retention of at least 70%
Coverage ratios are high at half year 2002
Operating income / Provisioning : 2.8x
Net attrib. Profit / Cash dividend: 3.2x
PBT / [taxes, extraordinaries, cash dividend]:1.8x
0 35
C&CC70%
Wholesale23%
Other5%
PCAM2%
The composition of the consolidated portfolio is stable
June 2001 December 2001 June 2002
Private loans (EUR bn - by outstanding)
0
50
100
150
200
Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02
Wholesale C&CC Private Other
Brazil3%
Other4%
NL62% US
31%
Wholesale23%
C&CC69%
PCAM3%
Other5%
C&CC68%
Wholesale25%
PCAM2%
Other5%
0 36
Provisioning – EUR million Annualised provisioning / RWA
SBU 1Q01 2Q01 1Q02 2Q02 YTD 02 1Q01 2Q01 1Q02 2Q02 YTD 02
C&CC 176 220 255 231 486 0.43% 0.53% 0.64% 0.62% 0.66%
WCS 92 40 111 345 456 0.38% 0.16% 0.49% 1.65% 1.09%
PCAM 3 -1 1 0 1 0.20% -0.07% 0.06% 0.03% 0.03%Total Group 267 253 390 582 972 0.38% 0.35% 0.58% 0.93% 0.78%
Overview of total loan loss provisioning per SBU
WCS59%
C&CC40%
Other1%
0.0%
0.5%
1.0%
1.5%
2.0%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
C&CC WCS Group
Annualised provisioning / RWA Loan loss provisioning per SBU
2Q02 loan loss provisioning
0 37
Asia Pacific Advanced
7.1%
North America27.0%
Latin America4.0%
Eastern Europe0.3%
Africa0.6%
Europe 52.9%
Middle East1.0%
Asia7.2%
Wholesale client base is predominantly OECD - (by limits, June 2002)
Geographic exposure calculated based on the country lending office of each counterparty
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Breakdown of Wholesale portfolio per client sector - (by limits, June 2002)
FIPS (NBFI)17%
Energy, Chemical, Health12%
FIPS (Public Sector)
7%
FIPS (Commercial Banks)35%
Automotive, Consumer, Diversified
21%
Telecom, Media, Technology
8%
Energy, Chemical, Health27%
Automotive, Consumer, Diversified
53%
Telecom, Media, Technology
20%
Wholesale - Corporate portfolioWholesale - Total portfolio
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Wholesale corporate portfolio is well diversified - (by limits, June 2002)
Tobacco0.9%
Leisure0.9%
(Non) durables4.5%
Food6.4%
Services4.1%
Manufacturing (general)8.6%
Real estate2.0%
Agri/raw materials1.5%
Construction3.9%
Transport services7.3%
Manuf other transport means1.5%
Automotive (oem + supply)6.7%
Metals & mining3.1%
Chemicals5.4%
Utilities10.3%
Oil & gas8.2%
Health/pharma3.2%
Retail2.2%
Technology6.3%
Media3.7%
Telecom9.4%
As a % of total limits of Wholesale Corporate portfolio which excludes FIPS
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Wholesale corporate exposure is gradually coming down across sectors
Sector breakdown of wholesale portfolio - Total limits, June 2002
TMT ECH ACD
Jun-01 Dec-01 Mar-02 Jun-02
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Breakdown of WCS risk-weighted assets
RWA per product - Ytd 01
Loan Product63%
Other4%
Equities and Corporate Finance
5%
Global Financial Markets
21%
Global Transaction Services
5%
Private Equity2%
RWA per product - Ytd 02
Loan Product59%
Other3%
Private Equity3%
Equities and Corporate Finance
4%
Global Financial Markets
25%
Global Transaction Services
6%
0 42
Average UCR of wholesale client sectors since June 2001 - (by limits)
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
Jun-01 Sep-01 Dec-01 Mar-02 June-02
TMT ECH ACD WCS portfolio
Average UCR - historical performance Average UCR
0 43
Average UCR of wholesale client sectors - (by limits, June 2002)
UCR >= 419%
UCR 1, 2, 381%
0%
20%
40%
60%
80%
100%
Jun-01 Sep-01 Dec-01 Mar-02 Jun-02
UCR 1, 2, 3 UCR >= 4UCR 1, 2, 3
82%
UCR >= 418%
ACD ECH
TMT
Wholesale corporate portfolio
(53.4% of WCS corp. portfolio) (27.1% of WCS corp. portfolio)
(19.5% of WCS corp. portfolio)
UCR >= 421%
UCR 1, 2, 379%
UCR >= 416%
UCR 1, 2, 384%
0 44
2Q02 Netherlands North America Brazil Rest of World
Commercial 74.2 31.6 36.3 1.4 4.9
Consumer 98.2 75.3 17.5 2.9 2.5
Total private loans 172.4 106.9 53.8 4.4 7.3
Overview of the C&CC consumer and commercial franchise
Commercial43% Consumer
57%
North America
31%
Brazil3%
Rest of World4%
Netherlands62%
C&CC total private loans (Eur bn)
0 45
Overview of the commercial portfolio of BU NL - (by outstanding, June 2002)
C&CC NL total portfolio
C&CC NL commercial portfolio by product C&CC NL commercial portfolio by UCR
Commercial30%
Consumer70%
Corporate clients43%
SME57%
UCR >=442.6%
Not rated0.5%
UCR 1, 2 and 356.9%
0 46
Standard Federal
39%
LaSalle61%
Overview of the portfolio of BU US - (by outstanding, June 2002)
Asset quality
Overview by legal entity Business mix
Resid. Mortgage
39%
Individual2%
Other5%
Commercial54%
0.0%
20.0%
40.0%
60.0%
80.0%
Dec-00 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02
UC
R p
erce
nta
ge
UCR 1, 2 and 3 UCR >=4
0 47
Business mix
C&CC portfolio performance - Total outstanding
UCR breakdown
Overview of the portfolio of BU Brazil (June 2002)
Car Financing
44%
Retail38%
Middle Corp18%
UCR 1, 2 and 364%
UCR >=430%
Not rated6%
0.0%10.0%20.0%30.0%40.0%50.0%60.0%
Dec-00 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02
UC
R %
UCR 1/2/3 UCR>=4 Not rated
0 48
By ProductBy Geography
Overview of C&CC consumer credit (by outstanding, June 2002*)
USA15.0%
Netherlands75.0%
Asia4.0%
Brazil6.0%
Rest of Europe, Middle East, Africa
0.0%
Rest of Latin America
0.0%
Mortage loans NL70%
Credit cards1%
Personal loans12%
Auto loans4%
Mortage loans USA9%
Overdraft1%
Other0%
Mortage loans other2%
Loans against shares
1%
0 49
Cautionary Statement regarding Forward-Looking Statements
This announcement contains forward-looking statements. Forward-looking statements arestatements that are not historical facts, including statements about our beliefs and expectations.Any statement in this announcement that expresses or implies our intentions, beliefs,expectations or predictions (and the assumptions underlying them) is a forward-lookingstatement. These statements are based on plans, estimates and projections, as they are currentlyavailable to the management of ABN AMRO. Forward-looking statements therefore speak only asof the date they are made, and we take no obligation to update publicly any of them in light ofnew information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of importantfactors could therefore cause actual future results to differ materially from those expressed orimplied in any forward-looking statement. Such factors include, without limitation, the conditions inthe financial markets in Europe, the United States, Brazil and elsewhere from which we derive asubstantial portion of our trading revenues; potential defaults of borrowers or tradingcounterparties; the implementation of our restructuring including the envisaged reduction inheadcount; the reliability of our risk management policies, procedures and methods; and otherrisks referenced in our filings with the U.S. Securities and Exchange Commission. For moreinformation on these and other factors, please refer to our Annual Report on Form 20-F filed withthe U.S. Securities and Exchange Commission and to any subsequent reports furnished or filedby us with the U.S. Securities and Exchange Commission.
The forward-looking statements contained in this announcement are made as of the date hereof,and the companies assume no obligation to update any of the forward-looking statementscontained in this announcement.