Investor Relations
Q4 2023 results and update of financial targets & capital framework
investor & analyst presentation | 14 February 2023
Key messages Q4 2023, new financial targets and capital framework
Key messages Q4
- Net profit of 545m, supported by continued high Interest Income ('NII') and impairment releases
- Net profit of 2.7bn for FY2023 and Return on Equity ('ROE') of 12.2%
- Q4 costs higher, FY2023 costs (excluding incidentals) at 5.1bn in line with guidance
- Credit quality remains solid, impairment releases of 83m; prudent buffers remain in place
- Strong capital position; Basel III CET1 ratio of 14.3% and Basel IV CET1 of around 15%
- Final dividend of 0.89 per share proposed 1), start of new 500m share buyback programme
Update financial targets and capital framework
- Updated financial targets for 2026
-
- Return on Equity 9-10%2)
- Cost/income ratio c.60%
- Updated capital framework
-
- Basel IV CET1 target of 13.5%
- Dividend policy unchanged: pay-out 50% of reported net profit 3)
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1) |
Total 2023 dividend 1.51 per share |
|
|
2) |
Based on new Basel IV CET1 target of 13.5% |
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|
3) |
After deduction of AT1 coupon payments and minority interests |
2 |
Q4 Results
Strong result Q4 and FY2023
|
EUR m |
2023 Q4 |
2023 Q3 |
Change |
2023 FY |
2022 FY |
Change |
|
|
Net interest income |
1,504 |
1,533 |
-2% |
6,278 |
5,422 |
16% |
|
|
- Underlying net interest income 1) |
1,538 |
1,533 |
0% |
6,294 |
5,315 |
18% |
|
|
Net fee and commission income |
452 |
442 |
2% |
1,782 |
1,778 |
0% |
|
|
Other operating income |
85 |
237 |
-64% |
558 |
640 |
-13% |
|
|
Operating income |
2,041 |
2,211 |
-8% |
8,618 |
7,841 |
10% |
|
|
Operating expenses |
1,462 |
1,228 |
19% |
5,233 |
5,425 |
-4% |
|
|
- Underlying expenses 1) |
1,381 |
1,228 |
12% |
5,133 |
5,295 |
-3% |
|
|
- Underlying excl. reg. levies |
1,278 |
1,193 |
7% |
4,798 |
4,899 |
-2% |
|
|
Operating result |
580 |
983 |
-41% |
3,385 |
2,415 |
40% |
|
|
Impairment charges |
-83 |
-21 |
-158 |
39 |
|||
|
Income tax expenses |
117 |
246 |
-52% |
847 |
509 |
66% |
|
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Profit |
545 |
759 |
-28% |
2,697 |
1,867 |
44% |
|
|
Client loans (end of period, bn) |
237.3 |
240.4 |
-1% |
237.3 |
240.1 |
-1% |
|
|
Client deposits (end of period, bn) |
229.0 |
223.7 |
2% |
229.0 |
231.0 |
-1% |
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1) Underlying is excluding disclosed incidentals. An overview is provided in the appendix. |
4 |
Resilient client lending
|
Mortgage client lending |
Corporate client lending 1) |
Consumer client lending |
|
EUR bn |
EUR bn |
EUR bn |
|
150.8 |
150.6 |
150.7 |
151.2 |
151.1 |
|
|
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2022 |
2023 |
|
79.1 |
79.4 |
79.5 |
79.7 |
77.2 |
|
|
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2022 |
2023 |
|
10.2 |
10.1 |
9.9 |
9.6 |
9.0 |
|
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Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2022 |
2023 |
- In a challenging environment mortgage portfolio stable; mortgage market share at 14% for Q4
- Corporate loans down by almost 2bn in 2023 reflecting winding down non-core (0.8bn), maturing TLTRO loans and FX impact; decrease in Q4 reflecting seasonality and FX impact 1)
- Corporate Banking non-corewind-down is now almost fully completed with non-core loans down over 98% since Q2 2020
- Decrease in consumer loans as several products are in run-off mode and lower client demand due to stricter lending criteria
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1) FX impact of -0.3bnY-o-Y and -0.4bnQ-o-Q |
5 |
Continued high Net Interest Income
|
Underlying NII increased 1) |
Client deposits increased 2) |
|
EUR m |
EUR bn |
|
1,504 |
1,620 |
1,604 |
1,533 |
1,538 |
|
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2022 |
2023 |
|
2.3 |
1.0 |
2.0 |
|
|
223.7 |
229.0 |
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2023 Q3 |
Time deposits |
Demand deposits |
Current accounts |
2023 Q4 |
- Underlying NII 1) maintained at high level of Q3
- Improvement in Treasury result in Q4 was largely offset by change in minimum reserve remuneration of c.20m
- Recovery of margins on corporate loans were partly offset by limited margin pressure on consumer loans and mortgages
- Deposit margins were stable despite increase in savings coupon by 25bps in October. Migration to time deposits slowed down in Q4
- FY2023 NII was 6.3bn and 16% higher versus FY2022 largely reflecting improved deposit margins
- Underlying NII excludes TLTRO in Q4 2022 of 60m and incidentals related to provisions for revolving consumer credit in Q2 2023 of 18m and Q4 2023 of -34m
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2) Client deposits do not include professional deposits; professional deposits were down 12bn Q-o-Q due to seasonality |
6 |
Fee and commission income resilient
|
Net fee and commission income up |
Underlying other income lower 1) |
|
EUR m |
EUR m |
|
443 |
444 |
444 |
442 |
452 |
|
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2022 |
2023 |
|
174 |
157 |
237 |
|||
|
78 |
85 |
||||
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Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2022 |
2023 |
- Fees up by 2% in Q4, largely driven by an increase in Corporate Banking and Wealth Management
- Increase in Wealth Management driven by higher Assets under Management driven by strong market performance during Q4 and higher securities related service fees
- Fees for Corporate Banking are up by 5% in Q4, largely reflecting strong results from Clearing
- Decrease in other income vs Q3, largely reflecting lower XVA results and lower ALM/Treasury results, Q3 also included disposals (c.50m)
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1) Underlying Other income excludes incidentals for Q4 2022 TLTRO unwind of -319m |
7 |
FY2023 cost excluding incidentals of 5.1bn within guidance
Underlying expenses 1) & regulatory levies
EUR m
Underlying expenses Regulatory levies
|
117 |
244 |
36 |
103 |
|
1,192 |
1,162 |
1,165 |
1,193 |
1,278 |
|
Q4 |
Q1 |
Q2 |
49 |
Q3 |
Q4 |
|||||
|
2022 |
2023 |
- Underlying expenses in Q4 up 7% largely reflecting increasing FTEs
- Cost saving programs delivered further savings (c.500m since YE2020)
- FY2023 costs excluding incidentals 1) of 5.1bn in line with guidance of 5.1 - 5.2bn
- Q4 underlying cost base of 1.3bn already reflecting targeted increase in staff, therefore a good reflection of 2024 run rate
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1) Underlying expenses exclude incidentals (20m in Q2 related to handling costs revolving consumer credit and 81m in Q4 for goodwill |
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impairments) |
8 |
Credit quality remains strong with another quarter of releases
Non-performing loans continued to decrease
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Stage 3 loans |
Stage 3 |
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(EUR m) |
coverage ratio |
|||
|
Q4 2023 |
Q3 2023 |
Q4 2023 |
Q3 2023 |
|
|
Mortgages |
1,292 |
1,228 |
9.7% |
7.7% |
|
Corporate loans |
3,152 |
3,242 |
26.4% |
27.8% |
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- of which CB non-core |
211 |
220 |
50.9% |
52.2% |
|
Consumer loans |
255 |
268 |
46.3% |
44.3% |
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Total 1) |
4,707 |
4,748 |
22.9% |
23.5% |
|
Impaired ratio (stage 3) |
1.9% |
1.8% |
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Impairment releases leading to Cost of Risk -13bps in Q4
|
62 |
Impairments (in EUR m) |
CoR (in bps) |
||||||||||||||||||
|
14 |
||||||||||||||||||||
|
7 |
32 |
|||||||||||||||||||
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-21 |
||||||||||||||||||||
|
-62 |
-69 |
-83 |
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|
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
||
|
2022 |
2023 |
- Impact of economic slowdown limited so far, non-performing corporate loans continued to decrease
- Impairment releases of 83m, largely reflecting stage 1 and 3 releases for corporate and consumer loans, partly offset by increases for mortgages
- New inflow in stage 3 impairments more than offset by releases in individual corporates files, largely in Corporate Banking
- Management overlays of c.260m remain in place, around 50% is related to geopolitical uncertainties
- CoR FY2023 of -5bps reflecting successful recovery of client flies
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1) Total includes other loans and advances customers (8m for Q4 2023 and 10m for Q3 2023) |
9 |
Strong capital position
Basel III CET1 ratio 1)
|
0.2% |
||||||||||||||||||||||
|
0.4% |
0.2% |
0.4% |
||||||||||||||||||||
|
15.0% |
14.6% |
14.3% |
3.7% |
10.6% |
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|
2023 Q3 |
Net result |
RWA |
Other |
2023 Q4 excl. SBB |
SBB |
2023 Q4 |
Distance to MDA |
Requirement |
Basel III RWA
|
EUR bn |
3.8 |
1.2 |
|
1.4 |
||
|
136.6 |
140.2 |
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2023 Q3 |
Model add-ons |
Asset quality |
Business developments |
2023 Q4 |
- Well capitalised with a Basel III CET1 ratio of 14.3% after deducting new 500m SBB to be executed as of February 15th
- Basel IV ratio now c.15%, reduction is in line with decline in Basel III CET1 ratio
- Increase in RWA of 3.6bn, largely related to credit risk RWAs reflecting model add-ons
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1) Net result excluding dividend reserve, dividend reserve part of other; Distance to MDA trigger level excluding AT1 shortfall |
10 |
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Disclaimer
ABN Amro Bank NV published this content on 13 February 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 February 2024 06:19:24 UTC.