AMSTERDAM ABN AMRO, the state-owned rump of the once leading Dutch international bank, said on Friday nine-month underlying net profit nearly quadrupled due to higher interest income, lower loan losses and gains on a debt buyback.
However, due to heavy charges it took in the second quarter for a mandatory sale of part of the Dutch commercial bank and for restructuring costs, the bank's underlying profit of 768 million euros turned to a net loss of 627 million euros, versus a net profit of 352 million a year ago.
The group is now made up of the ABN AMRO and Fortis Dutch retail banking activities, as well as commercial and merchant banking services for Dutch firms, and private banking units in 13 countries, with a growth focus on Asia.
Chief financial officer Jan van Rutte said the trend of improved profitability had started, but said integration of its constituent parts would take another two years. Privatization was likely between 2013 and 2015, chief risk officer Wietze Reehoorn said on a conference call, reiterating the timeframe given at the mid-year results.
"ABN AMRO is well on its way to improve the reported and underlying profitability of the bank as synergies will start to emerge from now on and integration costs will start to decline," Chief Executive Gerrit Zalm, a former finance minister, said in a statement.
"ABN AMRO Bank and Fortis Bank Nederland merged on 1 July 2010. It is very encouraging to see the positive reactions so far from staff and customers alike," he added.
The bank said loan writedowns fell 47 percent on the back of an improving Dutch economy, while impairments to its mortgage portfolio were marginally lower. Staff numbers were down 10 percent.
Shareholders equity increased by 2.9 billion euros to 11.7 billion, primarily the result of the conversion of 2.6 billion euros of mandatory convertible securities held by the Dutch state into equity and the remaining state capital injection of 490 million.
The state has all of the ordinary shares and most of the preference shares. The banking group ABRGPA.UL, which has roots going back to 1720, has many listed and tradable debt instruments, from notes to perpetuals.
The Dutch state pumped about 24 billion euros into the local ABN AMRO and Fortis entities after the dramatic failure of a three-pronged hostile takeover of ABN AMRO in 2007 by Royal Bank of Scotland, Fortis and Banco Santander.
The bank said it was well placed to meet the new Basel III capital requirements set by banking regulators, which will be phased in from early 2013.
"Based upon the current preliminary guidelines of Basel III and the quality of ABN AMRO's capital basis, ABN AMRO is relatively well positioned for Basel III," it said, with a Tier 1 ratio of 12.6 percent and a Core Tier 1 of 10.1 percent.
Risk officer Reehoorn said the bank had limited exposure to the crisis-hit economies of Ireland and Spain of 130 million and 150 million, respectively.
CFO Van Rutte said the finalization of the sale of prime fund activities to Credit Suisse (CSGN.VX) was taking longer than planned because of the complexity of some client portfolios.
The company announced the sale of the former Fortis unit, with 570 staff, for an undisclosed sum, in May.
(Editing by Sara Webb and Will Waterman)