BRUSSELS, May 16 (Reuters) - Dutch state-owned bank ABN AMRO reported a 30 percent rise in first-quarter underlying net profit on Friday and said loan impairments would take some time to fall to normal levels although should be slightly lower this year.
The bank, which is being readied for an eventual stock market flotation, said underlying net profit rose to 378 million euros ($518.5 million) as higher margins on deposits led to increased interest income and expenses barely rose.
ABN AMRO said loan impairments remained elevated, reflecting the weak state of the domestic economy. At 361 million euros, they were 39 percent above year earlier levels, although an improvement of 35 percent from the final quarter of 2014.
ABN AMRO, which had to be rescued in the 2008 financial crisis, said the Dutch economy was showing promising signs from rising house prices and transactions to improved sentiment among small businesses and rising job vacancies.
“However, a large proportion of SMEs are still facing financial difficulties as are a significant number of households. It will take time for loan impairments to return to more normal levels as these lag economic developments,” CEO Gerrit Zalm said in the earnings statement.
Zalm, a former Dutch finance minister, said full-year loan impairments should end slightly below last year’s level of 1.67 billion euros excluding special items.
“However, we caution not to extrapolate the Q1 results to the end of the year, as Q1 is traditionally the best quarter of the year and also because the bank tax is due in the final quarter,” he said.
ABN AMRO, which has been slowly restructuring in the run-up to its planned sale, has said that 2013 marked the bottom of the economic cycle.
The Dutch economy lagged others in the euro zone in emerging from recession and signs of recovery are mixed.
The housing market is expected to stabilise this year after prices fell about a fifth from their peak levels in 2008.
Fourth-quarter GDP growth was stronger than expected thanks to a pick-up in investment, but the economy contracted by 1.4 percent in the first three months of this year, against growth of 0.2 percent in the euro zone.
The sharp contraction was at least part the result of a mild winter squeezing sales of natural gas.
Unemployment also shows no sign of decline.
The government said last August it planned to sell ABN AMRO in a year’s time at the earliest but was unlikely to recoup its costs. It put the value of the bank at about 15 billion euros, well below what the Netherlands poured in to rescue and support it. ($1 = 0.7291 Euros) (Reporting By Philip Blenkinsop; Editing by Miral Fahmy)