February 7, 2018 / 7:00 AM / 9 months ago

UPDATE 1-ABN Amro keeps aim at high capital buffer after surge in Q4 profit

(Adds details on capital buffer, background)

AMSTERDAM, Feb 7 (Reuters) - Dutch bank ABN Amro posted a market-beating profit on Wednesday and said it will maintain its focus on high capital buffers, as it expects new banking regulations to have a significant impact on its risk profile.

The bank clearly beat analyst expectations with a 63 percent jump in fourth-quarter net profit at 542 million euros ($671.4 million), helped by a strong Dutch economy.

Analysts polled by Reuters had on average expected a profit of 480 million euros, after the bank made 333 million euros in the same period a year earlier.

ABN Amro said it will maintain relatively high capital buffers, as new banking regulations look likely to ultimately shave off 4 to 5 percentage points of the bank’s capital requirement ratios in the coming years.

The new regulations, dubbed Basel IV, put a much larger risk weight on mortgage loans. This specifically hurts ABN and other Dutch banks as they typically have a large mortgage loan book.

ABN said its risk-weighted assets were to increase by 35 percent under the new regime, which was agreed by international regulators in December but still has to be approved by the European Commission. The final outcome of the rules was still uncertain, the bank said.

To manage the transition, ABN will maintain a target of 17.5 percent to 18.5 percent for its core capital adequacy ratio in 2018, as it aims for a 13.5 percent ratio of capital to risk weighted assets under the new rules. The ratio stood at 17.7 percent at the end of last year, while the minimum requirement is 10 percent.

$1 = 0.8073 euros Reporting by Bart Meijer; Editing by Gopakumar Warrier

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