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UPDATE 2-ABN Amro ready for impact of new global rules on capital buffers
November 8, 2017 / 10:44 AM / 15 days ago

UPDATE 2-ABN Amro ready for impact of new global rules on capital buffers

* ABN Amro capital ratio could fall 5-6 percentage points on new Basel IV rules

* Expects capital buffers to be strong enough for Basel IV impact

* Reports surprise 11 pct rise in Q3 net profit

By Bart H. Meijer

AMSTERDAM, Nov 8 (Reuters) - ABN Amro said it expects new banking regulations, dubbed Basel IV, to have a big impact on its capital ratios, but it would be able to weather the hit.

The stricter rules, which could be finalised in the next two months, are designed by the Basel Committee of banking supervisors to avert a repeat of the financial crisis and are set to put a much larger risk weight on mortgage loans.

They will hit the capital ratios of Dutch banks specifically, as they traditionally have large mortgage loan books.

ABN Amro, which had to be bailed out by the Dutch state at the height of the financial crisis in 2008, is the Netherlands’ largest domestic lender. It said its capital ratios could fall by up to 6 percentage points after it implements the new regulations, as it reported a surprise 11 percent rise in third-quarter net profit on Wednesday.

“We’ve seen analysts running the numbers, and have seen figures of 5 to 6 (percentage points) in terms of the impact on our capital ratios,” Chief Financial Officer Clifford Abrahams said.

“Depending on the rules implemented, something in that order is possible. But we still feel well capitalised for any likely change.”

The rules, which have been delayed by France objecting to a key element, are not expected to come into force until the middle of the next decade. But investors in ABN Amro are already nervous about their impact, although the bank has strengthened its capital ratios to relatively high levels since its bailout.

Its core capital adequacy ratio stood at 17.6 percent of risk-adjusted assets at the end of September, up from 16.6 percent a year earlier and above the minimum requirement of just over 10 percent.

ABN said it expects the new rules to be finalised in December or January.

The expected hit to the capital buffer will have no effect on the bank’s dividend policy, Chief Executive Kees van Dijkhuizen said in a call with reporters.

ABN Amro shares were down 2.5 percent at 25.16 euro at 1015 GMT.

PROFIT RISES

Since its bailout, the bank has refocused its operations and orientation on the Dutch market, cutting thousands of jobs in the process and shutting down branches as it invested in digital services.

Its third-quarter net profit was unexpectedly strong, jumping to 673 million euros ($780.3 million) from 607 million euros a year ago, as its loan book grew while expenses fell.

Analysts polled by the bank had on average expected profit to fall to 592 million euros.

Savings implemented over recent years helped drive down costs by 12 percent, offsetting a 4 percent drop in operating income. The strong growth of the Dutch economy also held defaults on loans at a very low level, the bank said.

ABN Amro was re-privatised in 2015, but the Dutch state still owns 56 percent of its shares. ($1 = 0.8624 euros) (Reporting by Bart Meijer; Editing by Gopakumar Warrier and Susan Fenton)

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