Quarterly Report • Aug 27, 2013
Quarterly Report
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ABN AMRO Group N.V.
This is the Interim Financial Report for the first half year of 2013 of ABN AMRO Group N.V. and its consolidated subsidiaries (ABN AMRO). The Interim Financial Report consists of the Interim Managing Board report and the Condensed Consolidated Interim Financial Statements.
The financial information contained in this Interim Financial Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).
Some disclosures in the Risk management chapter of this report contain reviewed information and are part of the Condensed Consolidated Interim Financial Statements. Reviewed information is labelled as 'reviewed' in the respective headings.
This Interim Financial Report is presented in euros (EUR), which is the presentation currency of ABN AMRO, rounded to the nearest million (unless otherwise stated). All year-end averages in the Interim Financial Report are based on month-end figures. Management does not believe that these month-end averages present trends materially different from those that would be presented by daily averages.
Certain figures in this document may not tally exactly due to rounding. In addition, certain percentages in this document have been calculated using rounded figures. Unless otherwise stated, all figures are given in carrying amount according to the mixed model valuation basis as described by IFRS.
This report can be downloaded from abnamro.com.
For more information, please go to abnamro.com/ir or contact us at [email protected].
ABN AMRO Group N.V. Gustav Mahlerlaan 10, 1082 PP Amsterdam P.O. Box 283, 1000 EA Amsterdam The Netherlands
| 1 | Chairman's message | 4 |
|---|---|---|
| 2 | Interim Managing Board report Operating and financial review |
5 6 |
| 3 | Risk management | 22 |
| 4 | Capital management | 49 |
| 5 | Liquidity & funding | 56 |
| 6 | Responsibility statement | 63 |
| 7 | Cautionary statement on forward-looking statements | 64 |
| Condensed Consolidated Interim Financial Statements 2013 Table of contents |
66 67 |
|
| 8 | Other Definitions of important terms |
104 105 |
| 9 | Abbreviations | 110 |
ABN AMRO posted a net profit of EUR 817 million for the first half of 2013, down slightly from the corresponding period in 2012. Net interest income and Net fee and commission income increased by 6% and 5%, respectively. Together, they represent the vast majority of our operating income and have proven to be a stable source of revenue. Sizeable releases helped our results. We managed to recoup an additional EUR 221 million after tax on our Madoff exposure, which we had prudently impaired for the full amount. Similarly, in the first quarter we had already reported a large release related to our Greek exposure.
Excluding special items, net profit for the first half of 2013 would have been EUR 510 million, 36% lower than the previous year. We are predominantly exposed to the Dutch economy and hence to the current economic downturn, which led to a sharp rise in loan impairments. Domesticallyfocused SMEs in particular were hit hard by the decline in consumer spending. Consumers have lower disposable income but are nonetheless increasing their savings, as evidenced by the steady rise in customer deposits. A growing number of businesses that managed to weather the decline in revenues for a number of years are now reaching the end of their reserves. We are seeing increased inflow into the Financial Restructuring & Recovery
department and a higher number of write-offs. Mortgage impairment charges rose to 23 bps over the first half of the year compared with 11 bps a year ago. We expect loan impairments (excluding special items) for 2013 to rise above last year's level as the economic conditions in the Netherlands are set to remain challenging for the remainder of 2013.
Retail, Private and Commercial Banking recorded significantly higher operating results. Retail Banking's higher operating result more than offset the increase in impairments, which was not the case for Commercial Banking. Our Merchant Banking results have been disappointing, with results across a wide range of activities lower compared with last year. The strategic decision to terminate those equity derivatives operations that are unrelated to client activities also had an adverse effect on the results, as foreseen. Despite the economic downturn, our core Tier 1 capital ratio has continued to improve and now stands at 13.3%, placing us in a solid position ahead of the introduction of Basel III.
Chairman of the Managing Board
5
This Operating and financial review includes a discussion and analysis of the results of operations and the financial condition of ABN AMRO Group and its different segments for the six-month period to 30 June 2013.
ABN AMRO is organised into Retail & Private Banking (R&PB), Commercial & Merchant Banking (C&MB) and Group Functions. Each member of the Managing Board is responsible for either a business segment or a support unit within Group Functions. The Chairman of the Managing Board oversees the general management of ABN AMRO and is responsible for Group Audit and the Corporate Office, as shown in the diagram below.
For financial reporting purposes, the Managing Board adopted the following segment reporting:
ABN AMRO's performance is reported in accordance with International Financial Reporting Standards as adopted by the European Union. This section should be read in conjunction with the Condensed Consolidated Interim Financial Statements 2013 (including the summary of significant accounting policies).
In 2012, ABN AMRO finalised the integration of ABN AMRO Bank and FBN. As of the first quarter of 2013, ABN AMRO presents its results on a reported basis, which means that historical periods will no longer be adjusted for costs related to the integration. The integration costs are, however, part of the special items as defined in the Impact of special items table at the end of this section.
Furthermore, ABN AMRO adopted the amended pension accounting standard IAS 19 as from 1 January 2013. As a result, all 2012 disclosed figures have been adjusted accordingly for comparison purposes. The impact of the amendment of IAS 19 on the first half of 2012 figures is EUR 130 million lower pension costs leading to EUR 97 million higher net profit.
| (in millions) | First half year 2013 | First half year 2012 | Change |
|---|---|---|---|
| Net interest income | 2,665 | 2,515 | 6% |
| Net fee and commission income | 829 | 788 | 5% |
| Other non-interest income | 107 | 510 | -79% |
| Operating income | 3,601 | 3,813 | -6% |
| Personnel expenses | 1,199 | 1,009 | 19% |
| Other expenses | 1,112 | 1,220 | -9% |
| Operating expenses | 2,311 | 2,229 | 4% |
| Operating result | 1,290 | 1,584 | -19% |
| Impairment charges on loans and other receivables | 216 | 554 | -61% |
| Operating profit before taxes | 1,074 | 1,030 | 4% |
| Income tax expenses | 257 | 190 | 35% |
| Profit for the period | 817 | 840 | -3% |
| First half year 2013 | First half year 2012 | |
|---|---|---|
| Cost/income ratio | 64% | 58% |
| Return on average Equity | 12% | 12% |
| Return on average RWA (in bps) | 135 | 137 |
| NII/average Total assets (in bps) | 131 | 121 |
| Cost of risk (in bps) | 36 | 90 |
| 30 June 2013 | 31 December 2012 | Change | |
|---|---|---|---|
| RWA/Total assets | 29% | 31% | -7% |
| Assets under Management (in billions) | 164.5 | 163.1 | 1% |
| Risk-weighted assets (in billions) | 115.6 | 121.5 | -5% |
| FTEs | 22,788 | 23,059 | -1% |
ABN AMRO's net profit for the first half of 2013 amounted to EUR 817 million, a decline of EUR 23 million. A recovery on the Madoff files and a sizeable release related to the sale of part of the Greek government-guaranteed corporate exposures had a significant impact on the results. In addition, the 2012 results were impacted by several special items, such as integration costs. Excluding all special items listed in the Impact of special items table, net profit for the first half of 2013 would have been EUR 510 million, 36% lower than the first half of 2012, mainly as a result of a sharp rise in loan impairments within Commercial Banking, a further rise in mortgage impairment charges, higher pension costs, and lower results for Markets activities.
Operating income amounted to EUR 3,601 million, down EUR 212 million on the same period last year. The results within Other non-interest income were heavily impacted by a number of special items; excluding these, Operating income would have risen marginally.
Net interest income over the first half of 2013 amounted to EUR 2,665 million, up 6% on the same period last year. The improved results were predominantly driven by higher margins on loans. The average volume of the mortgage portfolio showed a modest decline due to scheduled redemptions and higher voluntary redemptions in combination with low new production volumes.
Net fee and commission income rose by 5% to EUR 829 million due to increased client activity in Private Banking, higher management fees due to a growth of Assets under Management, and higher fees within Clearing.
Other non-interest income declined by EUR 403 million. Excluding special items for both years, other non-interest income would have come down by EUR 152 million. Trading and sales activities within Markets recorded lower results across the board partly in relation to the winding down of non-client-related equity derivative activities. The vast majority of these positions were effectively closed down by July.
Eighty-three per cent of total operating income was generated in the Netherlands, 10% in the rest of Europe and 7% in the rest of the world.
Contents Interim Financial Report
Operating expenses rose by 4% to EUR 2,311 million. Excluding special items, expenses went up by 7% which was entirely caused by the increase in pension costs of EUR 169 million as a result of a sharply lower discount rate used in 2013. In addition, expenses last year included compensation from a service level agreement related to the EC Remedy which was terminated during 2012.
There was a 19% decrease in the operating result to EUR 1,290 million. Excluding special items, the operating result would have come down by 8%. The cost/income ratio deteriorated by 6 percentage points to 64%. Excluding special items, the cost/income ratio would have been 61% in the first half of 2013 compared with 57% in the first half of 2012.
Impairment charges on loans and other receivables decreased by EUR 338 million, driven by two large releases amounting to EUR 550 million in total. In the second quarter, a release of EUR 253 million was recorded in the Madoff files. In the first quarter, a release of EUR 297 million was recorded related to the partial sale of the Greek government-guaranteed corporate exposures. Excluding these releases, loan impairment charges would have risen by EUR 212 million, or 38%, to EUR 766 million. This increase is mainly the result of higher loan impairments for SMEs and, to a lesser extent, higher mortgage impairment charges as well as an Incurred But Not Identified (IBNI) charge of EUR 101 million. The cost of risk (impairment charges over RWA) over the first half of 2013 excluding special items rose to 127 bps from 90 bps in the previous year.
Contents Interim Financial Report
A decline in domestic spending as a result of lower consumer spending, lower investments and increased savings, has led to ongoing pressure on revenues, especially for SMEs dependent on the domestic market. A growing number of businesses are seeing their reserves running out. Of the total outstanding loans to SMEs, approximately 20% are managed by the Financial Restructuring & Recovery department (FR&R), but not all files are impaired. The rate of inflow into FR&R has increased over the past year while the number of clients which are returned to health has decreased. Recovery amounts also decreased due to lower collateral values. The increase in impairment charges is the result of the cumulative effect of these developments. Of the total IBNI charge of EUR 101 million taken during
the first half of 2013, approximately two-thirds is due to SMEs.
Mortgage impairment charges over the total mortgage book increased to 23 bps (annualised) in the first half of 2013, up from 11 bps in the first half of 2012. The increase was due to lower house prices and to a rise in the volume of impaired mortgages.
Assets under Management (AuM) within Private Banking grew by EUR 1.4 billion in the first half of 2013 to EUR 164.5 billion.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Cash and balances at central banks | 12,767 | 9,796 |
| Financial assets held for trading | 26,336 | 22,804 |
| Financial investments | 24,776 | 21,407 |
| Loans and receivables – banks | 41,695 | 46,398 |
| Of which securities financing activities | 19,568 | 14,277 |
| Loans and receivables – customers | 282,039 | 276,283 |
| Of which securities financing activities | 21,378 | 14,495 |
| Other | 14,704 | 17,070 |
| Total assets | 402,317 | 393,758 |
| Financial liabilities held for trading | 16,832 | 18,782 |
| Due to banks | 26,500 | 21,263 |
| Of which securities financing activities | 10,780 | 4,360 |
| Due to customers | 232,017 | 216,021 |
| Of which securities financing activities | 24,510 | 15,142 |
| Issued debt | 87,765 | 94,043 |
| Subordinated liabilities | 7,897 | 9,566 |
| Other | 17,792 | 21,200 |
| Total liabilities | 388,803 | 380,875 |
| Equity attributable to the owners of the parent company | 13,495 | 12,864 |
| Equity attributable to non-controlling interests | 19 | 19 |
| Total equity | 13,514 | 12,883 |
| Total liabilities and equity | 402,317 | 393,758 |
All 2012 figures have been adjusted for comparison purposes following adoption of the amended pension accounting standard (IAS 19). The impact of the amendment of IAS 19 on the 31 December 2012 disclosed figures is EUR 646 million lower other assets, EUR 508 million higher other liabilities and EUR 1,154 million lower equity.
Total assets grew by EUR 8.6 billion to EUR 402.3 billion at 30 June 2013. Growth was due mainly to a clientdriven increase in securities financing volumes (up by EUR 12.2 billion) as well as equity securities. Securities financing transactions dipped towards year-end 2012 due to the combined effect of traditionally lower client activity and uncertainty regarding the treatment of these transactions for calculating the leverage ratio under Basel III.
Financial assets held for trading increased by EUR 3.5 billion to EUR 26.3 billion as client positions in equity derivatives were hedged on-balance sheet rather than off-balance sheet, and higher positions related to the primary dealership in Dutch government bonds. This was partly offset by lower valuation of the interest rate derivative positions. The latter two also explain the movements in Financial liabilities held for trading.
Financial investment increased by EUR 3.4 billion as result of purchases for the liquidity buffer.
Contents Interim Financial Report
Loans and receivables – banks decreased by EUR 4.7 billion mainly as a result of lower deposits with the ECB (down by EUR 8.3 billion) and a decrease in the pledged cash collateral. The decline was partly offset by an increase in securities financing client volumes.
Loans and receivables – customers grew by EUR 5.8 billion to EUR 282.0 billion, primarily driven by an increase in client volumes in securities financing activities. Marginal growth of the C&MB loan portfolio, which was driven by the ECT activities, was offset by a small decrease of EUR 1.1 billion in the mortgage portfolio. The decrease was the result of additional voluntary redemptions and lower new production. The total mortgage portfolio at 30 June 2013 was EUR 152.8 billion.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Loans and receivables – customers other (incl. impairments) | 260,661 | 261,788 |
| Retail Banking | 160,209 | 161,668 |
| Private Banking | 17,405 | 17,300 |
| Commercial Banking | 42,234 | 42,378 |
| Merchant Banking | 35,958 | 35,072 |
| Group Functions | 4,855 | 5,370 |
| Securities financing activities | 21,378 | 14,495 |
| Total loans and receivables – customers | 282,039 | 276,283 |
Contents Interim Financial Report
Total liabilities went up by EUR 7.9 billion to EUR 388.8 billion. In addition to the increased securities financing activities, customer deposits grew, offset by a decrease in wholesale funding.
Due to customers rose by EUR 16.0 billion to EUR 232.0 billion. Increased client flow in securities financing activities led to an increase of EUR 9.4 billion. Client deposits grew by EUR 6.7 billion, particularly in Retail Banking in the Netherlands due to consumers exercising caution in response to the ongoing economic uncertainty. MoneYou (the online brand) also posted a growth in deposits mainly in Belgium and Germany. Commercial Banking managed to post a small increase in deposits. Private Banking deposits remained more or less flat as growth in the Netherlands was offset by some international outflow.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Total deposits | 207,198 | 200,541 |
| Retail Banking | 87,871 | 81,905 |
| Private Banking | 59,117 | 58,910 |
| Commercial Banking | 35,270 | 34,444 |
| Merchant Banking | 20,984 | 21,551 |
| Group Functions | 3,956 | 3,731 |
| Other (including securities financing activities) | 24,819 | 15,480 |
| Total Due to customers | 232,017 | 216,021 |
Issued debt decreased by EUR 6.3 billion to EUR 87.8 billion, due mainly to maturing long-term funding which was already pre-financed in 2012 partly offset by new long-term funding of EUR 5.8 billion raised in the first half of the year. Commercial Paper and Certificates of Deposit declined slightly.
Subordinated liabilities declined by EUR 1.7 billion as several lower Tier 2 instruments were called.
Total equity grew by EUR 0.6 billion, rising from EUR 12.9 billion to EUR 13.5 billion. The increase was due predominantly to the profit for the period further helped by positive effects within the special component of equity and a re-measurement of the pension liability under IAS 19. This was partly offset by the payment of EUR 262 million of dividend over the book year 2012 to ordinary and preference shareholders and the call of EUR 210 million of preference shares.
The methodology for determining the internal liquidity compensation applied to deposits was changed in 2013. This has led to a decline in Net interest income within
Group Functions of EUR 133 million and a corresponding increase within the businesses, mainly Retail Banking, followed by Private Banking and Commercial Banking.
| (in millions) | First half year 2013 | First half year 2012 | Change |
|---|---|---|---|
| Net interest income | 1,460 | 1,286 | 14% |
| Net fee and commission income | 229 | 231 | -1% |
| Other non-interest income | 19 | 13 | 46% |
| Operating income | 1,708 | 1,530 | 12% |
| Personnel expenses | 243 | 202 | 20% |
| Other expenses | 598 | 619 | -3% |
| Operating expenses | 841 | 821 | 2% |
| Operating result | 867 | 709 | 22% |
| Impairment charges on loans and other receivables | 284 | 153 | 86% |
| Operating profit before taxes | 583 | 556 | 5% |
| Income tax expenses | 144 | 138 | 4% |
| Profit for the period | 439 | 418 | 5% |
| First half year 2013 | First half year 2012 | |
|---|---|---|
| Cost/income ratio | 49% | 54% |
| Return on average RWA (in bps) | 289 | 266 |
| Cost of risk (in bps) | 187 | 97 |
| 30 June 2013 | 31 December 2012 | Change | |
|---|---|---|---|
| Loan-to-Deposit ratio | 176% | 190% | |
| Loans and receivables – customers (in billions) | 160.2 | 161.7 | -1% |
| Of which mortgages (in billions) | 149.4 | 150.4 | -1% |
| Due to customers (in billions) | 87.9 | 81.9 | 7% |
| Risk-weighted assets (in billions) | 31.0 | 30.1 | 3% |
| FTEs | 6,347 | 6,335 | 0% |
Contents Interim Financial Report
Retail Banking's net profit in the first half of 2013 went up by EUR 21 million to EUR 439 million. Higher impairment charges were more than offset by the strong increase in operating income.
Operating income for the first half of 2013 increased by EUR 178 million to EUR 1,708 million.
Net interest income rose by EUR 174 million to EUR 1,460 million. The increase was due to the previously mentioned change in liquidity compensation as well as higher margins on mortgages and higher savings volumes. Average savings volumes increased by EUR 13 billion over the past 12 months, with the MoneYou label, also active in Germany and Belgium, accounting for the bulk of this growth.
Net fee and commission income remained almost stable at EUR 229 million.
Operating expenses increased modestly compared with the same period in 2012. Excluding the effect of higher pension costs, operating expenses would have shown a modest decrease.
Personnel expenses increased by EUR 41 million due to the impact of higher pension costs. Other expenses declined due to lower operational losses as well as lower marketing expenses.
The operating result improved by EUR 158 million and the cost/income ratio dipped under the 50%, coming to 49%, compared with 54% in the same period in 2012.
Impairment charges on loans and other receivables increased by EUR 131 million to EUR 284 million. Impairment charges for mortgages were EUR 94 million higher than last year; the remainder of the increase took place within consumer lending, although this was mainly driven by provisions taken within a specific niche of the portfolio.
Loans and receivables – customers came down slightly compared with year-end 2012 to EUR 160.2 billion. The mortgage book continued its gradual decline, decreasing by EUR 1.0 billion from year-end 2012 and ending at EUR 149.4 billion. The trend of higher voluntary repayments continued into the first half of the year, as did lower new production due to the stagnating housing market. Outstanding consumer loans declined, which was due to a combination of a seasonal effect of repayments out of holiday allowances and increasing reluctance of consumers to finance their consumption through debt.
Due to customers rose by EUR 6.0 billion in the first six months, or 7%, to EUR 87.9 billion at 30 June 2013. The majority of the increase came from high savings levels as a result of the uncertain economic outlook in the Netherlands. ABN AMRO managed to increase its share of the growing savings market. Abroad, MoneYou posted growth in Germany and Belgium, accounting for the remainder of the volume increase.
| (in millions) | First half year 2013 | First half year 2012 | Change |
|---|---|---|---|
| Net interest income | 282 | 275 | 3% |
| Net fee and commission income | 267 | 253 | 6% |
| Other non-interest income | 32 | 39 | -18% |
| Operating income | 581 | 567 | 2% |
| Personnel expenses | 224 | 209 | 7% |
| Other expenses | 214 | 228 | -6% |
| Operating expenses | 438 | 437 | 0% |
| Operating result | 143 | 130 | 10% |
| Impairment charges on loans and other receivables | 38 | 54 | -30% |
| Operating profit before taxes | 105 | 76 | 38% |
| Income tax expenses | 20 | 12 | 67% |
| Profit for the period | 85 | 64 | 33% |
| First half year 2013 | First half year 2012 | |
|---|---|---|
| Cost/income ratio | 75% | 77% |
| Return on average RWA (in bps) | 167 | 89 |
| Cost of risk (in bps) | 75 | 75 |
| 30 June 2013 | 31 December 2012 | Change | |
|---|---|---|---|
| Loan-to-Deposit ratio | 29% | 28% | |
| Loans and receivables – customers (in billions) | 17.4 | 17.3 | 1% |
| Of which mortgages (in billions) | 3.4 | 3.4 | -1% |
| Due to customers (in billions) | 59.1 | 58.9 | 0% |
| Risk-weighted assets (in billions) | 9.9 | 10.7 | -7% |
| FTEs | 3,629 | 3,648 | -1% |
Private Banking's profit for the first half of 2013 amounted to EUR 85 million, an increase of EUR 22 million compared with last year. The increase in profit was due to lower
impairments and higher income, while costs remained unchanged.
Contents Interim Financial Report
Contents Interim Financial Report
Operating income amounted to EUR 581 million, an increase of 2%.
Net interest income rose by EUR 7 million to EUR 282 million. Excluding the abovementioned change in the liquidity compensation, Net interest income would have shown a limited decline. Net fee and commission income benefited from higher client activity as well as higher Assets under Management, increasing by EUR 14 million. Other noninterest income declined by EUR 7 million, although this was mainly the result of a release booked in 2012.
Operating expenses were virtually flat, at EUR 438 million. Higher pension costs were offset by lower project costs.
The operating result increased by EUR 13 million, or 10%, to EUR 143 million, while the cost/income ratio improved to 75% from 77%.
Impairment charges on loans and other receivables came to EUR 38 million compared with EUR 54 million during the same period last year. The decrease was seen mainly within the international businesses.
Loans and receivables – customers remained virtually unchanged compared with year-end 2012, amounting to EUR 17.4 billion.
Due to customers went up marginally, to EUR 59.1 billion. The increase of EUR 1.5 billion in the Netherlands was offset by a decline in the international network, mainly in Germany.
Assets under Management (AuM) increased by EUR 1.4 billion to EUR 164.5 billion mainly due to market performance and, to a lesser extent, to net new assets.
| 30 June 2013 (in billions) |
31 December 2012 | |
|---|---|---|
| Opening Balance AuM | 163.1 | 146.6 |
| Net new assets (excl. sales/acquisitions) | 0.5 | 3.1 |
| Market performance | 1.2 | 13.4 |
| Divestments/acquisitions | ||
| Other (incl. sales/acquisitions) | -0.3 | |
| Closing Balance AuM | 164.5 | 163.1 |
| (in millions) | First half year 2013 | First half year 2012 | Change |
|---|---|---|---|
| Net interest income | 677 | 614 | 10% |
| Net fee and commission income | 133 | 160 | -17% |
| Other non-interest income | 14 | 10 | 40% |
| Operating income | 824 | 784 | 5% |
| Personnel expenses | 150 | 138 | 9% |
| Other expenses | 298 | 336 | -11% |
| Operating expenses | 448 | 474 | -5% |
| Operating result | 376 | 310 | 21% |
| Impairment charges on loans and other receivables | 392 | 241 | 63% |
| Operating profit before taxes | -16 | 69 | |
| Income tax expenses | -5 | 18 | |
| Profit for the period | -11 | 51 |
| First half year 2013 | First half year 2012 | |
|---|---|---|
| Cost/income ratio | 54% | 60% |
| Return on average RWA (in bps) | -8 | 38 |
| Cost of risk (in bps) | 277 | 177 |
| 30 June 2013 | 31 December 2012 | Change | |
|---|---|---|---|
| Loan-to-Deposit ratio | 119% | 122% | |
| Loans and receivables – customers (in billions) | 42.2 | 42.4 | 0% |
| Due to customers (in billions) | 35.3 | 34.4 | 2% |
| Risk-weighted assets (in billions) | 26.0 | 28.8 | -10% |
| FTEs | 3,173 | 3,249 | -2% |
Commercial Banking posted a strong increase in its operating result due to higher net interest income and lower costs. However, this was more than offset by higher impairment charges leading to an EUR 11 million net loss for the first half of 2013, a decline of EUR 62 million compared with the previous year.
Contents Interim Financial Report
Operating income amounted to EUR 824 million, an increase of EUR 40 million despite the divestment of the insurance activities in 2012.
Net interest income increased by 10% to EUR 677 million mainly as a result of higher margins on loans as well as increasing commitment fees being charged on current accounts. Net fee and commission income declined by EUR 27 million, due chiefly to the divestment of part of the insurance activities partly offset by higher transaction fees. Fee income also declined due to a reclassification of interbank payment fees from other costs to negative fee income.
Operating expenses declined by EUR 26 million. Personnel expenses increased by EUR 12 million to EUR 150 million, primarily as a result of higher pension costs partly offset by a reduction in FTEs. Other expenses dropped by EUR 38 million largely due to the abovementioned reclassification.
The operating result showed a strong increase of EUR 66 million to EUR 376 million. The cost/income ratio improved by 6 percentage points to 54% from 60% for the first half of 2012.
Impairment charges on loans and other receivables amounted to EUR 392 million in the first half of 2013, up EUR 151 million compared with the same period in 2012. Impairment levels for Corporate Clients (clients with turnover between EUR 30 and EUR 500 million) remained flat, with the full increase in loan impairments due to SMEs. The construction, retail, commercial real estate, and horticulture sectors were particularly affected. Of the total additions to loan impairments related to theSME portfolio, approximately 40% were increases of clients already provisioned for, as files now remain longer within the Financial Restructuring & Recovery department and the proportion of clients which are restored to health has declined.
Loans and receivables – customers remained virtually unchanged at EUR 42.2 billion. Changes in outstanding loans compared with year-end 2012 have been modest within the various business lines (Corporate Clients, SMEs).
Due to customers increased by EUR 0.9 billion to EUR 35.3 billion, due to volume growth both in Corporate Clients and SMEs.
The number of FTEs decreased by 76 to 3,173 due mainly to the divestment of the insurance activities.
| (in millions) | First half year 2013 | First half year 2012 | Change |
|---|---|---|---|
| Net interest income | 333 | 320 | 4% |
| Net fee and commission income | 199 | 193 | 3% |
| Other non-interest income | 21 | 282 | -93% |
| Operating income | 553 | 795 | -30% |
| Personnel expenses | 160 | 141 | 13% |
| Other expenses | 286 | 296 | -3% |
| Operating expenses | 446 | 437 | 2% |
| Operating result | 107 | 358 | -70% |
| Impairment charges on loans and other receivables | 54 | 106 | -49% |
| Operating profit before taxes | 53 | 252 | -79% |
| Income tax expenses | 31 | 37 | -16% |
| Profit for the period | 22 | 215 | -90% |
| First half year 2013 | First half year 2012 | |
|---|---|---|
| Cost/income ratio | 81% | 55% |
| Return on average RWA (in bps) | 10 | 104 |
| Cost of risk (in bps) | 24 | 51 |
| 30 June 2013 | 31 December 2012 | Change | |
|---|---|---|---|
| Loan-to-Deposit ratio | 165% | 155% | |
| Loans and receivables – customers (in billions) | 57.3 | 49.6 | 16% |
| Due to customers (in billions) | 45.8 | 37.0 | 24% |
| Risk-weighted assets (in billions) | 40.2 | 45.5 | -12% |
| FTEs | 2,172 | 2,142 | 1% |
Net profit for the first half of 2013 amounted to EUR 22 million, down from EUR 215 million in the first half
of 2012. Excluding special items, net profit would have amounted to EUR 131 million, declining by EUR 84 million from last year. This was due to lower results across a wide array of market activities as well as the strategic decision to terminate the non-client-related equity derivatives business, offset by lower loan impairment charges.
Contents Interim Financial Report
Operating income declined by EUR 242 million compared with the first half of 2012.
Net interest income rose by 4% to EUR 333 million. Interest income from ECT, Real Estate, and Large Corporates increased, which was partly offset by securities financing. Securities financing posted lower results as the 2012 results benefited from the higher margin trades entered into in late 2011 following the European sovereign debt crisis. Net fee and commission income increased by 3% to EUR 199 million. Other non-interest income, excluding special items, declined by EUR 139 million. Within Markets, trading income was lower across the board, although this was due in part to the strategic decision to terminate the non-client-related part of the business, bringing down income compared with 2012. The vast majority of the positions were effectively closed down by July. Private Equity also contributed to the decline as favourable revaluations in 2012 were followed by negative revaluations in 2013.
Operating expenses increased by EUR 9 million to EUR 446 million, due primarily to higher staff costs.
Personnel expenses rose 13% to EUR 160 million as a result of higher pension costs. Other expenses were down 3% to EUR 286 million, mainly as a result of lower operational losses.
The operating result declined by EUR 251 million to EUR 107 million and the cost/income ratio deteriorated to 81% from 55% in the first half of 2012.
Impairment charges on loans and other receivables over the first half of 2013 amounted to EUR 54 million, coming down by EUR 52 million. The decline was due to a significant provision booked in 2012 for a single housing association client.
Loans and receivables – customers amounted to EUR 57.3 billion, an increase of EUR 7.7 billion. Client volumes in securities financing activities increased, while growth was recorded in ECT, partly offset by a decline within Markets.
Due to customers rose EUR 8.8 billion to EUR 45.8 billion. This increase, too, was mainly attributable to higher client volumes in securities financing activities.
The number of FTEs increased by 30.
| (in millions) | First half year 2013 | First half year 2012 | Change |
|---|---|---|---|
| Net interest income | -87 | 20 | |
| Net fee and commission income | 1 | -49 | |
| Other non-interest income | 21 | 166 | -87% |
| Operating income | -65 | 137 | |
| Personnel expenses | 422 | 319 | 32% |
| Other expenses | -284 | -259 | 10% |
| Operating expenses | 138 | 60 | 130% |
| Operating result | -203 | 77 | |
| Impairment charges on loans and other receivables | -552 | ||
| Operating profit before taxes | 349 | 77 | |
| Income tax expenses | 67 | -15 | |
| Profit for the period | 282 | 92 |
| 30 June 2013 | 31 December 2012 | Change | |
|---|---|---|---|
| Loans and receivables – customers (in billions) | 4.9 | 5.4 | -10% |
| Due to customers (in billions) | 4.0 | 3.7 | 6% |
| Risk-weighted assets (in billions) | 8.5 | 6.4 | 33% |
| FTEs | 7,467 | 7,685 | -3% |
The net result for Group Functions rose to EUR 282 million from EUR 92 million as a result of significant releases, offset by lower operating income and higher expenses. The result was heavily impacted by special items in both years.
Excluding these, Group Functions would have posted a net loss of EUR 134 million, down by EUR 171 million compared with last year.
Contents Interim Financial Report
Operating income, excluding special items, declined by EUR 73 million, mainly as a result of the decline in net interest income.
Net interest income decreased by EUR 107 million, due mainly to the previously mentioned change to the liquidity compensation of EUR 133 million. Net fee and commission income increased by EUR 50 million, due mainly to a reallocation of fees paid for interbank payments to the business. Other non-interest income, excluding special items, decreased by EUR 16 million. The upfront loss booked on the buyback of government-guaranteed bonds was partly offset by higher CVA as well as a gain on the sale of an office property.
Operating expenses, excluding special items, increased by EUR 140 million. The increase in personnel expenses was due to higher pension costs. Other expenses excluding special items increased mainly as a result of lower expenses in 2012 due to compensation from a service level agreement related to the EC Remedy. In addition, operating expenses increased due to incidental operational and IT costs, as well as additional depreciation costs resulting from disposals of premises.
Impairment charges on loans and other receivables was negative EUR 552 million and was almost entirely the result of the releases on Madoff and the Greek loans.
The number of FTEs fell by 218 to 7,467 mainly due to the sale of Solveon and further outsourcing.
| (in millions) | First half year 2013 | First half year 2012 |
|---|---|---|
| Operating income | ||
| Positive revaluations of EC Remedy-related provisions | 129 | |
| Reassessment of discontinued securities financing activities | -70 | |
| Costs of wind-down of non-client-related equity derivatives activities | -52 | |
| Total impact on Operating income | -122 | 129 |
| Operating expenses | ||
| Integration costs | 113 | |
| Restructuring provision | 37 | |
| Total impact on Operating expenses | 37 | 113 |
| Loan impairments | ||
| Greek releases | -297 | |
| Madoff releases | -253 | |
| Total impact on Loan impairments | -550 | |
| Total impact on Profit for the period | 307 | 45 |
This section provides an update on risk developments in terms of the main risks that ABN AMRO faced in the first half of 2013. First describing the key developments, this section then focuses on developments per main risk type: credit risk, market risk and operational risk. Information on other risk types, general information on management of risk, risk governance and definitions is provided in the Annual Report 2012.
ABN AMRO's asset quality continued to be impacted by the ongoing economic contraction in the first half of 2013, in the eurozone in particular. The Dutch economy continued to suffer from the stagnating housing market and the contraction of the domestic spending. As a result, consumer confidence is at historically low levels. This has led to lower consumption and lower investment levels than normal, causing unemployment levels to rise, real estate prices to fall and the number of bankruptcies to rise in the first half of 2013.
Generally, all sectors with a predominantly Dutch domestic focus have been struggling with the decline in consumption. Export-oriented sectors have performed slightly better on the back of the expected recovery of world trade. Excluding the releases from the Greek government-guaranteed corporate exposures and the Madoff-related files, the deterioration in economic conditions caused an increase in impairment charges in the first half of 2013.
Lower investments and lower consumer confidence are particularly affecting the Business Banking portfolio (i.e. SMEs), as reflected in the higher impairment charges. The mortgage portfolio was affected by a further rise in unemployment levels in the Netherlands and a further decline in house prices. The developments in these portfolios are monitored with the utmost attention.
In the first half of 2013, ABN AMRO further tightened its monitoring and watch procedures to detect credit risk deterioration at an early stage in order to minimise losses. Additional measures to limit impairments have been implemented in all business lines, at governance, policy and operational level.
In addition to managing and monitoring the existing portfolio on increased risk, ABN AMRO further improved its focus on managing its client portfolio proactively on risk return by implementing new risk return measurement tooling. The credit portfolio increased internationally in the first half of 2013 confirming the capability-led growth in selected areas and industries.
The 'carefree living' ('zorgeloos wonen') proactive approach to advising mortgage customers through budget coaching to prevent payment problems in the future was further strengthened and expanded in the first half of 2013. Activities in the first quarter focused on customers with a potential residual debt. This focus shifted in the second quarter to customers who are currently up to date with their mortgage payments but who might experience payment problems in the near future. The scope of the carefree living activities was broadened to consumer loans, with the programme being renamed 'carefree living and responsible lending'. 'Carefree living and responsible lending' helps ABN AMRO pursue proactive and strong risk management of its retail lending portfolios in order to minimise any losses.
In the first half of 2013, ABN AMRO also realised its IRB (Internal Ratings Based) coverage threshold of 85%, mainly via the implementation of additional IRB models.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Total assets1 | 402,317 | 393,758 |
| On-balance sheet maximum exposure to credit risk | 388,187 | 383,087 |
| Exposure at Default1 | 350,500 | 347,881 |
| Risk-weighted assets2 | ||
| Credit risk | 92,461 | 100,405 |
| Market risk | 6,749 | 5,640 |
| Operational risk | 16,415 | 15,461 |
| Total risk-weighted assets | 115,625 | 121,506 |
| Cost of risk (in bps)3 | 36 | 98 |
| Total risk-weighted assets/total assets | 28.7% | 30.9% |
1 2012 figures for Total assets and Exposure at Default have been adjusted for comparison purposes, following adaption of the amended pension accounting standard IAS 19.
2 Risk-weighted assets according to Basel II definition.
3 Cost of risk: annualised impairment charges on loans and receivables for the period divided by total average RWA.
The bank's risk-weighted assets (RWA) decreased by 5% to EUR 115.6 billion at 30 June 2013 compared to EUR 121.5 billion at 31 December 2012. This decrease was mainly due to the net reduction in credit risk risk-weighted assets by 8% mainly due to the rollout of the Internal Ratings Based (IRB) approach, for the Banks, Commercial Real Estate and Large Corporate portfolios.
With total assets increasing to EUR 402.3 billion at 30 June 2013 from EUR 393.8 billion at 31 December 2013 and risk-weighted assets decreasing to EUR 115.6 billion at 30 June 2013 from EUR 121.5 billion at 31 December 2012, the ratio total risk-weighted assets divided by total assets decreased to 28.7% from 30.9%.
The cost of risk declined to 36 basis points from 98 basis points. This includes the reversals of the Greek governmentguaranteed corporate exposures and the Madoff related files. Excluding these reversals, the cost of risk would have been 127 basis points compared to 114 basis points at 31 December 2012.
The following table presents the balance sheet items that are exposed to credit risk (maximum exposure to credit risk) and the reconciliation to and movements in Exposure at Default (EAD), as ABN AMRO assesses credit risk on EAD. The balance sheet items subject to credit risk are presented in accordance with IFRS (EU); at carrying amounts net of impairment allowances, but without consideration of collateral or other credit enhancements.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Total assets1 | 402,317 | 393,758 |
| Less: items that are not subject to credit risk exposure2 | 14,130 | 10,671 |
| On-balance sheet maximum exposure to credit risk | 388,187 | 383,087 |
| Off-balance sheet | ||
| Committed credit facilities | 14,366 | 17,635 |
| Guarantees and other commitments | 16,878 | 16,777 |
| Revocable credit facilities | 71,175 | 72,343 |
| Total Off-balance sheet credit facilities and guarantees | 102,419 | 106,755 |
| Maximum exposure to credit risk | 490,606 | 489,842 |
| Adjustments on assets3 | -7,756 | -5,691 |
| Valuation adjustments4 | -57,735 | -55,036 |
| Less: Off-balance sheet credit facilities and guarantees | 102,419 | 106,755 |
| -102,419 | -106,755 | |
| Add: Off-balance sheet exposure fraction expected to be drawn | ||
| prior to default (Credit Conversion Factors) | 27,804 | 25,521 |
| 27,804 | 25,521 | |
| Total Exposure at Default1 | 350,500 | 347,881 |
| Credit risk risk-weighted assets/Total Exposure at Default | 26.4% | 28.9% |
1 2012 figures for Total assets and Exposure at Default have been adjusted for comparison purposes following adaption of the amended pension accounting standard IAS 19.
2 Items that are not subject to credit risk: more details are provided in the Risk management section of the Annual Report 2012.
3 Adjustments to assets: more details are provided in the Risk management section of the Annual Report 2012.
4 Valuation adjustments: more details are provided in the Risk management section of the Annual Report 2012.
An explanation of the movements of Total assets is provided in the Operating and financial review section.
Contents Interim Financial Report
| (in millions, Exposure at Default) | 30 June 2013 | ||||
|---|---|---|---|---|---|
| Exposure at Default IRB |
Exposure at Default SA |
Total Exposure at Default |
Average Exposure at Default |
Risk-weighted assets |
|
| Credit risk | |||||
| Central governments and central banks | 45,393 | 45,393 | 43,953 | 579 | |
| Institutions1 | 19,444 | 2,305 | 21,749 | 20,053 | 8,365 |
| Corporates | 92,997 | 7,123 | 100,120 | 100,681 | 50,762 |
| Retail | 127,544 | 2,904 | 130,448 | 133,568 | 23,143 |
| - of which Retail mortgages | 109,343 | 1,487 | 110,830 | 113,879 | 14,704 |
| - of which Qualifying revolving exposures | 7,232 | 7,232 | 6,992 | 3,338 | |
| - of which Other retail | 10,969 | 1,417 | 12,386 | 12,697 | 5,101 |
| Securitisation positions2 | 45,795 | 45,795 | 41,365 | 3,985 | |
| Subtotal | 331,173 | 12,332 | 343,505 | 339,620 | 86,834 |
| Equities not held for trading | 877 | 877 | 764 | 1,750 | |
| Other3 | 1,463 | 4,655 | 6,118 | 7,201 | 3,877 |
| Total4 | 333,513 | 16,987 | 350,500 | 347,585 | 92,461 |
| 31 December 2012 |
|---|
| ------------------ |
| Exposure at Default IRB |
Exposure at Default SA |
Total Exposure at Default |
Average Exposure at Default |
Risk-weighted assets |
|
|---|---|---|---|---|---|
| Credit risk | |||||
| Central governments and central banks | 45,966 | 45,966 | 37,059 | 683 | |
| Institutions1 | 16,162 | 16,162 | 18,897 | 5,482 | |
| Corporates | 78,911 | 24,769 | 103,680 | 104,363 | 61,094 |
| Retail | 134,998 | 4,416 | 139,414 | 140,688 | 24,510 |
| - of which Retail mortgages | 115,802 | 2,752 | 118,554 | 119,950 | 14,611 |
| - of which Qualifying revolving exposures | 6,819 | 6,819 | 5,003 | 2,856 | |
| - of which Other retail | 12,377 | 1,664 | 14,041 | 15,735 | 7,043 |
| Securitisation positions2 | 35,493 | 35,493 | 34,633 | 3,284 | |
| Subtotal | 295,368 | 45,347 | 340,715 | 335,640 | 95,053 |
| Equities not held for trading | 845 | 845 | 718 | 1,789 | |
| Other3 | 1,593 | 4,728 | 6,321 | 7,086 | 3,563 |
| Total4 | 297,806 | 50,075 | 347,881 | 343,444 | 100,405 |
1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.
2 EAD only includes retained securitisation positions. As sold securitisation positions are mostly ineffective under the securitisation framework, these positions should largely be taken into account as credit risk exposure. The EAD relating to sold securitisation positions, which is not taken into account as overall credit risk exposure, amounted to EAD EUR 5.3 billion at 30 June 2013 (31 December 2012: EAD EUR 10.3 billion). Securitisation positions is including retail mortgages (30 June 2013: EAD EUR 44.7 billion and RWA EUR 3.6 billion, 31 December 2012: EAD EUR 34.0 billion and RWA EUR 2.5 billion) and SME loans (30 June 2013: EAD EUR 1.1 billion and RWA EUR 0.4 billion, 31 December 2012: EAD EUR 1.5 billion and RWA EUR 0.8 billion).
3 Other includes non-credit obligation assets.
4 2012 figures for Exposure at Default have been adjusted for comparison purposes following adaption of the amended pension accounting standard IAS 19.
In the first half of 2013, following regulatory approval of its internal models, ABN AMRO rolled out Internal Ratings Based (IRB) models for Banks, Commercial Real Estate and Large Corporates portfolios. These portfolios were
previously reported on the Standardised Approach (SA). The rollout led to an IRB coverage ratio (proportion of riskweighted assets reported on IRB) of 88% as of 30 June 2013, which is above the regulatory threshold of 85%.
The bank's credit risk risk-weighted assets decreased by EUR 7.9 billion to EUR 92.5 billion at 30 June 2013 from EUR 100.4 billion at December 2012. This decrease was mainly due to the mentioned rollout of the IRB approach (EUR 6.2 billion). During the first half of 2013, total Exposure at Default (EAD) increased by EUR 2.6 billion to EUR 350.5 billion at 30 June 2013 from EUR 347.9 billion at 31 December 2012.
The EAD increase in exposure class institutions to EUR 21.7 billion was for an amount of EUR 1.4 billion due to changed calculation method for securities financing transactions and a change in treatment of financial collateral and new exposures. The IRB model rollout to institutions in the first quarter of 2013 required a different treatment of financial collateral, increasing EAD by EUR 2.0 billion. Business volume growth further raised EAD by EUR 1.6 billion. The RWA increase of EUR 2.9 billion to EUR 8.4 billion at 30 June 2013 was mainly driven by the rollout of the IRB approach, as a result of which RWA
increased temporarily by EUR 1.9 billion. New exposures in the first half of 2013 additionally contributed to an EUR 1.0 billion RWA increase.
Contents Interim Financial Report
EAD in exposure class corporates decreased by EUR 3.6 billion EAD to EUR 100.1 billion EAD. The RWA decrease of EUR 10.3 billion RWA to EUR 50.8 billion RWA at 30 June 2013 is primarily caused by the IRB model rollout at Large Corporates and Commercial Real Estate, with a net decrease of EUR 8.0 billion RWA.
Retail EAD decreased by EUR 9.0 billion EAD to EUR 130.4 billion, mainly due to asset securitisation (EUR 6.2 billion EAD). Some retail exposure is securitised and related securitisation positions are reported under securitisation instead of retail. Furthermore, the remaining EAD decrease was partly due to the decline in outstanding offers (EAD: EUR 1.0 billion), implementation of new IRB models (decrease of 0.5 billion EAD) and decreased business volume.
| (in millions, Exposure at Default) | 30 June 2013 | ||||||
|---|---|---|---|---|---|---|---|
| Investment grade |
Sub investment grade |
Default without provision |
Default with provision |
Total rated (IRB advanced) |
Total unrated (standardised approach) |
Total rated and unrated |
|
| Central governments and central banks | 45,380 | 13 | 45,393 | 45,393 | |||
| Institutions1 | 17,284 | 2,140 | 20 | 19,444 | 2,305 | 21,749 | |
| Corporates | 30,735 | 56,612 | 1,589 | 4,061 | 92,997 | 7,123 | 100,120 |
| Retail | 99,728 | 25,238 | 2,578 | 127,544 | 2,904 | 130,448 | |
| Securitisation positions2 | 45,792 | 3 | 45,795 | 45,795 | |||
| Total Exposure at Default3 | 238,919 | 84,006 | 1,589 | 6,659 | 331,173 | 12,332 | 343,505 |
| 31 December 2012 | |||||||
| Central governments and central banks | 45,963 | 3 | 45,966 | 45,966 | |||
| Institutions1 | 16,162 | 16,162 | |||||
| Corporates | 20,129 | 52,510 | 1,593 | 4,679 | 78,911 | 24,769 | 103,680 |
| Retail | 105,049 | 27,554 | 2,395 | 134,998 | 4,416 | 139,414 | |
| Securitisation positions2 | 35,490 | 3 | 35,493 | 35,493 | |||
| Total Exposure at Default3 | 206,631 | 80,070 | 1,593 | 7,074 | 295,368 | 45,347 | 340,715 |
1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.
2 Securitisation positions is including retail mortgages (30 June 2013: EAD EUR 44.7 billion and RWA EUR 3.6 billion, 31 December 2012: EAD EUR 34.0 billion and RWA EUR 2.5 billion) and SME loans (30 June 2013: EAD EUR 1.1 billion and RWA EUR 0.4 billion, 31 December 2012: EAD EUR 1.5 billion and RWA EUR 0.8 billion).
3 Total Exposure at Default includes the securitisation positions, resulting in adjusted 2012 figures to improve comparability with the June 2013 information presented. Total Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.
Credit risk mitigation considers techniques that reduce credit risk associated with a credit facility or exposure. Activities related to credit risk mitigation mainly relate to offsetting financial assets and liabilities, enforcing master netting agreements or similar instruments and collateral management and guarantees.
Financial assets and liabilities are offset and the net amount reported on the balance sheet if there is a legally enforceable right to set off the recognised amounts and there is either an intention to settle on a net basis or an intention to realise the asset and settle the liability simultaneously. The bank applies offsetting to the following items, provided they meet these criteria:
Enforceable master netting arrangements are all agreements with provisions that make offsetting exercisable in the event of default. In addition, agreements are enforceable when the bank has the right to offset and is unable to offset simultaneously. These arrangements include derivative clearing agreements, global master repurchase agreements and global master securities lending agreements.
Collateral is any commitment made by a counterparty to which the bank can seek recourse in the event of default in order to reduce credit losses. The value of collateral is determined through a prudent valuation, based on a particular set of criteria, including the nature and specific type, the liquidity and the volatility of the price. It also incorporates the forced-sale context and the degree of priority of ABN AMRO's rights. The bank further uses third-party guarantees (from banks, governments, export credit agencies, etcetera) to mitigate risks. The credit quality of guarantors is initially assessed and continuously monitored to ensure their value in risk mitigation.
For further information on credit risk mitigation please refer to the Annual Report 2012.
The total amount of the balance sheet netting with gross liabilities decreased by EUR 19.3 billion to EUR 77.6 billion at 30 June 2013.
ABN AMRO has changed the reporting method for part of the residential mortgage collateral. Therefore, the comparative figures for 2012 have been adjusted. The (adjusted) collateral value of residential mortgages has decreased in line with the falling house prices in the Netherlands. This explains the decrease to EUR 213.1 billion at 30 June 2013 from EUR 221.8 billion at 31 December 2012.
The other collateral and guarantees for residential mortgages mainly involve NHG guarantees, the amount reported as NHG guarantee is the shortfall on the collateral value versus the residential mortgage, reflecting the potential claim under the NHG guarantee scheme.
The surplus collateral for the mortgage portfolio decreased with EUR 6.2 billion to EUR 76.2 billion at 30 June 2013 due to a decrease in overvalue caused by the fall in house prices.
1 Carrying amount includes fair value adjustment from hedge accounting and loan impairment allowances.
1 Carrying amount includes fair value adjustment from hedge accounting and loan impairment allowances.
2 2012 comparative figures have been restated to improve comparability with the June 2013 information presented.
| (in millions) | 30 June 2013 | ||||||
|---|---|---|---|---|---|---|---|
| Offset in the statement | Not offset in the statement | Net | |||||
| of financial position | of financial position | exposure | |||||
| Carrying amount before balance sheet netting |
Balance sheet netting with gross assets |
Carrying amount |
Master netting agree ments |
Financial instru ments collateral |
Surplus collateral |
||
| Short security positions | 4,146 | 4,146 | 4,146 | ||||
| Derivatives held for trading | 24,925 | 12,865 | 12,060 | 8,374 | 3,686 | ||
| Other liabilities held for trading | 626 | 626 | 626 | ||||
| Financial liabilities held for trading | 29,697 | 12,865 | 16,832 | 8,374 | 8,458 | ||
| Deposits | 17,820 | 2,143 | 15,677 | 1,392 | 14,285 | ||
| Professional securities transactions | 11,217 | 437 | 10,780 | 840 | 9,597 | 343 | |
| Other | 43 | 43 | 43 | ||||
| Due to banks | 29,080 | 2,580 | 26,500 | 2,232 | 9,597 | 14,671 | |
| Deposits | 264,517 | 57,319 | 207,198 | 179 | 207,019 | ||
| Professional securities transactions | 29,340 | 4,830 | 24,510 | 2,001 | 25,786 | 3,363 | 86 |
| Other borrowings | 309 | 309 | 309 | ||||
| Due to customers | 294,166 | 62,149 | 232,017 | 2,180 | 25,786 | 3,363 | 207,414 |
| Accrued expenses | |||||||
| and deferred income | 5,134 | 5,134 | 5,134 | ||||
| Total Accrued expenses and | |||||||
| deferred income | 5,134 | 5,134 | 5,134 | ||||
| Non-trading derivative liabilities | 8,283 | 8,283 | 1,248 | 7,035 | |||
| Other liabilities other | 2,827 | 14 | 2,813 | 2,813 | |||
| Other liabilities | 11,110 | 14 | 11,096 | 1,248 | 9,848 | ||
| Total liabilities subject | |||||||
| to netting arrangements | 369,187 | 77,608 | 291,579 | 14,034 | 35,383 | 3,363 | 245,525 |
| Remaining liabilities not subject | |||||||
| to netting | 97,224 | 97,224 | 97,224 | ||||
| Total liabilities | 466,411 | 77,608 | 388,803 | 14,034 | 35,383 | 3,363 | 342,749 |
| Total off-balance sheet | 16,878 | 16,878 | 16,878 | ||||
| Total on- and | |||||||
| off-balance sheet | 483,289 | 77,608 | 405,681 | 14,034 | 35,383 | 3,363 | 359,627 |
Contents Interim Financial Report
| (in millions) | 31 December 2012 | ||||||
|---|---|---|---|---|---|---|---|
| Offset in the statement of financial position |
Not offset in the statement | of financial position | Net exposure |
||||
| Carrying amount before balance-sheet netting |
Balance sheet netting with gross assets |
Carrying amount |
Master netting agreements |
Financial instruments collateral |
Surplus collateral |
||
| Short security positions | 3,138 | 3,138 | 3,138 | ||||
| Derivatives held for trading | 37,448 | 22,380 | 15,068 | 10,952 | 4,116 | ||
| Other liabilities held for trading | 576 | 576 | 576 | ||||
| Financial liabilities held for trading | 41,162 | 22,380 | 18,782 | 10,952 | 7,830 | ||
| Deposits | 18,176 | 1,322 | 16,854 | 1,594 | 15,260 | ||
| Professional securities transactions | 7,938 | 3,578 | 4,360 | 261 | 4,063 | 36 | |
| Other | 49 | 49 | 49 | ||||
| Due to banks | 26,163 | 4,900 | 21,263 | 1,855 | 4,063 | 15,345 | |
| Deposits | 265,014 | 64,473 | 200,541 | 302 | 200,239 | ||
| Professional securities transactions | 20,207 | 5,065 | 15,142 | 572 | 14,484 | 175 | 261 |
| Other borrowings | 338 | 338 | 338 | ||||
| Due to customers | 285,559 | 69,538 | 216,021 | 874 | 14,484 | 175 | 200,838 |
| Accrued expenses | |||||||
| and deferred income | 5,698 | 5,698 | 5,698 | ||||
| Total Accrued expenses and deferred income |
5,698 | 5,698 | 5,698 | ||||
| Non-trading derivative liabilities | 10,208 | 10,208 | 1,961 | 8,247 | |||
| Other liabilities other | 3,322 | 89 | 3,233 | 3,233 | |||
| Other liabilities | 13,530 | 89 | 13,441 | 1,961 | 11,480 | ||
| Total liabilities subject to netting arrangements |
372,112 | 96,907 | 275,205 | 15,642 | 18,547 | 175 | 241,191 |
| Remaining liabilities not subject to netting |
105,670 | 105,670 | 105,670 | ||||
| Total liabilities | 477,782 | 96,907 | 380,875 | 15,642 | 18,547 | 175 | 346,861 |
| Total off-balance sheet | 16,777 | 16,777 | 16,777 | ||||
| Total on- and off-balance sheet |
494,559 | 96,907 | 397,652 | 15,642 | 18,547 | 175 | 363,638 |
Credit concentration risk is the risk of insufficient diversification of risks within a portfolio, due to a number of positively correlated counterparties. Concentrations are monitored against limits set in the bank's risk appetite in order to support the moderate risk profile.
Geographic concentration risk is defined as the risk of credit losses due to country-specific events or circumstances. A number of the bank's business lines are either located outside the Netherlands or have clients who operate internationally. This risk is managed through the setting of country credit limits, which are reviewed at least once a year.
| (in millions, Exposure at Default) | 30 June 2013 | |||||
|---|---|---|---|---|---|---|
| The Netherlands |
Rest of Europe |
USA | Asia | Rest of the world |
Total | |
| Central governments and central banks | 31,906 | 11,519 | 1,838 | 117 | 13 | 45,393 |
| Institutions1 | 4,527 | 9,615 | 4,156 | 2,962 | 489 | 21,749 |
| Corporates | 62,742 | 19,330 | 4,866 | 5,851 | 7,331 | 100,120 |
| Retail | 130,436 | 12 | 130,448 | |||
| - of which Retail mortgages | 110,820 | 10 | 110,830 | |||
| - of which Qualifying revolving exposures | 7,232 | 7,232 | ||||
| - of which Other retail | 12,384 | 2 | 12,386 | |||
| Securitisation positions2 | 45,795 | 45,795 | ||||
| Total Exposure at Default3 | 275,406 | 40,476 | 10,860 | 8,930 | 7,833 | 343,505 |
| Percentage of total | 80.2% | 11.8% | 3.2% | 2.6% | 2.3% | 100.0% |
| 31 December 2012 | ||||||
|---|---|---|---|---|---|---|
| The Netherlands |
Rest of Europe |
USA | Asia | Rest of the world |
Total | |
| Central governments and central banks | 37,542 | 8,159 | 151 | 113 | 1 | 45,966 |
| Institutions1 | 3,912 | 8,333 | 1,506 | 1,945 | 466 | 16,162 |
| Corporates | 65,467 | 21,308 | 4,630 | 4,790 | 7,485 | 103,680 |
| Retail | 139,347 | 63 | 1 | 1 | 2 | 139,414 |
| - of which Retail mortgages | 118,491 | 63 | 118,554 | |||
| - of which Qualifying revolving exposures | 6,819 | 6,819 | ||||
| - of which Other retail | 14,037 | 1 | 1 | 2 | 14,041 | |
| Securitisation positions2 | 35,493 | 35,493 | ||||
| Total Exposure at Default3 | 281,761 | 37,863 | 6,288 | 6,849 | 7,954 | 340,715 |
| Percentage of total | 82.7% | 11.1% | 1.8% | 2.0% | 2.3% | 100.0% |
1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.
2 Securitisation positions is including retail mortgages (30 June 2013: EAD EUR 44.7 billion and RWA EUR 3.6 billion, 31 December 2012: EAD EUR 34.0 billion and RWA EUR 2.5 billion) and SME loans (30 June 2013: EAD EUR 1.1 billion and RWA EUR 0.4 billion, 31 December 2012: EAD EUR 1.5 billion and RWA EUR 0.8 billion).
3 Total Exposure at Default includes the securitisation positions, resulting in adjusted 2012 figures to improve comparability with the June 2013 information presented. Total Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.
ABN AMRO's credit risk exposure is focused primarily on the Netherlands (80.2%). Exposures outside the Netherlands are mainly concentrated in Energy, Commodities & Transportation (ECT), ABN AMRO Clearing and Private Banking International (PBI). International growth is capability-led, focusing on ECT, PBI and asset-based financing. European credit exposure outside the Netherlands of EUR 40.5 billion is concentrated in the countries surrounding the Netherlands: France (25.2%), Belgium (17.1%), the United Kingdom (14.5%) and Germany (11.2%).
The exposure to central governments and central banks in the Netherlands declined by EUR 5.6 billion due to a net reduction of EUR 6.9 billion on exposures to the Dutch central bank. The exposure in the rest of Europe increased by EUR 2.6 billion to EUR 40.5 billion, mainly due to central governments and central banks. This is mostly due to increased exposures on Germany. The exposure to the USA in central governments and central banks increased by EUR 1.7 billion due to a purchase of US treasury bonds.
| (in billions) | 30 June 2013 | 31 December 2012 | ||||
|---|---|---|---|---|---|---|
| Government | Government guaranteed |
Gross carrying amount |
Government | Government guaranteed |
Gross carrying amount |
|
| Netherlands | 12.1 | 12.1 | 12.6 | 12.6 | ||
| France | 4.2 | 4.2 | 2.5 | 2.5 | ||
| Germany | 2.2 | 2.2 | 1.8 | 1.8 | ||
| Austria | 1.4 | 1.4 | 1.4 | 1.4 | ||
| Greece | 0.4 | 0.4 | 1.0 | 1.0 | ||
| Belgium | 2.8 | 2.8 | 0.8 | 0.8 | ||
| Rest of Europe | 1.3 | 1.3 | 1.0 | 1.0 | ||
| Finland | 0.7 | 0.7 | 0.7 | 0.7 | ||
| Italy | 0.4 | 0.4 | 0.4 | 0.4 | ||
| Poland | 0.2 | 0.2 | 0.3 | 0.3 | ||
| United Kingdom | 0.2 | 0.2 | 0.2 | 0.2 | ||
| Spain | 0.1 | 0.1 | 0.1 | 0.1 | ||
| Total European exposure | 25.6 | 0.4 | 26.0 | 21.8 | 1.0 | 22.8 |
ABN AMRO's government and government-guaranteed exposure outside the Netherlands rose to EUR 13.9 billion in the first half of 2013 due to increased exposures in France, Germany and Belgium, party offset by the sale of the Greek goverment-guaranteed corporate exposure. As of 30 June 2013, the Greek government-guaranteed corporate exposures amounted to EUR 0.4 billion. The increase in exposure to France, Germany and Belgium relates to diversification of the bank's liquidity portfolio. The bank remained cautious towards the level of credit risk exposures in Europe, as tension in the eurozone remained high during the first half of 2013.
Industry concentration is presented both in terms of original obligor and in terms of resultant obligor. Original obligor refers to the counterparty with whom ABN AMRO originally has the contractual relationship, often referred to as the borrower. The resultant obligor is the counterparty to which ABN AMRO has the ultimate credit risk, often referred to as the guarantor.
| (in millions, Exposure at Default) | 30 June 2013 | 31 December 2012 | ||||||
|---|---|---|---|---|---|---|---|---|
| Original obligor Exposure at Default |
Percentage of total |
Resultant obligor Exposure at Default |
Percentage of total |
Original obligor Exposure at Default |
Percentage of total |
Resultant obligor Exposure at Default |
Percentage of total |
|
| Industry sector | ||||||||
| Banks | 16,935 | 4.9% | 16,955 | 5.0% | 14,597 | 4.3% | 14,251 | 4.2% |
| Financial services1 | 9,597 | 2.8% | 9,679 | 2.8% | 10,136 | 3.0% | 10,240 | 3.0% |
| Industrial goods and services | 19,314 | 5.6% | 19,106 | 5.6% | 18,599 | 5.3% | 18,447 | 5.4% |
| Real estate | 14,455 | 4.2% | 11,680 | 3.4% | 14,688 | 4.3% | 12,041 | 3.6% |
| Oil and gas | 7,740 | 2.3% | 7,657 | 2.2% | 8,349 | 2.5% | 8,350 | 2.5% |
| Food and beverage | 8,888 | 2.6% | 8,809 | 2.6% | 9,093 | 2.7% | 8,997 | 2.6% |
| Retail | 8,173 | 2.4% | 7,995 | 2.3% | 7,712 | 2.3% | 7,525 | 2.2% |
| Basic resources | 4,548 | 1.3% | 4,527 | 1.3% | 4,445 | 1.3% | 4,410 | 1.3% |
| Healthcare | 4,522 | 1.3% | 4,220 | 1.2% | 4,514 | 1.3% | 3,866 | 1.1% |
| Construction and materials | 3,339 | 1.0% | 3,155 | 0.9% | 3,806 | 1.1% | 3,714 | 1.1% |
| Other2 | 30,088 | 8.7% | 31,159 | 9.1% | 43,443 | 12.8% | 43,056 | 12.6% |
| Subtotal Industry Classification Benchmark |
127,599 | 37.1% | 124,942 | 36.4% | 139,382 | 40.9% | 134,897 | 39.6% |
| Private individuals (non-Industry Classification Benchmark) |
177,496 | 51.7% | 177,496 | 51.7% | 170,123 | 49.9% | 170,229 | 50.0% |
| Public administration (non-Industry Classification Benchmark) |
38,410 | 11.2% | 41,067 | 11.9% | 31,210 | 9.2% | 35,589 | 10.4% |
| Subtotal non-Industry | ||||||||
| Classification Benchmark | 215,906 | 62.9% | 218,563 | 63.6% | 201,333 | 59.1% | 205,818 | 60.4% |
| Total Exposure at Default3 | 343,505 | 100.0% | 343,505 | 100.0% | 340,715 | 100.0% | 340,715 | 100.0% |
1 Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.
2 Other includes travel and leisure, utilities, personal and household goods, media, technology, automobiles and parts, chemicals, telecommunication and insurance, in addition to unclassified. 3 Total Exposure at Default includes the securitisation positions, resulting in adjusted 2012 figures to improve comparability with the June 2013 information presented. Total Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations. EAD on securitisation positions are included in industry sectors 'other' and 'private individuals'.
The industry view based on original obligor and resultant obligor differs strongly for real estate, healthcare and public administration. The government-guaranteed exposures are included in the original obligor view under the applicable industry sector, but in the resultant obligor view these exposures are included in the public administration industry sector, as they concern government-related exposure. This mainly applies to real estate and healthcare exposures as in these sectors exposures are usually guaranteed by government-related parties.
The real estate portfolio includes social housing, and the exposure to social housing amounted to EUR 4.5 billion, of which EUR 2.7 billion is guaranteed by 'Waarborgfonds Sociale Woningbouw (WSW)'. This explains the difference between real estate exposure in the original obligor view and the resultant obligor view.
Contents Interim Financial Report
Contents Interim Financial Report
The table on the previous page shows that the portfolio is well diversified across the industries. Industrial goods and services comprise a broad variety of sub-sectors, including industrial transportation. The significant concentration of credit risk exposures observed in private individuals consists mainly of residential mortgages and, to a lesser extent, consumer loans.
The following overview shows key figures of the bank's mortgage portfolio.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Carrying amount1 | 156,255 | 158,412 |
| Exposure at Default2 | 155,515 | 152,523 |
| - of which Retail mortgages | 110,830 | 118,554 |
| - of which Securitisation positions3 | 44,685 | 33,969 |
| Risk-weighted assets4 | 18,267 | 17,105 |
| Past due but not impaired | 3,315 | 3,562 |
| Past due ratio | 2.1% | 2.2% |
| Collateral | 218,683 | 227,065 |
| Collateral/carrying amount | 140.0% | 143.3% |
| Coverage ratio | 21.7% | 19.4% |
| Impaired ratio | 1.1% | 0.9% |
1 Carrying amount includes fair value adjustment from hedge accounting and loan impairment allowances.
2 Retail mortgages EAD does not include EAD relating to mortgage securitisation positions sold.
3 Securitisation positions include the mortgage securitisation positions and exclude the SME securitisation positions (30 June 2013: EAD EUR 1.1 billion, 31 December 2012: EAD EUR 1.5 billion).
4 Risk-weighted assets include RWA on mortgage securitisation positions and exclude the SME securitisation positions (30 June 2013: RWA EUR 0.4 billion, 31 December 2012: RWA EUR 0.8 billion).
In the first half of 2013, the housing market in the Netherlands continued to suffer from the challenging macro-economic climate, lack of consumer confidence and tightened tax deductibility of mortgage interest following new legislation. House prices continued to decline. At 30 June 2013, house prices were 4.9% lower than at 31 December 2012 and 9.6% lower than at 30 June 2012 (source: Statistics Netherlands (CBS)). The maximum loan amount for government-guaranteed loans (NHG) was reduced from EUR 320,000 to EUR 290,000 at 1 July 2013 and will be further capped to pre-crisis levels of EUR 265,000 by July 2014. The government will also restrict residential mortgage financing by reducing the maximum Loan-to-Market Value (LtMV) of a mortgage loan from 105% in 2013 to 100% in 2018 (including 2% transfer tax).
On 30 June 2013, the bank's total mortgage portfolio in the Netherlands was EUR 152.8 billion, 0.7% lower than in in the fourth quarter of 2012. Of the total mortgage book, 23% is NHG-guaranteed. The portfolio breaks down into 57% of interest-only mortgages, of which 23% is 100% interest-only, as shown in the following pie chart.
The impaired mortgage portfolio amounted to EUR 1.7 billion at 30 June 2013 (EUR 1.5 billion at year-end 2012). This resulted in an increase in the impaired rate from 0.9% (year-end 2012) to 1.1% (June 2013). The coverage ratio for mortgages increased to 21.7% from 19.4% to cover for lower recovery results. Impairment charges of residential mortgages amounted to EUR 179 million (30 June 2012: EUR 86 million).
1 The hybrid portfolio consists of a combination of savings and investment mortgages.
2 The unclassified portfolio of EUR 3,169 million as at 30 June 2013 consists of bridge loans, flexible loans and tailor-made products.
| 30 June 2013 | 31 December 2012 | |
|---|---|---|
| Percentage of total | Percentage of total | |
| Loan-to-Market Value category1 | ||
| <50% | 9% | 10% |
| 50%-70% | 7% | 8% |
| 70%-100% | 6% | 5% |
| >100% | 1% | 1% |
| Total | 23% | 24% |
1 ABN AMRO calculates the Loan-to-Market Value using the indexation of the Dutch Land Registry Office (Kadaster).
The table shows the LtMV for the 100% interest only mortgage portfolio. Clients with interest only (100%) mortgages comprised 23% of the total mortgage portfolio, but only 1% of the total mortgage portfolio was 100% interest only and had an LtMV above 100%. The interest only (100%) mortgages were mainly provided to clients that also had credit balances (savings, investment accounts) with ABN AMRO.
Production volumes of residential mortgages at ABN AMRO decreased by 27% compared to the first half of 2012 and in line with the decline of the total market size for new mortgages by 23% (until 30 June 2013) (source: Dutch Land Registry Office, Kadaster). The decline was caused by changes to the Dutch mortgage regime in the beginning of 2013. The bank's production in the second quarter of 2013 was 20% lower than the first quarter of 2013 due to fiscal changes and regular seasonal patterns.
Contents Interim Financial Report
Historically, residential mortgages in the Netherlands are composed of different types of mortgages, e.g. a combination of interest only and savings mortgages. As from January 2013, new mortgages need to have 100% annuity redemption in order to be eligible for tax deduction. As a result, new production consists mainly of annuity mortgages, while interest only mortgages are decreasing further. The graph shows a small shift from interest only and savings mortgages to annuity mortgages in the first half of 2013.
1 Other consists of life, investment, hybrid and part the unclassified mortgage types (EUR 1,086 out of a total unclassified portfolio of EUR 3,169). The remaining unclassified portfolio of EUR 2,083 is not incorporated.
| (in millions) | 30 June 2013 | 31 December 2012 | ||
|---|---|---|---|---|
| Gross carrying amount |
Percentage of total |
Gross carrying amount |
Percentage of total |
|
| Loan-to-Market Value category1 | ||||
| NHG | 35,557 | 23% | 34,828 | 23% |
| <50% | 22,156 | 15% | 23,589 | 15% |
| 50%-60% | 9,042 | 6% | 9,627 | 6% |
| 60%-70% | 10,617 | 7% | 11,373 | 7% |
| 70%-80% | 11,203 | 7% | 11,347 | 7% |
| 80%-90% | 12,285 | 8% | 13,164 | 9% |
| 90%-100% | 13,878 | 9% | 14,612 | 9% |
| 100%-110% | 13,721 | 9% | 13,649 | 9% |
| 110%-120% | 12,273 | 8% | 13,026 | 9% |
| 120%-130% | 7,117 | 5% | 4,404 | 3% |
| >130% | 1,963 | 1% | 1,453 | 1% |
| Unclassified2 | 2,943 | 2% | 2,803 | 2% |
| Total | 152,755 | 100% | 153,875 | 100% |
1 ABN AMRO calculates the Loan-to-Market Value using the indexation of the Dutch Land Registry Office (Kadaster). Savings pledged for loan repayments are deducted from the loan amount.
2 The classified portfolio represents 98% of the total mortgage portfolio. The unclassified part of the portfolio still comprises several smaller portfolios administrated by external providers. EUR 226 million of the unclassified portfolio is incorporated into the table above; the remaining EUR 2,943 million unclassified is not incorporated.
The challenging economic conditions in the Netherlands adversely affected the asset quality of ABN AMRO's mortgage portfolio. The decline in residential property value of the mortgages resulted in an increase in the average LtMV of the mortgage portfolio to 83.5% (30 June 2013) from 81.5% (year-end 2012). Although 23% is above an indexed LtMV of 100%, this does not directly imply that clients with these mortgages are facing financial difficulties. Additional voluntary repayments continued to increase in the first half of 2013. These additional voluntary repayments have a positive impact on the LtMV of the portfolio.
Commercial clients with a turnover up to EUR 30 million are served by Business Banking, which is currently in the process of transforming to a sector knowledge-based model. Business Banking has a diversified portfolio across all sectors. Client activities are mostly related to the Netherlands. The loan book of Business Banking contracted in the first half of 2013.
Credit risk in the Business Banking portfolio increased due to further deterioration of the Dutch economy. Impairment charges increased in the first half of 2013, mostly in respect of clients that are already served by Financial Restructuring & Recovery (FR&R). Inflow in FR&R remained relatively high. In 2013, the inflow was seen across all industry sectors. Due to deteriorating collateral value, impaired loans within FR&R needed additional provisions.
ABN AMRO has taken various additional measures to mitigate Business Banking credit risk. All employees at Business Banking are enrolled in a permanent credit risk education programme. Loan approval policies have been tightened and should meet minimum expected risk adjusted return criteria. Early warning procedures to detect risk deterioration have proven their effectiveness, as witnessed by decreasing past due exposures.
Real estate includes client's own use, real estate investment and real estate development. At 30 June 2013, ABN AMRO's real estate Exposure at Default based on the original obligor view amounted to EUR 14.5 billion (EUR 14.7 billion at yearend 2012). Original obligor refers to the counterparty with whom ABN AMRO originally has the contractual relationship, often referred to as the borrower. The exposure in the resultant obligor view amounted to EUR 11.7 billion (EUR 12.0 billion at year-end 2012). The resultant obligor is the counterparty to which ABN AMRO has the ultimate credit risk, often referred to as the guarantor.
Contents Interim Financial Report
The real estate portfolio includes social housing, and the exposure to social housing amounted to EUR 4.5 billion, of which EUR 2.7 billion is guaranteed by 'Waarborgfonds Sociale Woningbouw (WSW)'. This explains the difference between real estate exposure in the original obligor view and the resultant obligor view.
On 30 June 2013, the impaired exposures in real estate amounted to EUR 730 million (up from EUR 696 million year-end 2012). The coverage ratio for the impaired portfolio was 64% at 30 June 2013. Impairment charges related to real estate amounted to EUR 47 million at 30 June 2013.
ABN AMRO defines Commercial Real Estate (CRE) as land or property owned by project developers or investors with the purpose to develop, to trade or to rent land or property. The credit quality of the counterparty depends on real estate generating cash flows and income-producing real estate. The majority of the CRE portfolio consists of investments in Dutch property. Around 30% is related to LC&MB clients. The Business Banking CRE portfolio has an exposure comparable in size. In general, exposures to office investments and land banks are limited.
Contents Interim Financial Report
ABN AMRO pursues a controlled growth strategy for Energy, Commodities and Transportation (ECT) globally. The combined on- and off-balance sheet growth of 19% was realised as a result of higher business volumes in the commodities sector in Asia and the USA as well as in the energy sector in the USA. The strengthening of the US dollar (+1.6%) contributed to the overall growth as well, although this was offset by a decline in prices for most commodities, generally resulting in a lower utilisation of credit lines.
The carrying amount of the ECT on-balance sheet loan portfolio, which is mainly USD denominated, amounted to an equivalent of EUR 14.7 billion (year-end 2012: EUR 12.5 billion). The off-balance sheet exposure, mainly consisting of short-term letters of credit secured by commodities and uncommitted credit facilities, increased by EUR 4.7 billion to EUR 28,7 billion (2012: EUR 24.0 billion). The bulk of the ECT on-balance loan portfolio was in the commodities sector, while the remainder comprised loans to clients in the transportation (33%) and energy (13%) sectors.
Markets remained challenging in certain parts of the shipping industry, in particular the tanker and dry cargo markets. The risk appetite of the dry bulk and tanker sectors includes a conservative deal intake with longstanding well known relationships only.
ABN AMRO monitors and manages the credit risk profile of the portfolio in line with respective market sentiment and trends. To monitor the risks in the portfolio, ABN AMRO continuously conducts deep dives (in-depth analyses) on specific ECT subsectors with increased risk, including stress tests. In the first half of 2013, deep dives were carried out for the metals sector in commodities and for dry bulk and tankers in transportation.
Specific loan impairment charges for ECT over the first half of 2013, mainly attributable to the commodities sector, amounted to EUR 14.5 million (first half of 2012: EUR 0.9 million). The annualised loss rate over the first half year of 2013, expressed as impairment charges over the on-balance sheet outstanding amount, equals 20 basis points. This is relatively low given the current economic environment.
A financial asset is past due if a counterparty has failed to make a payment when contractually due or if it has exceeded an agreed limit. ABN AMRO starts counting days past due from the first day that a counterparty is past due on any financial obligation regardless of the amount. Exposures are classified as being in default when the past due trigger of 90 days has been reached and a certain threshold (if applicable) has been exceeded.
| (in millions) | 30 June 2013 | |||||||
|---|---|---|---|---|---|---|---|---|
| Gross carrying amount |
Carrying amount of assets (not classified as impaired) |
Of which past due | Past due ratio |
|||||
| < = 30 days past due |
> 30 days & <= 60 days past due |
> 60 days & <= 90 days past due |
>90 days past due |
Total past due but not impaired |
||||
| Loans and receivables – banks | 41,719 | 41,696 | 0.0% | |||||
| Loans and receivables – customers |
||||||||
| Residential mortgage1 | 156,719 | 154,986 | 1,579 | 1,288 | 448 | 3,315 | 2.1% | |
| Other consumer loans | 16,402 | 15,603 | 105 | 29 | 18 | 32 | 184 | 1.1% |
| Total consumer loans2 | 173,121 | 170,589 | 1,684 | 1,317 | 466 | 32 | 3,499 | 2.0% |
| Commercial loans1 | 86,276 | 81,034 | 111 | 7 | 2 | 3 | 123 | 0.1% |
| Other commercial loans3 | 25,836 | 25,693 | 10 | 2 | 1 | 2 | 15 | 0.1% |
| Total commercial loans | 112,112 | 106,727 | 121 | 9 | 3 | 5 | 138 | 0.1% |
| Government and official institutions |
1,539 | 1,539 | 0.0% | |||||
| Total Loans and | ||||||||
| receivables – customers | 286,772 | 278,855 | 1,805 | 1,326 | 469 | 37 | 3,637 | 1.3% |
| Accrued income and prepaid expenses |
3,888 | 3,888 | 0.0% | |||||
| Total accrued income | ||||||||
| and prepaid expenses | 3,888 | 3,888 | 0.0% | |||||
| Other assets | 3,844 | 3,835 | 79 | 6 | 1 | 86 | 2.2% | |
| Total | 336,223 | 328,274 | 1,884 | 1,332 | 470 | 37 | 3,723 | 1.1% |
Carrying amount includes fair value adjustment from hedge accounting.
Consumer loans in the programme lending portfolio that are more than 90 days past due are immediately impaired.
Other commercial loans consist of reverse repurchase agreements, securities borrowing transactions, financial lease receivables and factoring.
Contents Interim Financial Report
| Gross carrying amount |
Carrying amount of assets (not classified as impaired) |
Of which past due | Past due ratio |
|||||
|---|---|---|---|---|---|---|---|---|
| < = 30 days past due |
> 30 days & <= 60 days past due |
> 60 days & <= 90 days past due |
>90 days past due |
Total past due but not impaired |
||||
| Loans and receivables – banks | 46,426 | 46,402 | 0.0% | |||||
| Loans and receivables – customers |
||||||||
| Residential mortgage1 | 158,781 | 157,277 | 1,652 | 1,433 | 477 | 3,562 | 2.2% | |
| Other consumer loans | 16,568 | 15,893 | 28 | 14 | 8 | 34 | 84 | 0.5% |
| Total consumer loans2 | 175,349 | 173,170 | 1,680 | 1,447 | 485 | 34 | 3,646 | 2.1% |
| Commercial loans1 | 86,395 | 80,109 | 145 | 16 | 4 | 23 | 188 | 0.2% |
| Other commercial loans3 | 18,722 | 18,602 | 10 | 1 | 1 | 2 | 14 | 0.1% |
| Total commercial loans | 105,117 | 98,711 | 155 | 17 | 5 | 25 | 202 | 0.2% |
| Government and official institutions |
1,329 | 1,329 | 0.0% | |||||
| Total Loans and receivables | ||||||||
| – customers | 281,795 | 273,210 | 1,835 | 1,464 | 490 | 59 | 3,848 | 1.4% |
| Accrued income | ||||||||
| and prepaid expenses Total accrued income |
3,940 | 3,940 | 0.0% | |||||
| and prepaid expenses | 3,940 | 3,940 | 0.0% | |||||
| Other assets | 5,328 | 5,315 | 55 | 55 | 1.0% | |||
| Total | 337,489 | 328,867 | 1,890 | 1,464 | 490 | 59 | 3,903 | 1.2% |
(in millions) 31 December 2012
Carrying amount includes fair value adjustment from hedge accounting.
2 Consumer loans in the programme lending portfolio that are more than 90 days past due are immediately impaired.
3 Other commercial loans consist of reverse repurchase agreements, securities borrowing transactions, financial lease receivables and factoring.
The total past due ratio fell by 0.1% to 1.1% at 30 June 2013, mainly due to a decline in the past due exposure in the mortgage portfolio. The mortgage portfolio in arrears (past due up to 90 days) decreased from EUR 3.6 billion at 31 December 2012 to EUR 3.3 billion at 30 June 2013 after an initial increase in the first quarter. This decrease was driven by the payment of the annual holiday allowances in May and June, which clients used to pay their mortgage arrears.
In the first half of 2013, a total reversal of impairment allowances of EUR 550 million was noted for the Greek government-guaranteed corporate exposures (EUR 297 million) and Madoff-related files (EUR 253 million). Due to the reversals of these impairment allowances, the total impaired charges on loans and receivables were reduced to EUR 216 million in the first half of 2013 compared to EUR 554 million in the first half of 2012.
In the past, ABN AMRO provided loans to various funds that were affected by the Madoff fraud. Following the unveiling of the fraud in 2008, the Madoff-related exposures amounting to EUR 1.0 billion were fully impaired. In addition to recoveries in previous years, ABN AMRO sold collateral on part of the exposures in June 2013, which resulted in a release of EUR 0.3 billion and a write-off of EUR 0.1 million. The remaining fully impaired Madoff-related exposures amounted to EUR 0.5 billion at 30 June 2013.
Following the sale of a second tranche of Greek governmentguaranteed corporate exposures, the outstanding notional amount decreased to EUR 0.4 billion. As a result, the related allowances have been released. Additionally, a reassessment of the remaining exposures resulted in a partial release of the allowance for remaining exposures. Including related write-offs and currency exchange differences, the remaining exposure after impairments decreased to EUR 0.2 billion.
| (in millions) | 30 June 2013 | 31 December 2012 | |||||
|---|---|---|---|---|---|---|---|
| Exposure at Default |
Impaired exposures |
Allowances for impair ments for identified credit risk |
Impairment charges for the period |
Exposure at Default |
Impaired exposures |
Allowances for impair ments for identified credit risk |
|
| Industry sector | |||||||
| Banks | 16,935 | 23 | -23 | -1 | 14,597 | 24 | -24 |
| Financial services1 | 9,597 | 933 | -813 | -174 | 10,136 | 1,237 | -1,101 |
| Industrial goods and services | 19,314 | 1,591 | -748 | -183 | 18,599 | 2,275 | -1,422 |
| Real Estate | 14,455 | 730 | -467 | 47 | 14,688 | 696 | -458 |
| Oil and gas | 7,740 | 93 | -89 | 11 | 8,349 | 106 | -106 |
| Food and beverage | 8,888 | 411 | -228 | 41 | 9,093 | 401 | -203 |
| Retail | 8,173 | 474 | -267 | 80 | 7,712 | 415 | -231 |
| Basic Resources | 4,548 | 161 | -109 | -29 | 4,445 | 259 | -215 |
| Healthcare | 4,522 | 45 | -21 | 2 | 4,514 | 43 | -19 |
| Construction and materials | 3,339 | 368 | -261 | 43 | 3,806 | 360 | -247 |
| Other2 | 30,088 | 681 | -360 | 15 | 43,443 | 661 | -354 |
| Subtotal Industry Classification Benchmark | 127,599 | 5,510 | -3,386 | -148 | 139,382 | 6,477 | -4,380 |
| Private individuals (non-Industry Classification Benchmark) Public administration (non-Industry Classification Benchmark) Subtotal non-Industry Classification Benchmark |
177,496 38,410 215,906 |
2,441 2,441 |
-778 -778 |
263 263 |
170,123 31,210 201,333 |
2,095 57 2,152 |
-617 -53 -670 |
| Total3, 4 | 343,505 | 7,951 | -4,164 | 115 | 340,715 | 8,629 | -5,050 |
1 Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.
2 Other includes travel and leisure, utilities, personal and household goods, media, technology, automobiles and parts, chemicals, telecommunication and insurance, in addition to unclassified. 3 Total Exposure at Default includes the securitisation positions, resulting in adjusted 2012 figures to improve comparability with the June 2013 information presented. Total Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations. EAD on securitisation positions are included in industry sectors 'other'
4 Amounts excluding Incurred But Not Identified (IBNI).
and 'private individuals'.
Total impaired credit risk exposures decreased by EUR 678 million to EUR 7,951 million in the first half of 2013 from EUR 8,629 million at year-end 2012, with the most significant decline registered in the industry sector industrial goods & services and in financial
services. The decrease in industrial goods and services was caused by the sale of Greek government-guaranteed corporate exposures. The decline in financial services reflects the sale of Madoff-related collateral.
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| On-balance sheet | 215 | 552 |
| Off-balance sheet | 1 | 2 |
| Total impairment charges on loans and other receivables | 216 | 554 |
| Commercial | Consumer loans – |
Other consumer |
|||
|---|---|---|---|---|---|
| (in millions) | Banks | loans1 | mortgages | loans | Total |
| Balance as at 1 January 2013 | 28 | 4,697 | 370 | 445 | 5,540 |
| Impairment charges for the period | 670 | 217 | 163 | 1,050 | |
| Reversal of impairment allowances no longer required | -4 | -756 | -36 | -14 | -810 |
| Recoveries of amounts previously written off | -3 | -2 | -20 | -25 | |
| Total impairment charges on loans and other receivables | -4 | -89 | 179 | 129 | 215 |
| Amount recorded in interest income from unwinding | |||||
| of discounting | -13 | -2 | -4 | -19 | |
| Currency translation differences | 16 | 16 | |||
| Amounts written off (net) | -878 | -82 | -59 | -1,019 | |
| Reserve for unearned interest accrued on impaired loans | 20 | 3 | 23 | ||
| Other adjustments | 3 | -2 | 1 | ||
| Balance as at 30 June 2013 | 24 | 3,756 | 463 | 514 | 4,757 |
1 Commercial loans included a release for the Greek government-guaranteed corporate exposures of EUR 297 million and Madoff-related collateral of EUR 253 million.
| Commercial | Consumer loans – |
Other consumer |
|||
|---|---|---|---|---|---|
| (in millions) | Banks | loans1 | mortgages | loans | Total |
| Balance as at 1 January 2012 | 26 | 4,895 | 281 | 344 | 5,546 |
| Impairment charges for the period | 5 | 517 | 117 | 77 | 716 |
| Reversal of impairment allowances no longer required | -2 | -135 | -29 | 15 | -151 |
| Recoveries of amounts previously written off | -4 | -2 | -7 | -13 | |
| Total impairment charges on loans and other receivables | 3 | 378 | 86 | 85 | 552 |
| Amount recorded in interest income from unwinding | |||||
| of discounting | 32 | -3 | 8 | 37 | |
| Currency translation differences | 26 | 1 | 27 | ||
| Amounts written off (net) | -433 | -78 | -68 | -579 | |
| Reserve for unearned interest accrued on impaired loans | |||||
| Other adjustments | 24 | 1 | -16 | 9 | |
| Balance as at 30 June 2012 | 29 | 4,922 | 287 | 354 | 5,592 |
1 Commercial loans included a release for the Greek government-guaranteed corporate exposures of EUR 125 million.
Excluding the reversals and recoveries of Greek governmentguaranteed corporate exposures and Madoff-related files, impairment charges in the first half of 2013 increased substantially by 38% compared to the first half of 2012. Write-offs almost doubled; excluding Greek governmentguaranteed corporate exposures and Madoff-related files, write-offs were EUR 717 million, up by 24%.
Within consumer loans, the impairment charges for residential mortgages increased by 85%, reflecting the adverse housing market in the Netherlands. Similar developments are visible for other consumer loans.
Within commercial loans, impairment charges increased by 30% mainly for Business Banking clients in line with the increase in the number of Business Banking clients under management by Financial Restructuring & Recovery.
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| (in millions) | 30 June 2013 | 31 December 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross carrying amount |
Impaired expo sures |
Allowances for Impair ments for identified credit risk |
Coverage ratio |
Impaired ratio |
Gross carrying amount |
Impaired expo sures |
Allowances for Impair ments for identified credit risk |
Coverage ratio |
Impaired ratio |
|
| Loans and receivables – banks |
41,719 | 23 | -23 | 100.0% | 0.1% | 46,426 | 24 | -24 | 100.0% | 0.1% |
| Loans and receivables – customers |
||||||||||
| Residential mortgages1 | 156,719 | 1,733 | -376 | 21.7% | 1.1% | 158,781 | 1,504 | -292 | 19.4% | 0.9% |
| Other consumer loans | 16,402 | 799 | -436 | 54.6% | 4.9% | 16,568 | 675 | -392 | 58.1% | 4.1% |
| Total consumer loans | 173,121 | 2,532 | -812 | 32.1% | 1.5% | 175,349 | 2,179 | -684 | 31.4% | 1.2% |
| Commercial loans1, 2 | 86,276 | 5,242 | -3,240 | 61.8% | 6.1% | 86,395 | 6,286 | -4,253 | 67.7% | 7.3% |
| Other commercial loans3 | 25,836 | 143 | -86 | 60.1% | 0.6% | 18,722 | 120 | -85 | 70.8% | 0.6% |
| Total commercial loans | 112,112 | 5,385 | -3,326 | 61.8% | 4.8% | 105,117 | 6,406 | -4,338 | 67.7% | 6.1% |
| Government and official institutions |
1,539 | 0.0% | 1,329 | 0.0% | ||||||
| Total Loans and receivables – customers |
286,772 | 7,917 | -4,138 | 52.3% | 2.8% | 281,795 | 8,585 | -5,022 | 58.5% | 3.0% |
| Accrued income and | ||||||||||
| prepaid expenses | 3,888 | 0.0% | 3,940 | 0.0% | ||||||
| Total accrued income and prepaid expenses |
3,888 | 0.0% | 3,940 | 0.0% | ||||||
| Other assets | 3,844 | 9 | -3 | 33.3% | 0.2% | 5,328 | 13 | -4 | 30.8% | 0.2% |
| Total on-balance sheet |
336,223 | 7,949 | -4,164 | 52.4% | 2.4% | 337,489 | 8,622 | -5,050 | 58.6% | 2.6% |
| Total off-balance sheet |
102,421 | 2 | 0.0% | 0.0% | 106,756 | 7 | 0.0% | 0.0% | ||
| Total4 | 438,644 | 7,951 | -4,164 | 52.4% | 1.8% | 444,245 | 8,629 | -5,050 | 58.5% | 1.9% |
Carrying amounts include fair value adjustment from hedge accounting.
Includes impairments on Madoff and the Greek government-guaranteed corporate exposures.
Other commercial loans consist of reverse repurchase agreements, securities borrowing transactions, financial lease receivables and factoring.
4 Amounts excluding Incurred But Not Identified (IBNI).
The impaired ratio decreased to 1.8% at 30 June 2013 from 1.9% at 31 December 2012, mainly as a result of the decreased impaired exposures. Within total consumer loans, the impaired ratio increased to 1.5% at June 2013 from 1.2% at 31 December 2012. This increase is explained by the continuing poor economic conditions in the Netherlands in general and the housing market in particular. The coverage ratio for mortgages increased to 21.7% from 19.4% to cover for lower recovery results. Within other consumer loans, there are significant impaired exposures which were well collateralised, resulting in a decrease in the coverage ratio to 54.6% from 58.1%. For commercial loans, the decrease in impaired exposures caused the impaired ratio to come down to 4.8% from 6.1%. The coverage ratio decreased to 61.8% from 67.7% due to the decrease of the loan loss allowances. The changes in ratios are mainly explained by the Greek government-guaranteed corporate exposures and Madoff-related files.
IBNI impairment allowances on loans and receivables increased by EUR 101 million to EUR 596 million in the first half of 2013 from EUR 495 million at year-end 2012. This was mainly due to higher IBNI impairment allowances for Business Banking clients, consumer loans and residential mortgages. The IBNI increase is a reflection of the current economic circumstances.
ABN AMRO is exposed to market risk through its trading activities, banking book and pension liabilities.
Contents Interim Financial Report
Market risk in the trading book refers to the risk resulting from movements in market prices, in particular changes in interest rates, foreign exchange rates, equity prices, commodity prices as well as changes in risk factor volatility.
Exposure to market risk in the trading book arises mainly from facilitating client orders and businesses. These client activities predominantly concern linearly behaving products and instruments. In line with market practice, exposures are reported in terms of Value at Risk (VaR) numbers. VaR calculations involve taking the market price movements of the last 300 days and calculating the impact on profit and loss as result of these movements. ABN AMRO applies a one-day 99% VaR meaning that a VaR of EUR 1 million implies a 1% change of a loss of more than EUR 1 million on any given business day.
| (in millions) | 30 June 2013 | 31 December 2012 | ||
|---|---|---|---|---|
| Diversified | Undiversified | Diversified | Undiversified | |
| VaR at last trading day of period | 2.9 | 3.6 | 2.2 | 2.4 |
| Highest VaR | 5.4 | 7.1 | 6.3 | 9.0 |
| Lowest VaR | 0.9 | 1.6 | 1.3 | 2.2 |
| Average VaR | 2.2 | 3.0 | 3.0 | 4.5 |
From the end of May 2013, reported VaR numbers omit exposure information with regard to equity derivatives, equity facilitation and carbon portfolios. This temporary situation was caused by an IT systems decommissioning. Trading exposure continues to be monitored and reported daily against position, sensitivities and stress test limits. The exposures for these activities will be integrated in
the target systems for these risk factor classes.
The influence on the VaR figure was limited as the activity had already been scaled down. The average VaR for equity was 0.7 in the first six months, with the average equity VaR at 30 June 2013 coming to 0.3. The diversified average VaR for June was approximately the same as the average for the first five months.
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During the first half of 2013 the VaR was driven by a combination of the low interest rate environment and the VaR methodology based on relative shifts. On average, more positions are concentrated in the short end of the curve. This has a large impact on the VaR. Due to relatively
low business volumes, only a few large deals are settled, which generally take a few days before they are fully hedged. This caused fewer VaR spikes in the first half of 2013 compared to 2012.
| (in millions) | 30 June 2013 31 December 2012 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Capital requirement |
Risk weighted assets |
Assets held for trading1 |
Liabilities held for trading |
Capital require ment |
Risk weighted assets |
Assets held for trading1 |
Liabilities held for trading |
|
| Position risk in traded debt instruments | 138 | 1,727 | 13,262 | 11,538 | 141 | 1,765 | 16,544 | 14,551 |
| Position risk in equities | 50 | 624 | 12,340 | 4,146 | 45 | 563 | 5,465 | 3,138 |
| Foreign exchange risk | 224 | 522 | 289 | 517 | ||||
| Commodity risk | 32 | 398 | 510 | 15 | 187 | 506 | ||
| Other | 626 | 576 | ||||||
| Add-on | 320 | 4,000 | 250 | 3,125 | ||||
| Total | 540 | 6,749 | 26,336 | 16,832 | 451 | 5,640 | 22,804 | 18,782 |
1 Included in the assets are also the MtM of derivatives. More information is provided in the Risk management section of the Annual Report 2012.
The capital requirement increased mainly due to an add-on of EUR 70 million for reasons of prudence (equivalent to EUR 875 million RWA) following the temporary application of the Standardised Approach to the equities portfolio instead of the Internal Models Approach (IMA). The add-on does not signify any change in the risk profile. ABN AMRO is currently applying for IMA approval.
Market risk in the banking book, predominantly interest rate risk, mainly refers to the potential negative impact on bank's interest income and the market value of its equity, due to yield curve movements. Other market risks in the banking book are mitigated through hedging (i.e. FX risk).
| 30 June 2013 |
31 December 2012 |
|
|---|---|---|
| Duration of equity (in years) | 3.3 | 1.6 |
| Absolute sensitivity (in millions) | 24.1 | 22.0 |
| VaR banking book1 (in millions) |
694 | 564 |
1 ABN AMRO applies a two-months 99% VaR for the banking book, meaning that a VaR of EUR 1 million implies a 1% chance of a loss of more than EUR 1 million within a two-months period.
In the first half of 2013, interest rates remained persistently low. The duration increase was mainly attributable to prepayment model adjustments pursued to better reflect actual and anticipated client behaviour in the Dutch mortgage market. In line with ABN AMRO's moderate risk profile, the duration of equity was managed at 3 to 4 years. Banking book VaR and absolute sensitivity changed in line with the duration development.
FX risk refers to the potential adverse impact on the net income and capital ratios due to unfavorable exchange rate developments. ABN AMRO does not take FX risk in its banking book, except for positions resulting from capital hedging and residual positions occurring for operational reasons. FX capital hedging is pursued to mitigate the capital ratios' volatility due to adverse FX movements.
The bank's exposure to pension risk is that ABN AMRO must provide additional funds to its employee pension fund as a result of guarantees and commitments to this fund. As such, ABN AMRO is exposed to adverse changes in interest rates, credit spreads, long-term inflation rates, mortality rates and investment risk. A detailed account of the changes can be found in note 15 of the Condensed Consolidated Interim Financial Statements 2013.
In the first half of 2013 ABN AMRO noted a number of trends in operational risk. In general, there is an increase in events related to the continuing economic crisis (for example credit fraud attempts and claims). ABN AMRO employees are encouraged to be alert to the operational risks they face and to rigorously apply controls and security measures.
In 2012, Retail Banking suffered from operational losses due to cybercrime such as skimming and phishing. ABN AMRO has continued to improve security precautions, which led to a sharp decrease in related losses in the first half of 2013. Business continuity threats such as the DDoS-attacks (distributed denial-of-service) captured headlines in the Netherlands in the first half of the year, potentially interrupting the bank's service via the internet.
ABN AMRO's defences against these attacks proved to be effective and led to very limited interruption of client services. ATM explosive gas attacks on ABN AMRO premises in the Netherlands led ABN AMRO to implement various counter-measures in the first half of 2013. At this point, the damage has been contained, and measures taken are already helping to reduce damage levels. Further improvements are expected.
ABN AMRO is implementing the Advanced Measurement Approach (AMA) in the organisation, in order to calculate regulatory capital levels using the AMA model. In the first half of 2013, various projects were completed in support of the AMA approach, such as a converged approach of risk and control assessments in which various risks are combined into one holistic overview for the entire bank.
ABN AMRO's capital according to TSA is increased by a regulatory add-on amount to AMA implementation. Under TSA, the full regulatory capital requirements for 2013 amounted to EUR 1.3 billion (year-end 2012: EUR 1.2 billion). Translated to risk-weighted assets, the amount is EUR 16.4 billion (year-end 2012: EUR 15.5 billion). The increase in the regulatory capital requirement for operational risk was caused by higher gross income over the reference period.
In the first half of 2013, ABN AMRO was well capitalised and well positioned to meet the upcoming Basel III requirements. ABN AMRO continues to actively manage its risk-bearing exposures along with its capital liabilities to ensure comfortable compliance with the new CRD IV regulatory framework. ABN AMRO's capital position remains supportive of its strategic ambitions.
At 30 June 2013, ABN AMRO's core Tier 1 and Tier 1 ratios were 13.3% and 14.2% respectively and its total capital ratio was 19.2%. The following tables present the development of Basel II regulatory capital and risk-weighted assets (RWA) in the first half of 2013.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Total Equity – IFRS (EU) | 13,514 | 12,883 |
| Goodwill and other intangible assets | -117 | -121 |
| IRB provisions shortfall | -151 | -114 |
| Participations in financial institutions > 10% | -329 | -323 |
| Valuation differences in available-for-sale Equities | -153 | -109 |
| Valuation differences in available-for-sale Loans and assets | 5 | 14 |
| Cash flow hedge reserve | 1,653 | 1,873 |
| Dividend reserve | -300 | -262 |
| Other regulatory adjustments | 1,285 | 859 |
| Core Tier 1 capital | 15,407 | 14,700 |
| Innovative hybrid capital instruments | 1,000 | 997 |
| Tier 1 Capital | 16,407 | 15,697 |
| Subordinated liabilities Upper Tier 2 | 175 | 183 |
| Valuation differences in available-for-sale Equities | 153 | 109 |
| Subordinated liabilities Lower Tier 2 | 5,899 | 6,848 |
| Participations in financial institutions > 10% | -329 | -323 |
| IRB provisions shortfall | -151 | -114 |
| Total regulatory capital | 22,154 | 22,400 |
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Credit risk | 92,461 | 100,405 |
| Advanced | 81,251 | 67,835 |
| Standardised | 11,210 | 32,570 |
| Operational risk | 16,415 | 15,461 |
| Advanced | ||
| Standardised | 16,415 | 15,461 |
| Market risk | 6,749 | 5,640 |
| Advanced | 500 | |
| Standardised | 6,749 | 5,140 |
| Total risk-weighted assets | 115,625 | 121,506 |
Contents Interim Financial Report
In the first half of 2013, the core Tier 1 ratio improved to 13.3% compared with 12.1% at year-end 2012, while the Tier 1 ratio increased to 14.2% from 12.9%. The increase in capital ratios is attributed to profit accumulation and a substantial RWA decrease,
partially offset by the dividend reserve. The total capital ratio improved to 19.2% compared with 18.4% at year-end 2012. This improvement reflects the positive impact of the RWA decrease that offset the total capital amount decrease due to the call of Tier 2 instruments. These capital ratios are well above the regulatory minimum requirements. The main items impacting the capital ratios in the first half of 2013 are illustrated below.
Net reported profit attributable to the owner of ABN AMRO in the first half of 2013 amounted to EUR 817 million. Net profit excluding intended dividend is included in the core Tier 1 capital. In the first half of 2013, EUR 300 million was deducted from core Tier 1 capital for a potential dividend payment to the shareholder over the year 2013.
In March 2013, ABN AMRO exercised the call option to repurchase EUR 210 million preference shares. The acquired repurchased shares were cancelled and NL Financial Investments (NLFI) consequently became the sole holder of all ABN AMRO Group N.V. shares. As these class A non-cumulative preference shares were already excluded from the regulatory capital position at year-end 2012, the repurchase had no impact on the capital ratios reported per 30 June 2013.
The call and coupon ban on capital instruments imposed by the European Commission in the state aid ruling expired on 11 March 2013. While preparing for Basel III compliance, a number of lower Tier 2 capital instruments were called in the first half of the year, totalling EUR 1.5 billion notional and of EUR 0.9 billion regulatory capital value.
Total Basel II RWA from on- and off-balance sheet activities decreased by almost 5% in the first half of 2013. The RWA fall reflects the substantial decrease in credit risk RWA partially offset by increases in the operational and market risk RWA.
Credit risk RWA came down primarily due to migration of the large corporates and institutions portfolios from standardised to advanced approach under the Basel II regulations. Market risk RWA increased in anticipation of the transition from the standardised to the advanced approach. Operational risk RWA increase reflects the update of the average gross income figures as part of the annual reassessment.
Further detailed information on RWA developments in the first half of 2013 is provided in the Risk management section.
In the first half of 2013, EUR 210 million of class A non-cumulative preference shares were repurchased and cancelled, resulting in a decline of share capital and share premium reserve of EUR 75 million and EUR 135 million respectively. The Annual Report 2012 provides a detailed description of all issued shares. An explanation of the movements in the first half of 2013 is provided in the Condensed consolidated statement of changes in equity in the Condensed Consolidated Interim Financial Statements.
For reasons of prudence and in close consultation with the shareholder, ABN AMRO has adopted a temporary reduction of the payout ratio. The targeted payout ratio will gradually increase again to 40% of the net profit by financial year 2015. In the first half of 2013, EUR 300 million was deducted from core Tier 1 capital for a potential dividend payment to the shareholder over the year 2013. Part of this could be paid as an interim dividend following the third-quarter results. Any dividend decision is subject to, among other factors, the third-quarter and full-year results.
At 30 June 2013, ABN AMRO had the following capital instruments outstanding.
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| (in millions) | 30 June 2013 | 31 December 2012 | |||
|---|---|---|---|---|---|
| First possible | Nominal | Nominal | |||
| ISIN/CUSIP | Maturity date | call date1 | amount | amount | |
| Tier 1 | |||||
| EUR 1,000 million 4.31% per annum | XS0246487457 | Perpetual | March 2016 | 1,000 | 1,000 |
| Total Tier 1 capital instruments | 1,000 | 1,000 | |||
| Upper Tier 2 | |||||
| GBP 150 million (originally GBP 750 million) | |||||
| 5.00% per annum | XS0244754254 | Perpetual | February 2016 | 175 | 183 |
| Lower Tier 2 | |||||
| EUR 1,650 million | |||||
| (originally EUR 2,000 million)2 | October 2017 | October 2012 | 1,650 | 1,650 | |
| EUR 1,228 million 6.375% per annum | XS0619548216 | April 2021 | 1,228 | 1,228 | |
| USD 595 million 6.250% per annum | XS0619547838 | April 2022 | 457 | 451 | |
| 00080QAD7/ | May 2023 | 87 | 86 | ||
| USD 113 million 7.75% per annum | N0028HAP0 | ||||
| EUR 1,000 million 7.125% per annum | XS0802995166 | July 2022 | 996 | 1,000 | |
| USD 1,500 million 6.25% per annum | XS0827817650 | September 2022 | September 2017 | 1,130 | 1,137 |
| SGD 1,000 million 4.7% per annum | XS0848055991 | October 2022 | October 2017 | 589 | 621 |
| EUR various smaller instruments | 2015-2020 | 280 | 313 | ||
| Various Tier 2 capital instruments3 | 1,464 | ||||
| Total Tier 2 capital instruments | 6,592 | 8,133 | |||
| Of which eligible for regulatory capital: | |||||
| Basel II, Tier 1 | 1,000 | 997 | |||
| Basel II, Tier 2 | 6,074 | 7,031 | |||
| Basel III, Tier 1 | 800 | 797 | |||
| Basel III, Tier 2 | 5,966 | 5,002 |
1 The call dates refer to the first possible call date per instrument, taking into account the EC call and coupon payment restrictions expired on 11 March 2013.
2 The EUR 1,650 million instrument is owned by the Dutch State and was acquired from Fortis Bank SA/NV in Belgium in October 2008; please refer to note 19 in the Condensed Consolidated Interim Financial Statements.
3 Tier 2 capital instruments called in the first half of 2013.
The Capital Requirements Directive IV and the Capital Requirements Regulation IV, as published in June 2013, set the framework for the implementation of Basel III within the European Union. The new rules will be phased in as from 1 January 2014 and will be fully effective by January 2019. Under the new rules, capital requirements are expected to increase due to the introduction of stricter capital eligibility criteria, capital requirements for derivatives, additional capital buffers and the leverage back stop.
The regulatory capital adequacy position is already managed in anticipation of Basel III requirements. ABN AMRO expects to be compliant with the more restrictive capital requirements.
Contents Interim Financial Report
The following graph presents the impact of the Basel III phase-in and Basel III fully loaded rules on the capital adequacy ratios as at 30 June 2013. The Basel III impact has been calculated based on current information and regulatory guidance.
Under the current interpretation of Basel III phase-in rules (as per January 2014), the 30 June 2013 regulatory capital ratios would be impacted as follows:
Contents Interim Financial Report
Under the Basel III fully loaded rules for capital deductions, prudential filters and RWA, the impact on the capital ratios is as follows:
of Tier 1 instruments and EUR 4.0 billion of Tier 2 instruments. The rest of the impact is caused by the deduction of deferred tax assets, defined benefit pension fund assets, and a different treatment of capital deductions and prudential filters.
The Basel III fully loaded Common Equity Tier 1 ratio amounts to 11.5%.
| 30 June 2013 | Basel II | Basel III January 2014 |
Basel III fully loaded |
|---|---|---|---|
| Risk-weighted assets | 115,625 | 122,270 | 122,205 |
| Core Tier 1/Common Equity Tier 1 capital | 15,407 | 15,641 | 14,026 |
| Core Tier 1/Common Equity Tier 1 ratio | 13.3% | 12.8% | 11.5% |
| Tier 1 capital | 16,407 | 16,442 | 14,027 |
| Tier 1 ratio | 14.2% | 13.4% | 11.5% |
| Total capital | 22,154 | 22,370 | 16,777 |
| Total capital ratio | 19.2% | 18.3% | 13.7% |
| Leverage ratio | 3.5% | 3.5% | 3.0% |
Impact of Basel III on capital ratios
CRD IV introduces a non-risk based leverage ratio to be monitored by 2017 and to be further refined and calibrated before becoming a binding measure. The leverage ratio is defined as Tier 1 capital divided by an exposure measure comprising on- and off-balance sheet items. ABN AMRO's Basel III phase-in leverage ratio was 3.5% on 30 June 2013. The amended treatment of securities financing exposures proposed by most recent update of CRD IV had a positive impact on the reported leverage ratio.
The Basel III fully loaded leverage ratio as at 30 June 2013 is estimated at 3.0%. The difference with the phase-in leverage ratio is mainly attributed to the lower Tier 1 capital level due to additional capital deductions and Tier 1 capital eligibility loss under the fully loaded rules.
The Loan-to-Deposit ratio improved in the first half of 2013 due to continued inflow of client deposits. The average remaining maturity of our outstanding debt increased to 4.6 years. The liquidity buffer was rebalanced while its size remained stable in anticipation of new LCR guidelines and the regulatory focus on strengthening buffers in general.
ABN AMRO takes a two-step approach to liquidity risk management, which is outlined in the Annual Report 2012: a going concern and a contingency liquidity risk approach.
Going concern liquidity management entails management of the day-to-day liquidity position within specified parameters to ensure all liabilities can be met on a timely basis. Indicators used in going concern liquidity management are stress testing, regulatory liquidity, survival period and the Loan-to-Deposit (LtD) ratio. More information on stress testing can be found in the Annual Report 2012.
The regulatory liquidity requirement measures the one-month liquidity position in a severe stress scenario. This stress scenario is defined by the Dutch central bank and it requires the one-month liquidity position to always exceed the minimum required regulatory level. As of 30 June 2013, the number was EUR 35.1 billion, well above the minimum regulatory requirement.
The survival period on 30 June 2013 was >11 months, comfortably meeting the internally set minimum target.
The LtD measures the relative size of the customer loan book compared to customer deposits. The LtD ratio improved to 122.5%, down from 125.0% on 31 December 2012, due to a 7.4% increase in Due to customers and only a slight increase in Loans and receivables – customers over the first half of 2013. The following table shows the LtD ratio as per 30 June 2013, compared with the situation on 31 December 2012.
Contents Interim Financial Report
| (in millions) | 30 June 2013 | 31 December 2012 | ||
|---|---|---|---|---|
| Loans and receivables – customers | 282,039 | 276,283 | ||
| Less: Reverse repurchase agreements | 11,200 | 7,346 | ||
| Less: Securities borrowing | 10,178 | 7,149 | ||
| Less: Fair value adjustment from hedge accounting | 4,883 | 6,041 | ||
| -26,261 | -20,536 | |||
| Add: Gross up savings in mortgage linked | ||||
| saving products | 6,946 | 6,574 | ||
| Adjusted Loans and receivables – customers | 262,724 | 262,321 | ||
| Due to customers | 232,017 | 216,021 | ||
| Less: Repurchase agreements | 21,111 | 12,148 | ||
| Less: Securities lending transactions | 3,399 | 2,994 | ||
| Less: Deposits from Dutch State Treasury Agency | ||||
| (DSTA) | 2,100 | 2,100 | ||
| -26,610 | -17,242 | |||
| Add: Gross up savings in mortgage linked | ||||
| saving products | 6,946 | 6,574 | ||
| Add: Debt certificates issued through Groenbank NV | 227 | 353 | ||
| Add: Fiduciary deposits | 1,866 | 4,233 | ||
| 9,039 | 11,160 | |||
| Adjusted Due to customers | 214,446 | 209,939 | ||
| Loan-to-Deposit ratio (LtD) | 122.5% | 125.0% |
Contingency liquidity risk management aims to ensure that ABN AMRO can generate sufficient liquidity to withstand a short-term or long-term liquidity crisis. Tools used by ABN AMRO in contingency liquidity risk management are the Liquidity Contingency Plan (LCP, outlined in the Annual Report 2012) and the liquidity buffer.
A liquidity buffer with sufficient collateral is retained as a safety cushion in the event of severe liquidity stress. The liquidity buffer portfolio mainly consists of retained RMBS, government bonds and cash, all unencumbered. The buffer amounted to EUR 67.1 billion at liquidity value on 30 June 2013, compared to EUR 68.0 billion on 31 December 2012.The composition of the liquidity buffer changed: the cash and central bank deposits component fell to EUR 11.2 billion on 30 June 2013 from EUR 19 billion on 31 December 2012 whereas government bonds increased to EUR 14.2 billion from EUR 11.8 billion. Retained RMBS also increased in the first half of 2013 to EUR 33.4 billion from EUR 29.3 billion. The increase in retained RMBS is the result of externally placed RMBS transactions that were called and not replaced in the market, but re-issued for liquidity purposes.
The following graph shows the composition of the liquidity buffer on 30 June 2013 and 31 December 2012.
(in billions, liquidity value)
The Basel III/CRD IV framework introduces two new liquidity ratios, the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). The minimum requirements for both the LCR and the NSFR are expected to be 100% under Basel III. The LCR for ABN AMRO increased to 91% on 30 June 2013, coming from 89% on 31 December 2012 and the NSFR decreased to 101% on 30 June 2013, coming from 108% on 31 December 2012.
In January 2013, the Basel Committee published an update on the LCR guidelines, indicating a delayed and staged implementation of the LCR ratio. Taking this into account ABN AMRO now targets an LCR of 90-95% by the end of 2013 and compliance with an LCR of 100% as of 2014. A variety of wholesale funding instruments will be used to manage the LCR.
Contents Interim Financial Report
| 30 June 2013 | 31 December 2012 | |
|---|---|---|
| Going concern indicators | ||
| Loan-to-Deposit ratio | 123% | 125% |
| NSFR | 101% | 108% |
| Survival period (months) | >11 months | >12 months |
| Contingency indicators | ||
| LCR | 91% | 89% |
| Liquidity buffer (in billions) | 67 | 68 |
ABN AMRO raises a significant part of its funding through its R&PB and C&MB networks. Total customer deposits grew by EUR 6.7 billion, particularly in Retail Banking in the Netherlands due to consumers being cautious
in response to the ongoing economic uncertainty. The increase in deposits improved the Loan-to-Deposit ratio and allowed the bank to reduce the size of funds raised in the wholesale market.
Credit spreads were relatively stable in the first half of 2013, due to a lack of issuance as a result of the deleveraging of banks and the ECB Longer Term Refinancing Operations in 2012. In June, credit spread levels increased slightly after the US Federal Reserve hinted at slowing the pace of asset purchases. ABN AMRO raised EUR 5.8 billion in the first 6 months of 2013, at competitive spreads. Virtually all of this funding was raised in senior unsecured format.
ABN AMRO benefits from a solid core retail funding base and well diversified wholesale funding sources with R&PB and C&MB deposits serving as the bank's main sources of funding. Customer deposits grew to EUR 207 billion on 30 June 2013 from EUR 201 billion on 31 December 2012. Customer deposits as a percentage of balance sheet total grew from 50.9% to 51.6% in the first half of 2013, allowing the bank to reduce the amount of wholesale funding (issued debt and subordinated liabilities) from EUR 104 billion to EUR 96 billion.
The graph below provides a total overview of liabilities and equity composition of ABN AMRO's balance sheet on 30 June 2013 and 31 December 2012.
(in billions)
ABN AMRO's funding strategy aims to further optimise and diversify the bank's funding sources, in order to maintain the targeted long-term funding position, liquidity profile and compliance with regulatory requirements. The bank also focuses on optimising Net interest income while complying with anticipated regulatory requirements.
More details on the funding guidelines can be found in the Annual Report 2012.
The main wholesale funding types can be specified as follows.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Saving certificates | 472 | 686 |
| Commercial Paper/Certificates of Deposit | ||
| Euro Commercial Paper | 4,055 | 5,238 |
| London Certificates of Deposit | 5,465 | 4,510 |
| French Certificats de Dépôt | 7,385 | 7,522 |
| US Commercial Paper | 3,837 | 3,788 |
| Total Commercial Paper/Certificates of Deposit | 20,742 | 21,058 |
| Senior guaranteed | ||
| Dutch State guaranteed medium-term notes | 1,416 | 2,692 |
| Senior unsecured | ||
| Unsecured medium-term notes | 28,318 | 25,808 |
| Senior secured | ||
| Senior secured bonds (excl. asset-backed securities) | 25,095 | 27,654 |
| Securitisations1 | ||
| Residential mortgage-backed securities (Dutch) | 11,548 | 15,964 |
| Other asset-backed securities | 174 | 181 |
| Total issued debt | 87,765 | 94,043 |
| Total subordinated liabilities | 7,897 | 9,566 |
| Total funding types | 95,662 | 103,609 |
1 Excluding long-term repos.
The Dutch State-guaranteed medium-term notes decreased to EUR 1.4 billion on 30 June 2013 from EUR 2.7 billion on 31 December 2012. This was due to a cash tender offer for the EUR 2.5 billion governmentguaranteed notes. The participation rate in the cash tender was 49%.
The following information is based on notional values. The main differences compared to the information above are differences between nominal value and issue price and fair value hedge accounting adjustments.
The graph below gives an overview of the outstanding long-term funding on 30 June 2013 and 31 December 2012.
In the first half of 2013, ABN AMRO raised EUR 5.8 billion in long-term debt with an average maturity of 5.4 years. Seventy per cent of the funding raised in the first half of 2013 was attracted through private placements and 30% through benchmark transactions and tap issuances on existing benchmarks. ABN AMRO raised funds in
EUR, USD, GBP, JPY, NOK, CAD, NZD and AUD, with 73% raised in EUR.
The average remaining maturity of ABN AMRO's wholesale funding increased to 4.6 years by 30 June 2013, compared to 4.3 years on 31 December 2012.
(in billions)
Contents Interim Financial Report
Contents Interim Financial Report
Pursuant to section 5:25d, paragraph 2(c), of the Dutch Financial Supervision Act (Wet op het financieel toezicht (WFT)), the members of the Managing Board state that to the best of their knowledge:
Gerrit Zalm, Chairman Johan van Hall, Vice-Chairman Kees van Dijkhuizen, Member Caroline Princen, Member Wietze Reehoorn, Member Chris Vogelzang, Member Joop Wijn, Member
The Group has included in this Interim Financial Report, and from time to time may make certain statements in its public filings, press releases or other public statements that may constitute "forward-looking statements" within the meaning of the safe-harbour provisions of the United States Private Securities Litigation Reform Act of 1995. This includes, without limitation, such statements that include the words "expect", "estimate", "project", "anticipate", "should", "intend", "plan", "aim", "believe ", desire", "strive", "probability", "risk", "Value-at-Risk" ("VaR"), "target", "goal", "objective", "will", "endeavour", "outlook", "optimistic", "prospects" and similar expressions or variations on such expressions.
In particular, this document includes forward-looking statements relating, but not limited, to ABN AMRO's potential exposures to various types of operational, credit and market risk, such as counterparty risk, interest rate risk, foreign exchange rate risk and commodity and equity price risk. Such statements are subject to risks and uncertainties. These forward-looking statements are not historical facts and represent only ABN AMRO's beliefs regarding future events, many of which by their nature are inherently uncertain and beyond the bank's control.
Other factors that could cause actual results to differ materially from those anticipated by the forward-looking statements contained in this document include, but are not limited to:
▶ Changes in Dutch and foreign laws, regulations, policies and taxes;
▶ Changes in competition and pricing environments;
The forward-looking statements made in this Interim Financial Report are only applicable as from the date of publication of this document. ABN AMRO does not intend to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report, and ABN AMRO does not assume any responsibility to do so. The reader should, however, take into account any further disclosures of a forward-looking nature that ABN AMRO may make in ABN AMRO's reports.
Contents Interim Financial Report
| Condensed consolidated income statement | 68 |
|---|---|
| Condensed consolidated statement of comprehensive income | 69 |
| Condensed consolidated statement of financial position | 70 |
| Condensed consolidated statement of changes in equity | 71 |
| Condensed consolidated statement of cash flows | 74 |
| General information | 76 |
|---|---|
| Segment reporting | 78 |
| Acquisitions and divestments | 84 |
| Operating income | 84 |
| Operating expenses | 85 |
| Financial assets and liabilities held for trading | 86 |
| Financial investments | 87 |
| Loans and receivables – banks | 88 |
| Loans and receivables – customers | 89 |
| Due to banks | 89 |
| Due to customers | 90 |
| Issued debt | 90 |
| Subordinated liabilities | 91 |
| Provisions | 91 |
| Pensions | 92 |
| Professional securities transactions | 95 |
| Commitments and contingent liabilities | 95 |
| Fair value of financial instruments | 96 |
| Related parties | 100 |
| Other information | 102 |
| (in millions) | Note | First half 2013 | First half 2012 |
|---|---|---|---|
| Income | |||
| Interest income | 5,979 | 6,870 | |
| Interest expense | 3,314 | 4,355 | |
| Net interest income | 2,665 | 2,515 | |
| Fee and commission income | 1,324 | 1,308 | |
| Fee and commission expense | 495 | 520 | |
| Net fee and commission income | 829 | 788 | |
| Net trading income | 4 | 207 | |
| Results from financial transactions | -16 | 48 | |
| Share of result in equity accounted investments | 37 | 33 | |
| Other income | 82 | 222 | |
| Operating income | 4 | 3,601 | 3,813 |
| Expenses | |||
| Personnel expenses1 | 1,199 | 1,009 | |
| General and administrative expenses | 1,017 | 1,089 | |
| Depreciation and amortisation of tangible and intangible assets | 95 | 131 | |
| Operating expenses | 5 | 2,311 | 2,229 |
| Impairment charges on loans and other receivables | 216 | 554 | |
| Total expenses | 2,527 | 2,783 | |
| Operating profit/(loss) before taxation | 1,074 | 1,030 | |
| Income tax expense1 | 257 | 190 | |
| Profit/(loss) for the period | 817 | 840 | |
| Attributable to: | |||
| Owners of the company | 818 | 842 | |
| Non-controlling interests | -1 | -2 |
1 All 2012 figures have been adjusted for comparison purposes following adoption of the amendments to IAS 1 represent changes in the presentation of other comprehensive income and the amended pension accounting standard IAS 19.
The notes to the Condensed Consolidated Interim Financial Statements, including the reviewed Risk management sections, are an integral part of these statements.
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| Profit/(loss) for the period | 817 | 840 |
| Other comprehensive income: | ||
| Items that will not be reclassified to the income statement | ||
| Remeasurement gains/(losses) on defined benefit plans1 | 80 | -2,026 |
| Items that will not be reclassified to the income statement before taxation | 80 | -2,026 |
| Income tax relating to items that will not be reclassified to the income statement1 | 19 | -506 |
| Items that will not be reclassified to the income statement after taxation | 61 | -1,520 |
| Items that may be reclassified to the income statement | ||
| Currency translation reserve | -10 | 31 |
| Available-for-sale reserve | 25 | 62 |
| Cash flow hedge reserve | 294 | -355 |
| Share of other comprehensive income of associates | 6 | 38 |
| Other changes | -4 | -3 |
| Other comprehensive income for the period before taxation | 311 | -227 |
| Income tax relating to components of other comprehensive income | 84 | -69 |
| Other comprehensive income for the period after taxation | 227 | -158 |
| Total comprehensive income/(expense) for the period after taxation | 1,105 | -838 |
| Total comprehensive income attributable to: | ||
| Owners of the company | 1,106 | -836 |
| Non-controlling interests | -1 | -2 |
1 All 2012 figures have been adjusted for comparison purposes following adoption of the amended pension accounting standard IAS 19.
The notes to the Condensed Consolidated Interim Financial Statements are an integral part of these statements.
| (in millions) | Note | 30 June 2013 | 31 December 2012 |
|---|---|---|---|
| Assets | |||
| Cash and balances at central banks | 12,767 | 9,796 | |
| Financial assets held for trading | 6 | 26,336 | 22,804 |
| Financial investments | 7 | 24,776 | 21,407 |
| Loans and receivables – banks | 8 | 41,695 | 46,398 |
| Loans and receivables – customers | 9 | 282,039 | 276,283 |
| Equity accounted investments | 1,077 | 1,011 | |
| Property and equipment | 1,483 | 1,519 | |
| Goodwill and other intangible assets | 203 | 223 | |
| Assets held for sale | 29 | 55 | |
| Accrued income and prepaid expenses | 3,888 | 3,940 | |
| Current tax assets | 125 | 278 | |
| Deferred tax assets1 | 903 | 1,241 | |
| Other assets1 | 6,996 | 8,803 | |
| Total assets | 402,317 | 393,758 | |
| Liabilities | |||
| Financial liabilities held for trading | 6 | 16,832 | 18,782 |
| Due to banks | 10 | 26,500 | 21,263 |
| Due to customers | 11 | 232,017 | 216,021 |
| Issued debt | 12 | 87,765 | 94,043 |
| Subordinated liabilities | 13 | 7,897 | 9,566 |
| Provisions1 | 14 | 1,429 | 1,915 |
| Accrued expenses and deferred income | 5,134 | 5,698 | |
| Current tax liabilities | 103 | 99 | |
| Deferred tax liabilities | 30 | 47 | |
| Other liabilities | 11,096 | 13,441 | |
| Total liabilities | 388,803 | 380,875 | |
| Equity | |||
| Share capital | 940 | 1,015 | |
| Share premium | 12,970 | 13,105 | |
| Other reserves (incl. retained earnings/profit for the period)1 | 4,360 | 3,811 | |
| Other components of equity1 | -4,775 | -5,067 | |
| Equity attributable to owners of the parent company | 13,495 | 12,864 | |
| Equity attributable to non-controlling interests | 19 | 19 | |
| Total equity | 13,514 | 12,883 | |
| Total liabilities and equity | 402,317 | 393,758 | |
| Committed credit facilities | 17 | 14,366 | 17,635 |
| Guarantees and other commitments | 17 | 16,878 | 16,777 |
1 All 2012 figures have been adjusted for comparison purposes following adoption of the amended pension accounting standard IAS 19.
The notes to the Condensed Consolidated Interim Financial Statements are an integral part of these statements.
| Other reserves |
||||||||
|---|---|---|---|---|---|---|---|---|
| Share | including | Other | Net profit | Non | ||||
| Share | premium | retained | comprehensive | attributable to | controlling | Total | ||
| (in millions) | capital | reserve | earnings | income | shareholders | Total | interests | equity |
| Balance at 31 December 2011 | 1,015 | 11,505 | 153 | -1,938 | 665 | 11,400 | 20 | 11,420 |
| Impact IAS 19R adoption1 | 1,925 | 1,925 | 1,925 | |||||
| Balance at 1 January 2012 | 1,015 | 11,505 | 2,078 | -1,938 | 665 | 13,325 | 20 | 13,345 |
| Total comprehensive income | -3 | -1,675 | 842 | -836 | -2 | -838 | ||
| Transfer | 665 | -665 | ||||||
| Dividend | -63 | -63 | -63 | |||||
| Increase/(decrease) of capital | 02 | |||||||
| MCS conversion | 2,000 | 2,000 | 2,000 | |||||
| Ageas settlement | -400 | -400 | -400 | |||||
| Balance at 30 June 2012 | 1,015 | 13,105 | 2,677 | -3,613 | 842 | 14,026 | 18 | 14,044 |
| Balance at 31 December 2012 | 1,015 | 13,105 | 733 | -1,783 | 948 | 14,018 | 19 | 14,037 |
| Impact IAS 19R adoption1 | 1,925 | -3,284 | 205 | -1,154 | -1,154 | |||
| Balance at 1 January 2013 | 1,015 | 13,105 | 2,658 | -5,067 | 1,153 | 12,864 | 19 | 12,883 |
| Total comprehensive income | -4 | 292 | 818 | 1,106 | -1 | 1,105 | ||
| Transfer | 1,153 | -1,153 | ||||||
| Dividend | -262 | -262 | -262 | |||||
| Increase/(decrease) of capital | -75 | -135 | -3 | -213 | -213 | |||
| Other changes in equity | 1 | 1 | ||||||
| Balance at 30 June 2013 | 940 | 12,970 | 3,542 | -4,775 | 818 | 13,495 | 19 | 13,514 |
1 All 2012 figures have been adjusted for comparison purposes following adoption of the amended pension accounting standard IAS 19.
2 In connection with the MCS Conversion, ABN AMRO Group N.V. issued one class A ordinary share (nominal value of EUR 1.00) to NLFI.
Specification of other comprehensive income is as follows:
| (in millions) | Remeasurement gains/(losses) on post-employee benefit plans1 |
Currency translation reserve |
Available for-sale reserve |
Cash flow hedge reserve |
Share of OCI of associates and joint ventures |
Total |
|---|---|---|---|---|---|---|
| Balance at 31 December 2011 | 6 | -253 | -1,691 | -1,938 | ||
| Net gains/(losses) arising during the period Net realised (gains)/losses included in |
-2,026 | 31 | 144 | -416 | 38 | -2,229 |
| income statement | -82 | 61 | -21 | |||
| Related income tax | 506 | -1 | -19 | 89 | 575 | |
| Balance at 30 June 2012 | -1,520 | 36 | -210 | -1,957 | 38 | -3,613 |
| Balance at 31 December 2012 | 5 | 24 | -1,873 | 61 | -1,783 | |
| Impact adoption IAS19R | -3,284 | -3,284 | ||||
| Balance at 1 January 2013 | -3,284 | 5 | 24 | -1,873 | 61 | -5,067 |
| Net gains/(losses) arising during the period | 80 | -10 | 25 | 242 | 6 | 343 |
| Net realised (gains)/losses included in | ||||||
| income statement | 52 | 52 | ||||
| Related income tax | -19 | -2 | -8 | -74 | -103 | |
| Balance at 30 June 2013 | -3,223 | -7 | 41 | -1,653 | 67 | -4,775 |
1 All 2012 figures have been adjusted for comparison purposes following adoption of the amended pension accounting standard IAS 19.
The notes to the Condensed Consolidated Interim Financial Statements are an integral part of these statements.
ABN AMRO adopted IAS 19 Employee Benefits as per 1 January 2013 and adjusted 2012 accordingly. Total comprehensive income includes EUR 817 million profit for the first half of 2013. Transfer includes the allocation of the profit/loss of the prior period to the other reserves. In 2013 a final dividend of EUR 250 million for the year 2012 was paid to the ordinary shareholders and EUR 12 million to the holders of preference shares A.
In the first half of 2013, EUR 210 million of class A non-cumulative preference shares were repurchased and cancelled, resulting in share capital and share premium decrease of EUR 75 million and EUR 135 million. In addition, EUR 3 million was paid to preference share A holders for accrued rights in the first half of 2013 due to the repurchase of the preference shares.
Share of OCI of associates and joint ventures are mainly related to the revaluation of associates.
The share premium reserve increased by EUR 2.0 billion due to the conversion of the EUR 2.0 billion Mandatory Convertible Securities. ABN AMRO Group N.V. issued one share (nominal value of EUR 1) to NLFI in connection with the settlement.
The settlement on 28 June 2012 of all legal proceedings between ABN AMRO, the Dutch State and Ageas led to a one-off cash payment by ABN AMRO to Ageas of EUR 400 million. This transaction is classified as a shareholders transaction under IFRS and the amount of EUR 400 million charged directly to equity (deduction from the share premium reserve).
Total equity grew by EUR 2.1 billion, mainly driven by the EUR 1.6 billion increase in equity following the Ageas settlement and EUR 842 million profit in the first half of 2012.
In 2012, a final dividend of EUR 50 million for the year 2011 was paid to ordinary shareholders and EUR 13 million to the holders of preference shares A.
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| Profit/(loss) for the period1 | 817 | 840 |
| Adjustments on non-cash items included in profit: | ||
| (Un)realised gains/(losses) | -442 | 616 |
| Share of profits in associates and joint ventures | -43 | -33 |
| Depreciation, amortisation and accretion | 169 | 221 |
| Provisions and impairment losses | 311 | 604 |
| Income tax expense | 257 | 190 |
| Changes in operating assets and liabilities: | ||
| Assets held for trading | -3,505 | -2,828 |
| Liabilities held for trading | -1,964 | 1,103 |
| Loans and receivables – banks | 6,460 | 10,605 |
| Loans and receivables – customers | -6,036 | -15,934 |
| Other assets1 | 1,201 | -1,919 |
| Due to banks | 5,376 | 69 |
| Due to customers | 16,045 | 14,969 |
| Liabilities arising from insurance and investment contracts | -125 | -150 |
| Net changes in all other operational assets and liabilities1 | -3,024 | 2,011 |
| Dividend received from associates | 31 | 47 |
| Income tax paid | 118 | -128 |
| Cash flow from operating activities | 15,646 | 10,283 |
| Investing activities: | ||
| Purchases of financial investments | -6,534 | -662 |
| Proceeds from sales and redemptions of financial investments | 2,740 | 1,031 |
| Acquisition of subsidiaries (net of cash acquired), associates and joint ventures | -33 | -24 |
| Divestments of subsidiaries (net of cash sold), associates and joint ventures | 13 | 33 |
| Purchases of property and equipment | -108 | -180 |
| Proceeds from sales of property and equipment | 85 | 28 |
| Purchases of intangible assets | -10 | -14 |
| Proceeds from sales of intangible assets | ||
| Other changes | ||
| Cash flow from investing activities | -3,847 | 212 |
continued >
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| Financing activities: | ||
| Proceeds from the issuance of debt | 22,710 | 45,485 |
| Repayment of issued debt | -27,831 | -48,813 |
| Proceeds from subordinated liabilities issued | ||
| Repayment of subordinated liabilities issued | -1,497 | -10 |
| Ageas settlement | -400 | |
| Preference shares settlement | -210 | |
| Dividends paid to the owners of the parent company | -262 | -63 |
| Dividends paid to non-controlling interests | ||
| Repayment of capital | -3 | |
| Cash flow from financing activities | -7,093 | -3,801 |
| Net increase/(decrease) of cash and cash equivalents | 4,706 | 6,694 |
| Cash and cash equivalents as at 1 January | 14,072 | 11,397 |
| Effect of exchange rate differences on cash and cash equivalents | -9 | 53 |
| Cash and cash equivalents as at 30 June | 18,769 | 18,144 |
| Supplementary disclosure of operating cash flow information | ||
| Interest paid | -3,939 | -4,483 |
| Interest received | 6,204 | 6,836 |
| Dividend received from investments | 14 | 52 |
1 All 2012 figures have been adjusted for comparison purposes following adoption of the amended pension accounting standard IAS 19.
The notes to the Condensed Consolidated Interim Financial Statements are an integral part of these statements.
ABN AMRO Group N.V. (referred to as 'ABN AMRO Group') is the parent company of ABN AMRO Bank N.V., and a related consolidated group of companies ('the Group' or 'ABN AMRO'). ABN AMRO Group is a public limited liability company, incorporated under Dutch law on 18 December 2009, and registered at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands. ABN AMRO provides a broad range of financial services to retail, private and commercial banking customers. These activities are primarily in the Netherlands and selectively abroad.
All ordinary shares in ABN AMRO Group N.V., representing 100% of the voting rights, are held by a foundation named Stichting administratiekantoor beheer financiële instellingen ('NLFI'). On 11 March 2013, the non-cumulative preference shares were repurchased. On 16 May 2013, the non-cumulative preference shares were cancelled.
The Condensed Consolidated Interim Financial Statements of ABN AMRO Group for the six months ended 30 June 2013 incorporate financial information of ABN AMRO Group N.V., its controlled entities, interests in associates and joint ventures. The Condensed Consolidated Interim Financial Statements were prepared by the Managing Board and authorised for issue by the Supervisory Board and Managing Board on 22 August 2013.
The Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting.
The Condensed Consolidated Interim Financial Statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with ABN AMRO's 2012 Consolidated Annual Financial Statements, which were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The accounting policies used in these Condensed Consolidated Interim Financial Statements are consistent with those set out in the notes to the 2012 Consolidated Annual Financial Statements of ABN AMRO except for the changes in accounting policies described below.
The Condensed Consolidated Interim Financial Statements are presented in euros, which is ABN AMRO's presentation currency, rounded to the nearest million (unless otherwise noted).
On 1 January 2013, ABN AMRO adopted the following standards as described below:
ABN AMRO has adopted the amended IAS 19 Employee Benefits in accordance with the transitional provisions which require retrospective application. The opening statements of financial position (1 January 2012) have been adjusted. Further details are included in note 15.
The amendments to IFRS 7 are intended to enable users of financial statements to better evaluate the effects or potential effects of netting arrangements on the entity's financial position. The additional disclosures are included in the Risk management section, including comparable figures of 2012.
On 1 January 2013, ABN AMRO adopted IFRS 13 Fair Value Measurement. In accordance with its transitional provisions, IFRS 13 is applied prospectively. Fair value is defined in IFRS 13 as the price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants at the measurement date. The change had no significant impact on the measurement of assets and liabilities. However, new disclosures required under IFRS 13 are included in note 18.
Amendments to IAS 1 represent changes in the presentation of other comprehensive income. Amendments are addressed in the Condensed consolidated statement of changes in equity of these Interim Financial Statements.
Since December 2012, the IASB has issued the following new interpretation and amendments to existing standards, which are not yet effective for these Condensed Consolidated Interim Financial Statements.
In May 2013 the IASB issued IFRIC 21 Levies. This IFRS interpretation applies to all government related levies that are accounted for in accordance with IAS 37 provisions, contingent liabilities and contingent assets. The timing of charging levies to the income statement is clarified compared to IAS 37. The interpretation is effective for periods after 1 January 2014 but is not endorsed by the European Union yet. Therefore this interpretation is not open for early adoption.
In May 2013 the IASB issued amendments to IAS 36. These amendments address disclosure requirements for recoverable amount information if this amount is based on fair value less costs of disposal. The amendments are to be applied retrospectively for annual periods beginning on or after 1 January 2014. The amendment is not endorsed yet by the European Union and is therefore not open for early adoption.
In June 2013 the IASB issued amendments to IAS 39 with the title 'Novation of derivatives and continuation of hedge accounting'. This amendment allows hedge accounting to continue in a situation where a derivative, designated as a hedging instrument, is novated to effect clearing with a central counterparty as result of laws and regulations. The effective date is 1 January 2014. The amendment is not endorsed yet by the European Union and is therefore not open for early adoption.
The primary segment information is presented in respect of ABN AMRO business segments. The operating segments are consistent with ABN AMRO management and internal reporting structure.
ABN AMRO is organised into Retail & Private Banking (R&PB), Commercial & Merchant Banking (C&MB) and Group Functions. For financial reporting purposes, based on the components of the business that management monitors in making decisions about operating matters, segment reporting is further refined as follows:
Segment assets, liabilities, income and results are measured on the basis of the ABN AMRO accounting policies. Segment assets, liabilities, income and results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Transactions between segments are conducted at arm's length. Geographical data is presented according to the location of the transacting Group entity.
Interest income is reported as net interest income, as management primarily relies on net interest income as a performance measure, not on gross income and expenses.
In 2012 or 2013 to date, no proceeds from transactions with a single external client or counterparty exceeded 10% of the bank's total revenues.
Contents Interim Financial Statements
Retail Banking serves mass retail and preferred banking clients and offers a wide variety of banking and insurance products and services through ABN AMRO's branch network, online, via contact centres and through subsidiaries.
Private Banking provides total solutions to its clients' global wealth management needs and offers a rich array of products and services designed to address their individual requirements. Private Banking operates under the brand name ABN AMRO MeesPierson in the Netherlands and internationally under ABN AMRO Private Banking and local brands such as Banque Neuflize OBC in France and Bethmann Bank in Germany. The Private Banking segment includes the activities of the International Diamond & Jewelry Group (ID&JG).
Commercial Banking serves commercial clients with annual turnover up to EUR 500 million and clients in the public sector, commercial finance and leasing. Commercial Banking consists of two business lines: Business Banking and Corporate Clients.
Merchant Banking serves Netherlands-based corporates, financial institutions and real estate investors as well as international companies active in Energy, Commodities & Transportation (ECT). Merchant Banking is organised into two business lines: Large Corporates & Merchant Banking (LC&MB) and Markets.
Group Functions supports the business segments and consists of Technology, Operations & Property Services (TOPS); Finance; Risk Management & Strategy; Integration, Communication & Compliance (ICC); Group Audit and the Corporate Office. The majority of the Group Functions costs are allocated to the business. Group Functions' results include those of ALM/Treasury.
Income statement
| (in millions) | First half 2013 | ||||||
|---|---|---|---|---|---|---|---|
| Retail & Commercial & Merchant Banking |
Private Banking | Group Functions |
Total | ||||
| Retail Banking |
Private Banking |
Commercial Banking |
Merchant Banking |
||||
| Net interest income | 1,460 | 282 | 677 | 333 | -87 | 2,665 | |
| Net fee and commission income | 229 | 267 | 133 | 199 | 1 | 829 | |
| Net trading income | 16 | 2 | -14 | 4 | |||
| Results from financial transactions | 1 | 11 | -28 | -16 | |||
| Share of result in equity accounted investments | 19 | 6 | 6 | 6 | 37 | ||
| Other income | 9 | 14 | 2 | 57 | 82 | ||
| Operating income | 1,708 | 581 | 824 | 553 | -65 | 3,601 | |
| Personnel expenses | 243 | 224 | 150 | 160 | 422 | 1,199 | |
| General and administrative expenses | 153 | 108 | 34 | 81 | 641 | 1,017 | |
| Depreciation and amortisation of tangible | |||||||
| and intangible assets | 3 | 8 | 2 | 7 | 75 | 95 | |
| Intersegment revenues/expenses | 442 | 98 | 262 | 198 | -1,000 | ||
| Operating expenses | 841 | 438 | 448 | 446 | 138 | 2,311 | |
| Impairment charges on loans and other receivables | 284 | 38 | 392 | 54 | -552 | 216 | |
| Total expenses | 1,125 | 476 | 840 | 500 | -414 | 2,527 | |
| Operating profit/(loss) before taxation | 583 | 105 | -16 | 53 | 349 | 1,074 | |
| Income tax expenses | 144 | 20 | -5 | 31 | 67 | 257 | |
| Profit/(loss) for the period | 439 | 85 | -11 | 22 | 282 | 817 | |
| Attributable to: | |||||||
| Owners of the company | 439 | 85 | -11 | 23 | 282 | 818 | |
| Non-controlling interests | -1 | -1 |
An explanation of the numbers is provided in the Operating and financial review of this Interim Financial Report.
The methodology for determining the internal liquidity compensation applied to deposits was changed in 2013. This has led to a decline in net interest income within Group Functions of EUR 133 million and a corresponding increase within the business sections, mainly Retail Banking, followed by Private Banking and Commercial Banking.
Operating income was EUR 178 million higher than in 2012, due to the abovementioned change in the liquidity compensation as well as higher margins on mortgages and higher saving volumes. Total expenses increased by EUR 41 million on higher Personnel expenses due to the impact of higher pensions costs. Loan impairment charges were EUR 131 million higher, of which mortgages increased by EUR 94 million; the remainder of the increase took place within consumer lending due to provision within a specific niche of the portfolio.
Operating income advanced EUR 14 million, especially Net fee and commission income (EUR 15 million) as a result of increased client activity and higher Assets under Management. Total expenses were stable, as higher Personnel expenses (pensions) were offset by lower project costs. Loan impairment charges were EUR 16 million lower, due to lower loan impairments within the international businesses.
Operating income increased EUR 40 million despite the divestment of the insurance activities in 2012. The increase was driven by higher margins on loans as well as rising commitment fees being charged on current accounts. Total expenses decreased by EUR 26 million. Personnel expenses increased primarily as a result of higher pension costs partly offset by a reduction in the number of FTEs.
Loan impairment charges continued to increase. Loan impairment levels for Commercial Clients (clients with a turnover between EUR 30 million and EUR 500 million) remained flat, with the full increase in loan impairments due to SMEs.
Operating income was EUR 242 million lower. Interest income from ECT, Real Estate and Large Corporates increased, partly offset by Securities Financing. Securities Financing showed lower results as the 2012 results benefited from the higher margin trades entered into late 2011 following the European sovereign debt crisis. Within Markets, trading income was lower across the board, although this was in part due to the strategic decision to terminate the non-client related part of the equity derivatives business, bringing down income compared to 2012. Total expenses were slightly higher than last year. The decline in loan impairment charges was due to a significant provision which was booked in 2012 for a single housing association client.
Net interest income decreased by EUR 107 million mainly as a result of the previously mentioned change to the liquidity compensation of EUR 133 million. Other operating income in 2012 included significant EC Remedy related gains of EUR 129 million. Operating expenses increased by EUR 78 million, mainly resulting from higher 2013 costs concerning pensions and an additional C&MB related restructuring provision. Loan impairment charges (EUR 552 million) 2013 were positively impacted by the partial sale of the Greek government-guaranteed loan portfolio (EUR 297 million) and Madoff related sale (EUR 253 million).
| (in millions) | 30 June 2013 | |||||
|---|---|---|---|---|---|---|
| Retail & Private Banking |
Commercial & Merchant Banking |
Group Functions |
Total | |||
| Retail Banking |
Private Banking |
Commercial Banking |
Merchant Banking |
|||
| Assets | ||||||
| Financial assets held for trading | 59 | 192 | 156 | 26,046 | -117 | 26,336 |
| Loans and receivables – customers | 160,209 | 17,408 | 42,234 | 57,333 | 4,855 | 282,039 |
| Total assets | 162,504 | 22,568 | 43,935 | 117,809 | 55,501 | 402,317 |
| Liabilities | ||||||
| Financial liabilities held for trading | 60 | 177 | 1 | 16,594 | 16,832 | |
| Due to customers | 87,871 | 59,148 | 35,269 | 45,772 | 3,957 | 232,017 |
| Total liabilities1 | 162,504 | 22,568 | 43,935 | 117,809 | 41,987 | 388,803 |
1 Total liabilities per segment are after elimination of intercompany transactions and may therefore be lower than the line items specified above.
Income statement
| (in millions) | First half 2012 | |||||
|---|---|---|---|---|---|---|
| Retail & Private Banking |
Commercial & Merchant Banking |
Group Functions |
Total | |||
| Retail Banking |
Private Banking |
Commercial Banking |
Merchant Banking |
|||
| Net interest income | 1,286 | 275 | 614 | 320 | 20 | 2,515 |
| Net fee and commission income | 231 | 253 | 160 | 193 | -49 | 788 |
| Net trading income | 14 | 223 | -30 | 207 | ||
| Results from financial transactions | 6 | 38 | 4 | 48 | ||
| Share of result in equity accounted investments | 5 | 6 | 5 | 17 | 33 | |
| Other income | 8 | 13 | 10 | 16 | 175 | 222 |
| Operating income | 1,530 | 567 | 784 | 795 | 137 | 3,813 |
| Personnel expenses1 | 202 | 209 | 138 | 141 | 319 | 1,009 |
| General and administrative expenses | 179 | 111 | 33 | 87 | 679 | 1,089 |
| Depreciation and amortisation of tangible | ||||||
| and intangible assets | 3 | 9 | 1 | 12 | 106 | 131 |
| Separation and integration-related items | ||||||
| Intersegment revenues/expenses | 437 | 108 | 302 | 197 | -1,044 | |
| Operating expenses | 821 | 437 | 474 | 437 | 60 | 2,229 |
| Impairment charges on loans and other receivables | 153 | 54 | 241 | 106 | 554 | |
| Total expenses | 974 | 491 | 715 | 543 | 60 | 2,783 |
| Operating profit/(loss) before taxation | 556 | 76 | 69 | 252 | 77 | 1,030 |
| Income tax expenses1 | 138 | 12 | 18 | 37 | -15 | 190 |
| Profit/(loss) for the period | 418 | 64 | 51 | 215 | 92 | 840 |
| Attributable to: | ||||||
| Owners of the company | 418 | 64 | 51 | 217 | 92 | 842 |
| Non-controlling interests | -2 | -2 |
1 All 2012 figures have been adjusted for comparison purposes following the adoption of the amended pension accounting standard IAS 19.
| 31 December 2012 (in millions) |
|||||||
|---|---|---|---|---|---|---|---|
| Retail & Private Banking |
Commercial & Merchant Banking |
Group Functions |
Total | ||||
| Retail Banking |
Private Banking |
Commercial Banking |
Merchant Banking |
||||
| Assets | |||||||
| Financial assets held for trading | 42 | 148 | 189 | 22,528 | -103 | 22,804 | |
| Loans and receivables – customers | 161,668 | 17,310 | 42,378 | 49,557 | 5,370 | 276,283 | |
| Total assets1 | 164,100 | 22,689 | 44,063 | 102,276 | 60,630 | 393,758 | |
| Liabilities | |||||||
| Financial liabilities held for trading | 42 | 169 | 1 | 18,570 | 18,782 | ||
| Due to customers | 81,905 | 58,911 | 34,444 | 37,029 | 3,732 | 216,021 | |
| Total liabilities1, 2 | 164,100 | 22,689 | 44,063 | 102,276 | 47,747 | 380,875 |
1 All 2012 figures have been adjusted for comparison purposes following the adoption of the amended pension accounting standard IAS 19.
2 Total liabilities per segment are after elimination of intercompany transactions and may therefore be lower than the line items mentioned above.
The following table shows the acquisitions and divestments made in the first half of 2013 and 2012.
| (in millions) | First half 2013 | First half 2012 | ||
|---|---|---|---|---|
| Acquisitions | Divestments | Acquisitions | Divestments | |
| Net assets acquired/Net assets divested | 33 | -4 | 24 | -19 |
| Cash used for acquisitions/received for divestments | -33 | 13 | -24 | 33 |
The acquisitions and divestments figures were related to in the investments in equity accounted investments mainly in Commercial and Merchant Banking.
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| Net interest income | 2,665 | 2,515 |
| Net fee and commission income | 829 | 788 |
| Net trading income | 4 | 207 |
| Results from financial transactions | -16 | 48 |
| Share of result in equity accounted investments | 37 | 33 |
| Other income | 82 | 222 |
| Total operating income | 3,601 | 3,813 |
Contents Interim Financial Statements
Net interest income increased by 6% driven by improved margins. These positive developments were partly offset as funding costs and capital costs increased.
Net fee and commission income increased by 5%, due to increased brokerage fees in Private Banking, higher management fees due to increasing Assets under Management, and higher fees within the Clearing business.
Net trading income decreased. Within Markets, the trading activities showed lower results across the board. In addition, termination of the non-client related equity derivatives business (Equity Delta 1) caused a decline in income compared with the previous year. The wind-down of these activities led to total costs of EUR 52 million before tax (EUR 39 million after tax).
Results from financial transactions decreased mainly due to the upfront losses booked on the buy-back of government guaranteed bonds offset by higher CVA for certain public sector loans. Private equity also contributed to the decline as favourable revaluations in 2012 were followed by negative revaluations this year.
The decrease in other income was mainly due to releases from the Credit Umbrella and other EC Remedy-related provisions totalling EUR 129 million in 2012, offset by a gain on the sale of an office property in the centre of Amsterdam in 2013.
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| Personnel expenses1 | 1,199 | 1,009 |
| General and administrative expenses | 1,017 | 1,089 |
| Depreciation and amortisation of tangible and intangible assets | 95 | 131 |
| Total operating expenses | 2,311 | 2,229 |
1 All 2012 figures have been adjusted for comparison purposes following the adoption of the amended pension accounting standard IAS 19.
Personnel expenses increased by EUR 190 million, mainly due to higher pension expenses and restructuring provisions (see the following table).
The decrease of EUR 72 million in General and administrative expenses was mainly caused by lower expenses in IT, housing, marketing and office expenses of EUR 58 million and lower external staffing of EUR 62 million.
Total depreciation and amortisation decreased by EUR 36 million. The amortisation of purchased software decreased by EUR 12 million due to fully amortised in-house software and development costs on software.
| (in millions) | First half 2013 | First half 2012 |
|---|---|---|
| Salaries and wages | 829 | 841 |
| Social security charges | 115 | 121 |
| Pension expenses relating to defined benefit plans1 | 129 | -40 |
| Defined contribution plan expenses | 14 | 18 |
| Other | 112 | 69 |
| Total personnel expenses | 1,199 | 1,009 |
1 All 2012 figures have been adjusted for comparison purposes following the adoption of the amended pension accounting standard IAS 19.
Salaries and wages decreased by EUR 12 million mainly due to a reduction in the number of employees. This was offset by wage inflation caused by the collective labour agreement.
Pension expenses relating to defined benefit plans increased by EUR 169 million as a result of a decrease in the discount rate. ABN AMRO adopted the amended pension accounting standard IAS 19 as from 1 January 2013.
Other includes a EUR 38 million addition to the restructuring provision due to a planned reorganisation in Commercial & Merchant Banking in 2013.
ABN AMRO's financial assets and liabilities held for trading mainly relates to client-facilitating activities carried out by the Markets business. Moreover, these contracts are managed on a combined basis and should therefore be assessed on a total portfolio basis and not as stand-alone assets and liability classes.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Trading securities: | ||
| Government bonds | 4,409 | 2,127 |
| Corporate debt securities | 1,101 | 799 |
| Equity securities | 6,830 | 2,539 |
| Total trading securities | 12,340 | 5,465 |
| Derivatives held for trading: | ||
| Over the counter (OTC) | 12,227 | 15,437 |
| Exchange traded | 224 | 289 |
| Total derivatives held for trading | 12,451 | 15,726 |
| Trading book loans | 1,035 | 1,107 |
| Commodities | 510 | 506 |
| Total assets held for trading | 26,336 | 22,804 |
Contents Interim Financial Statements
Financial assets held for trading increased by EUR 3.5 billion to EUR 26.3 billion, mainly due to higher equity positions related to the client-driven equity derivatives business and higher government bond positions. This was partly offset by lower valuation of the interest rate derivative positions. The latter two also explain the movements in financial liabilities held for trading.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Short security positions | 4,146 | 3,138 |
| Derivatives held for trading: | ||
| Over the counter (OTC) | 11,538 | 14,551 |
| Exchange traded | 522 | 517 |
| Total derivatives held for trading | 12,060 | 15,068 |
| Other liabilities held for trading | 626 | 576 |
| Total liabilities held for trading | 16,832 | 18,782 |
Financial investments break down as follows:
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Financial investments: | ||
| Available-for-sale | 24,364 | 21,056 |
| Held at fair value through profit or loss | 432 | 370 |
| Total, gross | 24,796 | 21,426 |
| Less: Available-for-sale impairment allowance | 20 | 19 |
| Total financial investments | 24,776 | 21,407 |
The fair value of ABN AMRO's financial investments available-for-sale including gross unrealised gains and losses is as follows:
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Interest-earning securities: | ||
| Dutch government | 4,976 | 5,304 |
| US Treasury and US government | 1,693 | 1,544 |
| Other OECD government | 11,633 | 7,665 |
| Non OECD government | 111 | 117 |
| Mortgage and other asset-backed securities | 3,601 | 3,688 |
| Financial institutions | 2,052 | 2,417 |
| Non financial institutions | 101 | 125 |
| Subtotal | 24,167 | 20,860 |
| Equity instruments | 197 | 196 |
| Total investment available-for-sale | 24,364 | 21,056 |
The increase in investments in government bonds relates to preparations to comply with the Liquidity Coverage Ratio (LCR) under Basel III. Extra funding has been taken up and invested mainly in Belgian and French bonds. ALM has received a mandate to invest in various countries to avoid concentration risk.
Most of these instruments are part of the liquidity buffer and are held for liquidity contingency purposes (also refer to Liquidity and funding section of this Interim Financial Report).
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Interest-bearing deposits | 13,192 | 21,461 |
| Loans and advances | 8,642 | 10,207 |
| Professional securities transactions | 19,568 | 14,277 |
| Mandatory reserve deposits with central banks | 204 | 287 |
| Other | 113 | 194 |
| Total | 41,719 | 46,426 |
| Less: loan impairment allowance | 24 | 28 |
| Loans and receivables – banks | 41,695 | 46,398 |
Interest-bearing deposits decreased mainly as a result of lower deposits placed with the ECB. This decrease was partially offset by an increase in the securities financing client volumes.
Mandatory reserve deposits with central banks are not available for use in the bank's day-to-day operations.
Details on loan impairment charges and allowances are provided in the Risk management section of this Interim Financial Report.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Government and official institutions | 1,539 | 1,329 |
| Residential mortgages | 152,755 | 153,875 |
| Fair value adjustment from hedge accounting on residential mortgages | 3,964 | 4,906 |
| Consumer loans | 16,402 | 16,568 |
| Commercial loans | 85,357 | 85,260 |
| Fair value adjustment from hedge accounting on commercial loans | 919 | 1,135 |
| Professional securities transactions | 21,378 | 14,495 |
| Financial lease receivables | 3,051 | 3,045 |
| Factoring | 1,398 | 1,182 |
| Other loans | 9 | |
| Total | 286,772 | 281,795 |
| Less: loan impairment allowance | 4,733 | 5,512 |
| Loans and receivables – customers | 282,039 | 276,283 |
Loans and receivables – customers increased mainly due to the increase in securities financing volumes.
Residential mortgages decreased by EUR 1.1 billion due to increased redemptions of mortgages and lower inflow of new mortgages.
Professional securities transactions were higher primarily due to an increase in client volumes in securities financing activities.
Details on loan impairment charges and allowances are provided in the Risk management section of this Interim Financial Report.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Deposits from banks: | ||
| Demand deposits | 3,909 | 2,755 |
| Time deposits | 6,870 | 9,436 |
| Other deposits | 4,898 | 4,663 |
| Total deposits | 15,677 | 16,854 |
| Professional securities transactions | 10,780 | 4,360 |
| Other | 43 | 49 |
| Total due to banks | 26,500 | 21,263 |
Due to banks include positions due to financial institutions, central banks and multilateral development banks.
Demand deposits and other deposits increased as a result of higher positions with banks, credit institutions at Large Corporates & Merchant Banking business and banks in the Clearing business.
Time deposits decreased mainly due to the lower amounts placed at the ECB (EUR 1.4 billion) and lower fiduciary loans (EUR 1.1 billion).
Professional securities transactions increased primarily driven by an increase in client volumes.
This item is comprised of amounts due to non-banking customers.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Demand deposits | 76,599 | 73,511 |
| Saving deposits | 85,366 | 81,142 |
| Time deposits | 24,519 | 25,996 |
| Other deposits | 20,714 | 19,892 |
| Total deposits | 207,198 | 200,541 |
| Professional securities transactions | 24,510 | 15,142 |
| Other borrowings | 309 | 338 |
| Total due to customers | 232,017 | 216,021 |
Due to customers increased by EUR 16.0 billion to EUR 232.0 billion, primarily due to increased client inflow in securities financing activities (up by EUR 9.4 billion). Total client deposits grew by EUR 6.7 billion, particularly in Retail Banking in the Netherlands due to consumers being cautious in response to the ongoing economic uncertainty. MoneYou also showed growth in deposits mainly in Belgium and Germany. Commercial Banking managed to post a small increase in deposits. Private Banking deposits remained flat.
The following table shows the types of debt certificates issued by ABN AMRO and the amounts outstanding as at 30 June 2013.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Bonds and notes issued | 64,415 | 70,018 |
| Certificates of deposit and commercial paper | 20,742 | 21,058 |
| Saving certificates | 472 | 686 |
| Total at amortised cost | 85,629 | 91,762 |
| Designated at fair value through profit or loss | 2,136 | 2,281 |
| Total issued debt | 87,765 | 94,043 |
The total amount of issued debt decreased by EUR 6.3 billion. The main decrease was in bonds and notes (EUR 5.6 billion) due to matured funding as well as the buy-back of governmentguaranteed bonds.
The amounts of debt issued and redeemed during the period are specified in the Consolidated Statement of Cash Flows. The decrease is also due to a cash tender offer for the EUR 2.5 billion government-guaranteed notes. The participation rate in the cash tender was 49%. Further details of the funding programmes are provided in the Liquidity and funding section.
The cumulative change in fair value of the structured notes attributable to change in credit risk amounted to EUR 8 million (31 December 2012: EUR 10 million).
Issued liabilities qualify as subordinated debt if claims by the holders are subordinated to all other current and future liabilities of ABN AMRO.
The following table specifies the issued and outstanding subordinated liabilities.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Perpetual loans | 1,269 | 1,172 |
| Other subordinated liabilities | 6,628 | 8,394 |
| Total subordinated liabilities | 7,897 | 9,566 |
Subordinated liabilities showed a net decrease of EUR 1.7 billion, resulting from the call of several lower Tier 2 capital instruments. The Capital management section provides more information on the regulatory capital position of ABN AMRO.
The following table breaks down provisions as at 30 June 2013.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Insurance fund liabilities | 389 | 401 |
| Provision for pension commitments1 | 169 | 560 |
| Restructuring | 327 | 360 |
| Other staff provision | 172 | 182 |
| Other | 372 | 412 |
| Total provisions | 1,429 | 1,915 |
1 All 2012 figures have been adjusted for comparison purposes following the adoption of the amended pension accounting standard IAS 19.
Insurance fund liabilities include insurance companies' actuarial reserves, premium and claims reserves. The expected cash outflow for 2013 is approximately EUR 67 million and approximately EUR 86 million for the 2014-2017 period.
For further details on provisions for pension commitments, please refer to note 15 Pensions.
Restructuring provisions cover the costs of restructuring plans for which implementation has been formally announced. These are related to the integration and further streamlining of the organisation and infrastructure and include allowances for staff and other operating expenses. The restructuring provisions are expected to be used before the end of 2014.
Other staff provisions relate to disability and other post-employee benefits in particular, except early retirement benefits payable to non-active employees, which are included in the provision for pensions commitments.
Other provisions consist mainly of provisions for litigation on tax and legal matters. These are based on best estimates available at period-end according to legal and tax advisors. The timing of the outflow of cash related to these provisions is uncertain by nature, given the unpredictability of the outcome and the time involved in completing litigation.
ABN AMRO has adopted the amended IAS 19 Employee Benefits in accordance with the transitional provisions which require retrospective application. The amended IAS 19 states that changes in the defined benefit obligation and fair value of plan assets are recognised in the period as they occur. The corridor method has been abandoned, and actuarial gains and losses and unrecognised past service costs are recognised directly in other comprehensive income. Actuarial gains and losses are highly volatile by their very nature.
The opening statements of financial position as at 1 January 2012 have been adjusted. The amended IAS 19 had a negative impact (net of tax) of EUR 1,154 million on total equity as per 31 December 2012. Furthermore, the net result for the year 2012 would have been EUR 205 million higher. See the tables below for more details of the impact of amended IAS 19.
The full-year effect on the balance sheet of 2012 is as follows:
| Net defined | Deferred tax | ||
|---|---|---|---|
| (in millions) | pension asset | liability | Equity |
| Balance as per 1 January 2012 | 674 | 41 | 11,420 |
| Effect of IAS 19 adoption (as revised in 2011) | 2,566 | 641 | 1,925 |
| Adjusted balance at 1 January 2012 | 3,240 | 682 | 13,345 |
| Balance as per 31 December 2012 | 979 | 47 | 14,037 |
| Effect of IAS 19 adoption (as revised in 2011) | 2,566 | 641 | 1,925 |
| Effect on profit/(loss) for the year | 273 | 68 | 205 |
| Effect on Other comprehensive income for the year | -4,378 | -1,094 | -3,284 |
| Adjusted balance at 31 December 2012 | -560 | -338 | 12,883 |
The half-year effect on the balance sheet of 2012 is as follows:
| (in millions) | Net defined pension asset |
Deferred tax liability |
Equity |
|---|---|---|---|
| Balance as per 30 June 2012 | 936 | 52 | 13,542 |
| Effect of IAS 19 adoption (as revised in 2011) | 2,566 | 641 | 1,925 |
| Effect on profit/(loss) for the period | 130 | 33 | 97 |
| Effect on Other comprehensive income for the period | -2,026 | -506 | -1,520 |
| Adjusted balance at 30 June 2012 | 1,606 | 220 | 14,044 |
The half-year and full-year effect on the income statement 2012 is as follows:
| (in millions) | First half 2012 | 2012 |
|---|---|---|
| Effect on pension expenses | -130 | -273 |
| Effect on income tax expense | 33 | 68 |
| Increase/(decrease) of profit for the year | 97 | 205 |
The half-year and full-year effect on the statement of comprehensive income 2012 is as follows:
| (in millions) | First half 2012 | 2012 |
|---|---|---|
| Remeasurement of defined benefit obligation | -2,026 | -4,378 |
| (Increase)/decrease of income tax relating to components | ||
| of other comprehensive income | 506 | 1,094 |
| Increase of profit/(loss) for the year | 97 | 205 |
| Increase/(decrease) of total comprehensive income | ||
| for the year after taxation | -1,423 | -3,079 |
The movement in the net defined benefit (liabilities)/assets during the first half of 2013 is as follows:
| (in millions) | Net defined pension (liabilities)/asset |
|---|---|
| Net Defined benefit (liabilities)/assets as per 1 January 2013 | -560 |
| Profit/(loss) for the period | -129 |
| Remeasurement gains/(losses) recognised in Other comprehensive income | 80 |
| Contributions | 466 |
| Other | -22 |
| Net Defined benefit (liabilities)/assets as per 30 June 2013 | -165 |
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Plan assets | 17,455 | 17,281 |
| Defined benefit obligations | 17,620 | 17,841 |
| Net Defined benefit (liabilities)/assets | -165 | -560 |
The effect on Other comprehensive income for the period of EUR 80 million in the first half of 2013 is mainly a result of the following:
Contents Interim Financial Statements
Actuarial gains and losses are highly volatile by nature, with changes in discount and indexation rates influencing the net defined benefit liability.
The following table shows the change in the defined benefit obligation, the plan assets and the net defined benefit liability resulting from a change in the risk-free interest rate, leaving all other assumptions equal. As the pension fund hedges most of the risk-free rate, the impact on the net defined benefit liability is relatively limited.
| Defined benefit obligation |
Plan assets | Net defined benefit (liability)/asset |
|
|---|---|---|---|
| Change in risk free rate | |||
| +0.50% | 16,061 | 16,354 | 293 |
| 0.00% | 17,620 | 17,455 | -165 |
| -0.50% | 19,416 | 18,656 | -760 |
The following table shows the change in the defined benefit obligation, the plan assets and the net defined benefit liability resulting from a change in the credit spread, leaving all other assumptions equal.
| Defined benefit obligation |
Plan assets | Net defined benefit (liability)/asset |
|
|---|---|---|---|
| Change in credit spread | |||
| +0.50% | 16,061 | 17,455 | 1,394 |
| 0.00% | 17,620 | 17,455 | -165 |
| -0.50% | 19,416 | 17,455 | -1,961 |
The following table shows the change in the defined benefit obligation, the plan assets and the net defined benefit liability resulting from a change in the expected indexation, holding all other assumptions equal.
| Defined benefit obligation |
Plan assets | Net defined benefit (liability)/asset |
|
|---|---|---|---|
| Expected indexation | |||
| +0.50% | 19,416 | 17,455 | -1,961 |
| 0.00% | 17,620 | 17,455 | -165 |
| -0.50% | 16,061 | 17,455 | 1,394 |
Professional securities transactions include balances relating to reverse repurchase activities and cash collateral on securities borrowed. ABN AMRO controls credit risk associated with these activities by monitoring counterparty credit exposure and collateral values on a daily basis and requiring additional collateral to be deposited with or returned to ABN AMRO when deemed necessary.
An explanation of the numbers is provided in notes 8, 9, 10 and 11.
| (in millions) | 30 June 2013 | 31 December 2012 | ||
|---|---|---|---|---|
| Banks | Customers | Banks | Customers | |
| Assets | ||||
| Reverse repurchase agreements | 9,704 | 11,200 | 7,082 | 7,346 |
| Securities borrowing transactions | 9,161 | 6,841 | 6,493 | 4,535 |
| Unsettled securities transactions | 703 | 3,337 | 702 | 2,614 |
| Total | 19,568 | 21,378 | 14,277 | 14,495 |
| Liabilities | ||||
| Repurchase agreements | 7,584 | 21,111 | 3,096 | 12,148 |
| Securities lending transactions | 2,412 | 2,307 | 1,121 | 2,517 |
| Unsettled securities transactions | 784 | 1,092 | 143 | 477 |
| Total | 10,780 | 24,510 | 4,360 | 15,142 |
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Committed credit facilities | 14,366 | 17,635 |
| Guarantees and other commitments: | ||
| Guarantees granted | 3,733 | 3,817 |
| Irrevocable letters of credit | 5,324 | 5,474 |
| Recourse risks arising from discounted bills | 7,821 | 7,486 |
| Total guarantees and other commitments | 16,878 | 16,777 |
| Total | 31,244 | 34,412 |
The decrease in committed credit lines is mainly due to fewer credit offers on residential mortgages.
ABN AMRO is involved in a number of legal proceedings in the ordinary course of business in a number of jurisdictions. In presenting the condensed consolidated interim financial information, management makes estimates regarding the outcome of legal, regulatory and arbitration matters, and takes charges to income to cover for probable losses. Charges, other than those taken periodically for defence costs, are not established for matters when losses cannot be reasonably estimated.
On the basis of information currently available, and having taken legal counsel, ABN AMRO believes that the outcome of these proceedings is unlikely to have a materially adverse effect on the interim financial position and interim result. For a list of the main relevant legal proceedings, see note 38 of the 2012 Annual Financial Statements.
Section 2:334t of the Dutch Civil Code requires that in the event of an entity being divided into two or more parts through a legal demerger, each part remains liable to the creditors of the other demerged part. Such liabilities relate only to obligations existing as at the date of the legal demerger. As explained in more detail in note 38 of the 2012 Annual Financial Statements, ABN AMRO was subject to two demergers, one in 2008 with New HBU II N.V. and one in 2010 with RBS N.V. In the first half of 2013, the contingent liability related to New HBU II N.V. decreased to EUR 156 million while the contingent liability related to RBS N.V. remained unchanged at EUR 950 million.
Fair value is defined as the price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants at the measurement date.
Portfolios of financial assets and liabilities exposed to market and credit risk and managed on the net exposure to either market or credit risk are measured on the basis of the price that would be received when selling out of a net long position or paid when settling a net short position for a particular risk exposure.
The internal controls of fair value valuation and the valuation techniques used are consistent with those set out in the notes to ABN AMRO's 2012 Annual Financial Statements.
ABN AMRO analyses financial instruments held at fair value, broken down into the three categories from the fair value hierarchy as described below.
Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial instruments.
Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this category are valued using quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.
Level 3 financial instruments are those valued using techniques that incorporate information other than observable market data. Instruments in this category have been valued using a valuation technique where at least one input, which could have a significant effect on the instrument's valuation, is not based on observable market data.
The following table presents the valuation methods used in determining the fair values of financial instruments carried at fair value.
| (in millions) | 30 June 2013 | |||
|---|---|---|---|---|
| Quoted market prices in active markets |
Valuation techniques -observable inputs |
Valuation techniques -significant unobservable inputs |
Total fair value | |
| Assets | ||||
| Financial assets held for trading | 13,053 | 13,283 | 26,336 | |
| Available-for-sale interest earning securities | 17,095 | 7,072 | 24,167 | |
| Available-for-sale equities | 125 | 18 | 34 | 177 |
| Equities designated at fair value through profit or loss |
112 | 187 | 133 | 432 |
| Derivatives not held for trading | 2,452 | 2,452 | ||
| Unit-linked investments | 1,070 | 1,020 | 2,090 | |
| Total financial assets | 31,455 | 24,032 | 167 | 55,654 |
| Liabilities | ||||
| Financial liabilities held for trading | 4,654 | 12,178 | 16,832 | |
| Issued debt | 2,136 | 2,136 | ||
| Derivatives not held for trading | 8,283 | 8,283 | ||
| Unit-linked investments | 1,070 | 1,020 | 2,090 | |
| Total financial liabilities | 5,724 | 23,617 | 29,341 |
Financial assets and liabilities held for trading valued by quoted market prices in active markets consisted mainly of equity securities, exchange traded derivatives and corporate debt securities. Valuation techniques by observable inputs are mainly comprised of OTC derivatives.
| (in millions) | 31 December 2012 | |||
|---|---|---|---|---|
| Quoted market prices in active markets |
Valuation techniques -observable inputs |
Valuation techniques -significant unobservable inputs |
Total fair value | |
| Assets | ||||
| Financial assets held for trading | 5,984 | 16,820 | 22,804 | |
| Available-for-sale interest earning securities | 13,619 | 7,241 | 20,860 | |
| Available-for-sale equities | 116 | 27 | 34 | 177 |
| Equities designated at fair value through profit or loss |
118 | 118 | 134 | 370 |
| Derivatives not held for trading | 3,563 | 3,563 | ||
| Unit-linked investments | 542 | 1,628 | 2,170 | |
| Total financial assets | 20,379 | 29,397 | 168 | 49,944 |
| Liabilities | ||||
| Financial liabilities held for trading | 3,620 | 15,162 | 18,782 | |
| Issued debt | 2,281 | 2,281 | ||
| Derivatives not held for trading | 10,208 | 10,208 | ||
| Unit-linked investments | 542 | 1,628 | 2,170 | |
| Total financial liabilities | 4,162 | 29,279 | 33,441 |
ABN AMRO recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.
During 2013 a reassessment of ABN AMRO's unit-linked investments was performed and consequently an amount of EUR 619 million was transferred from level 2 to level 1.
During the first half year of 2013 there were no material transfers from levels 1 and 2 to level 3.
The following table shows a reconciliation of the opening and closing amounts of level 3 financial assets recorded at fair value.
| (in millions) | 2013 2012 |
|||
|---|---|---|---|---|
| Equities designated at fair value through profit or loss |
Available for sale equities |
Equities designated at fair value through profit or loss |
Available for sale equities |
|
| Opening balance | 134 | 34 | 113 | 66 |
| Purchases | 7 | 2 | 5 | |
| Sales | -2 | -31 | ||
| Gains/losses recorded in profit and loss1 | -4 | -1 | ||
| Unrealised gains/losses | -6 | 12 | ||
| Transfer between levels | ||||
| Other movements | 11 | -5 | ||
| Closing balance | 133 | 34 | 134 | 34 |
1 Included in Results from financial transactions. All assets were held at balance sheet date.
The following tables present the level 3 financial instruments carried at fair value as at the balance sheet date for which fair value is measured in full or in part using valuation techniques based on assumptions that are not supported by market observable inputs. There may be uncertainty about a valuation, resulting from the choice of the valuation technique or model used, the assumptions embedded in those models, the extent to which inputs are not market observable, or as a result of other elements affecting the valuation technique or model. At 30 June 2013 and 31 December 2012, ABN AMRO performed a sensitivity analysis to assess the range of reasonably possible alternative assumptions that would have a significant impact (i.e. increase or decrease) on the fair value of the instrument.
| (in millions) | Valuation technique | Main assumptions | Carrying value | Reasonably possible alternative assumptions |
|
|---|---|---|---|---|---|
| Increase in fair value |
Decrease in fair value |
||||
| 30 June 2013 | |||||
| Private equity – | |||||
| Equity shares | valuation statements | EBITDA multiples | 167 | 20 | -20 |
| 31 December 2012 | |||||
| Private equity – | |||||
| Equity shares | valuation statements | EBITDA multiples | 168 | 20 | -20 |
Below follows a description of the types of products that comprise the portfolio and the valuation techniques that are applied in determining fair value of the equity shares shown in the table, including a description of models used and inputs to those models. Where reasonably possible alternative assumptions of unobservable inputs used in models would change the fair value of the portfolio significantly, the alternative inputs are indicated along with the impact these would have on the fair value. Where there have been significant changes to valuation techniques during the year, a discussion of the reasons for this is also included.
Equities designated at fair value through profit or loss classified as level 3 mainly comprise private equity investments. In general, private equity investments cannot be valued directly from quoted market prices or by using valuation techniques supported by observable market prices or other market data. The fair value is determined using a valuation technique applied in accordance with the European Private Equity and Venture Capitalist Association (EVCA) guidelines.
The EBITDA multiples, the main assumption for calculation of the fair value, has a range between 6.9 and 10.7 as at 30 June 2013 (31 December 2012: 6.1 and 10.3).
The fair value of the private equity investments is calculated by using company specific data and (listed) peer company data. As a consequence the fair value calculation of an investment is strongly linked with movements on the public (share) markets. In general, when the public markets on average go up with 17% this would have a positive effect on the fair value of the private equity investments of EUR 20 million. The opposite is also true, when the public markets go down with 17% this will also have an negative fair value impact of EUR 20 million.
An own credit adjustment is applied to positions where it is believed that counterparties will consider ABN AMRO's creditworthiness when pricing trades. The adjustment for ABN AMRO's own credit spread represents the difference between the interbank offered rate and the rate which includes ABN AMRO's own market perceived risk of default. In general, ABN AMRO anticipates that gains and losses arising from changes in ABN AMRO's own credit spread will reverse over the life of the instrument unless repurchased.
For issued debt securities, this adjustment is based on independent quotes from market participants for the debt issuance spreads above average interbank rates (at a range of tenors) which the market would demand when purchasing new senior or sub-debt issuances from ABN AMRO. Where necessary, these quotes are interpolated using a curve shape derived from CDS prices (please refer to note 12).
The methods and significant assumptions applied to estimate the fair values of financial instruments carried at cost are described in note 39 of the Annual Financial Statements 2012.
The estimated fair value of financial assets and liabilities recorded at amortised cost have not materially changed related to the figures as published in note 39 of the Annual Financial Statements 2012.
Parties related to ABN AMRO include NLFI with control, the Dutch State with significant influence, associates, pension funds, joint ventures, the Managing Board, the Supervisory Board, close family members of any person referred to above, entities controlled or significantly influenced by any person referred to above and any other related entities. ABN AMRO has applied the partial exemption for government-related entities pursuant to IAS 24 paragraphs 25-27.
As part of its business operations, ABN AMRO frequently enters into transactions with related parties. Transactions conducted directly with the Dutch State are limited to normal banking transactions, taxation and other administrative relationships with the exception of items specifically disclosed in this note. Normal banking transactions relate to loans and deposits and are entered into under the same commercial and market terms that apply to non-related parties.
| (in millions) | 30 June 2013 | 31 December 2012 | ||||||
|---|---|---|---|---|---|---|---|---|
| Joint ventures |
Associates | Other | Total | Joint ventures |
Associates | Other | Total | |
| Assets | 19 | 284 | 303 | 12 | 167 | 987 | 1,166 | |
| Liabilities | 112 | 1,941 | 109 | 2,162 | 88 | 1,853 | 1,941 | |
| Irrevocable facilities | 24 | 24 | 15 | 15 | ||||
| Income received | 17 | 24 | 41 | 34 | 56 | 90 | ||
| Expenses paid | 2 | 125 | 127 | 14 | 3 | 334 | 351 |
The column other includes pension fund-related amounts.
| (in millions) | 30 June 2013 | 31 December 2012 |
|---|---|---|
| Assets | ||
| Financial assets held for trading | 2,356 | 821 |
| Financial investments – available-for-sale | 4,976 | 5,304 |
| Loans and receivables – customers | 1,037 | 815 |
| Accrued income and deferred charges | 335 | 435 |
| Liabilities | ||
| Due to customers2 | 2,108 | 2,111 |
| Subordinated loans2 | 1,650 | 1,650 |
| Deferred revenues and accrued interest expenses | 29 | 83 |
| First half 2013 | First half 2012 | |
|---|---|---|
| Income statement | ||
| Interest income | 87 | 86 |
| Interest expense | 37 | 58 |
| Net trading income | 42 | -69 |
| Net fee and commission income | -13 | -13 |
1 Excluding balances related to tax positions.
2 Part of Due to customers (EUR 2,100 million) and the full amount of Subordinated loans are related to liabilities the Dutch State acquired from Ageas on 3 October 2008.
Transactions conducted directly with the Dutch State are limited to normal banking transactions, taxation and other administrative relationships.
Moreover ABN AMRO has Medium Term Notes of EUR 1.4 billion (2012: EUR 2.7 billion) outstanding that are guaranteed by the Dutch State under the EUR 200 billion government bond scheme. These notes will mature in Q2 2014.
In addition, RBS continues to legally own certain Consortium shared assets and liabilities. This means that these assets and liabilities are for the risk and reward of RBS, Santander and the Dutch State as shareholder of RFS Holdings B.V. On 1 April 2010 ABN AMRO signed an indemnity agreement with the Dutch State for a shortfall in capital above a certain amount related to specific assets and liabilities of RFS Holding. ABN AMRO has assessed the risk for such a shortfall and considers the risk to be remote.
As stated in note 38 of the Annual Financial Statements 2012, ABN AMRO took over the cross-liability exposure for NEW HBU II N.V. on Royal Bank of Scotland N.V. for a period of five years. ABN AMRO received an indemnity from the Dutch State for this exposure.
Financial assets held for trading increased due to primary dealerships. Financial investments – availablefor-sale decreased mainly as result of acquisition and sale transactions aiming to optimize the Dutch government bonds portfolio. Accrued income and deferred charges decreased mostly due to the settlement of the interest related to the outstanding positions with the Dutch State. Net trading income was higher as a result of the increase of the market interest rates while interest expense decreased mainly due to a catch-up effort related to covered bond guarantees in 2012.
On 11 July 2013, ABN AMRO announced that it would discontinue its Curaçao-based Private Banking activities and would close the operation by the end of this year. ABN AMRO Private Banking's strategic focus is to be a leading European private bank with growth ambitions in Asia. As such, a presence in Curaçao is no longer in line with this strategy. Also, the scale and growth opportunities of MeesPierson in Curaçao are too limited for ABN AMRO.
On 1 August 2013, ABN AMRO announced that the acquisition of Banco CR2 S.A., a small privately owned commercial bank based in Brazil, was closed on 31 July 2013. The initial transaction was announced on 25 October 2012. The acquisition fits with the strategy to selectively grow the existing international businesses and allows ABN AMRO to offer on-shore products authorised under Brazilian banking regulations to its existing clients in the Energy, Commodities and Transportation sector.
Contents Interim Financial Statements
To: The shareholders, Supervisory Board and Management Board of ABN AMRO Group N.V.
We have reviewed the accompanying condensed consolidated interim financial statements of ABN AMRO Group N.V., Amsterdam, included on pages 66 up to 102 which comprises the condensed consolidated statement of financial position as at 30 June 2013, the condensed consolidated income statement, the condensed consolidated statements of comprehensive income, changes in equity, and cash flows for the six month period ended 30 June 2013, and the notes. The Management Board of the Company is responsible for the preparation and presentation of these condensed consolidated interim financial statements in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. Our responsibility is to express a conclusion on these condensed consolidated interim financial statements based on our review.
We conducted our review in accordance with Dutch law including standard 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of condensed consolidated interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements as at 30 June 2013 are not prepared, in all material respects, in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.
Amstelveen, 22 August 2013
KPMG ACCOUNTANTS N.V. D. Korf RA
ABN AMRO Group N.V. incorporated on 18 December 2009 ('ABN AMRO Group' or 'the Company') and its consolidated subsidiaries.
ABN AMRO Bank N.V. (formerly known as 'ABN AMRO II N.V.').
ABN AMRO Holding N.V. and its consolidated subsidiaries, which was acquired by the Consortium and renamed RBS Holdings N.V. upon the Legal Separation. RBS Holdings N.V. is part of The Royal Bank of Scotland Group plc.
The absolute sensitivity adds up the different positions on the yield curve, regardless of whether they are positive or negative. It measures the absolute interest rate position.
The highest and most detailed level of credit risk calculation for determining capital adequacy levels under Basel II, based on the use of internal models to assess risk.
The highest and most detailed level of operational risk calculation for determining capital adequacy levels under Basel II, based on the use of internal models to assess risk.
Refers to ageas SA/NV (formerly known as Fortis SA/NV) and ageas N.V. (formerly known as Fortis N.V.) together.
Assets, including investment funds and assets of private individuals and institutions, which are professionally managed with the aim of maximising the investment result.
The Basel Capital Accord is the 1988 agreement among the G10 central banks to apply common minimum capital standards to the banking industry.
The Basel II Framework offers a new set of standards for establishing minimum capital requirements for banks. It was prepared by the Basel Committee on Banking Supervision.
The third set of Basel accords, which was developed in response to the financial crisis of the late 2000's. The Basel III standards include higher and better-quality capital, better risk coverage and the introduction of a maximum leverage ratio.
One hundredth of 1 percentage point.
Measure of a company's financial strength, often expressed in equity as a percentage of balance sheet total or – for banks – in the BIS ratio.
This item includes all cash and only credit balances with central banks that are available on demand.
Certificate of deposit is an unsecured short-term funding instrument with maturities up to one year.
Refers to the clearing businesses of ABN AMRO.
Commercial paper is an unsecured short-term funding instrument with maturities up to one year.
Refers to The Royal Bank of Scotland Group plc ('RBS Group'), Ageas and Banco Santander S.A. ('Santander'), which jointly acquired ABN AMRO Holding on 17 October 2007 through RFS Holdings B.V. ('RFS Holdings'). On 3 October 2008 the State of the Netherlands became the successor of Ageas.
The bank's core capital, excluding preference shares, expressed as a percentage of total risk-weighted assets.
The cost of risk is defined as annualised impairment charges on loans and other receivables divided by average risk-weighted assets.
Country risk is part of credit risk and is defined as the risk of losses due to country-specific events or circumstances (political, social, economic) relevant for credit exposures that are cross-border in nature.
The coverage ratio shows to which extent the impaired exposures are covered by impairment allowances for identified credit risk.
Covered bonds (CB) are secured long-term funding instruments. This type of bond differs from a standard bond by recourse to a pool of assets. In a default event, the bondholder has recourse to the issuer and this pool of assets.
Assessment of a credit rating agency expressed in a combination of letters and/or figures indicating the creditworthiness of a country, company or institution.
Credit risk is the risk of a financial loss that occurs if a client or counterparty fails to meet the terms of a contract or otherwise fails to perform as agreed.
Financial guarantee covering part of the potential credit losses on the portfolio that existed at the time of closing the sale under the EC Remedy.
Market value adjustments for counterparty credit risk.
Financial instruments whose value is derived from the price of one or several underlying assets (e.g. currencies, securities, indices).
Duration of equity indicates the sensitivity of the market value of equity to a 1% parallel change in the yield curve. The targeted interest risk profile results in a limit of the duration of equity between 0 and 7 years.
The divestment of the EC Remedy Businesses by ABN AMRO Bank Standalone in order to satisfy the conditions imposed by the European Commission for approval of the integration of FBN with ABN AMRO Bank Standalone through the Legal Merger. The EC Remedy Businesses consist of New HBU II N.V. and IFN Finance B.V.
Refers to New HBU II N.V. and IFN Finance B.V.
Assets that were pledged or subject to an arrangement, either explicitly or implicitly, in any way to secure, collateralise or credit enhance a transaction.
EAD models estimate the expected exposure at the time of a counterparty default.
The legal entity Fortis Bank (Nederland) N.V., previously named Fortis Bank Nederland (Holding) N.V., which merged with ABN AMRO Bank Standalone pursuant to the Legal Merger.
The difference between the purchase price of a participation and the fair value of the individual net assets and liabilities.
Protecting a financial position by going either long or short, often using derivatives.
Exposures for which not all contractual cash flows are expected and/or exposures more than 90 days past due for which impairments are determined on a portfolio basis.
The impaired ratio shows which fraction of the gross carrying amount of a financial asset category consists of impaired exposures.
The impaired EAD ratio shows which fraction of an EAD category consists of impaired exposures.
Charge to the income statement to cover possible loan losses on non-performing loans.
IRB approach is a method to calculate required capital by means of own estimated risk parameters. This approach can be used with explicit permission of the supervising authority only.
IFRS, formerly known as International Accounting Standards, are drawn up and recommended by the International Accounting Standards Board. The European Union requires that IFRS be used by all exchange-listed companies in the EU starting from the financial year 2005.
The legal demerger effectuated on 6 February 2010 in accordance with the demerger proposal filed with the Amsterdam Chamber of Commerce on 30 September 2009, thereby demerging the majority of the Dutch State-acquired businesses held by RBS N.V. into ABN AMRO Bank Standalone.
The legal merger effectuated on 1 July 2010 between ABN AMRO Bank Standalone and FBN. ABN AMRO Bank was the surviving entity and FBN was the disappearing entity.
The LCR is intended to promote resilience to potential liquidity disruptions over a thirty-day horizon. The LCR requires banks to hold sufficient highly-liquid assets equal to or greater than the net cash outflow during a thirty-day period.
Balance sheet allowance held against non-performing loans.
Market risk in the banking book, mainly interest rate risk, is the risk of yield curve development that is unfavourable for the bank. Other market risks are limited in the banking book either through hedging (foreign rate exchange risk) or in general (other market risk types).
Market risk in the trading book is the risk of loss resulting from unfavourable market price movements which can arise from trading or holding positions in financial instruments in the trading book.
Medium-term notes are unsecured funding instruments with maturities up to ten years issued in several currencies.
The NII-at-Risk metric indicates the change in net interest income during the coming 12 months, comparing the NII calculated using a constant yield curve with the NII calculated using a yield curve that is gradually shifted to a total of 200 basis points. The net interest income is negatively impacted when rates rise.
Stichting administratiekantoor beheer financiële instellingen (NL Financial Investments (foundation)). On 29 September 2011 the Dutch State transferred its shares in ABN AMRO Group N.V. and in ABN AMRO Preferred Investments B.V. to NLFI. NLFI is set up as a means to avoid potential conflicting responsibilities that the Minister of Finance might otherwise face, as a shareholder and as a regulator, as well as to avoid political influence being exerted.
The value of the principal of the underlying financial derivatives contracts.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events.
A financial asset is past due if a counterparty has failed to make a payment when contractually due, if it has exceeded an advised limit or if it has been advised of a limit lower than its current outstanding.
The past due ratio shows which fraction of the gross carrying amount of a financial asset category is past due but not impaired.
Share that receives a fixed rate of dividend prior to ordinary shares.
Qualifying revolving exposures are revolving, unsecured, and uncommitted exposures to private individuals that meet additional criteria specified in the CRD. These outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the bank.
The Royal Bank of Scotland N.V., formerly known as ABN AMRO Bank N.V. prior to the Legal Demerger.
Measure of a bank's financial strength, often expressed in risk-bearing capital as a percentage of total risk-weighted assets.
The regulatory liquidity requirement measures the one-month liquidity position in the scenario of a severe and short stress as defined by DNB. It requires the one-month liquidity position to exceed the minimum required regulatory level of zero.
A repo, also known as a repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date.
Residential mortgage backed securities (RMBS) are secured long-term funding instruments. A pool of underlying assets, in this case own-originated residential mortgages, provides the cash flows to bondholders.
Annualised underlying profit for the period divided by average RWA.
Net profit attributable to ordinary shareholders of the parent company divided by shareholders' equity.
Total assets and off-balance sheet items calculated on the basis of the risks relating to the various balance sheet items.
Saving certificates are non-exchange traded instruments with an annual coupon payment and have the same characteristics as bonds.
Savings mortgages are mortgages with a separate savings account whereby the balance of savings is used for redemption of the principal at maturity.
A transaction whereby securities are temporarily transferred from a lender to a borrower, with the commitment to re-deliver the securities.
Restructuring credits in the form of marketable securities.
The standardised approach for credit risk measures credit risk in a standardised manner, supported by external credit assessments.
Method of testing the stability of a system or entity when exposed to exceptional conditions.
The survival period indicates for what period the Group's liquidity position will remain positive in a situation where stress is observed in wholesale funding markets, but funds attracted through retail and commercial clients remain stable.
Tier 1 capital of the bank expressed as a percentage of total risk-weighted assets.
The UCR is an obligor rating and refers to the probability of default by an obligor, i.e. the likelihood that a counterparty fails to pay interest and/or principal and/or other financial obligations to the bank.
Value-at-Risk banking book (VaR banking book) is used as a statistical measure for assessing interest risk exposure. It estimates potential losses and is defined as the predicted maximum loss that might be caused by changes in risk factors under normal circumstances, over a specified period of time, and at a specified level of statistical confidence. A VaR for changes in the interest rate for the banking book is calculated at a 99% confidence level and a two-month holding period.
Statistical measure for the degree to which items (market rates, interests) fluctuate over time.
Section 2:403 of the Dutch Civil Code, which states that companies part of a consolidating group entity may publish limited annual accounts if the parent company, among other things, assumes joint and several liability for all liabilities of the group company.
| AA | ABN AMRO | CRE | Commercial Real Estate |
|---|---|---|---|
| AAC | ABN AMRO Clearing | CRO | Chief Risk Officer |
| AAHG | ABN AMRO Hypotheken Groep | CRR | Capital Requirements Regulation |
| AAL | ABN AMRO Lease | CSA | Credit Support Annex |
| ACF | ABN AMRO Commercial Finance | CVA | Credit Value Adjustment |
| AACF | ABN AMRO Capital Finance | CUSIP | Committee on Uniform Security Identification |
| AFM | Autoriteit Financiële Markten (Netherlands | Purposes | |
| Authority for the Financial Markets) | DDos | Distributed-denial-of-service | |
| AFS | Available-for-sale | DGS | Deposit Guarantee Scheme |
| AIRB | Advanced Internal Ratings Based (Approach) | DIGH | Dutch International Guarantees for Housing |
| ALCO | (ABN AMRO's) Asset & Liability Committee | DNB | De Nederlandsche Bank N.V. |
| ALM | Asset & Liability Management | (Dutch Central Bank) | |
| AMA | Advanced Measurement Approach | DSTA | Dutch State Treasury Agency |
| AUD | Australian Dollar | DTA | Deferred Tax Asset |
| AuM | Assets under Management | DTL | Deferred Tax Liability |
| BIS | Bank for International Settlements | DVA | Debt Valuation Adjustment |
| bn | Billion | EAD | Exposure At Default |
| bp(s) | Basis point(s) | EBA | European Banking Authority |
| CAD | Canadian Dollar | EBITDA | Earnings Before Interest, Taxes, |
| CBI | Commercial Banking International | Depreciation and Amortisation | |
| CBS | Centraal Bureau voor de Statistiek | EC | European Commission |
| (Statistics Netherlands) | ECB | European Central Bank | |
| CD | Certificate of Deposit | ECT | (ABN AMRO's) Energy, Commodities |
| CDO | Collateralised Debt Obligation | & Transportation | |
| CDS | Credit Default Swap | EU | European Union |
| CET1 | Common Equity Tier 1 | EUR | Euro |
| CFO | Chief Financial Officer | EVCA | European Private Equity and |
| CGU | Cash-Generating Units | Venture Capitalist Association | |
| CHF | Swiss Franc | FBN | Fortis Bank Nederland |
| C&MB | (ABN AMRO's) Commercial | FIRB | Foundation Internal Ratings-Based (Approach) |
| & Merchant Banking | FR&R | (ABN AMRO's) Financial Restructuring | |
| CP | Commercial Paper | & Recovery | |
| CRD | (the EU's) Capital Requirements Directive | FTE | Full-Time Equivalent |
| (a measurement of number of staff) |
| FX | Foreign exchange | NYSE | New York Stock Exchange |
|---|---|---|---|
| GBP | British pound | NZD | New Zealand Dollar |
| GDP | Gross Domestic Product | OCI | Other Comprehensive Income |
| GIIPS | Greece, Italy, Ireland, Portugal and Spain | OECD | Organisation for Economic Co-operation |
| IAS | International Accounting Standards | and Development | |
| IASB | International Accounting Standards Board | OOE | One Obligor Exposure |
| IBNI | Incurred But Not Identified | OTC | Over-The-Counter |
| ICC | (ABN AMRO's) Integration, Communication | PBI | Private Banking International |
| & Compliance | PBNL | (ABN AMRO's) Private Banking Netherlands | |
| ID&JG | (ABN AMRO's) International Diamond | PD | Probability of Default |
| & Jewelry Group | PWM | (ABN AMRO's) Private Wealth Management | |
| IFRS | International Financial Reporting Standards | QoQ | Quarter-on-quarter |
| IMA | Internal Models Approach | RBA | Ratings-Based Approach |
| IPD | Investment Property Databank | RBS | The Royal Bank of Scotland plc |
| IRB | Internal Ratings-Based (Approach) | RMBS | Residential Mortgage-Backed Security |
| ISDA | International Swaps and Derivatives | RM&S | (ABN AMRO's) Risk Management & Strategy |
| Association | ROE | Return on Equity | |
| ISIN | International Securities Identification Number | R&PB | (ABN AMRO's) Retail & Private Banking |
| IT | Information Technology | RWA | Risk-Weighted Assets |
| JPY | Japanese Yen | SA | Standardised Approach |
| LC&MB | (ABN AMRO's) Large Corporates | SCE | Special Component of Equity |
| & Merchant Banking | SEC | Securities and Exchange Commission | |
| LCP | Liquidity Contingency Plan | SFT | Securities Financing Transactions |
| LCR | Liquidity Coverage Ratio | SGD | Singapore dollar |
| LtD | Loan-to-Deposit (ratio) | SiFi | Systematically important Financial institution |
| LtMV | Loan-to-Market-Value | SMEs | Small and Medium-sized Enterprises |
| LtV | Loan-to-Value | SPE | Special Purpose Entity |
| LT2 | Lower Tier 2 | SPV | Special Purpose Vehicle |
| m | Million | TOPS | (ABN AMRO's) Technology, Operations & |
| MCS | Mandatory Convertible Securities | Property Services | |
| MtM | Mark-to-Market | TSA | The Standardised Approach |
| MTN | Medium-Term Notes | UCR | Uniform Counterparty Rating |
| NHG | Nationale Hypotheek Garantie | USD | US Dollar |
| (Dutch State-guaranteed mortgages) | UT2 | Upper Tier 2 | |
| NII | Net Interest Income | VaR | Value-at-Risk |
| NLFI | NL Financial Investments (foundation) | YE | Year-end |
| NOK | Norwegian Krone | YoY | Year-on-year |
| NSFR | Net Stable Funding Ratio |
Gustav Mahlerlaan 10 1082 PP Amsterdam The Netherlands
P.O. Box 283 1000 EA Amsterdam The Netherlands
abnamro.com (website in English), abnamro.nl (client website in Dutch) and abnamro.nl/en/index (client website in English). Information on our website does not form part of this Interim Financial Report, unless expressly stated otherwise.
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