Quarterly Report • Nov 9, 2022
Quarterly Report
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ABN AMRO Bank N.V.
Third quarter 2022
Net profit/(loss)
(in millions)
Earnings per share (in EUR)
(in %)
(in bps) Through-the-cycle around 20bps
(end-of-period, in %)
For more information about net profit, return on equity, earnings per share, cost/income ratio, cost of risk and net interest margin, please refer to the Financial review section. For more information about CET1 ratio (Basel III and Basel IV) and leverage ratio, please refer to the Capital management section.
The third quarter was again dominated by global events. The war in Ukraine has led to one of the largest humanitarian crises in decades, of which the long-term consequences are still difficult to assess. After a strong post-Covid recovery in the Netherlands, economic growth is starting to slow down due to high inflation, especially owing to the sharp rise in energy prices, combined with higher interest rates. The Dutch economy has strong fundamentals and the government is stepping in with support packages to ease the purchasing power shock. Uncertainty about economic developments remains high and we expect an economic slowdown. Although we are concerned about the outlook, we are well positioned to weather this environment and will continue to support our clients in these challenging times.
We maintained strong momentum in the third quarter as our mortgage and corporate loan books continued to grow. Our market share in mortgages improved further to 19.1% in Q3 and we remained the market leader in the Netherlands. We still face pressure on margins for mortgages and corporate loans due to a delay in passing on higher funding costs to clients.
In the third quarter, we delivered a good quarterly result, with a net profit of EUR 743 million and an ROE of 13.9%, supported by a book profit on disposals and low impairments. NII, excluding incidentals, has bottomed out as deposit margins continued to improve in the higher interest rate environment. We now expect NII to be around EUR 5.3 billion for the full year (excluding incidentals). Fee income increased by 7% compared with Q3 2021, driven by higher payment volumes, pricing and strong results at
Clearing. Net new assets at Wealth Management, excluding custody assets, increased by EUR 1.0 billion. Costs in the third quarter came down by 2% (excluding incidentals and regulatory levies) compared with Q2 due to lower staff costs. We expect full-year costs to be around EUR 5.3 billion, excluding incidentals and additional costs for the new CLA.
Against the backdrop of uncertainty and volatile markets, we continue to focus on risk management. Credit quality remains good and impairments were EUR 7 million for the quarter as the deteriorating macroeconomic outlook was offset by releases of non-performing loans. We continue to monitor second-order impacts on our clients caused by the war in Ukraine, including energy-intensive sectors, and prudent buffers remain in place. Risk-weighted assets increased by EUR 4.3 billion, mainly due to an adjustment in the application of the SME support factor and changes in the regulatory approach to models. Our capital position remains strong, with a fully-loaded Basel III CET1 ratio of 15.2% and a Basel IV CET1 ratio of around 16%. We are making progress in our AML remediation programmes, but ongoing effort is required to complete the programmes before the end of 2023.
We continue to deliver on our strategy to improve our performance and meet our bank-wide strategic targets. The three pillars of our strategy – customer experience, sustainability and future-proof bank – will drive profitable growth while we increase operational and capital efficiency. We took our customer experience a step further as we are continually developing new propositions for our clients both within our own digital channels and embedded in third-party Introduction
digital channels. ID & pay is an embedded banking innovation that simplifies the onboarding and payment process for clients such as online brokers and shared mobility services. This app provides a single digital identification and payment functionality within the bank's secure environment. We are currently piloting the app with Swapfiets, a 'bicycle as a service' company. Meanwhile Tikkie, serving some eight million users in the Netherlands, introduced a new feature called Groepie, which allows multiple users to track and settle costs incurred as a group.
As we further integrate sustainability into the core of our business, we recently financed a housing development project with sustainable and affordable homes to help meet demand, as the housing shortage in the Netherlands remains severe. Our mortgage label Florius now offers senior clients financing solutions for intergenerational and informal caregiver homes, supporting their mobility in the housing market and enabling future-proof living. Next month, we will present our climate strategy as we take the next step in our climate journey. We will present intermediate targets for 2030 for five carbon-intensive sectors as well as for our client assets portfolio and we will provide a clear roadmap for further target setting. Our climate journey ahead will depend on many factors including regulation, technological developments and global events. In our climate strategy, we will provide a compass on how we make decisions going forward.
We are building a future-proof bank. The digital customer experience is the main reason for many clients to recommend our bank, and I am pleased that the third-quarter NPS for both consumer and corporate clients improved compared with Q2, with clients praising the functionalities of the ABN AMRO app and Internet Banking. To strengthen the focus on mobile banking, the key features of Grip, our personal finance management app, will be integrated into the ABN AMRO app, giving all users direct insight into their personal finances. Meanwhile, vulnerable clients who have difficulty keeping pace with technology can now attend special walk-in clinics at libraries throughout the Netherlands. The clinics are run by retired ABN AMRO staff on a volunteer basis.
Last month, we announced the departure of our Chief Human Resources Officer Gerard Penning. We are grateful for his dedication and hard work in recent years. Meanwhile, I am very much looking forward to the arrival of Carsten Bittner as our new Chief Innovation & Technology Officer. He will be central to ABN AMRO's strategy of becoming a personal bank in the digital age.
I would like to extend my gratitude to all my colleagues for their strong commitment and drive, and I am pleased we have reached a new collective labour agreement. We will continue to focus on being the preferred partner for our clients, especially in these challenging times, and would like to thank them for placing their trust in us.
CEO of ABN AMRO Bank N.V.
This financial review includes a discussion and analysis of the results and sets out the financial position of ABN AMRO.
| (in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | Nine months 2022 |
Nine months 2021 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 1,276 | 1,202 | 6% | 1,273 | 3,859 | 3,871 | ||
| Net fee and commission income | 441 | 413 | 7% | 448 | -2% | 1,336 | 1,218 | 10% |
| Other operating income | 446 | 119 | 163 | 785 | 224 | |||
| Operating income | 2,162 | 1,734 | 25% | 1,884 | 15% | 5,979 | 5,313 | 13% |
| Personnel expenses | 605 | 575 | 5% | 619 | -2% | 1,824 | 1,753 | 4% |
| Other expenses | 649 | 727 | -11% | 702 | -8% | 2,259 | 2,619 | -14% |
| Operating expenses | 1,254 | 1,301 | -4% | 1,321 | -5% | 4,082 | 4,372 | -7% |
| Operating result | 908 | 432 | 110% | 563 | 61% | 1,897 | 940 | 102% |
| Impairment charges on financial instruments | 7 | -12 | -62 | 7 | -168 | |||
| Profit/(loss) before taxation | 902 | 444 | 103% | 626 | 44% | 1,890 | 1,108 | 71% |
| Income tax expense | 159 | 102 | 56% | 151 | 5% | 377 | 426 | -12% |
| Profit/(loss) for the period | 743 | 343 | 117% | 475 | 56% | 1,513 | 682 | 122% |
| Attributable to: | ||||||||
| Owners of the parent company | 743 | 343 | 117% | 475 | 56% | 1,513 | 679 | 123% |
| Non-controlling interests | 31% | 3 | ||||||
| Other indicators | ||||||||
| Net interest margin (NIM) (in bps) | 119 | 117 | 121 | 122 | 126 | |||
| Cost/income ratio | 58.0% | 75.1% | 70.1% | 68.3% | 82.3% | |||
| Cost of risk (in bps)1 | 1 | -2 | -9 | 1 | -13 | |||
| Return on average equity2 | 13.9% | 6.5% | 8.8% | 9.4% | 4.2% | |||
| Earnings per share (in EUR)3,4 | 0.80 | 0.34 | 0.50 | 1.59 | 0.65 | |||
| Client assets (end of period, in billions) | 292.6 | 306.0 | 297.2 | |||||
| Risk-weighted assets (end of period, in billions) | 131.0 | 110.6 | 126.7 | |||||
| Number of employees (end of period, in FTEs) | 20,128 | 19,700 | 20,079 | |||||
| Number of non-employees (end of period, in FTEs) | 5,207 | 6,238 | 5,933 |
1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting.
2 Annualised profit/(loss) for the period, excluding payments attributable to AT1 capital securities and results attributable to non-controlling interests, divided by the average equity attributable to the owners of the company excluding AT1 capital securities.
³ Annualised profit/(loss) for the period, excluding payments attributable to AT1 capital securities and results attributable to non-controlling interests, divided by the average outstanding and
paid-up ordinary shares. 4 For the first three quarters of 2022, the average number of outstanding shares amounted to 911,102,969.
5
On August 10 2022, the Appeals Board of the Dutch Financial Services Complaints Authority (Kifid) ruled that clients with interest rates that were not sufficiently aligned with market rates should also be compensated for compound interest (interest on interest). In Q3 2022, this provision was therefore increased by EUR 110 million for client compensation (recorded under net interest income) and by EUR 12 million for additional handling costs (recorded under other expenses) at Personal & Business Banking. In Q3 2021 this provision had been increased by EUR 217 million, of which EUR 174 million was recorded in net interest income (client compensation) and EUR 44 million in other expenses (handling costs).
Q3 2022 included EUR 44 million in net interest income for an additional TLTRO discount (Q2 2022: EUR 41 million). The majority of this benefit is being passed on to our clients.
The Court of Appeal in The Hague issued a ruling on 11 October 2022 in the EURIBOR mortgages case. This ruling was favourable for ABN AMRO. In Q3 2022, the EURIBOR provision was released to the P&L for an amount of EUR 28 million, under net interest income mainly at Personal & Business Banking.
On 2 July 2022, Nationale Nederlanden ABN AMRO Verzekering Holding (in which ABN AMRO has a 49% interest) completed the sale of the life insurance business to NN Group. This resulted in a profit of EUR 42 million, recorded under other operating income at Personal & Business Banking.
Net interest income amounted to EUR 1,276 million (Q3 2021: EUR 1,202 million). Excluding large incidentals, net interest income decreased by EUR 36 million, mainly due to higher steering costs at Treasury, a decrease in mortgage prepayment penalties, lower asset margins (mainly in mortgages) and the ongoing wind-down of the Corporate Banking non-core portfolio. This was mitigated by higher deposit margins as we started to benefit from rising interest rates, despite the decrease of negative interest rates on deposits in excess of EUR 100,000 to -25bps as of 1 August 2022. From 1 October 2022, ABN AMRO will not charge clients any negative interest rate for deposits, and from 1 December the interest rate on savings accounts will increase by 25bps.
The net interest margin remained nearly flat at 119bps in Q3 2022 (Q3 2021: 117 bps), as the rise in net interest income
On 1 September 2022, the sale of ABN AMRO Pensioeninstelling to Achmea was finalised. Profit from the sale amounted to EUR 73 million, recorded under other operating Income at Wealth Management.
In Q3 2022, ABN AMRO divested its stake in MP Solar. The gain on this transaction (around EUR 60 million) was recorded under other operating income at Corporate Banking.
Q3 2021 included a positive revaluation of EUR 26 million for a claim on the DSB bankruptcy estate, which related to the sale of the underlying mortgage portfolio to NIBC and was recorded in net interest income at Group Functions.
Other expenses in Q2 2022 included a EUR 34 million addition to the provisions for the AML remediation programmes, recorded mainly at Group Functions and for a small part at Personal & Business Banking.
was offset by a larger average amount of total assets on the balance sheet.
In comparison with Q2 2022, net interest income increased slightly by EUR 3 million. Excluding large incidentals, net interest income improved by EUR 82 million on the previous quarter, mainly due to higher deposit margins as interest rates continued to rise.
Net fee and commission income increased to EUR 441 million (Q3 2021: EUR 413 million), largely driven by higher transaction volumes and pricing at Personal & Business Banking and higher transaction volumes at Clearing resulting from increased market volatility. These were partially offset by lower asset management fees at Wealth Management, as negative stock market developments during 2022 pushed down assets under management and the related fees.
In comparison with Q2 2022, net fee and commission income declined by EUR 7 million. The decline was largely attributable to a decline in fee income at Wealth Management (negative stock market developments in Q3) and a seasonal decline in capital market fee income at CB (Global Markets), partly offset by higher transaction volumes and payment fees at Personal & Business Banking.
Other operating income totalled EUR 446 million in Q3 2022 (Q3 2021: EUR 119 million). Excluding large incidentals, other operating income was higher than in Q3 2021, mainly due to volatile items. These included higher asset and liability management results at Treasury (EUR 104 million versus EUR 15 million in Q3 2021), CVA/DVA/FVA1 results (EUR 27 million in Q3 2022 versus EUR 2 million in Q3 2021) and slightly lower equity participation results (EUR 7 million in Q3 2022, excluding the divestment of MP Solar, versus EUR 19 million in Q3 2021).
Compared with Q2 2022, other operating income increased by EUR 108 million, excluding large incidentals. The increase was mainly caused by a positive equity stake revaluation and volatile items: EUR 39 million higher asset and liability management results at Treasury, EUR 9 million higher CVA/ DVA/FVA and EUR 19 million lower equity participation results, excluding the MP Solar divestment.
Personnel expenses totalled EUR 605 million (Q3 2021: EUR 575 million) and increased by EUR 31 million, mainly driven by a positive one-off recorded in Q3 2021 and to a lesser extent a rise in FTEs for IT and AML activities.
Personnel expenses were EUR 14 million lower than in Q2 2022, largely reflecting collective labour agreement (CLA) related one-offs in Q2 2022.
Employee FTEs were up 428 from Q3 2021, totalling 20,128. The growing workforce was mainly driven by an increase in FTEs for IT and AML activities, and partly mitigated by progress made in the CB non-core wind-down.
Compared to Q2 2022, there was an increase of 49 FTEs, driven by the same factors.
Other expenses amounted to EUR 649 million (Q3 2021: EUR 727 million). Excluding incidentals, other expenses decreased by EUR 46 million, mainly as a result of lower regulatory levies and lower non-employee FTEs, mainly in AML activities. Compared with Q3 2021, non-employee FTEs for AML activities decreased by around 800, as a combined result of cases already remediated and increased efficiency.
In comparison with Q2 2022, other expenses decreased by EUR 53 million. Excluding incidentals, the decrease was EUR 31 million, driven by the same factors.
Impairment charges showed a net charge of EUR 7 million (Q3 2021: EUR 12 million release) as a result of additions in stage 1 and 2, offset by a net release in stage 3. The additions in stage 1 and 2 were mainly caused by worsening macroeconomic scenarios, increased management overlays and other adjustments. A new management overlay was formed for the potential impact of the government's nitrogen reducing measures on clients in livestock farming businesses in the Netherlands. The releases in stage 3 can be largely attributed to better performance of the existing defaulted portfolio, repayments of stage 3 loans, outflow to the performing portfolio and recoveries with lower than anticipated losses.
Income tax expenses totalled EUR 159 million in Q3 2022 (Q3 2021: EUR 102 million), while profit before tax amounted to EUR 902 million, resulting in an effective tax rate of 17.6%, reflecting tax exempted sale proceeds of large incidentals, and interest coupons charged to equity and paid on AT1 instruments, which were deductible for tax purposes in Q3.
came to EUR 743 million in Q3 2022 (Q3 2021: EUR 343 million). Excluding payments attributable to AT1, this amounted to EUR 720 million in Q3 2022.
RWA went up to EUR 131.0 billion in Q3 2022 (30 June 2022: EUR 126.7 billion), reflecting higher credit risk RWA. This increase was predominantly attributable to a change in the regulatory treatment of certain models from Advanced IRB to Foundation IRB and an adjustment in the application of the SME support factor due to deficiencies in the implementation.
Additional financial information
1 Credit Valuation Adjustment/Debit Valuation Adjustment/Funding Valuation Adjustment (CVA/DVA/FVA).
| (in millions) | 30 September 2022 | 30 June 2022 | 31 December 2021 |
|---|---|---|---|
| Cash and balances at central banks | 68,336 | 69,784 | 66,865 |
| Financial assets held for trading | 1,946 | 2,421 | 1,155 |
| Derivatives | 6,577 | 5,096 | 3,785 |
| Financial investments | 40,394 | 40,762 | 43,165 |
| Securities financing | 31,991 | 27,647 | 16,138 |
| Loans and advances banks | 4,217 | 3,766 | 2,801 |
| Loans and advances customers | 260,929 | 259,641 | 258,251 |
| Other | 9,989 | 12,387 | 6,955 |
| Total assets | 424,377 | 421,504 | 399,113 |
| Financial liabilities held for trading | 1,023 | 1,394 | 687 |
| Derivatives | 5,399 | 3,799 | 4,344 |
| Securities financing | 17,692 | 18,643 | 9,494 |
| Due to banks | 40,712 | 40,168 | 38,076 |
| Due to customers | 273,856 | 265,191 | 251,218 |
| Issued debt | 48,590 | 53,431 | 59,688 |
| Subordinated liabilities | 6,685 | 7,658 | 7,549 |
| Other | 7,696 | 8,693 | 6,059 |
| Total liabilities | 401,653 | 398,977 | 377,114 |
| Equity attributable to the owners of the parent company | 22,723 | 22,523 | 21,994 |
| Equity attributable to non-controlling interests | 2 | 5 | 5 |
| Total equity | 22,725 | 22,528 | 21,999 |
| Total liabilities and equity | 424,377 | 421,504 | 399,113 |
| Committed credit facilities | 53,550 | 55,464 | 54,642 |
| Guarantees and other commitments | 7,559 | 7,567 | 7,598 |
Total assets increased by EUR 2.9 billion, coming to EUR 424.4 billion at 30 September 2022, largely driven by a rise in securities financing, derivatives and loans and advances to customers, partly offset by a decline in other assets.
Securities financing assets increased by EUR 4.3 billion, totalling EUR 32.0 billion at 30 September 2022, mainly due to higher transaction volumes.
Loans and advances customers increased by EUR 1.3 billion, totalling EUR 260.9 billion. The increase was mainly attributable to an increase of EUR 3.2 billion in client loans and EUR 1.6 billion in loans to professional counterparties, partly offset by a EUR 3.6 billion decrease in fair value adjustments from hedge accounting on residential mortgages.
| (in millions) | 30 September 2022 | 30 June 2022 | 31 December 2021 |
|---|---|---|---|
| Residential mortgages | 150,510 | 148,773 | 146,351 |
| Consumer loans | 10,400 | 10,603 | 10,794 |
| Corporate loans to clients1 | 81,918 | 80,223 | 77,965 |
| - of which Personal & Business Banking | 9,332 | 9,433 | 9,920 |
| - of which Corporate Banking | 66,589 | 64,842 | 62,230 |
| - of which Corporate Banking - core | 64,993 | 63,117 | 60,269 |
| - of which Corporate Banking - non-core | 1,597 | 1,725 | 1,961 |
| Total client loans2 | 242,828 | 239,598 | 235,110 |
| Loans to professional counterparties and other loans2,3 | 29,683 | 28,098 | 23,605 |
| Total loans and advances customers, gross2 | 272,510 | 267,696 | 258,715 |
| Fair value adjustments from hedge accounting | -9,345 | -5,665 | 1,951 |
| Total loans and advances customers, gross | 263,166 | 262,031 | 260,666 |
| Loan impairment allowances | 2,237 | 2,390 | 2,416 |
| - of which Corporate Banking - non-core | 337 | 421 | 443 |
| Total loans and advances customers | 260,929 | 259,641 | 258,251 |
1 Corporate loans excluding loans to professional counterparties.
2 Excluding fair value adjustment from hedge accounting.
3 Loans to professional counterparties and other loans includes loans and advances to governments, official institutions and financial markets parties.
Client loans increased by EUR 3.2 billion to EUR 242.8 billion, driven largely by an increase in corporate loans (for both new and existing clients and, to a lesser extent, FX impact) and residential mortgages, reflecting strong operational capabilities and lower early repayments.
loans increased by EUR 1.6 billion to EUR 29.7 billion, primarily due to an increase in clients' funding needs at Clearing (CB).
Other assets came down by EUR 2.4 billion to EUR 10.0 billion at 30 September 2022, mainly as a result of unsettled securities transactions.
Total liabilities increased by EUR 2.7 billion, totalling EUR 401.7 billion at 30 September 2022, mainly driven by higher amounts recorded in due to customers.
Due to customers increased by EUR 8.7 billion to EUR 273.9 billion, almost entirely due to an increase in professional funding, mainly at Clearing.
Issued debt securities decreased by EUR 4.8 billion to EUR 48.6 billion, mainly due to matured long-term funding and negative fair value effects as a result of rising interest rates. At 30 September 2022, issued debt included EUR 23.7 billion in covered bonds, EUR 8.4 billion in senior preferred funding, EUR 7.5 billion in senior non-preferred funding and EUR 9.0 billion in commercial paper and certificates of deposit. EUR 3.5 billion in outstanding long-term funding and EUR 9.0 billion in outstanding short-term funding matures within 12 months.
Total equity increased by EUR 0.2 billion to
EUR 22.7 billion, mainly due to the inclusion of the profit for the period, which was largely offset by lower other comprehensive income, and by the interim dividend pay-out (40% of the reported H1 net profit). Moreover, the shares repurchased in previous quarters in line with the share buyback programme were cancelled in Q3 - this does not impact total equity, but is a shift in line items.
company amounted to EUR 22.7 billion in Q3 2022 (Q2 2022: EUR 22.5 billion). Excluding AT1 securities, increased by EUR 0.2 billion to EUR 20.7 billion, resulting in a book value of EUR 23.11 per share based on 897,521,916 outstanding shares.
| Net interest income 620 513 21% 669 -7% 1,942 1,924 Net fee and commission income 137 389 115 19% 131 5% 317 Other operating income 50 57 -1 2 23 Operating income 807 628 28% 803 1% 2,387 2,265 Personnel expenses 113 349 116 -3% 122 -7% 349 |
(in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | Nine months 2022 |
Nine months 2021 |
Change |
|---|---|---|---|---|---|---|---|---|---|
| 1% | |||||||||
| 23% | |||||||||
| 145% | |||||||||
| 5% | |||||||||
| Other expenses | 574 | 564 | 2% | 539 | 7% | 1,654 | 1,613 | 3% | |
| Operating expenses 687 680 1% 660 4% 2,003 1,962 |
2% | ||||||||
| Operating result 120 384 -52 142 -16% 303 |
27% | ||||||||
| Impairment charges on financial instruments 55 79 -3 28 94% -60 |
|||||||||
| Profit/(loss) before taxation 65 -49 114 -43% 304 362 |
-16% | ||||||||
| Income tax expense 4 65 -13 29 -84% 85 |
-24% | ||||||||
| Profit/(loss) for the period 60 240 -36 85 -29% 277 |
-14% | ||||||||
| Cost/income ratio 85.1% 83.9% 108.2% 82.3% 86.6% |
|||||||||
| Cost of risk (in bps)1 12 7 -3 7 -7 |
|||||||||
| Other indicators | |||||||||
| Loans and advances customers | |||||||||
| (end of period, in billions) 158.1 156.6 156.8 |
|||||||||
| -of which Client loans (end of period, in billions) 158.8 157.4 157.5 Due to customers (end of period, in billions) |
|||||||||
| 120.6 117.4 120.8 Risk-weighted assets (end of period, in billions) |
|||||||||
| 39.8 34.0 39.2 |
|||||||||
| Number of employees (end of period, in FTEs) 4,450 4,667 4,492 |
|||||||||
| Total client assets (end of period, in billions) 97.5 100.8 98.5 |
|||||||||
| - of which Cash 87.2 88.8 87.8 - of which Securities 10.3 12.0 10.7 |
1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting.
| (in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | Nine months 2022 |
Nine months 2021 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 207 | 161 | 29% | 172 | 21% | 537 | 481 | 12% |
| Net fee and commission income | 143 | 154 | -7% | 149 | -4% | 453 | 440 | 3% |
| Other operating income | 84 | 10 | 10 | 104 | 30 | |||
| Operating income | 434 | 324 | 34% | 331 | 31% | 1,095 | 951 | 15% |
| Personnel expenses | 98 | 97 | 90 | 8% | 285 | 291 | -2% | |
| Other expenses | 164 | 141 | 17% | 149 | 10% | 468 | 427 | 10% |
| Operating expenses | 262 | 238 | 10% | 239 | 9% | 753 | 718 | 5% |
| Operating result | 172 | 86 | 100% | 91 | 89% | 342 | 233 | 47% |
| Impairment charges on financial instruments | 10 | -4 | 5 | 99% | 15 | -5 | ||
| Profit/(loss) before taxation | 162 | 90 | 81% | 86 | 88% | 326 | 238 | 37% |
| Income tax expense | 23 | 23 | 23 | 68 | 65 | 5% | ||
| Profit/(loss) for the period | 139 | 67 | 109% | 63 | 120% | 258 | 173 | 49% |
| Cost/income ratio | 60.4% | 73.5% | 72.4% | 68.8% | 75.5% | |||
| Cost of risk (in bps)1 | 16 | -20 | 12 | 10 | -8 | |||
| Other indicators | ||||||||
| Loans and advances customers | ||||||||
| (end of period, in billions) | 16.7 | 15.3 | 16.6 | |||||
| -of which Client loans (end of period, in billions) | 16.8 | 15.4 | 16.7 | |||||
| Due to customers (end of period, in billions) | 64.5 | 60.2 | 62.5 | |||||
| Risk-weighted assets (end of period, in billions) | 10.7 | 10.3 | 10.5 | |||||
| Number of employees (end of period, in FTEs) | 2,893 | 2,852 | 2,899 | |||||
| Total client assets (end of period, in billions) | 195.1 | 205.2 | 198.7 | |||||
| - of which Cash | 64.5 | 60.2 | 62.5 | |||||
| - of which Securities | 130.6 | 145.0 | 136.2 | |||||
| Net new assets (for the period, in billions)2 | 1.4 | 1.1 | 2.8 | -1.2 |
1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting.
2 Net New Assets (NNA) consist of acquired relationships, relationship departures (attrition) and in- or outflows attributable to existing relationships (deepening, shallowing).
11
Operating results
| (in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | Nine months 2022 |
Nine months 2021 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 540 | 470 | 15% | 515 | 5% | 1,550 | 1,398 | 11% |
| Net fee and commission income | 166 | 149 | 12% | 174 | -5% | 512 | 477 | 7% |
| Other operating income | 179 | 45 | 86 | 108% | 367 | 68 | ||
| Operating income | 885 | 664 | 33% | 775 | 14% | 2,429 | 1,943 | 25% |
| Personnel expenses | 149 | 153 | -2% | 152 | -2% | 451 | 460 | -2% |
| Other expenses | 254 | 248 | 2% | 249 | 2% | 839 | 813 | 3% |
| Operating expenses | 403 | 401 | 0% | 402 | 1,290 | 1,273 | 1% | |
| Operating result | 482 | 263 | 83% | 374 | 29% | 1,139 | 670 | 70% |
| Impairment charges on financial instruments | -58 | -3 | -99 | 41% | -92 | -101 | 9% | |
| Profit/(loss) before taxation | 540 | 266 | 103% | 473 | 14% | 1,230 | 771 | 60% |
| Income tax expense | 115 | 64 | 80% | 114 | 1% | 274 | 209 | 31% |
| Profit/(loss) for the period | 425 | 202 | 111% | 359 | 19% | 956 | 561 | 70% |
| Cost/income ratio | 45.5% | 60.4% | 51.8% | 53.1% | 65.5% | |||
| Cost of risk (in bps)1 | -22 | 5 | -44 | -10 | -25 | |||
| Other indicators | ||||||||
| Loans and advances customers (end of period, in billions) |
94.7 | 78.6 | 90.8 | |||||
| -of which Client loans (end of period, in billions) | 67.2 | 58.0 | 65.4 | |||||
| Due to customers (end of period, in billions) | 73.9 | 58.7 | 68.4 | |||||
| Risk-weighted assets (end of period, in billions) | 75.4 | 61.4 | 72.2 | |||||
| Number of employees (end of period, in FTEs) | 3,753 | 3,791 | 3,799 | |||||
| 1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross |
1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting.
| Nine months | Nine months | |||||||
|---|---|---|---|---|---|---|---|---|
| (in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | 2022 | 2021 | Change |
| Net interest income | 523 | 442 | 18% | 498 | 5% | 1,497 | 1,301 | 15% |
| Net fee and commission income | 164 | 146 | 12% | 171 | -4% | 502 | 457 | 10% |
| Other operating income | 177 | 48 | 85 | 109% | 357 | 222 | 61% | |
| Operating income | 864 | 637 | 36% | 753 | 15% | 2,356 | 1,980 | 19% |
| Personnel expenses | 126 | 120 | 5% | 125 | 374 | 351 | 6% | |
| Other expenses | 238 | 222 | 7% | 232 | 2% | 782 | 711 | 10% |
| Operating expenses | 364 | 342 | 6% | 358 | 2% | 1,156 | 1,063 | 9% |
| Operating result | 500 | 294 | 70% | 396 | 26% | 1,200 | 917 | 31% |
| Impairment charges on financial instruments | -12 | -49 | 75% | -72 | 83% | -10 | -130 | 92% |
| Profit/(loss) before taxation | 512 | 343 | 49% | 467 | 10% | 1,210 | 1,047 | 16% |
| Income tax expense | 105 | 78 | 35% | 115 | -9% | 269 | 228 | 18% |
| Profit/(loss) for the period | 407 | 265 | 53% | 352 | 16% | 941 | 819 | 15% |
| Cost/income ratio | 42.1% | 53.8% | 47.5% | 49.1% | 53.7% | |||
| Cost of risk (in bps)1 | -10 | -16 | -36 | -1 | -23 | |||
| Other indicators | ||||||||
| Loans and advances customers | ||||||||
| (end of period, in billions) | 93.4 | 76.4 | 89.5 | |||||
| -of which Client loans (end of period, in billions) | 65.6 | 55.1 | 63.1 | |||||
| Risk-weighted assets (end of period, in billions) | 73.0 | 56.9 | 69.8 | |||||
| Number of employees (end of period, in FTEs) | 3,502 | 3,297 | 3,434 |
1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting.
| (in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | Nine months 2022 |
Nine months 2021 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 17 | 28 | -38% | 17 | 1% | 53 | 97 | -45% |
| Net fee and commission income | 2 | 3 | -24% | 3 | -39% | 10 | 20 | -51% |
| Other operating income | 2 | -3 | 1 | 18% | 10 | -153 | ||
| Operating income | 21 | 27 | -23% | 22 | -4% | 72 | -37 | |
| Personnel expenses | 23 | 32 | -30% | 27 | -14% | 77 | 109 | -29% |
| Other expenses | 16 | 26 | -38% | 17 | -5% | 57 | 102 | -44% |
| Operating expenses | 39 | 58 | -33% | 44 | -11% | 134 | 210 | -36% |
| Operating result | -18 | -31 | 43% | -22 | 18% | -62 | -247 | 75% |
| Impairment charges on financial instruments | -46 | 46 | -27 | -72% | -82 | 29 | ||
| Profit/(loss) before taxation | 28 | -77 | 5 | 20 | -276 | |||
| Income tax expense | 10 | -14 | -2 | 5 | -18 | |||
| Profit/(loss) for the period | 18 | -63 | 7 | 15 | -258 | |||
| Cost/income ratio | 184.4% | 213.4% | 198.4% | 185.3% | -570.6% | |||
| Cost of risk (in bps)1 | -700 | 477 | -465 | -436 | -53 | |||
| Other indicators | ||||||||
| Loans and advances customers | ||||||||
| (end of period, in billions) | 1.3 | 2.2 | 1.3 | |||||
| -of which Client loans (end of period, in billions) | 1.6 | 2.9 | 2.3 | |||||
| Risk-weighted assets (end of period, in billions) | 2.4 | 4.4 | 2.5 | |||||
| Number of employees (end of period, in FTEs) | 250 | 494 | 365 |
1 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting.
13
| (in millions) | Q3 2022 | Q3 2021 | Change | Q2 2022 | Change | Nine months 2022 |
Nine months 2021 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | -92 | 58 | -83 | -10% | -170 | 67 | ||
| Net fee and commission income | -6 | -5 | -12% | -6 | 3% | -18 | -15 | -19% |
| Other operating income | 134 | 65 | 106% | 65 | 107% | 258 | 103 | |
| Operating income | 36 | 118 | -69% | -24 | 69 | 154 | -55% | |
| Personnel expenses | 246 | 209 | 18% | 255 | -3% | 739 | 653 | 13% |
| Other expenses | -344 | -226 | -52% | -235 | -46% | -703 | -234 | |
| Operating expenses | -98 | -17 | 20 | 36 | 419 | -91% | ||
| Operating result | 134 | 135 | -1% | -44 | 33 | -265 | ||
| Impairment charges on financial instruments | -3 | 3 | -96% | 3 | -2 | |||
| Profit/(loss) before taxation | 134 | 138 | -3% | -47 | 30 | -263 | ||
| Income tax expense | 16 | 27 | -41% | -14 | -29 | 67 | ||
| Profit/(loss) for the period | 118 | 111 | 7% | -32 | 59 | -330 | ||
| Other indicators | ||||||||
| Securities financing - assets (end of period, in billions) |
21.6 | 17.3 | 20.1 | |||||
| Loans and advances customers (end of period, in billions) |
-8.5 | 3.3 | -4.5 | |||||
| Securities financing - liabilities (end of period, in billions) |
17.4 | 18.7 | 17.7 | |||||
| Due to customers (end of period, in billions) | 14.9 | 12.7 | 13.5 | |||||
| Risk-weighted assets (end of period, in billions) | 5.0 | 4.9 | 4.8 | |||||
| Number of employees (end of period, in FTEs) | 9,032 | 8,390 | 8,889 |
| (in millions) | Q3 2022 | Q3 2021 | Q2 2022 | Nine months 2022 |
Nine months 2021 |
|---|---|---|---|---|---|
| Income | |||||
| Interest income calculated using the effective interest method | 1,849 | 1,656 | 1,673 | 5,151 | 5,006 |
| Other interest and similar income | 55 | 68 | 49 | 166 | 187 |
| Interest expense calculated using the effective interest method | 613 | 332 | 442 | 1,413 | 1,036 |
| Other interest and similar expense | 16 | 190 | 7 | 46 | 286 |
| Net interest income | 1,276 | 1,202 | 1,273 | 3,859 | 3,871 |
| Fee and commission income | 561 | 565 | 563 | 1,707 | 1,650 |
| Fee and commission expense | 120 | 152 | 115 | 372 | 432 |
| Net fee and commission income | 441 | 413 | 448 | 1,336 | 1,218 |
| Income from other operating activities | 325 | 102 | 105 | 588 | 339 |
| Expenses from other operating activities | 30 | 35 | 33 | 97 | 107 |
| Net income from other operating activities | 294 | 67 | 72 | 491 | 231 |
| Net trading income | 81 | 41 | 78 | 199 | 87 |
| Share of result of equity-accounted investments | 70 | 9 | 10 | 89 | 12 |
| Net gains/(losses) on derecognition of financial assets measured at amortised cost | 1 | 2 | 4 | 6 | -106 |
| Operating income | 2,162 | 1,734 | 1,884 | 5,979 | 5,313 |
| Expenses | |||||
| Personnel expenses | 605 | 575 | 619 | 1,824 | 1,753 |
| General and administrative expenses | 605 | 678 | 662 | 2,130 | 2,471 |
| Depreciation, amortisation and impairment losses of tangible and intangible assets | 44 | 49 | 40 | 129 | 148 |
| Operating expenses | 1,254 | 1,301 | 1,321 | 4,082 | 4,372 |
| Impairment charges on financial instruments | 7 | -12 | -62 | 7 | -168 |
| Total expenses | 1,261 | 1,289 | 1,258 | 4,089 | 4,205 |
| Profit/(loss) before taxation | 902 | 444 | 626 | 1,890 | 1,108 |
| Income tax expense | 159 | 102 | 151 | 377 | 426 |
| Profit/(loss) for the period | 743 | 343 | 475 | 1,513 | 682 |
| Attributable to: | |||||
| Owners of the parent company | 743 | 343 | 475 | 1,513 | 679 |
| Non-controlling interests | 3 |
| (in millions) | Q3 2022 | Q3 2021 | Q2 2022 | ||
|---|---|---|---|---|---|
| Profit/(loss) for the period | 743 | 343 | 475 | ||
| Other comprehensive income: | |||||
| Items that will not be reclassified to the income statement | |||||
| Remeasurement gains/(losses) on defined benefit plans | 3 | 1 | |||
| Gains/(losses) on liability own credit risk | 4 | ||||
| Items that will not be reclassified to the income statement before taxation |
4 | 6 | |||
| Income tax relating to items that will not be reclassified to the income statement | 1 | 1 | |||
| Items that will not be reclassified to the income statement after taxation | 3 | 4 | |||
| Items that may be reclassified to the income statement | |||||
| Net gains/(losses) currency translation reserve | 66 | 18 | 46 | ||
| Less: Reclassification currency translation reserve through the income statement | 3 | 2 | |||
| Net gains/(losses) currency translation reserve through OCI | 64 | 18 | 44 | ||
| Net gains/(losses) fair value reserve | 38 | 61 | -64 | ||
| Less: Reclassification fair value reserve through the income statement | 1 | ||||
| Net gains/(losses) fair value reserve through OCI | 38 | 61 | -65 | ||
| Net gains/(losses) cash flow hedge reserve | -380 | 43 | 683 | ||
| Less: Reclassification cash flow hedge reserve through the income statement | -9 | 14 | -9 | ||
| Net gains/(losses) cash flow hedge reserve through OCI | -371 | 29 | 692 | ||
| Net gains/(losses) share of other comprehensive income of associates | -23 | 3 | -23 | ||
| Less: Reclassification share of other comprehensive income of associates through the income statement |
7 | ||||
| Share of other comprehensive income of associates | -30 | 3 | -23 | ||
| Items that may be reclassified to the income statement before taxation | -298 | 111 | 649 | ||
| Income tax relating to items that may be reclassified to the income statement | -86 | 23 | 162 | ||
| Items that may be reclassified to the income statement after taxation | -212 | 89 | 487 | ||
| Total comprehensive income/(expense) for the period after taxation | 533 | 436 | 962 | ||
| Attributable to: | |||||
| Owners of the parent company | 533 | 435 | 962 |
1 The consolidated comprehensive income have been refined. In order to achieve fairer presentation, reclassifications to the income statement have been added to the consolidated statement of comprehensive income.
| (in millions) | Share capital |
Share premium |
Other reserves including retained earnings |
Accumulated other com prehensive income |
Net profit/ (loss) attributable to owners of the parent company |
AT1 capital securities |
Equity attributable to the owners of the parent company |
Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 July 2021 | 940 | 12,970 | 6,777 | - 1,478 | 337 | 1,987 | 21,533 | 5 | 21,538 |
| Total comprehensive income | 93 | 343 | 435 | 436 | |||||
| Paid interest on AT1 capital securities |
- 46 | - 46 | - 46 | ||||||
| Balance at 30 September 2021 |
940 | 12,970 | 6,731 | -1,386 | 679 | 1,987 | 21,922 | 5 | 21,927 |
| Balance at 1 July 2022 | 940 | 12,970 | 6,224 | -366 | 770 | 1,985 | 22,523 | 5 | 22,528 |
| Total comprehensive income | -210 | 743 | 533 | 533 | |||||
| Dividend | -287 | -287 | -3 | -290 | |||||
| Decrease of capital | -1 | -1 | -1 | ||||||
| Share buyback | -42 | -441 | 484 | ||||||
| Paid interest on AT1 capital securities |
-46 | -46 | -46 | ||||||
| Balance at 30 September 2022 | 898 | 12,529 | 6,375 | - 576 | 1,513 | 1,984 | 22,723 | 2 | 22,725 |
the Netherlands. The continued surge in inflation and the prospect of energy shortages further weakened the economic outlook.
H Increased impairments resulting from the worsened economic outlook were offset by releases on existing impaired credit files.
| (in millions) | 30 September 2022 | 30 June 2022 | 31 December 2021 |
|---|---|---|---|
| Total loans and advances, gross carrying amount1,2 | 276,696 | 271,427 | 261,421 |
| - of which Banks | 4,221 | 3,771 | 2,811 |
| - of which Residential mortgages1 | 150,510 | 148,773 | 146,351 |
| - of which Consumer loans | 10,400 | 10,603 | 10,794 |
| - of which Corporate loans1,2 | 92,574 | 91,881 | 86,458 |
| - of which Other loans and advances customers2 | 18,991 | 16,401 | 15,007 |
| Total Exposure at Default (EAD) | 422,548 | 425,830 | 417,214 |
| Credit quality indicators2 | |||
| Forbearance ratio | 2.9% | 3.4% | 4.3% |
| Past due ratio | 0.7% | 0.6% | 0.8% |
| - of which Residential mortgages | 0.6% | 0.5% | 0.6% |
| - of which Consumer loans | 1.3% | 2.1% | 1.7% |
| - of which Corporate loans | 0.8% | 0.7% | 1.2% |
| Stage 2 ratio | 8.9% | 7.5% | 8.2% |
| Stage 2 coverage ratio | 1.7% | 1.9% | 1.7% |
| Stage 3 ratio3 | 2.0% | 2.3% | 2.6% |
| Stage 3 coverage ratio3 | 27.8% | 29.0% | 28.3% |
| Regulatory capital | |||
| Total RWA | 130,959 | 126,676 | 117,693 |
| - of which Credit risk4 | 112,538 | 108,070 | 99,976 |
| - of which Operational risk | 16,167 | 16,091 | 16,049 |
| - of which Market risk | 2,254 | 2,516 | 1,668 |
| Total RWA/total EAD | 31.0% | 29.7% | 28.2% |
| Mortgage indicators | |||
| Exposure at Default5 | 156,455 | 159,442 | 163,737 |
| - of which mortgages with Nationale Hypotheek Garantie (NHG) | 29,908 | 30,358 | 31,557 |
| Risk-weighted assets (Credit risk)5,6 | 22,516 | 22,185 | 22,110 |
| RWA/EAD | 14.4% | 13.9% | 13.5% |
| Average Loan-to-Market-Value | 54% | 54% | 56% |
| Average Loan-to-Market-Value - excluding NHG loans | 54% | 54% | 56% |
1 Excluding fair value adjustments from hedge accounting.
2 Excluding loans and advances measured at fair value through P&L.
3 Including POCI.
4 RWA for credit value adjustment (CVA) is included in credit risk. CVA per 30 September 2022: EUR 0.3 billion (30 June 2022: EUR 0.5 billion; 31 December 2021: EUR 0.2 billion).
5 The RWA (Credit risk) and Exposure at Default amounts are based on the exposure class Secured by immovable property. This scope is slightly broader than the residential mortgage portfolio.
6 Previous reports with reference date 31 December 2021 presented total RWA. In this report, the comparative figures for 31 December 2021 have been adjusted to show credit risk RWA only.
Additional financial information
While the ongoing war in Ukraine has had limited direct impact on our portfolio, it has sparked a surge in inflation, especially in energy prices, that continued in the third quarter and fueled recessionary expectations. Apart from an increased inflow in stage 2, caused by the downward adjustment of the economic scenarios and weights, the impact of these developments was not visible in our credit quality indicators, but may well impact our credit risk profile in the coming quarters.
Alongside our existing credit risk monitoring framework, we performed an in-depth review of our credit portfolio to assess the potential impact of any second and third-order effects. Retail and SME clients were subjected to affordability tests, taking into account elevated energy prices and clients' current financial liquidity positions. For corporate clients, individual client assessments were carried out to identify vulnerable clients, with a special focus on the impact of a potential disruption in the supply of natural gas. Thus far, these reviews have not resulted in a significant increase of clients with higher credit risk. Nevertheless, as the uncertainty in the macroeconomic outlook continues to be high, the management overlay of EUR 135 million on impairments for second and thirdorder impact remained in place.
In Q3 2022, total loans and advances grew to EUR 276.7 billion (30 September 2022: EUR 271.4 billion). This increase was visible across all product groups, except for consumer loans. Other loans and advances showed the largest increase, owing to higher collateral and default fund contributions for clients of Clearing, followed by residential mortgages, reflecting strong operational capabilities and lower early repayments. Corporate Banking's non-core portfolio amounted to EUR 1.6 billion at 30 September 2022 (30 June 2022: EUR 1.7 billion). Approximately EUR 0.6 billion of this portfolio was classified as stage 3, unchanged compared to 30 June 2022.
EAD decreased to EUR 422.5 billion (30 June 2022: EUR 425.8 billion) as other assets came down due to unsettled securities transactions, and cash and balances at central banks declined. The decrease was partly offset by higher business volumes, mainly in Clearing and residential mortgages.
The bank's credit quality indicators showed a mixed picture in the third quarter. The forbearance ratio improved to 2.9% (30 June 2022: 3.4%). The improvement was specifically observed in the residential mortgages and corporate loans portfolios, where loans for which a payment deferral had been provided after the outbreak of Covid-19 came to the end of their probation period and ceased to be forborne. In comparison with 30 June 2022, past due loans increased to EUR 1.9 billion, largely in line with growth in the loan
book. As a result, the past due ratio increased marginally from 0.6% to 0.7%. The primary contributor to the increase in arrears was the rise in 0-30 day arrears in residential mortgages (up from 0.5% to 0.6%), presumably due to overspending during the vacation season. The rise in corporate loans past due ratio (from 0.7% to 0.8%) was not industry-specific and short-lived, as the amount in arrears was repaid in early October 2022. Contrary to the trend in other product categories, the past due ratio for consumer loans declined from 2.1% to 1.3% due to a single client that was no longer past due.
Coverage and stage ratios declined, except for the stage 2 ratio, which increased as a result of the further weakening of the macroeconomic outlook, predominantly in corporate loans and, to a lesser extent, residential mortgages. More details can be found in the section coverage and stage ratios.
Total RWA went up to EUR 131.0 billion in Q3 2022 (30 June 2022: EUR 126.7 billion), reflecting higher credit risk RWA. Credit risk RWA increased predominantly due to a change in the regulatory treatment of certain models from Advanced IRB to Foundation IRB, an adjustment in the application of the SME support factor due to deficiencies in the implementation, and, to a lesser extent, business developments. These were partially offset by changes in asset quality and the sale of ABN AMRO Levensverzekeringen to Nationale Nederlanden. Market risk RWA decreased due to lower Stressed Value-at-Risk as a result of position changes. Operational risk RWA remained stable in Q3 2022.
| Q3 2022 | Q3 2021 | Q2 2022 | Nine months 2022 |
Nine months 2021 |
|
|---|---|---|---|---|---|
| Impairment charges on loans and other advances (in EUR million)1 | 7 | -12 | -62 | 7 | -168 |
| - of which Residential mortgages | 32 | 10 | 53 | 97 | - 27 |
| - of which Consumer loans | - 2 | - 11 | - 8 | 2 | - 1 |
| - of which Corporate loans | - 22 | - 13 | - 107 | - 70 | - 213 |
| - of which Off-balance sheet items | - 2 | 2 | 2 | - 17 | 77 |
| Cost of risk (in bps)2,3 | 1 | -2 | -9 | 1 | -13 |
| - of which Residential mortgages | 9 | 3 | 14 | 9 | - 2 |
| - of which Consumer loans | - 6 | - 41 | - 29 | 2 | - 1 |
| - of which Corporate loans | - 10 | - 6 | - 47 | - 10 | - 33 |
1 Including other loans and impairments charges on off-balance sheet exposures.
2 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
3 Calculation of CoR excludes (impairment charges on) off-balance exposures.
In Q3 2022, a net impairment charge of EUR 7 million was recorded (Q3 2021: EUR 12 million release), resulting in a cost of risk of 1bp (Q3 2021: -2bps). This amount is the result of additions amounting to EUR 107 million in stage 1 and 2, offset by a net release of EUR 100 million in stage 3. The releases in stage 3 can be largely attributed to better performance of the existing defaulted portfolio, repayments of stage 3 loans, outflow to the performing portfolio and recoveries. The additions in stage 1 and 2 were mainly caused by worsening macroeconomic scenarios, increased management overlays and other adjustments. The existing overlay for potential second and third-order effects of the war in Ukraine was maintained at the same level, while a
new management overlay of EUR 32 million was formed for the potential impact of the government's nitrogen reducing measures on clients in livestock farming businesses in the Netherlands.
Impairment releases for corporate loans were recorded because of better performance of the existing stage 3 portfolio, partly offset by increased management overlays and charges due to changed macroeconomic scenarios. Impairment charges for the residential loans portfolio were mainly in stage 1 and stage 2 and were caused by the deteriorated macroeconomic scenario.
| (in millions) | Weight | Macroeconomic variable | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|
| Real GDP Netherlands1 | 5.1% | 3.2% | 2.9% | 2.4% | ||
| Positive | 10% | Unemployment2 | 3.4% | 3.4% | 3.2% | 3.2% |
| House price index3 | 17.5% | 5.0% | 1.5% | 1.0% | ||
| Real GDP Netherlands1 | 4.7% | 0.5% | 1.4% | 1.6% | ||
| Baseline | 30% | Unemployment2 | 3.5% | 4.2% | 4.0% | 3.6% |
| House price index3 | 15.0% | 2.5% | 0.0% | 1.0% | ||
| Real GDP Netherlands1 | 4.1% | -1.8% | 0.1% | 1.3% | ||
| Negative | 60% | Unemployment2 | 4.2% | 5.4% | 6.2% | 5.6% |
| House price index3 | 10.0% | -10.0% | -12.5% | -7.5% |
1 Real GDP Netherlands, % change year-on-year.
2 Unemployment Netherlands, % of labour force.
3 House price index Netherlands - average % change year-on-year.
| (in millions) | Weight | Macroeconomic variable | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|
| Real GDP Netherlands1 | 3.9% | 3.1% | 2.3% | 1.8% | ||
| Positive | 15% | Unemployment2 | 3.5% | 3.2% | 2.9% | 2.9% |
| House price index3 | 15.0% | 5.0% | 3.0% | 2.0% | ||
| Real GDP Netherlands1 | 3.0% | 1.3% | 1.5% | 1.6% | ||
| Baseline | 35% | Unemployment2 | 3.8% | 4.2% | 3.8% | 3.7% |
| House price index3 | 12.5% | 5.0% | 1.5% | 1.0% | ||
| Real GDP Netherlands1 | 2.4% | -0.4% | 1.5% | 1.4% | ||
| Negative | 50% | Unemployment2 | 4.9% | 6.2% | 6.1% | 5.3% |
| House price index3 | 5.0% | -10.0% | -11.0% | -5.0% |
1 Real GDP Netherlands, % change year-on-year.
2 Unemployment Netherlands, % of labour force.
3 House price index Netherlands - average % change year-on-year.
The continued surge in inflation and the prospect of energy shortages in Europe are weakening the economic outlook in Northwest Europe and the Netherlands. Rising interest rates and uncertainties are dampening the increase in house prices. Whilst the recessionary pressure is likely to cause some rise in bankruptcies, unemployment is expected to remain low due to the current tightness in the job market. ABN AMRO economists expect the impact of these developments to be visible in macro-economic indicators from late 2022 or early 2023 onwards.
The macroeconomic scenarios shown above were prepared in early September and the base scenario assumed Russian gas deliveries to Europe would be around 20% of 2021. The positive scenario assumed a peace treaty between Russia and Ukraine while governments would still be reducing energy reliance on Russia, and the negative scenario assumed a complete stoppage of Russian gas deliveries. Following the explosion in the Nord Stream gas pipeline, ABN AMRO economists are considering a complete shutdown of Russian gas flows to Europe as the new base scenario, and expecting a recession in the Eurozone as well as in the Netherlands. To reflect the impact of these developments in the calculation of provisions, the weight of the negative scenario was raised to 60%, up from 50% on 30 June 2022.
| 30 September 2022 | 30 June 2022 | 31 December 2021 | ||||||
|---|---|---|---|---|---|---|---|---|
| (in millions) | Gross carrying amount2 |
Allowances for credit losses3 |
Coverage ratio |
Stage ratio |
Coverage ratio |
Stage ratio |
Coverage ratio |
Stage ratio |
| Stage 1 | ||||||||
| Loans and advances banks | 4,184 | 4 | 0.1% | 99.1% | 0.1% | 98.5% | 0.4% | 99.9% |
| Residential mortgages | 140,273 | 26 | 0.0% | 93.2% | 0.0% | 93.6% | 0.0% | 93.7% |
| Consumer loans | 9,221 | 26 | 0.3% | 88.7% | 0.3% | 88.1% | 0.2% | 86.6% |
| Corporate loans1 | 74,326 | 259 | 0.3% | 80.3% | 0.3% | 83.3% | 0.2% | 80.2% |
| Other loans and advances customers1 | 18,948 | 0.0% | 99.8% | 0.0% | 99.7% | 0.0% | 99.6% | |
| Total loans and advances customers1 | 242,768 | 311 | 0.1% | 89.1% | 0.1% | 90.2% | 0.1% | 89.2% |
| Stage 2 | ||||||||
| Loans and advances banks | 37 | 0.0% | 0.9% | 0.2% | 1.5% | 0.5% | 0.1% | |
| Residential mortgages | 9,119 | 77 | 0.8% | 6.1% | 0.6% | 5.6% | 0.3% | 5.5% |
| Consumer loans | 811 | 36 | 4.5% | 7.8% | 4.5% | 8.3% | 4.4% | 9.6% |
| Corporate loans1 | 14,285 | 293 | 2.1% | 15.4% | 2.6% | 11.8% | 2.4% | 14.0% |
| Other loans and advances customers1 | 39 | 3 | 7.1% | 0.2% | 6.9% | 0.2% | 3.2% | 0.3% |
| Total loans and advances customers1 | 24,254 | 409 | 1.7% | 8.9% | 1.9% | 7.5% | 1.7% | 8.2% |
| Stage 3 and POCI | ||||||||
| Loans and advances banks | ||||||||
| Residential mortgages | 1,118 | 88 | 7.9% | 0.7% | 7.2% | 0.8% | 4.1% | 0.9% |
| Consumer loans | 368 | 217 | 58.9% | 3.5% | 57.1% | 3.6% | 50.8% | 3.8% |
| Corporate loans1 | 3,962 | 1,208 | 30.5% | 4.3% | 32.2% | 4.9% | 32.5% | 5.8% |
| Other loans and advances customers1 | 4 | 3 | 81.7% | 0.0% | 52.5% | 0.0% | 32.0% | 0.1% |
| Total loans and advances customers1 | 5,452 | 1,516 | 27.8% | 2.0% | 29.0% | 2.3% | 28.3% | 2.6% |
| Total of stages 1, 2, 3 and POCI | ||||||||
| Total loans and advances banks | 4,221 | 4 | 0.1% | 0.1% | 0.4% | |||
| Residential mortgages | 150,510 | 191 | 0.1% | 0.1% | 0.1% | |||
| Consumer loans | 10,400 | 280 | 2.7% | 2.7% | 2.6% | |||
| Corporate loans1 | 92,574 | 1,760 | 1.9% | 2.1% | 2.4% | |||
| Other loans and advances customers1 | 18,991 | 6 | 0.0% | 0.0% | 0.0% | |||
| Total loans and advances customers1 | 272,474 | 2,237 | 0.8% | 0.9% | 0.9% | |||
| Total loans and advances1 | 276,696 | 2,241 | 0.8% | 0.9% | 0.9% |
1 Excluding loans at fair value through P&L.
2 Gross carrying amount excludes fair value adjustments from hedge accounting.
3 The allowances for credit losses excludes allowances for financial investments held at FVOCI (30 September 2022: EUR 1 million; 30 June 2022: EUR 0 million; 31 December 2021: EUR 1 million).
In Q3 2022, the stage 3 ratio of loans and advances to customers declined to 2.0% (30 June 2022: 2.3%) as a result of all product groups, but predominantly corporate loans. The decrease in stage 3 corporate loans was attributable to repayments and, to a lesser extent, write-offs, as well as clients from the industrial goods and services sector returning to stage 2.
The stage 3 coverage ratio came down to 27.8% (30 June 2022: 29.0%) due to an outflow of stage 3 clients with relatively high coverage ratios.
The stage 2 ratio of loans and advances to customers went up to 8.9% (30 June 2022: 7.5%). This increase was seen in corporate loans and, to a lesser extent, residential mortgages, as a result of the further weakening of the macroeconomic outlook. As the new inflow in stage 2 had a better than average quality, the stage 2 coverage ratio decreased slightly to 1.7% at 30 September 2022 (30 June 2022: 1.9%).
Confidence in the housing market is declining due to a drop in purchasing power, higher mortgage rates and growing economic and financial uncertainty. In response to the war in Ukraine, food and energy prices have risen sharply. This erodes the purchasing power of households and as a result, the affordability of houses is deteriorating. Maximum borrowing capacity of clients has decreased due to the increase in mortgage interest rates. A further consequence of the interest rate increase is that mortgage refinancing has become less attractive to clients.
According to the Dutch Land Registry (Kadaster) the number of transactions in Q3 2022 was 7% higher than in Q2 2022 and 6% lower than in Q3 2021. The number of transactions has been stable this year, but relatively low in comparison with prior years due to high prices and a shortage of available housing. The housing price index published by Statistics Netherlands (CBS) for Q3 2022 was 1% higher than in Q2 2022 and 12% higher than in Q3 2021.
New mortgage production amounted to EUR 6.1 billion, down 9% from Q2 2022 and up 19% on Q3 2021. Redemptions totaled EUR 4.3 billion, a 12% decrease on Q2 2022 and 10% less than in Q3 2021. ABN AMRO's market share in new mortgage production came to 19.1% in Q3 2022 (Q2 2022: 17.5%, Q3 2021: 15.2%).
In response to recent macroeconomic developments and rising energy prices, ABN AMRO continued the closely monitor arrears in loans and instalments and is in close contact with all collection partners. In Q3, the mortgage arrears ratio increased marginally (0.5% to 0.6%).
The average indexed Loan to Market Value (LtMV) remained relatively stable at 54% (30 June 2022: 54%). The gross carrying amount of mortgages with a LtMV in excess of 100% increased slightly to EUR 2.1 billion (30 June 2022: EUR 2.0 billion). New inflow of mortgages with a LtMV in excess of 100% related to sustainable home improvements. Loans with a LtMV in excess of 100% accounted for 1.4% of total mortgages (30 June 2022: 1.3%) and 3% of the extra repayments (30 June 2022: 2%). The proportion of amortising mortgages stabilised at 43% by 30 September 2022 (30 June 2022: 43%).
On August 10 2022, the Appeals Board of the Dutch Financial Services Complaints Authority (Kifid) ruled that clients with interest rates that were not sufficiently aligned with market rates should also be compensated for compound interest (interest on interest). Following this ruling, we adjusted our compensation scheme to include interest on interest. The provision that was taken earlier to cover the costs of the compensation scheme was increased by EUR 122 million, which was charged to the third-quarter results for 2022.
On 11 October 2022, the Court of Appeal in The Hague issued a ruling in the legal proceedings on EURIBOR-based home financing mortgages. It ruled that ABN AMRO had acted within its rights when amending the surcharge and that the surcharge increase had not been not excessive. The verdict is applicable to clients who did not accept the personal settlement offer that they had received from the bank in 2020/2021. The provision of EUR 28 million that ABN AMRO had recognised for the EURIBOR-based home financing mortgage cases was released and recorded as net interest income.
| (in millions) | 30 September 2022 | 30 June 2022 | 31 December 2021 |
|---|---|---|---|
| Total equity (EU IFRS) | 22,725 | 22,528 | 21,999 |
| Dividend reserve | -435 | -362 | -573 |
| AT1 capital securities (EU IFRS) | -1,984 | -1,985 | -1,987 |
| Share buyback reserve | -250 | -500 | |
| Regulatory and other adjustments | -132 | -553 | 267 |
| Common Equity Tier 1 | 19,923 | 19,628 | 19,206 |
| AT1 capital securities (EU IFRS) | 1,984 | 1,985 | 1,987 |
| Regulatory and other adjustments | -2 | -3 | -5 |
| Tier 1 capital | 21,906 | 21,610 | 21,188 |
| Subordinated liabilities (EU IFRS) | 6,685 | 7,658 | 7,549 |
| Regulatory and other adjustments | -750 | -2,406 | -2,413 |
| Tier 2 capital | 5,935 | 5,252 | 5,136 |
| Total regulatory capital | 27,841 | 26,862 | 26,324 |
| Other MREL eligible liabilities1 | 9,692 | 9,357 | 6,568 |
| Total MREL eligible liabilities | 37,533 | 36,219 | 32,893 |
| Total risk-weighted assets | 130,959 | 126,676 | 117,693 |
| Exposure measure | |||
| Exposure measure | 450,510 | 449,999 | 360,779 |
| Capital ratios | |||
| Common Equity Tier 1 ratio | 15.2% | 15.5% | 16.3% |
| Common Equity Tier 1 ratio (Basel IV)2 | 16% | 16% | 16% |
| Tier 1 ratio | 16.7% | 17.1% | 18.0% |
| Total capital ratio | 21.3% | 21.2% | 22.4% |
| MREL3 | 28.7% | 28.6% | 27.9% |
| Leverage ratio4 | 4.9% | 4.8% | 5.9% |
1 Other MREL eligible liabilities consists of subordinated liabilities and senior non-preferred notes that are not included in regulatory capital.
² Basel IV results are based on fully-loaded figures, rounded to the nearest whole percent, based on ABN AMRO's interpretation of the Basel IV framework and subject to the implementation of Basel IV standards into EU legislation.
³ MREL is calculated as total regulatory capital plus other MREL eligible liabilities divided by total risk-weighted assets. 4 The temporary relief measure that exempted central bank reserves from the exposure measure applied until 31 March 2022.
On 30 September 2022, the CET1 ratio under Basel III was 15.2% (30 June 2022: 15.5%). In comparison with Q2 2022, the CET1 ratio decreased mainly due to an increase in RWA, partly offset by an increase in capital. The EUR 4.3 billion increase in RWA reflects a rise in credit risk RWA, mainly due to add-ons and changes in the regulatory approach to models. CET1 capital increased mainly due to the addition of the Q3 2022 net profit of EUR 743 million, excluding the 50% dividend reservation, partly offset by the EUR 250 million conditional permission granted by the ECB to repurchase shares. All capital ratios were in line with the bank's risk appetite and comfortably above regulatory requirements.
The maximum distributable amount (MDA) trigger level came to 9.7% (excluding AT1 shortfall). The Dutch central bank (DNB) will increase the countercyclical capital buffer (CCyB) for Dutch exposures to 1% by 25 May 2023. Full implementation of the 2% CCyB rate is expected by Q2 2024, which will cause the MDA trigger level to increase by around 1.5%. This is already reflected in our capital targets. The reported Basel III CET1 ratio of 15.2% is well above the MDA trigger level. The bank remains committed to maintaining a significant buffer in excess of its regulatory requirements at all times.
Based on our latest views of the Basel IV EU proposal, the fully-loaded Basel IV CET1 ratio was estimated at around 16% on 30 September 2022. This was comfortably above the 13% target and the 15% threshold for considering share buybacks (subject to conditions and regulatory approval). Following the latest Basel III add-ons, Basel III RWA has become higher than Basel IV RWA. The Basel IV CET1 ratio at implementation is still subject to some uncertainties, including data limitations, finalisation of the Basel IV regulations, management actions and other portfolio developments.
The Capital Requirements Regulation (CRR) includes a non-risk-based and binding leverage ratio. The leverage ratio increased to 4.9% at 30 September 2022 (30 June 2022: 4.8%), mainly due to a decrease in on-balance sheet exposures and the addition of the retained net profit for Q3 2022, increasing Tier 1 capital. The reported leverage ratio remained well above the 3.0% requirement.
As of 1 January 2022, our intermediate MREL target is set at 27.1% of Basel III RWA, of which 26.6% must be met by own funds, subordinated instruments and senior nonpreferred (SNP) notes. This includes the combined buffer requirement (CBR) of 4.0%.
Based on the eligible liabilities, i.e. own funds, subordinated instruments and SNP notes, the MREL ratio increased slightly to 28.7% at 30 September 2022 (30 June 2022: 28.6%). The reported MREL ratio excludes EUR 6.4 billion of grandfathered senior preferred liabilities currently eligible for MREL. Compared to Q2 2022, the MREL ratio increased mainly due to the addition of the Q3 net profit and the issuance of EUR 0.6 billion of Tier 2 and SNP, partly offset by higher RWAs as a result of add-ons and changes in the regulatory approach to certain models.
This report presents ABN AMRO's results for the first three quarter of 2022. It provides a quarterly business and financial review, as well as risk and capital disclosures.
About this report
Except for the changes described below, the financial information contained in this Quarterly Report has been prepared according to the same accounting policies as our most recent financial statements, which were prepared in accordance with EU IFRS. The figures in this document have not been audited or reviewed by our external auditor. This report is presented in euros (EUR), which is ABN AMRO's functional and presentation currency, rounded to the nearest million (unless otherwise stated). All annual averages in this report are based on month-end figures. Management does not believe these month-end averages present trends that are materially different from those that would be presented by daily averages. Certain figures in this report may not tally exactly due to rounding. Furthermore, certain percentages in this document have been calculated using rounded figures.
As announced in November 2021, ABN AMRO has simplified its organisational structure by replacing its four business lines by three units organised around client segments: Personal and Business Banking, Wealth Management and Corporate Banking. Consequently, the prior period figures relating to these segments in the Financial review section of this report have been restated.
In the past ABN AMRO raised EUR 35.0 billion of funding through TLTRO III operations. Following the significant increase of central bank interest rates, the TLTRO funding led to additional net interest income. The interest rate sensitivity was hedged. The recent amendment of the TLTRO III terms by the ECB will remove both the additional interest income as well as the interest rate sensitivity from 23 November 2022 onwards. Therefore, the hedge is not effective anymore as of this date. The hedge currently has a negative mark-to-market. Following the change in TLTRO terms by the ECB, a net impact of around EUR 185 million on profit after tax (around EUR 250 million pre-tax) is expected in our Q4 results, including any remaining income under the original terms.
To download this report or to obtain more information, please visit us at abnamro.com/ir or contact us at [email protected]. In addition to this report, ABN AMRO provides an analyst and investor call, an investor presentation and a fact sheet regarding the Q3 2022 results.
A conference call for analysts and investors will be hosted by the bank on Wednesday 9 November 2022 at 11:00 am CET (10:00 am London time). To participate in the conference call, we strongly advise analysts and investors to pre-register for the call using the information provided on the ABN AMRO Investor Relations website. More information can be found on our website, abnamro.com/ir.
[email protected] +31 20 6288 900
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Information on our website does not form part of this Quarterly Report, unless expressly stated otherwise.
ABN AMRO has included in this document, and from time to time may make certain statements in its public statements, that may constitute "forward-looking statements". This includes, without limitation, such statements that include the words "expect", "estimate", "project", "anticipate", "should", "intend", "plan", "probability", "risk", "Value-at-Risk ("VaR")", "target", "goal", "objective", "will", "endeavour", "outlook", "optimistic", "prospects" and similar expressions or variations of such expressions. In particular, the document may include forward-looking statements relating but not limited to ABN AMRO's potential exposures to various types of operational, credit and market risk. Such statements are subject to uncertainties.
Forward-looking statements are not historical facts and represent only ABN AMRO's current views and assumptions regarding future events, many of which are by nature inherently uncertain and beyond our control. Factors that could cause actual results to deviate materially from those anticipated by forward-looking statements include, but are not limited to, macroeconomic, demographic and political conditions and risks, actions taken and policies applied by governments and their agencies, financial regulators and private organisations (including credit rating agencies), market conditions and turbulence in financial and other markets, and the success of ABN AMRO in managing the risks involved in the foregoing.
Any forward-looking statements made by ABN AMRO are current views as at the date they are made. Subject to statutory obligations, ABN AMRO does not intend to publicly update or revise forward-looking statements to reflect events or circumstances after the date the statements were made, and ABN AMRO assumes no obligation to do so.
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