Annual Report • Nov 16, 2016
Annual Report
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ABN AMRO Group N.V.
This Quarterly Report presents ABN AMRO's results for the third quarter of 2016. The report contains an update of ABN AMRO's share performance, a quarterly financial review, an economic update and selected risk, capital, liquidity and funding disclosures.
The financial information contained in this Quarterly Report has been prepared according to the same accounting policies and methods of computation 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 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 that 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.
In addition to this report, ABN AMRO provides the following supplementary documents on its 2016 results on abnamro.com/ir:
For a download of this report or more information, please visit us at abnamro.com/ir or contact us at [email protected].
| Kerncijfers | 2 |
|---|---|
| Bericht van de Voorzitter van de Raad van Bestuur | 3 |
| ABN AMRO shares (Engels) | 6 |
| Economic environment (Engels) | 7 |
| Strategic update (Engels) | 10 |
| Key developments (Engels) | 40 |
|---|---|
| Credit risk (Engels) | 44 |
| Operational risk (Engels) | 67 |
| Market risk (Engels) | 68 |
| Liquidity risk (Engels) | 70 |
| Funding (Engels) | 72 |
| Capital management (Engels) | 75 |
| Financial review (Engels) | 14 |
|---|---|
| Results by segment (Engels) | 22 |
| Additional financial information (Engels) | 37 |
| Enquiries (Engels) | 81 | |
|---|---|---|
Onderliggende cost/income ratio Doelstelling voor 2020 is 56-58 (in %)
(per einde kwartaal, in %) Doelstelling voor 2017 is: 11,5-13,5 (in %)
Total capital ratio (fully-loaded) (per einde kwartaal, in %)
Onderliggende netto rentemarge (in bps)
Leverage ratio (fully-loaded, CDR) (per einde kwartaal, in %)
In de afgelopen jaren hebben we een stabiele en winstgevende bank opgebouwd. ABN AMRO is nu een toonaangevende Nederlandse full-service bank, waarvan de inkomsten grotendeels komen uit rente- en provisiebaten. We hebben een transparant en relatiegedreven bedrijfsmodel en een gematigd risicoprofiel. In de segmenten van de Nederlandse markt waarin we actief zijn, hebben we een sterke positie, met daarnaast internationale groeigebieden in private banking, asset-based lending, ECT en clearing.
Elke dag bieden we onze klanten dienstverlening van de hoogste kwaliteit, aangevuld met innovatieve producten. Technologische ontwikkelingen maken het mogelijk dat klanten tegenwoordig hun bankzaken overal, op elk gewenst moment en op ieder apparaat kunnen uitvoeren. We hebben flink geïnvesteerd in technologie. Om in te spelen op de steeds sneller veranderende verwachtingen van de klant en ontwikkelingen in de technologie en wet- en regelgeving, gaan we de komende tijd onze activiteiten op dit gebied intensiveren.
In 2016 hebben we onze strategie en financiële doelstellingen verder aangescherpt en verlengd naar 2020: alle strategische prioriteiten gelden nog steeds. De keuze om een klantgedreven organisatie te zijn met behoud van een gematigd risicoprofiel, blijft voor ABN AMRO het uitgangspunt. Tegelijkertijd blijven we investeren in de toekomst. Onze keuzes om internationaal te groeien en onze winstgevendheid te verbeteren, komen samen in onze ambitie duurzame groei te realiseren. Met het verleggen van onze horizon naar 2020 willen we een volgende stap zetten om onze klanten diepgaande expertise te bieden. In Nederland worden we al erkend om onze uitgebreide sector- en productkennis bij Corporate Banking. Deze expertise gaan we ook beschikbaar stellen aan middelgrote en grote ondernemingen in onze omliggende landen. Ook willen we binnen ECT Clients onze wereldwijde sectorbenadering uitbreiden in de sectoren Natural Resources, Renewable Energy, Food Supply Chain en Utilities.
Onze Mobiel Bankieren app – zeer populair bij onze particuliere en Private Banking klanten in Nederland – oogst al een aantal jaar op rij veel waardering. We breiden deze app voortdurend uit met nieuwe functies en ontwikkelen daarnaast ook nieuwe apps. Bij Retail Banking gaan we ons assortiment digitale producten versneld uitbouwen en de omnichannel distributie optimaliseren. Ook wordt de in 2008 opgezette online bank MoneYou uitgebreid met nieuwe producten in Noordwest-Europa.
Ondertussen heeft Private Banking voor haar dienstverlening en digitale producten al veel onderscheidingen gekregen van klanten en vanuit de financiële sector. We zijn van plan bij Private Banking de processen en kernsystemen internationaal verder op elkaar af te stemmen.
Al deze voorbeelden tonen aan hoe we ons inzetten om de klantervaring te verbeteren. Om dit mogelijk te maken, moeten we onze processen verder vereenvoudigen en de organisatie wendbaarder maken, door meer 'agile' te werken om snel te kunnen leveren.
We verwachten dat onze investeringen in groei, innovatie en digitalisering in de periode tot 2020 met EUR 0,4 miljard zullen toenemen. De kosten zullen door onder andere loon- en prijsinflatie en wettelijke heffingen naar verwachting met EUR 0,5 miljard stijgen. Hiermee komen de totale kosten EUR 0,9 miljard hoger uit dan in 2015. Om deze stijging te compenseren, streven we ernaar de kosten met een vergelijkbaar bedrag (EUR 0,9 miljard) omlaag te brengen.
Voortbouwend op de initiatieven voor kostenbesparing uit het tweede kwartaal, hebben wij EUR 0,4 miljard aan extra besparingen in kaart gebracht, te realiseren door verdere digitalisering en procesoptimalisatie. Deze nieuwe kostenbesparingen komen bovenop de bestaande programma's TOPS 2020 en Retail Digitalisation (die beide goed op schema liggen met een beoogde besparing van in totaal EUR 0,3 miljard). Daarnaast hebben we bij de
presentatie van de halfjaarcijfers kostenbesparingen van EUR 0,2 miljard aangekondigd bij onze ondersteunende en controlerende activiteiten. De kostenbasis voor de ondersteunende en controlerende activiteiten komt uit op EUR 0,8 miljard, en voor de twee andere besparingsprogramma's (samen EUR 0,7 miljard) bedraagt de kostenbasis EUR 4,4 miljard.
De nieuwe plannen voor kostenbesparingen (EUR 0,4 miljard) zullen voor ongeveer 1.500 medewerkers van ABN AMRO gevolgen hebben. We verwachten in het vierde kwartaal van 2016, als de plannen verder zijn uitgewerkt, een voorziening te treffen van EUR 150- 175 miljoen. Dit is een aanvulling op de voorziening voor reorganisatiekosten van EUR 144 miljoen, die in het derde kwartaal werd getroffen in verband met de plannen voor het afslanken van de ondersteunende en controlerende activiteiten (zoals aangekondigd in het tweede kwartaal) en een uitbreiding van het TOPS 2020 programma. Als gevolg van alle nu aangekondigde programma's zal het totaal aantal arbeidsplaatsen naar verwachting met 13% dalen, van 26.500 (22.000 interne en 4.500 externe fte's) in 2015 naar ongeveer 23.000 in 2020. Ondanks onze inspanningen om het aantal boventalligen tot een minimum te beperken en het feit dat er nieuwe banen worden gecreëerd, zal het aantal medewerkers van ABN AMRO naar verwachting met ongeveer 10% afnemen. Het aantal externe medewerkers zal naar verwachting met 25-30% afnemen.
Met het verleggen van onze horizon hebben we de gestelde bandbreedte voor onze cost/income ratio aangescherpt van 56-60% in de periode tot 2017 naar 56-58% in 2020. Omdat de impact van Basel IV nog niet duidelijk is, blijven de doelstellingen voor de CET1 ratio (11,5-13,5%), het rendement op eigen vermogen (10-13%) en het dividenduitkeringspercentage (50% over 2017) voorlopig ongewijzigd. Meer informatie over de aangescherpte strategie is te vinden in het hoofdstuk Strategic update in dit kwartaalverslag.
Kijken we naar wat we in het afgelopen kwartaal hebben bereikt, dan zien we op het vlak van klantgedrevenheid de lancering van een aantal nieuwe diensten voor hypotheken, zoals het online aanvragen van rentemiddeling en hypotheekadvies in gebarentaal via de webcam.
Daarnaast werd onze app voor financiële planning Grip, die we in samenwerking met een fintech ontwikkelden, door 10.000 van onze klanten getest. Deze app is nu voor alle klanten van de bank beschikbaar.
Onze inspanningen om onze klanten de best mogelijke dienstverlening te bieden, zowel door persoonlijk contact als digitaal, kregen in het afgelopen kwartaal van een aantal organisaties erkenning. In een onderzoek van My Private Banking Research werden 113 mobiel bankieren apps van 35 internationale banken voor particuliere klanten bekeken. Met onze Mobiel Bankieren app (die gebruikt wordt door particuliere en Private Banking klanten in Nederland) en andere ABN AMRO apps kwamen we op een zesde plaats en stonden we als enige Nederlandse bank in de top 25. ABN AMRO MeesPierson werd verkozen tot beste private bank van Nederland en Neuflize OBC werd uitgeroepen tot beste private bank van Frankrijk bij de Global Private Banking Awards van 2016. Het tijdschrift MT Finance riep ABN AMRO uit tot beste zakenbank van Nederland in 2016. Deze positie hebben we voor het vierde jaar op rij weten te behouden en is gebaseerd op feedback van klanten. In acht van de twaalf categorieën stonden we op de eerste plaats.
Onder de strategische pijler 'investeren in de toekomst' valt ook de belofte om ons in te zetten voor een duurzame bedrijfsvoering. In dit kader is ABN AMRO een samenwerking aangegaan met OVG Real Estate voor de herontwikkeling van leegstaande panden. In totaal wordt ruim 50.000 vierkante meter aan commercieel vastgoed getransformeerd tot duurzame kantoorgebouwen die voorzien zijn van het energielabel A en minimaal 30% minder CO2 verbruiken. Voor de financiering van dit project gaf ABN AMRO haar eerste officiële groene vastgoedlening uit.
ABN AMRO realiseerde een flinke stijging op de gerenommeerde wereldwijde Dow Jones Sustainability Index (DJSI) ranglijst en kwam uit op 87 van de 100 punten – een stijging van 9 punten ten opzichte van 2015. Daarnaast heeft rating agency en onderzoeksbureau FTSE4Good de bank naar aanleiding van een review in juni 2016 opgenomen in de FTSE4Good Index. Zowel in de DJSI als in de FTSE4Good scoort ABN AMRO een plaats bij de top 15% van banken wereldwijd.
Verder kondigden we onlangs een samenwerking aan met de TU Delft voor de ontwikkeling van complexere blockchain applicaties. En tot slot blijkt uit het jaarlijkse Employee Engagement Onderzoek dat het gevoel van betrokkenheid onder onze medewerkers goed is, iets sterker dan in 2015 en hoger dan bij andere financiële dienstverleners.
Het realiseren van duurzame groei blijft een uitdaging in het huidige klimaat van volatiele markten en lage rentestanden. De economische groei in Nederland stond in het derde kwartaal op 0,7%, hetzelfde niveau als in het tweede kwartaal en hoger dan een jaar eerder. Veel indicatoren zijn positief: het consumentenvertrouwen laat een stijgende lijn zien, evenals de particuliere consumptie en de export. De nauwe handelsrelaties tussen Nederland en het Verenigd Koninkrijk zouden er echter toe kunnen leiden dat de Brexit voor de Nederlandse economie grotere gevolgen heeft dan voor de eurozone als geheel. Bovendien is niet duidelijk wat een nieuwe Amerikaanse president zal betekenen voor groei in de eurozone, en in Nederland in het bijzonder.
Financieel gezien hadden we weer een kwartaal met sterke onderliggende resultaten. De nettowinst voor het derde kwartaal van dit jaar bedroeg EUR 607 miljoen, een stijging van 19% ten opzichte van hetzelfde kwartaal in 2015. In de nettowinst zijn reorganisatiekosten van EUR 108 miljoen (na belasting) en een positieve herwaardering van onze deelneming in Equens van EUR 52 miljoen (na belasting) opgenomen. In het afgelopen kwartaal namen de totale kredietverlening aan klanten en de deposito's toe.
De onderliggende nettowinst over de eerste negen maanden bedroeg EUR 1.743 miljoen, een stijging van 5% in vergelijking met de eerste negen maanden van het jaar ervoor. De winst over de eerste negen maanden van 2016 is inclusief wettelijke heffingen van EUR 134 miljoen voor belasting (tegenover geen wettelijke heffingen in dezelfde periode in 2015), de hierboven vermelde reorganisatiekosten en incidentele baten uit deelnemingen [van EUR 168 miljoen na belasting]. De cost/income ratio voor de eerste negen maanden van 2016 verslechterde naar 61,8%. Een onderliggende nettowinst van EUR 1.743 miljoen komt neer op een rendement op eigen vermogen van 13,4%; dit ligt boven de financiële doelstelling. De fully-loaded Common Equity Tier 1 ratio (CET1 ratio) kwam eind september 2016 uit op 16,6%, een stijging ten opzichte van eind juni 2016 (16,2%) en eind 2015 (15,5%). We hebben besloten de voorlopige uitkomsten van het Supervisory Review and Evaluation Process (SREP) voor 2017 te publiceren. De vereiste CET1 ratio voor 2017 is voorlopig vastgesteld op 9%.
Op basis van onze huidige sterktes en ambities – een relatiegedreven, deskundige en digitaal innovatieve bank die actief is in Noordwest-Europa en expertise biedt in geselecteerde sectoren wereldwijd – hebben we er vertrouwen in dat we de voor 2020 gestelde prioriteiten zullen realiseren. De plannen om onze bank digitaler en wendbaarder te maken zullen voor velen van ons gevolgen hebben, in positieve zin, maar helaas voor sommigen ook in negatieve zin. Niettemin heb ik er vertrouwen in dat, onder leiding van mijn voorgedragen opvolger Kees van Dijkhuizen, deze plannen ons in staat zullen stellen om, zowel nu als in de toekomst, onze klanten duurzame waarde te bieden'.
Voorzitter van de Raad van Bestuur
Risk, funding & capital information
Between 30 June 2016 and 30 September 2016, ABN AMRO's share price (depositary receipts) rose 24% while the STOXX Europe 600 Bank index rose 11%. In September 2016 ABN AMRO paid an interim dividend of EUR 376 million, or EUR 0.40 per share, to its shareholders.
A total of 216.2 million shares, or 23% of the total issued share capital of ABN AMRO Group, is currently held by the STAK AAG ('Stichting Administratiekantoor Continuïteit ABN AMRO Group'), which subsequently issued depositary receipts representing such shares. More information on the STAK AAG is provided in the 'About ABN AMRO' section of abnamro.com. The depositary receipts trade under ISIN code 'NL0011540547', Reuters ticker 'ABNd.AS' and Bloomberg ticker 'ABN:NA'.
ABN AMRO Corporate Broking offers holders of depositary receipts for shares in ABN AMRO Group access to a dividend reinvestment plan ('DRIP'), whereby (net) cash dividends are reinvested in additional depositary receipts for shares in ABN AMRO. More information is provided in the 'Investor Relations' section of abnamro.com.
Amsterdam Exchange Index
Source: S&P Global Market Intelligence.
| (in millions) | Q3 2016 | Q2 2016 | Q3 2015 |
|---|---|---|---|
| Share count | |||
| Total shares outstanding/issued and paid-up shares | 940 | 940 | 940 |
| - of which held by NLFI | 724 | 724 | 940 |
| - of which listed (in the form of depositary receipts) | 216 | 216 | |
| - as a percentage of total outstanding shares | 23% | 23% | |
| Average number of shares | 940 | 940 | 940 |
| Average diluted number of shares | 940 | 940 | 940 |
| Key indicators per share (EUR) | |||
| Earnings per share (reported)2 | 0.63 | 0.40 | 0.54 |
| Shareholder's equity per share | 18.25 | 18.04 | 17.12 |
| Tangible shareholder's equity per share | 17.98 | 17.77 | 16.84 |
| Share price development (EUR) | |||
| Closing price (end of period) | 18.42 | 14.90 | |
| High (during the period) | 19.10 | 19.25 | |
| Low (during the period) | 14.02 | 14.50 | |
| Market capitalisation (end of period, in billions) | 17.31 | 14.01 | |
| Valuation indicators (end of period) | |||
| Price/Earnings | 8.6x | 7.3x | |
| Price/Tangible book value | 1.0x | 0.8x |
1 All dates are subject to change. Please refer to abnamro.com/ir for the latest information. Dividend record date applies only if a final or interim dividend is paid.
2 Reported profit for the period excluding reserved coupons for AT 1 Capital securities (net of tax) and results attributable to non-controlling interests.
The world economy performed relatively well in the third quarter of 2016. Economic growth is estimated to have been stable or slightly higher than in Q2 (quarter-on-quarter). Weaknesses in the Chinese economy and the uncertainty around the future Brexit had been (and still are) identified as risks for global or European economic growth. Although the Chinese economy is in transition, which is associated with structurally lower economic expansion, growth remained stable in Q3. The unexpected outcome of the Brexit referendum and the subsequent uncertainty was expected to start affecting growth in Q3. Yet, so far the effects of the Brexit on the UK and eurozone economies have been much less pronounced than expected. However, sterling has weakened significantly, and this will probably harm eurozone exports in the near future.
The US economy showed some further acceleration in Q3. According to the official first estimate, GDP rose by 0.7% quarter-on-quarter (+0.4% in Q2). In the eurozone, GDP growth was stable at +0.3%, according to Eurostat's 'preliminary flash estimate'.
The Dutch economy grew by a solid 0.7% quarter-on-quarter in Q3, following two quarters of clear economic expansion. This was again significantly better than the eurozone figure of 0.3%. Residential investment, private consumption and exports were the main contributors to the further rise in GDP. Business investment, however, contracted. Average GDP growth in 2016 is likely to be close to about 2%.
In general, the economic environment appears to be mildly positive for ABN AMRO, even slightly more positive than we assessed a quarter ago. Risks to the economy, however, are still tilted to the downside. For instance, the upcoming
Brexit negotiations may still have adverse effects at a later moment. Given the closer trade relations between the Netherlands and the United Kingdom, the Brexit is expected to hit the Dutch economy slightly harder than the eurozone as a whole. The same applies for the effects of a weaker sterling. However, the election of Donald Trump has led to volatility on financial markets. We expect this to continue in the near term. The consequences for growth are uncertain and depend on how aggressive Trump's policies will be. Our main scenario is that one of the most likely early initiatives will be tax cuts and infrastructure spending. This will be good for growth. We are assuming that many other policy initiatives will be watered down from the rhetoric during the campaign. However, the more elements of the rhetoric that become policy, such as protectionist measures, the worse it will be for global growth.
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Manufacturing Purchasing Managers' Index (>50: growth, <50: contraction, end-of-period)
Å The Dutch economy again performed significantly better than the eurozone economy.
(as % balance of positive and negative answers, end-of-period)
Source: CBS
Å Q3 saw another strong rise in the number of houses sold: 20% year-on-year (in both Q1 and Q2: +24%).
Unemployment in the Netherlands (in % of total labour force, end-of-period)
Source: CBS
The strategic priorities defined in 2013 are still valid today. The strategic choice to be an organisation that is client-driven, while maintaining a moderate risk profile, remains unchanged. Equally, we will continue to invest in the future. Our ambitions to pursue international growth and improve profitability have been combined into our commitment to achieve sustainable growth.
The banking sector currently faces challenges arising from changing client expectations and technological, competitive and regulatory developments. These developments pose threats, but also offer opportunities. To take full advantage of these opportunities, we have updated our plans regarding digitalisation, innovation and growth, resulting in a number of strategic objectives towards 2020.
One of the strategic objectives is to enhance the client experience. Among other things, this means taking the next step in digital banking. We will work more efficiently and accelerate development of these services by pursuing another one of our strategic objectives – deliver fast. To achieve this, the number of employees working according to agile principles will increase, and the effects will be felt by many more as this transition will lead to a cultural change.
Our expertise has traditionally been our strength. We are already recognised in the Netherlands for our in-depth sector knowledge. In the coming years we will leverage our expertise further by, for example, expanding our sector coverage to selected neighbouring countries within Corporate Banking. And last but not least, we will innovate our offering, with the first visible initiatives being a number of innovators which will go live in due course.
These initiatives will require ongoing investments going forward; however, they will also lead to further cost reductions. As a result, we have set a new cost/income target ratio for 2020. The other targets will remain unchanged until we have clarity on regulations regarding capital requirements.
Banking has seen tremendous changes over the past decade. The interaction with clients now takes place predominantly through digital channels. In fact, the main way clients interact with our bank today – by mobile phone – was introduced only five years ago. Our clients can now conduct the most common day-to-day banking affairs whenever and wherever they want. Going forward we will enable our clients to use digital channels to handle more complex matters as well, such as taking out a mortgage or business loan. We are expanding the use of video chat technologies to allow clients to obtain advice whenever and wherever they want. Another promising technology we will start using is robo-advice.
Not all inspiring experiences are technologically driven. A prime example is the network formed for our clients: we organise networking events so that our clients can connect and learn from each other, and forge collaborations. These events are highly appreciated by our clients. We will expand these activities in the future.
Banking is now perceived by most of our clients as a mobile service. Our clients use mobile applications offered by many other companies, such as music streaming, travel services and social networking, and are used to welldesigned apps, frequent updates adding new features and responsive customer support. Moreover, these successful firms all share an agile way of working. ABN AMRO started adopting agile methods a few years ago and has used them to develop the Mobile Banking app, among other things. This app has been highly ranked for a number of years running, reflecting the value of this way of working.
At present there are around 100 teams working according to agile principles. The bank's positive experiences with these methods underlie the strategic choice to adopt this approach for all major IT change processes. New multidisciplinary teams will be formed as from next year increasing the number of teams. Following the transition, we expect to accelerate the time-to-market of new products and services, in some cases by a factor of 3. We aim to significantly boost our responsiveness to the needs of all our clients. And last but not least, working according to agile methods gives employees more autonomy and end-to-end responsibility. This in turn increases job satisfaction, helping us to retain and attract talented employees.
In the previous quarter we announced our intention to simplify the bank's support and control activities by eliminating duplicate work, reducing the number of layers in the organisation and merging subsidiaries into the bank. We will also eliminate unnecessary activities, such as superfluous internal reports and non-core activities. We expect these initiatives to produce (staff and non-staff) cost savings of around EUR 0.2 billion by 2020.
Expertise is a key ingredient of our profile. Our employees are not only knowledgeable about financial matters; they also have expertise on non-financial issues that are relevant to our clients.
Over the past few years, we have invested heavily in the sector expertise of our staff. Our people's knowledge ranges from specific business lines, such as Logistics, Food or Charities, to key moments in the lives of our clients, such as when family wealth is transferred to the next generation, when a divorce is at hand, or in the event of a major acquisition. Clients appreciate this approach, so we plan to add a number of dedicated activities to the ones we already offer. For example, within the ECT Clients value chain we will expand our global activities in Renewable Energy and Utilities in the Energy sector, and we will also expand into Food in the Commodities sector. And Private Banking will continue to refine its segmentation, allowing us to tailor our products and services even more effectively.
Our expertise will enable us to grow without taking undue risk. Corporate Banking will explore additional business opportunities in Northwest Europe in sectors in which we have relevant expertise. We will not seek growth in sectors that are highly country- or location-specific, such as Real Estate, Healthcare and Leisure. We will target mid- to large-sized corporates that are internationally active and that use multiple banks to conduct their business operations.
We will introduce several innovative product offerings in various business segments. We want to move ahead quickly so these will be set up as innovator entities that will operate online and have a large degree of autonomy in running their own IT. The activities will be located in the Netherlands, but some will have a mandate to acquire clients in surrounding countries. Using these small entities will help us accelerate innovation while allowing us to test new banking concepts in a low-risk manner.
For instance, MoneYou will extend its digital product offering and will gradually be expanded more internationally. The interaction with clients will make the most of modern technology and agile principles, two key elements of the MoneYou organisation. The client experience should become even more seamless, mobile, attractive, relevant and 'techy' – what we call 'smart banking'. The ABN AMRO infrastructure will be used where it makes sense and where it does not slow down innovation.
The upcoming Payment Services Directive 2 (PSD2) is an EU directive intended to foster innovation and competition in the payments industry. Among other things, it will require banks to give third parties access to client accounts. We see this as part of a broader development towards open banking: online banking services becoming building blocks which can be integrated into third-party products and services. We believe this development offers very interesting opportunities and are investing in the required technology and partnering with fintechs to develop innovative solutions and products for our clients. Similarly, we are partnering with universities and consortia to develop new blockchain applications for this technology.
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Looking ahead, we will invest in our growth, digitalisation and innovation initiatives. These investments will drive up costs by EUR 0.4 billion compared with 2015. A number of external factors will also increase costs: wage inflation, regulatory levies and general price inflation. These are expected to lead to EUR 0.5 billion in additional costs on an annual basis by 2020. In total, costs are expected to grow by a total of EUR 0.9 billion by 2020.
To offset these cost increases, we will realise EUR 0.9 billion in cost savings in 2020. Rationalisation of our support and control activities will save the bank EUR 0.2 billion (on a cost base of EUR 0.8 billion), as announced when the secondquarter results were published. The ongoing TOPS 2020 and Retail Digitalisation programmes will account for EUR 0.3 billion in annual cost savings up to 2020.
An additional EUR 0.4 billion in cost savings have been identified in the rest of the bank, to be achieved by process optimisation, digitalisation and operational efficiency. Combined, the ongoing (TOPS 2020, Retail Digitalisation) and newly identified programmes will achieve savings of EUR 0.7 billion on a cost base of EUR 4.4 billion.
As a result of all programmes in place, the total workforce is expected to decline by 13% from 26,500 (22,000 internal and 4,500 external FTEs) in 2015 to approximately 23,000 by 2020. Even though we aim to limit the number of redundancies as much as possible and new positions will be created, the ABN AMRO workforce is expected to go down by about 10%. The number of external staff is expected to go down by 25-30%.
Compared to 2015 cost level of EUR 5.2 billion.
We have sharpened the target range for our cost/income ratio to 56-58% by 2020 from 56-60% in 2017. All other targets will remain unchanged for now. The uncertainty surrounding the upcoming Basel proposals could have a material impact on our risk weights, so it is not possible to set meaningful long-term targets that are directly or indirectly related to capital. We will therefore leave our
ROE target of 10-13%, our CET1 ratio target of 11.5-13.5% and our dividend payout ratio target (50% over 2017) unchanged for now. Once we know the impact of the new regulation, new targets will be formulated.
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| Retail Banking | 22 |
|---|---|
| Private Banking | 26 |
| Corporate Banking | 29 |
| Group Functions | 35 |
This financial review includes a discussion and analysis of the results and sets out the financial condition of ABN AMRO based on underlying results.
As from the second quarter ABN AMRO implemented an amendment to the accounting policy on notional cash pool balances (see for further details note 1 Accounting Policies in the Q2 2016 Interim Financial Statements). This amendment led to an increase in corporate loans and demand deposits in Corporate Banking and inflates the balance sheet. Following the adjustment of the policy, mitigating actions were taken to reduce the impact of notional cash pooling products on the balance sheet. As a result, the carrying amount has been reduced significantly and is expected to further decrease towards year-end 2016. As a result of the policy amendment and as required by IFRS, the comparative figures have been
adjusted accordingly. The impact was EUR 15.5 billion at 31 December 2015, EUR 5.6 billion at 30 June 2016 and EUR 2.2 billion at 30 September 2016.
To ensure a correct (historical) interpretation of ABN AMRO's performance, the balance sheet analysis of loans & receivables – customers and due to customers specifies the impact of the amended policy. In addition, the net interest margin (NIM), cost of risk (CoR) and loan-to-deposit (LtD) ratios in this section are presented excluding the impact of this policy amendment on the comparative figures before 30 June 2016 and therefore remain in line with previously disclosed figures.
14
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 1,575 | 1,524 | 3% | 1,582 | 4,703 | 4,580 | 3% | |
| Net fee and commission income | 437 | 449 | -3% | 431 | 1% | 1,303 | 1,375 | -5% |
| Other operating income | 210 | 136 | 54% | 188 | 12% | 388 | 449 | -13% |
| Operating income | 2,222 | 2,109 | 5% | 2,201 | 1% | 6,393 | 6,403 | |
| Personnel expenses | 765 | 619 | 24% | 617 | 24% | 2,000 | 1,852 | 8% |
| Other expenses | 607 | 615 | -1% | 643 | -6% | 1,951 | 1,847 | 6% |
| Operating expenses | 1,372 | 1,234 | 11% | 1,260 | 9% | 3,951 | 3,700 | 7% |
| Operating result | 849 | 875 | -3% | 941 | -10% | 2,442 | 2,703 | -10% |
| Impairment charges on loans and other receivables |
23 | 94 | -75% | 54 | -57% | 79 | 381 | -79% |
| Operating profit/(loss) before taxation |
826 | 781 | 6% | 887 | -7% | 2,363 | 2,322 | 2% |
| Income tax expense | 220 | 272 | -19% | 225 | -3% | 620 | 670 | -7% |
| Underlying profit/(loss) for the period |
607 | 509 | 19% | 662 | -8% | 1,743 | 1,652 | 5% |
| Special items | -271 | -271 | ||||||
| Reported profit/(loss) for the period |
607 | 509 | 19% | 391 | 55% | 1,472 | 1,652 | -11% |
| Of which available for AT 1 capital securities (net of tax) Of which Non-controlling interests |
11 | -1 | 11 | 32 1 |
1 |
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Net interest margin (NIM) (in bps)1 | 150 | 149 | 152 | 151 | 146 |
| Underlying cost/income ratio | 61.8% | 58.5% | 57.2% | 61.8% | 57.8% |
| Underlying cost of risk (in bps)1, 2 | 3 | 14 | 9 | 4 | 19 |
| Underlying return on average Equity3 | 13.8% | 12.7% | 15.1% | 13.4% | 14.0% |
| Underlying earnings per share (in EUR)4 | 0.63 | 0.54 | 0.69 | 1.82 | 1.76 |
1 For management view purposes the historical periods before 30 June 2016 have not been adjusted for the accounting policy change with regard to Notional cash pooling
(for further details please refer to note 1 in the Condensed Consolidated Interim Financial Statements published in Q2 2016). 2 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount
and excluding fair value adjustment from hedge accounting. 3 Underlying profit for the period excluding reserved coupons for AT 1 Capital securities (net of tax) and results attributable to non-controlling interests divided by the average equity
attributable to the owners of the company. 4 Underlying profit for the period excluding reserved coupons for AT 1 Capital securities (net of tax) and results attributable to non-controlling interests divided by the average outstanding
and paid-up ordinary shares.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Client Assets (in billions) | 316 | 310 | 314 |
| FTEs | 21,809 | 21,939 | 22,048 |
ABN AMRO's underlying profit for the period amounted to EUR 607 million, an increase of EUR 98 million compared with Q3 2015. Higher operating income (both net interest income and other operating income) and lower loan impairments were partly offset by higher expenses (fully attributable to a restructuring provision). Compared with Q2 2016, underlying profit for the period decreased by EUR 55 million mainly due to the current quarter's restructuring provision.
The underlying return on equity (ROE) was 13.8% in Q3 2016 compared with 12.7% in the same period of 2015.
Operating income increased to EUR 2,222 million compared with EUR 2,109 million in Q3 2015.
Net interest income came to EUR 1,575 million, up by EUR 51 million compared with Q3 2015. Improved pricing on deposits and higher margins on corporate loans in Q3 2016 contributed to higher NII. The increase in NII for mortgages was offset by a decrease for consumer loans. Part of the increase in NII was due to several negative non-recurring items in 2015, including EUR 21 million for the initial provision for SME derivative-related issues. Net interest income remained almost stable compared with Q2 2016.
Net interest income on residential mortgages increased compared with Q3 2015 as margin improvements more than offset the decrease in portfolio volume. The impact of repricing of the mortgage book again contributed to higher net interest income, although the repricing effect continued to level off.
Net interest income on consumer loans decreased due to lower average loan volumes and lower margins.
Net interest income on corporate loans increased compared with Q3 2015 due to improved margins, partly offset by lower average volumes mainly at Commercial Clients. Average volumes at International Clients increased (including currency impacts).
On the liability side, the rate paid on savings accounts decreased while volumes increased somewhat.
Net interest margin (NIM) increased slightly to 150bps in Q3 2016 compared with 149bps in Q3 2015. Higher net interest income was only partly offset by an increase in average total assets (excluding the impact of amended notional cash pool balances for historical figures before Q2 2016). NIM decreased slightly compared with Q2 2016 (152bps).
Net fee and commission income, at EUR 437 million in Q3 2016, was EUR 12 million lower than in Q3 2015. Although the market environment improved in Q3 2016, stock markets were on average still lower than they were in Q3 2015. This resulted in lower average client assets, which negatively impacted Private Banking in particular. The decrease at Retail Banking was mainly due to a reduction of client rates for payment packages.
Other operating income came to EUR 210 million, an increase of EUR 74 million compared with Q3 2015. The current quarter included a profit of EUR 52 million (at Group Functions) due to the positive revaluation of ABN AMRO's share in Equens.
CVA/DVA/FVA results in the third quarter were EUR 20 million positive (compared with EUR 18 million negative in Q3 2015) and Equity Participations results amounted to EUR 33 million (versus EUR 21 million in Q3 2015). Hedge accounting-related results (Group Functions) were slightly lower.
Personnel expenses amounted to EUR 765 million in Q3 2016 and included a restructuring provision of EUR 144 million booked at Group Functions. This provision is related to the announced reorganisation of the support and control activities. Excluding this provision, personnel expenses were flat compared with Q3 2015.
Other expenses decreased by EUR 8 million to EUR 607 million in Q3 2016. Excluding regulatory levies (EUR 24 million in Q3 2016), other expenses decreased by EUR 32 million. The decline in other expenses was due to a payment received in Q3 2016 concerning an insurance claim settlement at Private Banking; in addition, Q3 2015 included a EUR 55 million settlement with Vestia (a Dutch housing corporation) at Group Functions. This was, however, more than offset by a considerable VAT refund for the period 2007-2014.
Regulatory levies in Q3 2016 (EUR 24 million) included an amount of EUR 21 million related to the Deposit Guarantee Scheme (DGS), which is recorded on a quarterly basis.
Regulatory levies in 2016 are expected to amount to a total of EUR 250 million (including a EUR 32 million refund on the 2015 NRF payment). In 2015, all regulatory levies, totalling EUR 220 million, were recorded in Q4.
The operating result decreased by EUR 26 million compared with Q3 2015 and the cost/income ratio increased by 3.3 percentage points to 61.8%.
Impairment charges on loans and other receivables amounted to EUR 23 million in Q3 2016 compared with EUR 94 million in Q3 2015. The improved economic conditions in the Netherlands again resulted in limited impairment charges. An IBNI release of EUR 42 million was recorded in Q3 2016, of which EUR 32 million was due to a reclassification to impairments. The reclassification has no impact on overall impairment charges and was carried out to align the definitions of defaulted and impaired loans (see also the Risk section). Q3 2015 included an IBNI release of EUR 61 million.
The cost of risk (impairment charges over the total book) for mortgages decreased to 4bps versus 6bps in the same period last year.
Impairment charges on corporate loans also decreased compared with Q3 2015. Commercial Clients again had net impairment releases in Q3 2016. Both quarters contained IBNI releases, although these were lower in Q3 2016 than they were in the same period of 2015. International Clients had lower impairments. This was mainly due to lower charges at ECT Clients in Q3 2016 (EUR 33 million) compared with Q3 2015 (EUR 62 million). Charges at ECT Clients were also lower compared with Q2 2016 (EUR 93 million).
The cost of risk was 3bps in Q3 2016, down from 14bps in Q3 2015. In Q2 2016 the cost of risk was 9bps.
The effective tax rate decreased by 8 percentage points to 27% in Q3 2016. The effective tax rate of 35% in Q3 2015 was negatively impacted by our reassessment of our tax position.
Operating income from international activities represented 19% of overall operating income compared with 20% in Q3 2015 and 20% in Q2 2016. This was due to higher operating income in the Netherlands in Q3 2016 while operating income from international activities remained stable. Lower income at the international Private Banking activities (both fees and other operating income) was offset by higher income at Corporate Banking (International Clients and Capital Markets Solutions).
ABN AMRO's underlying profit for the period in the first nine months of 2016 was EUR 1,743 million, an increase of EUR 91 million compared with the same period of 2015. Significantly lower impairment charges were largely offset by higher expenses related mainly to regulatory levies and a restructuring provision. Operating income showed a slight decrease, despite significantly higher net interest income.
Reported profit for the period for the first nine months of 2016 amounted to EUR 1,472 million and included an addition to the provision for SMEs with derivative-related issues of EUR 271 million net of tax.
The underlying return on equity (ROE) decreased to 13.4% in the first nine months of 2016 compared with 14.0% in the same period of 2015.
Operating income was EUR 6,393 million in the first nine months of 2016 and remained almost stable compared with the same period of 2015. The increase in net interest income was offset by lower net fees and commissions and lower other operating income.
Net interest income went up by EUR 123 million to EUR 4,703 million in the first nine months of 2016. The increase was largely due to several negative non-recurring items in 2015, including EUR 21 million related to the SME derivatives provision.
Net fee and commission income, at EUR 1,303 million in the first nine months of 2016, was EUR 72 million lower than in the same period of 2015. This was related to the uncertainty and volatility in the financial markets which negatively impacted Private Banking in particular and, to a lesser extent, Retail Banking. The decline in fee income at Retail Banking was due mainly to a reduction of client rates for payment packages.
Other operating income, at EUR 388 million in the first nine months of 2016, came down by EUR 61 million compared with the same period of 2015. The decrease was due to lower CVA/DVA/FVA results (EUR 27 million negative in 2016 versus EUR 56 million positive in 2015) and lower Equity Participations results (EUR 35 million versus EUR 68 million in 2015). Hedge accounting related-results were negative in the first nine months of 2016 and much lower compared with 2015. This was partly offset by a profit of EUR 116 million on ABN AMRO's equity stake in Visa Europe and a profit of EUR 52 million related to the equity stake in Equens. Both years also included provisions within the underlying results for SME derivative-related issues (Corporate Banking), as well as part of the Securities Financing activities discontinued in 2009 (Group Functions), although the level of these provisions was higher in the first nine months of 2015.
Personnel expenses were EUR 2,000 million, an increase of EUR 148 million compared with the first nine months of 2015. The increase was due to a EUR 144 million restructuring provision related to the announced reorganisation of the control and support activities in Q3 2016.
Other expenses rose by EUR 104 million to EUR 1,951 million in the first nine months of 2016. The increase was related to EUR 134 million in regulatory levies booked in 2016, of which EUR 66 million concerns the Single Resolution Fund (including a EUR 32 million refund on the 2015 payment) and EUR 66 million for an accrual related to the Deposit
Guarantee Scheme. Higher costs related to the continuous improvement of IT processes, products and services were also recorded. These costs were partly offset by the settlement of an insurance claim at Private Banking. In 2015, there was a considerable VAT refund which was partly offset by the settlement of EUR 55 million with Vestia (a Dutch housing corporation).
The operating result decreased by EUR 261 million compared with the first nine months of 2015 and the cost/income ratio deteriorated by 4.0 percentage points to 61.8%.
Impairment charges on loans and other receivables were EUR 79 million versus EUR 381 million in the first nine months of 2015. The continued improvement of economic conditions in the Netherlands resulted in lower impairment charges. Both years recorded significant IBNI releases.
Impairment charges on residential mortgages were limited in the first nine months of 2016 but higher than in the same period of 2015 due to considerable IBNI releases in 2015. The cost of risk for mortgages was 4bps in the first nine months of 2016.
Impairment charges on corporate loans decreased in the first nine months of 2016. Commercial Clients recorded releases, International Clients saw higher impairment charges mainly in ECT Clients (EUR 175 million in the first nine months of 2016 versus EUR 97 million in the same period of 2015).
The cost of risk was 4bps in the first nine months of 2016, down from 19bps in the same period of 2015.
The effective tax rate in the first nine months of 2016 was 26% versus 29% in the same period of 2015. The effective tax rate in 2015 was negatively impacted by a reassessment of our tax position.
As a result of the amended accounting policy on notional cash pool balances, the comparative balance sheet figures have been adjusted by EUR 15.5 billion at 31 December 2015.
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Cash and balances at central banks | 22,572 | 12,773 | 26,195 |
| Financial assets held for trading | 3,914 | 4,459 | 1,706 |
| Derivatives | 18,745 | 23,350 | 19,138 |
| Financial investments | 46,214 | 46,392 | 40,542 |
| Securities financing | 40,122 | 34,460 | 20,062 |
| Loans and receivables – banks | 15,672 | 17,152 | 15,680 |
| Loans and receivables – customers | 269,038 | 271,456 | 274,842 |
| Other | 8,784 | 8,897 | 7,676 |
| Total assets | 425,062 | 418,940 | 405,840 |
| Financial liabilities held for trading | 2,551 | 1,990 | 459 |
| Derivatives | 21,462 | 27,016 | 22,425 |
| Securities financing | 28,415 | 23,132 | 11,372 |
| Due to banks | 15,016 | 12,214 | 14,630 |
| Due to customers | 240,367 | 240,942 | 245,819 |
| Issued debt | 79,819 | 76,505 | 76,207 |
| Subordinated liabilities | 11,115 | 11,214 | 9,708 |
| Other | 8,165 | 7,968 | 7,635 |
| Total liabilities | 406,910 | 400,981 | 388,255 |
| Equity attributable to the owners of the parent company | 17,154 | 16,962 | 16,575 |
| Capital securities | 993 | 993 | 993 |
| Equity attributable to non-controlling interests | 6 | 5 | 17 |
| Total equity | 18,152 | 17,960 | 17,584 |
| Total liabilities and equity | 425,062 | 418,940 | 405,840 |
Total assets increased by EUR 6.1 billion to EUR 425.1 billion at 30 September 2016, mainly in cash and balances at central banks and securities financing assets, partly offset by derivative assets.
Cash and balances at central banks increased by EUR 9.8 billion to EUR 22.6 billion at 30 September 2016, due partly to an increase in deposits from professional counterparties.
Financial assets held for trading at 30 September 2016 decreased by EUR 0.5 billion to EUR 3.9 billion, due chiefly to a decrease in government bonds mainly related to primary dealerships.
Derivative assets went down by EUR 4.6 billion compared with 30 June 2016, mainly reflecting the impact of interest-related movements and, to a lesser extent, FX-related movements.
19
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Residential mortgages | 147,155 | 146,607 | 146,932 |
| Consumer loans | 14,436 | 14,679 | 15,147 |
| Corporate loans to clients (excluding Notional cash pooling)1 | 81,048 | 80,218 | 78,195 |
| Total client loans (excluding Notional cash pooling)2 | 242,639 | 241,504 | 240,274 |
| Notional cash pooling | 2,241 | 5,648 | 15,523 |
| Total client loans2 | 244,880 | 247,152 | 255,797 |
| Loans to professional counterparties | 14,209 | 13,892 | 12,194 |
| Other loans3 | 8,148 | 8,680 | 6,356 |
| Total Loans and receivables – customers2 | 267,237 | 269,724 | 274,347 |
| Fair value adjustments from hedge accounting | 5,634 | 5,702 | 4,850 |
| Less: loan impairment allowance | 3,833 | 3,970 | 4,355 |
| Total Loans and receivables – customers | 269,038 | 271,456 | 274,842 |
1 Corporate loans excluding loans to professional counterparties.
2 Gross carrying amount excluding fair value adjustment from hedge accounting.
3 Other loans consist of loans and receivables to government, official institutions and financial markets parties.
Loans and receivables – customers decreased by EUR 2.4 billion compared with 30 June 2016.
Client loans (excluding notional cash pooling) increased by EUR 1.1 billion to EUR 242.6 billion.
Residential mortgages increased by EUR 0.5 billion compared with 30 June 2016. New mortgage production grew on the back of a further rise in housing transactions and house prices. The market share in new production increased to 23%1 in Q3 2016 compared with 20% in Q2 2016. Growth of new production was offset by gradually increasing contractual repayments. Contractual repayments increased following the amendment of tax regulations for mortgage coupon deductibility in 2013. Other redemptions remained high due to refinancing and relocation. Low interest rates on savings and enhanced awareness among homeowners of the possibility of residual debt are still incentives for extra repayments.
pooling) increased by EUR 0.8 billion to EUR 81.0 billion due mainly to an increase in loans at Corporate Banking (ECT Clients).
Total liabilities increased by EUR 5.9 billion to EUR 406.9 billion at 30 September 2016, mainly in securities financing liabilities, due to customers and wholesale funding.
Financial liabilities held for trading went up by EUR 0.6 billion due to increased short positions in bonds.
Derivative liabilities decreased by EUR 5.6 billion to EUR 21.5 billion at 30 September 2016, mainly reflecting the impact of interest-related movements and, to a lesser extent, FX-related movements.
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Retail Banking | 101,936 | 102,662 | 98,674 |
| Private Banking | 67,650 | 66,566 | 66,465 |
| Corporate Banking (excluding Notional cash pooling) | 64,954 | 64,192 | 62,850 |
| Group Functions | 3,588 | 1,874 | 2,308 |
| Total Due to customers (excluding Notional cash pooling) | 238,127 | 235,294 | 230,296 |
| Notional cash pooling | 2,241 | 5,648 | 15,523 |
| Total Due to customers | 240,367 | 240,942 | 245,819 |
Due to customers decreased by EUR 0.6 billion compared with 30 June 2016. Excluding notional cash pooling, due to customers increased by EUR 2.8 billion to EUR 238.1 billion, due partly to an increase in deposits from professional counterparties. The combined market share in retail deposits at Retail Banking and Private Banking in the Netherlands at 30 September 2016 came to 21%1 , stable compared with 30 June 2016.
Issued debt increased by EUR 3.3 billion to EUR 79.8 billion at 30 September 2016 due to an increase in wholesale funding.
Total equity rose by EUR 0.2 billion to EUR 18.2 billion at 30 September 2016, as the reported profit for the quarter was partly offset by an interim dividend payment of EUR 0.4 billion in September.
Main developments in total assets and liabilities compared with 31 December 2015
Total assets grew by EUR 19.2 billion to EUR 425.1 billion at 30 September 2016. Excluding the impact of notional cash pooling, total assets increased by EUR 32.5 billion. This was due mainly to an increase in securities financing assets, loans and receivables – customers and financial investments.
Total liabilities increased by EUR 18.7 billion to EUR 406.9 billion at 30 September 2016. Excluding the impact of notional cash pooling, total liabilities increased by EUR 31.9 billion. This was due mainly to an increase in securities financing liabilities, due to customers and wholesale funding.
Total equity increased by EUR 0.6 billion to EUR 18.2 billion, due mainly to the inclusion of the reported profit for the first three quarters of 2016, partly offset by dividend payments.
The Results by segment section includes a discussion and analysis of the results of the financial condition of ABN AMRO Group at segment level for the third quarter of 2016 compared with the third quarter of 2015. Most of the interest expenses and operating expenses incurred by Group Functions are allocated to the business lines through net interest income and other expenses, respectively.
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 851 | 853 | 855 | 2,535 | 2,497 | 2% | ||
| Net fee and commission income | 121 | 133 | -9% | 112 | 8% | 346 | 395 | -12% |
| Other operating income | 5 | 3 | 65% | 117 | -96% | 125 | 20 | |
| Operating income | 976 | 988 | -1% | 1,084 | -10% | 3,006 | 2,912 | 3% |
| Personnel expenses | 116 | 121 | -4% | 123 | -6% | 358 | 367 | -2% |
| Other expenses | 407 | 389 | 5% | 413 | -1% | 1,253 | 1,123 | 12% |
| Operating expenses | 524 | 510 | 3% | 536 | -2% | 1,611 | 1,490 | 8% |
| Operating result | 453 | 478 | -5% | 547 | -17% | 1,394 | 1,422 | -2% |
| Impairment charges on loans and other receivables |
16 | 52 | -69% | 22 | -25% | 64 | 90 | -28% |
| Operating profit/(loss) before taxation |
436 | 426 | 2% | 525 | -17% | 1,330 | 1,333 | |
| Income tax expense | 108 | 108 | 1% | 127 | -15% | 328 | 334 | -2% |
| Underlying profit/(loss) for the period |
328 | 319 | 3% | 399 | -18% | 1,002 | 999 | |
| Special items | ||||||||
| Reported profit/(loss) for the period |
328 | 319 | 3% | 399 | -18% | 1,002 | 999 |
Retail Banking's underlying profit for the period amounted to EUR 328 million, rising by EUR 9 million compared with Q3 2015. This increase was mainly the result of lower loan impairments, which offset lower operating income
and higher expenses. Compared with Q2 2016, underlying profit for the period decreased by EUR 71 million, due mainly to the fact that Q2 profit benefited from the sale of Visa Europe to Visa Inc.
Net interest income was, at EUR 851 million in Q3 2016, almost stable compared with Q3 2015. Higher interest income on mortgages and deposits was partly offset by lower interest income on consumer loans.
Margins on residential mortgages improved compared with Q3 2015, due to repricing of the backbook. This was partly offset by lower average volumes of residential mortgage loans. The impact of repricing of the mortgage book in recent years continued to contribute to higher net interest income, although the repricing effect continued to level off. Net interest income on consumer loans decreased due to lower average loan volumes and lower margins. Net interest income on deposits was higher compared with Q3 2015 due to increased margins and to average deposit volumes.
Net fee and commission income decreased by EUR 12 million compared with Q3 2015 due mainly to a reduction of fees charged for payment packages.
Personnel expenses decreased to EUR 116 million compared with EUR 121 million in Q3 2015. The number of FTEs employed in Retail Banking decreased due to the transfer of employees to Private Banking and a further reduction in the number of branches. This was partly offset by an addition to an existing restructuring provision.
Other expenses amounted to EUR 407 million, an increase of EUR 18 million compared with Q3 2015. This was mainly attributable to regulatory levies, which came to EUR 22 million in Q3 2016. In addition, allocated project costs, including the Retail Digitalisation programme, were higher but this was partly offset by lower marketing related expenses.
Operating result decreased by EUR 25 million in Q3 2016 to EUR 453 million. The cost/income ratio increased by 2.0 percentage points to 53.6%.
Impairment charges on loans and other receivables amounted to EUR 16 million in Q3 2016, down by EUR 36 million compared with Q3 2015. An IBNI release of EUR 42 million was recorded in Q3 2016, of which EUR 32 million was due to a reclassification to impairments. This has no effect on overall impairment charges and was carried out to align the definition of defaulted and impaired loans (see also the Risk section). The IBNI release in Q3 2015 amounted to EUR 3 million.
The Dutch economy recovered further and confidence in the housing market improved further in Q3 2016, contributing to a continued decrease in the impaired portfolio (although more gradually than in previous quarters) and to ongoing improvement of the credit quality indicators. Impairment charges for mortgages were lower than in Q3 2015. Consumer loans also benefited from further improved economic conditions.
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying cost/income ratio | 53.6% | 51.6% | 49.5% | 53.6% | 51.2% |
| Underlying cost of risk (in bps)1 | 4 | 13 | 6 | 6 | 7 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Loan-to-Deposit ratio | 148% | 146% | 152% |
| Loans and receivables – customers (in billions) | 154.3 | 153.8 | 154.2 |
| Due to customers (in billions) | 101.9 | 102.7 | 98.7 |
| Risk-weighted assets (risk exposure amount; in billions) | 32.7 | 33.7 | 34.8 |
| FTEs | 5,291 | 5,601 | 5,844 |
Loans and receivables – customers went up by EUR 0.5 billion compared with 30 June 2016 to EUR 154.3 billion. The Retail Banking mortgage portfolio grew compared with 30 June 2016. New mortgage production increased on the back of a further rise in housing transactions and house prices. The market share in new production rose to 23% in Q3 2016 compared with 20% in Q2 2016. Growth of new production was offset by gradually increasing contractual repayments. Contractual repayments increased following the amendment of tax regulations for
mortgage coupon deductibility in 2013. Other redemptions remained high due to refinancing and relocation. Low interest rates on savings and enhanced awareness among homeowners of the possibility of residual debt are still incentives for extra repayments.
Due to customers decreased by EUR 0.8 billion compared with 30 June 2016 to EUR 101.9 billion after a peak in Q2 as a result of holiday allowances.
| (in billions) | 30 September 2016 | 30 June 2016 | 31 March 2016 |
|---|---|---|---|
| Cash | 101.9 | 102.7 | 99.1 |
| Securities | 15.1 | 14.9 | 15.2 |
| Total Client Assets | 117.0 | 117.6 | 114.3 |
Retail Banking's underlying profit for the period was EUR 1,002 million for the first nine months of 2016, virtually equal to the EUR 999 million recorded in the same period of 2015. An increase in operating income and lower loan impairments were offset by an increase in operating expenses (partly related to regulatory levies).
Net interest income came to EUR 2,535 million, up by EUR 38 million compared with the first nine months of 2015. This improvement can be largely attributed to a provision of around EUR 30 million for inconsistencies in interest calculations between the bank and its business partners with respect to one of the mortgage products which was booked in the first nine months of 2015 and partly released in 2016.
Margins on residential mortgages continued to improve in the first nine months of 2016, due to repricing of the residential mortgage backbook. This was partly offset by lower average residential mortgage loan volumes. Interest income on consumer loans decreased due to lower average volumes and lower margins. Net interest income on deposits increased as a result of higher margins and higher average deposit volumes.
Net fee and commission income decreased by EUR 49 million compared with the same period of 2015, mainly due to a reduction of client rates for payment packages. Uncertainty and volatility in the financial markets, especially in the first six months of 2016, had a negative impact as well.
Other operating income increased by EUR 105 million and included the profit (EUR 101 million) related to the gain on sale of Visa Europe.
Personnel expenses amounted to EUR 358 million, down by EUR 9 million compared with the first nine months of 2015. The decrease was due mainly to a lower average number of FTEs employed in Retail Banking following the transfer of employees to Private Banking and a further reduction in the number of branches. This was partly offset by additions to an existing restructuring provision.
Other expenses increased by EUR 130 million compared with the first nine months of 2015. Regulatory levies in the first nine months of 2016 amounted to EUR 76 million. Excluding the regulatory levies, other expenses increased by EUR 54 million. This was mainly attributable to higher allocated project costs, including the Retail Digitalisation programme.
Operating result came down to EUR 1,394 million for the first nine months of 2016. The cost/income ratio increased by 2.4 percentage points to 53.6%.
Impairment charges on loans and other receivables came to EUR 64 million in the first nine months of 2016, versus EUR 90 million in the same period of 2015. Both periods included significant IBNI releases, although these were higher in 2015 (EUR 73 million) compared with 2016 (EUR 37 million, excluding the EUR 32 million reclassification).
The Dutch economy recovered further and confidence in the housing market improved further in the first nine months of 2016; these two developments contributed to lower impairment charges for mortgages (excluding IBNI releases). Consumer loans also benefited from further improved economic conditions, leading to lower loan impairments with higher IBNI releases.
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 159 | 147 | 8% | 160 | -1% | 476 | 440 | 8% |
| Net fee and commission income | 142 | 149 | -4% | 143 | -1% | 429 | 470 | -9% |
| Other operating income | 17 | 18 | -7% | 39 | -56% | 72 | 81 | -11% |
| Operating income | 317 | 314 | 1% | 341 | -7% | 977 | 992 | -1% |
| Personnel expenses | 125 | 133 | -6% | 123 | 2% | 374 | 382 | -2% |
| Other expenses | 116 | 136 | -15% | 144 | -19% | 394 | 389 | 1% |
| Operating expenses | 241 | 269 | -10% | 267 | -10% | 768 | 771 | |
| Operating result | 76 | 45 | 70% | 74 | 3% | 209 | 221 | -6% |
| Impairment charges on loans and other receivables |
1 | 5 | -79% | 7 | -86% | 13 | -10 | |
| Operating profit/(loss) before taxation |
75 | 40 | 89% | 66 | 13% | 195 | 231 | -15% |
| Income tax expense | 21 | 12 | 83% | 14 | 53% | 45 | 43 | 4% |
| Underlying profit/(loss) for the period |
54 | 28 | 92% | 53 | 3% | 150 | 188 | -20% |
| Special items | ||||||||
| Reported profit/(loss) for the period |
54 | 28 | 92% | 53 | 3% | 150 | 188 | -20% |
Private Banking's underlying profit for the period almost doubled to EUR 54 million in Q3 2016. The increase was due largely to lower expenses (mainly related to the settlement of an insurance claim) and slightly higher operating income. The underlying profit was in line with Q2 2016 as both quarters included a one-off item of a similar size.
Net interest income increased by EUR 12 million to EUR 159 million in Q3 2016, remaining stable compared with previous quarters. This was mainly due to higher margins on deposits, partly offset by lower average volumes.
Net fee and commission income decreased by EUR 7 million to EUR 142 million in Q3 2016. Although the market
environment improved in the third quarter, stock markets were on average still lower than they were in Q3 2015. This resulted in lower average client assets, which negatively impacted net fee and commission income.
Other operating income amounted to EUR 17 million and was in line with Q3 2015. Compared with Q2 2016 operating income declined by EUR 22 million as the previous quarter included a provision release related to the sale of the Swiss private banking activities in 2011.
Personnel expenses decreased by EUR 8 million compared with Q3 2015. This was due mainly to the Q3 2015 restructuring provision for the integration of the Jersey office into Guernsey.
Other expenses came down by EUR 20 million compared with Q3 2015, due mainly to a settlement of EUR 24 million concerning an insurance claim in the international activities. This was offset by higher allocated project costs.
Operating result increased from EUR 45 million to EUR 76 million in Q3 2016. The cost/income ratio for Private Banking came to 75.9%, an improvement of 9.7 percentage points compared with Q3 2015.
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying cost/income ratio | 75.9% | 85.7% | 78.3% | 78.6% | 77.7% |
| Underlying cost of risk (in bps)1 | 3 | 12 | 19 | 11 | -7 |
| Gross margin on client assets (in bps) | 65 | 62 | 70 | 67 | 65 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Loan-to-Deposit ratio | 24% | 24% | 25% |
| Loans and receivables – customers (in billions) | 15.9 | 16.0 | 16.6 |
| Due to customers (in billions) | 67.6 | 66.6 | 66.5 |
| Risk-weighted assets (risk exposure amount; in billions) | 7.9 | 8.3 | 8.2 |
| FTEs | 3,870 | 3,800 | 3,722 |
| (in billions) | Q3 2016 | Q2 2016 | Q1 2016 |
|---|---|---|---|
| Opening balance Client Assets | 192.8 | 193.7 | 199.2 |
| Net new assets | 1.3 | 0.2 | -1.1 |
| Market performance | 4.8 | -1.0 | -4.5 |
| Closing balance Client Assets | 198.9 | 192.8 | 193.7 |
| 30 September 2016 | 30 June 2016 | 31 March 2016 | |
| Breakdown by type | |||
| Cash | 67.8 | 66.7 | 65.3 |
| Securities | 131.1 | 126.0 | 128.4 |
| - of which Custody | 33.7 | 30.7 | 31.6 |
| Total | 198.9 | 192.8 | 193.7 |
| Breakdown by geography | |||
| The Netherlands | 47% | 48% | 47% |
| Rest of Europe | 44% | 44% | 44% |
| Rest of the world | 9% | 8% | 8% |
Client assets increased to EUR 198.9 billion at 30 September 2016 compared with EUR 192.8 billion at 30 June 2016. This was mainly due to a favourable market performance in Q3 2016.
Net new assets (NNA) in Q3 2016 amounted to EUR 1.3 billion. The impact of client transfers from Retail Banking and referrals from Corporate Banking to Private Banking was limited this quarter.
27
Private Banking's underlying profit for the period decreased to EUR 150 million in the first nine months of 2016, down by EUR 38 million compared with the same period of 2015. The decline was due to a combination of lower operating income (mainly fee and commission income) and higher loan impairments.
Net interest income went up to EUR 476 million, an increase of EUR 36 million compared with 9M 2015. Margins on deposits in particular improved, while average volumes decreased.
Net fee and commission income decreased by EUR 41 million to EUR 429 million in the first nine months of 2016. Uncertainty and volatility in the financial markets, especially in H1 2016, had a negative impact on the stock markets. This led to lower average client assets and a decline in transaction volumes.
Other operating income came down by EUR 9 million in the first nine months of 2016, due mainly to lower trading income. The 2016 provision release related to the sale of the Swiss private banking activities was partly offset by the sale of premises in 2015.
Personnel expenses decreased by EUR 8 million compared with the first nine months of 2015. This was almost fully attributable to the 2015 restructuring provision regarding the Channel Islands.
Other expenses increased by EUR 5 million and were impacted in 2016 by regulatory levies (EUR 13 million) and by the settlement of an insurance claim (EUR 24 million). This was partly offset by higher allocated project costs.
Operating result decreased by EUR 12 million to EUR 209 million in the first nine months of 2016. The cost/income ratio for Private Banking amounted to 78.6%, deteriorating by 0.9 percentage points compared with the first nine months of 2015.
Impairment charges on loans and other receivables increased to an addition of EUR 13 million compared with a release of EUR 10 million (mainly IBNI) in the first nine months of 2015.
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 585 | 515 | 13% | 556 | 5% | 1,689 | 1,597 | 6% |
| Net fee and commission income | 185 | 187 | -1% | 191 | -3% | 566 | 565 | |
| Other operating income | 102 | 60 | 71% | 68 | 49% | 142 | 224 | -37% |
| Operating income | 872 | 762 | 14% | 816 | 7% | 2,396 | 2,385 | |
| Personnel expenses | 177 | 166 | 7% | 163 | 9% | 501 | 510 | -2% |
| Other expenses | 292 | 283 | 3% | 282 | 3% | 909 | 846 | 7% |
| Operating expenses | 468 | 449 | 4% | 445 | 5% | 1,411 | 1,356 | 4% |
| Operating result | 404 | 313 | 29% | 371 | 9% | 986 | 1,029 | -4% |
| Impairment charges on loans and other receivables |
6 | 41 | -84% | 28 | -76% | 8 | 309 | -97% |
| Operating profit/(loss) before taxation |
397 | 273 | 46% | 344 | 16% | 977 | 720 | 36% |
| Income tax expense | 107 | 54 | 97% | 81 | 33% | 251 | 148 | 70% |
| Underlying profit/(loss) for the period |
290 | 218 | 33% | 263 | 10% | 726 | 572 | 27% |
| Special items | -271 | -271 | ||||||
| Reported profit/(loss) for the period |
290 | 218 | 33% | -8 | 455 | 572 | -20% |
Corporate Banking's underlying profit for the period in Q3 2016 amounted to EUR 290 million, increasing by EUR 72 million compared with Q3 2015. This was due mainly to higher operating income and lower impairment charges. Compared with Q2 2016, underlying profit for the period increased by EUR 27 million.
Net interest income rose to EUR 585 million in Q3 2016 compared with EUR 515 million in Q3 2015. All business lines posted an increase in net interest income compared with the same period of 2015.
Net interest income at Commercial Clients came to EUR 342 million, up by EUR 37 million compared with Q3 2015. Margins on loans and deposits improved and average deposit volumes increased, while average loan volumes decreased compared with the same quarter in 2015. In addition, Q3 2015 also included a negative EUR 21 million one-off item related to SME derivativerelated issues.
Net interest income at International Clients grew by EUR 22 million compared with Q3 2015, coming to EUR 194 million. This growth was achieved on the back of the increased loan portfolio at ECT Clients, lower internal liquidity charges allocated by Group Functions, and the fact that Q3 2015 was impacted by a negative one-off item.
Net interest income in Capital Markets Solutions increased by EUR 10 million to EUR 48 million compared to Q3 2015, mainly at Sales & Trading.
Net fee and commission income amounted to EUR 185 million in Q3 2016 and was almost stable compared with Q3 2015. A slight increase at International Clients was offset by small decreases at both Commercial Clients and Capital Markets Solutions.
Other operating income increased to EUR 102 million in Q3 2016 compared with EUR 60 million in Q3 2015. The CVA/DVA/FVA impact was EUR 20 million positive versus EUR 7 million negative in Q3 2015, and Equity Participations results at International Clients came to EUR 33 million versus EUR 21 million in Q3 2015. Improved CVA/DVA/FVA and Equity Participations results also drove the increase in other operating income compared with Q2 2016 (up EUR 34 million).
Personnel expenses increased by EUR 11 million to EUR 177 million in Q3 2016. In addition to an increase in the number of FTEs compared with Q3 2015, mainly at International Clients, Q3 2016 also included several additions to existing restructuring provisions.
Other expenses came to EUR 292 million, up by EUR 9 million compared with Q3 2015, and were slightly higher at all individual business lines including limited regulatory levies in Q3 2016. The increase of EUR 10 million compared
with the previous quarter was largely driven by the EUR 8 million adjustment for the Single Resolution Fund in Q2 2016.
Operating result was EUR 404 million in Q3 2016, up by EUR 91 million compared with the same period of 2015. The cost/income ratio improved to 53.7% compared with 58.9% in Q3 2015.
Impairment charges on loans and other receivables decreased by EUR 35 million to EUR 6 million in Q3 2016.
Impairment charges in Commercial Clients were EUR 12 million lower and amounted to a release of EUR 29 million in Q3 2016. The decrease was the result of higher releases on the impaired portfolio. The IBNI release of EUR 19 million in Q3 2016 was significantly lower than in Q3 2015.
Loan impairments in International Clients were EUR 35 million (of which EUR 21 million related to an IBNI addition), which was lower than both Q3 2015 and Q2 2016. Impairment charges for ECT Clients amounted to EUR 33 million compared with EUR 62 million in the same period of 2015 and EUR 93 million in Q2 2016.
Loan impairments in Capital Markets Solutions amounted to zero.
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying cost/income ratio | 53.7% | 58.9% | 54.5% | 58.9% | 56.8% |
| Underlying cost of risk (in bps)1, 2 | 1 | 18 | 13 | 0 | 46 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
2 For management view purposes the historical periods before 30 June 2016 have not been adjusted for the accounting policy change with regard to Notional cash pooling
(for further details please refer to note 1 in the Condensed Consolidated Interim Financial Statements published in Q2 2016).
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Loan-to-Deposit ratio1 | 125% | 124% | 121% |
| Total client loans (excluding Notional cash pooling, in billions) | 71.5 | 70.7 | 68.3 |
| Due to customers (excluding Notional cash pooling, in billions) | 65.0 | 64.2 | 62.9 |
| Risk-weighted assets (risk exposure amount; in billions) | 54.8 | 54.2 | 55.1 |
| FTEs | 5,113 | 5,035 | 4,959 |
1 For management view purposes the historical periods before 30 June 2016 have not been adjusted for the accounting policy change with regard to Notional cash pooling (for further details please refer to note 1 in the Condensed Consolidated Interim Financial Statements published in Q2 2016).
Total client loans (excluding notional cash pooling) increased to EUR 71.5 billion at 30 September 2016 compared with EUR 70.7 billion at 30 June 2016. The increase was driven mainly by International Clients / ECT Clients.
Corporate Banking's underlying profit for the period was EUR 726 million in the first nine months of 2016, up by EUR 154 million compared with the same period of 2015. This was due mainly to low impairment charges in the first nine months of 2016. Operating income was slightly higher and operating expenses increased (mainly driven by regulatory levies) compared with the same period of 2015.
Reported profit for the period for the first nine months of 2016 amounted to EUR 455 million and included an addition to the provision for SMEs with derivative-related issues of EUR 361 million gross (EUR 271 million net of tax; classified as special item).
Net interest income increased by EUR 92 million to EUR 1,689 million in the first nine months of 2016. All business lines showed an increase compared with the first nine months of 2015.
Net interest income at Commercial Clients increased by EUR 49 million to EUR 1,014 million in the first nine months of 2016. Margins on loans and deposits and average deposit volumes increased, while average loan volumes decreased compared with the same period of 2015. The previous year also included a EUR 21 million negative one-off item related to SME derivative-related issues.
Net interest income at International Clients increased by EUR 15 million compared with the first nine months of 2015, coming to EUR 548 million, due largely to asset growth at ECT Clients.
Net interest income in Capital Markets Solutions increased by EUR 27 million to EUR 126 million in the first nine months of 2016, due mainly to improved net interest income at Sales & Trading.
Net fee and commission income amounted to EUR 566 million and was stable compared with the first nine months of 2015.
Other operating income decreased by EUR 82 million to EUR 142 million in the first nine months of 2016. The CVA/ DVA/FVA results were lower (EUR 27 million negative versus EUR 34 million positive in the first nine months of 2015) and Equity Participations results at International Clients were also lower (EUR 35 million in 2016 versus EUR 68 million in 2015). This was partly offset by a lower addition to the provision for SME derivative-related issues, positive revaluations of equity stakes at Commercial Clients and higher results from Sales & Trading activities, all of which were recognised in 2016.
Personnel expenses amounted to EUR 501 million, down by EUR 9 million compared with the first nine months of 2015. This was due mainly to higher restructuring provisions in 2015. The number of FTEs increased compared with the previous year.
Other expenses increased by EUR 63 million compared with the first nine months of 2015, due mainly to regulatory levies of EUR 45 million. The remainder of the increase was related to higher allocated project costs.
Operating result was EUR 986 million in the first nine months of 2016, down EUR 43 million compared with the same period of 2015. The cost/income ratio was 58.9%, deteriorating from 56.8% in the first nine months of 2015.
Impairment charges on loans and other receivables were limited to EUR 8 million, compared with an addition of EUR 309 million in the first nine months of 2015.
Impairment charges at Commercial Clients decreased by EUR 361 million to a release of EUR 151 million in the first nine months of 2016. An IBNI release of EUR 128 million in the first nine months of 2016 was in line with the same period of 2015. Moreover, Q1 2015 included a single large addition of approximately EUR 100 million.
Loan impairments in International Clients came to EUR 161 million, significantly higher than the first nine months of 2015 (up EUR 73 million). Impairment charges for ECT Clients in particular increased to EUR 175 million compared with EUR 97 million in the same period of 2015.
Loan impairments in Capital Markets Solutions amounted to almost zero.
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 342 | 305 | 12% | 335 | 2% | 1,014 | 965 | 5% |
| Net fee and commission income | 50 | 53 | -5% | 51 | -1% | 151 | 155 | -3% |
| Other operating income | 8 | 7 | 9% | 29 | -72% | 42 | 23 | 86% |
| Operating income | 400 | 365 | 10% | 414 | -3% | 1,208 | 1,144 | 6% |
| Operating expenses | 209 | 202 | 3% | 200 | 4% | 630 | 614 | 3% |
| Operating result | 192 | 163 | 17% | 214 | -11% | 578 | 530 | 9% |
| Impairment charges on loans and other receivables |
-29 | -17 | -69% | -64 | 55% | -151 | 210 | |
| Operating profit/(loss) before taxation |
220 | 180 | 22% | 279 | -21% | 729 | 319 | 128% |
| Income tax expense | 55 | 45 | 22% | 69 | -21% | 182 | 79 | 130% |
| Underlying profit/(loss) for the period |
165 | 135 | 22% | 209 | -21% | 547 | 240 | 128% |
| Special items | -8 | -8 | ||||||
| Reported profit/(loss) for the period |
165 | 135 | 22% | 202 | -18% | 540 | 240 | 125% |
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying cost/income ratio | 52.2% | 55.3% | 48.3% | 52.2% | 53.7% |
| Underlying cost of risk (in bps)1, 2 | -28 | -17 | -67 | -52 | 69 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
2 For management view purposes the historical periods before 30 June 2016 have not been adjusted for the accounting policy change with regard to Notional cash pooling (for further details please refer to note 1 in the Condensed Consolidated Interim Financial Statements published in Q2 2016).
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Total client loans (excluding Notional cash pooling, in billions) | 37.5 | 37.4 | 37.0 |
| Due to customers (excluding Notional cash pooling, in billions)1 | 33.2 | 35.1 | 34.8 |
| Risk-weighted assets (risk exposure amount; in billions) | 21.2 | 21.0 | 21.5 |
1 Due to Customers included an internal transfer of deposits from Commercial Clients to Capital Markets Solutions (mainly Q1 2016).
32
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 194 | 172 | 13% | 177 | 10% | 548 | 533 | 3% |
| Net fee and commission income | 57 | 54 | 7% | 52 | 10% | 166 | 166 | |
| Other operating income | 27 | 21 | 29% | -3 | 29 | 73 | -60% | |
| Operating income | 278 | 246 | 13% | 227 | 23% | 742 | 772 | -4% |
| Operating expenses | 128 | 121 | 6% | 115 | 11% | 374 | 365 | 2% |
| Operating result | 151 | 125 | 20% | 111 | 35% | 368 | 407 | -10% |
| Impairment charges on loans and other receivables |
35 | 58 | -39% | 93 | -62% | 161 | 88 | 83% |
| Operating profit/(loss) before taxation |
115 | 68 | 71% | 18 | 207 | 319 | -35% | |
| Income tax expense | 28 | 3 | -1 | 47 | 44 | 5% | ||
| Underlying profit/(loss) for the period |
88 | 65 | 35% | 20 | 160 | 275 | -42% | |
| Special items | ||||||||
| Reported profit/(loss) for the period |
88 | 65 | 35% | 20 | 160 | 275 | -42% |
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying cost/income ratio | 45.9% | 49.0% | 50.9% | 50.4% | 47.3% |
| Underlying cost of risk (in bps)1, 2 | 33 | 69 | 108 | 60 | 35 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
2 For management view purposes the historical periods before 30 June 2016 have not been adjusted for the accounting policy change with regard to Notional cash pooling (for further details please refer to note 1 in the Condensed Consolidated Interim Financial Statements published in Q2 2016).
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Total client loans (excluding Notional cash pooling, in billions) | 34.0 | 33.3 | 31.3 |
| Due to customers (excluding Notional cash pooling, in billions)1 | 15.8 | 16.6 | 19.0 |
| Risk-weighted assets (risk exposure amount; in billions) | 22.8 | 22.5 | 22.6 |
1 Due to Customers included an internal transfer of deposits from International Clients to Capital Markets Solutions (mainly Q1 2016).
33
| (in millions) | Q3 2016 | Q3 2015 | Change | Q2 2016 | Change | Nine months 2016 |
Nine months 2015 |
Change |
|---|---|---|---|---|---|---|---|---|
| Net interest income | 48 | 38 | 26% | 44 | 10% | 126 | 99 | 28% |
| Net fee and commission income | 77 | 80 | -4% | 89 | -13% | 249 | 243 | 3% |
| Other operating income | 68 | 32 | 112% | 42 | 59% | 70 | 128 | -45% |
| Operating income | 193 | 150 | 28% | 175 | 10% | 446 | 470 | -5% |
| Operating expenses | 131 | 125 | 5% | 129 | 2% | 405 | 376 | 8% |
| Operating result | 62 | 25 | 146% | 46 | 35% | 41 | 94 | -56% |
| Impairment charges on loans and other receivables |
-1 | 95% | -1 | 11 | ||||
| Operating profit/(loss) before taxation |
62 | 25 | 146% | 47 | 31% | 42 | 83 | -49% |
| Income tax expense | 25 | 7 | 13 | 89% | 24 | 26 | -6% | |
| Underlying profit/(loss) for the period |
37 | 18 | 103% | 34 | 9% | 18 | 57 | -68% |
| Special items | -263 | -263 | ||||||
| Reported profit/(loss) for the period |
37 | 18 | 103% | -229 | -245 | 57 |
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying cost/income ratio | 68.0% | 83.3% | 73.8% | 90.8% | 80.0% |
| Underlying cost of risk (in bps)1 | 0 | -2 | -2 | -1 | 9 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Financial assets held for trading (in billions) | 3.9 | 4.5 | 1.7 |
| Loans and receivables – customers (in billions) | 17.2 | 16.7 | 13.1 |
| Financial liabilities held for trading (in billions) | 2.6 | 2.0 | 0.5 |
| Due to customers (in billions)1 | 16.0 | 12.5 | 9.1 |
| Risk-weighted assets (risk exposure amount; in billions) | 10.8 | 10.6 | 11.0 |
1 Due to Customers included an internal transfer of both Commercial Clients and International Clients to Capital Markets Solutions (mainly Q1 2016).
34
Operating results
Group Functions
35
(in millions) Q3 2016 Q3 2015 Change Q2 2016 Change
| Operating result | -83 | 38 | -51 | -64% | -147 | 31 | ||
|---|---|---|---|---|---|---|---|---|
| Impairment charges on loans and other receivables |
-1 | -4 | 79% | -3 | 69% | -6 | -8 | 19% |
| Operating profit before taxation | -82 | 42 | -48 | -71% | -140 | 39 | ||
| Income tax expense | -17 | 99 | 4 | -4 | 145 | |||
| Underlying profit/(loss) for the period |
-66 | -56 | -16% | -52 | -25% | -136 | -106 | -28% |
| Special items | ||||||||
| Reported profit/(loss) for the period |
-66 | -56 | -16% | -52 | -25% | -136 | -106 | -28% |
Net interest income -19 8 12 3 45 -94% Net fee and commission income -11 -18 39% -16 29% -38 -55 31% Other operating income 86 55 57% -36 50 123 -60% Operating income 56 45 24% -40 15 114 -87% Personnel expenses 348 200 74% 208 67% 766 594 29%
Group Functions' underlying profit for the period was EUR 66 million negative in Q3 2016 compared with a loss of EUR 56 million in the same period of 2015.
Net interest income was EUR 19 million negative in Q3 2016 and was impacted by lower allocated liquidity charges to International Clients.
Net fee and commission income was EUR 11 million negative, which was EUR 7 million higher than in Q3 2015.
Other operating income was EUR 86 million positive, an increase of EUR 31 million compared with Q3 2015. The current quarter included a profit of EUR 52 million related to the revaluation of ABN AMRO's share in Equens. This was partly offset by lower hedge accounting-related results. There were no CVA/DVA results in 2016 (versus EUR 11 million negative CVA/DVA results in Q3 2015).
Nine months 2016
Nine months
2015 Change
Personnel expenses went up by EUR 148 million to EUR 348 million in Q3 2016. This was due mainly to a significant restructuring provision of EUR 144 million related to the announced cost savings in the support and control activities across the bank. In addition, personnel expenses rose slightly as the average number of FTEs was higher than in Q3 2015.
Other expenses decreased by EUR 15 million compared with Q3 2015. The third quarter of 2015 contained a considerable VAT refund related to the period 2007-2014; this was partly
Other indicators
offset by the EUR 55 million settlement with Vestia. More operating expenses were allocated to the commercial segments in 2016 (recorded as negative expenses).
36
Group Functions' underlying profit for the period was a loss of EUR 136 million in the first nine months of 2016 compared with a loss of EUR 106 million in the same period of 2015.
Net interest income was almost nil, declining by EUR 42 million compared with the first nine months of 2015. The decrease was partly due to higher liquidity costs. Both years were impacted by negative interest provisions related to the part of the Securities Financing activities discontinued in 2009.
Net fee and commission income improved by EUR 17 million as lower fees were paid to Capital Markets Solutions related to Securities Financing results.
Other operating income was EUR 50 million positive in the first nine months of 2016, EUR 73 million lower than in the same period of 2015. This was mainly the result of significantly lower hedge accounting-related results and no CVA/DVA results in 2016 (versus EUR 22 million positive CVA/DVA results in the first nine months of 2015). This was partly offset by a positive revaluation of EUR 52 million related to Equens and a gain of EUR 14 million related to the sale of Visa Europe. Both years included provisions related to the part of the Securities Financing activities discontinued in 2009, but the impact was lower in 2016 than in 2015.
Personnel expenses increased by EUR 172 million to EUR 766 million in the first nine months of 2016. This was due mainly to the significant restructuring provision of EUR 144 million in Q3 2016 while 2015 contained several smaller releases from personnel provisions. The average number of FTEs increased slightly.
30 September 2016 30 June 2016 31 December 2015
Income tax in Q3 2015 was negatively impacted
by a reassessment of our tax position.
Securities financing – assets 29.6 27.1 15.5 Loans and receivables – customers (in billions) 8.7 8.7 7.9 Securities financing – liabilities 26.2 20.8 10.2 Due to customers (in billions) 3.6 1.9 2.3 Risk-weighted assets (risk exposure amount; in billions) 9.9 10.0 9.9 FTEs 7,536 7,503 7,522
Other expenses decreased by EUR 94 million compared with the first nine months of 2015. Group Functions had higher project costs related to enhancing client centricity and continuous improvement of products, services and IT processes. The first nine months of 2015 also contained a considerable VAT refund related to the period 2007-2014. This effect was, however, more than offset by the EUR 55 million settlement with Vestia and the fact that more operating expenses were allocated to the commercial segments (recorded as negative expenses).
Income tax expense in the first nine months of 2015 was negatively impacted by a reassessment of our tax position and the tax-exempt Securities Financing provision.
Securities financing assets and liabilities increased by EUR 14.1 billion and EUR 16.0 billion respectively compared with 31 December 2015. This was related to the cyclicality of the business.
Risk, funding & capital information
The following table provides an overview of the quarterly results.
| (in millions) | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
|---|---|---|---|---|---|
| Net interest income | 1,575 | 1,582 | 1,545 | 1,497 | 1,524 |
| Net fee and commission income | 437 | 431 | 435 | 454 | 449 |
| Other operating income | 210 | 188 | -10 | 101 | 136 |
| Operating income | 2,222 | 2,201 | 1,971 | 2,052 | 2,109 |
| Personnel expenses | 765 | 617 | 617 | 640 | 619 |
| Other expenses | 607 | 643 | 702 | 889 | 615 |
| Operating expenses | 1,372 | 1,260 | 1,319 | 1,528 | 1,234 |
| Operating result | 849 | 941 | 651 | 524 | 875 |
| Impairment charges on loans and other receivables |
23 | 54 | 2 | 124 | 94 |
| Operating profit/(loss) before taxation |
826 | 887 | 650 | 399 | 781 |
| Income tax expense | 220 | 225 | 175 | 128 | 272 |
| Underlying profit/(loss) for the period |
607 | 662 | 475 | 272 | 509 |
| Special items | -271 | ||||
| Reported profit/(loss) for the period |
607 | 391 | 475 | 272 | 509 |
To provide a better understanding of the underlying results, ABN AMRO adjusts reported results for defined special items and material divestments.
Special items are material and non-recurring items which are not related to normal business activities. In Q2 2016, the addition to the provision for SMEs withderivative-related issues of EUR 361 million gross (EUR 271 million net of tax) was classified as a special item. This provision was taken based on ABN AMRO's decision to adhere to the advice of the committee of independent experts on the reassessment of SME interest rate derivatives. The increase in the provision is classified as a special item.
38
| Q3 2016 | Q3 2015 | Q2 2016 | |||||
|---|---|---|---|---|---|---|---|
| (in millions) | Underlying | Special items Reported |
Underlying | Special items Reported |
Underlying | Special items |
Reported |
| Net interest income | 1,575 | 1,575 | 1,524 | 1,524 | 1,582 | -10 | 1,572 |
| Net fee and commission income | 437 | 437 | 449 | 449 | 431 | 431 | |
| Other operating income | 210 | 210 | 136 | 136 | 188 | -351 | -163 |
| Operating income | 2,222 | 2,222 | 2,109 | 2,109 | 2,201 | -361 | 1,840 |
| Personnel expenses | 765 | 765 | 619 | 619 | 617 | 617 | |
| Other expenses | 607 | 607 | 615 | 615 | 643 | 643 | |
| Operating expenses | 1,372 | 1,372 | 1,234 | 1,234 | 1,260 | 1,260 | |
| Operating result | 849 | 849 | 875 | 875 | 941 | -361 | 581 |
| Impairment charges on loans and other receivables |
23 | 23 | 94 | 94 | 54 | 54 | |
| Operating profit/(loss) before taxation |
826 | 826 | 781 | 781 | 887 | -361 | 526 |
| Income tax expense | 220 | 220 | 272 | 272 | 225 | -90 | 135 |
| Profit/(loss) for the period | 607 | 607 | 509 | 509 | 662 | -271 | 391 |
| Nine months 2016 | Nine months 2015 | |||||
|---|---|---|---|---|---|---|
| (in millions) | Underlying | Special items |
Reported | Underlying | Special items |
Reported |
| Net interest income | 4,703 | -10 | 4,693 | 4,580 | 4,580 | |
| Net fee and commission income | 1,303 | 1,303 | 1,375 | 1,375 | ||
| Other operating income | 388 | -351 | 37 | 449 | 449 | |
| Operating income | 6,393 | -361 | 6,033 | 6,403 | 6,403 | |
| Personnel expenses | 2,000 | 2,000 | 1,852 | 1,852 | ||
| Other expenses | 1,951 | 1,951 | 1,847 | 1,847 | ||
| Operating expenses | 3,951 | 3,951 | 3,700 | 3,700 | ||
| Operating result | 2,442 | -361 | 2,081 | 2,703 | 2,703 | |
| Impairment charges on loans and other receivables | 79 | 79 | 381 | 381 | ||
| Operating profit/(loss) before taxation | 2,363 | -361 | 2,002 | 2,322 | 2,322 | |
| Income tax expense | 620 | -90 | 530 | 670 | 670 | |
| Profit/(loss) for the period | 1,743 | -271 | 1,472 | 1,652 | 1,652 |
| Key developments | 40 |
|---|---|
| Credit risk | 44 |
| Operational risk | 67 |
| Market risk | 68 |
| Liquidity risk | 70 |
| Funding | 72 |
| Capital management | 75 |
Other Risk, funding & capital information
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Total loans and receivables – customers, gross excluding | |||
| Fair value adjustments | 267,237 | 269,724 | 274,347 |
| Of which Residential mortgages | 147,155 | 146,607 | 146,932 |
| Of which Consumer loans | 14,436 | 14,679 | 15,147 |
| Of which Corporate loans | 91,201 | 93,501 | 100,387 |
| Of which Other loans and receivables – customers | 14,444 | 14,936 | 11,881 |
| Total Exposure at Default (EAD) | 379,668 | 368,267 | 369,169 |
| Total RWA (REA)/total EAD | 27.7% | 28.8% | 29.3% |
| Regulatory capital | |||
| Total RWA (REA) | 105,318 | 106,137 | 108,001 |
| Of which Credit risk2 | 84,155 | 85,596 | 86,063 |
| Of which Operational risk | 17,003 | 17,003 | 16,227 |
| Of which Market risk | 4,160 | 3,539 | 5,710 |
| Fully-loaded CET1 ratio | 16.6% | 16.2% | 15.5% |
| Fully-loaded leverage ratio | 3.7% | 3.7% | 3.8% |
| Credit quality indicators | |||
| Forbearance ratio3 | 3.3% | 3.8% | 3.8% |
| Past due ratio1, 3 | 1.4% | 1.3% | 2.4% |
| Impaired ratio1, 3 | 3.5% | 3.4% | 3.3% |
| Coverage ratio1, 3 | 38.0% | 39.8% | 43.1% |
| Liquidity and funding indicators | |||
| Loan-to-Deposit ratio | 107.0% | 107.7% | 108.4% |
| LCR | >100% | >100% | >100% |
| NSFR | >100% | >100% | >100% |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted excluding the reclassification in allowances for impairments within residential mortgages. For more information on the reclassification in allowances refer to the residential mortgages section.
2 RWA (REA) for credit value adjustment (CVA) is included in credit risk. CVA at 30 September 2016 was EUR 1.0 billion (30 June 2016 EUR 1.2 billion; 31 December 2015 EUR 1.1 billion).
3 Loans and receivables – customers only.
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying Cost of risk (in bps)1 | 3 | 13 | 8 | 4 | 17 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
In order to simplify our reporting and improve comparability with our peers, ABN AMRO aligned the definition of default
and impaired in the third quarter of 2016. As a result, defaulted clients without an impairment allowance are now also considered to be impaired.
The alignment led to an increase of the total impaired exposure of EUR 2.0 billion at 30 September 2016 (30 June 2016: EUR 2.0 billion, 31 December 2015: EUR 1.8 billion). As a result, the impaired and coverage ratio also changed. Furthermore, the past due but not impaired exposure declined. Total impairment allowances remained unchanged.
As the definition of default has not changed, there is no impact on the figures on regulatory capital.
The comparative figures for impaired and past due exposure have been adjusted accordingly. Due to alignment of the definition a EUR 32 million IBNI charge has been reclassified to additions for residential mortgages. Please note that this reclassification was not restated for the comparative figures.
| 30 June 2016 | 30 June 2016 | 31 December 2015 | 31 December 2015 | |
|---|---|---|---|---|
| (in millions) | after adjustment | before adjustment | after adjustment | before adjustment |
| Impaired exposure | 9,196 | 7,192 | 9,177 | 7,388 |
| Of which Banks | 2 | 2 | 2 | 2 |
| Of which Residential mortgages | 1,424 | 967 | 1,511 | 1,031 |
| Of which Consumer loans | 849 | 711 | 1,028 | 860 |
| Of which Corporate loans | 6,646 | 5,320 | 6,179 | 5,244 |
| Of which Other loans and receivables – customers | 218 | 164 | 318 | 210 |
| Credit quality indicators | ||||
| Loans and receivables – customers | ||||
| Past due ratio | 1.3% | 1.6% | 2.4% | 2.7% |
| Impaired ratio | 3.4% | 2.7% | 3.3% | 2.7% |
| Coverage ratio | 39.8% | 50.8% | 43.1% | 53.0% |
| Residential mortgages | ||||
| Past due ratio | 1.3% | 1.5% | 1.7% | 1.9% |
| Impaired ratio | 1.0% | 0.7% | 1.0% | 0.7% |
| Coverage ratio | 14.4% | 21.2% | 16.2% | 23.8% |
| Consumer loans | ||||
| Past due ratio | 3.3% | 3.8% | 3.4% | 4.0% |
| Impaired ratio | 5.8% | 4.8% | 6.8% | 5.7% |
| Coverage ratio | 52.1% | 62.1% | 45.8% | 54.8% |
| Corporate loans | ||||
| Past due ratio | 1.0% | 1.3% | 3.3% | 3.5% |
| Impaired ratio | 7.1% | 5.7% | 6.2% | 5.2% |
| Coverage ratio | 43.9% | 54.9% | 50.1% | 59.1% |
| Other loans and receivables – customers | ||||
| Past due ratio | 1.8% | 2.0% | 2.9% | 3.4% |
| Impaired ratio | 1.5% | 1.1% | 2.7% | 1.8% |
| Coverage ratio | 32.5% | 43.3% | 24.7% | 37.4% |
The residential mortgages portfolio increased to EUR 147.2 billion at 30 September 2016 (30 June 2016: EUR 146.6 billion) due to substantial growth of new mortgage production despite fierce competition (partly
offset by redemptions). Corporate loans decreased to EUR 91.2 billion (30 June 2016: EUR 93.5 billion), primarily as a result of new offsetting arrangements on notional cash pooling (impact of EUR 2.2 billion at 30 September 2016, compared with EUR 5.6 billion at 30 June 2016) in the
third quarter of 2016. Besides this effect, corporate loans rose as a result of growth in ECT Clients. Other loans and receivables declined to EUR 14.4 billion in the third quarter.
Total RWA (REA) decreased to EUR 105.3 billion at 30 September 2016 (30 June 2016: EUR 106.1 billion), mainly due to credit risk. This was mainly the result of model reviews in Retail Banking and decreased business volume in Private Banking. These movements were partly offset by an increase caused by negative interest rates, reflecting the fact that the models for interest rate options were overly conservative. Improved valuation models have been developed and implemented, which will significantly lower the RWA figures. Regulatory approval for the improved valuation models is expected in the course of 2017.
The development of the credit quality indicators is the result of the improved economic climate in the Netherlands. The forbearance ratio improved to 3.3% in Q3 2016. The past due ratio was influenced by the holiday season and tax refunds in Q2 2016 for residential mortgages. The inflow of new impaired exposure in the corporate loan portfolio led to a slight deterioration of the impaired ratio. The coverage ratio declined to 38.0% at 30 September 2016 (30 June 2016: 39.8%).
In the third quarter of 2016, total on-balance impairment charges dropped significantly to EUR 23 million (Q3 2015: EUR 95 million). The decline reflects the improved economic conditions. Impairment charges were largely impacted by a decline in Corporate Banking mainly related to higher releases within Commercial Clients and lower impairment charges within International Clients, largely due to ECT Clients. Cost of risk was low at 3bps in Q3 2016 (Q3 2015: 13bps).
The residential mortgages portfolio grew to EUR 147.2 billion at 30 September 2016 (31 December 2015: EUR 146.9 billion) due to increased new mortgage production partly offset by redemptions. Consumer loans declined to EUR 14.4 billion at 30 September (31 December 2015: EUR 15.1 billion). Corporate loans decreased to EUR 91.2 billion (31 December 2015: EUR 100.4 billion). This decline was primarily the
result of the amendment of the new offsetting policy on notional cash pooling. This amendment led to an increase in corporate loans and inflated the balance sheet. Following adjustment of the policy, mitigating actions were taken to reduce the impact. As a result, the carrying amount has been reduced significantly (impact of EUR 2.2 billion at 30 September 2016, compared with EUR 15.5 billion at 31 December 2015). In addition, corporate loans increased as a result of growth in ECT Clients.
Total RWA (REA) decreased to EUR 105.3 billion at 30 September 2016 (31 December 2015: EUR 108.0 billion), mainly due to credit risk and, to a lesser extent, market risk. Credit risk declined as a result of a decline in the third quarter of 2016 driven by Retail Banking. The movement of market risk was mainly the result of the use of the Internal Model Approach (IMA) as from 1 January 2016 partly offset by negative interest rates, reflecting the fact that the models for interest rate options were overly conservative. Improved valuation models have been developed and implemented, which will significantly lower the RWA figures.
The development of the credit quality indicators is the result of an improved economic climate in the Netherlands. The forbearance ratio improved to 3.3% at 30 September 2016 (31 December 2015: 3.8%) and the past due ratio improved to 1.4% (31 December 2015: 2.4%). The inflow of new impaired exposure in the corporate loan portfolio led to an increased impaired ratio of 3.5% (31 December 2015: 3.3%). The coverage ratio declined to 38.0% (31 December 2015 43.1%).
In the first nine months of 2016, the total on-balance impairment charges decreased significantly to EUR 79 million (first nine months 2015: EUR 379 million). The decrease was mainly attributable to the improved economy in the Netherlands.
The cost of risk dropped to 4bps in the first nine months of 2016 (first nine months 2015: 17bps). Impairment charges were mainly lower in Corporate Banking, in particular at Commercial Clients, partly offset by higher impairment charges at International Clients, mainly in ECT Clients.
RWA (REA) per business segment (end-of-period, in billions)
EAD per business segment (end-of-period, in billions)
Cost of risk per business segment1
Corporate loans (in bps)
excluding fair value adjustments from hedge accounting. Residential mortgages (in %)
Consumer loans (in %)
Consumer loans (in bps)
55
-20
-18 -3
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
41
-4
Corporate loans (in %)
Impaired ratio2
Residential mortgages (in %)
Consumer loans (in %)
Corporate loans (in %)
10
Annualised impairment charges on Loans and receivables – customers for the period divided by average Loans and receivables – customers excluding fair value adjustments
for hedge accounting.
As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison reasons the historical periods before 30 September 2016 have been adjusted excluding the reclassification in allowances for impairments within residential mortgages. For more information on the reclassification in allowances refer to the residential mortgages section.
(in millions)
RWA (REA) flow statement credit risk
RWA (REA) decreased to EUR 84.2 billion at 30 September 2016 (30 June 2016: EUR 85.6 billion). This decrease was mainly the result of lower RWA (REA) due to model reviews within Retail Banking and decreased business volume within Private Banking.
The table below provides an overview of the figures reported in the condensed consolidated balance sheet (net) and the figures reported in the credit risk section (gross).
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (in millions) | Gross carrying amount |
Loan impairment allowance |
Carrying amount |
Gross carrying amount |
Loan impairment allowance |
Carrying amount |
Gross carrying amount |
Loan impairment allowance |
Carrying amount |
| Loans and receivables – banks | 15,679 | 7 | 15,672 | 17,154 | 2 | 17,152 | 15,682 | 2 | 15,680 |
| Residential mortgages | 150,609 | 278 | 150,331 | 150,152 | 286 | 149,866 | 150,333 | 324 | 150,009 |
| Less: Fair value adjustment from hedge accounting |
|||||||||
| on residential mortgages | 3,453 | 3,453 | 3,544 | 3,544 | 3,401 | 3,401 | |||
| Residential mortgages, excluding fair value |
|||||||||
| adjustments | 147,155 | 278 | 146,877 | 146,607 | 286 | 146,322 | 146,932 | 324 | 146,608 |
| Consumer loans | 14,436 | 472 | 13,964 | 14,679 | 508 | 14,171 | 15,147 | 561 | 14,587 |
| Corporate loans2 | 93,382 | 2,995 | 90,387 | 95,659 | 3,094 | 92,564 | 101,835 | 3,380 | 98,454 |
| Less: Fair value adjustment from hedge accounting |
|||||||||
| on corporate loans | 2,181 | 2,181 | 2,157 | 2,157 | 1,448 | 1,448 | |||
| Corporate loans, excluding fair value adjustments2 |
91,201 | 2,995 | 88,206 | 93,501 | 3,094 | 90,407 | 100,387 | 3,380 | 97,007 |
| Other loans and receivables – customers1 |
14,444 | 87 | 14,357 | 14,936 | 82 | 14,854 | 11,882 | 90 | 11,792 |
| Less: Fair value adjustment from hedge accounting on other loans and receivables – customers |
1 | 1 | |||||||
| Other loans and receivables – customers, excluding fair value adjustments1 |
14,444 | 87 | 14,357 | 14,936 | 82 | 14,854 | 11,881 | 90 | 11,791 |
| Total loans and receivables | |||||||||
| – customers, excluding fair value adjustments |
267,237 | 3,833 | 263,404 | 269,724 | 3,970 | 265,754 | 274,347 | 4,355 | 269,992 |
| Fair value adjustments on Loans and receivables – customers |
5,634 | 5,634 | 5,702 | 5,702 | 4,850 | 4,850 | |||
| Total loans and receivables – customers |
272,871 | 3,833 | 269,038 | 275,426 | 3,970 | 271,456 | 279,197 | 4,355 | 274,842 |
| Total loans and receivables, excluding fair value adjustments |
282,916 | 3,840 | 279,076 | 286,878 | 3,972 | 282,906 | 290,029 | 4,357 | 285,672 |
| Total fair value adjustments | |||||||||
| on Loans and receivables Total loans and receivables2 |
5,634 288,550 |
3,840 | 5,634 284,710 |
5,702 292,580 |
3,972 | 5,702 288,608 |
4,850 294,879 |
4,357 | 4,850 290,521 |
| Other | 140,351 | 130,333 | 115,318 | ||||||
| Total assets2 | 425,062 | 418,940 | 405,840 |
1 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
2 ABN AMRO amended its offsetting policy in Q2 2016. The year-end 2015 figures have been adjusted accordingly.
| 30 September 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Collateral received | ||||||||
| (in millions) | Carrying amount |
Master netting agree ment3 |
Financial instru ments |
Property & equip ment |
Other collateral and guarantees |
Total risk mitigation |
Surplus collateral4 |
Net exposure5 |
| Loans and receivables - banks | 15,672 | 7,501 | 1,907 | 57 | 9,466 | 1,565 | 7,771 | |
| Loans and receivables – customers | ||||||||
| Residential mortgages1 | 146,877 | 248 | 175,665 | 6,945 | 182,858 | 49,010 | 13,029 | |
| Consumer loans1 | 13,964 | 6,241 | 5,309 | 30 | 11,581 | 4,844 | 7,227 | |
| Corporate loans1 | 88,206 | 3,882 | 31,707 | 42,521 | 13,600 | 91,711 | 25,719 | 22,213 |
| Other loans and receivables – customers1, 2 | 14,357 | 936 | 3,253 | 3,202 | 1,232 | 8,623 | 902 | 6,637 |
| Fair value adjustment from hedge accounting | 5,634 | 5,634 | ||||||
| Total Loans and receivables – customers |
269,038 | 4,818 | 41,450 | 226,697 | 21,807 | 294,772 | 80,475 | 54,741 |
| Total Loans and receivables | 284,710 | 12,320 | 43,357 | 226,697 | 21,864 | 304,238 | 82,039 | 62,512 |
1 Carrying amount includes loan impairment allowances.
2 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
3 The master netting agreement amount presents legal netting rights and cash collateral. 4 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis.
5 Net exposure represents the portfolio corrected for the surplus amount and gives a view of the potential shortfall in collateral on the total portfolio.
| 30 June 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Collateral received | ||||||||
| (in millions) | Carrying amount |
Master netting agree ment3 |
Financial instru ments |
Property & equipment |
Other collateral and guarantees |
Total risk mitigation |
Surplus collateral4 |
Net exposure5 |
| Loans and receivables - banks | 17,152 | 9,100 | 1,476 | 51 | 10,627 | 1,088 | 7,612 | |
| Loans and receivables – customers | ||||||||
| Residential mortgages1 | 146,322 | 257 | 173,241 | 7,267 | 180,765 | 47,961 | 13,517 | |
| Consumer loans1 | 14,171 | 6,399 | 5,220 | 45 | 11,664 | 4,798 | 7,305 | |
| Corporate loans1 | 90,407 | 2,948 | 33,330 | 40,674 | 13,210 | 90,161 | 22,484 | 22,730 |
| Other loans and receivables – customers1, 2 | 14,854 | 984 | 3,738 | 3,155 | 1,379 | 9,255 | 819 | 6,418 |
| Fair value adjustment from hedge accounting | 5,702 | 5,702 | ||||||
| Total Loans and receivables – customers |
271,456 | 3,932 | 43,724 | 222,290 | 21,900 | 291,846 | 76,062 | 55,672 |
| Total Loans and receivables | 288,608 | 13,032 | 45,199 | 222,290 | 21,952 | 302,473 | 77,150 | 63,284 |
1 Carrying amount includes loan impairment allowances.
2 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
3 The master netting agreement amount presents legal netting rights and cash collateral. 4 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis.
5 Net exposure represents the portfolio corrected for the surplus amount and gives a view of the potential shortfall in collateral on the total portfolio.
| 31 December 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Collateral received | ||||||||
| (in millions) | Carrying amount |
Master netting agree ment5 |
Financial instru ments |
Property & equipment |
Other collateral and guarantees |
Total risk mitigation |
Surplus collateral6 |
Net exposure7 |
| Loans and receivables - banks | 15,680 | 7,282 | 1,742 | 4 | 9,027 | 1,332 | 7,984 | |
| Loans and receivables – customers | ||||||||
| Residential mortgages1, 2 | 146,608 | 160 | 170,418 | 7,887 | 178,465 | 45,877 | 14,020 | |
| Consumer loans1 | 14,587 | 6,474 | 5,419 | 53 | 11,946 | 4,540 | 7,181 | |
| Corporate loans1, 3 | 97,007 | 3,920 | 45,243 | 42,594 | 13,006 | 104,763 | 24,891 | 17,135 |
| Other loans and receivables – customers1, 4 | 11,791 | 748 | 2,590 | 3,006 | 1,406 | 7,750 | 842 | 4,883 |
| Fair value adjustment from hedge accounting | 4,850 | 4,850 | ||||||
| Total Loans and receivables – customers3 |
274,842 | 4,668 | 54,467 | 221,437 | 22,352 | 302,924 | 76,151 | 48,068 |
| Total Loans and receivables3) | 290,521 | 11,950 | 56,209 | 221,437 | 22,356 | 311,951 | 77,483 | 56,053 |
1 Carrying amount includes loan impairment allowances.
2 As of 31 March 2016, ABN AMRO revised the allocation of collateral values for residential mortgages. The year-end 2015 figures have been adjusted for comparison purposes.
3 ABN AMRO amended its offsetting policy in Q2 2016. The year-end 2015 figures have been adjusted accordingly. 4 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
5 The master netting agreement amount presents legal netting rights and cash collateral. 6 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis.
7 Net exposure represents the portfolio corrected for the surplus amount and gives a view of the potential shortfall in collateral on the total portfolio.
Total net exposure of total loans and receivables – customers decreased to EUR 54.7 billion at 30 September 2016 (30 June 2016: EUR 55.7 billion). This decrease was mainly the result of a decline in residential mortgages and corporate loans.
The net exposure of residential mortgages decreased to EUR 13.0 billion (30 June 2016: EUR 13.5 billion) as property & equipment increased by EUR 2.4 billion, coming to EUR 175.7 billion at 30 September 2016. This increase is the result of new client lending in combination with a rise in housing prices. The carrying amount of the increase is smaller (EUR 0.5 billion) as new client lending was partly offset by repayments.
Corporate loans net exposure declined to EUR 22.2 billion at 30 September 2016 (30 June 2016: EUR 22.7 billion), largely due to a higher level of risk mitigation related to an increase in property & equipment and an increase of financial instruments within Clearing.
Total net exposure of total loans and receivables – customers increased to EUR 54.7 billion at 30 September 2016 (31 December 2015: EUR 48.1 billion), mainly due to an increase in corporate loans, other loans and receivables and fair value adjustment from hedge accounting.
Total risk mitigation for residential mortgages increased to EUR 182.9 billion at 30 September 2016 (31 December 2015: EUR 178.5 billion). The increase, which was the result of new client lending in combination with a rise in housing prices, mainly affects surplus collateral and, to a lesser extent, net exposure.
Corporate loans showed a strong decrease in financial instruments to EUR 31.7 billion (31 December 2015: EUR 45.2 billion). The strong decline was mainly accountable to the modification of the offsetting policy in Q2 2016 (impact of EUR 2.2 billion at 30 September 2016, compared with EUR 15.5 billion at 31 December 2015).
The net exposure of other loans and receivables – customers increased to EUR 6.6 billion (31 December 2015: EUR 4.9 billion), mainly due to Clearing.
The following table provides an overview of forborne assets, broken down into performing and non-performing assets, specified by type of forbearance measure.
Clients (potentially) in financial difficulty, for whom contract amendments have been made since 1 January 2012 that are considered concessions on the part of the bank, are accounted for as forborne assets. Contracts that were in a recovery phase at the reporting date are not considered forborne.
| 30 September 2016 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Performing assets3 | Non-performing assets3 | Total | |||||||||
| (in millions) | Gross carrying amount |
Tempo rary modifi cation |
Perma nent modifica tion |
Refi nanc ing |
Total | Tempo rary modifi cation |
Perma nent modifica tion |
Refi nanc ing |
Total | Total forborne assets |
Forbear ance ratio |
| Loans and receivables – banks |
15,679 | 0.0% | |||||||||
| Loans and receivables – customers |
|||||||||||
| Residential mortgages1 | 147,155 | 846 | 16 | 132 | 994 | 197 | 7 | 20 | 224 | 1,219 | 0.8% |
| Consumer loans1 | 14,436 | 125 | 44 | 116 | 284 | 115 | 11 | 146 | 273 | 557 | 3.9% |
| Corporate loans1 | 91,201 | 1,497 | 1,174 | 902 | 3,573 | 675 | 986 | 1,536 | 3,197 | 6,770 | 7.4% |
| Other loans and receivables – customers1, 2 |
14,444 | 101 | 84 | 2 | 186 | 71 | 46 | 2 | 120 | 306 | 2.1% |
| Total Loans and receivables – customers1 |
267,237 | 2,569 | 1,318 | 1,152 | 5,038 | 1,059 | 1,051 | 1,704 | 3,814 | 8,852 | 3.3% |
| Total1 | 282,916 | 2,569 | 1,318 | 1,152 5,038 | 1,059 | 1,051 | 1,704 3,814 | 8,852 | 3.1% |
1 Gross carrying amount excludes fair value adjustments from hedge accounting.
2 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
3 For reporting purposes, performing is considered as non-default and non-performing is considered as default.
| 30 June 2016 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Performing assets4 | Non-performing assets4 | Total | |||||||||
| (in millions) | Gross carrying amount |
Tempo rary modifica tion |
Permanent modifica tion |
Refi nanc ing |
Total | Tempo rary modifica tion |
Permanent modifica tion |
Refi nanc ing |
Total | Total forborne assets |
Forbear ance ratio |
| Loans and receivables – banks |
17,154 | 0.0% | |||||||||
| Loans and receivables – customers |
|||||||||||
| Residential mortgages1 | 146,607 | 870 | 16 | 143 | 1,028 | 230 | 6 | 24 | 261 | 1,289 | 0.9% |
| Consumer loans1, 2 | 14,679 | 155 | 92 | 84 | 331 | 114 | 33 | 136 | 283 | 614 | 4.2% |
| Corporate loans1 | 93,501 | 2,623 | 1,526 | 1,190 | 5,338 | 825 | 1,117 | 857 | 2,799 | 8,137 | 8.7% |
| Other loans and receivables – customers1, 3 |
14,936 | 111 | 82 | 7 | 199 | 83 | 45 | 2 | 130 | 330 | 2.2% |
| Total Loans and receivables - customers1 |
269,724 | 3,759 | 1,715 | 1,423 | 6,897 | 1,252 | 1,201 | 1,020 | 3,473 | 10,370 | 3.8% |
| Total1 | 286,878 | 3,759 | 1,715 | 1,423 | 6,897 | 1,252 | 1,201 | 1,020 | 3,473 | 10,370 | 3.6% |
1 Gross carrying amount excludes fair value adjustments from hedge accounting.
2 Within consumer loans a reclassification was made from performing refinancing to non-performing refinancing. For comparison purposes the historical periods before 30 September 2016 have been adjusted (30 June 2016 EUR 106 milion, 31 December 2015 EUR 132 million).
3 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
4 For reporting purposes, performing is considered as non-default and non-performing is considered as default.
| 31 December 2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Performing assets5 | Non-performing assets5 | Total6 | |||||||||
| (in millions) | Gross carrying amount |
Tempo rary modifica tion |
Permanent modifica tion |
Refi nanc ing |
Total | Tempo rary modifica tion |
Permanent modifica tion |
Refi nanc ing |
Total | Total forborne assets |
Forbear ance ratio |
| Loans and receivables – banks |
15,682 | 0.0% | |||||||||
| Loans and receivables – customers |
|||||||||||
| Residential mortgages1 | 146,932 | 1,122 | 23 | 204 | 1,349 | 354 | 14 | 39 | 408 | 1,757 | 1.2% |
| Consumer loans1, 2 | 15,147 | 174 | 77 | 42 | 293 | 105 | 72 | 179 | 355 | 648 | 4.3% |
| Corporate loans1, 3 | 100,387 | 2,074 | 1,533 | 1,496 | 5,102 | 634 | 938 | 1,041 | 2,613 | 7,715 | 7.7% |
| Other loans and receivables – customers1, 4 |
11,881 | 110 | 39 | 148 | 109 | 124 | 2 | 235 | 383 | 3.2% | |
| Total Loans and receivables – customers1, 3 |
274,347 | 3,481 | 1,671 | 1,741 | 6,893 | 1,202 | 1,148 | 1,262 | 3,611 | 10,504 | 3.8% |
| Total1, 3 | 290,029 | 3,481 | 1,671 | 1,741 | 6,893 | 1,202 | 1,148 | 1,262 | 3,611 | 10,504 | 3.6% |
1 Gross carrying amount excludes fair value adjustments from hedge accounting.
2 Within consumer loans a reclassification was made from performing refinancing to non-performing refinancing. For comparison purposes the historical periods before 30 September 2016 have been adjusted (30 June 2016 EUR 106 milion, 31 December 2015 EUR 132 million).
3 ABN AMRO amended its offsetting policy in Q2 2016. The year-end 2015 figures have been adjusted accordingly.
4 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
5 For reporting purposes, performing is considered as non-default and non-performing is considered as default.
6 As of 31 March 2016, contracts can discontinue the forborne status as a result of passing the probation period (i.e. ceased to be forborne). Ceased to forborne contracts are still included in the year-end 2015 figures.
The total forborne portfolio decreased significantly, amounting to EUR 8.9 billion at 30 September 2016 (30 June 2016: EUR 10.4 billion). This decline was mainly due to developments within the corporate loans portfolio.
Risk, funding & capital information / Credit risk
Total forborne assets for corporate loans decreased to EUR 6.8 billion at 30 September 2016 (30 June 2016: EUR 8.1 billion). This decline was mainly observed within the performing forborne portfolio and was primarily the result of new offsetting arrangements. To a lesser extent, this decline was the result of an outflow of forborne exposures following from forborne contracts passing the probation period (ceased to be forborne). This outflow was mainly related to the food and beverage sector and healthcare sector. The non-performing forborne portfolio with refinancing modifications grew by EUR 0.7 billion, mainly as a result of forborne contracts becoming non-performing during the third quarter of 2016.
The total forborne portfolio decreased significantly, coming to EUR 8.9 billion at 30 September 2016 (31 December 2015: EUR 10.5 billion). This decline was mainly due to developments within the corporate loans and residential mortgages portfolio.
Total forborne assets within residential mortgages dropped to EUR 1.2 billion at 30 September 2016 (31 December 2015: EUR 1.8 billion). The performing forborne portfolio declined by EUR 0.4 billion, mainly as a result of forborne contracts passing the probation period (ceased to be forborne). The non-performing forborne portfolio decreased to EUR 0.2 billion at 30 September 2016 (31 December 2015: EUR 0.4 billion), mainly due to the recovery strategy which was applied to these forborne contracts.
Forborne corporate loans decreased significantly, coming to EUR 6.8 billion at 30 September 2016 (31 December 2015: EUR 7.7 billion). The decline was fully observed within the performing part of the forborne corporate loans. The performing forborne portfolio with temporary measures decreased, mainly as a result of new offsetting arrangements and, to a lesser extent, forborne contracts passing the probation period (ceased to be forborne). This decline was partly offset by an inflow of new forborne exposure, which mainly related to the industrial goods and services sector and, to a lesser extent, to the oil and gas sector. The performing forborne portfolio with refinancing measures decreased to EUR 0.9 billion at 30 September 2016 (31 December 2015: EUR 1.5 billion), mainly due to performing forborne contracts becoming non-performing. To a lesser extent, this decline was accountable to forborne contracts passing the probation period (ceased to be forborne).
| 30 September 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Carrying amount | Days past due | ||||||||
| (in millions) | Gross | Assets not classified as impaired1 |
<= 30 days |
> 30 days & <= 60 days |
> 60 days & <= 90 days |
> 90 days | Total past due but not impaired1 |
Past due ratio1 |
|
| Loans and receivables – banks | 15,679 | 15,677 | 0.0% | ||||||
| Loans and receivables – customers | |||||||||
| Residential mortgages2 | 147,155 | 145,846 | 2,072 | 181 | 42 | 12 | 2,307 | 1.6% | |
| Consumer loans2 | 14,436 | 13,613 | 294 | 86 | 22 | 89 | 491 | 3.4% | |
| Corporate loans2 | 91,201 | 84,226 | 506 | 84 | 26 | 123 | 739 | 0.8% | |
| Other loans and receivables – customers2, 3 | 14,444 | 14,210 | 117 | 73 | 4 | 18 | 212 | 1.5% | |
| Total Loans and receivables – customers |
267,237 | 257,895 | 2,989 | 424 | 94 | 243 | 3,750 | 1.4% | |
| Total Loans and receivables | 282,916 | 273,572 | 2,989 | 424 | 94 | 243 | 3,750 | 1.3% |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted.
2 Gross carrying amount excludes fair value adjustments from hedge accounting.
3 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
| 30 June 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Carrying amount | Days past due | |||||||
| (in millions) | Gross | Assets not classified as impaired1 |
<= 30 days | > 30 days & <= 60 days |
> 60 days & <= 90 days |
> 90 days | Total past due but not impaired1 |
Past due ratio1 |
| Loans and receivables - banks | 17,154 | 17,153 | 0.0% | |||||
| Loans and receivables – customers | ||||||||
| Residential mortgages2 | 146,607 | 145,183 | 1,697 | 165 | 36 | 1,899 | 1.3% | |
| Consumer loans2 | 14,679 | 13,831 | 285 | 73 | 50 | 79 | 487 | 3.3% |
| Corporate loans2 | 93,501 | 86,856 | 603 | 117 | 53 | 166 | 939 | 1.0% |
| Other loans and receivables – customers2, 3 | 14,936 | 14,718 | 204 | 14 | 8 | 46 | 272 | 1.8% |
| Total Loans and receivables – customers |
269,724 | 260,588 | 2,790 | 368 | 148 | 290 | 3,597 | 1.3% |
| Total Loans and receivables | 286,878 | 277,740 | 2,790 | 368 | 148 | 290 | 3,597 | 1.3% |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted.
2 Gross carrying amount excludes fair value adjustments from hedge accounting.
3 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
30 September 2016
51
| 31 December 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Carrying amount | Days past due | |||||||
| (in millions) | Gross | Assets not classified as impaired1 |
<= 30 days | > 30 days & <= 60 days |
> 60 days & <= 90 days |
> 90 days | Total past due but not impaired1 |
Past due ratio1 |
| Loans and receivables - banks | 15,682 | 15,680 | 0.0% | |||||
| Loans and receivables – customers | ||||||||
| Residential mortgages2 | 146,932 | 145,421 | 2,164 | 239 | 51 | 2,455 | 1.7% | |
| Consumer loans2 | 15,147 | 14,119 | 301 | 115 | 28 | 75 | 520 | 3.4% |
| Corporate loans2 | 100,387 | 94,208 | 3,019 | 117 | 6 | 146 | 3,287 | 3.3% |
| Other loans and receivables – customers2, 3 | 11,881 | 11,563 | 185 | 27 | 15 | 124 | 350 | 2.9% |
| Total Loans and receivables – customers2 |
274,347 | 265,310 | 5,669 | 498 | 100 | 345 | 6,612 | 2.4% |
| Total Loans and receivables2) | 290,029 | 280,990 | 5,669 | 498 | 100 | 345 | 6,612 | 2.3% |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted.
2 Gross carrying amount excludes fair value adjustments from hedge accounting. 3 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
The total past due exposure on loans and receivables – customers increased to EUR 3.8 billion at 30 September 2016 (30 June 2016: EUR 3.6 billion).
Past due exposure on residential mortgages rose to EUR 2.3 billion at 30 September 2016 (30 June 2016: EUR 1.9 billion) and was mainly related to the <= 30 days past due bucket. A rise in past due exposures is often seen in the third quarter of each year, on account of the summer holidays. Past due exposures are usually at lower levels in the second quarter of the year, influenced by the payment of holiday allowances and tax refunds. Note that the past due exposure at 30 June 2016 was at a historically low level.
The decline in past due exposure for corporate loans, arriving at EUR 0.7 billion on 30 September 2016 (30 June 2016: EUR 0.9 billion), was driven by International Clients, some of which are ECT Clients mainly related to the industrial goods and services sector.
The total past due exposure on loans and receivables dropped to EUR 3.8 billion at 30 September 2016 (31 December 2015: EUR 6.6 billion).
Past due exposure on residential mortgages decreased to EUR 2.3 billion at 30 September 2016 (31 December 2015: EUR 2.5 billion), on the back of the continued improvement of the Dutch economy.
The decrease in corporate loans past due was mainly attributable to a decline of EUR 2.5 billion in the <= 30 days past due bucket and related mainly to new offsetting arrangements.
| 30 September 2016 | |||||
|---|---|---|---|---|---|
| (in millions) | Gross carrying amount |
Impaired exposures |
Allowances for Impairments for identified credit risk |
Coverage ratio | Impaired ratio |
| Loans and receivables – banks | 15,679 | 2 | -2 | 100.0% | 0.0% |
| Loans and receivables – customers |
|||||
| Residential mortgages1 | 147,155 | 1,309 | -229 | 17.5% | 0.9% |
| Consumer loans1 | 14,436 | 823 | -414 | 50.3% | 5.7% |
| Corporate loans1 | 91,201 | 6,975 | -2,828 | 40.5% | 7.6% |
| Other loans and receivables – customers1, 2 | 14,444 | 234 | -75 | 31.8% | 1.6% |
| Total Loans and receivables - customers1 |
267,237 | 9,342 | -3,546 | 38.0% | 3.5% |
| Total Loans and receivables1, 3 | 282,916 | 9,344 | -3,548 | 38.0% | 3.3% |
| Securities financing | 40,123 | 100.0% | |||
| Total on- and off-balance sheet | 439,872 | 9,402 | -3,553 | 37.8% | 2.1% |
1 Gross carrying amount excludes fair value adjustments from hedge accounting.
2 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
3 Amounts excluding Incurred But Not Identified (IBNI).
| 30 June 2016 | |||||
|---|---|---|---|---|---|
| (in millions) | Gross carrying amount |
Impaired exposures1 |
Allowances for Impairments for identified credit risk1 |
Coverage ratio1 | Impaired ratio1 |
| Loans and receivables – banks | 17,154 | 2 | -2 | 100.0% | 0.0% |
| Loans and receivables – customers | |||||
| Residential mortgages2 | 146,607 | 1,424 | -205 | 14.4% | 1.0% |
| Consumer loans2 | 14,679 | 849 | -442 | 52.1% | 5.8% |
| Corporate loans2, 3 | 93,501 | 6,646 | -2,919 | 43.9% | 7.1% |
| Other loans and receivables – customers2, 3, 4 | 14,936 | 218 | -71 | 32.5% | 1.5% |
| Total Loans and receivables - customers2, 4 |
269,724 | 9,137 | -3,637 | 39.8% | 3.4% |
| Total Loans and receivables2, 4 | 286,878 | 9,138 | -3,638 | 39.8% | 3.2% |
| Securities financing | 34,461 | 100.0% | |||
| Total on- and off-balance sheet | 439,650 | 9,196 | -3,643 | 39.6% | 2.1% |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted excluding the reclassification in allowances for impairments within residential mortgages. For more information on the reclassification in allowances refer to the residential mortgages section. 2 Gross carrying amount excludes fair value adjustments from hedge accounting.
3 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
4 Amounts excluding Incurred But Not Identified (IBNI).
| 31 December 2015 | |||||
|---|---|---|---|---|---|
| (in millions) | Gross carrying amount |
Impaired exposures1 |
Allowances for Impairments for identified credit risk1 |
Coverage ratio1 | Impaired ratio1 |
| Loans and receivables – banks | 15,682 | 2 | -2 | 100.0% | 0.0% |
| Loans and receivables – customers | |||||
| Residential mortgages2, 3 | 146,932 | 1,511 | -245 | 16.2% | 1.0% |
| Consumer loans3 | 15,147 | 1,028 | -471 | 45.8% | 6.8% |
| Corporate loans2, 3 | 100,387 | 6,179 | -3,098 | 50.1% | 6.2% |
| Other loans and receivables – customers2, 3, 4 | 11,881 | 318 | -78 | 24.7% | 2.7% |
| Total Loans and receivables | |||||
| - customers2, 3 | 274,347 | 9,037 | -3,892 | 43.1% | 3.3% |
| Total Loans and receivables2, 5 | 290,029 | 9,039 | -3,894 | 43.1% | 3.1% |
| Securities financing | 20,073 | 11 | -11 | 100.0% | 0.1% |
| Total on- and off-balance sheet2 | 430,305 | 9,177 | -3,909 | 42.6% | 2.1% |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted excluding the reclassification in allowances for impairments within residential mortgages. For more information on the reclassification in allowances refer to the residential mortgages section.
2 ABN AMRO amended its offsetting policy in Q2 2016. The year-end 2015 figures have been adjusted accordingly.
3 Gross carrying amount excludes fair value adjustments from hedge accounting. 4 Other loans and receivables – customers consists of government and official institutions, financial lease receivables and factoring.
5 Amounts excluding Incurred But Not Identified (IBNI).
Impaired exposures for total loans and receivables increased to EUR 9.3 billion at 30 September 2016 (30 June 2016: EUR 9.1 billion). This increase was mainly related to a rise in corporate loans and was partly offset by residential mortgages. Allowances for impairments decreased for corporate and consumer loans, in line with the continued upturn in the Dutch economy.
As of 30 September 2016, ABN AMRO aligned the definitions of default and impaired in the third quarter of 2016. As a result, defaulted clients without an impairment allowance are now also considered impaired. The comparative figures for the impaired portfolio as at 30 June 2016 and 31 December 2015 have been restated accordingly. Due to this change, there has been a reclassification of allowances for impairments for residential mortgages. The IBNI allowances for exposures at default without an impairment allowance, totalling EUR 32 million, were reclassified as allowances for impairment for identified credit risk. Please note that this impact on allowances for impairments has not been restated for the comparative figures.
Impaired residential mortgages declined to EUR 1.3 billion at 30 September 2016 (30 June 2016: EUR 1.4 billion). The decline was caused by a lower inflow into the impaired portfolio and a consistently high level of outflow from the impaired portfolio. The high outflow is the result of a growing outflow of clients to the performing portfolio and a higher demand for houses, enabling faster settlement of files in long-term arrears. Combined with the EUR 0.5 billion increase of the mortgage portfolio, this resulted in an improved impaired ratio of 0.9%. Allowances for impairments increased as a result of the aligned definition of 'impaired', which resulted in a coverage ratio of 17.5%.
Impaired corporate loans rose due to new impaired files in ECT Clients and a single large file in the Commercial Clients portfolio. The coverage ratio of these files was relatively low, resulting in a higher impaired ratio of 7.6% and a lower coverage ratio of 40.5%.
Impaired exposures for total loans and receivables increased to EUR 9.3 billion at 30 September 2016 (31 December 2015: EUR 9.0 billion), mainly due to an increase in impaired
corporate loans. Allowances for impairments dropped to EUR 3.5 billion at 30 September 2016 (31 December 2015: EUR 3.9 billion), also driven by corporate loans due to the continued upturn in the Dutch economy.
The impaired residential mortgages declined to EUR 1.3 billion at 30 September 2016 (31 December 2015: EUR 1.5 billion), due to a lower inflow into the impaired portfolio and a continued high level of outflow from the impaired portfolio. Despite the reclassification of EUR 32 million to allowances for impairment for identified credit risk (as a result of the alignment of the definitions of default and impaired), the allowances declined due to the upturn in the Dutch housing market. Overall, we noted an improved impaired ratio of 0.9% and a coverage ratio of 17.5%.
Impaired exposure as well as allowances for impairments for consumer loans declined in the first nine months of this year, mainly as a result of the improved Dutch economy.
This led to a slightly improved impaired ratio of 5.7% and a coverage ratio of 50.3%.
New impaired files in the ECT Clients portfolio related to the oil and gas industry, and a single large file in the Commercial Clients portfolio caused the impaired corporate loans to rise to EUR 7.0 billion (31 December 2015: EUR 6.2 billion). The impacted exposures have a relatively low coverage ratio as these exposures are largely collateralised. In addition to these incidents, several reversals were also noted in the Commercial Clients portfolio with a higher coverage ratio, resulting in a higher impaired ratio of 7.6% and a lower coverage ratio of 40.5%.
The impaired ratio for other loans and receivables improved to 1.6% and the coverage ratio rose to 31.8% at 30 September 2016. These movements were mainly the result of a lower impaired exposure.
| Q3 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Securities | Corporate | Residential | Consumer | ||||
| (in millions) | financing | Banks | loans1 | mortgages | loans | Other loans | Total |
| Balance at begin of period | 2 | 3,176 | 286 | 508 | 3,973 | ||
| Impairment charges for the period | 5 | 240 | 54 | 34 | 2 | 334 | |
| Reversal of impairment allowances no longer required |
-235 | -32 | -26 | -293 | |||
| Recoveries of amounts previously written-off |
-4 | -6 | -9 | -19 | |||
| Total impairment charges on loans and other receivables |
5 | 2 | 15 | -1 | 2 | 23 | |
| Amount recorded in interest income from unwinding of discounting |
-12 | -8 | -2 | -22 | |||
| Currency translation differences | -20 | -20 | |||||
| Amounts written-off (net) | -105 | -14 | -33 | -152 | |||
| Reserve for unearned interest accrued on impaired loans |
20 | 3 | 23 | ||||
| Other adjustments | 18 | -1 | -2 | 15 | |||
| Balance at end of period | 7 | 3,080 | 278 | 472 | 2 | 3,840 | |
| Reconciliation from reported to underlying impairment charges |
|||||||
| Total reported on-balance sheet impairment charges on loans and other receivables |
5 | 2 | 15 | -1 | 2 | 23 | |
| Total underlying on-balance sheet impairment charges on loans and other receivables |
5 | 2 | 15 | -1 | 2 | 23 | |
1 Corporate loans includes financial lease receivables and factoring.
| Q3 2015 | |||||||
|---|---|---|---|---|---|---|---|
| (in millions) | Securities financing |
Banks | Corporate loans1 |
Residential mortgages2 |
Consumer loans |
Other loans | Total |
| Balance as at begin of period | 10 | 3,497 | 402 | 640 | 130 | 4,680 | |
| Impairment charges for the period | 1 | 207 | 46 | 46 | 7 | 307 | |
| Reversal of impairment allowances no longer required |
-159 | -18 | -14 | -6 | -196 | ||
| Recoveries of amounts previously written-off |
-7 | -10 | -17 | ||||
| Total impairment charges on loans and other receivables |
1 | 48 | 22 | 21 | 2 | 95 | |
| Amount recorded in interest income from unwinding of discounting |
-10 | -12 | -2 | -2 | -27 | ||
| Currency translation differences | -6 | -1 | -7 | ||||
| Amounts written-off (net) | -123 | -38 | -41 | -22 | -223 | ||
| Reserve for unearned interest accrued on impaired loans |
18 | 1 | 3 | 22 | |||
| Other adjustments | 2 | -2 | -2 | ||||
| Balance as at end of period | 10 | 3 | 3,421 | 374 | 620 | 109 | 4,537 |
| Reconciliation from reported to underlying impairment charges |
|||||||
| Total reported on-balance impairment charges on loans and other receivables |
1 | 48 | 22 | 21 | 2 | 95 | |
| Total underlying on-balance impairment charges on loans and other receivables |
1 | 48 | 22 | 21 | 2 | 95 | |
1 Corporate loans includes financial lease receivables and factoring.
2 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016
have been adjusted excluding the reclassification from IBNI to allowances for impairments for identified credit risk within residential mortgages.
| (in millions) | Q3 2016 | Q3 2015 |
|---|---|---|
| On-balance sheet | 23 | 95 |
| Off-balance sheet | ||
| Total impairment charges on loans and other receivables | 23 | 94 |
Total on-balance impairment charges decreased to EUR 23 million in Q3 2016 (Q3 2015: EUR 95 million). The largest decline was recorded for corporate loans (EUR 46 million), reflecting the improved economic conditions.
Impairment charges for corporate loans dropped considerably, amounting to EUR 2 million in Q3 2016 (Q3 2015: EUR 48 million). This decline was driven by Commercial Clients, despite a single large file, where higher releases resulted from the continued upturn in the Dutch economy. Furthermore, lower additions were recorded in the ECT Clients portfolio within International Clients, partly offset by an IBNI charge.
Impairment charges for residential mortgages declined to EUR 15 million at Q3 2016 (Q3 2015: EUR 22 million). As a result of the aligned definitions of default and impaired in Q3 2016, a EUR 32 million IBNI charge has been reclassified to additions for residential mortgages. Please note that this reclassification has not been restated for the comparative figures.
As a result of lower additions and higher releases related to a lower IBNI charge and a release for pilot financing activities, impairment charges for consumer loans came to a small release of EUR 1 million in Q3 2016 (Q3 2015: EUR 21 million).
| Nine months 2016 | |||||||
|---|---|---|---|---|---|---|---|
| (in millions) | Securities financing |
Banks | Corporate loans1 |
Residential mortgages2 |
Consumer loans |
Other loans | Total |
| Balance as at 1 January | 11 | 2 | 3,470 | 324 | 561 | 1 | 4,368 |
| Impairment charges for the period | 5 | 593 | 99 | 122 | 2 | 821 | |
| Reversal of impairment allowances no longer required |
-2 | -566 | -32 | -80 | -680 | ||
| Recoveries of amounts previously written-off |
-14 | -19 | -29 | -61 | |||
| Total impairment charges on loans and other receivables |
-2 | 4 | 14 | 48 | 12 | 2 | 79 |
| Amount recorded in interest income from unwinding of discounting |
-33 | -28 | -6 | -66 | |||
| Currency translation differences | -19 | -19 | |||||
| Amounts written-off (net) | -8 | -413 | -71 | -99 | -590 | ||
| Reserve for unearned interest accrued on impaired loans |
58 | 12 | 70 | ||||
| Other adjustments | 3 | 5 | -8 | -1 | -1 | ||
| Balance as at 30 September | 7 | 3,080 | 278 | 472 | 2 | 3,840 | |
| Reconciliation from reported to underlying impairment charges |
|||||||
| Total reported on-balance sheet impairment charges on loans and other receivables |
-2 | 4 | 14 | 48 | 12 | 2 | 79 |
| Total underlying on-balance sheet impairment charges on loans |
|||||||
| and other receivables | -2 | 4 | 14 | 48 | 12 | 2 | 79 |
1 Corporate loans includes financial lease receivables and factoring.
2 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted excluding the reclassification from IBNI to allowances for impairments for identified credit risk within residential mortgages.
57
| Nine months 2015 | |||||||
|---|---|---|---|---|---|---|---|
| (in millions) | Securities financing |
Banks | Corporate loans1 |
Residential mortgages2 |
Consumer loans |
Other loans | Total |
| Balance as at 1 January | 11 | 3,439 | 538 | 654 | 129 | 4,771 | |
| Impairment charges for the period | 1 | 760 | 114 | 135 | 23 | 1,033 | |
| Reversal of impairment allowances no longer required |
-1 | -441 | -87 | -55 | -16 | -599 | |
| Recoveries of amounts previously written-off |
-6 | -18 | -30 | -55 | |||
| Total impairment charges on loans and other receivables |
-1 | 1 | 313 | 8 | 50 | 7 | 379 |
| Amount recorded in interest income from unwinding of discounting |
-33 | -40 | -8 | -2 | -83 | ||
| Currency translation differences | 1 | 46 | 2 | 49 | |||
| Amounts written-off (net) | -376 | -128 | -102 | -30 | -636 | ||
| Reserve for unearned interest accrued on impaired loans |
45 | 10 | 3 | 58 | |||
| Other adjustments | 2 | -14 | -5 | 16 | -2 | ||
| Balance as at 30 September | 10 | 3 | 3,421 | 374 | 620 | 109 | 4,537 |
| Reconciliation from reported to underlying impairment charges |
|||||||
| Total reported on-balance sheet impairment charges on loans and other receivables |
-1 | 1 | 313 | 8 | 50 | 7 | 379 |
| Total underlying on-balance sheet impairment charges on loans and other receivables |
-1 | 1 | 313 | 8 | 50 | 7 | 379 |
1 Corporate loans includes financial lease receivables and factoring.
2 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted excluding the reclassification from IBNI to allowances for impairments for identified credit risk within residential mortgages.
| (in millions) | Nine months 2016 | Nine months 2015 |
|---|---|---|
| On-balance sheet | 79 | 379 |
| Off-balance sheet | 2 | |
| Total impairment charges on loans and other receivables | 79 | 381 |
Total on-balance impairment charges decreased significantly to EUR 79 million in 9M 2016 (9M 2015: EUR 379 million). The largest decline was recorded in corporate loans (EUR 299 million). The decline reflects the improved Dutch economy.
Impairment charges for corporate loans dropped to EUR 14 million in 9M 2016 (9M 2015: EUR 313 million). This decline was driven by significantly higher releases within Commercial Clients as a result of the continued improvement of the Dutch economy, and partly offset by additions in International Clients, mainly related to the energy and transportation sectors. The additions in International Clients were mainly recorded in Q2 2016.
Impairment charges for residential mortgages rose to EUR 48 million in 9M 2016 (9M 2015: EUR 8 million).
The increase was mainly the result of lower (IBNI) reversals in 2016. The residential mortgages portfolio is still benefiting from the upturn in the Dutch housing market and is still below the through-the-cycle cost of risk of 5-7bps. Impairment charges for consumer loans declined to EUR 12 million in 9M 2016 (9M 2015: EUR 50 million). The decline was mainly the result of higher reversals in 2016, including a higher IBNI release.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|---|
| (in millions) | Impaired exposures |
Allowances for impairments for identified credit risk |
Impaired exposures1 |
Allowances for impairments for identified credit risk1 |
Impaired exposures1 |
Allowances for impairments for identified credit risk1 |
|
| Industry sector | |||||||
| Banks | 2 | -2 | 1 | -2 | 12 | -12 | |
| Financial services2, 3 | 765 | -632 | 779 | -647 | 947 | -696 | |
| Industrial goods and services2 | 1,968 | -571 | 1,474 | -544 | 1,392 | -608 | |
| Real estate2 | 718 | -238 | 775 | -261 | 852 | -324 | |
| Oil and gas2 | 788 | -172 | 549 | -162 | 185 | -73 | |
| Food and beverage2 | 756 | -190 | 802 | -229 | 719 | -246 | |
| Retail2 | 620 | -210 | 716 | -236 | 695 | -282 | |
| Basic resources2 | 350 | -219 | 368 | -225 | 430 | -223 | |
| Healthcare2 | 165 | -146 | 220 | -148 | 234 | -167 | |
| Construction and materials2 | 507 | -253 | 546 | -260 | 591 | -285 | |
| Travel and leisure2 | 194 | -73 | 222 | -78 | 222 | -88 | |
| Other2, 4 | 458 | -208 | 490 | -219 | 450 | -207 | |
| Subtotal Industry Classification Benchmark2 |
7,291 | -2,914 | 6,942 | -3,012 | 6,730 | -3,210 | |
| Private individuals (non-Industry Classification Benchmark) |
2,111 | -638 | 2,254 | -631 | 2,447 | -698 | |
| Public administration (non-Industry Classification Benchmark)2 |
1 | ||||||
| Subtotal non-Industry Classification Benchmark |
2,112 | -638 | 2,254 | -632 | 2,448 | -698 | |
| Total2, 5 | 9,402 | -3,553 | 9,196 | -3,643 | 9,177 | -3,909 |
1 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. For comparison purposes the historical periods before 30 September 2016 have been adjusted excluding the reclassification in allowances for impairments within residential mortgages. For more information on the reclassification in allowances refer to the residential mortgages section.
2 ABN AMRO amended its offsetting policy in Q2 2016. The year-end 2015 figures have been adjusted accordingly.
3 Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.
4 Other includes, personal and household goods, media, technology, automobiles and parts, chemicals, telecommunication and insurance, in addition to unclassified.
5 Amounts excluding Incurred But Not Identified (IBNI).
Impaired exposures increased to EUR 9.4 billion at 30 September 2016 (30 June 2016: EUR 9.2 billion). Allowances for impairments remained stable at EUR 3.6 billion.
An increase in impaired exposures at industry level was noted for industrial goods and services, mainly due to a single file in the Commercial Clients portfolio. Oil and gas rose considerably on the back of files related to ECT Clients. Please note that these new files are in a restructuring phase where mitigating actions are being taken. Based on the underlying collateral, these files have a relatively low coverage ratio.
The industry sectors real estate and basic resources declined as a result of clients returning to the performing
portfolio. Private individuals declined mainly due to a continued high level of outflow out of, and lower inflow into, the impaired portfolio for residential mortgages.
Several other industry sectors also recorded lower impaired exposures as a result of the continued improvement of the economy.
Impaired exposures increased to EUR 9.4 billion at 30 September 2016 (31 December 2015: EUR 9.2 billion). Allowances for impairments dropped to EUR 3.6 billion (31 December 2015: EUR 3.9 billion).
Increases in impaired exposures were noted at industry level for industrial goods and services, mainly due to a single file in the Commercial Clients portfolio, while oil and gas rose sharply due to files related to ECT Clients. Please note that these new files are in a restructuring phase where mitigating actions are being taken. Based on the underlying collateral, these files have a relatively low coverage ratio.
Financial services dropped mainly as a result of clients fully repaying their debts in combination with write-offs recorded in Q1 2016. Real estate benefited from the improved economic environment and, consequently, the impaired exposures declined. The releases in the allowances for impairments for real estate were mainly attributable to an improvement in the underlying collateral values.
The industry sectors construction and materials and retail declined due to repayments of loans and, to a lesser extent, write-offs. Basic resources benefited from clients returning to the performing portfolio.
Impaired exposures and allowances for impairments for private individuals declined mainly due to a continued high level of outflow out of, and lower inflow into, the impaired portfolio for residential mortgages.
The Dutch housing market showed a sustainable and strong upturn. The ongoing recovery of the Dutch economy combined with low interest rates, strong demand and a lack of supply have led to a sharp increase in transaction volumes and the strongest rise in house prices in 14 years. According to Statistics Netherlands (CBS), the number of transactions in the Dutch housing market was up 20% on Q3 2015 (and rose by 22% in 9M 2016 compared with the same period last year). The CBS housing price index increased 2.5% in Q3 2016.
ABN AMRO's market share in new mortgage production, at 23.1%1 , was significantly higher in Q3 2016 (Q2 2016: 19.6%). The strength of the Dutch housing market is reflected in ABN AMRO's production of new mortgages, which was 35% higher in Q3 2016 than in Q2 2016 and 8% higher in 9M 2016 compared with the same period last year. The NHG proportion of new mortgage production decreased further to 19% in the Q3 2016, compared with 22% in Q2 2016.
Total redemptions in Q3 2016 amounted to EUR 3.4 billion (Q2 2016: EUR 3.0 billion). Total redemptions for 9M 2016 amounted to EUR 9.1 billion (9M 2015: EUR 8.4 billion). Contractual repayments gradually grew, following current tax regulations. Extra repayments amounted to EUR 0.4 billion in Q3 2016, which was slightly higher than in the same quarter last year. Incentives for the current extra redemptions are very low interest rates on savings and an increased awareness among homeowners of the possibility of residual debt at the end of their loan term.
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Gross carrying amount excl. fair value adjustment from hedge accounting | 147,155 | 146,607 | 146,932 |
| Of which Nationale Hypotheek Garantie (NHG) | 38,553 | 38,654 | 38,872 |
| Fair value adjustment from hedge accounting | 3,453 | 3,544 | 3,401 |
| Gross carrying amount | 150,609 | 150,152 | 150,333 |
| Exposure at Default1 Risk-weighted assets/ risk exposure amount1 |
163,407 19,395 |
162,073 19,538 |
162,405 20,779 |
| RWA (REA)/EAD | 11.9% | 12.1% | 12.8% |
| Forbearance ratio | 0.8% | 0.9% | 1.2% |
| Past due ratio3 | 1.6% | 1.3% | 1.7% |
| Impaired ratio3 | 0.9% | 1.0% | 1.0% |
| Coverage ratio3 | 17.5% | 14.4% | 16.2% |
| Average Loan-to-Market-Value | 78% | 79% | 81% |
| Average Loan-to-Market-Value – excluding NHG loans | 74% | 75% | 77% |
| Total risk mitigation2 | 182,858 | 180,765 | 178,465 |
| Total risk mitigation/carrying amount | 121.4% | 120.4% | 118.7% |
1 The RWA (REA) 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.
2 As of 31 March 2016, ABN AMRO revised the allocation of collateral values for residential mortgages. The year-end 2015 figures have been adjusted for comparison purposes.
3 As of 30 September 2016 ABN AMRO aligned the definition of default and impaired. Comparing figures have been adjusted excluding the reclassification in allowances for impairments for residential mortgages.
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Underlying Cost of risk (in bps)1 | 4 | 6 | 2 | 4 | 1 |
1 Annualised impairment charges on loans and receivables – customers for the period divided by the average loans and receivables – customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting.
The gross carrying amount of the residential mortgage portfolio amounted to EUR 147.2 billion at 30 September 2016 (30 June 2016: EUR 146.6 billion; 31 December 2015: EUR 146.9 billion). New mortgage production increased substantially. NHG-guaranteed loans accounted for 26% of the residential mortgage portfolio.
The RWA (REA) for the residential mortgage portfolio decreased to EUR 19.4 billion at 30 September 2016 (30 June 2016: EUR 19.5 billion; 31 December 2015: 20.8 billion) due to a lower probability of default (related to decreasing exposures arrears) and lower expected losses in case of a default (due to rising house prices).
EAD increased to EUR 163.4 billion at 30 September 2016 (30 June 2016: EUR 162.1 billion; 31 December 2015 162.4 billion), in line with the growing mortgage portfolio.
The forbearance ratio decreased slightly to 0.8% (30 June 2016: 0.9%; 31 December 2015 1.2%). The past due (but not impaired) ratio increased to 1.6% at 30 September (30 June 2016: 1.3%; 31 December 2015: 1.7%). Higher levels of past due ratios are often seen in the third quarter of each year, on account of the summer holidays. Past due exposures are usually at lower levels in the second quarter of the year, influenced by the payment of holiday allowances and tax refunds. Note that the past due exposure at 30 June 2016 was at a historically low level.
As of 30 September 2016, ABN AMRO aligned the definitions of default and impaired. As a result, defaulting clients without an impairment allowance are now also considered impaired. The comparative figures for the impaired portfolio for 30 June 2016 and 31 December 2015 have been restated accordingly. Due to this change, there has been a reclassification in allowances for impairments for residential mortgages. The IBNI allowances for exposures at default without an impairment allowance, totalling EUR 32 million, were reclassified as allowances for impairment for identified credit risk. Please note that this impact on allowances for impairments has not been restated for the comparative figures.
The impaired ratio continued to decline, coming down to 0.9% at 30 September 2016 (30 June 2016: 1.0%; 31 December 2015: 1.0%). This was caused by a lower inflow into the impaired portfolio and a continued high level of outflow from the impaired portfolio. The high outflow is the result of a higher outflow of clients to the performing portfolio as well as a higher demand for houses, which enables faster settlement of files in long-term arrears. The upswing in the housing market and improved economic conditions led to a higher recovery rate. The average residual debt on foreclosures is at a low level, in line with previous quarters.
The coverage ratio came to 17.5% at 30 September 2016 (30 June 2016: 14.4%; 31 December 2015: 16.2%).
Both the impaired portfolio and allowances for credit risk decreased as a result of the sustained improvement of the economy. If the impact on allowances for impairments had been adjusted historically, the coverage ratio would have been 16.7% at 30 June 2016 and 18.5% at 31 December 2015.
Annualised cost of risk for 9M 2016 remained low at 4bps.
The risk profile of the residential mortgage portfolio proved to be low in the years of economic downturn and has been improving since 2014. Impairments are low across the average loan book.
The increase in house prices and restrictions on the maximum Loan to Market Value (LtMV) for new residential mortgages resulted in a further improvement of the average LtMV of the mortgage portfolio, which amounted to 78% at 30 September 2016 (30 June 2016: 79%; 31 December 2015: 81%). The same trend can be noted for the LtMVs excluding NHG. Extra repayments on residential mortgage loans have a small impact on the highest LtMV categories. Approximately 14% of the extra repayments are related to mortgages with an LtMV >100%.
The long-term LtMV of the bank's portfolio is expected to decrease further, as a result of the regulatory reduction of the maximum LtMV on mortgage loans, recovering house prices and redemptions.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | Gross carrying amount |
Per centage of total |
- of which guaran teed3 |
- of which unguar anteed |
Gross carrying amount |
Percent age of total |
- of which guaran teed3 |
- of which unguar anteed |
Gross carrying amount |
Percent age of total |
- of which guaran teed3 |
- of which unguar anteed |
| LtMV category1, 2 |
||||||||||||
| <50% | 24,547 | 16.7% | 1.8% | 14.9% | 24,011 | 16.4% | 1.8% | 14.6% | 23,122 | 15.7% | 1.7% | 14.0% |
| 50% - 80% | 43,763 | 29.7% | 5.7% | 24.0% | 42,264 | 28.8% | 5.4% | 23.4% | 40,145 | 27.3% | 4.9% | 22.4% |
| 80% - 90% | 21,029 | 14.3% | 4.6% | 9.7% | 19,866 | 13.6% | 4.2% | 9.3% | 18,340 | 12.5% | 3.6% | 8.9% |
| 90% - 100% | 26,015 | 17.7% | 7.4% | 10.3% | 25,955 | 17.7% | 7.5% | 10.2% | 25,164 | 17.1% | 7.0% | 10.1% |
| 100% - 110% | 16,877 | 11.5% | 4.0% | 7.5% | 17,497 | 11.9% | 4.4% | 7.5% | 19,225 | 13.1% | 5.0% | 8.1% |
| 110% - 120% | 9,201 | 6.3% | 2.0% | 4.3% | 10,556 | 7.2% | 2.3% | 4.9% | 12,982 | 8.8% | 2.9% | 5.9% |
| >120% | 3,398 | 2.2% | 0.7% | 1.5% | 4,061 | 2.8% | 0.8% | 2.0% | 6,003 | 4.1% | 1.4% | 2.7% |
| Unclassified | 2,326 | 1.6% | 2,397 | 1.6% | 1,951 | 1.3% | ||||||
| Total | 147,155 | 100% | 146,607 | 100% | 146,932 | 100% |
1 ABN AMRO calculates the indexed market value using the indexation of the CBS (Statistics Netherlands).
2 As of 31 March 2016, ABN AMRO revised the allocation of collateral values for residential mortgages. The year-end 2015 figures have been adjusted for comparison purposes.
3 NHG guarantees.
The gross carrying amount of mortgages with an LtMV above 100% decreased significantly to EUR 29.5 billion at 30 September 2016 (30 June 2016: EUR 32.1 million; 31 December 2015: EUR 38.2 million).
The number of mortgages in the higher LtMV bucket range is decreasing mainly due to indexation of the value of the
underlying collateral in combination with the absence of new inflow into these buckets as a result of current regulations for tax deductions. Note that LtMVs of more than 100% do not necessarily indicate that these clients are in financial difficulties. However, ABN AMRO advises clients not to maintain loans at high LtMV levels.
Breakdown of the residential mortgage portfolio by year of loan modification as from 20161 (in billions)
1 Production includes the new mortgage production and all mortgages with a modification date.
Other includes universal life, life investment, hybrid, other and unclassified mortgage types. The hybrid portfolio consists of a combination of savings and investment mortgages. .
Under Dutch tax regulations implemented on 1 January 2013, mortgage interest is only deductible for redeeming mortgage loans. Mortgage loan type originations that took place in 2016 (defined as new production and mortgages with a loan type modification) breaks down into 27.8%
interest-only, 66.6% redeeming mortgages and 2.6% savings mortgages. Interest-only and savings mortgages can still be produced for clients who wish to refinance loans that originated before 2013.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|---|
| (in millions) | Gross carrying amount |
Percentage of total |
Gross carrying amount |
Percentage of total |
Gross carrying amount |
Percentage of total |
|
| Interest only (partially) | 47,311 | 32% | 47,426 | 32% | 47,943 | 33% | |
| Interest only (100%) | 30,842 | 21% | 31,257 | 21% | 32,076 | 22% | |
| Redeeming mortgages (annuity/linear) | 24,157 | 16% | 21,670 | 15% | 18,569 | 13% | |
| Savings | 19,857 | 13% | 20,423 | 14% | 21,735 | 15% | |
| Life (investment) | 16,282 | 11% | 16,819 | 11% | 17,787 | 12% | |
| Other1 | 8,705 | 6% | 9,012 | 6% | 8,822 | 6% | |
| Total | 147,155 | 100% | 146,607 | 100% | 146,932 | 100% |
1 Other includes hybrid, other and unclassified mortgage types. The hybrid portfolio consists of a combination of savings and investment mortgages.
The change in tax regulations is reflected in the composition of the mortgage portfolio. The proportion of redeeming mortgages increased to 16% of the residential mortgage
portfolio at 30 September 2016 (30 June 2016: 15%; 31 December 2015: 13%). 'Redeeming mortgages' is the only category that increased in volume.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in billions) | Energy | Com modi ties |
Trans porta tion |
Total ECT clients |
Energy | Com modi ties |
Trans porta tion |
Total ECT clients |
Energy | Com modi ties |
Trans porta tion |
Total ECT clients |
| On-balance sheet exposure1 |
5.3 | 12.2 | 9.5 | 27.0 | 5.2 | 11.9 | 9.3 | 26.3 | 4.7 | 11.1 | 9.3 | 25.0 |
| Guarantees and letters of credit | 0.8 | 5.8 | 0.2 | 6.8 | 0.7 | 6.0 | 0.2 | 6.9 | 0.7 | 5.5 | 0.2 | 6.3 |
| Subtotal1 | 6.1 | 18.1 | 9.7 | 33.8 | 5.8 | 17.8 | 9.5 | 33.2 | 5.3 | 16.5 | 9.5 | 31.4 |
| Undrawn committed credit facilities |
2.1 | 2.5 | 0.9 | 5.5 | 2.1 | 2.2 | 1.1 | 5.4 | 2.3 | 2.4 | 1.9 | 6.7 |
| Total on- and off-balance sheet exposure1 |
8.2 | 20.6 | 10.5 | 39.3 | 8.0 | 20.1 | 10.6 | 38.6 | 7.6 | 19.0 | 11.4 | 38.0 |
1 Including fair value adjustment from hedge accounting.
| Q3 2016 | Q3 2015 | Q2 2016 | Nine months 2016 |
Nine months 2015 |
|
|---|---|---|---|---|---|
| Impairments charges ECT clients | 33 | 62 | 93 | 175 | 97 |
| - of which Energy | 10 | 14 | 63 | 102 | 14 |
| - of which Commodities | 5 | 48 | -1 | 16 | 93 |
| - of which Transportation | 19 | 32 | 57 | -10 | |
| Underlying Cost of risk ECT (in bps) | 52 | 107 | 153 | 95 | 57 |
ABN AMRO provides financial solutions and support to clients across the entire value chain of the Energy, Commodities & Transportation (ECT) industry. ECT Clients finances and serves corporate clients that are internationally active in Energy (upstream, offshore, midstream, Storage and Offloading (FPSO), corporate lending), Commodities (energy, agricultural and metals) and Transportation (ocean-going vessels and containers).
ECT Clients operates in cyclical sectors. This cyclicality is reflected in our lending policies, financing structures, advance rates and risk management. As some clients in the ECT sectors currently face more challenging market circumstances (for example, the price of oil and the dry bulk and container markets), they are continuously subject to stringent credit monitoring and close risk management attention. In addition, ABN AMRO periodically performs sensitivity analyses and stress testing exercises to gain insight into the credit performance under different price scenarios, economic scenarios and risk measures.
The vast majority of the ECT Clients loan book is US-dollar denominated and largely secured by either commodities for which liquid markets exist, first-priority ship mortgages or pledged contracted project cash flows. Conservative advance rates are applied, taking into account through-thecycle asset values.
Volume growth in Transportation and Energy is controlled and based on a combination of new client acquisitions and broadening and deepening of existing client relations in selectively chosen markets. The ECT Clients' total loan portfolio amounted to EUR 27.0 billion in on-balance sheet exposure at 30 September 2016 (30 June 2016: EUR 26.3 billion, 31 December 2015: EUR 25.0 billion). The on-balance sheet exposure increased by 2.5% in Q3 2016 (7.7% in 9M 2016) driven by growth in all
three segments despite a 0.7% weakening of the US-dollar over the third quarter (and 2.5% US-dollar weakening over the first nine months of 2016).
Commodities Clients remained the largest sector of ECT Clients, accounting for EUR 12.2 billion of the ECT Clients on-balance sheet exposure (30 June 2016 EUR: 11.9 billion, 31 December 2015: EUR 11.1 billion). Transportation Clients accounted for EUR 9.5 billion (30 June 2016: EUR 9.3 billion, 31 December 2015: EUR 9.3 billion). Energy Clients' share in the on-balance sheet exposure was EUR 5.3 billion (30 June 2016: EUR 5.2 billion, 31 December 2015: EUR 4.7 billion).
The off-balance-sheet exposure, consisting mainly of short-term letters of credit secured by commodities, guarantees and availability under committed credit lines, remained stable in Q3 2016 at EUR 12.3 billion, of which EUR 8.3 billion in Commodities Clients, EUR 2.9 billion in Energy Clients, and EUR 1.1 billion in Transportation Clients.
Although some commodity prices have been recovering since the start of 2016, price levels for a number of major commodities are still substantially below the historical 5-year average and investments are not yet recovering. In addition, circumstances in a number of shipping markets and offshore services remain challenging given structural overcapacity and decreased demand.
ECT Clients' impairment charges for Q3 2016 amounted to EUR 33 million (Q3 2015: EUR 62 million). Most of the impairment charges for Q3 2016 were taken in the Transportation sector at EUR 19 million, followed by Energy at EUR 10 million, and Commodities at EUR 5 million. Total impairment charges for 9M 2016 amounted to EUR 175 million, of which Energy accounted for EUR 102 million, Commodities EUR 16 million and Transportation EUR 57 million (9M 2015: EUR 97 million, of which Energy EUR 14 million, Commodities EUR 93 million and Transportation EUR -10 million).
ABN AMRO reviewed the scenario analysis performed for the Transportation portfolio in Q1 2016 based on realisation of the impairment charges in Transportation. Market conditions for the dry bulk sector improved somewhat, but the container market remained weak. The tanker and LPG market became more challenging. To sum up, we do not expect the level of potential impairments to change much compared with our previous scenario forecast in Q1 2016. The EUR 57 million impairment charges in 9M 2016 for the Transportation portfolio suggest a realisation between the mild and severe scenarios. Furthermore, the number of completed recapitalisations and restructurings of clients in the Transportation portfolio showed a favourable development.
(in millions)
RWA (REA) flow statement operational risk
RWA (REA) for operational risk is calculated based on the Standardised Approach (TSA). To calculate the required capital, once a year the gross income is multiplied by a percentage (predefined by the directives).
As the bank is applying the TSA approach, the RWA (REA) calculation is revised yearly and, as a consequence, no changes are noted in the third quarter of 2016 compared with the second quarter of 2016.
As a result of the yearly revised calculations, RWA (REA) increased by EUR 0.8 billion to EUR 17.0 billion in the first nine months of 2016 compared with year-end 2015.
ABN AMRO is awaiting the ECB's response to the request for approval to use the Advanced Measurement Approach (AMA).
ABN AMRO is exposed to market risk in its trading book and banking book.
ABN AMRO has limited exposure in the trading book.
RWA (REA) for market risk increased to EUR 4.2 billion at 30 September 2016 (30 June 2016: EUR 3.5 billion). The increase was caused by negative interest rates, reflecting the fact that the models for interest rate options were overly conservative. Improved valuation models have been developed and implemented, which will significantly lower the RWA figures. Regulatory approval for the improved valuation models is expected in the course of 2017.
RWA (REA) for market risk dropped significantly to EUR 4.2 billion at 30 September 2016 (31 December 2015: EUR 5.7 billion). This decline was mainly the result of the use of the Internal Model Approach (IMA) as from 1 January 2016, which accounted for EUR 2.6 billion of the decline. The decline was partly offset by negative interest rates, reflecting the fact that the models for interest rate options were overly conservative. Improved valuation models have been developed and implemented, which will significantly lower the RWA figures. Regulatory approval for the improved valuation models is expected in the course of 2017.
| Internal aggregated diversified and undiverisified VaR for all trading positions | ||||||
|---|---|---|---|---|---|---|
| Q3 2016 | Q3 2015 | Q2 2016 | ||||
| (in millions) | Diversified | Undiversified | Diversified | Undiversified | Diversified | Undiversified |
| VaR at last trading day of period | 9.5 | 11.8 | 6.3 | 8.4 | 2.1 | 3.8 |
| Highest VaR | 10.4 | 13.4 | 8.5 | 14.4 | 6.5 | 8.6 |
| Lowest VaR | 2.1 | 3.6 | 3.5 | 4.6 | 2.0 | 3.1 |
| Average VaR | 7.2 | 8.9 | 5.6 | 7.3 | 2.9 | 5.1 |
In the third quarter of 2016, the average diversified and undiversified VaR increased by EUR 1.6 million compared with the same period last year.
The average diversified VaR for Q3 2016 was EUR 4.3 million higher than the average of the previous quarter. The general increase of the VaR figures was due to the negative interest rate environment and increased volatility in the markets following the outcome of the British referendum to leave the European Union.
Due to current interest rate developments, ABN AMRO has updated and implemented new internal models for valuation and VaR which are better at dealing with negative interest rates. Pending approval from the regulator to use the new models for regulatory capital, ABN AMRO reports capital based on the old models, which provide a more conservative VaR.
Market risk in the banking book is the risk that the bank's value or earnings decline because of unfavourable market movements. The market risk of the banking book consists predominantly of interest rate risk. Interest rate risk arises from holding loans with interest rate maturities that are different from the interest rate maturities of the savings and funding of the bank.
The assets have on average a longer behavioural maturity than the liabilities, especially savings. ABN AMRO uses a combination of portfolio (macro) hedges and specific asset or liability (micro) hedges to swap fixed interest rates to a floating interest rate position. The resulting interest rate position, after application of interest rate hedges, is in line with the bank's strategy and risk appetite.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| NII-at-risk (in %) | -0.4 | -2.3 | -1.3 |
| Duration of equity (in years) | 3.6 | 4.0 | 3.6 |
NII-at-Risk is defined as the worst outcome of two scenarios: a gradual increase in interest rates and a gradual decline in interest rates by 200bps. Some floors are applied in the falling interest rate scenario. During Q3 ABN AMRO implemented a number of refinements to the NII-at-Risk methodology. As part of these refinements we also lowered the floor applied to market rates from -60bps to -100bps in order to present a more prudent outcome in the falling rates scenario.
Following these changes NII-at-Risk improved from -2.3% to -0.4% (approximately EUR -20 million) and, as in the previous quarter, reflects a reduction of NII in the falling rates scenario. In a scenario reflecting a rise in interest rates NII would increase by 1.6% (approximately EUR 90 million).
Duration of equity decreased from 4.0 to 3.6 years.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |
|---|---|---|---|
| Loan-to-Deposit ratio | 107% | 108% | 108% |
| LCR | >100% | >100% | >100% |
| NSFR | >100% | >100% | >100% |
| Survival period (moderate stress) | > 12 months | > 12 months | >12 months |
| Available liquidity buffer (in billions) | 88.9 | 79.6 | 82.8 |
The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) both remained above 100% in Q3 2016. This is in line with the bank's targeted early compliance with future regulatory requirements.
The survival period reflects the period that the bank's liquidity position is expected to remain positive in an
internally developed (moderate) stress scenario. In this internally developed stress scenario it is assumed that wholesale funding markets deteriorate and retail and commercial clients withdraw part of their deposits. The survival period was consistently >12 months in Q3 2016.
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Loans and receivables – customers | 269,038 | 271,456 | 274,842 |
| Net adjustments | -3,918 | -4,041 | -1,737 |
| Adjusted loans and receivables – customers | 265,120 | 267,415 | 273,105 |
| Due to customers | 240,367 | 240,942 | 245,819 |
| Net adjustments | 7,340 | 7,270 | 6,216 |
| Adjusted due to customers | 247,708 | 248,211 | 252,035 |
| Loan-to-Deposit ratio | 107% | 108% | 108% |
The adjustment of notional cash pooling led to a slightly lower Loan-to-Deposit (LtD) ratio. Applying the change in accounting policy retrospectively led to an increase of loans and receivables – customers and the due to customers balance of EUR 2.2 billion for 30 September
2016 (30 June 2016: EUR 5.6 billion and 31 December 2015: EUR 15.5 billion). The impact on the LtD ratio was close to zero (30 June 2016: close to zero and 31 December 2015: minus 1%).
71
The LtD ratio decreased slightly to 107% at 30 September 2016 (30 June 2016 and 31 December 2015: 108%).
Corrected for the impact of notional cash pooling, adjusted loans and receivables – customers increased to EUR 262.9 billion at 30 September 2016 (30 June 2016: EUR 261.8 billion and 31 December 2015: EUR 257.6 billion). Adjusted due to customers grew to EUR 245.5 billion at 30 September 2016 (30 June 2016: EUR 242.6 billion and 31 December 2015: EUR 236.5 billion). Net of notional cash pooling, due to customers grew faster than loans and receivables – customers. This explains the decrease in the LtD ratio during Q3 2016. Most of the growth of deposits came from Retail Banking and Corporate Banking.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|---|
| (in billions) | Liquidity buffer |
LCR eligible | Liquidity buffer |
LCR eligible | Liquidity buffer |
LCR eligible | |
| Cash & central bank deposits1 | 21.7 | 21.7 | 11.5 | 11.5 | 24.4 | 24.4 | |
| Government bonds | 30.9 | 31.2 | 32.2 | 33.1 | 26.0 | 26.9 | |
| Covered bonds | 1.8 | 1.7 | 2.0 | 1.8 | 1.4 | 1.3 | |
| Retained RMBS | 23.3 | 24.3 | 24.0 | ||||
| Third party RMBS | 1.5 | 1.3 | 2.2 | 1.9 | 0.7 | 0.6 | |
| Other | 9.7 | 10.2 | 7.4 | 7.1 | 6.3 | 3.3 | |
| Total liquidity buffer | 88.9 | 66.1 | 79.6 | 55.3 | 82.8 | 56.5 | |
| - of which in EUR - of which in other currencies |
93.3% 6.7% |
91.9% 8.1% |
94.1% 5.9% |
1 The mandatory cash reserve with the central bank has been deducted from the cash and central bank deposits in the liquidity buffer.
The liquidity buffer largely consists of cash and deposits at central banks, government bonds and retained RMBS. Most of the securities in the liquidity buffer, with the exception of retained RMBS, are eligible for the LCR. Furthermore, both the liquidity buffer and the LCR eligible buffer face haircuts based on their market value. These haircuts are used to determine the liquidity value. Haircuts may differ between the two buffers as the internal assessment of the liquidity buffer deviates from Basel III regulations. This explains the differences between the liquidity values. For government bonds, for example, the internal haircut is higher than the haircut based on Basel III regulations. As a result, the liquidity buffer value for government bonds is lower than the LCR eligible amount.
The liquidity buffer increased to EUR 88.9 billion at 30 September 2016 (30 June 2016: EUR 79.6 billion and 31 December 2015: EUR 82.8 billion). The cash position grew mainly due to a net increase in due to customers and an increase in short-term wholesale funding. Compared with 31 December 2015, government bonds increased due partly to the inclusion of off-balance sheet positions consisting of LCR eligible government bonds.
ABN AMRO's strategy for wholesale funding is derived from the bank's moderate risk profile. This strategy aims to optimise and diversify the bank's funding sources in order to maintain market access and reach the targeted funding position. We aim to have a balance sheet with a diverse, stable and cost-efficient funding base.
Client deposits are a source of funding, complemented by a well-diversified portfolio of wholesale funding. Excluding the impact of notional cash pooling, client deposits increased to EUR 238.1 billion at 30 September 2016 (30 June 2016: EUR 235.3 billion and 31 December 2015: EUR 230.3 billion). Total wholesale funding (as defined by issued debt plus subordinated liabilities) increased to EUR 90.9 billion at 30 September 2016 (30 June 2016: EUR 87.7 billion and 31 December 2015: EUR 85.9 billion).
Long-term funding raised in Q3 2016 amounted to EUR 0.7 billion, which mainly consists of USD issuance. Total long-term funding raised in 9M 2016 amounted to EUR 9.4 billion. This includes EUR 3.7 billion of covered bonds, EUR 2.4 billion of Tier 2 capital instruments and EUR 3.3 billion of senior unsecured funding. The relatively high amount of covered bond issuance is in line with the growing demand for mortgages with long-term fixed interest rate periods. Long-term covered bonds mitigate liquidity repricing risk due to mortgages with long-term fixed interest rate periods. The average maturity of the covered bonds issued in 2016 is 13 years. The instruments issued are included in the funding overview below. More information on capital instruments is provided in the Capital management section of this report.
A key goal of the funding strategy is to diversify funding sources. The available funding programmes allow us to issue various instruments in different currencies and markets. This enables us to diversify our investor base.
A description of capital and funding instruments issued by ABN AMRO is provided on our website, abnamro.com. We continuously assess our wholesale funding base in order to determine the optimal use of funding sources.
The types of wholesale funding can be specified as follows:
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Euro Commercial Paper | 2,610 | 655 | 1,326 |
| London Certificates of Deposit | 5,506 | 3,060 | 3,744 |
| French Certificats de Dépôt | 35 | 19 | 164 |
| US Commercial Paper | 4,437 | 4,493 | 4,585 |
| Total Commercial Paper/Certificates of Deposit | 12,589 | 8,226 | 9,820 |
| Senior unsecured (medium-term notes) | 33,998 | 35,058 | 37,404 |
| Covered bonds | 30,231 | 30,219 | 25,956 |
| Securitisations | 2,950 | 2,950 | 2,968 |
| Saving certificates | 52 | 51 | 59 |
| Total issued debt | 79,819 | 76,505 | 76,207 |
| Subordinated liabilities | 11,115 | 11,214 | 9,708 |
| Total wholesale funding | 90,934 | 87,719 | 85,915 |
| Other long-term funding1 | 1,841 | 1,834 | 6,813 |
| Total funding instruments2 | 92,775 | 89,553 | 92,728 |
| - of which CP/CD matures within one year | 12,589 | 8,226 | 9,820 |
| - of which funding instruments (excl. CP/CD) matures within one year | 12,750 | 10,967 | 12,044 |
| - of which matures after one year | 67,437 | 70,359 | 70,865 |
1 Includes long-term repos (recorded in Securities financing), TLTRO funding (recorded in Due to banks, however redeemed in second quarter 2016) and funding with the Dutch State as counterparty (recorded in Due to customers).
2 Includes FX effects, fair value adjustments and interest movements.
Total wholesale funding (issued debt and subordinated liabilities) increased to EUR 90.9 billion at 30 September 2016 (30 June 2016: EUR 87.7 billion and 31 December 2015: EUR 85.9 billion). The change compared with 30 June 2016 was due mainly to an increase in commercial paper and certificates of deposit, within our targeted bandwidth for short-term funding.
Maturity calendar at 30 September 2016 (notional amounts, in billions)
Other long-term funding includes long-term repos and funding with the Dutch State as counterparty.
| 30 September 2016 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (notional amounts, in billions) | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | ≥ 2026 | Total |
| Senior unsecured | 1.6 | 7.5 | 4.2 | 6.4 | 4.8 | 1.2 | 3.3 | 1.2 | 0.3 | 1.7 | 0.7 | 32.7 |
| Covered bonds | 0.5 | 2.2 | 1.9 | 1.8 | 2.5 | 2.5 | 2.7 | 1.9 | 1.8 | 0.5 | 8.3 | 26.7 |
| Securitisations | 0.6 | 1.1 | 0.8 | 0.5 | 3.0 | |||||||
| Subordinated liabilities | 2.1 | 1.6 | 1.5 | 1.5 | 1.1 | 1.3 | 1.2 | 10.3 | ||||
| Other long-term funding1 | 1.0 | 0.1 | 0.3 | 0.5 | 1.8 | |||||||
| Total | 2.6 | 13.8 | 6.9 | 8.7 | 9.0 | 5.5 | 7.5 | 4.2 | 2.1 | 3.5 | 10.6 | 74.5 |
1 Other long-term funding includes long-term repos and funding with the Dutch State as counterparty.
The average remaining maturity of the total outstanding long-term wholesale funding decreased to 4.5 years on 30 September 2016 (30 June 2016: 4.8 years and 31 December 2015: 4.6 years). The main reason for the decline was that we issued a relatively low amount of funding in Q3 2016, resulting in a natural decline of the remaining maturity. Compared with 31 December 2015, this effect was partly offset by newly issued long-term covered bonds.
The maturity calendar assumes redemption on the earliest possible call date or the legal maturity date. Early redemption of subordinated instruments is subject to the approval of the regulators. However, this does not mean that the instruments will be called at the earliest possible call date.
ABN AMRO's solid capital position ensures that the bank is compliant with the fully-loaded capital requirements of the Capital Requirements Directive IV (CRD IV). The overall capital base increased slightly during Q3 2016 due to accumulated profit. The bank strives to optimise
its capital structure in anticipation of pending regulatory requirements. The capital structure consists mainly of common equity and loss-absorbing capital to cover unexpected losses. The subordination of capital instruments provides further protection to senior creditors.
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Total equity (EU IFRS) | 18,152 | 17,960 | 17,584 |
| Cash flow hedge reserve | 1,167 | 1,148 | 1,056 |
| Dividend reserve | -272 | -376 | -414 |
| Capital securities | -993 | -993 | -993 |
| Other regulatory adjustments | -538 | -525 | -466 |
| Common Equity Tier 1 | 17,517 | 17,213 | 16,768 |
| Innovative hybrid capital instruments | 700 | ||
| Capital securities | 993 | 993 | 993 |
| Other regulatory adjustments | -158 | -150 | -234 |
| Tier 1 capital | 18,352 | 18,056 | 18,226 |
| Subordinated liabilities Tier 2 | 7,004 | 7,137 | 4,938 |
| Excess Tier 1 capital recognised as Tier 2 capital | 300 | ||
| Other regulatory adjustments | -56 | -39 | -33 |
| Total regulatory capital | 25,299 | 25,155 | 23,431 |
| Total risk-weighted assets (risk exposure amount) | 105,318 | 106,137 | 108,001 |
| Common Equity Tier 1 ratio | 16.6% | 16.2% | 15.5% |
| Tier 1 ratio | 17.4% | 17.0% | 16.9% |
| Total capital ratio | 24.0% | 23.7% | 21.7% |
| Common Equity Tier 1 capital (fully-loaded) | 17,497 | 17,196 | 16,695 |
| Common Equity Tier 1 ratio (fully-loaded) | 16.6% | 16.2% | 15.5% |
| Tier 1 capital (fully-loaded) | 18,489 | 18,189 | 17,688 |
| Tier 1 ratio (fully-loaded) | 17.6% | 17.1% | 16.4% |
| Total capital (fully-loaded) | 23,740 | 23,477 | 20,624 |
| Total capital ratio (fully-loaded) | 22.5% | 22.1% | 19.1% |
Developments impacting capital ratios in Q3 2016 (in %)
At 30 September 2016, the phase-in Common Equity Tier 1, Tier 1 and Total Capital ratios were 16.6%, 17.4% and 24.0% respectively. All capital ratios were well above regulatory minimum requirements and in line with the bank's risk appetite and strategic ambitions. ABN AMRO's CET1 ratio strengthened during Q3 2016, as a result of profit accumulation and a reduction of RWA. At 30 September 2016, the fully-loaded Common Equity Tier 1, fully-loaded Tier 1 and fully-loaded Total Capital ratios were 16.6%, 17.6% and 22.5% respectively.
The group level RWA (REA) decreased to EUR 105.3 billion at 30 September 2016 (30 June 2016: EUR 106.1 billion). More information on RWA (REA) is provided in the Risk section of this report.
All risk-weighted capital ratios increased materially at 30 September 2016 compared with 31 December 2015. In Q1 2016, ABN AMRO redeemed two grandfathered instruments which had a remaining eligibility for regulatory capital of EUR 1.2 billion at 31 December 2015. Specifically, the bank redeemed a GBP 150 million Tier 2 instrument and a EUR 1.0 billion Tier 1 instrument (of which EUR 700 million was eligible for Tier 1 and EUR 300 million was eligible for Tier 2 capital at 31 December 2015). Profit accumulation, a decrease of RWA and Tier 2 issuances have more than compensated for these redemptions. This led to a 1.1 percentage point increase in the fully-loaded Common Equity Tier 1 ratio and a 1.2 percentage point increase in the fully-loaded Tier 1 ratio at 30 September 2016 compared with 31 December 2015. Finally, the fully-loaded Total Capital ratio has increased by 3.4 percentage points over the past three quarters.
ABN AMRO is required in 2016 to meet a minimum CET1 ratio of 10.25% on a consolidated basis, which is composed of a 9.5% SREP requirement and a 0.75% phase-in of the systemic risk buffer (SRB). The SRB is expected to grow by 0.75 percentage points per annum up to 3.0% in 2019. The 9.5% CET1 requirement for 2016 includes the capital conservation buffer. ABN AMRO is comfortably above the 10.25% minimum, with phase-in CET1 at 16.6% at 30 September 2016.
To provide transparency, ABN AMRO has decided to publish the preliminary outcome of the Supervisory Review and Evaluation Process (SREP) for 2017. The MDA trigger level for ABN AMRO Bank N.V. is 9.0% of CET1 capital, to be increased by any AT1 or Tier 2 capital shortfall. At the end of the third quarter of 2016 the AT1 shortfall was 0.7%, implying an MDA trigger level of 9.7% for 2017. Based on full phase-in of the systemic risk buffer (from 1.5% in 2017 to 3.0% in 2019) and the capital conservation buffer (from 1.25% in 2017 to 2.5% in 2019), the fully-loaded MDA trigger level is expected to increase to 11.75% in 2019, assuming no AT1 or Tier 2 capital shortfall.
ABN AMRO expects its future CET1 capital target to end up at 13.5%, which is at the upper end of the current 11.5-13.5% CET1 target range. This expectation is based on the preliminary SREP requirement, the fully-loaded systemic risk and capital conservation buffer, Pillar 2 capital guidance and the management buffer. It excludes possible implications and consequences of revisions to the calculation of risk-weighted assets (Basel IV). Given this uncertainty, ABN AMRO continues to hold a buffer above the current CET1 target range.
Over the full year 2016, ABN AMRO intends to pay a dividend of 45% of the reported net profit attributable to shareholders. An interim dividend of EUR 376 million has already been paid out. In line with earlier communication, the dividend payout ratio is set to increase to 50% in 2017.
| 30 September 2016 | 30 June 2016 | 31 December 2015 | ||
|---|---|---|---|---|
| (in millions) | Phase-in | Fully-loaded | Fully-loaded | Fully-loaded |
| Tier 1 capital | 18,352 | 18,489 | 18,189 | 17,688 |
| Exposure measure (under CDR) | ||||
| On-balance sheet exposures | 425,062 | 425,062 | 418,940 | 405,840 |
| Off-balance sheet exposures | 29,121 | 29,121 | 28,818 | 29,183 |
| On-balance sheet netting | 15,849 | 15,849 | 13,350 | 11,098 |
| Derivative exposures | 48,300 | 48,300 | 40,789 | 31,541 |
| Securities financing exposures | 2,803 | 2,803 | 2,553 | 1,317 |
| Other regulatory measures | -17,069 | -16,956 | -18,019 | -14,322 |
| Exposure measure | 504,066 | 504,179 | 486,431 | 464,657 |
| Leverage ratio (CDR) | 3.6% | 3.7% | 3.7% | 3.8% |
The CRR introduced a non-risk based leverage ratio which will be monitored until 2017 and further refined and calibrated before becoming a binding measure as from 2018. The Commission Delegated Regulation (CDR), applicable since 1 January 2015, amended the definition of the leverage ratio to enhance comparability of leverage ratio disclosures. The Group aims for a leverage ratio of at least 4% by year-end 2018, to be achieved by issuance of AT1 instruments, management of the exposure measure and profit retention.
At 30 September 2016, the Group had a CDR fully-loaded leverage ratio of 3.7% (30 June 2016: 3.7%). The leverage ratio has remained stable as capital accumulation was more than offset by growth of the balance sheet and the bank's derivatives position.
The fully-loaded leverage ratio decreased to 3.7% at 30 September 2016 (31 December 2015: 3.8%). The decline can be attributed to seasonal volatility of the balance sheet, which was partly offset by profit accumulation over the past three quarters.
On 6 April 2016, the Basel Committee issued a consultative document on the revision to the Basel III leverage ratio framework. Among the areas subject to proposed revision in this consultative document are the change in calculation of the derivative exposure and the credit conversion factors for off-balance sheet items. The revised calculation method of derivative exposure could potentially result in a decrease of the exposure measure for clearing guarantees. This decrease would amount to approximately EUR 40-50 billion, or a 30-40bps increase in the fully-loaded leverage ratio. An adjustment of credit conversion factors for off-balance sheet exposures, for example unconditionally cancellable commitments, would partly offset this potential increase.
Risk, funding & capital information / Capital management
| (in millions) | 30 September 2016 | 30 June 2016 | 31 December 2015 |
|---|---|---|---|
| Regulatory capital Other MREL eligible capital1 |
25,299 3,223 |
25,155 3,124 |
23,431 3,162 |
| Total assets2 | 425,062 | 418,940 | 390,317 |
| MREL3 | 6.7% | 6.8% | 6.8% |
1 Other MREL eligible capital includes subordinated liabilities that are not included in regulatory capital.
2 For management view purposes the historical periods before 30 June 2016 have not been adjusted for the accounting policy change with regard to Notional cash pooling (for further details please refer to note 1 in the Interim Financial Statements).
3 MREL is calculated as total regulatory capital plus other MREL eligible subordinated liabilites divided by total IFRS assets.
The Bank Recovery and Resolution Directive (BRRD) provides authorities with more comprehensive and effective measures to deal with failing banks. Implementation of the BRRD in the European Union began in 2015 and the bail-in framework has been applicable since January 2016. Implementation of the bail-in framework has led to the introduction of additional loss-absorbing measures, such as the Minimum Requirement for own funds and Eligible Liabilities (MREL).
ABN AMRO monitors the pending regulatory requirements in relation to MREL and aims for an MREL of at least 8% by year-end 2018 (through subordinated debt and profit retention). Final MREL terms, as well as bank-specific MREL requirements, will determine the precise measures to be undertaken to comply with these requirements. At 30 September 2016, the Group had a 6.7% MREL (solely based on own funds and other subordinated liabilities). MREL decreased by 0.1 percentage point compared with 30 June 2016, driven by balance sheet lengthening.
ABN AMRO expects to continue to issue new subordinated capital instruments to further increase its buffer of loss-absorbing instruments to above 8% in 2018 in view of scheduled amortisations, MREL and any other regulatory changes.
Following discussions with the Single Resolution Board (SRB) throughout 2016, and subject to final SRB confirmation expected towards the end of 2016 or early in 2017, we have concluded that ABN AMRO Bank N.V. should be our designated resolution entity. As all capital and debt instruments have been issued in the past by ABN AMRO Bank N.V., no structural changes are expected to prevent ABN AMRO Bank N.V. from continuing to issue capital and debt instruments in the future, including any loss absorbing instruments for resolution purposes, if and when required.
CRD IV and CRR set the framework for implementation of Basel III in the European Union. CRD IV and CRR have been phased in since 1 January 2014 and will be fully effective by January 2019.
Also commonly referred to as Basel IV, the Basel Committee on Banking Supervision has presented two consultative papers on a revision of the Standardised Approach and the design of a capital floor framework based on this revised Standardised Approach. This framework will replace the current transitional floor based on the Basel I standard. The aim of the revised capital floor framework is to enhance the reliability and comparability of risk-weighted capital ratios. Revision of the Standardised Approach for Residential Real Estate and SMEs in combination with revision of the capital floors could lead to a significant risk-weighted assets inflation risk for ABN AMRO.
Regulatory developments, such as the Basel proposal (especially with respect to risk-weighting of mortgages and corporate loans) and increasing capital requirements set by the regulators could have a significant impact on the bank's capital position going forward. Hence, ABN AMRO will continue to focus on capital efficiency and will further strengthen its capital position.
ABN AMRO continues to monitor TLAC requirements following publication of the final terms in November 2015. Although Total Loss-Absorbing Capacity (TLAC) is not directly applicable to ABN AMRO, final terms for TLAC would be consistent with the current ambition to steer MREL to 8%. In line with a recent EBA positioning paper on this matter, further convergence between TLAC and MREL requirements is anticipated.
[email protected] +31 20 6282 282
A conference call will be hosted by the Managing Board for analysts and investors on Wednesday 16 November 2016 at 11:00 am CET (10:00 GMT).
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 www.abnamro.com/ir.
[email protected] +31 20 6288 900
Gustav Mahlerlaan 10, 1082 PP Amsterdam P.O. Box 283, 1000 EA Amsterdam The Netherlands abnamro.com
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 on 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 on future events, many of which, by their nature, are inherently uncertain and beyond our control. Factors that could cause actual results to differ materially from those anticipated by forward-looking statements include, but are not limited to, (macro)-economic, 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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