ABN Amro shares dip on buyback delay

Investing.com -- Shares of ABN Amro Bank N.V. (AS:ABNd ) (VIE:ABNd ) dipped on Wednesday after the company postponed a decision on potential share buybacks until the second quarter of 2025. 

At 4:05 am (0905 GMT), ABN AMRO Bank was trading 3.4% lower at €14.64.

The delay, management said, is due to ongoing complex model updates, which are taking longer than expected.  

The bank reiterated its dividend payout ratio target of 50% of reported net profit and maintained its capital goal of achieving a Basel IV CET1 ratio of 13.5% by the end of 2026.

However, the timeline for assessing room for share buybacks has been pushed back, leaving the current consensus forecast for a €400 million buyback in 2025 up in the air. 

This is a reduction from previous estimates of €500 million in 2024, with analysts projecting the buybacks could boost earnings per share by 3%.  

Despite the uncertainty around capital returns, ABN AMRO reported an earnings beat in Q3. Net profit surged to €651 million, well above the €528 million consensus. 

Underlying pre-tax profit hit €938 million, compared to market expectations of €769 million. The bank’s outperformance was boosted by a €29 million release in loan loss provisions, as opposed to a forecasted charge of €73 million, due to an improved mortgage model.  

Net interest income also exceeded estimates, coming in at €1.638 billion. Even after excluding non-recurring items, NII stood at €1.628 billion, surpassing the €1.608 billion consensus. 

The bank benefited from a higher treasury result, which added €40 million quarter-on-quarter. 

Meanwhile, mortgage growth continued at a modest 1%, with deposit levels holding steady. Management reiterated its guidance for 2024 NII to exceed €6.4 billion, aligning with market expectations.  

Fee income provided another boost, growing 3% quarter-on-quarter and coming in slightly above consensus. This growth was broad-based, reflecting strength across all business segments. 

Operating expenses were in line with expectations, increasing 6% year-on-year, driven by salary hikes. ABN reiterated its 2024 cost target of €5.3 billion, including levies.  

Capital metrics were another area of strength, with the Basel III CET1 ratio improving to 14.1%, ahead of the 13.9% consensus, due to lower risk-weighted assets. However, the delay in buyback discussions overshadowed these positive developments.  

Going forward, ABN’s replicating portfolio, which has been a key driver of NII, is expected to decline. The bank forecasts a €400 million drop in portfolio income for 2025, with similar reductions through 2028. 

Still, treasury results and client deposit rates are expected to partly offset these declines. For 2025, ABN guides for an NII of about €6.2 billion, slightly below the €6.322 billion consensus.  

The bank also reaffirmed its 2026 targets, aiming for a return on equity of 9-10%, a cost-to-income ratio of around 60%, and a through-the-cycle cost of risk at 15-20 basis points. 

Source: Investing.com