(Bloomberg) — ABN Amro Bank NV will cut its investment bank by about a third and shut down lending outside of Europe as the Dutch bank tries to turn around business hit hard by the market chaos caused by the coronavirus crisis.
ABN Amro will stop providing corporate finance outside Europe and exit trade and commodity financing altogether, the Dutch bank said on Wednesday. As many as 800 jobs could be lost over three to four years as the investment bank pulls back from activities that currently bring in about 45% of client loans.
European lenders including Deutsche Bank AG, Societe Generale SA and BNP Paribas SA have been slashing and refocusing their investment banks as they seek to cut costs and get out of higher-risk businesses. Chief Executive Officer Robert Swaak accelerated his review of the investment bank as volatile markets hit profitability and caused large impairments at the unit.
“The new CEO has essentially delivered what we asked for over a year ago, namely a proper wind-down of the CIB business. A pity that it took a pandemic to do so,” Barclays Bank Plc analyst Omar Fall said in a note. “The focus will now be on how much of the very sizable 2.5 billion euros of CIB wind-down capital will eventually return to shareholders.”
ABN Amro rose as much as 9.4% in Amsterdam trading, the most in two months, and was up 8.3% as of 3:40 a.m. The stock has declined by 46% this year. That compares with a 32% drop by the STOXX 600 Banks Index.
Net Loss
The bank reported a net loss of 5 million euros ($5.9 million) for the quarter on writedowns and a slowdown in lending prompted by the Covid-19 crisis. Provisions for loan losses declined to 703 million euros from 1.1. billion euros in the first quarter. ABN Amro said it expects provisions to total 3 billion euros this year, partly on costs to wind down loans at the investment bank. That’s up from an earlier prediction of 2.5 billion euros.
Corporate banking in the U.S., Asia, Australia and Brazil will be wound down, but the bank will retain its global clearing business, one of the world’s biggest, the company said. The natural resources and transportation and logistics parts of the business will focus on European clients only.
“Clearing has taken several de-risking measures in the past months following a large loss incurred earlier this year,” it said. The bank said it expects additional impairments related to job losses and the wind down of corporate loans.
‘Tough Decision’
“It’s a tough decision,” to exit trade and commodity finance, a business that has been historically strong for the Netherlands, Chief Financial Officer Clifford Abrahams said in an interview. “We’ve been in these businesses in some cases for hundreds of years. It’s tough for our clients and our staff, but we are convinced it’s in the best interest for the bank.”
CEO Swaak said that ABN Amro lacks scale in the rest of the world but it is looking to “invest and grow” in its corporate banking business in northwest Europe. The lender is currently also conducting a strategic review on operational efficiency, financial targets and capital distributions, which will be presented in November.
ABN Amro is among the four banks with the highest exposure to Wirecard AG, the defunct payments company that prompted competitors ING Groep NV and Commerzbank AG to take provisions of about 175 million euros each in the second quarter, Bloomberg reported in June. The bank said an “exceptional client file” contributed to the high impairments in the second quarter.
Exceptional Charges
“We don’t comment on specific clients, but the exceptional client file that caused high impairments reflect a potential fraud case in Germany” Abrahams said when asked about the impact of Wirecard.
ABN Amro reported provisions of 616 million euros for three exceptional client files in the first half of this year. Two cases in the first quarter accounted for 460 million euros, leaving 156 million euros for the German case.
The corporate and investment bank accounted for 14.5% of group profit last year and the unit’s headcount was a similar share of the total. The investment bank’s activities carry much more risk than ABN Amro’s retail business and require more capital as well, making it costly to squeeze out decent profits in good times.
In the previous quarter, the lender wrote down 460 million euros on two individual client cases, which contributed to its first loss since 2013. Even before the coronavirus crisis, the investment bank fell short of ABN Amro’s 10% to 13% return on equity target.
Other second quarter earnings highlights:
Net interest income EU1.51 billion, -9.9% y/y, estimate EU1.55 billionCommon equity Tier 1 ratio 17.3% vs. 17.3% q/q, estimate 17.1%2Q cost-to-income Ratio 60.4% vs. 67.6% q/q, estimate 62.3%2Q net fee and commission income EU375 million, -9.2% y/y, estimate EU380 million
(Updates with growth ambitions, strategic review and provision figure for German client)
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For more articles like this, please visit us at bloomberg.com” data-reactid=”42″>For more articles like this, please visit us at bloomberg.com
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Subscribe now to stay ahead with the most trusted business news source.” data-reactid=”43″>Subscribe now to stay ahead with the most trusted business news source.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
