Where ING and ABN AMRO opt for investor drivers, Rabobank’s capital buffers are running

All three large Dutch banks are still making quite high profits, the conclusion is after the latest figures from ABN AMRO, ING and Rabobank. And that despite the interest halved by the European Central Bank, from 4 to 2 percent. Although it put pressure on the interest margin that was so important for income, the banks managed to largely compensate for it by more fixed reimbursements for bank services – fees In bank jargon. Consider in recent years at all banks highly increased costs for a checking account or making investments through the bank.

What does divert between the banks is what the banks then do with that income. And in it the listed ING and ABN AMRO opt for their shareholders, while Rabobank can opt for financial reinforcement – the cooperative bank is not listed on the stock exchange.

Last week, ING reported that he had achieved a profit of 1.7 billion euros in the second quarter, a slight decrease of 7 percent compared to a year ago. ABN AMRO recorded a net profit of 606 million euros in the second quarter, a minus of 6 percent. Rabobank reported on Thursday for the entire first half year. The Bank from Utrecht saw the net profit the least valleys compared to the record profit from a year earlier, with minus 4 percent to 2.7 billion euros. For comparison: ING achieved a profit of 3.1 billion euros over the first two quarters, ABN AMRO 1.2 billion.

With capital buffers, a bank can take care of losing if things go wrong with a loan

What to do with that profit? Banks usually promise their shareholders to part of the profit anyway, in the form of dividend. ABN Amro hand out 54 cents in interim dividend. ING transfers 35 cents per share. Both banks strive for a benefit of half of the profit throughout the year. That what remains is then added to equity.

Rabobank has no shareholders. Although a small part of the half -year profit (8 percent) in the form of dividend does go to the holders of certificates (an alternative form of a share with less participation). However, the lion’s share of profits of the bank is added to the capital of Rabobank.

And that brings a remarkable difference between the major banks, which usually get the reproach that is so similar to each other – in terms of savings products for consumers, they were even accused of a tacit cartel in terms of savings products for consumers. And that difference is in the so -called capital ratio, a benchmark for how strong a bank is in terms of financial buffers.

The benchmark in the banking sector for this is called the Common Equity Tier 1 ratio (CET1). That is roughly said the relationship between the equity of the bank – the capital – in relation to the risk -bearing assets of the bank on the balance sheet. Consider especially loans to customers, such as mortgage loans or business credits. The idea: if things go wrong with a few loans, a bank needs sufficient capital to absorb that loss.

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Depending on how risky a bank operates, the Dutch banks require a CET1 ratio of just below (ING), on (Rabo) or just above (ABN) the 11 percent. The CET1 ratios Dutch banks are well above that supervisory requirement. Moreover, in a recent stress test of the European supervisors, all capital ratios (but on the basis of those of the end of 2024) were found sufficient to compensate for large shocks.

But the differences between the banks are starting to rise. The CET1 ratio of Rabobank was 19.9 percent on July 1 of this year, partly thanks to the addition of profit. ING reported a CET1 ratio of 13.3 percent, ABN AMRO 14.8 percent.

The fact that the two listed banks have a falling trend – and both banks also communicate that they in principle want to go a little further down – is due to the purchase of their own shares. Equity is used for this.

ABN AMRO communicated last Wednesday for 250 million euros to remove shares from the market (or to buy it in proportion to the Dutch state, which has just under a third of the shares). The new top woman of the bank, Marguerite Bérard, will be judged next November with an opinion whether there is more room for this type of program. Since the spring, ING has been running a purchasing program for 2 billion euros, after a program of 2.5 billion euros last year.

Buy your own shares

Such a share -buying program provides a direct revenue for investors who sell their shares, but potentially also increases the dividend per share of investors who remain in place. Banks that keep their capital ratio high are therefore accused of ‘having money unemployed on the shelf’. According to ING chairman Steven van Rijswijk, that would even be at the expense of customers: “If you work with too much capital, then there will be too much pressure from capital providers [aandeelhouders] To achieve more returns, “he said earlier this year. That pressure on more returns can then be at the expense of customers.” Because then you may have to increase your prices too much. “

Investors in banks are now counting on the stock buying. This can also be seen as banks – against that expectation – do not decide or announce less than expected. For example, ABN AMRO postponed their decision on stock buying three -quarters ago, because it had backlogs in its risk management. After that announcement, the share resulted in substantial. The ABN Amro stock buying program that was announced this Wednesday – actually the deferred program – disappointed again. Analysts had counted on average on a program of more than half a billion, instead of the quarter billion announced. Result: also a minus on the Damrak on Wednesday (although the share was strongly reclaimed afterwards).

The Rabobank board calls the large capital buffers a “luxury position”

At ING, such a stock market reaction also took place a year and a half ago. During an explanation of the annual figures for 2023, the questions of analysts showed that they had actually counted on a statement about the share purchasing program that day. Partly for that reason, the ING share was set 7 percent lower day. At the time, CEO Steven van Rijswijk was quite surprised about the assumption of the analysts, because his bank always says something about such drivers for investors in the first and third-quarter figures.

Last year, Rabobank also did a certificate buying program for the first time in its existence. For an amount of 1 billion euros, about one in eight certificates were removed from the market. That was immediately the last time, the bank emphasized at the time: it was a one -off promotion.

‘Luxury position’

The earned billions are largely on the balance at Rabobank this year. Despite an increase in the number of mortgage loans and SME loans-the other side of the ratio-the CET1, as said, amounted to 19.9 percent. The financial director of Rabobank, Bas Brouwers, therefore called the capital position of the Bank a “luxury position” on Thursday.

What can a bank like Rabobank do with that space capital buffers? And is therefore also a possible alternative to ING and ABN AMRO for the share purchasing program for which they now chose?

For a bank with a lot of capital on the balance sheet it is easier to grow: more risk in the form of new loans can easily be taken on the balance sheet, without this coming under too much pressure on the CET1 ratio. Rabobank seems to be already working on that benefit: the bank says it increased the market share in the Netherlands on both the mortgage market and the market for SME loans.

Chairman of the board Stefaan Decraene also said on Thursday that Rabobank can easily make any takeovers due to the many capital if a possibility passes. “But the money is not burning in my pockets.” The fact that the CET1 ratios of the other two are lower does not mean that they do not also look at potential acquisitions. ABN AMRO recently even completed a takeover: the German private bank Hauck Aufhäuser Lampe for an amount of around 670 million euros. However, if ING and ABN want to make larger acquisitions, they have to go to their shareholders before financing them.

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Brouwers from Rabobank further said on Thursday that his bank could also settle for slightly less returns on loans due to the high capital position, “although of course I can’t say that as CFO [financieel directeur]”. According to him,” a lower return must be marked by the customer or have an impact. ” “A lower return should not be the result of being a diaper or less cost -efficient.” As examples of Impact, Brouwers mentioned discounts on sustainable mortgages or loans with low interest rates for farmers who want to make it more sustainable.

Is a bank with a higher nuclear capital ratio a better bank? That is certainly not law. Look for this at the fourth bank in the Netherlands, ASN Bank (which was still called de Volksbank until 1 July). ASN, which is still completely in state hands, reported a CET1 ratio of 20 percent on Friday for the first half year-even higher than Rabobank.

Nevertheless, ASN, which is in fact only a savings and mortgage bank, has been struggling for years with the earning capacity. For every euro in income, the bank must now incur 70 cents in costs. At the other bank that is between 50 and 60 cents. This ensures that if ASN wants to grow in lending – and there seems to be no doubt about it that that should be a goal – it generates too little new capital for this in the long term. After all, some capital must be put aside for each new loan. “Even if you are a state bank, you should not fall back on the taxpayer if you want to grow,” said Roland Boekhout board chairman this summer NRC. “That is now the case, if we don’t transform.” ASN is in the middle of a large reorganization – Boekhout hopes to see the first results at the end of this year.

None of the banks seems to consider using the high profits and equity to reduce the costs for a bank account. For that the fairy-Income for banks a too attractive, stable counterpart to the ever-volatile interest income of a bank.

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