The rise in interest rates is good news for ABN Amro. In the third quarter, the bank benefited from interest rates on mortgages and business loans rising faster than interest rates on savings.
Finally, the absence of major setbacks for the state bank and a number of windfalls resulted in a significant plus in the third quarter. The couch made 743 million euros in net profit. That is more than twice as much as the profit in the same quarter of 2021 (343 million euros), and also considerably more than analysts had expected on average (301 million euros).
Net interest income amounted to 1.28 billion euros, compared to 1.20 billion a year earlier (+6 percent). ABN Amro increased its market share in the mortgage market to almost a fifth of new mortgages, making the bank the market leader. Income also grew in the business loan market.
The other side of the interest margin, the interest that the bank charges on savings, also rose slightly. However, the rise in ‘interest costs’ was not as fast as the rise in interest income on loans, which improved the margin for the bank.
For a long time, banks had to pay half a percent in interest to store their customers’ savings at the European Central Bank (ECB). The banks have never fully passed on these costs. For most customers, the interest rate was 0 percent for a long time. Half a percentage interest was only collected on deposits above EUR 100,000. As a result, the interest margin, which makes up a large part of the income of banks such as ABN Amro, was under pressure for a long time.
Also read: ABN and ING are also offering interest on savings again
ABN Amro has lowered the negative interest rate on assets above one ton to a quarter of a percent from 1 August, after the ECB abolished its negative interest rate at the end of July. Banks are now again receiving an interest rate of 1.5 percent from the ECB on their deposits. Most banks therefore charge positive interest again from 1 December (see inset).
ABN Amro’s result was further positively influenced by the fact that the bank set aside less money than expected for possible loan losses, despite the poor economic outlook. In addition, ABN Amro made one-off profits on, among other things, the sale of a pension subsidiary to Achmea and its share in a solar energy company. ABN Amro’s costs also fell by 4 percent, partly because the bank hired fewer external staff to screen customers and transactions for money laundering and terrorist financing. As a result, the bank lost 58 cents for every euro in income. A year earlier, it was still 75 percent.
ABN Amro issued a profit warning for the current quarter. This is due to another measure by the ECB, the so-called TLTRO. Thanks to that dirt-cheap lending program, banks could earn money on borrowing from the central bank for a long time, as long as they lend that money back to companies. To the surprise of the banks, the program is now being phased out at an accelerated pace. ABN Amro says it takes into account that this will save 185 million euros in profit in the fourth quarter.