ABN Amro shares fell 6% Wednesday on the back of its latest earnings quarterly earnings release.
The company reported a net profit of EUR 674 million, driven by net interest income, fee income and low cost of risk. ABN Amro noted that its business momentum remained good.
However, the stock decline came about as its CET1 ratio disappointed investors. The ratio is a key measure of a bank's financial strength and stability, comparing core capital against risk-weighted assets. For ABN Amro, it fell to 13.8%, down from 15.0% a year ago.
Elsewhere, the company's mortgage loan book grew by EUR 0.8 billion and its corporate loan book by EUR 0.3 billion., while there was continued strong net interest income as Amro continued to benefit from the current interest rate environment. In addition, fee income was higher, driven by " good performance in all client units."
"Our capital position remains strong, with a fully-loaded Basel III CET1 ratio of 13.8% and a Basel IV CET1 ratio around 14%. We continue to focus on the optimisation of our capital position and are fully committed to generating and returning surplus equity to shareholders in combination with targeted growth," said Robert Swaak, ABN Amro's CEO.
In early May, the company finalized its third share buyback program of EUR 500 million, which had been announced in February.
Following the report, analysts at UBS said ABN reported a good set of Q1 numbers as far as earnings are concerned. However, a fall in CET1 is "an unexpected headwind to the capital return story."
Meanwhile, analysts at RBC Capital said ABN's "reassuring operating trends in Q1'24 are overshadowed by a miss on capital.
The B3 CET1 of 13.8% missed the consensus of 14.3%, and the B4 CET1 ratio at 14%, down from 15% in Q4, 2023, "is now much closer to the 2026 target of 13.5%, which leaves less room for further capital distributions, but this might just be a timing effect as ABN previously guided to pluses and minuses along its capital path," said analysts at RBC.