strong increase in net profit second quarter results 2004 2 august 2004
TRANSCRIPT
Strong increase in net profit Second Quarter Results 2004
2 August 2004
0 2
Table of contents
Introduction 3
Operating performance 10
Asset quality, capital and interest rate sensitivity 32
Outlook and strategic update 38
Appendices 49
GSS Presentation “Fuel for Growth” 85
0 3
397
534591
685 690
782832 857
934987
0
200
400
600
800
1000
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Net profit increased for the 9th consecutive quarter
Net profit (EUR mln)
0 4
8384 9225
3047210
2000
4000
6000
8000
10000
H1 03 H1 04
US Mortgage Income Total revenues AA excl. US mortgages
Revenue increased despite strong decline in US mortage income Total revenues ABN AMRO (excl. US mortgage) and US mortgage revenues (EUR mln)
91059529
+841
-417
0 5
Continuing positive results due to well diversified business mix
Operating result per (S)BU (H1 2004, y-o-y % change)
8%27%
-12%
-35%
71%66%
185%
51%
112%
-50%
0%
50%
100%
150%
200%
BU NL BU NA BU Brazil BU NGM Bouwfonds WCS PC AM Other
0 6
72.873.4
71.0
69.2
66.567.4
66.7
62.0
64.0
66.0
68.0
70.0
72.0
74.0
H1 01 H2 01 H1 02 H2 02 H1 03 H2 03 H1 04
Leading to a gradual improvement of the efficiency ratioEfficiency ratio (%)
0 7
The performance is supported by top market positions
All figures based on Brazilian GAAP
TOP 4 PRIVATE BANK IN BRAZIL
TOP RANKING US REGIONAL
FRANCHISE IN THE MID-WEST
EUROPEAN PRIVATE BANKING:# 1 Netherlands# 3 France and Germany
Top 6 US mortgage originatorTop 7 US mortgage servicer
WCS European franchise with top 3 Global Trade and Cash & Payment platform
NETHERLANDS:Top commercial bank for large SME and affluent customers
INDIA Growing mass affluent retail franchises (12 branches)
Source: SNL financials
0 8
Shareholder returns have increasedReturn on equity (ROE, %) and Earnings per Share (EPS, EUR)
13.7
19.2
22.4
26.4 25.9
29.429.228.5
29.028.2
10
15
20
25
30
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
ROE
0.60.56
0.520.51
0.48
0.430.43
0.370.34
0.25
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
EPS
0 9
Interim dividend increased by 5 cents to 50 Euro centsDividend and Dividend yield
0.45 0.45 0.450.50
0.45 0.450.50
0.00
0.25
0.50
0.75
1.00
2001 2002 2003 2004
Interim Dividend Final Dividend
5.5%
5.9%
5.1%
4.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2001 2002 2003 H1 04
Dividend yield (dividend/average share price)
Operating performance
0 11
Further increase in net profit due to lower provisioning
Revenues flat quarter on quarter as higher revenues in BU NA and CC offset lower revenues in WCS
Operating expenses were stable as higher expenses in BU NA and CC offset lower expenses in WCS and Brazil
Operating result flat, but net profit higher as a result of lower provisioning
* At constant forex rates
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 4,770 4,759 0.2 (0.0) 9,529 9,105 4.7 7.9
Operating expenses 3,184 3,169 0.5 0.1 6,353 6,057 4.9 8.0
Operating result 1,586 1,590 (0.3) (0.3) 3,176 3,048 4.2 7.9
Provisioning loan losses 154 195 (21.0) (21.0) 349 648 (46.1) (44.6)
Net profit 987 934 5.7 3.9 1,921 1,472 30.5 33.4
Efficiency ratio 66.8% 66.6% 66.7% 66.5%
0 12
C&CC
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 2,602 2,486 4.7 4.1 5,088 5,318 (4.3) 0.2
Operating expenses 1,613 1,602 0.7 0.4 3,215 3,090 4.0 8.4
Operating result 989 884 11.9 11.0 1,873 2,228 (15.9) (11.1)
Provisioning loan losses 139 160 (13.1) (13.1) 299 397 (24.7) (22.4)
Net profit 598 493 21.3 16.6 1,091 1,168 (6.6) (2.6)
Efficiency ratio 62.0% 64.4% 63.2% 58.1%
Staff (fte) 73,755 75,817 (2.7) 73,755 77,369 (4.7)
Risk-weighted assets (in bn) 146.3 146.0 0.2 146.3 141.4 3.5
* At constant forex rates
0 13
Strong C&CC results mainly due to BU NA and BU Brazil
Operating result per BU (Q2 2004, q-o-q % change)
0%
19%
16%
-2%
6%
12%
-5%
0%
5%
10%
15%
20%
25%
BU NL BU NA BU Brazil BU NGM Bouwfonds C&CC
0 14
BU NL
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004 % change 2004 2003 % change
Total revenue 784 791 (0.9) 1,575 1,644 (4.2)
Operating expenses 604 611 (1.1) 1,215 1,235 (1.6)
Operating result 180 180 0.0 360 409 (12.0)
Provisioning loan losses 42 68 (38.2) 110 108 1.9
Net profit 93 74 25.7 167 231 (27.7)
Efficiency ratio 77.0% 77.2% 77.1% 75.1%
Staff (fte) 20,396 21,152 (3.6) 20,396 21,417 (4.8)
Risk-weighted assets (in bn) 53.5 52.6 1.7 53.5 52.6 1.7
0 15
Improvement efficiency ratio BU NL despite low GDP growthEfficiency ratio BU NL*
* Q1 03 is adjusted for sale of insurance business to DL, Q2 03 is adjusted for share loss in Interpay and release of accrued provisioning, and Q4 is adjusted for the unwinding of the security vehicle and EUR 23 mln restructuring costs.
86.7
92.4
84.0 84.5
81.5
84.8 84.7
77.9
83.6
78.9 79.5 80.1
77.2 77.0
70.0
75.0
80.0
85.0
90.0
95.0
Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
0 16
BU NA
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 1,004 903 11.2 8.7 1,907 2,419 (21.2) (13.4)
Operating expenses 537 512 4.9 2.5 1,049 1,095 (4.2) 5.4
Operating result 467 391 19.4 16.9 858 1,324 (35.2) (28.9)
Provisioning loan losses 31 23 34.8 30.4 54 163 (66.9) (63.8)
Net profit 291 245 18.8 16.3 536 747 (28.2) (21.3)
Efficiency ratio 53.5% 56.7% 55.0% 45.3%
Staff (fte) 18,177 18,555 (2.0) 18,177 19,356 (6.1)
Risk-weighted assets (in bn)
* At constant forex rates
0 17
BU NA non-mortgage businesses have picked up in the second quarter
438365 375
247189 183
929 960 915 890 9321031
0
200
400
600
800
1000
1200
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Revenues US mortgages Total revenues BU NA excl.mortgages
Revenues US mortgages and total revenues BU NA excl. mortgages (in mln USD)
0 18
Increase in total commercial banking revenuesCommercial banking and total loan commitments (USD bn)
10%
15%
21
23
25
27
29
31
33
35
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
44%
46%
48%
50%
52%
54%
56%
Total Loan Commitments (USD bn)
Net loans as % of total commitments
Q1 04 Q2 04
Commercial speciality banking
Corporate banking
0 19
BU Brazil
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 476 473 0.6 2.7 949 784 21.0 25.9
Operating expenses 301 322 (6.5) (4.3) 623 483 29.0 33.7
Operating result 175 151 15.9 17.9 326 301 8.3 13.3
Provisioning loan losses 56 66 (15.2) (13.6) 122 128 (4.7) (2.3)
Net profit 87 58 50.0 22.4 145 57 154.4 133.3
Efficiency ratio 63.2% 68.1% 65.6% 61.6%
Staff (fte) 26,599 27,880 (4.6) 26,599 28,160 (5.5)
Risk-weighted assets (in bn) 8.5 8.5 0.0 8.5 7.8 9.0
* At constant forex rates
0 20
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
H1 2003 H1 2004
Retail loans Banco Real Retail loans Sudameris
Lower interest rates in Brazil are leading to higher retail loan growthSelic interest rate (%) and retail loan growth (%)
14.7%
134.5%
10
12
14
16
18
20
22
24
26
28
Selic rate
0 21
BU Brazil consumer finance: higher volumes offsetting lower spreadsProduction and average outstanding (BRL Bn) and monthly spreads (%)
0.9
1.0
1.1
1.2
1.3
1.4
1.5
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Production (l.a.) Spread (r.a.)
5.8
6.0
6.2
6.4
6.6
6.8
7.0
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Av erage outstanding (l.a.) Spread (r.a.)
0 22
BU NGM
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 166 161 3.1 2.5 327 226 44.7 52.2
Operating expenses 104 98 6.1 6.1 202 167 21.0 25.7
Operating result 62 63 (1.6) (3.2) 125 59 111.9 127.1
Provisioning loan losses 7 5 40.0 40.0 12 (2)
Net profit 45 47 (4.3) (6.4) 92 44 109.1 125.0
Efficiency ratio 62.7% 60.9% 61.8% 73.9%
Staff (fte) 7,046 6,715 4.9 7,046 6,937 1.6
Risk-weighted assets (in bn) 6.5 6.5 0.0 6.5 6.0 8.3
* At constant forex rates
0 23
Strong growth in Greater China and IndiaCredit cards in force and total clients in Greater China and India
510,000
750,000
956,000
50,000
233,000
327,000
0
200,000
400,000
600,000
800,000
1,000,000
Dec-02 Dec-03 Jun-04
Credit cards Greater China Credit cards India
500,000
675,000
750,065
338,000
635,000
773,162
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Dec-02 Dec-03 Jun-04
Clients Greater China Clients India
0 24
Bouwfonds
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004 % change 2004 2003 % change
Total revenue 172 158 8.9 330 245 34.7
Operating expenses 67 59 13.6 126 110 14.5
Operating result 105 99 6.1 204 135 51.1
Provisioning loan losses 3 (2) 1 0
Net profit 82 69 18.8 151 89 69.7
Efficiency ratio 39.0% 37.3% 38.2% 44.9%
Staff (fte) 1,537 1,515 1.5 1,537 1,499 2.5
Risk-weighted assets (in bn) 21.0 20.2 4.0 21.0 19.7 6.6
0 25
Bouwfonds will build further on its strong results by acquisition of MAB
On 15 July, Bouwfonds
announced the acquisition of
MAB Group BV
The activities of MAB will
become part of Bouwfonds
Property Development,
strengthening its position in
commercial property in general
and in the retail field in
particular
59
7683 82
99105
40
4955
50
69
82
0
20
40
60
80
100
120
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Operating result Net profit
0 26
WCS
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 1,222 1,371 (10.9) (11.0) 2,593 2,442 6.2 8.1
Operating expenses 1,040 1,097 (5.2) (5.6) 2,137 2,083 2.6 4.5
Operating result 182 274 (33.6) (32.8) 456 359 27.0 29.0
Provisioning loan losses 10 30 (66.7) (66.7) 40 239 (83.3) (82.8)
Net profit 146 175 (16.6) (15.4) 321 90 256.7 263.3
Efficiency ratio 85.1% 80.0% 82.4% 85.3%
Staff (fte) 17,018 17,293 (1.6) 17,018 17,624 (3.4)
Risk-weighted assets (in bn) 72.6 69.8 4.0 72.6 61.6 17.9
* At constant forex rates
0 27
Net profit WCS is in line but operating result is below our expectations
121
201207
219
114
245
264
281274
182
0
50
100
150
200
250
300
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Operating result
146
175163
134
110
-20
63
-44
-125
-188
17
-200
-150
-100
-50
0
50
100
150
200
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Net profit Net profit (excl. restructuring charge)
Net profit and operating result WCS (EUR mln)
0 28
BU Private Clients
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 273 276 (1.1) (1.4) 549 447 22.8 23.7
Operating expenses 201 194 3.6 3.1 395 393 0.5 1.5
Operating result 72 82 (12.2) (12.2) 154 54 185.2 185.2
Provisioning loan losses 1 0 1 5 (80.0) (80.0)
Net profit 51 56 (8.9) (8.9) 107 36 197.2 197.2
Efficiency ratio 73.6% 70.3% 71.9% 87.9%
Staff (fte) 4,198 4,187 0.3 4,198 3,877 8.3
Risk-weighted assets (in bn) 7.3 7.1 2.8 7.3 6.0 21.7
Assets under adm. (in bn) 113 113 0.0 113 102 10.8
* At constant forex rates
0 29
Revenues and AuA of BU PC stable q-o-q despite unfavourable market conditions
Revenues and Assets under Administration (AuA) BU Private Clients
Revenues 2003 are adjusted for the transfer of NGM France to BU PC
223
237 238
264276 273
100
150
200
250
300
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Revenues
94
98100
102
113 113
80
85
90
95
100
105
110
115
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Assets under Administration (EUR bn)
0 30
BU Asset Management
Quarterly Six months
(EUR mln) Q2 2004 Q1 2004%
change%
change* 2004 2003%
change%
change*
Total revenue 136 144 (5.6) (6.3) 280 229 22.3 26.2
Operating expenses 106 106 0.0 (0.9) 212 188 12.8 16.0
Operating result 30 38 (21.1) (21.1) 68 41 65.9 73.2
Net profit 19 30 (36.7) (36.7) 49 28 75.0 82.1
Efficiency ratio 77.9% 73.6% 75.7% 82.1%
Staff (fte) 2,065 2,064 0.0 2,065 2,124 (2.8)
Assets under Man. (in bn) 166 166 0.0 166 156 6.4
* At constant forex rates
0 31
Operating result down q-o-q in BU AM due to one-off in Q1 and weaker markets
Revenues and Assets under Management (AuM) BU Asset Management
148
154 156 156
166 166
100
110
120
130
140
150
160
170
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Assets under Management (EUR bn)
19
22
29 30
38
30
0
5
10
15
20
25
30
35
40
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Operating result
Asset Quality, Capital and Interest rate Sensitivity
0 33
Provisions down in Q2, mainly due to decrease in WCS, BU NL and BU Brazil
WCS provisions decreased due to releases as a result of conservative provisioning policy in previous years and continuing improvement of loan portfolio
Provisions in BU NL came down as a result of lower provisions in corporate loan portfolio
Provisions in BU Brazil decreased due to marked improvement of credit quality of consumer finance portfolio
Provisioning level for the group is expected to remain low in H2
Annualised provisions / RWA (%)
0.0%
0.5%
1.0%
2Q03 3Q03 4Q03 1Q04 2Q04
C&CC WCS ABN AMRO
SBUC&CCWCSPCAMTotal AA
Loan loss provisions per SBU (EUR mln)
2Q03
21783
2305
3Q03
20554
3304
4Q03
214106
1323
1Q04
16030
0195
2Q04
13910
1154
0 34
New capital targets of Tier 1 ratio of 8.5% and Core Tier 1 of 7%Core Tier 1 and Tier 1 ratio (%)
4.59
4.23 4.214.47 4.51 4.61 4.53
4.92 4.965.24
5.46
5.91 5.91 6.01
6.826.55 6.47
7.03 7.13 7.157.00
7.48 7.407.63
7.79
8.15 8.27 8.33
4.00
5.00
6.00
7.00
8.00
9.00
Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
Core Tier 1 Tier 1
0 35
(1) : Ceteris paribus
We will neutralise the dilutive effect of the full year stock dividend Proceeds of sale of LeasePlan Corporation and Bank of
Asia will increase Tier 1 and Core Tier 1 ratio by 110 basis points(1)
We increase our targets to a Tier 1 ratio of 8.5% and a Core Tier 1 of 7%
We will neutralise the dilutive effect of the interim stock dividend once sales proceeds of LeasePlan have been received
0 36
50 bp 100 bp
Volume Margin NII Volume Margin NII
Retail assets + 0 + 0 0 0
Retail liabilities + - 0 0 + +
Commercial assets 0 0 0 + 0 +
Commercial liabilities 0 - - 0 0 0
Investments Mgt - (-) Mgt + (+)
Interest Position Mgt + (+) Mgt - (-)
Overall 0/+ +
EUR interest rate sensitivity(12 months; EUR; base case = rates unchanged)
0 37
USD interest rate sensitivity(12 months; USD; base case = rates unchanged)
50 bp 100 bp
NII NII
MSR’s
Origination
Balance sheet
-
++
-
0
-
0
Overall + -
Outlook and Strategic Update
0 39
2004 outlook
“Based on our performance in the first half and our
estimates for the second half of the year, we expect our
2004 operating result to be around that of 2003.
Retaining our full year net profit outlook for the BU North
America and for the Wholesale Clients SBU, we expect
an increase in our net profit of at least 10% for 2004
compared to last year (excluding the profit on the sale of
Bank of Asia and Leaseplan Corporation).”
0 40
Substantial cost synergies can still be extracted across SBUs
All restructuring programmes to date concentrated on establishing BUs and on improving their returns
Group Shared Services was established in January 2004 with the objective to optimise cross-(S)BU cost synergies whilst maintaining operational excellence
Benchmarking against top-quartile Banks conducted on technology spending revealed significant potential. Additional sources of savings in procurement and HR
Current estimates point to at least EUR 500 mln annual savings from 2007 onwards
0 41
69.4%
68.3%
71.9%
73.1%
71.5%
67.0%
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
1998 1999 2000 2001 2002 2003
63%
65%
67%
69%
71%
73%
75%
Revenue (EUR mln) Costs (EUR mln)
Efficiency ratio (%)
Revenue growth is equally critical to improving operating efficiency
Growth in commercial banking
revenues, especially in US and
Brazil, driven by economic
recovery and our relationship
approach
Growth in retail banking
revenues in Asia, due to rapid
growth of a consumer and
increasingly wealthy middle
class in India and Greater
China
0 42
Our business mix can deliver satisfactory organic revenue growth
BU NL : increase cross-selling
to mass-affluent customers
BU NA : top ranking
commercial banking franchise
and market growth
BU Brazil : strong platform
geared for economic growth
NGM : fast development of the
mass-affluent retail franchises
PCAM : top quality brand
names and growth of onshore
market
WCS : Investments in FM and
WoCa - ROE up to 15%-20%
through the cycle
Cross-SBU synergies : 20
action tracks, 5 of which under
the direct responsibility of the
Managing Board
0 43
Our strategy aims at further strengthening our C&CC business We are a multi-regional bank focused on consumer and
commercial banking, supported by our international wholesale franchise
Our strategy therefore aims at further strengthening our consumer and commercial banking franchises, to optimise our business mix
This can be achieved by a combination of organic growth and M&A
Focus is on accelerating organic growth in the US and in Asia
M&A deals will be value creating
0 44
No acquisitions to be expected in Brazil and Europe
BU Brazil: No further acquisition needed or desired. After Sudameris, all Brazil needs is economic growth
Europe is unlikely to see any cross-border activity in the short-term
In Asia, organic growth in combination with acquisitions could accelerate the already rapid growth – The Indian franchise is building up quickly within limitations by
the regulatory framework
– In China, focus on Hong Kong and China
0 45
Organic growth in the US is a valid strategic option
Our US franchise has a very strong position in the Midwest
The strength of the US franchise gives us the option not to join the current consolidation phase. The franchise has a defendable and sustainable market share. It is well positioned for organic growth in the coming years, especially with the expected pick up in the commercial banking cycle
0 46
Long term, regional consolidation might require us to expand our US franchise
The core skill and value driver of the US franchise is commercial banking
In the long run, cost efficiencies derived from scale might be necessary to compete with super regional players in commercial and retail banking
Acquisitions in an adjacent state would strengthen our regional commercial banking franchise and deliver revenue and cost synergies
ABN AMRO will stick to its MfV principles as it has no reason to overpay for “strategic” considerations
0 47
Share Buy-Backs are an option Excess capital is a new phenomenon for ABN AMRO
Unlike a number of other European players we started from a relatively low capital base
The Managing Board considers that its main task on behalf of ABN AMRO’s shareholders is long term value creation by investing capital in attractive growth opportunities
In accordance with our capital discipline and with the capital ratio targets, we will give capital back to our shareholders, if no value creating opportunities can be found