Title: ABN AMRO reports double digit growth
1ABN AMRO reports double digit growth
- Second Quarter Results 2003
7 August 2003
2Table of Contents
- Chairmans Introduction
- Operating Performance
- Asset Quality and Capital
- Outlook
- Appendices
3ABN AMRO reports double digit growth
- First half 2003 performance
- Net profit excl. extraordinaries improves by
29.6 - Revenues lower by 3.8, but up by 9.7 adjusted
for foreign exchange - Expenses down 9.9, but up 2.3 adjusted for
foreign exchange - Operating result above EUR 3 bn mark, an all time
high - Provisioning sharply down (-33.4)
- Unchanged interim dividend at EUR 0.45 per share
4Operating Performance
5Efficiency ratio falls for the seventh
consecutive quarter
Revenues Q2 2003
- Revenues improved in nearly all BUs
- Operating expenses continue to trend down
- Operating result strongly up (12.8)
- Efficiency ratio has reached a new low (64.8)
6CCC continues to perform well
Revenues Q2 2003
- Revenues were stable when adjusted for incidental
items in Q1 and currency variations - Operating expenses down due to strict cost
control across geographies - Operating result up by 1.6 when adjusted for
incidental items
7BU NL improves performance significantly
Revenues Q2 2003
- Revenues were stable adjusted for the EUR 111 mln
profit on sale of insurance business in Q1 - Expenses fell due to lower staff costs
- Operating result increased by 31 on a like for
like basis
8Revenues in BU US return to more normalised level
Revenues Q2 2003
Other
32.4
Interest
51.5
Trading
3.2
Commissions
12.9
- The US dollar depreciated on average by 6
against the Euro during Q2. - In local currency terms
- Revenues were down by 3.3 due to lower mortgage
origination margins and higher pre-payments - Operating expenses were flat due to strict cost
control - Continued signs of growth in the commercial
banking activities
9Strong performance of BU Brazil continues
Revenues Q2 2003
- The Brazilian real appreciated on average by
12.8 against the Euro during Q2. In local
currency terms - Revenues up by 4.7, mainly driven by retail
banking - Expenses flat due to good cost control
- Operating result was up by 11.2
10WCS delivers significantly better results
Revenues Q2 2003
- Higher revenues reflect better performance across
nearly all Business Units, particularly BU
Financial Markets and BU Equities - Expenses slightly up due to higher bonus accruals
- Operating result up by 114.9
- Efficiency ratio (81.1) at lowest level since
third quarter of 2000
11Private Clients performance shows improvement in
key markets
Revenues Q2 2003
- Higher revenues reflect the recovery in equity
and bond markets. Revenues supported by good
performance in France, the Netherlands and
International Private Clients - Expenses down, partly due to lower restructuring
charge. Savings related to the restructuring in
France will be realised during H2 2003 and 2004
12Asset Management benefits from improved market
conditions
Revenues Q2 2003
- Higher revenues, reflecting the improved market
conditions, successful fund launches and higher
margins - Expenses up due to one-off adjustment in first
quarter - Operating result up by 16
13Asset Quality and Capital
14Overall provisioning is lower
- Overall provisioning substantially lower, mainly
due to fall in WCS - In CCC, provisioning went down in US, but went
up in the Netherlands and Brazil - In CCC, quality of commercial portfolio improved
in US, but deteriorated in Netherlands and Brazil - In WCS, average UCR improved for the second
quarter in a row. Overall quality of the
portfolio remains solid and well diversified
- Annualised provisions / RWA ()
15Continuous improvement of Tier 1 - level and
quality
change
30 06 03/ 31 03 03
30 06 03/ 30 06 02
(EUR bln)
31 03 03
30 06 02
30 06 03
597.1 11.56 30.8 233.0 7.40 11.03
607.5 11.02 31.3 250.5 7.15 10.80
2.9 3.3 1.0 (2.0)
1.1 8.3 (0.6) (8.8)
614.2 11.94 31.1 228.4 7.63 11.10
Total assets Shareholders equity Group
capital Risk-weighted assets Tier 1 ratio Total
capital ratio
- Tier 1 ratio improvement led by decline of RWA
and by high retained earnings - The gearing ratio decreased for the fifth
consecutive quarter to 31 - Barring any major adverse currency movements,
Tier 1 ratio is expected to be in the region of
7.75 - 8 by year end, and to increase further in
2004
16Outlook
17We are delivering on our commitments
Commitments
Achievements
- Group
- Deliver sustainable earnings stream
- Improvement of Tier 1
- Divestiture of unprofitable and non-strategic
assets - Create an accountable and transparent
organisation - Improvement of efficiency ratio
- Group
- Net profit up, to EUR 782 mln (Q2 03) from EUR
671 mln (Q2 01) - Tier 1 at 7.63 (Q2 03), from 6.55 (Q2 01)
- Exit of 13 countries (retail only) closure of US
Equities and Corporate Finance - MfV and Economic Profit as the guiding principle
- Efficiency ratio at 64.8 (Q2 03), from 73.8 (Q2
01)
- Restructuring BU NL
- Net cost savings of EUR 400 mln
- Use of lower cost service channels
- Restructuring BU NL
- Staff reduction 6,250 FTE and branch closures
280 by end of 2002 - 39 of payments made over the internet
- Restructuring WCS
- Reduction of cost base
- (a.o.TOPS savings of EUR 430 mln)
- Decrease in RWA to EUR 70 bn, from EUR 100 bn (Q2
01)
- Restructuring WCS
- Cost base down by 23 from EUR 2,706 mln in H1
01 to EUR 2,083 mln in H1 03) - RWA at EUR 66.1 bn (end Q2 03)
18Outlook for 2003
- Historically, at ABN AMRO, the second half of
the year has been weaker than the first due to
the seasonal nature of earnings. However, based
on the outlook for the remainder of the year, we
expect the second half of this year to be better
than the same period last year. As a result and
barring any unforeseen circumstances, full year
profits are expected to be higher by at least 15
compared to the 2002 net profit of EUR 2.4 bn.
19Appendices
- Second Quarter Results 2003
20Appendices table of contents
- Key figures profit and loss account
- Currency Variations
- Details on the US Mortgage Business
- Update on the Restructuring of BU NL
- Details on WCS Revenues and capital management
- Recent Achievements WCS
- Asset Quality and Provisioning
- Asset Quality and Provisioning in CCC
- Asset Quality and Provisioning in WCS
21Key figures profit and loss account
22Currency Variations
23Impact of currency variations on Group
performance
Reported change ()
Currency impact (EUR mln)
Organic growth ()
H1 03 / H1 02
Revenues Expenses Operating result Pre-tax
profit
(1,283) (824) (459) (308)
9.7 2.3 27.9 54.5
(3.8) (9.9) 11.2 36.9
Note Reported change is the arithmetic sum of
currency impact and organic growth. In this case,
revenues were negatively impacted by EUR 1,283
mln and costs were reduced by EUR 824 mln
24Impact of currency variations on Group
performance
Reported change ()
Currency impact (EUR mln)
Organic growth ()
Q2 03 / Q1 03
Revenues Expenses Operating result Pre-tax
profit
(25) (17) (8) (8)
2.1 (3.1) 13.4 22.2
1.6 (3.7) 12.8 21.5
Note Reported change is the arithmetic sum of
currency impact and organic growth. In this case,
revenues were negatively impacted by EUR 25 mln
and costs were reduced by EUR 17 mln
25Impact of currency variations on CCC performance
Reported change ()
Currency impact (EUR mln)
Organic growth ()
Q2 03 / Q1 03
Revenues Expenses Operating result Pre-tax
profit
(24) (4) (20) (24)
(4.3) (2.7) (6.3) (10.7)
(5.2) (3.0) (8.1) (13.2)
Note Reported change is the arithmetic sum of
currency impact and organic growth. Revenues were
negatively impacted by EUR 24 mln and costs were
decreased by EUR 4 mln
26Impact of currency variations on BU US performance
Reported change ()
Currency impact (EUR mln)
Organic growth ()
Q2 03 / Q1 03
Revenues Expenses Operating result Pre-tax
profit
(69) (31) (38) (33)
(3.3) 1.4 (7.1) (7.1)
(8.8) (4.1) (12.5) (12.4)
Note Reported change is the arithmetic sum of
currency impact and organic growth. Revenues and
expenses were negatively impacted by respectively
EUR 69 mln and EUR 31 mln
27Impact of currency variations on BU Brazil
performance
Reported change ()
Currency impact (EUR mln)
Organic growth ()
Q2 03 / Q1 03
Revenues Expenses Operating result Pre-tax
profit
45 27 18 9
4.7 0.9 11.2 (21.7)
17.2 12.8 24.6 (12.0)
Note Reported change is the arithmetic sum of
currency impact and organic growth. Revenues were
positively impacted by EUR 45 mln and costs were
increased by EUR 27 mln
28Details on US Mortgage Business
29Income from Mortgage Banking Activities (BU US)
- Data provided on a US GAAP basis
30Changes in MSR Balances (BU US)
- Data provided on a US GAAP basis
31Update on the Restructuring of BU NL
32Update on the restructuring ofBU NL
(1) 5 of which are not combined to a bankshop
33Details on WCS Performance and Capital
management
34WCS Client Performance
WCS Revenues (EUR 2,442 mln in H1 2003)
Revenues by Client (EUR 2,081 mln in H1 2003)
Priority Key Revenues by Client (EUR 1,149 mln
in H1 2003)
- Overall client revenues for WCS are EUR 2,081
mln, representing 85 of WCS revenues - The revenue contribution of our Priority and Key
clients represents 55 of total client revenues
35WCS Product Performance
Revenues by Product EUR 1,297 mln in Q2 2003
Revenues by Product EUR 1,145 mln in Q1 2003
- Most important revenue contributor is Financial
Markets
36Capital deployed has been reduced substantially
- The Loan Portfolio represents approx. 45 of
total WCS RWA. Most of the remaining RWA are tied
up within other annuity businesses - As at end June 03, the Loan Portfolio had been
reduced by Euro 33bln, or approx. 50 - The Loan Portfolio is expected to increase
slightly - The WCS target of EUR 70 bn by the end of 2004
remains in place
102.3
95.2
83.8
67.2
66.1
Note BU Loan products (LP) until Dec.2002 and
Portfolio Management Group (PMG) since Jan 2003
37Profitability per client relationship has
increased
- The constant turnover of capital made it possible
to increase revenues whilst reducing RWA at the
same time. This improved the ratio Annualised
Net Interest Income / RWA constantly over time - Credit RAROC of deals originated in 2003 has
increased substantially compared to the average
RAROC of the portfolio as measured during 2002
38Asset Quality and Provisioning
39Private Loans
June 2002
December 2002
June 2003
Private loans (EUR bn - by outstanding)
40Overview of total loan loss provisioning per SBU
Loan loss provisioning per SBU (EUR mln)
Annualised provisioning / Avg RWA
Total ABN AMRO mainly includes Corporate Centre
and LeasePlan Corporation
2Q 2003 loan loss provisioning by SBUs
41Asset Quality and Provisioning in CCC
42Overview of the CCC consumer and commercial
franchise
CCC total private loans (EUR bn)
Numbers may not add up due to rounding
43CCC loan loss provisions - stable performance
despite market conditions
Loan loss provisioning per SBU (EUR mln)
Annualised provisioning / Avg RWA
2Q 2003 loan loss provision by Geography
44Overview of the total portfolio of BU NL
CCC NL commercial portfolio by UCR
CCC NL commercial portfolio by product
45Overview of the commercial portfolio of BU NL
CCC NL total portfolio1
CCC NL commercial portfolio by industry1
CCC NL commercial portfolio by product2
1 Incl. Bouwfonds 2 excl. Bouwfonds
46C CC BU NL Commercial Portfolio Asset Quality
47Overview of the portfolio of BU US
Business mix
48Overview of the portfolio of C CC BU US
Commercial Portfolio
CCC BU US Total Portfolio
CCC BU US commercial portfolio by Industry
CCC BU US commercial portfolio by Unit
5.8
49C CC BU US Commercial Portfolio Asset Quality
50Overview of the portfolios of BU Brazil
CCC - Asset quality
Business mix
UCR breakdown
Note Includes only loans booked onshore
51Overview of the portfolio of C CC BU Brazil
Commercial Portfolio
CCC BU Brazil Total Portfolio
CCC Brazil commercial onshore by Industry
CCC Brazil commercial portfolio
52C CC BU Brazil Commercial Portfolio Asset
Quality
53Asset Quality and Provisioning in WCS
54Wholesale client base is predominantly OECD
Geographic exposure calculated based on the
country lending office of each counterparty
55Breakdown of Wholesale portfolio per client sector
Wholesale - Total portfolio
Wholesale - Corporate portfolio
TMTH
TMTH
Commercial banks exposure includes commercial
lines money market and OBSI facilities
56Wholesale corporate portfolio is well diversified
As a of total limits of Wholesale Corporate
portfolio which excludes FIPS
57Stabilization of exposure after significant
reduction
Sector breakdown of wholesale portfolio - Total
limits
-18.2
-17.8
-20
-18
-16.1
58Average UCR of wholesale client sectors
Average UCRs - Historical Performance
Average UCRs
59Asset Quality of wholesale client sectors
Integrated energy
Country coverage
Wholesale corporate portfolio
(37 of WCS corp.portfolio)
(26 of WCS corp.portfolio)
Consumer
TMTH
(22 of WCS corp.portfolio)
(15 of WCS corp.portfolio)