ABN AMRO expects Q1 2020 cost of risk to exceed 25-30bps through-the-cycle cost of risk range

Maria Nikolova

ABN AMRO confirms that it expect to record a loss in the first quarter of 2020.

ABN AMRO Bank NV (AMS:ABN) forecasts that the FY2020 and especially Q1 2020 cost of risk will be materially higher than the through-the-cycle cost of risk range of 25-30bps. The company noted that the long term impact of the coronavirus on the economy, on its clients and on the quality of its loan portfolio is currently uncertain.

Together with the incidental loss at ABN AMRO Clearing, ABN Amro expects to record a loss in Q1 2020.

Several days ago, ABN AMRO said that ABN AMRO Clearing will register a USD 250 million pretax incidental loss on one of its US clients. The net loss is approximately USD 200 million (EUR 183 million).

The client had a specific strategy, trading US options and futures, and failed to meet the minimum risk and margin requirements following extreme stress and dislocations in US markets. In order to prevent further losses, ABN AMRO Clearing decided to close-out the positions of this client.

Today, ABN AMRO stated that it took notice of the recommendation of the European Central Bank (ECB) to credit institutions under ECB supervision to conserve capital and refrain from making dividend payments and perform share buy-backs until at least October 1, 2020 in order to support the economy in an environment of heightened uncertainty caused by COVID 19.

ABN AMRO’s annual general meeting is expected to take place as planned on April 22, 2020. At the recommendation of the ECB, ABN AMRO has decided to keep the initial proposal for distribution of the dividend for the financial year 2019 but make the actual payment conditional to the reassessment of the situation once the uncertainties caused by COVID 19 disappear (and, in any case, not before October 1, 2020). In addition, ABN AMRO will not pay an interim dividend in August 2020.

ABN AMRO has a strong capital position (CET1 of 18.1% at YE 2019) and a significant buffer above its minimum capital requirements. Given its solid capital and liquidity position and the bank’s important role in the Dutch economy, ABN AMRO was able to announce several measures to support clients affected by the COVID 19 virus in the past two weeks.

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