The private banking arm of Dutch lender ABN AMRO has posted an underlying profit of €53m for the second quarter of 2016, down 27% compared to €72m in the year ago quarter.
The bank attributed the fall in profit to higher expenses, which is partly related to regulatory charges as well as higher loan impairments.
The division's operating profit before tax stood at €66m, a slump of 22% from €85m a year earlier.
Operating income was up by 1% to €341m from €336m a year ago, while net interest income increased 14% year-on-year to €160m from €141m.
The unit’s operating expenses rose 4% to €267m during the quarter from €257m a year earlier.
The cost/income ratio of the private banking unit was 78.3%, a rise of 1.8 percentage points compared with 76.5% in the corresponding period of 2015.
At the end of June 2016, client assets stood at €192.8bn as against €193.7bn on 31 March 2016, driven by a negative market performance in the second quarter of 2016. Net new assets (NNA) stood at €0.2bn spread over the domestic and international activities.
Overall, the banking group recorded underlying profit of €662m for the second quarter of 2016, up 10% from €600m in the prior year. The banking group’s reported profit for the period however, slid 35% year-on-year to €391m, driven by a one-off charge on interest rate derivatives.
ABN AMRO Group chairman of the managing board Gerrit Zalm said: “We are well on track with three of our financial targets: an ROE of 10-13% over the coming years, a CET1 ratio of 11.5-13.5% and a dividend payout ratio increasing to 50% over 2017. The underlying net profit for H1 2016, which excludes an additional provision for SME interest rate derivatives, was flat at EUR 1,136 million.
“Continued growth of our capital base – the fully-loaded CET1 ratio increased to 16.2% – caused the ROE to decline to 13.1%, above the target range. We will pay an interim dividend of EUR 0.40 per share, or 45% of the reported net profit. Once there is more clarity on Basel IV, we will update our strategic financial targets beyond 2017.”