ABN Amro said it would cut more than 2,500 jobs and abandon its short-term profit target as the Dutch bank prepares for a prolonged period of record-low interest rates even after the impact of the coronavirus pandemic eases.
The bank, which is majority controlled by the Dutch state, plans to reduce staff numbers by about 15 per cent over the next few years. The job losses are part of an effort to cut €700m of costs by 2024, which will also include branch closures, digitisation, and a previously-announced wind-down of part of its investment bank.
ABN said that “rigorously simplifying” its operations would help to “future proof” the bank, but it warned that returns would not return to pre-pandemic levels for the foreseeable future.
The bank has reported a return on equity of above 10 per cent every year since it was partially reprivatised in 2015, but on Monday said it would be unable to return to those levels until interest rates “normalise”. It set a new ROE target of about 8 per cent by 2024.
Shares in ABN Amro fell 6.7 per cent, having dropped more than 45 per cent this year.
“We expect more than 50 per cent [of the cuts] to be executed against natural attrition and we have a long history of reskilling our own workforce to ensure people are ready for the future,” said Robert Swaak, who became the bank’s chief executive in April.
“We don’t expect this to significantly impact 2021. We wanted to be transparent about the effects of digitisation as we continue to watch the trends in the industry.”
Johan Ekblom, an analyst at UBS, said he expected shareholders to welcome the announcements on cost reduction, but added: “We think the market is likely to be less generous when it comes to factoring in improvements to the top-line outlook where we continue to see material challenges.”
Negative interest rates have been weighing on bank profitability across the eurozone, as income from lending has fallen faster than the cost of deposits. Banks have been reluctant to pass on negative rates to retail customers, but from January ABN will begin charging 0.5 per cent interest on any deposits above €500,000.
It will also aim to offset the pressure of negative rates by increasing the fees it earns from services such as private banking, credit card lending and payments services. The bank also noted that it would consider acquisitions to support such growth, particularly in private banking.
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