ABN Amro said its quarterly profits took a hit from the cost of ramping up anti-money laundering safeguards at the Dutch government-backed bank after recent scandals at Danske Bank and local rivals ING and Rabobank.
The lender took an €85m provision to “accelerate” customer due diligence remediation programmes in its commercial banking and credit card businesses.
The move comes after a money laundering scandal at ING led to a record €775m penalty at the Netherlands’ largest bank and the resignation of its chief financial officer last September.
Separately, Rabobank last year paid the US government $369m after it tried to cover up weaknesses in its compliance systems that allowed Mexican drug gangs to launder hundreds of millions of dollars.
A larger dirty-money scandal at Denmark’s Danske Bank, meanwhile, has led to criminal probes in Denmark, Estonia and the US, as well as several investor lawsuits.
Kees van Dijkhuizen, ABN’s chief executive, said: “Danske was a very clear example and means that of course the bar is higher after what happened . . . we want to do the utmost in this area.”
The bank noted in its quarterly report on Wednesday that “regulatory requirements and scrutiny are intensifying”, but Mr van Dijkhuizen declined to comment on whether the Dutch central bank had explicitly ordered any changes to its policies.
The AML provision, together with an increase in bad loans in certain parts of ABN’s commercial bank, contributed to a 42 per cent year-on-year decline in net earnings for the fourth quarter to €316m. The average forecast among analysts polled by Refinitiv was €446m.
Investors were also disappointed that the full-year dividend was kept steady at €1.45 per share, although the payout as a proportion of total earnings increased.
Shares in the bank fell 7 per cent in morning trading, to €20.38, making it the worst performer on the Stoxx 600 index of major European companies.
Despite the disappointing end to 2018, chief financial officer Clifford Abrahams said the bank, which is 56 per cent owned by the Dutch government, was on track to meet its 2019 forecasts. “The bank is in good shape,” he said.
Mr Abrahams said overall impairments for the year remained below the long-run average, but were “higher than we’d like at this point in the cycle” in some areas, namely companies in the diamond sector and those exposed to low oil prices. He said the bank was already reducing its exposure to those areas as part of a shake-up announced last August that included 250 job cuts.
Omar Fall, analyst at Barclays, said ABN’s relatively strong net interest margin and progress in restructuring its corporate bank were “encouraging to us, but we will need better guidance on the non-recurring nature of” elements such as higher provisions.
ABN’s worse than expected results contrasted with those of ING, which beat analysts’ forecasts with a more than 25 per cent increase in quarterly net profits last week.
