ABN AMRO has carefully reviewed its financial performance and targets which were set for 2017. These targets, which were announced early 2013, are a CET1 ratio of 11.5-12.5%, a C/I ratio of 56-60% and an ROE of 9-12%. After a clear improvement already in 2014, the H1 2015 results - a fully loaded CET1 of 14.0% and, assuming the expected regulatory levies had been included evenly over the four quarters, a C/I of 60% and an ROE of 13% - showed that ABN AMRO is well on track to achieving these targets.
Based on this review, ABN AMRO announces today that it is raising its financial ambitions, resulting in the upward revision of two financial targets and the addition of a new one. ABN AMRO now targets:
- a fully loaded Common Equity Tier 1 ratio range of 11.5-13.5%
- a cost/income ratio of 56-60% by 2017
- a return on equity of 10-13% in the coming years
- and a dividend payout ratio of 50% over 2017
To account for current regulatory uncertainty, including the discussion on RWA standardisation (Basel IV), ABN AMRO already has a relatively high fully loaded CET1 ratio. The wider range for the new CET1 target provides flexibility to absorb regulatory changes and increasing requirements over time.
The revised ROE target is based on the bank’s strong performance in 2014 and the first half of this year. Going forward, ABN AMRO expects that a number of developments should be taken into consideration; for example, increasing regulatory levies and the cost for new subordinated instruments which will be issued in the future to meet the leverage ratio, MREL and TLAC requirements. These developments will also impact the C/I ratio. Nevertheless, the C/I target has not been amended.
The increase of the targeted dividend payout ratio from 40% of the 2015 net profit to 50% of the 2017 net profit is underpinned by the expected strong capital generation while allowing for a further build-up of capital.
Once regulatory uncertainty has subsided, these financial targets will be reviewed again.