ABN sharpens axe as profits plunge

ABN Amro, the Dutch banking giant whose tentacles reach London, New York and Asia, has revealed profits down more than 17% in the third quarter. It blamed a surge in bad debt provisions and poor conditions in corporate and investment banking as well as the private banking division.

Chairman Rijkman Groenink was pessimistic. He said: 'We expect current market conditions to continue for the remainder of the year, and indeed into the new year.' The bank, which employs 100,000 people worldwide including 2,500 in London, intends to cut jobs and specifically mentions the corporate finance and equity businesses, many of whose employees work at Bishopsgate.

For the three months to 30 September, pre-tax operating profits declined by 17.4% to e858m (£533m) after a 21.7% increase in provisions to e308m. ABN's efficiency ratio, which compares costs to income, was virtually static at 73.9%. Nine-month operating profits declined almost 22% and the bank was less efficient over the period than in 2000.

Wholesale banking delivered a 52.2% slump in pre-tax operating profits to e85m, driven principally by a big fall in revenue from financial transactions and a leap of 125% in bad debt provisions to e90m. The unit includes equities and debt trading, investment banking and any activity relating to large corporate clients. 'We will be taking further steps to refocus the US equities business and to restructure the global corporate finance business,' said the bank.

There were also hints that provisions, many of which relate to specific clients, may need to increase. Global financial markets, which focuses on debt products, performed well within the division. Corporate finance, equities and private equity were weak.

ABN's private client and asset management business was also hit by market conditions, producing a 52.5% decline in pre-tax operating profits to e51m. Part of this fall was blamed on a switch from equities to bonds and cash, which tend to attract lower margins.

Retail banking held up well and ABN is confident it will meet last month's e2.3bn year-end profits forecast. The bank said in August that it intended to make e2.7bn profit this year but was forced to issue a profits warning last month.

Despite the surge in provisions, the group believes the overall quality of its assets remains solid. 'We believe very strongly that this is a function of one of our time-tested core strengths - risk management,' said Groenink.