“The foundation is there, now it’s time to grow”

Ferdinand Vaandrager looks back on a successful year for ABN AMRO. He also discusses how the bank is improving its cost and capital efficiency while investing in future growth. “Our focus is gradually shifting from investing in our licence to operate to investing in our licence to grow.”

How do you view last year’s financial performance?

“2024 was a good year for ABN AMRO. It was a year of delivery, in which we were able to stick to our guidance and meet our targets. We were able to further increase our net interest income, we had almost zero impairments on loans, and we managed to stay within the cost boundaries we had communicated to the market.

We were also successful in serving our clients. Our mortgage business was a significant driver as we reinstated our market leading position in the Netherlands, and our fee income growth came in above guidance.”

How did fee income rise in 2024 and why is this important?

“We have focused in recent years on improving the customer experience and the added value from our products, services and expertise. That is visible in the results of all three client units. Fees in Personal & Business Banking have increased while at the same time we improved our Net Promoter Score (NPS), which shows how likely clients are to recommend us. We also benefited from developments in the financial markets, which contributed to our asset management and clearing fees. We attracted more clients through our Entrepreneur & Enterprise offering, as corporate lending to business owners increasingly becomes a source of new clients for our wealth management practice and vice versa.

A core part of our strategy is to find new ways to create value for our clients and increase our fee income as a result. When interest rates started to decline and even became negative, this had a significant impact on our interest income. To become less dependent on interest rate fluctuations, we must diversify our income and focus more on fee-generating activities. These are also capital light, which is very welcome as we aim to grow the bank in a capital-efficient way.”

Why is the bank containing its risk-weighted assets?

“Our risk-weighted assets (RWAs), which determine how much capital the bank has to set aside to cover potential losses, are relatively high compared to our loan portfolio’s size and quality. This hampers our lending capacity and essentially puts a lid on our scope to grow. To contain our RWAs, we are investing in our credit risk models and data quality. We are taking a more structural approach to capital management so we can make better use of the bank's assets and liabilities. For example, we are collaborating on an infrastructure loan portfolio with a US investment manager, which will help us to free up capital. We are also seeking ways to expand without using too much capital, for instance by developing products that increase our capital-light fee income. Inorganic growth opportunities like the acquisition of Hauck Aufhäuser Lampe in Germany will support this as well.”

How do you view the bank’s cost development?

“Expenses in 2024 were just in line with our guidance. However, our operational efficiency as measured by the cost-to-income ratio is above industry average and needs to come down. We’re reaching the peak of investing in the foundation of the bank, which will help improve our efficiency in the future. Over the past few years, we’ve been investing in scaling up our data capabilities, digitalisation of processes, simplifying our IT landscape and implementing new regulations such as Basel IV, the Sustainable Finance Disclosure Regulation and the Digital Operational Resilience Act. We are gradually shifting our change capacity to initiatives that rejuvenate our product offering, improve customer experience and contribute to the bank’s top-line growth. A good example is our investments in retail investment platform BUX and our Tikkie payment app, which will enhance our digital offering for client segments where we want to grow.”

The EU’s CSRD regulation requires more reporting on sustainability. What does this mean for the bank?

“First of all, it’s not only about reporting. Yes, reporting on environmental, social and governance aspects is shifting from voluntary to mandatory, which requires us to make much more of our non-financial data measurable. We have worked tirelessly to strengthen the data chains within the bank, which has been a huge effort involving many teams across the organisation.

The next step, which has already started, is to leverage the non-financial data that we collect to steer our lending and other activities. We aim to support the sustainability transition, help create positive social impact and accelerate circular business practices. As we get more insight into our clients’ and our own impact, we can make better-informed decisions and maximise the long-term value we create for all stakeholders.”

Another regulatory development is the implementation of Basel IV in 2025. Is ABN AMRO ready?

“After years of preparation, we are happy that we are now in this phase of implementation. The amended capital regime took effect in January and required significant changes to our IT infrastructure, data storage and sourcing. We already moved portfolios to less advanced modelling approaches ahead of these capital rules and are ready to apply these publicly in our first quarter report. Under Basel IV, the bank continued to have a strong solvency with a buffer of more than 3 percentage points above our capital requirements.”

What’s your outlook for 2025?

“The Dutch economy has shown itself to be resilient, and we expect domestic demand growth to remain healthy. But clearly, we are cautious. There’s an enormous uncertainty about a possible increase in tariffs, which might impact global trade. This is obviously a risk to the trade-oriented Dutch economy, which is traditionally highly dependent on what happens to its trading partners. Another uncertainty is central bank policy. It’s all about the speed and extent of interest rate cuts. We might enter a situation in which the rate paths of the European Central Bank and the Federal Reserve are going to diverge, which could also have a significant impact on the euro-dollar exchange rate.

Despite all this uncertainty, ABN AMRO is well positioned and is moving forward on its three pillars: customer experience, sustainability and future-proofing the bank. Our focus is gradually shifting from investing in our licence to operate to investing in our licence to grow. We will keep developing products and services to meet the evolving needs of our clients, diversify our revenue mix and position the bank for future growth.”