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ABN Amro Shares Slip as Probe Raises Doubts Over Cost Targets

Ruben Munsterman
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ABN Amro Shares Slip as Probe Raises Doubts Over Cost Targets

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ABN Amro Bank NV fell in Amsterdam trading as profit slipped and a criminal probe prompted the bank to warn of uncertainty.

Operating profit missed estimates while an ongoing money laundering investigation raised concerns that the company’s cost-cutting targets could be at risk. The stock fell as much as 6.7%, the most since the probe was announced in September.

The Dutch lender is grappling with a criminal investigation by the country’s public prosecutors office over alleged failures to check on clients and report suspicious transactions. ABN Amro set aside an additional 27 million euros ($30 million) for its customer due-diligence program, bringing the total to 226 million euros since the last quarter of 2018.

“The timing of the completion of the investigation and the outcome are uncertain; ABN Amro is cooperating fully,” Executive Officer Kees van Dijkhuizen said in a statement. The bank has hired an independent expert to review its anti money-laundering plans.

Analysts earlier estimated a possible fine ranging from 150 million euros to 450 million euros.

Investors will be concerned that ABN Amro will face continuous cost increases to beef up its money- laundering controls, Mediobanca analyst Robin van den Broek said in a note. That could make the bank miss its goal of reducing costs by 5 billion euros in 2020.

ABN Amro was down 5.5% in Amsterdam trading as of 11:27 a.m., making it the worst performer in the Stoxx 600 Banks Index. Shares have fallen 20% this year and the value has been below its initial public offering price since the criminal probe was announced.

The Dutch government still holds a 56% stake in ABN Amro after a bailout during the global financial crisis but pledged to sell its complete stake at some point. The last time the state sold ABN Amro shares was two years ago.

The bank will not pass on the cost of negative interest rates on deposits of less than 100,000 euros, the CEO said. It already charges corporate clients and the largest commercial and private banking customers. ABN Amro also said its market share in mortgages jumped to 22% in the third quarter from 17% in the previous quarter.

Net income fell 24% from a year earlier to 558 million euros. Net interest income was down 3% to 1.63 billion euros.

Meanwhile ABN Amro is still looking for a new CEO. Van Dijkhuizen announced five months ago he will resign when his term ends in April. ABN Amro’s legal problems likely are complicating the search.

Highlights from third quarter earnings

Net interest income EU1.63bOperating profit down 22% to EU854mNet income EU558m, down 24%Cost/income ratio 59.4% vs 52.9% in Q3 2018

To contact the reporter on this story: Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Vernon Wessels

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