ABN AMRO Holdings Investor Presentation 2012

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ABN AMRO Holdings Investor Presentation 2012

  1. 1. Nine months 2012 results Roadshow Presentation 16 November 2012
  2. 2. Key take-aways nine months 2012 resultsResults  Satisfactory underlying net profit of EUR 1,201m in 9M2012, up 22% from EUR 983m in 9M2011  Underlying results Q3 2012 up 10% to EUR 374m from EUR 341m in Q2 2012  Results improved due to lower impairments on Greek exposures and a decline in expenses  Operating result for 9M2012 increased by 5% and the underlying cost/income ratio for 9M2012 improved to 59% from 63% in 9M2011  Reported net profit of EUR 1,045m in 9M2012 and EUR 302m in Q3 2012Business  Despite current market conditions business results were satisfactory and costs remained under controlperformance  Increase commercial loan book mainly in Merchant Banking  Mortgage book size remained virtually stable at EUR 155bn, margins improved  Solid deposit inflow in Retail and Private Banking, margins remained under pressure  Client-related integration remains on track, expected to be finalised this yearAsset quality  Impairments down 23% to EUR 762m (9M2011: EUR 989m) mainly because of a EUR 500m charge in 9M2011 on Greek exposures followed by a release of EUR 125m in 9M2012  Adjusted for these, impairments were up 81% mainly in Merchant, Private and Retail Banking as a result of deterioration of the Dutch economy  Impairments in Commercial Banking remained elevated  Impaired ratio for the total loan portfolio remained virtually stable compared to YE2011 at 2.4% (mortgages 0.9%)Capital  Core Tier 1 ratio of 11.4%, Tier 1 ratio of 12.2% and total capital ratio of 17.1%  The capital position of 30 September 2012 would result in a Basel III CET1 ratio of 10.4%, above the targeted CET1 ratio of at least 10% as from 2013Liquidity & Funding  In 9M2012 EUR 14.1bn of long-term funding (excl. EUR 2.2bn subordinated debt) was issued in numerous currencies and maturities and an additional EUR 0.7bn was issued in October 2012  All long-term funding maturing in 2012 was re-financed by April 2012  Liquidity buffer amounted to EUR 58.1bn at 30 September 2012 2
  3. 3. Table of contents At a glance Financial results Risk Management Capital, Funding and Liquidity Management Business profiles & segment results 1H2012 Annex 3
  4. 4. At a glance
  5. 5. At a glance Profile  A leading Dutch bank with the majority of revenues generated by interest income  Clearly defined business model:  Strong position in the Netherlands in all markets  International growth areas in Private Banking, ECT1 and ABN AMRO Clearing1  Moderate risk profile with a clean balance sheet, limited trading and investment activities, low exposure to GIIPS2 and sound capital and liquidity management  Execution excellence with strong focus on improving service to customer, lowering cost base and achieving integration synergies Retail Banking Private Banking Commercial Banking Merchant Banking  Top position in the Netherlands  No.1 in the Netherlands and  Top position in the Netherlands  Strong domestic position,  Serves Dutch mass retail and No.3 in the Eurozone3  Serves Business Clients (SMEs) leading global positions in mass affluent clients with  Serves private clients with and Corporate Clients (up to ECT & Clearing1 investible assets up to EUR 1m investible assets >EUR 1m, EUR 500m revenues)  Serves Large Corporates &  FTEs: 6,435 foundations and charities  FTEs: 3,322 Merchant Banking and Markets  Clients: 6.8m  FTEs: 3,661 clients  AuM: EUR 159.9bn  FTEs: 2,147 Group Functions: supports the businesses with TOPS, Finance (incl. ALM/Treasury), Risk Management & Strategy and ICC1 Operating income by type of income Operating income by business Operating income by geography Other non- Group Functions Rest of World interest 6% income Merchant 3% Rest ofNotes: 12% Europe Banking1. ECT: Energy, Commodities & 20% 11% Retail Transportation; Clearing refers Banking to the clearing activities of the Net fee and 41% bank and its subsidiaries; commission 9M2012 income 9M2012 9M2012 TOPS: Technology, Operations EUR 5.6bn EUR 5.6bn EUR 5.6bn 21% and Property Services; ICC: Integration, Communication and Net interest Commercial Compliance income Banking2.GIIPS: Greece, Italy, Ireland, 67% 21% Netherlands Portugal and Spain 83% Private3.Source: based on Scorpio Banking Private Banking Benchmark 15% report 2011 5
  6. 6. At a glance Financial highlights nine months 2012 results Key messages Key figures in EUR m 9M2012 9M2011 FY 2011  Underlying net profit for 9M2012 improved to EUR 1,201m due to lower Underlying Operating income 5,624 5,949 7,794 Underlying Operating expenses 3,318 3,760 4,995 impairments on Greek exposures and a decline in expenses Impairment charges 762 989 1,757  Underlying cost/income (C/I) ratio for 9M2012 improved to 59% from 63% in Underlying Net profit 1,201 983 960 Integration and Separation (net) -156 -173 -271 9M2011, below the 60-65% C/I target for end 2012 Reported Net profit 1,045 810 689  Impairments down to EUR 762m (9M2011: EUR 989m) due to Greek Underlying Cost/Income ratio 59% 63% 64% exposures. Excluding Greek exposures1, impairments up 81% mainly as a Return on average Equity (IFRS) 12.8% 7.8% Return on average RWA (in bps) 129 85 result of deterioration of Dutch economic environment. Q4 impairments are 30% 29% RWA/Total assets expected to increase further Cost of risk 2 (in bps) 82 156  Underlying net profit in Q3 up to EUR 374m from EUR 341m in Q2, driven in EUR bn 30 Sep 12 31 Dec 11 Total assets 430.4 404.7 by a decrease in impairments partially offset by higher tax charges Assets under Management 159.9 146.6 FTEs (#) 23,429 24,225  Business segments showed satisfactory performance despite challenging Equity (IFRS) 14.0 11.4 market conditions; costs under control RWA Basel II 130.1 118.3 Available liquidity buffer 58.1 58.5  Core Tier 1 increased to 11.4% primarily as a result of the conversion of theNotes: Core tier 1 ratio3 11.4% 10.7% Separation and integration costs liability resulting from the MCS Tier 1 ratio 12.2% 13.0% impact the financials. Underlying Total Capital ratio 17.1% 16.8% results allow for a better  Total capital ratio up to 17.1%, due to issuance of Tier 2 capital Loan to deposit ratio 126% 130% understanding of trends and exclude separation and integration costs1.Greek exposures are Greek government-guaranteed Credit ratings4 corporate exposures2.Cost of risk = impairment Rating agency Long term Standalone LT Outlook Short term charges over average RWA; excluding the Greek impairments S&P A bbb+ Stable A-1 the cost of risk was 95bps for Moody‟s A2 C- (baa2) Stable P-1 9M2012 (58bps in 9M2011) Fitch A+ bbb+ Stable F1+3.Core Tier 1 ratio is defined as DBRS Ahigh A Stable R-1middle Tier 1 capital excluding all hybrid capital instruments4.Credit ratings as at 15 November 2012 6
  7. 7. At a glance Key financial messages Net interest margin and total assets Impairments charges and cost of risk1 In EUR bn In EUR m 600 160bp 1,000 300bp 267 Total assets (lhs) NIM (rhs) 127 132 132 Impairments (lhs) 243 124 122 122 122 115 117 750 225bp 450 120bp Cost of risk (rhs) 768 419 421 430 397 405 406 679 391 377 386 135 300 80bp 500 150bp 119 105 85 67 367 150 40bp 250 78 45 75bp 61 65 257 77 232 45 54 208 185 187 125 0 0bp 0 0bp 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 Net interest margin (NIM) showed a slight decline compared to 2010 Cost of risk increased as from Q2 2011 as a result of worsening and early 2011 levels, largely due to increase in Securities Financing economic circumstances in the Netherlands Underlying operating result and cost/income ratio Capital ratio development In EUR m Operating result (lhs) C/I (rhs) 1,000 75% 25% 70% 68% 67% Core Tier 1 ratio (%) Tier 1 ratio (%) Total Capital ratio (%) 63% 60% 58% 59% 59% 58% 20% 750 60% 17.9 18.2 15% 17.4 16.8 17.1 16.6 16.6 16.5 16.2 500 856 45% 13.8 13.9 13.2 12.7 677 12.6 12.8 13.0 12.9 12.2 805 797 769 10% 11.3 11.4 656 610 740 10.4 10.9 10.7 10.6 11.9 11.4 614 10.1 250 30% 5%Notes: All figures are underlying 0% 0 15% figures, which exclude 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 3Q2010 4Q2010 1Q 2011 2Q 2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 separation & integration items, in EUR m Cost/income trending down to below YE2012 target of 60-65%, Core tier 1 ratio up to 11.4% due to the conversion of the MCS1. Cost of risk is loan impairments due to lower expenses and integration synergies liability and retained earnings. Total capital ratio further increased over average RWA largely due to several Tier 2 issuances 7
  8. 8. At a glance & Customer Excellence IntegrationIntegration budget and targetsIntegration expenses Integration expenses Client integration on schedule and expected to be finalised by In EUR bn Expected total pre-tax integration expenses EUR 1.6bn YE2012 1.6 1.4 Total integration expenses of EUR 209m (gross) in the first nine 1.2 months 2012, largely consisting of project costs (IT infrastructure and Markets integration) 0.8 0.8 Total integration expenses 2009-2012(YTD) amounted to EUR 0.4 1.4bn and are expected to remain within the overall budget of EUR 0.4 0.3 1.6bn 0.1 0.2 0.0 Actual Actual Actual Actual Total 2009 - Expected Q4 FY2009 FY2010 FY2011 9M2012 2012 (ytd) 2012 - Targeted cost synergiesIntegration synergies In EUR bn Cumulative integration synergies 2009-2012 (YTD) amounted to 1.3 c. EUR 0.9bn; derived mainly from housing savings, personnel 1.1 reductions 1.0 0.9 Total synergies for the entire process expected to reach the 0.8 0.8 synergy target of EUR 1.1bn per annum (pre-tax) as from January 0.5 2013 0.3 0.3 0.1 0.0 2009 (cum)2010 (cum)2011 (cum) 9M 2012 Run-rate Other Admin & Personnel (cum) (2013) General expenses Cost/Income ratioCost/income targets Between 60-65% by year-end 2012 90% Underlying Integration target YE2012 (60-65%) Target 2014 (<60%) Structurally below 60% by 2014 80% 70% 60% 50% 1H2009 2H2009 1H2010 2H2010 1H2011 2H2011 9M2012 8
  9. 9. At a glanceIntegration milestones delivered on time and within budgetIntegration objectives and status The ambitious timelines for the execution of the Legal Merger and the retail bank integration were delivered on time and within budget Both the Commercial & Merchant Banking integration and the Private Banking integration were completed ahead of schedule The remaining integration activities are well on trackEC Remedy (incl. the transfer of client data)  CompletedMigration from FBN systems to ABN AMRO systemsFBN Retail Banking clients: 1.6m  CompletedPrivate Banking clients  CompletedCommercial Banking & Merchant Banking clients (ex ECT NL)  CompletedECT-NL  CompletedSegment integration objectivesRetail & Private  Integration of 153 FBN and 501 ABN AMRO retail  CompletedBanking branchesCommercial &  Restore presence of Corporate Clients in NL related  CompletedMerchant Banking to EC Remedy  Fully operational dealing room  Completed  Re-establish client teams / trading capabilities in all  Completed (UK, Hong Kong and the USA) time zones  Expand Commercial Banking units abroad  Completed: Offices opened in UK, Germany, France, Belgium, Hong Kong & Singapore)  Strengthen international position of ECT  Completed: (Rep) offices in Greece, Brazil, USA and Hong Kong, Shanghai  Housing 114 buildings to be sold and 144 rental contracts to In progress (28 buildings yet to be divested and 11 be terminated rentals to be terminated)  Human Resources Resourcing employees following integration In progress (97% of employees informed on future within the new organisation) 9
  10. 10. Financial results
  11. 11. Financial resultsKey underlying profit driversNet interest income (-1%) Non-interest income (-14%)In EUR m In EUR m4,000 4,0003,000 3,0002,000 2,000 3,807 3,7731,000 1,000 2,142 1,851 0 0 9M2011 9M2012 9M2011 9M2012Net interest income 1% lower largely due to pressure on savings Net fees & commissions decreased 16%, explained by divestments,margins and higher funding costs. Margins on mortgage and consumer lower transaction volumes and a reclassification. Other non-interestloans improved income declined 9% due to a reclassification, lower private equity results and debt value adjustments Operating expenses (-12%) Impairment charges (-23%)In EUR m In EUR m4,000 2,0003,000 1,5002,000 1,000 3,760 3,318 989 887 +81% (excl. 7621,000 500 Greece) 489 (excl. Greek (excl. exposures) Greece) 0 0 9M2011 9M2012 9M2011 9M2011 9M2012 9M2012Excluding EUR 177m restructuring provision in 2011, the impact of Impairments down because of Greek impairments (release EURdivestments and reclassifications, operating expenses were roughly 125m in 9M2012 and EUR 500m charge in 9M2011). Adjusted forunchanged mainly due to cost synergies being offset by wage inflation these, impairments were up 81% and reflect the current economicand a rise in losses from cybercrime conditions 11
  12. 12. Financial results Underlying results by segment  Retail Banking net profit down by EUR 81m due to lower Underlying results by segment 9M2012 margins on savings, a decline in fee income and higher In EUR m impairments (mortgages and consumer loans) 900  Private Banking net profit declined by EUR 93m as a result of 9M2011 9M2012 lower fee income and higher impairments 704 600 623  Net profit for Commercial Banking increased by EUR 27m largely due to lower operating expenses. Impairment levels remained elevated 300 391 254 209  Merchant Banking net profit declined by EUR 137m as a result 153 60 55 28 of higher impairments (primarily to public sector and real 0 estate), partly offset by a higher operating result -293  Group Functions1 net profit increased to EUR 209m largely due -300 to lower costs (restructuring provision in 2011) and lower Retail Private Commercial Merchant Group Banking Banking Banking Banking Functions impairments on Greek exposuresNote:1. Group Functions supports the business segments and almost all costs are allocated to the business segments as from 2012 12
  13. 13. Financial results Increase balance sheet primarily due to SF volumes and loan growth  Balance sheet increased by EUR 25.7bn. Largely impacted by the Balance sheet increase in client flows SF1 (EUR +13.0bn assets and EUR in EUR m 30 Sep 2012 31 Dec 2011 +13.7bn liabilities) Cash and balances at central banks 7,988 7,641 Financial assets held for trading 33,884 29,523  Increase in Loans and receivables – customers (excluding SF) of Financial investments 19,073 18,721 EUR 7.4bn largely driven by growth in LC&MB and Markets Loans and receivables - banks 62,648 61,319 (Clearing). Residential mortgage loans virtually stable at EUR of which securities financing 31,406 27,825 155bn Loans and receivables - customers 288,851 272,008 of which securities financing 25,882 16,449 Other 17,973 15,470  Financial assets and liabilities held for trading increased mainly due Total assets 430,417 404,682 to valuation changes of interest rate derivatives Financial liabilities held for trading 22,941 22,779 Due to banks 32,137 30,962  Due to customers (excluding SF) increased as a result of growth in of which securities financing 12,915 12,629 mainly Retail and Private Banking deposits both in the Netherlands 238,827 Due to customers 213,616 and abroad 38,774 of which securities financing 25,394 Issued debt 92,075 96,310  Issued debt decreased largely because of a decline in short term Subordinated liabilities 8,988 8,697 debt paper (CP/CD) Other 21,460 20,898 Total liabilities 416,428 393,262  Total equity increased primarily due to the cancellation of the Total equity 13,989 11,420 liability resulting from the MCS following the settlement with Ageas Total equity and liabilities 430,417 404,682 (decrease in subordinated liabilities) and the retained earnings for the periodNote:1. SF = Securities Financing. Client flows from securities financing activities include all repo, reverse repo and securities lending and borrowing transactions with professional counterparties and are recorded under loans and receivables- customers, loans and receivables-banks, due to customers and due to banks 13
  14. 14. Risk Management
  15. 15. Risk managementModerate risk profileMaintaining a moderate risk profile, part of ABN AMRO‟s corporate strategy, is reflected in the balance sheet composition, in the clients,products and geographies we serve, and translates in sound capital and liquidity management. A clear governance safeguards themoderate risk profile Balance sheet reflects  Focus on asset based lending. Loan portfolio matched by customer deposits, long-term debt and equity moderate risk profile  Limited trading and investment activities (12% of total balance sheet, September 2012); trading book is customer-driven; market risk is 5% of total RWA Client, product and  Serving mainly Dutch clients and their operations abroad (in core markets) and international clients in geographic focused specialised activities (Private Banking International, Clearing, ECT, Lease and Commercial Finance)  Clear retail focus, with about half of the customer loans in residential mortgages  Credit risk kept within core geographic markets: the Netherlands, rest of Western Europe (mainly UK, France and Germany), USA and Asia  Commercial loan portfolio adequately diversified with max concentration of 6% in one sector (excluding banks and public administration) as of June 2012 Sound capital & liquidity  Core Tier 1 ratio of 11.4% at 30 September 2012 management  ABN AMRO targets a Common Equity Tier 1 ratio of at least 10% as from 2013  Leverage ratio above 3.1%, based on current Basel II Tier 1 capital, at 30 September 2012 Clear governance under 3  1st line, risk ownership: management of businesses is primarily responsible for the risk that it takes, lines of defence approach the results, execution, compliance and effectiveness of risk control  2nd line, risk control: risk control functions are responsible for setting frameworks, rules and advice, and monitoring and reporting on execution, management, and risk control. The second line ensures that the first line takes risk ownership and has approval authority on credit proposals above a certain threshold  3rd line, risk assurance: Group Audit evaluates the effectiveness of the governance, risk management and control processes and recommends solutions for optimising them and has a coordinating role towards the external auditor and the Dutch supervisor 15
  16. 16. Risk managementBalance sheet composition reflects moderate risk profileModerate risk profile underpinned by: Assets Liabilities & Equity Focus on asset-based lending Loan portfolio matched by deposits, LT-debt and equity 36% Mortgages Limited reliance on short-term debt 154.8 Customer 46% deposits 199.7 Securities financing fully collateralised Limited market risk and trading portfolios Investment activities part of liquidity management Other 25% customer loans 108.1 LT debt & sub 19% liabilities; 82.1 Bank loans 7% 31.2 3% Equity 14.0 Bank deposits 4% Sec financing 19.2 13% (incl customers & banks) 57.3 Sec financing 12% (incl customers & banks) 51.7 Held for 8% trading 33.9 Held for 5% trading 22.9 Fin investments; 4% 19.1 ST debt 18.9 4% Other (incl 6% cash) 26.0 Other 21.8 5% Axis Title Axis Title Balance sheet at 30 September 2012, EUR 430.4bn 16
  17. 17. Risk management Client diversification reflection of client focus  Majority of the loan portfolio (in EAD) consists of private Industry concentration (Exposure at Default) individuals (mostly residential mortgages) Banks, Financial Serv  Maximum current exposure to one single industry (except for & Insurance banks and public administration) is 6% to Industrial Goods and 17.1% Private Services, which includes part of the ECT portfolio individuals Other 9.9% 46.6% Public 30 June 2012 administration  Other includes various sectors with exposures around 1% 7.6% EUR 301.7bn Industrial goods & services 6.0% Real Estate Construction 3.3% 0.9% Basic Food & Resources beverage 2.6% 1.7% Oil & gas 2.1% Retail 2.2% ECT Real Estate Commodities c.  ECT comprises c. 4% of total 50% Transportation c.  Real estate exposures include both commercial real estate 33% loan portfolio at 30 June 2012 (CRE) and real estate for clients‟ own use and 20% of off-balance sheet 30 Jun 2012 exposures, mostly related to 4% of loan  Majority of CRE consist of investments in Dutch property with book Commodities (largely limited exposures to office investments and land banks uncommitted facilities)  A screening of CRE portfolio resulted in additional Incurred But Energy c. 17% Not Identified (IBNI) charge of EUR 44m in H1 2012  Transportation is diversified in segments (tankers, dry/wet bulk and container carriers). Majority of portfolio originated from 2008,  The ratio of impaired exposures over EAD (real estate) increased in a relatively low asset value environment. Despite challenging to 6.7% at H1 2012 from 5.3% at YE20111 markets in certain parts of the shipping industry impairment charges remained subdued  Management has acted to tighten CRE loan approval policies and has increased focus on management of current portfolioNote:  Energy includes a diversified customer base in the oil & gas, and1.In the interim report 2012 this off-shore services industries was incorrectly stated as impairment charges over EAD 17
  18. 18. Risk managementGeographic diversification reflection of client focus 79% of the credit risk exposure is concentrated in the Geographic concentration (Exposure at Default) Netherlands and 13% in rest of Europe (mainly UK and France) Rest of Europe 13% At 30 June 2012, the majority of the rest of Europe exposure is The concentrated in the corporate sector (51%) with 29% in Netherlands 79% 30 Jun 2012 institutions and 20% in central governments and central banks, USA 2% EUR 301.7bn with no material exposures to Italy and Spain Asia 3% Rest of the Asian and rest of the world exposures are mostly concentrated world 3% in ECT and the USA exposures relate mainly to Clearing, ECT and securities financing Gross EU government and government-guaranteed exposures Greek government-guaranteed exposures amounted to EUR In EUR bn, 30 September 2012 0.4bn after impairment charges (EUR 1.2bn gross) at 30 September 2012. Early October part of the exposures were 16.0 Government Government Guaranteed sold reducing the total exposures to EUR 0.3bn after 14.0 impairment charges (EUR 1.0bn gross) 1.3 12.0 Government exposures to Italy and Spain at 30 September 10.0 2012 remained unchanged at EUR 0.3bn and EUR 0.1bn 8.0 respectively 6.0 4.0 There were no exposures to governments of Portugal and 2.0 Ireland 12.4 2.3 1.7 1.4 0.4 0.3 0.3 0.2 1.2 0.8 0.8 0.1 0.0 18
  19. 19. Risk management Risk parametersPast due ratio: Financial assets that are  The past due mortgage portfolio increased by EUR 0.2bn Past due ratio (up to and including 90+ days)past due (but not impaired) as a percentageof gross carrying amount due to higher unemployment as a result of deteriorating 5% economic conditions 31 Dec 2011 30 Sep 2012Impaired ratio: Impaired exposures as apercentage of gross carrying amount.  The past due portfolio of commercial loans decreased by 4%Mortgages that are 90+ days past due are EUR 0.4bn due to tightened control of credit filesclassified as impaired exposures  Impaired ratio for commercial loans decreased (mainly due 3%Coverage ratio: Impairment allowances foridentified credit risk as a percentage of the to increase in commercial loan book), and remained stable 2.1% 2.2%impaired exposures for mortgages and other consumer loans 2%  The Coverage ratio in commercial loans decreased partly 1.1% due to a release on Greek exposures 1% 0.6% 0.5% 0.4% 0.0% 0.0% 0.1% 0.0% 0% Mortgages Commercial Other consumer Banks Governments loans loans Impaired ratio Coverage ratio 10% 125% 31 Dec 2011 30 Sep 2012 31 Dec 2011 30 Sep 2012 100.0% 100.0% 8% 100% 6.6% 5.9% 6% 75% 69.8% 66.1% 56.0% 55.2% 4% 50% 3.2% 3.2% 2% 25% 18.4% 17.2% 0.9% 0.9% 0.0% 0.0% 0.0% 0.0% 0% 0% Mortgages Commercial Other consumer Banks Governments Mortgages Commercial Other consumer loans Banks loans loans loans 19
  20. 20. Risk management Mortgage portfolio of good quality  The average indexed LtMV was 82% by 30 September 2012 Loan to market value (indexed) - LtMV (77% YE2011); the decline in house prices resulted in a shift LtMV 80%-100% to higher LtMV classes 18%  Marginal impairment charges over total mortgage loans of LtMV <50% 15% 13bps over 9M2012, up from 9bps in 9M2011 NHG  58% of new production YTD was in NHG (indirectly 23% 30 Sep 2012 LtMV 100%-110% guaranteed by Dutch State) EUR 155bn 8%  Interest-only mortgages are expected to decrease going forward, most of the new production in the first nine months LtMV >110% 11% consisted of saving mortgages Unclassified LtMV 50%-80%  Approx. 90% of total mortgage portfolio consisted of fixed-rate 21% 4% mortgage loans, with 5 and 10 years being most popular fixed periods Past due (up to 90 days) and impaired exposures Product split In EUR m 4,000 Hybrid & life 31 Dec 2011 30 Sep 2012 3,534 investment 3,286 13% 3,000 Saving Interest only mortgages 1,885 56% 30 Sep 2012 15% 2,000 EUR 155bn 1,730 1,481 1,343 1,392 Universal life 1,000 7% 671 730 Unclassified 461 6% Annuity 2% 0 ≤ 30 days > 30 ≤ 60 days > 60 < 90 days Total past due Total impairedNote:1.Please also refer to the Annex on Dutch mortgage market 20
  21. 21. Risk management Annex Overview Dutch mortgage market Overview of the Dutch mortgage market A competitive and mature market of almost EUR 644bn1 in total size (Q2 2012) and new mortgage production in 9M2012 at EUR 33.1bn2 Unique aspects of the Dutch mortgage market  Dutch consumers generally prefer fixed interest rates: 5 and 10 years being the most popular fixed-rate periods  The majority of existing mortgages are non-amortising, regulatory changes will encourage new loans to be fully amortising  Interest paid on mortgages is tax-deductible up to a maximum period of 30 years for owner-occupied property, although the rate of tax deductibility will be gradually decreased (see next slide)  As from 1 July 2011: interest-only portion of the mortgage is capped at 50% of the original purchase price of the property and at a maximum loan to market value of 104% (plus 2% transfer tax). This will be reduced to 103% (plus 2 transfer tax) in 2013 and gradually in annual steps of 100bp to 100% by 2018  Unique and thorough underwriting process, including the involvement of a notary and verification of loan applicants using data maintained by the national credit registry (BKR), as well as a code of conduct and duty of care Market shares new mortgage production4 to prevent over-indebtedness of the borrower  Full recourse to borrowers upon default Other Top 3  Borrowers can obtain a guarantee (for principal and interest) from a 27% 73% national trust fund (Nationale Hypotheek Garantie “NHG”)3 for residential 9M2012 mortgages up to EUR 320k (to be decreased to EUR 265k by July 2014) EUR 33.1bn  Historically the Dutch residential mortgage market has seen very lowNotes: defaults1.Source: DNB2.Source: Dutch Land Registry  As of 9M2012, 73% of new mortgage production is granted by the top 3 Office (Kadaster)3.NHG: Dutch government- players in the market guaranteed mortgages4.9M2012 average (based on monthly volumes). Source: Kadaster 21
  22. 22. Risk management Dutch mortgage market is expected to change Recent developments  House prices declined by 2% in 20101, 2.3% in 20111 and another 7.9%1 until September 2012 and are expected to decline further in 20132. Transaction volumes remain at low levels. Foreclosures are rising but remain at relatively low levels  Housing demand is impacted by macro economic uncertainty, more stringent criteria and uncertainty on scope of tax deductibility:  In 2011 and 2012 the “accommodation ratios”3 were lowered, restricting borrowing capacity of a mortgage applicant  Mortgage Code of Conduct of August 2011 restricts interest-only portion and LtMV  NHG loan maximum lowered from EUR 350k to EUR 320k as per 1 July 2012, to gradually decrease to EUR 265k per 2014  The newly elected Dutch government has proposed the following measures, yet to be accepted by the Parliament:  Mortgage tax deduction for existing mortgages will be reduced in steps of 0.5% annually, starting in 2014 until the maximum deduction is reduced from 52% now to 42%. This will lead to higher net monthly instalments and will provide an incentive for pre-payments  Not to allow tax deductibility any more for new interest-only mortgages, only for fully amortising mortgages  To keep the transfer tax at 2% permanently (following the temporarily decrease from 6% to 2%) Transaction prices and volumes (quarterly, 1995=100)4 Number of foreclosures (rolling 12 month average)5 EUR „000 Transactions Foreclosures Number of transactions (rhs) 3,000 2.5% 300 70,000 Median House Price Index (lhs)Notes: CPI-adjusted Median House Price Index (lhs) Foreclosures (lhs) % of total transactions (rhs)1.Based on calculations made by 250 60,000 2,500 2.0% the Dutch Bureau of Statistics 50,000 (CBS) and Kadaster (Land 200 2,000 1.5% Registry) 40,0002.ABN AMRO Group Economics 150 1,500 expect -6% in 2012 and -8% in 30,000 1.0% 2013 100 1,000 20,0003.Set by the National Institute for 0.5% Family Finance Information 50 10,000 500 (NIBUD)4.Based on a combination of data 0 0 0 0.0% Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Sep 1995 1997 1999 2001 2003 2005 2007 2009 2011 from the Land Register (Kadaster) and the Dutch 2005 2006 2007 2008 2009 2010 2011 2012 Bureau of Statistics (CBS)5.Source Land Registry, foreclosures are execution sales 22
  23. 23. Capital, Funding & Liquidity
  24. 24. Capital, Funding & Liquidity Good capital base with large equity component Capital Regulatory capital (Basel II)  Core Tier 1 ratio at 11.4%, up from year-end, predominantly as In EUR m 30 Sep 2012 31 Dec 2011 a result of the conversion of the MCS liability into equity Total Equity (IFRS) 13,989 11,420 Other 823 1,185  Core Tier 1 capital at 30 September 2012 includes 60% of Core Tier 1 capital 14,812 12,605 reported net profit as retained earnings (aligned with the Non-innovative hybrid capital - 1,750 dividend policy) Innovative hybrid capital 997 994 Tier 1 Capital 15,809 15,349  Total capital ratio 17.1%, up due to issuance of Tier 2 capital Sub liabilities Upper Tier 2 (UT2) 187 178 (EUR 1bn and USD 1.5bn)1 Sub liabilities Lower Tier 2 (LT2) 6,628 4,709 Other -399 -379 Total Capital 22,225 19,857 RWA  RWA up in 9M2012 by EUR 11.8bn RWA Basel II 130,075 118,286 Credit risk (RWA) 107,797 101,609  Increase in credit risk RWA caused by business growth (EUR Operational risk (RWA) 15,461 13,010 5.0bn) and the temporary application of the standardised Market risk (RWA) 6,817 3,667 approach for part of the large corporates portfolio (EUR 6.6bn), Core Tier 1 ratio1 11.4% 10.7% partly offset by RWA releases following the completion of Tier 1 ratio 12.2% 13.0% separation and integration activities (EUR 5.9bn) Total Capital ratio 17.1% 16.8%  Operational risk RWA and Market risk RWA increased primarily awaiting the transition from the standardised to the advanced approach RWA and capital ratio development  A roll-out plan is being executed to move the majority of In EUR bnNotes: 25% Core Tier 1 ratio (%) Tier 1 ratio (%) 150 portfolios currently reported under the Standardised Approach Total Capital ratio (%) RWA (rhs)1.In October, another Tier 2 note 124.4 130.1 was issued for SGD 1bn (EUR to the Advanced-IRB approach in 2013 109.4 109.1 115.7 118.3 121.1 20% 120 632m), the effect of which is not included in the Basel II & III 18.2 15% 17.9 17.4 16.8 16.5 16.2 17.1 90 figures at 30 September 2012 in 13.8 13.9 13.2 this presentation. The 13.0 12.9 12.7 12.2 transaction is expected to be at 10% 11.3 11.4 11.9 11.4 60 10.9 10.7 10.6 least eligible for grandfathering under Basel III 5% 302.Core Tier 1 ratio is defined as Tier 1 capital excluding all hybrid 0% 0 capital instruments divided by mrt 2011 jun 2011 sep 2011 dec 2011 mrt 2012 jun 2012 sep 2012 risk-weighted assets (RWA) 24

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