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ABN Amro reports 29% YOY fall in Q2 profit, to shrink CIB division

ABN Amro Group NV reported a 29% year-over-year decline in second-quarter results and announced plans to reduce its workforce following a review of its corporate and institutional banking division.

The Dutch bank said it found that the division as a whole does not meet the group return on equity target. As a result, the group plans to reduce the capital allocated to CIB, lower its cost base by €80 million reflecting a staff reduction of around 250, and transform the division's business model to improve its profitability to an ROE above 10%.

In the second quarter, return on average equity for the group declined year over year to 13.5% from 20.0%.

Second-quarter profit attributable to owners of the parent company totaled €664 million, down from €938 million in the prior-year period. EPS for the quarter was 71 cents, compared to €1.00 a year earlier.

The group noted that the lower result mainly reflects the private banking Asia divestment and impairment releases in the year-ago period.

Net interest income rose on a yearly basis to €1.66 billion from €1.60 billion. The net interest margin came in at 164 basis points, compared to 153 basis points in the second quarter of 2017.

Net fee and commission income amounted to €425 million in the period, down from the year-ago €436 million.

Impairment charges on financial instruments amounted to a charge of €134 million, compared to a release of €96 million in the previous year.

"Impairments were well below the previous quarter, although still elevated as challenges remain in certain sectors," CEO Kees van Dijkhuizen said. "We continue to expect full-year impairments to be below the through-the-cycle average of 25 to 30 basis points of the loan book."

For the first half, ABN Amro's attributable profit fell year over year to €1.22 billion from €1.54 billion. EPS for the half was €1.30, down from the year-ago €1.64.

The Dutch lender's fully loaded common equity Tier 1 ratio stood at 18.3% at the end of June, compared to 17.5% at March-end and 17.7% at the end of 2017. The fully loaded and phased-in CDR leverage ratios were 4.1% as of June 30, compared to 4.0% at the end of March.

An interim dividend has been set at 65 cents per share for the first half, which the group noted is in line with the amount paid for the first half of 2017.

Van Dijkhuizen also noted that the group is "well on track" in achieving its strategic priorities and financial targets toward 2020.