Annual Report ABN AMRO Group N.V. 2012 Notes to the reader Introduction This is the Annual Report for the year 2012 of ABN AMRO, which consists of ABN AMRO Group N.V. and its consolidated subsidiaries. The Annual Report consists of the Managing Board report, Supervisory Board report, the Pillar 3 report, and the Annual Financial Statements. It also complies with the financial reporting requirements included in Title 9, Book 2 of the Dutch Civil Code, where applicable. Presentation of information The financial information contained in this Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). Some chapters in the Risk & Capital management section of this report contain audited information and are part of the Annual Financial Statements. These are: Risk management, Capital management, Liquidity & funding and Securitisation. Audited information in these sections is labelled as ‘audited’ in the respective headings. The Risk & Capital management section also constitutes the Pillar 3 report. The Pillar 3 report is prepared in accordance with the Capital Requirements Directive (CRD). The CRD is legally enforced by Dutch law by the Financial Supervision Act (Wet op het financieel toezicht – Wft). This Annual Report is presented in euros (EUR), which is the presentation currency of ABN AMRO, rounded to the nearest million (unless otherwise stated). All year-end averages in the Annual Report are based on month-end figures. Management does not believe that these month-end averages present trends materially different from those that would be presented by daily averages. Certain figures in this document may not tally exactly due to rounding. In addition, certain percentages in this document have been calculated using rounded figures. This report can be downloaded from abnamro.com For more information, please visit us at abnamro.com/ir or contact us at [email protected] ABN AMRO Group N.V. Gustav Mahlerlaan 10, 1082 PP Amsterdam P.O. Box 283, 1000 EA Amsterdam The Netherlands abnamro.com ABN AMRO at a glance 2 Risk & capital management 125 1 Chairman’s message 6 16 Introduction to risk & capital management 126 17 Risk management 128 Corporate governance 11 18 Capital management 186 2 Supervisory Board letter 12 19 Liquidity & funding 196 3 Corporate governance 14 20 Securitisation 209 4 Supervisory Board report 25 5 Remuneration report 30 Annual Financial Statements 215 6 Central works council 36 Table of contents 216 7 Responsibility statement 38 Other 341 Managing Board report 21 Composition of the Managing Board 342 Business & strategy 39 22 Composition of the Supervisory Board 344 8 Economic environment 40 23 Senior Managing Directors 348 9 Regulatory environment 45 24 Definitions of important terms 349 10 Strategy 54 25 Abbreviations 355 11 Integration 62 26 Cautionary statement on 12 Customer Excellence 66 forward-looking statements 358 13 Business, operating and financial review 72 14 Human resources 112 15 Sustainability 120 Contents Annual Report 2 ABN AMRO Annual Report 2012 Our profile Our international growth businesses are Private Banking, ABN AMRO is an all-round Dutch bank that offers a full range Energy, Commodities & Transportation (ECT), Clearing of products and services to retail, private, commercial and and asset-based finance. merchant banking clients. We build long-term, sustainable relationships with our clients in order to best serve their interests and are continuously strengthening our moderate Our identity, mission and vision risk profile. We have a clean balance sheet, limited Our identity is reflected in our core values, which are trading and investment activities, low exposure to highly embedded in our culture: Trusted, Professional and indebted countries and a good capital and liquidity Ambitious. We want to be trusted by our stakeholders position. We have a strong position in the Netherlands and professional in everything we do, and we have in all our business activities. the ambition to continuously improve. Our history R. Mees & Zoonen established Algemene Bank Nederland (ABN) created AMEV and Verenigde Spaarbank merge Hope & Co in 1762; Pierson, from the merger between Nederlandsche to create AMEV/VSB, and are later joined Heldring & Pierson in 1875 Handel-Maatschappij and Twentsche Bank by Belgium-based AG Group to create Fortis 1720 1824 1964 1990 1991 Formation of Nederlandsche Handel-Maatschappij Amsterdam - Rotterdam Bank created ABN and Amro merge Twentsche Bank in 1861, Rotterdamsche Bank in 1863 from the merger between Rotterdamsche to form ABN AMRO and Amsterdamsche Bank in 1871 Bank and Amsterdamsche Bank Contents Annual Report ABN AMRO at a glance 3 million households private bank in Business Banking Corporate Clients global player provide a stable the Netherlands clients in the clearing client basis and no.3 in industry the eurozone1 Our mission Our vision Our mission is: Our vision is to be a professional, all-round bank with ▶ to be successful through the success of our clients; a leadership role in the Dutch market. Internationally, we ▶ to strongly commit ourselves to and be positively will be a capability-led bank in selected businesses and recognised for our position on sustainability geographies. Our ambition is to be a top class employer. and transparency; ▶ to be an organisation that has the best talent and where people grow both professionally and personally. 1 Source: based on Scorpio Private Banking Benchmark report 2012. MeesPierson is created from Generale Bank Nederland and VSB Fortis, Banco Santander Legal merger between ABN AMRO and the merger of Bank Mees & Hope change their names upon merger: and RBS acquire Fortis Bank Nederland becomes effective, and Pierson, Heldring & Pierson Fortis Bank is born ABN AMRO Holding creating the current ABN AMRO Group 1993 1997 1998 2000 2007 2008 2010 Fortis acquires Fortis acquires Generale Bank, Dutch government acquires MeesPierson including Generale Bank Nederland the Dutch activities of the Fortis Group Contents Annual Report 4 ABN AMRO Annual Report 2012 Figures at a glance Operating income1 Operating expenses1 Cost/income ratio1 (in millions) (in millions) (in %) 10,000 10,000 100 92% 7,794 7,659 7,794 8,000 7,338 7,338 8,000 80 6,797 70% 68% 69% 6,229 61% 64% 6,000 6,000 5,335 60 4,995 4,959 5,357 4,509 4,000 4,000 40 2,000 2,000 20 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 Underlying Reported Underlying Reported Underlying Reported Capital, funding and liquidity 2012 2011 2010 Risk-weighted assets (in billions) 121.5 118.3 116.3 Core Tier 1 ratio (Basel II) 12.1% 10.7% 10.4% Tier 1 ratio (Basel II) 12.9% 13.0% 12.8% Total Capital ratio (Basel II) 18.4% 16.8% 16.6% Loan-to-deposit ratio 125%2 130%2 135% Liquidity buffer (in billions) 68.0 58.5 47.9 RWA/Total assets (Basel II) 31% 29% 31% Operatingp g income byy regiong Breakdown of assets Breakdown of liabilities and equityq y 6% 12% 21% 22% 27% 2012 2012 4% 2012 EUR 7,338m 7% EUR 394.4bn EUR 394.4bn 50% 4% 6% 82% 20% 39% The Netherlands Customer loans 3 Customer deposits deposits3 Rest of Europe Mortgages Long-term & subordinated debt Rest of the world Held for trading Equity Securities financing Securities financing Other Other 1 Underlying excludes the impact of seperation and integration-related items. 2 Calculated according to a refined methodology. According to former metholodogy, 2011 would amount to 132.7%. 3 Excluding securities financing. Contents Annual Report Figures at a glance 5 Loan impairments Profit for the year1 FTEs (in millions) (in millions) 2,000 1,500 35,000 1,285 1,757 1,077 1,600 1,000 960 948 28,000 26,161 1,353 689 23,059 24,225 1,228 1,200 500 21,000 837 877 837 800 14,000 400 -500 -414 7,000 -1,000 20121 20112 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 Including Greek impairments/release Underlying Reported Excluding Greek impairments/release Performance indicators 2012 2011 2010 NII/average RWA 4.0% 4.4% 4.2% NII/average total assets (bps) 120 125 124 Loan impairments/average RWA (bps) 983 1563 72 Impaired ratio – customers 2.0% 2.0% 1.5% Return on average RWA (bps) 103 85 93 ROE (based on IFRS equity) 10.0% 7.8% 8.9% Assets under Management (in billions) 163.1 146.6 164.2 2012 Contribution by segment (in %, underlying) Operating income Operating expenses Operating result Loans and receivables – customers Due to customers Risk-weighted assets FTEs 0 20 40 60 80 100 Retail Banking Private Banking Commercial Banking Merchant Banking Group Functions 1 2012 includes a release of EUR 125 million (EUR 94 million net of tax) following the sale of part of the Greek government-guaranteed corporate exposures. 2 2011 includes EUR 880 million (EUR 660 million net of tax) of impairment charges for Greek government-guaranteed corporate exposures. 3 Excluding Greek impairments/release, ‘Loan impairments/average RWA’ would amount to 108 bps for 2012 and 78 bps for 2011. Contents Annual Report 6 ABN AMRO Annual Report 2012 1 Looking back on 2012, it seems appropriate not only to consider the events that took place last year, but also to take stock of what we’ve achieved in the past four years, during which we completed a challenging task: separating the operations of two banks from their original organisations and merging the two companies to create a new bank. When we started out on our journey in 2009, the world was a very different place to what it is today. Amid a series of changes, we have built a new bank, the ABN AMRO of today.