ABNABN AMRO AMRO Bank Group N.V. N.V. Annual Report 2018 Introduction Table of contents Introduction Strategy and performance Strategy and performance
2 5 35 123 Risk, funding & capital Introduction Strategy and Risk, funding & Leadership & performance capital governance Risk, funding & capital About this report 2 Economic environment 6 Introduction to Risk, Introduction to Leadership Key figures and profile 3 Regulatory environment 8 funding & capital 36 & governance 124 ABN AMRO shares 4 Strategy 10 Risk, funding & Executive Board and Group performance 13 capital management 37 Executive Committee 124 Business performance 20 Risk, funding & Supervisory Board 128 Responsibility statement 34 capital review 65 Report of the Additional risk, funding Supervisory Board 132 & capital disclosures 116 General Meeting and Leadership shareholder structure 138 Codes and regulations 141 Leadership & governance Legal structure 144 Remuneration report 145 Governance
153 257 Annual Financial Statements Annual Financial Statements 2018 Other
Consolidated income statement 154 Independent Annual Financial Statements Consolidated statement of comprehensive income 155 auditor’s report 258 Consolidated statement of financial position 156 Other information 264 Consolidated statement of changes in equity 157 Cautionary statements 267 Consolidated statement of cash flows 159 Enquiries 268 Notes to the Consolidated Annual Financial Statements 161 Company Financial Statements of ABN AMRO Group N.V. 254 Other Other
ABN AMRO Group Annual Report 2018 Introduction About this report
Introduction / About this report 2 Introduction About this report Introduction
This is the Annual Report for 2018 of ABN AMRO, which consists of ABN AMRO Group N.V. and its consolidated entities. The purpose of the Annual Report Group and Annual Report Bank Strategy and performance is to provide information about our financial and non-financial performance in compliance with Strategy and performance regulatory requirements. ABN AMRO provides the following reports next to our Annual Reports:
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ABN AMRO Group N.V. ABN AMRO Group N.V. Risk, funding & capital ABNABABNN AAMROM AMRORO BaBank Groupnk NN.V.V N.. V. ABN AMRO OGroupther N.V. sustainability Banking OtherOther sus sustaitainabnabilitilyit y Additional Pillar 3 disclosuresdisclosures for better, disclosures disclosures
for generations Risk, funding & capital to come ABN AMRO Group N.V. Integrated Annual Review 2018
The purpose of the Integrated The Additional Pillar 3 disclosures on Other sustainability disclosures Annual Review is to describe the our website provides detailed complement our Integrated
group’s ability to create value over time. quantitative information in the area Annual Review by providing Leadership structure As our primary report, it examines of risk and capital management. detailed sustainability disclosures, the themes that are central to achieving A description of our main approach background information, key figures
our long- and medium-term strategy. to risk management and qualitative and highlights under Reporting, Leadership & governance Information has been taken from the Pillar 3 requirements is included including our Human Rights Report. reports listed here, where applicable. in this report.
Other sustainability disclosures include updates on ABN AMRO’s sustainability performance, human rights, value creating topics and stakeholder engagement. Governance
Presentation of information This report is presented in euros (EUR), which is The Annual Report for 2018 consists of the Executive Board ABN AMRO’s presentation currency, rounded to the report (sections Strategy and performance, Risk, nearest million, and sets out the results for the entire funding & capital, Leadership & governance), Report of the ABN AMRO organisation worldwide (unless otherwise Annual Financial Statements Supervisory Board and the Annual Financial Statements. stated). All financial year-end averages in this report are
based on month-end figures. Management does not Annual Financial Statements The financial information contained in this Annual Report believe that these month-end averages present trends has been prepared in accordance with International that are materially different from those that would be Financial Reporting Standards (IFRS) as adopted by the presented by daily averages. Certain figures in this report European Union (EU IFRS). Some chapters in the Risk, may not tally exactly due to rounding. In addition, certain funding and capital section contain audited information percentages in this report have been calculated using and are part of the Annual Financial Statements. Audited rounded figures. information in these sections is labelled as ‘audited’ in the respective headings. All capital metrics and risk exposures To download this report or obtain more information, in this section are reported under the Basel III (CRD IV/ please visit us at abnamro.com/ir or contact us at CRR) framework. Some chapters in this section contain [email protected]. The definitions Other information according to Pillar 3 and Enhanced Disclosure and abbreviations used in this report can be found on Task Force (EDTF) requirements. These sections are the ABN AMRO website via abnamro.com/annualreport. Other labelled as ‘Pillar 3’ and ‘EDTF’ respectively.
ABN AMRO Group Annual Report 2018 Key figures and profile
Introduction / Key figures and profile 3 Introduction Key figures and profile Introduction
ABN AMRO is a modern, full-service bank with a transparent ABN AMRO is present outside the Netherlands include and client-driven business model, a moderate risk profile, France, Germany, Belgium and the United Kingdom.
a clean and strong balance sheet with digital and traditional ABN AMRO also has branches, subsidiaries or Strategy and performance banking products, and a solid capital position and strong representative offices in Norway, Greece, Guernsey, Strategy and performance funding profile. We serve retail, private and corporate Australia, Brazil, the USA, Dubai, Singapore, China, banking clients, with a primary focus on the Netherlands Hong Kong and Japan. and selective operations internationally. Countries where
Key figures
Target 2020 2018 2017 Financial results
Return on average equity 10-13% 11.4% 14.5% Risk, funding & capital Cost/income ratio 56-58% 58.8% 60.1% Risk, funding & capital CET1 (fully loaded) 17.5-18.5% 18.4% 17.7% Dividend pay out ratio1 50% 62% 50%
Non-financial results2 Net Promoter Score Best NPS of Dutch peers - Retail Banking -9 -9 - Commercial Banking -2 -6 - Private Banking -1 12 - Corporate & Institutional Banking 45 32
Employee engagement ≥ 80% 80% 79% Leadership Trust monitor AFM/NvB Leading among large Dutch banks 3.3 3.2
Dow Jones Sustainability Within 10% top 5% of top 5% of Leadership & governance Index ranking sector banks3 sector banks sector banks
Gender diversity (% women)4 - total 44% 46% - subtop 35% women 27% 28%
- top 30% women 28% 25% Governance
FTEs5 Employee FTEs Total employee FTEs 18,830 19,954 - of which the Netherlands 15,557 16,269
- of which Rest of Europe 2,267 2,628 Annual Financial Statements - of which USA 429 428
- of which Asia 440 490 Annual Financial Statements - of which Rest of the World 138 139 Non employee FTEs Total non employee FTEs 4,608 4,003
1 Sustainable net profit excludes exceptional items that significantly distort profitability. In the first quarter of 2019, ABN AMRO proposed a dividend pay-out of 62% of the full-year 2018 sustainable net profit (after deduction of AT1 coupon payments and minority interests). The sustainable net profit was identical to the net profit for 2018. 2 For definitions and measurement methods of the non-financial indicators, please refer to the strategy chapter. 3 Target in refreshed strategy updated to top 5% of sector banks. Please note that, under DJSI, scores are not directly comparable because of regular recalibration and changes to methodology (2018: 86; 2017: 91). 4 In the Netherlands. 5 As per 31 December. Other Other
ABN AMRO Group Annual Report 2018 ABN AMRO shares
Introduction / ABN AMRO shares 4 Introduction ABN AMRO shares Introduction
Key developments go to the ‘About ABN AMRO’ section of abnamro.com Between 29 December 2017 and 31 December 2018, or visit stakaag.org or nlfi.nl. The depositary receipts
ABN AMRO’s share price (depositary receipts) declined are traded under ISIN code NL0011540547, Reuters Strategy and performance 24%, while the STOXX Europe 600 Bank index declined ticker ‘ABNd.AS’ and Bloomberg ticker ‘ABN:NA’. Strategy and performance 28%. Total dividend proposed for 2018 is EUR 1.45 per Other than STAK AAG and NLFI, ABN AMRO is not share, representing a dividend payout ratio of 62%. aware of any current or potential shareholders (or This consists of an interim dividend of EUR 0.65 paid owners of depositary receipts) that have an interest in in September 2018 and a proposed final dividend of ABN AMRO of 3% or more as at 31 December 2018. EUR 0.80 per share, subject to approval at the annual general meeting. a n (in %) Listing information and substantial holdings 110% A total of 470.9 million shares, which is 50.1% of the total Risk, funding & capital issued capital of ABN AMRO Group N.V., are held by the 100% STAK AAG (‘Stichting Administratiekantoor Continuïteit Risk, funding & capital ABN AMRO Group’). STAK AAG has issued depositary 90% receipts representing such shares, which are listed on Euronext Amsterdam. NLFI holds 59.7 million (6.4%) 80% of these depositary receipts and has waived, in its 70% capacity of holder of depositary receipts only, any meeting and voting rights attached to the depositary receipts other than the right to vote in the shareholders meeting of Dec 2017 Dec 2018 ABN AMRO. The remaining 469.1 million shares (49.9%) ABN AMRO STOXX Europe 600 Banks Index Leadership structure are held directly by NLFI. More information is provided Amsterdam Exchange Index in the Leadership & governance section of this report. Source: S&P Global Market Intelligence. For more information about STAK AAG or NLFI, please Leadership & governance
(in millions) 31 December 2018 31 December 2017
Share count Total shares outstanding/issued and paid-up shares 940 940 - of which held by NLFI 529 529
- of which listed (in the form of depositary receipts) 4 11 4 11 Governance - as a percentage of total outstanding shares 44% 44% Average number of shares 940 940 Average diluted number of shares 940 940 Key indicators per share (EUR) Earnings per share1 2.35 2.89 Annual Financial Statements Shareholder's equity per share 20.58 20.53
Tangible shareholder's equity per share 20.41 20.34 Annual Financial Statements Dividend per share2 1.45 1.45 Share price development (EUR) Closing price (end of period) 20.54 26.90 High (during the period) 28.48 27.16 Low (during the period) 19.81 20.95 Market capitalisation (end of period, in billions) 19.31 25.29 Valuation indicators (end of period) Price/Earnings 8.74x 9.31x Price/Tangible book value 1.01x 1.32x Dividend yield 7.1% 5.4%
Dividend pay out ratio2 62% 50% Other
1 Profit for the period excluding reserved coupons for AT1 capital securities (net of tax) and results attributable to other non-controlling interests divided by the average outstanding and Other paid-up ordinary shares. 2 Dividend per share and pay out ratio subject to approval of the annual general meeting in April 2019.
ABN AMRO Group Annual Report 2018 Introduction StrategyStrategy and and performance performance Risk, Risk,funding funding & capital & capital LeadershipLeadership & governanceGovernance AnnualAnnual Financial Financial Statements Statements OtherOther 21 24 26 32 29
Responsibility statement Banking & Institutional Corporate Banking Retail Banking Commercial Banking Private Functions Group 34 20 Business performance 17 13
6 Group performance Strategy review Financial 13 review Non-financial 10 8 the same period. and performance of the Group and the business lines during and performance of the operated in the past year. It also includes details of the strategy details of the strategy It also includes the past year. operated in This section describes the environment in which ABN AMRO in which ABN AMRO describes the environment This section Strategy and performance Strategy Regulatory environment
Economic environment
performance Strategy and Economic environment
Strategy and performance / Economic environment 6 Introduction Economic environment Introduction
The economic environment remained relatively favourable sentiment. Business surveys meanwhile showed a in 2018. The key countries in which ABN AMRO operates substantial drop in export orders. Moreover, restrictive – Belgium, France, Germany, the United States and the measures by Chinese policymakers aimed at deleveraging Netherlands – all experienced continued growth. Once again, the economy reduced GDP growth in China, while Strategy and performance ABN AMRO’s home market outperformed its European the rate hikes and shortening of the balance sheet by counterparts as the Dutch economy expanded by 2.5%. the Federal Reserve also resulted in tighter financial conditions in many other countries. Continued broad-based growth The increase in activity in the Netherlands was broad- ECB preparing for QE withdrawal based, with household consumption, government On the back of higher commodity prices, headline inflation spending, investments and exports all contributing to rose towards the ECB’s 2% target, while core inflation, growth. Consumption advanced on the back of a positive which disregards volatile price components, remained labour market and developments in the housing market. much lower. Technological change, growing international Risk, funding & capital The number of jobs rose, while unemployment fell to competition and a more flexible labour market continued a historic low. Although the government decided to to hold back price rises. However, the ECB repeatedly increase spending, supply constraints meant it was stated that it expects core inflation to rise, with ongoing Risk, funding & capital unable to meet all its intended expenditure commitments. economic growth and a further improvement in the labour Businesses experienced strong demand, and a lack of market propping up the pressure on prices. Given this production capacity induced them to step up investments. prospect, the ECB gradually reduced the degree of policy Meanwhile, housing investments started to flatten after accommodation. Its first step was to reduce its monthly years of acceleration. The external sector benefited from asset purchases, while the second step was to announce relatively high growth in world trade on the back of strong plans to cease purchases completely by the end of 2018 international demand. and then raise the deposit rate. Credit spreads materially Leadership structure widened in 2018, but came down again when signals Global trade under pressure of a slowing economy became more clear and the ECB Various signs point to global expansion having reached its notified markets it was about to inject more liquidity into Leadership & governance peak in 2018, with the clearest sign of a slowdown being the European banking system and would not raise official the persistent fall in confidence indicators. During the rates before 2020. year, growth in world trade, industrial production and global GDP all weakened. This was partly for cyclical Rapidly rising house prices reasons as pent-up demand waned and the inventory After reaching a historic high in 2017, Dutch housing cycle started running out of steam. In addition, inflation transaction volume started declining in 2018. While
rose in response to higher energy prices and held back the deceleration was initially confined to the Randstad Governance the increase in consumer purchasing power. The threat conurbation, it later also became visible in other parts of of protectionism also contributed to the declining the country. The decline was primarily caused by a lack of confidence, while the political uncertainty created by properties for sale. In response to this shortage, but also Brexit and concerns about the Italian budget impacted because of strong economic growth, the favourable labour Annual Financial Statements