ABN Amro Earnings: We Expect Higher Share Buybacks and Welcome Stable Net Interest Income Guidance

Narrow-moat ABN Amro reported a 58% year-on-year increase in net profit for fourth-quarter 2023. Reported net profit for the quarter came in substantially ahead of our expectations, but the outperformance was largely due to an unexpected loan-loss provision release. Provision releases are naturally not a maintainable source of profit growth. We welcome the greater clarity around ABN Amro’s capital targets. We believe ABN Amro will increase its share buybacks from 2024 above the new EUR 500 million buyback program announced on Feb. 14. Given the pressure that some European banks expect on the NII line in the face of lower interest rates, we view the guidance of flat NII for 2024 as positive. Cost guidance is less bullish than before. We maintain our fair value estimate of EUR 21 per share and narrow moat rating, but will update our model shortly to incorporate the new guidance from ABN Amro.