ABN Amro Earnings: Margin Resilience and Cost Discipline Contribute to Strong Performance

Narrow-moat ABN Amro posted strong results for the first quarter of 2024, beating company-compiled consensus on almost every line item. Net profit reached EUR 674 million, 29% above the comparable period a year earlier and 29% above the consensus estimate. Net interest margin has been a focus area for investors and ABN Amro delivered a 162-basis-point NIM. Stronger-than-expected loan volume growth drove net interest income higher than expected. Good cost discipline led to a 57% cost/income ratio, below the bank’s 2026 target of 60%. Credit quality remains sound with stable nonperforming loans reported. The only blemish in the results was an unexpected 50-basis-point decline in the common equity Tier 1 Basel III ratio to 13.8% due to model changes. We still model a 14.6% fully loaded CET 1 for 2024 after considering a EUR 500 million buyback and 50% dividend payout. Despite a solid start to the year, ABN Amro did not increase its guidance for the full year, which shows us that the second half of the year could be more challenging. We maintain our fair value estimate of EUR 21 per share and believe ABN Amro is undervalued.