ABN Amro Holdings Q3 2003 Earnings Conference Call (1st call) - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

TOM DE SWAAN, CFO, ABN AMRO: Good morning to all of you. I will do the presentation which you probably either have in front of you on the screen or printed out. I will do that English. Obviously, from the Dutch side, people would like to ask a question in Dutch, go ahead. I probably will answer them in English but there's no problem by asking them in Dutch.

What I will do, I will give a presentation on the results of the third quarter and then, obviously, there is every chance to ask your questions.

If we go to page 3 of the presentation, the overall review of the third quarter, I think we can say that we are very pleased with the results of ABN AMRO. It continues to go up as far as operating result is concerned. A record result in the third quarter and if we compare it to the third quarter of 2002, you can see that all figures point upward except for the provisioning, and that is the way it should be.

Provisioning is down substantially but net profit is up by more than 40%, a substantial improvement in our efficiency ratio. Capital ratios turning better and I think that with the E830m net profit, ABN AMRO is clearly outperforming the market expectations. And what we especially value is that that is broadly based in the bank. Revenue growth is basically everywhere and especially in the wholesale side of the bank.

So, a good and very solid result leading to a substantial increase of our expectations for this year but I will come back to that point later.

Let us look a bit more in detail, comparing quarter-to-quarter. Revenue on page five, you see that revenue continues to improve by 5.2%. As I said earlier, by revenue growth in wholesale but the C&CC business also doing well. Some increases in expenses but these are clearly due to incidentals, both in the Netherlands and the US. I will come back to that later. So we are still very much on the path of bringing of costs under control and down. If you look at the first nine months of the year, you will see that costs are down nearly 5% as compared to the first nine months of last year.

And very importantly here also to signal that if you adjust the revenue line and the expenses for currency, you see a very, very solid growth in revenues of more than 12% over the first nine months of this year as compared to the first nine months of last year. And an increase of pre-tax results of 51%.

Going to the individual parts of the bank, page six, the overall picture of C&CC. I will go into a little bit more detail as far as the Netherlands, US and Brazil is concerned. So on this page one or two words on the rest of the world because that is an increasingly important part of our C&CC business.

The rest of the world is performing very well. If you correct for two exceptionals, namely the adjustment we had to take for our share in the loss of our Italian bank. And the provisioning we had to make for our part in a fraud in the Hungarian joint venture we have with our Belgian friends in KHB. If you correct for that, revenues are up in the rest of the world nearly 17%.

So we further growth in countries like India, Saudi Arabia, China. A broad based improvement and continued growth in the rest of the world.

The individual parts of C&CC. The three home markets: the Netherlands, US and Brazil. First of all the Netherlands. Clearly a further improvement. Revenues are holding up very well. They are up by 3.4% in an environment whereby the economy actually is contracting. So a clear sign that we are gaining market shares, especially in the net interest revenues and commissioning where we do see a pick up.

Costs are somewhat higher, 6%, but there are two incidentals. One in the second quarter. We had a release of costs which led to an exceptionally low cost level in the second quarter, below E600m. That, of course, does not recur and this quarter we see an increase in the profit sharing agreement we have for the Dutch workforce. And that is obviously a reflection of our very good performance.

Important to signal here as well that our [Zundemom base] program has been finalized. You might remember that when we announced this program, that we thought and we expected costs to be growing with E400m less than if we had not done the restructuring. Actually, we have a reached level of E425m less cost growth because of our [Nodetours] program. And it has started to yield results on the revenue. Client satisfaction is clearly improving.

So all in all, we think the heading of this slide, namely that we are remaining on track despite the recession in the Netherlands, reflects an improved performance for the Netherlands.

In the US you will remember that we saw an end of the substantial and the very unprecedented mortgage origination business in the third quarter. And we announced that actually when we published our first half results and, indeed, origination volumes. So the actual sale of mortgages in the United States is down by 4.1% over the quarter. Nevertheless, in euro terms, revenue remains basically flat, only down by slightly less than 1%. And that includes a reserve we have built of $48m which we call the Mortgage Liability Reserves. That is to cater for mortgages we get back from the agencies like the Federal Home, Jenny May and Freddy Mack, in the United States. …