Image for post
Image for post

ABN AMRO due diligence report.

Hatchworks has conducted due diligence on ABN AMRO, the third-largest bank in the Netherlands, and added it to Hatchnet. ABN AMRO is listed on Euronext, a European stock exchange with registered office in Amsterdam and corporate headquarters at La Défense in Greater Paris, under the symbol ‘’ABN AMRO BANK N.V.’’

Financials — ABN AMRO
(source: Marketscreener.com)

ABN AMRO’s current market cap is €16.7B.

With a predicted net-income growth of 7% for 2020E and 2021E, and a net income estimate for 2020E in excess of €2B, this points to a P/E ratio of 8.41x.

The sales forecast is over €8.5B, indicating a P/S ratio of 1.97x.

In terms of profitability, an operating margin of 40.5% is predicted for 2020E. This compares to a 25% operating margin for competitor Credit Suisse (CSGN).

ABN AMRO has a relatively high expected yield of 8.24% for 2020E. Some competitors, like Credit Suisse(CSGN) has a low expected yield of 2.34%. We could state here that ABN AMRO is giving the highest yield for 2020E, compared with the competitors.

Image for post
Image for post

Looking at their latest Q2 2019 results we can see that:

  • Net profits were up 44% compared with Q1 2019, and ROE was also more profitable. EPS increased from €0.48 in Q1 to €0.71 in Q2.
Image for post
Image for post

Currently, banks pay the European Central Bank (ECB) to store their money as a result of negative interest rates, often considered as a last-ditch effort to boost economic growth. Banks can still make profits so long as their lending rates are above their borrowing costs. But while they have passed on negative rates to corporate depositors, they have not done so to households, as no bank wants to undermine its funding base. The result is lower bank profitability or higher lending rates.

Hatchworks, while appreciating the financial sector risk associated with an eventual recession, holds ABN owing to its superior yield characteristics and relatively benign valuation. Also, it is worth noting that the NLFI currently holds 56.3% in ABN AMRO on behalf of the Dutch state (of which 49.9% is directly held via ordinary shares), adding some security to the uncertain times that may lay ahead.

The Hatchscore is 5 out of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies

What is ABN AMRO?

ABN AMRO Bank N.V. provides various banking products and services in the Netherlands and internationally. It operates through Retail Banking, Commercial Banking, Private Banking, and Corporate & Institutional Banking segments.

Big Investors:

  • Price (T.Rowe) Overseas Stock Fund.

Advisors and Bookrunners:

  • BofA Merril Lynch.
Image for post
Image for post

What are the risks?

  • If banks pass on negative interest rates to their regular retail clients, they could see significant withdrawals. As a result, market share could drop rapidly.

Top competitors:

  • Credit Suisse. (CSGN)

Management team:

  • Kees van Dijkhuizen: CEO.

The Hatchwork Team

The forecast figures are based on the data of MarketScreener and not from Hatchworks: https://www.marketscreener.com/ABN-AMRO-BANK-N-V-24962165/?type_recherche=rapide&mots=ABN%20AMRO

Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ‘Hatchscore’. Hatchworks has not received any compensation for this research. For more information you can reach us at info@hatchworksvc.com. This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.

Written by

Heading up the group’s R&D activities for Hatchworks.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store