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RBS Holdings N.V. 20-F 2010 As filed
with the Securities and Exchange Commission on 26 March 2010
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
(Mark
One)
Commission
file number 1-14624
ABN
AMRO HOLDING N.V.
(Exact
name of registrant as specified in its charter)
THE
NETHERLANDS
(Jurisdiction
of incorporation or organisation)
Gustav
Mahlerlaan 10, 1082 PP Amsterdam
The
Netherlands
(Address
of principal executive offices)
Securities
registered pursuant to Section 12(b) of the Act:
Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:
None
Indicate the number of
outstanding shares of each of the issuer's classes of capital or common
stock as of the close of the period covered by the annual
report.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes x No
o
If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes o No
x
Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x
No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated
filer o Accelerated
filer o Non-accelerated
filer x
Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.
Item
17 o
Item
18 o
If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No
x
The
information contained in this report is incorporated by reference into the
registration statements on Form S-8 with Registration Nos. 333-74703, 333-81400,
333-84044, 333-127660, 333-128619, 333-128621, 333-140798, 333-145751 and
333-149577, and the registration statements on Form F-3 with Registration Nos.
333-162193 and 333-104778-01.
2
The year 2009 was
marked by further preparations to legally separate the Dutch State acquired
businesses from the residual RBS acquired businesses. This separation, which is
planned to take place on 1 April 2010, marks one of the last steps of a
carefully managed process to split up ABN AMRO. The separation also means a new
starting point for two independent banks, the new ABN AMRO Bank N.V. and The
Royal Bank of Scotland N.V. At the same time, 2009 was a year of economic
uncertainty, requiring increased focus on business as usual in what still was a
transitional year.
Results
of operations in 2009
In a challenging
business climate, ABN AMRO recorded a loss for the period of EUR 4,400 million
comprising a loss after tax of EUR 4,499 million from continuing operations,
partly offset by a gain after tax from discontinued operations of EUR 99
million. The loss for the period comprises a loss of EUR 4,168 million
attributable to the RBS acquired businesses, a loss of EUR 117 million
attributable to the Dutch State acquired businesses and a loss of EUR 214
million attributable to Central Items.
The loss for the
RBS acquired businesses was significantly lower than the loss reported in 2008
predominantly due to improvements in net trading income, where the business did
not experience the large losses on trading counterparties as seen in 2008.
Business activities continued to be transferred to the RBS Group causing
realisation of losses on these transfers. The loss for the Dutch State acquired
businesses is mainly due to lower interest margins, higher loan impairments
reflecting the deterioration of the economic climate, higher deposit guarantee
scheme charges, and separation and restructuring costs. The loss for Central
Items is mainly reflecting the impact of ongoing ramp down activities within
this segment.
Separation
ABN AMRO filed the
legal demerger documentation with the Amsterdam Chamber of Commerce on 30
September 2009 and confirmed at the beginning of November 2009 that the creditor
objection period had successfully ended with no objections filed. On 6 February
2010, the majority of the businesses acquired by the Dutch State were legally
demerged from the RBS acquired businesses included in ABN AMRO.
As a result, there
are now two separate banks within ABN AMRO Holding, The Royal Bank of
Scotland N.V. (‘RBS N.V.’) and a new entity named ABN AMRO Bank N.V. (the new
‘ABN AMRO Bank’). RBS N.V. is the renamed former ABN AMRO Bank N.V., principally
containing the activities acquired by the RBS Group comprising of international
lending, international transaction services and equities businesses. The
strategies and long term objectives of RBS N.V. will be aligned with those of
the RBS Group. The new ABN AMRO Bank contains the activities acquired by the
Dutch State, comprising Dutch commercial clients (SMEs and corporates), Dutch
consumer clients, and Dutch and international private clients including the
diamond businesses. The new ABN AMRO Bank and Fortis Bank (Nederland) N.V. will
merge in the second half of the year and jointly will roll out a strategy for
the combined bank.
Both entities are
licensed separately by the Dutch Central Bank. Until final legal separation of
the new ABN AMRO Bank from ABN AMRO Holding, which is planned to occur on 1
April 2010, ABN AMRO Holding and the two banks will continue to be governed by
the same Managing Board and Supervisory Board as those of ABN AMRO Holding and
regulated on a consolidated basis with capital ratios, liquidity measures and
exposures being reported to and regulated by the Dutch Central
Bank.
An important step
that needed to be taken to enable the new ABN AMRO Bank and Fortis Bank
(Nederland) N.V. to merge and integrate their activities in 2010 was the sale of
part of the Dutch commercial clients’ activities and selected regional branch
offices and IFN Nederland B.V. to comply with the European Commission’s
requirements for competition (‘EC Remedy’). The sale agreement with Deutsche
Bank AG was signed on 23 December 2009. The closing of the sale is expected to
take place directly after the legal separation of the new ABN AMRO Bank from ABN
AMRO Holding.
3
Capital
ABN AMRO continued
to be well capitalised and exceeded the minimum tier 1 and total capital ratios
of 9% and 12.5% respectively (under Basel I as set by the Dutch Central Bank
during the transition period of ABN AMRO). The tier 1 ratio at the end of 2009
was 19.9% and the total capital ratio amounted to 25.5%. In 2009, ABN AMRO and
its shareholder, RFS Holdings B.V., through which the Consortium Members
participate in ABN AMRO Holding, took several capital actions, which were part
of an agreed plan for the separation of the businesses, to ensure that at legal
separation each individual bank is adequately capitalised with a sound liquidity
position.
In 2009 and early
2010 several significant milestones were reached in the separation process, with
the creation of two new banks, a transition process which is expected to be
completed in 2010 with the legal separation.
On behalf of the
Managing Board, I would like to thank all our employees and clients for their
continued commitment during another eventful period.
Gerrit
Zalm
Chairman of the
Managing Board of ABN AMRO Holding N.V.
Amsterdam, 26 March
2010
4
5
Filing>
This document
contains ABN AMRO’s Annual Report 2009 and will also be filed as ABN AMRO’s
Annual Report 2009 on Form 20-F with the United States Securities and Exchange
Commission (‘SEC’).
Certain
definitions
Throughout this
document, ‘ABN AMRO Holding’ means ABN AMRO Holding N.V. The term ‘ABN AMRO’
refers to ABN AMRO Holding and its consolidated subsidiaries. ‘RBS N.V.’ refers
to the former ABN AMRO Bank N.V. which was renamed The Royal Bank of Scotland
N.V. after the legal demerger. The term ‘new ABN AMRO Bank’ refers to the new
entity named ABN AMRO Bank N.V. (previously named ABN AMRO II N.V.), and its
consolidated subsidiaries, after the legal demerger. ‘EUR’ refers to euros,
while ‘USD’ refers to US dollars.
The terms
‘Consortium’ and ‘Consortium Members’ refer to the banks The Royal Bank of
Scotland Group plc (‘RBS Group’), Fortis N.V. and Fortis SA/NV (together
‘Fortis’) and Banco Santander S.A. (‘Santander’) who jointly acquired ABN AMRO
Holding on 17 October 2007 through RFS Holdings B.V. (‘RFS Holdings’). On 3
October 2008 the State of the Netherlands (‘Dutch State’) acquired Fortis Bank
Nederland (Holding) N.V., including the interest in RFS Holdings that represents
the acquired activities of ABN AMRO and effectively became the successor of
Fortis in the Consortium Shareholder Agreement.
Furthermore, all
references to ABN AMRO Bank N.V. (where it is clear from the context that such
reference is not a reference to the new ABN AMRO Bank) shall be deemed to be a
reference to RBS N.V.
Presentation
of information
Unless otherwise
indicated, the financial information contained in this Annual Report has been
prepared in accordance with International Financial Reporting Standards (‘IFRS’)
as adopted by the European Union (‘EU’) and IFRS as issued by the International
Accounting Standards Board (‘IASB’) which vary in certain significant respects
from accounting principles generally accepted in the United States (‘US’), or
‘US GAAP’.
All annual averages
in this report are based on month-end figures. Management does not believe that
these month-end averages present trends materially different from those that
would be presented by daily averages.
Certain figures in
this document may not sum up exactly due to rounding. In addition, certain
percentages in this document have been calculated using rounded
figures.
6
Cautionary
statement on forward-looking statements
We have included or
incorporated by reference into this report, and from time to time may make in
our public filings, press releases or other public statements, certain
statements that may constitute ”forward-looking statements” within the meaning
of the safe harbour provisions of the United States Private Securities
Litigation Reform Act of 1995. This includes, without limitation, such
statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’,
‘should’, ‘intend’, ‘plan’, ‘probability’, ‘risk’, ‘Value-at-Risk (“VaR”)’,
‘target’, ‘goal’, ‘objective’, ‘will’, ‘endeavour’, ‘outlook’, 'optimistic',
'prospects' and similar expressions or variations on such
expressions.
In particular, this
document includes forward-looking statements relating, but not limited, to ABN
AMRO’s potential exposures to various types of market risks, such as
counterparty risk, interest rate risk, foreign exchange rate risk and commodity
and equity price risk. Such statements are subject to risks and uncertainties.
For example, certain of the market risk disclosures are dependent on choices
about key model characteristics and assumptions and are subject to various
limitations. By their nature, certain of the market risk disclosures are only
estimates and, as a result, actual future gains and losses could differ
materially. These forward-looking statements are not historical facts and
represent only ABN AMRO’s beliefs regarding future events, many of which, by
their nature, are inherently uncertain and beyond our control.
Other factors that
could cause actual results to differ materially from those estimated by the
forward looking statements contained in this document include, but are not
limited to:
Factors that could
also adversely affect ABN AMRO’s results, the accuracy of forward-looking
statements in this report and the factors discussed here and in the paragraphs
‘Regulation and Supervision’ and ‘Risk factors’ and elsewhere in this report
should not be regarded as a complete set of all potential risks or
uncertainties. ABN AMRO has economic, financial market, credit, legal and other
specialists who monitor economic and market conditions and government policies
and actions. However, because it is difficult to predict with complete accuracy
any changes in economic or market conditions or in governmental policies and
actions, it is hard for ABN AMRO to anticipate the effects that such changes
could have on ABN AMRO’s financial performance and business operations.
Accordingly, you are cautioned not to place undue reliance on forward-looking
statements.
The forward-looking
statements made in this report speak only as at the date of publication of this
report. ABN AMRO does not intend to publicly update or revise these
forward-looking statements to reflect events or circumstances after the date of
this report, and ABN AMRO does not assume any responsibility to do so. The
reader should, however, take into account any further disclosures of a
forward-looking nature ABN AMRO may make in ABN AMRO’s interim
reports.
7
Corporate
Information
ABN AMRO Holding
N.V. is the parent company of the ABN AMRO consolidated group of companies. ABN
AMRO Holding is a public limited liability company, incorporated under Dutch law
on 30 May 1990, and registered at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the
Netherlands. ABN AMRO provides a broad range of financial services on a
worldwide basis, including consumer, commercial and investment
banking.
On 17 October 2007
RFS Holdings, a company incorporated, in the Netherlands, by the RBS Group,
Fortis and Santander acquired 85.6% of ABN AMRO Holding. After the acquisition,
ABN AMRO applied for de-listing of its ordinary shares from Euronext Amsterdam
and the New York Stock Exchange. Through subsequent purchases RFS Holdings
increased its stake in ABN AMRO to 99.3% as at 31 December 2007. The de-listing
of the ABN AMRO Holding ordinary shares and the (formerly convertible)
preference shares with a nominal value of €2.24 each from Euronext Amsterdam and
the de-listing of its American Depositary Shares (‘ADSs’) from the New York
Stock Exchange was effected on 25 April 2008. RFS Holdings started squeeze-out
proceedings in order to acquire the remainder of the shares in ABN AMRO from
minority shareholders and this procedure was completed on 22 September 2008. As
a result in 2008 RFS Holdings became the sole shareholder of ABN AMRO
Holding.
RFS Holdings is
controlled by RBS Group, which is incorporated in the UK and registered at 36
St. Andrew Square, Edinburgh, Scotland. RBS Group is the ultimate parent company
of ABN AMRO Holding.
On 3 October 2008,
the Dutch State acquired all Fortis’ businesses in The Netherlands, including
the Fortis share in RFS Holdings. On 21 November 2008, the Dutch State announced
its intention to integrate the Dutch State acquired businesses of ABN AMRO with
Fortis Bank (Nederland) N.V. after completion of the legal demerger and legal
separation processes, discussed within this report. On 24 December 2008, the
Dutch State purchased from Fortis Bank Nederland (Holding) N.V. its investment
in RFS Holdings, to become a direct shareholder in RFS Holdings.
Update
on separation
On 6 February 2010
ABN AMRO successfully executed the deed of demerger in accordance with the
demerger proposal filed with the Amsterdam Chamber of Commerce on 30 September
2009, thereby demerging the majority of the Dutch State acquired businesses into
the new ABN AMRO Bank. Additionally, as part of the overall separation process,
some subsidiaries and assets and liabilities were separately transferred to the
new legal entity ahead of the execution of the legal demerger. Some further
assets and liabilities were separately transferred to the new legal entity
around the same time or shortly after the execution of the legal
demerger.
Effective at the
same date, the existing legal entity ABN AMRO Bank N.V., from which the Dutch
State acquired businesses were demerged, was renamed The Royal Bank of Scotland
N.V. (‘RBS N.V.’). The legal entity into which the Dutch State acquired
businesses were demerged was also renamed, from ABN AMRO II N.V. to ABN AMRO
Bank N.V. (‘new ABN AMRO Bank’). RBS N.V. and new ABN AMRO Bank are wholly owned
by ABN AMRO Holding. The new ABN AMRO Bank is planned to be legally separated
from ABN AMRO Holding on 1 April 2010.
From 6 February
2010 onwards, the name ABN AMRO Bank N.V. will be used by the separate legal
entity (registered with the Dutch Chamber of Commerce under number 34334259),
which will after legal separation from ABN AMRO Holding be owned by the Dutch
State. Neither the new entity named ABN AMRO Bank nor the Dutch State
guarantees the obligations under securities issued by RBS N.V. unless otherwise
expressly stated in the terms and conditions of such securities. Similarly, RBS N.V. does not guarantee the obligations
under securities issued by the new ABN AMRO Bank unless otherwise expressly
stated in the terms and conditions of such securities.
The legal demerger
represents the successful execution of the first step in a two step process
chosen to effect the legal separation of the assets and liabilities acquired by
the Dutch State. The second step, "legal separation", will result in the
transfer of the shares of the new ABN AMRO Bank from ABN AMRO Holding to a
8
new holding company
(ABN AMRO Group N.V.) fully owned by the Dutch State and independent of ABN AMRO
Holding. After the legal separation, ABN AMRO Holding will be renamed RBS
Holdings N.V.
Until legal
separation, ABN AMRO will continue to be governed by ABN AMRO Holding’s Managing
Board and Supervisory Board and regulated on a consolidated basis with capital
adequacy, liquidity measures and exposures being reported to and regulated by
the Dutch Central Bank (De Nederlandsche Bank). Until legal separation, the
Managing Board and Supervisory Board of RBS N.V. and of the new ABN AMRO Bank
will be the same as the Managing and Supervisory Boards of ABN AMRO
Holding.
RBS N.V. will,
after the legal separation, become a majority owned subsidiary of ultimately RBS
Group and will be an integral part of the RBS Group. It will principally contain
international lending, international transaction services and equities
businesses of the RBS Group. These activities will continue to be subject
to Dutch Central Bank supervision and on a consolidated basis as part of the RBS
Group be subject to UK Financial Services Authority supervision. Due to the
change in the business and operating model of RBS N.V. compared to
pre-acquisition ABN AMRO Bank N.V., a licence renewal was requested and granted
by the Dutch Central Bank on 3 February 2010.
The majority of the
businesses acquired by the Dutch State, consisting of the Dutch commercial and
retail banking, Dutch and international private clients and diamond businesses,
were transferred to the new ABN AMRO Bank at or shortly before the legal
demerger. During the period between the legal demerger and legal
separation a small ‘tail’ of predominantly international businesses will
continue to be transferred to the new ABN AMRO Bank with a few minor businesses
remaining to be transferred after legal separation. The exact timing
of these transfers will be determined by, amongst other things, the granting of
regulatory approvals in the countries in which the businesses operate. The new
ABN AMRO Bank was granted a banking licence on 13 January 2010.
On 11 March 2010 a
request for a Declaration of Non-Objection (‘DNO’) on the separation of ABN AMRO
Bank N.V. from ABN AMRO Holding N.V. by means of sale to ABN AMRO Group N.V. was
submitted to the Dutch Central Bank. This sale is planned to be executed on 1
April 2010.
The following
diagram details the demerger and legal separation process in steps.
9
EC
Remedy
RBS
N.V.
On 26 November
2009, RBS Group and The Royal Bank of Scotland plc (‘RBS plc’) signed an
accession agreement to the UK Government's Asset Protection Scheme ('APS'). This
scheme also covers a pool of assets within the RBS acquired businesses in ABN
AMRO Holding N.V. (the future RBS Holdings N.V.) to further strengthen the
capital position and de-risk the earnings of the future RBS N.V. Group
businesses.
On 26 November
2009, RBS Group also entered into a State Aid Commitment Deed with Her Majesty's
Treasury ('HM Treasury') containing commitments and undertakings given by RBS
Group to HM Treasury that are designed to ensure that HM Treasury is able to
comply with the commitments given by it to the European Commission for the
purpose of obtaining State aid approval.
As part of these
commitments, and unless the European Commission agrees otherwise, the hybrid
capital instruments existing on 24 November 2009 which are retained in the
future RBS Holdings N.V. Group after separation is complete will be subject to a
restriction on the payment of dividends and coupons and on the exercise of any
call rights, unless in any such case there is a legal obligation to do so, for
an effective period of two years after the proposed capital restructuring of RFS
Holdings B.V. (which is intended to take place soon after separation) and
following the expiry of any "pusher" periods (which will last for 12 months)
following separation and such capital restructuring.
The
new ABN AMRO Bank
To comply with the
European Commission’s requirements for competition, ABN AMRO and Deutsche Bank
AG signed a Share Purchase Agreement on 23 December 2009 confirming the
agreements reached for the sale of New HBU II N.V. ('New HBU II') and IFN
Finance B.V. ('IFN Finance'). The sale price agreed for New HBU II and IFN
Finance, including a guarantee provided for 75% of future credit losses ('credit
umbrella') and an amount to cover other liabilities and costs, is EUR 700
million.
The closing of the
New HBU II and IFN Finance transaction is planned to take place after legal
separation according to the conditions of the agreement. ABN AMRO has
considered the impact of the transaction on results and capital ratios and
considers that the transaction will have a negative impact of between EUR 800
and EUR 900 million. This total loss includes a provision for the expected
cost of the credit umbrella. The new ABN AMRO Bank expects to account for
these losses when, after legal separation, the conditions for effecting the
closing have been met.
10
From 1 January
2009, ABN AMRO is comprised of three reportable segments, namely the “RBS
acquired”, “Dutch State acquired” and “Central Items” segments. This
segmentation reflects the focus of and the governance created by the Managing
Board on the separate identification and subsequent legal separation of the
Dutch State acquired businesses from the residual RBS acquired businesses and
remaining Shared Assets in order to create two separate independent
banks.
The “RBS acquired”
segment represents the businesses acquired by the RBS Group and not sold or
transferred to RBS plc. It principally contains the international lending,
international transaction services with operations in Europe, Asia and the
Americas and the equities business. It also includes some retail and commercial
businesses in Asia and South America that are to be divested.
The “Dutch State
acquired” segment serves Dutch commercial clients, Dutch consumer clients, and
Dutch and international private clients, and includes the International Diamond
and Jewelry business.
The “Central Items”
segment includes items that are not allocated to but are economically shared by
the Consortium Members as well as settlement amounts accruing to Santander
arising from the disposal of Banco Real and other sales and settlements of
Santander acquired businesses completed in 2008. In addition, prior to April
2008, the majority of the Group Asset and Liability Management portfolios were
economically shared. Since the allocation of these portfolios was effected on
the basis of prospective agreements between Consortium Members, the results on
these portfolios prior to this date are reported in Central Items.
11
The selected
financial data set out below has been derived from ABN AMRO’s audited
consolidated financial statements for the periods indicated. ABN AMRO’s
consolidated financial statements for each of the years ended 31 December 2009
and 2008 have been audited by Deloitte Accountants B.V. and the consolidated
financial statements for each of the years ended 2007, 2006 and 2005 have been
audited by Ernst & Young Accountants LLP, both independent auditors. The
selected financial data is only a summary and should be read in conjunction with
and is qualified by reference to the consolidated financial statements and notes
included elsewhere in this report and the information provided in this
section.
Selected
Consolidated Income Statement
(1)
Solely for the convenience of the reader, euro amounts have been translated into
US dollars at an exchange rate of 1 USD = EUR 0.7166, which is the rate equal to
the average of the month-end rates for 2009.
(2)
Selected financial data for 2005 has not been restated for discontinued
operations arising in 2008 and 2007. Income statement figures for 2008, 2007 and
2006 have been restated for discontinued operations in accordance with
International Financial Reporting Standards (‘IFRS’).
12
Selected
Consolidated Balance Sheet Data
(1)
Solely for the convenience of the reader, euro amounts have been translated into
US dollars at an exchange rate of 1 USD = EUR 0.6940, which is the year-end rate
for 2009.
13
Selected Ratios >(1)
(1)
According to IFRS the income statement figures of 2007 and 2006 have been
restated for the qualifying discontinued operations arising in 2008. In
accordance with IFRS the balance sheet figures of 2007 and 2006 are not restated
for the effect of discontinued operations in 2008. The 2005 figures have not
been restated for discontinued operations arising in 2008 and 2007. As a result
the applicable ratios throughout the years are not comparable.
(2)
Net interest income as a percentage of average interest earning
assets.
(3)
Negative ratios have been excluded.
(4)
Operating expenses as a percentage of net interest income and total non-interest
income. Negative efficiency ratios have been excluded.
(5)
Profit for the year as a percentage of average total assets. Negative ratios
have been excluded.
(6)
Net profit attributable to Ordinary shares as a percentage of average ordinary
shareholders’ equity excluding the reserves with respect to cash flow hedges and
available for sale securities. Negative ratios have been excluded.
(7)
Dividend per Ordinary share as a percentage of net profit per Ordinary
share.
(8)
Tier 1 capital and total capital as a percentage of risk-weighted assets. For
more information on ABN AMRO’s capital ratios, please refer to our Capital
ratios discussion in Section 3: Operating Review.
(9)
Excludes professional transactions (2009: EUR 10 billion; 2008: EUR 13 billion;
2007: EUR 98 billion; 2006: EUR 94 billion; 2005: EUR 75 billion) because
these primarily consist of reverse repurchase agreements with limited credit
risk and balances held by multi seller conduits (2009: EUR 0.3 billion; 2008:
EUR 5 billion; 2007: EUR 29 billion; 2006: EUR 26 billion; 2005: 26
billion).
(10)
Non-performing loans are doubtful loans for which there is objective evidence
that not all contractually agreed amounts will be collected and for which an
allowance for loan losses has been established. For more information on
non-performing loans please refer to Section 8: ‘Additional
Information’.
(11)
Deposits include banks and total customer accounts. Negative ratios have been
excluded. The earnings for the years ended 31 December 2009 and 2008 were
inadequate to cover total fixed charges excluding interest on deposits and total
fixed charges including interest on deposits. The coverage deficiencies for
total fixed charges excluding interest on deposits and total fixed charges
including interest on deposits for the year ended 31 December 2009 was EUR 4,914
million (2008: EUR 15,474 million).
14
15
Operating
and Financial Review and Prospects
The following
discussion of operating results is based on, and should be read in
conjunction with, ABN AMRO’s consolidated financial statements. The financial
information contained in this review has been prepared in accordance with IFRS
issued by the IASB and adopted by the EU. For critical accounting policies and
changes in accounting rules, refer to the accounting policies section in Section
6: ‘Financial
Statements’.
This operating
review reflects the fact that ABN AMRO consists of two increasingly independent
business segments. ABN AMRO’s consolidated results are discussed in this context
by first comparing the results of operations for the years 2009 to 2008 and 2008
to 2007, highlighting key notes by business segment for each line item. This is
followed by a more detailed analysis of the results of operations for each
segment, which explains significant variances with reference to the relevant
line item.
Consolidation
effects of controlled private equity investments
IFRS requires
consolidating investments over which ABN AMRO has control, including
non-financial investments managed as private equity investments. However, as a
practical matter, ABN AMRO’s private equity business is managed separately from
the rest of the banking business and management does not measure the performance
of the banking business based on the consolidated results of the private equity
operations. Private equity business involves buying equity stakes in unlisted
companies over which ABN AMRO can establish influence or control, and managing
these share holdings as an investor for a number of years with a view to selling
them at a profit.
The companies in
which ABN AMRO has these temporary holdings are active in business sectors
outside the financial industry. ABN AMRO believes that combining these temporary
holdings with the core banking business does not provide a meaningful basis for
discussion of the financial condition and results of operations. Therefore, in
the presentation of the ‘ABN AMRO results’, the effects of a line-by-line
consolidation in the income statement of the private equity holdings are
removed. The results excluding the consolidation effect include the
‘de-consolidated’ holdings based on the equity method.
Discontinued
operations
No assets and
liabilities relating to discontinued operations remain on the balance sheet as
at 31 December 2009. For 2009 only a small remainder of Santander bound
businesses are reported as discontinued operations. From 1 January 2008 all
remaining Santander acquired businesses, including Banco Real, were reported as
discontinued operations due to the sale of these businesses during 2008. In 2007
Banca Antonveneta, the former BU Asset Management, ABN AMRO North America
Holdings (‘La Salle’), ABN AMRO Mortgage Group, Inc. and Bouwfonds were reported
as discontinued operations. Profits from discontinued operations include the
related operating results and if applicable the gain on sale, (refer to note 2
‘Acquisitions and disposals of subsidiaries’ and note 45 ‘Discontinued
operations and assets and liabilties held for sale’ in Section 6: ‘Financial
Statements’). The comparative income statement figures for the years 2008 and
2007 have been restated in accordance with IFRS.
16
ABN
AMRO results
The following table
sets out selected information relating to ABN AMRO for the years ended 31
December 2009, 2008 and 2007.
(1)
This number includes double counting of branches and offices that serve more
than one business. Adjusted for double counting, the actual number of branches
and offices amounts to 908 (2008: 970; 2007: 4,254). Including
numbers from operations presented as discontinued until actually
sold.
17
Results
of operations for the years ended 31 December 2009 and 2008
The results for the year decreased by EUR 7,995
million, to a loss of EUR 4,400 million. Results from continuing operations improved by EUR 8,395 million to a loss of EUR
4,499 million. The variances year-on-year reflect an improvement of EUR 8,381
million for the RBS acquired segment, a deteriotation of EUR 588 million for
the Dutch State acquired segment and an improvement of EUR 602 million for
Central
Items.
Total
income
Operating income increased by EUR 7,152
million to EUR 6,694. This reflects increases in RBS acquired businesses
(EUR 8,238 million) and Central Items (EUR 422 million) and a decrease
in Dutch State acquired businesses (EUR 290 million).
Further commentary is provided in the discussion of the
individual lines that constitute operating income below and later in the segment commentaries.
Net
interest income
Net interest income decreased by EUR
1,135 million, or 19.6%, to EUR 4,648 million. This reflects decreases in the RBS acquired businesses (EUR 837
million), the Dutch State acquired businesses (EUR 229 million) and Central Items (EUR 99
million).
Key
notes:
Net
fee and commission income
The following table
sets out the net fee and commission income for the years ended 31 December
2009, 2008 and 2007.
Net fees and commission income decreased
by EUR 408 million, or 15.5%, to EUR 2,221 million. This was due to decreases in
the RBS acquired businesses (EUR 334
million), Dutch State acquired businesses (EUR 124 million), partly offset by an
increase in Central Items (EUR 50 million).
Key
notes:
18
Net
trading income
The following table
sets out the net trading income for the years ended 31 December 2009, 2008
and 2007.
Net trading income increased by EUR
10,886 million to EUR 1,562 million. The majority of the increase is
attributable to the
RBS acquired businesses
(EUR 10,564 million).
Key
notes:
Results
from financial transactions
The following table
sets out the results from financial transactions for the years ended
31 December 2009, 2008 and 2007.
Results from financial transactions
decreased by EUR 522 million, or 31.0%, to EUR 2,206 million. The decrease was
due to the RBS acquired businesses (EUR 743
million), partly offset by increases in Dutch State acquired businesses (EUR 118 million)
and Central Items (EUR 61 million).
Key
notes:
19
Share
of result in equity accounted investments
Share of result in equity accounted
investments decreased by EUR 81 million to EUR 25 million. This was due to
decreases in the RBS acquired businesses (EUR 74 million)
and Central Items (EUR 59 million), partly offset by an increase in Dutch State acquired businesses (EUR 52
million).
Key notes
Other
operating income
The following table
sets out the other operating income for the years ended 31 December 2009,
2008 and 2007.
Other operating income decreased by EUR
298 million to EUR 8 million. This is due to decreases in the RBS acquired businesses (EUR 338
million) and Dutch State acquired businesses (EUR 27 million),
partly offset by an increase in Central Items (EUR 67
million).
Key
notes:
Income
of consolidated private equity holdings
Income of consolidated private equity
holdings decreased by EUR 1,290 million to EUR 436 million due to the sale of consolidated private
equity investments in 2009.
Operating
expenses
Operating expenses decreased by EUR
2,814 million, or 24.2%, to EUR 8,815 million, due to decreases in the RBS acquired businesses (EUR 1,261
million) and Central Items (EUR 350 million), partly offset by an increase in
Dutch State acquired businesses (increase EUR 10 million).
Key
notes:
20
Loan
impairment and other credit risk provisions
Loan impairments
and other credit risk provisions decreased from EUR 3,387 million to EUR 2,793
million due to a decrease in the RBS acquired businesses (EUR
988 million) partly offset by an increase
in Dutch State acquired businesses (EUR 396 million).
Key
notes:
Tax
The income tax credit decreased to net
benefit of EUR 415 million compared to a credit of EUR 2,580 million in 2008.
The overall net credit was impacted in 2009 and 2008 by deferred tax assets relating to losses
not recognised due to uncertainty of recoverability of EUR 0.8 billion (2008: EUR 1.4
billion).
Profit
from discontinued operations net of tax
Profit from
discontinued operations net of tax of EUR 99 million in 2009 relates to
Santander disposals.
Profit from
discontinued operations net of tax of EUR 16,489 million in 2008
included:
21
Results
of operations for the years ended 31 December 2008 and 2007
Profit for the year
decreased by EUR 6,380 million, to EUR 3,595 million. Profit from continuing
operations decreased by EUR 13,848 million to a loss of EUR 12,894 million. The
variances year-on-year are: the RBS acquired segment (decrease EUR 12,118
million), Central Items (decrease EUR 1,021 million) and the Dutch State
acquired segment (decrease EUR 709 million). Profit from discontinued operations
net of tax amounted to EUR 16,489 million, reflecting gains on the sale of Banco
Real to Santander, Asset Management to Fortis and Banca Antonveneta to Banca
Monte dei Paschi di Siena.
Total
income
Operating income
decreased by EUR 16,456 million to a negative operating income of EUR 458
million. This relates to decreases in operating income in the RBS acquired
businesses (EUR 12,403 million), Central Items (EUR 1,659 million) and the Dutch
State acquired businesses (EUR 373 million).
The negative
operating income in the global market business, predominantly attributable to
the European business in the RBS acquired segment, include credit market write
downs against asset-backed securities (approximately EUR 1.6 billion) and credit
valuation adjustment against exposures to credit insurance counterparties
(approximately EUR 4.8 billion), losses arising on trading book counterparty
failures (approximately EUR 1.0 billion, including losses associated with the
Lehman Brothers bankruptcy and the Bernard L. Madoff fraud), losses due to a
change in the valuation methodology for complex trading products (approximately
EUR 0.5 billion) and approximately EUR 2.4 billion of losses on the transfer of
certain portfolios to RBS Group. These transfers are at fair value to RBS Group.
However, from an RBS Group perspective, the results on these transfers are
eliminated as RBS Group is both the buyer and the seller.
Within Central
Items the results from the Private Equity portfolio and our shareholding in
Unicredit were both negative in 2008.
Further comment is
provided in the discussion of the individual lines that constitute operating
income and in the segment commentaries.
Net
interest income
Net interest income
increased by EUR 1,188 million, or 25.9%, to EUR 5,783 million. This was
predominantly due to increases in Central Items (EUR 847 million), and the RBS
acquired segment (EUR 383 million), partly offset by a decrease in the Dutch
State acquired segment (EUR 217 million).
Key
notes:
Net
fee and commission income
Net fee and
commission income decreased by EUR 1,223 million, or 31.7%, to EUR 2,629
million. This was due to a decrease in the RBS acquired segment (EUR 749
million), Central Items (EUR 255 million) and the Dutch State acquired segment
(EUR 219 million).
22
Key
notes:
Net
trading income
Net trading income
decreased by EUR 10,443 million to a loss of EUR 9,324 million. The majority of
the decrease is attributable to the RBS acquired segment (EUR 10,204 million)
specifically within the European operations.
Key
notes:
Results
from financial transactions
Results from
financial transactions decreased by EUR 2,818 million to a loss of EUR 1,684
million. The decrease was due to the RBS acquired segment (EUR 1,709 million)
and Central Items (EUR 1,171 million), partly offset by an increase in the Dutch
State acquired segment (EUR 144 million).
Key
notes:
Share
of result in equity accounted investments
Share of result in
equity accounted investments decreased by EUR 117 million to EUR 106 million.
This was due to the decrease in profits generated by investments held in Central
Items (EUR 54 million) and the RBS acquired segment (EUR 39
million).
Other
operating income
Other operating
income decreased by EUR 933 million to EUR 306 million, primarily due to a
decrease in Central Items (EUR 755 million).
Key
notes:
23
Income
of consolidated private equity holdings
Income of
consolidated private equity holdings decreased by EUR 2,110 million to EUR 1,726
million, due to the transfer of management activities from businesses within
Private Equity to an independent management company. As a result of the
structural change in control, the results from the portfolio of investments
managed by the independent management company were no longer consolidated as of
1 July 2007 but changes in fair value were shown within results from financial
transactions as a net result on other equity investments instead.
Operating
expenses
Operating expenses
decreased by EUR 3,156 million, or 21.3%, to EUR 11,629 million, due to
decreases in Central Items (EUR 929 million) and the RBS acquired segment (EUR
404 million). This was partly offset by an increase in the Dutch State acquired
segment (EUR 176 million).
In 2008, EUR 1,036
million of restructuring charges were included, compared to a net release of EUR
101 million in 2007.
Key
notes:
Loan
impairment and other credit risk provisions
Loan impairment and
other credit risk provisions increased by EUR 2,670 million to EUR 3,387
million. The main increases were in the RBS acquired segment (EUR 2,263 million)
and the Dutch State acquired segment (EUR 398 million).
Key
notes:
Tax
Tax expense
decreased by EUR 2,122 million to a net tax benefit of EUR 2,580 million. In
2008 deferred tax assets relating to losses were not recognised due to
uncertainty of recoverability in the RBS acquired segment (EUR 1.4
billion).
Included in 2007
were significant tax-exempt gains on disposals, including the gain on the sale
of Capitalia (EUR 624 million, net EUR 617 million), tax credits in some
countries as well as substantial releases of tax liabilities resulting from the
finalisation of prior-year tax returns and conclusions on a number of additional
items.
Profit
from discontinued operations net of tax
Profit from
discontinued operations net of tax of EUR 16,489 million in 2008
included:
24
Profit from
discontinued operations net of tax of EUR 9,021 million in 2007
included:
25
The following is an
analysis by significant balance sheet category of movements between 31 December
2009 and 31 December 2008.
ABN AMRO’s total
assets were EUR 469 billion at 31 December 2009, a decrease of EUR 197 billion,
or 30%, when compared with EUR 667 billion at 31 December 2008. This decrease is
primarily related to the continued transfer and sale of businesses and
portfolios to RBS Group. The impact from the dislocation in the financial
markets was not as significant in 2009, in comparison to 2008, however it was
still a prevalent factor in the reduction of some balance sheet
activities.
ABN AMRO’s total
liabilities decreased EUR 199 billion, or 31%, to EUR 450 billion for reasons
related to the decrease in total assets.
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