RBS Holdings N.V. 20-F 2010
As filed with the Securities and Exchange Commission on 26 March 2010
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Commission file number 1-14624
ABN AMRO HOLDING N.V.
(Exact name of registrant as specified in its charter)
(Jurisdiction of incorporation or organisation)
Gustav Mahlerlaan 10, 1082 PP Amsterdam
(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:
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
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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.
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.
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.
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.
Chairman of the Managing Board of ABN AMRO Holding N.V.
Amsterdam, 26 March 2010
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’).
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.
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.
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
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.
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.
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.
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’).
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.
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).
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.
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.
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.
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.
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).
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).
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).
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).
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).
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).
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 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).
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).
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:
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.
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).
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).
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.
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).
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).
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 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.
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).
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:
Profit from discontinued operations net of tax of EUR 9,021 million in 2007 included:
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.