Time to Take Some Profits off the Table: ABN AMRO Group NV


Dutch Bank has performed very well so far this year


ABN AMRO Group N.V. is a €10.4 billion Dutch bank group, consisting of ABN AMRO Netherlands, ABN AMRO Private Banking, the International Diamond and Jewelry Group, and Fortis Bank Netherlands (Wiki) .

AMRO has an attractive 4.3% dividend yield with 49.4% payout ratio along with 9.7x P/E ratio.

In its recent six months of operations, AMRO reported 24% operating income to €4.74 billion and an impressive 83% profit growth to €1.54 billion.

In review, AMRO’s main revenue generator—retail banking (43% of unadjusted operating income—actually experienced a 3.5% decline in operating income, but has remained profitable. Meanwhile, the bank’s corporate & institutional banking business rose 159% while having recorded profit margins of 17.5% compared to losses a year earlier brought by “a larger number of professional clients are being charged negative interest rates on deposits.”

As of June, the bank had €26.6 billion in cash and balances and €384 billion in total liabilities with liabilities-to-equity ratio of 19.4 times compared to 22.3 times a year earlier. Overall liabilities fell by €17 billion while equity increased €1.9 billion.

In the past three years (excluding the recent half), AMRO allocated €1.14 billion in capital expenditures, reduced its debt by €10 billion, raised €994 million in common stock issuance, generated €32.8 billion, and provided €1.74 billion in dividends.

Analysts have an overweight recommendation with target price of €26.89 a share vs. €25.34 at the time of writing.

Having returned 25.56% so far this year, AMRO shareholders should probably cash in some profits in the Dutch Bank and wait for a 20%-30% price drop before accumulating again.

In summary, AMRO is a pass.

Disclosure: I do not have shares in any of the companies mentioned.