ABN Amro is a predominantly Dutch operation these days with some global private banking plus energy, commodities and transportation activities.
The bank shows above-average regional profitability (above guidance), sound risk-weighted capital ratios (fully loaded CET1 ratio reached 17.6%), incremental asset quality improvements (especially in corporate space), cost-control, and a diverse funding and solid liquidity profile.
Dutch mortgage loans represent over half the bank's loan portfolio. Diluted Basel 111 capital requirements with loan-splitting are advantageous to ABN Amro. A risk weight of 20% will be permitted for a portion of mortgage exposures up to 55% of the property value and the risk weight of the counterparty is applied to the remainder of the exposure. In cases where the criteria are not met, the risk weight of the counterparty is applied to the entire exposure. ABN Amro uses internal models for 92% of credit exposures, with a mortgage risk weight of 10.8% while 43% and 10% of its mortgage book has a LTV of over 80% and >100%.
The aforementioned usage of internal credit risk weightings models means that its CET1 ratio is more sensitive to output floors.
With an Earnings Yield of almost 11%, and a Franchise Value at a sizeable discount to the global median, ABN Amro will have its followers. PH Score™ suggests that they may be on to something.