The Netherlands' biggest bank ABN Amro on Wednesday raised the possibility of a merger as it scrapped a take-over defence and reported record net profit for 2003, boosted by a turnaround in investment banking.
ABN Amro - one of the biggest foreign retail banks in the United States, where the banking sector is consolidating - grew net profit by 31 percent to 3.16 billion euros ($3.96 billion), beating its own and analysts' expectations.
Chief Executive Rijkman Groenink, who has overseen a billion-euro restructuring that included closing non-core units and slashing 10,000 jobs world-wide to cope with hard times, said earnings would grow again this year but at a slower pace.
Cost control, better stock markets and lower bad-debt provisions for the year boosted earnings and saw the bank's wholesale investment banking and brokerage unit return strongly to profit. Provisions were down despite money set aside to cover its exposure to Italian food group Parmalat.
ABN Amro's results news failed to kick its shares higher, however, and analysts said pre-tax profit was somewhat below expectations and a one-off gain from accrued credit spreads and a tax exemption in Brazil had artificially boosted the net.
Analysts said news the bank planned to cancel its Dutch preference shares, giving up a bid defence mechanism, was interesting amid consolidation in the US banking sector where J.P. Morgan Chase & Co and rival Bank One Corp have agreed a $58 billion merger.ABN Amro, which, alongside the Netherlands, calls the United States and Brazil core markets, said its Tier 1 capital ratio, a measure of stability and strength, improved to 8.15 percent.
Although ABN Amro has succeeded in strengthening its capital base in order to enable it to make acquisitions, Groenink said the bank would be unable to make any large-scale purchases but did not rule out the likelihood of a merger with a rival.
"If it is necessary to improve value for our shareholders, then a merger is of course not out of the question," Groenink told a news conference in Amsterdam.
Asked where a possible merger may lie, Groenink referred to the United States, saying that in Europe mergers within single countries needed to happen before any cross-border tie-up.
ABN Amro executives say in private that they are open to bolt-on acquisitions in the $1-$3 billion range in regions neighbouring the bank's Illinois-based franchise in an attempt to achieve the scale needed to remain competitive there.