By Leo Marchandon and Matteo Allievi
(Reuters) -ABN Amro's shares rose 5% on Wednesday as the Dutch bank raised its forecast for full-year net interest income to 6.4 billion euros ($6.98 billion) after a stronger than expected second-quarter performance.
ABN Amro beat estimates for second-quarter net interest income, benefiting, along with some of the euro zone's biggest banks, from a "higher-for-longer" environment for interest rates.
"Our results continue to benefit from the good performance of the Dutch economy," CEO Robert Swaak said in a statement, pointing at a housing market rebound amid an increase in new mortgage clients.
ABN Amro's previous forecast of 6.3 billion euros for net interest income was in line with 2023 levels.
Rival Dutch bank peer ING earlier this month also lifted its 2024 outlook for total income to more than 22 billion euros after reporting second-quarter net interest income above estimates.
ABN Amro's net interest income, a key measure of earnings on loans minus deposit costs, fell 1% in the second quarter to 1.61 billion euros year-on-year, but beat analysts' forecast of 1.58 billion euros in a company-compiled poll.
Net profit was also above estimates at 642 million euros, but down 26% compared to last year.
The company's CET1 ratio, a measure of capital strength for European banks that compares their core capital against risk-weighted assets, fell to 13.8% from one year ago, in line with analysts' estimates.
CAUTIOUS ON 2025 NET INTEREST INCOME
ABN Amro said it did not expect a significantly positive trend in net interest income in 2025 compared with 2024, given a gradual normalisation of deposit margins as interest rates are likely to decrease.
"The question is how fast this margin normalisation will be, but we do not expect NII into 2025 to increase at the same rate as we have seen this year," CFO Ferdinand Vaandrager told reporters.
"Let's wait until we start 2025 when we will have a better view on the rate curve and on clients behaviour," he added.
Keefe, Bruyette & Woods said in a note that the prospect of more cuts to borrowing costs could become a headwind for banks' profits but saw no reason to panic.
Earlier this month, ABN Amro reached a new two-year collective labour agreement, which includes a salary increase, raising its personnel expenses to 659 million euros from 612 million one year ago.
The bank kept its cost guidance for the year at around 5.3 billion euros.
The company announced last week that CEO Robert Swaak would step down in 2025, without announcing a candidate for his replacement.
($1 = 0.9168 euros)