Adjusted operating income increased by 2% as ABN AMRO recorded a 1,561 million credit market related write-down in its Global Markets business due to the significant downturn in credit markets.
ABN AMRO’s valuation methodology was aligned to that of Royal Bank of Scotland Group’s (RBS) in the fourth quarter of 2007. Excluding the write-down, adjusted operating income was up 12%.
Operating expenses increased by 15% to 13,846 million largely due to non-recurring expenses. Adjusted operating expenses increased by 7% primarily as a result of the expansion of the distribution infrastructure in Latin America and Asia, and the acquisition of Prime Bank in Pakistan and Taitung Business Bank in Taiwan.
Loan impairments were 293 million higher at 1,704 million, primarily as a result of strong loan growth in Brazil.
Taxes benefited from significant tax-exempt gains on disposals and tax credits in some countries, as well as substantial releases of deferred tax liabilities resulting from the finalisation of prior-year tax returns and conclusions on a number of additional items.
Reported net profit from continuing activities was 1,798 million and adjusted net profit from continuing activities was 1,806 million. Excluding the effect of the credit market related write-down, adjusted net profit from continuing operations was 2,945 million, up 18%.
Discontinued operations include the net of tax results from LaSalle, ABN AMRO Mortgage Group (AAMG), Antonveneta, BU Asset Management and Bouwfonds. The operating performances of LaSalle, BU Asset Management, and AAMG were in line with expectations. The operating performance of Antonveneta continued to disappoint.
Net profit attributable to shareholders in 2007 amounted to 9,848 million and included a gain on the sale of LaSalle of 7,162 million. Adjusted net profit attributable to shareholders was 2,665 million.
The original earnings per share (EPS) target for 2007 of 2.30 included the full-year profit of LaSalle. Following the sale of LaSalle, this target was revised for a nine months contribution to 2.16. The adjusted EPS was 1.44, primarily due to the impact of the credit market related write-down and the continued disappointing performance of Antonveneta.
The core tier 1 ratio was 10.59% and the tier 1 ratio was 12.42%, well above the year-end targets of 6% and 8%, partly due to the gain on sale of LaSalle.
Due to the change of ownership during 2007, ABN AMRO proposes not to pay a final dividend. The interim dividend was 0.58 which was paid in the third quarter of 2007.