2015 Outlook and Risks

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1 2015 Outlook and Risks Renzo Hoefnagels Head of Intermodal Finance Intermodal Europe 2014 Rotterdam 11 November 2014

2 Snapshot of ABN AMRO today: NW Europe as its home market supplemented with a firm international footprint Assets under management: EUR 168bn A leading bank with the majority of revenues generated by interest income and fees & commissions Execution excellence with strong focus on improving customer service and lowering cost base Core tier 1 ratio 2) : 14.4% FTE: 22,289 Long term credit ratings: S&P A Moody s A2 Fitch A+ Clearly defined business model Strong position in the Netherlands International growth areas in Private Banking, asset-based financing (Leasing & Factoring), ECT and ABN AMRO Clearing 1) Moderate risk profile Enhanced risk management & control framework Diversified loan book Limited investment banking activities and only client-related trading Retail Banking Private Banking Commercial Banking Merchant Banking Top position in the Netherlands Serves Dutch mass retail and mass affluent clients with investible assets up to EUR 1m Best online banking service in NL (9.2 out of 10) 3) FTE: 6,227 No. 1 in the Netherlands No. 3 in the Eurozone 4) Serves private clients with assets >EUR 1m, institutions and charities FTE: 3,523 Leading position in the Netherlands Serves Business Clients (SMEs) and Corporate Clients (up to EUR 500m in revenues) FTE: 3,048 Strong domestic position Leading global positions in ECT and Clearing Serves Large Corporates & Merchant Banking and Markets clients FTE: 2,204 1) ECT: Energy, Commodities & Transportation; Clearing refers to the clearing activities of the bank and its subsidiaries; TOPS: Technology, Operations and Property Services; PR&I: People Regulations & Identity 2) Core tier 1 ratio is defined as tier 1 capital excluding all hybrid capital instruments 3) Dutch Consumers Association, WUA Web Performance 4) Based on Scorpio Private Banking Benchmark report 2013

3 C&MB: Local strategy combined with international growth Orange strategy International strategy International Clients services are available to Corporate Banking clients and include: Debt Solutions: origination and sales of syndicated bank loans, acquisition & leveraged finance, project finance, structured debt, export finance, institutional solutions, debt capital markets products Capital Structuring & Advisory Sector Origination Cash management and working capital services M&A advice and equity capital market solutions Equity Participations Dutch Large Corporates Financial Institutions Energy, Commodities & Transportation Clients Diamond & Jewellery Clients

4 ABN AMRO has an international footprint ABN AMRO operates in 30 countries and in all major financial centres worldwide

5 Energy, Commodities and Transportation Clients: a core sector for ABN AMRO Energy Clients Commodities Clients Transportation Clients Principal Finance Marine Shipping Finance Firm of the Financier of the Year Year Oil and Gas Floating production systems Drilling Oilfield Services Infrastructure Agri: grains, cocoa, coffee, sugar, cotton Metals: ores and base metals, steel Energy: crude oil, oil products, gas Deep sea shipping industry Offshore Supply Vessels Intermodal / Containers Aviation Direct ECT investment activities Portfolio of assets in projects related to and companies active in the ECT value chain Best Investment Bank in the Netherlands 2014 Selection of awards and rankings Marine Finance Firm of the Year 2014 Greece Shipping Bank of the Year 2013 (Lloyd s List) Bond Deal of the Year, Americas (Project Finance International 2012) and Deals of the Year Latin American Upstream Oil & Gas (Project Finance, 2012) for SBM Aleia Azul SARL Top 3 global position in Floating Production Storage and Offloading systems Top 3 position worldwide as commodity bank Best Commodity Trade Finance Bank in Asia-Pacific 2012, 2013 & 2014 (Trade Finance Magazine) Silver soft commodities bank 2014 (Trade & Forfaiting Review, 2nd year in a row) Top 2 position in Commodities Metals, Dealogic 1H2013 Top 5 position in shipping syndicated loan markets Third in Best Trade Bank in W. Europe 2014 TFR Magazine ECT Merchant Banking products On the back of its lending relationships, ABN AMRO provides an integrated product suite to its clients: Equity capital markets Equity s trading team Brokerage advisory Equity research M&A advisory Debt (capital) markets Capital structuring advisory Structured/export finance Trading and hedging

6 Global Economic Outlook 6

7 US: buoyant balance sheets US assets minus liabilities % GDP, 100 = long-term average Companies Households Source: Thomson Reuters Datastream 7

8 US: labour market recovery going strong index % PMI Manuf. Employment (lhs) Unemployment rate (rhs) Source: Thomson Reuters Datastream 8

9 US demand is gaining speed US ISM manufacturing new orders Source: Thomson Reuters Datastream 9

10 Renewed worries about the eurozone That sinking feeling (again) Source: The Economist 10

11 Fall in the euro should support exports EUR/USD level Past euro strength reduced growth by almost 1% GDP! Source: Thomson Reuters Datastream, ABN AMRO Group Economics 11

12 ECB s assessment of bank was rigorous Extent of stress in adverse scenario ECB 2014 EBA 2011 Change in CT1 ratio Cumulative change in GDP Source: ECB, ABN AMRO Group Economics 12

13 Much of the capital gap has already been closed Capital gap, EUR bn 12 Total capital gap was from EUR 24.6 bn but has since shrunk to EUR 9.5 bn IT GR CY PT IE AT BE SL Initial After capital raising Source: ECB, ABN AMRO Group Economics 13

14 Eurozone: demand for bank loans recovering Survey of banks, net change vs last quarter Cons. credit and other lending (lhs) Overall corporate (lhs) House purchase (lhs) GDP (rhs, % yoy) Source: Thomson Reuters Datastream, ECB Bank Lending Survey 14

15 Banks are easing credit standards ECB s Bank Lending Survey, net change in credit standards tighter Loans to entreprises Other consumer lending Household mortgage loans Source: Thomson Reuters Datastream 15

16 ECB has been too conservative Total central bank assets, USD bn Fed ECB BoJ Source: Thomson Reuters Datastream 16

17 Government bonds the market with scale Outstanding debt securities in the eurozone, EUR bn Gov Covered Corp ABS Euro agencies Source: AFME, ABN AMRO Group Economics 17

18 Introducing Dr No Such a policy is for me close to state financing via the printing press" Jens Weidmann, President of Germany s Bundesbank, August 2012 Source: Deutsche Bunbdesbank 18

19 China s economy slowing, but gradually 25 % yoy Retail sales Industrial production Source: Thomson Reuters Datastream 19

20 Rebalancing of China s economy 20

21 China: more targeted stimulus but no bazooka Index % yoy easier tighter Monetary Conditions Index (lhs) GDP (rhs) Source: Bloomberg, ABN AMRO Group Economics 21

22 Advanced economy demand will boost EM % yoy Emerging market exports (lhs) OECD domestic demand (rhs) Source: Thomson Reuters Datastream, IMF 22

23 Asian economies will benefit Export exposure to US and eurozone, % GDP HK VI SG MA TH KO CH PH IN IND US Eurozone Source: Thomson Reuters Datastream, ABN AMRO Group Economics 23

24 World trade has a high beta to world GDP % yoy ratio of % yoy growth rates World GDP (lhs) World trade/world GDP (rhs) Source: Thomson Reuters Datastream, ABN AMRO Group Economics 24

25 China s debt 25

26 Risks from excessive debt in China Total debt to GDP, % Consumer Central govt. Local govt. Companies Source: CICC, PBoC, ABN AMRO Group Economics

27 The Fed s exit 27

28 Markets are anticipating only modest rate hikes Expectation for fed funds rate from futures and FOMC, % What happens when the gap closes? Market FOMC Source: Federal Reserve, Bloomberg, ABN AMRO Group Economics 28

29 US economic growth during tightening cycles Quarters after rate hike expectations built %qoq saar %yoy Source: Thomson Reuters Datastream 29

30 Growth assets & sentiment tend to do well Reactions of markets after rate hike expectations built during past cycles, % dollar performance to be stronger this time WTI S&P Copper Gold USD Index CRB MSCI EM VIX 90 days 180 days Source: ABN AMRO GE 30

31 Bonds sell off, corporates the least Reactions of markets after rate hike expectations built, bp days 180 days 10-yr yield 10-2 yr Corporate AAA yield AAA spread Source: ABN AMRO GE 31

32 The wave of global liquidity: its not over yet!! Mario and Haruhiko taking over from Janet. Source: ABN AMRO GE 32

33 European deflation, political risks 33

34 Inflation close to the bottom % yoy Total Core rate ECB target 34 Source: Thomson Reuters Datastream

35 Unemployment and wage growth flatten out % yoy % labour costs (lhs) unemployment rate (rhs) Source: Thomson Reuters Datastream 35

36 Import prices will likely pick up % yoy % yoy import prices (lhs) global prices/eer (rhs) Source: Thomson Reuters Datastream 36

37 European political risks 37

38 Our views in numbers Economic outlook Global GDP US Eurozone Emerging Asia China World trade Rates and FX Spot 9M 2015 US 3-M Libor rate US 10Y Treasury EUR/USD Source: ABN AMRO Group Economics

39 Important information Please go to for all our economics and markets research The views and opinions expressed in this document may be subject to change at any given time. Individuals are advised to seek professional guidance prior to making any investments. This material is provided to you for information purposes only and should not be construed as an advice nor as an invitation or offer to buy or sell securities or other financial instruments. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading the presentation, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether this product considering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO Bank N.V. has taken all reasonable care to ensure that the information contained in this document is correct but does not accept liability for any misprints. ABN AMRO Bank N.V. reserves the right to make amendments to this material. 39