ABN Amro takes $285m loss on single client felled by coronavirus-linked market volatility

The Dutch lender said the US client was responsible for a US$250 million pretax hit to its clearing business.
The Dutch lender said the US client was responsible for a US$250 million pretax hit to its clearing business.PHOTO: REUTERS

AMSTERDAM (BLOOMBERG) - ABN Amro Bank became the first European lender hurt by a major trading loss stemming from the coronavirus crisis, booking a US$200 million (S$285 million) net loss after a single US client of the Dutch lender's clearing division could not meet a margin call on a loan.

The Ducth lender said the US client was responsible for a US$250 million pretax hit to its clearing business after the client failed to meet risk and margin requirements amid market volatility caused by the pandemic, it said in a statement on Thursday (March 26).

Trading has been one of the rare bright spots for European banks since the crisis exploded globally. An increase in market turmoil has led to record volumes for investment banks in the first quarter, though most will still report year-on-year profit declines for the period due to other effects of the pandemic, Citigroup said this week.

"I expect to see more large one-off hits, even though investment banking overall is likely to post good results in the first quarter due to more trading activity," Jason Kalamboussis, an analyst at KBC Group, said by email. KBC has a sell rating on ABN Amro.

ABN Amro Clearing plays a key role in the world's trading markets, functioning as a global link between exchanges, counterparties and investors. The loss announced Thursday was the biggest one-time hit in the history of the clearing business at the lender, spokesman Arien Bikker said.

ABN Amro declined as much as 6.9 per cent in Amsterdam trading and was down 5.1 per cent as of 11:22 a.m. That exceeds the 3.6 per cent fall in the STOXX Europe Banks Index.

Volatile markets especially boosted trading in rates, equities and currencies Citigroup said. ABN Amro said the client who caused the losses had a strategy involving trading US options and futures and failed to meet the risk and margin requirements "following extreme stress and dislocations in US markets." ABN Amro Clearing closed out the positions of the client.

The first months of this year were going to be tough for the Dutch Bank even without the one-off charge. Fourth-quarter earnings significantly missed estimates amid impairments at its corporate and investment bank and its new chief executive officer, Robert Swaak, will have to deal with uncertain liabilities including investigations in the Netherlands and Germany.