Published Mon, 20 May 2019 08:30:56 -0400 on Seeking Alpha
ABN has struggled this year
The share price has failed to participate in the broader bank sector rally we've seen recently, being -5% YTD and -20% on a 1-year view. This is a conspicuously worse performance than northern European commercial banking peers like BNP Paribas (OTCQX: OTCQX:BNPQF, OTCQX: OTCQX:BNPQY), which is +15% YTD or ING (NYSE: ING), +7%.
Source: FT markets data
The underperformance can be traced back to the full-year 2018 results in February and to the surprise announcement that the dividend was to being held flat at the 2017 level (€1.45), against consensus expectations for 6% growth to (€1.54). My fear is we could be in for a repeat in 2019 given expectations are currently for the dividend to grow by 10% this year to €1.60, an assumption that looks increasingly optimistic in view of declining earnings and a multitude of uncertainties surrounding ABN's capital position.
In many respects the company faces a similar dilemma to Intesa Sanpaolo (OTCPK: OTCPK: IITOF) (see my recent article here) in that the investment case has been hijacked by a single issue (the dividend) around which there is a growing uncertainty. Both are amongst the highest dividend payers in Europe, yielding over 8%. But any disappointments on this totemic issue are tending to have a disproportionate impact on their share prices.
Like Intesa Sanpaolo many ABN investors are having to revise their original thesis that the company is a cash-cow thanks to its extremely... Read more
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