ABN Amro chairman apologises after executive pay reversal

The chairman of ABN Amro has apologised for the uproar over executive pay that is disrupting the Dutch bank's planned privatisation.

Gerrit Zalm said the state-owned bank had cancelled a salary increase for top executives that was met with political uproar and caused the postponement of its planned flotation.

"We sincerely regret the increase in fixed salary and the impact it has had on ABN Amro, our clients and employees and other stakeholders," said Mr Zalm. It would "take time for the public to regain confidence" in the bank.

Mr Zalm, a former Dutch finance minister and chairman of the bank's management board since 2009, said a rebound in the Dutch economy had helped ABN to achieve its highest quarterly profit in four years.

The improving performance had prompted the government to start preparations for an initial public offering to recover some of the €30bn used to bail the bank out during the financial crisis.

However, the government was forced to delay the announcement of the IPO after it emerged that ABN planned to grant a €100,000 salary increase to most of its senior executives, generating a storm of criticism from the media and politicians.

Bankers pitching to advise the Dutch government on the IPO said the affair had damaged the bank's listing prospects in the eyes of potential investors. "The government will still own a majority of ABN after the IPO and this kind of political interference in the bank sends the wrong message to investors," said one banker.

"There is certainly a loss of value in terms of the confidence of investors and in terms of delaying the IPO," said a rival Dutch banker.

The Netherlands has some of the strictest rules on banker bonuses in Europe - capping any at 20 per cent of salary - well below the level set by EU rules. Banks that have not repaid government aid, such as ABN and until recently ING, are banned from paying any bonuses to staff.

Jeroen Dijsselbloem, finance minister, said last month that calm was required before the public listing of ABN - expected to value it at about €15bn - could move ahead. He needs a majority of parliament to vote in favour of privatisation.

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When the financial crisis hit, the remaining Dutch rump of both ABN and Fortis had to be bailed out by the government.

In the three months to March, ABN made a net profit of €543m, which Mr Zalm said was its best performance for 16 quarters. It was helped by a 30 per cent drop in loan impairments, reflecting an improving Dutch economy and housing market.

Revenues rose 9 per cent year-on-year, while operating expenses were up 7 per cent. Its return on equity rose from 11 to 14 per cent, while its common equity tier one ratio, a key measure of financial strength, rose above its target to 14.2 per cent.

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