(Bloomberg) -- ABN Amro Bank NV reported fourth-quarter profit that beat analysts’ expectations as the Dutch lender restrained costs and announced a €500-million ($536 million) share buyback.

Net income of €354 million in the three months through December compared with expectations for profit of €55.1 million, with the result aided by a combination of lower loss provisions and operating expenses, according to a statement on Wednesday.

European lenders are benefiting from being able to charge more for credit after central banks hiked interest rates to combat record inflation, without yet seeing a spike in bad loans. That’s allowed peers including UniCredit SpA and BNP Paribas SA to distribute excess capital to shareholders even as regulators call for restraint given economic uncertainty.

Read More: ABN Amro May Consider Lower Capital Threshold for Buybacks 

“Our strong capital position enables us to consider further share buybacks,” Chief Executive Officer Robert Swaak said in a statement. “We are aiming for a gradual reduction of capital over time, in constructive dialog with our regulator.”

ABN Amro shares rose after the result to the highest in almost three years, trading at €15.39 in Amsterdam.

Loan loss provisions of €32 million were better than €153.6 million estimated in a Bloomberg survey of analysts, while operating expenses of €1.34 billion were also slightly below the €1.4 billion estimated in a survey of analysts. 

Net interest income rose 17% from a year earlier to €1.56 billion.  Fee and commission income was 0.7% lower. CET1, the key measure of capital strength, was 15.2%, higher than estimates. 

Swaak has overhauled ABN Amro by pulling out of swathes of its investment banking business to focus on retail and corporate clients. ABN Amro held its first ever share buyback earlier last year, distributing €500 million to investors. 

What Bloomberg Intelligence Says:

ABN Amro’s 10% revenue-driven beat at 4Q vs. consensus — along with a 4% drop in costs and strong credit quality (3-bp charge, both also exceeding expectations) — justify its position as one of the best-performing European banks over three and six months, surpassing peers by 15-20%. A full-year 2022 return on equity of 8.7%, and scope to lift that this year, is well ahead of the 2023 consensus of 6.2%, suggesting upgrade potential. A share-buyback program doubled to €500 million is an added positive.

— Philip Richards, BI banking analyst

(Updates with shares, analyst comment)

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