Bloomberg News

AMSTERDAM — ABN Amro Holding NV, the largest Dutch banking company, said second-quarter profit fell 21% as declining stock markets reduced income from investment banking and recent cost cuts failed to boost results.

Profit excluding a one-time gain fell to $614 million, or 40 cents a share, from $777.1 million, or 52 cents a share in the same period a year earlier.

“They have to deliver on costs, and it’s clear that’s not the case at the moment,” said Andy Killean, who helps manage $2.9 billion in European equities, including ABN Amro, at Britannic Asset Management. “As an investment bank, they’re too small to compete on the global stage.”

Under pressure to reduce costs, chief executive Rijkman Groenink is reining in the company’s ambitions for its corporate and investment bank to focus instead on retail banking. That could mean an alliance with a rival like Fortis Bank Nederland, he said.

“Fortis is an interesting name if one would consider a cross-border merger,” Mr. Groenink said at a press conference. “I don’t have a short list of potential merger candidates, but if we were to draw up a list, Fortis would fit the criteria.” Fortis spokeswoman Liliane Tackaert declined to comment.

Of ABN Amro’s three main divisions, only consumer banking posted a gain, with profit rising 7.2%, to $365.2 million. Profit from private banking and asset management fell 35%, to $58 million.

Profit from its North American retail banking business rose 63%, to $232 million, as it integrated its $2.75 billion purchase of Michigan National Corp., completed in April. Net income from ABN Amro’s Dutch retail bank dropped 62%, to $36.5 million, as it wrestled with costs.

As ABN Amro shifts it focus to retail banking, analysts say the Dutch banking company will continue to come under pressure to expand into more European markets, with on option remaining on Italy’s Banca di Roma SpA, in which ABN Amro owns 10%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.