ABMRF - ING Groep: Options Can Boost Your Returns As The ECB Is Set To Cut Rates
2024-01-24 03:00:56 ET
Summary
- ING's net interest income was boosted by ECB rate hikes, with a confluence of factors likely making 2023 a peak for the bank's profitability.
- The ECB is set to start cutting rates, impacting ROE by between 0.9% and 2.7% depending on the magnitude of the cuts.
- With expected rate cuts, ING's net interest income will decrease, but the 12% ROE target seems sustainable. Selling covered calls can be a way to generate extra income.
- The main risk to the covered call strategy is a recession accompanied, with 0% interest rates, severely impacting ING's net interest income.
Introduction
I previously covered ING Groep ( ING ) back in January 2023 in a comparison with the largest domestic peer ABN AMRO ( AAVMY ) where I argued ING looked expensive compared to ABN AMRO. While ING stock moved sideways as expected, it still managed to outperform ABN AMRO over the past year, in contrast to my forecast:
ING vs ABN AMRO stock over the past year (Seeking Alpha)
