INGVF - With Rate Cycle Benefits In The Rearview Mirror Further Progress At ING Groep Will Be Harder

2024-07-15 17:00:00 ET

Summary

• ING Groep's restructuring efforts paid off in 2023, as the bank leveraged higher rates to generate better core earnings and outperform its sector.
• Second quarter results should be positive, with potential upside in revenue from both net interest income and core fees, but opex is a key watch item.
• Management has set ambitious growth targets; loans will have to grow around 4%, and fees will have to grow around 7%-8% to meet targets, and that could prove too ambitious.
• ING is in a position to return substantial amounts of capital to shareholders, but I could see a limited amount of capital going toward M&A to boost fee-generating businesses.
• I still believe ING Groep is a top-tier bank, but I struggle to drive a truly comparing fair value unless the bank can meaningfully outperform my long-term 3% core growth expectations.

For quite a while I felt that Netherlands bank ING Groep N.V. ( ING ) wasn't getting its due for the substantial restructuring and repositioning efforts made by management. Higher rates allowed the company to deliver on that underappreciated potential in 2023, and the shares are up more than 30% since my last update , with a real return closer to 50% due to dividends, outperforming the broader European bank space....

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