ING Groep: An Ambitious ROE Target Of Over 14% For 2027

2025-02-18 19:28:44 ET

Summary

• If we exclude the volatile Other income category, ING Groep relies on net interest income for 79% of its revenues - a key concern during ECB monetary policy normalization.
• Lower NII and a normalizing cost of risk resulted in ING reporting a return on equity of 13% in 2024, below the exceptional 14.8% result in 2023.
• The bank's ROE is forecast at above 12% in 2025, impacted by higher costs and the ongoing effects of ECB rate cuts on NII.
• Looking ahead to 2027, ING expects ROE to improve to over 14%, driven by business growth and higher net commission income, as well as a smaller capital buffer.
• While not prohibitively expensive relative to broad European or U.S. financial ETFs, I think ING is still a Hold given the near-term impact of Russia's exit and stiff competition for commission income.

Introduction

Over the past year, ING Groep ( ING ) has marginally outperformed the iShares MSCI Europe Financials ETF ( EUFN ), delivering a total return of ~41%:

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