ING’s First-Quarter Profit Rises 43%

Updated on

ING Groep NV, the biggest Dutch financial-services company, posted a 43 percent increase in profit at its banking operation in the first quarter, helped by a boost in fees from new lending.

Profit from its banking activities increased to 1.19 billion euros ($1.3 billion) from 830 million euros in the year-earlier period, the Amsterdam-based company said in a statement Thursday. That compares with the 1.09 billion-euro estimate of seven analysts surveyed by Bloomberg.

ING was forced to sell its insurance operations and focus on banking after receiving a government rescue during the financial crisis. Lenders’ margins are being squeezed as the European Central Bank holds interest rates at record lows while regulators press banks to bolster deposits, stoking competition among banks for savers’ money.

“ING’s strong lending growth was most positive,” said Cor Kluis, an analyst at Rabobank, who has a buy recommendation on the stock. “Net interest income is expected to rise further next quarter” as it cuts rates for savers.

The stock, which has gained 26 percent this year, climbed

0.6 percent to 13.80 euros as of 12:50 p.m. in Amsterdam. That compares with the 0.8 percent decline in the 47-member STOXX Europe 600 Banks index.

Regulatory Costs

ING will resume dividends this year for the first time since 2008 after repaying its bailout. The company spun off its U.S. insurance unit, Voya Financial Inc., in May 2013 and sold shares in NN Group NV, its fund management and insurance operation, the following year. In February, ING cut its holding in NN Group to 55 percent and sold its remaining Voya stake the following month.

ING Group reported net income of 1.8 billion euros in the first quarter, up from a loss of 1.92 billion euros a year earlier, when it booked losses on asset sales.

The company said it expects regulatory costs to jump almost 60 percent to 650 million euros this year as it faces higher bank levies and contributions to fund deposit insurance programs.

“It’s anywhere between 15 percent and higher of our profit, next to the normal taxes and all other duties to be paid,” Chief Executive Officer Ralph Hamers told reporters on a conference call. “It’s certainly sizable.”

Net interest income, the revenue generated from the difference between what banks charge for loans and pay for funding, rose to 3.2 billion euros from 3 billion euros a year earlier.

The company’s core capital ratio under the full application of the strictest Basel guidelines rose to 11.6 percent from 11.4 percent at the end of the year.

In Russia, where U.S. and European sanctions over the Ukraine conflict are weighing on the economy, ING trimmed lending outstanding to 6.9 billion euros from 7 billion euros at the end of the year.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE