- Results beat analyst estimates as bank's margins improve
- Dutch bank raises its forecast for regulatory costs next year
ING Groep NV, the biggest Dutch lender, reported a 14 percent rise in third-quarter profit as margins improved and the bank reduced provisions for bad loans.
Net income climbed to 1.06 billion euros ($1.16 billion) from 928 million euros a year earlier, the bank said in a statement on Wednesday. That beat the average of six analyst estimates of 975 million euros compiled by Bloomberg.
Chief Executive Officer Ralph Hamers is transforming Amsterdam-based ING, once a global financial firm, into a bank focused on Europe. Lenders’ profit margins are being squeezed as the European Central Bank holds interest rates at record lows while regulators press banks to bolster capital, stoking competition for savers’ money.
“Dutch retail finally showed signs of improvement,” Benoit Petrarque, an analyst at Kepler Cheuvreux in Amsterdam who has a hold recommendation on the shares, said in a note to clients. “Capital was slightly disappointing this quarter, but the ING Group continues to reserve all of net profit for dividends.”
ING rose as much as 4.1 percent in Amsterdam trading and was up 3.9 percent at 13.66 euros as of 1:32 p.m. The stock has gained 26 percent this year, compared with a 3 percent increase in the 46-member STOXX Europe 600 Banks Index.
Profit from banking increased to 1.08 billion euros from 1.01 billion euros a year earlier, the lender said. Net income was also boosted by so-called other income which doubled to 345 million euros. The measure includes increases in credit and debt values and revenue from financial markets.
“As we have such a strong capital position, our name is associated with so many opportunities out there” for acquisitions, ING Chief Financial Officer Patrick Flynn said in an interview on Bloomberg Television.“We don’t need any inorganic growth.”
ING expects regulatory costs to jump by more than 50 percent to 650 million euros this year as it faces higher levies and contributions to fund deposit-insurance programs. The costs may grow to about 800 million euros in 2016, the lender said in an analyst presentation. That’s about 100 million euros higher than it predicted in the previous quarter.
“We see more regulation coming at us, and more capital demands may come at us too,” ING CEO Hamers said on a conference call with journalists Wednesday. “The initiatives are the right ones. It’s just that there’s no coordination between all of the institutions.”
Provisions for bad loans fell to 261 million euros from 322 million euros. The decline was driven by a recovering Dutch economy and rising house prices, resulting in the lowest level of risk costs since 2011, the bank said.
The lender’s core capital ratio was unchanged at 12.3 percent due to an increase in risk-weighted assets and negative foreign exchange effects.
Net interest income, the revenue generated from the difference between what banks charge for loans and pay for funding, rose to 3.1 billion euros from 2.9 billion euros a year earlier.
In Russia, where U.S. and European sanctions over the Ukraine conflict are weighing on the economy, ING trimmed lending outstanding to 6.2 billion euros from 7.8 billion euros a year earlier.
(An earlier version of this story corrected the figure for other income.)