ING Rises as Lending Income Holds Steady, Beating Estimates

  • Underlying performance seen as solid on margins, volume growth
  • Regulatory charges jumped on levies, deposit insurance

ING Group 1Q Net Income Drops, CFO Remains Growth Focused

ING Groep NV, the biggest Dutch lender, rose the most in two months in Amsterdam trading as lending income and margins held steady in the first quarter, a period of volatile global financial markets and low interest rates.

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 ($3.5 billion) in the three months through March from 3 billion euros a year earlier, ING said on Tuesday. That beat estimates of some analysts including Kepler Cheuvreux SA. Net income dropped 29 percent to 1.26 billion euros on higher regulatory costs and a loss at its financial-markets division.

The bank’s performance excluding the regulatory charges and the trading unit was “solid on the back of strong volume growth, higher margins and lower impairments,” Matthias de Wit, an analyst at KBC Securities in Brussels, said in a note to clients.

Chief Executive Officer Ralph Hamers has transformed ING into a bank focused on Europe and is seeking to expand lending to consumers and companies outside its home market of the Netherlands as record-low interest rates and regulatory demands to bolster capital threaten to erode profit.

ING rose as much as 5.5 percent and was 2.9 percent higher at 10.49 euros as of 1:11 p.m., the fifth-best performer in the Stoxx Europe 600 Banks price index.

Interest Margin

Net interest margin rose by 4 basis points to 1.51 percent from the end of the fourth quarter.

First-quarter regulatory costs jumped to 496 million euros from 174 million euros a year earlier on higher levies and contributions to fund deposit-insurance programs. The bank expects costs of 960 million euros for the full year, up from 620 million euros in 2015. The financial markets division, which provides products such as risk management and structural finance, fell to a loss of 2 million euros, from a profit of 149 million euros a year earlier, mainly due to lower income from rates and equities trading, ING said.

“I wish we could say we were at peak regulatory costs,” Chief Financial Officer Patrick Flynn said in an interview with Manus Cranny on Bloomberg Television. “I hope that any additional regulatory costs comes from us growing the business.”

ING sold its remaining stake in NN Group NV in April at a loss as the Dutch bank completed its drawn-out exit from the insurance business. The deal is expected to result in a net loss of 66 million euros in the second quarter.

“ING presented a decent set of figures where especially the good net interest income continues to show up well,” Cor Kluis, an analyst at Rabobank with a buy rating on the stock, said by e-mail . “The only setback is the again increased banking levies.”

Provisions for bad loans fell to 265 million euros from 432 million euros a year earlier. The decline was driven by a recovering Dutch economy and rising house prices, the bank said.

In Russia, where the slump in oil prices and sanctions over the Ukraine conflict are weighing on the economy, ING trimmed lending outstanding to 6 billion euros from 6.9 billion euros a year earlier, the bank said.

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