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Fundamental View
AS OF 05 Feb 2024ING displays robust and consistent asset quality, good earnings, solid capital ratios and a well-balanced funding profile.
These attributes are supported by its strong franchise in retail and wholesale banking in the Benelux region, its good geographic diversification, and its focus on low risk residential mortgage lending.
At the same time, it has sizeable exposures to cyclical industry sectors in its Wholesale Banking division, although these have been reduced in recent years.
Business Description
AS OF 05 Feb 2024- ING was founded in 1991 by a merger between Nationale-Nederlanden and NMB Postbank Group. It is now the largest Dutch financial institution by total assets.
- ING Bank is focused on retail and commercial banking in the Benelux countries, with direct banking franchises in Germany, Spain, Italy, Australia, as well as Poland, Romania, Turkey and the Philippines.
- In April 2016, it completed the process of divesting all of its insurance business (in Europe, the US and Asia), under the Restructuring Plan conditions imposed by the European Commission after it received state aid in 2008-2009.
- In November 2016, ING announced that its resolution entity would be its holding company, ING Groep NV. ING Groep is now the issuing entity for all TLAC/MREL-eligible debt (AT1, Tier 2 and senior unsecured), and its sole operating entity is ING Bank N.V.
Risk & Catalysts
AS OF 05 Feb 2024ING has determinedly managed down its Russian exposure although we may expect a slower pace of reduction from now on.
ING’s CET1 ratio will trend down towards its 12.5% target in the coming years, bringing it more in line with other major peers. This is lower than its current level of above 14%, but its target implies a management buffer (including P2G) of around 150 bp over its fully-loaded CET1 requirement.
Customer deposits fund 64% of ING’s balance sheet. 85% of deposits are insured.
Commercial Real Estate exposure is €48 bn or 6% of total loans, of which US office exposure stands at €1.3 bn. The NPL ratio of the book is 2.0%.
Key Metric
AS OF 05 Feb 2024| € mn | 4Q23 | Y23 | Y22 | Y21 | Y20 |
|---|---|---|---|---|---|
| Return On Equity | 12.1% | 14.4% | 7.1% | 8.8% | 4.6% |
| Total Revenues Margin | 2.2% | 2.3% | 1.9% | 2.0% | 1.9% |
| Cost/Income | 56.9% | 51.2% | 60.3% | 60.5% | 63.2% |
| CET1 Ratio (Transitional) | 14.7% | 14.7% | 14.5% | 15.9% | 15.5% |
| CET1 Ratio (Fully-Loaded) | 14.7% | 14.7% | 14.5% | 15.9% | 15.5% |
| Leverage Ratio (Fully-Loaded) | 5.0% | 5.0% | 5.1% | 5.9% | 4.8% |
| Liquidity Coverage Ratio | 143% | 143% | 134% | 139% | 137% |
| Impaired Loans (Gross)/Total Loans | 1.8% | 1.8% | 1.8% | 1.8% | 2.1% |
CreditSight View Comment
AS OF 05 Sep 2024After divesting its insurance operations, the remaining business, ING Bank, has stayed a solid Benelux-based bank with a strong direct banking arm in several countries. Profitability growth has been supported by a gradual recovery in the Dutch economy, but since 2018 heavily affected by higher compliance costs after ING was hit by a money-laundering charge. In the current higher rate environment, ING has benefited greatly from higher deposit margins, helping to offset any slowdown in loan income. Net interest revenues are declining but fundamentally, the bank looks in good shape versus several other core European banks. We move to Outperform on its HoldCo bonds on 2 May 2024, from Market perform.
Recommendation Reviewed: September 05, 2024
Recommendation Changed: May 02, 2024
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