ING Profit Rises as Loan-Loss Provisions Drop More Than Half

(Bloomberg) -- Lower provisions helped ING Groep NV boost its bottom line a tad in the third quarter.

Net income rose 2 percent from a year earlier to 1.38 billion euros ($1.61 billion), the biggest Dutch lender said in a statement on Thursday. Analysts were expecting 1.33 billion euros, according to eight estimates compiled by Bloomberg. Revenue was little changed at 4.41 billion euros, while provisions for loan losses fell by more than half to 124 million euros.

Pretax profit came in at 2 billion euros, a year-on-year increase of 6.2 percent, while the highest estimate collected by Bloomberg anticipated 1.93 billion euros.

What “causes the beat is in fact the risk costs, they’re extremely low,” Chief Financial Officer Koos Timmermans said on Bloomberg TV after the earnings release. He also highlighted growth in client numbers and lending as factors contributing to the bank’s performance in the three months through September.

Like many European banks, ING is slashing costs to ease pressure on revenue from record-low interest rates. The lender is now one year into a plan to achieve 900 million euros in annual savings by the end of 2021, partly by eliminating as many as 7,000 jobs. Chief Executive Officer Ralph Hamers has also pledged to invest 800 million euros into digital technology over the same period.

“We had a bit of delay” in our restructuring plan because the bank had to obtain regulatory approvals first, Timmermans said on Bloomberg TV. “But there is ample time to catch up” over the next four years.

Buffers Stable

ING said its retail base grew by 400,000 to 36.9 million customers. Core lending increased by a net 8 billion euros, while customer deposits increased by 4.2 billion euros.

The lender is expanding abroad to help counter growing competition at home from insurance companies and other non-bank mortgage lenders. ING gets two-thirds of its revenue from consumer banking, with branch networks mainly in the Netherlands and Belgium and mobile-banking services in other countries including Germany. It recently began offering online lending to small and mid-sized enterprises in Italy and France in collaboration with five technology firms.

Net interest income, revenue generated from the gap between interest earned on loans and the amount paid to depositors, rose 3.1 percent to 3.49 billion euros from the third quarter of 2016. Underlying operating expenses rose 3 percent to 2.29 billion euros, mainly as a result of higher regulatory costs in Germany.

The fully loaded common equity Tier 1 ratio, a key measure of the bank’s capacity to absorb losses, remained 14.5 percent, the same as at the end of June.

The stock rose 0.6 percent to 16.03 euros at 9:04 a.m. in Amsterdam, giving the bank a market value of 63 billion euros. ING has gained about 20 percent this year, outstripping the Stoxx 600 Banks Index, which was up 9.6 percent.

©2017 Bloomberg L.P.