ING Hints at Higher Dividend After Building Up Capital Buffers

(Bloomberg) -- ING Groep NV hinted it may raise its dividend after adding 400,000 new customers and recovering from a dip in fee income last quarter.

The bank will “see if we can pay something extra” to shareholders, Chief Financial Officer Koos Timmermans said in an interview on Bloomberg TV, though added that the bank has “to be careful,” because of future higher capital requirements. The bank posted second quarter results that mostly beat estimates, with higher loan growth and fee income.

ING, which gets about two-thirds of its revenue from consumer banking, is on a push to win customers through further digitalization, while also seeking to expand in so-called challenger markets such as Germany and Australia and “growth markets” such as Poland and Turkey. The bank plans to roll out its Yolt money management app to France and Italy, having hit 400,000 customers in the U.K. and is benefiting from rising credit demand in multiple markets.

“We’ve seen growth across the board -- Germany, Australia, Poland, Spain, and overall those clients did more business with us,” Timmermans said. “So we have 14 billion-worth more of loans, at approximately the same margin.”

Timmermans said that the bank will already have accrued enough cash to match last year’s dividend by the end of the third quarter. Amsterdam rival ABN Amro Group NV has also held out the prospect of greater payouts after building up its capital buffers.

Fee Income

ING also enjoyed a strong quarter for fee and commission income, which had declined because of the lender’s Belgian unit. Net commission income recovered to 717 million euros ($835 million) in the three months through June, beating estimates. Underlying net income rose to 1.44 billion euros beating estimates of 1.33 billion euros.

The bank also kept better control of its costs than expected by analysts, despite increased investment in digitization, and costs related to a new partnership in insurance with AXA SA and the integration of Belgium-based Record Bank into ING Belgium. One negative was the decline in the bank’s CET1 ratio -- a key measure of financial strength - which dropped to 14.3 percent.

In a morning note, Mainfirst analyst Matthew Clark highlighted what he said was “very strong” organic loan growth which, at an annualized rate of 10 percent in the quarter, was more than twice the bank’s target of 4 percent. From an earnings per share perspective, ING remains "inexpensive for a high-quality growth franchise," Clark said.

Other highlights of the second-quarter report included:
  • Underlying cost-income ratio rose to 52.3 percent vs 53.8 estimate
  • CET1 ratio 14.1 percent vs 14.3 percent at end-March
  • Additions to loan loss provisions 115 million euros
  • Underlying return on equity 10.4 percent on a rolling four-quarter basis

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