ING Signals Share Buybacks After Beating Estimates on Profit
(Bloomberg) -- ING Groep NV posted fourth-quarter profit that topped analysts’ estimates and joined peers across Europe in signaling more payouts to shareholders once the European Central Bank removes restrictions.
The Dutch lender reported net income for the final three months of last year of 727 million euros ($881 million), compared with estimates of 499 million euros. The bank set aside much less than expected to cover the cost of loans going bad amid the pandemic and also saw a strengthening of its key capital buffers.
The results are a bright spot for Chief Executive Officer Steven Van Rijswijk, who took over last year and must now steer ING through one of Europe’s deepest recessions in decades. He’s joining a growing number of bank executives in the region who are trying to bolster their depressed share prices by promising capital returns that the ECB froze earlier in the pandemic.
The result “stands for resilience to recover during 2021,” Chief Financial Officer Tanate Phutrakul said in an interview on Bloomberg TV. “We believe that we’re back on track after a challenging 2020.”
ING rose 4.4% at 9:04 a.m. in Amsterdam. The stock is still down 24% over the past 12 months.
ING will pay a dividend of 12 cents per share at the end of the month or beginning of March, according to the CFO. The Dutch lender plans to pay another 27 cents per share once the ECB cap expires in September and will return further funds to shareholders via cash payouts or share buybacks. ING has a total of 3.27 billion euros set aside to return to shareholders.
Regulators have called on banks to conserve capital to absorb losses and keep lending in the pandemic. ING already cut its loan loss provisions in the third quarter after factoring in rosier economic forecasts. Since then, the government in its home country has taken drastic measures to stop the spread of the virus, including a nighttime curfew.
ING added provisions of 208 million euros in the fourth quarter, compared with estimates of 721 million euros. The bank also generated more net interest income than expected, even as it signaled lower demand for loans. A key measure of capital strength, known as CET1 ratio, rose to 15.5% at the end of last year, from 14.6% a year earlier.
European banks like ING that rely on lending income rather than trading businesses are under pressure as the extended period of ultra-low interest rates combines with credit losses amid the pandemic. Yet many banks have predicted loan-loss provisions are forecast to decline as the arrival of vaccines offers hope that the pandemic can be tamed this year.
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