ING®

ING®

20 February 2018Reading time: 3 minutes

In October last year, we wrote about the positive outlook for ING. Credit rating agency Moody’s had increased their rating for ING Bank from A1 to Aa3, while the rating for ING Group was maintained at Baa1. On average, analysts also anticipated a further recovery of the economy within Europe. This optimism among analysts was continued at the beginning of this year. Credit rating agency S&P expects that the profitability and credit quality of the finance industry will continue to improve in 2018. The risks they encounter are the Brexit, protectionism and geopolitical risks. It remains to be seen if the anticipated economic recovery will indeed show up.

The stock price of ING was volatile in the last months and has even dropped strongly since January 22. This was partly due to the disappointing fourth quarter results, which ING published on January 31. In the fourth quarter the underlying net profit declined with 27.5% to EUR 1,001 billion on an annual basis. The final net profit rose with 35.5% to EUR 1,015 billion on an annual basis but this was due to the favourable comparison basis. In the fourth quarter of 2016, ING had to write off several special expenses. Throughout 2017 the underlying net profit of ING plummeted with 0.4% tot EUR 4,957 billion compared to 2016, while the final net profit increased with 5.5% to EUR 4,905 billion.

Especially the increasing costs of ING could be problematic. Although the bank strives to maintain the cost-benefit ratio between 50% and 52%, this ratio increased from 54.2% to 55.5% throughout 2017. The bank also had to set apart more money for bad loans. In the fourth quarter, EUR 55 million was written off because of the tax reforms in the US and Belgium. It remains to be seen to which extend this will affect the growth of ING.

To strengthen their online position, ING took a majority stake of 75% in Payvision at the end of January. This Dutch company processes online payments. With this agreement ING hopes to offer better services to their business customers. With this deal, business customers will gain the possibility to accept both online and physical payments via more than 80 payment methods in more than 150 different currencies. The agreement values Payvision at a total of EUR 360 million.

At the moment ING shares are traded around EUR 14.80 (15.02.2018). Analysts still remain predominantly positive about the stock. A majority of them maintains a buy rating but during the last weeks, some sell ratings were also given. On average analysts maintain a target price of EUR 17.00.

The future price of the share is subject to several political, industrial and sector specific as well as economic factors. Investors should consider such risk when making investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

Vontobel products on ArcelorMittal are tradable at DEGIRO, Lynx and Interactive Brokers.


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21/09/2019 03:13:34