06 June 2018Reading time: 2 minutes

ING under pressure due to external factors The company looks back at a good first quarter but did not convinced analysts and investors. Meanwhile the political problems within Europe are still adding up, which could have consequences for the long-awaited interest rate hikes.

Early May, ING presented their first quarter results of 2018. The bank welcomed over more than 400,000 new customers during this period, which resulted in a total customer base of 37.8 million by the end of the first quarter. The revenue of ING increased with 1.4% on an annual basis to almost EUR 4.5 billion and the gross profit ended 2.1% higher at EUR 1.67 billion. This resulted in a net profit increase of 7.2% to EUR 1.2 billion on an annual basis.

The quarter results of ING meet expectations. However, analysts wonder if ING will keep their dividend promise in the coming years, because of the stricter capital buffers.

Just like other European banks, ING will have to maintain higher capital buffers in order to fence itself against any possible losses. The ministers of finance of the European Union reached an agreement about this subject by the end of May. Banks within the European Union must have a minimum ratio leverage of at least 3%. The leverage ratio is the ratio between equity in relation to the total balance sheet. Under the new legislation, eventually every European bank has to keep three Euro cents of equity against every Euro that is lent.

For large banks such as ING, another surcharge of 0,5% is applied. For Dutch banks these new rules are no problem. The Dutch government already applied a legal leverage ratio of 4%. From 2024, European banks also have to keep an extra capital buffer of 8% of their total balance sheet, in case of financial difficulties or even bankruptcy.

At the moment of writing the European banks are under pressure due to the political crisis in Italy and Spain. If the emerged political unrest will continue for a longer time, the long-awaited interest rate hike for Europe could be postponed. This could lead to a profit increase for the banks.

The stock price of the ING share is now (31.05.2018) at EUR 12.84, which is the lowest price in 12 months. 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 their investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

Vontobel products on ING are tradable at DEGIRO.

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18/02/2020 16:18:19