ING must be more economical with its investments and bank reserves

ING must be more economical with its investments and bank reserves

08 December 2020Reading time: 3 minutes

On November 5, ING presented its third quarter results for 2020. These were significantly less than in the same period last year. For example, annual turnover was 7.3 percent lower at EUR 4.29 billion and profit fell 41.4 percent to EUR 788 million.

In the past period, ING had to cope with several serious setbacks. In September, it was revealed that ING's Polish subsidiary would be involved in dubious transactions from Russia to Western Europe. At the time of writing, it is not yet known whether and, if so, what financial consequences the problems at the Polish subsidiary will have for ING.

Payvision seems to be a bad buy

The second major setback is the takeover of payment platform Payvision. ING paid around EUR 350 million for the fintech company in 2018, making this one of the largest acquisitions ever for ING. With this acquisition, ING wanted to achieve a stronger market position within the fast-growing fintech industry.

An investigation by the Financieele Dagblad showed that the acquisition of Payvision appears to be a bad buy. It turned out that the payment platform served a special clientele group, consisting of parties active within the porn and gambling industry. There also seems to have been money laundering practices. In November, ING sold the remaining Payvision customers back to the previous owner for the symbolic amount of 1 euro and the bank was left with a loss of EUR 188 million.

ING puts ambitions aside

The aforementioned setbacks, in combination with the uncertainty surrounding the corona crisis, means that ING has made choices for both its international and IT related ambitions. For example, the bank recently announced that it will close all its offices in South America and Asia, meaning thousands of jobs will disappear by the end of 2021. This mainly concerns the Wholesale Banking activities. In addition, ING announced that it would freeze all salaries until 2024.

ING is also pulling the plug on an ambitious IT project involving a write-off of EUR 140 million. As an extension of this, ING said goodbye to innovation officer Benoit Legrand who, amongst others, set up a large fintech fund worth EUR 300 million for ING. Legrand will be succeeded by Annerie Vreugdenhil at the end of this year.

ECB and DNB uncertain about the future for banks

At this moment it is difficult to predict what consequences the current corona crisis will have for banks. The ECB (European Central Bank) is quite pessimistic and fears that banks will face significant losses as soon as government support to companies in various countries stops.

Meanwhile, the DNB (De Nederlandsche Bank) states that the number of problem loans will be higher than during the previous financial crisis. Approximately 4 percent of the EUR 1,900 billion in outstanding loans by Dutch financial institutions is problematic, which amounts to EUR 76 billion. Half of them already have payment problems and the DNB expects these to arise in the other half any time soon.

Stock price development

Investors responded positively to ING's plans to cut the number of offices and jobs abroad. After the announcement of this news on November 5, the stock price rose sharply and is now (27-11-2020) at EUR 8.41, which is still 19.9 percent lower compared to a year ago.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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23/10/2021 19:04:12