ING Beats Estimates as Lower Loan Provisions Boost Profit

ING Groep NV reported second quarter profit that beat analyst estimates as it set aside less money for soured loans.

(Bloomberg) — ING Groep NV reported second quarter profit that beat analyst estimates as it set aside less money for soured loans. 

Net income of €2.16 billion ($2.36 billion) in the second quarter compared with expectations for profit of €1.72 billion, the bank said on Thursday. ING added €98 million to its loan loss provisions in the quarter, well below the €383 million estimated in a Bloomberg survey of analysts.

Geopolitical challenges were “less pronounced than in previous quarters,” Chief Executive Officer Steven van Rijswijk said in a statement. “Risk costs were limited in the second quarter, underlining the quality of our loan book.”

The Dutch lender is one of many European banks that continue to enjoy a boost from higher interest rates as monetary authorities try to rein in inflation. ING’s net interest income, or essentially the difference between the interest it earns on loans and pays on deposits, rose nearly 20% to €4.06 billion, though that was below the €4.14 billion analysts had expected on average.

Still, the lender’s net interest margin — which compares interest income to the amount of interest-earning assets — dropped slightly, providing an early indication that the strong growth in net interest income may have run its course.

ING’s shares rose as much as 1.5% after the statement and were trading 0.8% higher at €13.16 per share as of 9:35 a.m. local time in Amsterdam.

The expansion rate of interest income is “likely to slow” as central banks hit the brakes on rate hikes, Chief Financial Officer Tanate Phutrakul said in a Bloomberg TV interview. 

ING was among the few banks to fare worse in the latest stress tests conducted by European Banking Authority. The lender is “happy with the stress test results,” Phutrakul said during the interview, adding that he doesn’t see any reason to change the firm’s 12.5% target level for its capital cushion.

ING’s operating expenses fell 4.1% to €2.63 billion while regulatory costs more than halved to €91 million. 

Rising shareholder payouts at competitors UBS Group AG and UniCredit SpA had raised pressure on ING to boost dividends and stock repurchases. ING announced a buyback of as much as €1.5 billion in May. Phutrakul said further announcement on buybacks may come during third-quarter results. 

(Updates with shares in the sixth paragrah)

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