ING plans $1.47bn buyback as one-off charges hit profit

ING Groep NV said it will buy back as much as €1.5 billion ($1.47 billion) of shares to reward investors, after a mixed third quarter in which profit missed estimates following charges at its Polish business and in accounting for hedges.

Net income of the bank reached €979 million in the three months through September compared with analysts’ expectations for profit of €1.15 billion. The share buyback program was larger than some analysts had expected.

While ING is one of the few European banks to miss profit estimates this quarter, it joined peers in posting better-than-expected net interest income as lenders enjoy a sweet spot where they can charge more for credit while funding costs and defaults remain low. That’s stoked confidence that they can afford to distribute excess capital even as regulators call for restraint given the economic uncertainty.

“The most important thing that gives us confidence is the fact that our loan book is very resilient and that non-performing loans are relatively low,” Chief Financial Officer Tanate Phutrakul said in an interview with Bloomberg TV. “That gives us confidence to continue our share buyback program.”

The bank said it has received approval from the ECB for its buyback. Giulia Aurora Miotto, a Morgan Stanley analyst, said before the announcement any buyback above €500 million should be taken positively and that she expected an €800 million program.

ING’s results were marred by a €343 million hit related to Polish mortgages after that country’s government allowed borrowers suspend payments on their loans. The bank also took a €288 million hit in Belgium to unwind a hedge on deposits.

ING set aside €403 million to cover loan defaults in the quarter, more than the €354 million analysts had expected. That included €205 million for “increased macroeconomic uncertainties and overlays for risks from secondary impacts.”

—Bloomberg