ING plans $1.65 billion buyback as rates fuel profit beat

BLOOMBERG 

ING Groep NV plans to buy back as much as €1.5 billion ($1.65 billion) worth of stock after higher interest rates helped lift profit past analysts’ expectations.
Shares of the lender rose, after first-quarter results showed interest income and provisions for loan losses came in better than analysts had expected. Net income more than tripled from a year earlier, to €1.59 billion, ING said in a statement. That compares with estimates for a profit of €1.18 billion.
European lenders are benefiting from being able to charge more for credit after central banks raised interest rates to combat record inflation, without yet seeing a spike in bad loans. That’s allowed well-capitalised lenders like ING to boost shareholder payouts by buying back stock despite the economic uncertainty.
“We had a very solid start to the year,” Tanate Phutrakul, the bank’s chief financial officer, said in an interview with Bloomberg TV. “The high interest environment has driven a strong revenue growth. But that’s also matched by relatively low risk costs in the quarter.”
The European Central Bank (ECB), which oversees lenders in the euro area, has approved the buyback plan, ING said. The repurchases will start on Friday and are expected to end by October 18, according to the bank.
ING rose 4% and traded 3.8% higher in Amsterdam, erasing losses this year.
BNP Paribas SA and UniCredit SpA are among European banks paying out billions of euros to shareholders by repurchasing stock. ING has made some of the fattest payouts in recent years, yet disappointed investors when it stopped short of announcing another round of stock buybacks at its previous quarterly results.
ING will cut its common equity Tier 1 ratio to about 12.5% by 2025 from 14.8% at the end of March by distributing excess capital. The payouts will be made “in roughly equal steps” and the bank will update investors when it publishes third-quarter results, Chief Executive Officer Steven van Rijswijk told analysts on a conference call.
In touting the bank’s financial strength, the CEO went as far as to borrow a term used by his counterpart at JPMorgan Chase & Co., a much larger US bank that cites its “fortress balance sheet.”
“We have the right strategic focus and fortress-like balance sheet with a strong funding and liquidity profile which provides a robust foundation to build on,” said van Rijswijk.
Profit a year earlier was hit by €834 million the bank had set aside to cover potential losses on its Russia-related exposure after that country’s invasion of Ukraine. This year, ING’s wholesale banking division freed up €118 million in such provisions to reflect lower Russia-related exposure and “improved macro-economic indicators.”