EUR 850.00 For Business Accounts Only

Morningstar | ING Reports Mixed 2Q Results as Lower Loan-Loss Provisions Help the Bottom Line

We maintain our EUR 16.20 per share fair value estimate and no-moat rating for ING after it reported mixed second-quarter results. Net results grew 4.2% to EUR 1,443 million thanks to lower losses from the "insurance other" segment, while underlying results came in 2.3% higher than last year, helped by lower loan-loss provision additions in the quarter. Higher up on the income statement, performance was less inspiring. Total underlying income declined 1.1% relative to last year, as higher net interest income and net fee and commission income could not offset lower other income contributions. Additionally, underlying operating costs came in higher at 1.6% year over year, resulting in a 3.8% lower gross result before provisions. The cost/income ratio of 52.3% in the quarter was slightly higher than last year, but the four-quarter rolling average, which smooths out the seasonally high regulatory costs in the first quarter, sits right on the 56% full-year target. Retail and wholesale banking showed some good asset growth in the second quarter as net core lending increased EUR 14.2 billion to EUR 592.4 billion, while ING recorded a net deposit inflow of EUR 5.8 billion. The underlying interest margin remained flat at 1.51%, however, reflecting weaker interest-related results in financial markets, bank treasury, and the corporate line. The common equity Tier 1 ratio stands at 14% for the first half of 2018, while return on equity of 11% lies slightly ahead of our 9% expectation for the year.