EUR 850.00 For Business Accounts Only

Morningstar | ING's Underlying Business Performs Well but Money Laundering Related One-Offs Hurt the Bottom Line. See Updated Analyst Note from 08 Feb 2019

ING reported net profit of EUR 4.7 billion, down 4% from last year, impacted by the EUR 775 million penalty paid to Dutch authorities related to money laundering cases. Underlying net results, however, which do not include these one-off charges, give a better picture of ING's business development through the year. Underlying results increased 9% to EUR 5.4 billion as income generation outpaced higher expenses. Loan loss provisions of EUR 656 million were again low in a historical context, while t Save he NPL ratio improved to 1.5% from 1.8% at the beginning of the year. Being well below through-the-cycle averages at this point, we expect provisions to pick up gradually. Indeed, we now forecast a more pronounced recovery towards through-the-cycle provisioning averages. We also forecast an efficiency ratio at the top of ING's range of 50%-52% by 2022, which management set out to achieve two years earlier than we expect. As a result, we are lowering our fair value estimate to EUR 15/$17 from EUR 16.2/$18.5 per share. We maintain our no-moat and stable trend rating.

On a segment level, higher retail banking results across the regions were nearly completely offset by a weaker performance in wholesale banking. In particular, wholesale banking in the Netherlands and in the rest of the world, that is outside ING's core markets, experienced a slowdown. Additionally, management voiced lower growth expectations for wholesale lending volumes going forward.

Return on equity came in at 11.2%, roughly in line with our average return on equity through our explicit forecast period of about 11%. ING's capital position is healthy. It's common equity Tier 1 ratio stands at 14.5% versus a requirement of 11.8%.