Analyst Note| Johann Scholtz, CFA |
Narrow-moat ING reported net attributable profit of EUR 1.5 billion for second-quarter 2021, a material recovery from the EUR 299 million profit it reported for second-quarter 2020. ING reported a net recovery of loan-loss provisions (credit) of EUR 91 million for the quarter after raising provisions (debit) of EUR 1.3 billion during second-quarter 2020. This was the main driver of earnings growth. Revenue declined by 3% year on year, but a 9% decline in operating expenses supported a 5% increase in preprovision profits. However, this is somewhat flattering given that the 2020 base included a EUR 310 million goodwill impairment charge. ING confirmed it will return capital of around 8% of its current market value to shareholders in fourth-quarter 2021. Even after that, we estimate it still sits on excess capital equal to around 20% of its market value. However, we did get the sense from the results call that ING is taking a more cautious approach to returning this to shareholders. We maintain our narrow moat rating and our EUR 14/share fair value estimate.