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ING Groep NV ADR ING

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

ING's Second-Quarter 2021 Earnings Growth Driven by Loan-Loss Provision Releases

Johann Scholtz, CFA Equity Analyst

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.

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Company Profile

Business Description

The merger of the Dutch postal bank and NN Insurance in 1991 created ING. Through a series of further acquisitions ING build up a global footprint. The 2008 financial crisis forced ING to seek government support--a precondition of which was that ING should separate its banking and insurance activities, which saw ING revert to being solely a bank. ING has market- leading banking operations in the Netherlands and Belgium, and a range of digital banks across Europe and Australia. Its global wholesale banking operation is primarily focused on lending.

Contact
Bijlmerdreef 106, Cedar
Amsterdam, 1102 CT, Netherlands
T +31 205639111
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type
Employees 55,901

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