ING Beats 1Q17 Pre-Tax Profit View, CET1 Ratio at 14.5%

Man walking past ING building - photo - June 2017In May, the Dutch lender ING Group N.V. (NYSE: ING) reported a 9.1% decline in the fiscal 2017 first-quarter results, compared to the similar quarter last year. However, the net profit from continuing operations increased 52.2% on y-o-y basis. So, the stock of ING Group, which had appreciated by about18.5% in 2017, continues to consolidate at 17.0 levels. The bank has also performed well on several measures, as explained below. Thus, we expect the stock to begin a fresh rally soon.

The Amsterdam-based banking and financial institution reported a net interest income of €3.352 billion in 1Q 2017. This compares with a net interest income of €3.248 billion in 1Q 2016. Total underlying income in the March quarter increased 7.6% to €4.396 billion, from €4.09 billion last year.

During the recent quarter, the largest lender in the Netherlands posted underlying pre-tax profit of €1.65 billion, up 39.3% on y-o-y basis, and greater than Thomson Reuters’ estimates of €1.45 billion. In 1Q17, underlying net profit increased 39.5% to €1.18 billion, from €842 million in the same period year ago.

Net profit for the January-March quarter was €1.143 billion, compared with €1.26 billion in the year-ago corresponding quarter. During 2016, the bank realised a one-time profit of €506 million from the divestment of its stake in the former subsidiary NN Group. Net core lending increased by €5.7 billion in the first-quarter.

Underlying net profits from the wholesale banking division increased 17% y-o-y to €1.545 billion. A decrease in the loan loss provision and an increase in customer deposits aided a rise in profits. Likewise, commissions at wholesale banking division increased 12% to €682 million. Notably, ING’s cost to income ratio fell to 45.2%, from 51.3%.

Net interest margin increased a notch higher to 1.52%, from 1.51% in the prior year quarter. ING reported an impressive CET1 ratio of 14.5% at the end of first-quarter. Provisions for loan losses declined to €133 million, from €265 million a year earlier.

The bank is also implementing a cost-cutting program, which partly involves elimination of 7,000 jobs, to save as much as €900 million over the next five years. ING continues to lure customers on the strength of its mobile banking software. In this regard, the bank has plans to spend up to €800 million on digital technology. Thus, considering the increase in underlying net profit, strong CET1 ratio, and efforts taken to lure customers, we anticipate the stock to remain in a bullish orbit.

The price chart indicates the movement of the Chaikin oscillator above the zero line. Similarly, the stochastic RSI indicator is also rising. Thus, technically, there is underlying bullishness in the stock. So, it would wise to buy the stock in dips.

ING Group - Technical Analysis - 12th June 2017

Alternatively, we can go for a call option offered by a binary broker. In our case, we prefer to enter when the stock trades near $17 in the NYSE. Additionally, we would opt for a date around June 20th as the contract expiry date.