ING Groep NV announced a bigger share buyback program than analysts had expected as higher interest rates continued to boost profits in the third quarter.
The Netherlands’ largest bank said on Thursday that it plans to buy back stock worth as much as €2.5 billion ($2.65 billion), its second big stock repurchase this year. Analysts had expected ING to disclose a buyback of around €1.5 billion-€2 billion.
The European Central Bank’s efforts to tame inflation with a series of interest rate increases have boosted lending income. Banks have been able to book higher profits by charging customers more for credit while paying little interest on deposits, expanding their bandwidth to reward shareholders through buybacks and dividends.
“Our cost trajectory is beginning to come down as inflation comes off, risk costs are doing well,” Tanate Phutrakul, ING’s chief financial officer, said in an interview with Bloomberg TV. “Strong capital position allows us to do this” share buyback, he said.
Net income more than doubled to €1.98 billion compared with estimates for a profit of €1.9 billion in a survey of analysts by Bloomberg.
Fat Payouts
ING said it will have returned about €7 billion to shareholders in 2023 including dividends and the full amount of the buyback. That cements the Dutch lender’s position as offering some of the fattest payouts among European banks. Competitors including UniCredit SpA have also ramped up dividends and share buybacks to win back investors after years of meager returns.
Net interest income, the difference between what the bank earns from loans and pays for deposits, came in below analysts’ expectations despite a 24% surge to €4.03 billion from a year ago. Loan loss provisions were €183 million, ING said in a statement on Thursday, less than analysts had expected.
The ECB’s rate pause “means that our deposit margin is likely to be under some more pressure,” Phutrakul said. “Having said that, rates are expected to be higher for longer and that gives us structural support of our net income going forward.”
Earlier this year, ING said it will cut its common equity Tier 1 ratio to about 12.5% by 2025 as it distributes excess capital. The measure stood at 15.2% at the end of September. The lender completed a €1.57 billion buyback in October.
ING’s payouts to shareholders come as the Dutch lower house of parliament approved proposals to introduce a tax on share buybacks from 2025. The proposal is subject to senate approval.
--With assistance from Kriti Gupta.
(Updates with estimates for buyback starting in first paragraph, CFO in fourth)