ING has promised to increase dividend payments and share buybacks if regulators lift restrictions later this year, as the Dutch bank announced a stronger-than-expected end of 2020.
The pledge came as the lender’s annual net profits fell 48% mainly due to potential bad debt provisions, but the new allowance rate declined significantly in the fourth quarter. The bank set aside only 208 million euros in the fourth quarter, which is less than the same period in 2020, before the coronavirus pandemic struck.
Core revenue for the quarter was also above analysts’ expectations, with net interest income down less than expected and commission income up 4.9%. Shares of the company rose 4.8% at the start of trading on Friday.
Steven van Rijswijk, managing director, said the bank was “well positioned to capture growth again” when economies start to recover, but added that ING “would be aware of the uncertainty ahead and the effects of potential cliff “as government support programs arrive. an end.
Caution has prevented ING from following in the footsteps of the big American banks which freed billions of loan loss reserves. ING said improving its economic forecast would have led to a reversal of € 622 million in bad debts, but offset most of the impact with an additional “management overlay”.
The bank said it had set aside 3.3 billion euros to return to shareholders. It will initially pay a dividend of 12c per share – the maximum allowed under strict limits announced by the European Central Bank in December – but plans to pay an additional 27 cents per share if the rules are lifted after September.
ING ended 2020 with a Tier 1 common stock ratio – a key measure of balance sheet strength – of 15.5%, and the bank said it would reduce that level to around 12.5% over the course of the years. years through new returns on capital.
ING, the Netherlands’ largest lender, operates retail banks in more than a dozen countries and has long struggled against the impact of record interest rates. Net interest income continued to decline in 2020, falling 3.4% on the year.
The bank aims to offset the decline by increasing commission income from services such as its investment platform, as well as charging more for commodities that have been previously offered free and charging the wealthiest corporate clients and consumers negative interest rates.
Van Rijswijk, who took over as chief executive in June, said the bank had more leeway to increase fees than many of its competitors because it historically offered more free products.
