Q3: NII miss, some uncertainties surrounding its trajectory

ING reported a low-quality beat, overdelivering on other income, fees and cost of risk but missing on NII and costs. The NII trajectory will remain at the core of the share price sentiment going forward with the announcement of a new buyback while the management pledge to return to its 12.5% CET1 ratio target provided some limited positivity.

An excellent Q2 built on continued deposit margin momentum

ING posted an excellent Q2 built again on continued momentum in deposit margins, good deposit volume growth and a still-low pass-through rate. Opex was also a positive development thanks to lower regulatory costs and incidental items, while asset quality remained untouched. The management maintained all of its 2023 and 2025 financial targets. The excess capital situation continued to build up with an update due in Q3-23.

Q1: Deposit margin momentum continues, asset quality improves

ING published excellent results with strong top line and bottom-line beats. The top line was again driven by rising deposit margins while the bottom line was further helped by contained costs inflation and a reduction in the cost of risk. The management announced a new €1.5bn buyback program which should add to the bank’s 50% dividend payout ratio and support the bank’s valuation.

ING Groep N.V.: Initiation of Coverage – Business Strategy & Key Drivers, Financial Forecasts, Comparables Valuation, ESG & Other Risks (03/23)

This is our first report on Benelux banking behemoth, ING Groep N.V. The bank achieved satisfactory results in the fourth quarter despite the difficult climate and managed an all-around beat. ING's financial results demonstrate that growing NII momentum is a tailwind for the bank, while fee income has shown to be quite durable. Despite the indexation-related inflationary pressure in some areas and ongoing investments to implement its plan, costs remained controlled. Moreover, mortgage lending to

A correct Q4 but a beat built on lower LLPs

ING realised a correct quarter, marked by a strong increase in underlying NII (excluding net negative TLTRO impact) but a beat on total income which was supported by less sustainable other income. Costs were a bad surprise due to inflation but loan losses saw a welcomed improvement from last quarter, resulting in a PBT beat. 2025 total income guidance was upgraded but 2023 C/I ratio was disappointing. No new buy-back was announced for now but we expect more in 2023.

Q3: Poland hit, reinforcing NII tailwinds and continued buybacks

ING published a mixed Q3, impacted by two large incidentals due to the loan moratorium in Poland and the unwinding of a hedge in Belgium. Excluding the loan moratorium impact, NII would have shown good progress thanks to higher margins. The management is confident that the NII tailwinds should be even stronger than disclosed during the investor day in June. Combined with continued distribution through a third buyback programme, this will likely lead to an upgrade in our estimates.

A mixed Q2; long-term outlook unchanged but the short term may be more uncertain

ING exhibited a mixed Q2 with positive surprises on both revenue and cost of risk, but a miss on costs, mostly on incidentals and regulatory costs. The capital position remained solid and the distribution of excess capital continued. 2025 targets set during the investor day (June) were maintained while the short-term outlook may be uncertain due to the current macro-environment.

Investor Day 2022: long-term ambitions confirmed

ING held its Investor Day this Monday, the first one since the pandemic began. The financial targets unveiled were, for the most part, a confirmation of the previous long-term financial ambitions: 5-10% annual fee income growth, a 50-52% C/I ratio and a 12.5% CET1 ratio by 2025. Still, the group upgraded its profitability target, aiming for 12% RoE (vs 10-12%), made possible in part through higher NII, as indicated by the new 3% total income CAGR between 2022 and 2025.

Mixed Q1 on Russia provisions, targets maintained

ING realised a mixed Q1 as earnings were hit by provisions made in relation to its Russian exposure, to which net exposure declined to €4.6bn. Total income also saw a slight decline as the group’s NII suffered from a lower TLTRO impact as well as an impairment on its stake in its Thai subsidiary. The distribution policy in response to the excess capital situation looks undisturbed by the group’s heightened cost of risk, as an additional €1.25bn will be distributed through dividends and buy-backs

A positive fee surprise darkened by costs higher than expected

ING Group presented its Q4 21 earnings today. The results showed considerable growth in revenue thanks to a jump in net commission income. NII contributed only a bit despite growing volumes, with a one-off reclassification deteriorating the net interest margin. Expenses displayed slow growth but were still higher than expected and LLPs increased unexpectedly due to scenario updates. The excess capital situation strengthened as capitalisation improved. Long-term financial targets were maintained.

A glimmer of hope from net interest income

ING Group released yesterday its numbers for Q3 21. Net income was above expectations driven by a strong beat at the top line. The latter was driven by all businesses (including net interest income). The CET1 ratio at 15.8% was well above requirements (in line with the consensus) as management does not expect a material increase in RWA (Basel IV implementation) from here. We will revise upwards our EPS for ING Group but keep our Sell/Reduce recommendation (we prefer ABN Amro).

Numbers in line, capital distribution is starting

ING Group released this morning its numbers for Q2 21. The numbers were mostly in line with expectations, except for loan losses which were well below expectations. This was, however, expected given the recent publications from other global banks. Our expectations being below consensus’ forecasts, we will revise upwards our EPSs for 2021 and 2022. The CET1 ratio is at 15.7% and 15.4% under Basel IV. Management has a 12.5% CET1 ratio target and will pay therefore some dividends/SBB at the end of

Short-term disappointment, comforting in the mid to long-term

ING Group released this morning its numbers for Q1 21. Net profit was 31% above expectations, driven by lower loan losses (expected) and higher net interest income (only driven by a higher contribution from TLTRO). The underlying numbers were rather below expectations even if the investment case remains intact with a high amount of capital to be paid back to shareholders in the next quarters as well as a decreasing cost/income ratio.

All-you-can-pay dividends!

ING Group released this morning its numbers for Q4 20. These were better across-the-board. Net interest income (under pressure at ABN Amro or KBC) was above expectations, while the generous capital distribution policy (2019, 2020 and interim 2021 dividends expected to be paid at the end of 2021) supported by a high level of capital should support the share. A normalisation of the cost of risk in 2021 at 25bp (vs consensus at 40bp) should be supportive as well.

UK REITs: Building back better

UK commercial property has been a cornerstone asset for many income-seeking investors (both retail and institutional) in recent decades, particularly since the global financial crisis of 2007/8 and the resulting ultra-low interest rate environment. However, since rates began to rise in 2022 to tackle surging inflation, meaningful returns have once more become available on lower-risk assets such as cash and government bonds, which has led to a retrenchment from alternative income assets such as p

Upcoming Webinar - Schroder Real Estate Investment Trust

Attend our SREI Investor Webinar, 15th May 9-10am. Nick Montgomery, Head of UK Real Estate Investment, will provide an intro to the Trust and answer live questions.

LIBERUM: Amedeo Air Four Plus: Emirates aircraft upgrade plans imply the retention of almost all A380s

Hardman & Co Research on NB Private Equity Partners: Wider operating company EBITDA margins in 2023

We reviewed NBPE’s business model in our initiation, Co-investments generating superior performance. We noted the high-secular-growth and downside-resilient investee companies, the value added by GPs, the good co-investing cashflow and return profile and the value added by the NB. The 2023 results confirmed all these trends. The key numbers were i) NAV p/sh $28.07 (£22.02), ii) private portfolio +5.3% in 2023 on a constant currency basis, iii) EV/LTM EBITDA 14.9x, and iv) debt/EBITDA 5.3x. The p

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Gresham House Energy Storage Fund - Responding to challenging times

Gresham House Energy Storage Fund (GRID) is the largest UK fund investing in utility-scale battery energy storage systems (BESS). A recent sharp decline in gas prices, a ‘disappointing’ start to the Energy System Operator’s (ESO’s) new energy trading platform and systemic delays connecting completed projects to the national grid have raised concerns about the revenue generating capacity of the BESS sector. This has placed significant downward pressure on the share prices of GRID and others in th

Chesnara (CSN): Good 2023 results set platform for future progress

Chesnara has announced its 2023 results. Positive returns from equity markets and gains from acquisitions in the first half were somewhat offset by adverse changes to operating assumptions in the second. Economic Value profit of £59.1m marked a good turnaround from a loss of £85.1m in 2022. Economic Value of £524.7m was 2% higher than a year ago, reflecting the dividend payment and forex effects. The final dividend of 15.61p brought the full year up to 23.97p, a 3% increase over the previous yea

NextEnergy Solar Fund – High- and growing-income opportunity?

NextEnergy Solar Fund (NESF) is almost 10 years old. Since launch, it has built a £1.2bn, 933MW portfolio of 100 operating solar assets, powering the equivalent of over 330,000 homes, declared dividends totalling £333m, and avoided the emission of about 2.2 Mt CO2e. NESF is on track to pay 8.35p in dividends, with forecast dividend cover of about 1.3x. Share price weakness that has afflicted the whole sector means that dividend translates to a yield of 11.1%, one of the highest in its sector, a

NextEnergy Solar Fund - Second Refinancing Delivered

NextEnergy Solar Fund has extended its £70m revolving credit facility by a year to June 2025 and improved the margin by 10bps. Along with the refinancing of £135m announced in April the move shows a willingness amongst lenders to support solar energy and storage on attractive terms in our view.

PCI Pal - +25% FY23 revenue growth, FY24 growth of +28% reiterated

PCI Pal’s FY23 results show revenue growth of +25% to £14.9m, gross profit growth of +31% to £13.1m at a margin of 88%, and an outlook confirming robust momentum in H1 24. The FY23 results are as expected following the August trading update, and FY23 Total Annual Contract Value (TACV) is +23% yoy to £16.4m, with ARR +14% yoy to £12.6m due to £3.1m of contracts in deployment. We expect ARR will increase +35% and +31% to £17.0m and £22.2m in FY24 and FY25, as management lands and expands following

Postcard from Vodafone headquarters

Morning Note – 3 May 2024

Reality check

As we emerged from the pandemic, it seemed the world was gripped by a greater awareness of the fragility of our planet, and our place within it. Mirroring this, investors and fund managers started to explore what this increased focus on sustainability meant for investing. For many, the instinctive response was to follow their heart and ditch ‘dirty’ stocks from portfolios, such as oil companies. Hot on the heels of the likes of Shell and BP cutting their dividends in 2020 – a result of Covid-19

Hardman & Co Healthcare Index: 2023 – Capital demands dent performance

The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. For the second year running, apart from global economic influences affecting world markets, performance in 2023 was dented by the capital-intensive nature of the sector. The HHI fell 3.7%, to 483.8, underperforming the main London markets – FTSE 100 (+3.8%) and FTSE All-Share (3.8%) but outperforming the FTSE AIM All-Share Index (

Morning Note – 2 April 2024