ING Groep kickstarts $2.65 billion buyback plan amid interest rate hikes

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ING Groep kickstarts $2.65 billion buyback plan amid interest rate hikes
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ING Groep (AS: INGA ) NV, the leading bank in the Netherlands, has initiated a new stock buyback plan worth €2.5 billion ($2.65 billion). This move follows the successful completion of a €1.57 billion buyback in October. The bank's net income has risen to €1.98 billion, surpassing the anticipated profits of €1.9 billion.

The European Central Bank's (ECB) approach to combating inflation by increasing interest rates has bolstered banks' lending income. This has enabled higher credit charges and lower deposit interest rates. ING's net interest income increased by 24% year-on-year, although it did not meet expectations. The bank reported loan loss provisions at a lower-than-predicted €183 million.

Steven van Rijswijk, CEO of ING Groep, hinted at a potential halt in central bank rate hikes and a possible contraction in liability margins due to discussions on public saving rates and shifts in competitive markets.

In parallel, the Dutch lower house has green-lighted proposals for a share buyback tax set to take effect in 2025. ING plans to decrease its common equity Tier 1 ratio from 15.2% (as of end September) to approximately 12.5% by 2025 through excess capital distribution.

InvestingPro Insights

While ING Groep NV has seen success with its recent stock buyback and rising net income, InvestingPro Tips and data suggest a cautious approach. The bank has been noted for its poor earnings and cash flow, which could potentially force dividend cuts. Additionally, the company is quickly burning through cash, and its valuation implies a poor free cash flow yield. However, the bank has raised its dividend for three consecutive years, reflecting a certain level of financial stability.

InvestingPro Data provides more context. As of Q2 2023, ING's P/E ratio (adjusted) stands at 5.07, and the price to book ratio is at 0.74, indicating the bank is trading at a low earnings multiple. The bank's revenue for the last twelve months stands at $25,140.77M, though it has experienced a 15% decline in revenue growth over the same period.

It's worth mentioning that InvestingPro houses many more tips and data points that can help investors make informed decisions.

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