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ING's Q4 earnings beat forecast

February 5
2:06 AM 2016

The Netherland's largest bank ING Groep has reported encouraging quarterly numbers. Its fourth quarter earnings surpassed analysts' forecasts. ING's stock suffered 20 percent drop recently owing to the bank's exposure to the oil industry. However, ING also getting indirect benefit from lower oil prices. The bank was able to reduce non-performance loans marginally during the fourth quarter. 

Ralph Hamers, CEO, ING, said the bank's performance indicates strength in retail and wholesale businesses. Bank's customer lending rose Euro 3.7 million and net interest margin slightly up by 1.47 percent. However, loan provisions eased to Euro 302 million from Euro 400 million. Non-performance loans also dropped to Euro15 billion in fourth quarter from Euro15.6 billion in the third quarter.

Reuters reports that ING's revenues rose to Euro 822 million for the fourth quarter of 2015 from Euro548 million in the same period a year ago. About 97 percent of balance sheet benefiting from lower oil prices, according to Nagel. The average of forecasts made by analysts in a poll carried out by Thomson Reuters was Euro 765 million for the fourth quarter. 

Wilfried Nagel, Chief Risk Officer, ING, said that ING's exposure to the oil industry was to the tune of euro 4.8 billion ($5.3 billion). The total customer loans stand at euro 533 billion. However, the bank is also a beneficiary of lower oil prices through some indirect aspects. The indirect benefits include strengthening of repaying capacity of companies and consumers as well. 

The German market is adding fast to the ING's business. The retail operations in Germany rose to Euro 288 million from Euro 198 million. The revenues profit before tax grew encouragingly on volume growth and higher margins in the German market. For the entire 2015 year, the loan provisions were Euros 1.35 billion down from 2014's Euro 1.59 billion, as reported by CNBC.

ING hints at cautious approach in dividend policy in the wake of its need of new capital. ING has decided to propose a final dividend of Euro 0.41 a share. ING's stock rose 6.5 percent in Amsterdam market though the dividend proposal was less than expectations. 

The Dutch banking regulator is imposing new norms on the banking sector particularly major lenders. And accordingly, ING needs new capital to build up system risk buffer. This decision has been taken by the Dutch banking regulator as a potential safeguard against future taxpayer bailouts. ING should maintain a common equity Tier-I ratio of minimum 12.5 percent by 2019, as reported by The Wall Street Journal (WSJ).

Jan Willem Knoll, an analysts at ABN Amro, said: "A strong operational performance in Q4, a solid dividend pay-out and outlook and a reassuring message on oil and gas provides the necessary ingredients for a strong bounce today."

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