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On Friday, CFRA analyst Firdaus Ibrahim downgraded ING Groep NV (NYSE:ING) shares from Hold to Sell, adjusting the price target to $15.00, a decrease from the previous $15.00. The new target is set based on a projected price-to-book (P/B) ratio of 0.88x for the year 2025, which aligns closely with the peer average P/B of 0.92x. Currently trading at a P/E ratio of 8.07x and a P/B of 0.98x, InvestingPro analysis suggests the stock is undervalued relative to its Fair Value. Alongside the downgrade, CFRA revised its earnings per share (EPS) estimate for ING for 2025 to €1.90, down from €2.05, and introduced a 2026 EPS forecast of €2.10.
ING’s fourth-quarter results for 2024 demonstrated a challenging period for the bank, with a significant 38.6% year-over-year decline in net results to €1.15 billion, which was consistent with S&P Capital IQ consensus estimates of €1.18 billion. The decrease in profitability was attributed to higher operating expenses and a marked increase in loan loss provisions.
The financial institution’s outlook for 2025 suggests that revenue is expected to remain mostly unchanged, a projection that CFRA finds unimpressive. Additionally, an anticipated rise in operating costs indicates that ING’s cost-to-income ratio is unlikely to see improvement. However, the bank maintains a significant 3.94% dividend yield and has raised its dividend for four consecutive years, according to InvestingPro data.
CFRA’s analysis also points to potential challenges for ING due to expected lower interest rates in Europe. The bank’s significant reliance on net interest income as a revenue source could result in a more pronounced impact from the rate changes compared to its competitors. This concern has contributed to the analyst’s decision to downgrade ING’s stock rating to Sell.
In other recent news, ING Group has been projected to experience substantial growth in the coming years. UBS has maintained a positive outlook on ING, revising its price target to EUR21.00 from the previous EUR20.60 and continuing to recommend a Buy rating for the company. The firm notes that ING’s performance has been largely influenced by capital distributions and fluctuating interest rates, with expectations for capital returns to persist at the current rate for about another 18 months.
The focus for ING is anticipated to shift towards underlying business growth, moving beyond what has been termed ’the rates trade.’ UBS analysts project that ING will achieve a compound annual growth rate (CAGR) of around 10% in earnings per share (EPS) through to the conclusion of its business plan in 2027, significantly outpacing the sector’s average of approximately 4%. This growth is expected to be supported by continued capital distributions, selective balance sheet expansion, a focus on non-interest income, and capital optimization in the Wholesale Bank.
Despite acknowledging near-term headwinds due to decreasing policy rates, UBS analysts remain confident that these challenges do not detract from the favorable investment case for ING. The company’s strategic initiatives are expected to propel it forward, despite the potential obstacles presented by the policy rate environment. These are the recent developments for ING Group.
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