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Investing.com -- ING Groep (AS:INGA) shares rose more than 4% on Thursday after the Dutch banking group reported a 6% profit beat for the third quarter, supported by higher fee income and a return to loan growth.
The Amsterdam-based lender said profit before tax came in 6% above consensus as total income rose 4% ahead of estimates, with commercial net interest income up 1% quarter over quarter and in line with expectations.
Core lending expanded by €14.2 billion across both mortgage and wholesale banking segments, while deposits declined as a result of outflows from promotional campaigns.
Fees were 6% above forecasts, prompting ING to upgrade its full-year guidance and now expect fee growth of more than 10%, compared with a consensus forecast of 10%.
Other income also exceeded projections, boosted by a €44 million gain from the sale of an associate in Belgium. Costs were 2% higher than expected, largely due to €73 million in incidental restructuring expenses.
The bank said it remains on track to keep full-year costs at the lower end of its €12.5 billion to €12.7 billion guidance range, including all one-off items recorded in the first nine months of the year.
By division, profit before tax in retail banking in the Netherlands was in line with forecasts, 4% higher in Germany, 2% ahead in other retail markets, and 9% higher in wholesale banking. Belgium was the only weak spot, with profit before tax 7% below expectations.
ING announced €1.6 billion in excess capital distribution, including a €1.1 billion share buyback and a €500 million special cash dividend. The bank raised its Common Equity Tier 1 (CET1) capital target to 13%, which was in line with projections.
Risk costs were reported at 19 basis points, consistent with guidance. Stage 3 risk costs totaled €361 million, tied mainly to newly defaulted loans in wholesale banking and collective provisioning in consumer and business lending. Stage 1 and 2 risk costs amounted to a net release of €35 million, reflecting portfolio adjustments.
The brokerage said ING’s deposit margin outlook remains steady at 110 basis points for the coming years, even as deposits fell slightly from the previous quarter.
“While bears will point to deposits down QoQ as a negative, we think this was already well flagged with the pre-close and instead we think it’s important to highlight that there is a small mix shift towards higher current accounts as part of the mix, which is positive,” Morgan Stanley said.