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Why ING is turning back to insurance

Loan margin pressures at the Dutch bank may be structural.


ING’s announcement in June of a new insurance distribution agreement with France’s Axa comes after a tough period for the Dutch lender.

Its share price performance has been worse than any other large-cap bank in Europe, notes Citi research. In June it slipped below consensus 2018 book value, according to Berenberg. ING underperformed the European Stoxx Banks 600 index by 8% in the 12 months to mid-June. Other Benelux banks, on the other hand, continued to outperform. ABN Amro beat the index by 10% and KBC by 8%.

One problem is that fading expectations for imminently higher ECB rates have hurt an expected recovery in interest margins. ING’s bigger size makes it better known internationally and so more likely to attract US speculation on a rate-led European bank recovery – particularly given that, according to Credit Suisse, it relies on net interest income for more than 70% of revenues, versus a European average of about 55%.

Switch to online

It seems there are downsides to an international strategy of providing online-only accounts that are cheap to run and fee-free.

Cost savings have not outweighed investor concern about interest revenues, as ING is in the middle of an expensive core-banking overhaul – switching to one system for Benelux and one for its digital businesses elsewhere in western Europe.

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