ING Groep Earnings Call Flags Growth, Higher Payouts

Ing Groep N.V. ((ING)) has held its Q4 earnings call. Read on for the main highlights of the call.

ING Groep’s latest earnings call struck an upbeat tone, with management emphasizing a third consecutive year of record income, stronger‑than‑expected profitability and upgraded guidance through 2027. Executives highlighted powerful engines of growth in customer acquisition, lending and fee income, as well as generous capital returns that have supported a roughly 60% rise in the share price. At the same time, they openly acknowledged rising risk costs, pressure on capital ratios, and uncertainty around margins and non‑NII income, positioning these as manageable headwinds rather than structural threats to the bank’s momentum.

Customer and Deposit Growth Underpins Franchise Strength

ING continued to grow its retail franchise at scale, adding more than 350,000 mobile primary customers in the fourth quarter alone and over one million across the full year. Core deposits rose by EUR 38.1 billion, up 5.5% year‑on‑year, with Q4 retail deposits contributing EUR 11.3 billion, supported by targeted campaigns and seasonal inflows. Management framed this as evidence of the bank’s digital appeal and brand strength, which should support future cross‑selling of investment and insurance products.

Loan Book Expansion Accelerates

Lending growth was a key highlight, with absolute loan growth doubling versus the prior year and total loans increasing 8.3% since the start of the year. In Q4, net core lending rose by EUR 20.4 billion, evenly split between Retail (+EUR 10.1 billion) and Wholesale (+EUR 10.3 billion). Residential mortgages and a rebound in wholesale lending demand were the main drivers, showing that ING is capturing both household and corporate credit demand across its markets.

Net Interest Income Remains a Profit Engine

Commercial net interest income (NII) remained very strong at EUR 15.3 billion for 2025, with Q4 commercial NII growing almost 5% year‑on‑year and increasing by more than EUR 100 million versus the previous quarter. Management underscored that lending margins are broadly stable, with the main risk concentrated in liability margins as deposit competition evolves. For now, NII remains the core earnings engine and a key contributor to the bank’s robust profitability.

Fee Income Momentum and Diversification

Fee income emerged as a fast‑growing and increasingly diversified revenue stream. Fees rose 15% for the full year and now represent about 20% of total income, with Q4 fees up 22% year‑on‑year (17% excluding a EUR 66 million one‑off in Germany). Growth was propelled by investment products—where customers grew 9%, assets under management rose 16% and trades increased 22%—alongside higher insurance and daily banking fees. Management positioned fee growth as a strategic priority to reduce dependence on interest income.

Record Total Income and Beating Profitability Targets

ING delivered record total income for the third consecutive year, with Q4 income up 7% versus the prior year. Full‑year net profit topped EUR 6.3 billion, and return on equity reached 13.2%, exceeding the bank’s start‑of‑year guidance. Executives stressed that this was achieved despite higher risk costs and cost inflation, underlining the strength of the underlying business model and operating leverage.

Capital Generation and Generous Shareholder Returns

Strong organic capital generation contributed almost 2 percentage points to the CET1 ratio over the year, which in turn financed substantial shareholder payouts. ING distributed 50% of its EUR 6.3 billion profit via regular cash dividends and announced additional distributions totaling EUR 3.6 billion, including an ongoing share buyback. Management also pointed to a roughly 60% increase in the 2025 share price as market validation of the bank’s strategy and capital allocation discipline.

Upgraded Outlook Through 2027

Management upgraded and clarified its medium‑term outlook, giving investors more visibility on growth and returns. For 2026, ING targets total income of around EUR 24 billion, fee income growth of 5–10%, and an ROE of about 14% with ROTE above 14%. For 2027, the bank aims for total income above EUR 25 billion, fee income above EUR 5 billion, operating expenses (excluding incidentals) around EUR 13 billion, and ROE of roughly 15% with ROTE above 15%. These targets reflect confidence that the current growth and efficiency trends are sustainable.

Operational Efficiency and Technology as Cost Levers

Efficiency improvements featured prominently on the call. ING reported that its ratio of FTEs to customer balances has improved by more than 7% since 2023, signaling better productivity. Increased straight‑through processing and wider use of chatbots and generative AI are reducing manual interventions, boosting customer satisfaction—Retail NPS ranks #1 in five of ten markets, and Wholesale NPS stands at 77—and are expected to drive further cost savings. Management argued that technology investments are now translating into tangible operational leverage.

Higher Risk Costs and Stage 3 Provisions

The main blemish in the quarter was higher risk costs and Stage 3 provisioning. Total risk costs reached EUR 365 million in Q4, around 20 basis points of average customer lending. Net additions to Stage 3 provisions were EUR 389 million, mainly from individual provisions related to several funds in the Wholesale Bank. This led to a slight increase in the Stage 3 ratio and triggered questions on concentration risk. Management framed these charges as specific and manageable rather than a sign of broad asset quality deterioration.

CET1 Ratio Pressure and Rising RWAs

Despite strong capital generation, the CET1 ratio declined quarter‑on‑quarter, primarily due to a EUR 1.6 billion distribution and a roughly EUR 4.5 billion increase in risk‑weighted assets. Credit RWAs rose by about EUR 1.5 billion (excluding FX), operational RWAs by EUR 2.2 billion and market RWAs by EUR 0.5 billion. This RWA expansion diluted capital ratios and sparked investor questions on the trajectory of regulatory capital needs. ING reiterated its commitment to maintaining a solid CET1 buffer while continuing capital returns.

Loan Growth Outpacing Deposits Tightens Funding Balance

Lending growth of about 8.3% since the start of the year outpaced the 5.5% increase in core deposits, raising questions around balance sheet mix and future funding strategy. While recent deposit campaigns have delivered solid inflows, management acknowledged the need to keep actively managing liquidity and funding costs as loan demand remains robust. The bank signaled it will balance growth with prudent funding and liquidity management to avoid undue pressure on margins or capital.

Liability Margin and Deposit Competition Uncertainty

Analysts repeatedly pressed management on liability margins, reflecting concerns about rising deposit competition in a changing interest rate environment. ING guided its liability margin to the lower end of 100–110 basis points for 2026 and refrained from giving a firm view for 2027. Executives pointed to uncertainties around pass‑through dynamics and customer behavior but emphasized that lending margins are stable and that fee growth and cost control should help offset any pressure on deposit spreads.

Treasury and Other Income Headwinds

Non‑NII income faced headwinds in the quarter. Treasury income was affected by weaker results from foreign currency hedging, while ‘other income’ saw seasonal softness, even though client‑driven financial markets activity remained healthy. These factors reduced the contribution from non‑interest lines and underscored why management’s medium‑term guidance is cautious on “other income,” focusing instead on NII and fees as the main growth pillars.

Incidental and Inflation‑Driven Cost Pressures

Cost dynamics were mixed, with inflation and incidentals offset by restructuring savings. ING expects inflation to push up staff expenses in 2026. Q4 included one‑off items and restructuring provisions, though management anticipates roughly EUR 100 million of annualized savings once these measures are fully implemented. Investors questioned the level and recurrence of such incidentals, but management argued they are part of a broader effort to reshape the cost base and support long‑term efficiency.

High Cost Growth in Germany Raises Questions

Germany stood out as a cost hot spot, with retail expenses rising around 11% year‑on‑year in 2025 due to client acquisition initiatives and investments in new products. While management sees this spending as strategic, aimed at capturing long‑term growth and strengthening market positioning, analysts probed whether it is partly defensive in response to competitive pressure and what it implies for near‑term margins in the German business.

Wholesale Fees and Seasonal Volatility

Wholesale banking fees declined sequentially in Q4, although they remained strong versus the prior year. Management attributed the quarter‑on‑quarter drop largely to seasonality and the inherently lumpy nature of working‑capital‑driven lending, which often carries lower margins. The quarter’s wholesale provisioning, particularly for certain funds, also highlighted some exposure concentrations. Executives stressed, however, that the underlying wholesale franchise remains solid and fee‑generative over the cycle.

Guidance Signals Confident Growth and Returns

Looking ahead, ING’s guidance provided a clear and upgraded roadmap through 2027. For 2026, the bank expects total income around EUR 24 billion, assuming customer balance growth of about 5% per year, fee growth of 5–10%, a liability margin at the lower end of 100–110 basis points, broadly stable lending margins and “other income” of roughly EUR 2.8 billion excluding incidentals. Operating costs are targeted at EUR 12.6–12.8 billion excluding incidentals (or EUR 11.6–11.8 billion excluding both incidentals and regulatory items), with a CET1 target of around 13% and ROE at 14% and ROTE above 14%. For 2027, management raised targets to total income above EUR 25 billion, fees above EUR 5 billion, operating expenses excluding incidentals around EUR 13 billion, and ROE and ROTE of about 15% and above 15%, respectively. The bank plans to maintain its 50% payout ratio while using synthetic risk transfers to add 15–20 basis points to CET1 in 2026 and continuing with additional distributions and share buybacks already announced.

In closing, ING’s earnings call painted a picture of a bank delivering strong growth, rising profitability and substantial shareholder returns, while candidly confronting higher risk costs, capital pressure and margin uncertainties. Rapid customer and lending expansion, surging fee income and improving efficiency underpin upgraded guidance out to 2027. For investors, the story is one of a well‑capitalized bank leaning into growth and technology, balancing attractive payouts with prudent risk management in a still‑uncertain macro and competitive environment.