ING Groep’s Ascension: A Financial Phoenix Rising from the Ashes

The relentless energy coursing through the stock market manifested in 169 companies hitting fresh 52-week peaks on U.S. exchanges this past Monday. Amidst this swarm, ING Groep (ING), a titan in Dutch banking and wealth management, soared to its 35th 52-week high over the last year, positioning it at a commendable 63rd on the leaderboard of all U.S. stock exchanges.

Having surged by an impressive 38% in the last year, ING’s stock has now pierced the $20 mark, a milestone last achieved in 2008, just before the financial world teetered on the brink of collapse. Could it reach that pinnacle again by the closing bell of 2024?

Strength in Motion

Before delving into ING’s fiscal intricacies and operational maneuvers, it’s crucial to acknowledge the propulsive force at its disposal, primed to propel it beyond the $20 threshold.

Highlighted by Investor’s Business Daily on March 14th, ING’s relative strength (RS) rating has escalated from 68 to 72, underscoring the resurgence in its momentum. History whispers that equities unveiling substantial gains typically sport an RS Rating of 80 or higher at the onset of their meteoric ascent.

With an RS rating of 72, ING has outshone 72% of its peers in the past year. For it to scale to $20 or beyond, its RS rating must ascend to the 80s or 90s. And while it brushed $20 briefly in 2018, the memories of its glory days, trading above $30 from 2005 to 2008 and cresting at a record $47.18 in April 2007, still linger.

Robust Business Foundations in 2023

February heralded the arrival of ING’s 2023 full-year financial performance, a narrative brimming with robust success stories.

A topline figure of 22.58 billion euros ($24.51 billion) crowned its revenue tale, a staggering 21.6% surge from the previous year. Meanwhile, its net income, resting at 7.29 billion euros ($791.2 million), catapulted by 98.3% year-over-year. Various metrics witnessed enhancements, including a 22-basis-point surge in net interest margin, a 72.1% slash in net additions to loan loss provisions, a 910-basis-point drop in cost-to-income ratio to 51.2%, and a 14.7% common equity Tier 1 ratio, 20 basis points north of 2022.

Although its loan portfolio shrunk by 3.4% to 786.65 billion euros ($853.77 billion), prospects of a rebound in loan demand in 2024 loom on the horizon. By December 2023, loan loss provisions fell to 5.62 billion euros ($6.10 billion), a reduction from 2022 figures, signaling a strong asset quality and contributing to a robust net profit of €7.3 billion and a full-year RoE of 14.8%, as articulated by CEO Steven van Rijswijk.

Eyes trained to the future, 2024 might set the stage for ING to burgeon once more.

Expanding Customer Universe

Closing the curtains on 2023, ING counted 15.3 million patrons in its corner, a tally elevated by 750,000 from the previous year. Among the active clientele, mobile-only users comprised 62%, a rise from the previous year’s 58%. The epicenter of its customer surge felt most acutely in Germany, Spain, and its homeland, the Netherlands.

While the sun may peek over ING’s 2023 achievements, the horizon darkens with impending interest rate dips anticipated in the latter part of 2024, foreshadowing a downturn in profits and perhaps signifying the culmination of the momentum witnessed in its yearend 2023 results.

CEO’s projection of a steadfast return on equity ranging between 12.0-12.5% over the long haul remains a beacon of hope, albeit tempered by a cooling enthusiasm in the banking sector as interest rates wane, setting the stage for a possible slowdown in the coming months.

While analysts tiptoe cautiously around ING’s stock, a sizeable chunk, 14 out of 23, extend a Buy designation, projecting a target price of $16.96, 8% loftier than its present perch. This anticipated retraction hints at potential avenues to blunt possible risks, with options offering a safety net to cushion any market tremors.

ADR earnings per share forecasts for 2024 stand at $1.94 and $2.18 in 2025, with multiples of 8.2x for 2024 EPS and 7.3x for 2025, offering a view into ING’s undervalued status. Options trading on Tuesday morning showcased the allure of an Oct. 18 $15 call at a $1.30 ask price, marking an 8.7% down payment for a hopeful surge. Yet, like every venture, this carries a hint of calculated risk, standing poised to either magnify or muffle the crescendo of ING’s upward trajectory.

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On the publication date, Will Ashworth did not hold any positions (either directly or indirectly) in the securities outlined in this piece. The information and data presented herein are purely for informational purposes. For additional insights, please refer to the Barchart Disclosure Policy.

The views and expressions conveyed in this narrative belong to the author and do not necessarily mirror those of Nasdaq, Inc.