ING Group NV, the largest Dutch bank, said it would repay the last of its state aid ahead of schedule this week, signalling an extra dividend for shareholders as lending growth drove a jump in pre-tax earnings.
In its first full quarter as a pure banking business, ING’s underlying earnings before tax from its banking operations rose more than a third to €1.5 billion, beating analysts’ average forecasts of €1.4 billion.
The bank, once the globe-spanning flagship of Dutch financial capitalism and still Europe’s eighth largest by stock market value, was forced to retrench in the years after the financial crisis, taking €10 billion in state aid in 2008 and selling many of its international businesses.
It sold a stake in its insurance arm NN Group in July to comply with the terms of the rescue package.
Announcing the early repayment of the final €1 billion tranche of aid, chief executive Ralph Hamer said the bank was seeing signs of a recovery in its home market and of structural recoveries in parts of Europe.
We were able to extend more credit into the economies in which we are active
“We had two milestones to make this year before we would consider an early payment: a successful IPO of the insurance company and the... successful outcome of the asset quality review and stress tests, and we saw that just recently,” he told a conference call for journalists.
ING comfortably passed the European Central Bank review last month, with an end-2013 tier 1 common capital rate of 10.1 per cent, well above the required minimum of 8 per cent.
“We were able to extend more credit into the economies in which we are active,” Hamer said, adding that there were signs of a domestically-driven recovery in the Netherlands even as the eurozone’s main growth engine Germany faltered.
ING’s interest income rose 7.5 per cent year on year while the underlying interest margin improved to 1.53 per cent from 1.44 per cent. Loan loss provisions were cut by 41.7 per cent as lending risks fell in commercial banking and general lending.
ING said its global retail banking business also picked up, with its German operation posting record underlying third quarter earnings before tax of €213 million.But group net profit, which rose sharply to €928 million due to one-off items, just missed consensus forecasts. The debt repayment, six months early, means the first dividend of next year can now go to shareholders rather than the Dutch state.