ING to take €300M hit on interest income when cheap ECB loans program ends – CFO

Dutch bank ING Groep NV will lose roughly €300 million of net interest income once the European Central Bank's third targeted longer-term refinancing operations, or TLTRO, expire later in 2022, according to CFO Tanate Phutrakul.

The lender assumes that TLTRO III, which offers banks long-term funding at attractive rates to ensure continued lending, will end this year, Phutrakul said Feb. 3 during an earnings call. Net interest income, or NII, in 2021 rose to €13.62 billion from €13.60 billion in 2020, thanks to a €483 million benefit from TLTRO.

Absent the benefit, NII would have declined to €13.13 billion amid continued pressure on liability income. The decline came despite a rebound in loan growth, with ING booking net lending growth of €30.6 billion in 2021.

Still, the bank is optimistic on its loan growth target of 3% to 4%, and the growth will be observed "across the board" in retail and wholesale banking, said Phutrakul. Net core lending in the fourth quarter of 2021 amounted to €13.4 billion.

Focus on fees

While NII weakened, ING's net commission and fee income, or NCFI, increased to €3.52 billion in 2021 from €3.01 billion in 2020, marking a 16.8% annual growth and beating the bank's own target of 5% to 10%. Daily banking and investment product fees rose by 25% and 18%, respectively, while lending fees rose by 9%.

Executives expect further growth in fees in the coming years, especially as lending fees in wholesale banking, though already strong, have not yet returned to pre-pandemic levels. "It's typically still a take-and-hold market on a number of these elements," including syndicated loans and underwriting, CEO Steven van Rijswijk said.

The elements that make up the 2021 NCFI are "structural" and are unlikely to go away soon, van Rijswijk said. Customers availing of investment product accounts have increased, particularly in Germany, and the bank has also boosted payment packages in some countries, the CEO added.

While fees on investment products rose, they could be subject to market sentiments in the future, Sonja Förster, vice president for global financial institutions at DBRS Morningstar, said in an email.

ING stocks were down more than 4% at €12.86 apiece during midday trading Feb. 3 in Amsterdam.