ING Navigates Mixed Q1 with Strategic Buyback and Fee Growth

Amsterdam-based ING Groep NV (ING.AS) has reported a first-quarter 2025 net profit of €1.455 billion, narrowly surpassing analyst expectations of €1.34 billion. The results, while showing resilience in fee-driven income and deposit growth, underscore the challenges facing European banks amid persistent macroeconomic headwinds. Coupled with a new €2 billion share buyback program, ING’s performance highlights its balancing act between capital discipline and growth ambitions.

Key Takeaways from Q1 Results

• Fee Income Growth: Retail fee income surged 18% year-on-year, driven by a 10% rise in assets under management and 20% more mortgage applications. This reflects ING’s focus on recurring revenue streams.
• Deposit Strength: Core deposits grew by €22.6 billion (13% annualized), with Germany contributing €17 billion. This liquidity buffer positions ING well for future lending opportunities.
• Expense Pressures: Operating expenses rose 6.2% to €2.835 billion, largely due to inflation and investments in digital infrastructure.

The bank’s CET1 ratio, a key capital metric, stood at 13.6%, comfortably above the 10.71% regulatory minimum. However, under Basel IV rules, the ratio would drop to 10.9% post-buyback—a reminder of the regulatory pressures shaping European banking.

The Buyback Decision: A Vote of Confidence

ING announced a €2 billion share buyback program to reduce its CET1 ratio toward its 12.5% target. This follows a previous €2 billion buyback completed in April 2025, which had already trimmed the ratio from 14.3% to 13.6%.

The buyback signals management’s confidence in ING’s capital position and its ability to navigate a low-yield environment. Analysts have praised the move as a prudent use of excess capital, though some caution that further rate hikes or economic slowdowns could test margins.

Challenges Ahead

1. Net Interest Income (NII) Decline: NII fell 5.3% to €3.794 billion, reflecting tighter credit conditions and falling loan volumes in Wholesale Banking. ING’s reliance on variable-rate mortgages in the Netherlands and Germany may offer some NII stability, but prolonged low rates remain a risk.
2. Operating Costs: The 6.2% expense growth contrasts with the bank’s 2025 target of €12.5–12.7 billion. Controlling costs will be critical to maintaining its 56.8% cost-to-income ratio.
3. Geopolitical Risks: ING operates in 12 European markets, including Eastern Europe, where Russia’s invasion of Ukraine continues to disrupt business.

Strategic Priorities and Long-Term Outlook

CEO Steven van Rijswijk emphasized ING’s focus on sustainable finance, with €30 billion mobilized in green projects—a 23% year-on-year increase. This aligns with its 2027 targets, including a 4–5% compound annual growth rate in total income and a 52–54% cost-to-income ratio.

The bank also aims to expand its digital customer base, with 36% of its 40 million customers now mobile-first. This shift reduces reliance on physical branches and lowers operational costs.

Conclusion: A Resilient Performer in a Testing Landscape

ING’s Q1 results demonstrate its ability to navigate a complex environment through fee-based growth and capital management. While NII headwinds and rising expenses pose challenges, the bank’s strong deposit franchise, sustainability focus, and shareholder-friendly policies position it to meet its 2027 targets.

Crucially, the €2 billion buyback underscores ING’s confidence in its balance sheet. With a CET1 ratio of 13.6% (13.1% post-buyback) and a dividend yield of 5.1%, the stock offers investors a blend of income and growth potential. However, risks remain: a prolonged economic slowdown or further Basel III rule changes could test its margins.

For now, ING’s Q1 performance reaffirms its status as a resilient player in European banking—a sector where adaptability and capital strength are paramount.

Final Analysis: ING’s Q1 results are a mixed bag but broadly positive. With fee income up, deposits strong, and a shareholder-friendly buyback in motion, the bank is well-positioned to capitalize on its strategic priorities. Investors should monitor NII trends and cost control closely, but the path to its 2027 goals appears navigable.