ING appeases shareholders and ignores Klaas Knot’s warning

De Nederlandsche Bank urgently advises banks to strengthen their protective margins. But ING actually cuts them down. This writing is good news for shareholders, but not good news for taxpayers Jeroen Van Winsen.

ING’s third-quarter profit was 979 million euros, about 400 million euros less than the same period in 2021. This is due to one-time fees, such as problems with mortgages in Poland.

ING buys back its own shares

Basically, the bank works like a charm due to the high interest rates. According to CEO Stephen van Reswijk, this is a good opportunity for the bank to buy back 1.5 billion euros of its shares.

Below the line, fewer shares remain as a result of repurchases, so that from now on dividends are distributed to fewer shareholders. This is of course beneficial to shareholders. After the share repurchase, ING still meets the statutory requirements that apply to capital buffers.

The downside of this douceurtje for shareholders is that those buffers are declining. As a result, the bank will be less able to absorb future investment and credit losses.

In light of recent warnings from banking regulators and the International Monetary Fund of severe shocks to the financial system, the choice of ING is fantastic. The Dutch central bank recently advised banks urgently to boost their buffer margins.

Buffers are historically low

If shocks occur in the financial system (as happened recently in the UK and globally in 2008), the bank’s fenders could melt like snow in the sun.

The most frightening outcome is that governments (again) are forced to bail out banks with taxpayers’ money to prevent families and businesses from seeing their bank balances skyrocket – and the economy collapsing. It will become clear in retrospect whether the choice of ING was wise or risky.

This week at EW you can read more about banks’ historically low hedge stocks, and how they still depend on taxpayers.