ING Groep (ING.US) is striving to increase its fee income and improve profitability. At the capital markets day on Monday, the Dutch bank announced its ambitious plans to achieve 14% return on capital by 2027 and set a cost-saving target of €5 billion (about $5.3 billion).
Like many other European banks, ING Groep has benefited from rising rates in the past two years. However, as the European Central Bank begins to lower rates, the bank is exploring new business areas to alleviate the potential impact of the rate declines. ING Groep plans to achieve an additional €1 billion in fee income by 2027 by expanding its customer base and adjusting its pricing strategy.
In addition, the bank said it would consider M&A activity if it encounters transactions that could accelerate strategic implementation and meet its stringent criteria. While aiming to increase the return on capital target by 2027, ING Groep expects to exceed 12% return on capital this year.
Philip Richards, senior industry analyst at Bloomberg Industries, said that ING Groep's expectations for return on capital by 2027 may rely too heavily on revenue growth, which may be difficult to achieve in the current rate-cutting environment. He believes that while the emphasis on retail banking growth is strategically significant, cost growth and wholesale banking may be major drag factors.
Finally, ING Groep reiterated its commitment to reduce the common equity Tier 1 capital ratio to around 12.5% by the end of 2025 and achieve a cost-to-income ratio between 52% and 54% by 2027. The bank emphasized the increase in capital allocation to retail business while focusing on growing and improving the capital efficiency of its wholesale banking business.
Anke Reingen, Royal Bank of Canada's European analyst, expressed optimism about ING Groep's future performance in a report, noting that performance expectations for 2027 will be revised upwards due to revenue increases. She also mentioned that the bank's capital position and strategic direction remain stable and there have been no corresponding changes due to positive adjustments to performance expectations.