Investment Thesis
I believe that ING Groep (NYSE:ING) has further upside potential despite its 54% 2021 rally, backed by a strong capital position and robust operating indicators. At the current price of 11.79 EUR/share, the stock trades
ING: Some Upside Potential Left Even After A 54% YTD Rally
Summary
- In Q2 2021, ING achieved an 11.2% ROE, driven by negative cost of risk (-6bps) and fee growth (+18% Y/Y).
- ING's current CET1 ratio of 15.7% represents a 520-basis point buffer over MDA requirements or a 320-basis point buffer over management's 12.5% CET1 target (Basel IV).
- Bringing the CET1 ratio to the 12.5% target would allow up to 2.5 EUR/share of shareholder distributions, not accounting for RWA growth or additional Basel IV impact.
- 1.87B EUR is set to be distributed with the 12 October 2021 dividend (48 euro cents), leaving 1.744B EUR for near-term dividends and buybacks (45 euro cents), subject to approvals.
- I present a model for ING share price total returns over the next 4 years.
I ventured into investing in high school in 2011, mainly in REITs, preferred stocks, and high-yield bonds, starting a fascination with markets and the economy that has not faded despite the years. More recently I have been combining long stock positions with covered calls and cash secured puts. I approach investing purely from a fundamental long-term point of view. On Seeking Alpha I mostly cover REITs and financials, with occasional articles on ETFs and other stocks driven by a macro trade idea.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of DB, SCGLF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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