ING Q4 pre-tax profit hit by regulatory costs

Amsterdam

ING Groep, the largest Dutch financial services company, reported a fourth-quarter pre-tax profit of 1.34 billion euros (S$2 billion) on Thursday, slightly below analysts' estimates as regulatory costs rose.

Analysts polled by Refinitiv had forecast an average of 1.61 billion euros in underlying pre-tax profit for the three months ended Dec 31, compared with 1.69 billion euros a year earlier.

"Pricing discipline and growth helped counter the pressure of negative interest rates," said CEO Ralph Hamers.

The company's net interest margin, a key measure of profitability, rose by three basis points to 1.57 per cent from a quarter earlier, thanks to improved lending margins and better return on funds stored at the European Central Bank.

However "we recorded a 4.5 per cent rise in underlying expenses for 2019, which includes a marked increase in regulatory costs, as well as costs related to our KYC (know your customer) enhancement programme", Mr Hamers said on a media call, adding that most of those costs will be recurring.

ING has spent heavily on staff and systems to detect money laundering among customers, after being fined US$900 million in 2018 by prosecutors in 2018. The cost increase hurt ING cost-income ratio, which rose to 56.6 per cent for the full year from 54.8 per cent in 2018.

Provisions for bad loans also increased in the quarter, due in part to what ING said was a single provision for a fraud case in Asia. Loan provisions rose to 303 million euros from 266 million euros a year ago, which ING said was still lower than a through-the-cycle average.

The bank said that it continued to win new customers throughout the year.

Customer deposits increased by 3.8 billion euros to 555.8 billion euros in the fourth quarter of 2018, driven by a strong influx from Germany. REUTERS