Hold Rating for ING GROEP Amid Business Model Concerns and Strategic Uncertainty

Analyst Tarik El Mejjad of Bank of America Securities reiterated a Hold rating on ING GROEP (0RIC – Research Report), with a price target of €19.10.

Tarik El Mejjad has given his Hold rating due to a combination of factors influencing ING GROEP’s current and future performance. One of the primary concerns is the company’s business model, particularly the imbalance between net interest income (NII) and fees, which needs addressing. Additionally, the restructuring of the Wholesale Banking division is essential to cover its cost of equity, and there is a necessity for proactive cost-saving measures to manage persistent cost inflation. The sudden interest in mergers and acquisitions (M&A) has also raised questions about the company’s strategic direction.
Moreover, ING GROEP faces challenges in achieving its target NII amidst a lower interest rate environment, with potential delays in reaching the NII inflection point until fiscal year 2025. The company’s valuation appears fair, but its shares have underperformed compared to the sector year-to-date. While there is support from its share buyback program, the potential downside risk to the second tranche of the share buyback in 2025 and the increased focus on M&A, particularly in Italy and Spain, add to the uncertainty. These factors collectively contribute to the Hold rating, as ING GROEP needs to navigate these challenges to improve its financial outlook.

According to TipRanks, El Mejjad is a 3-star analyst with an average return of 9.6% and a 77.78% success rate.

In another report released on May 13, Barclays also maintained a Hold rating on the stock with a €18.40 price target.