ING: We Increase our FVE by 18% on Greater Confidence That Net Interest Margins Will Remain Stable

We upgraded our fair value estimate for narrow-moat ING to EUR 20 per share (from EUR 17 per share previously) after incorporating the fresh guidance it gave at a recent capital markets day. We now expect a less pronounced earnings decline over the next three years than before. We expect broadly stable revenue, with robust growth in fee income offsetting some initial pressure on net interest margins. Inflationary cost pressure looks set to remain while we factor in a modest increase in loan loss provisions. We forecast that ING will return EUR 18 billion (36% of its current market value) to shareholders through dividends and share buybacks over the next three years.