ING Earnings: On Track to Meet Full-Year Expectations, but Early Signs of Weaker Credit Quality

No-moat ING booked a net profit of EUR 1.8 billion for the second quarter of 2024, nearly 10% ahead of the company-compiled consensus estimate. Earnings came in 24% lower than a year earlier, but operating trends aligned with what we saw in the first quarter. ING looks well set to meet our expectations and its guidance for the full year. The one blemish in the results was that ING needed to release some of its rainy day "overlay" provisions to smooth out the higher provisions taken in the quarter against nonperforming loans. The reported return on tangible equity was an already impressive 14%. Still, if one excluded ING's surplus capital, profitability would have been closer to 18%; therefore, we feel very comfortable with our midcycle return on tangible equity estimate of 13%. We keep our EUR 20/share fair value estimate.