For 4 years now, ING's management ignores the common shareholder's interest. Their decisions reflect deep ignorance of ING's business status, completely lost oversight of the complexity of their products in the current recessionary environment, can't follow and control the day-to-day trends and operations, missed taking proactive and preventive defensive actions in face of clear and present business risks, plus broke the law, admitted it, and paid $600M penalties.
This gross negligence led to a series of 5 quarters of extraordinary losses, in each Q over $400M, and in 5 quarters accumulated a total loss of $4.1B loss, all caused by management errors and faults.
ING's Board of Directors is corrupt; otherwise they should have started public investigations and fired the management long ago. Sooner or later they should end up in courts to answer for it.
Agree with your comments and I am amzed that the Dutch government, the board of directors, etc have not taken action....perhaps there is even more corruption. The shareholders should elect new management and a new board.
Do not make the mistake to directly connect ING management's incompetence, and the deep discount of ING share price.
The current share price is clearly influenced by other strong factors too, and not only management’s failure. Not easy, but not impossible to separate the current external price pressures on ING share price from the influence of management’s incompetence on it. But if you compare historical valuation data and similar bank’s current data to ING valuation metrics, you can get a good estimate on what is the effects of Incompetence in dollars.
This is an attempt to do just this. I use the PE for valuation to show the idea. The PB or PS metrics would show similar results.
The main price-depressing factors are:
Factor1) All banks on all stockmarkets in the world are undervalued. The long term rel.PE of US banks is 0.81. So using the current S&P average PE=14, US banks should show an average normal PE=14*0.81=11. But their current PE average is PE=7.6
This Factor1, I name “bank confidence loss”, makes a 30% discount from the normal price.
Factor2) The US media daily blames the euroland debts, euro crisis, etc. as the culprit of every price drop in the stocks and DJIA average since 3 years. Their relentless blame campaign works with the cooperation of S&P, Moodys, etc., and has clear results, since US banks, hedge funds made a lot of money on this effort, plus could divert attention of their public from the fact, that the US economy, US national debt, and US banks are high vulnerable too. The US debt/GDP is 20% higher than the EU average. As result of media war, EU banks are even more undervalued than US banks. I made statistical calculations and found "the media war discount" on EU banks average PE has a 15% discount, compared to US banks.
Factor 3) ING looks at first sight extremely “unfairly valued” even to other EU banks. The sorry fact is that this is not mainly because of the fundamentals (like the Dutch gov. debt, the compelling restructurings, the failure to pay dividend, etc. is fundamental), but because of widespread loss of confidence in the competece of ING's management.
ING currently simply cannot be valued according to its business fundamentals, like other EU banks, because its recent 5 years of stunning history of management failures. ING simply has a big “management discount” on its price. This extra effect is why ING cannot be valued according to other EU banks average.
ING’s current normalized PE is in the 3.0-4.0 range. This is cca. 50% below EU average. This is the price we shareholders all pay for Jan Hommen’s team of incompetents.
Shareholders lost$ 4.1B in earnings in just the last 5 quarters (!), all because of management negligence and outright failure. Just remeber JPM's loss of $2B last month, and its huge public scandal plus gov. investigation; ING cound do double as much loss, admit to break law, without any scandal or investigation.
So, if you read that ING is 100% below its “fair” price, this is an understatement.
I estimate ING fair price is well above 250% of the current price. To get realistic value, the first step is to replace the management. Jan Hommen cost 25-30B penalty in market capitalisation. He must resign.