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ING Groep N.V. Message Board

  • jpomper jpomper Oct 16, 2012 6:16 AM Flag

    Q3 report of ING

    The US banking giants reported good results.
    JPM and Citi both produced positive surprise, and both share price soared over 5% in the 3 days after reporting. BAC is to report soon, but judging from share price action, they should also outperform.

    What will ING report?

    1)The Jan Hommen presentation on 27th sept Bank of America Conference, his key pointw were:
    •ING Group is making good progress on EC restructuring
    •Solid performance in challenging environment in 2Q2012
    •ING Bank is delivering on Ambition 2015

    2)Selling Asia Insurance/Im business is in progress, with price a little over book value is achievable. Base case IPO (in US and Eu) of Insurance business is still in early preparation phase, they are in process of improving capital ratios. Final decisions clearly dependent on Eu negotiations.

    3) ING capital Tier 1 ratios improving. By selling US Direct to Capital One and the Canada ING Direct business the improvement is cca. 1%. Currently the Basel 2.5 ratio is at 11.9%. Basel III projected to 10.7
    Risk costs are provisioned in increasing amount in the lastest year, no negative surpprises are expected. Insurance business operating results improved in the last 3 quaters, and hopefully not deterioreted much in Q3.

    4) ING repaid 9B to the state (7B + 2B interest), and 4.5B is to be paid (3B+1.5B interest).
    The revenue from selling the business in Asia is enough to cover.

    5) Operating characteristics like cost/income, risk profime, etc. should not deteriorated, even slight improvment is expected.

    SUMMARY: it is time ING finally surprises on the positive side.
    Citi is valued at PE=13, PEforw=8, P/S=1.52, P/B=0.7
    ING is valued at PE=11, PEforw=5, P/S=0.5, P/B=0.5

    All valuation ratios are below the slowly recovering US bank giant.
    All over the world the banks are recovering.
    It is time to do something for ING shareholders too.

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    • crancpa Oct 16, 2012 12:04 PM Flag

      Mr. jpomper,
      Thank you for your analysis, I always read them carefully,
      Thanks again and keep it up.

      • 1 Reply to crancpa
      • 1)The current rally is not specific to ING.
        If you compare the major EU competitors, ING is in the middle of the bank pack.
        Take a look at a sample.

        2)Still, in 3 months ING rallied 40%, while DeutscheBank made +50%, Royal Scotland +30%.
        The extrem points are at Credit Agricole with +100%, and HSBC with only +15% at the end of the pack. The EU banksector average rallied in 3 months cca. +45%.

        3)However, let make it clear, that this banksector rally is very much stronger than the SP500 average was. SP500 rallied in the last 3 months only +8%, which pales in comparison. The conclusion: sell other stocks and jump into banks now. I think a lot of fund managers do just this. Valueline upgraded the banksector last week to 41 place from a total of 96 sectors.

        4)But even after this rally, the 2 year relative price lag of ING to SPY is still -40%.
        This simply means that if the EU banks continue to play the catchup rally, for the next 3 months with the same momentum, then ING is expected to rally into the $13-14 range.

        5)Imagine...., imagine that the banks will continue the catchup all the way, where they were 5 years ago compared to the Sp500 index.
        This means their total Market Cap ratio is again the same number as it was compared to all stocks, like it was in 2007 before the current crisis.
        If this happens..and sooner or later it happens, then the bank sector has to rally an average +60% more to catch banks/SPY ratio 5 years ago.

        This might project ING price to the ...take deep breath.... into $21-23 range.

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