War in Ukraine cut ING profits in half
ING's quarterly profit more than halved as a result of the war in Ukraine. Due to the conflict, the financial group has set aside 834 million euros for loans to companies that may never be repaid. As a result, the “stropping pot” increased considerably.
Under the line, that major intervention left only 429 million euros in profit. In the first quarter of last year, the profit amounted to slightly more than 1 billion euros.
Due to the war in Ukraine, ING already intervened at its Russian branch, which employs about three hundred people. At the beginning of March, the bank decided to stop doing new business with Russian companies. ING has the largest interests in Russia of all Dutch banks.
With the announced steps, ING is not yet going as far as some peers. Rabobank, for example, already announced at the end of March that it would completely withdraw from Russia. But according to ING CEO Steven van Rijswijk, ING's choices ultimately also mean that its presence in Russia is being phased out.
"If you want to get rid of loans as a bank, you do that by getting them repaid," he said in an explanation of the quarterly results. The repayment process has already started. Van Rijswijk says that the bank still has 5.8 billion euros in loans outstanding on the Russian market. That is about one billion euros less than before. The CEO cannot say what will happen with activities in Russia long term.
Apart from the impact of the conflict, ING was able to do good business in the past period, according to Van Rijswijk. Interest income, for example, was moving in the right direction, he said. ING is benefiting from the rising interest rates on the financial markets.
Low-interest rates have put a lot of pressure on the banks' earning model in recent years and that this is now gradually changing is good news for the bank. ING also announced that it will buy back 380 million euros of its own shares as a way of rewarding shareholders.
High inflation, with higher energy bills and expensive petrol at the pump, has not yet caused major problems for the bank’s customers, according to ING. The government's Covid-19 support ending also did not have a massive impact. For instance, the group does not see a large influx of companies in the special management department, where problem cases are accommodated. ING is keeping a close eye on the situation and said it would set aside extra money if necessary.
Reporting by ANP