Peter Adams, the CEO of ING Belgium, left no doubt at a press conference: “A new, tax-friendly government bond is a very bad idea. By doing so you not only hurt the banks, but you also jeopardize the future provision of credit to the Belgian economy and society.”
ING Belgium made 888 million euros in net profit last year, almost three times as much as in 2022. The profit was mainly driven by the favorable interest rate environment. The bank’s interest income rose by a third to 2.7 billion euros. But CEO Peter Adams also pointed to the bank’s efforts to keep operating costs virtually stable. It was also positive that provisions for credit losses were limited to 139 million euros. (see results table below)
The bank’s good results will reignite the discussion about the interest it pays to savers, Adams realizes. On the one hand, he pointed out that the ING Savings Account and the Tempo Savings formula offer almost the highest interest rates in the market. On the other hand, he emphasized that ING can grant 20 euros in loans with 1 euro of capital, and that most Belgians opt for a fixed interest rate on their mortgage loan. “I think that stability is much more socially important than a little more interest on the savings account.”
ING Belgium granted 15 billion euros in new loans last year. Adams: “If we want to continue to do that in the future, you have to make a profit and strengthen your capital. ING Belgium is also increasingly orienting its lending to the needs of the Belgian economy and what is socially important. I am talking about financing the climate transition and supporting business investments and innovation. In addition, we advise private individuals, including the less wealthy, to build up resources to be financially independent and to provide for their pension.”
Government is player and referee
For all these reasons, Adams is not inclined to the idea of a new government bond. And that is putting it mildly: “A tax-friendly government voucher in one year is not worth repeating,” he says. “The government behaves at the same time as a player in the market and as a referee, which also applies different rules for itself than for the other players.”
The tax-friendly Van Peteghem government bond withdrew 22 billion euros from the banks at the end of August. At ING Belgium the outflow amounted to 2.7 billion euros. Adams: “At that time there was a surplus of 50 billion euros in deposits in the Belgian banking sector, on the basis of which loans could be provided. That surplus has now been halved. This means that the banks have 25 billion euros less available to invest in the real economy.”
In other words: a new government bond will not only hurt the banks, but also jeopardize future lending. “The money that the government raises with the government bond does not flow back to companies or private individuals. Banks are much better placed to finance the real economy than the government,” Adams concludes.
The Belgian government has until the end of June to launch a new tax-friendly government voucher. The previous one posted a net interest rate of 2.81 percent. A decision is expected one of these days. The Debt Agency is aiming for a return of 13.5 billion euros.