February 1, 2024
Both the Dutch ING and the French BNP Paribas achieved record results on Thursday thanks to rising interest rates and strict cost management. But the small print in the hurray messages makes investors fear that the major banks will have to make do with less income this year.
The results season in the banking sector has only just kicked off, but investors are already drawing their conclusions from the annual reports published by major players such as ING
and Deutsche Bank
published on Thursday: the interest party in the industry may not be over yet, but the atmosphere is a lot less than a few months ago. Performing as well as in the grand cru year of 2023 is therefore anything but obvious.
Due to unforeseen circumstances – BNP Paribas explicitly refers to the government bond and the Belgian banking tax – the group says it will not be able to achieve a number of its financial targets by 2025.
That is certainly the message that ING sent on Thursday. At first glance, there is nothing to complain about the annual results of the Dutch banking giant. CEO Steven Van Rijswijk was able to achieve a net profit of 7.2 billion euros, almost double the level of a year earlier. ING’s Belgian subsidiary booked a net profit of 888 million euros for the whole of 2023, a record.
The strong profit jump was largely due to a mix of higher interest rates and lower costs. Last year, ING achieved 15 percent more net interest income (the difference between what you receive in interest as a bank and what you pay out) and at the same time managed to keep costs under control. For example, the group had to set aside significantly less money to cover any losses on loans not repaid or repaid late.
Treasury has a prospect of a dividend of 280 million
After a record year, BNP Paribas is increasing its dividend to gross EUR 4.60 per share. That is also good news for the Belgian government. With a stake of 5.3 percent, he is the second largest individual shareholder in the French banking giant.
The treasury will have a view of just under 280 million euros in dividend income. In addition to a higher dividend, BNP Paribas also announced that it wants to buy back its own shares for 1.04 billion euros this year. Investors are fans of such programs because they mean that future profits later have to be spread over fewer shares.
Concerns about the entire sector
But for investors that was old news. They were stumbled by the fact that ING warned that its revenues are likely to be lower this year as the interest rate environment changes. The European Central Bank is expected to cut interest rates later this year.
Moreover, interest income in the last three months of 2023 was already lower than hoped. The result: ING suffered a hit of more than 6 percent on the Amsterdam stock exchange on Thursday, the biggest drop since March last year.
Small consolation for ING shareholders: things were no better in Paris. BNP Paribas also suffered a hit of more than 9 percent after the French banking giant lowered a number of targets for the coming months. BNP Paribas also presented record results for 2023 with a net profit of just under 11 billion euros, but disappointed in the last three months of the year.
Investors had not anticipated that the bank would have to set aside additional money to cover costs for Polish and French mortgages in Swiss francs. Due to a number of unforeseen circumstances – BNP Paribas explicitly refers to the government bond and the Belgian banking tax – the group also says it will not be able to achieve a number of its financial targets by 2025.
The figures from ING and BNP Paribas seem to set the tone for the rest of the banking sector’s results season. KBC will publish its annual figures next Thursday, followed in March by Belfius and BNP Paribas Fortis – together with ING Belgium, the four major banks in our country.