European bank stocks are surging and beating their American rivals this year. The closely-watched iShares Stoxx Europe 600 Banks ETF (EXV1) has jumped by over 16% this year while the SPDR Bank ETF (KBE) has retreated by about 1%.
Most European bank stocks are thriving but few are beating ING Group, the biggest Dutch bank. Its stock is up by almost 16% this year and by almost 50% in the past 12 months. Only Unicredit, which is up by 110% in the past 12 months is beating ING.
ING Bank vs KBE vs Unicredit vs European bank ETF
Dividends and buybacks galoreThe main reason why the ING share price is doing well is that it has become one of the biggest rewarders of its shareholders. In a statement earlier this year, the company announced that it will use most of its excess capital to return to shareholders.
ING has the ability to do that since it has a CET ratio of 14.7%, much higher than its target of 12%. The CET ratio is an important figure that shows the amount of capital buffer in its balance sheet. It does that by comparing its core capital against its risk-weighted assets (RWA).
As a result, it hopes to pay dividends worth over €12 billion to its shareholders through dividends by 2027. It also plans to spend another €12 billion in share buybacks. These are substantial sums of money for a company that has a market cap of €52 billion and a dividend yield of 7.14%.
The most recent quarterly and annual results showed that ING Bank’s profit rose by 31% YoY to €2.2 billion. Its income rose by 11% as the number of retail customers jumped by 236k during the quarter. It now has over 15.6 million customers around the world.
For the year, ING Bank brought in €10.9 billion, helped by a sharp increase in its net interest income (NII) as the European Central Bank (ECB) hiked interest rates to a record high.
Therefore, ING Bank stock is beating its peers because of the management’s focus on shareholder returns. Still, it has some risks. For one, it has an exposure to Thames Water, the embattled water utility company in the UK.
Also, there is a risk that the European Central Bank will start to cut interest rates soon since European inflation is falling at a fast pace. ECB’s rate cuts will likely dent its net interest income margin.
ING share price forecast
The chart above shows that the ING Bank stock price has made a strong comeback recently. It has jumped in the past eight straight weeks, the longest winning streak since 2022. The stock has also risen above the upper side of the rising channel shown in black.
It also remains above all moving averages while the Relative Strength Index (RSI) has jumped above the overbought level. Therefore, technically, the stock will likely continue rising in the coming months. However, there is a likelihood that it will retreat and retest the upper side of the channel at €14.20 and then resume the bullish trend.
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