The last six months have been better for ING Groep (ING) shareholders, as the bank finally has the green light to resume capital distributions to shareholders and has also managed to put together a little run of better-than-expected core profit results. That has helped drive the shares up about 25% since my last update – not quite beating Societe Generale (OTCPK:SCGLY) over that time (which I recently covered here), but outperforming local peers like ABN AMRO (OTCPK:AAVMY) and KBC (OTCPK:KBCSY), as well as outperforming the wider European bank group by more than 10 points.
I’m still bullish on the prospects for this bank. There are legitimate questions and concerns about the spread income outlook and the bank’s ability to hit its own cost-cutting targets, but I think there’s evidence that management is taking a serious approach to the long-term return potential of the bank, and I think the market still underestimates the long-term potential of leveraging past tech investments and gaining share in growth markets. I’m only looking for long-term core growth of around 2%, but that’s still enough to support a fair value for the ADRs in the mid-teens and a double-digit long-term annualized return.
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