Rates Grinding Down Sentiment For ING

When I last wrote about ING Groep (ING), I wrote that “ING shares remain undervalued and could stay that way for while…”, and so it has been. The shares are down another 20% or so since then, with renewed worries about spread compression as ING is looking at negative rates in its swap portfolio, minimal deposit pricing leverage, and softening underlying macroeconomic trends.

I continue to believe ING is a high-quality, well-run bank, and I believe ING’s strategies to gain share in higher-growth markets can help support above-average loan growth. I likewise am still bullish on the bank’s ability to leverage years of investment in IT into lower operating cost run-rates in the near future. I still believe that a mid-teens fair value for ING is appropriate (ranging from around $13.50 to $16.50 depending upon methodology), but it is increasingly probable that ING may see little-to-no core earnings growth over the next five years, and it’s going to take something more than just low valuation to get investors to reconsider this name.

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Rates Grinding Down Sentiment For ING