For our present purposes, one substitutes equally as well for the other. The Sources of Investment Returns The returns of investing in an individual stock or in the entire stock market are determined by these three factors: Business growth If we look at a particular business, the value of the business is determined by how much money this business can make. The growth in the value of the business comes from the growth of the earnings of the business growth.
Summary Equity 1 1 domestic market capitalization is a quality bank in Europe focused on retail banking. ING Groep ING is one of the best banks in Europe due to its stable business profile, excess capital position, attractive dividend yield and cheap valuation.
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ING was a bancassurance financial group, but following the bailout of the Dutch government during the financial crisis ofit has divested its insurance operations in Europe and the U.
This means that ING is currently a pure banking group, operating mainly in the retail and commercial banking segment. It has a large exposure to its domestic market, even though it operates in more than 40 countries and has close to 38 million customers.
Measured by total income, the bank has a good balance between geographies, despite the fact that its domestic market generates one third of total income, as shown in the next graph. This means that ING offers an interesting profile, with a leading position in developed markets of Central Europe, organic growth prospects in countries where its presence is smaller and emerging markets that enjoy good long-term economic growth prospects.
This business profile is somewhat unique within the European banking sector, given that most retail-oriented banks are usually heavily exposed to the domestic market, such as Lloyds LYGIntesa OTCPK: Additionally, the Benelux markets are much more concentrated than other retail markets in Europe, with the top 3 players holding a large market share, leading to higher profitability levels for the established players.
It wants to achieve this by improving its customer service, through simplification of processes, innovation and technological leadership. The bank has a good history in recent years regarding the increase in retail customers Like most of its peers, ING is investing significantly in new technologies and digitalization aiming to create a differentiating customer experience.
An example of how this strategy can create a competitive advantage for the bank was the first trade-finance transaction performed in blockchain, in which ING acted as a counterparty on the deal. Financial Overview ING has performed a restructuring program after the global financial crisis that ended roughly intherefore its business profile today is quite different than what it was a few years ago.
Thus, its most recent financial figures last three years are the most useful ones to see how the bank has performed and to analyze what path it should follow in the coming years. Given its retail-oriented business model and the low interest rate environment in Europe, ING has delivered relatively stable top-line in the past years while profitability has increased due to better asset quality.
InING has maintained a positive operating momentum even though its growth was moderate.
Total revenues increased by 1. NII and commissions, which are more stable revenue streams than trading income over the long-term.
Another important driver of higher earnings has been improving credit quality in the past few years, which is reflected in lower risk costs and provisions for loan losses.
Its underlying ROE ratio was During the first quarter ofING has delivered a stable operating momentum, even though it was able to slightly increase the number of primary customers, revenues and profits.
NII and margins were quite stable in the quarter, while commission income declined a little bit and cost control was good.
This is supported to a large extent by its strong capitalization, among the best within large European banks.
This means that ING currently has some excess capital, but the bank expects some dilution to its capital ratio by Basel IV regulation as is taking a conservative approach to its shareholder remuneration policy.
This is the main reason why, despite the fact that ING is very well capitalized, its dividend has increased softly in recent years. The bank has a short dividend historygiven that it only resumed payments in related to earnings. Since then, its dividend has grown at about 1.
Conclusion ING has a very interesting business profile, due to its balanced exposure between highly profitable markets and growth opportunities. Despite this background, ING is currently trading at 1.
This means that ING offers value both from an income perspective and price appreciation, as the bank seems to be undervalued right now. I wrote this article myself, and it expresses my own opinions.
I am not receiving compensation for it other than from Seeking Alpha. I have no business relationship with any company whose stock is mentioned in this article.As of 31 March, , ING’s fully loaded core equity tier 1 [FL CET1] ratio was %, well above the European banking sector average and its own target of around %.
2 | EQUITY Time Horizon One of the major considerations when embarking on the journey to generate asset class return expectations is the consideration of time horizon.
Because the focus here is on generating capital market expectations for strategic asset allocation, and not tactical overlays, a significantly long time horizon of 10 years was selected.
The US stock market is positioned for an average annualized return of %, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at %. what is a security stock preferred stock return on investment transferbility of ownership tracking equity securities rights and warrants american depository receipts 1. 3 Figure 1. Historical mix of global equity market capitalization Notes: U.S. market represented by MSCI USA Index; non-U.S. market represented by MSCI World Index ex USA from through and MSCI All Country World.
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Investing in an array of companies diversifies your investment mix. Diversification may lower the risk in your overall portfolio. Diversification may also improve returns for that level of risk.
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