ING has reported a significant decline in net profit following a “challenging” end to the year for the Netherlands’ largest bank.
The lender reported a 29 per cent drop in year-on-year net profit, which fell to €1.2bn (£1bn) amid a sharp increase in bad loans during the fourth quarter, due in part to a fraud case at a customer in Asia.
ING said that new provisions for bad loans had jumped 77 per cent to €528m. This was driven by a spike in provisions in its wholesale banking division, which serves large corporate customers, where they increased fivefold compared to the same quarter in 2018.
The Dutch bank said that risk costs in the fourth quarter had been “primarily impacted by various large individual files, including a sizeable provision for a suspected external fraud case”, but did not name the customer involved.
ING was also hit by what chief executive Ralph Hamers described on a call with reporters as a “marked increase in regulatory costs, as well as costs related to our KYC (know your customer) enhancement programme”.
The lender has spent heavily on staff and systems to detect money laundering among its customers after being fined a record €775m by Dutch authorities in 2018 for failing to prevent the laundering of hundreds of millions of euros.
This cost increase hurt ING’s cost-income ratio, which climbed to 56.6 per cent for the full year, from 54.8 per cent in 2018.
ING is still banned from taking on new customers in Italy, over a year after its central bank and prosecutors began investigating it. The lender said it is still consulting with Italy’s central bank over further improvements to be made before it can restart acquiring customers in the country.
Although ING’s revenue rose 1.2 per cent during 2019, this growth was more than offset by the increase in bad loans and expenses.
“Looking back at 2019, we see a year of solid commercial performance despite the challenging rate environment, geopolitical uncertainties and an increasingly complex and demanding regulatory environment,” said Hamers, who added that the fourth quarter had “proved challenging”.
Net profit for 2019 was 1.7 per cent higher at €4.8bn despite the bank’s tough fourth quarter, but this favourable comparison was due to the impact of the €775m fine in 2018. On an underlying basis, profit dropped 11.3 per cent year-on-year.