(Bloomberg) -- ING Groep NV’s shares fell as the Dutch lender reported higher-than-expected costs and a key measure of financial strength missed estimates.
ING’s operating expenses increased 8.5% in the second quarter on the back of higher staff expenses and marketing costs. The bank’s common-equity Tier 1 ratio was sequentially lower and missed estimates compiled by Bloomberg.
The lender’s shares dropped as much as 3.8% in Amsterdam and were trading 2% lower at €16.416 apiece at 10:14 a.m. local time. The stock has been up 24% this year ahead of the results.
Banks’ profits had swollen in recent years on the back of interest rate hikes. With the European Central Bank cutting rates in June, that boost is expected to ease.
Still, net income at the Netherlands’ biggest bank came in at €1.78 billion ($1.9 billion) in the three months through June, beating analysts’ estimate of €1.66 billion, according to a statement on Thursday. ING also raised its revenue outlook to more than €22 billion, from around €22 billion previously.
“While the CET 1 ratio missed,” the second-quarter headwinds are expected to reverse and the capital outlook has been reiterated, RBC Capital Markets analyst Anke Reingen said in a note to clients.
“We come in with a strong commercial momentum and strong return on equity and that’s why” ING raised the outlook, Chief Financial Officer Tanate Phutrakul said in an interview with Bloomberg TV.
The bank said second-quarter fee income rose as it added customers, increased investment products and sold more insurance contracts. With interest rates coming down, mortgage rates normalizing and housing prices ticking up, there’s “a conducive market for mortgage growth,” Phutrakul said.
Lenders have been seeking out growth in fee revenue to reduce their dependency on interest income. The Amsterdam-headquartered bank has set a goal to achieve €5 billion in fee income by 2027.
--With assistance from Cagan Koc, James Cone and Kit Rees.
(Updates with details throughout)
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