The management acknowledged serious shortcomings in the execution of due diligence policies to prevent financial economic crime at ING Netherlands from 2010 to 2016.
"We are taking a number of robust measures to strengthen our compliance risk management and support a strong risk culture and will be making further improvements to ensure we can play a full role in contributing to protecting the integrity of the financial system," the company said in a statement.
This comes after the bank reported a 1.5 percent rise in second-quarter underlying pretax profit to 2.02 billion ($2.35 billion), beating analysts expectations. Its primary customer base increased by 400,000 to 12 million, while the total number of retail customers reached 38.2 million. Net core lending in grew by 14.2 billion, and net customer deposit inflow amounted to 5.8 billion.
The second quarter also marked the completion of the merger of Record Bank into ING in Belgium.
While ING is one of the worst performing bank in Europe - YTD, it is down 25% and has underperformed the sector by 12.4% - Jefferies maintains a Buy rating. It said the legal settlement should bring better visibility on the group's earnings dynamic. "On the litigation side, the 775m bill is higher than expected, but no cost increase is expected as regulatory cost is already factored in. The fine is a post-tax item for Q3-18, with a 24bp impact on CET1. In terms of dividend, the group stated that it will stick to its policy of provisioning for one-third of the previous dividend per quarter and, overall, it aims to increase the dividend gradually."
Jefferies also expects positive triggers in Q4 results due to the Belgium integration, then further positive jaw effects in most activities by 2019. "The early investments in digital banking made ING the most advanced leader, in our view."