ING reports $2.5 billion pretax profit, plans dividends and buybacks

AMSTERDAM (Reuters) -ING Groep NV on Friday reported a better-than-expected quarterly pretax profit of 2.07 billion euros ($2.45 billion) and said it plans to resume paying dividends as it reversed some provisions for bad loans taken amid the coronavirus pandemic.

Analysts had forecast a pretax profit at 1.62 billion euros for the biggest Dutch bank, according to Refinitiv data. That compares with 532 million euros in pretax profit in the second quarter of 2020, at the height of pandemic lockdowns.

Provisions were a negative 91 million euros, compared with 1.37 billion euros a year earlier.

"Looking at risk costs, these are actually negative for the quarter, but we have to remain prudent, there are still a lot of risks in the economies," CEO Steven van Rijswijk said, pointing to uncertainty over COVID-19 variant strains.

ING's biggest markets, the Netherlands and Germany, are both forecast to grow by more than 3% this year, and the bank said the economic recovery - uneven but quicker than had been expected a year ago - was the main reason.

Fee income rose by 18% to 855 million euros, mostly in daily banking and investment products for retail customers.

Net interest income declined by 2.6% to 3.34 billion euros amid continuing low interest rates. ING said net interest income benefited by 83 million euros from its participation in ECB lending programs, in which banks are paid, rather than charged, to borrow money from the central bank, on the condition they lend it on to customers.

Still, ING's net interest margin, a key measure of lending profitability, shrank to 1.36% from 1.44% a year ago.

The ECB restricted banks from paying dividends at the onset of the pandemic and ING said on Friday it intends to distribute 3.62 billion euros in dividends, or 0.48 cents per share, in October, covering both 2020 and 2021 interim dividends.

In addition, it will distribute 1.74 billion euros it has been holding since 2019, either by dividend or share buyback.

The money for those distributions is kept outside the bank's Tier 1 capital buffer, which stood at 15.7% at the end of the quarter.

ING shares closed at 11.17 euros on Thursday, up 46% in the year to date.

($1 = 0.8457 euros)

(Reporting by Toby Sterling; Editing by Muralikumar Anantharaman, Stephen Coates and Anil D'Silva)

By Toby Sterling