TheChek News Flow

We believe ING is on track to make the leap from a restructuring story to a restructured

bank in the next 12-18 months, crystallising shareholder value in the process. Most of

the restructuring efforts of the group should come to fruition in 2014, with a

substantial reduction in double leverage financed by stake sales in VOYA and

SulAmerica and, more importantly, with an IPO of the European insurance business,

which should for the first time provide the market with a standalone valuation of ING

Bank. Using our base-case scenario for these disposals, we estimate that ING Bank is

trading at a c.20% discount to the sector on a P/E basis and believe this should narrow,

given the balance-sheet strength of ING Bank.

With a number of leading indicators pointing to a recovery in the Dutch economy, we

expect to see c.8% growth in underlying earnings from a moderation in loan losses in

2014; we also estimate that a shift to normalised loan losses could be worth an

additional c.10% of earnings, which should feed into the P&L over time. Furthermore,

we see additional upside to both our and consensus estimates if an economic recovery

in Europe translates into better demand for new lending.

We estimate that ING Bank should have a sufficient capital buffer to declare a dividend

for 2015 – the first since the start of the restructuring process – after the last tranche of

state aid is repaid in May 2015. We believe that ING Bank’s focus on stable, cash-flowgenerating

European markets should then enable the bank to maintain a 50% dividend

payout ratio, in our view.

We increase our SOTP-driven price target to €12.4 from €11.3 to reflect a mark to

market of the VOYA and SulAmerica stakes and the roll-over of our capital-adjusted

Gordon growth model to 2015E profitability (from 2014 previously).