ING Groep announced a fresh share buyback after reporting a first-quarter profit that beat estimates.

The Netherlands’ biggest bank will repurchase stock worth as much as 2.5 billion euros (S$3.6 billion), it said on Thursday (May 2).

While net income slipped 0.8 per cent to 1.6 billion euros in the first three months of the year, it was above analysts’ estimates of 1.5 billion euros. Fee income jumped 11 per cent in the period.

The latest buyback “is part of our plan to return cash to our shareholders”, said chief financial officer Tanate Phutrakul. He reiterated the bank’s plan to keep making payouts as it seeks to lower its regulatory capital ratio.

ING has pledged to cut its so-called Common Equity Tier-1 ratio to about 12.5 per cent by 2025. That metric stood at 14.8 per cent at the end of March, giving the bank room to give out cash to investors.

ING continues to make some of the largest payouts in the European banking industry, having returned 6.4 billion euros to shareholders through stock repurchases and dividends last year.

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Like many lenders, ING has been enjoying higher profits for much of the last two years thanks to higher interest rates. That enabled banks to book higher profits by charging more on loans, without paying as much for deposits.

Yet those tailwinds may soon begin to ebb as the European Central Bank is expected to start reducing interest rates in June, and ING is looking for ways to reduce its reliance on lending income.

As part of that effort, chief executive officer Steven van Rijskwijk is looking to boost fee revenue by growing in wealth management.

Fee generation was “exceptionally strong” in the first quarter, Phutrakul noted.

Net interest income (NII), or the difference between what the bank earns from loans and pays for deposits, was 3.8 billion euros in the first quarter. That was down 1.3 per cent from the previous three months’ period.

Phutrakul said that he’s “quite bullish” on the bank’s NII. The bank “can operate quite profitably” even at substantially lower interest rates.

ING on Thursday reiterated the warning that total income this year would be “somewhat” below the level of 2023. BLOOMBERG