ING Bank is doing well. In the third quarter, net profit rose from 788 million euros to 1,367 million euros.
But customers do not benefit, on the contrary. The bank’s profit growth is partly due to customers spending more on their banking services.
For example, for a basic payment package at ING Bank in the Netherlands, since 1 March you no longer have to pay 2.40 euros per month, but 2.65 euros per month. In euros, the total is only 3 euros extra per year, but it is an increase of more than 10 percent.
Dutch consumers also have to pay interest above a certain amount, instead of receiving interest. As of July 1, you pay 0.5 percent interest on the balance above 100,000 euros.
And with a savings interest rate of 0.01 percent, you get a meager 10 euros interest on a balance of 100,000 euros.
Still loss on banking services
The higher rates for payment packages are necessary, says the bank, because considerable costs are incurred. For example, for developing new (online) services and keeping payment transactions safe. And despite the increased rates for banking services, ING is still making a loss on this, says CEO Steven van Rijswijk.
ING has also had to pay interest itself for some time if the money is deposited at the ECB. The bank passes this negative interest on to customers.
Rates continue to rise
Payment rates will increase further in 2022. The costs of the basic package then increase by another 15 percent, from 2.65 euros to 3.05 per month.
You can no longer purchase a new basic package, but the price of an Orange package will also increase, by 0.25 euros per month, or more than 20 percent.
ING’s profit growth in the third quarter was driven by revenues increasing by more than 8 percent, while expenses increased by just 2.5 percent. This higher income is partly due to the net increase in interest income. These account for more than 70 percent of ING’s total income.
Banks earn by paying interest on the one hand to customers who have money in their account, and on the other hand, they lend money at a higher interest rate. For example, being in the red costs 9.9 percent interest and for a personal loan of between 25,000 and 75,000 euros you pay between 4 and 9.7 percent interest. If you, as a bank, only pay 0.01 percent interest, then that adds up nicely.
In addition, commission income also increased, partly due to the higher rates that customers have to pay for current accounts. Customers also started to invest more and ING was able to charge customers for this.
Furthermore, it makes a huge difference to profit that only 39 million euros has now been set aside for bad loans, compared to 469 million in the same period last year.