ING Groep NV (ING)

Fee income OK, risk cost high, Core 1 ratio is healthy. Problem is in areas they do business, like the Netherlands. Belgium acquisition hurting them, since they overpaid. Dividend hasn’t moved, cutting costs until they can return to profitability. Trying desperately to play catch up. YTD, stock’s down 18%.

They have re-emerged as one of the best capitalized banks in Europe trading at 9 times earnings. The stock price was down on European economic concerns, nothing to do with the bank itself. Yield 6.8%. (Analysts’ price target is $20.05)

A past pick. What's holding this back is also holding back all European banks--negative or no interest rates. But when rates normalize, like they did in America in 2016, they will take off. Euro banks are a step behind American ones. 7.1% dividend. (Analysts' price target: $20.20)

The percentage of the Financial Services sector to GDP is the largest in Europe – approaching 400% of GDP for its capitalization, compared to 150% for the US. He thinks this creates an overhang for the European banks. He would continue to hold for now as there is some short-term basing on the chart, but sees better value elsewhere, like US banks.

It's sold off and has had good volumes, which is usually a bad combination. $13 is the support level. He would exit this.

The major issue is surrounding QE in the EU. It will likely take two years before interest rates will begin to rise in Europe before earnings will grow. At this point the company has done well selling off poor assets, but it will take time. He would be a buyer here. They have announced there will not be any dividend increase for a few years.

He is positive on them with the rising interest rate scenario and thinks it is trading below book value. If you think the global economy is going to continue, this is well leveraged to that recovery.

His favourite European bank. They were one of the first to get back on side and clean up the balance sheet after the financial crisis. They were an Internet bank before others were. They did a great job of expanding the Internet space in Europe. They are extremely well managed and if he could only own one this would be it. Their numbers have been consistently good.

This is very much a Dutch bank. Insurance has been separated from it. To like it, you have to have a positive view of the Dutch mortgage market. He used to own it but sold out after housing prices stabilized, which means that there’s not a lot of upside in that business. Their electronic bank was a potential catalyst, but they did significant business in the former Soviet Union and in energy infrastructure. As his view got more negative about the price of energy and as sanctions got put on Russia, he backed away.

Earnings have been growing 8-10% a year for the past few years. Paying a healthy dividend with double-digit increases expected in the next few years. It's a great way to play the European recovery which will certainly continue. ING is well-position with a strong capital base.

The Benelux area has been relatively strong. Risk management in these banks has been good. This is a well-run bank. They should increase their dividend rates and will benefit from rising interest rates when they do rise in Europe. He thinks rates will rise in Europe relatively soon. While he owns other banks, he sees this as a quality name and sees this one as a good choice.

(A Top Pick Nov 24/16. Up 54.41%.) A pure retail bank, so no funny business is going on. They are trading at a very cheap multiple with double digit earnings growth. Also, Europe is recovering, and this bank is a big beneficiary. Dividend yield of 2.8%.

ING (ING-N) or Lloyds Bank (LYG-N)? For any of the European banks, if the euro continues to rise they may get pressure. With an improving economy, they may have to start raising interest rates. From a quality standpoint, this one would be much better, because Lloyds still has the overhang of the British government, and what is going on with BREXIT. Yields 4.1%, however, their dividend growth was only 2% last year. (See Top Picks.)

European financials have moved up a lot since the recession. This was on his watch list, but has now moved up too far for him. It is of no interest to him at this time. At some point there is going to be another banking blowout, and this could get hit.

In general, he likes the European space. The economy is steadying and recovering. This one gives you a pretty decent financial services name. Trading at 1.2 X Price to Book ratio. Has a very robust digital platform which is very compelling because they have very low operating costs. That is going to resumé well with the millennial demographics going forward. Dividend yield of 4.2%. (Analysts’ price target is $21.60.)