ING Groep NV (ING)

Have really scaled back and have gotten back into being a purer bank from a conglomerate. They are getting fixed; it is just a matter of where they are on the runway before lifting off. This will be okay once the European economy gets going again. While you’re waiting for this to go, your risk might be that you have some dead money for a while.

They have split up their banking and insurance divisions. Trades below book value, but has no dividend. They cleaned up their balance sheet. They are a safer company right now because they are in retail and commercial banking, although in Europe. They are in a better situation than previously. They are worth buying at these levels. They passed all the stress tests.

Very bullish on this. It is really at an inflection point. They borrowed €10 billion from the Dutch government during a financial crisis. The last payment is due in the next few months, at which point the company will start paying a dividend again. Shares are trading at about 12X earnings, but earnings growth for the next 2-3 years is going to be in the 10%-20% range. The balance sheet is impeccably clean versus so many of the European banks that are in trouble. A compellingly cheap stock. Trading below breakup value and tangible book value. Thinks this is worth in the $25 range over the next 2-3 years.

Total debt to total capital is about 80%, but because this is a bank, you can’t look at debt to capital. Debt to them means investors deposits and things like that. This company has not paid a dividend since the financial crisis, and they can’t until they pay back the Dutch government the €1 billion that they borrowed. They will finish this in 2015 and will then return to a healthy dividend paying company. He is anticipating a dividend yield of around 4% and generating earnings at $1.20-$1.40 next year and higher by 10% a year in the next 2 years going forward.

(A Top Pick July 2/13. Up 46.68%.) (See comments under ING-N.) Still a buy.

Effectively cutting costs and selling non-core areas. They left Canada recently. It is fairly valued. He likes it. They can still grow 10%.

Like many European banks they did not do a great job of managing their balance sheet pre-Lehman Brothers. Invested in all sorts of businesses and all sorts of financial vehicles which plummeted in value and required a huge injection of capital from the Dutch government in 2008-2009. Have done a good job of spinning off all sorts of business, so the balance sheet is in stronger shape. One of his concerns is that, when you invest in a bank, you are getting exposure to the country they operate in, and he doesn’t think the economic picture in Holland is particularly great. Also, Holland has a housing market that is debatably overvalued. If your appetite for volatility is high and your time horizon is at least 2-3 years, this could be potentially an interesting buy at these levels.

Major Dutch financial conglomerate. It will be able to restore its dividend. The stock has done pretty well over the last year. Although the European financial banks are looking a lot better, but something like this with an insurance component is probably a lot safer bet than the euro zone banks.

Hasn’t done any analysis on this one for quite some time. It’s a developed market bank. Capital ratios are very strong right now. Well managed. Doesn’t think there is anything wrong with this.

Good performer over 12 months. If EU is recovering, financials will do very well. Lifecos will do well also. ING has good growth prospects. Not sure where the right entry point is. Analyzing insurance companies is one of the worst jobs in his business. You have to look at their assets. Not sure if you can analyze this as a do-it-yourselfer.

Thinks that this is one that could actually do quite well. Not actively looking at this. Thinks you will see a recovery.

Got damaged during financial crisis. Emerged as a very profitable bank and insurance company. Just spun off US insurance operations. Worth 15% of share price. Selling for half tangible book value. 2014 they will finish paying back the Dutch government and will become a dividend-paying company. They will really jack the dividend up. Sees shares doubling in the next 2-3 years.

Owned some sub prime paper and had to raise a bunch of capital. Issued a bunch of shares and got a loan from the Dutch government. That loan is almost fully repaid. Very, very profitable in banking and insurance. In excellent shape but cannot pay a dividend until they finish paying off the loan, which will probably happen by the end of 2013 and expect they will resume paying dividends in 2014. Trading for a very low multiple. Cheap discount to BV. Sees a lot of upside in this.

This is on his Stock Watch list. Have done a wonderful job in terms of their turnaround. Sold off a tremendous number of assets, partially because the Dutch government wanted them to. Spread out too much with too many tentacles in too many places. If it got down to around $5.50-$6.50 he would be more interested but even the current price is a pretty good price point.

Hard for him to get too excited about European financials in general. There may be some cyclical growth for these companies but he is not seeing secular growth or structural growth right now. It may have bottomed out and may be a good time to be accumulating but he is not too excited about the prospects.