(Reuters) -ING announced on Thursday a share buyback of 2.5 billion euros, following a quarterly performance considered strong by the Dutch bank, due to high interest rates, and despite a drop of its net interest income, a key indicator of profitability.

ING shares rose 5.03% to 15.61 euros on the Amsterdam Stock Exchange at 7:11 a.m. GMT.

The banking sector has been a major beneficiary of rising interest rates in recent years, but predictions that the European Central Bank will soon start cutting borrowing rates have sparked concerns about bank profits .

“Whether we operate with a 4% or 2.5% ECB rate, we expect our ING to do well in either interest rate environment,” said the managing director Steven van Rijswijk, during a call with journalists.

The largest Dutch bank by assets posted a 4.7% drop in net interest income (NII) for the first quarter, to 3.83 billion euros, due to interest rates which have led to an increase in financing costs in financial market activities.

ING also recorded a net profit of 1.58 billion euros during the period, slightly less than the 1.59 billion euros posted a year ago.

The new share buyback follows those announced in November and May 2023.

The CET1 ratio, a key measure of financial strength, is expected to converge toward its target of around 12.5% ​​by 2025, up from 14.8% at the end of the first quarter, the bank said.

Net additions to the bank’s loan loss provisions (money set aside for defaulting loans) totaled €258 million in the quarter, above the €152 million recorded a year ago .

The bank reiterated that it expects its 2024 total income, which includes net interest income, fees and commissions, to be slightly lower than the 22.58 billion euros recorded in 2023.

(Reporting Diana Mandiá and Matteo Allievi; Kate Entringer and Stéphanie Hamel)

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