Dutch lender ING is set to report third-quarter earnings on Thursday, and analysts at Bank of America (BofA) expect the bank to use the occasion to lift its 2026 profit targets. The move would come even as higher deposit costs begin to eat into the income banks earn from lending.
BofA's view, shared in a note to clients, is that ING will nudge its guidance for its "liability margin" above 110 basis points, up from the current range of 100 to 110 basis points. A basis point is one-hundredth of a percentage point, so the shift is modest but meaningful for a bank of ING's size.
What is a liability margin?
For everyday investors, the term "liability margin" can sound like jargon. In simple terms, it measures how much a bank earns on its assets (like loans and bonds) after accounting for what it pays to fund itself with deposits and other liabilities. A higher margin means the bank is keeping more of the spread between what it earns and what it pays out.
ING's liability margin has been a key driver of its earnings in recent years. After the European Central Bank (ECB) raised interest rates sharply, banks across Europe enjoyed a "rates tailwind": they could charge more on loans while keeping deposit rates relatively low, widening their margins.
But that tailwind only lasts if what banks pay on deposits rises more slowly than the income from loans. BofA argues that the easy part may be ending. As competition for savings intensifies and as regulated savings rates in Belgium—a major market for ING—rise, the bank may have to pass more of the ECB's rate moves on to depositors. That can quickly squeeze net interest income, the money a bank makes from lending versus what it pays savers.
The role of the replication portfolio
BofA says ING's ability to lift its 2026 guidance is supported by its "replication portfolio," a strategy banks use to invest part of their deposits across different maturities. This approach smooths income as interest rates move, because it locks in yields on longer-dated bonds that were bought when rates were higher.
That smoothing effect can make near-term guidance look stronger, but it also means the full impact of rising deposit costs may be delayed. BofA warns that the story can look strongest in 2026 guidance while the bigger sensitivity shows up in 2027-28 results. In other words, the bank's forecasts for net interest income in those later years may be too optimistic.
That is why BofA keeps a Neutral rating on ING shares, with a price target of €30.50. A Neutral rating means the bank expects the stock to perform in line with the broader market, not necessarily to surge or slump.
What to watch in the report
Investors will be watching Thursday's report for more than just the headline numbers. The key metric to focus on is "deposit beta"—how much of an ECB rate move gets passed on to savers. A higher beta means ING is paying out more to depositors, which reduces the benefit of higher loan rates.
If ING raises its 2026 margin target, it may initially read as a positive sign that higher rates are still doing the heavy lifting. But markets will likely look past that to the deposit beta, because it determines whether the extra loan income sticks around or gets competed away through higher deposit pricing.
BofA's warning about 2027-28 net interest income suggests that even if 2026 guidance improves, the longer-term picture may be less rosy. That could weigh on the stock if investors focus on the sustainability of earnings.
What it means for investors
For everyday investors, the takeaway is that ING's earnings report is not just about the past quarter—it's about the trajectory of the bank's profitability in a changing rate environment. Banks that have benefited from higher rates are now facing the flip side: as deposit costs catch up, margins may compress.
ING's ability to manage that transition will be key. If it can keep deposit costs low while still attracting savers, it may protect its margins. But if competition forces it to pay more, the earnings boost from higher rates could fade faster than expected.
BofA's Neutral stance reflects that uncertainty. The bank sees upside in the 2026 guidance but also sees risks that could hit results further out. For investors, the report will offer clues about how ING is navigating this tricky balance.
As always, it's worth remembering that analyst forecasts are just one view. The actual numbers, and how management frames the outlook, will provide the clearest picture. And for those holding ING shares or considering them, the deposit beta and the 2027-28 outlook are the numbers to watch.
