(Bloomberg) -- ING Groep NV announced a fresh share buyback after reporting a first-quarter profit that beat estimates.

The Netherlands’ biggest bank will repurchase stock worth as much as €2.5 billion ($2.7 billion), it said in a statement on Thursday. 

While net income slipped 0.8% to €1.58 billion in the first three months of the year, it was above analysts’ estimates of €1.45 billion. Fee income jumped 11% in the period.

The latest buyback “is part of our plan to return cash to our shareholders,” Chief Financial Officer Tanate Phutrakul said in a Bloomberg TV interview. He reiterated the bank’s plan to keep making payouts as it seeks to lower its regulatory capital ratio.

The Dutch bank’s shares rose as much as 6.5% after the earnings report, the biggest jump in over a year.

ING has pledged to cut its so-called common equity Tier 1 ratio to about 12.5% by 2025. That metric stood at 14.8% at the end of March, giving the bank room to give out cash to investors. 

The firm continues to make some of the largest payouts in the European banking industry, having returned €6.4 billion to shareholders through stock repurchases and dividends last year.

Read more: Global Share Buybacks Return With a Bang as Stocks Hit Records

It joins other banks in the continent that have pledged further payouts this year. Swiss lender UBS Group AG said it would repurchase up to $2 billion in shares over the next two years, while Commerzbank AG vowed its buyback would be bigger than the previous one. Unicredit SpA said it will distribute about €10 billion this year via dividends and share buybacks.

Like many lenders, ING has been enjoying higher profits for much of the last two years due to higher interest rates. That enabled banks to book higher profits by charging more on loans, without paying as much for deposits.

Yet those tailwinds may soon begin to ebb as the European Central Bank is expected to start reducing interest rates in June, and ING is looking for ways to reduce its reliance on lending income. 

As part of that effort, Chief Executive Officer Steven van Rijskwijk is looking to boost fee revenue by growing in wealth management. The bank attributed the higher fee income to a growth in customers, increased package fees, increase in assets under management and in the number of brokerage trades.

“There are several levers that we are pulling for that fee business,” Van Rijswijk said in a call with reporters. 

What Bloomberg Intelligence Says:

“ING’s upbeat 9% profit beat on robust fees and cost control in 1Q, a new €2.5 billion share-repurchase program and confirmed full-year revenue outlook lift prospects for financial targets being raised at its June 17 capital markets day and could see consensus drift higher. Net interest income (-5% vs. 1Q23) was the one weak spot, though in line with estimates, while 11% fees lift and costs coming under control (up 5%) are supportive.”

— Philip Richards, BI Senior Industry Analyst

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Net interest income, or the difference between what the bank earns from loans and pays for deposits, was €3.83 billion in the first quarter. That was down 1.3% from the previous three months’ period. It said it expects the net interest income for the year to “end up at the upper end” of the €15 billion to €15.5 billion range previously communicated.

ING on Thursday reiterated the warning that total income this year would be “somewhat” below the level of 2023.

--With assistance from Nicholas Comfort and Tom Mackenzie.

(Updates with shares and net interest income guidance in the penultimate paragraph)

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