(Bloomberg) -- ING Groep NV reported second-quarter profit that beat analyst estimates after putting aside less money for bad loans than expected. 

Net income of 1.18 billion euros ($1.2 billion) in the three months through June compared with expectations for profit of 1.07 billion euros, according to a statement by the Dutch lender on Thursday. Loan loss provisions of 202 million euros were lower than the 509.3 million euros analysts had expected on average. 

Banks are currently in a sweet spot where they can charge more for loans as the European Central Bank exits years of negative interest rates to rein in inflation while so far avoiding a surge in bad credit. ING has offered some of the fattest investor payouts in recent years and joined competitors in June by pledging billions more in dividends and share buybacks in the coming years.

ING described the loan loss provisions as “modest” and said the quality of its lending book “remains strong.” 

European banks such as ING that rely on lending income rather than trading businesses are reaping gains from rising interest rates as central banks seek to fight inflation. Last week, several major eurozone banks beat analyst expectations for second-quarter profits thanks in part to bumper lending revenue.

Rising shareholder payouts at competitors UBS Group AG and UniCredit SpA had raised the pressure on ING to boost dividends and stock repurchases. The Dutch lender pledged in June to distribute about 17 billion euros in the coming years.

ING has ceased new business with Russian clients, yet stopped short of the kind of rapid and costly exit from the business pursued by some peers, such as Societe Generale SA. 

In the same quarter a year earlier, the bank freed up 91 million euros of reserves that it built up during the height of the pandemic. Net income fell 19% from a year earlier. 

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