Analysts Initiate Coverage on ING US at Neutral on ROE Improvement

In reports published on Tuesday, multiple analysts initiated coverage on ING US VOYA. Analysts from Morgan Stanley, JP Morgan, Deutsche Bank, Goldman Sachs, Credit Suisse, Bank of America, Citigroup, Sandler O'Neill, SunTrust Robinson Humphrey, Keefe Bruyette & Woods, Evercore Partners, Barclays and Wells Fargo all initiated ING US at Neutral ratings with price targets in the range of $27.00 to $31.00.

Goldman Sachs analyst Christopher Giovanni noted that the company is, "well positioned to capture growth from structural changes in the retirement space with additional asset management cross-sell opportunities." Along with tactical price increases, run-off of capital-intensive business and expense efficiencies, the company is well on its way for ROE expansion.

With approximately 40 percent appreciation since its May IPO, Deutsche Bank analyst Yaron Kinar firmly believed in turn-around of underperforming ongoing business. He noted, "we find that limited upside remains for VOYA absent (1) strong indicators of an improving U.S. recovery, (2) ongoing business op. ROE improvement to the 11% range, (3) reduced uncertainty over the company's closes-block variable annuities portfolio, (4) the emergence of capital deployment or (5) greater float."

Morgan Stanley analyst Nigel Dally also viewed the company's broad-based ROE expansion strategy positively and believed it has made good progress in mitigating risks associated with its legacy variable annuity exposures. Dally noted, "ING U.S. has a very low ROE — 6% firm-wide in 2012, or 8% excluding closed block variable annuity operations. We have a positive view of management's plans to significantly improve this by 2016 through a range of margin, growth, and capital initiatives; however, our estimates are somewhat more conservative than management's targets. We also use an alternative means of calculating the ROE from ongoing operations, which yields lower returns in later years than management's methodology."

JP Morgan analyst Jimmy Bhullar expected Ing US's overall ROE to remain sub-par. Bhullar believed that, "management initiatives to improve the performance and returns of its operating business are key positives." With about 58 percent of its earnings from high-return business in retirement and asset management, Bhullar noted that the proportion could increase over time.

ING US closed on Monday at $28.41.