The last three years has been a troublesome time for financial equities around the world, as numerous crises struck different regions of the globe one by one. Starting with the recession in 2008, various regions quickly fell prey to many of the same problems that anchored the U.S., and now a new issue threatens our financial system yet again. As the U.S. government stares at its largest deficit in history, its actions going forward will have a significant impact on financials, as major spending cuts that will likely go into effect may put the nation in a bit of a bind. And no matter how the U.S. implements policies going forwards, it may be too late, as major credit rating agencies are already considering removing our country from the AAA club until we get our debts under better control [see also Netherlands ETF Immune To ‘Dutch Disease’ Thanks To Euro].
A U.S. downgrade would have devastating effect on the global economy as well as our own; and numerous banks that have long been under scrutiny will have even more trouble picking back up with the economy slowing yet again. Today, one of the world’s largest banks, ING, will be reporting its most recent fiscal quarter’s earnings, shedding light on how this multinational institution has fared the shaky environment that the majority of the world has endured. ING is headquartered in the Netherlands, and operates in over 40 countries worldwide. In fact, ING is the largest banking/financial company in the world when it comes to revenues [see also ETFs To Watch As Debt Ceiling Deadline Nears].
Analysts expect the company to produce roughly 40 euro cents in profits for the most recent quarter which would represent a solid increase from the year ago period in which the company had earnings of 29 euro cents. In addition to this bottom line number, there are several factors for investors to consider before this report hits the market; last week, ING “agreed to sell its Latin American pensions, life insurance and investment management operations” for about $3.85 billion, the majority of which will come in the form of cash. Because of this, the report may be a bit inflated as far as cash flows and earnings, so positive figures on some parts of the report may simply be due to this one-time sale [see also ETF Research Report Now Available: China ETFs In Focus].
With this earnings announcement on tap, today’s ETF to watch will be the MSCI Netherlands Index Fund (EWN). This ETF measures the performance of the Dutch equity market, and features ING among its top holdings, giving the financial institution a healthy 13.7% allocation. Thus far in 2011, EWN has lost 5.1%. If ING reports strong numbers, EWN will have the potential to post a strong trading day. But a bad outlook, or an analyst estimate miss will likely bring this product down on the day. The U.S. debt deal may have more of an impact on this product than any one single earnings report, as stocks took a dangerous nose dive earlier in the week, so investors will need to consider both factors when evaluating this ETF’s performance on the day.
Disclosure: Photo courtesy of Massimo Catarinella. No positions at time of writing.