Dutch bank ING targets total income growth of between 4% and 5% per year until 2027, driven by an expected increase in revenues from net interest income and fees, while reduced loan losses should offset higher costs, the group said on Monday.

An expected fall in interest rates this year could erode profits across the sector. ING reported a slight dip in profit in the first quarter of 2024 from last year's levels.

But RBC analysts said in a note to clients the new guidance to 2027, issued ahead of a capital markets day event 1200 GMT on Monday, pointed to upgrades.

ING shares rose 2.6% at 0826 GMT, topping Amsterdam's AEX index.

The largest Dutch lender by assets said it will aim for fee income of 5 billion euros ($5.35 billion) and a return on equity of 14% over the same period.

"Our net interest income development is mainly a function of volume growth, while margins can be managed at strong levels in a positive rate environment," ING said in a presentation to investors.

It said it expected cost inflation to exceed headline inflation because of the delayed impact of collective labour agreements. Regulatory costs in 2025 are expected to be flat compared with 2024 and, as of 2026, to grow in line with deposit volumes.

After an income increase from its retail banking unit in the first quarter, boosted by higher fee income for both daily banking and investment products, ING plans to maintain its focus on expanding its retail business.

It aims to have risk-weighted assets (RWA) in the sector of 50% to 55% by 2027. ING added it would prioritise local scale in retail banking and build wholesale banking as a separate pillar.

($1 = 0.9344 euros)

(Reporting by Dagmarah Mackos and Alban Kacher; Editing by Sonali Paul, Jacqueline Wong and Barbara Lewis)