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ING returns to profit in Q3 on cost-cutting

ING returns to profit in Q3 on cost-cutting
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First Published: Wed, Nov 11 2009. 03 41 PM IST
Updated: Wed, Nov 11 2009. 03 41 PM IST
Amsterdam: ING Groep NV, the bailed-out Dutch financial services company, said on Wednesday it made a profit in the third quarter, ending a year of heavy losses, as financial market conditions recovered.
Net profit was €499 million ($748 million), compared with a loss of €478 million in the same period a year ago, when the financial crisis became most acute.
“Negative market impacts were less severe than in previous quarters as equity markets improved,” said chief executive Jan Hommen. Banking profits were helped by better interest margins and lower costs.
“However, the company’s results continued to be impacted by impairments on mortgage-backed securities and negative revaluations on real estate investments,” he said.
Shares rose 4.2% to €9.95 in Amsterdam.
The current quarter included €1.54 billion in market-related losses and provisions for bad loans, less than both the €2.40 billion booked in the year-ago period and €2.27 billion in the second quarter this year.
ING was forced to seek two bailout packages from the Dutch state as a result of the financial crisis.
Last month it announced plans to split its banking and insurance arms by 2013 in order to simplify its structure and appease the complaints of European regulators about the state assistance. ING said it would also issue €7.5 billion worth of new shares to begin repaying some of the assistance it has received.
At that time, it indicated its third quarter “underlying” earnings, a nonstandard measure that strips out gains or losses on divestments and one-time charges, would be about €750 million. ING reported underlying profit of €778 million on Wednesday, up from an underlying loss of €568 million in the same period a year earlier.
SNS Securities analyst Maarten Altena said the earnings were in line with expectations, though loan losses were slightly better.
Hommen, the CEO, said the separation of ING’s insurance arm and share issue is proceeding as planned.
“We have had a lot of interest expressed” in purchasing parts of ING insurance, but the company is not in negotiations yet, Hommen said on a conference call with analysts. “With markets recovering this is not the time to be extremely quick” with a sale.
He said ING would aim to float the insurance arm on the stock exchange, weighing the benefits of any purchase offers against that plan.
ING will pay off half of €10 billion it received from the Dutch state after carrying out the share issue, and Hommen said the disposal of the insurance arm would raise enough to pay off the rest.
The company will pay the Dutch state €1.3 billion in the fourth quarter to resolve regulators’ complaints about its other bailout package, under which the state assumed the risks for most of ING’s derivatives.
ING’s banking arm reported third quarter profit of €274 million, up from a loss of €216 million. This year’s figure includes €664 million in charges on debt derivatives and €423 million in losses on real estate.
Provisions for bad loans rose to €662 million from €373 million a year ago.
ING said its core Tier 1 ratio _ a key measure of a bank’s solvency _ was 7.6%, up from 7.3% at the end of June.
ING’s insurance arm reported profit of €587 million, from a loss of €496 million. This year’s figures include gains on investments as the stock market recovered, and a higher appraisal of the value of its insurance policies.
The company said earnings were helped by cost-cutting. ING has slashed some 10,400 jobs so far this year, about 8.3% of its total.
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First Published: Wed, Nov 11 2009. 03 41 PM IST