UPDATE: ING Returns To Profit, But Is Hit By Property Losses
August 12 2009 - 4:33AM
Dow Jones News
Dutch bank ING Groep NV (ING) Wednesday said it had returned to
a profit in the second quarter after three consecutive quarters of
losses, but the profit was well below expectations due to real
estate writedowns at its banking business.
The bancassurer said it is seeing the first signs of recovery in
financial markets, but cautioned that it expects economic
conditions to remain challenging "for some time." It raised its
cost savings target by 30% to EUR1.3 billion, from EUR1 billion,
but scrapped its dividend due to the uncertain conditions.
ING said it booked a net profit of EUR71 million in the second
quarter, down from the EUR1.92 billion profit it made a year
earlier but well above the net loss of EUR793 million it posted in
the first quarter. The profits were largely driven by its insurance
unit, which saw low claims in the U.S. and managed to cut costs and
sales expenses.
However, the figure was well below analysts' expectations for a
net profit of EUR388 million as it wrote down EUR584 million on the
value of its property portfolio and made EUR852 million of new
provisions for potential losses on its loan book.
It said it expects loan losses to be about the same amount in
the second half of the year.
ING, which received a EUR10 billion Dutch state capital
injection in October last year and received a EUR27.7 billion state
guarantee on its Alt-A mortgage portfolio in January, is trying to
cut costs from its operations around the world and is also trying
to sell assets worth EUR6 billion to EUR8 billion.
It said it had managed to cut 8,219 jobs by the end of the
second quarter, ahead of its target of 7,000 job cuts by the end of
this year.
SNS Securities analyst Maarten Altena, who is maintianing an
accumulate rating on the stock even though results were below
expectations, said he was disappointed that the E.U. still hadn't
decided on the measures ING needs to take to get approval for the
state aid it received.
ING Chief Executive Jan Hommen said discussions with the
European Commission on the restructuring plan that is needed for
definite approval of the Dutch state support "will commence in the
coming weeks and it is uncertain what the outcome will be."
In its statement, the company said the EC's decision "could lead
to significant changes for ING Group going forward," but Hommen
declined to elaborate.
The CEO said ING wants to repay the Dutch state support as soon
as possible, but couldn't say when because of the economic
uncertainty. He said the main priority is to keep ING viable.
At 0800 GMT, ING's shares were 6.9% lower at EUR8.49.
- By Bart Koster; Dow Jones Newswires; +31 20 571 5201;
bart.koster@dowjones.com