3rd UPDATE: ING Returns To Profit, But Economy Remains Tough
August 12 2009 - 10:18AM
Dow Jones News
Dutch financial services group ING Groep NV (ING) Wednesday
returned to a profit in the second quarter, but real-estate
write-downs and loan-loss provisions kept the result below analyst
expectations and it said it expects conditions to remain tough for
some time.
ING scrapped its interim dividend and Chief Executive Jan Hommen
told a news conference that no decision has been taken yet on the
possibility of a full-year payout, although the group did say that
it was seeing the first signs of a recovery in financial markets.
It also raised its 2009 cost-cutting target by 30% to EUR1.3
billion.
At 1432 GMT, ING shares were down EUR0.08, or 1%, at EUR9.04,
recovering most of its losses after a 15% tumble earlier in the
day.
ING's second-quarter net profit of EUR71 million followed three
consecutive quarters of losses. But the April-June earnings were
down substantially from the EUR1.92 billion net profit a year
earlier.
The earnings were driven by the insurance operations, where
EUR278 million in pretax underlying profit, which strips out
special items, was still down sharply from EUR1.04 billion a year
earlier.
Gross insurance premium income fell 22% to EUR7.3 billion, as
sales dropped due to lower consumer demand for investment-oriented
products.
Total underlying income for the group was EUR10.24 billion, down
34% from EUR15.42 billion.
Net profit was well below analyst expectations of EUR388
million, as the company wrote down a more-than-expected EUR584
million from negative revaluations on its property portfolio and
made EUR852 million of new provisions for potential loan
losses.
Of the second-quarter real-estate revaluations, EUR251 million
came from the Canadian Summit portfolio, which contains mainly
industrial real estate in the economically hurting Great Lakes
region.
Since the start of the year, negative real-estate revaluations
have hit EUR1.7 billion, of which 70% are from the U.S., U.K.,
Australia and Canada.
ING said loan-loss provisions should be about the same in the
second half as in the first.
Hommen said that ING still intends to sell assets worth EUR6
billion to EUR8 billion to help pay down a EUR10 billion lifeline
it got from the Dutch government last October to underpin the
company's core capital.
He said ING wants to repay the state support as soon as possible
but couldn't say when because of economic uncertainty. He added
that the priority is to keep ING viable.
"We won't sell assets at (just) any price," Hommen said, adding
that offers received for assets so far haven't been priced
right.
ING said it is reviewing additional strategic options and that
the stabilization of its capital base has given it more leeway to
act.
Hommen said he hopes for more clarity by year-end from the
European Commission on its regulatory review of government aid to
ING and reiterated that discussions with the commission on its
restructuring plan begin in the coming weeks, which could have a
"significant impact on the company."
SNS Securities analyst Maarten Altena, who maintained an
accumulate rating on the stock even though results were below
expectations, said he was disappointed that the Commission still
hadn't decided on the measures ING needs to take to get approval
for the state aid it has received.
The European Commission said later Wednesday that it was aware
of ING's statement: "We are in close contact with all involved
parties concerning ING and we can confirm that we have received a
restructuring plan which is currently under assessment."
Meanwhile, Fitch Ratings downgraded ING Group's Long-term Issuer
Default Ratings to A from A-plus, saying that "consolidated results
for 2009 are expected to remain under pressure, despite a number of
de-risking and cost-cutting initiatives, and are unlikely to allow
the group to rebuild its capital resources in the short term."
KBC Securities analyst Dirk Peeters, who downgraded the stock to
accumulate from buy, said, "Most of our concern is about the
real-estate exposure that has hurt earnings at ING Direct and ING
Real Estate."
-By Bart Koster and Robin van Daalen; Dow Jones Newswires; +31
20 571 5201; bart.koster@dowjones.com
(Peppi Kiviniemi in Brussels contributed to this report.)