August 8, 2012 9:52 am

Spanish woes weigh on ING profits

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Provisions for bad loans at its banking division and writedowns at its insurance arm have weighed on second-quarter net profit at ING, causing the Dutch group to miss analysts expectations.

The bailed-out Dutch bancassurer, which is in the process of selling off several of its banking and insurance divisions, on Wednesday reported pre-tax profit of €1.2bn in the three months to June 30, down from €1.5bn in the same period the previous year.

Analysts had pencilled in underlying profit of €1.3bn for the quarter.

The group’s banking division reported second-quarter net profit down 13 per cent year on year to €995m, which ING partially attributed to a €217m writedown from selling some of its Spanish investments at a loss.

At ING’s insurance arm, profit fell from €472 to €229m as the group took a €180m goodwill writedown from the value of its South Korean investment management unit, which is up for sale.

On an underlying basis excluding one-off items, ING’s net profit fell 18 per cent to €1bn in the quarter. ING’s core tier one capital ratio – a measure of financial strength – edged up 0.2 percentage points quarter on quarter to 11.1 per cent.

“Provisions for loan losses at the bank increased as the macroeconomic environment weakened, and the net interest margin declined,” said Jan Hommen, chief executive.

“As the eurozone crisis deteriorated, we accelerated our efforts to de-risk the investment portfolio at the bank, and brought down our Spanish exposure. At our insurance business, we continued to hedge to protect regulatory capital, leading to volatility in IFRS earnings.”

ING is in the process of separating its banking and insurance arms in spite of a court victory in April against the European Commission’s demands to split as a condition for ING’s receiving €10bn from the Dutch government during the financial crisis in 2009.

This move has resulted in ING selling off a number of businesses including its ING Direct division in the US for $9bn and its Latin America insurance business for €2.65bn.

ING last week said it was “reviewing strategic options” for its direct banking businesses in the UK and Canada – a move that could result in the two units being sold for about €2.1bn.

The Dutch group has also been working on the sale or refinancing of its Japanese unit as well as its Asian insurance operations, which are valued together at $7bn.

Shares in ING fell 0.7 per cent to €5.71.

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