ING, the Dutch financial services group, is to accelerate moves to strengthen compliance after incidents at its domestic operations, including alleged insider trading, triggered a wave of negative publicity and led regulators to call for a justice department inquiry.
Michel Tilmant, ING chief executive, on Thursday responded forcefully to governance concerns, saying: “I feel very sorry for the majority of our employees, and our shareholders and clients, when they read what they have in the past few weeks about ING. This is something that required my attention, and you can be sure my attention has been captured.”
The group will speed up a two-year programme launched to improve compliance as a result of what Mr Tilmant called “isolated incidents” that included an error in commercial software at Nationale-Nederlanden, its domestic insurance unit, and mortgage selling and investment fund issues.
But he dismissed suggestions of governance failings, saying it was “inevitable” that cases would be uncovered at an institution of ING's size and given management's constant focus on compliance.
His comments came as ING reported a 6.7 per cent fall in second-quarter net profit of €1.55bn - reflecting one-off items in the previous year that skewed comparisons.
While confident about second-half prospects. Mr Tilmant noted the challenge posed by interest rate developments.
That factor had already led to a €80m second-quarter provision to shore-up reserves in Taiwan where rates had fallen. The move related to pre-2001 contracts which had guaranteed high interest, a legacy of ING's acquisition of US insurer Aetna, and had no bearing on new business.
Pre-tax profits in the insurance unit overall fell 23 per cent to €867m, due to the fact that the prior year's results were flattered by one-off gains and the impact of accounting changes.
In banking, profits rose 13 per cent to €966m, with retail results up 30 per cent. Profit growth slowed at ING Direct, which accounts for 11 per cent of pre-tax banking profits, because of narrower interest margins and investment. But ING said it had added 850,000 in the quarter and now had 13.3m.
The company also benefited from lower tax and record low provisions, slashing expectations for the full-year tax rate from 20-25 per cent to 20 per cent, thanks to lower rates in the Netherlands and US. However it said abnormally low loan loss provisions would not last.
Shares fell 2.9 per cent in afternoon trade but Mr Tilmant said the results showed ING's focus on efficiency and organic growth was paying off. “I don't think a company needs to change strategy every 12 months to look good,” he said, ruling out large acquisitions.