Dutch financial services company ING Group, N.V. (ING) on Wednesday reported over 22 percent drop in profit for the second quarter, as loan loss provisions climbed and the firm reduced its exposure to Spain, amid a weak macroeconomic environment and heightened eurozone crisis.
ING said the sales process for its Insurance and Investment Management businesses in Asia is on track. For Insurance Europe, the firm is accelerating its efforts, as it prepares for the base case of an IPO.
Jan Hommen, CEO of ING Group, said, "ING posted solid second-quarter results...As the eurozone crisis deteriorated, we accelerated our efforts to de-risk the investment portfolio at the Bank, and brought down our Spanish exposure to reduce the funding mismatch in that country. At Insurance, we continued to hedge to protect regulatory capital, leading to volatility in IFRS earnings."
Net income for the quarter dropped to 1.171 billion euros ($1.45 billion) from 1.507 billion euros in the prior year. The latest results included 188 million euros of net losses on divestments, stemming mainly from the IIM Korea goodwill write-off, and 111 million euros profit from discontinued operations.
Underlying net result, which excludes items, was 1.045 billion euros, while it totaled 1.271 billion euros last year.
Total underlying income grew to 11.355 billion euros from 10.355 billion euros, as gross premium income increased slightly to 4.74 billion euros, and investment & other income surged 60 percent to 2.77 billion euros.
Operating expenses were more or less stable at 3 billion euros as the firm maintained a strict vigil on costs.
Addition to loan loss provisions climbed 78 percent to 541 million euros. Exposure to Greece, Italy, Ireland, Portugal and Spain was reduced by 5.6 billion euros compared with the first quarter, mainly due to active de-risking in Spain.
The banking segment reported a net profit of 884 million euros, down 8 percent from last year. Provisions for loan losses increased, as the macroeconomic environment weakened, and the net interest margin declined, despite easing competition for savings. The Bank's underlying result before tax fell over 13 percent to 995 million euros, reflecting higher risk costs.
In the Insurance business, net profit plunged over 47 percent to 288 million euros, due partly to positive non-recurring items in the investment and technical margins last year, as well as pressure on Non-life results in the Benelux. The underlying result before tax fell 51.5 percent to 229 million euros.
The Bank's core Tier 1 ratio strengthened to 11.1 percent from 10.1 percent as of March 31. The Insurance Group Directive ratio increased to 240 percent from 225 percent.
The bancassurer, which received state bailout funding in 2008, said that due to its priority to repay the Dutch State, no interim dividend will be paid in 2012.
The stock closed in Amsterdam on Tuesday higher by 3.12 percent at 5.75 euros on 36.58 million shares.
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