Oct. 21 (Bloomberg) -- ING Groep NV, the largest Dutch financial-services company, had the credit rating on its senior debt cut to Aa3, the fourth-highest investment grade, by Moody's Investors Service on narrowing margins in the banking unit.

Moody's also lowered by one grade the financial-strength and long-term senior debt ratings of ING Bank NV to B- and Aa2 respectively and cut the senior debt rating of ING Verzekeringen NV to A1 from Aa3, according to a statement today. In addition, the ratings firm said it's reviewing the Aa3 financial-strength ratings of ING's life-insurance units in the U.S. for possible downgrades.

Today's cut mainly reflects lower profitability at the banking unit, while a 10 billion-euro ($13-billion) capital infusion by the Dutch government assures a stable outlook for all the ratings that were lowered today, Moody's said. The downgrade brings its assessment of ING Groep's long-term creditworthiness in line with the ratings applied by Standard & Poor's and Fitch Ratings, whose AA- ratings on ING are equivalent to Aa3 at Moody's.

``The bank is now a clear outlier within its rating category for both profitability and efficiency, a consequence of the low margins in banking activities in the Benelux and in ING Direct's operations,'' Antonello Aquino, a London-based credit analyst at Moody's, wrote in the statement.

Received Lifeline

ING received a 10 billion-euro lifeline from the Dutch government on Oct. 19 to shore up capital after reporting a first quarterly loss two days earlier. The preliminary third-quarter net loss of about 500 million euros included 1.6 billion euros of writedowns on investments in stocks, bonds, structured credit and real estate.

The Amsterdam-based bank and insurer also marked down its U.S. residential mortgage and collateralized debt obligation portfolios, reducing shareholders' equity by 1.5 billion euros after taxes.

The review of ING's U.S. life-insurance businesses will focus on ``expected and stress-level losses likely to materialize on the investment portfolio,'' Aquino wrote. ``The effect of the volatile equity market and economic turbulence on ING US' heavily equity-based and interest-sensitive accumulation business will be an additional focus.''

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net

Last Updated: October 21, 2008 17:13 EDT