ING Groep Cutting 2,350 Jobs as Quarterly Profit Slides

ING Groep Will Cut 2,350 Jobs After Quarterly Profit Slumps 64%
ING is under orders to sell its insurance operations before the end of 2013 after receiving a government bailout. Photographer: Goh Seng Chong/Bloomberg

ING Groep NV, the biggest Dutch financial-services company, will cut 2,350 jobs as it lowers costs and prepares to meet pledges to sell units.

Net income dropped 64 percent to 609 million euros ($784 million) from 1.69 billion euros a year earlier, the Amsterdam-based lender said in a statement today. That missed the 846 million-euro median estimate of nine analysts surveyed by Bloomberg. Profit fell after losses on hedges protecting the insurer’s capital, a charge related to its U.S. annuity unit, and measures to cut risks from investments, ING said.

Chief Executive Officer Jan Hommen is under European Union orders to sell insurance operations by the end of next year. “Good progress” was made in talks with the regulator on revised terms for the restructuring, he said, after some disposal plans were derailed by Europe’s debt crisis. ING said it’s cutting 1,350 insurance jobs by 2014 and another 1,000 in commercial banking for savings of 460 million euros from 2015.

The job reductions are “positive for the future earnings capacity of the company,” said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International with a buy rating on the shares. “The statement on good progress in the dialog with the European Commission about the revisions to the restructuring plan is another positive as it may reduce possible losses on disposals and enable a faster government pay back.’”

ING fell 0.2 percent to 6.86 euros as of 2:16 p.m. in Amsterdam, extending its advance this year to 24 percent. The Stoxx Europe 600 Insurance Index slipped 0.2 percent.

Job Cuts

Insurance job cuts will lead to a charge of about 150 million euros in the fourth quarter, ING said. Reductions in commercial banking over the next three years will spark a similar provision, it said. The measures follow 2,700 job cuts in the Dutch retail banking unit announced last year.

ING has 12,000 employees in its European insurance and investment management businesses and 10,500 in its global commercial bank, it said today.

ING’s insurance unit reported a drop in pre-tax profit, excluding divestments and one-time items, of 91 percent to 44 million euros.

“We are taking steps to increase our agility in this uncertain environment,” Hommen said in the statement.

Underlying pre-tax profit in ING’s banking unit increased by 16 percent to 1.02 billion euros, helped by a 323 million-euro gain on the sale of a stake in U.S. lender Capital One Financial Corp.

‘Steady Performance’

The results “showed a steady performance in a tough market,” said Lemer Salah, an Amsterdam-based analyst at SNS Securities who recommends clients to buy the stock. “The company is taking the right steps to divest its insurance assets and further improve its efficiency.”

ING still aims to repay the Dutch state at least part of

4.5 billion euros it still owes this year, Hommen told reporters.

The sale of insurance units in Hong Kong, Thailand, Malaysia and a stake in China Merchants Fund should lead to transaction gains of 1.89 billion euros. The selling process for other units in the region is “ongoing,” ING said. The third-quarter profit included a 200 million-euro goodwill writedown on its life insurance business in South Korea.

ING plans to sell a first tranche of its U.S. insurance unit in 2013 after filing a registration statement to regulators in the next three to four months, according to the CEO. Part of the proceeds may be used to capitalize the unit after it’s split from the group, he said.

Asset Sale

On top of the disposals ordered by the European Union, ING is selling bank assets to speed up repayment to the Dutch state. In August it agreed to sell its Canadian online bank for $3.16 billion.

So far the company has returned the Dutch government 7 billion euros out of 10 billion euros received in 2008 plus 2 billion euros in interest and premiums. Full repayment by 2012, Hommen’s original goal, became uncertain because of Europe’s debt crisis and tougher capital requirements.

The bank will make the repayments as quickly as possible, Chief Financial Officer Patrick Flynn said in an interview with Bloomberg Television today. The timing is depending on the outcome of the talks with the European Commission, Hommen said.

ING’s tier one capital adequacy ratio was 12.1 percent at the end of the third quarter, according to the statement. Sales of 2.4 billion euros in debt holdings, including Spanish covered bonds as well as Spanish and Irish residential mortgage-backed securities, cut risk-weighted assets by 5 billion euros. The bonds were sold at a loss of 258 million euros.

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