ING Quarterly Profit Rises 12%, Beating Analysts’ Estimates
May 05, 2011, 4:51 AM EDTBy Maud van Gaal
(Updates with analyst comment in fourth paragraph.)
May 5 (Bloomberg) -- ING Groep NV, the biggest Dutch financial-services company, reported a 12 percent increase in first-quarter profit that beat estimates as earnings at the insurance unit almost quadrupled.
Net income climbed to 1.38 billion euros ($2.05 billion) from 1.23 billion euros in the first three months of 2010, the Amsterdam-based firm said in a statement today. ING shares rose as much as 2.9 percent as profit exceeded the 1.25 billion-euro average projection of eight analysts surveyed by Bloomberg.
ING is preparing its insurance unit for a sale, a condition for the European Union’s approval of government aid. The firm is considering two initial public offerings, one for the European and Asian operations and one for the U.S., while “exploring all options” for the Latin American part of the business. Chief Executive Officer Jan Hommen has said the IPOs are likely to take place in 2012 depending on market conditions.
“These are strong results, underlining ING is well on track,” said Lemer Salah, an Amsterdam-based analyst at SNS Securities. “The nice comeback of the operational result at insurance will brush up the unit’s reputation and allow management to concentrate on its divestment.”
ING shares rose 21 cents, or 2.3 percent, to 8.99 euros as of 10:12 a.m. in Amsterdam trading. They have gained 24 percent this year, giving the company a market value of about 34.5 billion euros.
Insurance Earnings
The insurance division had an underlying pretax profit of 461 million euros, up from 121 million euros a year earlier. Fees and premium-based revenue rose 11 percent to 1.33 billion euros in the quarter.
ING in November said it was taking steps to bring accounting and hedging for its variable annuities business at the U.S. insurance operations in line with peers ahead of the sale and increase reserves of the business. The company took a 975 million-euro pretax writedown in the fourth quarter.
The firm earlier this year hired two former American International Group Inc. executives to help prepare its U.S. insurance business for an IPO. Rodney Martin became CEO of the unit, while Alain Karaoglan was named vice president of finance and strategy.
ING received 10 billion euros of state aid in 2008 and transferred the risk on 21.6 billion euros of U.S. mortgage assets to the Dutch government. The company, which paid back 5 billion euros in December 2009, is scheduled to redeem another 2 billion euros next week from retained earnings after its banking business recovered in 2010. The firm plans to repay the remainder of the aid by May 2012, it reiterated today.
Balance Sheet
ING seeks to reduce its balance sheet by about 45 percent from 2008 levels. In addition to EU-imposed divestments, which also include its U.S. online banking unit and Dutch retail lender WestlandUtrecht Bank, the company has been selling other non-strategic assets. The company earlier this year agreed to sell the majority of its Real Estate Investment Management unit for about 770 million euros.
The firm may move ING Direct USA’s Alt-A mortgage assets and the risk-transfer deal with the Dutch state to ING Bank as it prepares to divest the online unit, Chief Risk Officer Koos Timmermans said on a call today. “We’re not planning on a short notice to unwind this transaction, but we might change the ownership of that transaction within ING,” he said.
The company is “sounding the market” for interest in WestlandUtrecht, which is mainly a mortgage bank. In light of new Basel III capital and liquidity requirements, there aren’t “that many potential candidates in a position to buy” the unit, Hommen said.
Underlying profit before tax at ING’s banking operations rose 32 percent to 1.70 billion euros. The firm set aside 332 million euros for doubtful loans, compared with 497 million euros a year earlier and 415 million euros in the final three months of 2010.
--With assistance from Martijn van der Starre in Amsterdam. Editors: Christiane Lenzner, Frank Connelly
To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
