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ING Groep Cutting 2,350 Jobs as Quarterly Profit Slides 64%

November 07, 2012

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 (INGA), the biggest Dutch financial-services company, will cut 2,350 jobs in its banking and insurance units after reporting a 64 percent slump in third- quarter profit.

Net income dropped 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 and a charge related to its U.S. annuity unit, ING said.

Chief Executive Officer Jan Hommen is under orders to sell its insurance operations by the end of next year after ING received a 10 billion-euro government bailout in 2008. As the bank prepares to sell shares in its European insurance unit to the public, it’s cutting 1,350 jobs by 2014 and another 1,000 in commercial banking to make total savings of 460 million euros from 2015, it said today.

“These cost-cutting measures are an appropriate step in getting the European insurance unit ready for divestment,” Lemer Salah, an analyst at SNS Securities in Amsterdam with a buy rating on the shares, said by e-mail. “Information- technology support in particular was a huge cost unit and it’s good they’re striving for more efficiency.”

ING rose 1.2 percent to 6.96 euros as of 10:16 a.m. in Amsterdam, extending its advance this year to 25 percent. The Stoxx Europe 600 Insurance Index (SXIP) gained 0.7 percent.

Job Cuts

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 consumer bank announced in November 2011.

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

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

ING earlier this year agreed to sell its Canadian online bank for $3.16 billion and raised about $3 billion by selling shares of U.S. lender Capital One Financial Corp. (COF:US)

Insurance Units

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 20 million-euro goodwill writedown on its life insurance business in South Korea.

ING has so far repaid the Dutch government 7 billion euros of the aid plus 2 billion euros in interest and premiums. Full repayment by 2012, Hommen’s original goal, is 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 company aims to repay a part this year, depending on the outcome of talks with the European Commission, Hommen said.

“Good progress” has been made in talks with European regulators on revised terms for ING’s restructuring, he said. Some divestment plans were derailed by Europe’s debt crisis, while the European Commission is probing whether the Netherlands is making a sufficient return on the funds it provided to the bank.

Systemic Banks

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.

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

ING targets a ratio of more than 10 percent before the end of 2013 taking into account new capital rules known as Basel III. It’s the only Dutch lender on the Financial Stability Board’s list of systemic banks published earlier this month, according to which it will be subject to a 1 percent capital surcharge on top of requirements from the Basel Committee on Banking Supervision.

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


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Companies Mentioned

  • COF
    (Capital One Financial Corp)
    • $81.65 USD
    • -0.75
    • -0.92%
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