Dutch bancassurer ING Groep NV today returned to profitability after nearly €5 billion of losses in the previous three quarters, but profit was well below the expected result on a loss in banking operations.
The loss in banking was entirely unexpected, as analysts had forecast the business to be very profitable in the quarter. But ING said it was hurt by real estate revaluations, impairments in the United States on mortgage-backed securities, fair value changes on debt and higher risk costs.
The company also raised its year-end cost cuts target by 30 per cent to €1.3 billion and said it will not pay an interim dividend given market conditions.
ING's second-quarter net profit was €71 million, down from €1.92 billion a year earlier. The consensus of 14 analysts polled for Reuters was a profit of €275 million.
After surprising analysts with larger-than-expected loan losses in the first quarter, ING posted loan losses of €852 million in the second quarter. Analysts expected a figure of €776 million.
The banking business lost €204 million before tax on an underlying basis; analysts had expected it to earn €444 million. The insurance operations, on the same basis, earned €278 million versus a consensus forecast of €123 million.
ING received €10 billion in state aid last October and is in the midst of a worldwide cost-cutting program that includes €6 billion to €8 billion in asset sales and an exit from 10 of its 48 countries.
In an interview on CNBC, chief financial officer Patrick Flynn reaffirmed those targets and said ING has identified the businesses it means to sell.
Reuters