S&P Affirms ING’s Group Ratings; Outlook Remains Stable

Standard & Poor’s Ratings Services has affirmed its ‘AA-/A-1+’ counterparty credit ratings on both ING Groep N.V. and ING Verzekeringen N.V. S&P also affirmed its ‘AA/A-1+’ counterparty credit ratings on ING Bank N.V., and said that “the outlook on all entities remains stable.”

Credit analyst Claire Curtin explained: “The affirmation follows the group’s announcement yesterday of a €10 billion [$12.9 billion] capital injection by the State of The Netherlands to increase capitalization at the bank and insurer, and reduce holding company leverage.

“The rating action also reflects the announcement of the sale of ING’s insurance activities in Taiwan and the group’s pre-announced €500 million loss for the third quarter of 2008,” she added.

S&P noted: “On Oct. 9, the Dutch government established a fund with an initial amount of €20 billion [$25.8 billion], to be made available to ‘fundamentally sound and viable’ financial institutions. The capital increase aims to provide the group with a strong buffer to navigate the ongoing difficult market and economic conditions.

The €500 million [$646 million] loss reported for the third quarter of 2008 resulted from pressures from several directions, including markdowns and impairments on securities, the revaluation of real estate, and higher cost of credit at the bank. These totaled around €2 billion [$2.583 billion], illustrating the level of turmoil in financial markets during the quarter. Profitability in the fourth quarter is likely to remain challenged.

Curtin explained that the “stable outlook reflects the improved capitalization and leverage following the government capital injection, and our expectations of continuing good underlying performance, resilient client balances, and solid liquidity.”

S&P indicated that “ING’s diversification and risk management are strengths in the current rating. It retains good medium-term growth opportunities in areas such as emerging markets and U.S. retirement services.”

However, the rating agency cautioned that a “negative outlook could arise from a marked deterioration in earnings or asset quality, or from material impairment in asset-backed securities or commercial real estate exposures. Adverse trends in client balances, combined with weaker financial markets, could also pressure the ratings. A positive rating action is considered unlikely in current market conditions.”

Source: Standard & Poor’s – www.standardandpoors.com

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