ING Groep NV, the biggest Dutch financial-services company, will complete its reorganization two years earlier than planned after winning regulators’ permission to combine its Japanese insurance unit with European operations in a 2014 initial public offering.
Under its agreement with the European Commission, ING will accelerate the sale of all of its European insurance and investment management activities by two years to the end of 2016, the Amsterdam-based company said today. The deadline to sell more than half of ING Life Japan was extended by two years to the end of 2015 after the company failed to find a buyer.
“The positive news is they found a solution for Japan,” said JanWillem Knoll, an Amsterdam-based analyst at ABN Amro Group NV. “Now they can sweat the bad assets out rather than being a forced seller.” Knoll has a buy rating on the shares.
Since taking over in October, Chief Executive Officer Ralph Hamers, 47, has cut ING’s stake in its U.S. insurance unit to about 57 percent and reached a deal with the Netherlands on how the nation will sell U.S. mortgage bonds it took over in a 2009 bailout. ING today reported third-quarter profit excluding one- time items that was in line with analysts’ estimates.
The shares rose as much as 4.7 percent in Amsterdam trading, and were up 4.3 percent to €9.68 [$13.08] as of 9:54 a.m. The stock has increased 37 percent this year.
Net Income
Net income dropped 85 percent to €101 million [$136.45 million] in the third quarter from a year earlier, after a €950 million [$1.283 billion] write-down on the sale of its South Korean life insurance unit, ING reported. Profit excluding one-time items rose 5.6 percent to €891 million [$1.203 billion], compared with the €899 million [$1.214 billion] estimate of analysts.
ING is paying the Netherlands €1.13 billion [$1.756 billion] in state aid received in 2008 with interest today, a step toward resuming dividend payments to investors. It will make a subsequent payment in March and a final reimbursement by May 2015.
“We look to pay the next one on the due date next year,” Chief Financial Officer Patrick Flynn told reporters on a call today. “Thereafter we’ll see what the lay of the land is. Our ambition would be to exit the state as fast as possible whilst maintaining prudent capital ratios.”
ING got a €10 billion [$13.51 billion] capital injection from the Dutch government in 2008 and transferred the risk on €21.6 billion [$29.18 billion] of U.S. mortgage assets to the Dutch government in 2009. The rescue was approved by EU regulators on the condition that the company sells its global insurance operations and returns the financial aid with a premium and interest.
‘End Phase’
“ING continued to make strong progress on its restructuring program in the third quarter, advancing further into the end phase of our transformation,” Hamers said in today’s statement.
While working through the restructuring, Hamers has to deal with struggling European economies, including the recession in its home market.
The European Commission, the European Union’s executive arm, yesterday cut its forecast for euro-area growth next year as the economy struggles to gain momentum with the debt crisis dragging into a fifth year and unemployment at a record. Gross domestic product in the 17-nation currency bloc will rise by 1.1 percent in 2014, less than the 1.2 percent forecast in May, according to the forecast.
The commission also lowered its 2014 economic forecast for the Netherlands, citing weak domestic consumption that will only gradually pick up in the course of next year.
Pretax profit excluding one-time items at ING’s banking operations fell 0.6 percent to €1.1 billion [$1.486 billion], beating the €1.03 billion {$1.391 billion] estimate of six analysts in a Bloomberg survey. The bank set aside €552 million [$745.75 million] for bad loans in the third quarter, less than the €608 million [$821.4 million] estimate of analysts.
Loan-loss provisions, while lower than the previous quarter, are expected to remain high in the foreseeable future, Chief Risk Officer Wilfred Nagel said today.
–Editors: Frank Connelly, Keith Campbell
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