ING Q1 Profit Misses Estimates; Loan Losses Remain High

May 7, 2014

Dutch financial group ING made underlying profits of €988 million ($1.374 billion) in the first quarter of the year, slightly missing expectations, as loan losses remained high despite a better outlook for the Dutch economy.

A Reuters poll of ten analysts predicted underlying net profits of €1.103 billion [$1.5347 billion] for the group, which said on Wednesday it would inject €850 million [$1.183 billion] of fresh capital into the insurance arm it is selling later this year.

“ING Bank posted a solid first-quarter underlying pre-tax result of €1.176 billion [$1.636 billion], reflecting an increase in the net interest margin and lower risk costs as economic conditions improved,” Chief Executive Ralph Hamers said in a statement.

Underlying net interest margin – or the gap between what the bank pays for funding and what it earnings from lending – came in at 150 basis points, in line with its target of 150 and 155 basis points by 2017 and well ahead of the 138 basis points recorded in the first quarter of 2013.

Loan losses at the bank came in at €468 million [$651 million] for the quarter, down on the €561 million [$780.5 million] in the first quarter of 2013 and in line with the bank’s guidance that last year was the peak. Net lending grew by €5.1 billion [$7.1 billion], higher than the €2.5 billion [$3.4785 billion] of new lending in the first quarter of 2013 and the €2.1 billion [$2.92 billion] in the last quarter of 2014.

Analysts see loan growth, which is particularly challenging in the muted Dutch home market, as key to ING’s future earnings. Earlier this week, the European Commission raised its economic growth forecasts for the Netherlands, which is still expected to lag EU-area growth for 2014 and 2015.

The bank’s return on equity was 10.2 percent for the quarter, against a target of 10 to 13 percent. Its core tier one capital, a key measure of financial strength, came in at 10.1 percent.

The group confirmed that a mooted stock market offering of its insurance arm would now only be a secondary listing, after it attracted private investment of €1.275 billion [$1.774 billion] and agreed to put €850 million [$1.182 billion] of group capital into the insurer.

(Reporting by Laura Noonan; Editing by Miral Fahmy)

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