ING Groep NV, the biggest Dutch financial services company, will shed 1,400 jobs in the Netherlands and 1,000 in Belgium after saying fourth-quarter profit missed estimates due to restructuring costs.
Net income was euro 1.43 billion ($1.92 billion) compared with euro 1.19 billion a year earlier, the Amsterdam-based company said in an e-mailed statement today. That missed the euro 1.63-billion median estimate of 12 analysts surveyed by Bloomberg.
The results included euro 643 million in special items after tax, mostly related to restructuring of units.
ING Chief Executive Officer Jan Hommen, 69, will eliminate the 2,400 jobs in addition to 2,350 positions in commercial banking and insurance announced in November. Last year he won more time from European Union regulators to divest insurance operations and repay a 2008 government bailout. He’s seeking to cut costs by euro 1 billion a year by 2015.
“Times are obviously difficult,” said Corne Aben, who helps manage about 1 billion euros of assets including ING shares at Amsterdam-based Optimix Vermogensbeheer NV. “The cost-cutting announcements are incrementally positive, especially as they seem related to a structural shift in business. Hommen is clearly executing the announced strategy step by step.”
Capital decline
ING’s core Tier 1 capital ratio, a key measure of financial strength, dropped to 11.9 per cent at the end of December from 12.1 per cent in the third quarter, as it repaid the Netherlands euro 1.13 billion in aid and premiums.
Underlying pretax profit at ING’s banking operations slid 72 percent to euro 184 million, hurt by a loss of euro 126 million on the sale of southern European bonds.
That reduced risk weighted assets by euro 1 billion. The firm set aside euro 588 million for so-called doubtful loans, compared with euro 445 million a year ago, it said.
ING’s fourth-quarter earnings also included euro 175 million in a Dutch bank tax, introduced in October to force lenders to share in the costs of ensuring financial stability after the nation bailed out companies including ING, SNS Reaal NV and ABN Amro Group NV in 2008 and 2009.
The firm will also have to pay about a third of a euro 1-billion one-time industry levy next year imposed after the Netherlands took control of SNS Reaal on February 1.
Shares slide
ING slid 4.9 per cent in Amsterdam following the nationalisation of SNS for euro 3.7 billion. Shareholders and holders of subordinated bonds in SNS were also forced to share in the costs of the bailout.
The shares have declined 1.8 per cent this year compared with a 9 per cent gain for banks in the Stoxx Europe 600 Index and a 1.2 per cent increase for Europe’s benchmark gauge for insurance companies.
The insurance division had an underlying pretax profit of euro 272 million in the fourth quarter, compared with a loss of euro 1.51 billion a year earlier. Investment margin rose to euro 447 million from euro 413 million.
ING received a euro 10-billion bailout by the Dutch state in 2008, triggered as subprime mortgage assets held at its US unit plunged. It has returned euro 7.8 billion of the borrowing, with euro 2.4 billion in interest and premiums.
The Dutch firm was ordered to sell its global insurance and asset management operations before the end of 2013 as a condition of the bailout. The European Commission said on Novemebr 19 that it extended the deadline because of current market conditions. Under the new time line ING has until the end of 2018 to complete the disposal of its European insurance arm.
In the fourth quarter, ING completed the sale of its Malaysian insurance unit to AIA Group Ltd. for 1.3 billion euros. The disposal of its Canadian online bank in November resulted in a 1.1 billion-euro gain after tax, while the sale of ING Direct U.K. led to a loss of 244 million euros.
