ING Groep NV, one of Europe's largest banking and insurance groups, reduced its losses to €712 million ($980 million) for the fourth quarter on Wednesday, reflecting a mixed operating performance and a big charge related to an earlier bailout.
ING Groep NV, one of Europe's largest banking and insurance groups, reduced its losses to €712 million ($980 million) for the fourth quarter on Wednesday, reflecting a mixed operating performance and a big charge related to an earlier bailout.
ING's net loss was less than the €3.71 billion the company lost in the same period a year ago at the height of the financial crisis.
This quarter's figures included a one-time payment to the Dutch state of €930 million. That was demanded by the EU Commission's competition authority after it ruled a bailout package given to ING by the Netherlands was too generous.
ING made a €132 million profit at its banking division, mostly due to a highly profitable retail banking arm, but its corporate and real estate banking arms continued to lose money. In addition, provisions against bad loans rose by €686 million. A year ago the banking division lost €1.84 billion.
"The bank showed a strong commercial performance, supported by improved interest margins, higher results from financial markets and cost reduction," said Chief Executive Jan Hommen in a statement.
The company has cut 7.9 percent of staff over the past year and now employs 107,173 people.
Shares rose 1.1 percent to €6.52 in early trading.
Analyst Maarten Altena of SNS Securities, who rates shares a "Buy," said the earnings were worse than expected due to a one-time charge at the company's insurance operations.
"The underlying performance of the bank was solid, while the insurance was mainly impacted by weak sales," he wrote in a note on the earnings.
"Weak US housing markets will continue to trigger impairments and loan losses will remain high for the coming quarters," he added.
Under pressure from the EU, ING is planning to split its banking and insurance arms by the end of 2012.
ING lost €47 million at its insurance division, compared with a €2.5 billion loss a year ago.
The main reason for the improvement was lower underwriting expenses, thanks to the stock market recovery, which allows the company to set aside less cash to pay claims.
However, ING's fourth quarter insurance loss was much less than the €311 million profit it made in the third quarter. This quarter the company took a €343 million charge at its annuities business in the U.S. and Japan.
Customers are incurring fewer "surrenders" — costs for early withdrawal from variable annuity investments — than ING expected.
ING's insurance premium income was down 26 percent, mostly because the company has scaled back selling annuities in the U.S. and Japan.
Included in the fourth quarter insurance results are a €273 million profit on investments, compared with a loss of €217 million a year ago.
