AMSTERDAM - ING Groep NV, the Dutch banking and insurance group, says net profit was 39 per cent lower in the second quarter from the same period a year ago, on losses incurred on a U.S. retirement product and on discontinued operations, and because it booked large one-time gains in 2012 on its pension plans.
However the company said Wednesday the operational picture at both its insurance arms and banking arms is improving, five years after its bailout by the Dutch state — which has still not been fully repaid.
Second-quarter net profit was 788 million euros ($1.05 billion), down 39 per cent from 1.29 billion euros in the same period a year earlier.
ING said Wednesday its underlying banking earnings had improved to 1.15 billion euros from 1.01 billion euros, as its loan margins expanded and it saw strong deposit inflows.
The company said insurance operations were thriving — however it no longer reports them as a single unit. It plans to sell shares in its European and Asian insurance operations next year. It has already done the same for its U.S. arm this year.
"The financial performance in all three business segments was robust in the second quarter," said CEO Jan Hommen, who is due to retire in favour of Ralph Hamers in October. He praised the bank numbers as showing one of the strongest returns on investment the bank has seen since the crisis began, "despite higher risk costs (provisions against bad loans), reflecting the challenging economic climate."
Shares rose 3.1 per cent to 8.104 euros in early trading in Amsterdam.
The U.S. insurance arm was hit by large losses on its variable annuities division, which is hedged to lose money when stock markets rise — as they have recently. The arm's operating result was 140 million euros, a 37 per cent rise from a year ago. But that turned to a loss of 19 million euros after accounting for the hedge, while a year earlier, similar hedges in a falling market led to the opposite effect: a profit of 392 million euros.
ING's European/Asian insurance arm operating result was up 26 per cent to 256 million euros, as earlier cost-cutting efforts bore fruit.
But not included in the operational numbers were a 98 million euro charge on discontinued insurance operations in Asia that made 111 million euros profit a year earlier. Also, the company last year booked a profit of around 300 million last year after switching its Dutch employee pensions to a "defined contribution," instead of a "defined benefit" system.
ING still owes the Dutch state 2.2 billion euros, due to be repaid by 2015, so it doesn't plan to pay any dividends this year. It noted that its shareholders' equity dipped to 49.9 billion euros from 54.4 billion euros, as it was forced to value its stake in its US insurance arm at its market price after the initial public offering in May.