ING Q2 Earnings Drop; Cuts Debt

(RTTNews) - Dutch financial group ING Group N.V. (ING) Wednesday reported a decline in the second-quarter net profit, that reflected negative hedge results due to an increase in financial market volatility. The firm said its debt at the end of the quarter was significantly lower.

Jan Hommen, CEO of ING Group who is handing over reins to Ralph Hamers on October 1, said, "ING has made good progress so far this year as we work to improve our operational performance, execute our restructuring and prepare our banking and insurance companies for independent futures."

ING was asked to sell its insurance and investment- management businesses before the end of 2013, as it had taken huge federal aid during the financial crisis. ING U.S., Inc. had said on April 16 that it would sell 64.17 million common shares in an initial public offering to raise up to $1.5 billion.

The company said today that the core debt at ING Group declined from 7.1 billion euros at the end of the first quarter to 4.4 billion euros, following the upstream of the secondary offering proceeds of 0.6 billion euros from the IPO of ING U.S. in May.

ING's net profit dropped 39.1 percent to 788 million euros ($1.05 billion) from 1.29 billion euros in the previous year. Prior-year results have been restated. The latest results reflected negative hedge results driven by an increase in financial market volatility.

The firm recorded a loss of 98 million euros in Insurance and Investment Management Asia, primarily due to some guarantees and hedges in Japan that deteriorated.

On an underlying basis, group net profit was 942 million euros, while it totaled 1.11 billion euros last year.

Underlying pre-tax profit slid 1.3 percent to 1.29 billion euros as increase in the bank business was more than offset by a sharp decline in the insurance U.S. business.

Bank's underlying pre-tax profit climbed 13.5 percent to 1.147 billion euros, reflecting an improvement in net interest margin, a reduction in the cost/income ratio and continued strong net inflow of funds entrusted.

Net inflow of funds entrusted increased by 6.5 billion euros, fuelled primarily by Retail Banking and with net growth in all regions.

Insurance EurAsia reported underlying pre-tax profit of 182 million euros compared to a loss of 110 million euros last year.

The division's total new sales on a constant currency basis declined 20.3 percent, due to a 64 percent decrease in Benelux as a result of lower retail life sales and lower sales and renewals in corporate pensions in the Netherlands. The business saw lower single-premium product sales in Belgium due to the low yield environment.

Insurance business U.S. reported underlying pre-tax loss of 19 million euros, compared to 394 million euros profit last year, reflecting 112 million euros of losses in the US Closed Block VA primarily due to hedge losses as equity markets increased 2.4 percent in the quarter.

Total underlying income, which includes gross premium income, Interest result Banking operations, Commission income as well as Total investment & other income, declined to 9.495 billion euros from 11.338 billion euros in the prior year.

ING said that due to the uncertain financial environment, increasing regulatory requirements and ING's priority to repay the remaining outstanding core Tier 1 securities, no interim dividend will be paid over the first six months of 2013.

The stock fell 1.1 percent on Tuesday to close at 7.86 euros.