ING Groep NV, the biggest Dutch financial-services company, reported profit that missed analysts’ estimates on restructuring expenses as it announced 1,400 more job cuts in the Netherlands and 1,000 in Belgium.
Fourth-quarter net income was 1.43 billion euros ($1.92 billion), up from 1.19 billion euros a year earlier, Amsterdam-based ING said. That missed the 1.63 billion-euro median estimate of 12 analysts surveyed by Bloomberg. ING incurred 643 million euros in special items after tax, including expenses for the job cuts announced Wednesday.
ING also set aside more money for bad loans and reported a weaker capital ratio as it repaid its government bailout. ING Chief Executive Officer Jan Hommen, 69, is eliminating 2,400 more jobs after announcing 2,350 cuts to the commercial banking and insurance workforce in November, aiming to reduce costs by 1 billion euros a year by 2015.
ING had “less benefits from de-risking than we had anticipated,” Jan Willem Weidema, an Amsterdam-based analyst at ABN Amro Bank NV, said by e-mail. “Capital ratios in the bank somewhat disappointed.”
ING shares fell as much as 2.9 percent and were down 2 percent to 6.80 euros at noon in Amsterdam, giving the company a market value of 26 billion euros. That exceeded the 0.5 percent decline for banks in the pan-European Stoxx Europe 600 Index and a 0.4 percent decrease for Europe’s benchmark gauge for insurance companies.
ING is the fifth-worst-performing stock in the 33-member Stoxx 600 insurance index this year.
“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.”
ING’s core Tier 1 capital ratio, a key measure of financial strength, dropped to 11.9 percent at the end of December from 12.1 percent in the third quarter, as the company repaid the Netherlands 1.13 billion euros in aid and premiums. ABN Amro’s Weidema had forecast a core Tier 1 ratio of 12.4 percent.
Underlying pretax profit at ING’s banking operations slid 72 percent to 184 million euros, hurt by a loss of 126 million euros on the sale of southern European bonds. That reduced risk- weighted assets by 1 billion euros. The firm set aside 588 million euros for so-called doubtful loans, up from 445 million euros a year ago.
ING’s fourth-quarter earnings were also cut by 175 million euros to pay a Dutch bank tax, introduced in October to force lenders to share 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 1 billion-euro one-time industry levy next year imposed after the Netherlands took control of SNS Reaal on Feb. 1.
ING shares have dropped 8 percent since SNS was nationalized for 3.7 billion euros. Shareholders and holders of subordinated bonds in SNS were also forced to share in the costs of the bailout.
The insurance division, whose units are up for sale, had an underlying pretax profit of 272 million euros in the fourth quarter, compared with a loss of 1.51 billion euros a year earlier. Investment margin rose to 447 million euros from 413 million euros.
ING’s 10 billion-euro bailout by the Dutch state in 2008 was triggered as subprime mortgage assets held at its U.S. unit plunged. It has repaid 7.8 billion euros of that sum, with 2.4 billion euros in interest and premiums.
Last year, Hommen won more time from European Union regulators to divest the insurance operations due to weak market conditions. 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 Nov. 19 that 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.
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