ING eyes more cost cuts as bank profit tops forecast
Dutch financial group ING beat second-quarter profit forecasts at its main banking business and said it was looking at further possible cost savings as it continues to slim down in a drive to recover from the financial crisis.
ING shares rose nearly 4 percent to 8.17 euros ($10.87) in early Wednesday trading, their highest since 2011.
Bailed out by the Dutch state in 2008, ING has dismantled its once-fashionable banking and insurance model and announced thousands of job cuts and other cost savings.
The group reiterated it was on track for its next big divestment, its European insurance unit, in 2014. Outgoing chief executive Jan Hommen, 70, said he would give more details about the various options for the unit - initial public offering, spin-off, trade sale or some combination - on September 19.
ING has raised about 23 billion euros ($30.6 billion) in total from divesting insurance, investment management and other assets in order to repay state aid.
CFO Patrick Flynn told CNBC he was starting to see an improvement in the Dutch economy, ING's domestic market, but said it was still struggling to pull out of recession.
"Some of the fundamentals are beginning to come through to give the basis of a recovery but it's not there yet," Flynn said. "It's the end of the beginning rather than the beginning of the end."
He warned that loan loss provisions could stay elevated for "a little while to come",
ING posted a 39 percent drop in second-quarter net profit to 788 million euros, hit by a 98 million euro loss from Asian operations, which it said was due to guarantees and related hedges at its insurance business in Japan.
A poll of three analysts commissioned by Reuters gave an average forecast for net profit of 944 million euros, with forecasts ranging from 882 million to 1.05 billion euros.
However, underlying pre-tax profit at ING's banking operations rose 13.5 percent to 1.15 billion euros, beating the average forecast for 989 million euros. That was driven by cost cutting and a higher net interest margin.
ING's cost/income ratio improved slightly to 54.3 percent, from 55.2 percent in the first three months of the year.
But against the backdrop of a weak European economy, demand for lending remained lacklustre, while non-performing loans increased to 2.8 percent of outstanding credit, up from 2.6 percent at the end of the first quarter, with a significant increase in the real estate sector.
"ING released a mixed set of results as deteriorating asset quality is overshadowing the solid underlying performance," said KBC Securities in a research note.
ING's European insurance business turned to an underlying pretax profit of 182 million euros, at the lower end of forecasts, from a loss a year ago of 110 million euros.
Follow us on Twitter: