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  • bluecheese4u bluecheese4u May 9, 2012 2:00 AM Flag

    ING posts 1Q12 underlying net profit of EUR 705 million

    ING posts 1Q12 underlying net profit of EUR 705 million

    9 May 2012
    •ING Group 1Q12 net profit totalled EUR 680 million, including the impact of divestments and special items
    •Bank underlying result before tax increased 65.1% from 4Q11 to EUR 1,126 million, helped by lower impairments. Results include EUR -304 million of valuation adjustments (CVA/DVA) and fair value changes on own Tier 2 debt as credit spreads tightened. Excluding that impact, Bank results were down just 6.8% from a strong 1Q11
    •Insurance posted an operating result of EUR 475 million, supported by a strong investment margin and higher fees and premium-based revenues. Sales rose 5.1% from 1Q11, and jumped 29.6% from 4Q11. Underlying results were impacted by losses on hedges to protect regulatory capital, leading to a pre-tax underlying loss of EUR 18 million
    •Capital ratios remained strong: ING Bank’s core Tier 1 ratio strengthened to 10.9%, reflecting the sale of ING Direct USA and ongoing capital generation. The Insurance IGD solvency ratio remained stable at 225%
    •ING has begun discussions with the Dutch State, and together with the State will soon start discussions with the European Commission following the favourable court ruling on ING’s appeal

    Chairman's Statement

    “The operating environment remained challenging in the first quarter, as the European sovereign debt crisis persisted, increasing volatility on financial markets. The impact of this environment was evident in our underlying results, which declined from a strong first quarter last year; however, earnings for both Bank and Insurance improved from the previous quarter,” said Jan Hommen, CEO of ING Group.

    “Bank results rose 65.1% from the fourth quarter, supported by lower impairments, despite a negative CVA/DVA adjustment in the first quarter of 2012. Expenses declined compared with both prior quarters, and loan loss provisions improved slightly from the fourth quarter, but are expected to remain elevated given the weakening economic environment in Europe. Although competition for savings remained intense, Retail Banking attracted EUR 11.4 billion in new deposits, further strengthening the funding position of ING Bank, and on professional markets the Bank raised EUR 9.2 billion of long-term funding. The capital position strengthened further with a 10.9% core Tier 1 ratio.”

    “Insurance results recovered from the fourth quarter, though underlying earnings continue to be impacted by mark-to-market losses on hedges to protect regulatory capital. Operating results remained solid, driven by a strong investment margin and higher fees and premium-based revenues as sales gained momentum in Asia, the US and Central Europe.”

    “While ING welcomed the favourable court ruling on ING’s appeal against the European Commission, we remain committed to the decision to separate the banking and insurance operations, and are making good progress in preparing our Insurance and Investment Management businesses for stand-alone futures in Europe and the US.”

    Analyst and investor conference call, 9 May 2012, 9:00 Amsterdam time

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    • If you check ING's 1Q2012 report, 4 facts stands out:

      1)Total Income would be OK. Except the loss of "Investment&Other, which last year was positive 1490M, this year -504M. This is cca. 2.0B loss of income. The statement simply overlooks this, no explanation for 2.0B income loss.

      2)Expenditures are largely as expected. The loan-loss provisions are 441M, close to highest level in the 6 quarters. Risk cost is still very high and "will remain so".

      This signals ING has a lot of problems with their loan portfolio. This is confirmed by NPL going up from 2.0% to 2.1%.

      3)ING's insurance business recovery looks broken down. Despite the last 2 quarter's virtual improvement, insurance result is negative again, the business looks very weak. Clearly a loss-center.
      Very sad, especially in the light of the fact that most of world's insurers are fast improving and are in much better shape. They currently usually produce at PE=7-9, while ING's is negative again.

      4)As result, underlying total net result dropped cca. 50% compared to year-ago result. This is very disappointing.
      But the tragedy is the special items after tax -515M, which more than annihilated all the divestment gains +489M.
      Most of those losses are made by Corporate Line Banking.

      Summary: almost all losses are direct consequences of very poor business management.

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