ING aims for swift exit from bail-out

By Matt Steinglass in Amsterdam

Published: February 16 2011 19:36 | Last updated: February 16 2011 19:36

Dutch bancassurer ING has signalled a fresh determination to secure a swift exit from government bail-out money this year, as it announced strong profits of €3.22bn ($4.34bn) for 2010, turned round from a €900m loss a year earlier.

Jan van Hommen, chief executive, said on Wednesday that one of the priorities for 2011 would be an effort to repay more of the €10bn in aid the Dutch government pumped into the bank during the financial crisis, by buying back tier 1 assets the government currently holds for it. Having repaid €5bn just over a year ago, he said he was “quite hopeful that we can repay the Dutch state to a significant amount this year”.

ING’s banking arm performed strongly, reporting pre-tax profits of €1.5bn in the fourth quarter, driven by an unexpectedly strong rise in its interest margin to 1.47 per cent.

But the group’s insurance business fell into loss, dealing a potential blow to plans to float the operation. The insurance arm’s €690m loss in the fourth quarter was triggered by a €975m one-time deferred acquisition charge on a closed block of policies in the US.

ING operationally separated its banking and insurance divisions as of the end of 2010. It plans to spin its insurance operations off in two initial public offerings, with details yet to be announced.

Responding to reporters’ queries on Wednesday, Mr Van Hommen emphasised that the group’s insurance operations had returned to profitability in 2010 apart from the one-time DAC charge. “The US operations, the franchises that are there, the retirement services and the life business are very good businesses. So we do have a company right now that the experts say we can do an IPO with,” Mr Van Hommen said.

The group’s insurance arm showed an operating profit of €438m in the fourth quarter, before accounting for the DAC charge and other non-operating expenses.

The costs of separating the banking and insurance operations were €85m for the year. The group expects to spend a further €200m on separation costs in 2011, which it will book as special items.

ING reported its core tier one capital ratio had increased to 9.6 per cent by the end of the year, from 7.8 per cent a year earlier, as it prepares to comply with Basel III requirements.