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ING Q2 profit shrinks after heavy writedowns

ING Groep turned a small profit after three quarters of heavy losses, but the profit was well below expectations as real estate writedowns drove the banking business to a surprise loss. The writedowns, a 30% increase in year-end cost-cut targets and uncertainty over the financial group's ability to wean itself off state aid raised fresh questions about how aggressive its asset sale program will have to be.

ING took a hit of nearly €700 million on its real estate portfolio, and said it is “reviewing additional strategic options” to pay back the €10 billion in emergency aid it took from the Dutch state last year.

Combined with the ongoing review of its aid package at the European Commission, the statement raised speculation about whether ING will have to sell more assets than it forecast when it announced a restructuring in April.

ING shares dropped sharply, wiping out a big chunk of the gains they made in the last month. Steep declines in the value of new business and single premiums in its European insurance operations appeared to weigh on competitors as well, with Aegon down a day before it reports its earnings.

KBC Securities downgraded ING to “accumulate” from “buy,” while SNS Securities said it was “somewhat disappointed” with the results and the ongoing uncertainty. (Reuters)