ING reported a decline in operating net profits on Thursday as strength in banking failed to offset difficulties at its insurance division. The Dutch financial services group reported a 3 per cent fall in operating net profits to Ã¢âÂ¬ 902 mln in the first quarter to March 31 2003, at the top end of the range forecast by analysts.
However, unrealised capital losses on equities of Ã¢âÂ¬ 735 mln - an almost Ã¢âÂ¬ 1 bn reverse from the capital gain of Ã¢âÂ¬ 205 mln a year earlier - saw net profits reduced to Ã¢âÂ¬ 167 mln. This means the market value of ING´s equity investment portfolio is now Ã¢âÂ¬ 735 mln less than its cost price, although rising share prices could change this figure by the end of the year.
'Should the stock markets show a further recovery in the course of 2003, the revaluation reserve may become positive again,' said Ewald Kist, ING chairman. 'This means that our top priorities continues to be strengthening of the capital base and the lowering of the cost base,' he added.
Total operating costs fell 8 per cent to Ã¢âÂ¬ 3.2 bn. ING said that it would reduce its workforce by a further 1,000-1,500 by the end of 2005. Banking profits in the first quarter rose 14 per cent to Ã¢âÂ¬ 398 mln due to higher interest results and lower expenses. ING Direct, the internet bank that earlier this week launched operations in the UK, made a profit of Ã¢âÂ¬ 7 mln against a loss of Ã¢âÂ¬ 46 mln a year earlier.
However, profits from the insurance division declined 13 per cent to Ã¢âÂ¬ 504 mln, reflecting votatile stock markets and weak consumer demand for unit-linked products. ING said its insurance operation had a solvency level of 158 per cent, down from 169 per cent at the end of the year though above the 100 per cent requirement. An insurer´s solvency level refers to its free capital as a percentage of the minimum required free capital required by regulators.
ING declined to make a forecast for the full-year, citing market uncertainties. However, analysts have predicted a 13 per cent fall in net profits to Ã¢âÂ¬ 3.8 bn. Shares in ING fell 1.3 per cent to Ã¢âÂ¬ 14.16 in Amsterdam on Thursday morning.
Source: Financial Times