ING to Cut 2,700 Jobs as It Announces Improved 3Q Results
November 5, 2011 by Robert O'Connor
AMSTERDAM, Netherlands – Reporting improved third-quarter results within a broader climate of economic uncertainty, Netherlands-based global financial services provider ING Group announced the elimination of 2,700 jobs.
ING Group announced an underlying third-quarter net result of 1.28 billion euros (US$1.76 billion), up from 835 million euros for the third quarter of 2010.
“As income is coming under pressure, we must renew efforts to reduce expenses across the group to adapt to the leaner environment and maintain our competitive position,” Jan Hommen, group chief executive officer, said in a statement.
The job losses, ING said, will apply to about 2,000 internal employees and 700 “external” employees. The group estimated that about 10% of its internal work force will go.
ING’s announcement comes as anxiety has gripped the European financial and political world over the likely fate of the euro.
ING spokesman Raymond Vermeulen, blamed the job losses within the group on the “current weakening economic environment,” particularly in the Netherlands. He also cited the costs associated with both increased attention from regulators and higher expectations from customers.
“As we see income coming under pressure, we must renew efforts across the group to reduce expenses,” Vermeulen said.
The job losses will largely affect middle and back office and corporate employees, Vermeulen said. They will follow earlier efforts to reduce costs in the group’s Dutch retail banking operation.
“We will try to improve customer service by reducing complexity from our processes and streamlining our workflows,” Vermeulen said.
The group suffered an impairment of about 500 million euros from its exposure to Greek government bonds. The effect was split about evenly between ING’s banking and insurance operations. The group has responded by moving bonds issued by governments in southern Europe.
This shift reflected “a prudent approach to risk” and a willingness to hedge, Hommen said.
Consumers and businesses, Vermeulen said, “are all impacted by the large uncertainty” about what will happen in Europe. This uncertainty has affected investment decisions, he said: “What we’re seeing is a slowing demand for lending.”
Hommen also painted a picture of economic haze. “The third quarter saw a marked deterioration on debt and equity markets amid a slowdown in the macroeconomic environment and a deepening of the sovereign debt crisis in Europe,” he said.
During the third quarter, ING’s insurance operating result was up 27% to 527 million euros. The group said it benefited from higher fees, stronger premium income and better investment performance. Insurance sales increased by 6.5% from the third quarter of 2010. Hedging gains cushioned the impact of the Greek crisis, ING said.
Despite Europe’s myriad economic problems, Vermeulen said, “ING’s earnings remained relatively resilient. Our strong funding position enabled us to increase the lending to support our customers, even in these times.”
ING’s underlying return on equity for the third quarter was 12.1%. This compared with 13.9% for the first nine months of 2010.
Hommen said the group remains committed to splitting off its insurance operations through initial public offerings “when markets recover.”
ING Group has previously announced it will conduct two initial public offerings as it continues paying back a $13 billion bailout in 2008 from the Dutch government (Best’s News Service, Nov. 11, 2010). An agreement with the European Commission requires ING to divest its global insurance, ING Direct (U.S. only) and asset management operations by 2013, which it can achieve through a sale, IPO or combination.
“Regulatory approvals are under way to create a separate holding company for our European and Asian insurance and investment management activities, and today we announced the creation of a management board for these operations, Hommen said.
The IPOs will apply to ING Insurance EurAsia N.V. and ING America Insurance Holdings Inc.
To hear the full interview with Raymond Vermeulen go to http://www.ambest.com/media/media.asp?RC=193578
(By Robert O’Connor, London editor: Robert.OConnor@ambest.com)BN-NJ-11-03-2011 1630 ET #