LONDON (Reuters) - Dutch financial services group ING took a lower-than-expected impairment charge of 194 million euros ($286 million) on riskier investments in its fourth-quarter results on Wednesday, while a stake sale helped offset the loss.
By Reed Stevenson
LONDON (Reuters) - Dutch financial services group ING took a lower-than-expected impairment charge of 194 million euros ($286 million) on riskier investments in its fourth-quarter results on Wednesday, while a stake sale helped offset the loss.
ING's shares rose as much as 5.6 percent, bucking a lower market, after the Dutch lender and insurer said net profit in the quarter rose 18 percent from a year earlier to 2.48 billion euros, or 1.18 euros per share, just ahead of analysts' average forecast of 2.34 billion euros, or 1.12 euros per share.
The impairment charge was offset by a gain of 1.03 billion euros on the sale of its stake in local rival ABN AMRO to a consortium of three banks in October. ING had also booked gains from ABN and other asset sales in the third quarter.
!ADVERTISEMENT!Analysts had expected ING to take a charge of 200 million to 1 billion euros on its riskier investments, including residential mortgage-backed securities in subprime mortgages made to risky borrowers and "Alt-A" loans, which are made to borrowers with a slightly better credit profile, as well as from collateralized debt obligations (CDOs).
ING's writedown was smaller than its European rivals, including Credit Suisse, which took a $2.85 billion charge this week on its asset-backed investments, and HSBC, which took an $880 million charge last year.
U.S. banks have written off even larger amounts in the credit crisis, triggered last year by widespread defaults on mortgages extended to less creditworthy borrowers.
Underscoring the risk of further losses, ING said it made an additional provision of 751 million euros in the quarter on investments in subprime, Alt-A and CDO assets. This was taken to a revaluation reserve, not against profit, as these assets were still considered recoverable, despite a fall in market value.
For 2007, ING said it had provided for a total 1.38 billion euros in such assets.
ING Chief Financial Officer John Hele said the revaluation was "nothing very special," and the company had taken steps such as taking out credit protection on its portfolio.
MORE TO COME?
ABN analyst Thomas Nagtegaal said ING would face fears of further writedowns: "The only negative on this exposure in our view is that the market is not willing to trust the limited size of this writedown, especially when compared to peers."
"The subprime crisis is far from over, and undoubtedly investors will continue to question ING's positions (such as on Alt-A investments) in the course of this year," Petercam analyst Ton Gietman said in a note.
ING said that at the end of December, its exposure to subprime RMBS was 2.8 billion euros, Alt-A loans 27.5 billion euros and CDOs 1.9 billion euros.
ING shares were up 3 percent at 22.41 euros at 5:40 a.m. EST, while the DJ Stoxx insurers' index was up 0.48 percent.
ING Chief Executive Michel Tilmant said "solid risk management" helped to shield ING from the worst of the crisis, but added that the business environment remained "challenging" and that ING had to lower valuations on its real estate and private equity investments as well.
"We will this year see quite some volatility in markets in a number of asset categories," Tilmant said in a conference call.
In contrast to the troubles with investments in ING's banking arm, insurance performed well, posting a quarterly underlying profit of 1.82 billion euros, up 37 percent from a year earlier.
That was due in part to the stake sales, which offset lower valuations of real estate and private equity investments, and a 10 percent rise in premium income also helped.
Banking profit was mostly flat in the quarter from a year earlier, at 1.15 billion euros.
For 2007 ING said net profit rose 20 percent to 9.24 billion euros, or 4.32 euros per share. Analysts had expected, on average, a full-year profit of 8.71 billion euros, or 3.96 euros per share.
Separately on Wednesday, a filing with Dutch market watchdog AFM showed that U.S. asset management firm AllianceBernstein now had a 5.08 percent stake in ING.
(Reporting by Reed Stevenson, editing by Greg Mahlich/Will Waterman)
