ING Profit Up as Loans Grow -- 2nd Update

By Maarten van Tartwijk 

AMSTERDAM--Dutch bank ING Groep NV Wednesday reported a rise in second-quarter profit as it continues to reap the benefits from its repositioning toward consumer and business lending in Europe.

The Netherlands' largest bank by assets said net profit rose 27% to EUR1.36 billion ($1.49 billion), lifted by a EUR376 million gain tied to the sale of its stake in Vysya Bank, an Indian lender. Underlying pretax profit, which strips out divestments and other special items, rose 25% to EUR1.6 billion.

The results were boosted by strong growth of ING's loan book, which increased by EUR8.7 billion in the period, as well as a drop in loan-loss provisions. The bank said it added 600,000 new customers in the first six months of 2015, including in large markets such as France, Italy and Spain.

Still, ING's shares fell around 3% in Amsterdam, as analysts voiced disappointment over weaker profitability and rising costs. The bank's net interest margin, the difference between the rate at which it borrows and lends, declined to 1.43% from 1.46% last year, while operating expenses jumped 6%.

ING attributed the weaker margins to charges on its mortgage books and said expenses rose because of investments and higher regulatory costs.

The Amsterdam-based lender has nearly completed an overhaul in which it was required to divest its global insurance business. The restructuring was ordered by the European Union's antitrust regulator after ING received a government bailout during the 2008 financial crisis.

The proceeds of the insurance business leave ING with billions of euros in excess capital that analyst say can be deployed to boost dividends or pursue acquisitions. In recent weeks, ING has been linked to the Turkish operations of HSBC Holding PLC, which are currently up for sale.

Chief Executive Ralph Hamers declined to comment when asked about ING's potential interest in HSBC's Turkish arm, but signaled that he isn't planning any major acquisitions. Should ING be looking to make deals, it will only focus on assets that support the bank's strategy to grow organically, he said. "Asset books, skills and technology. That's the sort of M&A we would be looking at," he said.

ING said it would pay shareholders an interim dividend of EUR0.24 a share, in line with its target to pay at least 40% of annual net profit. The bank hinted at the prospect of a higher payout ratio for the full year, although this will depend on new developments in banking regulations, it said.

Write to Maarten van Tartwijk at [e-mail]

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