AMSTERDAM (AP)—Dutch bank and insurer ING Groep NV said Wednesday its first quarter earnings were cut in half due to a myriad of charges and provisions, while its core businesses were modestly weaker.
Net profit at the group, designated one of the world’s “systemically important” financial companies by the G-20’s Financial Stability Board, was €680 million ($882 million), down from €1.38 billion in the same period a year ago.
ING said banking earnings fell 27 percent to €1.13 billion, hit by worse interest margins and higher provisions for bad loans. Meanwhile, insurance earnings flipped to an €18 million loss from a €428 million profit, due mostly to losses on hedges.
“The European sovereign debt crisis persisted, increasing volatility on financial markets,” CEO Jan Hommen said in a statement. “The impact of this environment was evident in our underlying results.”
Net profit was helped by the sale of ING Direct USA to Capital One for €489 million in February, a sale that also strengthened ING’s balance sheet. ING said Wednesday its core Tier one capital ratio—the most-watched measure of solvency for banks, and vital for investor confidence in times of crisis—had risen to 10.9 percent from 9.6 percent at the end of 2011.
The company added that it issued €9.2 billion in long-term debt in the quarter, covering about half its long-term funding needs for 2012.
ING shares rebounded 1.3 percent to €5.064 in Amsterdam, after a fall of more than 5 percent on Tuesday.
But the shares have a book value of €12.56 per share—a wide discrepancy common in bank shares at the moment that telegraphs investors either don’t believe the company is valuing its assets and liabilities correctly, or that investors are highly skeptical of future prospects.
One source of concern is ING’s exposure to Spain, around €38 billion in debt and loans, mostly linked to real estate and personal loans.
However, chief risk officer Wilfred Nagel told reporters on a conference call that the company’s Spanish portfolio is “of high quality.”
ING is also highly exposed to the Dutch housing market, which has suffered only modest declines during the crisis but more are forecast.