ING Groep NV, the biggest Dutch financial-services company, will post a €1.2 billion ($1.6 billion) charge after agreeing to end some payment obligations to its pension fund in the Netherlands.
ING will terminate future funding and indexing obligations to a pension plan that guaranteed payouts for participants, the Amsterdam-based company said in a statement today. The first- quarter charge includes a €400 million payment to the fund, while €800 million is related to the removal of the pension assets on ING’s balance sheet, it said.
The agreement will reduce swings in equity in ING’s banking and insurance units resulting from changes in pension accounting rules. The deal also marks a “significant milestone in the separation of bank and insurance” as ING prepares to sell shares of the insurance unit in an initial public offering this year, Chief Executive Officer Ralph Hamers said.
“It’s a sizable charge that will eliminate quarterly profit, which is unfortunate,” JanWillem Knoll, an Amsterdam- based analyst at ABN Amro Group NV, said by telephone. “Still it’s the right thing for them to do as it releases them of all obligations related to a large back book that can cause significant financial volatility.”
ING shares fell as much as 1.6 percent in Amsterdam trading today, and had swung to a 0.7 percent gain, to €10.59 at 12:50 p.m. local time, giving the company a market value of €41 billion euros. The stock advanced 43 percent in 2013.
The company reached the agreement with the retirement fund, trade unions, the workers council and retirees. ING said it expects to announce a final settlement, following regulatory approvals, in March.
The pension fund manages about €18 billion euros in assets for 70,000 current and former employees of ING’s Dutch banking and insurance units, it said.
ING announced in 2012 it would switch to a new pension plan, with defined contributions rather than guaranteed benefits in 2014. In the set up, it will create separate funds for its Dutch banking and insurance employees before its final break up.