ING unveils EUR 600m writedowns on real estate

Dutch financial giant ING said on Monday that it expects to post real estate writedowns of EUR 600 mln in the fourth quarter, accounting for half of the group's total real estate writedowns for the full year (EUR 1.2 bn). The correction in the value of its real estate was mostly seen in the UK, Australia and the US, chairman Jan Hommen said in a conference call on Monday. 'Real estate prices, including the US housing market, were down, roughly 30% in the fourth quarter,' Hommen said. Writedowns across all businesses totaled EUR 1.8 bn in the fourth quarter.

Based on preliminary data, the group said it expects to post a full-year net loss of about EUR 1 bn and that it would cut 7,000 jobs this year as a result of 'persistently challenging economic and market conditions.' ING, which in October received EUR 10 bn of funds from the Dutch government, also announced that the state is taking an 80% stake in its EUR 27.7 bn US mortgage backed securities business. As a result of disappointing results, ING's chief executive Michel Tilmant will step down from the executive board with immediate effect and will be replaced by chairman Hommen.

'In the fourth quarter market conditions deteriorated sharply, making it the worst quarter for equity and credit markets in over half a century,' ING said in a statement on Monday.

As part of a series of measures to improve profitability, the group announced it will cut operating expenses by EUR 1 bn in 2009, of which 35% will come from slashing 7,000 full-time positions in 2009. This represents about 5.4% of ING's total staff of 130,000 worldwide.

'We are currently discussing where these positions will be cut. What I can say now is that the Netherlands will be relatively less impacted that the business abroad,' said John Hele, who will be retained as Group Chief Financial Officer until end-March 2009.

ING said it hopes to raise proceeds of EUR 2-3 bn from the divestments of several business units and added that 'it will work towards these disposals in a disciplined way.' 'We will carry out some divestments in the first quarter of 2009,' it added. The company did not say which business units are on the chopping block.

'A number of actions have already been taken in the course of the fourth quarter to adapt to the current environment,' Hele said. In particular, the group's real estate arm has carried out net disposals of EUR 900 mln over the course of last year and ING said it will look into selling more real estate assets in 2009. 'If we can dispose without losing value, we will do so,' Hele said in a statement.

ING expects market conditions will continue to be challenging and does not rule out the need for further capital injections in the future. 'Although our starting position is sound, we cannot forecast where the market will go,' the company said.