Amsterdam-based banking and insurance group ING will take a 2008 loss of €1 billion ($1.3 billion), tap into €22 billion of Dutch state loan guarantees for its troubled loan portfolio and cut 7,000 jobs, it said today.
Michel Tilmant will step down as chief executive, the Dutch financial group said, and will be replaced by board Chairman Jan Hommen (65) former chief financial officer of Dutch electronics group Philips.
By 11am, shares in ING, which are down 81 per cent from a year earlier, were up 21 per cent to €6.42. The DJ Stoxx European banking index was up 5.7 per cent.
"It's just a major relief," said Theodoor Gilissen analyst Paul Beijsens. "At the moment we can't predict whether the market will get worse. ING may need more help, but at this point they addressed a major risk."
After what it said was the worst quarter for equity and credit markets in more than half a century, ING said it would post an underlying loss of €3.3 billion for the fourth quarter, including €2 billion in losses from its structured credit portfolio.
The group said it would look into making divestments outside its core business, but declined to say what or how much it planned to sell. ING also said it would cut €1 billion of costs in 2009, by scrapping 7,000 jobs out of a total of about 130,000 worldwide.
In addition to other cost-cutting measures, such as reducing head office spending, ING said it had decided not to launch its ING Direct banking service in Japan, a project it had planned to launch in 2008 pending regulatory approval.
It also said it would re-evaluate its sponsorship of the Renault Formula One racing team.
"ING can focus again on providing credit," said Rob Koenders, asset manager at Harmony Vermogensbeheer, which owns ING shares. "This should have a positive effect ... I think you can consider buying ING."
"Today we are taking a number of very strong actions," Mr Hommen told reporters on a conference call. "The most significant of these actions is the agreement we reached with the Dutch government."
In order to bolster its capital ratios, ING said the Dutch government would cover 80 per cent of its €27.7 billion residential mortgage-backed securities (RMBS) in subprime mortgages, made to risky borrowers, and "Alt-A" loans, made to borrowers with a slightly better credit profile.
The Dutch government will take on the risk of the portfolio at a 10 per cent discount to par value, and will receive 80 percent of cash generated from the portfolio.
Mr Tilmant, CEO since 2004, will step down immediately and Mr Hommen will formally take over for a four-year term once appointed by shareholders at a general meeting on April 27th.
Reuters