ING Canada profit drops 75%, parent company cuts 7,000 jobs
Last Updated: Monday, January 26, 2009 | 6:01 PM ET
CBC News
ING's stock price ING Canada reported a fourth-quarter net loss Monday of $64.1 million.
Full-year net income for 2008 was $128.2 million, down 74.8 per cent from the previous year.
"Given the deep and prolonged decline of the Canadian stock market and the level of uncertainty about its recovery, we took a significant impairment on our common equity portfolio," ING President and CEO Charles Brindamour said in a statement.
There are also indications that customers of ING's insurance arm are soon likely to face higher premiums.
"The increased cost of claims in automobile insurance and the changing weather patterns are likely to drive up the price of home and auto insurance products in 2009, " he said.
ING Canada released its financial results early because of dramatic developments at its parent company, ING Group of the Netherlands.
The global bank and insurer will book a large fourth-quarter loss, cut 7,000 jobs and change its CEO. The company predicts a loss of about $5.2 billion when it posts its earnings on Feb. 18.
ING said in the fourth-quarter "market conditions deteriorated sharply, making it the worst quarter for equity and credit markets in over half a century."
The company said CEO Michel Tilmant's abrupt departure should be seen "in light of the extraordinary developments over the past few months."
The job cuts represent five per cent of the company's total workforce.
In a deal reached with the Dutch government, the state will assume the risk for most of the $44.32 billion in troubled U.S. mortgage-backed securities ING owns.
The securities are based on "Alt-A" mortgages that are a step below prime mortgages. They were often made with limited or no documentation of assets or income, leading to the nickname "liar loans," and many borrowers are defaulting.
Analysts say the current market value of these securities is roughly two-thirds of face value. ING's deal with the state assumes they are worth 90 per cent.
Under the complex deal, the government will assume 80 per cent of both risk and payments from the portfolio.
For ING, the benefits of the deal include further deleveraging of its balance sheet. It said its Tier 1 ratio — the measure commonly used to rate a bank's strength — will improve to 9.5 per cent from 9.1 per cent.
ING Canada says it won't slash jobs as part of the staff reductions at its parent company.
Corrections and Clarifications
- ING Group of the Netherlands will book a fourth-quarter loss of about $5.2 billion when it posts its earnings on Feb. 18, not $52 billion, as originally reported. Jan. 26, 2009 / 6:04 p.m. ET
