ING second quarter profit drops 73% as loan provisions soar

AMSTERDAM (Reuters) – ING Groep NV INGA.AS, the largest Dutch financial group, on Thursday announced a 73% drop in its profit before tax in the second quarter to 542 million euros (490.17 million pounds), while it had taken 1.34 billion d ‘euros of provisions for bad debts in the context of the coronavirus pandemic.

Profit was lower than the 625 million euros expected by analysts, according to data from Refinitiv Eikon.

But new CEO Steven van Rijswijk said loan provisions have likely peaked and the company in July saw customer payment traffic improve to pre-COVID-19 levels.

“This year we’ve had the bulk of the risk, and the second half risk costs are expected to come down,” he said on a call with reporters.

A year ago, ING posted a quarterly profit before tax of 2 billion euros and 209 million euros of provisions.

Higher provisions this year dominated earnings, with interest income and fees and commissions virtually unchanged, although personnel, regulatory and other expenses increased.

There were some provisions in ING’s high-mortgage retail operations, but its wholesale banking arm recorded the most at 833 million euros.

The company said the arrangements focused on oil and gas customers, but also included “a large allowance for a suspected case of external fraud.”

Van Rijswijk declined to identify the deal, although analysts said the lender is expected to record a loss on its exposure to German payments company Wirecard.

“This is a well-documented fraud case that you have seen in the press over the past few weeks as many banks also have exposure to this company, for which we have also taken a provision,” said Van Rijswijk.

The bank’s action closed at 6.16 euros on Wednesday, down 42% since the start of the year.