INGA ING Groep NV

By Sabela Ojea

--ING reported a 31% loss in net profit for the fourth quarter of 2019.

--ING faced regulatory costs that surpassed 1 billion euros ($1.10 billion) in 2019 compared with EUR947 million in the previous year.

--ING was fined EUR775 million in 2018 by the Dutch Public Prosecution Service, over failures to stop money-laundering activities.

ING Groep N.V. (ING) on Thursday reported a significant fall in net profit for the fourth quarter of 2019 and said there needs to be changes so that banks and authorities can collaborate after facing regulatory costs of over 1 billion euros ($1.10 billion) for the whole year.

The Dutch bank said it suffered a 31% loss in net profit for the three months ended Dec. 31, reflecting higher risks, higher expenses and a higher effective tax rate.

The lender said it had EUR303 million regulatory costs over the period compared with EUR266 million for the same period a year earlier.

However, these total cashout costs reached EUR1.02 billion for the whole year compared with EUR947 million in 2018, despite facing a EUR775 million fine by the Dutch Public Prosecution Service in 2018 over failures to crack down on money-laundering activities.

ING said "its biggest growth factor from an economic perspective" were these costs, which the bank mostly attributed to an increase in contributions to bank taxes, contributions to depositary taxes, as well as contributions to single resolutions. More than 10% of its total cost-base was linked to these three components, the bank said.

"In addition to a higher contribution for the deposit guarantee schemes, the increase was mainly caused by a higher bank tax in the Netherlands and a new bank tax in Romania," ING said.

The Dutch lender said it has seen incidents through the period, including an alleged "external fraud" case that it says it has to look into. It said the fraud is related to the documentation of its security and that this was the first time it had to look into something like this in five or six years, but didn't provide any further details.

"The quarter was marked by a high amount of provisions for existing and new defaulted files, including a suspected external fraud case," it said.

"The next step is how to become more effective as a system, how banks and authorities can collaborate more," ING said, noting the need for changes so that authorities and banks can share information. "There's a lot of work to do there," Chief Executive Ralph Hamers said.

ING made a net profit of EUR880 million ($969.7 million) for the fourth quarter compared with EUR1.27 billion for the same period a year earlier. This compares with consensus forecasts of EUR1.14 billion, taken from FactSet and based on five analysts' forecasts.

Underlying net profit also decreased to EUR880 million from EUR1.24 billion in the year-earlier period. Citi group said Monday that ING was expected to report an underlying net attributable profit of EUR1.14 billion, which the U.S. bank attributed to a slightly better net-interest income, offsetting marginally worse costs and provisions.

The lender's underlying pretax profit--one of the bank's preferred metrics, which strips out exceptional and other one-off items--was EUR1.34 billion compared with EUR1.69 billion for the fourth quarter of 2018. Underlying pretax profit was expected to be EUR1.62 billion, according to FactSet and based on three analysts' estimates.

However, the company was able to increase its net-interest income to EUR3.60 billion, while total underlying income fell to EUR4.44 billion from EUR4.50 billion.

ING's common equity Tier 1 ratio--a key measure of balance-sheet strength--was 14.6%. Citi also said Monday that its CET1 ratio should come in at 14.8%.

The board has declared a final dividend of 69 European cents a share, up from 68 cents for the prior year.

ING also said its net core lending reached EUR2.0 billion in the fourth quarter of 2019 compared to EUR3.2 billion for the same period in 2018. Its total retail customer base also decreased to 38.8 million from the previous 38.4 million.

"Looking back at 2019, we see a year of solid commercial performance despite the challenging rate environment, geopolitical uncertainties and an increasingly complex and demanding regulatory environment. The fourth quarter of 2019 proved challenging," Chief Executive Ralph Hamers said.

Write to Sabela Ojea at sabela.ojea@wsj.com; @sabelaojeaguix

(END) Dow Jones Newswires

February 06, 2020 10:50 ET (15:50 GMT)

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