Dutch financial services group ING Groep NV (ING) returned to profit in the second quarter of 2009 after losing three straight quarters.

But earnings at the banking giant came in much below market expectations because of rising loan-loss provisions and continued write-downs in real estate.
 
''I'm happy to say we're back in the black again,'' Jan Hommen, chief executive of ING, said at a news conference. ''Commercial performance has picked up quite significantly in the last two quarters.''

''Benefits of Back to Basics and improvements in equity and credit markets helped the Group return to profit with an underlying net result of €229 million. However, market impacts and the weaker economic environment continue to strain ING's results,'' he added.

The bank said it expects the turbulence in the financial market to remain for some time.

ING scrapped its interim dividend, and Hommen said no decision has been taken yet on the possibility of a full-year payout.

The company's second-quarter underlying net profit of €229 million shows improvement from underlying net loss of €305 million in Q1.

The Group's operating expenses were down 5.5 per cent from the second quarter of 2008 and 2.4 per cent from Q1.

''Market impacts and the weaker economic environment continue to strain ING's results,'' Hommen said in the earnings statement, adding that ''credit quality worsened, leading to a rise in risk costs, while lower property prices in many markets triggered negative revaluations on real estate, which are immediately reflected'' in the results.

ING's insurance branch made the strongest showing, with an underlying pretax profit of €278 million, compared to the banking arm, which reported a loss of €204 million on the same basis.

It added that its commercial banking unit had been hit by deteriorating credit conditions that led to an increase in risk costs. ING Bank added €852 million to loan loss provisions.

Results were dampened by market impacts including €584 million of real write-down in the second quarter, €251 million of that related to Canadian industrial properties.

The group noted other problems in North America, saying that ''the ongoing weakness in the US housing market, coupled with rising unemployment, triggered €323 million of impairments.''

The bank said it was more than half way toward attaining the €1 billion in cost cuts it hoped for in the year, after removing more than 8,200 full-time employees from its ranks.

''We have made strides to reduce risk, stabilise the capital base and simplify our organisation in the first half. The merger of ING's Dutch retail banking operations is well on track and a programme to integrate ING's Dutch insurance operations has been announced with positive earnings contribution in 2010,'' Hommen added.

Since receiving €10 billion from the Dutch government last year to save its shares from collapsing amid concerns that it was running out of capital, ING has been struggling to return to financial health.

Total assets at ING Bank at the end of June had been reduced by €85 billion compared to a year earlier.

There are reports that ING, like the Royal Bank of Scotland, is planning to sell its assets in some countries to overcome the financial crisis.

 Hommen, in a speech in April said that the Group will divest up to €8 billion ($10.6 billion) in non-core assets and trim its geographical spread in a bid to refocus its business and boost capital (See: ING to divest $10.6 billion of assets, withdraw to consolidate).

In July, ING sold its Annuity and Mortgage Businesses in Chile to Corp Group Vida Chile, S.A. In 2008, the Annuity and Mortgage businesses in Chile generated combined pre-tax earnings of approximately €35 million.

Tom McInerney, ING Insurance Management Board member and CEO for ING Insurance Americas told reporters at that time that selling non-core Annuity and Mortgage businesses in Chile is part of the bank's global ''Back to Basics'' strategy.