AMSTERDAM (AP) -- Buffeted by Europe's debt crisis, ING Groep NV reported a 23 percent fall in second quarter earnings on Wednesday as its banking operations were hurt by higher bad loan provisions and losses in Spain, and its insurance arm wrote down the value of some operations.
Net profit for the Dutch-based company, one of Europe's largest financial institutions, was €1.17 billion ($1.45 billion), down from €1.51 billion in the same period a year ago.
Its banking profits fell 13 percent to €860 million from €994 million on the back of lower interest margins, investment losses in Spain, and higher bad loan provisions.
Insurance earnings were cut in half from €548 to €288 million as ING wrote down the value of its for-sale South Korean operations by €180 million.
Even after stripping out one-off items, ING's earnings were down 17 percent at €1.05 billion.
"ING's net result was weaker than expected," said SNS Securities analyst Lemer Salah. "In particular, its insurance activities have performed weakly which is somewhat worrisome."
Shares fell 1.6 percent to €5.664 in early trading in Amsterdam.
Nevertheless, CEO Jan Hommen called the results, which were better than in the first quarter of 2012, "solid."
"In these uncertain times the financial strength of the company is our highest priority: capital, liquidity and funding have all improved," he said.
ING reduced its exposure to Spain by selling off €2.1 billion euros in Spanish bonds, booking a loss of €178 million euros. The company said its Spanish portfolio will continue to shrink naturally as mortgage-linked products age.
Hommen noted the company continues to benefit from strong retail deposits in the Netherlands in its banking operations, and its exposure to the weak Dutch housing market is gradually decreasing.
He repeated that ING will not pay a dividend until it has repaid the Dutch state a remaining €3 billion it owes after being bailed out during the 2008 financial crisis. The company was also ordered by the European Commission to split its banking and insurance activities, but that has yet to occur. The company is in negotiations with the commission over the final terms of its penalties for having taken state aid.
Hommen said preparations to shed insurance operations continue, with sales of its Asian insurance operations a likely scenario, and initial public offerings of its insurance operations in the U.S. and Europe in the works.
The company said earlier this week it will also sell its British and Canadian "Direct" Internet banking operations, which Hommen said would help it raise the funds it needs to repay the state.
In February, ING sold ING Direct in the U.S. to Capital One for €489 million ($600 million).
