ING Groep NV, the biggest Dutch financial-services company, said second-quarter profit dropped a less-than-estimated 25 percent as investment earnings at the wholesale-banking and insurance units declined.

Net income fell to 1.92 billion euros ($2.87 billion), or 94 cents a share, from 2.56 billion euros, or 1.18 euros, a year earlier, the Amsterdam-based company said in a statement. Analysts predicted profit of 1.56 billion euros.
Profit dropped as the collapse of the U.S. sub-prime-mortgage market hit stock and bond markets and made borrowing more expensive. Lower real estate and private equity valuations and lower equity capital gains cut earnings by 754 million euros after tax, ING said. The company took advantage of the brief market rally in April to reduce its equity investments, Chief Executive Officer Michel Tilmant said.
``If ING is in pain, it's mainly as an investor and not as an originator of risky assets,'' said Ton Gietman, an analyst at Petercam SA in Amsterdam who rates ING shares ``hold.''
The company's investments related to collateralized debt and loan obligations increased to 4.3 billion euros from 2.1 billion euros in the previous quarter. The company had a 2.2 billion-euro U.S. sub-prime-mortgage portfolio at the end of the second quarter, while Alt-A mortgage assets amounted to 22 billion euros. Alt-A loans rank between sub-prime and prime.
Financial institutions worldwide have posted more than $500 billion of credit losses and write-downs since the start of last year, according to data compiled by Bloomberg. ING, which traces its roots to 1743, declined 1 percent to 22.75 euros as of 9:02 a.m. in Amsterdam, matching the loss for the 31-member Bloomberg Europe 500 Insurance Index.
ING fell about 15 percent in the second quarter, compared with an 18 percent drop for the benchmark. Among the 39 analysts tracked by Bloomberg who cover ING, 23 have ``buy'' ratings on the stock, while four advise selling. Twelve rate it a ``hold.''
Earnings from ING's wholesale banking unit fell 40 percent to 365 million euros, while retail-banking profit declined 9.9 percent to 558 million euros. Both were less than analysts estimates, which were for profit of 449 million euros and 604 million euros respectively. Profit from online banking rose 4.7 percent to 179 million euros.
Insurance profit from the Americas dropped 37 percent to 374 million euros, beating analysts' estimates, while earnings from Europe declined 42 percent to 397 million euros. Asia and Pacific insurance results fell 19 percent.
``Financial services companies are facing unprecedented market volatility, limited liquidity, and intensified competition for deposits, which we see continuing into 2009,'' Tilmant, 56, said in the statement. ``As markets remain volatile, we will continue to manage our risk and capital with discipline.''
ING was helped in 2007 by the sale of ABN Amro Holding NV shares. The company, which got almost two-thirds of its profit from insurance last year, had further gains when it disposed of shares of Royal Numico NV, the Dutch baby-food maker that was bought by France's Groupe Danone SA.
(Source: Bloomberg)