LONDON (MarketWatch) -- ING, the Dutch group that has been pressed to split up by European regulators, said Wednesday that both its banking and insurance arms returned to profit in the third quarter as the rebound in equity markets helped offset further losses on mortgage-linked investments.

The firm said it swung to a net profit of 499 million euros ($747 million) in the quarter, in line with preliminary figures given last month when it announced plans to break apart and repay some of the state aid it has received. The profit followed a loss of 478 million euros in the year-earlier quarter. INGA 9.97, +0.42, +4.36%
ING said its banking business, which will be retained after the restructure, swung to an underlying pretax profit of 274 million euros, from a loss of 216 million euros.
Higher margins and a modest increase in customer deposits helped drive the result, along with a sharp decrease in costs.
ING said it had cut around 4,100 full-time equivalent jobs in the banking arm and over 10,200 across the entire group by the end of September. That figure was well ahead of the 7,000 it had expected to cut for the full year.
But the group said it also took write-downs of 673 million euros, largely on its portfolio of investments linked to Alt-A mortgages. It was also hit by a 133 million euro loss on the value of its direct real-estate investments. Shares in the firm climbed 4% in Amsterdam.
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In the insurance business, which ING will either spin off or sell to rivals, the group reported an underlying pretax profit of 587 million euros, compared to a loss of 496 million euros a year earlier.
So far in 2009 the firm has announced disposals totaling around 4.1 billion euros, including its 70% stake in ING Canada, insurance assets in Australia and New Zealand and private banking operations in Switzerland and Asia. It will dispose of the remaining insurance operations over the next four years. See archived story on ING's plans to break up. ING said the equity market gains drove the improved result in insurance, but that its attempts to reduce the risk in its investment portfolio mean margins have come under pressure.
Sales in the division were down around 20% as demand for investment-related products fell in the U.S., Central Europe and Asia.
ING in the past has stressed the benefits of having a combined banking and insurance business, but said the financial crisis has altered its position. “The financial services industry will be transformed as a result of the crisis and the winners will be those institutions that can regain their customers' trust,” said CEO Jan Hommen.
“The split will enable both the bank and the insurer to adapt more quickly and emerge from the crisis more efficient, more agile and more focused,” he added.