ING to Cut 1,000 Jobs as Costs Miss Estimates in Third Quarter

 ING Groep NV will cut 1,000 jobs and close offices in South America and some in Asia as it looks to cut costs and boost its digital transformation.

The Dutch lender said it would streamline its wholesale offering to focus on key clients and markets, according to its third-quarter statement Thursday. Profit was 788 million euros ($925 million) in the third quarter, lower than the 844 million euro profit estimated by analysts. Costs came in at 2.6 billion euros, higher than a year before and missing a 2.35 billion euro estimate.

“In wholesale banking, we will concentrate even more on core clients and simplify our geographical footprint, which will require fewer staff,” said Chief Executive Officer Steven van Rijswijk. “This includes closing our offices in South America and some in Asia while continuing to serve the international needs of clients from our regional hubs.”

ING set aside lower loan loss provisions in the quarter, after taking heavy provisions in the early stages of the Covid-19 pandemic. The bank took a 469 million euro charge, about half as much as expected.

The bank also adopted a new dividend policy comprising a 50% payout ratio of resilient net profit that will take effect once restrictions on shareholder distributions are lifted. The widely-watched capital ratio known as Common Equity Tier 1 rose to 15.3% from 15% three months earlier.

In recent years, ING was one of the fastest-growing banks in Europe as it added millions of customers through online services under the previous Chief Executive Officer Ralph Hamers, who is now leading UBS Group AG. Even after adding millions of customers in recent years, ING has struggled to be more profitable after low-interest rates and increased compliance costs weighed on profit margins.

British grocer J Sainsbury is expected to announce more than 3,000 redundancies, The Times of London reports.

--Most of those jobs will be cut at the company's Argos business, according to the Times.

--Some jobs will also be cut due to the closure of some in-store delicatessens and fresh fish and meat counters, the Times reports.

Commerzbank AG reported a bigger-than-expected decline in revenue and warned that the outlook for bad loans could still worsen depending on how the pandemic develops, breaking from peers who have so far taken an optimistic view.

Group revenue fell 6.8% in the third quarter to 2.03 billion euros, slightly below the 2.06 billion-euro estimate in a Bloomberg survey. The bank set aside 272 million euros for potential bad loans, slightly less than expected while lifting its forecast for a key measure of capital strength.

“The rapidly evolving nature of the coronavirus pandemic means that the form and impact of the response measures” will need “to be monitored very closely over the coming days and weeks,” Commerzbank said Thursday. “This may in turn lead to corresponding reassessments of individual earnings forecasts.”

Germany’s second-largest listed lender has been struggling to grow since Chief Executive Officer Martin Zielke took over in 2016 with a plan to cut back volatile investment banking and focus on the business of lending. The strategy backfired when expectations for higher interest rates failed to materialize, and it left the firm without a sizable trading operation that supported rivals such as Deutsche Bank AG during the pandemic.

Key figures from Commerzbank’s third quarter:

in million euros3Q 2020 actual3Q 2020 estimate3Q 2019 actual
Net interest income122612401259
Net commission income812784763
Credit provisions272307114
Pretax profit-43-38441
Net income-69-49297
CET1 ratio13.5%13.5%12.8%

A new turnaround plan unveiled by Zielke a little over a year ago prompted an investor backlash that ultimately led to his resignation in July. Supervisory Board Chairman Hans-Joerg Vetter has since tapped a Deutsche Bank executive, Manfred Knof, to assume the CEO role. Knof will join Commerzbank at the beginning of next year and he will then unveil a new restructuring plan.

While Knof will have the final say over a new strategy that Commerzbank has been working on, preliminary versions were going to seek drastic cost cuts to boost profitability. The lender may end up eliminating as much as a quarter of the workforce, Bloomberg has reported.

Lufthansa on Thursday said it booked a net loss of 2 billion euros ($2.35 billion) in the third quarter due to the pandemic-related slump in traveling and said further restructuring measures would weigh on fourth-quarter figures.

The amount of the expected restructuring costs will depend on the negotiations with trade unions, the group said.

The airline, which has already announced plans to cut 20% of its leadership positions and 1,000 administrative jobs, aims to slash 22,000 full-time jobs.

Lufthansa said the average monthly operating cash drain was at 200 million euros in the third quarter. As the airline expects even fewer passengers in the colder months, it said that number will grow in the October-December period but not exceed 350 million euros.

“We want to return to a positive operating cash flow in the course of the coming year,” said Chief Executive Carsten Spohr in a statement. “In order to achieve this, we are advancing restructuring programs throughout the group.”

Operating expenses were cut by 43% in the third quarter compared to the previous year, helped by significantly lower fuel costs and fees. Sales fell to 2.7 billion euros from 10.1 billion euros.

The German airline, which secured a 9 billion euro state bailout in June, said it had liquidity of 10.1 billion euros available.

AstraZeneca Plc’s third-quarter profit fell short of analysts’ estimates as the pandemic increased costs while it discouraged doctors’ visits and diagnoses.

  • Earnings per share fell to $0.94, missing analysts’ estimates of $1, according to a company statement Thursday. Sales rose 3% to $6.6 billion for the period.

Key Insights

  • The drugmaker’s cancer focus delivered as sales of key oncology drugs roughly met analysts’ estimates, with Tagrisso delivering revenue of $1.2 billion.
  • Astra reiterated it’s making progress on its coronavirus vaccine under development with the University of Oxford and on tests of antibodies as possible coronavirus treatments.
  • Demand began for the new breast cancer drug Enhertu, which cost as much as $6.9 billion to buy into, showing sales of $27 million. The therapeutic received U.S. approval last year.

Market Reaction

  • Astra shares rose almost 12% this year through Wednesday, while the Bloomberg Europe 500 Pharmaceuticals Index lost about 5% over the period.

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