(8,97 EUR, 2,08%) reports a 1Q11 net result of € 1,381m (vs € 1,293m expected and consensus of € 1,237m) and an underlying net profit of € 1,492m (vs € 1,431m expected and consensus of € 1,376m). Underlying profit before tax stood at € 2,156m (€ 1,946m expected) o/w € 1,695m from banking (€ 1,488m expected) and € 461m from insurance (€ 458m expected). Basic EPS stood at € 0.37.
Banking underlying earnings before tax (€ 1,695m) benefitted from healthy interest margin (1.44%), higher client balances, lower risk costs (42bps vs 60bps in 1Q10) and cost control. The ROE (IFRS equity) stood at 13.7% (vs 11.7% in 1Q10). The core Tier 1 ratio stood at 10.0%. will (as announced) buy back € 2bn of core capital securities + € 1bn repurchase premium on 13 May 2011.
Insurance underlying earnings before tax (€ 461m vs € 121m in 1Q10) was driven by higher fees and premium-based revenues, robust sales growth, an improvement in investment margin (investment spread at 95bps) and cost control. The operating profit (margin format) stood at € 561m (vs EUR 414m in 1Q10) which was lower than our forecast € 675m. New life sales (APE) stood at € 1,384m (+11.4% or +8.0% excluding currency effects) which was better than we expected (€ 1,243m). NBV is not disclosed.
Divestments and special items in 1Q11 amounted to € -111m after tax and related primarily to various restructuring programmes. After tax separation costs were € 20m (we took € 50m in our forecast) out of a total of € 200m projected for FY11E.
restructuring remains on track with two planned IPOs (US and Europe & Asia) whereas the strategic options for Latin American insurance are still being explored. Steps are also taken for the divestment of Direct USA and the carve-out of WestlandUtrecht Bank from the Dutch retail banking business.
Our View:
1Q11 underlying earnings before tax were better than we expected, notably in banking whereas insurance underlying earnings before tax were exact in line.
Conclusion:
We remain Accumulating with an unchanged target at € 9.0.