(6,01 EUR, 6,26%) reported a 3Q11 underlying net profit of € 1,285m which keeps the middle between our € 1,330m forecast and the € 1,235m consensus average. The net profit stood at € 1,692m vs € 1,728m expected and consensus at € 1,593m.
Bank underlying earnings before tax stood at € 1,063m (vs € 1,359m expected and consensus at € 1,235m) including € 267m pre-tax impairments on Greek government bonds. decided to write down Greek bonds, including maturities beyond 2020, to 40%.
The net interest margin narrowed to 1.37% (vs 1.42% in 2Q11). Risk costs stood at € 438m or 55bps of average RWA, which was higher than we expected (40bps). attributes this to further provisioning on some specific files in the Structured Finance and General Lending portfolios in Commercial Banking and the US mortgage portfolio at
Direct. It is not sure if this is to be linked to the restructuring of the Alt-A guarantee structure following the sale of Direct USA. The earnings of Direct USA were still including at underlying whereas we did already move it to discontinued. Banking solvency remained strong with a core Tier 1 ratio of 9.6% and a CAD ratio of 11.4%.
Insurance underlying earnings before tax stood at € 561m (vs € 552m expected and consensus at € 409m) and included € 200m impairments on Greek bonds which were more than offset by significant hedging gains in the BeNeLux. The operating result (margin format) rose by 27% to € 527m (vs € 576m expected). The investment spread improved to 104bps (vs 99bps in 2Q11). New life sales (APE) remained flat at EUR 1,011m vs € 1,051m expected. The Insurance Group Directive (IGD) solvency ratio decreased q/q to 242% (from 252%) which is still very strong.
announced the restructuring of its Dutch retail operations which will see a 2,700 FTE reduction o/w 2,000 internal FTE and 700 external FTE. will take a € 215m charge in 4Q11E and will make some € 200m of IT investments in the coming 2 years.
3Q11 earnings were in line on a reported basis with a deviation on the pre-tax banking earnings, offset by lower than expected taxes following some tax gains in the US insurance operations. When stripping out the Greek impairments that were not included in our forecasts, 3Q11 underlying earnings seem stronger than we expected.
We maintain our Accumulate rating and € 9.0 target price.