ING to Book Impairment of $350 Million on Coronavirus Impact

(Bloomberg) -- ING Groep NV issued a surprise profit warning, saying the Covid-19 crisis triggered a 300 million-euro ($352 million) writedown in the second quarter related to past acquisitions.

A goodwill impairment will be reported under operating expenses and won’t impact the company’s capital ratios, the Amsterdam-based bank said in a statement on Tuesday. ING, which is due to report results on Aug. 6, didn’t identify the acquisitions affected.

Banks are being hit across their businesses by the unprecedented impact of the coronavirus, ranging from setting aside billions for soured loans to mark-to-market writedowns on the value of assets. Last month, Swiss asset manager GAM Holding AG also issued a profit warning after the coronavirus hurt its historical goodwill valuations.

Steven van Rijswijk, ING’s new chief executive officer, is confronting the economic impact of the virus while also trying to move past a legacy of compliance issues that plagued the bank under the departing CEO Ralph Hamers.

Like lenders across Europe, ING reported a jump in loan-loss provisions in the first quarter due to the fallout from the virus. However the hit to profit was smaller than expected and the shares rose sharply following its earnings report in May.

During large acquisitions, companies keep goodwill -- the intangible value of a company’s brand, its customers and employees -- on their books. By writing down the value of these businesses, ING is acknowledging that the pandemic’s impact will drag on earnings into the future.

The virus, as well as IFRS-9 accounting rules, will result in much higher than average risk costs “which will impact ING’s net profit for the quarter,” the bank said.

©2020 Bloomberg L.P.