ING to Unwind Mortgage Securities

LONDON â€" In another sign of improving headwinds for European banks, the Dutch financial services firm ING said on Friday that it would unwind a portfolio of securities tied to mortgages in the United States that was shifted off its books by the Dutch government during the financial crisis.

The government took on the majority of the risk associated with a portfolio of so-called Alt-A mortgage securities in January 2009 to reduce the uncertainty on ING’s balance sheet. Alt-A mortgages are considered risker than prime mortgages but are not as risky as subprime mortgages.

The portfolio of mortgage securities, originally valued at 24 billion euros, or about $33 billion, will be unwound at an expected €400 million profit for the Dutch government, ING said.

“While we are grateful for the support the Dutch State extended to us in 2009, we are pleased that today we can announce the end of the Alt-A arrangement,” said Ralph Hamers, ING’s chief executive. “Over the past years we have worked hard to make ING stronger and simpler and to limit risks. We are looking ahead to take ING through the last phase of our restructuring and work on further focusing our company on serving our customers.”

The news comes just days after ING announced it was preparing to pay an additional €1.13 billion to the Dutch government later this month as it comes closer to repaying the state aid it received during the financial crisis.

ING has repaid €8.5 billion in principal of the €10 billion it received from the Dutch government in 2008, plus an additional €2.8 billion in interest and premiums. It is expected to complete its repayment by May 2015.

A number of governments that provided European banks with state aid during the financial crisis have profited in recent years on share sales as the banks have shed billions of dollars in underperforming assets and the general economic outlook has improved.

The Swiss government sold its 9.4 percent stake in UBS for a profit of more than $1 billion in 2009. In September, the British government raised 3.2 billion pounds, or $5.1 billion, through the sale of a 6 percent stake in the Lloyds Banking Group, generating a £61 million profit for taxpayers.

The gains mirror similar returns generated by the United States government as banks have repaid their bailout funds.