ING’s Alt-A RMBS Portfolio Turns 21% Delinquent

ING Group (ING: 13.78 -3.97%) posted a EUR 71m ($100.9m) profit in Q209 after three consecutive quarters of losses, despite a decrease in the value and performance of its residential mortgage-backed securities (RMBS) portfolio.

“While we begin to see signs of recovery in financial markets, economic conditions are expected to remain challenging for some time,” ING CEO Jan Hommen said in the company’s quarterly report.

ING said delinquencies in Alt-A mortgages underlying its mortgage portfolio increased from 17.2% to 20.9% in the quarter. Pre-payments and redemptions of the underlying mortgages drove ING’s Alt-A RMBS portfolio down from EUR 3.8n to EUR 3.1bn during Q209

For the Alt-A mortgages left in the RMBS portfolio, rising unemployment and the continued weakness of the US housing market created “significant impairments,” ING said. It has increased staff to handle loan modifications and restructurings and continues to adhere to strict underwriting policies, it added.

The share of ING’s US loans considered non-performing, or over 90 days past due, rose to 4.1% in Q209, up from 3.7% in Q109. Despite the increase, ING said its mortgage portfolio is performing better than its portfolio of prime adjustable rate mortgages (ARMs), which was 13.7% non-performing at the end of May 2009.

Gains in the insurance division and EUR 525m in cost cutting offset a loss in ING’s banking division. ING increased its projection for cost cutting to EUR 1.3bn from EUR 1bn.

Write to Austin Kilgore.

Disclaimer: The author held no relevant investments when this story was published.