ING Group NV of Amsterdam said Thursday that its Internet-based consumer banking operations in eight countries grew dramatically in the second quarter and were profitable in six of those countries.
Pretax profit of the operations, which operate under the ING Direct brand, soared 433.3% from the year-earlier period, to $157 million. But ING Group's own net profit dropped 12%, to $2 billion. The company attributed the decline to a one-time gain of $854 million in last year's second quarter.
The ING Direct model includes no branches and only a few kinds of accounts. It is profitable in the United States, Canada, Australia, Spain, France, and Germany, said Arkadi Kuhlmann, the president and chief executive of the U.S. operation, ING Bank FSB of Wilmington, Del. In fact, he said, versions of ING Direct made money within three years in most of those countries.
The Italian and U.K. operations are too new to turn a profit, he said. The Italian is in its fourth year and the U.K. operation in its first. Profit is expected from Italy this quarter and from the United Kingdom at the end of next year, Mr. Kuhlmann said.
"It's amazing that the model does kind of replicate" in different countries, he said.
ING Direct does best in the United States, Canada, and Australia, where mortgage markets are very well developed and mortgages are a commodity product, Mr. Kuhlmann said. In Europe "people don't move as much"; Germany is the only European country in which ING Direct sells mortgages.
Another driver is consumer demand in markets with stores "like the Home Depots, the Costcos, and the Ikeas," Mr. Kuhlmann said. The do-it-yourself attitude there goes beyond home improvement to Web banking, he said.
