By Maarten van Tartwijk 

AMSTERDAM -- ING Groep NV is the latest European lender to announce a new round of layoffs and restructuring as it battles ultralow interest rates and stricter regulation.

The Dutch bank said Monday it would scrap around 7,000 jobs in the next couple of years, of which 3,500 would be in Belgium and 2,300 in the Netherlands. The cuts are aimed at saving EUR900 million ($1.01 billion) in annual costs by 2021 and represent around 13% of the bank's global workforce. ING said it expects to take a pretax "redundancy provision" of roughly EUR1.1 billion.

The measures are part of a wider overhaul in which ING aims to converge its banking operations in Europe and move toward one digital platform. It said it would invest EUR800 million to improve its digital services.

Several European banks have announced restructuring plans or more-cautious financial targets in recent weeks as they grapple with a combination of record-low interest rates, tighter regulations and a still sluggish economy. With profits under pressure, many are seeking to reduce costs.

Last week, Germany's Commerzbank AG said it would scrap around 20% of its workforce to restore profitability, while Spain's Banco Santander SA downgraded two of its important financial targets in light of the challenging environment. In the Netherlands, ABN Amro Group NV is planning to cut more than 1,000 jobs.

"Banks are confronted with a continuous regulatory burden and a prolonged period of ultralow interest rates," ING's Chief Executive Ralph Hamers said. "These factors put pressure on the returns which are necessary to fund growth and investments and cover our cost of capital."

Mr. Hamers said the latest measures are made "from a position of strength," referring to previous restructuring plans that bolstered ING's capital position and made it less complex.

The plans are facing fierce resistance in Belgium where ING operates a large retail-banking franchise. Labor unions threatened to strike and Belgian Prime Minister Charles Michel expressed support for the employees, saying ING "must assume its responsibility."

Since the global financial crisis, when ING received a government bailout, it has embarked on a strategic overhaul to transform itself into a smaller, Europe-focused bank. It divested its global insurance business and dozens of other assets, including its online savings bank in the U.S., ING Direct USA. The bank now employs around 52,000 people, compared with roughly 125,000 in the years before the crisis.

ING, the Netherlands' largest bank by assets, reiterated its target of achieving a core capital ratio of more than 12.5% and a leverage ratio of more than 4%. It said it wouldn't update its return-on-equity target, a measure of profitability, citing "continuing regulatory uncertainty." The bank currently targets a return of 10% to 13%.

KBC Securities, a brokerage, said it could be seen as a disappointment that the targeted savings won't translate into a "meaningful improvement" in earnings. Shares in ING were little changed after the announcement.

The move comes amid a debate in the Netherlands on whether banks have set goals that are too ambitious, after a study by the Dutch central bank concluded that their double-digit targets may no longer be feasible with new capital requirements on the horizon.

Mr. Hamers said he doesn't necessarily agree with the central bank's views and that investors generally demand "decent returns" from healthy banks. He said ING will present new profitability targets when there is more clarity on the regulatory front. ING still aims to pay a "progressive dividend over time," he said.

Write to Maarten van Tartwijk at maarten.vantartwijk@wsj.com

 

(END) Dow Jones Newswires

October 03, 2016 10:43 ET (14:43 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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