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* Q2 net profit down 39 pct, hit by Asian loss
* Banking unit tops forecast on cost cuts, better margin
* To detail European insurance unit options on Sept. 19
* Shares up more than 5 pct to highest since 2011 (Adds analyst quote, head count, valuation, updates shares)
By Sara Webb
AMSTERDAM, Aug 7 (Reuters) - Dutch financial group ING beat second-quarter profit forecasts at its banking business and said it could announce more cost savings later this year as it continues to slim down in a drive to recover from the financial crisis.
Shares in ING, which was rescued by the Dutch state in 2008, surged more than 5 percent to 8.3 euros on Wednesday, their highest level since 2011.
"ING remains the most mis-priced restructuring story in the sector in our view, and we expect this value to finally be crystallised as the group enters the last stages of its restructuring," said Jefferies analyst Omar Fall.
Shares in ING still trade at a substantial discount to European rivals, according to StarMine SmartEstimates, with a price to book value ratio of 0.6, against a peer average of 0.9.
Since its rescue in 2008, ING has dismantled its once-fashionable banking and insurance model and announced thousands of job cuts and other cost savings.
The group reiterated on Wednesday it was on track for its next big divestment, its European insurance unit, in 2014. Outgoing chief executive Jan Hommen, 70, said he would give more details about the various options - initial public offering, spin-off, trade sale or some combination - on Sept. 19.
ING has raised about 23 billion euros ($30.6 billion) in total from divesting insurance, investment management and other assets in order to repay state aid.
The group, with 82,643 employees worldwide, now needs to examine whether its overheads are appropriate in size, Patrick Flynn, chief financial officer, told Reuters Insider.
"It's good housekeeping," Flynn said. "We need to look at the size of our support functions and our head office."
ING said it is looking into what would be included in a review of its overheads and the group's Amsterdam headquarters, a sprawling, low-rise complex that resembles a residential honeycomb with gardens, water features and walkways. ING's insurance unit occupies a separate landmark shoe-shaped building, also in Amsterdam.
Hommen - who is succeeded in October by Ralph Hamers, former head of ING's business in Belgium and Luxembourg - said an announcement about the review could come in the second half.
ING posted a 39 percent drop in second-quarter net profit to 788 million euros, hit by a 98 million euro loss from Asian operations, which it said was due to guarantees and related hedges at its insurance business in Japan.
A poll of three analysts commissioned by Reuters gave an average forecast for net profit of 944 million euros, with forecasts ranging from 882 million to 1.05 billion euros.
However, underlying pretax profit at ING's banking operations rose 13.5 percent to 1.15 billion euros, beating the average forecast for 989 million euros. That was driven by cost cutting and a higher net interest margin.
ING's cost/income ratio improved slightly to 54.3 percent, from 55.2 percent in the first three months of the year.
But against the backdrop of a weak European economy, demand for lending remained lacklustre, while non-performing loans increased to 2.8 percent of outstanding credit, up from 2.6 percent at the end of the first quarter, with a significant increase in the real estate sector.
ING's European insurance business turned to an underlying pretax profit of 182 million euros, at the lower end of forecasts, from a loss a year ago of 110 million euros.
$1 = 0.7513 euros Editing by David Cowell and Mark Potter