AMSTERDAM ING ING.AS said it should complete its restructuring two years ahead of schedule, meaning the Dutch banking and insurance group could be one of the first euro zone casualties of the 2008 global crisis to emerge from a state rescue.
Cutting free of the state is seen as an important step for ING, removing a European ban on acquisitions and giving it greater pricing flexibility so it can compete more easily.
Major U.S. banks repaid much of their emergency government aid in months, allowing them to stay competitive, but in Europe it is taking years to unwind a series of bailouts stretching from Belgium to Greece.
Like its Dutch rivals ABN Amro and Rabobank, ING had a strong international presence at the time of the financial crisis, with a network far larger than its tiny home market.
Both ING, which required a 10 billion euro ($13.5 billion) bailout by the state, and ABN Amro, which was nationalized, were forced to retreat from their global empires to focus on Europe, where business is hampered by anemic economic growth.
But ING reported better-than-expected third-quarter net profit of 101 million euros on Wednesday, repaid another tranche of state aid, and said it has also made progress on divesting assets as outlined in the restructuring plan.
"Under a new agreement with the European Commission, the total restructuring of ING Group will now be completed two years earlier, by the end of 2016," Chief Executive Ralph Hamers, who took over from Jan Hommen in October, said in a statement.
Hamers said the divestment of ING's Asian insurance and investment management activities was almost complete, while the group was on track with plans for an initial public offering of its European insurance unit.
That IPO will now include ING's Japanese life insurance business, avoiding a fire sale or distressed price for a unit which had proved difficult to sell separately.
"The Dutch state informed the Commission that ING would be unable to divest its subsidiary ING Life Japan by end December 2013," the European Commission said in a statement.
"Instead the Dutch state proposed to integrate ING Life Japan in the divestment process of ING Insurance Europe. To compensate for the longer divestment period of ING Life Japan the Dutch state and ING committed to advance the divestment date of ING Insurance Europe by two years to end 2016."
ING shares surged more than 6 percent to hit a new high of 9.879 euros, the highest since the crisis.
In October 2008, ING warned of its first-ever quarterly loss and watched its shares lose a quarter of their value in one day, taking a Sunday-night bailout from the Dutch government.
Its market capitalization, which fell from 74 billion euros in 2006 to 15 billion euros in 2008, is now back to nearly 38 billion euros.
Under Hommen, a former Philips (PHG.AS) executive, ING has raised about 25 billion euros as it shed a host of insurance, investment management and other assets around the world through disposals or listings, and cut thousands of jobs to raise funds with which to repay aid and bolster its capital.
It paid another 1.125 billion euros to the state on Wednesday, including premiums and interest, bringing the total amount repaid to 11.3 billion euros.
That leaves 2.25 billion euros in principal and interest still to be repaid in two tranches in March 2014 and May 2015.
Chief Financial Officer Patrick Flynn said ING would look at that timetable again when the next tranche is paid in March.
"We would love to exit as quickly as possible while maintaining strong capital ratios," Flynn said.
"We don't get a discount for paying early."
Last week ING ended another tie with the state when the Dutch government said it would sell a 6.4 billion euro portfolio of U.S. Alt-A mortgage securities that it took over from the troubled financial group during the crisis in order to reduce risk and uncertainty.
That news prompted speculation that ING would try repay state aid ahead of schedule.
ING's next big divestment, of its European insurance unit, is expected in 2014 either via an initial public offering, spin-off, trade sale or some combination.
ING said its better-than-expected third-quarter net profit was lifted by higher net interest margins and cost savings.
A poll of five analysts commissioned by Reuters gave an average forecast for a quarterly net loss of 25 million euros, with forecasts ranging from a loss of 69 million euros to a profit of 42 million euros. ($1 = 0.7421 euros)
(Reporting by Sara Webb; Editing by David Cowell and Anna Willard)