AMSTERDAM (Reuters) - ING will take a 2008 loss of 1 billion euros ($1.3 billion), tap into 22 billion euros of Dutch state loan guarantees for its troubled loan portfolio and cut 7,000 jobs, it said on Monday.

The headquarters of Dutch bank and insurance group ING is pictured in Amsterdam in this file photo taken February 29, 2008. Dutch financial group ING will take a 2008 loss of 1 billion euros and will tap into a Dutch state guarantee for its troubled loan portfolio, it said on January 26, 2009, adding its Chief Executive Michel Tilmant will step down. REUTERS/Toussaint Kluiters/United Photos/Files

Michel Tilmant will step down as chief executive, the Dutch financial group said, and will be replaced by board Chairman Jan Hommen, 65, former chief financial officer of Dutch electronics group Philips.

By 1100 GMT, shares in ING, which are down 81 percent from a year earlier, were up 21 percent to 6.42 euros. The DJ Stoxx European banking index was up 5.7 percent.

“It’s just a major relief,” said Theodoor Gilissen analyst Paul Beijsens. “At the moment we can’t predict whether the market will get worse. ING may need more help, but at this point they addressed a major risk.”

After what it said was the worst quarter for equity and credit markets in more than half a century, ING said it would post an underlying loss of 3.3 billion euros for the fourth quarter, including 2 billion euros in losses from its structured credit portfolio.

The Amsterdam-based banking and insurance group said it would look into making divestments outside its core business, but declined to say what or how much it planned to sell.

ING also said it would cut 1 billion euros of costs in 2009, by scrapping 7,000 jobs out of a total of about 130,000 worldwide.

In addition to other cost-cutting measures, such as reducing head office spending, ING said it had decided not to launch its ING Direct banking service in Japan, a project it had planned to launch in 2008 pending regulatory approval.

It also said it would re-evaluate its sponsorship of the Renault Formula One racing team.

“ING can focus again on providing credit,” said Rob Koenders, asset manager at Harmony Vermogensbeheer, which owns ING shares. “This should have a positive effect ... I think you can consider buying ING.”

STRONG ACTIONS

“Today we are taking a number of very strong actions,” Hommen told reporters on a conference call. “The most significant of these actions is the agreement we reached with the Dutch government.”

In order to bolster its capital ratios, ING said the Dutch government would cover 80 percent of its 27.7 billion euros residential mortgage-backed securities (RMBS) in subprime mortgages, made to risky borrowers, and “Alt-A” loans, made to borrowers with a slightly better credit profile.

The Dutch government will take on the risk of the portfolio at a 10 percent discount to par value, and will receive 80 percent of cash generated from the portfolio.

Tilmant, CEO since 2004, will step down immediately and Hommen will formally take over for a four-year term once appointed by shareholders at a general meeting on Apr. 27.

Until then ING executive Eric Boyer will be acting CEO, the financial group said.

In October, ING agreed to a 10 billion euros cash injection from the Dutch government following the nationalization of Fortis’s Dutch activities in the Netherlands, including ABN AMRO, for 16.8 billion euros.

The Dutch government had also set up a 200 billion euros state loan guarantee scheme in order to help extend credit.

Earlier this month, it had convened a meeting of bank executives after indications that some banks had hesitated in tapping into the scheme.

The Dutch finance ministry said ING had agreed to boost its lending to consumers and businesses by 25 billion euros and would not pay bonuses to the management board for 2009 and beyond until a new remuneration policy was set.