Dutch bancassurer ING Groep NV returned to profitability after nearly 5 billion euros ($7.1 billion) of losses in the previous three quarters, but the profit was well below expectations as real estate writedowns drove the banking business to a surprise loss.

The company also raised its year-end cost cuts target by 30 percent to 1.3 billion euros and said on Wednesday it will not pay an interim dividend given market conditions.

ING shares opened 6.8 percent lower, giving up a large chunk of the sharp gains it has made in the last month.

Evolution Securities said there were some encouraging signs in the figures, but maintained a sell rating on the stock on fears of more writedowns. ING took a total of nearly 700 million euros in real estate writedowns and impairments worldwide in the quarter.

ING may continue to be hit by further negative real estate revaluations. We anticipate a further 25 percent loss on its portfolio of 15.5 billion euros, analyst Jaap Meijer said in a research note.

ING's second-quarter net profit was 71 million euros, down from 1.92 billion euros a year earlier. The consensus of 14 analysts polled for Reuters was a profit of 275 million euros.

After surprising analysts with larger-than-expected loan losses in the first quarter, ING posted loan losses of 852 million euros in the second quarter. Analysts expected a figure of 776 million euros. The company said it expects loan losses at or around the same level in the second half of the year.

The banking unit lost 204 million euros pre-tax on an underlying basis; analysts expected it to earn 444 million euros.

The insurance operations, on the same basis, earned 278 million euros versus a consensus forecast of 123 million euros. All three insurance regions were profitable, though ING said the biggest drivers were low claims levels in the United States and lower costs and sales expenses.

ING received 10 billion euros in state aid last October and is in the midst of a worldwide cost-cutting program that includes 6 billion to 8 billion euros in asset sales. The company reaffirmed those targets Wednesday and said it has identified which assets to sell.

Sources close to the program have told Reuters in recent days that ING aims to sign a deal to sell Swiss and Asian private banking assets in September.

ING shares fell 72 cents to 8.40 euros at 0704 GMT in Amsterdam. Since a recent bottom of 6.64 euros on July 13, the stock is up just over 37 percent, fueled in part by talk of pending asset sales.

Over the same period the Dow Jones STOXX Bank Index <.SX7P> is up about 23 percent.

(Reporting by Ben Berkowitz; Editing by Hans Peters)

($1 = 0.7079 euro)