ING Groep NV (ING) shares fell sharply Tuesday following a report that the E.U. Competition Commission will reject the terms of the Dutch government's EUR22 billion guarantee of the company's U.S. Alt-A portfolio.

Analysts said the E.U. may claim ING paid too little for the guarantee and that the price should be increased.

KBC Securities analyst Dirk Peeters said the cost to ING could be "raised considerably," estimating that it will have to pay an additional EUR1 billion. He kept ING's target price at EUR11. KBC downgraded the stock to reduce from accumulate.

Alt-A securities are mortgage-backed and rated between prime and subprime.

At 0822 GMT, ING shares were down EUR0.51, or 4.7% at EUR10.40, sharply underperforming the Stoxx Europe 600 financial services index, which was up slightly. The shares are up by around 50% since the start of 2009 but have fallen by almost 52% over the last year.

The European Commission said it will make a statement on state aid being offered to the troubled bancassurer later Tuesday. "There will be a statement later today," said competition spokesman Jonathan Todd.

According to a report Tuesday in Dutch daily De Volkskrant, the E.U. will reject the Alt-A mortgage transaction. However, it said the Dutch finance ministry will get a few more months to convince the E.U. to approve the deal in which it took on risk from the portfolio.

SNS Securities also said the E.U. will not approve the Dutch state guarantee. Analyst Maarten Altena said that in the worst case scenario ING could have to pay an additional EUR1.7 billion, bringing its core Tier 1-ratio down below the minimum requirement of 7%. In that case ING would have to either make more divestments or raise capital, Altena said.

Company Web site: www.ing.com

-By Bart Koster; Dow Jones Newswires; +31 20 571 5201; bart.koster@dowjones.com