ING to split in two, launch rights issue

 

Dutch bancassurer ING Group NV will split in two as part of a restructuring deal with the European Commission, turning into a smaller Europe-focussed bank over the next four years.

The company also said it would pay back 50 percent of its aid from the Dutch state early and launch a 7.5 billion euro (6.9 billion pound) rights issue.

Monday's surprise announcement from ING accelerates a move that investors had expected, but not for years to come. It effectively dismantles something of a national champion that was created just 18 years ago.

"I think the separation of the assets is a good move that brings more simplicity to ING as a financial institution" said Paul Beijsens, an analyst at Theodoor Gilissen.

ING shares were 3 percent lower just after the open.

The dismantling process, which is expected to run through 2013, will leave its balance sheet 30 percent smaller than before its bailout. ING said it would be "predominantly focussed on Europe with selective growth options elsewhere."

The restructuring deal is the most striking example yet of the deep changes the European Union's executive arm plans to force on major banks that received state aid. It is trying to push through most of those rulings soon, before the current commission's term expires.

A rescue plan for Germany's second-largest bank, Commerzbank, got the go-ahead from European antitrust regulators in May on the understanding that it divest about 45 percent of its balance sheet. 

Royal Bank of Scotland and Lloyds Bank Group, 70 percent and 43 percent respectively owned by Britain, are expected to be ordered into disposals by the European Commission.

Belgium's KBC and Franco-Belgian Dexia are also awaiting rulings from the executive arm of the 27-member European Union.

ASSETS TO BE SOLD

ING said the divestment of the insurance operations would be completed by 2013, through IPOs and or sales.

On a conference call with reporters, ING Chief Executive Jan Hommen said it would be "quite interesting" to launch one IPO for the entire global insurance business as a whole, adding that he hoped for the insurance divestment process to start one way or another next year.

ING will also split off some Dutch mortgage operations into a new company that would have about a 6 percent share of the Dutch mortgage market.

Pursuant to the restructuring agreement with the EU, ING also said it will have to sell ING Direct USA, its American online banking business. That sale is expected to take until the end of 2013 to complete.

The company has already made a number of divestitures this year, including wealth management businesses in Switzerland, Australia and New Zealand and the broader Asian region.

Those came under the "Back to Basics" program it announced in April, where it targeted 6 billion to 8 billion euros in asset sales. 

REPAID AID

Subsequent to a revised agreement with the Dutch state, ING said it would repurchase 5 billion euros in core Tier 1 securities in December. ING received 10 billion euros from the state in October 2008 to bolster its balance sheet amid a crisis in the Dutch banking sector.

ING also said it would pay an additional 1.3 billion euros under an asset guarantee scheme from January. At that time ING and the state made a deal for the government to guarantee the risk on 22 billion euros of mortgage-backed securities at 90 percent of their par value.

The EU had extended a review on that deal, saying it appeared the state paid too much for the assets.

To finance those repayments and protect its ratios ING will launch a rights issue underwritten by Goldman Sachs and JP Morgan. ING said it will present the rights issue at an extraordinary general meeting on November 25. The price, ratios and total number of shares will be announced after that.