The chief executive officer of ING Direct Canada says the restructuring of its Dutch parent will be positive for the bank.
"There is very little question that ING Group at the end of the day is going to be very very focused on retail banking, and ING Direct is a big big part of the retail strategy of the group," Peter Aceto, whose Canadian unit employs about 900 people, said Monday after ING Group NV announced plans to split in two and shrink itself into a smaller Europe-focused bank.
"We will be an even more relevant player in ING Group and should have an easier time getting resources," Mr. Aceto said. "Our business is core to what ING Group is and wants to be."
ING surprised markets with its plans to split in two, pay back 50 per cent of its aid from the Dutch state early and launch a €7.5-billion ($11.25-billion U.S.) rights issue.
The move by ING, which said the dismantling was expected to run through 2013, accelerates a restructuring 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 fell as analysts expressed doubts about ING's tapping the market with a rights issue of nearly 30 per cent of its market capitalization. SNS Reaal, one of the last major bancassurers along with ING, was also down.
"This is still a difficult environment and ING may be running ahead of themselves with the rights issue but capital markets have shown they can be quite forgiving to ING," said Fred Huibers, a fund manager at Het Haags Effektenkantoor.
The splitting process will leave its balance sheet 30 per cent smaller than before its bailout. ING said it would be "predominantly focused on Europe with selective growth options elsewhere."
ING has already split its banking and insurance operations in Canada. Earlier this year, the Dutch financial group's insurance business in Canada - ING Canada - completed a $2.2-billion (Canadian) private placement and secondary offering as it spun the business off into a widely-held company that's listed on the Toronto Stock Exchange and has since been rebranded Intact Insurance Co. It is the biggest home, auto and business insurer in Canada.
The European Union's executive arm wants to force banks which took state aid to restructure and 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 per cent of its balance sheet.
Royal Bank of Scotland and Lloyds Bank Group, 70 per cent and 43 per cent 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.
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 per cent market share.
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 a program it announced in April, where it targeted €6-billion to €8-billion in asset sales.
Subsequent to a revised agreement with the Dutch state, ING said it would repurchase €5-billion in core Tier 1 securities in December. ING received €10-billion from the state in Oct. 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 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 of mortgage-backed securities at 90 per cent of their par value.
The EU had extended a review on that deal, saying it appeared the state paid too much for the assets.
In a separate statement, ING said it expected to report an underlying net profit of €750-million for the third quarter, adding that a "moderate stabilization" of operating conditions that started in the second quarter continued into the third quarter.
With files from Tara Perkins