The sale process for ING Bank Canada has already kicked into high gear, and rival Canadian banks are heavily interested in scooping up their online-focused competitor.
For potential bidders, not only is it rare to see a Canadian rival on the market, but ING's operations here are remarkably safe, according to someone familiar with the sale process. The mortgages on ING's books are insured by Canada Mortgage and Housing Corporation, and its deposits are easy to understand.
But that doesn't mean the business is risk-free as an acquisition target. ING marketed itself over the past decade as an alternative to the Big Six's high retail banking fees, and tried to brand itself as the best independent alternative. If the sale goes through, customers who flocked to ING for these very reasons may not put up with higher fees.
Yet given the level of interest from rival banks, that doesn't appear to be a major concern. Plus, it is common to see the purchase price in financial institution acquisitions to be adjusted after the deal closes if many clients flee.
A final announcement on the sale is expected to come in the fall, according to a person familiar with the process, and the deal could close by year end if everything goes according to plan.
To value ING's Canadian operations, bidders are looking to the sale of ING's U.S. online banking business to Capital One Financial Corp. for about $9-billion last year. However, that deal isn't completely comparable. At the time of the deal U.S. mortgages were in much rougher shape and Capital One wrote down the value of the mortgages by 4 per cent because it expected future delinquencies. But it's a good starting point.
JP Morgan has been hired as the banker for ING Bank Canada.