Business NEWS
ING announces plan to split into two units to Satisfy EU
By Mike Martinez for CEOWORLD Magazine Updated:October 27, 2009
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Dutch ING Group NV (ING.AS) will split itself in two and launch a 7.5 billion euro ($11.3 billion) rights issue as part of a deal with the European Commission.
Shares in Belgian financial group KBC (KBC.BR) fall as much as 13.3 percent to 27.33 euros, their lowest point since Sept. 4, with analysts pointing to a negative read-across from Dutch peer ING’s (ING.AS) plans to transform itself.
As part of a plan to satisfy E.U. concerns about a state-aid package offered to ING late last year, the company said it will dispose of its insurance and investment management activities, including its internet bank ING Direct in the U.S. and some retail banking activities in the Netherlands, by the end of 2013.
The Dutch state pumped EUR10 billion worth of capital into ING at the height of the financial crisis and agreed to guarantee EUR28 billion of its U.S. Alt-A mortgage portfolio. Alt-A securities are backed by mortgages rated between prime and subprime.
ING Canada’s insurance business completed a $2.2billion (Canadian) private placement and secondary stock offering, and became Intact Insurance Co., which is a widely held home, car and business insurance company whose shares are listed on the Toronto Stock Exchange.
The repayment of the first EUR5 billion tranche of state aid will generate a return for the government of 15% to 21.5%, or EUR593 million-EUR951 million, depending on the exact timing of the payback, Hommen told analysts.
ING also said Monday that it expects to post an underlying net profit in the third quarter of EUR750 million, climbing back from a loss of EUR568 million a year earlier. The net result after divestments and special items is about EUR500 million, or EUR0.24 a share, up from a loss of EUR478 million in the year-earlier period. ING will publish full third-quarter results Nov. 11.
Asked why ING was abandoning its bancassurance model, Hommen said the new ING would still be able to sell insurance products without having to own them. He said ING’s insurance business could be broken up and sold off in parts and that the company will decide later about what to do with its real-estate business. “We are not in a hurry to make a decision. We know that we can’t sell it for a good price in the current market,” he said.
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