INGto carve up banking and insurance
ING has staked its future on becoming a smaller, European-focused bank as it revealed plans yesterday to break up its empire, sell all insurance businesses and raise €7.5bn (£6.9bn) to pay down debts to the Dutch government.
In a move that has ramifications for bailed-out British banks Lloyds and Royal Bank of Scotland, ING was forced to transform its structure as the price of being saved from the brink of collapse by the Dutch taxpayer last year.
EU competition commissioner Neelie Kroes, who is also investigating the bailouts of Lloyds and RBS, insisted on the break up and speedy repayment of state aid. ING’s plans to split its banking and insurance arms had been known but the market was surprised that the group, which has built the world’s biggest online and telephone retail bank, agreed to Kroes’ demands to sell its US operations.
The sale of ING’s insurance assets and ING Direct USA, which was mired in toxic subprime loans that almost sank the entire group, will leave ING’s balance sheet nearly a third smaller than it is today.
The break up marks a move away from the so-called “bancassurance” model where banking operations are used as a channel to sell insurance products to customers. Banking analysts said RBS and Lloyds may be forced into similar simplifying transformations before they escape the clutches of government control.
ING chief executive Jan Hommen, who was parachuted in just six months ago conceded: “The complexity of ING did not help us during the crisis”. He said: “Splitting the company is not a decision we took lightly.”
Hommen, a noted cost-cutter, has dumped 10,800 staff so far this year, selling businesses all over the world, including Australia, Canada and Asia, in a bid to refocus on Europe.
ING said it expected to report third-quarter profits of about €750m compared with a loss of €568m last year.
TIMELINE OF A RESTRUCTURING
19 October, 2008
Netherlands injects €10bn into ING.
12 November, 2008
ING posts first ever quarterly loss after writedowns of €1.5bn.
26 January, 2009
Warns 2008 losses will reach €1bn, taps into €22bn of state loan guarantees and cuts 7,000 jobs. Michel Tilmant steps down as chief executive to be replaced by Jan Hommen.
3 February, 2009
Sells $1.42bn worth of its ownership stake in ING Canada.
26 March, 2009
Shelves plans to apply for a banking licence in China
9 April, 2009
Reveals plans to divest units worth up to €8bn and focus on Europe.
4 June, 2009
Says it will exit 10 of the 48 countries it operates in and sell 10 to 15 businesses within five years.
4 July, 2009
Cuts 800 jobs and announces plans to separately manage bank and insurance operations.
15 September, 2009
EC extends review of $32bn loan portfolio guarantee between ING and the Dutch state, saying government may have paid too much.
7 October, 2009
Julius Baer agrees to buy ING’s Swiss private banking assets for $507m.
15 October, 2009
Banking group OCBC buys ING’s private banking unit in Asia for $1.5bn.
JAN HOMMEN
CHIEF EXECUTIVE
ING GROUP
The near collapse of the global banking system made Jan Hommen the man for the moment at ING. The no nonsense Dutchman, 66, was appointed not only to rescue Holland’s biggest financial institution but to restore the shattered faith in bankers among the Dutch public.
His predecessor Michel Tilmant was the very image of the well-heeled European banker with his slicked-back hair. By contrast Hommen is a stoic figure whose leadership has been characterised by austerity. He has not drawn a salary since taking the reins. When Hommen used to work for Philips he arrived so early for work on the first day the building was still locked.