ING tries to claw back investor confidence
One of the Netherlands’ most prominent banking groups is seeking to win back investor trust after being forced to accept state aid in 2008. But how will it overcome bad press over bailouts and bonuses, asks Luisa Porritt
When the financial world fell apart in late 2008, the Dutch government was forced to bail out a number of household names in banking and insurance, including ING, Aegon, SNS Reaal, ASR Verzekeringen (ASR), ABN Amro and the Dutch parts of collapsed Fortis that were ultimately merged into ABN Amro.
Since then, banks in the Netherlands have been attempting to repair the damage to both their reputations and balance sheets. Heading these attempts to win back client trust is ING, after the collapse of Lehman Brothers hit the world financial system, the group found itself caught in the ‘too big to fail’ trap.
In October 2008, ING was forced to turn to the Dutch government for €10bn. It was by no means the largest stake the government took in a financial institution, but neither was it the smallest.
In 2009, the Dutch government acquired a 100% stake in ABN Amro, after a doomed consortium takeover attempt led to it having to take responsibility for the Dutch parts of Fortis and ABN Amro under one brand. Combined state support for ABN Amro and ASR was €28.22bn, and the Dutch government still owns those entities.
SNS, meanwhile, received the smallest amount of state support: €750m, which is the only amount not in billions.
So far, ING has repaid half of the money it owes (€5bn). Setting aside unforeseen circumstances, it hopes to repurchase a further €2bn of core Tier 1 securities from the Dutch government in May, reducing its repayment to €3bn. It hopes to repay the full amount by May 2012.
But the consequences of bailout do not stop at repayment. Currently, the bank is undergoing what the head of its retail and private bank in Luxembourg Dirk Adriaenssens describes as a “divorce” or, the separation of its bank on the one side, and its insurance and asset management business on the other.
Return to the core
The idea is to shrink the institution back to its core banking activities, compelled by an agreement made between ING and the European Commission in late October 2008. Then, ING committed to reducing its balance sheet by 30% by 2013 against its size as at 30 September 2008.
Anxious to show clients it can change, the group has gone some way towards meeting those demands.
“The bride is there and is there to be sold,” says Adriaenssens, following the recent sale of most of the group’s real estate business ING REIM for $1bn, set to bring in €500m after tax, as he looks ahead to possible future sales of its entities.
On the real estate side, it is yet to sell its Australian business. ING still holds equity interest in some REIM funds, in Europe, Asia, the US and Australia, which it intends to reduce.
Next is the likely sale of ING Direct USA. “We are preparing for divestment (of ING Direct USA) to comply with the EU agreement,” spokesman for the Group Raymond Vermeulen said. That could recoup ING as much as $10bn, the New York Post reported.