ING Said to Weigh Sale of Australia Online Banking Division
ING Said to Weigh Sale of Australia Online Banking Unit
Jock Fistick/Bloomberg
Flags fly outside the ING Groep NV headquarters in Amsterdam.
Flags fly outside the ING Groep NV headquarters in Amsterdam. Photographer: Jock Fistick/Bloomberg
ING Groep NV (INGA), the biggest Dutch financial-services company, is weighing the sale of its Australian online banking unit, said two people with knowledge of the matter.
ING has canvassed interest from lenders including Standard Chartered Plc (STAN), said the people, who declined to be identified because the talks are private. ING may also consider selling some of its commercial-banking operations in Asia, the people said.
The 12-year-old ING Direct unit in Australia, which offers banking services over the Internet and telephone, has about 1.4 million customers, according to its website. Amsterdam-based ING, which received a bailout during the financial crisis, plans to reduce its balance sheet by about 45 percent from 2008 levels. The company agreed to sell insurance and U.S. online banking divisions as a condition for European Union approval of its rescue.
“If they are selling both the U.S. and Australian online banks, this would underline ING is increasingly focusing on the a European retail market,” said Jan Willem Weidema, an Amsterdam-based analyst at ABN Amro Group NV. “Giving up part of your expansion by exiting growth markets in Australia and Asia doesn’t have to be bad as long as you get a good price for them.”
ING Direct Australia may be valued at between 2.6 billion euros and 4.4 billion euros ($6.5 billion), Weidema estimated, taking into account valuations for Australian competitors.
Record Profit
Raymond Vermeulen, an Amsterdam-based spokesman for ING, declined to comment, as did Beverly Mathews, a Standard Chartered spokeswoman in Mumbai. David Breen, a Sydney-based spokesman for ING Direct in Australia, also declined to comment.
ING fell 1.1 percent to 8.90 euros by 11:22 a.m. in Amsterdam trading, valuing the company at 34.1 billion euros. The stock has advanced 22 percent this year.
The Sydney-based ING Direct unit reported record profit in 2010 while competing against Australia’s four largest retail banks -- Westpac Banking Corp. (WBC), Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. (NAB)
“I would expect any player other than the four major banks to have a look,” said Frank Zumbo, a competition lecturer specializing in banking at the Australian School of Business in Sydney. “ING Direct has been a significant and growing player. Any move by a major bank on ING Direct should be blocked.”
Full-year net income at the Australian lender rose 5 percent to A$275.9 million ($301 million) as mortgages and deposits increased, it said in a statement on March 16.
Home Loans
Retail savings climbed 10 percent to more than A$23 billion and new home loans increased by A$1.1 billion to A$37 billion. ING Direct Australia added 100,000 customers, according to the release. The bank said its Tier 1 capital ratio, a measure of ability to absorb losses, was 9.9 percent at the end of 2010.
“ING Direct Australia has a heavy portfolio of residential mortgages,” Cor Kluis, an Utrecht-based analyst at Rabo Securities said. “That will reduce valuations a bit if they were to sell the unit.” The unit’s loan to deposit ratio exceeds 150 percent, compared to 61 percent for ING Direct in total, he said.
A sale would also make sense in terms of balance sheet management, as the Australian operations can’t be integrated with the European businesses, he said. Taking into account the ratio of loans compared to deposits, Kluis estimates a sale of the Australian online bank could free up 1.2 billion euros in capital.
Capital Rules
Australian house prices declined in the first quarter by the most since 2008, according to an index measuring the weighted average for established houses in eight major cities, which dropped 1.7 percent from three months earlier, a report showed yesterday.
The sale of the unit would add to other divestments by ING as it complies with conditions of its bailout and faces tougher financing rules worldwide. The bank said in March that its capital strength under Basel III rules may be hurt more than previously estimated.
Requirements proposed by the Basel Committee on Banking Supervision, if applied at the end of last year, would have cut the firm’s core Tier 1 capital ratio to 8.3 percent from 9.6 percent under Basel II rules, ING said on its website.
U.S. Online Bank
ING Groep has received interest from several potential buyers of its U.S. online bank, people familiar with the matter said last month. SJB National Bank, formed by Related Cos. executives, and Capital One Financial Corp. are among firms that have expressed interest, the people said.
ING’s U.S. bank may fetch at least $10 billion in a sale, JPMorgan Chase & Co. analysts said in March. That price would “free up” about 3.4 billion euros for aid repayment. ING Direct, the U.S. unit, had $77.7 billion in deposits at the end of 2010 and $40 billion in net loans and leases, according to Federal Deposit Insurance Corp. data.
ING received 10 billion euros of state aid in 2008 and also transferred the risk on 21.6 billion euros of U.S. mortgage assets to the Dutch government. ING, which paid back 5 billion euros in December 2009, will return another 2 billion euros this month and the remainder a year later.
To contact the reporter on this story: George Smith Alexander in Mumbai galexander11@bloomberg.net.
To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net
Rate this Page