ING Groep NV (INGA), the biggest Dutch financial-services company, won more time from European Union regulators to sell its insurance operations and pledged to repay state support by 2015. The shares rose.
The European Commission said today that it extended the deadline for ING to divest the businesses, originally set for the end of 2013, because of current market conditions. ING said today that the new timeline means it must sell more than half of its insurance arm in Europe by the end of 2015 and dispose of the rest by the end of 2018.
“It’s good news,” said Corne Aben, an Amsterdam-based fund manager at Optimix Vermogensbeheer NV, which manages about 1 billion euros ($1.3 billion), including ING shares. “That increases flexibility, which means they’ll be able to get better prices for the units they want to sell.”
EU regulators were forced to re-examine the terms of ING’s rescue by the Dutch government after the company won a court challenge that overturned their 2009 decision. ING sought to change the original plan as Europe’s debt crisis worsened and regulations became tougher, disrupting markets and making it harder to sell assets.
ING said it agreed to sell more than 50 percent of its Asian insurance and investment-management operations by the end of next year, and dispose of the rest by the end of 2016. It must divest at least 25 percent of its U.S. arm by the end of 2013, more than half by the end of 2014 and the rest by 2016.
The Brussels-based regulator also approved ING’s plan to create a new Dutch retail bank and extended a ban on the company making acquisitions or undercutting rivals on price at its ING Direct Europe unit.
Chief Executive Officer Jan Hommen said on a conference call that it’s not in shareholders’ interest to pay a dividend yet, and that “many priorities” must come first, including repaying the Dutch state and bolstering capital levels.
“It’s important that they now can avoid forced sales at lower prices,” Optimix’s Aben said. “So much money is concerned with these asset sales. To me, that outweighs the fact that the restructuring, and possibly dividend resumptions, will take longer.”
ING plans to sell the European insurance assets through an initial public offering, the company said. It filed for a share sale of its U.S. division on Nov. 9.
ING will combine the commercial operations of WestlandUtrecht Bank, which has 36.4 billion euros of Dutch mortgages, with the retail banking activities of its Nationale- Nederlanden insurance unit. Stricter capital requirements had scared off potential buyers as ING sought to comply with previous EU orders to sell WestlandUtrecht.
The combination will create a new retail lender that the EU said would ensure competition in the concentrated Dutch market. The new Nationale-Nederlanden Bank will get 2.6 billion euros in WestlandUtrecht Bank mortgages, while the other 33.8 billion euros will be retained in a separate unit at ING Bank. ING said the reorganization will cause “a number of redundancies.”
“It’s good to hear” that ING won’t have to sell WestlandUtrecht, while keeping so much of the mortgage book “prevents a large divestment loss,” said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International.
ING received a 10 billion-euro bailout by the Dutch state, triggered as subprime mortgage assets held at its U.S. unit plunged. It has returned 7 billion euros, with 2 billion euros in interest and premiums, to date.
“We are pleased that the agreement announced today gives us more time and flexibility to complete the required restructuring, while leaving our strategic objectives unchanged,” Hommen said in the statement.
ING will withdraw its appeal of the Commission’s earlier decision at the EU General Court in Luxembourg, Hommen said today, while the Commission will continue its appeal against the Luxembourg court ruling of March 2012 for “principal legal reasons.” The outcome won’t change today’s agreement, ING said.
EU governments spent 1.6 trillion euros to shore up banks from 2008 to 2010 amid the crisis that followed the collapse of Lehman Brothers Holdings Inc. The EU must approve large state subsidies and can impose conditions on any aid given.
Among other disposals scuppered by the financial crisis, Royal Bank of Scotland Group Plc may seek more time from EU regulators to sell 316 U.K. branches after Banco Santander SA (SAN) abandoned its planned 1.7 billion-pound ($2.7 billion) purchase on Oct. 12. RBS was required to sell the outlets by 2014 as an EU condition of its British bailout.
ING said it will repay the Dutch government 3 billion euros in state aid with a 50 percent premium, starting with the first payment of 1.125 billion euros on Nov. 26. It will make three more payments in November 2013, March 2014 and May 2015, and may speed up repayments “if possible and prudent under the prevailing economic circumstances.” After the final repayment, the Netherlands will make a return of 12.5 percent on its investment, ING said.
“The agreement ensures that the taxpayer is rewarded appropriately for the support he has given,” Dutch Finance Minister Jeroen Dijsselbloem said in a letter today.
To contact the editor responsible for this story: Anthony Aarons at email@example.com