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[Scoop] ING to Split in Two Amid $11.3 Billion Rights Issue

本文发表在 rolia.net 枫下论坛ING to Split in Two Amid $11.3 Billion Rights Issue

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By DAVID JOLLY and ERIC DASH
Published: October 26, 2009

PARIS — ING Group, the Dutch financial services company, said Monday that it would divest itself of its insurance operations, under pressure from European competition authorities, and would also repay half of its government bailout through a stock issue.

The move to separate banking and insurance, which began tentatively in April, was an admission that the model under which the group had operated since its creation 18 years ago was no longer viable. The announcement and the plans for the stock issue of up to €7.5 billion, or $11.2 billion, caught the market by surprise. ING’s shares tumbled 18 percent in Amsterdam.

Jan H.M. Hommen, the ING chief executive, said that negotiations with European regulators over the restructuring plan following the government’s bailout a year ago acted “as a catalyst” for the divestiture.

The combination of banking and insurance under one roof “provided us with advantages of scale, capital efficiency and earnings stability through a diversified portfolio of businesses,” he said. But when bond yields soared last autumn, both sides of the business suffered, revealing the weakness of the model. “The costs of complexity now outweigh the advantages we once saw,” he said.

ING said the divestiture would be completed by 2013 through an initial public offering of shares or a sale.

On a stand-alone basis, the banking business had assets of €912 billion at the end of the first half, ranking it 13th in Europe, ING said, while the insurance business had revenue of $64 billion, sixth in the world.

ING got a €10 billion bailout from the Dutch government at the height of the crisis in October 2008, followed by a separate deal in January under which the government agreed to take on 80 percent of the risk on a portfolio of illiquid U.S. real estate investments, primarily so-called Alt-A mortgage securities. Such mortgages were for borrowers with credit problems. The bank said it would use the proceeds of the stock sale to repay half of the €10 billion in securities the Dutch government issued for the bailout, plus interest and a repayment premium.

It is still liable for the remaining €5 billion at the original terms, though Mr. Hommen expressed his desire to revisit the agreement.

Like all the European banks that received state bailouts, ING’s restructuring plans have come under scrutiny by the European Commission. The bank said after discussions with the commission it had agreed to make additional payments to the Dutch government related to the Alt-A portfolio, for which it would take a one-time pretax charge of €1.3 billion in the fourth quarter of 2009. The commission had expressed concern that the terms of the guarantee had been too generous, providing a de facto subsidy to ING at the expense of its rivals.

ING also agreed with the regulators “not to be a price leader” in Europe on certain financial products or to make acquisitions until the remaining €5 billion in state aid was repaid. Mr. Hommen said the bank hoped to repay the remainder by the end of 2011, through divestments and profit from operations.

Mr. Hommen said the commission would most likely endorse the restructuring on Nov. 18.

Maarten Altena, a banking analyst at SNS Securities in Amsterdam, called the decision to split up the banking and insurance businesses “an immensely important strategic decision,” and he said it would be positive for the bank in the long term. “There has always been a ‘conglomerate discount’ on ING shares,” he said, “because investors have great difficulty trying to value the different parts of the company.” But “in the near term there’s a substantial execution risk,” he said. “This deal is predicated on them finding a buyer to pay a decent price, and given the current market that may turn out to be quite difficult.”

He said investors sold ING shares Monday because of the risk that divesting itself of the insurance business might prove harder than anticipated, and because, for a company with a market value of about €20 billion, €7.5 billion in new shares represented a substantial dilution of shareholders’ ownership. Investors are also concerned about the E.U.’s continuing regulatory scrutiny, he said.

As part of the deal with the European Commission, ING also agreed to sell its U.S. Internet banking arm, ING Direct, by 2013. The company anticipates that it will take several years to get out of the business, but said that it regards the operation as “a very strong franchise.”

By 2014, when all the divestitures are finished, Mr. Hommen said, ING would be a “predominantly European bank” with a strong international network and a sophisticated online retail business. He declined to say whether he expected job cuts to accompany the restructuring. The bank has eliminated more than 10,000 jobs this year.

Separately, ING said Monday that it expected net profit for the third quarter, from both banking and insurance operations, would come to €750 million after divestments and special items.

Chris V. Nicholson contributed reporting.更多精彩文章及讨论,请光临枫下论坛 rolia.net
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