ING to split into two for simplicity
By Toby Sterling |
October 27, 2009, Tuesday
|
Print Edition
Print Edition
EUROPEAN services giant ING Groep NV said yesterday it will split itself in two, spinning off its insurance arm to simplify its business and issuing 7.5 billion euros (US$11.3 billion) in new shares to repay state bailout money.
The dramatic change in strategy caps a year of cutting costs and selling operations since the financial crisis struck, when ING was kept afloat only with two major rounds of assistance from the Dutch state.
The insurance operations have a book value of 22 billion euros, and the company said it will likely seek an initial public offering for them within four years.
"This is a momentous day for us: Splitting the bank and insurance is not a decision to be taken lightly," said Chief Executive Jan Hommen, a former board chairman who took the executive job in January after his predecessor was fired.
"We're making a decisive move to turn ourself into a simple organization."
ING has been an leading advocate in Europe of the advantages of combining banking and insurance, and historically the two arms have generated about equal shares of the company's earnings.
Bank to benefit
But Hommen said the events of the past year "have changed the environment in which we operate, and the complexity of ING didn't help us during the crisis."
He said ING bank, which will remain within the holding company, will benefit more from transparency and a smaller balance sheet than it did from cost savings on related businesses.
ING issued a series of related announcements yesterday. It will also sell or float its asset management arm, which does not now report its earnings separately but oversees 500 billion euros in investments; it will sell its United States Internet banking arm, ING Direct, by 2013; and will sell some of its Dutch banking operations.
The dramatic change in strategy caps a year of cutting costs and selling operations since the financial crisis struck, when ING was kept afloat only with two major rounds of assistance from the Dutch state.
The insurance operations have a book value of 22 billion euros, and the company said it will likely seek an initial public offering for them within four years.
"This is a momentous day for us: Splitting the bank and insurance is not a decision to be taken lightly," said Chief Executive Jan Hommen, a former board chairman who took the executive job in January after his predecessor was fired.
"We're making a decisive move to turn ourself into a simple organization."
ING has been an leading advocate in Europe of the advantages of combining banking and insurance, and historically the two arms have generated about equal shares of the company's earnings.
Bank to benefit
But Hommen said the events of the past year "have changed the environment in which we operate, and the complexity of ING didn't help us during the crisis."
He said ING bank, which will remain within the holding company, will benefit more from transparency and a smaller balance sheet than it did from cost savings on related businesses.
ING issued a series of related announcements yesterday. It will also sell or float its asset management arm, which does not now report its earnings separately but oversees 500 billion euros in investments; it will sell its United States Internet banking arm, ING Direct, by 2013; and will sell some of its Dutch banking operations.
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