As part of its ongoing review of its strategy and as a logical next step in its back to basics programme, ING has decided to seperate its banking and insurance operations. This will be achieved over the next four years by a divestment of all insurance operations (including Investment Management). ING will explore all options, including initial public offerings, sales or combinations thereof.
Earlier this year ING presented the back to basics programme to streamline the company and reduce risk, costs and leverage. The bank will be predominantly focused on Europe with selective growth options elsewhere. The insurance business will focus on its long-term structural leadership positions in life and retirement services. The business will be managed regionally, with key building blocks including the operations in the Benelux, US, Central Europe, Latin America and Asia.
Also as part of the restructuring plan, ING will create a new company in the Dutch retail market out of part of its current operations, by combining the interadvies banking division (including Westland Utrecht and the mortgage activities of Nationale-Nederlanden) and the existing consumer lending portfolio of ING Retail. This business, once separated, will be divested.
ING has agreed not to be a price leader in any EU country for certain retail and SME banking products and will refrain from acquisitions of financial institutions that would slow down the repayment of the core Tier 1 securities. These restrictions will apply for the shorter period of three years or until the Core Tier 1 securities have been repaid in full to the Dutch State.
Jan Hommen, CEO of ING, said: “Over the last six months, we have worked tirelessly – both inside ING and with the Dutch Government and the European Commission – to devise a plan that will enable us to pay back the Dutch State, address the EC’s requirements for viability and fair competition, and return our focus to the business and what matters most to our customers.
“Splitting the company is not a decision we took lightly. ING has a proud history as a global financial services leader and has been a strong advocate for combining banking and insurance in one company. The combination provided us with advantages of scale, capital efficiency and earnings stability through a diversified portfolio of businesses. However, the financial crisis has diminished these benefits. Now, the widespread demand for greater simplicity, reliability and transparency has made a split the optimal course of action. We will work carefully in the coming months and years to manage the separation in a way that will support the success of our businesses in the interests of our customers, employees, shareholders and other providers of capital.”
A key goal of the back to basics programme was to reduce complexity by operating the bank and insurer separately under one Group umbrella. Negotiations with the European Commission (EC) on the restructuring plan have acted as a catalyst to accelerate the strategic decision to completely separate banking and insurance operations. The restructuring measures, including steps already taken as part of our back to basics programme, are expected to result in a pro forma balance sheet reduction of around E600 billion by 2013, equal to approximately 45% of the balance sheet at 30 September 2008.
