ING has reached an agreement with the Dutch State and the European Commission (EC) on amending the restructuring plan devised in 2009, after the bank’s receipt of a €10bn government bailout to save it from collapse.
ING, which earlier this month announced plans to cut more than 2,000 jobs, said that the amendments extend the time horizon and increase the flexibility for the completion of divestments and adjust other commitments in light of the market environment, economic climate and more stringent regulatory requirements.
Under the agreement, ING has filed a schedule for repayment to the Dutch State of the remaining €3bn in core Tier 1 securities plus a 50% premium, in four equal tranches in the next three years. A first tranche of €1.125bn will be paid on 26 November 2012.
As part of the EC’s approval for its state support, ING was committed to divest all insurance and investment management (IM) operations, ING Direct USA and WestlandUtrecht Bank by the end of 2013.
The operational separation of the insurance and banking activities was completed at the end of 2010, the Latin-American insurance/IM operations were sold in 2011, the sale of ING Direct USA was completed in February 2012, the first three sales of the Asian insurance/IM units were announced in October 2012 and this month ING US filed the registration statement for its initial public offering (IPO).
Under the latest amendments, the ultimate dates for divesting the insurance and investment management businesses have been extended. The divestment of more than 50% of the Asiani/IM operations has to be completed by year-end 2013, with the remaining interest divested by year-end 2016.
The divestment of at least 25% of ING US has to be completed by year-end 2013, more than 50% has to be divested by year-end 2014, with the remaining interest divested by year-end 2016. The divestment of more than 50% of Insurance/IM Europe has to be completed by year-end 2015, with the remaining interest divested by year-end 2018.
New Dutch Retail Bank
ING was also required to divest WestlandUtrecht Bank, comprising mainly of certain mortgage, savings, investments and consumer lending activities. However, market circumstances and changing regulatory requirements meant that the divestment proved not to be feasible.
Under the amended terms of the plan, the commercial operations of WestlandUtrecht Bank will be combined with the retail banking activities of Nationale-Nederlanden, which is to be divested as part of Insurance/IM Europe. The integrated retail banking business will operate under the 'Nationale-Nederlanden' brand, resulting in a competitive retail bank in the Dutch market with its own funding capabilities and a broad distribution network.
ING has committed itself to ensuring Nationale-Nederlanden Bank reaches certain targets for mortgage production and consumer credit until 31 December 2015 or until the date on which more than 50% of the Insurance/IM Europe operations have been divested, whichever date comes first. Furthermore, ING has agreed on a maximum ratio for mortgage production at ING Retail Banking Netherlands in relation to mortgage production of Nationale-Nederlanden Bank until year-end 2015.
"Since launching our Back to Basics programme in 2009, we have worked hard to safeguard our financial strength, simplify our organisation and further strengthen the focus on our customers, ensuring they are at the heart of everything we do," said Jan Hommen, chief executive officer (CEO) of ING Group. "For our employees, the past years of restructuring and insecurity have not been easy. We realise that, against a backdrop of enormous changes in the financial sector and society at large, our work is far from done.
"We are pleased that the agreement announced gives us more time and flexibility to complete the required restructuring while leaving our strategic objectives unchanged. We will ensure that we maintain the momentum of the programme as we have demonstrated in the past four years. We will continue our efforts to improve our performance, serving our customers, managing risks and controlling expenses to make sure that when the circumstances are right, we will be ready for the next steps."