Dutch bancassurer ING, which received a €10bn injection, must lop off its
global insurance arm and sell the US part of ING Direct.
The insurance businesses will be sold via an initial public offering next
year, the online bank unit perhaps in the next month. The likes of GE and
Capital One have bid up to $9bn for it, Bloomberg reports, or roughly the
book value of the equity allocated to the business – hardly the valuation a
more willing seller might expect.
Sticky deposits
The unit’s worth lies in its deposit-gathering prowess: $82bn of sticky
deposits would be a cheap funding source for the consumer finance books of
GE or Capital One.
It would more than double GE’s deposits, for example. Admittedly, ING Direct’s
$40.5bn mortgage book is less attractive, but either buyer has the asset
diversity to cope with it.
GE could offer cash, while Capital One is said to have offered cash and
equity. Some cash up front plus a share of earnings and the upside potential
from a later exit would soften the blow of the disposal for ING.
Awkward position
But ING chief executive Jan Hommen is in an awkward position: a unique
business with such brand value should be worth much more, but he also needs
to get the Dutch state off his back.
JPMorgan Cazenove’s base valuation of $10bn in March would have freed up
€3.4bn - enough to repay the remaining €3bn principal owing on ING’s
bail-out. Realistically, given that comparable US banks trade below book
value, ING will be lucky to get $9bn.
Whatever he decides, investors will not forgive Mr Hommen if, after the
disposals, ING’s shares do not re-rate, and close their discount to European
bank peers.
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