Part 2:
‘Important Step’
“ING is a complex deleveraging story and this transaction is an important step on that road,” William Elderkin, a London- based analyst at Societe Generale wrote, in a note today. “Compared with the redemption cost of the remaining Dutch government capital” the capital generated by the deal, together with the potential divestments of the firm’s Latin American insurance operations, gives ING “an increasingly strong position,” he said.
The online bank’s $40 billion in net loans and leases gave it a Tier 1 capital ratio, a measure of financial strength, of 26.8 percent at the end of 2010, compared with an average of 12.7 percent for all U.S. lenders, according to FDIC figures. The return on assets was 0.3 percent in 2010, less than half the industry average of almost 0.7 percent, according to the FDIC.
ING Direct USA’s assets include $40.7 billion in outstanding mortgage loans, Capital One said in its presentation yesterday. Capital One said it expects to take a credit mark of $1.7 billion, or about 4 percent of mortgage balances.
Insurance Operations
European Union regulators approved ING’s taxpayer-funded bailout in November 2009, after the company agreed to sell its insurance and U.S. online-banking divisions and make additional payments to the state. The firm also has to dispose of Dutch lender WestlandUtrecht Bank.
ING is considering divesting its insurance operations through two initial public offerings, one for the U.S. and one for the European and Asian business. Hommen has said the IPOs are likely to take place in 2012 depending on market conditions.
The firm also is reviewing options for the Latin American insurance operations, Hommen said today. The company may make further announcements on this in the next three to four months, he said.
In addition to HSBC, other banks based abroad are weighing the sale of U.S. businesses. Royal Bank of Canada is seeking a buyer for its U.S. retail branch network, people with knowledge of the matter said in April.
“This deal stands on its own,” Fairbank said of Capital One’s agreement with ING. “It does not require additional acquisitions to make it financially compelling.”
Morgan Stanley (MS), Barclays Capital, and Centerview Partners LLC are advising Capital One. Frankfurt-based Deutsche Bank AG and New York-based JPMorgan are advising ING.