The FINANCIAL -- ING announced that, together with the Dutch State, it has
reached an agreement with the European Commission on significant
amendments to the 2009 Restructuring Plan.
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
As part of the agreement, ING has filed a schedule for repayment to the
Dutch State of the remaining EUR 3 billion in core Tier 1 securities
plus a 50% premium, in four equal tranches in the next three years. A
first tranche of EUR 1,125 million will be paid on 26 November 2012.
"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, CEO of ING Group. “For our
employees, the past years of restructuring and insecurity have not been
easy. We realize 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 today 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.”
As part of the approval by the
European Commission in November 2009 for the State support received
from the Dutch State during the financial crisis, ING was committed to
divest all of its Insurance and Investment Management 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 U.S. filed the registration statement for its IPO. Since the start, ING has incurred over EUR 500 million in expenses in executing the Restructuring Plan.
Under the amendments announced today, the ultimate dates for divesting the insurance and investment management businesses have been extended. The divestment of more than 50% of the Asian Insurance/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 U.S. 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. As ING has committed to eliminate double leverage, proceeds from the divestments will be used to that end, provided they are not needed to maintain the leverage of the remaining insurance businesses.
The base case scenario for Insurance Europe and ING U.S. is to become standalone businesses through an IPO process. The actual timing of divestments will depend on market conditions and readiness including performance. The process to divest the remaining units in Asia is on-going. Any further announcements will be made if and when appropriate.Under the terms of the original Restructuring Plan, ING was required to divest WestlandUtrecht Bank, comprising mainly of certain mortgage, savings, investments and consumer lending activities. However, due to market circumstances and changing regulatory requirements, divestment of WestlandUtrecht has proved not to be feasible.
Under the amended terms of the Restructuring 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. Nationale-Nederlanden Bank will offer a broad and coherent product line, with mortgages, savings, bank annuities, investments and consumer credit products, combined with the core retail insurance products of Nationale-Nederlanden.
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.
Of WestlandUtrecht Bank’s EUR 36.4 billion Dutch mortgage portfolio, EUR 2.6 billion will be transferred to Nationale-Nederlanden Bank. ING Bank will retain the remaining EUR 33.8 billion mortgage portfolio and in relation to this will contribute EUR 350 million to the capital of Nationale-Nederlanden Bank. To service existing WestlandUtrecht Bank labelled mortgages, insurance policies and real estate finance agreements, part of WestlandUtrecht Bank will become a separate entity within ING Retail Banking Netherlands.
Part of the employees of WestlandUtrecht Bank will transfer to Nationale-Nederlanden Bank while another part will remain at the separate WestlandUtrecht Bank entity within ING Retail Banking Netherlands. Unfortunately, this reorganization will result in a number of redundancies, the full extent of which will become clear in the next few months. The measures mentioned above will be taken in accordance with local regulations and will be discussed with the applicable stakeholders.Since receiving EUR 10 billion in capital support from the Dutch State, ING has consistently strengthened its capital position. Shareholders’ equity has more than doubled since 30 September 2008 and the bank core Tier 1 ratio of 12.1% as of 30 September 2012 was 85% higher than that of 30 September 2008. At the same time, ING has made good progress in repaying the capital support from Dutch State. On the original EUR 10 billion in core Tier 1 securities issued in November 2008, ING has paid over EUR 9 billion to the Dutch State of which EUR 7 billion in principal and over EUR 2 billion in interest and premiums.
Under the terms of the agreement announced today, ING commits itself to repaying the remaining EUR 3 billion core Tier 1 securities at a total cost of EUR 4.5 billion, consisting of principal, premiums, accrued interest and coupon payments would they be triggered by potential future dividend payments. The repayment is scheduled in four equal tranches of EUR 1,125 million each. ING has notified the Dutch State that it will pay the first tranche of EUR 1,125 million on 26 November 2012. This payment has been approved by the Dutch Central Bank (DNB). After this tranche, ING will have paid to the Dutch State more than the original capital support of EUR 10 billion, including EUR 7.8 billion in principal and EUR 2.4 billion in interest and premiums.
A second tranche will be paid in November 2013, the third in March 2014 and the final tranche will be paid ultimately in May 2015. After the last payment, ING will have paid EUR 13.5 billion to the Dutch State, with a total annualised overall return for the State of 12.5%. It remains ING’s ambition to repay the remaining support as quickly as possible and ING intends to accelerate repayments if possible and prudent under the prevailing economic circumstances. All actual repayments are conditional upon the approval of DNB.The 2009 Restructuring Plan included restrictions on acquisitions and price leadership for certain products in EU markets. As ING Group reported, these restrictions will continue to apply until 18 November 2015 or until the date on which more than 50% of each of the Insurance/IM operations has been divested, whichever date comes first.
The price leadership restrictions in Europe will be amended to reflect specific conditions in various local markets. Under the amendments, the constraint will no longer apply in the Netherlands and ING Direct will refrain from offering more favourable prices than its best priced direct competitor among the ten financial institutions having the largest market share in the respective countries.
The calling or buy back of Tier-2 capital and Tier-1 hybrids will continue to be proposed for authorization to the European Commission on a case by case basis until ING has fully repaid the core Tier 1 securities to the Dutch State, but ultimately until 18 November 2014, whichever date comes first. Notwithstanding this restriction, ING will be allowed to call the EUR 1.25 billion ING Verzekeringen NV hybrid and intends to do so per 21 December 2012.
The agreement announced today has been formally approved by the European Commission. As a result of the agreement, the Commission will close its formal investigations as announced on 11 May 2012. ING will withdraw the appeal at the General Court of the European Union that it filed in July 2012. For principal legal reasons the European Commission will continue with its appeal against the General Court ruling of March 2012. However, ING, the Dutch State and the European Commission have agreed that any outcome of this procedure will not affect the agreement as announced today.