The auction process for ING Direct USA is gathering speed, a day after the Dutch financial services company ING confirmed it was seeking to sell its online American division.
ING is in talks with several parties to merge or divest the unit, a person familiar with the matter said. Potential bidders include Citigroup, Bloomberg News reported Thursday, as well as the
commercial lender CIT Group, according to The New York Post, which said ING Direct USA could be worth as much as $10 billion.
“If the price quoted by press is achieved,” the JPMorgan Cazenove analyst Duncan Russell wrote in a note Thursday, “then this should have a strongly positive impact on the share price given that the market capitalization of ING Group is just €35bn and ING Direct USA is roughly 5-7% of the Group pre-tax earnings power.”
It would also go a long way toward paying back the 10 billion euro bailout ING received from the Dutch state during the financial crisis.
That rescue led the European Union’s competition commission to require the divestment by 2014 of assets like ING’s American unit, once one of the company’s crown jewels.
The unit, although a relative newcomer to the United States, became one of the country’s largest savings banks, attracting more than $80 billion in deposits by offering relatively high interest rates.
Much of those savings, however, were invested in subprime and Alt-A mortgages that experienced steep declines in value, meaning the bank’s liabilities soon outstripped its assets.
The Dutch rescue in early 2009 took the form of a swap, by which the government took on 80 percent of the risk of the Alt-A mortgage-backed securities, which were then worth 27.7 billion euros. It paid 90 cents on the euro for those assets in an emergency move to save ING from going into free fall.
That agreement, however, could complicate the sale of ING Direct USA, as the Dutch would be understandably hesitant to continue to guarantee the risky assets of a foreign institution.
That may push ING to lean toward merging the unit instead with a company whose assets are complementary, such as Citigroup or CIT.
“We would be surprised by a 2011 disposal,” Mr. Russell wrote, suggesting that a deal would be more likely in 2013, the year before ING is required to sell.
Reporting its results for fourth quarter last year, the bank said in February that ING Direct had seen losses on investments narrow considerably, from 353 million in the last quarter of 2009 to 22 million in the same period in 2010. “This was attributable to lower impairments on the U.S. investment portfolio,” the bank said.
Spokespeople for ING and Citigroup declined to comment.
ING is in talks with several parties to merge or divest the unit, a person familiar with the matter said. Potential bidders include Citigroup, Bloomberg News reported Thursday, as well as the
commercial lender CIT Group, according to The New York Post, which said ING Direct USA could be worth as much as $10 billion.
“If the price quoted by press is achieved,” the JPMorgan Cazenove analyst Duncan Russell wrote in a note Thursday, “then this should have a strongly positive impact on the share price given that the market capitalization of ING Group is just €35bn and ING Direct USA is roughly 5-7% of the Group pre-tax earnings power.”
It would also go a long way toward paying back the 10 billion euro bailout ING received from the Dutch state during the financial crisis.
That rescue led the European Union’s competition commission to require the divestment by 2014 of assets like ING’s American unit, once one of the company’s crown jewels.
The unit, although a relative newcomer to the United States, became one of the country’s largest savings banks, attracting more than $80 billion in deposits by offering relatively high interest rates.
Much of those savings, however, were invested in subprime and Alt-A mortgages that experienced steep declines in value, meaning the bank’s liabilities soon outstripped its assets.
The Dutch rescue in early 2009 took the form of a swap, by which the government took on 80 percent of the risk of the Alt-A mortgage-backed securities, which were then worth 27.7 billion euros. It paid 90 cents on the euro for those assets in an emergency move to save ING from going into free fall.
That agreement, however, could complicate the sale of ING Direct USA, as the Dutch would be understandably hesitant to continue to guarantee the risky assets of a foreign institution.
That may push ING to lean toward merging the unit instead with a company whose assets are complementary, such as Citigroup or CIT.
“We would be surprised by a 2011 disposal,” Mr. Russell wrote, suggesting that a deal would be more likely in 2013, the year before ING is required to sell.
Reporting its results for fourth quarter last year, the bank said in February that ING Direct had seen losses on investments narrow considerably, from 353 million in the last quarter of 2009 to 22 million in the same period in 2010. “This was attributable to lower impairments on the U.S. investment portfolio,” the bank said.
Spokespeople for ING and Citigroup declined to comment.
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