Agreement on amended 2009 Restructuring Plan
On 19 November 2012, ING Group announced that it, together with the Dutch State, has agreed with the European Commission (EC) on significant amendments to the restructuring plan it submitted to the EC in 2009.
These amendments extend ING’s time horizon, gives it more flexibility to complete the divestments, and adjust other commitments in light of the market environment, economic climate and more stringent regulatory requirements while leaving ING’s strategic objectives unchanged. ING remains committed to the decision to separate its Banking and Insurance/IM operations and has made good progress so far.
In this article, the main changes to the original plan will be briefly summarised.
ING has been given more time to finalise the independent futures of its Insurance/IM businesses, as the ultimate dates for divestment have been extended from the original deadline of year-end 2013. In the previous plan, ING had agreed to divest 100% of its Insurance/IM businesses by year-end 2013. The deadlines for each of the geographical business units have been determined as follows:
- Asia: More than 50% needs to be divested by year-end 2013, with the remaining interest divested before year-end 2016.
- US: At least 25% of the operations should be divested by year-end 2013 and more than 50% by year-end 2014, with the remaining interests divested before year-end 2016.
- Europe: More than 50% of operations are to be divested by year-end 2015, with the remaining interest divested by year-end 2018.
The actual timing of divestments will depend on market conditions and readiness, including performance.
Under the terms of the agreement announced today, ING commits to a schedule of repaying the remaining EUR 3 billion core Tier 1 securities at a total cost of EUR 4.5 billion in four equal instalments of EUR 1.125 billion each. The first payment will be made on 26 November 2012; the second in November 2013, the third in March 2014 and the final in May 2015. ING’s ambition remains to accelerate repayments if possible and prudent under prevailing economic circumstances.
ING has been consistently strengthening its capital position ever since it received the EUR 10 billion in capital support from the Dutch State. 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.
ING has agreed upon an alternative scenario for the divestment of the Netherlands’ WestlandUtrecht Bank (WUB), which commercial operations will be combined with the retail banking activities of Nationale-Nederlanden (NN); with the mortgage portfolio largely retained by ING Bank.
NN currently offers core retail insurance products, as well as mortgages and bank annuity products, which reflects the changing life insurance market in the Netherlands. 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. With WUB’s commercial operations, NN 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 NN. This fits with NN’s ambition to position itself as a financial services provider.
Part of the employees of WUB will transfer to NN Bank while another part will remain at the separate WUB entity within ING Retail Banking Netherlands. Unfortunately, this reorganisation will result in a number of redundancies, the full extent of which will become clear in the next few months.
Acquisition and price leadership ban
In the original plan, there was a restriction on acquisitions, where ING agreed to not make any acquisitions of financial institutions or other businesses if that would slow down the repayment to the Dutch State; as well as a restriction on price leadership, where it agreed not to be a price leader on standardised ING products in certain markets.
Both restrictions will continue to apply until 18 November 2015 or until the date on which (more than 50% of) the Insurance/IM operations have been divested, whichever comes first. The price leadership restrictions will be amended to reflect specific conditions in various local markets. This constraint will no longer apply in the Netherlands.
Following the announcement of 19 November, ING will withdraw its appeal to the General Court of the European Union that it filed in July 2012. For principally legal reasons, the EC will continue with its appeal against the General Court ruling of March 2012. However, ING, the Dutch State and the EC have all agreed that any outcome of this procedure will not affect the agreement as announced today.
For further information, see press release of 19 November