Thursday, Dutch financial-services giant ING Groep NV (ING) said that its previously announced measures to reduce cost, risk, and leverage are on track, through which ING aims to take it 'back to basics'. ING said it plans to divest a total of 10 to 15 businesses, with expected total proceeds between 6 billion and 8 billion euros, and that it will operate the Bank and Insurer separately under one Group umbrella, in order to reduce complexity.
The Amsterdam-based company noted that its Chief Executive Officer -designate, Jan Hommen, will provide an update on its previously announced measures and the change program at the bi-annual ING Investor Day, to be held in Rotterdam Thursday. In a keynote speech, he will specifically address the efforts to focus the company on fewer, coherent and strong businesses.
Hommen said, As the economic crisis is fundamentally changing the financial services industry, now is the time to choose where ING has the scale and strength to succeed in the current environment and to position the company to be a leader when the markets recover.
While announcing the various cost cutting and capital strengthening measures back in January, the company had noted that the measures taken are to counter the implications of the persistently challenging economic and market conditions. In order to adapt the organization to the new business environment, ING is taking several steps to reduce risk and expenses and increase focus on its core savings and investment business.
Of the company's target to reduce the Bank balance sheet by 110 billion euros, ING said it has realized 55 billion euros. Further, the 1 billion euros cost reduction initiative is well on track, and the company has realized over half of the planned 7,000 full-time employee workforce reduction.
ING had said previously that its top priorities in the New Year would be to further reduce asset exposures and rationalize the cost base, and also to shrink the balance sheet of ING Bank by 10% compared with the end of September. In January, ING had announced about 7,000 job cuts, of which about 4,200 full-time reductions in the Insurance division, with the remaining about 2,800 in the Banking division, thus saving about 1.1 billion euros annually. ING's savings also were expected to come from focusing on operational efficiency, and reducing marketing and project expenses, however, the company had noted that it intends to continue to selectively invest in IT and infrastructure in core businesses.
By focusing in markets with the strongest franchises, ING now said it plans to reduce its geographic and business scope to build a stronger organization. According to the company, certain smaller businesses with no clear outlook for market leadership takes a disproportionate amount of capital, and to face this over-extension, ING has made portfolio choices based on market leadership, capital intensity, return on capital, funding needs, earnings contribution and the overall coherence of the Group.
While announcing a fourth-quarter net loss of 3.71 billion euros or 1.82 euros per share in mid February, compared to prior year's net profit of 2.48 billion euros or 1.18 euros per share, the company had said, citing the financial crisis, that it would conduct a review of its portfolio of businesses and would focus on fewer businesses and markets.
Meanwhile, Tuesday's media reports suggested that ING has no plans to sell its German direct banking operation, ING-DiBa. Financial Times Deutschland had earlier reported that ING-Diba was among the units that ING would consider selling.
Further, ING, which currently offers banking, investments, life insurance and retirement services, said it would operate the Bank and Insurer separately under one Group umbrella in order to reduce complexity. ING noted that its bank will be predominantly focused on Europe with selective growth options elsewhere, and will have one integrated balance sheet and one management team.
In the banking business, main operations will include the current Retail activities in the Benelux where ING is a major internet-first bank focused on further capturing scale and efficiency gains.
ING's Insurance business, which will be managed regionally with an aggregated balance sheet, will focus on its long-term structural leadership positions in life and retirement services. The business' main building blocks will include the operations in the Benelux, US, Central Europe, Latin America and Asia/Pacific.
In the US, ING plans to focus on individual life and retirement services and a transition of the variable and fixed annuities business to low-risk rollover products, to achieve a fundamental shift in the risk profile. The company will review its strategic options for the non-core businesses, including Employee Benefits, Group Reinsurance and the existing Annuity books, while the US Financial Products division will be reduced as assets mature. ING said it will sustain its leadership positions in the key growth markets in Central Europe, Latin America and key markets in Asia/Pacific, while the life insurance activities in China and Japan are under review.
Further, ING said it will integrate its Investment Management operations in Europe, the Americas and Asia/Pacific into one Global Investment Management organization, which will also include Real Estate Investment Management. The company's Real Estate Development will manage down capital exposure and will become part of the Commercial Bank, as will Real Estate Finance.
ING closed Wednesday's regular trading session at $6.92, up $0.32 or 4.85%, on a volume of 1.9 million shares.
For comments and feedback: contact email@example.com