ING won shareholder approval for the breakup of the Dutch bank and insurance group and a 7.5 billion euro ($11.18 billion) rights issue on Wednesday, paving the way for it to pay back state support.

ING, Europe's biggest insurance group by assets, is splitting its operations as part of a restructuring deal with the European Commission after it got 10 billion euros in Dutch state aid to help it through the credit crisis last year.

Rival European banks which have received state aid, such as Royal Bank of Scotland and Belgium's KBC, have also agreed to divest operations. ING will join France's Societe Generale and others in paying back state aid.

Up to 99 percent of shareholders voted in favour of the breakup and rights issue proposals.

We think a split is preferable to keeping the bank and insurer together. It will strongly reduce the risk profile, and this will benefit us as investors, a spokesman for Dutch shareholder group VEB said during the shareholders meeting.

The next step in ING's restructuring plan will be a 7.5 billion euro rights issue, which is set to become the eighth-largest rights issue globally and will be used to pay down the first half of the state aid. ]

On or around November 27, ING will publish the rights issue's prospectus, ING Chief Executive Jan Hommen told shareholders. The offering will be priced at a discount comparable to other recent rights issues, he said last month.

UK banking group Lloyds priced its rights issue at a 39 percent discount on Tuesday, while Societe Generale's issue was offered at a 27 percent discount last month.

There are currently 2 billion ING shares outstanding and analysts have estimated there could be more than 1 billion new shares issued to raise 7.5 billion euros.

ING shares were up 1.1 percent at 9.54 euros by 1602 GMT but that still left them down 18 percent since the breakup announcement last month, due to uncertainty about the company's value after the breakup and dilution worries.

The DJ Stoxx European index .SXIP has fallen almost 5 percent over the same period, and was up 0.2 percent on Wednesday.

By paying back the first 5 billion euros of state loan, ING could save almost 2.2 billion euros in costs compared with paying down the aid on the original terms, which required a 50 percent premium, Hommen said.

The Dutch Finance Ministry was willing to talk about cheaper payback costs for the remaining 5 billion euros in state aid, a ministry spokeswoman said.

I think the first use for our internal profits will be to pay down state support, Hommen said in reference to paying the second tranche of aid.

He was not happy about all the restructuring demands from the European Commission, and said he would continue to talk with the commission to keep U.S. direct online savings bank ING Direct USA within the group instead of divesting it as required.

($1=.6708 Euro)

(Reporting by Gilbert Kreijger; Editing by Gugulakhe Lourie and Malcolm Davidson)