Chillin' out till it needs to be funded
ING is trying to sell its Private Bank in Asia because it needs the $1 billion from the sale to cover the $11 billion borrowed from the Dutch Government (Netherlands, Prince Philip)
The erstwhile sponsor of the New York Marathon, is also considering the withdrawal of ING Direct from USA after its recent failures. It had walked into a sale of ABN AMRO where it was thwarted by RBS and Barclays in 2007. It also sponsors the Renault F1 team, is AAA rated with central risk management from Netherands HO, and is 81st in the World’s Top 100 brands. Though it has recently been favored by Market pundits, it remains at the bottom of the Euro top 25 much like Alonso’s podium achievements this year, ranking just 2/3rd of SocGen which in itself is hardly known outside France despite the excellent branch network both share. Loan loss provisions are nearing trillions of Dollars ( EUR 852 million at 1.16% of RWA on a Balance sheet of EUR 1.1 billion only) Also the claim Tier I ratio of 9.4% is still low in terms of TCE
I have the usual objections to the sale:
1. For the buyer, It will never include sizable offshore assets from India as it works out of Hongkong, Singapore and maybe Philipines and in India it is independently owned and controlled by the ING and Vysya JV with ING stake at around 41%
2. The China assets in Private Banking will again likely be structured products and other such which are not going to be of any significant continuous revenue and where the customers are locked in.
3. Offshore Banking assets are being purchased by Swiss major Julius Baer who have no experience in Asia or DBS which has no real experience in Banking outside commercial bills discounting and trade services for SMEs. Thus the point also being made is that bank regulation does not ssolve all problems, it only creates more.
4. If a wealth management major does snag the bank, the expectation from the new provider would be of tax efficient structures, which have historically been rare in Asia unless tax avoidance is counted as another viable structure 🙂 And the European structures or the ones in Bermuda are not going to be able to offer hope to such wealth list honchos as may be 1-2% of the ING portfolio
5. A lot of these wealth assets have historically been mortgaged/remortgaged or otherwise suspended assets from heirs and fourth generation entrepeneurs which are not what you would find in a Swiss vault
6. Fee structures are tightly regulated in the Asian market and new sources of fee revenue may not be possible.
All that said, I really don’t know the asset size that ING Wealth Management holds in Asia, but it would seem possible that the $1 billion price may be way off the price recd in the red tag sale underway.
However, the mechanics of this sale are vastly different from the one attempted by RBS where Private Banking and Corporate Banking are being retained by the bank. Offshore banking teams would be largely dependent on commission arrangements with Funds and Insurance investment companies and new business is not the main revenue stream here..
New Year Update: As of October 2009, ANZ has wound up purchasing ING’s partnership interest in the JV down under giving ING a clear $300 million profit on the wealth operation and $1.5 billion in Dutch Cash to pay its government..The other Asia units remain