ING : Profits Up – Barings Out

November 20, 2000

At the same time that Dutch financial services giant ING announced increased profits for the first 9 months of the year, it also confirmed widespread rumors that it was “reviewing the future positioning of its investment banking activities,” which is expected to result in the sale of ING Barings U.S. operations, and broad restructuring in Europe, Asia and South America.

ING said that total assets for the group had increased 24.3 percent during the period to $536.4 billion. It showed growth in all sectors registering net profits of $1.188 billion from banking operations, up 38.9 percent; $1.48 billion from insurance activities up 17.5 percent, and a 20.9 percent increase in assets under management to $365.6 billion.

The figures include the operations of ReliaStar, which closed in September, but no figures for Aetna’s financial services or international operations, which ING is in the process of acquiring. That deal is expected to close before the end of the year.

ING expects to see 20 percent growth this year, and Chairman Ewald Kist, commenting on the results, stated, “The first nine months results show that we are firmly on track to meet our profit forecast.”

The financial news was partly overshadowed, however, by ING’s announcement that it was reviewing all its investment banking activities. This could mean the end of the line for Barings Bank, which ING acquired in 1995 for a symbolic £1 (and the assumption of its debts) after rogue trader Nick Leeson in its Singapore office lost millions through unauthorized derivative trading, and brought Barings close to bankruptcy.

The review will focus on downsizing ING’s investment banking activities, and effectively marks a retreat from the financial markets in the face of growing competition, especially in the U.S., where ING Barings has been unable to make a sizable penetration.

“The marketplace is changing rapidly,” said the announcement. “Accelerating consolidation in the investment banking market combined with a rapid increase in remuneration in the industry are prompting ING to reassess the scope, breadth and organisation of its investment banking activities.”

ING said it has already turned to Goldman Sachs “to assist in exploring the options for the investment banking activities in the US market.” Most analysts assume the division is up for sale.

In other areas ING announced that “In order to create maximum co-operation and synergies, the global infrastructure of ING Barings will be reviewed. ING Barings European activities will be integrated into ING Europe’s strong wholesale business. ING will continue its profitable emerging markets franchise in Asia, Central Europe and Latin America.”

It’s somewhat ironic that the Barings name will most likely survive in Singapore, where all its troubles began, but probably not in the City of London where it began 237 years ago.

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