Time Seen Tight for ING Asset Sales

By | May 18, 2009

Dutch financial group ING made clear this week it was not in any particular rush to complete its planned €8 billion [$10.8 billion] of asset sales — but to hear analysts and bankers tell it, Chief Executive Jan Hommen may be the only one lacking a sense of urgency.

“We will take our time. We are not in a hurry. We will do it when the time is right and when the conditions are right,” Hommen told reporters Wednesday while discussing the company’s first-quarter results.

But analysts are not so sure that he has unlimited freedom to dispose of those assets, part of the Amsterdam-based group’s “back to basics” plan announced in April.

“Right now the way markets are, I guess it’s hard to really say, but definitely they certainly have a very tight time schedule on their hands — certainly I would think three to six months,” said Cubillas Ding, London-based senior analyst in securities investment at consulting firm Celent.

Ding added that the timeframe depended to some extent on market conditions, and that if ING did not complete its planned asset sales in the medium term, it would quickly lose whatever competitive advantages it currently has.

ING, which was ranked as the twelfth-largest bank by market value last February, made a loss in 2008 and received a €10 billion [app.$13.48 billion] injection from the Dutch state in October last year after being battered by the global credit crisis.. The company shares have lost 72 percent of their value over the past 12 months.

But no matter at what pace Hommen may want to sell, he may struggle to find buyers for parts of ING, which could involve its Asian operations, a divided bank and insurer or even the entire group, some say.

“You’ve got to be able to find willing buyers and it may well be everybody else is in a pinch as well,” said one London-based analyst who declined to be named. “It’s just merely a function of the climate.”

ING may ultimately be left with no other option than share offerings for units it wants to dispose of, as it did with ING Canada in February, the analyst suggested.

In the meantime, speculation is rampant over what pieces of its varied businesses ING will try to sell. But with the upper end of the targeted disposals accounting for more than half of the group’s €14.3 billion [$19.27 billion] total market value, what is not clear is much of ING will be left after any deals.

“They will exit the Japan business and the two joint ventures they have in China,” said a Hong Kong-based investment banker who did not want to be named because of client sensitivity.

Should ING put its Japanese and Chinese assets on the market, it would mark yet another example of a Western financial institution cashing out of Asian units and partnerships to raise money for troubles back home.

Based on current market values and gross income in the second half of 2008, ING’s Asian insurance operations could fetch €2 billion to €3 billion [$2.7 to $4 billion].

Though companies may not want to sell out of Asia, the exits are seen as a logical step for ING and other groups that have received significant financial help from local governments. Meanwhile, Russian business daily Kommersant recently reported — citing sources at a regulator, bank and ratings agency — that ING would pull out of that market too. ING was quick to firmly deny the report, though.

There is also the question of whether the group could split entirely down the middle into separate banking and insurance companies. Already it has created separate boards to oversee the two businesses, nominally to sharpen their focus.

But SNS Securities, in a note this week, said a full split was unlikely, owing in part to difficulties in finding buyers and the prospect of poor sale price.

In fact, Hommen said ING has seen plenty of interest but also plenty of “bargain hunting” from suitors after a cheap deal — a deal that ING says it does not need to make.

Analysts were not so sure, though, that Hommen was not trying to buy more time to get deals done.

“I suspect that some of the more specific deals have not been finalized and that’s why they’re just painting the bigger picture,” Celent’s Ding said. And there is always the potential that a buyer could eye the whole company, rather than its component parts.

Shares more than tripled between early March, when they bottomed at €2.50 [$3.37] and the first part of this month, when they peaked at €8.40 [$11.32]. But since that peak last Monday they have retrenched sharply, shedding some 17 percent of their value and cutting the group’s market cap to just over €14.3 billion [$19.265 billion].

With that decline the stock has now underperformed the broader NYSE Euronext Amsterdam index by 6 percent for the year and the AEX Banks Financial index by 48 percent.

(Additional reporting by Michael Flaherty in Hong Kong; editing by Mike Nesbit)

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