ING Groep NV (ADR) (NYSE:ING) is one step from fully repaying a 2008 bailout and set to meet the deadline of May 2015 agreed to with European Union regulators.
The biggest Dutch financial-services company will return 1.23 billion euros ($1.7 billion) to the government on March 31.
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Total payment tops 12 billion euros
ING Groep NV (ADR) (NYSE:ING) is finally coming to the end of five years’ worth of restructuring and divestments, with strong balance sheets and the potential to increase payouts significantly over the next few years.
Citi analysts, in their recent report, highlight the strong performance of ING Groep NV (ADR) (NYSE:ING) and KBG Groep NV. The analysts pointed out that with strong balance sheets and restructuring essentially finished, the banks’ target payouts to be 40% to 50% by 2015 in line with the payout ratios the banks ran before the crisis (2002-2007).
ING Grope dismantled its once-fashionable banking and insurance model and announced thousands of job cuts and other savings after its 10 billion euro state rescue in 2008, at the height of the global financial crisis. Its payment announcement made today takes the total amount returned to the state to 12.5 billion euros, including 9.3 billion euros in principal and 3.2 billion euros in interest.
ING Groep: Aggressively shedding assets
The biggest Dutch financial-services company, ING Groep was bailed out by the government during the 2008 financial crisis. The company has been aggressively shedding assets and cutting thousands of jobs to pay off the government aid and strengthen its capital. The Dutch bank sold its 9% stake in Capital One Financial Corp that was valued at about $3.05 billion. ING Groep was the largest shareholder of Capital One. That sale increased ING’s Core Tier 1 ratio by about 20 basis points.
In June, ING Groep NV (ADR) (NYSE:ING) made announcement to sell its Mexican mortgage business unit for $50.7 million in cash to the Mexican unit of Spanish banking giant Banco Santander, S.A. (ADR) (NYSE:SAN) (MCE:SAN). The sale was part of a larger plan to divest its investment management and insurance businesses.
According to a statement made today, ING Bank’s core Tier 1 ratio will drop by about 40 basis points after the payment on March 31. When the repayment is fully completed, the Netherlands will have made an annualized return of 12.5% on the bailout funds. ING still owes the Netherlands 1.03 billion euros, to be returned no later than May 2015, according to an agreement with European Union regulators.
Analyzing ING Groep NV (ADR) (NYSE:ING)’s Investor Day press release made today, Omar Fall and team at Jefferies note that ING’s targets look strong with over 40% dividend pay-out target after repaying the state aid. The analysts note that while the 10-13% 2017 RoE target is unchanged, they believe secondary P&L items targets imply they will get to the top end of this range at least. The analysts have pegged ING’s share price at € 13.00 using single-stage GGM model.