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ING Groep N.V. Message Board

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  • vandemar1 vandemar1 Nov 20, 2012 10:55 AM Flag

    ING Restructuring Deadlines all are postponed by EU

    disagree, what this does, if the world continues to recover, it gives the bank leverage to negotiate better sales pricing, as the buyers will now know they are under no pressure to do so. I am sure the banks management will sell at good prices, and that could be quickly, if the recovery continues. So I only see this as good.

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    • Your comment on the usefulness of buying 5 more years time, to relieve the pressure to sell at fire sale prices, might be correct. The current conditions are clearly not favorable to sell $20-20B worth of insurance business.

      But there are 2 clear arguments against this thought, and the 5 years extra time delay to sell Insurance.

      First, ING's Insurance business has cca. 20-24B Euros equity comitted, has 320B Assets, and practically made no profit (actually devoured cca. 6.5B in losses in different management catastrophes like Closed Block VA, etc.,) in the last 4 years.
      Plus, for comparison, a similar size and equity US Insurer, Manulife, makes 2.5B/year profit. If you check other smaller/larger insurers, they are operating at similar profitability ratios. This is nothing extraordinary, it is 10% profit on equity.
      So, simply by keeping and having ING Insurance, we shareholders lost 6.5 in losses plus 4years of 2.5B profit, total 16.5B in the last 4 years, just because WE HAVE INSURANCE.

      If 4 years of incompetent executive management and cca. 16.0B loss does not convince you that ING management can not manage this business, I dont know what will.

      Secondly, Insurance still has a lot of loss-making products, and, as long as bond rates and business profitability will not improve markedly (and since FED and ECB will keep rates down at least until 2015,so bond rates will not improve much), so, in all probability, Insurance will continue to lose money.
      So look ahead 4 more years of losses (or as many as ING needs to SELL Insurance).
      We might speak similar amount, like in the last 4 years, maybe close to 16B (!) loss again, and idle equity committed to Insurance.

      This 2 argument might be enough to support my thesis, that any further delay to sell, will most probably make much more loss in continued mismanagement than the 2-5B higher selling price (10-25% better price is not easy to get!) simply by waiting 4 more years until favorable selling conditions emerge.

      In summary:
      Your argument looks to me like hope wins you over, against your experience.
      Like in some second marriages.;-)
      I still favor fire sale for somewhat less money than 4 more year of losses.

      • 1 Reply to jpomper
      • Quite frankly I understand their problems and if they ran the business better the values would be much higher. These are very large businesses which are hard to find, and if you are in the business, this is a very economical way to add scale. Someone looking to grow a global footprint want these properties and the values will represent what they are and what they can be. Taking away the time pressure, simply takes that negative away from the value. If you think the world is in big trouble for a long time, then quite frankly selling now would be preferable, if someone would buy it at all. But I do not believe that ,so let things get better, take the time pressure off and the sales will be made relatively quickly anyway releasing the value. If you really hate the institution you should not own it or take a short position, that is what makes a marketplace.

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