Amsterdam-based ING Groep NV (ING) has completed the sale of its division – ING Direct UK – to Barclays PLC (BCS). The deal was announced in Oct 2012.
ING transferred the division’s savings and deposits worth €13.4 billion and mortgages worth €6.4 billion to Barclays as per the terms of the deal. ING has already recorded the impact of the transaction in its results for the second half of 2012. Owing to this deal, ING incurred a loss of €260 million, which is lower than €320 million expected before. The lower loss on the investment portfolio stems from positive market trends witnessed over the last couple of months.
However, the divestment will lead to €280 million worth of capital increase in the first quarter of 2013, due to the reduction in risk-weighted assets. This is expected to positively impact ING bank’s core Tier 1 ratio of 11.9% as of Dec 31, 2012 by 12 basis points.
The sale of ING’s UK division is part of a series of asset divesture that the company has been undertaking to pay back the bailout fund it took from the Dutch government during the 2008 financial crisis. It is also in line with the company’s strategic aim to concentrate more on the core banking segments.
In Nov 2012, ING concluded the sale of ING Direct Canada – the Internet banking division of ING Bank of Canada – to The Bank Of Nova Scotia (BNS). Further, in Feb 2012, ING completed the sale of its online banking unit, ING Direct USA, to Capital One Financial Corp. (COF).
For Barclays, the acquisition is an effort to further strengthen its domestic retail banking business. Amid the bleak macroeconomic environment, which is clouded with mounting regulatory restrictions, Barclays has witnessed a decline in profit in its investment-banking segment. Barclays is in the process of conducting a strategic review to simplify its businesses, increase profitability and reduce its over-dependence on the investment-banking arm.
ING currently retains a Zacks Rank #4 (Sell), while Barclays holds a Zacks Rank #5 (Strong Sell).
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