Dutch financial services giant ING Group NV (ING) said Thursday that it has agreed to sell its Asian Private Banking business to Singapore-based Oversea-Chinese Banking Corp. Ltd., or OCBC Bank, for a consideration of US$1.463 billion, or around 1 billion euros, in cash. The deal is expected to be completed around year-end 2009, subject to regulatory approvals. ING expects the sale to generate an estimated net profit of about 300 million euros and free up around 370 million euros of capital.
In its release, OCBC Bank said the acquisition of ING's Asian private banking assets, comprising Singapore-based ING Asia Private Bank Limited and its affiliated entities, or IAPB, for approximately S$2.048 billion would triple its private banking business. The deal price includes IAPB's estimated surplus capital of approximately US$550 million, and the transaction is expected to be funded by OCBC Bank's existing resources.
The deal is not expected to have a material impact on the net tangible assets or earnings per share of OCBC for the current financial year, while it is projected to be earnings per share accretive in 2010, with more significant earnings accretion from 2011 onwards.
Following the deal closure, IAPB, with all its private banking staff, will operate as a wholly-owned subsidiary of OCBC Bank. The private banking businesses of IAPB and OCBC Bank will be integrated at an appropriate time. Under the deal terms, ING will continue to provide certain key transitional services to IAPB for a period of time after completion.
Commenting on the deal, ING Chief Executive Officer Jan Hommen said, "Today's announcement reflects the momentum and the strength of our strategic transformation. Through the Back to Basics Programme, ING will simplify its organization and will reduce its geographic and business scope, focusing on its positions in markets with the strongest franchises. After today's transaction we have completed the divestment program of our Private Banking business. ING Private Banking in the Benelux and Central Eastern Europe remain integral parts of ING."
On October 7, ING had said that it was in discussions about the future of the Private Banking activities in Asia, as part of its Back to Basics strategy. On the same day, ING said it agreed to sell its Swiss private banking business ING Bank (Switzerland) Ltd. to Julius Baer Group Ltd. for CHF 520 million, or 344 million euros in cash.
Earlier, in July, the Wall Street Journal had reported that ING seeks buyers for its private-banking business in Europe and Asia, and the company in August asked for final bids for its private banking operations seeking about $1.8 billion and expected Asian private banking operations to contribute about 70% of the proceeds.
Hommen recently had said that its recent asset sales show "ING's commitment to focus on fewer franchises and the reduction of the complexity of the group." On September 25, ING had agreed to sell its 51% equity stake in ING Australia and ING New Zealand to joint venture partner Australia and New Zealand Banking Group Ltd. (ANZBY.PK, ANZ.AX) for 1.1 billion euros in cash.
ING is expected to raise between 6 billion euros and 8 billion euros by selling between 10 and 15 units, to help pay down a 10 billion euros aid it received from the Dutch government last October to strengthen its core capital.
The company added that it remains active in Asia with retail banking, insurance, wholesale banking, investment management and real estate.
In a Tuesday's statement, OCBC Bank had said that it was in discussions with ING relating to a possible acquisition of Asian private-banking assets, which is consistent with OCBC's strategy of looking for growth opportunities in the region. On Wednesday, OCBC Bank's trading was halted in Singapore pending release of an announcement.
HSBC Holdings Plc (HBC,HSBA.L), Swiss wealth manager Julius Baer Holding AG and Singapore's DBS Group Holdings Ltd. were also among other bidders that submitted binding offers for the unit. On September 11, WSJ reported that Standard Chartered dropped its bid to buy ING's Swiss and Asian private banking business. Before the deadline for binding bids on September 3, Credit Suisse Group (CS) had dropped out of the bid. Bidders were given the option by ING and its adviser on the sale, J.P. Morgan Chase & Co., to make an offer for both the Swiss and Asian business or just one of the two units, but ING reportedly preferred to sell the units together.
ING's Asian Private Banking, led by Renato de Guzman, has around 11 billion euros of assets under management, or AUM, and offers private banking services to more than 5,000 clients in 11 markets, including Hong Kong, the Philippines and Singapore. As of August 31, 2009, ING Asia Private Bank had shareholders' funds of US$906 million and Tier 1 capital adequacy ratio of 25%. IAPB was formed in 2000 through the merger of ING Private Bank and Banque Brussel Lambert. OCBC Bank today noted that in terms of valuation multiples, it is paying 1.6 times IAPB's net asset value as of August 31, 2009, 17 times its normalized 2008 earnings, 3.4% goodwill over AUM, and adjusted for estimated surplus capital, 5.8% of AUM. On a pro-forma basis, the acquisition is expected to reduce OCBC's Tier 1 capital adequacy ratio to 13.9% from 15.4%, and its total capital ratio to 14.4% from 15.9%. These ratios remain strong and well above the regulatory minimums of 6% and 10% respectively.
According to OCBC Bank, the purchase of IAPB will more than triple the Bank's private client AUM to US$23 billion, creating a leading Asian private bank. The acquisition is also in line with its strategic goal of becoming a leading player in wealth management, and it will significantly strengthen the Bank's position in serving the wealth management needs of its mass, mass affluent and high net worth customers.
The acquisition of IAPB is consistent with the strategic objectives articulated in OCBC Bank's New Horizons II strategy which runs from 2006 to 2010. The objectives include focusing on acquiring new private banking customers and becoming a top 3 bank for wealth management in the combined Singapore and Malaysia market. The bank's recent initiatives to expand its wealth management capabilities and grow its market share include the acquisitions of Great Eastern Holdings and Malaysia's PacificMas Berhad, and the merger of its asset management businesses to form Lion Global Investors.
OCBC Bank also noted that none of its Directors or substantial shareholders has any interest, direct or indirect, in the proposed transaction.
Eli Leenaars, Chief Executive Officer Retail Banking, ING, commented, "With OCBC Bank we found a solid new owner for our Asian Private Banking Business. OCBC Bank is a professional player offering a wide range of specialist financial services. ING remains confident about Asia's long-term financial and economic prospects and potential and we are committed to our other existing Asian banking positions."
ING closed Wednesday's regular trading session at $18.73, up $0.55 or 3.03%, on a volume of 1.07 million shares. In the past 52 weeks, shares have been trading in a broad range of $3.02 - $18.73.
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