Background to the ING Direct story and the rumours of Ally Bank interest
I missed the rumour that Ally Bank is in talks with ING Direct. It was put out there first by the NY Post on 10th May, 2011.
Sources told The Post that Ally, the automobile and home mortgage lender, is looking to acquire the online banking business to boost its deposit base and further fortify the lending giant, which accepted a taxpayer handout during the height of the financial crisis.
ING Direct could fetch as much as $10 billion in a sale, according to source
This follows the EU Commission requirement that ING in Holland divest its insurance business following receipt of €10bn during the banking crisis. That funding was required for liquidity and potential bad debts resulting from poor quality US mortgage assets.
The Commission demanded a restructuring of the group after it received €10bn ($13.7bn) of state aid from the Dutch authorities during the financial crisis, as well as help with souring US mortgage assets.
The insurance part of the equation was a result of a 1991 merger.
Created in 1991 by the merger of the Nationale Nederlanden insurance group and NMB Postbank, ING always maintained a roughly equal weighting between its insurance and banking activities.
Of more interest here though is the ING Direct US part. Back in 2009 it was never directly acknowledged but was suggested the divestiture of this arm was also from pressure directed by the EU Commission according to the FT in 2009.
Another key part of the restructuring – and one that ING came closer to acknowledging was authored in Brussels – is the disposal of ING Direct USA, one of the online banking operations that the Dutch group has built up in 10 countries.
The US bank ranked as the 17th largest by deposits at the end of the second quarter, with $74.8bn in customer deposits. It is the 18th largest US bank by assets, with $90.1bn.
It is seen as an attractive asset but selling it could be complicated by its business model, which involves attracting customers with high rates for their deposits who then generally give ING little business on the asset side.
These measures were designed to bring ING ‘back to basics’, which is a lesson that Citi and to a certain extent HSBC have taken a little longer to learn. The EU have been much more direct in recognising the negative impact of the US mortgage space and basically telling ING they are better served to divest of that activity from the early 2000’s.
I am more curious to see what is in this for Ally (ex GMAC Finacial) which went through a $60 Bn restructuring in 2008 from various banks, a scant 3 months before the peak of the banking crisis in September of that year. This was incredibly fortuitous timing.
GMACand Residential Capital, GMAC’s embattled mortgage lending arm, on Wednesday secured an urgently needed $60bn rescue financing package to help stave off the threat of a ResCap bankruptcy filing.
After weeks of negotiations, more than 50 banking institutions led by JPMorgan, Citigroup, Bank of America and Royal Bank of Scotland co-operated to overhaul GMAC and ResCap’s bank credit lines and shore up the two companies’ liquidity position with about $50bn of total credit capacity.
What would they have to gain from ING? Certainly ING would be more heavily weighted towards deposits spread across many customers and that is attractive as Ally lead up to an IPO in coming months.