Sponsored Link:

ING Gets a $13.4 Billion Government Boost

By Jennifer Yousfi
Managing Editor
Money Morning

ING Groep NV (ADR: ING) shares jumped more than 20% in early afternoon trading yesterday (Monday) after the Dutch financial firm announced a $13.4 billion (10 billion euro) capital injection and the sale of one of its life insurance subsidiaries.

ING shares gained $2.24 for the day, a 21% gain, to close at $12.89.

Yesterday’s gain was almost enough to erase Friday’s 27% loss in ING’s Netherlands-traded shares after the company announced it would post its first quarterly loss in more than 50 years.

ING projected a third-quarter loss of $665.6 million (500 million euros) after $2.1 billion (1.6 billion euros) in writedowns, partially due to exposure to Lehman Brothers Holdings Inc. (OTC: LEHMQ) debt and incredibly tight short-term credit markets.

“Our capital position was in line with previously targeted levels and regulatory requirements,” ING Chief Executive Officer Michel Tilmant, said in a statement, The New York Times reported.

Sign up below…
and we’ll send you a new investment report for free:

“Credit Crisis Report.”

“However, market conditions have changed dramatically in recent weeks and have led to an internationally recognized belief that going forward, in this market environment, capital requirements for financial institutions should be higher,” Tilmant said.

Societe Generale SA (OTC ADR: SCGLY) analyst Michael van Wegen said the Netherlands capital infusion for ING is more shareholder-friendly than some other government plans, MarketWatch reported. The government will purchase non-voting preferred shares, which ING can repurchase at 150% of the issued value or convert the shares to common stock after three years. The government will also appoint two members to the ING board of directors.

In a separate announcement today (Monday), ING said it would sell its Taiwan life insurance unit to Taipei-based Fubon Financial Holding Co. Ltd. for $600 million.

Despite its third-quarter loss, many analysts expect ING to be able to redeem the government shares in a relatively short timeframe. As one of the world’s largest financial firms, ING has more than 75 million customers and $450 billion (338 billion euros) in account deposits.

“Although ING does not say so explicitly, the buy-back option suggests that it believes that it does not really need this capital injection,” wrote analyst Ton Gietman in a note upgrading the company to "Buy" from "Hold," The Associated Press reported.

“In our view, the shares should no longer trade at a multiple that includes a huge fear-discount,” Gietman added.

The $13.4 billion cash infusion will raise ING’s Tier 1 capital ratio – a measure of a bank’s stability – to 8 from 6.5.

“ING had little choice but to raise capital over the weekend,” wrote Duncan Russell, an analyst at JPMorgan Chase & Co. (JPM), in a note to clients, Bloomberg News reported. “It is wise in our view to raise significantly more than the minimum needed so as to take the issue completely off the table.”

Russell has an “overweight” rating on ING shares. 

News and Related Story Links:

More on this topic (What's this?)
Tax free saving account (TFSA) (Canadian Business Blog, 10/17/08)
ING Direct Electric Orange Review (A Slacker's Quest For His First ..., 10/27/08)
ING Bailed Out By Dutch (LOLFed, 10/20/08)
What Corporate Insiders Are Telling Us (Investment U, 9/28/09)
Read more on ING Groep N.V., What is a stock? at Wikinvest
October 20th, 2008

Why Gold Will Surpass $2,500

Few investors realize that inflation is the least of the factors driving the bull market in gold. Other factors, like Venezuela's crackdown on gold exports, are likely to push prices higher. Find out how to play each of the "7 Key Drivers" in our Money Morning Publisher's Series report... Go here to get it for free.




This entry was posted on Monday, October 20th, 2008 at 7:23 pm and is filed under Top News. You can follow any responses to this entry through the RSS 2.0 feed. Due to the amount of comments we receive Money Morning will not be able to respond to all questions. If you have not already registered to leave a comment, once doing so you will receive Money Morning's Daily Email.

There Are 2 Responses So Far. »

  1. Pingback by ING Gets a $13.4 Billion Bailout from the Dutch Government | socalspaces on 23 October 2008:

    [...] to 0,000 — so long as your bank is an FDIC member or your credit union is an NCUA member.  Read the full story on the Dutch bailout of ING. This entry was posted on Wednesday, October 22nd, 2008 at 5:01 pm and is filed under [...]

  2. Pingback by ING Gets a $13.4 Billion Bailout from the Dutch Government · Real Clear Politcs on 23 October 2008:

    [...] Well guess what?  ING necessary a huge bailout from the Dutch government of 10 1000000000 Euros, which is roughly $13.5 billion. Yet even if the Holland hadn’t intervened, it would have made no difference to your money. You crapper have example of mind — up to $250,000 — so long as your slope is an FDIC member or your assign union is an NCUA member.  Read the full story on the Dutch bailout of ING. [...]

Post a Response