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Dutch government invests 10b euro in ING Groep
(Agencies)
Updated: 2008-10-20 09:38 AMSTERDAM, Netherlands -- The Dutch government will invest euro10 billion (US$13.4 billion) in ING Groep NV to boost the bank and insurance company's capital position, officials said Sunday.
Finance Minister Wouter Bos said the deal, which makes the government a major shareholder in ING, was necessary even though there had been no run on the bank. ING is "a healthy financial institution," Bos said at a news conference held at the country's central bank offices in Amsterdam. But "the situation in the market is so unpredictable at this point in time, so risky, and the expectations of the market are such that it is in the interest of ING to strengthen its capital by euro10 billion." The state will name two members of ING's supervisory board. Bos said that one condition of the deal is that ING's chief executive Michel Tilmant and other managers would receive no more than a year's pay if they are dismissed. Amsterdam-based ING said separately it will cancel dividends for the rest of the year. The company's shares slumped on the Amsterdam stock exchange Friday on rumors it was short of capital, falling 27 percent to euro7.34 (US$9.86). After markets closed, it said it expected to post a euro500 million (US$670 million) loss for the third quarter, blaming the global credit crisis for its woes. It said it would post the quarterly loss, its first in 50 years, because of euro 2 billion (US$2.68 billion) in investment losses, asset write-downs and extra provisions for bad loans. ING was among the top 20 financial services companies globally in terms of market capitalization in March, but its stock has lost nearly three quarters of its value since then. ING was worth just euro 15.2 billion (US$20.4 billion) at Friday's closing price. Under the deal announced Sunday, the government will buy 1 billion newly-issued nonvoting shares with special rights at euro10 (US$13.43) per share. The shares will earn at least 8.5 percent interest once ING begins paying dividends again, and that amount will escalate each year. But ING can repurchase the shares for euro15 (US$20.14). Bos said that would give the company a strong incentive to buy them back and see the state exit "as soon as this financial hurricane recedes." On Friday, ING said that, as of September 30, its banking operations were within target solvency ratios and it retained a low risk "AA" credit rating. But the bank didn't rule out needing more capital, and Tilmant was in talks with Bos and central bank authorities throughout the weekend before the deal was announced. Earlier this month, the Dutch government established a euro20 billion (US$27 billion) fund to support ailing financial companies. Bos said the fund remains open to other takers. Among the country's major financial companies with stock market listings, Fortis NV was nationalized outright after its ill-fated acquisition of ABN Amro fell apart. ABN was also nationalized. After ING, only Aegon NV, an insurer with large operations in the US and Britain, remains free of government money. |
