* To repay 2 bln euro of core Tier 1 securites in May 2011
* Total cost of this repurchase is 3 bln euros
* To repay total 7 bln euro, 70 pct of state aid by May 2011
* To buy back outstanding 3 bln euro Tier 1 by May 2012
(Adds analyst's comment, more details, background)
By Sara Webb
AMSTERDAM, March 7 Dutch bancassurer ING
ING.AS outlined plans for the expected early repayment of
state aid it received during the credit crunch, further evidence
of the Dutch financial sector's recovery from the crisis.
ING (ING.N) said on Monday that by May 2011 it will have
repaid 7 billion euros out of a total 10 billion euros it
received from the Dutch state, with the remaining 3 billion
euros to be paid back by May 2012.
Early repayment is an important step for the banking and
insurance group: once free of its state shackles, a European ban
on acquisitions will be lifted and ING will have more pricing
flexibility, allowing it to compete more easily.
The Dutch government paid nearly 40 billion euros to rescue
the domestic financial sector in 2008 when it nationalised ABN
AMRO [ABNNV.UL] and provided capital injections for ING, insurer
Aegon (AEGN.AS), and bancassurer SNS Reaal SR.AS.
"Today's announcement marks another important milestone as
we work towards the full repayment of the support ING received
from the Dutch state," said Jan Hommen, ING's chief executive,
in a statement.
"The strong recovery of the banking business in 2010 has
enabled us to accelerate the repurchase of the core Tier 1
securities from retained earnings, while maintaining a robust
capital position post repayment."
ING shares opened lower after the news, and were flat by
Both ING and Aegon have said recently that they plan to make
significant repayments, while state-owned ABN AMRO is being
readied for a stock market listing in 2014. [ID:nLDE5BN0B7]
Aegon, which received 3 billion euros of state aid in the
crisis, last month raised about 900 million euros in a share
issue to help repay its debt. [ID:nLDE71M20U]
ING has already divested several non-core assets, including
most of its real estate management operations and its Asian
private banking business, to raise funds, and plans to list its
insurance units in 2012.[ID:nLDE71E0H7]
"ING wants to prevent any European Commission actions and
show they (are doing) their best to pay back" the state, said
Rabobank in a research note.
"If ING had not paid back by 13 May there might have been
negative consequences from the European Commission...There was a
risk that it would consider extra consequences for ING,"
ING has already repurchased half of the 10 billion euros of
core Tier 1 securities it used to borrow from the state and said
that it aimed to repurchase the remainder by May 2012.
On Monday, it said that it would exercise its option for
early repurchase of 2 billion euros of core Tier 1 securities at
the next coupon reset date on May 13, 2011. The early repurchase
entails a 50 percent repurchase premium, or penalty, bringing
the total cost of the deal to 3 billion euros.
ING will then have paid 7 billion euros out of a total of 10
billion euros, leaving it with 3 billion euros to repay.
ING said its recovery last year boosted its capital position
resulting in a core Tier 1 ratio of 9.6 percent as of the end of
"Based on our capital position at that date, the intended
repurchase in May would reduce the core Tier 1 ratio by 90 basis
points, and the ratio is expected to remain above 8.5 percent,"
ING said in a statement.
For a Take a Look on the Dutch financial sector [ID:nLDE71N277]
(Editing by Sophie Walker)