(Adds Taiwan deal, ING CFO, asset manager comments)
AMSTERDAM/TAIPEI, Oct 20 (Reuters) - The Dutch government has agreed a 10 billion euro ($13.5 billion) cash injection into financial group ING ING.AS, and ING shares are expected to rally on Monday after a 27.5 percent slump in the previous session.
ING sought government help to shore up its core capital and restore investor confidence after a weekend of intense negotiations and following the partial nationalisation of rival Fortis FOR.BR two weeks ago. [ID:nLJ78025]
ING has also agreed to sell its Taiwan life insurance unit to Fubon Financial (2881.TW) for $600 million, it said on Monday. [ID:nTPU000762]
“We are in a large financial storm, and the storm has been building in recent weeks. We wanted to make sure we had a buffer, a buffer large enough to carry us through the storm,” ING Chief Financial Officer John Hele told CNBC.
“Our shareholders and customers, all our stakeholders don’t have to worry about ING group.”
A first indication on how shareholders receive the cash infusion will be ING’s market valuation, which fell to 15.3 billion euros on Friday after the group said it would post a 500 million euro net loss in the third quarter, hit by the credit crisis.
“The deal is better than expected. I expect that the stock will go up this morning. A share issue would have been much worse and would not have been possible in the current market,” said Fred Huibers, asset manager at Haags Effectenkantoor, who holds ING shares.
Huibers estimated ING shares would rise 15 to 18 percent at the opening.
Other market participants also expected ING shares to rise.
“The capital injection can be positive for ING. Shareholders aren’t sidelined this time,” asset manager Rob Koenders at Harmony Vermogensbeheer said.
ING is due to give further comment on the government cash infusion and the Fubon deal in a conference call at 0900 GMT.
The Dutch state will have a position similar to common shareholders and the deal is designed not to dilute shareholder capital. [ID:nLJ112794]
ING shares hit a 13-year low at 7.335 euros on Friday after dropping three consecutive trading days. The shares have fallen 73 percent since the start of the year, compared with a 48 percent drop of the DJ Stoxx European insurance index .SXIP.
As governments around the world pour in billions of dollars of state cash to help stabilise their banks, the Dutch government has set aside 20 billion euros to pump capital into its financial institutions. Several British and Swiss banks tapped similar government funding lifelines in the past week.
Most of the smaller listed Dutch financial companies have indicated that they did not plan to ask for capital support, but ING and insurer Aegon (AEGN.AS) had only said they were looking at the government offer.
Together with the 16.8 billion euros for the partial nationalisation of Fortis, the Dutch government has already spent nearly 5 percent of the country’s gross domestic product to help banks. (Reporting by Niclas Mika and Gilbert Kreijger in Amsterdam, and Faith Hung and Yvette Chan in Taipei; Editing by Quentin Bryar)