Change font size:   

 
The US treasury market reaches breaking point

The US treasury market reaches breaking point

The structural issue that could cause the world's market of last resort to grind to a halt

Cash management poll 2008:

Cash management poll 2008:

Results now live

weeklyFiXLiquid real estate
Skip Navigation LinksHome :: Back Issues :: ING takes a long view of regional expansion

March 2002

ING takes a long view of regional expansion


ASIA




       
Cees Maas
Could it be that ING knows something about Asia that other global financial institutions do not? Increasingly, global players have been cutting back in Asia: Morgan Stanley has closed its retail brokerage business in Japan, ABN Amro has exited that country's domestic cash equities business altogether, and last month Citibank and Salomon Smith Barney merged their Asian sales coverage for fixed-income products.
ING has been taking the opposite tack. It is busy buying its way back into the region, not least in China - a country in which it is notoriously difficult to turn a profit - where it is setting up a second joint venture in insurance.
Nor would it seem that ING is complaining about the costs involved. Cees Maas, the chief financial officer of ING Group, says of the company's greenfield or start-up operations in Asia: "The faster you grow, the faster you lose. But this is healthy loss."
Maas has been travelling in the region to raise ING's profile with Asian investors and he has a good story to tell: the financial group's return on equity for the first nine months of 2001 was 18.4% compared with the previous full year's 12.2%. The company's stock price rose by nearly 42% in 2000 while other financials were flat. Average net profit growth between 1991 and 2000 was 30%.
But at the time of Maas's trip, the full impact of September 11 on the company's insurance business had yet to make itself felt. Claims resulting from the terrorist attacks led to a e100 million ($87 million) revision to the company's P&L after tax. And its stock price at the end of the year fell 32% compared with a drop of 10.53% in the S&P financials index. Results due out in March are likely to show an increase in net profit per share of only some 5% as opposed to the pre-September forecast of 17%.
Maas has been concentrating on strategy. He spoke to investors about the many initiatives of ING in the region - some of which, such as its insurance business in China, might take several years to become profitable. But he is confident that profit will come. He says: "We have a long-term financial target of an average annual growth of operational net profit per share of 12%."
Looking at Asia makes sense as ING's earnings capacity is what Maas describes as mature in the home market. In insurance, which accounts for half of the group's core business, it is targeting India and China. Through a joint venture set up in 2000, Pacific Aetna Life Insurance, it is already the second-largest insurer in Shanghai.
In banking, it has followed up in Asia on its early success in ING Direct, an online-only retail service, in Canada. The service, which is available in Asia only in Australia so far, offers above-market interest rates on retail deposits.
The higher rates are made possible because, as a virtual bank that handles all transactions online, ING Direct can pass on to the depositor the cost savings from the overheads involved in a bricks-and-mortar set-up. Physical payments are made through a link-up with the customers' regular high street banker.
Maas admits: "We are losing money [on ING Direct]. We pay some 50 basis points above the money market rate although that is still lower than, say, the 10-year bond rate." Is it worth it? Last year, the operations of ING Direct in Europe racked up a loss of e150 million.
Maas offers a lesson in lateral thinking: "We are getting more and more clients - about 100,000 each month," he says. "And we have found that the stickiness of these clients is quite high. With this client base, we can introduce other products. Additional marketing costs for those products are relatively low. It works out nicely in the end." ING Direct operates in Europe, North America and Australia with a total of 1.4 million clients and assets of e14 billion under management.
But no conversation with an ING executive is complete without reference to Barings, the UK investment bank that it bought following its sensational collapse. Six years down the line, how is the marriage panning out?
Maas says: "Like all marriages, it is not always sunshine. But then, we are not divorced either. I can say we are happy we did the acquisition. We were buying an equity business. Barings have a franchise in brokerage and research in Asia and in M&A business in Europe. We have kept their operations relatively independent."
Maas gives the impression that the group is now concentrating its energies more on corporate lending in the banking side of its business. He says: "At the time of the purchase [of Barings], global markets were in a state of disintermediation. Now the opposite is happening as investors withdraw from stocks. Companies have less access to the capital markets. We see a bigger role for corporate banking."
As at end-2001, ING was capitalized at e57.1 billion, the fourteenth-largest global financial institution worldwide by market value and sixth largest in Europe. Insurance accounts for more than half of its core business activity, banking about 35% and asset management 15%. ING is listed on the stock exchanges in Amsterdam, New York, Zurich, Frankfurt, Brussels and Paris.






I wanted to pay exactly one quid [£1] but my arm was twisted, and we rounded up to $2

Nomura’s Sadeq Sayeed, one of the architects of the bank’s acquisition of Lehman Brothers’ European business, on the deal of a lifetime

  1. US treasury market reaches breaking point

  2. Top 10 financial definitions that are funnier since the credit crunch

  3. Top 10 reasons to tell your boss you deserve a bonus this year

  4. Eksportfinans turns to government for funding

  5. Nomura’s great leap forward: Will Lehman takeover help fulfil its global ambitions?

Latest Issue

December 2008
Ruromoney Jobs Post a job

Home | Mobile site | Contact Us | Debt markets | Equities | Foreign exchange | Banking | Alternative Investments | Regions and Emerging markets | Polls & Awards | Structured credit | Back issues | Euromoney store | Useful links and Related events | Site Map

The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms and Conditions, Privacy Policy before using the site.

All material subject to strictly enforced copyright laws. © 2008 Euromoney Institutional Investor PLC.