Scotiabank plans to scoop up ING Bank of Canada from its Dutch parent company in a $3.13-billion deal that will give the country's most international bank a stronger foothold in domestic consumer banking.
ING Direct would continue to operate separately and maintain its 1,000 employees under the deal announced Wednesday.
It will keep the same branding - popularized in ads set against its orange lion logo in which viewers are exhorted to "save your money" - for at least 14 months after the deal closes. But the name will change within 18 months.
Scotiabank said the deal - one of its largest acquisitions - to buy the no-fee online banker, with a book value of about $1.7 billion, $40 billion in assets and about $3 billion in deposits, will add "modestly" to its earnings within the first year.
"ING will now benefit from a strong, stable Canadian owner who will provide additional resources to continue to expand and to grow," Scotiabank president and CEO Rick Waugh said on a conference call with analysts after the deal was announced.
"For Scotiabank, this will provide us with a new source of incremental earnings beginning in the first year as well as $30 billion in retail deposits of 1.8 million customers to further diversify our funding."
ING's portfolio will help Scotia solidify its No. 3 position in the Canadian deposit space. ING, Canada's eighth largest bank, also has a $30billion loan portfolio, mostly in residential mortgages, Waugh said.
Scotiabank has been making a series of international acquisitions as it diversifies its revenue base away from a seemingly tapped out Canadian market.
But Anatol von Hahn, Scotia's group head of Canadian banking, said the opportunity fit its strategic focus on growth in deposits, payments and wealth management.
"This is a strategic decision, an opportunity that arose to fit in with what we already do on a day-to-day basis with our customers, and this just augments that."
ING Direct president and CEO Peter Aceto said ING - which does not have branches - would continue to operate under its no-frills banking model and as a separate entity from Scotia.
"For our customers, we expect no change," Aceto said. "We will continue to offer our customers the highly competitive and attractively priced products that we have become known for, and we will be continuing our efforts to earn more customers with our focus on Canadians who are self-directed."
However, he added that deal will provide opportunities for growth, both in terms of products and geographical footprint, suggesting that credit cards are one potential new product in the pipeline.
"There are a lot of Canadians who are looking for other things from us on the payment side and a variety of other opportunities."
Parent company ING Groep NV, which has struggled to keep its balance sheet healthy amid bad loans and declining margins, announced this summer that it was putting its Canadian division under review for a potential sale.
It still owes three billion euros ($3.7 billion Cdn) in bailout money it received from the Dutch government during the 2008 financial crisis.
The deal, announced after markets closed Wednesday, is expected to result in a net investment by Scotiabank of $1.9 billion, after deducting the excess capital currently at ING Direct.
Scotiabank also announced a public offering of 29 million common shares at $52 - for gross proceeds of $1.5 billion - to fund the acquisition.
