Several Canadian banks may be interested in scooping up ING's Canadian banking arm, analysts said Thursday after its troubled parent company announced it is reviewing Canada's largest Internet bank as a prelude to a possible sale.
ING Groep NV, which is struggling to keep its balance sheet healthy amid bad loans and declining margins, could sell Canada's ING Direct, which has 1.8 million customers, for as much as $2.6 billion, analysts said.
National Bank analyst Peter Routledge said ING Direct's stable deposit base may be a draw for Canadian institutions, and estimated the Canadian bank has a book value of about $1.6 billion, but could go for more depending on how much potential buyers want it. "I wouldn't necessarily say that [Canadian banks] are sitting there with bated breath waiting to pounce, but it's an interesting franchise," Routledge said.
The Canadian ING business was established in 1997, attracting customers with its promise of no-fee banking. Customers can manage high-interest savings and chequing accounts online as well as take out mortgages, or invest in mutual funds - but withdrawals and deposits are made at various ATM locations.
Despite the fact that ING's parent company has been in the news for getting bailed out by the state - it still owes three billion euros ($3.6 billion) in remaining bailout money from the Dutch state after the 2008 financial crisis - Routledge noted that deposits from customers at the Canadian arm are "remarkably constant." He added: "Long-term deposits are very useful and very valuable under new liquidity rules that are going to be rolled in over the next two or three years."
The rules were brought in as part of a global oversight system, Basel III, agreed upon after the 2008 crisis, which will determine how much cash banks are required to have on hand to meet obligations when they come due.
Credit Suisse analyst Gabriel Dechaine said Bank of Nova Scotia and National Bank could be potential buyers and estimated the asset may be worth $1.7 billion to $2.6 billion.