Wednesday 29 August 2012

Scotiabank to buy ING Direct

Bank of Nova Scotia has agree to purchase ING Groep's Canadian online bank for C$3.1 billion ($3.14 billion) in cash, taking advantage of a rare opportunity to grab market share in the crowded Canadian retail banking space.

The asset, branded as ING Direct Canada, will bring 1.8 million customers, C$40 billion in assets and C$30 billion in deposits under the wing of Canada's No. 3 bank.

Scotiabank also said it would issue 29 million shares at C$52 each for total proceeds of C$1.5 billion to help fund the deal. It said it would operate ING Direct as a separate entity.

Amsterdam-based ING put the unit up for sale earlier this month as part of a series of planned asset divestments to raise funds to repay a Dutch government bailout from the 2008 financial crisis.

Scotiabank Chief Executive Rick Waugh said in a statement the transaction would be accretive to the bank's earnings in the first year after the deal is finalized.

"ING Direct will benefit from the backing of a strong stable Canadian shareholder with the additional resources to enable it to expand and grow," he said.

Scotiabank said its actual net cost will be C$1.9 billion after deducting the excess capital levels currently at ING Direct.

Scotiabank also said its Basel III common equity tier 1 ratio will remain within its targeted range of 7 to 7.5 percent through the first quarter of 2013, meeting new standards that begin to take effect next year.

Started in 1997, ING Direct Canada is an online bank which offers cheap loans and high-interest savings accounts.

Touted by familiar ads where Dutch actor Frederik De Groot encourages Canadians to "save your money," it currently holds about 3 percent of the Canadian market.

Canada's banking industry is dominated by six domestic lenders, who are not permitted to merge with each other, which makes domestic growth opportunities few and far between, and has forced them to look to international markets for growth.

While the domestic bank industry has been hurt by slowing loan growth and narrow interest margins, it still churns out steady profits for the banks, underpinned by Canada's relatively strong economy and a housing market that continues to chug along, despite fears of a pullback.

 

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