ING Direct’s UK business unit has reported first half
losses before tax of €15m ($19.6m), bringing its accumulated losses
to €254m since the division was established in 2003.
To date, ING Direct UK has only posted a profit in two
years (2006 and 2009).
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In 2006, ING told investors that “measures are
[to be] taken to reposition the business, among others targeting
for less rate-sensitive clients.”
Since then, the UK division has lost
€122m.
In 2008, ING told RBI: “The UK is an important market for ING.
We are confident that management, pricing and marketing initiatives
will be successful but [they will] require significant investments
and time. Remedial action has been taken to reposition the UK
business strategically, including management changes, increasing
the savings rate and undertaking significant marketing
spending.”
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By GlobalDataSince then, average balances per UK savings
clients have declined sharply, down to €11,500 in the second
quarter of 2010 from €20,000 in the fourth quarter of 2007. At the
end of 2006, the average UK customer balance was €38,000.
Funds entrusted within the UK arm of ING
Direct amounted to €16.3bn at the end of June, down 8.4% compared
with the end of 2009 and less than half the highpoint for the unit
by that measure; at the end of 2006 funds entrusted peaked at
€36.3bn.
Christopher Hitchings, analyst at investment bank Keefe,
Bruyette & Woods, told RBI: ” ING Direct UK made
errors at the start and focussed too much on high net worth
individuals. It did not follow the usual business model.”
According to Hitchings, the most pressing
priorities for ING are repayment of €5bn of bail out funds
received from the Dutch government and separation of ING’s banking
and insurance units.
“That process is an enormous exercise for a
business which has been a bancassurer for 20 plus years. But if
someone came along and made an offer for ING Direct UK, I am sure
they would consider it, but with Egg also up for sale, I don’t see
it.”
ING beat anlayst forecasts for
the second quarter, posting net profits of €1.09bn, compared with a
net profit of €71m in the corresponding period last year.
ING’s banking unit posted pre-tax profits of €1.61bn, excluding
special items and divestments, up from €186m in the year-ago
quarter.
ING CEO Jan Hommen told analysts that separation of the
banking and insurance divisions should be finished by the end of
the year and will cost up to €150m.
Carolien van der Giessen, ING
spokeswoman, told RBI: “ING is
repositioning our UK ING Direct savings
business to be profitable when the unusual Bank of England rate
position eases.
” We are successfully
attracting new savings customers in the UK to our low cost, simple and high
quality service offering. We have established a growing and
profitable mortgage business and are currently investing in
additional products to develop a full service bank that will meet
the needs of our customers.”
