In a surprise decision, ING says it will split up its banking and insurance interests as part of a restructuring deal with the European Commission. Analysts had expected the move, but not quite so quickly.

The bank had already set up separate boards to run the banking and insurance units, but up to now had denied plans to split them. The divestment of the insurance operations will be complete by 2013, through IPOs and sales. The mortgage operations will be brought under a new company, which will cover six percent of the Dutch mortgage market.

Payback time
In December, the bank also plans to sell 7.5 billion euros worth of shares to pay off half of last-year’s 10-billion-euro state bailout early. The remaining five billion euros will be paid at a later date. However, no agreement has been made with the Dutch government on the issue.

ING will pay an addition 1.3 billion euros under an asset guarantee scheme from January. A year ago, the bank and the state made a deal for the government to guarantee 22 billion euros of risky mortgages. The EU criticised this deal, saying the state had paid too much for the assets. This will be financed by selling shares underwritten by Goldman Sachs and JPMorgan. The shares will be presented at an extraordinary general meeting at the end of November.

By 2013, ING will also sell off its US operation, ING Direct USA. The CEO of ING Direct is planning to take early retirement.

Europe-focussed bank
As a result, ING will become a smaller Europe-focussed bank. By the end of the restructuring operation the balance sheet will be 30 percent smaller than when the state stepped in to help out the Dutch banks in October 2008. The deal is the most striking example up to now of the EU's executive arm forcing far-reaching changes on a bank that had received state aid.

A similar fate awaits several other banks across Europe. In May, Germany’s second largest bank, Commerzbank was given the go-ahead by the European antitrust regulators on the understanding that it divest 45 percent of its balance sheet.

Britain’s Royal Bank of Scotland and Lloyds Bank Group, respectively 70-percent and 43-percent state-owned, are expected to be ordered into disposals by the European Commission.

Belgium’s KBC and the Franco-Belgian Dexia are also awaiting rulings by the Commission.

Asset sales
ING announced in August that the bank’s assets sales would be more than the 6-8 billion euros predicted back in April.

The ING’s provisional results for the third quarter have also been published. The net profits are probably 750 million euros. ING CEO Jan Hommen has announced changes to the structure and composition of the board.