ING appeal on restructuring opens door for other European banks
By Ben Berkowitz
AMSTERDAM, Jan 28 (Reuters) – Bancassurer ING and the Dutch state said they would appeal against elements of the European Commission’s decision on ING’s state aid restructuring, opening the door for other European state-aided banks to follow suit.
Analysts said if ING was successful, it could open the way to substantial renegotiation of the restructuring deals announced just in the last three months. That could mean banks could keep assets they were loathe to sell in the first place.
“We agree with ING that differences within the EU between State aided companies are large which does not comply with one European level playing field,” SNS Securities analysts said in a research note.
Both SNS and Evolution Securities said that if ING won its appeal, it could potentially renegotiate the ordered sale of its U.S. online bank, ING Direct USA. That asset in particular is one that ING wanted to keep because of its strong position.
ING shares were up 2.1 percent to 6.86 euros at 1007 GMT in Amsterdam, compared with a 2.3 percent rise for the DJ Stoxx banking index <.SX7P>.
“It is their right to appeal. The Commission is confident that the ING state aid decision is 100 percent legally watertight,” European Commission spokesman Jonathan Todd said.
ING, the world’s sixth-largest insurer, said on Thursday it would contest at the General Court of the European Union the way the Commission calculated the amount of state aid ING received.
ING received a 10 billion euros ($14.04 billion) bailout from the Dutch state in Oct. 2008. It came with a 50 percent repayment penalty if ING returned any of the money within the first three years.
But late last year, alongside its restructuring, ING and the state agreed on a reduction of the repayment premium for the first 5 billion euros tranche of core tier 1 securities. It ended up paying roughly 2 billion euros less than it would have under the original terms.
“The Commission views this reduction as additional state aid of approximately 2 billion euros,” ING said in a statement.
Both ING and the Dutch state contest this point, as it could hamper discussions on repayment terms of the remaining securities, ING said. The bancassurer has previously said that the government was willing to consider better terms for the remaining 5 billion euros.
In a separate statement, the Dutch Finance Ministry said the EC’s decision “came as a surprise to the State” and that it has not explained clearly why it made the calculations it did.
KBC Securities, in a research note, said the appeal did not affect its investment case for ING, since it already modelled ING repaying the remaining 5 billion euros at the original terms.
Besides the aid calculations, ING said it will also appeal price leadership restrictions in the restructuring deal. The company had to agree that it would not be a price leader in any EU country for certain banking products.
But ING is not appealing the other elements of the decision, it said, including orders to divest its worldwide insurance business, its Dutch mortgage operations and ING Direct USA.
There has already been a perception in Europe that the penalties imposed here are much more punitive than the ones imposed in the United States, and some bankers and lawyers have argued the pricing limits in particular could lead to the formation of cartels that would hurt consumers.
(Reporting by Harro ten Wolde and Ben Berkowitz; Editing by Dan Lalor and Mike Nesbit)
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