The ING Bank Growth Study

The ING Bank Growth Study

ING Bank stands tall as one of the leading banks in the world and among the top 30 in Europe. Here’s its incredible growth journey…

Founded in 1991, ING Group is a Dutch multinational banking and financial services corporation with assets of over $1 trillion. It owns ING Bank N.V., the parent company of all the different ING banks around the globe.

ING Bank stands tall as one of the leading banks in the world and among the top 30 in Europe. With its wide-scale operations in more than 40 countries, firm grip in the primary markets in Europe, and highly anticipated growth in Asia, the bank is continuing to set the bar higher.

Below are some key figures from 2020 highlighting the size and stature of ING:

ING has undergone several ups and downs in its eventful journey from a small company to a global bank that’s a force to be reckoned with. All this while, the company has stuck to its guns, including the hallmark strategy of smart mergers, acquisitions, and investments.

Let’s delve deep into ING’s journey from its inception to its current position and understand how it has grown over the years, what challenges it faced, and which strategies it leveraged to thrive through thick and thin.

The Lion is Born

The story of ING starts with the incorporation of the ING group in 1991 due to a merger of two companies, one in insurance and the other in banking.

With the insurance company’s market share coupled with the bank’s networking,

 ING was able to excel as it started with teams that already had extensive experience in both domains rapidly.

Roots of Banking and Insurance

Since the merging companies belonged to these fields, ING had its base in banking and insurance.

The insurance company in the merger was a Dutch private insurance company, Nationale-Nederlanden. It was formed in 1963 by the merger of a fire insurance company and a life insurance company, Nationale Levensverzekering Bank.

The other component of the merger was a banking service of the Dutch Government which initially started as a postal savings scheme. After introducing structural changes in banks, the government expanded the postal project by forming a bank, the NMB.

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Once the postal savings scheme was privatized as Postbank N.V., it later merged with Nationale-Nederlanden to form the ING Group in 1991.

ING's initials come from ‘Internationale Nederlanden Group,’ coined after the combined companies.

The NMB bank enjoyed a substantial market share with hundreds of thousands of customers. On the other hand, Nationale-Nederlanden had been a significant player in insurance until it merged into ING. With backgrounds in insurance and banking, the two most essential services in the finance sector, ING was well on its rapid growth trajectory.

The Knowledge and Experience Were Already There

National-Netherlanden was one of the prominent insurance and asset management companies in the Netherlands in the 1980s. With more than $2 billion in revenues and billions in assets, it boasted millions of customers in insurance.

As for Postbank, it had been a government banking service. It was founded in 1881 and later privatized in 1986. Before the merger with ING, with more than a century of experience, it had primarily operated without any branches using landline phones and later online. Despite branchless banking, it was one of the primary institutions in the mortgages, investments, and savings market. 

The merger of these two companies proved successful as ING would move on to become one of the largest banks globally. Post-merger, the group will undertake a series of mergers and acquisitions that will become ING’s main ingredient of becoming a ‘lion’ in the world of banking.

Key Takeaway 1: Strong Roots Provide a Head Start

Since the two constituents of ING’s establishment merger involved already established companies, the group already had a head start.

Relevant knowledge and experience are what any business requires for success. ING’s strong banking roots coupled with expertise in insurance meant ING had established a strong base in the two most essential niches in finance.

Also, these companies boasted a long history and large customer bases, which meant that the company did not have to spend time and resources on building clientele from the start. Rather, from the start, the company could pursue growth goals and stay ahead of the competition.

The Beauty of Mergers and Acquisitions

The primary factor in ING’s global success has been the array of mergers and acquisitions. It acquired dozens of companies in the financial services, insurance, and investment sector - majority of which were in the US in the late 1990s as ING entered the US market.

Major Acquisitions of ING

Since its inception, ING has acquired different companies globally. These have enabled the bank to build enhanced capabilities, expand its market share, and grow its customer base.

Following is the list of some prominent acquisitions made by the bank:

  • Barings Bank (1995)
  • Equitable of Iowa (1997)
  • Furman Selz (1997)
  • Relia Star (2000)
  • Aetna (2000)
  • Postbank (2007)

Barings Banks

The Barings Bank was a long-running British bank that collapsed in the 1990s due to fraud. In 1995, it was acquired by ING for a nominal amount. Later in 2005, ING sold this subsidiary at a profit.

When ING acquired Barings, it boosted ING’s wholesale banking. Furthermore, it enhanced ING's global brand reputation and strengthened its presence in emerging markets. Post-acquisition, ING's investment banking section was known as ING Barings until 2004, when it dropped the Barings brand and merged with the rest of ING's wholesale banking operations.

Equitable of Iowa

In 1997, ING acquired the US-based insurer, Equitable of Iowa, for $2.2 Billion, doubling ING's insurance domain assets in the US. It was a buyout by ING as Equitable faced issues due to fierce competition in the insurance market.

The acquisition was long expected as ING was already in talks with Equitable and the opportunity was just right as Equitable found itself in crisis. The market welcomed the acquisition, leading to a 7% rise in ING’s share price and providing it a stronghold in the market despite the competition

Furman Selz

To diversify its portfolio and penetrate the investment banking market in the US, ING acquired Furman Selz in the US in 1997, a private equity firm. ING purchased the firm for $600 million in cash.

Though the deal amount may be small in relation to ING’s assets and investments, it was enough to establish a stronghold in the equities and investment banking niche.

Relia Star

Relia Star, one of the top health insurers in the US, was acquired by ING in 2000 for $6.1 Billion. ING had a goal of spreading its name in the US Market. The acquisition helped ING fulfill its goal of acquiring a major US insurer. It did not plan to change the management of the acquired company immediately.

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Aetna - ING’s Biggest Acquisition to Date

In 2000, ING Bank signed its largest deal worth $7.7 Billion, acquiring the US health insurance company, Aetna Inc. The acquisition helped ING increase its customer base to fifty million clients all across the globe. The deal made it one of the most prominent insurance players in the US.

PostBank and ING

In 2007, ING Group merged its independent subsidiaries, Postbank and ING Bank.

In the 2000s, with increasing competition in the banking segment, customer demand increased, and consumers started expecting a lot more from their banks. Thus, both these banks were facing challenges keeping up.

However, Postbank’s marketing and customer base were more robust than ING. It was primarily famous in business lending along with services relevant to mortgages.

The senior management made the mission successful by emphasizing strategic communication. It integrated the employees of two companies. By showing consistency in working and demonstrating skills through professionalism, the unit achieved its mission of strengthening the system.

Immense Benefits of Merging with ING

Companies that merge with ING find themselves at an advantage since ING has team members that are well-equipped with their job expectations.

For all those companies who join the group, ING bank evaluates their relative market position and advises on all factors that help improve overall financial performance.

Whether the company is facing problems in leadership or wants to make its management more effective, ING has the proposed plans to get through. After scrutinizing the market's relative size, ING also has expertise in dealing with tactics and analyzing key performance indicators (KPIs). Merging with ING can significantly benefit a company that wants to negotiate huge transactions for several shipments.

Key Takeaway 2: Leverage Mergers and Acquisitions To Scale Up

A key takeaway from the success of ING is that mergers and acquisitions should be dealt with seriously. If ING did not merge with PostBank, it could not spread awareness about the company since they were more inclined towards PostBank. Similarly, acquiring several firms helped ING gain a better reputation by increasing revenue and total profit of the company, especially the strategy of enhancing its insurance domain in the US.

Focusing on the internal aspects is reasonably necessary for any business. But the idea of diversifying portfolios by using the “Merger and Acquisition” strategy always helps improve the overall growth of the business.

The Financial Crisis and Post-2008

During the financial crisis of 2007-2008, the dominoes started to fall one after the other. ING Group, too, took a big hit, and the intervention by the Dutch government provided much-needed relief.

The post-financial crisis period primarily involved divestment of ING’s operations globally, yet it managed to come out even stronger than before.

Aid From the Dutch Government

As the financial crisis hit Europe, ING found itself in a crunch as well, with a dive of 27% in share price. After negotiations with the Dutch government, EUR 10 Billion of aid was approved and injected into the group.

At the time, ING was one of the world's largest retail banks and a major player in insurance and commercial banking. It had 338 billion euros in savings and said it would use the new capital to increase shareholders' equity in its banking unit by 5 billion euros. In comparison, ING will use the remaining 3 billion euros to pay down the group's debt. The bank was also affected by stock market extremes, as ING had 3.5 billion euros of unhedged equity exposure in its equity portfolio.

ING Group approved a capital injection plan from the Dutch government in October 2008 to raise its core Tier 1 capital ratio over 8%. In exchange for security and veto rights, the plan provided €10 billion. As a covenant of accepting the state aid, the European Commission asked ING to sell its insurance and investment management operations by the end of 2013.

The Sale of ING Direct

As part of the deal with the Dutch government aid, ING began selling operations globally. One significant segment of ING was ING Direct. In 2012, ING made one of its biggest deals of the decade, the sale of its ING Direct segment in the US. ING Direct was one of the biggest direct banks in the US at that time. The sale was made for $6.2 billion in cash to Capital One Financial Corporation.

ING Direct was the pioneer of branchless banking for ING. The buyer, Capital One, is a major financial holding company. Post-acquisition, Capital One did not undertake any changes in the management or structure of ING Direct.

Similarly, the bank sold ING Direct in the UK to Barclays at a loss of EUR 260 million. ING Direct Canada was sold to Scotiabank for 3.13 billion Canadian dollars and rebranded. All these deals are in line with ING’s strategic objectives and the aim to divest banking operations due to the Dutch government deal.

IPO in the US

The bank in the US underwent an initial public offering in 2013. It was left with 47% shareholding. By 2018, it had sold all ownership. The bank was later rebranded as Voya Financial.

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ING was able to raise $1.3 Billion through the IPO. By this time, ING was well on its way to becoming a Europe-focused bank as it had undergone significant divestment overseas.

Key Takeaway 3: Desperate Times Call for Desperate Measures

The 2008 financial crisis was no small event. It forced hundreds of giant companies and banks into bankruptcy. Where firms were getting bailed out by governments, ING was one of the primary considerations of the Dutch government, as it was a prominent bank, and its fall would initiate an explosive chain reaction in the Dutch financial system. So, ING was one of those ‘too big to fail.’

ING had to negotiate with the government to secure a deal. In return for the significant capital injection, the bank had to abide by dozens of covenants, such as fewer holdings outside Europe, separation of the insurance and banking divisions, and further share issues to ensure a timely repayment.

These measures, though seemingly desperate, proved to be the right choice, as ING not only survived the crisis but also completed full repayment six months ahead of schedule. Today, ING is a force to be reckoned with in the banking industry - stronger than ever - despite the setbacks it faced.

ING Bank Today

As the financial crisis ended, public trust in financial institutions faded and the aftershocks still remained. Having undergone divestment, ING looked towards other opportunities to reach its current gigantic status.

ING in Covid-19

The breaking out of the coronavirus meant remote work for employees and digital access for customers. Though ING was already overhauling its business operations to further its digitization, Covid accelerated the efforts. The bank announced 1000 job cuts by the end of 2021, mostly in Asia and Latin America.

ING’s digital engagement with customers had increased from 52% in 2016 of total transactions to around 80% in 2019. The management alluded to the increasing digital trend with the job cuts and branchless banking.

Though profits plummeted in covid, the bank has risen again to pre-covid levels as the management asserts. Credit default estimations were also lower. In Q3 2020, earnings were 75% higher than in Q3 2019.

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Buyback Program

In October 2021, ING announced a plan to buy back around 140 million ordinary shares in order to change its capital structure. The number of shares makes up around 10% of the total share capital. ING repurchased 12,077,832 shares in Feb 2022.

These shares were repurchased for a total of EUR 137,379,911.03 at an average price of EUR 11.37. This share buyback scheme has been authorized by the ECB. This was done in accordance with the Anti-Money Laundering Regulation. This program has now been completed.

First Climate Report

As the world moves towards sustainable measures and customers demand action from companies, ING responded by publishing its first climate report.

In 2021, ING released its first integrated climate report. The report provides an overview of the impact of financing on climate change. As the work to assess climate risks continues, it also addresses how changes in the climate can impact business.

According to the report, ING intends to cut its funding for upstream oil and gas by 12% by 2025. They will work to keep global temperatures at 1.5 degrees Celsius rather than well below two degrees Celsius, with the goal of reaching net-zero by 2050 rather than 2070. They will gradually devise steps that will lead them to the more ambitious net-zero path. ING will do its best to manage all of the risks associated with climate change as part of its risk management framework.

Redemption of Perpetual Securities

On March 3, 2022, ING Group announced that it will redeem a total of US$ 1,000 million in order to achieve its target of maximizing capital structure. The securities will be redeemed in accordance with their terms and conditions, with payment made on the first business day following the call date of April 18, 2022.

The Bank of New York Mellon will serve as the paying agent, and future debt securities decisions will be made strategically, taking into account the interests of all stakeholders.

Key Takeaway 4: Resilience Against All Odds

Post-2008, ING had undergone several changes. It had to be bailed out by the government, which required subsequent divesting globally. Then came the issue with the US Treasury Department. ING has by now sold almost all of its ING Direct segment. In the US, it has sold all shares through an IPO. Yet as we have seen, it came strong not only out of the financial crisis but covid as well.

With the intelligent modification of the capital structure, it was able to pay back the aid in time. The sales of the Direct segment were made on profit. Through resilience, it has been able to pull through covid, complete an ambitious shares buyback plan and continue the long-paused perpetuities in the market.

Move Towards Digitalization Is Paramount

The global banking industry is one of the fastest ones in embracing the move towards digitalization with fintech players making their mark rapidly all around the world.

In this dynamic digital environment, the ING group has made several significant inroads in recent years yet there are many challenges it needs to overcome consistently to keep up the pace.

Increased Competition From Smaller Players

Although the banking industry is fast adopting the digital route, this has not always been the case. Traditionally, large global banks like ING have had digital services for quite a few years but they have not been up to the mark since customer attrition has been relatively low and these banks haven’t faced many new competitors.

Growing fintech companies have changed the game.

Fourthline, Ohpen, and BUX are just a few of the recently established fintech firms that have cemented their place in Europe with innovative financial services that big banks had left the gap open for.

Therefore, now that ING has to deal with both large traditional banks and upcoming fintech companies, there is a greater need to embrace digitalization.

Current Focus on Digital Strategies

Although ING and other local and global banks were already expanding their operations digitally, the outbreak of the COVID-19 further emphasized how important it is to accelerate the transformation to improve the efficiency of banking operations.

As a result, ING let go of 1000 employees at the end of 2021 and shut down the majority of its operations in South America and in several regions of Asia. The move was intended to shift the focus from costly physical branches to digital networks which saw a significant rise in customer interactions during the pandemic.

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Additionally, pre-COVID, ING had planned to standardize its digital offerings, particularly in key European markets. However, recent developments also mean the company isn’t going ahead with those plans. Rather, it will alter its strategy and focus more on IT technology, including cloud and data infrastructures, mobile apps, and digital products, such as lending and insurance.

Importance of Digital Reputation

A bank’s reputation is everything, especially if it is as large as ING. From how it engages with its customers to how it manages its financial and non-financial risks, every aspect matters. Thus, when going digital, ING needs to ensure it translates the same integrity in its services.

Unfortunately, with the rapid evolution of technology, doing the same is no straightforward task. There is an increased risk of financial crimes, such as major frauds and scams going unnoticed, or being too difficult to trace. This also means that regulatory authorities and watchdogs have greater interference in the industry.

ING has already experienced these problems first-hand. In 2018, Dutch authorities took strict action when the company failed to detect major cases of money laundering through its channels. In fact, ING had to pay a hefty fine of $900 million to the authorities. Ever since, the bank has worked to minimize the gap for such problems to occur using machine learning and artificial intelligence techniques. Yet there is still a long way to go to ensure that consumer due diligence and transaction monitoring on digital channels are as robust as possible.

“Invisible” Payments

The scope of e-commerce and digital payments has risen considerably in the last few years. In fact, in the Netherlands alone, there are more than 13.8 million people that shop online.

However, the procedure involved in making online purchases through banks is still very inefficient. After adding items to the cart, the purchase process takes place at the end, where often customers that want to make purchases via their account have to log in to the bank portal, input credentials, and wait. This tedious procedure is an obstacle many customers want to avoid.

Thus, to truly capitalize on the huge potential that online shopping boasts for digital transactions, ING needs to ensure that its payment capabilities are designed to facilitate customers to the maximum instead of acting as a deterrent. The goal should be to enable customers to connect with the bank just once and proceed to make payments without going back every time; thus, making the payments “invisible.”

Tools such as artificial intelligence and data analytics can help ING with such integrated payment procedures where automatic recognition checks can be set to maintain the speed, efficiency, and security of transactions.

Key Takeaway 5: Keep Up With Digital Transformation

Technology has completed transformed the banking industry. ING and similar large banks in Europe enjoyed dominant positions for a very long time. But now, fintech firms with smarter products and consumers with a growing demand for safer and more and convenient solutions, are forcing ING to pursue digitization and digitalization much more seriously.

In response, the company has invested more heavily in AI, ML, and data analysis tools and if it sticks to this route, it will be able to maintain its strong position.

Growth By Numbers and Key Strategic Takeaways

With a journey that started just over three decades, ING has achieved astonishing success to reach the heights of the banking industry - not just in Europe but globally.

However, the path hasn’t always been straightforward. Propelled to success early on with strong roots, the company’s growth was hindered when it faced setbacks during the Global Recession. Yet, it managed to come back strongly and ensure its position in the banking world only moved upwards.

Growth By Numbers

COVID-19 may have hampered growth for ING in recent years, but the company has shown remarkable resilience and recovered strongly to register greater revenues, increase its clientele, and grow its workforce.

Here’s an overview of how it has fared:

 

2021

2017

Total Income

EUR 18.48 Billion

EUR 17.8 Billion

Countries

40+

40+

Customers

38 million

37.4 million

Employees

57,000

54,000

Key Strategic Takeaways

Throughout the last few decades, ING has repeatedly shown why it is a role model company for firms not just in the financial sector but in the non-financial sector as well.

It has deployed several successful strategies to propel it towards the stature it has attained today and continues to implement them, setting up for even greater heights.

  1. Strong Foundation Paves The Way For Success

Even though ING was formed in 1991, it was never a small or an upcoming company. In fact, the companies that came together to form ING provided it with a very strong foundation in both the banking and insurance sector.

Therefore, with substantial resources, expertise, and a well-established customer base, ING did not have to face the initial survival period most new firms do. Instead, by applying itself smartly, and capitalizing on these advantages, the company was already a step ahead in the industry,

Furthermore, it paved the way for the firm to vigorously pursue an effective mergers and acquisitions strategy.

  1. Strategic Mergers and Acquisitions Promote Growth

From the Equitable of Iowa to Postbank, Aetna, and countless more, ING has successfully merged with numerous businesses over the years. Consequently, it has helped the company establish its dominance in the industry.

Interestingly, the reason why these acquisitions have been so successful is that ING identifies the gaps in the company it acquires and lends its expertise to fill them. Be it in the form of leadership voids, difficult market dynamics, or unsuitable market strategies, the bank addresses these concerns holistically.

As a result, those new companies prosper under ING resulting in the ultimate growth of ING.

  1. Revisit Your Approach During Challenges

From day one, ING had been a company focused on expanding its operations and its strategies had been aligned to do the same. However, when the economic crisis of 2008 happened, the company had to change its approach in order to brave the storm.

Not only did it have to put a pause on growth, but it also had to make the difficult decisions of closing down ING direct and going to external sources to inject much-needed funds into the business.

By playing out this period, it came back stronger to again set out on the path of growth.

Similarly, COVID-19 posed major challenges for the company and it had to let go off hundreds of employees. Yet by going ahead with this challenging move and focusing on digital operations, the bank increased customer engagement during the pandemic, and resultantly, navigated the tricky waters of the changing business environment.

  1. Digital Transformation is the Future

For a long time, the banking sector has been dominated by large players with competitors few and retention rates high. Yet, with more and more fintech firms making their mark, banks like ING need to enhance their digital services to ensure the competition doesn’t take over.

Customers are looking for more convenient solutions such as invisible payments, while ING needs to find a way to reduce its costs and boost its operational efficiency. Leveraging AI, Data Analytics, and Machine Learning is the best way to achieve this and ING has invested in these tools in recent times. However, there is a need to consistently embrace digitalization so the company sets itself for long-term growth.

Parting Thoughts

As market dynamics change, the need to combine traditional strategies, such as mergers and acquisitions with modern ones like digitization is essential for ING. If it does so successfully, there’s nothing stopping ING from reaching even greater heights.

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