In an effort to further strengthen its domestic retail banking
business, UK banking giant
) has agreed to acquire the mortgages and deposits of ING Direct UK
- the British online banking division of
ING Groep NV
). The detailed financial terms of the deal were undisclosed.
BARCLAY PLC-ADR (BCS): Free Stock Analysis
ING GROEP-ADR (ING): Free Stock Analysis Report
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The deal will bring in 1.5 million customers along with 750
employees, £10.9 billion ($17.47 billion) deposits and £5.6 billion
($8.98) mortgages under the Barclays umbrella. Barclays declared
that it will be buying the mortgages at roughly 3% discount and the
deposits at par. The deal is anticipated to be completed in the
second quarter of 2013, subject to certain regulatory conditions.
Following the completion of the deal, Barclays will integrate the
ING Direct UK business with its UK Retail and Business Banking
division. However, until the integration is completed, Barclays
will continue using ING Direct UK's businesses to serve the
customers under the same terms and conditions. Further, Barclays
expects the deal to improve its return on equity.
Amidst the bleak macroeconomic environment, which is clouded with
mounting regulatory restrictions, Barclays has witnessed a decline
in profit in its investment-banking segment. The bank is in the
process of conducting a strategic review to simplify its
businesses, increase profitability and reduce its over-dependence
on the investment-banking arm.
We believe the acquisition will help Barclays to improve its retail
banking market share in UK. The abovementioned agreement is an
addition to numerous deals by Barclays in the recent years,
including the acquisitions of Standard Life Bank in 2009 and credit
card division of Egg in 2011.
On the other hand, the sale of ING Groep NV's UK division is a part
of a series of asset sales that the company has been undertaking to
pay back the bailout fund, which it took from the Dutch government
during the 2008 financial crisis. Further, it is part of the
company's strategic aim to concentrate more on the core banking
Earlier, in August, ING announced the sale of ING Direct Canada -
the Internet banking division of ING Bank of Canada - to
The Bank Of Nova Scotia
). Further, in February 2012, it completed the sale of its online
banking unit, ING Direct USA, to
Capital One Financial Corp.
Barclays and ING Groep NV, both currently retain a Zacks #3 Rank,
which translates into a short-term Hold rating.