ING Canada could be spun off or sold

ING Bank of Canada could be spun off or sold as its European parent seeks to raise cash after being bailed out by the Dutch government, according to people familiar with the matter.

The strategic options are being explored as the parent group seeks to recoup up to $13-billion by selling off up to 15 subsidiaries spread across the globe to refocus on core markets.

The review underlines how the fallout from the financial crisis continues to reshape the country's financial landscape, and could see "the guy with accent," who is ubiquitous on national television, lose his Dutch intonation.

ING Direct has grown into one of the country's leading mortgage lenders over the past dozen years and holds about $24-billion in deposits on behalf of Canadians, according to regulatory filings.

The parent has already spun off its other Canadian unit, selling the last of its property-and-casualty insurance business to Canadian shareholders two months ago in a $2.2-billion deal.

A similar float is seen as one option for the bank, alongside the possibility of a sale to a strategic buyer such as a Canadian insurer.

Manulife Financial Corp., the country's largest insurer, already operates a small banking operation, but such rivals as Sun Life Financial Inc. and Great-West Lifeco Inc. do not have the capacity to take deposits.

People close to the process stressed that there was no certainty the parent would ultimately divest its ownership of the Canadian unit, which is a net contributor to the Dutch group and a better fit than other foreign assets on the block.

Peter Aceto, chief executive of ING Bank of Canada, declined to speculate on the possibility of a divestment, but made it clear it was business as usual at the bank.

But he said ING Direct's "emphasis on retail savings and investments makes it a strong, strategic fit for ING Group."

"Our business in Canada is profitable, we are able to gather savings in an efficient manner, we underwrite excellent-quality mortgages and we execute our customer-focused, low-cost model tremendously well. Local management and ING Group are proud of our Canadian business," he said.

The bank has had unique success in Canada by operating without branches and reaching out to price-sensitive consumers through online and telephone banking services, and generates enough capital to sustain itself.

The company's marketing has focused on high-interest savings accounts and flexible mortgage products that have forced a shake-up at the country's dominant domestic banks.

The ability of the bank to retain loyal customers in the event of a divestment is seen as a key factor in its valuation and its appeal to a strategic buyer.

"How sticky are the deposits?" asked one person observing the process.

Regulatory filings suggest the deposits have held up well during the course of the financial crisis and grown at a higher rate than analysts predicted.

Mr. Aceto said, "Gathering savings directly from customers in a low-cost, tech-savvy manner and offering them simple lending and investment products to help them through their life's journey is fundamental to what ING Group wants to do and what ING Direct has always done."