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ING To Split In Two And Repay State Aid

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The bailed-out Dutch financial services group ING is splitting itself in two, breaking up its banking and insurance arms.

European services giant ING Groep NV said Monday it will split itself in two, spinning off its insurance arm to simplify its business and issuing euro7.5 billion ($11.3 billion) in new shares to repay state bailout money.

The dramatic change in strategy caps a year of cutting costs and selling operations since the financial crisis struck, when ING was kept afloat only with with two major rounds of assistance from the Dutch state.

The insurance operations have a book value of euro22 billion, and the company said it will likely seek an initial public offering for them within four years.

"This is a momentous day for us: splitting the bank and insurance is not a decision to be taken lightly," said Chief Executive Jan Hommen, a former board chairman who took the executive job in January after his predecessor was fired.

"We're making a decisive move to turn ourself into a simple organization."

Shares slid 8.5 percent to euro10.67 in Amsterdam as investors reacted to the prospect of the share issue.

ING has been an leading advocate in Europe of the advantages of combining banking and insurance, and historically the two arms have generated about equal shares of the company's earnings.

But Hommen said the events of the past year "have changed the environment in which we operate, and the complexity of ING didn't help us during the crisis."

He said ING bank, which will remain within the holding company, will benefit more from transparency and a smaller balance sheet than it did from cost savings on related businesses.

ING issued a series of related announcements Monday: it will also sell or float its asset management arm, which does not now report its earnings separately but oversees euro500 billion in investments; will sell its U.S. Internet banking arm, ING Direct, by 2013; and will sell some of its Dutch banking operations.

With these and earlier disposals, the bank's balance sheet will shrink by some 45 percent from euro1.3 trillion in September 2008.

The disposal of ING Direct, considered one of ING's most attractive businesses, was made under pressure from the EU's competition authority, which is also investigating whether parts of ING's bailout amounted to improper state aid.

"The Commission hopes to be able to take a decision within the next few weeks," spokesman Jonathan Todd said.

Source: AP

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