AMSTERDAM — ING Groep NV has scrapped plans to sell its insurance business in Belgium as a stand-alone operation, highlighting the difficulties financial companies may have shedding assets in currently choppy markets.
The Amsterdam-based group informed staff in Belgium last week that it won't move ahead with the Belgian sale, said Mathieu Blondeel, the head of ING's European works council who attended the meeting. While several parties showed an interest in the operations, their bids were too low. "The offers were ridiculous and couldn't be considered," he said.
ING had hired JPMorgan Chase & Co. to explore strategic options for the insurance businesses in Belgium, which will now be added to the European-Asian insurer that ING is readying for a stock market listing, Blondeel said.
"[It] clearly underscores that the market environment is extremely tough and as such the bid prices for asset disposals [are] low," SNS Securities analyst Lemer Salah said in a note. He estimates the value of the Belgian operations at between EUR800 million ($1 billion) and EUR1.1 billion ($1.4 billion.)
An ING spokesman declined to comment.
Many financial companies in Europe are struggling to sell assets since markets were rattled by the euro zone debt crisis. With many banks opting to shrink their balance sheets as a way of meeting stricter capital rules, risks are increasing that they may have to sell assets at fire-sale prices.
This could aggravate the situation for banks that are being forced by the European Commission to dispose of businesses. Like other banks that received government bailouts during the financial crisis, ING was ordered to sell off a large number of assets to ease competition concerns.
This divestment program, which will nearly halve ING's EUR1.3 trillion ($1.7 trillion) balance sheet, should be completed by the end of 2013. The deadline is still two years away but Chief Executive Jan Hommen last month warned at an investor conference that ongoing market turmoil poses a serious threat to the plan.
Until recently, the ING program was progressing well. Analysts say the company managed to get decent prices for its online bank in the U.S., ING Direct USA, and its pensions and insurance activities in Latin America.
The worries now are mainly focused on its insurance business, which it plans to divest through two initial public offerings. Another source of concern is WestlandUtrecht Bank NV, a mortgage lender in the Netherlands for which ING is having trouble finding a buyer.
If markets remain unfavorable, ING and other financial institutions with the same issue would "have to explain to the European Commission that a spinoff won't work at the moment," Hommen said last month.
At 1212 GMT, ING shares were down 0.9% at EUR5.63 in relatively light holiday trading, slightly underperforming the Stoxx Europe 600 financial services index, which was down 0.2%.
