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ING sets its sights on commercial banking in Asia

Friday, July 4, 2014 - 06:00

[SINGAPORE] As ING Group weeds through the last of its global restructuring plan, revenue from its commercial-banking operations in Asia is expected to contribute 20 per cent to the group's commercial banking unit in three to five years' time, up from 13 per cent, said CEO of ING's commercial banking in Asia, Mark Newman.

This comes as the Dutch bank, which is now fully focused on corporate banking in Asia, builds a clear niche position in financing complex trade transactions, setting itself apart from banks working on plain-vanilla trade financing transactions.

"We don't try to be all things to all people," Mr Newman told BT in an interview.

ING operates in 14 markets in Asia, where besides trade finance, it provides transaction services and structures deals on equity capital markets.

Focusing on services with a higher barrier to entry is crucial for ING, on a few fronts. The bank is going through a period of "balance sheet optimisation", essentially meaning it has to lend in markets where it commands liquidity used to fund these loans.

In this area, ING is well-placed in Europe, where it has a retail banking arm to collect deposits. ING is the largest bank in Benelux and the third-largest retail bank in Germany, Mr Newman said.

"What we've seen through the crisis, is that our deposit base has grown," he added.

"Regulations mean the movement of liquidity is not as free as it used to be. If you look at Europe, we have a number of pools of liquidity. We're building up the expertise in locations that have liquidity, so that we're able to book the relevant assets to match that liquidity."

This also comes as more Asian clients are going into Europe, with this business growing at a faster clip than that of European clients coming into Asia, said Mr Newman.

Deals with Asian clients going into Europe made up 18 per cent of the bank's commercial banking revenue in Asia. Another 15 per cent constitute deals with non-Asian clients booked in Asia, with the remaining made up of deals with Asian clients booked in the region.

As national regulators now favour the "Balkanisation" concept - which ensures that lending in one jurisdiction by a foreign bank is primarily funded within that jurisdiction, not through deposits from its home market - global banks have to turn to more expensive forms of funding.

This forces lenders, including ING, to cherry-pick the transactions they chase in foreign markets, to earn a rich enough margin.

Also, on the backdrop is the rise of Asian banks that are gunning for a slice of the trade finance pie. These banks have yet to build a European network that banks such as ING have had for years, or they may not have the same level of expertise in more specialised financing targeted at different sectors' needs.

Such specialised financing could include asset-backed securities. To do this, banks pool assets and repack them into securities that pay interest to investors. Banks also offer financing based on the value of commodity inventories.

"They are a much more significant competitor than they were before, and will continue to be so," said Mr Newman, referring to Asian banks.

"They can definitely grow their expertise, and they can hire people, and build teams. Will they grow domestically and regionally? Yes. But our global expertise will take a little bit longer (to grow)."

ING has been restructuring its business since 2008, when it was bailed out by the Dutch government via capital injections of some 10 billion euros (S$17 billion), after being hit by its soured portfolio of US mortgage-backed securities.

OCBC snapped up ING Asia's private banking unit - now known as Bank of Singapore - in late 2009.

ING is nearing the end of this restructuring process. Its insurance unit, NN Group, was listed this week, with the IPO proceeds to be used to pare debt. Temasek Holdings is one of the anchor investors in NN Group, which consists of ING's European and Japanese insurance businesses.