ING to Cut 7,000 Jobs in Cost-Savings Drive -- 3rd Update
October 03 2016 - 10:58AM
Dow Jones News
By Maarten van Tartwijk
AMSTERDAM -- ING Groep NV is the latest European lender to
announce a new round of layoffs and restructuring as it battles
ultralow interest rates and stricter regulation.
The Dutch bank said Monday it would scrap around 7,000 jobs in
the next couple of years, of which 3,500 would be in Belgium and
2,300 in the Netherlands. The cuts are aimed at saving EUR900
million ($1.01 billion) in annual costs by 2021 and represent
around 13% of the bank's global workforce. ING said it expects to
take a pretax "redundancy provision" of roughly EUR1.1 billion.
The measures are part of a wider overhaul in which ING aims to
converge its banking operations in Europe and move toward one
digital platform. It said it would invest EUR800 million to improve
its digital services.
Several European banks have announced restructuring plans or
more-cautious financial targets in recent weeks as they grapple
with a combination of record-low interest rates, tighter
regulations and a still sluggish economy. With profits under
pressure, many are seeking to reduce costs.
Last week, Germany's Commerzbank AG said it would scrap around
20% of its workforce to restore profitability, while Spain's Banco
Santander SA downgraded two of its important financial targets in
light of the challenging environment. In the Netherlands, ABN Amro
Group NV is planning to cut more than 1,000 jobs.
"Banks are confronted with a continuous regulatory burden and a
prolonged period of ultralow interest rates," ING's Chief Executive
Ralph Hamers said. "These factors put pressure on the returns which
are necessary to fund growth and investments and cover our cost of
capital."
Mr. Hamers said the latest measures are made "from a position of
strength," referring to previous restructuring plans that bolstered
ING's capital position and made it less complex.
The plans are facing fierce resistance in Belgium where ING
operates a large retail-banking franchise. Labor unions threatened
to strike and Belgian Prime Minister Charles Michel expressed
support for the employees, saying ING "must assume its
responsibility."
Since the global financial crisis, when ING received a
government bailout, it has embarked on a strategic overhaul to
transform itself into a smaller, Europe-focused bank. It divested
its global insurance business and dozens of other assets, including
its online savings bank in the U.S., ING Direct USA. The bank now
employs around 52,000 people, compared with roughly 125,000 in the
years before the crisis.
ING, the Netherlands' largest bank by assets, reiterated its
target of achieving a core capital ratio of more than 12.5% and a
leverage ratio of more than 4%. It said it wouldn't update its
return-on-equity target, a measure of profitability, citing
"continuing regulatory uncertainty." The bank currently targets a
return of 10% to 13%.
KBC Securities, a brokerage, said it could be seen as a
disappointment that the targeted savings won't translate into a
"meaningful improvement" in earnings. Shares in ING were little
changed after the announcement.
The move comes amid a debate in the Netherlands on whether banks
have set goals that are too ambitious, after a study by the Dutch
central bank concluded that their double-digit targets may no
longer be feasible with new capital requirements on the
horizon.
Mr. Hamers said he doesn't necessarily agree with the central
bank's views and that investors generally demand "decent returns"
from healthy banks. He said ING will present new profitability
targets when there is more clarity on the regulatory front. ING
still aims to pay a "progressive dividend over time," he said.
Write to Maarten van Tartwijk at maarten.vantartwijk@wsj.com
(END) Dow Jones Newswires
October 03, 2016 10:43 ET (14:43 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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