ING Makes Efficiency Drive In Latin America After M&A Freeze
June 04 2009 - 5:02PM
Dow Jones News
Financial services firm ING Groep NV (ING) aims to improve the
efficiency of its Latin American operations this year after the
global financial crisis forced the company to suspend its
acquisition plans, according to a top executive.
For Carlos Muriel, chief executive of ING Latin America, 2009 is
a year to cut costs and expand the firm's distribution channels,
after pulling the plug on dealmaking in the second half of
2008.
"We were evaluating projects that were in advanced stages,
acquisitions that would have allowed us to increase our scale in
the region, which had to be shelved," he told Dow Jones
Newswires.
Muriel said it's too early to say if ING could restart its
acquisition program next year, noting that many of the deals he was
looking at are still on the market because the crisis has limited
the number of potential buyers.
"I think asset management and voluntary savings are what I would
see as the biggest priority," he said.
ING was forced to seek government aid, temper its growth plans,
and divest assets after extreme market volatility and sharp
declines in asset prices in 2008 resulted in a loss of EUR729
million.
In order to free up capital and reduce its risk profile, ING
sold its life insurance operations in Taiwan and its Canadian
property and casualty business in the first quarter of this
year.
In Latin America, the Dutch group has been active in recent
years both buying and selling assets as part of its strategy to
focus on pension savings and wealth management services.
ING bought Banco Santander SA's (STD) pension fund and annuity
assets in the region for EUR1.14 billion in early 2008 in a deal
that cemented its position as the No.2 manager of compulsory
retirement savings in Latin America, behind Spain's Banco Bilbao
Vizcaya Argentaria SA (BBV).
In Peru, ING increased its stakes in the country's leading
pension fund company as well as a local mutual fund provider.
ING sold its insurance operations in Mexico to France's AXA SA
(AXA) for EUR950 million, and completed the sale of its health
business in Chile.
Today, the company has about 9 million clients in the region
with operations in Brazil, Mexico, Chile, Colombia, Uruguay and
Peru.
Latin America's compulsory pension savings industry, which
represents the bulk of ING's revenue and clients in the region, is
fast approaching maturity, according to Muriel, who sees wealth
management services like mutual funds and life insurance as the
biggest growth opportunity in the years ahead.
While the low use of financial services in Latin America is a
boon for foreign banks and insurance companies, the rise of
populism in several countries has caught foreign investors off
guard.
ING took an EUR188 million loss in the fourth quarter from the
expropriation of its pension fund business and provisioning for
annuities in Argentina after the government nationalized the
country's private pension industry.
Muriel said Argentina's pension fund companies are currently
debating how to approach the government for compensation.
"Our experience was a lesson in the need to constantly study and
watch political developments in each country where we operate," he
said.
According to the executive, pension fund companies need to do a
better job of promoting financial literacy where they operate so
that the public identifies with the savings managed on their
behalf, rather than seeing mandatory retirement contributions as an
unwanted tax.
"I think the best defense against temptations to nationalize
these resources is financial education and culture. One of the
biggest lessons (from Argentina) is that important players like
ING, BBVA, and Citigroup should have a much more proactive attitude
in terms of helping to promote education," he said.
-By Ken Parks, Dow Jones Newswires, 52-55-5001-5723,
ken.parks@dowjones.com