ING's
decision to sell off its Swiss private-banking unit to Julius Baer Group today is renewing speculation that the insurer may soon sell off most of its broker-dealer network here in the United States.
The divestment of the unit for $505 million is another step in the Dutch financial services firm's Back to Basics program, in which ING is attempting to slim down its structure and reduce its franchises — while also raising cash to pay back government bailout funds it received last year.
This sale now brings into question what will happen next with three of the broker-dealers in ING Advisors Network: Financial Network Investment Corp., Multi-Financial Securities Corp. and Primevest Financial Services Inc., noted Don Putnam, founder and managing partner of Grail Partners LLC. The three broker-dealers have been conducting a strategic review
this year.
“The reorganization at ING makes it easier to see which assets are sensibly sold and which should be sensibly operated,” Mr. Putnam said in an interview. “These businesses are fragile, you have to pick the right moment to sell them. ING is approaching the time to sell it at a profitable price without disturbing clients or brokers.”
ING spokesman Dana Ripley was tight-lipped on the fate of the broker-dealers, however. “We really don't have much to say about what's going on other than the strategic review we started this summer is still ongoing and that we're making steady progress.”
“We hope to conclude it soon,” he said.
Mr. Putnam pointed to American International Group Inc.'s recent decision to hold on to the AIG Advisor Group — which was put on the block at the end of last year — as an example of how difficult it can be for a distressed financial institution to sell off one of its businesses in the midst of a recession.
“While the financial crisis is ongoing, the stability of ING and the brokerage business is no longer in doubt,” he added. “The lesson from the AIG experience is that you can't sell a fragile business in the middle of a thunderstorm.”
A sale of the three ING Advisors Network broker-dealers, he added, could come within the next six months.
Though ING's broker-dealers are good businesses, they're not necessarily the right business for the financial services giant, and capital from the sale would be best used elsewhere, Mr. Putnam said. For one thing, selling the firms would get money out of U.S. dollars and into euros, which would behoove the company's shareholders.
“From their perspective, the dollar-denominated businesses are likely to return ING shareholders less than the non-dollar-denominated businesses — the dollar is in trouble,” Mr. Putnam said. “I also suspect that as insurance and banking activities bulk up, it will demand that other businesses are reconsidered.”
“Considering whether you want to go to the public markets [for capital] or would you rather sell a successful U.S. subsidiary, the capital markets are a less hospitable answer,” he added.
