DBRS Places Ratings for ING Bank of Canada Under Review with Negative Implications

DBRS has today placed its ratings for ING Bank of Canada (ING Direct Canada or the Company) Under Review with Negative Implications, including the Company’s Issuer & Long-Term Debt rating of AA (low) and the Company’s Short-Term Debt rating of R-1 (middle).

The placement of the ratings Under Review – Negative reflects DBRS’s heightened concern that the Group’s income diversification and its underlying earnings ability, which are important rating factors, may be reduced due to ING’s exposure to the ongoing financial crisis and the deepening global economic downturn. As a result, the Group may have fewer resources to provide support to ING Direct Canada in a stress scenario. The ratings review follows additional information provided by ING on 9 April 2009 detailing the Group’s efforts to reduce leverage, lower its substantial risk exposures and cut expenses.

The rating review will focus on the ING’s future income diversification and earnings ability. The review will also take into account the Group’s risk profile, capital position and liquidity following the announced restructuring and will further address the role of ING Direct Canada within the overall ING Group. Currently, the ratings for ING Bank of Canada are closely linked to the credit profile of its parent, ING Bank N.V. and ultimately ING Group overall. This close link is based on ING Direct Canada’s role as an important component of the Group’s online savings-gathering capabilities which remain a core strategic focus for ING under the reorganisation.

In DBRS’s view, ING’s restructuring is likely to involve substantial costs, as the Group strives to divest businesses and reduce assets in a very challenging environment. ING stated that it has identified 10 to 15 businesses that generated underlying income before taxes, fair-value adjustments, impairments, loan loss provisions and other market-related items of approximately EUR 800 million in 2008, or slightly above 10% of the Group total. These non-core businesses include significant portions of the Group’s U.S. insurance operations, such as its annuities business, employee benefits services and reinsurance. ING also stated that its insurance operations in China and Japan are under review. Moreover, ING plans to reduce risk by managing down exposures in its financial products, wholesale banking and real estate development units.

DBRS had previously revised the long-term ratings trend for ING Direct Canada to Negative from Stable on 27 January 2009, following the pre-announcement from the Group of a substantial loss for Q4 2008. The Group’s Q4 2008 loss of EUR 3.7 billion exceeded DBRS’s prior expectations and demonstrated the Group’s vulnerability to the ongoing financial crisis and the deepening global economic slowdown.

Notes:
All figures are in euros unless otherwise noted.

The applicable methodologies are Analytical Background and Methodology for European Bank Ratings, Second Edition, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.