INVESTMENT THESIS
We believe ING Group has clearly articulated its intentions and priorities for the next few years. One important aspect of the firm's ongoing turnaround efforts has involved shrinking its balance sheet substantially through asset sales and the public offering of divested businesses (such as the initial public offering of ING's U.S. insurance business in 2013 and this year's scheduled offering for its European insurance business). This follows the company's decision three years ago to separate ING's banking operations from its insurance business (from an operating perspective), which ended a 20-year-plus joint operation between the two organizations and set the stage for the eventual separation of the two entities (which will result in three separate publicly traded companies).
With its history of investing capital in nonmoaty businesses like online banking and variable annuities, it has been refreshing to see the firm acknowledge its mistakes and move to do what is best for the firm and its shareholders. Arguably, much of this was prompted by the need to repay the Dutch government, which offered a EUR 10 billion ($13.4 billion) lifeline to the company during the financial crisis, but management has taken it one step further by taking a long and hard look at ING's entire operating structure. In our view, a more streamlined and focused organization is critical for both the banking and insurance groups to return to more consistent levels of profitability.
