Additional reporting Veselin Valchev
ING Group is in the process of reducing equity derivatives for financial institutions in Singapore, New York and Brussels. The move follows an update on the bank's Accelerating Think Forward strategy, which was launched in 2014. "The equity derivatives business for financial institutions as a third party which included structured products for retail investors has ceased," said an ING spokesperson. "However, we will continue with our equity derivative business for our own retail clients as well as for corporate clients."
The bank's equity over the counter (OTC) and structured derivatives solutions for financial institutions has a lower return on equity (RoE) than other financial markets business lines, and the client base for the product does not align with the core bank client franchise as well as other financial markets products such as the foreign exchange and rates businesses "where financial market clients have a much better alignment to ING's core clients", according to the official.
"But also because the product complexity, the IT and operational infrastructure for the product requires us to maintain a complex and expensive IT infrastructure," said spokesperson.
The Dutch bank has also confirmed that it will move as many as 60 trading jobs from Amsterdam and Brussels to London to consolidate operations and reduce costs, as part of its plans to move to an integrated digital banking platform, with the goal of making annual savings of €900m by 2021.
'Aimed at further customer and volume growth, we will deliver a scalable business platform, initially for Spain, Italy, France, Czech Republic and Austria,' stated Ralph Hamers (pictured), chief executive officer for ING during the bank's Investor Day in Amsterdam last week. 'The platform can be extended to additional countries, products and services... In Germany, we will enhance our digital banking platform, introducing an omni-channel approach and investing in scalability to provide room for business growth and improve operational efficiency."
Hamers also said that, because of the reorganisation, ING will begin headcount reduction affecting 7,000 functions, including 950 positions held by external suppliers. 'The intended initiatives are expected to result in a reduction of ING´s workforce in Belgium by around 3,500, and by around 2,300 in the Netherlands for the years 2016-2021,' stated Hamers. 'These numbers include the intended move to an integrated banking platform, with the remainder of functions affected spread over intended programmes in IT, operations, wholesale banking and various business support functions.
The bank's cuts to its workforce are the heaviest since 2009, when ING was forced to divest all of its insurance and investment management (IM) operations by the end of 2013 as part of the bailout package negotiated with European Commission in late 2009 in exchange for support from the Dutch government during the financial crisis, although the Dutch banking group reached a new agreement with the European Commission to extend the deadline for asset divestiture in Asia to the end of 2016.
As a result of the business restructuring since 2008 and the subsequent divestiture of its various insurance units, ING was able to "strategically refocus" in 2013 on its core banking businesses in Asia Pacific, which included the development of its structured solutions business in Asia, especially to target growth in emerging markets.
SRP statistics show a dramatic decline in the issuance of tranche-based retail structured product by ING in recent years. In 2008, 2009 and 2010 the bank launched 483, 365, and 287 tranche products, respectively, across 13 markets.
In 2011, the bank's issuance across jurisdictions spiked to 871 tranche products on the back of a significant increase in the number of products sold in The Netherlands and the number of markets covered which stood at 15.
In 2012, ING's overall issuance increased to 1,027 products across 12 markets of which 137 were tranche products which further increased to 3,422 products in 2013 as the Dutch bank bolstered its issuance of leverage and flow products in Germany, although issuance tranche-based products decrease to 131 products.
This increased issuance remained in 2014, with 4,781 products of which 93 were tranche products but dropped in 2015 to 3,389 products globally across 11 markets with the issuance of tranche products further decreasing to 61 products.
Year to date, the Dutch bank has marketed 2,124 leverage and flow products in Germany with a marginal issuance in its core markets with only 18 products issued in Belgium, 19 in The Netherlands and 16 in Poland with only eight markets covered and the lowest number of tranche based products (59 products) ever registered.
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