The buyer of ING Groep NV's French retail banking division will take on part of a business that generated income of €266 million in 2020, as the Dutch bank moves on from a business that is not sustainable.
Netherlands-based ING said on Dec. 21, 2021, that it will exit the French retail market and is considering an agreement for its client portfolio with third parties. Société Générale SA and Crédit Mutuel Arkéa have each submitted bids for the business, according to French newspaper La Tribune, with SocGen bidding on behalf of its Boursorama SA unit and Crédit Mutuel Arkéa seeking the portfolio for its Fortuneo Direct Finance business.
ING France operates both retail and wholesale banking, and ING will retain the wholesale business. As a whole, ING France had 737 employees at the end of 2020, according to data obtained by S&P Global Market Intelligence, of which about two-thirds work in the retail division. Its income declined to €266 million in 2020 from €302 million in 2019, and it had total assets of €11.57 billion at 2020-end.
ING's decision to sell follows a strategic review kicked off in June 2021. The bank did not think it likely that the French retail business would achieve the necessary scale in a reasonable time frame, a spokesperson told Market Intelligence. ING has made similar moves elsewhere in Europe, selling the Austrian retail business to bank99 AG and that in the Czech Republic to Raiffeisenbank a.s.
Limited impact
French retail banking appears "way too small" to be sustainable in the long term for ING, Thomas Couvreur, associate director for equity research at KBC Securities, said in an email. The French retail sector is also dominated by mutual banks that do not have the same profit goals as publicly listed banks like ING, making it difficult to yield sufficient returns, according to Morningstar equity analyst Johann Scholtz.
Outstandings, or credits and loans to customers, at ING France amounted to €22.72 billion at the end of 2020. Couvreur estimated that the retail bank had roughly €6.4 billion of outstandings at the end of 2021, lower than other foreign markets such as Germany and Poland, where outstandings totaled €119 billion and €20.8 billion, respectively.
ING's France retail operation is mostly a digital bank and the company had hoped to replicate the success it has had in Germany, but results were mixed, said Scholtz via email. "France was one of the failures in this regard," Scholtz said, adding that the impact of the exit on ING's financials would be "minimal," with an immaterial restructuring charge set to be booked in the fourth quarter.
Wholesale banking
Couvreur said the wholesale business does not require the same scale as retail banking in order to be sustainable.
"I don't expect wholesale [France] to disappear anytime soon," Couvreur said.
ING did not comment on when the exit would be completed. Its fourth-quarter and full-year 2021 results are due for release on Feb. 3.