In an attempt to ease market concerns on its exposure to troubled Eurozone countries, ING announced it has substantially cut its holding of Italian government debt.
Financial markets are increasingly worried about European banks’ exposure to fiscally troubled governments in the region. The concerns resulted in an acute shortage of dollar availability for large parts the European banking industry, prompting central banks to pump dollars into the banking system to stem a new liquidity crisis.
In a presentation posted on its website, ING sought to remove some of this fears, saying it recently sold a substantial part of its bondholdings and that the funding position of its banking arm remains “strong.”
The Netherlands’ biggest financial company said it held EUR4.7 billion in Italian sovereign bonds by Sept. 15, down from EUR7.3 billion at the end of June. In the same period, it sold off some Spanish government bonds, reducing its exposure to EUR1.7 billion from EUR2.3 billion.
In total, ING now holds around EUR7.7 billion in Southern European sovereign debt. It said it will “stay alert to further market developments.”
Rabobank analyst Cor Kluis said ING has benefited from the decision of the European Central Bank to purchase Italian and Spanish bonds, and that its exposure now seems manageable. He noted ING has EUR140 billion available to park at the ECB in case of an emergency. “ING won’t be in the first seat in case banks run into troubles,” he said.
In the presentation, ING acknowledged that U.S. lenders have reduced their exposure to European banks and that it has “opted for the prudent approach” in tapping alternative funding sources.
Overall, ING said that its funding position remains strong, pointing at the high proportion of corporate and retail deposits and increased long-term funding.
Like other financial stocks in Europe, ING shares have been hit hard in the past three months, losing around 39% in value. Some analysts say the sharp drop is also caused by concerns that ING will have trouble selling off its insurance arm through two initial public offerings.
The firm was ordered by the European Commission to sell the business in return for getting approval for the state aid it received during the financial crisis.
ING said Wednesday that preparations for the IPOs will be executed “decisively but prudently.”
Amsterdam, September 21, 2011 (Dow Jones)
