After the markets closed on Wednesday, Scotiabank announced that it was buying ING Bank of Canada for $3.13 billion.
Scotiabank will put up $1.9 billion and fund the rest through the issuance of 29 million shares at $52 apiece.
From its arrival in Canada in 1997, its distinctive ING Direct brand has championed that it was different — it "wasn’t like a typical bank," as its advertising pointed out.
It had no physical branches, charged no service fees, insisted on no minimum balance in client accounts, offered cheaper and flexible mortgages than the big guys, and consistently paid above-average interest in its chequing and savings accounts.
In just 15 years, those selling points helped it to attract 1.8 million clients and $30 billion in retail deposits. It had another $30 billion in loans on its books, primarily in mortgages.
It quickly grew to become the eighth largest bank in Canada and is currently the largest internet bank in the country.
But then came the European financial crisis.
Its Dutch parent, ING Groep NV, is struggling to keep its balance sheet healthy amid bad loans in Europe and declining margins.
Earlier this month, it signalled that it was exploring the possibility of shedding its Canadian and British units – something it had already done with its American unit. It sold ING Direct U.S. to Capital One.
Reports suggested that the Big Six banks were very interested in ING Bank of Canada. Its mortgage loan book was considered especially attractive.
But what about that much-ballyhooed distinctiveness? Both sides in this deal rushed to reassure ING Direct’s Canadian clients that it would be business as usual.
"Scotiabank is committed to preserving what ING Direct's customers have come to love about it," said Scotiabank executive Anatol von Hahn, in a release. "ING Direct … customers will be able to interact the way they do now using their existing account numbers and passwords, served by the same familiar team."
Name change within 18 months
Similar assurances came from ING.
"For our customers, we expect no change ... we will continue to offer our customers the highly competitive and attractively priced products that we have become known for, and we will be continuing our efforts to earn more customers with our focus on Canadians who are self-directed," ING Direct CEO Peter Aceto said in an afternoon conference call.
So clients will likely continue to see and hear those high-profile "save your money" exhortations for a while. But change is coming.
Company officials say the brand will survive for at least 14 months after the deal closes. But the name will change within 18 months.
Scotiabank said its takeover of ING Direct should be a done deal by December, subject to regulatory approvals. It said its acquisition of ING Direct would add to its earnings within the first year of ownership.
On Tuesday, Scotiabank reported its third-quarter profits grew by 57 per cent to $2.05 billion as several divisions improved performance and the bank also benefited from the sale of its Toronto headquarters.