ING Direct would continue to operate separately and maintain its 1,000 employees under the deal announced Wednesday.
And it will keep the same branding — popularized in ads set against its orange lion logo in which viewers are exhorted to "save your money" — for at least 14 months after the deal closes. But the name will change within 18 months.
Scotiabank said the deal — one of its largest acquisitions ever — to buy the no-fee online banker, with a book value of about $1.7 billion, $40 billion in assets and about $3 billion in deposits, will add "modestly" to its earnings within the first year.
"ING will now benefit from a strong stable Canadian owner who will provide additional resources to continue to expand and to grow," Scotiabank president and CEO Rick Waugh said on a conference call with analysts held just after the deal was announced.
"For Scotiabank, this will provide us with a new source of incremental earnings beginning in the first year as well as $30 billion in retail deposits of 1.8 million customers to further diversify our funding."
Waugh added that ING's portfolio will help Scotia solidify its No. 3 position in the Canadian deposit space. ING — Canada's eighth largest bank — also has a $30-billion loan portfolio, mostly in residential mortgages.
Scotiabank has recently been making a series of international acquisitions as it diversifies its revenue base away from a seemingly tapped out Canadian market.
But Anatol von Hahn, Scotia's group head of Canadian banking, said the opportunity fit its strategic focus on growth in deposits, payments and wealth management.
"This is a strategic decision, an opportunity that arose to fit in with what we already do on a day-to-day basis with our customers, and this just augments that."
ING Direct president and CEO Peter Aceto said ING — which has no physical branches — would continue to operate under its current no frills banking model and as a separate entity from Scotia.
"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."
However, he added that deal will provide opportunities for growth, both in terms of products and geographical footprint, suggesting that credit cards are one potential new product in the pipeline.
"There are a lot of Canadians who are looking for other things from us on the payment side and a variety of other opportunities."
Parent company ING Groep NV, which has been struggling to keep its balance sheet healthy amid bad loans and declining margins, announced earlier this summer that it was putting its Canadian division under review for a potential sale.
It has been in the news for getting bailed out by the state — it still owes three billion euros in remaining bailout money from the Dutch government from the 2008 financial crisis.
The deal, announced after markets closed Wednesday, is expected to result in a net investment by Scotiabank of $1.9 billion, after deducting the excess capital currently at ING Direct.
Scotiabank (TSX:BNS) also announced a public offering of 29 million common shares at $52 — for gross proceeds of $1.5 billion — to fund the acquisition.
The deal, which is subject to regulatory approval, is expected to close by this December.
The Canadian ING business was established in 1997, attracting customers with its promise of no-fee banking.
They can manage high interest savings and chequing accounts online or over the phone as well as take out mortgages, or invest in mutual funds — but withdrawals and deposits are done at various ATM locations.
On Tuesday, Scotiabank reported its profits grew by 57 per cent in the third quarter as several divisions improved performance and the bank also benefited from the sale of its headquarters in Toronto.
Net income for the period was $2.05 billion, or $1.69 per share, up from $1.3 billion, or $1.10 per share, a year ago.
Scotiabank's Core EPS, a measurement the bank says best compares with analyst predictions, was $1.22 per share. A survey by Thomson Reuters had shown analysts, on average, expected earnings of $1.19 per share.
Revenue increased to $5.51 billion from $4.3 billion.
The bank said the results also included an after-tax gain of $614 million from the sale of its headquarters, Scotia Plaza, a 68-storey tower near the corner of King and Bay streets.
In its performance breakdown, the bank said its Canadian operations saw profits rise to $521 million from $426 million.
In February, ING sold ING Direct in the U.S. to Capital One for 489 million euros (US$600 million).
In 2010, ING Group unloaded 400 Canadian industrial properties at a $1.3-billion discount to Alberta Investment Management Corp. and KingSett Capital after the European financial giant saw the portfolio's value crash since it was acquired four years ago.
Scotiabank shares closed up 70 cents, or 1.32 per cent, at $53.60 Wednesday on the Toronto Stock Exchange.