ING to cut 7,000 jobs in cost-cutting plan
ING Groep NV on Monday became the latest European lender to announce a new round of layoffs and restructuring as it battles ultralow interest rates and stricter regulations.
The lender said it would scrap around 7,000 jobs in the next couple of years, of which 3,500 in Belgium and 2,300 in the Netherlands. The cuts are aimed at saving EUR900 million ($1.01 billion) in annual costs by 2021 and represent around 13% of the bank’s global workforce. ING said it expects to take a pretax “redundancy provision” of roughly EUR1.1 billion.
The measures are part of a wider overhaul in which ING aims to converge its banking operations in Europe and move toward one digital platform. It said it would invest EUR800 million to improve its digital services.
Several European banks have announced restructuring plan or more cautious financial targets in recent weeks as they grapple with a combination of record-low interest rates, stricter tighter regulation and a still sluggish economy.
Last week, Germany’s Commerzbank AG said it would scrap around 20% of its workforce to restore profitability, while Spain’s Banco Santander SA downgraded two of its important financial targets in light of the challenging environment. In the Netherlands, ABN Amro Group NV is planning to cut more than 1,000 jobs.
“Banks are confronted with a continuous regulatory burden and a prolonged period of ultralow interest rates,” ING chief executive Ralph Hamers said. “These factors put pressure on the returns which are necessary to fund growth and investments and cover our cost of capital.”
Mr. Hamers said the latest measures are made “from a position of strength,” referring to previous restructuring that bolstered ING’s capital position and made it less complex.
Since the global financial crisis, when the bank received a government bailout, it has embarked on a dramatic strategic overhaul to transform itself into a smaller Europe-focused bank. It now employs around 52,000 people compared with roughly 125,000 in the years before the crisis.
ING, the Netherlands’ largest bank by assets, reiterated its target of achieving a core capital ratio of more than 12.5% and a leverage ratio of more than 4%. But it said it would not update its return on equity target, a key measure of profitability, due to “continuing regulatory uncertainty.” The bank currently targets a return of 10% to 13%.
The move comes amid a debate in the Netherlands on whether banks have set goals that are too ambitious after a study by the Dutch central bank concluded that their double-digit targets may no longer be feasible with new capital requirements on the horizon.
Mr. Hamers said he doesn’t necessarily agree with the central bank’s views and said investors demand “decent returns.” He said ING still aims to pay a “progressive dividend over time.”
Source: Market Watch
