ING to repay more Dutch state aid by May 2011

Dutch bancassurer ING said on Monday it would repay €2 billion of core Tier 1 securities to the Dutch state ahead of schedule, further evidence of Dutch financial sector's recovery from the crisis.

ING will then have paid €7bn out of a total of €10bn, leaving it with €3bn which it intends to repurchase by May 2012.

The Dutch government paid nearly €40bn to rescue the domestic financial sector in 2008 when it was forced to nationalise ABN AMRO and provide capital injections for ING, Aegon, and SNS Reaal.

The finance ministry said in December that the banks and insurers would be allowed to repay the emergency funding ahead of schedule.

In recent weeks, both ING and Aegon have said they plan to make significant repayments.

ING said it has already repurchased half of the €10bn of core Tier 1 securities it used to borrow from the state and that it aimed to repurchase the remainder by May 2012.

In a statement on Monday, ING said it will exercise its option for early repurchase of €2bn of core Tier 1 securities at the next coupon reset date on May 13, 2011.

The early repurchase entails a 50 per cent repurchase premium - or penalty - bringing the total cost of the deal to €3bn.

"Today's announcement marks another important milestone as we work towards the full repayment of the support ING received from the Dutch State," said Jan Hommen, chief executive.

"The strong recovery of the banking business in 2010 has enabled us to accelerate the repurchase of the core Tier 1 securities from retained earnings, while maintaining a robust capital position post repayment."

ING said its recovery last year boosted its capital position resulting in a core Tier 1 ratio of 9.6 per cent as of the end of December 2010.

"Based on our capital position at that date, the intended repurchase in May would reduce the core Tier 1 ratio by 90 basis points, and the ratio is expected to remain above 8.5 per cent," ING said in a statement.

ING repurchased the half of the core Tier 1 securities in December 2009, paying a total premium of €606 million at that time.

"Provided that the strong capital generation continues, ultimately by May 2012 ING intends to repurchase the remaining 3bn core Tier 1 securities from retained earnings, on terms that are acceptable to all stakeholders," it said in its statement.