ING shapes up as frontrunner to acquire Citi’s consumer arm

ING appears to be set to buy Citi’s Australian retail banking business.

ING Bank is shaping up as the frontrunner to buy Citi’s $2bn Australia and New Zealand consumer banking business, according to sources.

The Dutch bank has the greatest market share in Australia of all of the foreign banks, with 12 per cent market share, according to IBISWorld. It places it ahead of HSBC with 8.5 per cent and Citi with 7.9.

ING’s business is largely the same as Citi’s Australia and New Zealand consumer banking operations, offering deposits, mortgages and credit cards, and buying the business would provide major cost savings.

Based on this, market experts believe ING is in the strongest position to pay up for the business, estimated to be worth between $1.5bn and $2bn. The thinking is that ING’s interest will likely extend to Asia, where it has been growing its business specifically in the Philippines.

Citi’s Australian consumer banking operation makes most of its money from mortgages and The Australian reported in recent days that a sale agreement could be reached within the next three months.

A move by the New York headquarters to place the business on the market will see Citi focus on investment banking in Australia. Citi in April said it was pursuing an exit from consumer banking businesses in 13 markets, including Australia, following a strategic review.

APRA figures show Citigroup’s Australian retail banking arm had a residential mortgage book of $4.1bn and investor housing book of $2.44bn. Its credit card business has $3.6bn in loans while the bank has a deposit book of $7.3bn.

ING Group – one of the world’s largest banks – provides banking, insurance and asset management services in more than 40 countries and employs more than 53,000 people. It is one of the fastest growing mortgage providers in Australia since it entered the market in 1999, and has more than two million customers and 1700 staff.

ING’s revenue is expected to grow at an annualised 2.2 per cent over the five years through December 2020, to $2.37bn, according to IBISWorld. Despite this growth trend, the company has underperformed the overall industry over the same period.

While susceptible to movements in the cash rate, given its significant exposure to residential mortgages, the overall low interest rate environment has also benefited ING as it has reduced the cost of funding, with profitability increasing over the past five years.