ING shares rebound after capital injection
Shares in the bank shot up 20 percent higher than on Friday.20 October 2008
THE NETHERLANDS -- The Dutch stock exchange has reacted positively to the state’s capital injection into ING. Shortly after the exchange opened on Monday, shares in the bank were 20 percent higher than on Friday.
Politicians in The Hague and the unions are also generally pleased with the move, which is costing the state EUR 10 billion.
Coalition parties - the Christian Democrats and the Labour Party - say this is exactly the kind of situation the recently set up fund is meant for while opposition party, the conservative VVD, calls the capital injection a necessary evil.
Chief financial officer at ING John Hele says that without the extra money ING would get into difficulties as a result of the "huge financial storm" in recent weeks. He thinks that there will be no need for job losses at the bank now.
The state bought 1 billion of a new class of shares - there are 2 billion common shares outstanding - for EUR 10 each after Dutch Finance Minister Wouter Bos announced the decision to invest in ING on Sunday.
Shares closed at EUR 7.34 Friday after a 27 percent tumble, but were quoted 21 percent higher at EUR 8.87 in early trading in Amsterdam on Monday.
The government shares earn at least 8.5 percent interest, and that amount will escalate each year. But ING can repurchase the shares for EUR 15, giving it a way to limit dilution.
Bos said that would give the company a strong incentive to buy them back and see the state exit "as soon as this financial hurricane recedes".
"Although ING does not say so explicitly, the buy-back option suggests that it believes that it does not really need this capital injection," wrote analyst Ton Gietman in a note upgrading the company to "Buy" from "Hold".
"In our view, the shares should no longer trade at a multiple that includes a huge fear-discount."
[Radio Netherlands / AP / Expatica]