ING to Sell Its Canadian Unit to Scotiabank for $3.1 Billion

The ING Group said on Wednesday that it would sell its Canadian unit to Scotiabank for about $3.1 billion in cash, as the Dutch bank continues to sell off assets to pay for its government bailout.

The transaction comes a year after ING agreed to sell its ING Direct online banking unit in the United States to Capital One Financial for about $9 billion, in one of the largest banking deals since the financial crisis.

ING said earlier this year that its primary goals remained bolstering its Tier 1 capital ratio and repaying the rescue of 10 billion euros that it received from the Dutch government in 2008.

Wednesday's deal will give Scotiabank control of one of Canada's 10 biggest banks: The ING unit has $30 billion in deposits and 1.8 million customers. The ING business also has what it describes as a strong home loan portfolio, with 59 percent of the mortgages insured. And for uninsured mortgages, the loans cover about half the price of the purchased propert y.

Yet the business' low-margin model deterred some would-be buyers from bidding for the unit.

In a nod to the ING unit's strong consumer brand awareness, Scotiabank said that it would keep the division's ING Direct name.

“Scotiabank is committed to preserving what ING Direct's customers have come to love about it,” Anatol von Hahn, Scotiabank's group head of Canadian banking, said in a statement. “ING Direct will continue to operate separately and customers will be able to interact the way they do now using their existing account numbers and passwords, served by the same familiar team.”

Scotiabank said that it would stay within its Tier 1 capital ratio of 7 percent to 7.5 percent through the first quarter of next year.

The Canadian bank will finance the deal in part by issuing 29 million shares at $52 each, raising about $1.5 billion in new equity. That stock sale could be expanded up to $1.7 billion if demand proves strong enough.

< p>Shares in Scotiabank fell 2.6 percent in after-hours trading, to $52.75. They have risen about 1 percent over the last 12 months.

The deal is expected to close by December, pending regulatory approval.

Scotiabank advised itself, while ING was advised by JPMorgan Chase.

Ian Austen contributed reporting.