By Elena Vardon
ING Groep is sticking to its plans to grow organically in the markets where it already operates, even as several European rivals turn to mergers and acquisitions to expand.
"We're looking to become bigger, better, and more impactful in the markets where we are currently playing," ING's Chief Operating Officer Marnix van Stiphout said in an interview.
Some of Europe's biggest banks put dealmaking back on the table last year, which has raised expectations that the continent's fragmented banking industry could be on the cusp of a long-awaited consolidation wave.
After years in turnaround mode, many European lenders are again in a position to consider deals, having cleaned up their balance sheets, restored profitability and handed billions of euros in payouts to shareholders. Nevertheless, a handful of prominent deals have hit roadblocks, such as BBVA's hostile bid for Banco de Sabadell and UniCredit's pursuits of Commerzbank and Banco BPM.
ING doesn't completely rule out growth through acquisitions, but the Dutch bank's focus is on bulking up in its existing markets by harnessing its digital-first approach.
Executives at ING--which was created in 1991 through the merger of Dutch insurer Nationale-Nederlanden and postal bank NMB Postbank--are open to looking at opportunities for transactions that could accelerate growth, but they have stringent criteria to consider potential deals, ING's Chief Executive Steven van Rijswijk told investors in June. Any transaction would have to drive value, synergies and be largely focused on retail, he said.
Instead, the group is prioritizing digital banking as an engine for further growth. ING was among the first to offer banking services on the internet in Europe, introducing the concept of branch-less retail banking and launching ING Direct as early as 1997. For over a decade, ING has focused on shrinking its network of physical branches and boosting its digital footprint.
The bank also exited several markets in which its presence was small, such as France and the Philippines, and sold its online banking business in the U.S. to Capital One in 2012 for $9 billion. ING retains an important presence in wholesale banking in the U.S.
"Retail banking in America is not on our agenda," van Stiphout said.
ING isn't seeking to expand geographically despite the scalability of its digital capacities and infrastructure. Compared with a traditional banking model, this could reduce the cost of entering new markets organically, Berenberg analyst Hugh Moorhead wrote in a research note.
The bank is instead betting on its existing retail segment to drive growth, it said at the June event. ING aims to achieve this through mortgage market share gains and offering more services to entrepreneurs and small and medium enterprises. It is pushing for the cross-sale of products to boost its income from fees and wants to replicate successful offerings across its geographies.
Beyond its core markets in the Netherlands, Belgium and Luxembourg, ING has retail banking operations in seven other countries, with relatively low shares of large markets such as Germany, Italy, Spain and Australia.
Competition in those countries is increasing as incumbent banks strengthen their own digital propositions and digitally-oriented banks, dubbed neobanks, are trying to disrupt the industry.
"We don't get nervous or…change the way we react to things or approach customers because another bank is doing something," van Stiphout said. "We trust our own agenda, we trust our own speed."
ING will consider moves that could accelerate its plans but it won't add to the agenda easily, its operating chief said.
"The art of this whole conversation is not to do new things but to stick with what you decided to do," van Stiphout said.
Write to Elena Vardon at elena.vardon@wsj.com
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