The Bank of Nova Scotia said Wednesday it will buy ING Bank of Canada from its Dutch parent for $3.1 billion.
Toronto-based Scotiabank, one of Canada's five largest banks, said ING's portfolio will help Scotia solidify its No. 3 position in Canadian deposits.
ING Groep NV, one of Europe's largest financial institutions, has been revamping its business since it was bailed out by the Dutch state during the 2008 financial crisis. It said the deal will help sharpen its focus on core businesses and strengthen its balance sheet.
The division, called ING Direct Canada, is an online bank that offers savings, checking, mutual fund and mortgage products through online access and telephone representatives. It has no physical branches, but the it has about 1.8 million customers in Canada.
The parent company announced earlier this summer that it was putting its Canadian division under review for a potential sale. Last year, Capital One agreed to buy ING's U.S. online banking unit for $9 billion in a cash and stock deal.
ING will continue to operate direct banking businesses in Australia, Austria, France, Germany, Italy and Spain.
ING expects to record a gain of $1.38 billion on the Canadian sale.
Anatol von Hahn, Scotiabank's Group Head for Canadian Banking, said in an interview that customers now have an alternative to a full service bank. He noted that ING Bank of Canada grew from nothing in 1997 to become the eighth largest bank in Canada. It adds about $40 billion in assets. The name will change within 18 months, he said.
ING DIRECT Canada CEO Peter Aceto said Canadians are doing more online and mobile banking and he's confident they will continue to grow the business under Scotiabank.
Scotiabank announced a public offering of 29 million common shares at $52 Canadian (US$52.55) to fund the acquisition. Shares of The Bank of Nova Scotia declined 2.8 percent, or $1.51, to $52.65 in afterhours trading on the New York Stock Exchange.
The deal is expected to close in December. It is subject to regulatory approval.