ING wants a slice of the investment banking action

If ING’s wholesale bankers have a lean and hungry look, it’s because they have been forced by their boss to go on a strict regime. Group chief executive Steven van Rijswijk has put the unit on a “capital diet”, to shed risk-weighted assets so it can meet its target of a 14% return on equity by the end of 2027.

Considering this spartan fare, it’s a surprise to learn that ING’s corporate finance business is also in the middle of an ambitious growth plan. ING plans to build up its capital markets and advisory business by recruiting 100 bankers. This move is the brainchild of Andrew Bester, head of wholesale banking (pictured above).

Before joining ING in 2021, Bester worked at Deutsche Bank and Standard Chartered, before spending five years as CEO of commercial banking at Lloyds and doing a spell as CEO of the UK’s Co-operative Bank.

Last year, ING’s wholesale division, which Bester is now running, generated half of its income from lending. Transaction services and financial markets were the next biggest contributors. Investment banking came fourth, providing 10% of the division’s income.

In his first three years, Bester has overseen an efficiency drive at his division. Now he’s urging one corner of his domain, investment banking, to grow beyond its core strength in debt capital markets, to diversify the wholesale group’s revenue and generate more fee income from capital-light products.

Last year, he brought together ING’s previously disparate investment banking offerings into a new unit called Capital Markets and Advisory (CMA), led by Horacio Martinez (pictured).

Martinez joined ING in January 2023 from BBVA, where he had been its head of investment banking for Europe, Asia and South America.

ING’s wholesale bank spans 4,000 clients and 35 markets. But Bester wants its bankers to penetrate corporate boardrooms.

“The CMA product set is at the top of our value chain in the boardroom with our clients. To get the returns up we have better conversations with clients,” says Bester.

Before Bester formed the CMA, ING’s investment banking capabilities were a patchwork of products based around seven core industry sectors.

Now the CMA has five product areas ― corporate finance, run by Rob van Veldhuizen; global capital markets (GCM), led by Mike Koerkemeier; acquisition finance under Martijn Bruins; loan distribution headed by Gertjan van Toorn; and corporate investments, overseen by Rob Engelschman.

CMA revenues amounted to €500m at the time of its inception. Martinez wants it to turn over €900m by the end of 2026. To achieve this he intends to use existing resources and newly recruited senior bankers who have access to corporate CEOs.

Martinez has an initial mandate to hire 17 managing directors globally for CMA. So far he has recruited six, and has 11 more in the pipeline.

“The MDs we are attracting appreciate a growth project,” says Martinez. “They trust the basis of the project. This is not a phase and the project will not evaporate when the wind changes.”

CMA operates across 14 countries. ING’s priority is to hire MDs in its most important regional hubs ― New York, London, Amsterdam and Singapore ― and then hire junior bankers to execute the business the MDs bring in.

Bester believes executing this strategy will involve hiring around 100 bankers, the bulk of which will be in continental Europe.

CMA aims to build on its presence in loans and DCM by expanding into “safe adjacencies” ― products or countries closely aligned with ING’s existing strengths. For example, its growth project in North America is focused on global capital markets. For ING, this mainly means DCM.

Last September, ING hired Mike Kendrot, a veteran DCM banker who had worked at Crédit Agricole until 2019, to run GCM for the Americas.

He came in to replace Cefas van den Tol, who was promoted to head of CMA Americas.

The bank also moved its head of sectors Americas Mark Appelman to run corporate coverage in Germany and promoted Matt Rosetti to replace him.

The changes followed Andy Schaeffer, former CEO of Lloyds Bank North America, joining in February 2023 as CEO of ING Americas.

“A lot of the lending has already been deployed and we can get more mandates from the relationships we already have in place,” says Martinez. “Also we can also capitalise on our strength in North America and in dollars with our clients in Europe, the Middle East and Apac. We are developing our dollar credentials as a Yankee bookrunner. And the US plays a part in our aim to become a larger player in the ABS market.”

Martinez says that more clients, such as Irish packaging maker Smurfit Kappa and US logistics property company Prologis, are trusting ING with dollar financing mandates.

The bank is tailoring its approach, product by product. In equity capital markets, for example, it will concentrate on strengthening its domestic position in the Netherlands, working alongside international investment banks on share offerings as more companies seek to list in Amsterdam.

That might yield some ECM mandates for clients in continental Europe, but there is no plan to expand beyond that.

In M&A, expansion outside the Benelux region will be built on five global industry sectors where ING has an international presence: financial institutions; technology, media and telecoms (TMT); healthcare; commodities, food and agriculture; and energy and infrastructure.

In Benelux, “we still want to be the lead player, with universal coverage of all sectors”, Martinez says. Elsewhere, the bank is “focused on developing our sectoral expertise — focused on four or five industries ― and our right to win will be levered on our success in each of those”.

In the US, ING has hired M&A bankers in TMT and food and agriculture.

“That’s an example of where we’re a global leader from an overall sector point of view, but we need to have more M&A and CMA capability to drive more opportunities,” says Martinez.

ING is also building an M&A team to win business from financial sponsors. This began in 2022 when Cedric Ide, who had joined three years before from Bank of America, was appointed to the newly created role of global head of private equity advisory and financial sponsors.

Ide has established a five-strong team in London, led by Anshul Pandey, who joined from Credit Suisse in February as head of UK private equity advisory. Now ING plans to expand its private equity offering in Frankfurt and New York.

This fits the theme of increasing fee-based revenue while reducing risk-weighted assets.

ING slashed its leveraged finance exposure by 35% between 2019 and 2023, and introduced a €25m cap on the final take for each transaction.

“We have the relationships in financing but we are not getting the share in advisory,” says Bester. “It’s about being aligned and thinking holistically. CMA brings it all together.”

An example came in April when ING advised private equity firm Triton on its acquisition of V&N Group, which carries out energy, telecoms and telecom installation work, from VolkerWessels. ING also provided €655m in financing, which it then distributed.

As well as making fresh hires, Martinez is using existing resources more wisely, ensuring that junior bankers gain experience across all of CMA’s products.

The bank has formed an early career group, a pool of junior staff who would previously have focused on DCM. Now they will work across M&A and ECM to provide execution capability to the senior bankers joining the firm.

“As well as hiring senior talent, we’re completely remodelling the way our colleagues work at a more junior level,” says Bester. “A lot are getting pooled and getting to work across acquisition financings, across advisory. It means bankers in the early stages of their careers are getting good training that will in time drive origination and advice for clients in the boardroom.”

Bester sees ING as a leading European wholesale bank, along with BNP Paribas and Santander. All three are building their capabilities in investment banking, but each is taking a different approach.

BNPP is the most ambitious, going head-to-head with the big US banks. Santander has a bold expansion plan for corporate finance in North America, where it has poached dozens of bankers from Credit Suisse and has entered new lines of business, such as leveraged finance.

ING’s ambitions are closely tied to its existing strengths ― CMA will not be judged as an autonomous unit, but rather by its success in serving the bank’s existing clients.

“The first thing to consider when you’re trying to run a wholesale bank from a relationship base is: do you have the relationships?” says Bester. “Then you need to consider whether you’re deploying the capital in the relationships. Then crucially it’s about being able to support those clients more broadly, whether across the geographic network or through the product set.”

Bester previously ran commercial banking at Lloyds, which included the corporate and investment bank.

“It’s not dissimilar to what I did at Lloyds ― bring all that capability set together, because we’re not trying to be an investment bank that is competing to be purely in investment banking,” he says. “We’re a relationship-based bank, but we have strong capability to be able to support our clients.”

The difference is that when Bester was at Lloyds the emphasis was on retrenching the bank’s home market, but ING wants to grow its wholesale offering globally.

The capital diet Bester has imposed on his division means it has to do more with less capital. Squaring that circle requires two things: squeezing the most business possible out of every opportunity, and turning down work that is not remunerative enough.

“We don’t want M&A P&L for the sake of it,” says Martinez. “Every deal we bring in we want to have a high multiplier in the other products. We will improve our credentials, but we are not running the business on the basis of league tables.”