Canada's big financial institutions are keen on scooping up their rival, ING Bank Canada, but what exactly would the lucky winner get?
For starters, about $40-billion in assets, which generated $117-million in net income last year, according to regulatory filings.
Breaking out those assets, ING's Canadian operation had about $4.75-billion in deposits and fixed-term securities and $31.5-billion in residential mortgages as of October 31, 2011, the fiscal year end for most Canadian banks.
Those numbers don't mean much on their own, so to compare, consider that HSBC Bank Canada, the country's seventh largest bank, had assets of about $80-billion last year and net income of $705-million – both of which are much higher than ING's.
A more realistic comparison is Laurentian Bank of Canada, which had assets totalling $25-billion and net income of $128-million.
Analyzing the figures from each of these banks, two things stand out: ING has a stunning amount of mortgages, and its return on assets isn't as appealing.
While ING had $31.5-billion in residential mortgages at year end, Laurentian only had about $9-billion, and HSBC, which is double the size in total assets, had mortgages totalling only $26-billion. To someone who doesn't follow the banking sector closely, this might come as a surprise, considering that ING is typically better known in the retail sector for advertising low-fee chequing accounts.
Better yet, the majority of ING's mortgages are insured, and these are clearly the most desired type from an acquisition standpoint.
However, ING doesn't seem to get as much out of its assets. Typically, banks measure their profitability by calculating their return on equity, but that may not be the best metric in this case. Ever since the parent ING bank took a massive bailout from the Dutch government, the Canadian subsidiary hasn't been able to issue things like preferred shares or subordinated debt, which means it is overstuffed with common equity.
Looking at return on assets, then, which measures net income relative to total assets on the balance sheet, ING fares the worst of the three. (This is calculated using a simplistic calculation of net income last year divided by total assets at year end – typically you would use average total assets throughout the year.) Still, ING's return is only 0.3 per cent of assets, while Laurentian's is 0.5 per cent and HSBC's is more than double ING's, coming in at 0.9 per cent.