ING Still Looks Fine

ING has received a _10bn injection from the Dutch government. Savers with ING Direct shouldn't worry.

Dutch bank ING has been in the news a lot recently. Earlier this month, it acquired £3bn of UK savings accounts from Kaupthing Edge and Heritable Bank following the Icelandic bank crisis.

Then  ING's share price tumbled 27% last Friday after the bank said that it would ask for a cash boost from the Dutch government. ING also warned that it would post a loss for this quarter.

Today the cash injection was duly announced. The Dutch government is injecting _10bn (£7.7bn) in ING in return for 1 billion non-voting securities. The bank won't pay a dividend this year and the directors won't take any bonuses. ING has also sold a Taiwanese subsidiary for $600m (£350m.)

Should you worry?

Given what's happened over the last month, it's only natural that some Fools might worry that ING wasn't safe. But I think there's nothing to worry about.

Let's look at financial regulators' favourite measure of banking strength - the tier one capital ratio. Today's cash injection lifts ING's tier one ratio from 6.5% to 8%. In normal times, 6.5% is enough. With this extra cash from the Dutch government, ING should be able to survive any further shocks that might come along.

I don't see today's news as a sign that things have gone dramatically wrong at ING. It's more that both the bank and the Dutch government want to make sure that ING can withstand any further shocks that might hit the financial system.

The other point is that some of ING's European rivals now have strong balance sheets after government bailouts, so it makes sense for ING to be as well capitalised as its rivals.

What's  more, the credit markets don't appeared to be worried about ING's health. I've just checked the price of credit default swaps (CDS) for ING and it's fallen 3% to 121.5. A CDS measures how likely it is that a particular bank will go bust. The market basically thinks that there's a 1.21% chance that ING will fold. Just before Kaupthing and Icesave folded, their CDSes were around the 30% mark.

CDS traders don't think ING is about to go.

Even if they're wrong and ING did fold, the Dutch government's compensation scheme would pay out up to _100,000 (£77,000) to savers. If any private individuals had in excess of that sum with ING, Alistair Darling would probably ride to the rescue.

What now?

In two recent articles we've said that we think ING is safe and, again, today I stand by that position.

So if you're looking for a home for your savings, the ING Direct Savings Account is a decent product. It's not at the top of the tables but it still pays out a healthy 6% rate including a 1.67% bonus. 

Of course, savers may want to go elsewhere to get the very highest rates. But in my opinion, you shouldn't be put off this account or ING due to concerns about its safety.

More: Super Savings Rates Are Still Available!