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DealBook: ING Outlines Strategy to Pay Back Government Bailout

Toussaint Kluiters/United Photos — ReutersJan Hommen, chief of ING.

7:42 p.m. | Updated

LONDON — The Dutch financial services group ING said Friday that it would not pay a dividend to shareholders until it had repaid all of the state aid it received during the recent financial crisis.

ING’s chief executive, Jan Hommen, said the bank’s priorities over the next two years also include increasing its core Tier 1 capital ratio — a measure of a bank’s ability to weather financial shocks — to 10 percent, from 9.6 percent at the end of September, despite rising regulatory costs.

Updating investors on the bank’s strategy, Mr. Hommen said ING was focused on repaying the bailout from the Dutch government. In 2008, the firm received 10 billion euros, or $12.8 billion, from local authorities, and still has to repay 3 billion euros.

ING did not say when it would repay the state aid, other than “as soon as possible.” It also has to split up its banking and insurance assets by the end of 2013 to comply with requirements attached to the bailout.

“Given the ongoing crisis in the euro zone and increasing regulatory capital requirements, we need to take a cautious approach and pay special attention to liquidity, funding and capital,” Mr. Hommen said in a statement. “In 2011, market circumstances became increasingly difficult and volatile, and we expect that to remain the case in the near future.”

The company’s stock had fallen 2 percent by the close of trading in Amsterdam on Friday. ING’s share price has fallen 20.5 percent over the last 12 months.

ING also announced that it expected to save 300 million euros a year by 2015 through so-called procurement initiatives, which will look to centralize purchasing across the firm to reduce costs.

The Dutch company wants to reduce its cost-income ratio — a measure of a bank’s profitability — to 50 to 53 percent by 2015. The figure was 55.8 percent at the end of the third quarter of 2011.

“By managing our balance sheet more efficiently, ING will increase returns and grow customer lending without increasing the balance sheet,” Mr. Hommen said.

Like other European financial institutions, ING has been reducing its exposure to the Continent’s sovereign debt crisis. The Dutch firm reduced its holdings in Southern European sovereign debt by 1.2 billion euros in the fourth quarter of 2011, according to a company statement.

Last year, ING reduced its total exposure to these debt-ridden countries by 4 billion euros, but still has approximately 2 billion euros of Southern European sovereign debt on its balance sheet.

On Thursday, ING announced that it was abandoning plans for an initial public offering of its combined Asian and European businesses, citing turbulence in the equity markets.

The firm said it was now considering a sale of its Asian business, but still planned to pursue a separate I.P.O. for its European arm.

“Given the uncertain economic outlook and turbulent financial markets, especially in Europe, ING has decided to explore other options for its Asian insurance and investment management business,” Mr. Hommen said in a statement.

Tags: Bailout, DealBook, Government, Outlines, Strategy

Apple Releases List of Its Suppliers for the First Time

The list accompanied a report detailing troubling practices inside many of the technology giant’s suppliers. Apple said audits revealed that 93 supplier facilities had records indicating that over half of workers exceeded a 60-hour weekly working limit. Apple said 108 facilities did not pay proper overtime as required by law. In 15 facilities, Apple found foreign contract workers who had paid excessive recruitment fees to labor agencies.

And though Apple said it mandated changes at those suppliers, and some showed improvements, in aggregate, many types of lapses remained at general levels that have persisted for years.

Labor rights groups, journalists and academics have long asked Apple to reveal the names of its suppliers. While other companies have published the names of firms providing parts and services, Apple has resisted, with some inside the company citing the firm’s culture of secrecy.

Judy Gearhart, executive director of the International Labor Rights Forum, an advocacy group for workers’ rights, was disappointed Apple did not reveal the location of the suppliers on its list, complicating outside efforts to monitor the progress at the factories. Some plants on the list are relatively unknown, with Web sites that do not list where facilities are situated.

“It’s a bit of a half-step really to say, ‘Here are the names of the factories, go look through a haystack,’ ” Ms. Gearhart said. “But it’s a start.”

Steve Dowling, an Apple spokesman, declined to comment beyond the report.

The calls for Apple to disclose suppliers became particularly acute after a series of deaths and accidents in recent years.

In the last two years at companies supplying services to Apple, 137 employees were seriously injured after cleaning iPad screens with n-hexane, a toxic chemical that can cause nerve damage and paralysis; numerous workers have committed suicide, or fallen or jumped from buildings in a manner suggesting suicide attempts; and in two separate explosions caused by dust from polishing iPad cases, four were killed and 77 injured.

Apple, based in Cupertino, Calif., posted the supplier list on its Web site on Friday as part of something it calls its supplier responsibility progress report, a document typically published in February. Apple provides aggregate statistics of audits examining labor, discrimination, worker health and safety, environmental and other practices.

The list consists of 156 companies, accounting for 97 percent of what Apple says it pays to its suppliers. Apple’s tally of its suppliers includes many big-name companies like Intel and Nvidia, both makers of chips for Apple’s Macintosh computers, along with other parts makers like Samsung Electronics, Toshiba and Panasonic. The list also includes less recognized companies like Zeniya Aluminum Engineering, Jin Li Mould Manufacturing and Unisteel Technology.

But the list excludes many of the secondary suppliers — companies that provide parts to firms that directly contract with Apple. For instance, though the American glassmaker Corning has manufactured the strengthened glass in iPhones, it does not appear on the list because it technically does not contract with Apple, but with an intermediary that finishes the glass before it is delivered to an assembly factory.

Apple said 229 audits were conducted as part of this year’s supplier responsibility report, an 80 percent increase over the number the year before. The company said the facilities where repeat audits were done had shown fewer violations.

In an e-mail to Apple employees, Timothy D. Cook, the chief executive, said Apple had used its influence to improve living conditions for the people who make its products, including employee housing. “To meet our requirements, many suppliers have renovated their dorms or built new ones altogether,” he wrote.

This is the sixth such report Apple has issued. The company began conducting audits and publishing reports after news articles in 2006 showed poor working conditions at Foxconn, a Chinese manufacturer of Apple products.

Apple said in the report that it recently became the first technology company to join the Fair Labor Association, a nonprofit group that aims to improve conditions in factories around the world. Apple said it would allow the association’s auditing team to gauge the performance of Apple’s suppliers against a code of conduct and publish the results.

“We welcome Apple’s commitment to greater transparency and independent oversight, and we hope its participation will set a new standard for the electronics industry,” Auret van Heerden, the association’s president, said in a statement.

Jeff Ballinger, a global labor activist, said he was skeptical that transparency alone would change the behavior of Apple’s suppliers, unless Apple was willing to pay more. “They can say forced overtime is a big problem, can you give Saturday afternoons off?” he said, adding that the factories’ “response is going to be raise the prices you give us.”

“That they don’t want to do,” he said of Apple.

Tags: Apple, First, Releases, Suppliers

Inside the Fed in 2006: A Coming Crisis, and Banter

The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was “rising through the roof.”

But the officials, meeting every six weeks to discuss the health of the nation’s economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.

“We think the fundamentals of the expansion going forward still look good,” Timothy F. Geithner, then president of the Federal Reserve Bank of New York, told his colleagues when they gathered in Washington in December 2006.

Some officials, including Susan Bies, a Fed governor, suggested that a housing downturn actually could bolster the economy by redirecting money to other kinds of investments.

And there was general acclaim for Alan Greenspan, who stepped down as chairman at the beginning of the year, for presiding over one of the longest economic expansions in the nation’s history. Mr. Geithner suggested that Mr. Greenspan’s greatness still was not fully appreciated, an opinion now held by a much smaller number of people.

Meanwhile, by the end of 2006, the economy already was shrinking by at least one important measure, total income. And by the end of the next year, the Fed had started its desperate struggle to prevent the collapse of the financial system and to avert the onset of what could have been the nation’s first full-fledged depression in about 70 years.

The transcripts of the 2006 meetings, released after a standard five-year delay, clearly show some of the nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.

“It’s embarrassing for the Fed,” said Justin Wolfers, an economics professor at the University of Pennsylvania. “You see an awareness that the housing market is starting to crumble, and you see a lack of awareness of the connection between the housing market and financial markets.”

“It’s also embarrassing for economics,” he continued. “My strong guess is that if we had a transcript of any other economist, there would be at least as much fodder.”

Many of the officials who appear in the transcripts have since spoken publicly about the Fed’s failings in the years before the crisis. But the transcripts provide a raw and detailed account of those errors as they were made. Evidence of problems in the housing market accumulated at each meeting of the Federal Open Market Committee, which sets policy for the central bank.

“We are getting reports that builders are now making concessions and providing upgrades, such as marble countertops and other extras, and in one case even throwing in a free Mini Cooper to sweeten the deal,” George C. Guynn, then president of the Federal Reserve Bank of Atlanta, said at the June meeting.

The committee consists of the governors of the Federal Reserve and the presidents of the 12 regional banks.

“The speed of the falloff in housing activity and the deceleration in house prices continue to surprise us,” Janet Yellen, then president of the Federal Reserve Bank of San Francisco, said in September.

One builder she spoke with, she said, “toured some new subdivisions on the outskirts of Boise and discovered that the houses, most of which are unoccupied, are now being dressed up to look occupied — with curtains, things in the driveway, and so forth — so as not to discourage potential buyers.”

Tags: Banter, Coming, Crisis, Inside