By James Langton

(November 20 – 13:15 ET) – ING is taking a long hard look at the viability of the investment banking business.

Anyone who dismisses talk of Bank of Montreal dumping BMO Nesbitt Burns should take a look at Dutch financial giant ING, a firm that is also being pressured by a business that is producing low returns and using lots of capital.

ING says it is focusing on maximizing synergies and optimizing the existing operations to meet its increased financial targets. It says that the ING Barings division underwent a strategic review in 1999. The review was aimed at providing corporate and investment banking services to clients, while at the same time reducing the risk profile, lowering costs and increasing its focus on selected markets and sectors.

“However, the market place is changing rapidly. Accelerating consolidation in the investment banking market combined with a rapid increase in remuneration in the industry are prompting ING to reassess the scope, breadth and organization of its investment banking activities. This reassessment fits in with ING’s planning process for the coming three years,” the firm says.

The firm says that it has appointed Goldman Sachs to assist in exploring the options for the investment banking activities in the U.S. market; many analysts suggest this means a sale is likely. “In order to create maximum co-operation and synergies, the global infrastructure of ING Barings will be reviewed,” the firm says.

On the heels of this news, Merrill Lynch upgraded ING stock from Neutral to Accumulate. It notes that “the high capital allocation and low return from [investment banking] has been depressing the group’s ROE. We believe any disposal should enhance the group ROE”.

In the past, financial services players thought they had to be in investment banking to be taken seriously. With shareholder demands getting tougher though, firms can’t afford to be in businesses where they don’t have the scale to compete.

ING stresses that, “the reconsideration of the scope of its investment banking activities is part of ING’s normal business assessments. An update on the review process will be provided early next year at the latest. ING will not communicate about this process until a decision has been reached.”