I'm a probably a little late to the party on this, but I saw today in American Banker that ING Group is being forced by the European Union to sell off its U.S. online banking unit:
ING is under European Union orders to divest its U.S. online lender, ING Direct USA, before 2013. The Amsterdam, Netherlands, company has talked in recent months with Citigroup Inc., CIT Group Inc. and Chrysler Financial Corp., according to people with knowledge of the matter.
Fans of high-interest online checking, savings and money market accounts will recognize ING as a perennial source for consistently above-average returns on deposit products. But if I had an ING account, I'd be a little concerned about those rates, because banks that acquire high-yield savings account providers don't have a great track record of keeping those rates high.
Corus Bank, for example, used to offer consistently above-average rates on its high-yield savings, until it failed and its accounts were acquired by MB Financial, which is currently offering a 0.15 percent interest on its savings accounts. Umbrella Bank was another top-tier savings option in 2008, only to be acquired by Beal Bank, which offers an interest rate of 0.25 percent on its savings accounts.
Then of course, there's Washington Mutual, a bank that collapsed under the weight of large and unwise bets on real estate in 2008. Before it was taken over by the Federal Deposit Insurance Corp. and sold to JPMorgan Chase, it was offering yields in the 4 percent range. Afterward, its former savings accountholders were subject to Chase's generally lower deposit accounts rates.
I asked Bankrate's senior financial analyst Greg McBride about how accountholders fare when their bank is acquired by another institution. He said that while he didn't want to comment on ING specifically, what happens to deposit rates after a buyout depends on who acquires the bank and why.
McBride says that if the bank is being acquired by a competitor in the same segment, usually yields will suffer, because that bank is probably looking to grow market share by consolidating the competition. On the other hand, if the acquiring bank is making the purchase because it's looking to break into a new market, it probably will let yields stand at its new acquisition.
I, for one, think it would be a mistake for a U.S. bank to buy ING only to snuff out its high yields and cannibalize its accounts. ING's brand is based largely on offering competitive checking and savings interest rates, and its online customers are likely fickle enough to move on to another bank if those rates are cut. Drastically reducing interest rates would simultaneously damage ING's reputation as a destination for high rates and get rid of a lot of valuable customers, probably destroying a good bit of its value right off the bat for whoever bought it.
What do you think? Do bank buyouts hurt savers? If you were an ING customer, would you be nervous?