* Central bank, managers doubt value of bancassurance model
* Dutch government wants banks to be simpler and smaller
* ING seen splitting in medium to long term -- fund managers
* Stock's price-to-book ratio is 0.54 vs 1.05 for sector
By Gilbert Kreijger and Ben Berkowitz
AMSTERDAM, July 23 (Reuters) - Dutch ING, one of the few bank-insurance hybrids left in Europe, is seen likely to split its operations to unlock value as the combination offers few benefits and regulatory pressure to streamline mounts.
Sources told Reuters on Thursday that ING was looking to sell private banking operations in Europe and Asia, part of plans to raise up to 8 billion euros by asset sales. ING declined to comment.
But analysts said the next key step, in a few years, could be a big one: spinning off insurance into a separate, listed unit.
Europe's biggest insurer in terms of balance sheet total is already separating management of its insurance and banking units, but Chief Executive Jan Hommen has said this was not a prelude to a formal split of the entity.
The Dutch government is pushing for more simplicity among banks and insurers, in which it invested more than 13 billion euros, of which 10 billion was put into ING.
Earlier this month, in a report on the nation's financial system, the Dutch central bank indicted the bancassurance model in fairly strong terms, offering little hope for its prospects.
"With hindsight, analysis suggests that cost synergies were only partially realised, as banks and insurers continued to operate for the most part as separate companies, corporate cultures proved different, and the crisis demonstrated that risk diversification does not hold in times of distress," the DNB said.
Dutch Finance Minister Wouter Bos, who spearheaded an investment of 10 billion euros in ING last year to shore up capital buffers, wants banks to be smaller and simpler. He has nominated two supervisory board members at ING.
If ING were unwound, it would mark the reversal of major deals done in just the last 18 years, since the government legalised single ownership of banks and insurers. Nationale-Nederlanden combined with Postbank Groep in 1991 to make ING.
Allianz's sale of Dresdner Bank in January was the clearest sign yet that insurance and bank businesses are moving apart, while U.S. Citigroup has decided to divest its Primerica insurance unit among other assets.
"I don't think there is an urgency...but it is clear that ING is separating into a bank and insurer," said Folmer Pietersma, who co-manages 120 million euros for the Robeco Financial Equities fund, including ING.
CONGLOMERATE DISCOUNT
Breaking up the group would unlock what analysts called a "conglomerate discount" because currently it was too difficult to value what ING was worth.
"I think the discount to rivals is at least 10 to 15 percent, looking at price-to-book value," SNS Securities analyst Maarten Altena said.
A bank's price-to-book ratio measures its market value compared to its liquidation or book value.
Fund manager Fred Huibers from Dutch wealth manager Het Haags Effektenkantoor also expected a break-up of the group, which could happen by listing the insurance operations separately, to boost ING's share price.
ING trades at a price-to-book value of 0.54 compared to the median of 1.05 for the DJ Stoxx European Insurance sector, Reuters Knowledge data shows.
In Europe, ING stands out in combining banking and insurance operations. The group got 83 percent of 2008 revenue from insurance operations.
This compares to 12 percent or less for European bank rivals HSBC, Santander and BNP Paribas, while insurance rivals Generali and AXA get 3 percent or less of income from banking operations.
Huibers said he saw a split as inevitable down the road.
"ING will probably become a big retail bank. That is where their strength is, in the retail area. They've proven this internationally with ING Direct and locally with its Postbank unit," Huibers said.
Analysts say the group could wait until markets improve to effect the split because it wants a good price for assets.
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(Editing by Sitaraman Shankar)