UPDATE 2-Barclays grabs ING Direct UK in retail bank push

* ING effectively pays Barclays to take UK business

* Retail banking at heart of new Barclays' CEO strategy

* After 2003 launch ING Direct shook up UK savings market

By Anjuli Davies and Steve Slater

LONDON, Oct 9 (Reuters) - Barclays' new chief executiveshowed off his determination to put retail banking at the heartof his strategy with his first deal, adding 1.5 millioncustomers by taking over the UK savings and loan business ofDutch bank ING.

ING said in August it wanted to quit Britain, partof plans to divest assets to increase capital and repay Dutchstate aid. It will effectively pay Barclays to take itsING Direct business, including 750 employees, 10.9 billionpounds ($17.5 billion) of deposits and 5.6 billion of mortgages.

Barclays will buy the loans at a 3 percent discount to theirface value, leaving ING with a 320 million euro ($415million)loss on the transaction after tax.

Antony Jenkins, who used to run Barclays' retail bankingoperations, took over as chief executive at the end of Augustafter a Libor interest rate rigging scandal prompted previousCEO Bob Diamond, an investment banker, to resign.

Jenkins has signalled since taking the helm that he intendsto focus more on retail banking, rather than riskier investmentbanking.

"To the extent that this deal signals CEO Antony Jenkins'revised strategic intentions and lower dependence on theinvestment bank, we view it as positive," said Vivek Raja,analyst at Oriel Securities.

In the last week Barclays has announced a shake up at itsinvestment bank to cut costs and prepare for new regulations,and promoted two of the top consumer banking bosses.

Barclays said the acquisition was a good fit with itsexisting UK retail banking business, where it has about 15million customers.

ING Direct was launched in Britain in 2003 and was one ofthe most aggressive new banks, using its distinctive orange lionbrand and shaking up the UK savings market with high interestrates thanks to a low cost, mostly online operating model.

Barclays said the ING Direct deal meets the new CEO's targetto deliver return on equity above its 11.5 percent cost ofequity, and would not have a material impact on its capital.

The deal will release around 330 million euros of capitalfor ING, which is in the process of divesting its insuranceoperations and other assets in an effort to repay Dutch stateaid received in 2008 and increase its capital level.

It sold its Canadian online bank in August, and is currentlytrying to sell its Asian investment management and insuranceoperations, a deal which could raise around $7 billion in total.It later plans to separately list its European and U.S.insurance and investment management businesses.

About 500 of ING Direct UK's staff are based in Reading,with the remaining 250 in Cardiff. Barclays said it was tooearly to say if there will be redundancies.

Completion is subject to regulatory approval and is expectedto finalise in the second quarter of 2013.

Barclays shares were down 0.6 percent at 221 pence by 0736GMT, in line with a weaker European banking index .

($1 = 0.6240 British pounds)($1 = 0.7711 euros)

(Additional reporting by Steve Slater and Gilbert Kreijger;Editing by Peter Graff)

((anjuli.davies@thomsonreuters.com)(+44 207 542 6670))