Download Fitch ratings: ING Bank NV Full rating report

Banks
Netherlands
ING Bank N.V.
Full Rating Report
Key Rating Drivers
Ratings
Foreign Currency
Long-Term IDR
Short-Term IDR
A+
F1+
Viability Rating
Support Rating
Support Rating Floor
a
1
A+
Sovereign Risk
Foreign-Currency Long-Term IDR
Local-Currency Long-Term IDR
AAA
AAA
Outlooks
Foreign-Currency Long-Term IDR Negative
Sovereign Foreign-Currency Long- Stable
Term IDR
Sovereign Local-Currency LongStable
Term IDR
Financial Data
ING Bank N.V. (cons.)
30 Jun
14
31 Dec
13
Total assets (USDm)
1,118,144 1,086,256
Total assets (EURm)
818,705 787,644
Total equity (EURm)
34,681
33,760
Operating profit (EURm)
2,621
4,564
Published net income
1,211
3,153
(EURm)
Comprehensive income
2,609
729
(EURm)
Operating ROAA (%)
0.7
0.6
Operating ROAE (%)
15.7
12.8
Fitch core capital/
11.3
11.0
weighted risks (%)
CET 1 ratio (%)
10.8
11.7
State Support Driven IDRs: ING Bank N.V.‟s Long-Term Issuer Default Rating (IDR) is at its
Support Rating Floor (SRF), reflecting Fitch Ratings‟ belief that the Dutch state (AAA/Stable)
would support the bank if required due to its importance to the domestic economy and financial
system.
Evolving Support Dynamics: The Negative Outlook on the IDR reflects Fitch's view there is a
clear intention ultimately to reduce implicit state support for financial institutions in the EU, as
demonstrated by a series of legislative, regulatory and policy initiatives.
Strong Standalone Strength: ING Bank‟s „a‟ Viability Rating (VR) reflects its strong franchise
(mostly in the Benelux) and diverse business model. These support a solid ability to underwrite
new business, recurring earnings generation and material deposit-gathering capacities. The VR
factors in a stabilising impaired loans ratio.
Resilient Performance: ING Bank‟s operating performance has remained resilient 'throughthe-cycle' due to its diversification by geography and sector, as well as good cost efficiency.
Profitability will benefit from the expected continued gradual reduction in loan impairment
charges (LICs) throughout 2H14 and 2015, although some lag effect is likely to remain
following recent weak economic conditions and low growth in most of ING Bank's markets.
Diversification Benefits Funding Profile: ING Bank's funding profile is strong and benefits
from the bank's solid franchise in deposit-rich jurisdictions, such as Belgium and Germany. The
bank also regularly taps the wholesale funding market, to which it has ready access. Its liquidity
position remains healthy, despite liquidity being not fully fungible within the group.
Stabilising Impaired loans: ING Bank's impaired loans ratio is in line with similarly rated
European peers', and Fitch expects impaired loans to peak in 2014. Impaired loans coverage is
fairly low, but its largely collateralised loan book offers some buffer and the bank has a track
record of LICs consistently exceeding write-offs.
Sound Capitalisation: Consistent profitability, combined with some deleveraging, has helped
ING Bank to boost capitalisation to solid levels. The bank targets to maintain a fully-loaded
common equity tier 1 (CET 1) ratio above 10% plus a “comfortable buffer”, which Fitch expects
will be circa 1pp. This is not overly ambitious in Fitch‟s view. Leverage is sound in a European
context, although Fitch expects the bank will improve this further during 2H14 and 2015. ING
Bank came through the ECB Comprehensive Assessment unscathed, as expected by Fitch.
Related Research
ING Bank N.V. - Ratings Navigator
(July 2014)
Sovereign Support for Banks - Rating Path
Expectations (March 2014)
Rating Sensitivities
IDR Downgrade From SRF Revision: Fitch expects to revise the bank's SRF down to 'No
Floor' by mid-2015 as a consequence of weakening sovereign support. ING Bank‟s Long-Term
IDR would then most likely be downgraded to the level of its 'a' VR.
Netherlands (July 2014)
Analysts
Philippe Lamaud
+33 1 44 29 91 26
[email protected]
Jens Hallen
+44 20 3530 1326
[email protected]
www.fitchratings.com
Increased Risk Appetite: Pressure on the VR, although not expected, would most likely stem
from significantly increased appetite for higher-risk markets or sectors, or less prudent liquidity
or capital management, particularly should these hurt ING Bank‟s access to and/or cost of
wholesale funding. Capital is also vulnerable to collateral valuations in light of the fairly modest
reserve coverage of impaired loans compared with peers. Upside potential is limited due to the
already high rating.
29 October 2014
Banks
Support
Figure 1
Dutch Companies
Bankruptcies and
Unemployment Rate
IDR Based on Sovereign Support
ING Bank‟s Long-Term IDR and senior debt ratings are driven by its SRF of „A+‟. This reflects
Fitch‟s expectation that there remains an extremely high probability that the Dutch state would
support the bank if required because of its importance to the Dutch economy.
1Q13-2Q14
Bankruptcies (RHS)
Unemployment (LHS)
(%)
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
2,500
2,250
2,000
1,750
1,500
1,250
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
1,000
Unemployement rate based on ILO
definition
Source: Eurostat, CBS, Fitch
The Negative Outlook on ING Bank‟s Long-Term IDR reflects Fitch's view that there is a clear
intention to reduce implicit state support for financial institutions in the EU, as demonstrated by
a series of legislative, regulatory and policy initiatives. Fitch expects the EU's Bank Recovery
and Resolution Directive (BRRD) to be implemented into national legislation by mid-2015. Fitch
also expects progress towards the Single Resolution Mechanism (SRM) for eurozone banks in
this timeframe. In Fitch's view, these two developments will dilute the influence the Netherlands
has in deciding how Dutch banks are resolved and increase the likelihood of senior debt losses
in its banks if they fail solvability assessments. Fitch expects to then downgrade ING Bank's
and ING Group's Support Ratings to '5' and to revise down their SRFs to 'No Floor'.
ING Bank's 'a' VR means, however, that any support-driven downgrade of the bank's Longterm IDR and senior debt ratings would be limited to one notch, by which point the ratings
would be based on the bank‟s standalone strength.
Operating Environment
Receding Cyclical Headwinds in Key Markets
Figure 2
Dutch Housing Prices and
Sale
Jan 13-Aug 14
83
81
79
77
Europe, and the eurozone in particular, represents the vast majority of ING Bank‟s operations
(around 85% and 70%, respectively, of total exposures at end-2013), with the rest being mostly
in other global major advanced economies (mainly Australia and the US). The vast majority of
ING Bank‟s operations are conducted in countries that Fitch assigns a Macro-Prudential
Indicator of „1‟, indicating a low macro-prudential risk.
Fitch‟s macroeconomic forecasts for ING Bank‟s main markets all point to a gradual
acceleration of the economic recovery, but to moderate levels, and decreasing unemployment
rates. Fitch recently revised the Outlook on the Netherlands‟ „AAA‟ rating to Stable from
Negative, and one of the drivers was the turnaround of the Dutch economy.
75
Jan 13
Mar 13
May 13
Jul 13
Sep 13
Nov 13
Jan 14
Mar 14
May 14
Jul 14
16
15
14
13
12
11
10
9
8
7
6
5
Number of sold dwellings (000
units) (LHS)
Housing price index (100=Aug 08)
(RHS)
Linear (Number of sold dwellings
(000 units) (LHS))
85
ING Bank is based in the Netherlands, where it is a top-three universal bank and has therefore
been affected by the Dutch recession in recent years. However, unlike the two other major
Dutch banks, Rabobank Group (AA−/Negative/aa−) and ABN AMRO Bank N.V.
(A+/Negative/a), the majority of ING Bank‟s operations are conducted in other EU countries.
Figure 3
Macroeconomic Data - ING Bank’s Main Markets
Source: CBS, Fitch
Eurozone
Netherlands (AAA/Stable)
Belgium (AA/Stable)
Germany (AAA/Stable)
GDP annual growth (%)
2013
2014e
2015e
-0.4
0.9
1.3
-0.8
0.7
1.4
0.2
1.2
1.6
0.1
1.6
1.8
Unemployment rate (%)
2013
2014e
2015e
12.0
12.0
11.6
6.7
7.5
7.3
8.4
8.6
8.2
5.3
4.9
4.7
Source: Eurostat, Fitch
Related Criteria
Global Financial Institutions Rating Criteria
(January
2014)
Related
Criteria
Assessing and Rating Bank Subordinated and
Hybrid (January 2014)
ING Bank N.V.
October 2014
ING Bank mostly operates in developed and concentrated banking systems, where barriers to
entry are high and dominated by a few leading players with established presence and
franchises. In the Netherlands, the aggregated market shares of the three largest banks
amount to 70%-75% in the retail and SME segments. The Belgian banking system also shows
significant concentration, with the four largest banks (among which ING Belgium) making up
70%-80% of retail volumes. The German market is more fragmented, notably owing to the
strong market shares of local saving and cooperative banks.
2
Banks
Developed and Transparent Regulatory Environment
The regulatory environments in ING Bank‟s main markets are developed and transparent, and
legislations and regulations are effectively enforced. ING Bank operates under a Dutch banking
licence and is subject to domestic and European banking regulations. ING Bank‟s main
supervisor is the Dutch regulator (DNB, the Dutch central bank) and its foreign subsidiaries are
regulated by local authorities. ING Bank‟s supervision will be transferred to the ECB by the end
of 2014 under the Single Supervisory Mechanism (SSM), one of the pillars of the Banking
Union. As such, it was subject to the ECB‟s 2014 comprehensive assessment; the bank easily
passed the assessment which showed a strong resilience to economic stresses for ING Bank.
Company Profile
Strong Benelux Franchise, Challenger Positions Elsewhere
Figure 4
Selected Market Shares
End-2013 (%)
Retail mortgage loans
Retail savings
SME lending
Mid-corp lending
NL
22
19
30
17
BE GE
19
7
15
6
17 n.a.
35 n.a.
Source: ING Bank
Figure 5
Business Volumes by
Division
End-June 14
(EURbn)
Commercial
banking
Retail banking
Of which:
Netherlands
Belgium
Germany
France
Italy
Spain
Australia
Other
Loans
129.5
Deposits
75.7
275.6
402.9
167.7
68.1
67.9
7.9
10.6
26.1
21.7
116.0
81.6
111.7
10.9
15.0
24.4
21.4
23.7
ING Bank‟s strong franchises in retail and commercial banking in the Benelux countries provide
it with scale, pricing power and deposit gathering abilities; this underpins ING Bank‟s ratings.
The bank also has a good retail presence in Germany. Through ING Direct (established in
1999), ING Bank has been a pioneer bank for direct (mostly internet) banking, which is
increasingly becoming the dominant distribution channel in many markets. Outside the
Benelux, ING Bank is essentially a challenger bank in retail banking. Commercial banking
enjoys good competitive positions, but limited to certain industries and niche segments (such
as commodities and trade finance).
ING Bank is wholly owned by ING Group (A/Negative) which is a listed company. The stakes in
ING Bank‟s subsidiaries (ING Belgium, the German ING DiBa, ING Direct, etc.) are directly
held by ING Bank. The foreign subsidiaries are locally regulated, meaning capital and liquidity
are not fully fungible within ING Bank. In particular, there has been increased regulatory
caution around cross-border flows of customer deposits from deposit-rich jurisdictions (such as
Belgium and Germany) to foreign parent banks.
The implementation of the Banking Union within the eurozone would be beneficial for ING Bank
if restrictions on current liquidity transfer across eurozone jurisdictions are removed. According
to ING Bank, the removal of such regulatory hurdles could have a positive impact of around
EUR0.4bn on its annual earnings (7%-10% of annual pre-tax profits reported over the past four
years), which are currently not incorporated in the bank‟s „2017 Ambition‟ financials targets.
Excluding the Netherlands, ING Bank‟s loan/deposit ratios in its main eurozone markets are
below 100%.
Source: ING Bank
Management
High Quality Management
Figure 6
Main Financial Targets
CET1 ratio (%)
Leverage (%)
Loans/deposits
Net Interest
Margin (bp)
Cost/income
(%)
ROE (%)
a
1H14
10.5
3.7
1.03
146
‘Ambition
2017’
> 10
±4
n.a.
150-155
56.2a
50-53
10.7a
10-13
Underlying earnings (i.e. excludes oneoffs)
Source: ING Bank
ING Bank N.V.
October 2014
ING Bank‟s management has a high degree of depth, stability and experience. Succession
planning for key executive roles is routinely undertaken. The current CEO has been with the
bank for over 20 years and succeeded the previous CEO in 2013 on his retirement. Corporate
culture is consistent at ING Bank. Strategic objectives are well articulated and appear
consistent over time.
Management has delivered on an extensive restructuring programme imposed by the
European Commission (EC) on state aid received during the financial crisis. The divestments of
the insurance operations are advanced and well on track with the timing agreed with the EC.
The latest milestone was the sale in July 2014 of 32% of the European insurance operations,
NN Group, through an IPO and to institutional investors. In addition, ING Group has almost
completely repaid the state held capital securities.
Fitch believes that ING Bank‟s corporate governance is effective; the bank follows the
recommendations from the Dutch corporate governance code which sets best practices in this
matter. As a bank licensed in the Netherlands, it adheres to the Dutch Banking Code, which
discloses standards for corporate governance, risk management, audit and remuneration
3
Banks
policy. Governance is organised around a two-tier board with an executive board and a
supervisory board. ING Bank and ING Group share same governance bodies, but ING Bank‟s
executive board is enlarged with four members, in addition to the CEO, CFO and CRO.
Risk Appetite
Moderate Risk Appetite
ING Bank‟s risk appetite is moderate, in Fitch‟s view, and underwriting standards are broadly in
line with industry practice. Credit standards are largely consistent over economic cycles. ING
Bank‟s Dutch mortgage lending has been done at high loans/values by international standards,
but this is in line with other Dutch banks, and driven by tax incentives to borrow. Overall, a
majority of lending is collateralised with direct recourse to the asset being financed, and ING
Bank prudently monitors borrower concentration limits. Risk controls and reporting are robust
and public disclosures are of good quality.
Balanced Growth Expected
The balance sheet has shrunk in the past years due to deleveraging (mostly from the
divestments of ING Direct subsidiary in the US, as required by the EC, as well as the Canadian
and UK subsidiaries) and low demand for new lending in a weak economic environment.
Balance sheet growth should resume as the economy recovers and the restructuring is
completed for ING Bank. ING Bank‟s 2017 strategic plan considers an annual growth for the
bank‟s balance sheet of 3% and customer lending of 4%; when compared with 1%-2% GDP
expected annual growth in the bank‟s main markets, this is not overly aggressive and, if the
economy plunged back into recession, Fitch believes ING will revise its own growth target.
Moreover, the expected earnings and dividend policy would allow the bank to generate
sufficient capital to maintain solid capital ratios.
Limited Market Risk
Structural interest rate risk is ING Bank‟s most significant market risk, reflecting its focus on
traditional commercial banking activities. ING Bank uses hedging to reduce this risk. Interest
rate risk in the banking book is measured against various indicators, including earnings. ING
Bank calculated that, at end-2013, a 100bp upward/downward shift in interest rates for the
major currencies would result in impacts of negative EUR122m and positive EUR188m
respectively on the bank‟s net income, which is small. Foreign exchange risk is modest,
reflecting limited currency mismatches on ING Bank‟s balance sheet. Market risk for the trading
operations is largely customer driven and has conservative limits. The average undiversified
value at risk during 2Q14 (1-day, 99%) was a low EUR14m (EUR16m in 2013).
Financial Profile
Resilient Asset Quality, Stabilising Impaired Loans
ING Bank‟s asset quality has remained relatively resilient, despite a deteriorating trend since
2011, and is in line with similarly rated European peers. The loan book (EUR520bn at end-June
2014, EUR570bn when including off-balance sheet exposures) accounts for around two-thirds
of total assets and represents the largest credit risk. Interbank exposures (EUR43bn at endJune 2014) and fixed-income debt investments (EUR107bn) are overall of sound quality.
The weak operating environment since 2011, particularly in the Netherlands, has affected asset
quality. Fitch expects impaired loans to peak in 2014, supported by improving economic
conditions, although the performance remains sensitive to eurozone growth. At just over 3% of
gross loans, ING Bank‟s impaired loans ratios is in line with similarly rated peers.
ING Bank N.V.
October 2014
4
Banks
Figure 8
Figure 9
Asset Quality Ratios (1)
Asset Quality Ratios (2)
Impaired loans/gross loans (LHS)
LICs/average gross loans
Writte-offs/average gross loans
LICs/average gross loans, 10 past years average
Reserves for impaired loans/gross loans (LHS)
Net impaired loans/equity (RHS)
(%)
(bp)
(%)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
40
30
End-2011 End-2012 End-2013 End-1H14
Source: ING Bank, Fitch
50
40
30
20
20
10
10
0
0
2011
2012
2013
1H14
Source: ING Bank, Fitch
Retail Loan Book: Healthy Mortgage Loans, Weaker SME Lending
Just over 40% of ING Bank‟s lending consists of well performing residential mortgage loans,
with a further around 15% of consumer loans and SME lending. Dutch residential mortgage
lending (EUR132bn at end-June 2014) was faced with a property price correction of around
20% since the 2008 peak, combined with increasing unemployment. Fitch expects the
somewhat brighter prospects will stabilise the quality of Dutch mortgage lending, supported by
reducing unemployment and house prices bottoming-out. ING Bank‟s Dutch mortgage loan
book showed the highest ratio of 90-day past due loans amongst the three large Dutch banks,
but it remain low (1.5% at end-June 2014, 1.1% for ABN AMRO and 0.8% for Rabobank at the
same date). Despite potential lag effects of the 2011-2013 recession, Fitch believes the quality
of this book will remain healthy.
The remainder of the retail banking exposure is mostly in the SME sector, an inherently more
volatile segment. SME lending in the Netherlands has faced significant challenges and, despite
bankruptcies reducing from the 2013 peak, impaired loans are once again rising in 2014, albeit
at a slower pace. Fitch believes they should stabilise in 2015.
Figure 7
Customer Loan Book
(End-June 2014, EUR570bnᵃ)
(%)
Retail NL
Dutch mortgage
loans
Dutch SMEs
NPLᵇ
Exposure ratio
31
3.3
24
2.0
5
7.8
Retail BE
Retail GE
Retail international
Retail banking
12
13
13
69
3.2
1.0
1.8
2.5
Structured finance
CRE
General lending
Leasing
Other
Commercial
banking
12
4
11
1
3
31
2.0
11.1
2.0
18.1
3.6
3.6
ᵃ Includes off-balance sheet exposures
ᵇ Non-performing loans
Source: ING Bank
Solid Commercial Banking Book, Easing Strains on CRE Exposures
The commercial banking loan book is diversified by obligor and geography and has largely
been performing well in the recent difficult conditions. Commercial real estate (CRE) remains
challenging, and this cyclical sector has faced increased vacancy rates and related fall in
property prices; both have now stabilised. Impaired CRE exposures were 11.1% of total CRE
exposures at end-June 2014; however, Fitch believes the downside risk has reduced and that
the portfolio is manageable for the bank. The Dutch regulator conducted an extensive review of
major Dutch banks‟ CRE portfolios in 2013, which has not led to any particular additional
provisioning and/or regulatory capital adjustments for ING Bank. ING Bank‟s leasing exposures
are weak and in run-off, but given the small volume, Fitch does not expect any material
additional LICs.
In order to grow its net interest margin, ING Bank intends to slightly increase its lending
towards more remunerative (but higher risk) segments, including structured finance, SMEs and
consumer lending in Germany, Spain and Italy. These are not new geographies or customer
segments for ING Bank, and are unlikely to significantly shift the customer loan mix, which
could otherwise be ratings negative for ING Bank.
ING Bank‟s Russian exposure (EUR7.9bn at end-June 2014) is composed of large Russian
corporates (mostly benefiting from US dollar denominated revenues), and the quality of the
portfolio has remained sound (0.1% impaired loans ratio). However, depending on the evolution
of the political situation and economic sanctions, this could result in additional impaired loans.
The Ukrainian exposure is much weaker (19.9% impaired loans ratio at end-June 2014), but
ING Bank N.V.
October 2014
5
Banks
significantly smaller (EUR1.4bn in total at the same date) and manageable for the bank. Total
net exposures to Russia and Ukraine represented 26% of the bank‟s total equity; while
relatively significant, Fitch believes these exposures will remain manageable for the bank.
Figure 10
Debt Securities
End-June 2014
ABS
6%
Corporates
3%
Low Impaired Loans Coverage Partly Mitigated by Prudent Classification
Banks
11%
Covered
bonds
18%
Source: ING Bank, Fitch
Government
bonds
62%
The fairly low impaired loans coverage (38% at end-June 2014) leaves close to 30% of the
bank‟s equity exposed to unreserved impaired loans. This is higher than most similarly rated
peers and renders ING Bank‟s capital vulnerable to collateral valuations. However, this is partly
mitigated by a fairly prudent approach in classifying an exposure as impaired, largely
collateralised lending and the bank‟s track record of LICs consistently exceeding write-offs (see
Figure 9). The adjustments from the ECB‟s Asset Quality Review on the level of nonperforming exposures and their coverage have been limited.
Other Earning Assets
ING Bank‟s liquidity portfolio is of good quality. At end-June 2014, „AAA‟ rated government
bonds made up over 60% of the portfolio. The bank has shifted the purpose of its securities
portfolio from investment into a liquidity reserve. The focus is on investing is highly rated assets
eligible as liquid asset classes for the calculation of the Basel III liquidity coverage ratio (LCR).
Solid Earnings Capacities from Strong Franchise
ING Bank‟s profitability is good and compares well with its peers, and its performance
continues to benefit from its diversified operations across customer segments and geographies.
Net interest income remains the main revenue source (75%-80% of operating income),
reflecting ING Bank‟s business mix geared towards traditional banking activities. Its net interest
margin has improved since 2012 backed by continuing reduction in interest rates paid on
deposits and gradual upward repricing of the loan book. The envisaged growth in SME,
consumer lending and structured finance will provide further widening of the NIM toward the
targeted 150-155bp.
The difficult economic conditions with low transaction volumes have dented net fees and
commissions. However, fees are predominately made up of recurring commissions, such as
cash management and banking transactions, which have held up well. Other income stems
from the bank‟s treasury and financial markets activity (the latter being client-driven), with some
volatility implied by the changes in credit and debit value adjustments (CVA/DVA).
Figure 11
Figure 12
Key Profitability Ratios (1)
Key Profitability Ratios (2)
(%)
Cost/income (LHS)
Imp. charges/pre-imp. op. profit (LHS)
Operating profit/average equity (RHS)
Interest income/average earning assets (RHS)
Net income/average equity (RHS)
65
60
55
50
2011
2012
Source: ING Bank, Fitch
2013
1H14
20
40
1.7
15
30
1.6
10
20
5
10
0
0
2011
2012
Source: ING Bank, Fitch
1.5
1.4
1.3
1.2
2013
1H14
Good Cost Efficiency Provides Buffer to Absorb LICs
A number of restructuring programmes have been adopted across the bank to improve cost
efficiency and reach the targeted cost/income ratio of 50%-53% by 2015 (just over 55% since
2012). ING Bank had achieved EUR521m of cost savings by end-June 2014, of a targeted
EUR955m by 2017 (EUR880m by 2015). This has enabled ING Bank to contain nominal
expenses and absorb inflation as well as investments and higher costs from new regulations.
ING Bank N.V.
October 2014
6
Banks
This excludes the EUR0.7bn charge booked in 1H14 on the termination of the defined benefit
pension plan, reported on line 26 (non-recurring expenses) in the attached spreadsheet.
Figure 13
1H14 Underlying
Performance by Division
(EURm)
RB CB CL
Net interest 4,443 1,680 21
income
Commission 678 479
-1
income
Other
136 383 -97
Underlying 5,255 2,542 -77
income
Operating
3,044 1,137 47
expenses
Impairment
570 330 11
charges
Underlying 1,642 1,075 -135
pre-tax
profit
Underlying cost/income (%)
Underlying ROE (%)
Total
6,145
1,155
422
7,721
4,228
912
2,582
54.7
10.7
RB = Retail Banking, CB = Commercial
Banking, CL = Corporate Line
Underlying profit is defined by the bank
using its analytical accounts and excludes
the impact of divestments and special
items
Source: ING Bank, Fitch
Key Capitalisation and
Leverage Ratios
(%)
Fitch core capital/weighted risks
(LHS)
CT1/CET1 ratio (LHS)
Total capital ratio (LHS)
Tangible common equity/tangible
assets (RHS)
5
4
3
2
1
0
End2011
End2012
End2013
End1H14
2011-2013: Basel II/1H14: 'Phased-in'
Basel III
Source: ING Bank, Fitch
Retail banking provides for the bulk of ING Bank‟s income but its contribution to net profit is
smaller due to the typically higher expenses associated with running a retail network, and
cyclically elevated LICs in the Netherlands. Earnings diversification is good and the
Netherlands represent around 30% of underlying net profit, Belgium around 25% and Germany
15%. Nevertheless, the vast majority of the bank‟s earnings stems from the eurozone.
Capitalisation and Leverage
Sound Capitalisation
ING Bank‟s internal capital generation is good and consistent profitability, combined with some
deleveraging, has helped ING Bank to boost capitalisation in recent years. It reported a fully
loaded Basel III CET1 ratio of 10.5% at end-June 2014, despite substantial dividends (EUR8bn
paid between 2011 and 2013) upstreamed to ING Group to fund the repayment of state capital
securities.
In May 2014, the Dutch regulator announced national systemic risk buffers for the systemically
important domestic banks. Like for Rabobank and ABN AMRO, ING Bank will be subject to a
3% buffer, which will be phased from 2016 to 2019. This will mean a minimum regulatory
requirement of 10% (4.5% CET1, 2.5% capital conservation buffer and 3% systemic risk
buffer), when restrictions are imposed on the payment of dividends, hybrid coupons and
bonuses.
Figure 14
18
16
14
12
10
8
6
4
2
0
ING Bank‟s resilient profitability provides it with a buffer to absorb LICs. Pre-impairment profit of
around EUR7bn means the bank can withstand LICs 3x higher than the 2013 levels (already
well above the “through-the-cycle” average) before it would report a loss. LICs have come
down markedly in 1H14, and Fitch expects LICs will reduce in 2014 compared with 2013.
ING Bank targets a fully-loaded CET1 ratio above 10% plus a “comfortable buffer”, which Fitch
expects will be around 1pp. This target is not excessively ambitious given that the bank already
reports a 10.5% ratio, and should enable the bank to meet its targeted dividend pay-out ratio
(40%). ING Bank‟s capitalisation is in line with similarly rated peers, although lag some more
highly rated northern European banks that target CET1 ratios well above 11%.
ING Bank has issued CRD IV compliant Tier 2 securities, building a buffer for senior unsecured
creditors, the latter particularly in view of new regulations potentially imposing losses via bail-in
of unsecured creditors. Fitch expects that ING Bank will also issue additional Tier 1 securities
when the new tax treatment is voted by the Dutch parliament (scheduled for 4Q14), to
strengthen risk-weighted and unweighted capital ratios; this will bring the leverage ratio closer
to the 4% targeted by the bank. It may also replace its (still grandfathered) legacy Tier 1
securities (EUR6.8bn at end-2013).
Risk-weights on ING Bank‟s Dutch mortgage loans are 19%, which is higher than its Dutch
peers (12% at ABN AMRO, 9% at Rabobank). Leverage (tangible equity-to-tangible assets of
4.0% at end-June 2014 is sound in a European context.
Funding and Liquidity
Strong Funding Profile
ING Bank‟s funding profile is well balanced, with customer deposits as its main funding source,
and complemented by wholesale funding. Its funding profile benefits from large market shares
in deposit rich countries (such as Belgium) offsetting structurally deposit short countries (such
as the Netherlands). However, liquidity is not fully fungible within ING Bank, and the individual
operating entities report varying loan/deposit ratios (eg 118% for the Dutch company at end2013). The bank has addressed local regulators‟ caution around large cross-border flow of
domestic deposits to foreign parent banks by transferring assets to deposit-rich entities and
ING Bank N.V.
October 2014
7
Banks
now intends to focus lending growth in countries where there are deposits „available‟ to fund
new lending.
Figure 15
LT Debt Maturity Profile
At end-June 2014
Subordinated debt
RMBS
Covered bonds
Senior unsecured debt
(bn)
The bank‟s large deposits base has grown steadily since the financial crisis (+22% since end2009 to EUR475bn), reflecting ING Bank‟s robust deposit-gathering abilities from a strong
franchise in its home markets. Successes in countries where it is a challenger bank have
supplemented its deposit base. Corporate deposits (potentially more volatile) represented
12.5% of total deposits at end-2013. The rest is households/SMEs, the largest part covered by
domestic deposit guarantee schemes.
>2020
2018
-2020
2017
2016
2015
2H14
35
30
25
20
15
10
5
0
Source: ING Bank, Fitch
ING Bank has maintained uninterrupted access to the capital markets since 2009, and its debt
maturities are reasonably well spread over time. The EUR17bn of long-term debt maturing in
2015 is significant, but less than the bank has recently issued. Debt issuance volumes have
reduced in 2013 and 2014 as a result of lower credit demand and strong deposit inflow. ING
Bank has substantially reduced its use of interbank and short-term debt securities, and asset
encumbrance is low.
Figure 16
Long-Term Debt Issuance
Large Liquidity Buffer
(EURbn)
1H14 2013 2012
Senior unsecured
6.6 13.8 24.3
Secured debt
0.9
7.8 8.8
Covered bonds
0.1
2.7 7.3
RMBS
0.8
5.1 1.5
Subordinated debt
1.5
4.1
Total
9.0 25.7 33.1
ING Bank manages its liquidity to provide it with sufficient unencumbered assets eligible for
ECB repo transactions or repoable with commercial banks to withstand a temporary drying-up
of all wholesale markets. It had ample liquidity available at end-June 2014, mainly made up of
high-quality liquid assets. The bank‟s liquidity coverage ratio was above 100% at end-June
2014.
Source: ING Bank, Fitch
ING Bank N.V.
October 2014
8
Banks
Appendix
Figure 17
Peer Comparison
(‘Viability Rating’)
Total assets (EURbn)
Total equity (EURbn)
Performance (%)
Net interest margin
Cost/income
Loan & securities imp.
charges/pre-imp. op. profit
Operating profit/average
total assets
Operating profit/average
equity
Asset quality (%)
Growth of gross loans
Impaired loans/gross loans
Reserves for impaired
loans/impaired loans
Impaired loans less
reserves for imp.
loans/equity
Loan impairment charges/
average gross loans
Funding & capital (%)
Loans/customer deposits
Customer deposits/total
funding (excl. derivatives)
Equity/assets
CET1/CT1 ratio
Fitch core capital ratio
Fully-loaded B3 CET1
Fitch core capital (EURbn)
ING Bank
(‘a’)
ABN AMRO
(‘a’)
BNPP Fortis
(‘a’)
Groupe
BPCE (‘a’)
Danske
Bank (‘a’)
1H14 2013 1H14 2013 1H14 2013 1H14 2013 1H14 2013
818.7 787.6 395.8 372.0 276.5 261.4 1,152 1,123 439.0 432.8
34.7 33.8 13.9 13.6 24.3 23.4 57.8 54.6 20.2
19.5
1.62
56.6
25.0
1.53
55.7
33.4
1.57
70.5
59.9
1.43
65.3
38.3
2.00
64.4
12.1
1.84
65.8
24.5
1.18
68.3
24.6
1.15
69.9
29.4
1.04
55.0
16.0
1.03
62.6
36.8
0.66
0.55
0.25
0.40
0.85
0.57
0.50
0.43
0.53
0.30
15.7
12.8
6.9
11.8
9.6
6.6
9.9
9.1
11.8
7.2
1.02
3.15
38.0
-5.96
3.09
38.5
0.37
2.99
65.9
-2.22
2.98
63.8
3.55
4.16
49.8
8.64
4.56
49.7
1.63
3.98
53.2
2.04
4.06
52.7
1.32
5.11
2.78
-5.61
5.21
2.89
29.3
29.0
19.2
20.8
14.7
16.1
18.8
20.2
25.6
26.0
0.34
0.43
0.54
0.37
0.24
0.28
0.30
0.31
0.20
0.33
106
64.3
108
68.6
126
59.0
126
62.6
101
74.0
102
73.8
132
48.5
129
49.7
216
31.3
210
32.4
4.24
10.8
11.3
10.5
33.1
4.29
11.7
11.0
10.0
31.8
3.52
12.8
11.4
12.7
13.1
3.65
14.4
11.4
12.2
12.4
8.79
14.2
16.2
n.a.
21.0
8.97
14.1
15.2
n.a.
19.1
5.02
n.a.
n.a.
11.1
44.0
4.86
11.4
11.1
10.4
41.1
4.59
14.4
12.5
13.2
14.9
4.51
14.7
12.5
12.8
14.2
Source: Banks‟ data reclassified by Fitch
ING Bank N.V.
October 2014
9
Banks
ING Bank N.V.
Incom e Statem ent
30 Jun 2014
1. Interest Income on Loans
31 Dec 2013
6 Months - Interim
6 Months - Interim
USDm
EURm
Unaudited
Unaudited
As % of
Year End
31 Dec 2012
As % of
EURm
Year End
31 Dec 2011
As % of
EURm
Year End
As % of
EURm
Earning Assets
Unqualified
Earning Assets
Unqualified
Earning Assets
Unqualified
Earning Assets
n.a.
n.a.
-
21,549.0
2.86
24,793.0
3.12
26,434.0
3.13
33,290.1
24,375.0
6.25
30,025.0
3.98
35,478.0
4.46
38,770.0
4.59
12.3
9.0
0.00
94.0
0.01
64.0
0.01
49.0
0.01
33,302.4
24,384.0
6.26
51,668.0
6.86
60,335.0
7.59
65,253.0
7.73
n.a.
n.a.
-
6,618.0
0.88
9,140.0
1.15
9,383.0
1.11
6. Other Interest Expense
24,897.6
18,230.0
4.68
32,992.0
4.38
38,883.0
4.89
42,237.0
5.00
7. Total Interest Expense
24,897.6
18,230.0
4.68
39,610.0
5.26
48,023.0
6.04
51,620.0
6.12
8,404.8
6,154.0
1.58
12,058.0
1.60
12,312.0
1.55
13,633.0
1.62
9. Net Gains (Losses) on Trading and Derivatives
386.5
283.0
0.07
895.0
0.12
784.0
0.10
90.0
0.01
10. Net Gains (Losses) on Other Securities
189.8
139.0
0.04
215.0
0.03
581.0
0.07
132.0
0.02
11. Net Gains (Losses) on Assets at FV through Income Statement
n.a.
n.a.
-
n.a.
-
(12.0)
(0.00)
n.a.
12. Net Insurance Income
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
1,577.4
1,155.0
0.30
2,240.0
0.30
2,133.0
0.27
2,495.0
0.30
2. Other Interest Income
3. Dividend Income
4. Gross Interest and Dividend Incom e
5. Interest Expense on Customer Deposits
8. Net Interest Incom e
13. Net Fees and Commissions
14. Other Operating Income
-
316.9
232.0
0.06
4.0
0.00
(456.0)
(0.06)
255.0
0.03
15. Total Non-Interest Operating Incom e
2,470.6
1,809.0
0.46
3,354.0
0.44
3,030.0
0.38
2,972.0
0.35
16. Personnel Expenses
3,393.9
2,485.0
0.64
4,914.0
0.65
4,708.0
0.59
5,506.0
0.65
17. Other Operating Expenses
2,762.9
2,023.0
0.52
3,663.0
0.49
4,025.0
0.51
4,720.0
0.56
18. Total Non-Interest Expenses
6,156.8
4,508.0
1.16
8,577.0
1.14
8,733.0
1.10
10,226.0
1.21
19. Equity-accounted Profit/ Loss - Operating
53.3
39.0
0.01
22.0
0.00
22.0
0.00
32.0
0.00
20. Pre-Im pairm ent Operating Profit
4,771.9
3,494.0
0.90
6,857.0
0.91
6,631.0
0.83
6,411.0
0.76
21. Loan Impairment Charge
1,190.9
872.0
0.22
2,289.0
0.30
2,125.0
0.27
1,670.0
0.20
1.4
1.0
0.00
4.0
0.00
38.0
0.00
725.0
0.09
3,579.6
2,621.0
0.67
4,564.0
0.61
4,468.0
0.56
4,016.0
0.48
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
271.8
199.0
0.05
26.0
0.00
1,605.0
0.20
906.0
0.11
26. Non-recurring Expense
1,466.8
1,074.0
0.28
228.0
0.03
897.0
0.11
n.a.
-
27. Change in Fair Value of Ow n Debt
(101.1)
(74.0)
(0.02)
(129.0)
(0.02)
(633.0)
(0.08)
377.0
0.04
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
2,283.5
1,672.0
0.43
4,233.0
0.56
4,543.0
0.57
5,299.0
0.63
629.6
461.0
0.12
1,080.0
0.14
1,171.0
0.15
1,216.0
0.14
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
1,653.9
1,211.0
0.31
3,153.0
0.42
3,372.0
0.42
4,083.0
0.48
(0.06)
22. Securities and Other Credit Impairment Charges
23. Operating Profit
24. Equity-accounted Profit/ Loss - Non-operating
25. Non-recurring Income
28. Other Non-operating Income and Expenses
29. Pre-tax Profit
30. Tax expense
31. Profit/Loss from Discontinued Operations
32. Net Incom e
33. Change in Value of AFS Investments
831.7
609.0
0.16
(363.0)
(0.05)
1,972.0
0.25
(539.0)
34. Revaluation of Fixed Assets
(16.4)
(12.0)
(0.00)
0.0
0.00
n.a.
-
n.a.
-
35. Currency Translation Differences
267.7
196.0
0.05
(1,038.0)
(0.14)
(313.0)
(0.04)
(477.0)
(0.06)
36. Remaining OCI Gains/(losses)
826.3
605.0
0.16
(1,023.0)
(0.14)
(2,688.0)
(0.34)
(195.0)
(0.02)
3,563.2
2,609.0
0.67
729.0
0.10
2,343.0
0.29
2,872.0
0.34
61.5
45.0
0.01
90.0
0.01
91.0
0.01
78.0
0.01
39. Memo: Net Income after Allocation to Non-controlling Interests
1,592.5
1,166.0
0.30
3,063.0
0.41
3,281.0
0.41
4,005.0
0.47
40. Memo: Common Dividends Relating to the Period
1,673.0
1,225.0
0.31
2,962.0
0.39
2,131.0
0.27
3,000.0
0.36
41. Memo: Preferred Dividends Related to the Period
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
37. Fitch Com prehensive Incom e
38. Memo: Profit Allocation to Non-controlling Interests
Exchange rate
ING Bank N.V.
October 2014
USD1 = EUR0.73220
USD1 = EUR0.72510
USD1 = EUR0.75790
USD1 = EUR0.77290
10
Banks
ING Bank N.V.
Balance Sheet
30 Jun 2014
31 Dec 2013
31 Dec 2012
31 Dec 2011
6 Months - Interim
6 Months - Interim
As % of
Year End
As % of
Year End
As % of
Year End
As % of
USDm
EURm
Assets
EURm
Assets
EURm
Assets
EURm
Assets
Assets
A. Loans
1. Residential Mortgage Loans
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
398,079.8
291,474.0
35.60
291,925.0
37.06
312,467.0
37.45
n.a.
-
3. Other Consumer/ Retail Loans
36,686.7
26,862.0
3.28
26,761.0
3.40
24,598.0
2.95
n.a.
-
4. Corporate & Commercial Loans
202,026.8
147,924.0
18.07
141,057.0
17.91
145,977.0
17.49
n.a.
-
72,993.7
53,446.0
6.53
54,730.0
6.95
64,009.0
7.67
582,512.0
60.60
2. Other Mortgage Loans
5. Other Loans
6. Less: Reserves for Impaired Loans
8,492.2
6,218.0
0.76
6,135.0
0.78
5,505.0
0.66
4,943.0
0.51
7. Net Loans
701,294.7
513,488.0
62.72
508,338.0
64.54
541,546.0
64.90
577,569.0
60.09
8. Gross Loans
709,786.9
519,706.0
63.48
514,473.0
65.32
547,051.0
65.56
582,512.0
60.60
22,358.6
16,371.0
2.00
15,921.0
2.02
14,928.0
1.79
13,382.0
1.39
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
58,981.2
43,186.0
5.27
37,875.0
4.81
37,944.0
4.55
45,323.0
4.72
n.a.
n.a.
-
5,137.0
0.65
1,109.0
0.13
n.a.
-
177,163.3
129,719.0
15.84
84,412.0
10.72
61,922.0
7.42
66,875.0
6.96
9. Memo: Impaired Loans included above
10. Memo: Loans at Fair Value included above
B. Other Earning Assets
1. Loans and Advances to Banks
2. Reverse Repos and Cash Collateral
3. Trading Securities and at FV through Income
4. Derivatives
4,751.4
3,479.0
0.42
37,164.0
4.72
64,241.0
7.70
69,215.0
7.20
125,569.5
91,942.0
11.23
76,883.0
9.76
74,279.0
8.90
74,935.0
7.80
6. Held to Maturity Securities
3,410.3
2,497.0
0.30
3,098.0
0.39
6,545.0
0.78
8,868.0
0.92
7. Equity Investments in Associates
2,006.3
1,469.0
0.18
707.0
0.09
841.0
0.10
827.0
0.09
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
312,900.8
229,106.0
27.98
207,401.0
26.33
208,937.0
25.04
220,720.0
22.96
89,497.4
65,530.0
8.00
52,679.0
6.69
48,337.0
5.79
49,217.0
5.12
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
127.0
93.0
0.01
108.0
0.01
207.0
0.02
435.0
0.05
13. Insurance Assets
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
14. Other Earning Assets
n.a.
n.a.
-
n.a.
-
6,781.0
0.81
n.a.
-
1,073,303.7
785,873.0
95.99
753,722.0
95.69
795,415.0
95.32
844,047.0
87.81
16,845.1
12,334.0
5. Available for Sale Securities
8. Other Securities
9. Total Securities
10. Memo: Government Securities included Above
11. Memo: Total Securities Pledged
12. Investments in Property
15. Total Earning Assets
C. Non-Earning Assets
1. Cash and Due From Banks
1.51
11,920.0
1.51
15,447.0
1.85
28,112.0
2.92
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
983.3
720.0
0.09
n.a.
-
n.a.
-
n.a.
-
4. Fixed Assets
2,904.9
2,127.0
0.26
2,282.0
0.29
2,336.0
0.28
2,417.0
0.25
5. Goodw ill
2. Memo: Mandatory Reserves included above
3. Foreclosed Real Estate
1,425.8
1,044.0
0.13
1,035.0
0.13
1,188.0
0.14
1,179.0
0.12
6. Other Intangibles
777.1
569.0
0.07
571.0
0.07
590.0
0.07
564.0
0.06
7. Current Tax Assets
379.7
278.0
0.03
n.a.
-
n.a.
-
459.0
0.05
2,051.4
1,502.0
0.18
1,305.0
0.17
2,139.0
0.26
2,437.0
0.25
n.a.
n.a.
-
n.a.
-
n.a.
-
62,483.0
6.50
19,472.8
14,258.0
1.74
16,809.0
2.13
17,318.0
2.08
19,467.0
2.03
1,118,143.9
818,705.0
100.00
787,644.0
100.00
834,433.0
100.00
961,165.0
100.00
1. Customer Deposits - Current
667,045.9
488,411.0
59.66
190,714.0
24.21
182,597.0
21.88
114,362.0
11.90
2. Customer Deposits - Savings
n.a.
n.a.
-
284,069.0
36.07
277,766.0
33.29
291,516.0
30.33
3. Customer Deposits - Term
n.a.
n.a.
-
n.a.
-
n.a.
-
73,486.0
7.65
667,045.9
488,411.0
59.66
474,783.0
60.28
460,363.0
55.17
479,364.0
49.87
7.52
8. Deferred Tax Assets
9. Discontinued Operations
10. Other Assets
11. Total Assets
Liabilities and Equity
D. Interest-Bearing Liabilities
4. Total Custom er Deposits
5. Deposits from Banks
44,251.6
32,401.0
3.96
24,071.0
3.06
32,981.0
3.95
72,233.0
6. Repos and Cash Collateral
n.a.
n.a.
-
3,186.0
0.40
5,723.0
0.69
n.a.
-
7. Other Deposits and Short-term Borrow ings
n.a.
n.a.
-
49,891.0
6.33
57,330.0
6.87
66,332.0
6.90
8. Total Deposits, Money Market and Short-term Funding
711,297.5
520,812.0
63.61
551,931.0
70.07
556,397.0
66.68
617,929.0
64.29
9. Senior Debt Maturing after 1 Year
177,547.1
130,000.0
15.88
72,408.0
9.19
77,359.0
9.27
64,594.0
6.72
21,195.0
15,519.0
1.90
9,653.0
1.23
9,633.0
1.15
11,558.0
1.20
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
198,742.1
145,519.0
17.77
82,061.0
10.42
86,992.0
10.43
76,152.0
7.92
10. Subordinated Borrow ing
11. Other Funding
12. Total Long Term Funding
13. Derivatives
6,401.0
0.78
127,838.0
93,603.0
11.43
57,844.0
7.34
44,916.0
5.38
65,251.0
6.79
1,046,619.8
766,335.0
93.60
731,014.0
92.81
756,359.0
90.64
833,540.0
86.72
(329.1)
(241.0)
(0.03)
(167.0)
(0.02)
(38.0)
(0.00)
(595.0)
(0.06)
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
1,703.1
1,247.0
0.15
1,226.0
0.16
1,721.0
0.21
1,834.0
0.19
4. Current Tax Liabilities
710.2
520.0
0.06
342.0
0.04
809.0
0.10
806.0
0.08
5. Deferred Tax Liabilities
984.7
721.0
0.09
340.0
0.04
1,571.0
0.19
1,735.0
0.18
6. Other Deferred Liabilities
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
7. Discontinued Operations
n.a.
n.a.
-
n.a.
-
n.a.
-
64,265.0
6.69
14. Trading Liabilities
15. Total Funding
E. Non-Interest Bearing Liabilities
1. Fair Value Portion of Debt
2. Credit impairment reserves
3. Reserves for Pensions and Other
8. Insurance Liabilities
8,742.1
39,178.0
4.97
68,054.0
8.16
74,208.0
7.72
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
21,089.9
15,442.0
1.89
16,006.0
2.03
31,430.0
3.77
17,670.0
1.84
1,070,778.5
784,024.0
95.76
748,761.0
95.06
791,852.0
94.90
919,255.0
95.64
1. Pref. Shares and Hybrid Capital accounted for as Debt
n.a.
n.a.
-
5,123.0
0.65
6,774.0
0.81
6,850.0
0.71
2. Pref. Shares and Hybrid Capital accounted for as Equity
G. Equity
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
46,604.8
34,124.0
4.17
32,380.0
4.11
33,011.0
3.96
33,608.0
3.50
760.7
557.0
0.07
955.0
0.12
843.0
0.10
693.0
0.07
3. Securities Revaluation Reserves
n.a.
n.a.
-
1,870.0
0.24
2,650.0
0.32
550.0
0.06
4. Foreign Exchange Revaluation Reserves
n.a.
n.a.
-
(989.0)
(0.13)
(263.0)
(0.03)
209.0
0.02
5. Fixed Asset Revaluations and Other Accumulated OCI
n.a.
n.a.
-
(456.0)
(0.06)
(434.0)
(0.05)
n.a.
-
47,365.5
34,681.0
4.24
33,760.0
4.29
35,807.0
4.29
35,060.0
3.65
9. Other Liabilities
10. Total Liabilities
F. Hybrid Capital
1. Common Equity
2. Non-controlling Interest
6. Total Equity
7. Total Liabilities and Equity
1,118,143.9
818,705.0
100.00
787,644.0
100.00
834,433.0
100.00
961,165.0
100.00
8. Memo: Fitch Core Capital
45,162.5
33,068.0
4.04
31,884.0
3.94
33,220.0
4.01
32,099.0
3.34
9. Memo: Fitch Eligible Capital
45,162.5
33,068.0
4.04
31,884.0
3.94
33,220.0
4.01
32,099.0
3.34
Exchange rate
ING Bank N.V.
October 2014
USD1 = EUR0.73220
USD1 = EUR0.72510
USD1 = EUR0.75790
USD1 = EUR0.77290
11
Banks
ING Bank N.V.
Sum m ary Analytics
30 Jun 2014
31 Dec 2013
31 Dec 2012
31 Dec 2011
6 Months - Interim
Year End
Year End
Year End
1. Interest Income on Loans/ Average Gross Loans
n.a.
4.03
4.33
4.54
2. Interest Expense on Customer Deposits/ Average Customer Deposits
n.a.
1.40
1.93
1.92
3. Interest Income/ Average Earning Assets
6.40
6.57
7.17
7.58
4. Interest Expense/ Average Interest-bearing Liabilities
4.91
5.21
5.86
6.12
5. Net Interest Income/ Average Earning Assets
1.62
1.53
1.46
1.58
6. Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets
1.39
1.24
1.21
1.39
7. Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets
1.62
1.53
1.46
1.58
1. Non-Interest Income/ Gross Revenues
22.72
21.76
19.75
17.90
2. Non-Interest Expense/ Gross Revenues
56.61
55.65
56.92
61.58
3. Non-Interest Expense/ Average Assets
1.13
1.04
0.96
1.08
20.86
19.24
18.15
18.61
A. Interest Ratios
B. Other Operating Profitability Ratios
4. Pre-impairment Op. Profit/ Average Equity
5. Pre-impairment Op. Profit/ Average Total Assets
0.88
0.83
0.73
0.68
6. Loans and securities impairment charges/ Pre-impairment Op. Profit
24.99
33.44
32.62
37.36
7. Operating Profit/ Average Equity
15.65
12.80
12.23
11.66
0.66
0.55
0.49
0.42
27.57
25.51
25.78
22.95
10. Pre-Impairment Operating Profit / Risk Weighted Assets
2.40
2.43
2.38
1.94
11. Operating Profit / Risk Weighted Assets
1.80
1.62
1.60
1.22
1. Net Income/ Average Total Equity
7.23
8.84
9.23
11.85
2. Net Income/ Average Total Assets
0.30
0.38
0.37
0.43
3. Fitch Comprehensive Income/ Average Total Equity
15.58
2.04
6.41
8.34
4. Fitch Comprehensive Income/ Average Total Assets
0.65
0.09
0.26
0.30
5. Net Income/ Av. Total Assets plus Av. Managed Securitized Assets
n.a.
n.a.
n.a.
n.a.
6. Net Income/ Risk Weighted Assets
0.83
1.12
1.21
1.24
7. Fitch Comprehensive Income/ Risk Weighted Assets
1.79
0.26
0.84
0.87
1. Fitch Core Capital/ Risk Weighted Assets
11.27
10.98
11.99
9.71
2. Fitch Eligible Capital/ Risk Weighted Assets
11.27
10.98
11.99
9.71
3. Tangible Common Equity/ Tangible Assets
3.96
3.97
4.02
3.47
4. Tier 1 Regulatory Capital Ratio
11.60
13.53
14.40
11.69
5. Total Regulatory Capital Ratio
14.60
16.46
16.96
14.26
6. Core Tier 1 Regulatory Capital Ratio
10.80
11.72
11.97
9.62
4.24
4.29
4.29
3.65
101.16
93.94
63.20
73.48
46.95
406.31
90.95
104.46
n.a.
n.a.
n.a.
n.a.
(0.08)
0.57
3.47
3.09
1. Grow th of Total Assets
3.94
(5.61)
(13.19)
3.01
2. Grow th of Gross Loans
1.02
(5.96)
(6.09)
(1.71)
3. Impaired Loans/ Gross Loans
3.15
3.09
2.73
2.30
4. Reserves for Impaired Loans/ Gross Loans
1.20
1.19
1.01
0.85
5. Reserves for Impaired Loans/ Impaired Loans
37.98
38.53
36.88
36.94
6. Impaired loans less Reserves for Impaired Loans/ Fitch Core Capital
30.70
31.55
28.19
26.29
7. Impaired Loans less Reserves for Impaired Loans/ Equity
29.28
28.99
26.32
24.07
8. Loan Impairment Charges/ Average Gross Loans
0.34
0.43
0.37
0.29
9. Net Charge-offs/ Average Gross Loans
0.25
0.28
n.a.
0.20
10. Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets
3.28
3.09
2.73
2.30
1. Loans/ Customer Deposits
106.41
108.36
118.83
121.52
2. Interbank Assets/ Interbank Liabilities
133.29
157.35
115.05
62.75
64.27
68.63
66.88
63.13
8. Operating Profit/ Average Total Assets
9. Taxes/ Pre-tax Profit
C. Other Profitability Ratios
D. Capitalization
7. Equity/ Total Assets
8. Cash Dividends Paid & Declared/ Net Income
9. Cash Dividend Paid & Declared/ Fitch Comprehensive Income
10. Cash Dividends & Share Repurchase/Net Income
11. Internal Capital Generation
E. Loan Quality
F. Funding
3. Customer Deposits/ Total Funding (excluding derivatives)
ING Bank N.V.
October 2014
12
Banks
ING Bank N.V.
Reference Data
30 Jun 2014
31 Dec 2013
31 Dec 2012
31 Dec 2011
6 Months - Interim
6 Months - Interim
As % of
Year End
As % of
Year End
As % of
Year End
As % of
USDm
EURm
Assets
EURm
Assets
EURm
Assets
EURm
Assets
1. Managed Securitized Assets Reported Off-Balance Sheet
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
2. Other off-balance sheet exposure to securitizations
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
3. Guarantees
n.a.
n.a.
-
23,137.0
2.94
24,034.0
2.88
n.a.
-
4. Acceptances and documentary credits reported off-balance sheet
n.a.
n.a.
-
14,587.0
1.85
14,552.0
1.74
n.a.
-
5. Committed Credit Lines
n.a.
n.a.
-
85,057.0
10.80
86,549.0
10.37
n.a.
-
6. Other Contingent Liabilities
n.a.
n.a.
-
507.0
0.06
499.0
0.06
n.a.
-
1,118,143.9
818,705.0
100.00
910,932.0
115.65
960,067.0
115.06
961,165.0
100.00
400,710.2
293,400.0
35.84
282,503.0
35.87
278,656.0
33.39
330,421.0
34.38
A. Off-Balance Sheet Item s
7. Total Business Volume
8. Memo: Risk Weighted Assets
9. Fitch Adjustments to Risk Weighted Assets
10. Fitch Adjusted Risk Weighted Assets
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
400,710.2
293,400.0
35.84
282,503.0
35.87
278,656.0
33.39
330,421.0
34.38
B. Average Balance Sheet
Average Loans
704,774.7
516,036.0
63.03
534,725.6
67.89
572,453.4
68.60
581,873.0
60.54
Average Earning Assets
1,049,417.8
768,383.7
93.85
785,850.4
99.77
841,759.2
100.88
860,737.7
89.55
Average Assets
1,097,750.2
803,772.7
98.18
823,793.8
104.59
905,170.0
108.48
945,613.3
98.38
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
1,023,338.3
749,288.3
91.52
760,989.8
96.62
820,026.4
98.27
843,419.3
87.75
Average Common equity
44,525.7
32,601.7
3.98
33,736.4
4.28
35,231.2
4.22
32,863.0
3.42
Average Equity
46,126.3
33,773.7
4.13
35,648.4
4.53
36,534.6
4.38
34,443.3
3.58
658,712.5
482,309.3
58.91
473,499.4
60.12
472,549.4
56.63
487,873.7
50.76
Loans & Advances < 3 months
n.a.
n.a.
-
79,338.0
10.07
77,733.0
9.32
n.a.
-
Loans & Advances 3 - 12 Months
n.a.
n.a.
-
32,854.0
4.17
31,944.0
3.83
n.a.
-
Loans and Advances 1 - 5 Years
n.a.
n.a.
-
120,881.0
15.35
125,556.0
15.05
n.a.
-
Loans & Advances > 5 years
n.a.
n.a.
-
275,265.0
34.95
306,313.0
36.71
n.a.
-
Debt Securities < 3 Months
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Debt Securities 3 - 12 Months
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Debt Securities 1 - 5 Years
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Debt Securities > 5 Years
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Loans & Advances to Banks < 3 Months
n.a.
n.a.
-
27,497.0
3.49
28,157.0
3.37
n.a.
-
Loans & Advances to Banks 3 - 12 Months
n.a.
n.a.
-
5,653.0
0.72
3,894.0
0.47
n.a.
-
Loans & Advances to Banks 1 - 5 Years
n.a.
n.a.
-
4,361.0
0.55
5,597.0
0.67
n.a.
-
Loans & Advances to Banks > 5 Years
n.a.
n.a.
-
364.0
0.05
296.0
0.04
n.a.
-
Retail Deposits < 3 months
n.a.
n.a.
-
440,869.0
55.97
413,534.0
49.56
n.a.
-
Retail Deposits 3 - 12 Months
n.a.
n.a.
-
25,311.0
3.21
38,098.0
4.57
n.a.
-
Retail Deposits 1 - 5 Years
n.a.
n.a.
-
6,212.0
0.79
6,239.0
0.75
n.a.
-
Retail Deposits > 5 Years
n.a.
n.a.
-
2,391.0
0.30
2,492.0
0.30
n.a.
-
Other Deposits < 3 Months
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Other Deposits 3 - 12 Months
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Other Deposits 1 - 5 Years
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Other Deposits > 5 Years
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Deposits from Banks < 3 Months
n.a.
n.a.
-
18,139.0
2.30
27,891.0
3.34
n.a.
-
Deposits from Banks 3 - 12 Months
n.a.
n.a.
-
1,755.0
0.22
3,305.0
0.40
n.a.
-
Deposits from Banks 1 - 5 Years
n.a.
n.a.
-
2,891.0
0.37
2,757.0
0.33
n.a.
-
Deposits from Banks > 5 Years
n.a.
n.a.
-
4,472.0
0.57
4,751.0
0.57
n.a.
-
Senior Debt Maturing < 3 months
n.a.
n.a.
-
31,069.0
3.94
35,063.0
4.20
n.a.
-
Senior Debt Maturing 3-12 Months
n.a.
n.a.
-
18,822.0
2.39
22,267.0
2.67
n.a.
-
Senior Debt Maturing 1- 5 Years
n.a.
n.a.
-
39,476.0
5.01
44,411.0
5.32
n.a.
-
Senior Debt Maturing > 5 Years
n.a.
n.a.
-
32,932.0
4.18
32,948.0
3.95
n.a.
-
Total Senior Debt on Balance Sheet
n.a.
n.a.
-
122,299.0
15.53
134,689.0
16.14
n.a.
-
Fair Value Portion of Senior Debt
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Covered Bonds
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Subordinated Debt Maturing < 3 months
n.a.
n.a.
-
15.0
0.00
650.0
0.08
n.a.
-
Subordinated Debt Maturing 3-12 Months
n.a.
n.a.
-
90.0
0.01
28.0
0.00
n.a.
-
Subordinated Debt Maturing 1- 5 Year
n.a.
n.a.
-
2,218.0
0.28
4,581.0
0.55
n.a.
-
Subordinated Debt Maturing > 5 Years
n.a.
n.a.
-
7,330.0
0.93
4,374.0
0.52
n.a.
-
21,195.0
15,519.0
1.90
9,653.0
1.23
9,633.0
1.15
11,558.0
1.20
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
Average Managed Securitized Assets (OBS)
Average Interest-Bearing Liabilities
Average Customer Deposits
C. Maturities
Asset Maturities:
Liability Maturities:
Total Subordinated Debt on Balance Sheet
Fair Value Portion of Subordinated Debt
D. Equity Reconciliation
1. Equity
47,365.5
34,681.0
4.24
33,760.0
4.29
35,807.0
4.29
35,060.0
3.65
2. Add: Pref. Shares and Hybrid Capital accounted for as Equity
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
3. Add: Other Adjustments
n.a.
n.a.
-
n.a.
-
n.a.
-
n.a.
-
47,365.5
34,681.0
4.24
33,760.0
4.29
35,807.0
4.29
35,060.0
3.65
47,365.5
34,681.0
4.24
33,760.0
4.29
35,807.0
4.29
35,060.0
3.65
0.0
0.0
0.00
(167.0)
(0.02)
(38.0)
(0.00)
(595.0)
(0.06)
4. Published Equity
E. Fitch Eligible Capital Reconciliation
1. Total Equity as reported (including non-controlling interests)
2. Fair value effect incl in ow n debt/borrow ings at fv on the B/S- CC only
3. Non-loss-absorbing non-controlling interests
0.0
0.0
0.00
0.0
0.00
0.0
0.00
0.0
0.00
1,425.8
1,044.0
0.13
1,035.0
0.13
1,188.0
0.14
1,179.0
0.12
777.1
569.0
0.07
571.0
0.07
590.0
0.07
564.0
0.06
6. Deferred tax assets deduction
0.0
0.0
0.00
103.0
0.12
771.0
0.07
623.0
0.06
7. Net asset value of insurance subsidiaries
0.0
0.0
0.00
0.0
0.00
0.0
0.00
0.0
0.00
8. First loss tranches of off-balance sheet securitizations
0.0
0.0
0.00
0.0
0.00
0.0
0.00
0.0
0.00
45,162.5
33,068.0
4.04
31,884.0
3.94
33,220.0
4.01
32,099.0
3.34
0.0
0.0
0.00
0.0
0.00
0.0
0.00
0.0
0.00
0.0
0.0
0.00
0.0
0.00
0.0
0.00
0.0
0.00
45,162.5
33,068.0
4.04
31,884.0
3.94
33,220.0
4.01
32,099.0
3.34
4. Goodw ill
5. Other intangibles
9. Fitch Core Capital
10. Eligible w eighted Hybrid capital
11. Government held Hybrid Capital
12. Fitch Eligible Capital
Exchange Rate
ING Bank N.V.
October 2014
USD1 = EUR0.73220
USD1 = EUR0.72510
USD1 = EUR0.75790
USD1 = EUR0.77290
13
Banks
The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
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October 2014
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