ING reports a strong start to 2014
At a glance
ING in the first quarter 2014
Bank
Underlying profit before tax --- up 0.6% to EUR 1,176 million from the first quarter 2013 and up 30.1% from the previous quarter
NN Group
Operating result of ongoing business ---- up 61.2% to EUR 274 million from the first quarter 2013 and up 28.0% on the previous quarter
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Key points
Bank
- Strong first-quarter result driven by lower risk costs and relatively stable income
- Net interest margin widens further due to higher interest results in Financial Markets
- Significant increase in net lending, funded entirely by net deposit inflows
- Operating expenses down on previous quarter but up slightly on first quarter 2013
NN Group
- Operating result ongoing business up 61.2% on first quarter 2013
- Improved results in core Dutch businesses boost result
- Administration expenses lower across NN Group
- Double digit rise in sales compared to the first quarter 2013 and the previous quarter
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ING Group recorded an underlying net result of EUR 988 million in the first quarter of 2014, compared with EUR 1,170 million one year ago and EUR 493 million in the fourth quarter of 2013.
ING Group’s first-quarter results were driven by the strong performance of ING Bank and a substantial improvement in the results of NN Group’s ongoing businesses, particularly in the Netherlands. Commercial momentum was also robust across the Group. ING Bank recorded a significant increase in net lending, funded entirely with net deposit inflows that were attracted during the quarter. At NN Group, new sales, excluding currency effects, rose by double digits both compared to the first quarter 2013 and the previous quarter.
After taking into account the financial impact of the deconsolidation (in ING Group’s accounting records) of ING’s US insurance and investment operations, Voya Financial, and the changes to the Dutch closed defined benefit pension funds (their separation from ING Bank and NN Group’s accounts as part of an agreement to make them financially independent), ING recorded a EUR 1,917 million net loss for the quarter.
A strong start to 2014
Commenting on the first quarter results ING Group CEO Ralph Hamers said: “ING Group made a strong start to 2014, posting a first-quarter underlying net result of EUR 988 million while demonstrating good commercial growth. At the same time, we reached significant milestones in our restructuring plan and sharpened the strategic priorities of our businesses to ensure they remain sustainable and competitive.
In March, we presented our ‘Think Forward’ strategy for ING Bank, which outlines the actions we are taking to secure our future as a European banking leader, along with a focused set of financial targets for 2017. The core of our strategy is to create a differentiating customer experience. Our dedication to achieving high levels of customer satisfaction is evident in our most recent Net Promoter Scores, which indicate that ING Bank is number one relative to its competitors in the Netherlands, Germany, Italy, Poland, Spain and Australia, and is number two in all other core markets. We are proud of this recognition from our customers and will continue to serve them as best as we can. Our new Chief Operations Officer will certainly help to advance our efforts.
Continued capital generation at ING Bank enabled us to make a penultimate EUR 1.225 billion payment to the Dutch State in March, bringing the total paid to the State since 2008 to EUR 12.5 billion. The capital position of ING Bank remained strong, with a fully-loaded (Common Equity Tier 1) CET1 ratio of 10.1% at the end of the quarter. The first-quarter underlying return on IFRS-EU equity rose to 10.2%, within the range of our Ambition 2017 target.
ING Group made significant progress in finalising its preparations for the intended IPO of NN Group, announcing last week transactions to secure important investments from three firms. Today, we announce measures to strengthen the company’s standalone capital structure with a further EUR 850 million and confirm that the intended IPO will comprise only secondary shares.
In April, ING U.S. started operating under the name Voya Financial, Inc. representing a new era for the company. We have reduced our stake in Voya to approximately 43%, fulfilling the requirement to divest more than 50% of this business by year end. Although deconsolidating Voya brought us a step further in our strategic transformation, it also triggered a EUR 2,005 million after-tax loss. This impact, together with a EUR -1,059 million charge for successfully completing the Dutch closed defined benefit pension plan agreement and a EUR 202 million gain following the deconsolidation of ING Vysya Bank, led to the Group’s quarterly net loss.
As we look forward to the rest of this year, we remain committed to achieving our strategic priorities and advancing further towards the completion of our restructuring. I am confident that the work we are doing will strengthen our company for the long term and that we are well positioned to achieve our purpose of empowering people to stay a step ahead in life and in business.
Bank
ING Bank recorded a strong first-quarter underlying result before tax of EUR 1,176 million, reflecting lower risk costs and an increase in the net interest margin. Results were flat compared to the first quarter 2013, but they jumped 30.1% from the fourth quarter of 2013, which included the annual Dutch bank tax and additional restructuring charges.
The net interest margin strengthened to 1.50% from 1.45% in the fourth quarter of 2013, driven by higher interest results in Financial Markets, although overall Financial Markets results were down compared to the first quarter 2013.
Risk costs declined as economic activity improved. Operating expenses were 7.5% lower than in the previous quarter, but rose 1.9% from a year ago as the annual Belgian bank taxes were recognised in full in the first quarter of 2014.
ING Bank’s focus on serving its customers well resulted in EUR 8.3 billion of net deposits inflow, primarily generated by Retail Banking. Net lending to both retail and corporate clients rose significantly by EUR 5.1 billion, in line with ING Bank’s Ambition 2017, in which ING aims to grow its lending book by 4% per year and for this to be primarily funded by customer deposits.
ING is committed to supporting its customers’ financial needs and will continued to grow lending though the economic recovery.
ING Bank remains well capitalised. Its CET1 ratio remained strong at 10.0%, but it declined from a comparable 10.8% at year-end 2013, mainly due to the separation of the Dutch pension fund in order to make it financially independent, and because of a dividend payment to ING Group for the penultimate repayment in March 2014 on the Dutch State aid received in October 2008. On a fully-loaded basis (taking into account the full impact of the CRD IV- Basel III agreement in a EU legal framework - capital buffer requirements), the CET1 ratio was 10.1%.
Customer Focus
During the quarter, ING launched new customer- centric initiatives. After a successful pilot in 2013, ING Netherlands launched “contactless payments”, whereby customers can transact on amounts up to EUR 25 by simply positioning their debit card alongside the payment terminal. Customers do not have to type in a PIN code, making payments easier and faster. ING Netherlands plans to roll out this service to all debit card customers and has already issued 4 million new bank debit cards with this functionality in 2014.
In Turkey, ING Bank introduced an innovative training programme to support family-owned businesses. The ‘Generation to Generation Family Business Management Academy’ trains participants on how to enhance business competitiveness and sustainability, and to strengthen their companies’ financial policies and governance. The initiative follows similar programmes launched by ING Bank in Belgium and in the Netherlands.
In Poland, ING Bank Śląski was named the best bank in terms of customer service by finance website Money.pl. The bank also received the highest Net Promoter Score (NPS) in a field of seven Polish banks in the first quarter of 2014. The NPS is a measure of customer satisfaction.
NN Group
The first quarter operating result for NN Group’s ongoing business was EUR 274 million, a significant improvement compared with the first quarter 2013 and the previous quarter. The higher result was driven by solid results in the core Dutch businesses and lower expenses across the organisation. Commercial momentum was strong, with sales rising 20.6% compared to the first quarter 2013 and 53.0% from the previous quarter, excluding currency effects.
Total first-quarter administrative expenses for the ongoing business were EUR 437 million, down 5.0% from a year ago. Expenses declined despite higher NN Bank expenses as a result of the partial transfer of WUB to NN Bank, which added 369 FTEs and EUR 15 million of expenses in the current quarter. Excluding currency effects and the partial transfer of WUB to NN Bank, expenses for the ongoing business fell 7.1%, demonstrating the impact of the transformation programme in the Netherlands and strong cost control across all business lines. Expenses for the ongoing business declined 5.0% from the fourth quarter of 2013, excluding currency effects, mainly due to lower IT, project and marketing expenses.
Total new sales (APE) at NN Group were EUR 439 million, up 20.6% from a year ago, excluding currency effects. Sales grew 20.0% in Japan Life driven by an increased demand for financial planning products. In Insurance Europe, sales grew 14.8% year compared to the first quarter 2013 due to higher life insurance sales across the region. APE rose 28.4% in Netherlands Life driven by higher pension renewals. Compared with the previous quarter, new sales grew 53.0% excluding currency effects, fuelled by seasonally higher pension contracts renewals in the Netherlands and seasonally higher sales in Japan Life.
The result before tax of NN Group (includes the impact of non-operating factors) was EUR - 372 million, which was largely due to a EUR -541 million special item related to the impact of the agreement to make ING’s closed Defined Benefit Pension Plan in the Netherlands financially independent.
Customer Focus
In the first quarter, NN Group introduced a financial planning tool called LifeMappr (www.lifemappr.com) for the Romanian and Dutch markets. LifeMappr combines information about a user on social media sites such as Facebook and LinkedIn with information from NN Group’s actuarial database as well as publicly available statistics (such as average retirement age, salary and life expectancy) to enable the user to visualise their financial future. It also flags areas where the user might need financial planning. The visualisation is in the form of a timeline, a short video and a financial infographic.