ING reports on a solid fourth quarter
At a glance
ING in 2013
Underlying net profit
ING Group up 22.2% to EUR 3,255 million from EUR 2,664 million in 2012
Underlying profit before tax
Bank up 21.6% to EUR 4,323 million from EUR 3,554 million in 2012
Result before tax
Insurance down 82.6% to EUR 83 million from EUR 478 million profit in 2012
ING in the fourth quarter
Underlying profit before tax
Bank up 219.4% to EUR 904 million from the fourth quarter 2012 but down 18.0% from the previous quarter
Result before tax
Insurance EUR 428 million loss compared to a EUR 448 million profit in the fourth quarter 2012 and a EUR 685 million loss in the previous quarter
--------------------------------------------------------------------------------------------------------------------------------------------
Key points
Bank
- Underlying result up on fourth quarter 2012 on higher interest margin
- Dutch Bank Tax and restructuring costs dampen result compared to third quarter
- Cost containment programmes continue to have impact
- Risk costs down on fourth quarter 2012 but up on previous quarter
Insurance
- Operating result ongoing business up 13.2% on fourth quarter 2012
- Higher investment income in Netherlands Life and lower expenses boost result
- New sales remained robust
- Insurance/IM committed to making customers’ interests a priority in all business activities
--------------------------------------------------------------------------------------------------------------------------------------------
ING Group’s 2013 underlying net result showed strong improvement compared with the previous year, rising 22.2% to EUR 3,255 million. The improvement was driven by a solid performance at ING Bank, which recorded a 21.6% increase in underlying pre-tax results, driven by a strengthening of the interest margin and strong cost control. The absence of de-risking losses in 2013 and a positive swing in CVA/DVA* impacts also supported results.
At ING Insurance, the operating result for the ongoing business rose 6.4% from 2012, driven by higher investment income in Netherlands Life, lower expenses reflecting the impact of the transformation programme and lower funding costs.
For the fourth quarter of 2013, ING Group posted an underlying net result of EUR 405 million, primarily attributable to ING Bank.
The Executive Board will not propose to pay a dividend over 2013 at the annual General Meeting in May 2014.
A successful year
Commenting on the fourth quarter results ING Group CEO Ralph Hamers said: “ING Group had a successful year in 2013, delivering an improved financial result while making significant progress on our transformation. We reported a full year underlying net profit of EUR 3,255 million, up 22.2% from 2012. The improvement was driven by a solid performance at ING Bank, which recorded a 21.6% increase in underlying pre-tax results, as well as an improved operating result for the ongoing business at ING Insurance which rose 6.4% from 2012.”
“We have also kept up the momentum on our transformation program in the fourth quarter, during which we resolved the divestment of our Asian Insurance and Investment Management businesses, reduced our stake in ING U.S. to 57%, and lowered our holding in SulAmérica. We have strengthened the capital position of ING Insurance ahead of its intended IPO in 2014. We also reduced our State support by paying another tranche of core Tier 1 securities in November, and by unwinding the IABF in December 2013. We are now within the final phase of our restructuring and have started 2014 as a simpler, stronger and more sustainable company.”
“While working diligently to strengthen our businesses for their independent futures, we have consistently placed our highest priority on customer-centricity and have gained more customers along the way. ING-DiBa, for example, welcomed its 8 millionth customer in 2013 and is the third largest retail bank in Germany by number of customers. In Spain, ING opened its millionth payment account, eight years after the first account was opened there. Our customers’ use of internet and mobile banking is expanding rapidly and we now have around 3 million mobile banking customers in 14 countries. We’re proud that customers choose to do business with us.”
“ING Insurance moved forward in defining its independent future. Its new ‘NN‘ brand was launched in October and the segmentation of ING Insurance was aligned to better reflect its businesses. The fourth-quarter operating result for the ongoing business of ING Insurance was EUR 215 million, primarily reflecting improved performance in Netherlands Life. We have taken measures in the fourth quarter of 2013 as well as in early 2014 to fortify the capital position of ING Insurance. As
a result, the IGD and NN Life solvency ratios increased sharply and local entities are currently adequately capitalised.”
“Preparations for the base case IPO are on track and we intend to go to market this year, assuming conditions are favourable.”
“For 2014, I am confident that we are well positioned to achieve our strategic objectives and that we will continue to make progress in completing the restructuring, while keeping our customers at the heart of everything we do.”
Bank
In 2013, ING Bank’s underlying result before tax was EUR 4,323 million, up 21.6% on EUR 3,554 million in 2012.
ING Bank posted a solid fourth-quarter underlying result before tax of EUR 904 million, reflecting an increase in the interest margin to 1.45% and despite seasonally lower activity in Financial Markets. The result on the unwinding of the Illiquid Assets Backup Facility (IABF) following the agreement with the Dutch State, which closed in December 2013, also supported the fourth quarter. Risk costs remained elevated and increased slightly versus the previous quarter, but they declined 4.9% from a year ago.
Expenses rose 10.9% on the previous quarter, as the fourth quarter included the annual Dutch bank tax and additional restructuring charges in the Netherlands. However, expenses were flat compared to the fourth quarter in 2012 and declined excluding restructuring charges, reflecting the impact of ongoing cost-containment programmes.
ING Bank attracted a EUR 2.4 billion net inflow of funds entrusted during the fourth quarter. Commercial Banking generated EUR 2.6 billion of net inflows, driven by seasonally higher deposits from asset managers and corporate treasuries. Retail Banking reported a marginal net outflow in funds entrusted of EUR 0.2 billion.
ING Bank continued to demonstrate progress towards Ambition 2015. The cost/income ratio for the full year improved to 56.8% from 60.3% in 2012 and the full-year underlying return on IFRS-EU equity rose to 9.0%, within reach of our 2015 target. The year-end capital position was strong with a core Tier 1 ratio of 11.7% and a pro-forma fully-loaded CRD IV core Tier 1 ratio of 10.0%.
Customer focus
During the quarter, ING was named ‘Bank of the Year 2013’ in Western Europe, the Netherlands and Belgium by The Banker, a global financial magazine. The Banker praised ING for its continued investments to optimise its online and mobile banking. This has enabled ING to deliver better customer service and be more competitive in an increasingly digitalised and regulated environment.
ING Direct Australia’s new mobile app won a 2013 Mobile Award, or ‘Mobie’ in the Financial Information and Tool category of the Australian Mobile Awards. ING Vysya Bank in India was named safest banker in the mid-size category by Indian newspaper, The Sunday Standard.
ING Vysya Bank launched a new mobile banking app, one that could increase the Bank’s reach into untapped markets including remote cities and rural areas. Customers in remote and other areas will now be able to use the app to pay utility bills, transfer funds to other accounts, view mini-statements, request cheque books, stop payment of cheques, and locate the nearest ATM and branches. In Romania, a special mobile app ‘ING Pay’ was launched for contactless payments by smartphone.
ING continued to introduce innovative new services to make banking and finance easier for customers. In Poland, ING Bank Śląski introduced a commerce and auction platform called Aleo, that manages the purchasing and sales process for Polish businesses. Suitable for a variety of industry sectors, including the service industry, manufacturing, and commerce, Aleo streamlines work and saves time. It also makes companies more cost effective and improves their selling capacity.
Insurance
In 2013, ING Insurance recorded a EUR 83 million profit before tax compared to a EUR 478 million profit in 2012. As announced in November 2013, the result for 2013 was affected by a EUR 575 million one-off charge to restore reserve adequacy for the Japan Closed Block Variable Annuity (VA) business.
The fourth-quarter operating result for the ongoing business of ING Insurance improved to EUR 215 million, up 13.2% from a year ago, or 20.0% higher excluding currency effects. The improvement was mainly driven by a higher operating result in Netherlands Life as well as lower funding costs and corporate expenses, which were partly offset by lower P&C (Property and Casualty) results in Netherlands Non-Life and a lower result for Insurance Europe.
The fourth-quarter result before tax was EUR -428 million, primarily reflecting the one-off charges to restore the reserve adequacy of the Japan Closed Block VA to the 50% confidence level (due to the change in segmentation) and a change in the market interest rate assumption to further align the accounting and the hedging for the separate account pension business in Netherlands Life.
Total new sales (APE) at ING Insurance were EUR 292 million, up 11.9% compared to the fourth quarter and 10.6% higher than in the third quarter, on a constant currency basis. Compared with the fourth quarter of 2012, APE at Japan Life grew 30.0% (at constant currencies) driven by an increased demand for financial planning products. Sales in Netherlands Life jumped 56.4%, mainly driven by accelerated conversion of group pension contracts towards a new defined benefit pension product. Compared to the third quarter, the growth in total sales at ING Insurance was primarily attributable to higher sales in both Netherlands Life and Insurance Europe, partially offset by seasonally lower sales in Japan Life.
Total fourth-quarter administrative expenses for the ongoing businesses were EUR 462 million, down 0.6% from a year ago, despite higher pension costs and higher NN Bank expenses. The latter was the result of the partial transfer of WUB to NN Bank on 1 July 2013, which added 369 FTEs and EUR 18 million of expenses in the fourth quarter. Excluding currency effects, the impact of the partial transfer of WUB to NN Bank and the higher pension costs, administrative expenses for the ongoing businesses fell 6.8%, demonstrating the impact of the transformation programme in the Netherlands and strong cost control across all business lines.
Customer focus
ING Investment Management (IM) is committed to investing responsibly and delivering customer-oriented solutions. In the fourth quarter, ING IM launched a new website that describes in more detail how ING IM integrates environmental, social and governance (ESG) criteria into its overall investment process (www.ingimresponsibleinvesting.com). ING IM also organised a series of “Demystifying Responsible Investing” seminars for institutional investors. Both initiatives underscore how ING IM is stepping up efforts to demonstrate to its customers the value of ING’s responsible investment practices.
In December 2013, the Dutch Association of Investors for Sustainable Development (VBDO) included NN in its annual “Benchmark Responsible Investment by Insurance Companies”. NN was ranked 6th out of the 29 companies included in the benchmark study. This achievement was based on the efforts of ING IM, NN’s primary asset manager, to embed ESG factors into our investment process, including exerting influence on companies through voting.
ING continuously seeks to improve its offerings to meet changing customer demands. In this context, Dutch insurance subsidiary NN became the first Dutch financial-services company to introduce the “mortgage commitment.” This is an innovative new service that offers first-time home buyers an upfront mortgage commitment from NN based on how much they can borrow. In the Netherlands, an offer on a house is typically contingent upon the potential buyers being able to arrange the funding. Having a mortgage commitment in advance provides clarity on funding and gives first-time home buyers confidence as they negotiate the potential purchase of a house.
ING regularly uses feedback from its customers to improve its products and services. During the fourth quarter, Nationale-Nederlanden in the Netherlands became the first insurance company, to receive a commendation from the organisation ‘Gouden Oor’ (Golden Ear) for meeting high quality standards in the way ING handles customer feedback. Gouden Oor is an independent association in the Netherlands that measures companies’ implementation of the sharpened ISO 9000 criteria for customer centricity and continuous quality improvement.
ING Life Poland was named ‘Most Friendly Insurance Company 2013’ by Poland’s leading financial magazine Gazeta Bankowa. It was the third time that ING Life Poland has won this award.
*CVA/DVA are adjustments to certain asset and liability items in the balance sheet that are measured at market value. CVA (on the asset side) refers to changes in counterparty credit risk, which are related to changes in the market value of derivative assets. DVA refers to changes in the market value of derivative liabilities and ING’s funding liabilities that are measured at fair value, resulting from changes in ING’s own credit spreads.