Key Points

Key restructuring milestone achieved

“ING posted a strong set of commercial and financial results during the second quarter of 2015,” said Ralph Hamers, CEO of ING Group. “We also achieved a key milestone in our restructuring by reducing our stake in NN Group to 37.6% and deconsolidating it from our accounts, thereby ending restrictions on price leadership and acquisitions.”

“ING Bank’s second-quarter underlying result before tax was EUR 1,601 million, up 25.3% year-on-year, driven by robust loan and deposit growth and lower risk costs. Positive CVA/DVA adjustments amounted to EUR 208 million, but were largely offset by non-recurring impacts in income relating to mortgage refinancing. On a sequential basis, the underlying result before tax was 3.6% lower than in the first quarter of 2015.”

“Our businesses across the Bank continued to generate strong commercial growth and attract new customers. Total customer deposits increased by EUR 9.3 billion in the quarter, primarily through Retail Banking, where growth was recorded in all segments. During the second quarter, we extended EUR 8.7 billion of net lending in our core lending businesses. We made significant progress on building sustainable balance sheets in key Challengers & Growth Markets such as Germany and France. Germany, in particular, demonstrated strong momentum in its lending capabilities, with funded Commercial Banking assets increasing nine-fold over the past five years to reach EUR 10 billion, and consumer lending growing by EUR 1 billion in less than two years to EUR 5 billion.”

“During the first six months of 2015, ING gained over 600,000 new individual customers and established approximately 250,000 primary relationships. We take great pride in supporting our customers’ banking needs and providing them with a differentiating customer experience. In the second quarter, we continued to expand our digital offerings for retail customers and also identified new ways to facilitate the financing needs of small companies. For example, in Belgium we partnered with Koalaboox, an online financial services provider, to offer small companies cash management and invoicing tools to help them manage their financial position. And by using data mining in Poland, we have been able to provide pre-approved loans to selected entrepreneurs, which has improved the customer experience and made the lending process more efficient.”

“ING Bank performed well against its Ambition 2017 targets during the first half of 2015. The underlying return on IFRS-EU equity increased to 11.8% and our capital position strengthened further as we continued to allocate our resources efficiently. ING Group’s fully-loaded CET 1 ratio increased to 12.3% at the end of the second quarter, following the further sell-down and subsequent deconsolidation of NN Group. ING Bank’s fully-loaded CET 1 ratio was 11.3%, roughly stable quarter-on-quarter, reflecting 30 basis points of capital generation and a EUR 1.2 billion capital upstream to Group.”

“Today, we are pleased to announce an interim cash dividend of EUR 0.24 per ordinary share, amounting to EUR 922 million, or 40% of the underlying net profit of the first half of 2015. We remain committed to returning value to shareholders and reiterate our intention to pay a full-year dividend of at least 40% of ING Group’s total annual net profits. The Board’s final decision will be made at year-end and will be subject to financial and strategic considerations, and future regulatory developments.”

“ING’s performance during the first half of 2015 demonstrates consistent delivery on our Think Forward priorities, to which we hold ourselves accountable every day. Looking forward to the rest of this year, I am confident that our franchise is well positioned to empower our customers around the world while delivering sustainable returns to our shareholders.”

Income higher

Total underlying income rose by 10.3% compared to the second quarter last year, but fell 3.8% on the first quarter, when income was boosted by high capital gains on debt and equity securities and positive results from hedging.

Expense vigilance

ING remained vigilant on costs while continuing to invest in our strategic priorities and in business growth. Underlying operating expenses rose 5.7%, largely due to higher regulatory costs (notably in Belgium), business growth in Industry Lending and the Retail Challengers & Growth Markets, as well as higher IT investments in Retail Netherlands to improve the customer experience and enhance operational excellence. These were partly offset by the benefits from the ongoing cost-savings initiatives.

Compared with the first quarter of 2015, which included substantially higher regulatory costs partly offset by a release from a legal provision, expenses fell 1.1%. The second-quarter underlying cost/income ratio for ING Bank was 53.2%, down from 55.5% in the second quarter 2014.

The current cost-savings programmes in place at ING Bank and announced since 2011 are expected to reduce total annual expenses by EUR 1.2 billion by 2017 and by EUR 1.3 billion by 2018. Of these targets, EUR 746 million of cost savings have already been achieved.

Strong commercial momentum

Commercial growth remained robust as ING continued to support customers’ financial needs throughout the quarter.

Net growth in the core lending business (excludes loans in run-off portfolios such as WestlandUtrecht Bank and Lease as well as sales of mortgage portfolios) was EUR 8.7 billion. Residential mortgages grew by EUR 1.4 billion as a small decline in Retail Netherlands was more than offset by growth in most other countries.

Net growth in other customer lending in the core lending business was EUR 7.3 billion: Retail Banking reported net growth of EUR 2.9 billion, which was generated outside of the Netherlands, while net growth at Commercial Banking was EUR 4.7 billion, driven mainly by growth in Structured Finance and General Lending & Transaction Services.

In Retail Banking net customer deposits grew by EUR 6.7 billion in the second quarter, and growth was recorded in all segments. In Commercial Banking net deposits grew by EUR 1.0 billion.

Risk costs lower

Risk costs (addition to loan loss provisions) were lower compared to the second quarter last year and the previous quarter, and the non-performing loans ratio started to decline in the second quarter.

Risk costs for Dutch mortgages fell compared to the second quarter last year, but remained stable compared to the first quarter 2015. Risk costs for business lending in the Netherlands continued to decline gradually, but are still elevated.

Most businesses, with the exception of Retail Netherlands, are now operating close to the longer-term average as the overall economic environment gradually improves.

Customer focus

ING’s customer promise is to be clear and easy, to be available anytime and anywhere, to empower people and to keep getting better.

We are expanding our digital services to ensure clients can do their banking anytime and anywhere, in a safe and easy way. For example, an increasing number of our customers, especially in the Netherlands, Italy and Spain, are using their smartphones to make contactless payments. Being able to conduct transactions with just a smartphone is convenient and easy as it eliminates the need to carry bank cards and type in access codes.

In the second quarter, ING in Romania introduced the ‘ING Bazar’ mobile wallet for smartphones.
This is a 3-in-1 solution with payment capabilities, merchant loyalty cards and targeted offers from retailers. Combining all of these features in one application saves customers time and money.

ING is making innovative digital solutions available to small companies as well. For instance, ING Belgium has partnered with Koalaboox, an online financial services provider, to offer small companies tools that help them manage their financial position. Koalaboox provides real-time information on a company’s key financial data and offers a feature to process invoices and payments. In Poland, ING uses data mining to provide entrepreneurs with pre-approved loans. Almost 75,000 clients in Poland have already been serviced this way.

Accelerating sustainable transitions

ING believes that financial services play a significant role in creating a fairer and greener economy. We can facilitate this transition by financing projects that accelerate our clients’ own sustainable transition and by supporting clients who develop solutions to broader environmental and social challenges.

In the second quarter, ING acted as documentation arranger and joint bookrunner for the inaugural EUR 1 billion green bond issuance of TenneT Holding B.V., the Dutch electricity transmission system operator. ING has been a member of the ‘Green Bond Principles’ initiative since 2014. The TenneT Green Bond is a prime example of ING’s commitment to support clients and transactions that deliver practical climate solutions.

ING also updated its Environmental and Social Risk (ESR) Framework with new policies for coal-fired power and coal mining. Our new ESR policy encourages ING’s clients to diversify their power production activities. To support this, ING will closely monitor its lending activity to clients who rely almost exclusively on coal as a fuel source, but are located in countries where alternative fuel sources are widely available. In addition, ING introduced restrictions on the financing of lignite-fired power plants and the mining of lignite, one of the most polluting fossil fuels.

ING’s focus on financing sustainable solutions continued in the second quarter with participation in the following deals:

Awards

ING also won several awards for customer service excellence. In the Netherlands, a poll of 2,700 businesses in the annual Incompany 500 survey found ING to be the best business partner and most attractive financial institution. In Poland, ING Bank Slaski topped the ‘Internet banking and mobile applications’ category of the “Wprost Wallets” 2015 awards, hosted by Wprost magazine. And at the annual Euromoney Awards for Excellence, ING in Western Europe, Belgium and the Netherlands was again named best bank.

*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.

**ING Group now consists primarily of its banking operations, so therefore the underlying results of ING Bank are effectively also those of ING Group, the major difference being that ING Group contains the net results of the legacy Insurance business, NN Group.

For more information about ING Group’s results, please go to the press release and the presentation in the Investor Relations section of ing.com.