Ing Groep N.v. · EURONEXT:INGA
Ing Groep — Q4 2011 Earnings Presentation
36 slides from Ing Groep's earnings presentation, Feb 9, 2012
Slide 1: Fourth Quarter 2011 Results
Fourth Quarter 2011 Results ING Full-Year 2011 underlying net profit increased to EUR 3,675 million Jan Hommen CEO Amsterdam - 9 February 2012 www.ing.com
Slide 2: ING Group posts higher full-year 2011 results despite challenging environment in 4Q11
ING Group posts higher full-year 2011 results despite challenging environment in 4Q11 ING Group 2011 underlying net profit rises 15.1% despite challenging environment in 4Q11 • FY 2011 net profit was EUR 5,766 mln, or EUR 1.52 per share, including divestments and special items Priority in 4Q11 was d
Slide 3: Full year 2011 underlying net profit rose 15.1% to EUR 3,675 mln
Full year 2011 underlying net profit rose 15.1% to EUR 3,675 mln Underlying pre-tax result Underlying pre-tax result Underlying net result Bank (in EUR mln) Insurance (in EUR mln) ING Group (in EUR mln) 2,205 5,738 1,297 1,558 4,740 3,675 314 3,192 1,269 -510 762 -1,072 2009 2010 2011 2009 2010 2011
Slide 4: Fourth quarter 2011 results impacted by impairments and de-risking
Fourth quarter 2011 results impacted by impairments and de-risking Bank Insurance Group % % % 4Q11 4Q10 Change 4Q11 4Q10* Change 4Q11 4Q10* Change Reported underlying result before tax 793 1,428 -44.5% -1,348 -873 n.a. -555 554 -200.2% Impairments Greek government bonds -133 -66 -199 Other impairmen
Slide 5: Government bond exposure to southern Europe substantially reduced
Government bond exposure to southern Europe substantially reduced Bank: Government bond exposure Insurance: Government bond exposure (in EUR bln)*, ** (in EUR bln)*, ** 1.7 1.7 1.2 0.9 0.8 0.9 0.9 0.5 0.4 0.4 0.3 0.2 0.2 0.1 0.1 0.1 Italy Spain Portugal Greece Italy Spain Portugal Greece B/S value 3
Slide 6: All capital ratios remained stable in 4Q11
All capital ratios remained stable in 4Q11 ING Bank core Tier 1 ratio ING Insurance Solvency I ratio* (in %) 10.0% 230 232 244 224 225 9.6% 9.4% 9.6% 9.6% 4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q11 2Q11 3Q11 4Q11 All capital ratios remain strong Regulatory capital US operating • The core tier 1 ratio remain
Slide 7: ING is making good progress on EC restructuring
ING is making good progress on EC restructuring Separation and preparation for the Delivering on EC restructuring Insurance divestment Action • Bank and Insurance/IM operationally split at the • Sell ING Direct USA Announced end of 2010 and operational disentanglement of US and EurAsia Insurance/I
Slide 8: Next priorities: State repayment & reduction of Group Leverage
Next priorities: State repayment & reduction of Group Leverage Progress 2011 State Repayment State Repayment: EUR 3 bln paid to the • Capital priorities for 2012 will continue with the State in 2011. To date EUR 7 bln principal + State repayment and further reduce the EUR 2 bln coupons and exit pr
Slide 9: Liability management action and Latin American Insurance sale resulted in reduction of leverage
Liability management action and Latin American Insurance sale resulted in reduction of leverage ING Group 31 Dec 2011 Gain on Liability ING Bank 34 Equity 47 management ING Insurance 23 CT1 securities 3 transaction reduced HybridsB 7 Core Debt 8 core debt by HybridsI 3 Hybrids 9 EUR 0.5 bln to EUR 7
Slide 10: ING Bank
ING Bank Fourth Quarter 2011 Results 10
Slide 11: Bank made an underlying return on equity of 10.0% in 2011
Bank made an underlying return on equity of 10.0% in 2011 Underlying income (EUR bln) Underlying cost/income ratio (%) 75% 68.4% 65% C/I ratio 59.6% 55.5% excl. market 16.8 15.9 impacts 13.0 55% Target: 50-53% was 55.4% in 2011 45% 2009 2010 2011 2009 2010 2011 Underlying risk costs in bps of averag
Slide 12: Fourth quarter 2011 results impacted by impairments and de-risking
Fourth quarter 2011 results impacted by impairments and de-risking Gross result 4Q11 4Q10 % Change Reported gross result 1,323 1,838 -28.0 Impairments Greek government bonds -133 Other debt and equity securities -81 -30 RED Development projects -55 -55 Goodwill impairment RED -32 De-risking Realised
Slide 13: Bank result in the fourth quarter impacted by additional de-risking measures and higher risk costs
Bank result in the fourth quarter impacted by additional de-risking measures and higher risk costs Bank results (in EUR mln) Addition to loan loss Underlying result Gross result* + provisions = before tax 1,979 1,648 1,838 1,428 1,639 1,269 1,467 1,323 1,031 793 -331 -369 -410 -437 -530 4Q10 1Q11 2Q
Slide 14: Net interest margin increased to 142 bps, mainly due to recovery of Financial Markets
Net interest margin increased to 142 bps, mainly due to recovery of Financial Markets results Interest margin by quarter* (in bps) Interest result (in EUR bln) 147 933 943 974 961 144 142 142 928 137 3.54 130 130 3.42 3.37 3.32 3.45 126 124 118 4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q11 2Q11 3Q11 4Q11 ING B
Slide 15: Funds Entrusted increased by EUR 8.1 bln in the fourth quarter
Funds Entrusted increased by EUR 8.1 bln in the fourth quarter Funds entrusted Retail Bank (EUR bln)* Residential mortgages (EUR bln)* 5.9 455.7 5.3 337.4 5.6 3.9 444.3 328.3 30/09/11 Net FX 31/12/11 30/09/11 Net FX 31/12/11 production production Funds entrusted Commercial Bank (EUR bln) Corporate a
Slide 16: Expenses down from 4Q10, but up from 3Q11 on higher marketing costs and impairments
Expenses down from 4Q10, but up from 3Q11 on higher marketing costs and impairments of software and goodwill Operating expenses (EUR mln) Underlying cost/income ratio (%) 103 78 47 120 64.3% 73 61.3% 58.9% 57.7% 54.8% 2,347 2,320 2,297 2,252 2,261 57.1% 58.2% 55.6% 53.6% 54.2% 4Q10 1Q11 2Q11 3Q11 4Q
Slide 17: The weakening economic environment is becoming evident in higher risk costs
The weakening economic environment is becoming evident in higher risk costs Additions to loan loss provisions • Net addition to loan loss provisions of (bps average RWA) EUR 530 mln or 65 bps of average RWA in 4Q11 83 • Excluding ING Direct USA, net additions to loan losses were 61 bps in 65 4Q11 61
Slide 18: Non-performing loan ratio remained stable at 2.0%
Non-performing loan ratio remained stable at 2.0% Risk cost per segment (EUR mln) NPLs: stable at 2.0%* 8% Total: 437 Total: 530 53 7% REF 48 65 34 33 6% 40 47 L&F 29 25 49 166 5% 99 SME 26 24 44 4% 17 US M 86 82 3% GL 3Q11 4Q11 2% Total SF US Mortgages NL Retail Mortgages 1% Other M Other Other Mor
Slide 19: ING's de-risking of the balance sheet has continued
ING’s de-risking of the balance sheet has continued Total investments (in EUR bln)* ING’s Real estate exposure (EUR bln) 126 4.0 114 22 16 2.9 3 3 2.0 50 49 0.4 1.0 29 28 2.0 1.5 22 18 31 Dec 2010 31 Dec 2011 31 Dec 2010 31 Dec 2011 pro-forma** Development projects Real Estate Corporate/FI bonds Rea
Slide 20: Quality of balance sheet improved in 4Q11
Quality of balance sheet improved in 4Q11 30 September 2011 31 December 2011 Optimisation EUR 974 bln EUR 961 bln • Balance sheet reduction in 4Q11 mainly due to lower trading 120 83 130 86 assets (repos and trading 47 87 38 72 securities) and amounts due from 151 149 136 139 banks 34 35 • The fundi
Slide 21: Change of Banking external reporting structure as of the first quarter of 2012
Change of Banking external reporting structure as of the first quarter of 2012 Quarterly Report Total Banking Retail Banking Commercial Banking Corporate Line • Netherlands • Industry Lending • Belgium • General Lending & • Germany Transaction Services • Rest of the world • Financial Markets • Real
Slide 22: ING Insurance
ING Insurance Fourth Quarter 2011 Results 22
Slide 23: Insurance operations showing progress on Ambition 2013 in a very challenging economic environment
Insurance operations showing progress on Ambition 2013 in a very challenging economic environment Life general account (EUR bln) and Life & IIM administrative expenses / investment spread*,** (bps) Life & IIM operating income** (%) 200 120 50% 44.2% 43.7% 106 150 100 45% 39.8% 90 40% 100 81 175 80 3
Slide 24: Insurance result strongly impacted by the EUR 1,099 mln charge for the US Closed Block VA
Insurance result strongly impacted by the EUR 1,099 mln charge for the US Closed Block VA Insurance result (in EUR mln) Operating Non-operating Underlying result result* + impact* = before tax* 689 671 563 428 511 527 -83 -18 -36 478 397 -1,270 -873 -1,348 -1,826 4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q11 2
Slide 25: Investment spread on a four-quarter rolling average increased to 106 bps
Investment spread on a four-quarter rolling average increased to 106 bps Life and ING IM operating income, 4Q11 Investment spread (in bps) Life GA 10% 1% 121 25% 110 106 EUR 1,734 93 93 103 102 mln 99 90 92 64% Investment margin 4Q10 1Q11 2Q11 3Q11 4Q11 Fees and premium-based revenues Technical marg
Slide 26: Fees and premium-based revenues decreased primarily due to lower fee income
Fees and premium-based revenues decreased primarily due to lower fee income Life Insurance & ING Investment Management (IM) Fees and premium-based revenues Technical margin (in EUR mln) (in EUR mln) 514 509 483 549 457 260 199 194 171 590 688 629 658 646 136 4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q11 2Q11 3
Slide 27: Life & ING IM administrative expenses/operating income ratio was 41.8%
Life & ING IM administrative expenses/operating income ratio was 41.8% Life & IM administrative expenses* Life & IM administrative (EUR mln) expenses/operating income ratio* (%) 60% 762 710 715 707 725 50% 43.4% 40.5% 41.8% 39.6% 40% 37.7% 2013 target of 35% 30% 20% 4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q1
Slide 28: Underlying result strongly impacted by charge for US Closed Block VA and market volatility
Underlying result strongly impacted by charge for US Closed Block VA and market volatility Underlying pre-tax result 4Q11 (in EUR million) Operating result 478 US Closed Block VA assumption changes -1,099 Losses on hedges to protect regulatory capital* -348 Realised gains/losses from de-risking and
Slide 29: US Closed Block VA assumption changes
US Closed Block VA assumption changes Fourth Quarter 2011 Results 29
Slide 30: US Closed Block VA Assumption Change Recap
US Closed Block VA Assumption Change Recap • As announced in December, ING conducted a comprehensive assumptions review for the Insurance US Closed Block Variable Annuity (VA) business during the fourth quarter resulting in a EUR 1,099 mln earnings charge • The review included both pre-crisis and po
Slide 31: Actions Taken in 2010 and 2011 have Strengthened Balance Sheet and Increased Transparency in our Closed Block VA
Actions Taken in 2010 and 2011 have Strengthened Balance Sheet and Increased Transparency in our Closed Block VA Objective Actions Taken Impact on Future Results 1. Improve closed block VA block became a separate • Strengthened VA balance sheet transparency business line • Improved future earnings
Slide 32: US Closed Block VA largely consists of Guaranteed Minimum Income and Withdrawal Benefits
US Closed Block VA largely consists of Guaranteed Minimum Income and Withdrawal Benefits As of 31 Dec 2011 (in EUR billion) Living Benefits Hedging Account Value IFRS Reserve Target Market Risk Hedged Guaranteed Minimum 11.3 1.0 Economic Claims Delta (Equity) Income Benefit Guaranteed Minimum 11.7 2
Slide 33: US Closed Block VA earnings volatility follows from hedges focused on protecting regulatory capital
US Closed Block VA earnings volatility follows from hedges focused on protecting regulatory capital Estimated IFRS-EU earnings sensitivities to market movements during 1Q2012 In EUR million Equity Market Baseline is 31 Dec 2011 -25% -15% -5% +5% +15% +25% Earnings sensitivity before RAT Policy Impac
Slide 34: Wrap up
Wrap up Fourth Quarter 2011 Results 34
Slide 35: Wrap up
Wrap up ING Group 2011 underlying net profit rises 15.1% despite challenging environment in 4Q11 • FY 2011 net profit was EUR 5,766 mln, or EUR 1.52 per share, including divestments and special items Priority in 4Q11 was de-risking and capital preservation as sovereign debt crisis deepened • Group p
Slide 36: Disclaimer
Disclaimer ING Group’s Annual Accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (‘IFRS-EU’). In preparing the financial information in this document, the same accounting principles are applied as in the 3Q2011 ING Group Interim Acco