ING Direct 2004 Annual Report Download - page 158
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156 ING Group Annual Report 2004
RISK CLASSES: ING BANK PORTFOLIO, AS % OF TOTAL OUTSTANDINGS(1)
2004 2003
AAA (1) 11.8% 9.1%
AA (2-4) 21.9% 23.2%
A (4-7) 10.9% 14.1%
BBB (8-10) 22.5% 10.6%
BB (11-13) 29.1% 39.4%
B (14-17) 2.3% 1.9%
Watch / Problem Grade (18-22) 1.5% 1.7%
100.0% 100.0%
(1) Based on lending (wholesale and retail), financial markets and investment activities.
The growth in AAA (1) outstandings is largely attributable to the conservative investment policy and growth in assets at ING
Direct. There has also been a significant shift from BB (11-13) to BBB (8-10) ratings resulting from the introduction of improved
rating models and a more complete coverage of the portfolio with these models, removing conservative default ratings.
RISK CONCENTRATION: ING BANK PORTFOLIO, BY ECONOMIC SECTOR
in percentages 2004 2003
Construction, Infrastructure & Real Estate 4.3% 5.1%
Financial Institutions 39.6% 39.4%
Private Individuals 28.9% 23.8%
Public Administration 8.6% 8.4%
Services 2.1% 2.5%
Other 16.5% 20.8%
Total 100.0% 100.0%
The credit portfolio is under constant review. A formal analysis takes place quarterly to determine the provisions for possible
bad debts, using a bottom-up approach. Conclusions are discussed by the IPC, which advises the Executive Board on specific
provisioning levels. ING Bank identifies as impaired loans those loans for which it is probable, based on current information
and events, that the principal and interest amounts contractually due will not be collected in accordance with the contractual
terms of the loan agreements.
In 2004, ING added EUR 465 million to the provision for loan losses, compared with EUR 1,125 million in 2003. The addition
equalled 18 basis points of average credit-risk-weighted assets in 2004, compared with 46 basis points in 2003. The significant
reduction in additions to the provisions were the result of portfolio credit quality improvements registered in ING’s core markets
of Netherlands, Belgium and Poland. New problems in Germany were limited and the existing problem portfolio in Germany
showed significant improvements. ING is of the opinion that its loan-loss provisions as of 31 December 2004 are adequate to
absorb losses from ING Bank’s credit risk taking activities.
ADDITIONS TO THE PROVISION FOR LOAN LOSSES ING BANK (BASED ON COUNTRY OF THE BORROWER)
2004 2003
Netherlands 197 352
Belgium 56 114
Rest of Western Europe 126 410
Central and Eastern Europe 70 94
North America 55 194
Latin America -23 -18
Asia -15 -31
Other -1 10
465 1,125
RISK MANAGEMENT
(continued)
2.3
ADDITIONAL FINANCIAL
INFORMATION