ING Direct 2004 Annual Report Download - page 31

PROFIT AND LOSS ACCOUNT
in millions of euros 2004 2003 change comparable*
Operating income 1,705 1,045 63.2% 65.9%
Operating expenses 1,184 829 42.8% 44.9%
Additions to loan loss
provisions 89 65 36.9% 39.1%
Operating profit before tax 432 151 186.1% 193.9%
* Comparable change = excluding foreign exchange differences, acquisitions and
divestments, and one-offs.
KEY FIGURES
2004 2003
After-tax RAROC 11.3% 6.1%
Economic capital (in billions of euros) 2.4 1.7
ING Group Annual Report 2004 29
ING DIRECT
ING Direct showed strong profit growth in 2004, contributing
increasingly to overall Group profit. Business continued to
grow strongly, in new customers worldwide, in funds entrusted
and in retail mortgage lending, ING Direct’s second core
product. ING Direct’s cost base was one of the lowest in the
market. Brand awareness and customer satisfaction – already
at high levels – continued to improve. All of the business units
of ING Direct rank first in their direct banking markets in terms
of total retail funds entrusted.
FINANCIAL DEVELOPMENTS
Operating profit before tax from ING Direct rose to EUR 432
million in 2004 compared with EUR 151 million in 2003,
a rise of 186%, as it continued to attract new customers and
increase the amount of funds entrusted. ING Direct consists of
eight business units which are active in nine countries. Each
country has its own business unit except for Austria which is
part of ING Direct’s German unit (ING DiBa). All eight business
units are profitable, except the latest start up in the United
Kingdom, which began operations in May 2003 and is still
incurring the usual start-up losses. France and Italy moved
into profit, compared with losses in 2003, and Canada and
Australia, already very successful, produced double-digit profit
growth. The United States, Spain and Germany posted strong
profit increases.
Operating income increased 63.2% to EUR 1,705 million,
driven by a 62.1% jump in the interest result, mainly triggered
by the continued growth in funds entrusted. Since year-end
2003, total funds entrusted grew by EUR 46.0 billion, or
46.3%, to EUR 145.4 billion. In addition to attracting savings,
ING Direct also offers mortgages. Growth in mortgage lending
helped to boost income as well. At the end of 2004, ING Direct
had a total mortgage loan portfolio of EUR 33.1 billion, an
increase of EUR 12.1 billion (or 57.6%) from the end of 2003.
Operating expenses at ING Direct increased 42.8% to
EUR 1,184 million as a result of strong growth, higher
marketing costs and expenses to handle continued growth in
the savings business, as well as investing in the expanding
mortgage business. However, ING Direct has a low operational
cost base, due to its focus on a limited, transparent product
range, the use of standardised, state-of-the-art IT-systems, the
absence of a branch network and its low acquisition costs per
customer. Moreover, its cost/income ratio improved to 69.4%
in 2004 from 79.3% the previous year. The addition to the
provision for loan losses developed in line with the strong
growth of the business, reaching EUR 89 million in 2004
compared with EUR 65 million in 2003. Risk costs equalled
22 basis points of average credit-risk-weighted assets, down
from 26 basis points in 2003.
THE WORLD’S LEADING DIRECT BANK
OPERATING PROFIT BEFORE TAX
in millions of euros
ING Direct 6% 432
Rest of ING 94% 6,987