ING Direct 2006 Annual Report Download - page 10

Cees Maas vice-chairman and CFOFinancial highlights
ING again posted strong results in 2006, driven
by solid top-line growth, improved returns,
sustained business momentum at our growth
engines and good performance in the mature
markets in which we operate. Costs remained
under control while we invested in new growth
opportunities. ING proposes to increase total
dividend by 12% to EUR 1.32 per share, to be
paid fully in cash.
In 2006, ING again posted a solid
increase in profi t. Total net profi t
rose by 6.7% to EUR 7,692 million.
Underlying net profi t, which is defi ned
as total net profi t excluding the impact
of divestments and special items, rose
by 24.3% to EUR 7,750 million. This
is the third consecutive year with a
growth in underlying net profi t of
more than 20%. Earnings per share
rose to EUR 3.57 from EUR 3.32.
Growth
ING’s three key growth engines continued
to show strong business momentum,
supported by profi table growth segments in
mature markets. The life insurance business
in developing markets showed strong sales,
refl ected in a rise of 14.4% in the value of
new business and of 31.5% in underlying
pre-tax profi t, compared with 2005. Sales of
US retirement services accumulation products
rose 35.2% and variable annuities were up
9.8% as the US business continues to focus
on meeting the needs of baby boomers as
they reach retirement. ING Direct increased
its underlying profi t before tax by 16.2%
to EUR 717 million and showed a good
operational performance in 2006. It attracted
almost three million new customers and
total own originated mortgages and funds
entrusted rose with EUR 20 billion and EUR
14 billion, respectively. Both fi gures exclude
currency effects and the divestment of
Degussa Bank. Growth in mature markets
is shown in our retail banking businesses,
where underlying profi t before tax rose by
6.4%, especially in the Netherlands and
Belgium, as well as at ING Real Estate, where
profi t before tax rose by 81%.
Our performance
Returns
Margins remained strong as ING focuses on
balancing growth and returns to maximise
value creation. Continued attention for
capital allocation and pricing discipline
led to a further increase in returns at
the banking operations. The underlying
after-tax Risk-Adjusted Return On Capital
improved to 20.4% from 19.1%, driven
by a strong improvement at Wholesale
Banking. Underlying economic capital
increased by EUR 1.0 billion to EUR 15.9
billion due to model refi nements as well as
continued growth at ING Direct and Retail
Banking. The internal rate of return on
new life insurance sales improved slightly
to 13.3%.
Execution
Improving the execution of the business
fundamentals is a priority for ING.
Operating expenses remained under
control, despite continued investments in
new growth initiatives. Recurring expenses
for the Group were up 2.4% in 2006,
excluding one-off items, currency effects
and expenses at the growth businesses of
ING Direct, ING Real Estate and Insurance
Asia/Pacifi c. The underlying cost/income
ratio within the bank improved to 63.6%
from 65.1% in 2005, showing the strong
cost containment. On the insurance side,
expenses to life premiums improved slightly
to 13.26% from 13.28% in 2005, while
expenses to assets under management
improved to 0.75% from 0.82%.
Dividend
At the Annual General Meeting of
Shareholders on 24 April 2007, ING will
propose a total dividend for 2006 of
EUR 1.32 per (depositary receipt for an)
ordinary share, up 12% from EUR 1.18
per (depositary receipt for an) ordinary
share in 2005. Taking into account the
interim dividend of EUR 0.59 made payable
in August 2006, the fi nal dividend will
amount to EUR 0.73 per (depositary receipt
for an) ordinary share to be paid fully in
cash. ING’s shares on Euronext will be
quoted ex-dividend as of 26 April 2007
and the dividend will be made payable
on 3 May 2007 (on the NYSE these dates
are 23 April 2007 and 10 May 2007,
respectively).
Taxes and net profi t
The effective tax rate increased to 19.2%
from 15.5% in 2005, when total profi t
included large tax-exempt gains on
divestments of Group companies. The
effective tax rate on underlying profi t
decreased to 18.8% from 23.4%.
Capital ratios
The debt/equity ratio of ING Group
improved to 9.0% compared with 9.4% at
1 January 2006, supported by growth in
capital and reserves. The capital-coverage
ratio for ING Verzekeringen N.V. increased
to 274% of EU regulatory requirements
at the end of December, compared with
255% at 1 January 2006. The Tier-1 ratio
of ING Bank N.V. stood at 7.63% at the
end of 2006, up from 7.32% at 1 January
2006, as growth in capital was only
partially offset by growth in risk-weighted
ING Group Annual Review 2006
8