ING Direct 2007 Annual Report Download - page 24

Underlying profit before tax rose
6.6% to EUR 2,062 million. Strong
growth in most products helped
offset the impact of challenging market
conditions, with persistent inverse yield
curves and intensified competition for retail
savings. The retail banking business in the
Netherlands rose 9.8%, with volume
growth in almost all products. Investments
continued to grow the business in Poland,
India, Romania and our Private Banking
activities in Asia. The underlying risk-
adjusted return on capital (RAROC) after
tax from Retail Banking rose to 39.5%.
Retail Banking operates in the mature
markets of the Benelux and high-growth
markets of Central Europe and Asia. Across
these regions, we continued to address
successfully the various trends affecting the
retail banking business: consumer power,
globalisation, growing internet usage, and
the rapid expansion of a middle class
needing advice on investment products.
Efficiency in mature markets
In the Benelux, we are concentrated on
increased efficiency by consolidating
businesses, optimising distribution channels
and the transition towards an ‘internet-first,
advice when needed’ model. Highlights
included the announcement in May that
Postbank and ING Bank will join forces,
creating a Dutch bank with over 8 million
retail and 600,000 business clients, while
ING Belgium will implement a new branch
service concept focused more on internet
banking and automated cash services.
Focus on fast-developing markets
In Central Europe and Asia, Retail Banking’s
strategy is both to expand in existing
markets and enter new high-growth
markets. The intention over the coming
three years is to grow the contribution
of growth markets to retail banking profit,
by leveraging the strengths of our products,
services and expertise in areas such as
direct banking – a strategy that will entail
substantial investment.
Highlights here include continued
successful progress in Poland and Romania,
where we saw rapid growth in client
numbers and the further roll-out of our
pioneering automated Self’Bank branches.
In India, ING Vysya Bank obtained
Retail Banking performed well in 2007,
particularly in the key product areas of
mortgages and savings. Important steps
were taken to improve efficiency and drive
growth, and we continued to progress
towards our aim of setting the standard
in convenience banking around the world.
In 2007, we grew by investing
in acquisitions in growth markets
such as Turkey, Thailand and
Ukraine, while keeping our
promise to increase efficiencies
in the mature markets of the
Benelux. The Dutch and Belgian
retail strategies are geared
towards ING becoming a cost
leader – by simplifying processes,
making the delivery of products
to clients easier and preparing
ourselves for increased
competition in the market.
Technology is key in all
these areas.
Eli Leenaars
Profit and loss account (underlying)
in EUR million 2007 2006 change
Total income 6,396 6,086 5.1%
Operating expenses 4,162 3,990 4.3%
Additions to loan loss provisions 172 161
Underlying profit before tax 2,062 1,935 6.6%
Total profit before tax* 1,783 1,935 –7.9%
* Total profit before tax is defined as profit before tax including divestments and special items.
22 Our performance
Retail
Banking
ING Group Annual Review 2007