ING Direct 2009 Annual Report Download - page 12

ING and the financial environment
Key points
> Global economy recovering after
steep downturn
> Transactions with the Dutch State amidst
market turmoil
> Back to Basics programme has reduced
complexity and increased focus
> Restructuring Plan approved by European
Commission
> First repayment to Dutch State following
rights issue
After the unprecedented shockwave that hit financial markets
in 2008, we initiated transactions with the Dutch State to
strengthen our capital base and reduce our risk exposure, while
redefining our strategic course. Hence, it was clear from the
beginning that 2009 would be a difficult year for ING. Throughout
the year, market conditions remained challenging, but the second
half of 2009 also brought the first signs of recovery. ING’s first
priorities were to stabilise the Company, restore credibility and regain
trust. We thus introduced Back to Basics, a change programme
comprising a series of measures to decrease costs, reduce risk and
capital exposures, and deleverage the balance sheet, with the
ultimate objective of increasing focus on the essence of financial
services and creating a more coherent set of activities. We
simplified the governance structure by operationally separating the
Bank and the Insurer under the umbrella of the Group, and carried
out a portfolio review, which led to a number of divestments.
Meanwhile, we managed to turn around our commercial
performance. Above anything, however, 2009 will be remembered
as the year in which we took the most far-reaching decisions in
the history of the Company. First of all, we set a clear course for the
future by announcing an independent future for our Bank and our
Insurer. In addition, we closed an early repayment agreement with
the Dutch State on 50% of the capital provided in October 2008.
GLOBAL ECONOMY SHOWING SIGNS OF RECOVERY
AFTER STEEP DOWNTURN
From September 2008 onwards, especially after the collapse of
Lehman Brothers, market conditions rapidly worsened. Due to
the impact of the financial crisis, macro-economic prospects at the
beginning of 2009 were very bleak. The steep economic downturn
was reflected in a sharp decline in world trade, asset prices and
industrial production and a tightening availability of credit. As a
consequence, even a repetition of the Great Depression was
considered a plausible scenario. In contrast to the 1930s, however,
policy makers around the world acted swiftly and firmly, by
providing significant economic stimuli and loosening monetary
conditions. Governments took exceptional measures to reinvigorate
financial institutions and stabilise the financial system. As a result,
an increasing number of countries were able to report positive
economic growth in the second half of the year.
World trade seems to have picked up firmly and in many countries
the rise in unemployment seems to have a less adverse impact on
the economy than expected. Nevertheless, the recovery of
the global economy remains fragile. Companies have rebuilt
inventories despite a strengthening consumer and investor demand.
However, as a result of the market interventions to cushion the
impact of the crisis, public finances have been thrown off-balance.
Our Economics Department’s forecasts for 2010 and 2011 indicate
that the global economy will return to growth, albeit at a slower
pace than before the crisis.
Notwithstanding the negative impact of the financial crisis on
the overall economic climate, which clearly weakens the growth
prospects for the financial services industry, the crisis also offers
new opportunities for financial institutions. The substantial
reduction in asset values during the financial crisis has reinforced
customer demand for wealth accumulation and raised consumer
awareness of the need for financial protection.
Back to Basics
1.2 Report of the Executive Board
ING Group Annual Report 2009
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