ING Direct 2009 Annual Report Download - page 38

ING REAL ESTATE
ING Real Estate includes the Finance, Development and Investment
Management businesses, which report to ING Commercial Banking.
The fee business of Real Estate Investment Management saw a
decrease in its result before tax of EUR 7 million to EUR 73 million
due to lower market activity. The result before tax of the Real
Estate Investment Portfolio decreased from a loss of EUR 695
million in 2008 to a loss of EUR 1,173 million in 2009. This is almost
completely related to the much higher negative fair value changes
in 2009.
Real Estate Finance’s underlying result decreased from EUR 240
million in 2008 to EUR 181 million. Underlying income was
higher, operating expenses were lower, but these were offset
by substantially higher risk costs. The Finance portfolio was
EUR 35.2 billion, down from EUR 37.0 billion by year-end 2008,
due to limited market activity.
Real Estate Development reported a loss of EUR 470 million
compared to a profit of EUR 78 million a year earlier. This was
largely due to impairments and to a lesser extent to fair value
changes. Excluding fair value changes and impairments the result
decreased from EUR 66 million in 2008 to EUR 14 million in 2009.
Operating expenses, excluding impairments, fell 29% following a
significant headcount reduction. Total assets under management
for Real Estate (Real Estate Investment Management and Real
Estate Development) decreased slightly from EUR 69.5 billion to
EUR 66.8 billion.
CONCLUSIONS AND AMBITIONS
Commercial Banking made good progress in 2009 towards realising
its Fitter, Focused, Further strategy and achieved strong results,
despite negative impairments and fair value changes in Real Estate
and higher risks costs. ING will continue on its course to becoming
a leading European commercial bank with selective growth options
in other regions. It will do so through continuing to secure
important mandates and transactions, and by building on its
expertise and international network to meet client needs globally.
Risk and expenses will be managed carefully and the strategic focus
will continue on key markets and product areas where it has a
competitive advantage. In 2010, the bank will strengthen its
Financial Markets platform and PCM capacity, and expand its
coverage of financial institutions and clients in Belgium. Commercial
Banking is a very important part of ING and will play an essential
role in the formation of the new bank.
STRONG DEMAND FOR STRUCTURED FINANCE
Structured Finance, ING’s specialised finance arm, helps companies
finance large capital projects and transfer risk through various
products. Key segments of expertise are natural resources,
telecommunications, media, finance and utilities. In 2009, solid
income growth and declining costs at Structured Finance were
more than offset by an increase in risk costs. Interest margins
strongly increased since 2008 due to continued portfolio repricing.
Commission income increased thanks to fees earned on waivers
and restructuring.
LEASING & COMMERCIAL FINANCE IMPACTED
Leasing & Commercial Finance experienced a decline in earnings
due to weak economic conditions that resulted in lower profits on
the sale of leased assets and increased residual value provisioning,
and an increase in risk costs. Expenses decreased as a result of
cost-containment measures, including a decline in staff due to the
integration of the Car Lease activities in Spain and the
reorganisation of General Lease activities in Germany and France.
Income for ING Car Lease was adversely impacted by lower prices in
the used vehicle market, resulting in lower returns from the sale of
leased assets following contract termination and lapses. However,
the market for second-hand cars in the Netherlands and the UK did
show an improvement in the second half of the year. Risk costs rose
over 2009 but were in line with the general market trend.
SOLID FINANCIAL MARKETS PERFORMANCE
Financial Markets delivers a broad range of products to ING’s
corporate and institutional client base as well as to other ING
businesses including the retail network. ING aims to be a leading
player with superior profitability in selected markets or products
by taking advantage of its geographic footprint, strong brand
recognition and commercial expertise and reputation.
In 2009, Financial Markets enjoyed a very strong year due to
the steep yield curve, increased spreads and favourable trading
conditions. Margins on standardised flow products (including
foreign exchange forwards, interest rate swaps and foreign
exchange options) remained at elevated levels, as counterparty
and credit risks were increasingly priced in. Financial Markets did
well seeking out cross-selling opportunities across product areas
and client groups, as part of its renewed focus on emerging
markets, home markets, strategic clients and global clients.
ING is diversifying away from higher risk businesses, including
proprietary trading. The fixed income market was extremely
buoyant due to the continued disruption of the loan syndication
market. This resulted in a marked improvement in ING’s league
table position in Euro sovereign bonds and Benelux corporate
bonds. Financial Markets also saw strong results in interest rate
related products, including government bonds, credit bonds and
interest rate derivatives.
Commercial Banking (continued)
1.2 Report of the Executive Board
ING Group Annual Report 2009
36