ING Direct 2011 Annual Report Download - page 46

44 ING Group Annual Report 2011
Commercial Banking continued
2011 was the first year in which FM implemented counterparty
credit revaluations of derivative positions and issued notes – more
generally referred to as CVA and DVA. These were individually very
volatile through the year on a month-to-month basis, while by the
end of the year there was considerable offset with only a relatively
small impact on net profits.
FM faced further challenges during the year, including the Q4
implementation of Basel 2.5, which had a large impact on Market
Risk Capital usage as the new elements of Stressed Value-at-Risk
and Incremental Risk Charges were included for the first time.
We believe the regulatory environment will continue to be
challenging, with many further initiatives under way that will
impact all financial markets participants.
These anticipated developments have led to a reassessment of
individual business lines and activities, particularly with regard to
their capital requirements and subsequent return on equity.
We will further de-risk our platform in line with other market
participants.
ING REAL ESTATE
ING Real Estate includes the Finance, Development and Investment
Management businesses.
During 2011 Real Estate Finance (REF) maintained the quality of its
credit portfolio at a satisfying level, despite the challenging market
circumstances. The volume of new transactions in Europe fell in
2011 as part of our strategy to reduce exposure to real estate in
general, while investors continued their focus on core assets. The
US businesses closed numerous restructurings, thereby optimising
the portfolio, while the Asian and Australian businesses faced
increased competition from regional players.
Real Estate Development (ING RED) and Real Estate Investment
Management (ING REIM) continued with a controlled wind down
of activities.
In 2011, ING signed an agreement with CB Richard Ellis Group
(CBRE), Inc. on the sale of ING REIM Europe, ING REIM Asia and ING
Clarion Real Estate Securities (CRES). Separately, ING sold ING Clarion
Partners to Clarion Partners’ management in partnership with
Lightyear Capital LLC. The combined price of the two transactions
was approximately USD 1.0 billion (EUR 770 million). In addition, as
part of the overall transactions, ING agreed to sell approximately
USD 100 million of its equity interest in existing ING REIM funds.
These highly complex transactions were closed during 2011.
Also, in early 2011 ING finalised the strategic review of ING REIM
Australia and its five listed real estate funds. Four funds have since
been divested with strategic options being considered for the
remaining business.
For ING RED, the year started with the announcement of the sale
ofa number of Dutch projects to a subsidiary of the largest Dutch
construction company. Furthermore, two country offices were
closed and the remaining country organisations have been
restructured to minimal wind-down teams. In addition the
restructuring or disposal of 100 development projects and
positionsresulted in the reduction of EUR 700 million of future
commitments. Overall the real estate exposure of the Bank has
decreased significantly.
Although the real estate markets are expected to remain difficult,
we will continue to serve real estate investors around the world
while retaining our network of highly skilled real estate experts
andour knowledge base.
CONCLUSIONS AND AMBITIONS
ING Commercial Banking performed well in 2011 and proved that
in difficult circumstances its underlying business is robust thanks to
its strong commercial franchises, solid risk management, strict cost
discipline and prudent management of capital and lending asset
growth. It has also benefited from a well-diversified portfolio.
In the coming year, we will:
• Continue to be client focused, making further inroads through
transparency, fair pricing, convenience and excellent service.
• Improve and maintain leadership positions in our core markets in
Benelux and Central and Eastern Europe, in Structured Finance
and in Financial Markets.
• Develop Germany as a core market franchise and make further
improvements to our Transaction Services activities.
• Further optimise our balance sheet structure and increase the
efficiency and effectiveness of our operations.
• Continue to manage our capital prudently and allocate it to core
markets and high return businesses with attractive risk/reward
characteristics.
• Further optimise our cost structure.
In conclusion, Commercial Banking is strong and well positioned for
the current and developing regulatory and economic environment.
By combining robust commercial franchises and a disciplined,
flexible operating model, we are confident of continued positive
developments in this area.