ING Direct 2006 Annual Report Download - page 21

In 2006, Wholesale Banking did well
in a challenging business climate by
focusing on clients’ interests, capitalising
on cross-selling opportunities
and managing for greater value.
ING invested selectively to ensure future
growth, sold underperforming business
units, sought out opportunities for
profi table growth and closed several
landmark deals. The real estate activities
also continued to grow rapidly.
Wholesale Banking achieved good
results in 2006, delivering profi table
growth. Underlying profi t grew, as strong
income growth more than offset higher
expenses. Underlying profi t before tax
increased 9.8% to EUR 2,525 million,
driven by higher profi t in General Lending
and Payments and Cash Management,
Leasing and Factoring, as well as in ING
Real Estate. Structured Finance continued
to perform strongly. The Financial
Markets result was down due to
challenging yield curves and historic
low market volatility. Underlying
operating expenses rose 5.1% to
EUR 3,400 million due to non-recurring
cost items such as compliance. The after-
tax Risk-Adjusted Return On Capital conti -
nued to improve to 20.6%, also driven by
higher returns from ING Real Estate.
Focus on clients and costs
Wholesale Banking continued its efforts
to strengthen client relationships, contain
costs and optimise capital allocation,
helping increase returns in a highly
competitive market. In line with the new
client coverage model, the focus has been
on solution selling, i.e. structured fi nance
and other high-value products. ING
“ By developing a truly relationship-driven
business model we have intensifi ed our
client focus and we have clearly defi ned
and targeted our core market and
product strengths in an increasingly
competitive environment.”
Eric Boyer de la Giroday, Executive Board member
responsible for Wholesale Banking
€ 4.35 billion
Private equity fi rms Cinven and Warburg
Pincus turned to ING when they set out
to create the largest cable operator in the
Netherlands. Building on its knowledge of
the Dutch market, ING arranged for EUR 4.35
billion in fi nancing and helped the consortium
acquire Casema and Essent Kabelcom in almost
simultaneous competitive auctions.
Wholesale Banking Profi t and loss account* (underlying)
in EUR million 2006 2005 change
Total income 5,804 5,406 7.4%
Operating expenses 3,400 3,234 5.1%
Additions to loan loss provisions -121 -127
Underlying profi t before tax 2,525 2,299 9.8%
Total profi t before tax** 2,481 2,599 -4.5%
* These numbers include the result from ING Real Estate, which reports to
Wholesale Banking. ING Real Estate is also discussed in the chapter on
Asset management.
** Total profi t before tax is defi ned as profi t before tax including divestments
and special items.
increased its market share in asset-based
lending in our core markets in both the
corporate and mid-corporate segments.
Finding opportunities
ING also completed a number of top
deals that underscore our wide array of
banking products and geographical reach.
We continued to be a leading player
in leveraged fi nance, with a focus on
‘originate to distribute’ and maintaining
quality risk monitoring. ING Real Estate
has had another year of rapid expansion,
in large part due to infl ows of third-party
money and a strong improvement in the
development business. The portfolio of
ING Real Estate, the world’s largest real
estate investment manager by assets under
management, increased by 29.8% to
EUR 90.7 billion. Growth was driven by
strong investor demand for property funds
and the takeover of Summit Real Estate
Investment Trust in Canada.
Investing for growth
ING has been reallocating capital and
investing selectively in order to secure and
grow the revenue base. Capital was freed
up by selling Williams de Broë and Deutsche
Hypothekenbank. In 2006, we invested
in our existing core products and in new
products that meet the needs of our clients
and will contribute to future growth.
ING Wholesale Banking made good
progress in implementing the Group
compliance policy in all regions.
Looking ahead
Wholesale Banking will continue
developing a truly relationship-driven
business, identifying and executing
cross-selling opportunities and remaining
vigilant in keeping costs under control.
We seek to invest for profi table growth,
to improve our business support
functions, and to strive to fi nd new
ways of maximising value creation.
ING Group Annual Review 2006 19