ING Direct 2008 Annual Report Download - page 197

ING Bank experienced a modest downward migration in terms of risk classes, in particular from the AA class to lesser quality classes.
The principle driver was the downgrading of many securitisations, particularly at ING Direct. Additionally problem grades also increased
during the year. These negative effects were modestly offset by a shift to higher quality counterparties for Money Market and Pre-
Settlement activities.
Risk concentration: ING Bank portfolio, by economic sector (1)
Wholesale Banking Retail Banking ING Direct Total ING Bank
2008 2007 2008 2007 2008 2007 2008 2007
Private Individuals 0.2% 0.4% 68.4% 83.7% 44 .1% 39.8% 34.5% 33.9%
Non-Bank Financial
Institutions 13.5% 14.9% 2.0% 2.5% 29.9% 31.9% 15.0% 17.7%
Commercial Banks 20.4% 22.6% 1.2% 1.1% 15.4% 19.5% 13.1% 16.2%
Central Governments 12.8% 7.5% 1.5% 1.4% 2.7% 3.0% 6.2% 4.5%
Real Estate 12.5% 9.6% 3.9% 1.5% 0.6% 0.7% 6.2% 4.6%
Natural Resources 6.9% 6.2% 0.7% 0.2% 2.9% 2.7%
Central Banks 2.4% 3.9% 1.6% 4.5% 2.4% 2.8% 2.4%
Transportation & Logistics 5.4% 4.7% 1.6% 0.5% 2.6% 2.1%
Services 3.5% 4.7% 3.1% 1.7% 2.3% 2.4%
Food Beverage and
Personal Care 3.6% 3.4% 2.5% 1.6% 0.1% 2.2% 1.9%
General Industries 3.4% 3.8% 2.6% 1.1% 2.1% 1.9%
Builders & Contractors 2.9% 3.7% 2.8% 0.9% 0.1% 0.1% 2.0% 1.8%
Other 12.5% 14.6% 8.1% 3.8% 2.7% 2.5% 8.1% 7.9%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies.
ING Direct continued to increase its diversifications into residential mortgages, while proportionally reducing its securitisation and bond
portfolios. During 2008, ING reclassified the Mid-Corporate portfolio from Wholesale Banking to Retail Banking, which proportionally
decreased the Retail Banking concentration in Private Individuals and created a wider distribution across other economic sectors. This
was partially offset by the purchase of EUR 4.5 billion in residential mortgages from Nationale Nederlanden Hypotheek Bedrijf (NNHB,
residential mortgages). All other industries not shown in the table above have less than 2.0% concentrations.
Largest economic exposures: ING Bank lending portfolio, by country (12)
Wholesale Banking Retail Banking ING Direct Total ING Bank
amounts in billions of euros 2008 2007 2008 2007 2008 2007 2008 2007
Netherlands 56.2 68.7 171.9 141.1 1.0 1.6 229.1 211. 4
United States 35.3 28.9 0.2 0.2 63.6 58.2 99.1 87.3
Belgium 25.6 44.4 52.6 27.5 1.1 1.4 79.3 73.3
Germany 12.5 9.4 0.2 0.2 61.5 54.8 74.2 64.4
Spain 15.2 12.4 0.4 0.4 40.1 38.5 55.7 51.3
United Kingdom 15.8 19.4 0.2 0.1 13.5 17.3 29.5 36.8
France 23.4 17.0 0.7 0.6 4.2 4.1 28.3 21.7
Italy 14.7 12.6 0.5 0.5 12.8 12.2 28.0 25.3
Australia 4.3 5.0 23.0 25.4 27.3 30.4
Canada 1.4 1.7 0.1 17.4 15.7 18.8 17.5
Poland 9.7 7.0 2.1 2.5 11.8 9.5
Turkey 0.8 6.2 8.6 2.7 9.4 8.9
(1) Only covers total exposures in excess of EUR 9 billion, including intercompany exposure with ING Insurance.
(2) Country is based on the country of residence of the obligor.
The growth in most countries presented above followed the growth pattern of the portfolio as a whole. The growth at ING Direct in
Germany, the United States and Spain was principally driven by own originated mortgages (Germany + EUR 6.3 billion, USA + EUR 7.3
billion, Spain + EUR 1.4 billion). Retail Banking in the Netherlands, Belgium and Turkey grew through organic growth as well as the shift
of Mid-Corporates from Wholesale Banking to Retail Banking. The decline in the United Kingdom is driven by exchange rate effects.
ING BANK – MARKET RISKS
Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign exchange rates and real estate
prices, negatively impact the bank’s earnings, market value or liquidity position. Market risk either arises through positions in trading
books or through the banking book positions. The trading positions are held for the purpose of benefiting from short-term price
movements, while the banking book positions are intended to be held in the long term (or until maturity) or for the purpose of hedging
other banking book positions.
195
ING Group Annual Report 2008