ING Direct 2009 Annual Report Download - page 34

ING Direct (continued)
DEVELOPING THE MAJOR PRODUCT CATEGORIES
Savings – continued strong competition
Despite continuing tough competition, ING Direct experienced
strong savings inflows. In each of the nine countries the bank
continued to refine its savings products, pricing strategy and
retention activities in order to win both new customers and
more funds from existing customers.
ING Direct lowered client savings rates in all countries following
central bank rate reductions, while maintaining attractive rates
for customers given local market competition.
In the UK, ING Direct is on track with its repositioning programme:
the savings base stabilised and the mortgage product line
was reactivated to become a more complete bank. In 2009,
UK consumers ranked ING Direct the country’s second
most-trusted savings provider in the annual Moneywise Awards.
Net production of total funds entrusted at ING Direct across all
nine countries was EUR 22.2 billion. Including positive currency
and market performance effects, funds entrusted amounted to
EUR 217.1 billion at year-end.
Mortgages – controlled growth in mortgage lending
A focal point in 2009 was the controlled growth in mortgage
lending, as the bank continued to adhere to strict underwriting
policies and acceptance standards. In all countries, new mortgage
production remained moderate, falling compared with 2008, while
margins increased.
In the US, rising unemployment and the continued weakness of
the housing market resulted in significant impairments, mainly on
the retained Alt-A RMBS portfolio, and increased risk costs related
to the US mortgage portfolio. ING Direct USA introduced a loan
modification programme to help US borrowers stay in their homes
and mitigate risk costs associated with mortgages that roll into
foreclosure. ING Direct’s non-performing loans (90 Days Past Due)
in the US stood at 4.7% at year-end. This was better than the
US industry average of 18.3% non- performing loans for prime
adjustable-rate mortgages as at the end of November 2009.
Overall, the ING Direct USA portfolio consists of quality customers
with an average loan-to-value ratio of 77% (indexed for changes
in property values) with 96% of mortgages owner-occupied.
ING Direct’s own-originated residential mortgage portfolio across
all countries of operation rose by EUR 10.2 billion (excluding
currency effects) in 2009, to reach EUR 124.2 billion, 57% of
funds entrusted.
Payment accounts – expanding geographic footprint
Payment accounts performed well in 2009. 278,000 accounts
were opened, bringing the total number of payment accounts to
1.6 million globally at year-end. Six out of nine countries now offer
payment accounts.
ING Direct France and ING Direct Australia launched payment
accounts, both of which were enthusiastically received by
customers and media. ING Direct Australia won the 2010 Money
Magazine ‘Best New Innovative Banking Product’ for this fee-free
payment account.
COUNTRY DEVELOPMENTS
Excluding impairments, ING Direct’s underlying result before tax
declined 4.8% to EUR 729 million. In the US, the result before tax
excluding impairments decreased to EUR 7 million from EUR 343
million in 2008, driven by higher risk costs, increased deposit
insurance premiums and a realised loss on the sale of part of its
prime RMBS portfolio to derisk the business. In Germany, the
result before tax declined to EUR 217 million from EUR 297 million
in 2008, mainly due to interest margin pressure in a highly
competitive savings market. In Italy, the result before tax declined
to EUR 22 million from EUR 34 million in 2008, due to lower
income. All other countries reported higher results. In the UK, the
result improved from a loss of EUR 72 million in 2008 to a profit
of EUR 66 million, due to improved interest margins as the strong
decrease of the central bank rate was fully tracked in client rates.
Excluding impairments, results in Canada and Australia more than
doubled, while results in France and Spain were both up 74%,
driven by improved interest margins and lower expenses.
BUSINESS DEVELOPMENTS
ING Direct continued to focus on providing retail customers in nine
major developed countries with five simple, competitive banking
products: savings, mortgages, payment accounts, investments and
consumer lending. These products are providing an increasingly
diversified income stream, thereby reducing reliance on savings
earnings and reducing earnings volatility.
In 2009, ING Direct invested EUR 267 million in developing the
business. It continued rigorously to manage its risks, capital and
expense base, in line with the economic circumstances and ING’s
current priority of preserving its capital position.
Due to a strong increase in deposit insurance premiums, ING Direct
did not fully achieve its ambition to lower expenses during the year
by about EUR 150 million. The internal and external staff headcount
was reduced by 836 FTEs. ING Direct reduced its cost base by
lowering marketing expenses, reviewing supplier relations and
further improving operational processes.
Part of the agreement signed with the European Commission
on ING’s Restructuring Plan (see the section ‘ING and the financial
environment’ for further details), is the sale of ING Direct USA
by 2013. ING only decided to meet the EC’s requirements on the
condition that the EC guarantees equal treatment of all State-
supported financial institutions and safeguards the level playing
field in the EU internal market. ING regards ING Direct USA as a
very strong franchise and will continue to grow the value of the
business. The agreement with the EC has no impact on other ING
Direct countries and we will continue to manage ING Direct USA as
a long-term shareholder. ING remains committed to the ING Direct
franchise as a strong contributor to future growth.
ING is bringing together all its retail banking activities. As a result,
ING Direct became part of the newly-formed Retail Banking
Direct & International division on 1 January 2010.
ING will build on its global presence and international network
and capitalise on its leadership position in gathering savings,
multi-channel distribution, simple propositions and marketing,
in particular through ING Direct.
1.2 Report of the Executive Board
ING Group Annual Report 2009
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