ING Direct 2009 Annual Report Download - page 37

EXECUTING LANDMARK DEALS
ING completed a number of high-profile deals during the year
which showcased its commitment to cross-selling and offering
client solutions across regions. This resulted in improved league
table positions, including number one bank by volume for M&A
in the Benelux, number one Mandated Lead Arranger (MLA) and
Bookrunner in the Netherlands, number two MLA in Russia,
number three by volume for M&A in Central and Eastern Europe,
and number four for Lease in Europe.
These transactions included underwriting EUR 2.05 billion in a
EUR 19 billion Jumbo Syndicated Loan to finance Gas Natural’s
acquisition of Union Fenosa in May 2009. ING played a leading
role in the mid-term financing (of debt structuring) of the
Vandemoortele Group in Belgium in June. The following month
ING also acted as sole financial adviser for Vopak in a EUR 110
million preference shares transaction, marking the first large
corporate preference shares issuance for a listed company in
the Netherlands since 2004.
In May ING acted as a joint bookrunner of a syndicated facility
for Mobile TeleSystems, the largest mobile operator in Russia and
neighbouring countries, to refinance a USD 630 million tranche
of its USD 1.33 billion syndicated loan facility, and in August ING
acted as joint adviser on the acquisition of a 50.91% stake in
Comstar-UTS by Mobile TeleSystems. Both are landmark
transactions carried out in Russia in 2009. In September, ING acted
as joint bookrunner for a EUR 1.5 billion bond issue for General
Electric. In October, ING was bookrunner for A.P. Moller Maersk’s
EUR 750 million Euro bond issue.
OPERATING EXPENSES DECLINE
Commercial Banking continued to be vigilant toward costs without
impairing growth opportunities, in line with Back to Basics.
Operating expenses fell in 2009 compared with 2008 due to
cost-containment initiatives and a reduction in headcount of 1,562
which exceeded the expected reduction of 1,400 FTEs. In addition,
the number of external staff declined by 401 FTEs. That said, the
market turmoil also resulted in additional risk costs, as well as
impairments on development projects at ING Real Estate.
VOLUME GROWTH IN GENERAL LENDING & PCM
General Lending is used as an entry product in all regions to attract
customers and to cross-sell other high-value products. Volumes
decreased in General Lending over the course of the year. However,
income for General Lending increased due to repricing the portfolio
and widening lending margins in the first half of the year.
Additional income from landmark deals with AB InBev and Gas
Natural also lifted returns. These types of deals helped ING move
into the leading book runner spot in 2009 in the loans league
tables for the Benelux and Central and Eastern Europe.
Income at ING’s PCM business was affected by lower interest rates
and competition for liabilities, especially in the Netherlands and
Central and Eastern Europe where volumes in transactions
increased and fees were under pressure. In July, ING was chosen
by AkzoNobel as prime payments and cash management service
provider for Europe. ING is committed to further enhancing the
capacity of its PCM business in the coming period.
This was mainly due to very unfavourable market conditions, which
led to EUR 1,076 million in negative fair value changes on the direct
and indirect real estate investments and impairments to an amount
of EUR 619 million compared with EUR 663 million and EUR 60
million respectively in 2008. Excluding revaluations and impairments,
underlying result before tax decreased by EUR 120 million from
EUR 426 million in 2008 to EUR 306 million in 2009. This lower
result is mainly due to lower transaction volumes.
BUSINESS DEVELOPMENTS
Commercial Banking, which was renamed from Wholesale Banking
in 2009, continues to play a fundamental role in ING Group. One of
the main functions of the Group is to collect customer deposits and
redeploy these funds as investments. Commercial Banking
generates high-quality assets into which ING can invest retail
deposits, and provides the Group with many relevant skills in
financial markets, risk and specialist finance.
It conducts operations for corporate clients – from large companies
to major multinationals – as well as for governments and financial
institutions, and is made up of five product groups: General
Lending & Payments and Cash Management (PCM), Structured
Finance, Leasing & Commercial Finance, Financial Markets, and ING
Real Estate. Commercial Banking’s primary focus is on its home
markets in the Benelux, as well as in Central and Eastern Europe,
where it offers a full range of products. Elsewhere, it takes a more
selective approach to clients and products.
FOCUSED STRATEGY
In 2009, Commercial Banking continued to execute its Fitter,
Focused, Further strategy for 2008-2010, the aim of which is to
become a leader in several key markets and products by the end
of 2010. The strategy includes becoming the market leader in the
Benelux, a top-five wholesale bank in Central and Eastern Europe,
a global leader for Structured Finance and Financial Markets, and a
regional leader for PCM and Leasing. Throughout the year ING was
committed to achieving these medium-term leadership goals, as
well as delivering an improved cost structure, operational excellence
and growing the key market and product positions. In light of the
market circumstances Commercial Banking decided to put its
Financial Markets Emerging Markets initiative on hold, though it
is expected to be resumed in 2010 when the markets stabilise.
Commercial Banking also significantly contributed to the Group’s
overall balance sheet reduction.
Commercial Banking worked hard to reduce risks and contain
costs in line with ING’s Back to Basics programme. It significantly
reduced risk in its Financial Market business, reflected by lower
Value-at-Risk, and significantly reduced its exposure to high-risk
industries such as automotive and construction. In October 2009,
ING announced that it would move towards a complete separation
of its banking and insurance operations as part of its review of the
Group’s strategy and as a logical next step in its Back to Basics
programme. ING’s banking activities will be based on its proven
strengths of gathering savings, distribution leadership, simple
propositions and strong marketing. The bank will be predominantly
focused on Europe with selective growth options elsewhere, with
Commercial Banking especially focused on the Benelux and Central
and Eastern Europe, as well as key product areas and growth
markets. Turn to the Strategy section, page 15, for further details.
ING Group Annual Report 2009 35