ING Direct 2011 Annual Report Download - page 34

32 ING Group Annual Report 2011
Retail Banking
Strong position in a changing competitive
environment
> Resilient results in difficult
economic conditions
> Superior customer service
akey long-termambition
> Product improvement continues,
usingNPSfeedback
Retail Banking maintained its strong positions in the mature
markets of the Benelux, Western Europe, Canada and Australia.
It is well placed to capture opportunities in the high-growth
markets of Central Europe and Asia. Financial performance in
2011was solid, but certain areas came under pressure due to the
deteriorating global economic situation. The business continued
towork on the ‘direct if possible, advice when needed’ model,
moving towards full-service banking in some countries in order
torealise the Bank’s ambition of becoming the preferred bank.
Customer centricity remained a key focus, with many initiatives
inmobile banking and social media. Customer feedback via the
NetPromoter Score (NPS) methodology was central to product
andservice improvements.
FINANCIAL DEVELOPMENTS
Retail Banking’s underlying result before tax declined to EUR 2,944
million from EUR 3,601 million in 2010 mainly due to EUR 363
million of impairments on Greek government bonds and EUR 181
million of losses from selective de-risking of exposures at ING
Direct. Net production in client balances was EUR 51.1 billion,
including a net inflow of EUR 22.5 billion in funds entrusted
andEUR 27.3 billion in lending, of which EUR 19.7 billion was in
residential mortgages and EUR 7.6 billion in other lending. Assets
under management reported a net inflow of EUR 1.3 billion.
Total underlying income decreased by 4.4% to EUR 10,903 million.
The interest result declined 1.0%, as the impact of higher volumes
was more than offset by lower interest margins on most products,
especially in the Netherlands. The interest results of ING Direct and
Central Europe increased as volume growth outpaced the impact
oflower margins. Commission income was 2.8% down as declines
in the Benelux and Central Europe were only partly offset by
increases in ING Direct and Asia. Investment and other income
declined significantly, mainly due to the impairments on Greek
government bonds and the losses from selective de-risking of
exposures at INGDirect.
Underlying operating expenses were up 3.4% to EUR 6,768 million,
mainly due to increased staff costs, higher marketing spending,
theintroduction of new products and investments in the branch
network in Spain. The underlying cost/income ratio increased
to62.1% from 57.4% in 2010.
The addition to the loan loss provisions declined 4.9% to EUR 1,191
million in 2011, or 67 basis points of average risk-weighted assets
compared with 70 basis points in 2010. This decline was mainly
caused by lower risk costs in the Benelux, especially in the mid-
corporate and SME segments, although the level remained elevated
and started to increase again in the last quarter of 2011. Risk costs
at ING Direct and Central Europe were higher compared with 2010.
The underlying return on equity, based on a 10% core Tier 1 ratio,
dropped to 12.0% from 14.8% in 2010, due to the decline in
results. In 2011, total risk-weighted assets increased by 2.0%
toEUR 179 billion at year-end, mainly outside the Benelux.
RETAIL NETHERLANDS
FINANCIAL DEVELOPMENTS
The underlying result before tax of Retail Netherlands decreased
8.2% to EUR 1,261 million in 2011 from EUR 1,374 million in 2010,
principally driven by lower income and higher expenses, partly
offset by a decrease in risk costs.
Financial overview*
in EUR million 2011 2010
Total underlying income 10,903 11, 4 02
Underlying operating expenses 6,768 6,548
Underlying additions to loan loss provisions 1,191 1,253
Underlying result before tax 2,944 3,601
Underlying cost/income ratio 62.1% 57.4%
Underlying cost/income ratio
(excl. market impacts) 58.8% 56.9%
Net production client balances (EUR billion) 51 36
Underlying risk costs in bp of average RWA 67 70
Risk-weighted assets (year-end, EUR billion,
adjusted for divestments) 179 176
Underlying Return on Equity based on 10%
core Tier 1** 12.0% 14.8%
* Underlying numbers are derived from IFRS-EU, excluding the impact of
divestments and special items.
** Underlying after tax return divided by average equity based on 10% core
Tier1 ratio.
Underlying income
in EUR million 2011 2010
Retail Netherlands 4,146 4,310
Retail Belgium 2,031 2,048
ING Direct 3,423 3,782
Retail Central Europe 1,028 976
Retail Asia 275 286
Total 10,903 11, 4 02
Underlying result before tax
in EUR million 2011 2010
Retail Netherlands 1,261 1,374
Retail Belgium 454 543
ING Direct 999 1,450
Retail Central Europe 158 154
Retail Asia 72 80
Total 2,944 3,601