ING Direct 2011 Annual Report Download - page 35

1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
33ING Group Annual Report 2011
Retail Banking continued
Total underlying income decreased 3.8% to EUR 4,146 million in
2011. This decrease was mainly due to a 5.3% decline in interest
result, owing to increased competition for savings putting pressure
on margins.
Net production in residential mortgages was EUR 3.6 billion, while
volumes in other lending decreased EUR 0.2 billion and margins
declined. Funds entrusted increased EUR 3.1 billion, mainly driven
by a successful marketing campaign for a one-year deposit in the
fourth quarter.
Operating expenses rose 2.2% to EUR 2,428 million in 2011,
mainlyas a consequence of higher pension costs following updated
mortality tables and an impairment on software in WestlandUtrecht
Bank. The addition to loan loss provisions decreased 18.4% to
EUR 457 million, or 93 basis points of average risk-weighted assets,
mainly due to lower additions for specific files in the Mid-Corporate
and SME segments, although the level started to increase again
inthe last quarter of 2011.
BUSINESS DEVELOPMENTS
The economic setback in 2011 in several parts of the world, and
inthe eurozone in particular, had its impact on the Netherlands,
and therefore on the Dutch banking sector and ING. Retail
Netherlands’ (Retail NL) revenues were affected by the adverse
economic circumstances, with private lending volumes decreasing
due to lower demand, although business lending volumes stayed
atmoderate levels. These trends are expected to continue into 2012.
Despite the difficult economic environment – coupled with
repositioning by long-established competitors – Retail NL focused
onserving its customers, remained a strong capital generator and
continued to fulfil its role of financing retail customers and small and
medium-sized businesses. The key to its success is maintaining a fine
balance between delivering added value to customers, being a
robust bank, and meeting many new regulatory requirements
(including liquidity and solvency requirements).
Retail NL’s results were resilient. Its average mortgage market share
was 16% (22% including WestlandUtrecht Bank), with full-year net
production in residential mortgages falling to EUR 3.6 billion
compared with EUR 5.5 billion in 2010. This was due to a
considerable decline in demand on the overall residential mortgage
market, as well as ING’s policy to selectively grow this lending class
while maintaining pricing discipline. Funds entrusted were up, at
EUR 106 billion at year-end.
Retail NL was faced with increased, strong competition, especially
in savings, but in spite of this the savings market share of ING
Netherlands (private individuals and SME/Business Banking
combined) went slightly up.
Certain organisational changes were made to enhance efficiency,
reduce costs even further, and increase investments in IT and
processes. This was done against the background of a weakening
economic environment, more stringent regulation and changing
customer expectations, and to secure the long-term viability of the
company. Customers expect flawless service, and technology can
help deliver that, especially in internet and mobile banking.
In response to these developments, Retail NL announced
redundancies – approximately 2,000 internal FTEs and 700
externalFTEs. These redundancies will take effect in 2012–13.
ING will do its utmost to implement these measures with care.
Retail NL maintained its strong top two overall market position and
is the number two in the Mid-Corporate segment. Retail NL serves
8.9 million retail customers, including around 600,000 business
customers. It has more than 400 agents and 280 branches across
the country. Furthermore, it has the ‘Best-in-Class’ cost/income
ratio in the Dutch market and the most flexible cost base.
Strategy
Retail NL’s strategy is linked to ING Bank’s overall strategy to build
aleading retail and commercial bank. Its ambition is to be the
customer’s preferred bank, something that will be realised through
operational excellence, customer centricity and becoming a
topemployer.
The aim is to create long-term value for all stakeholder groups:
customers, employees, business relations and suppliers, society
atlarge and shareholders. The Dutch businesses continued to focus
strongly on customer suitability. Our Customer Suitability programme,
launched in 2010, emphasises the importance of transparency,
easy-to-understand products and services, and providing the right
products and services to fit customers’ needs at every stage of their
relationship with us.
ING Netherlands made good progress with its score in the AFM
(the Netherlands Authority for the Financial Markets) customer
centricity assessment. AFM examined ING’s policy on customer
centricity and its execution on10 criteria. On all criteria, such as
transparency of product conditions and prices and complaint
handling, ING scored similar to, or higher than, the market’s
average and was complemented by AFM for the execution of
itsintegral improvement plan.
Investments to improve client satisfaction remain key, as delivering
superior customer centricity is part of the bank’s long-term
ambitions between now and 2015. One of Retail NL’s aims is
tocontribute to the optimising of ING Bank’s balance sheet.
Stakeholder trust
ING continued to enhance its reputation and regain trust among
stakeholders, and as part of that, Retail NL organised another series
of Financial Information Evenings for customers and several
round-table discussions with various stakeholder groups on the
future of the financial sector, and on thefinancing of healthcare
and renewable energy. Retail NL also held sessions with building
companies, real estate developers and public authorities on the
future of the Dutch housing market, and entered into dialogues
with consumer organisations on several topics.
Another initiative involved Dutch Board members – together with
relationship managers of Business Banking and Private Banking –
visiting various customers around the country. The objective was to
enhance customer relationships and listen to their feedback on
aspects of their relationship with ING.
Operational excellence
All business units focus on operational excellence to ensure the
timely, efficient and flawless execution of customer service. A key
development in 2011 was the introduction of ‘Customer Service
Through Delivery Guarantees’, the aim of which is to reduce the
time it takes to act on customers’ requests. To this end,