ING Direct 2013 Annual Report Download - page 34

Retail Banking provides banking services to individuals and small
and medium-sized enterprises in Europe, Asia and Australia. A full
range of products and services is provided, albeit offerings may
vary according to local demand. Retail Banking has leading
positions in the Netherlands, Belgium, Luxembourg, Germany,
Australia and Poland. It also has solid positions in its other markets
– Spain, France, Austria, Italy, Romania, Turkey and India – where it
challenges the established players. It has equity positions in TMB
Bank (Thailand) and Bank of Beijing (China). Every country has the
same strategic focus: to provide easy and fair banking, at low costs,
according to the “direct if possible, advice when needed” principle.
In addition to putting the customer first, operational excellence and
being a top employer, the focus in 2013 was on “digital first”,
providing customers with a consistent and improved experience
across all channels and on maintaining a safe electronic banking
environment. Although in many areas the economic and social
uncertainty persisted in 2013, Retail Banking’s performance
wasstrong.
FINANCIAL DEVELOPMENTS
Retail Banking’s underlying result before tax rose 32.6% to EUR
2,603 million in 2013 from EUR 1,963 million in 2012, mainly due to
higher interest results following improved margins on lending and
savings, and the absence of de-risking losses on the investment
portfolio, which were prominent in 2012. This was in part offset by
higher expenses and increased risk costs.
Underlying income rose 11.8% to EUR 10,162 million. Theinterest
result was 6.3% higher, driven by improved margins on lending and
savings, the latter following reductions in customer savings rates,
which more than offset the impact of the transfer and sale of
portfolios, mainly related to the partial transfer of WestlandUtrecht
Bank (“WUB”) to Nationale-Nederlanden Bank. Adjusted for
currency impacts and the aforementioned transfers and sales, net
inflow in funds entrusted was EUR 18.8 billion, predominantly in
Germany and Rest of World. Net lending growth was EUR 5.8
billion, of which EUR 4.2 billion was in residential mortgages.
Commission income rose 3.0% due to higher fees from the
securities business. Investment and other income improved to
EUR396 million from a loss of EUR 137 million in 2012, mainly due
to the absence of losses from the selective sale of European debt
securities, which dampened incomeby EUR 462 million in 2012,
and higher dividend from Bank of Beijing.
Underlying operating expenses increased 3.0% to EUR 6,138
million, mainly due to higher pension costs and additional
restructuring charges recorded in the Netherlands as part of the
existing efficiency programmes. This was largely offset by the
benefits from the ongoing cost-savings initiatives and the partial
transfer of WUB staff to Nationale-Nederlanden Bank. The
underlying cost/income ratio improved to 60.4%, from 65.6%
in2012.
The additions to the provision for loan losses increased by 21.9%
toEUR 1,421 million, or 100 basis points of average risk-weighted
assets compared with 82 basis points in 2012. The increase was
mainly caused by higher risk costs in the Dutch mortgage and
business lending portfolio, as well as in India and Turkey.
The underlying return on equity, based on a 10% core Tier 1 ratio,
rose to 13.2% from 9.5% in 2012 due to higher results, while
Customer First, Digital First
> Continued focus on customer needs with
easy and fair products at low costs
> Providing fast and innovative responses in
arapidly changing banking environment
> Digital innovation a top priority
Financial overview*
in EUR million 2013 2012
Total underlying income 10,162 9,090
Underlying operating expenses 6,138 5,961
Underlying additions to loan loss provisions 1,421 1,166
Underlying result before tax 2,603 1,963
Underlying cost/income ratio 60.4% 65.6%
Customer balances: net production funds
entrusted (EUR billion) 19 28
Customer balances: net production lending
(EUR billion) 612
Underlying risk costs in bp of average
risk-weighted assets 100 82
Risk-weighted assets (year-end, EUR billion,
adjusted for divestments) 152 143
Underlying return on equity based on 10%
core Tier 1** 13.2% 9.5%
* 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 2013 2012
Retail Netherlands 4,079 3,897
Retail Belgium 2,321 2,194
Retail Germany 1,388 1,193
Retail Rest of World 2,374 1,807
Total Retail Banking 10,162 9,090
Underlying result before tax
in EUR million 2013 2012
Retail Netherlands 872 983
Retail Belgium 663 601
Retail Germany 598 441
Retail Rest of World 471 -62
Total Retail Banking 2,603 1,963
32 ING Group Annual Report 2013
Retail Banking