ING Direct 2013 Annual Report Download - page 45

Credit exposure of derivatives are revalued for counterparties and
for notes issued by ING and these elements, referred to as
CVA/DVA, are included in the trading results of FM. As the results
of these movements are not actively managed, these CVA/DVA
results are not considered in the core results of the underlying
trading and sales business. In 2013 these non-core results were
positive, against negative non-core results in 2012.
During 2013, FM enhanced its offering through the introduction of
new specialised services, the introduction of a sales trading
function, renewed focus on technological automation for client
execution and the introduction of a global sales Client Relationship
Management system.
In addition to market structure changes, new capital rules continue
to increase the capital required to support trading businesses, and
dilute return on capital. As a consequence, FM will continually
analyse and re-assess its business profile to ensure that we continue
to maintain and outperform ING’s return targets.
BANK TREASURY, REAL ESTATE & OTHER
BANK TREASURY
To adapt to new regulations and to execute ING’s balance sheet
optimisation strategy, ING has been coordinating treasury activities
across all business lines within the Bank. This has been made
possible through significant asset transfers across countries to
guarantee an optimal use of our internal funding.
Bank Treasury (BT) has helped improve ING’s liquidity position and
supported the development of a strong Funds Entrusted base
which will support future asset origination within Commercial
Banking. Through its investment portfolio management arm, BT is
continuously transforming the bank investment portfolio into a
liquid asset buffer, applying selective de-risking while maintaining
the net interest margin of the portfolio.
Finally, BT continues to closely monitor developments concerning
the future European banking union and other regulatory changes
that will affect the Bank’s liquidity profile. Balance sheet
optimisation will remain a priority for ING in the coming years.
REAL ESTATE & OTHER
Commercial Banking has a separate unit involved in the run-off and
closure of non-core activities. The Real Estate & Other (“RE&O”)
division consists of the residual assets of the legacy businesses sold
or discontinued within the former Real Estate Development and
Real Estate Investment Management businesses. It also includes
General Lease operations outside ING’s home markets which have
been placed in run-off. A dedicated organisation was established to
oversee the discontinuation of operations ensuring the necessary
control and management oversight.
RE&O continued to reduce its exposure substantially despite the
ongoing challenging market. RE&O also succeeded in accelerating
the wind down of several lease operations by the sale of lease
portfolios. Although impairments and risk costs are still at
considerable levels, the portfolio is adequately provisioned and
being wound down in a controlled manner.
The Energy, Transport and Infrastructure Group (ETIG) specialises
incapital-intensive industry sectors such as oil and gas, mining,
offshore services, shipping, utilities and power, and infrastructure.
ETIG performed well in 2013. The structured metals and energy
finance business has continued to develop business in CEE and in
Latin America. The utilities and power team continued to do
business in North America and worked on renewable projects in
Europe. Container finance remained a market with reasonable
opportunities, although in shipping markets supply continues
toexceed demand. Our approach to the shipping market has
beencautious for many years and the loan book is performing
within expectations.
The Specialised Financing Group comprises a number of global
teams largely engaged in arranging, underwriting and lending
against business cash flows in sectors such as telecommunications,
media and technology. In 2013 our clients have been able to take
advantage of excess supply of credit in the market, which has made
it challenging to retain asset levels.
International Trade and Export Finance supports international trade
in basic commodities such as oil, oil products, metals, grain, sugar
and cotton. We also finance the export of capital goods and offer
services to clients with long-term financing supported by export
credit agencies. ING maintained its consistent support and high
service levels in the commodity finance business, and continued
togrow the Structured Export Finance hub in Germany. ING has
become the leading bank in the syndicated loan market for
companies in the commodities business.
Sustainable business practices
A Sustainable Lending team was established within Industry
Lending at the end of 2012 to help ING become the preferred bank
for fulfilling clients’ sustainability agendas, explore new business
opportunities in sustainable areas and build expertise in niche
markets. It supports the re-balancing of our lending portfolio
towards companies that follow sustainable business practices.
In 2013, the Sustainable Lending team worked with various experts
and clients to facilitate a better understanding of the potential
business opportunities in sustainable markets and build the
necessary capacity to partner with clients in financing their
sustainability needs.
REAL ESTATE FINANCE
Real Estate Finance’s (“REF”) primary activity is lending to investors
in income-producing real estate backed by first mortgages. During
2013, REF sought to maintain the quality of its credit portfolio,
while reducing its total exposure to this asset class, which was
reduced significantly over the year. The volume of loan assets
decreased to EUR 24 billion in 2013 reaching the target previously
set for 2015. REF’s loan portfolio was the subject of two asset
quality reviews by the DNB, the Dutch central bank, which validated
our own assessment of its credit quality.
FINANCIAL MARKETS
FM is a well-diversified business exposed to developed markets and
fast-growing economies and focused on rates and currencies more
than credit. In this business unit we offer a broad range of global
solutions to assist our clients in the management of their exposures
to foreign exchange, interest rate, equity, commodity or credit
movements. FM also acts as ING’s interface to these markets.
43ING Group Annual Report 2013
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