ING Direct 2015 Annual Report Download - page 10

Contents
Who we are
Report of the
Management
Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Report of the Management Board - continued
Who are we?
ING’s Retail Banking business lines provide products and
services to individuals, small and medium-sized enterprises
(SMEs) and mid-corporates. Our purpose is to empower these
customers to stay a step ahead in both their private and
professional lives. We aim to do this by ensuring our products
and services are clear and easy, fairly-priced and available
anytime, anywhere. Through transparent tools, tailored offers
and expert advice, we strive to help customers make the right
financial decisions at the important moments in their lives, be
it buying a home, saving for retirement or expanding their
business.
ING Retail Banking serves more than thirty-four million
customers in a variety of markets that we have designated as
Market Leaders, Challengers and Growth Markets. In all
markets we pursue a digital-first approach, complemented by
advice when needed, with omni-channel contact and
distribution possibilities. Market Leaders are our businesses in
the Netherlands, Belgium and Luxembourg. In our Challengers
countries - Australia, Austria, the Czech Republic, France,
Germany, Italy and Spain – we combine strong deposit-
gathering capabilities with low-cost digital distribution.
Growth Markets are expanding economies which offer good
opportunities for achieving sustainable share: Poland,
Romania and Turkey, our stakes in Bank of Beijing (China) and
TMB (Thailand) and our investment in Kotak Mahindra Bank
(India). In most of our markets we offer a full range of retail
banking products and services, covering payments, savings,
investments and secured and unsecured lending.
Financial results
Total Retail Banking
Retail Banking posted strong 2015 results. The underlying
result before tax rose 17.3 percent to EUR 3,928 million, driven
by higher income and lower risk costs.
Underlying income increased by 3.0 percent compared to
2014 to EUR 11,228 million, due to higher income in most of
the Challengers & Growth Markets, while income growth in
the Benelux was flat. Interest results increased as a result of
volume growth and an improved interest margin on savings,
while the margin on current accounts declined due to the low
interest rate environment. Lending margins remained stable.
Income was negatively affected by EUR 127 million of non-
recurring charges related to mortgage portfolios in Italy and
Belgium where we experienced higher-than-expected
repayments and renegotiations.
The net production of customer lending (excluding Bank
Treasury, currency impacts, transfers of WestlandUtrecht
Bank mortgages to NN Bank and the sale of mortgage
portfolios in Australia) was EUR 6.8 billion in 2015. Net core
lending, also excluding the run-off in the WestlandUtrecht
Bank portfolio, increased by EUR 9.0 billion, driven by growth
outside of the Netherlands. Net customer deposits (excluding
Bank Treasury and currency impacts) grew by EUR 20.9 billion
in 2015.
Operating expenses were slightly lower at EUR 6,430 million
compared with EUR 6,456 million in 2014, which included
EUR 349 million of redundancy provisions, mainly related to
the further digitalisation of our banking services in the
Netherlands. Excluding these provisions, expenses rose by
EUR 323 million, or 5.3 percent, of which almost half was as a
result of higher regulatory costs. The remaining increase was
mainly due to business growth in the Challengers & Growth
Markets, IT investments in the Netherlands, some smaller
restructuring provisions in the Benelux and a provision for
potential compensation related to certain floating interest
rate loans and interest rate derivatives that were sold in the
Netherlands. This was partly offset by cost savings from
restructuring programmes. The underlying cost/income ratio
improved to 57.3 percent from 59.2 percent in 2014.
Risk costs declined 20.4 percent to EUR 870 million in 2015,
mainly due to lower risk costs in the Netherlands and
Germany.
Market Leaders
Retail Netherlands
The underlying result before tax of Retail Netherlands rose to
EUR 1,495 million from EUR 938 million in 2014, mainly due to
lower risk costs and lower expenses. Operating expenses
declined by EUR 203 million, predominantly due to EUR 349
million of redundancy provisions taken in 2014. Excluding
these provisions, underlying result before tax rose 16.2
percent.
Underlying income increased 1.7 percent to EUR 4,403 million.
The interest result was supported by higher margins on
lending and savings, which largely compensated for a decline
in lending volumes. Lower lending volumes were partly
caused by the continued transfer of WestlandUtrecht Bank
(WUB) mortgages to NN Group and the run-off in the WUB
portfolio. Net core lending (excluding the WUB portfolio, Bank
Treasury products and movements in the mortgage hedge)
declined by EUR 2.9 billion due to higher repayments on
mortgages and muted demand for business lending. The net
production in customer deposits (excluding Bank Treasury)
was EUR 3.5 billion, reflecting increases in both savings and
current accounts. Commission income was up 11.0 percent
and investment and other income rose by EUR 118 million, in
part due to positive hedge ineffectiveness, while 2014
included a one-off loss on the sale of real estate in own use.
Excluding the redundancy provisions in 2014, operating
expenses increased 6.3 percent, mainly due to higher
regulatory costs, investments in IT, some smaller
restructuring provisions and a provision for potential
compensation related to certain floating interest rate loans
and interest rate derivatives that were sold in the
Netherlands. This increase was partly offset by the benefits
from ongoing cost-saving programmes. The cost-saving
programmes remain on track to realise EUR 675 million of
annual cost savings by the end of 2017. Of this amount, EUR
438 million has been realised since 2011.
Retail Banking
ING Bank Annual Report 2015 8