ING Direct 2015 Annual Report Download - page 9

Contents
Who we are
Report of the
Management
Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual
accounts
Other
information
Additional
information
ING Bank posted a strong performance in 2015, resulting in a
net profit of EUR 4,659 million, up from EUR 2,744 million in
2014. Results on divestments and special items contributed
EUR 309 million to the net profit in 2015 versus EUR -818
million in 2014. Divestments and special items in 2015
included a EUR 367 million net gain resulting from the merger
between ING Vysya Bank and Kotak Mahindra Bank and
EUR -58 million of special items after tax related to
restructuring programmes in Retail Netherlands that were
announced before 2013. Divestments and special items in
2014 related to a EUR 653 million net charge to make the
Dutch closed defined benefit pension fund financially
independent, EUR 304 million of bank tax related to the
nationalisation of SNS in the Netherlands and EUR -63 million
of special items after tax related to restructuring programmes
in Retail Netherlands. This was partly offset by a EUR 202
million net gain on the deconsolidation of ING Vysya Bank
following its reclassification as an investment in an associate
under equity accounting at the end of the first quarter of
2014.
The underlying net result of ING Bank increased 22.1 percent
to EUR 4,350 million, from EUR 3,562 million in 2014.
Underlying net result is derived from total net result by
excluding the impact from divestments and special items.
The underlying result before tax rose 24.7 percent to EUR
6,125 million in 2015 from EUR 4,912 million in 2014, mainly
reflecting higher interest results and lower risk costs. This was
realised despite a sharp increase in regulatory costs during
2015. Commercial performance was robust in 2015: ING Bank
grew net core lending (excluding currency impacts) by EUR
21.7 billion, or 4.2 percent, and attracted EUR 25.1 billion of
net customer deposits (excluding currency impacts and Bank
Treasury).
Total underlying income rose 8.0 percent to EUR 16,703
million in 2015, from EUR 15,471 million in 2014, supported by
a positive swing in CVA/DVA adjustments in Wholesale
Banking and Corporate Line. The underlying interest result
increased 1.1 percent to EUR 12,744 million driven by a higher
average balance sheet, whereas the interest margin declined
to 1.47 percent from 1.53 percent in 2014. The interest
margin on lending and savings products improved slightly,
supported by repricing in the loan book and further reduction
of client savings rates in several countries. This was more than
offset by lower margins on current accounts due to the low
interest environment and lower interest results at Financial
Markets. Customer lending and deposits volumes increased
except for residential mortgages due to the continued
transfer of WestlandUtrecht Bank (WUB) assets to NN Group,
the run-off in the WUB portfolio and the sale of white-labelled
mortgage portfolios in Australia. Commission income rose 1.3
percent to EUR 2,320 million. Investment and other income
jumped to EUR 1,639 million, from EUR 574 million in 2014.
This increase was mainly explained by the positive swing in
CVA/DVA adjustments in Wholesale Banking and the
Corporate Line (which were EUR 224 million in 2015,
compared with EUR -273 million in 2014) and higher other
revenues at Financial Markets.
Underlying operating expenses increased 3.0 percent to EUR
9,231 million, compared with EUR 8,965 million in 2014. In
2015, expenses included EUR 620 million of regulatory
expenses (including contributions to the new national
resolution funds and a one-off charge in Poland related to the
bankruptcy of SK Bank) compared with EUR 408 million of
regulatory expenses in 2014. The fourth quarter 2015 also
included a number of smaller restructuring provisions in Retail
Benelux and Wholesale Banking which in aggregate
amounted to EUR 120 million, whereas 2014 included EUR 399
million of redundancy provisions. Excluding both items,
expenses increased by EUR 333 million, or 4.1 percent. This
increase was partly visible in the Corporate Line, where
expenses were EUR 121 million higher year-on-year, mainly
due to large releases from DGS-related provisions and high
value-added tax refunds in 2014. The remaining increase was
mainly caused by investments to support business growth in
Retail Challengers & Growth Markets and Wholesale Banking,
IT investments in the Netherlands and a provision for potential
compensation related to certain floating interest rate loans
and interest rate derivatives that were sold in the
Netherlands, partly offset by the benefits from the ongoing
cost-saving programmes. The cost/income ratio improved to
55.3 percent from 57.9 percent in 2014.
The net addition to the provision for loan losses declined 15.5
percent to EUR 1,347 million, from EUR 1,594 million in 2014.
Risk costs were 44 basis points of average risk-weighted
assets, which is within the range of the expected loss of 40-45
basis points through the cycle.
The underlying return on IFRS-EU equity was 11.1 percent in
2015, up from 10.3 percent in 2014.
Financial developments ING Bank
ING Bank Annual Report 2015 7