ING Groep N.V. · EURONEXT:INGA
ING Groep — Debt Investor Presentation (May 2018)
46 slides from ING Groep's debt investor presentation, May 9, 2018
Slide 1: ING Credit Update 1Q18
ING Credit Update 1Q18 Amsterdam • 9 May 2018
Slide 2: Key points
Key points • ING posted 1Q18 net profit of €1,225 mln, up 7.2% on 1Q17 • Primary customers increased by 170,000 to 11.2 mln with Australia contributing strongly to the quarterly growth • We recorded net core lending growth of €12.3 bln in the quarter; net interest margin at 152 bps • Expenses came d
Slide 3: Business profile and strategy
Business profile and strategy 3
Slide 4: Well-diversified business mix with many profitable growth drivers
Well-diversified business mix with many profitable growth drivers Retail Banking Market Leaders Wholesale Banking Netherlands, • Focus on earning the Belgium / Luxembourg • Our business model is the primary relationship same throughout our global • We use technology to offer WB franchise of more tha
Slide 5: Our focus on primary customers and digital drives value
Our focus on primary customers and digital drives value Target to reach 14 mln primary customers* by 2020 Core lending Customer deposits 1Q18 net growth 1Q18 net growth CAGR +9.5% 10.1 11.1 11.2 >14 € +12.3 bln € +2.4 bln 9.2 Net promoter scores (NPS) # of digital interactions** 2015 2016 2017 1Q18
Slide 6: Innovative, clear and easy products and services to create the go-to digital platform
Innovative, clear and easy products and services in order to create the go-to digital platform We innovate ourselves… …and we partner with (fin)techs Yolt passed 250k user mark Blockchain-based trade finance Robo advice partnership Acquisition of leading payment services provider Peer-to-peer paymen
Slide 7: Strong start of the year for sustainable finance
Strong start of the year for sustainable finance Responsible Finance portfolio (Year-end 2017) Building our reputation as leading green bond house ING led 8 green bonds for clients in 1Q18 including: € bln % of WB lending • Joint bookrunner on the green bond debut of the Kingdom of Belgium, a Climat
Slide 8: ING Group financial ambitions
ING Group financial ambitions Actual 2017 Actual 1Q18 Financial ambitions ~13.5%** • CET1 ratio (%) 14.5%* 14.3%* (Basel IV) Capital • Leverage ratio (%) 4.7% 4.4% >4% • Underlying C/I ratio (%)*** 55.5% 55.7% 50-52% (by 2020) Profitability • Underlying ROE (%)*** 10.2% 10.3% 10-12% (IFRS-EU Equity)
Slide 9: 1Q18 results
1Q18 results 9
Slide 10: Solid pre-tax result despite seasonally high regulatory costs
Solid pre-tax result despite seasonally high regulatory costs Underlying pre-tax result (in € mln) Net interest income excl. Financial Markets (in € mln) +2.1% +1.1% 1,992 1,995 3,383 3,340 1,686 3,263 3,294 3,299 1,652 1,560 91 8 -35 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 Impact ending s
Slide 11: NIM continues to be at healthy levels
NIM continues to be at healthy levels Net interest margin down quarter-on-quarter… (in bps) …as volatile positive impacts in 4Q17 largely reversed 157 158 158 -3 152 154 -2 152 152 -1 152 153 154 152 151 1Q17 2Q17 3Q17 4Q17 1Q18 4Q17 Financial Impact Other 1Q18 Markets ending hedge NIM NIM (4-quarte
Slide 12: Core lending growth in all franchises
Core lending growth in all franchises Customer lending ING Group 1Q18 (in € bln) Core lending businesses: €12.3 bln 1.6 1.1 -0.7 0.1 -4.3 4.4 578.2 2.0 2.2 0.7 570.7 0.3 01/01/2018* Retail Retail Retail Retail WB Industry WB General WB Other** Lease run- Bank FX / 31/03/18 NL Belgium Germany Other L
Slide 13: Fee income growth in C&G; FM impacted by lower client activity
Fee income growth in C&G; FM impacted by lower client activity Net commission income (in € mln) Underlying income Financial Markets* (in € mln) 682 714 643 674 661 280 297 321 323 252 279 263 251 257 227 138 154 151 157 149 232 257 144 55 153 265 265 240 238 250 172 89 107 105 66 1Q17 2Q17 3Q17 4Q17
Slide 14: Operating expenses excl. regulatory costs normalised in 1Q18
Operating expenses excl. regulatory costs normalised in 1Q18 Underlying operating expenses (in € mln) Regulatory costs (in € mln) 474 493 264 2,242 2,354 2,137 2,195 2,193 69 94 1Q17 2Q17 3Q17 4Q17 1Q18 1Q 2Q 3Q 4Q Expenses excl. regulatory costs Regulatory costs 2017 2018 • Compared to 4Q17, which
Slide 15: Asset quality
Asset quality 15
Slide 16: Risk costs remained low; new NPL metric introduced under IFRS 9
Risk costs remained low; new NPL metric introduced under IFRS 9 Risk costs (in € mln) Stage 3 ratio* 229 2.4% 2.3% 2.3% 190 124 2.1% 2.1% 133 135 133 68 2.0% 2.0% 46 85 1.9% 1.9% 35 1.8% 45 90 62 1.8% 68 71 1.9% 1.9% 1.7% 36 1.8% 1.8% 1.8% 13 28 27 47 1.7% 17 12 5 -4 -22 -20 1Q17 2Q17 3Q17 4Q17 1 Ja
Slide 17: Well-diversified lending credit outstandings by activity
Well-diversified lending credit outstandings by activity ING Group* Retail Banking* Wholesale Banking* 6% 3% 1% 15% 28% 17% 36% 43% €646 4% €412 €234 bln bln bln 64% 17% 8% 22% 9% 13% 14% Retail Banking Mortgages Netherlands Structured Finance Wholesale Banking Other lending Netherlands Real Estate
Slide 18: Granular Wholesale Banking lending credit outstandings by geography and sector
Granular Wholesale Banking lending credit outstandings by geography and sector Loan portfolio is well diversified across geographies… …and sectors Lending Credit O/S Wholesale Banking (1Q18)* Lending Credit O/S Wholesale Banking (1Q18)* 1% NL 8% 3% 2% Builders & Contractors 12% 6% 19% Belux 10% Cent
Slide 19: Detailed stage 3 / NPL disclosure on selected lending portfolios
Detailed stage 3 / NPL disclosure on selected lending portfolios Selected lending portfolios (in € mln) Lending credit Stage 3 ratio Lending credit NPL ratio Lending credit NPL ratio O/S 1Q18 1Q18 O/S 4Q17 4Q17 O/S 1Q17 1Q17 Wholesale Banking 234,201 1.8% 232,521 2.1% 234,175 2.3% Industry Lending 1
Slide 20: Group capital
Group capital 20
Slide 21: ING Group Total Capital Ratio at 18.6% including IFRS 9 impact
ING Group Total Capital Ratio at 18.6% including IFRS 9 impact ING Group fully loaded Total capital ratio development* 2.7% 18.6% 1.6% 14.7% -0.2% 14.5% 0.1% -0.1% -0.2% -0.1% 14.3% 4Q17 CET1 IFRS 9 1 Jan. 2018 Profit added Payvision Credit RWA & Oper. & 1Q18 AT1 Tier 2 1Q18 total ratio adoption CET
Slide 22: ING Group's CET1 capital requirements
ING Group’s CET1 capital requirements ING Group SREP* 2017 SREP (Supervisory Review and Evaluation Process) • In the 2017 SREP the European Central Bank has set the capital requirements for 2018 MDA MDA restriction • A 10.4% phased-in CET1 ratio requirement applies for restriction level (11.8%) 2018
Slide 23: Additional Tier 1: comfortable buffers to triggers
Additional Tier 1: comfortable buffers to triggers Buffer to MDA 1Q18* Buffer to Conversion Trigger 1Q18 (in € bln) 14.3% 44.6 €12 bln 11.8% €23 bln 3.9% 10.4% 7.3%*** 21.9 7% CET1 equity conversion trigger 1Q18 phased-in CET1 2018 2019** 1Q18 phased-in 1Q18 phased-in CET1 1Q18 phased-in CET1 2018 M
Slide 24: HoldCo resolution strategy
HoldCo resolution strategy 24
Slide 25: Issuance entities under our approach to resolution
Issuance entities under our approach to resolution Issuance entities Instruments Designated • Capital instruments resolution ING Group • Senior unsecured debt (TLAC / MREL eligible) entity • Covered Bonds / secured funding ING Bank • Senior unsecured debt (TLAC / MREL ineligible) • Covered Bonds / s
Slide 26: ING's total capital position a strong foundation for the future
ING’s total capital position a strong foundation for the future ING Group 1Q18 fully loaded capital ratios* • Capital ratios include the impact of the interpretation of the EBA Q&A published on 3 November 2017 2.7% -0.8% • This Q&A relates to externally placed own funds from a subsidiary in conjunct
Slide 27: ING well positioned for TLAC/MREL issuance plans
ING well positioned for TLAC/MREL issuance plans… Strong current capital position…. …which provides flexibility for TLAC issuance plans • ING maintains a strong CET1 ratio • ING Group fully-loaded CET1 ratio at 14.3% • Steady state TLAC needs to be met by 2019/2022 • ING Group has a very manageable
Slide 28: Supported by a recycling strategy of ING Bank instruments
…supported by a recycling strategy of ING Bank instruments Maturity ladder outstanding long-term senior unsecured debt (in € bln)* 12 8 4 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 >2028 ING Bank senior unsecured debt ING Group senior unsecured debt • ING Group has issued approx. €7.2
Slide 29: Liquidity and funding
Liquidity and funding 29
Slide 30: ING balance sheet: strong and conservative with customer deposits as primary funding
ING balance sheet: strong and conservative with customer deposits as the primary source of funding Balance sheet ING Group (in € bln) High quality customer loan book Balance sheet size ING Group 31 March 2018: €887 bln • See “Asset Quality” section of the presentation Other 17 51 Total equity 62 Cas
Slide 31: Robust liquidity position
Robust liquidity position Funding mix* ING holds sizable liquidity buffer 31 March 2018 • ING’s funding consists mainly of retail deposits, corporate 2% deposits and public debt 9% Customer deposits (retail) 6% Customer deposits (corporate) • ING’s 12-month moving average LCR increased from 114% 5%
Slide 32: Funding profile well diversified by currency
Funding profile well diversified by currency Long-term debt maturity ladder per currency (in € bln)* 16 14 12 10 8 6 4 2 0 2017 1Q18 2018 2019 2020 2021 2022 2023 2024 2025 2026 >2026 EUR USD Other Long-term HoldCo debt issuance** • ING Group issued approx. €8.9 bln of long-term debt in 2017 and app
Slide 33: Robust rating profile with strong trend over the last quarters
Robust rating profile with strong trend over the last quarters Main credit ratings of ING on 8 May 2018 Latest ING Bank rating actions S&P Moody’s Fitch • Moody’s: Sep-2017 ING Bank was upgraded to Aa3 from A1 with a stable outlook. The improvement was driven by Stand-alone rating a baa1 a+ resilien
Slide 34: Appendix
Appendix 34
Slide 35: Outstanding benchmark capital securities
Outstanding benchmark capital securities (Additional) Tier 1 securities issued by Group Currency Issue date First call date Coupon Issued Outstanding** USD (CRR/CRDIV compliant) Nov-16 Apr-22 6.875% 1,000 1,000 USD (CRR/CRDIV compliant)* Apr-15 Apr-20 6.000% 1,000 1,000 USD (CRR/CRDIV compliant)* Ap
Slide 36: Outstanding HoldCo Senior benchmarks
Outstanding HoldCo Senior benchmarks HoldCo Senior Unsecured* ISIN Issue date Maturity Tenor Coupon Currency Issued Spread XS1771838494 Feb-18 Feb-25 7yr 1.125% EUR 1,000 m/s + 42 XS1730885073 Dec-17 Jan-28 10yr 1.375% EUR 1,000 m/s + 57 US456837AG8 Mar-17 Mar-22 5yr 3.15% USD 1,500 T + 125 US456837
Slide 37: ING Bank's covered bond programme
ING Bank’s covered bond programme… Repayment type • ING Bank NV €30 bln Hard and Soft Bullet Covered Bonds programme 2%4% Interest Only • UCITS, CRR and ECBC Label compliant. Rated Aaa/AAA/AAA (Moody’s/S&P/Fitch) 4% 6% Investment • Programme is used for external issuance purposes; separate €10 bln S
Slide 38: Benefiting from continued improvement of the Dutch economy and housing market
…benefiting from continued improvement of the Dutch economy and housing market Dutch Purchasing Managers Index (PMI) was 60.7 as of April 2018, which indicates positive growth in industry Dutch unemployment rate (%) continues to decline 70 15 60 10 50 5 40 30 0 2009 2010 2011 2012 2013 2014 2015 201
Slide 39: IFRS 9
IFRS 9 39
Slide 40: Change in impairment methodology due to IFRS 9
Change in impairment methodology due to IFRS 9 • ING’s Expected Credit Loss (ECL) model, which is probability-weighted, reflects three macroeconomic scenarios via a baseline, an up and a down scenario • In the baseline scenario, the use of external consensus forecasts for economic variables (unemplo
Slide 41: Key macro-economic parameters
Key macro-economic parameters Main macro-economic forecasts (averages 2018-2020) Baseline (60%) Up (20%) Down (20%) GDP (YoY %-change) Netherlands 2.0 3.6 0.4 Belgium 1.6 2.4 0.5 Germany 1.9 3.4 0.2 US 2.3 4.0 0.5 Unemployment (%) Netherlands 4.2 2.9 6.2 Belgium 6.8 5.6 8.1 Germany 3.6 2.3 4.9 US 3.
Slide 42: Three-stage approach to measure expected credit losses
Three-stage approach to measure expected credit losses Lending credit outstandings* (in € bln) Loan loss provisions** (in € bln) 1 January 31 March QoQ 1 January 31 March QoQ 2018 2018 change 2018 2018 change Total 643.7 646.1 0.4% Total 5.4 5.2 -4.4% Of which Stage 2 44.3 43.7 -1.4% Of which Stage
Slide 43: Major macroeconomic outlook change will cause P&L volatility
Major macroeconomic outlook change will cause P&L volatility Change in outlook Portfolio effects Dutch GDP: Consensus forecast vs. observed • The current benign macroeconomic • The impact will differ per portfolio, outlook leads to below average depending on e.g. observed / 5% expectations for PDs a
Slide 44: Classification & measurement
Classification & measurement Is the financial asset held to Is the objective of ING’s No No achieve an objective by both Business business model to hold the collecting contractual cash Model financial assets to collect flows and selling financial contractual cash flows? assets? Yes Yes No Fair Value
Slide 45: Financial impact on capital at transition
Financial impact on capital at transition Impact (net of tax) of adopting IFRS 9 on 1 January 2018 IFRS 9 impact on capital on Impact on shareholders’ Impact on FL CET1 ratio 1 January 2018 equity (in € bln) (in %-point) • IFRS 9 impacts capital as a result Loan loss provisions1 -0.6 of the transiti
Slide 46: Important legal information
Important legal information Projects related to the integration of Record Bank in Belgium are still subject to regulatory approval. ING Group’s annual accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (‘IFRS-EU’). In preparing the f