ING Groep N.V. · EURONEXT:INGA
ING Groep — Debt Investor Presentation (February 2017)
47 slides from ING Groep's debt investor presentation, Feb 2, 2017
Slide 1: ING Group Credit Update 4Q16
ING Group Credit Update 4Q16 Amsterdam • 2 February 2017
Slide 2: Key points
Key points • ING recorded 2016 underlying net profit of EUR 4,976 mln, up 17.9% from 2015 • Strong commercial momentum on the back of an increase in primary customers (> 700,000 during 2016), robust business growth, and continued decline in risk costs • 4Q16 ING net result (EUR 750 mln) impacted by
Slide 3: Ambition 2020 – ING Group Financial Targets
Ambition 2020 – ING Group Financial Targets Actual 2015 Actual 2016 Ambition 2020* • CET1 ratio (%) 12.7% 14.2% > Prevailing fully-loaded requirements** Capital • Leverage ratio (%) 4.4% 4.8% > 4% • Underlying C/I ratio (%) 55.9% 54.2% 50-52% Profitability • Underlying ROE (%) 8.6% 10.1% Awaiting re
Slide 4: Business profile and strategy
Business profile and strategy 4
Slide 5: We have a well-diversified portfolio with strong profitability
We have a well-diversified portfolio with strong profitability Retail Banking Market Leaders Wholesale Banking Netherlands, • We use technology to offer • Our business model is the Belgium / Luxembourg a differentiating experience same throughout our global to our customers WB franchise of more than
Slide 6: Our focus on primary customer relationships drives value
Our focus on primary customer relationships drives value ING currently serves ~36 mln retail customers (in mln) Targeting > 14 mln primary customers by 2020 (in mln) 34.5 35.8 >14 31.8 33.1 9.7 >10 8.4 9.0 7.9 2013 2014 2015 2016 2013 2014 2015 2016 Ambition Ambition 2017 2020 ING Bank core lending
Slide 7: Think Forward strategy delivered strong results in 2016
Think Forward strategy delivered strong results in 2016 Underlying net result ING Bank (in EUR mln) Underlying ROE ING Bank within target range (in %) CAGR +16.4% 4,976 11.6% 10.8% 10-13% 4,219 9.9% 12.6% 9.0% 3,424 11.4% 11.6% 3,155 10.0% 10.0% 2013 2014 2015 2016 2013 2014 2015 2016 ROE Ambition R
Slide 8: Transformation programmes improving customer experience and bringing further efficiency gains
Transformation programmes improving customer experience and bringing further efficiency gains Four major digital transformation programmes Estimated impact of digital transformation programmes Integrated universal banking platform in (in EUR mln) Belgium and the Netherlands “Orange 900 Bridge” • Dia
Slide 9: Update 4Q16 results
Update 4Q16 results 9
Slide 10: Strong fourth-quarter results reflecting resilient NII
Strong fourth-quarter results reflecting resilient NII Underlying pre-tax result ING Bank (in EUR mln) Net interest income excl. Financial Markets (in EUR mln) +62.6% +6.1% 2,009 1,955 3,124 3,191 3,247 3,235 1,878 3,049 200 1,202 1,186 1,808 4Q15 1Q16 2Q16 3Q16 4Q16 4Q15 1Q16 2Q16 3Q16 4Q16 Underly
Slide 11: Our core lending franchises grew by EUR 9.2 bln in 4Q16
Our core lending franchises grew by EUR 9.2 bln in 4Q16 Customer lending ING Bank 4Q16 (in EUR bln) Core lending businesses: EUR 9.2 bln 2.6 0.3 -1.1 -2.8 4.2 0.3 560.6 2.5 554.9 -1.8 0.9 0.6 30/09/16 Retail NL Retail Retail Retail WB IL* WB GL&TS* WB Other* Lease run- Bank FX / 31/12/16 Belgium Ger
Slide 12: Underlying operating expenses remained stable
Underlying operating expenses remained stable Underlying operating expenses (in EUR mln) Regulatory costs experience seasonality (in EUR mln) 496 279 209 174 2,139 2,140 2,157 2,155 2,159 105 61 75 65 4Q15 1Q16 2Q16 3Q16 4Q16 1Q 2Q 3Q 4Q Expenses Regulatory costs Redundancy costs 2015 2016 Regulator
Slide 13: Asset quality
Asset quality 13
Slide 14: Risk environment benign; NPLs trending down
Risk environment benign; NPLs trending down Risk costs (in EUR mln) NPL ratio (in %) 2.8% 302 307 2.6% 265 265 2.5% 2.5% 97 123 2.4% 2.4% 117 97 2.3% 2.3% 80 138 2.4% 2.2% 77 2.1% 74 31 67 2.2% 2.2% 65 57 42 32 51 2.1% 36 2.0% 59 49 50 43 29 4Q15 1Q16 2Q16 3Q16 4Q16 4Q15 1Q16 2Q16 3Q16 4Q16 Wholesal
Slide 15: Lending credit outstandings are well diversified
Lending credit outstandings are well diversified ING Bank* Retail Banking* Wholesale Banking* 6% 5% 1% 14% 31% 15% 36% EUR 3% EUR EUR 45% 623 399 225 64% bln bln bln 17% 21% 8% 12% 9% 13% Retail Banking Mortgages Netherlands Structured Finance Wholesale Banking Other lending Netherlands Real Estate
Slide 16: Lending credit outstandings Wholesale Banking well diversified by geography and sector
Lending credit outstandings Wholesale Banking well diversified by geography and sector Loan portfolio is well diversified across geographies… …and sectors Lending Credit O/S Wholesale Banking (4Q16)* Lending Credit O/S Wholesale Banking (4Q16)* 1% NL 13% 3%4% Builders & Contractors 19% Belux 5% 7% C
Slide 17: Detailed NPL disclosure on selected lending portfolios
Detailed NPL disclosure on selected lending portfolios Selected lending portfolios Lending credit NPL ratio Lending credit NPL ratio Lending credit NPL ratio O/S 4Q16 4Q16 O/S 3Q16 3Q16 O/S 4Q15 4Q15 Wholesale Banking 224,916 2.4% 215,779 2.4% 200,717 2.8% Industry Lending 131,221 2.4% 121,257 2.4%
Slide 18: Lending to the broader Oil & Gas industry is largely short-term
Lending to the broader Oil & Gas industry is largely short-term Lending Credit O/S ING Bank to Oil & Gas industry (in EUR bln) Lending outstanding per currency Change Change 4% 4Q16 4Q15 4Q-4Q 3Q16 4Q-3Q 15% Total Lending Credit O/S 36.3 29.1 7.2 31.3 4.9 USD EUR Other NPL ratio and coverage ratio O
Slide 19: Lending to Metals & Mining industry is well diversified
Lending to Metals & Mining industry is well diversified Lending Credit O/S ING Bank to Metals & Mining (in EUR bln) Lending outstanding by segment Change Change 30% 25% General Lending 4Q16 4Q15 4Q-4Q 3Q16 4Q-3Q Transaction Services Total Lending Credit O/S* 14.9 14.2 0.7 13.9 1.0 Trade & Commodity
Slide 20: The quality of our Russian portfolio remains strong
The quality of our Russian portfolio remains strong Exposure ING Bank to Russia (in EUR mln) Lending outstanding per currency Change Change 8% 1% 4Q16 4Q15 4Q-4Q 3Q16 4Q-3Q 23% Total Lending Credit O/S 5,100 5,752 -652 5,614 -514 68% Other* 219 361 -142 629 -410 Total outstanding 5,319 6,113 -794 6,
Slide 21: Ukraine portfolio weak but stabilising
Ukraine portfolio weak but stabilising Exposure ING Bank to Ukraine (in EUR mln) Lending outstanding per currency Change Change 1% 24% 4Q16 4Q15 4Q-4Q 3Q16 4Q-3Q Total Lending Credit O/S 1,162 1,286 -124 1,138 24 68% 7% Other* -1 -2 1 -3 2 Total outstanding 1,161 1,285 -124 1,135 26 USD Undrawn comm
Slide 22: Group and Bank capital
Group and Bank capital 22
Slide 23: ING Group CET1 ratio at 14.2%
ING Group CET1 ratio at 14.2% ING Group fully-loaded CET1 ratio development 0.1% -0.2% 0.1% 14.2% 13.5% 0.7% 11.75% 9.0% 3Q16 Interim profits Equity stakes FX RWA & Other 4Q16 Group CET1 2017 SREP** 2019 SREP** Group CET1 added to CET1* • ING Group’s 4Q16 fully-loaded CET1 ratio rose to 14.2% mainly
Slide 24: ING Group's 2016 SREP process completed
ING Group’s 2016 SREP process completed ING Group SREP and Ambition 2016 SREP (Supervisory Review and Evaluation Process) MDA • ING Group has been notified of the European Central restriction Bank (ECB) decision on the 2016 SREP which will set the level capital requirements for 2017 (11.75%) • A 9.0
Slide 25: Additional Tier 1: comfortable buffers to triggers
Additional Tier 1: comfortable buffers to triggers Buffer to MDA 4Q16 Buffer to Conversion Trigger 4Q16 (in EUR bln) 44.5 EUR 16.2 bln 5.1% EUR 22.5 bln 7.1%** 22.0 7% CET1 equity 14.1% conversion trigger 10.25% 10.38% 11.75% 9.00% 4Q16 phased-in CET1 2016 MDA trigger level 4Q16 2016 2017 2018* 2019
Slide 26: HoldCo resolution strategy
HoldCo resolution strategy 26
Slide 27: ING well positioned for TLAC issuance plans
ING well positioned for TLAC issuance plans Strong current capital position…. …which provides flexibility for TLAC issuance plans • ING maintains strong CET1 ratio • ING Group fully-loaded CET1 ratio at 14.2% • Steady state and TLAC needs are moderate • ING Group currently has a TLAC shortfall of EU
Slide 28: New legislation focuses on loss absorbing capacity
New legislation focuses on loss absorbing capacity Loss absorbing capacity • Regulators have added total loss-absorbing capacity (TLAC) and (in the EU) minimum requirement for own funds and eligible liabilities (MREL) to the post-crisis regulatory reform aimed at ending too-big-to-fail • Regulators
Slide 29: Loss absorption and recapitalisation overview
Loss absorption and recapitalisation overview Pre-resolution tools Resolution tools Insolvency tools Going concern Recovery PONV Resolution Liquidation • Dividend payments • Dividends, AT1 • Capital instruments • Remaining • Liquidation • AT1 coupon coupons and instruments, through normal • Conversi
Slide 30: ING's preferred approach to resolution
ING’s preferred approach to resolution Current status Resolution entity ING Group • ING has always benefitted from the optionality of having both a HoldCo and an OpCo in place External senior unsecured • Both ING Group and ING Bank are issuing entities External Additional Tier 1 • Historically, ING
Slide 31: Simplified indicative transition and end-state issuance structures
Simplified indicative transition and end-state issuance structures Transition structure End-state structure HoldCo issuance strategy • All external TLAC/MREL-eligible Senior unsecured Senior unsecured debt will be issued by ING Group ING Group creditor ING Group creditor (to be issued over time) (Ho
Slide 32: TLAC requirements are manageable…
TLAC requirements are manageable… “Gap” bridged with ING Group senior ING Group 4Q16 capital position* unsecured issuance 30% EUR 10-15 bln 25% 3.8% 23.5% EUR 62 bln 3.1% 19.7% 20% EUR 45 bln 2.5% 15% 14.2% 10% 5% 0% 4Q16 Group CET1 Group Additional Tier 1** Bank Tier 2** 4Q16 Total Capital Ratio Sh
Slide 33: …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 EUR bln) 12 8 4 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 >2027 ING Bank senior unsecured debt* ING Group senior unsecured debt • ING Bank has EUR 43.1 billion of
Slide 34: Issuance entities under our proposed approach to resolution
Issuance entities under our proposed approach to resolution Issuance entities Instruments • Capital instruments ING Group • Senior unsecured debt (TLAC / MREL eligible) • Covered Bonds / secured funding ING Bank • Senior unsecured debt (TLAC / MREL ineligible) • Covered Bonds / secured funding Vario
Slide 35: Bank liquidity and funding
Bank liquidity and funding 35
Slide 36: ING Bank balance sheet: strong and conservative with customer deposits as the primary source of funding
ING Bank balance sheet: strong and conservative with customer deposits as the primary source of funding Balance sheet ING Bank (in EUR bln) High quality customer loan book Balance sheet size ING Bank 31 December 2016: EUR 844 bln • See “Asset Quality” section of the presentation Attractive funding p
Slide 37: ING Bank maintains a strong long-term funding position supported by solid credit rating profile
ING Bank maintains a strong long-term funding position supported by solid credit rating profile Long-term funding (in EUR bln) Short-term professional funding (in EUR bln) 30 29 34 26 93 93 84 81 30 34 37 32 17 16 16 16 2014 2015 3Q16 4Q16 2014 2015 3Q16 4Q16 Subordinated loans Long-term debt* Inter
Slide 38: ING Bank has modest long-term funding needs
ING Bank has modest long-term funding needs Maturity ladder outstanding long-term debt (in EUR mln) Outstanding LT debt by type 25,000 11% Issued Upcoming maturities outstanding LT debt 6% 20,000 51% Senior Covered 32% RMBS Tier 2 15,000 10,000 Outstanding LT debt by currency 6% 3% 5,000 25% EUR USD
Slide 39: Investment portfolio consists of high quality assets
Investment portfolio consists of high quality assets Debt securities by type Debt securities by LCR category Level 1A assets by country 2% 6% 9% 11% Germany 3% 3% 3% 23% Netherlands 51% 4% Beglium 4% 15% France EUR 8% EUR 6% EUR Poland Government bonds 96.1 bln 96.1 bln Level 1A 7% 72.7 bln Austria
Slide 40: Appendix
Appendix 40
Slide 41: Sustainability is embedded throughout our business
Sustainability is embedded throughout our business Sustainable Transitions Financed* Sustainability news in 4Q16 Recognition (STF, in EUR bln) • ING launched the Sustainable • ING remains a 34.3 Finance Collective Asia constituent of the FTSE4Good FTSE4Good Index 23.8 • Real Estate Finance will only
Slide 42: Robust rating profile with strong trend over the last quarters
Robust rating profile with strong trend over the last quarters Credit ratings on 2 February 2017 Latest ING Bank rating actions S&P Moody’s Fitch • S&P: Jun-2015 outlook change from ‘A’ Negative to ‘A’ Stable on strengthening capital Stand-alone rating bbb+ baa1 a+ • Moody’s: May-2015 rating uplift
Slide 43: Outstanding capital securities
Outstanding capital securities (Additional) Tier 1 securities issued by Group Currency Issue date First call date Coupon Issued Outstanding** USD Dec-00 Dec-10 3mL + 360 1,500 522 USD Dec-02 Dec-07 7.200% 1,100 1,100 EUR Jun-03 Jun-13 10yr DSL +50 750 432 USD Oct-03 Jan-09 6.200% 500 500 EUR Jun-04
Slide 44: Recent ING Bank Senior, Covered and RMBS benchmarks
Recent ING Bank Senior, Covered and RMBS benchmarks Senior Unsecured ISIN Issue date Maturity Tenor Coupon Currency Issued Spread US449786BG67 Aug-16 Aug-19 3yr 3mL + 61 USD 250 3mL + 61 US449786BH41 Aug-16 Aug-19 3yr 1.65% USD 450 T + 83 US449786BF84 Aug-16 Aug-21 5yr 3mL + 88 USD 250 3mL + 88 US44
Slide 45: ING Bank's covered bond programme…
ING Bank’s covered bond programme… • ING Bank NV EUR 30 bln Hard and Soft Bullet Covered Bonds programme Repayment type • UCITS, CRR and ECBC Label compliant. Rated Aaa/AAA/AAA (Moody’s/S&P/Fitch) 2% 4% Interest Only 3% • Programme is used for external issuance purposes; separate EUR 10 bln Soft Bul
Slide 46: …benefiting from improving Dutch economy and housing market
…benefiting from improving Dutch economy and housing market Dutch Purchasing Managers Index (PMI) was 57.3 in December 2016 which indicates positive growth Unemployment rates (%) continue to decline 70 15 60 10 50 5 40 30 0 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2
Slide 47: Important legal information
Important legal information 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 financial information in this document, except as described otherwise, the same accounting principles are
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