ING posts strong FY10 earnings

ING has reported a strong set of results for fiscal 2010, earning over €3.2bn ($4.34bn) following a loss of almost €1bn in 2009. ING’s fight back is being underpinned by a powerful performance from its retail banking unit, with the exception of its struggling ING Direct unit in the UK. Douglas Blakey reports.

ING has reported a retail banking net profit for fiscal 2010 of €2.78bn, more than a fivefold increase from the €512m posted in the prior year.

All of ING’s retail banking business units reported improved results for the 12 months to 31 December:

• Retail branch operations in the Netherlands posted net income of €797m (up 87%);
• In Belgium, retail net profit improved by 9.2% to €520m;
• ING’s retail unit in Asia reported net income of €376m, compared with a loss of €54m in fiscal 2009;
• In Central and Eastern Europe, ING posted net income of €104m, more than double the €45m earned in 2009, and
• ING Direct reported a much improved performance, with a net income of €985m, turned round from a net loss of €379m the prior year.

ING Direct successfully grew deposits in fiscal 2010, by 9.6% to €238.1bn.

In eight of the nine countries where ING Direct operates – Canada, Spain, Australia, France, US, Italy, Germany and Austria – funds entrusted increased during fiscal 2010.

Notable increases occurred in Canada (funds entrusted increased by 25.2% to €21.6bn), the US (funds entrusted increased by 11.3% to €58.0 bn) and in Germany/Austria (up by 9.2% to €81.8bn).

ING Direct’s UK operation was the exception.

In August last year, ING spokeswoman Carolien van der Giessen told RBI:

“ING is repositioning its savings business to be profitable when the unusual Bank of England rate position eases.

“We are successfully attracting new savings customers in the UK to our low cost, simple and high-quality service offering.

“We are currently investing in additional products to develop a full service bank that will meet the needs of our customers."

ING Direct’s current UK operation is limited to savings, mortgage and insurance products; it does not offer current accounts, credit cards or personal loans, with customer service and sales conducted online and by telephone.

But in fiscal 2010, funds entrusted at ING Direct nosedived by 16% to just below €15.0bn.

The UK country unit of ING Direct posted a loss before tax of €36m, having reported a rare profit in 2009 (€66m).

ING Direct’s UK unit has now accumulated losses of €275m since setting up shop in 2003; it has only posted a profit in two years (2006 and 2009).

Average balances per UK savings client have continued to decline sharply, down to €10,475 in the fourth quarter of 2010, from €20,000 in the fourth quarter of 2007. At the end of 2006, the average UK customer balance was €38,000.

By contrast, ING Direct enjoyed a notable turnaround in the US.

Profit before tax at ING Direct US in fiscal 2010 was €684m, having posted a loss of €7m in fiscal 2009.

In Germany/Austria, traditionally ING Direct’s strongest European markets, profit before tax more than doubled to €442m.

At group level, ING posted a net profit of €3.22bn, compared with a loss of €935m a year earlier.

Total assets increased by 7.2% to €1.25trn.

Highlights included a reduction in the ING cost income ratio to 56.0% from 68.7% in 2009, while the net interest margin increased by 10 basis points to 1.52%.

ING ended the year with a Tier 1 capital ratio of 9.6%, up from 7.8% a year earlier.

Looking ahead, ING CEO Jan van Hommen, said that repayment of €10bn bail-out funds received at the height of the crisis from the Dutch government was a key priority for 2011.

“ING made good progress in 2010 as we prepare to create strong stand-alone companies for banking and insurance,” said Hommen.

“The focus for 2011 will be on preparing the insurance company for two initial public offerings and working towards the repurchase of the remaining outstanding core Tier 1 securities from the Dutch State.”