ING Direct, for a long time seen
as the bellwether for North American and pan-European savings
trends, has reported a collapse in pre-tax income. The unit has
posted a loss of €1.13 billion, driven downwards by a huge rise in
impairments.
Without the €1.89 billion in impairments,
pre-tax income was up 37 percent to €766 million, with Canada (up
97 percent to €59 million) and the US (up 340 percent to €343
million) rising the most.
Go deeper with GlobalData
France, (pre-tax income down 33 percent),
Germany (down 31 percent) and Spain (down 22 percent) all suffered
– though the biggest overall loss was felt in the UK, a market ING
continues to struggle in despite sucking up billions in deposits
from the collapse of UK subsidiaries of failed Icelandic banks. In
October, ING acquired more than €3 billion in deposits held by
182,000 British savers in Kaupthing Edge and Heritable Bank.
But since launching in the country in 2003,
ING has lost €305 million on ING Direct UK, only posting a profit
once, in 2006 (of €19 million).
ING Direct also took a €40 million hit for its
aborted attempt to launch a direct banking operation in Japan,
initially announced 18 months ago. Added to the 2007 Japan cost of
€22 million, the Dutch group spent €62 million trying to break into
the world’s most uncompetitive – and souring – retail banking
market (see Japan: the best story that
never was).
22.2m customers worldwide
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By GlobalDataOverall, ING Direct now has 22.2
million customers around the world, an increase of 9 percent
year-on-year, meaning that it earned, pre-impairments, €34.5 in
profit per customer in 2008. Funds entrusted remained flat (0
percent change) at €191 billion – meaning that on average each
customer has €8,603 either saved or invested with the division.
ING Direct’s cost-income ratio, which should
be low given its internet-only business model, was a staggering
91.7 percent for 2008 – a figure which calls into question the
raison d’être of the service in the first place. ING
Direct’s interest margin for 2008 was a lowly 0.94 percent (though
this was still up from 0.75 percent in 2007).
In a statement, the CEO-designate of ING
Group, Jan Hommen, said: “The financial crisis has had an
unprecedented impact on our industry… Our top priorities this year
are to further reduce asset exposures and rationalise the cost
base.
“We aim to shrink the balance sheet of ING
Bank by 10 percent compared with the end of September. We are
cutting our expenses this year by €1 billion to align our cost base
to the current operating environment.
“Over the coming months, we will conduct a
review of our portfolio of businesses to accelerate ING’s
transformation. Our basic strategy, based on retail savings and
investments, is a solid foundation for the future. In order to
truly drive operational excellence, we must simplify governance,
reinforce accountability, and make the organisation more responsive
to our customers’ needs.”
ING as a group posted a nasty €786 million
loss for fiscal 2008, down from a €11.1 billion profit in 2007.
One fact emphasised by the results is the
significant shift the ING Group took into banking and away from
insurance in 2008: banking accounted for 72 percent of group
revenue for the year.
But this strategic move into banking has not
been overly successful: its banking units in Central and Eastern
Europe posted a €39 million loss off the back of a cost-income
ratio of 108.1 percent.
Excluding its domestic retail franchise (ING
Postbank) and ING Direct, ING is exposed either via equity
investments or controlling stakes to consumer banking in, among
others, China (a stake in Bank of Beijing), South Korea (Kookmin
Bank), India (ING Vysya), Thailand (TMB Bank), Turkey (Oyak Bank),
Poland (ING Bank Slaski) and Romania (ING Romania).
