11 may 2006 first quarter 2006 results strong start to the year
TRANSCRIPT
11 May 2006
First Quarter 2006 Results
Strong start to the year
First Quarter 2006 Results 2
• First quarter marks strong start to the year
• Continued strong performance key growth engines
• Record quarter Retail Banking
• Efficiency improves due to focus on execution
• Allocating capital to high return areas
Key points
First Quarter 2006 Results 3
• Underlying net profit rises 28.7% to EUR 1,976 million**• Insurance +29.4%; Banking +28.2%
• Net profit rises 3.3% to EUR 2,006 million
• EPS up 4.1% to EUR 0.93 from EUR 0.89
• Double-digit underlying top-line growth supported by favourable FX-impact
• Life premiums +14.4%; bank income +12.0%
• Strong value creation• Value of new life insurance business up 31.9% to EUR 248 million
• IRR of new life insurance business increases to 14.0% (12.6%)
• Underlying after-tax RAROC up to 24.0% (19.8%)
• Efficiency improves due to continued focus on execution• Underlying cost/income ratio banking improves to 60.4% (63.7%)
• Outsourcing and streamlining of Ops&IT organisation on track
• Reduction in operating expenses Dutch insurance* All figures compare first quarter 2006 with first quarter 2005 unless otherwise stated** Underlying net profit is defined as net profit excl. divestments and special items
Summary financial results*
First Quarter 2006 Results 4
2,0061,8401,878
1,551
1,941
1,408
1,5541,663
1,130
-500
0
500
1,000
1,500
2,000
1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06
In E
UR
mil
lio
n
1,813
1,3891,633
1,3671,497
1,0491,0451,279
1,007
Impact divestmentsSpecial items
Underlying net profit excluding realised capital gains on shares from Insurance
Realised capital gains on shares from Insurance
Higher quarterly underlying profitUnderlying net profit excluding
realised capital gains on shares from Insurance in 1Q 06 up 23% versus
average 2005
First Quarter 2006 Results 5
Life insurance developing markets
US Retirement ServicesVNB +46%
New sales +37%
Growth engines continue strong performance
VNB +54%New sales +44%IRR 19%
1Q 06 vs 1Q 05
ING Direct
Profit +28%
Funds entrusted +21%Mortgage portfolio +56%Number of customers +26%
First Quarter 2006 Results 6
Asset Management
ING Real Estate
AuM +EUR 85 bn vs 1Q 05
Net inflow +EUR 7 bn vs end 05
Strong investment performance
Total portfolio + EUR 19.2 bn
vs 1Q 05 (+35.9%)
Profit before tax +17.2% vs 1Q 05
Total income +29.9% vs 1Q 05
Asset Management and ING Real Estate: Continued good performance
First Quarter 2006 Results 7
Record quarter Retail Banking
• Mortgage portfolio up 16%
• Savings deposits up 10%
• Current account balances up 16%
• Interest margins stable
• Prepayment penalties on
mortgages up to EUR 34 m
• Customer due diligence in the
Netherlands will require
± EUR 100 million in one-time
costs in remainder of 2006
Underlying income
1,000
1,100
1,200
1,300
1,400
1,500
1,600
2004 2005 1Q2006
1Q 2006: +13.6%
In E
UR
mill
ion
Underlying expenses
500
600
700
800
900
1,000
1,100
2004 2005 1Q2006
1Q 2006: +3.9%
In E
UR
mill
ion
In E
UR
mill
ion
Underlying profit before tax
0100200300400500600
2004 2005 1Q2006
1Q 2006: + 43.7%
1Q 06 vs 1Q 05*
* Based on average outstanding amounts
First Quarter 2006 Results 8
Other operating expenses
• Restructuring at Nationale-Nederlanden results in reduction in operating expenses for Dutch insurance
Internal FTEs
Ex
pe
ns
es
In E
UR
mill
ion
Operating expenses Nationale-Nederlanden
100
120
140
160
180
200
220
240
260
280
300
1Q 05 2Q 05 3Q 05 4Q 05 1Q 06
6,000
6,200
6,400
6,600
6,800
7,000
7,200
7,400
Depreciation new IT-systems Severance costs
# o
f inte
rna
l FT
Es
Efficiency programs Insurance start to pay off
First Quarter 2006 Results 9
• Cost/income ratio improves to 60.4% from 63.7% in 1Q 2005
55%
60%
65%
70%
75%
80%
2001 2002 2003 2004 2005 1Q 06
Underlying cost/income ratio Banking
• Outsourcing and streamlining of IT organisation continues on plan• Memorandum of understanding signed with IT services provider for
outsourcing, involving 350 FTEs; part of ING’s efficiency program for Ops&IT in Benelux announced November 2005
Continued reduction cost/income ratio Banking
First Quarter 2006 Results 10
• Risk costs remain low: 1Q 2006 release of EUR 25 million (-3 bps of average credit risk weighted assets)
• Reflecting improved quality loan portfolio, high liquidity in the market and stronger risk management skills
Addition to provisions for loan losses
2001 2002 2003 2004 2005 20061Q
-10
0
10
20
30
40
50
60
70
80
90
In b
as
is p
oin
ts o
f a
ve
rag
e c
red
it R
WA
*
While we see no sign yet of a deterioration in our credit portfolio, loan losses are expected to return to more normalised levels of between 25-30 bps over the coming years.
Risk costs remain low
* Annualised
First Quarter 2006 Results 11
• RAROC increased in Banking
• RAROC ING Direct lower mainly due to higher marketing expenses
• Strong increase in IRR on new life business
* Underlying figures
19.7
34.8
13.2
19.823.4
40.0
11.4
24.0
0
10
20
30
40
50
WholesaleBanking
RetailBanking
ING Direct Total
Banking: after-tax RAROC* 1Q 061Q 05
%
12.9
10.5
15.2
12.6
14.4
11.6
17.1
14.0
0
4
8
12
16
20
InsuranceEurope
InsuranceAmericas
InsuranceAsia/Pacific
Total
Life Insurance: IRR new business%
Improved returns in Banking and Insurance
1Q 061Q 05
First Quarter 2006 Results 12
Wholesale Banking
ING DirectRetail Banking
0
10
20
30
40
50
60
0 5 10 15 20
Total BankingR
AR
OC
(%
)
0
10
20
30
40
50
60
0 5 10 15 20
0
10
20
30
40
50
60
0 5 10 15 20
Economic Capital (in EUR billion)
0 5 10 15 20
RA
RO
C (
%)
Economic Capital (in EUR billion)
cost of capital
30-6-2003 31-3-2006Note: all figures pre-tax
0
10
20
30
40
50
60
Reallocate bank capital to high return areas
First Quarter 2006 Results 13
• First quarter marks strong start to the year
• Continued strong performance key growth engines
• Record quarter Retail Banking
• Efficiency improves due to focus on execution
• Allocating capital to high return areas
Key points
First Quarter 2006 Results 14
ING remains confident in the growth prospects of its
underlying businesses and its ability to continue to
create value for shareholders in the year ahead
Looking forward
11 May 2006
First Quarter 2006 Results
Results by Business line
First Quarter 2006 Results 16
Group profits first quarter 2006
0.93
+4.1%
2,177
1,535
1,941580
62
390 16
1Q 2
005
In E
UR
mil
lio
n
0.89
EPS(EUR)
1Q 2
006
In E
UR
mil
lio
n
2,678
1,976 2,006
610
92 30 0
Underlyingprofit before tax
Taxation Third-partyinterests
Underlyingnet profit
Net gains /losses on
divestments
Net profitfrom
divestedunits
Net Profit
+23.0% +28.7% +3.3%
First Quarter 2006 Results 17
In EUR million 1Q 06 1Q 05 %-change
Net Profit 2,006 1,941 3.3%
30 35
0 371
Underlying net profit 1,976 1,535 28.7%
Total ING Group 30 406
19Gain on unwinding Piraeus
10Gain sale Freeler
Insurance operations
269Gain sale Baring Asset Management
92Gain partial sale ING Bank Slaski shares
Banking operations
Greenshoe ING Canada 19
11Gain sale Australian non-life
Profit from divested units 6
Profit from divested units 10
Net impact divestments
First Quarter 2006 Results 18
Value of new business (EUR 248 m)
Insurance
Europe
21%
Insurance
Americas29%
Insurance Asia/Pacific
50%
• Strong increase of 22.3% in underlying profit before tax, driven by higher life results (+16.5%) and continued strong non-life results (+36.2%)
• Increase also supported by higher realised gains on equities (EUR 188 m vs EUR 44 m in 1Q 05)
• Life premium growth of 14.4%, excl. FX-impact up 7.8%
• Non-life premium growth of 2.9%, excl. FX-impact down 4.8%
• Excluding FX-impact, modest increase operating expenses of 2.2%
• Value of new life business rises 31.9%; half of VNB from Asia/Pacific
• IRR new life business increases to 14.0% from 12.6% in 1Q 05
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Premium income 12,525 11,130 12.5
Operating expenses 1,297 1,188 9.2
1,205 985 22.3Profit before tax
%-change
Net profit 899 695 29.4
Insurance activities
First Quarter 2006 Results 19Europe Americas Asia/
Pacific
ING Insurance
VNB: EUR 53 m (+15.2%)
IRR: 14.4% (12.9%)
New sales (APE): EUR 204 mfrom EUR 209 m
Combined ratio: 77% (80%)
AuM: EUR 146.7 bn (EUR 145.2 bn end 2005)
Insurance Europe
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Premium income 3,236 3,152 2.7
Operating expenses 437 454 -3.7
443 506 -12.5Profit before tax
%-change
• Underlying profit declined 12.5% due to fair-value changes on investments and derivatives in NL
• Life results declined 21.5% due to NL and changed commission structure Belgium
• Non-life results improved 20.0% driven by lower claims in NL and Belgium
• Life premiums up 7.0% due to strong sales in Central Europe
• Non-life premiums declined reflecting changes in disability act in NL
• Cost-reduction programs start to pay off: expenses in the Netherlands declined
• Improved value creation as VNB and IRR both increased strongly, driven by higher sales of single-premium products and increased efficiency in NL and Central Europe
First Quarter 2006 Results 20Europe Americas Asia/
Pacific
ING Insurance
VNB: EUR 71 m (+65.1%)
IRR: 11.6% (10.5%)
New sales (APE): EUR 990 m from EUR 727 m
Combined ratio: 98% (96%)
AuM: EUR 199.6 bn(EUR 201.7 bn end 2005)
Insurance Americas
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Premium income 6,196 5,165 20.0
Operating expenses 629 544 15.6
484 437 10.8Profit before tax
%-change
• Underlying profit improved 10.8%, reflecting solid fundamental business performance in US and Canada
• Positive currency impact offset by interest-related investment losses in US• Claims ratio in Canada deteriorated slightly, but the claims environment
remains favourable• Non-life in Mexico under pressure due to higher claims in health and P&C • Life premiums grew 9% excluding FX-impact, driven by US• Operating expenses up 2.4% excluding FX-impact • VNB improved 65.1%, led by US Retirement Services and Annuities• IRR up to 11.6% due to repricing, higher sales and sales mix changes in
Annuities
First Quarter 2006 Results 21Europe Americas Asia/
Pacific
ING Insurance
VNB: EUR 124 m (+25.3%)
IRR: 17.1% (15.2%)
New sales (APE): EUR 577 m
from EUR 472 m
AuM: EUR 73.2 bn (EUR 69.5 bn end 2005)
Insurance Asia/Pacific
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Premium income 3,088 2,810 9.9
Operating expenses 238 180 32.2
156 169 -7.7Profit before tax
%-change
• Underlying profit declined 7.7% due to reserve strengthening in Taiwan
• Excluding Taiwan, profit increased 41.8%
• Very strong performance South Korea (profit +65.0%) and Japan (profit +72.7%)
• Life premiums rose 9.9% due to South Korea and Taiwan
• Operating expenses excl. FX-impact up 24%, reflecting non-recurring expenses in Taiwan and business growth
• Improvement VNB driven by strong unit-linked sales South Korea
• IRR improved as increased unit-linked sales require less capital costs
• Reserve adequacy Taiwan decreased slightly to 52% from 53% (year-end 05)
First Quarter 2006 Results 22
• Underlying net profit increased 28.2% driven by Retail Banking and ING Direct
• Strong income growth in mortgages and savings
• Cost/income ratio improved further as a result of growth and tight cost control
• Interest margin under some pressure reflecting the more challenging interest rate environment
• Net loan loss releases due to continued favourable credit environment and improved risk management
• RAROC improved as capital was allocated to higher return areas
1Q 06 Underlying profit before tax*
Wholesale Banking
51%
RetailBanking38%
ING Direct11%
* Excludes component ‘Other‘
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Operating expenses 2,213 2,082 6.3
Total income 3,661 3,270 12.0
1,473 23.6Profit before tax
%-change
Additions to loan loss provisions -25 -4
1,077 28.2Net profit
1,192
840
Banking activities
First Quarter 2006 Results 23
ING BankingWhole-
sale RetailING
Direct
Underlying C/I ratio: 53.9% from 55.5%
Risk costs: -16 bps from -22 bps
RWAs: EUR 166.4 bn (EUR 158.0 bn)
Underlying RAROC after tax: 23.4% (19.7%)
Econ. cap: EUR 8.2 bn (EUR 8.5 bn)
Wholesale Banking
• Underlying profit improved due to strong performance of the international network and ING Real Estate
• Profit ING Real Estate up 17.2% driven by investment management and development
• Increased fee income in line with strategy to rebalance revenues
• Credit environment remains benign resulting in net releases of risk costs (-16bp)
• Improvement C/I ratio to 53.9% reflecting tight cost control
• RAROC improved to 23.4% as economic capital was reduced
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Operating expenses 820 801 2.4
Total income 1,521 1,444 5.3
764 725 5.4Profit before tax
%change
Additions to loan loss provisions -63 -82
First Quarter 2006 Results 24
Underlying C/I ratio: 62.2% from 68.1%
Risk costs: 7 bps from 21 bps
RWAs: EUR 95.6 bn (EUR 81.6 bn)
Underlying RAROC after tax: 40.0% (34.8%)
Econ. cap: EUR 3.8 bn (EUR 3.0 bn)
Retail Banking
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Operating expenses 963 927 3.9
Total income 1,547 1,362 13.6
566 394 43.7Profit before tax
%change
Additions to loan loss provisions 18 41
ING BankingWhole-
sale RetailING
Direct
• Underlying profit up 43.7% to record high
• Profit: NL up 37.2%, Belgium up 71.3% and Poland more than doubled
• Private Banking profit posted 62.8% growth
• Income growth of 13.6%, reflecting strong growth in all regions
• Modest expense growth related to expansion of Poland, India and Private Banking
• C/I ratio further improved strongly to 62.2%
• Loan losses declined to 7bps, due to improvements in credit portfolios
• Economic capital attributed to Retail Banking up by more than 25% to realise growth
First Quarter 2006 Results 25
Underlying C/I ratio: 69.9% from 66.3%
Risk costs: 10 bps from 27 bps
RWAs: EUR 80.5 bn (EUR 56.6 bn)
Underlying RAROC after tax: 11.4% (13.2%)
Econ. cap: EUR 3.3 bn (EUR 2.6 bn)
ING Direct
Profit & loss account (underlying)In EUR million 1Q 06 1Q 05
Operating expenses 424 323 31.3
Total income 607 487 24.6
163 127 28.3Profit before tax
%change
Additions to loan loss provisions 20 37
ING BankingWhole-
sale RetailING
Direct
• Underlying profit up 28.3% led by strong results in Germany
• Profit lower than fourth quarter 2005, reflecting EUR 27 m higher marketing cost
• ING Direct UK posted profit for first time
• Interest margin narrowed slightly to 0.94% from 0.96% in fourth quarter
• Record 1.1 million new customers in first quarter
• Funds entrusted grew EUR 6.7 bn, despite EUR 2.1 bn negative FX-impact
• Residential mortgage portfolio grew EUR 3.3 bn, despite EUR 1.0 bn negative FX-impact
• Germany and US increased client rates in April
First Quarter 2006 Results 26
Underlying profit before tax
in EUR million 1Q 06 1Q 05 %-change
Insurance 1,205 985 22.3
Europe 443 506 -12.5
Americas 484 437 10.8
Asia / Pacific 156 169 -7.7
Other* 122 -127
Banking 1,473 1,192 23.6
Wholesale Banking 764 725 5.4
Retail Banking 566 394 43.7
ING Direct 163 127 28.3
Other** -20 -54
Total ING Group 2,678 2,177 23.0
Contribution of business lines 1Q 2006*
*) Excludes component ‘Other‘ in banking and insurance
*) The improvement in Other insurance results in 1Q ’06 results mainly from higher capital gains on shares, the run-off of old reinsurance business, lower interest expenses on core debt and a fair value change in a swap position
**) Other banking results in 1Q ’06 consist mainly of interest expenses related to capital management that are not allocated to the business lines and the impact of the implementation of the fair value option under IFRS in Q3 2005
InsuranceEuropeInsuranceAmericasInsuranceAsia/Pacific
WholesaleBankingRetailBanking
ING Direct
17%
19%
6%30%
22%
6%
Profit distribution
First Quarter 2006 Results 27
31/03/06 31/12/05
ING GROUPBalance sheet total (EUR bn) 1,201 1,159 Capital and reserves (EUR bn) 36.4 36.7 Capital and reserves per share (EUR) 16.87 16.96
Debt/equity ratio Group 8.4% 9.4%
Net revaluation reserve (EUR bn)• Shares 4.9 4.2• Fixed income securities 2.7 5.8
INSURANCEDebt/equity ratio insurance 12.7% 13.4% Capital Coverage ratio 277% 255%
BANKINGBIS ratio 11.00% 10.86% Tier-1 ratio 7.43% 7.32% RWAs (EUR bn) 333.4 319.7
Continued strong capital position
11 May 2006
First Quarter 2006 Results
Strong start to the year
First Quarter 2006 Results 29
Certain of the statements contained herein are statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those in such statements due to, among other things, (i) general economic conditions, in particular economic conditions in ING’s core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) interest rate levels, (vii) currency exchange rates (viii) general competitive factors, (ix) changes in laws and regulations, (x) changes in the policies of governments and/or regulatory authorities. ING assumes no obligation to update any forward-looking information contained in this document.
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