AMSTERDAM, Netherlands, Aug. 11, 2005 (PRIMEZONE) -- ING:
- Net profit per share increases 20.4% to EUR 1.61 from EUR 1.33
in first half 2004
- Profit before tax excluding impact of divestments rises 9.3% to
EUR 4,011 million
- Insurance profit excluding divestments rises 2.3% led by Americas
and Europe
- Banking profit excluding divestments climbs 16.0% driven by
all business lines
- Returns increase: RAROC after tax and divestments rises to
18.0%, IRR to 12.6%
- ING to pay interim dividend of EUR 0.54 per share in cash, up
from EUR 0.49
Chairman's statement "ING showed a solid performance in the first six months of 2005, despite challenges posed by low interest rates in most markets," said Michel Tilmant, Chairman of the Executive Board. "Income rose across the Group. The banking businesses benefited from lower risk costs as the credit environment remained benign, and ING Direct continued its fast growth, adding 1.8 million new customers. Life insurance sales increased, especially in emerging markets, while the non-life insurance units posted strong underwriting results. Both banking and insurance also benefited from lower taxes."
"We are seeing results from our emphasis on value creation, with returns improving in both banking and insurance, despite market pressures on margins. The risk-adjusted return on capital for the banking operations improved with all three business lines performing above ING's target. At the insurance operations, the value of new life business increased 33.2% as units improved margins and focused on the most attractive markets, such as retirement services and pensions."
"Net profit in the second quarter declined mainly due to gains on divestments last year and other non-recurring items. Excluding that impact, second-quarter profit rose 6.7%. In addition, we have taken measures to strengthen insurance reserves for an old book of business in Taiwan as a result of low interest rates, despite the fact that insurance reserves for the Group as a whole remain more than adequate, even using our conservative internal standards."
"We also continue to focus on improving execution to increase efficiency, address operational and compliance issues, and improve service. We announced some initiatives earlier this year to reduce expenses at some units. Cost control remains a priority for management, and we will continue to take steps to improve efficiency and preserve our competitive position in mature markets to deliver more value for our customers and shareholders."
"The company has declared an interim dividend of EUR 0.54 to be paid in cash, equal to a rounded half of the full-year dividend for 2004. We remain confident about the remainder of the year, although interest-rate developments pose challenges for some businesses as we saw in the second quarter."
Table 1. ING Group key figures
First Half Second Quarter
In EUR million 2005 2004 Change 2005 2004 Change
Profit before tax
excluding
divestments:
- Insurance Europe 995 861 15.6% 490 509 -3.7%
- Insurance Americas 986 789 25.0% 549 461 19.1%
- Insurance
Asia/Pacific 225 264 -14.8% 54 152 -64.5%
- Other(1) -353 -103 -226 9
Insurance profit
before tax excluding
divestments 1,853 1,811 2.3% 867 1,131 -23.3%
- Wholesale Banking 1,206 1,084 11.3% 481 423 13.7%
- Retail Banking 808 644 25.5% 414 319 29.8%
- ING Direct 254 203 25.1% 127 125 1.6%
- Other(2) -110 -71 -56 -15
Banking profit
before tax excluding
divestments 2,158 1,860 16.0% 966 852 13.4%
Total profit before
tax excluding
divestments 4,011 3,671 9.3% 1,833 1,983 -7.6%
Gains/losses on
divestments 345 135 -31 219
Profit before tax
from divested units 26 180 5 48
Total profit before
tax 4,382 3,986 9.9% 1,807 2,250 -19.7%
Taxation 766 1,050 -27.0% 194 521 -62.8%
Third-party
interests 124 143 -13.3% 62 66 -6.1%
Net profit 3,492 2,793 25.0% 1,551 1,663 -6.7%
- of which Insurance 1,430 1,543 -7.3% 700 1,076 -34.9%
- of which Banking 2,062 1,250 65.0% 851 587 45.0%
Net profit per share
(in EUR) 1.61 1.33 20.4% 0.72 0.79 -8.9%
Key figures
Net return on
capital and
reserves(3) 25.7% 25.4%
Debt/equity ratio(4) 9.8% 10.9%
Total staff (average
FTEs) 114,600 113,300 1.1%
1. Other insurance results includes the positive currency hedge result in 2004, interest on core debt and results on old reinsurance activities in 2004
2. Other banking results consist mainly of interest expenses that are not allocated to the different business lines
3. 2004 figures are full-year on ING GAAP basis; 2005 figures exclude revaluation reserves for available-for-sale securities
4. Comparable figure is based on IFRS at 1 January 2005
First-half profit Net profit rose 25.0% to EUR 3,492 million in the first half of 2005, up from EUR 2,793 million in the same period last year, driven by solid growth at all three banking business lines as well as the insurance activities in the Americas and Europe. Net profit from banking increased 65.0% to EUR 2,062 million, mainly as a result of low risk costs, lower taxes, and realised gains on divestments. Net profit from insurance decreased 7.3% to EUR 1,430 million, despite lower taxes, due to divestments and other non-recurring items as well as a decision to strengthen reserves in Taiwan. However, the rest of Asia as well as the Americas and Europe showed strong growth. Net profit per share rose 20.4% to EUR 1.61 from EUR 1.33.
Total profit before tax increased 9.9% to EUR 4,382 million. On balance, divestments had a positive impact of EUR 56 million in the first half. Results in the first half of 2005 included EUR 345 million in realised gains on divestments and EUR 26 million in profit from divested units. That compares with EUR 135 million in gains from divestments and EUR 180 million in profit from divested units in the first half of 2004. Excluding the impact of divestments, profit before tax increased 9.3% to EUR 4,011 million, lifted by higher results from both banking and insurance.
Insurance profit before tax excluding divestments rose 2.3% to EUR 1,853 million as higher results from the Americas and Europe were largely offset by lower results from Asia/Pacific and Other, which includes one-off gains in the first half last year. Insurance Europe posted an increase of 15.6% to EUR 995 million, lifted by higher investment gains in the Netherlands as well as strong growth in Central Europe. Insurance Americas posted a 25.0% increase to EUR 986 million, driven by higher investment and fee income and improved margins in the U.S. life businesses, as well as continued strong underwriting results at the Canadian non-life insurance business. Insurance Asia/Pacific posted a 14.8% decrease, mainly caused by reserve strengthening in Taiwan which offset strong growth elsewhere in the region, notably Australia and South Korea. The Other insurance results showed a decrease due to EUR 254 million of gains in the first half of last year on old reinsurance business and the U.S. dollar hedge.
Banking profit before tax excluding divestments rose 16.0% to EUR 2,158 million, lifted by higher profits from all three business lines. Results of Wholesale Banking increased 11.3% to EUR 1,206 million, driven by lower risk costs. Retail Banking profit rose 25.5% to EUR 808 million, lifted by higher income and lower risk costs, particularly in the Netherlands and Belgium. ING Direct posted a 25.1% increase to EUR 254 million, supported by ongoing strong growth in volumes, which was partially offset by a narrowing of the interest margin in the second quarter of 2005.
Effective tax rate
The effective tax rate decreased to 17.5% in the first half of 2005 from 26.3% in the first six months last year, due to a lower statutory tax rate in the Netherlands, high tax-exempt gains on divestments and private equity, as well as EUR 135 million in releases from the tax-contingencies reserve due to the favourable resolution of some pending corporate income tax matters. The effective tax rate for the full year 2005 is expected to be around 20%.
Currency impact
The weakening of the U.S. dollar and related currencies was entirely offset by the strengthening of other currencies, such as the Polish zloty, the Canadian dollar, and the Korean won. However, results in the first half of 2004 included a net gain of EUR 87 million (EUR 133 million before tax) on a U.S. dollar hedge, which was not repeated as ING stopped hedging its U.S. dollar exposure from 2005.
Impact of IFRS
The 2004 figures have been restated to comply with IFRS. However, as permitted under IFRS 1, the 2004 comparatives exclude the impact of IAS 32, 39 and IFRS 4, which were implemented starting from 1 January 2005. In the first half of 2005, IAS 32, 39 and IFRS 4 had a total positive impact of approximately EUR 80 million on the reported net profit. For the insurance operations, the standards had a positive net impact of approximately EUR 10 million, mainly due to the revaluation of non-trading derivatives, as well as prepayment penalties on mortgages and realised gains on bonds, which are no longer amortised. In the banking operations, the impact of IAS 32 and 39 was approximately EUR 70 million after tax, mainly due to unrealised results on voluntary trade assets, realised gains on the sale of bonds and higher prepayment penalties on mortgages. That was partially offset by the negative revaluation of non-trading derivatives and the asymmetrical accounting for market-making in ING bonds. In the second quarter of 2005, IFRS had a total negative impact of EUR 10 million on the Group's results, compared with a positive impact of EUR 90 million in the first quarter of 2005. The swing was mainly caused by a lower value of non-trading derivatives, partially offset by higher gains on bonds and higher results from prepayment of mortgages.
Second-quarter profit
Second-quarter net profit declined 6.7% to EUR 1,551 million, mainly due to gains from divestments in the second quarter last year and other non-recurring items. Net profit in the year-earlier period included EUR 219 million after tax from gains on divestments and profit from divested units, plus EUR 92 million in releases from old reinsurance business, and a gain on the U.S. dollar hedge of EUR 35 million. In the second quarter of 2005, profit was lifted by EUR 135 million in releases from the tax-contingencies reserve, while divestments contributed EUR 11 million to results, including a net gain and profit from divested units. Excluding those items, net profit in the second quarter increased 6.7%. Insurance profit before tax excluding divestments declined 23.3% to EUR 867 million, due in part to gains from old reinsurance activities and the U.S. dollar hedge in the second quarter of 2004, and a negative revaluation of derivatives under IFRS in the second quarter of 2005, which are reported under Other. Results from Insurance Asia/Pacific declined 64.5% as a result of measures taken to strengthen reserves in Taiwan. That more than offset strong growth elsewhere in the region. Profit from Insurance Europe declined 3.7% due to lower life results in the Netherlands, mainly as a result of higher operating expenses. Insurance Americas posted a 19.1% increase in profit, driven by growth in the U.S. life businesses and continued strong underwriting results at the Canadian non-life business. Banking profit before tax excluding divestments increased 13.4% to EUR 966 million, driven by higher results from Retail and Wholesale Banking due to lower risk costs as well as higher income, particularly from mortgage lending in the Retail business line. Profit before tax from ING Direct increased 1.6% as strong growth in customers and funds entrusted was offset by narrower interest margins, particularly in the U.S.
Compared with the first quarter of 2005, net profit declined 20.1% to EUR 1,551 million. Excluding divestments, which contributed a total of EUR 405 million in the first quarter and EUR 11 million in the second quarter, net profit increased 0.3%. Net profit from insurance decreased 4.1% to EUR 700 million due to reserve strengthening in Taiwan as well as lower private-equity gains and the negative revaluation of derivatives under IFRS, which offset higher non-life results and lower taxes. Net profit from banking declined 29.7% to EUR 851 million from EUR 1,211 million in the first quarter. Profit in the first quarter included gains on the divestments of Baring Asset Management and shares in ING Bank Slaski, and profit in the second quarter included a gain on NMB-Heller. Excluding divestments, profit before tax declined 19.0% due to an increase in risk costs, lower Financial Markets results and provisions at the Belgian Wholesale Banking business. Profit from Retail Banking increased 5.1% and ING Direct maintained its good performance from the first quarter.
1.2 Balance Sheet & Capital and reserves
Table 2. Key Balance Sheet Figures
30 June 1 January 1H 31 March 2Q
In EUR billion 2005 2005 Change 2005 Change
Capital and reserves 35.3 28.3 24.8% 31.3 12.9%
- insurance operations 18.6 15.3 21.6% 16.8 10.7%
- banking operations 21.2 17.2 23.3% 18.4 15.2%
- eliminations(1) -4.5 -4.2 -3.9
Total assets 1,107.1 964.5 14.8% 1,036.5 6.8%
Net return on capital and
reserves(2) 25.7% 25.4% 26.4%
- insurance operations 19.7% 27.0% 21.0%
- banking operations 24.0% 15.8% 23.9%
1. Own shares, subordinated loans, third-party interests, debenture loans and other eliminations
2. The comparable figures shown under 1 January 2005 are FY 2004 figures based on net profit and average capital and reserves under ING GAAP 2005 figures are annualised
Capital and reserves
On 30 June 2005, ING's capital and reserves amounted to EUR 35.3 billion, an increase of EUR 7.0 billion, or 24.8%, compared with 1 January 2005. The increase was driven by the addition of net profit from the first six months of 2005 (EUR 3.5 billion), unrealised revaluations of debt securities (EUR 1.8 billion net after transfer of deferred profit sharing to insurance liabilities), exchange rate differences (EUR 1.6 billion), unrealised revaluations on equities (EUR 0.8 billion) and a change in cash-flow hedge reserve (EUR 0.8 billion). That was offset mainly by the cash dividend payment (EUR -1.3 billion).
Capital ratios
The debt/equity ratio of ING Groep N.V. improved to 9.8% from 10.9% at 1 January 2005. The improvement was caused by a EUR 5.4 billion increase in the Group capital and reserves (excluding third-party interests) due to retained earnings and revaluations. That was partially offset by an increase of EUR 0.1 billion in core debt. The capital coverage ratio for ING's insurance operations increased to 228% of regulatory requirements at the end of June, compared with 201% at 1 January 2005. The Tier-1 ratio of ING Bank N.V. stood at 7.20% on 30 June 2005, up from 7.00% on 1 January 2005. The solvency ratio (BIS ratio) for the bank decreased slightly to 10.55% at the end of June from 10.59% on 1 January 2005. Total risk-weighted assets rose by EUR 31.4 billion, or 11.5%, to EUR 305.5 billion, driven by growth in all three banking business lines.
Return on capital and reserves
The net return on capital and reserves increased to 25.7% in the first six months of 2005 from 25.4% for full-year 2004. The insurance operations posted a 19.7% net return on capital and reserves in the first six months of 2005, compared with 27.0% for full-year 2004, while the banking operations posted an increase to 24.0% from 15.8%. The comparable figures for net return on capital and reserves are based on net profit and average capital and reserves under ING GAAP, while the 2005 figures are based on IFRS.
Assets under management
Assets under management increased 13.2% to EUR 505.2 billion at the end of June from EUR 446.1 billion at the end of 2004, excluding the impact of divestments and restatements. The increase was driven by a net inflow of EUR 13.6 billion, the impact of higher currencies (EUR 31.7 billion) and higher stock markets (EUR 13.8 billion). Including the impact of divested units and a restatement due in part to IFRS, which had a combined effect of EUR 45.8 billion, total assets under management increased 2.7%.
1.3 Dividend
ING Group will pay an interim dividend of EUR 0.54 per ordinary share, up from EUR 0.49 last year, which is equal to a rounded half of the total dividend paid over the book-year 2004 (EUR 1.07). The interim dividend will be fully paid in cash. The ING share will be quoted ex-interim dividend as of 12 August 2005 and the dividend will be made payable on 18 August 2005.
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All figures compare first-half 2005 with first-half 2004 unless
otherwise stated.
Comparable figures for 2004 exclude IAS 32, 39 and IFRS 4.
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Press conference: 11 August, 9 a.m. CET at ING House, Amsterdam.
Presentation & webcast www.ing.com
Analyst presentation: 11 August, 11:15 a.m. CET at ING House,
Amsterdam. Presentation & webcast www.ing.com
Analyst call: 11 August, 4 p.m. CET.
Listen in: NL +31 20-794-8504
UK +44 207-190-1595
US +1 303-262-0078
Analyst presentation London, 12 August, 11 a.m. UK time, webcast
at www.ing.com
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The full report including tables can be downloaded from the following link: http://hugin.info/130668/R/1005699/154966.pdf