Chairman's statement
"ING posted strong results in the first half, driven by an excellent performance at our banking businesses, as well as exceptionally low claims at our non-life insurance units and a gain on the sale of our Australian non-life business," said Michel Tilmant, chairman of the Executive Board. "All three banking business lines showed top-line growth while improving their cost/income ratios, and risk costs declined sharply. The life insurance businesses in the US and Asia also benefited from higher sales, stricter product pricing and lower credit losses."
"ING posted strong results in the first half, driven by an excellent performance at our banking businesses, as well as exceptionally low claims at our non-life insurance units and a gain on the sale of our Australian non-life business," said Michel Tilmant, chairman of the Executive Board. "All three banking business lines showed top-line growth while improving their cost/income ratios, and risk costs declined sharply. The life insurance businesses in the US and Asia also benefited from higher sales, stricter product pricing and lower credit losses."
"This year we accelerated a programme to actively manage our portfolio of businesses, taking steps to sell units that no longer fit into our long-term strategy, such as the Asian cash equities business, and the Australian non-life insurance joint venture. We have agreed to sell CenE Bankiers in the Netherlands, and are in talks regarding ING BHF-Bank in Germany,'' Tilmant said. "As a result, ING's debt/equity ratio is improving, so we decided to change ING's dividend-funding policy to limit dilution of earnings per share."
"The positive trends we experienced in the first quarter continued in the second quarter. Loan loss provisions and credit losses have declined sharply, and are now well below long-term average levels," Tilmant said. "However, there is still need for caution, as stock-market volatility and swift changes in interest rates could pose challenges for some businesses in the short run."
"We are optimistic about the results for the full year," Tilmant said. "However, we have adopted a policy to no longer give profit forecasts."
1.1 ING Group
|
Table 1. ING Group key figures | ||||||
|
|
First Half |
Second Quarter | ||||
|
In EUR million |
1H
2004 |
1H
2003 |
%
Change |
2Q
2004 |
2Q
2003 |
%
Change |
|
Operating profit before tax: |
|
|
|
|
|
|
|
- Insurance Europe |
774 |
798 |
-3.0 |
365 |
400 |
-8.8 |
|
- Insurance Americas |
800 |
634 |
26.2 |
460 |
395 |
16.5 |
|
- Insurance Asia/Pacific |
527 |
176 |
199.4 |
405 |
105 |
285.7 |
|
- Other |
-43 |
88 |
|
39 |
184 |
|
|
Insurance operating profit before tax |
2,058 |
1,696 |
21.3 |
1,269 |
1,084 |
17.1 |
|
|
|
|
|
|
|
|
|
- Wholesale Banking |
1,170 |
752 |
55.6 |
511 |
358 |
42.7 |
|
- Retail Banking |
678 |
493 |
37.5 |
351 |
257 |
36.6 |
|
- ING Direct |
203 |
31 |
554.8 |
128 |
24 |
433.3 |
|
- Other |
-71 |
-66 |
|
-21 |
-25 |
|
|
Banking operating profit before tax |
1,980 |
1,210 |
63.6 |
969 |
614 |
57.8 |
|
|
|
|
|
|
|
|
|
Total operating profit before tax |
4,038 |
2,906 |
39.0 |
2,238 |
1,698 |
31.8 |
|
Taxation |
1,100 |
678 |
62.2 |
568 |
444 |
27.9 |
|
Third-party interests |
142 |
160 |
-11.3 |
65 |
88 |
-26.1 |
|
Operating net profit* |
2,796 |
2,068 |
35.2 |
1,605 |
1,166 |
37.7 |
|
- of which Insurance |
1,469 |
1,265 |
16.1 |
935 |
761 |
22.9 |
|
- of which Banking |
1,327 |
803 |
65.3 |
670 |
405 |
65.4 |
|
|
|
|
|
|
|
|
|
Capital gains/negative value adjustment shares |
47 |
-38 |
|
36 |
697 |
|
|
Net profit |
2,843 |
2,030 |
40.0 |
1,641 |
1,863 |
-11.9 |
|
|
|
|
|
|
|
|
|
Net profit per share (In EUR) |
1.36 |
1.03 |
32.0 |
0.79 |
0.95 |
-16.8 |
|
Operating net return on equity** |
24.8% |
21.5% |
|
|
|
|
|
Debt/equity ratio*** |
12.1% |
14.4% |
|
|
|
|
|
Total staff (average FTEs) |
113,300 |
115,500 |
-1.9 |
|
|
|
* Operating net profit = net profit excluding realised capital gains/losses on shares and negative revaluation reserve shares
** 2003 figures are full-year
*** 2003 figures are year-end
First-half profit
Operating net profit rose 35.2% to EUR 2,796 million, led by strong increases in operating profit from ING's three banking business lines, driven by a sharp decline in risk costs and higher income. The insurance businesses in the Americas and Asia/Pacific also posted higher profit, driven by exceptionally strong results from non-life insurance, higher life insurance sales in the US and Asia, and a gain on the sale of ING's non-life joint venture in Australia. Profit from Insurance Europe declined due to lower results in the Netherlands.
First-half net profit rose 40.0% to EUR 2,843 million, including EUR 47 million in realised capital gains on equities in the first half of 2004 as well as realised capital losses and a negative adjustment to the revaluation reserve shares which totalled EUR 38 million in the first half of 2003.
Net profit per share rose 32.0% to EUR 1.36 from EUR 1.03 in the first half last year. The increase lagged growth in total net profit due to an increase in the average number of shares outstanding because ING's dividend has been fully funded in stock since the final dividend 2002. ING will continue to offer shareholders a choice to receive the dividend in cash or stock, but beginning with the interim dividend for 2004, it will no longer issue shares to fund the cash portion of the dividend.
Operating net profit from insurance rose 16.1% to EUR 1,469 million led by higher profit from the Americas and Asia/Pacific. For Insurance Americas, operating profit before tax increased 26.2% to EUR 800 million. Results from the US life business continued to improve and the Canadian non-life insurance operations posted exceptionally good results due to a very favourable claims experience. Operating profit before tax from Insurance Asia/Pacific increased from EUR 176 million to EUR 527 million, including a one-off gain of EUR 219 million from the sale of ING's stake in its Australian non-life insurance venture. Excluding that gain, operating profit before tax from Insurance Asia/Pacific increased 75.0%, driven by higher sales and a favourable claims environment. Insurance Europe posted a 3.0% decrease in operating profit before tax to EUR 774 million, due to lower life insurance profit in the Netherlands mainly as a result of higher costs and lower one-off gains.
Operating net profit from banking rose 65.3% to EUR 1,327 million, lifted by higher profit from all three business lines. Wholesale Banking posted a 55.6% increase in operating profit before tax, driven by a substantial reduction in risk costs and continued growth in income. Operating profit before tax from Retail Banking increased 37.5% to EUR 678 million, bolstered by higher income, lower risk costs and a decline in operating expenses. ING Direct posted an operating profit before tax of EUR 203 million, up from EUR 31 million in the first half of 2003, as it continued to attract new clients and funds.
One-off items
One-off items resulted in a net gain of EUR 184 million in the first half of 2004, which was roughly balanced by a net gain of EUR 207 million in the first half of 2003. In the first half of 2004, ING booked gains of EUR 146 million (EUR 219 million before tax) on the sale of its Australian non-life insurance venture and EUR 92 million (EUR 96 million before tax) from a gain on old reinsurance business, as well as a loss plus additional expenses of EUR 54 million (EUR 84 million before tax) from the sale of the Asian equities unit. The year-earlier period included a gain of EUR 247 million (EUR 303 million before tax) from old reinsurance business and a restructuring charge of EUR 40 million (EUR 45 million before tax) for ING BHF-Bank and ING Bank France. (See Appendix 5.2)
Currency impact
The weakening of most currencies against the euro had a negative impact of EUR 46 million on first-half net profit. That was partially offset by a gain of EUR 87 million after tax on the US dollar hedge, compared with a gain of EUR 54 million on the hedge in the first half of 2003. ING has hedged the expected profits in US dollar and dollar-linked currencies for the remainder of 2004.
Second-quarter profit
Second-quarter operating net profit rose 37.7% to EUR 1,605 million, compared with the second quarter of 2003. Operating net profit from banking increased 65.4% to EUR 670 million, boosted by higher income and substantially lower risk costs. Insurance operating net profit rose 22.9% to EUR 935 million, lifted by very strong non-life results in Canada, higher life results in Asia, and the gain on the sale of the Australian non-life business. Second-quarter net profit declined 11.9% to EUR 1,641 million, due to a gain of EUR 697 million in the second quarter of 2003, when ING recouped most of the negative value adjustment on the revaluation reserve shares taken in the first quarter of 2003.
Compared with the first quarter of 2004, operating net profit rose 34.8% to EUR 1,605 million from EUR 1,191 million, driven by a 75.1% increase in operating net profit from insurance, due in part to the gains on the sale of the Australian non-life insurance joint venture and the old reinsurance business. Operating net profit from banking rose 2.0% to EUR 670 million from EUR 657 million.
1.2 Balance Sheet & Capital
|
Table 2. Key Balance Sheet Figures | ||||
|
In EUR billion |
30 June
2004 |
31 Dec.
2003 |
%
Change |
31 March
2004 |
|
Shareholders' equity |
24.1 |
21.3 |
12.8 |
22.9 |
|
- insurance operations |
13.3 |
12.0 |
11.5 |
12.8 |
|
- banking operations |
17.4 |
16.7 |
4.1 |
17.4 |
|
- eliminations* |
-6.6 |
-7.4 |
|
-7.3 |
|
|
|
|
|
|
|
Total assets
|
871.6 |
778.8 |
11.9 |
830.0 |
|
Operating net return on equity |
24.8% |
21.5% |
|
21.8% |
|
- insurance operations |
23.0% |
22.7% |
|
17.2% |
|
- banking operations |
17.9% |
11.1% |
|
18.1% |
* own shares, subordinated loans, third-party interests, debenture loans and other eliminations
Shareholders' equity
On 30 June 2004, ING's shareholders' equity amounted to EUR 24.1 billion, an increase of EUR 2.8 billion, or 12.8%, compared with year-end 2003. The first-half net profit added EUR 2.8 billion to shareholders' equity and revaluations accounted for an increase of EUR 0.3 billion.
Capital ratios
The debt/equity ratio of ING Groep NV improved to 12.1% from 14.4% at the end of 2003. The improvement was caused by a EUR 3.4 billion increase in the capital base due to higher retained earnings, a positive revaluation of shares and real estate, and the issue of hybrid securities in June as well as a EUR 0.3 billion decrease in core debt. The capital coverage ratio for ING's insurance operations increased to 184% of regulatory requirements at the end of June, compared with 180% at year-end 2003. The Tier-1 ratio of ING Bank Holding NV stood at 7.65% on 30 June 2004 up from 7.59% at the end of 2003. The solvency ratio (BIS ratio) for the bank fell from 11.34% to 11.27%. Compared with year-end 2003, total risk-weighted assets rose by EUR 21.4 billion, or 8.5%, to EUR 272.7 billion. Almost half of the increase was due to the growth of ING Direct.
Return on equity
The operating net return on equity increased from 21.5% for the full year 2003 to 24.8% in the first half of 2004. The operating net return on equity of the insurance operations rose from 22.7% in 2003 to 23.0% in the first half, while the operating net return on equity from banking rose from 11.1% to 17.9%.
Assets under management
Assets under management increased 6.1% in the first six months to EUR 490.8 billion at the end of June 2004. The EUR 28.1 billion increase resulted from a net inflow of EUR 13.7 billion, EUR 8.6 billion from higher stock markets, and EUR 7.8 billion from positive currency rate differences. Divestments had a negative impact of EUR 2.0 billion, mainly due to the deconsolidation of Baring Private Equity Partners.
1.3 Dividend
ING Group will pay an interim dividend of EUR 0.49 per ordinary share, equal to a rounded half of the total dividend paid over the book-year 2003 (EUR 0.97), in line with the dividend policy. Shareholders can choose to receive the dividend in either cash or shares. As ING's capital position is more than adequate and the debt/equity ratio of the group has been reduced, ING will not issue new shares to finance the cash portion of the dividend. The ING share will be quoted ex-dividend as from 6 August 2004. From 6 August until 27 August shareholders can decide to receive the interim dividend 2004 in cash or shares. The exchange ratio, which will be announced on 3 September after closing of the Euronext Amsterdam Stock Exchange, will be based on the volume-weighted average share price over the period of 30 August to 3 September inclusively. The interim dividend will be made payable on 10 September 2004. The value of the dividend in cash will be 0 to 4% lower than the dividend in stock.
|
All figures compare first half 2004 with first half 2003 unless otherwise stated. | |
|
Press conference: 5 August, 9:30 a.m. CET at ING House, Amsterdam. Presentation & webcast at www.ing.com
Analyst presentation: 5 August, 11:15 a.m. CET at ING House, Amsterdam. Presentation & webcast at www.ing.com
Analyst conference call: 5 August, 3 p.m. CET.
Listen in: NL +31 45 631 6910 UK +44 20 8515 2312 US +1 303 262 2130
Analyst presentation: 6 August, 11 a.m. UK time in London. Webcast at www.ing.com | |
|
Media relations +31 20 541 5446 |
Investor relations +31 20 541 5571 |
The full report including tables can be downloaded from the following link:
