Netherlands Full Rating Report Ratings Foreign Currency Long-Term IDR Short-Term IDR A F1 Viability Rating a Support Rating Support Rating Floor NF ING Group Long-Term IDR Short-Term IDR A F1 Viability Rating a Support Rating Support Rating Floor NF Sovereign Risk Foreign-Currency Long-Term IDR Local-Currency Long-Term IDR Outlooks AAA AAA Foreign-Currency Long-Term Stable IDR Sovereign Foreign-Currency Stable Long-Term IDR Sovereign Local-Currency Long- Stable Term IDR Financial Data 3 Jun 1 31 Dec 14 Total assets (USDm) 963,13 1,,91 Total assets (EURm) 86,749 828,62 Total equity (EURm) 39,381 38,686 Published net income 2,769 2,823 (EURm) Operating ROAA.8.7 Operating ROAE 16.7 1.1 Fitch core capital/ 12. 12.3 weighted risks Tangible equity/ 4.3 4. tangible assets Common equity Tier 1 ratio (fully-loaded) 11.3 11.4 Related Research - Ratings Navigator (July 21) Analysts Jens Hallen +44 2 33 1326 jens.hallen@fitchratings.com Bjorn Norrman +44 2 33 133 bjorn.norrman@fitchratings.com Konstantin Yakimovich +44 2 33 1789 konstantin.yakimovich@fitchratings.com Key Rating Drivers Strong Standalone Strength: 's ratings are driven by the bank's strong franchise a leading bank in the Benelux and reasonable presence in other EU countries and diverse business model, supporting resilient earnings generation, and its balanced funding profile. The ratings also factor in the bank's moderate impaired loans and modest coverage ratios, which result in a higher proportion of equity exposed to unreserved impaired loans than similarly rated peers. Company Profile Underpins Earnings: A strong and diverse company profile underpins ING Bank's resilient operating performance (average operating return on equity of 14% in 211-1H1). Slow growth in the eurozone and generally low interest rates weigh on performance, but reducing loan impairment charges (LICs) and strong cost focus mitigate the pressure. Strong Deposit Franchise: ING Bank's funding profile is supported by its strong franchises in some deposit-rich jurisdictions, such as Belgium and Germany. To supplement its funding, ING Bank also regularly taps the wholesale market, to which it has ready access. The wholesale funding maturities are reasonably spread over time, and the bank s ample liquidity buffer further mitigates refinancing risk. Moderate Impaired Loans: ING Bank's impaired loans ratio is in line with similarly rated European peers', and Fitch believes impaired loans peaked in 214. Reserves for impaired loans remain low relative to peers, although ING Bank has a track record of prudent collateral management and LICs exceeding write-offs. Well Capitalised: Capitalisation is solid and compares adequately with similarly rated eurozone peers. Risk-weighted capital ratios, however, lag behind some more highly rated northern European banks, and the bank s capital ratio target is relatively modest compared to these banks. However, additional capital is held at the ING Group level (ING Bank s parent), providing additional buffers in case of need. ING Bank s leverage (tangible equity / tangible assets) is sound in a European context. ING Group Aligned with Bank: ING Group's ratings are aligned with those of its main operating entity ING Bank. This is driven by low and reducing double leverage (13% at end- 214) as well as high fungibility of capital between the holding company and the bank, and regulatory focus on the Group as a consolidated entity. Rating Sensitivities Increased Risk Appetite: Downward pressure on ING Bank's ratings, while not expected, would most likely result from a significantly increased risk appetite in higher-risk markets or sectors, or less prudent liquidity or capital management. Significant negative valuation changes on collateral for impaired loans would also be rating-negative should capital be materially affected. Sustained Strong Profitability: Given the current high ratings, upside potential is limited, and any upgrade would be contingent on the improvements in profitability being sustained driving solid internal capital generation and stronger capital ratios, while maintaining a conservative risk appetite and strong asset quality. www.fitchratings.com 23
4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q1 Jan 7 Sep 7 May 8 Feb 9 Oct 9 Jun 1 Mar 11 Nov 11 Jul 12 Apr 13 Dec 13 Aug 14 May 1 Banks Figure 1 Dutch House Price Index December 26 = 1 11 1 1 9 9 8 8 Source: CBS Operating Environment Receding Cyclical Headwinds in Key Markets ING Bank is based in the Netherlands, where it is a top-three universal bank and has therefore been affected by the Dutch recession in recent years. However, unlike the two other major Dutch banks, Rabobank Group (AA /Stable/a+) and ABN AMRO Bank N.V. (A/Stable/a), the majority of ING Bank s operations are conducted in other EU countries. Europe (and the eurozone in particular) represents the vast majority of ING Bank s operations at around 82% of total exposure at end-214, with the rest being mostly in other global major advanced economies (mainly Australia and the US). The vast majority of ING Bank s operations are conducted in countries that Fitch assigns a Macro-Prudential Indicator of 1, indicating a low macro-prudential risk. Fitch s macroeconomic forecasts for ING Bank s main markets all point to a gradual acceleration of the economic recovery, but to moderate levels, and decreasing unemployment rates. Figure 2 Macroeconomic Data - ING Bank s Main Markets GDP annual growth Unemployment rate Share of credit exposure at end- June 21 21f 216f 217f 21f 216f 217f Eurozone 1. 1.6 1.7 11. 1.6 1.3 Netherlands (AAA/Stable) 38 1.7 1.7 1.7 7. 6.9 6.7 Belgium (AA/Negative) 16 1.2 1. 1.6 8.4 8.3 8. Germany (AAA/Stable) 17 1.7 1.9 1.9 4.8 4.6 4.4 Source: Fitch Figure 3 Dutch Corporate Sector Health 3 2 2 1 1 - -1 Source: CBS Related Criteria Number of bankruptcies (RHS) Producer confidence (LHS) (') 3. Global Bank Rating Criteria (March 21) 2. 2. 1. 1... -. -1. ING Bank mostly operates in developed and concentrated banking systems, where barriers to entry are high, and dominated by a few leading players with established presence and franchises. In the Netherlands, the aggregated market shares of the three largest banks amount to 7%-7% in the retail and SME segments. The Belgian banking system also shows significant concentration, with the four largest banks (among which ING Belgium) making up 7%-8% of retail volumes. The German market is more fragmented, notably owing to the strong market shares of local saving and cooperative banks. Developed and Transparent Regulatory Environment ING Bank is subject to domestic and European banking regulations. ING Bank is now directly supervised by the European Central Bank under the Single Supervisory Mechanism (SSM), one of the pillars of the Banking Union. In Fitch s view the regulatory environments in ING Bank s main markets are developed and transparent, and legislations and regulations are effectively enforced. Company Profile Strong Product and Geographical Diversification ING Bank has a diverse and strong business model focused on retail and commercial banking across multiple geographies, but with emphasis on the eurozone. It has market shares in the Benelux countries ranging 1%-3% depending on the product, and reasonable presence in many other EU countries, resulting in significant pricing power and deposit collecting ability. The bank s business model is highly weighted towards traditional retail and commercial banking with a low proportion of volatile businesses. Net interest income (NII) dominates revenues at around 7%-8%, complimented by fees. Trading activities are mostly client driven and make a modest contribution to total revenues (and limited balance sheet use). 2
ING Bank is fully owned by a listed holding company ING Group. All bank subsidiaries are owned directly by ING Bank which leads to some organisational structure complexity in light of the bank s international presence, but key operating and legal entities are visible and transparent. Given that foreign subsidiaries are also regulated locally, capital and liquidity are not fully fungible within the group and hence ING Bank would benefit if current cross-border restrictions are lifted within the banking union countries. Figure 4 Figure Geographical Split of Lending At end-june 21 Growth markets 6% Other challengers 12% Rest of the World 11% The Netherlands 38% Geographical Split of Deposits At end-june 21 Other challengers 1% Growth markets 6% Rest of the World 4% The Netherlands 33% Belgium 16% Germany 17% Other challengers: Australia, France, Italy, Spain, UK Growth markets: Poland, Romania, Turkey, Asian markets Belgium 19% Germany 23% Other challengers: Australia, France, Italy, Spain, UK Growth markets: Poland, Romania, Turkey, Asian markets Management and Strategy ING Bank s management team has a high degree of depth, stability and experience. Succession planning for key executive roles is routinely undertaken. The current CEO has been with the bank for over 2 years and succeeded the previous CEO in 213 on his retirement. The bank s strategy is clearly articulated and reflects long-term sustainable level of performance in Fitch s view. Business and financial objectives are generally met with limited variability over cycles. An extensive restructuring programme (imposed by the European Commission on state aid received in 212), essentially related to the divestment of the insurance operations, was executed according to plan, and management also streamlined the bank's operations. ING Bank s corporate governance is effective, and the bank follows the recommendations from the Dutch corporate governance code. As a bank licensed in the Netherlands, it adheres to the Dutch Banking Code. Governance is organised around a two-tier board with an executive board and a supervisory board. ING Bank and ING Group share same governance bodies, but ING Bank s executive board is enlarged with four members, in addition to the CEO, CFO and CRO. Risk Appetite Moderate Risk Appetite ING Bank s risk appetite is moderate, in Fitch s view, and underwriting standards are broadly in line with industry practice. Credit standards are largely consistent over the economic cycles, and Fitch expects standards to be maintained in the post-crisis environment. ING Bank employs stringent limits on concentration and market risks and regularly tests its solvency against stress scenarios. Risk and reporting tools and controls are robust and cascaded through the bank's business lines. Like its Dutch peers, and driven by tax incentives to borrow, ING Bank s Dutch mortgage lending has been done at high loan/value ratios by international standards. While loan/value ratios remain high, a number of regulatory changes have been adopted since 211 to reduce gradually loan/value cap to 1% by 218, and require mortgage loans to be fully amortising for interest costs to be tax deductible. 3
ING Bank s balance sheet has shrunk in the past years due to deleveraging and low demand for new lending in a weak economic environment. Balance sheet growth resumed in 214 as lending started to pick up across most geographies, and from increased treasury activity. ING Bank s 217 strategic plan considers an annual balance sheet growth rate of around 3%, which is somewhat above the expected 1%-2% GDP growth in the bank s main markets. Fitch expects balanced growth to be the key focus for ING Bank. Limited Market Risk Structural interest rate risk is ING Bank s most significant market risk, reflecting its focus on traditional retail and commercial banking activities. Interest rate risk in the banking book is measured against various indicators, including earnings. ING Bank calculated that at end-214, a 1bp upward/downward shift in interest rates for the major currencies would result in a modest EUR89m increase/eur119m decrease in NII. Foreign exchange risk is low, reflecting limited currency mismatches on ING Bank s balance sheet. Market risk for the trading operations is largely customer driven and has conservative limits. The average diversified value at risk during 1H1 (1-day, 99%) was a low EUR1m (EUR9m in 214). Figure 6 Impaired Loans (% gross loans). 4. 3. 2. 1. Figure 9 Net Impaired Loans/ Equity 3 3 2 2 1 1 212 Impaired loans Reserves for imp. loans Peers' imp. loans*. June 212 213 214 21 * Average impaired loans ratio for ABN AMRO Bank (VR: 'a'), BNP Paribas Fortis (a), Danske Bank (a), and ING Bank Source: Banks, adjusted by Fitch Net impaired loans/equity Net impaired loans/equity av. peers 213 214 Source: Banks, adjusted by Fitch June 21 Financial Profile Asset Quality Gradually Improving Economies Support Asset Quality ING Bank s asset quality compares well with European peers and proved resilient through the cycle, underpinned by the bank s product and geographic diversification. Fitch believes impaired loans (3% of gross loans at end-june 21) peaked in 214, and asset quality will gradually improve in 21 and 216 due to the ongoing economic recovery in the bank s main markets (see figure 2). The reserves for impaired loan remain moderate, although should be viewed in the context of mostly collateralised lending. Figure 7 Figure 8 Impaired Loans Starting to Trend Down (% of gross loans) 4 3 2 1 Other retail Residential mortgages Commercial banking Net impaired loans/fcc (RHS) 212 213 FCC - Fitch core capital 214 June 21 Resilient Corporate Portfolio; CRE Reducing, Russia Manageable 4 3 3 2 2 1 1 Subsiding LICs.2 212 213 214 1H1 ING Bank s commercial banking book is diversified by obligor and geography and has largely been performing well. Structured finance is the largest part of the portfolio (accounting for around one-third of on- and off-balance sheet commercial banking exposure) and also a strong contributor to growth. The bank has completed a derisking of its commercial real estate (CRE) financing portfolio, which contracted by one-third since end-21, and accounted for only 13% of corporate lending at end-june 21 (see Figure 1). ING Bank's net exposures to Russia and Ukraine are sizeable but manageable at 2% and 3% of Fitch core capital respectively at end-june 21. The Russian exposure is mostly to leading national exporters, which have US dollar denominated revenues and hence benefit from..4.4.3.3 LICs/av. gross loans Net write-offs/av. gross loans LICs/av. gross loans (28-1H1 average) 4
Russian rouble devaluation. This has so far proved resilient with impaired loans at 3% of gross loans at end-june 21. The Ukrainian book is extremely weak but considerably smaller (2% impaired loans/gross loans ratio, 1% covered by reserves at end-june 21). Although further deterioration is likely, Fitch expects improvements in other parts of ING Bank s loan portfolio will offset additional impaired exposures in Ukraine on a gross basis. Strong Retail Portfolio, Improving Trend in Business Lending A major portion of ING Bank s loan book is residential mortgage lending, particularly in the Netherlands, which continues to perform well and help maintain a relatively low impaired loans ratio for the bank. ING Bank s impaired mortgage loans ratio in the Netherlands (2.4% at end- June 21) is slightly higher than its peers (average of ING Bank, ABN AMRO, Rabobank and SNS Bank was 1.7% at the same date), primarily driven by a somewhat stricter definition according to the bank. The bank s lower 9 days-past-due ratio (1.3% at end-june 21) appears to support this view. Despite the high loan/value ratios of the Dutch mortgage lending, which were exacerbated by a peak-to-trough 2% house price decline, Fitch expects this portfolio to remain resilient. Lending to SMEs is a significant contributor to the bank's impaired loans (21% of total impaired loans at end-june 21) despite being a smaller part of the overall portfolio (11% of total exposure at end-june 21). While the quality of Belgian loan book is stable, Dutch SME lending was particularly affected by the country s recent recession and remains weak. Fitch expects a visible improvement of the Dutch SME impaired loans ratio to require sustained growth in the Dutch economy. Figure 1 Loan Portfolio Quality Gross exposure a (EURbn) June 21 Impair Change ed in 1H1 Loans Coverage Change in 214 214 Impair ed Loans Coverage Retail Benelux 24.1.6 3.4 28.9.9 3.7 28.3 Mortgage loans Netherlands 132.7-1.2 2.4-2.4 2.6 Other retail Netherlands 3.6-4.8 7.2.7 8.7 O/w SME 27. -. 8.3 -.6 7.8 Mortgage loans Belgium 33.3 3.1 3.2.8 2.8 Other retail Belgium 43. 9.3 3.3 9.3 3. O/w SME 3.4 6.1 3. 11.6 3. Retail international 148.6 1. 1.4 8.8 -.1 1.4 9.7 Mortgage loans Germany 62.9 -.4 1.1 2.1 1.1 Other retail Germany 12.2 1.8 1.4-23.7 1.4 Mortgage loans rest of the 49.9.9.8 4.3.8 world Other retail rest of the world 23.7 4.4 3.4-24.8 3.2 Commercial banking 197.4 11.7 3.1 39.1 4.7 3.3 38.2 Industry 18. 11.1 3.2 9. 3.6 O/w structured finance 83.4 12.3 2.3 16.1 2.1 O/w real estate finance 24.9 7.1.8-6.4 8.1 General lending & 69.9.1 2.1 19.8 1.9 transaction services Other 19..8.8-47.7 8.8 O/w lease run-off 4. -11.4 24.7-29.2 21.8 Total 91.2 4.1 2.8 36.4.4 3. 3. a Includes loans, issued guarantees and letters of credit but excludes undrawn committed facilities Low Risk Other Earning Assets ING Bank s interbank exposure and liquidity portfolio are of good quality. At end-june 21, AAA rated government bonds made up the bulk of the portfolio. The bank has shifted the purpose of its securities portfolio from investment into a liquidity reserve. The focus is on investing is highly rated assets eligible as liquid asset classes for the calculation of the Basel III liquidity coverage ratio (LCR).
Figure 11 Pre-Tax Underlying Result (1H1; EURm) Retail Banking 1,934 7% Netherlands 778 23% Belgium 39 12% Germany 3 1% Commercial 1,83 47% Banking Corporate -148-4% Centre Total 3,369 1% Source: ING Bank, excluding one-off items as defined by the bank Figure 12 Earnings Structure Impairment charge Non-interest op. expense Other non-interest op. income Net fees Net interest income Op. profit/average assets (RHS) (EURbn) 2 1 1 - -1-1 212 213 214 1H1 1... -. -1. Earnings and Profitability Strong Operating Performance Through-the-Cycle ING Bank s strong operating profitability is underpinned by its vast Benelux franchise coupled with geographic diversification resulting in consistently solid earnings through the cycle. However, given the bank s more traditional lending-based business model, its profitability remains challenged by low interest rates and subdued business volumes. We expect the pressure to persist in 2H1-216 despite some tentative signs of growth picking up, but consider ING Bank to be well positioned to sustain this kind of stress. The bank is focusing on improving operating efficiency with a number of restructuring programmes underway, aimed at achieving gross annual cost savings of EUR1.3bn by 218 (just over half achieved to date). The cost savings will mitigate the effect from increasing regulatory costs and investments, and should help improve the bank s cost/income ratio to its targeted %-3% by 217. Contained costs and lower LICs should mitigate the pressure on NII. ING Bank s solid earnings generation provides it with sufficient buffer to absorb LICs; the bank could sustain roughly five times the average LICs in 28-1H1 before depleting its (annualised) 1H1 pre-impairment operating profit. Figure 13 Profitability 2 1 1 OP RoE OP RoE av. peers 212 213 214 1H1 Source: Banks, adjusted by Fitch Figure14 Cost Efficiency Net income was hit in 214 by non-recurring items, in particular the defined benefit pension plan termination cost and SNS nationalisation levy. In 21 ING Bank will face two new bank levies which will likely affect its performance. Nonetheless, Fitch expects that ING Bank s profitability and internal capital generation will remain solid as a result of improving operating efficiency and reducing LICs. 7 6 4 3 2 1 Cost/income Cost/income av. peers 212 213 214 1H1 Source: Banks, adjusted by Fitch Capitalisation and Leverage Sound Capitalisation, Additional Buffers at Group Level ING Bank s capitalisation is sound, although risk-weighted capital ratios are at the lower end of similarly or higher rated peers, particularly once the exposure to unreserved impaired loans is considered (27% of end-june 21 equity). ING Bank targets a fully-loaded common equity Tier 1 (CET1) ratio above 1% (in line with minimum regulatory pillar 1 requirements) plus a comfortable buffer. This is a relatively modest target, particularly given that the bank already exceeds this target combined with solid profitability and limited growth. ING Bank s leverage (tangible equity-to-tangible assets) compares well with peers and stood at 4.3% at end-june 21. Capital management for ING Bank is done at group level, and net income has largely been upstreamed to the holding company, ING Group. As a result, at end-june 21, ING Group held over EURbn of additional capital buffers (including EUR2bn profits made in 1H1) compared to the bank. In addition, the full divestment of ING Group s insurance companies still ongoing will further release around EUR2.6bn of capital at the group level. This translates into ING Group s pro-forma fully-loaded CET1 ratio of 13.9% at end-june 21. Some of these buffers will likely be paid out over time as dividend to shareholders, but Fitch expects the group will carefully manage capitalisation, particularly given new regulation and uncertainty surrounding debt and capital buffers, as well as possible risk-weight floors. 6
Figure 1 Risk-Weighted Capital Ratios 2 18 16 14 12 1 8 6 4 2 212 Total capital ratio Fitch core capital ratio Av. peers total capital ratio Av. peers Fitch core capital ratio 213 214 June 21 June 21 peers total capital ratio excluding BNP Paribas Fortis Source: Banks, adjusted by Fitch Figure16 Leverage 6 4 3 2 1 Tangible common equity/tangible assets Av. peers tangible common equity/tangible assets 212 213 Source: Banks, adjusted by Fitch 214 June 21 Figure 17 LT Debt Maturity Profile (EURbn) 2 2 1 1 Wholesale debt at holding level Subordinated debt RMBS Covered bonds Senior debt 9M1 216 217 218 219 22 Funding and Liquidity Strong Funding Profile ING Bank s funding profile is well balanced, with customer deposits as its main funding source, and complemented by wholesale funding. The funding profile benefits from large market shares in deposit rich countries (such as Belgium) offsetting structurally deposit short countries (such as the Netherlands). However, liquidity is not fully fungible within ING Bank, and the individual operating entities report varying loans/deposits ratios. ING Bank has maintained uninterrupted access to the capital markets since 29, and its debt maturities are reasonably well spread over time. The EUR33bn of wholesale debt maturing in 2H1-216 is significant, but is well covered by available liquidity and is comparable to the amount the bank has issued in 214-1H1. ING Bank has substantially reduced its use of interbank and short-term debt securities, and asset encumbrance is low. Large Liquidity Buffer ING Bank manages its liquidity to provide it with sufficient unencumbered assets eligible for ECB repo transactions or repoable with commercial banks to withstand a temporary drying-up of all wholesale markets. It had ample liquidity cushion of EUR18bn available at end-june 21, mainly made up of high-quality LCR-eligible liquid assets. Support In Fitch s view legislative, regulatory and policy initiatives (including the implementation of the EU s Bank Recovery and Resolution Directive (BRRD)) have substantially reduced the likelihood of sovereign support for EU commercial banks in general. The bank's and group s Support Rating of '' and Support Rating Floors of 'No Floor' imply that, despite ING Bank s systemic importance, it is likely that senior creditors will be required to participate in losses, if necessary instead of or ahead of the bank receiving sovereign support. Hence sovereign support, although possible, cannot be relied upon. 7
Income Statement 3 Jun 21 31 Dec 214 31 Dec 213 31 Dec 212 6 Months - Interim Months - Interim As % of Year End As % of Year End As % of Year End As % of USDm EURm EURm Earning EURm Earning EURm Earning Unaudited Unaudited Earning Assets Unqualified Assets Unqualified Assets Unqualified Assets 1. Interest Income on Loans n.a. n.a. - 2,192. 2.3 21,49. 2.86 24,793. 3.12 2. Other Interest Income 26,3.6 23,4..78 28,178. 3.3 3,2. 3.98 3,478. 4.46 3. Dividend Income 6.7 6.. 36.. 94..1 64..1 4. Gross Interest and Dividend Income 26,362.3 23,6..78 48,46. 6.6 1,668. 6.86 6,33. 7.9. Interest Expense on Customer Deposits...,36..67 6,618..88 9,14. 1.1 6. Other Interest Expense 19,22.1 17,177. 4.21 3,48. 3.81 32,992. 4.38 38,883. 4.89 7. Total Interest Expense 19,22.1 17,177. 4.21 3,764. 4.48 39,61..26 48,23. 6.4 8. Net Interest Income 7,142.2 6,383. 1.7 12,642. 1.8 12,8. 1.6 12,312. 1. 9. Net Gains (Losses) on Trading and Derivatives 826.9 739..18 289..4 89..12 784..1 1. Net Gains (Losses) on Other Securities 189.1 169..4 19..2 21..3 81..7 11. Net Gains (Losses) on Assets at FV through Income Statement....... (12.) (.) 12. Net Insurance Income......... 13. Net Fees and Commissions 1,33.4 1,189..29 2,291..29 2,24..3 2,133..27 14. Other Operating Income 1.1 1.. 12..1 4.. (46.) (.6) 1. Total Non-Interest Operating Income 2,347. 2,98..1 2,872..36 3,34..44 3,3..38 16. Personnel Expenses 2,829.8 2,29..62 4,912..62 4,914..6 4,78..9 17. Other Operating Expenses 2,18.8 1,949..48 3,789..47 3,663..49 4,2..1 18. Total Non-Interest Expenses,1.6 4,478. 1.1 8,71. 1.9 8,77. 1.14 8,733. 1.1 19. Equity-accounted Profit/ Loss - Operating 4.8 49..1 76..1 22.. 22.. 2. Pre-Impairment Operating Profit 4,34. 4,2..99 6,889..86 6,87..91 6,631..83 21. Loan Impairment Charge 878.4 78..19 1,94..2 2,289..3 2,12..27 22. Securities and Other Credit Impairment Charges 42. 38..1 13.. 4.. 38.. 23. Operating Profit 3,613.1 3,229..79,282..66 4,64..61 4,468..6 24. Equity-accounted Profit/ Loss - Non-operating......... 2. Non-recurring Income 411.8 368..9 19..2 26.. 1,6..2 26. Non-recurring Expense... 1,24..19 228..3 897..11 27. Change in Fair Value of Own Debt 11.3 13..3 (98.) (.1) (129.) (.2) (633.) (.8) 28. Other Non-operating Income and Expenses......... 29. Pre-tax Profit 4,14.1 3,7..91 3,8..48 4,233..6 4,43..7 3. Tax expense 1,41.7 931..23 1,32..13 1,8..14 1,171..1 31. Profit/Loss from Discontinued Operations......... 32. Net Income 3,98.4 2,769..68 2,823..3 3,13..42 3,372..42 33. Change in Value of AFS Investments 631.1 64..14 1,878..24 (363.) (.) 1,972..2 34. Revaluation of Fixed Assets (2.2) (2.) (.)...... 3. Currency Translation Differences 314.4 281..7 369.. (1,38.) (.14) (313.) (.4) 36. Remaining OCI Gains/(losses) (838.1) (749.) (.18) 1,11..19 (1,23.) (.14) (2,688.) (.34) 37. Fitch Comprehensive Income 3,23. 2,863..7 6,81..82 729..1 2,343..29 38. Memo: Profit Allocation to Non-controlling Interests 41.4 37..1 79..1 9..1 91..1 39. Memo: Net Income after Allocation to Non-controlling Interests 3,7. 2,732..67 2,744..34 3,63..41 3,281..41 4. Memo: Common Dividends Relating to the Period 2,461.7 2,2..4 1,29..16 2,962..39 2,131..27 41. Memo: Preferred Dividends Related to the Period......... Exchange rate USD1 = EUR.8937 USD1 = EUR.8237 USD1 = EUR.721 USD1 = EUR.779 8
Balance Sheet 3 Jun 21 31 Dec 214 31 Dec 213 31 Dec 212 6 Months - Interimonths - Interim As % of Year End As % of Year End As % of Year End As % of USDm EURm Assets EURm Assets EURm Assets EURm Assets Assets A. Loans 1. Residential Mortgage Loans......... 2. Other Mortgage Loans 321,97.8 287,689. 33.42 287,817. 34.74 291,92. 37.6 312,467. 37.4 3. Other Consumer/ Retail Loans 33,33.1 29,763. 3.46 28,393. 3.43 26,761. 3.4 24,98. 2.9 4. Corporate & Commercial Loans 193,174.4 172,64. 2.6 1,18. 18.73 141,7. 17.91 14,977. 17.49. Other Loans 6,18.3 8,232. 6.77 2,713. 6.36 4,73. 6.9 64,9. 7.67 6. Less: Reserves for Impaired Loans 6,683.,973..69,989..72 6,13..78,..66 7. Net Loans 66,86.2 42,31. 63.1 18,119. 62.3 8,338. 64.4 41,46. 64.9 8. Gross Loans 613,43.7 48,324. 63.7 24,18. 63.2 14,473. 6.32 47,1. 6.6 9. Memo: Impaired Loans included above 18,377. 16,424. 1.91 16,889. 2.4 1,921. 2.2 14,928. 1.79 1. Memo: Loans at Fair Value included above......... B. Other Earning Assets 1. Loans and Advances to Banks 44,49.8 39,689. 4.61 32,96. 3.98 37,87. 4.81 37,944. 4. 2. Reverse Repos and Cash Collateral... 4,162..,137..6 1,19..13 3. Trading Securities and at FV through Income 16,29.2 143,179. 16.63 93,17. 11.24 84,412. 1.72 61,922. 7.42 4. Derivatives 3,812.2 3,47..4,916. 6.14 37,164. 4.72 64,241. 7.7. Available for Sale Securities 96,112.8 8,896. 9.98 9,41. 11.1 76,883. 9.76 74,279. 8.9 6. Held to Maturity Securities 7,311.2 6,34..76 2,239..27 3,98..39 6,4..78 7. Equity Investments in Associates 991.4 886..1 861..1 77..9 841..1 8. Other Securities......... 9. Total Securities 268,436.8 239,92. 27.87 246,686. 29.77 27,41. 26.33 28,937. 2.4 1. Memo: Government Securities included Above 69,761.7 62,346. 7.24 68,13. 8.27 2,679. 6.69 48,337..79 11. Memo: Total Securities Pledged......... 12. Investments in Property 88.4 79..1 8..1 18..1 27..2 13. Insurance Assets......... 14. Other Earning Assets 29.1 26.. 729..9.. 6,781..81 1. Total Earning Assets 919,824.3 822,47. 9. 798,74. 96.38 73,722. 9.69 79,41. 9.32 C. Non-Earning Assets 1. Cash and Due From Banks 24,8.4 21,1. 2. 12,222. 1.48 11,92. 1.1 1,447. 1.8 2. Memo: Mandatory Reserves included above......... 3. Foreclosed Real Estate......... 4. Fixed Assets 2,261.4 2,21..23 2,1..2 2,282..29 2,336..28. Goodwill 1,14.8 1,24..12 1,61..13 1,3..13 1,188..14 6. Other Intangibles 69.1 89..7 94..7 71..7 9..7 7. Current Tax Assets......... 8. Deferred Tax Assets 1,4.4 1,26..1 1,126..14 1,3..17 2,139..26 9. Discontinued Operations......... 1. Other Assets 13,77.3 12,311. 1.43 12,92. 1.6 16,89. 2.13 17,318. 2.8 11. Total Assets 963,129.7 86,749. 1. 828,62. 1. 787,644. 1. 834,433. 1. Liabilities and Equity D. Interest-Bearing Liabilities 1. Customer Deposits - Current 7,317.2 14,161. 9.73 193,749. 23.38 19,714. 24.21 182,97. 21.88 2. Customer Deposits - Savings... 29,32. 3.67 284,69. 36.7 277,766. 33.29 3. Customer Deposits - Term......... 4. Total Customer Deposits 7,317.2 14,161. 9.73 489,281. 9. 474,783. 6.28 46,363..17. Deposits from Banks 44,118.8 39,429. 4.8 3,3. 3.62 24,71. 3.6 32,981. 3.9 6. Repos and Cash Collateral n.a. n.a. -.. 3,186..4,723..69 7. Commercial Paper and Short-term Borrowings n.a. n.a. - 1,92. 6.27 49,891. 6.33 7,33. 6.87 8. Total Money Market and Short-term Funding 619,436.1 3,9. 64.31 71,236. 68.94 1,931. 7.7 6,397. 66.68 9. Senior Unsecured Debt (original maturity > 1 year) 141,81.1 126,31. 14.7 69,7. 8.33 72,48. 9.19 77,39. 9.27 1. Subordinated Borrowing 19,1.3 16,994. 1.97 1,872. 1.31 9,63. 1.23 9,633. 1.1 11. Covered Bonds n.a. n.a. - n.a. - n.a. - n.a. - 12. Other Long-term Funding......... 13. Total LT Funding (original maturity > 1 year) 16,96.4 143,2. 16.67 79,879. 9.64 82,61. 1.42 86,992. 1.43 14. Derivatives,481.7 4,899..7 4,376. 6.6 39,178. 4.97 68,4. 8.16 1. Trading Liabilities 113,999.1 11,881. 11.84 62,9. 7.9 7,844. 7.34 44,916..38 16. Total Funding 899,13.3 83,89. 93.39 768,396. 92.73 731,14. 92.81 76,39. 9.64 E. Non-Interest Bearing Liabilities 1. Fair Value Portion of Debt (21.4) (18.) (.2) (282.) (.3) (167.) (.2) (38.) (.) 2. Credit impairment reserves......... 3. Reserves for Pensions and Other 1,662.8 1,486..17 2,133..26 1,226..16 1,721..21 4. Current Tax Liabilities 86.8 721..8 442.. 342..4 89..1. Deferred Tax Liabilities 822.4 73..9 872..11 34..4 1,71..19 6. Other Deferred Liabilities......... 7. Discontinued Operations......... 8. Insurance Liabilities......... 9. Other Liabilities 16,46.8 14,711. 1.71 12,628. 1.2 16,6. 2.3 31,43. 3.77 1. Total Liabilities 919,64.6 821,368. 9.42 784,189. 94.64 748,761. 9.6 791,82. 94.9 F. Hybrid Capital 1. Pref. Shares and Hybrid Capital accounted for as Debt n.a. n.a. n.a.,727..69,123..6 6,774..81 2. Pref. Shares and Hybrid Capital accounted for as Equity......... G. Equity 1. Common Equity 43,42.6 38,8. 4.1 33,892. 4.9 32,38. 4.11 33,11. 3.96 2. Non-controlling Interest 644. 76..7 622..8 9..12 843..1 3. Securities Revaluation Reserves... 3,61..44 1,87..24 2,6..32 4. Foreign Exchange Revaluation Reserves... (69.) (.7) (989.) (.13) (263.) (.3). Fixed Asset Revaluations and Other Accumulated OCI... 1,166..14 (46.) (.6) (434.) (.) 6. Total Equity 44,6.1 39,381. 4.8 38,686. 4.67 33,76. 4.29 3,87. 4.29 7. Total Liabilities and Equity 963,129.7 86,749. 1. 828,62. 1. 787,644. 1. 834,433. 1. 8. Memo: Fitch Core Capital 41,47.9 37,67. 4.31 36,419. 4.4 31,884. 4. 33,22. 3.98 9. Memo: Fitch Eligible Capital 43,727.2 39,79. 4.4 36,419. 4.4 31,884. 4. 33,22. 3.98 Exchange rate USD1 = EUR.8937 USD1 = EUR.8237 USD1 = EUR.721 USD1 = EUR.779 9
Summary Analytics 3 Jun 21 31 Dec 214 31 Dec 213 31 Dec 212 6 Months - Interim Year End Year End Year End A. Interest Ratios 1. Interest Income on Loans/ Average Gross Loans n.a. 3.9 4.3 4.33 2. Interest Expense on Customer Deposits/ Average Customer Deposits n.a. 1.11 1.4 1.93 3. Interest Income/ Average Earning Assets.86 6.24 6.7 7.17 4. Interest Expense/ Average Interest-bearing Liabilities 4.41 4.74.21.86. Net Interest Income/ Average Earning Assets 1.9 1.63 1.3 1.46 6. Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets 1.39 1.42 1.24 1.21 7. Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets 1.9 1.63 1.3 1.46 B. Other Operating Profitability Ratios 1. Non-Interest Income/ Gross Revenues 24.74 18.1 21.76 19.7 2. Non-Interest Expense/ Gross Revenues 2.8 6.8.6 6.92 3. Non-Interest Expense/ Average Assets 1.7 1.7 1.4.96 4. Pre-impairment Op. Profit/ Average Equity 2.93 19.68 19.24 18.1. Pre-impairment Op. Profit/ Average Total Assets.97.8.83.73 6. Loans and securities impairment charges/ Pre-impairment Op. Profit 2.31 23.33 33.44 32.62 7. Operating Profit/ Average Equity 16.68 1.9 12.8 12.23 8. Operating Profit/ Average Total Assets.77.6..49 9. Operating Profit / Risk Weighted Assets 2.1 1.78 1.62 1.6 C. Other Profitability Ratios 1. Net Income/ Average Total Equity 14.31 8.7 8.84 9.23 2. Net Income/ Average Total Assets.66.3.38.37 3. Fitch Comprehensive Income/ Average Total Equity 14.79 18.8 2.4 6.41 4. Fitch Comprehensive Income/ Average Total Assets.68.81.9.26. Taxes/ Pre-tax Profit 2.16 26.77 2.1 2.78 6. Net Income/ Risk Weighted Assets 1.8.9 1.12 1.21 D. Capitalization 1. Fitch Core Capital/ Risk Weighted Assets 11.96 12.29 11.29 11.92 2. Fitch Eligible Capital/ Risk Weighted Assets 12.61 12.29 11.29 11.92 3. Tangible Common Equity/ Tangible Assets 4.34 4.4 3.97 4.2 4. Tier 1 Regulatory Capital Ratio 13.3 12.2 13.3 14.4. Total Regulatory Capital Ratio 16.4 1.3 16.46 16.96 6. Core Tier 1 Regulatory Capital Ratio 11.3 11.22 11.72 11.97 7. Equity/ Total Assets 4.8 4.67 4.29 4.29 8. Cash Dividends Paid & Declared/ Net Income 79.4 44.6 93.94 63.2 9. Internal Capital Generation 2.91 4.4.7 3.47 E. Loan Quality 1. Growth of Total Assets 3.88.2 (.61) (13.19) 2. Growth of Gross Loans 4.62 1.87 (.96) (6.9) 3. Impaired Loans/ Gross Loans 3. 3.22 3.9 2.73 4. Reserves for Impaired Loans/ Gross Loans 1.9 1.14 1.19 1.1. Reserves for Impaired Loans/ Impaired Loans 36.37 3.46 38.3 36.88 6. Impaired loans less Reserves for Impaired Loans/ Fitch Core Capital 28.19 29.93 3.69 28.37 7. Impaired Loans less Reserves for Impaired Loans/ Equity 26.4 28.18 28.99 26.32 8. Loan Impairment Charges/ Average Gross Loans.3.31.43.37 9. Net Charge-offs/ Average Gross Loans.33.31.28.27 1. Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Ass 3. 3.22 3.9 2.73 F. Funding and Liquidity 1. Loans/ Customer Deposits 16.64 17.12 18.36 118.83 2. Interbank Assets/ Interbank Liabilities 1.66 19.86 17.3 11. 3. Customer Deposits/ Total Funding (excluding derivatives) 64.3 68.2 68.63 66.88 1
Reference Data 3 Jun 21 31 Dec 214 31 Dec 213 31 Dec 212 6 Months - Interimonths - Interim As % of Year End As % of Year End As % of Year End As % of USDm EURm Assets EURm Assets EURm Assets EURm Assets A. Off-Balance Sheet Items 1. Managed Securitized Assets Reported Off-Balance Sheet......... 2. Other off-balance sheet exposure to securitizations......... 3. Guarantees n.a. n.a. - 22,396. 2.7 23,137. 2.94 24,34. 2.88 4. Acceptances and documentary credits reported off-balance sheet n.a. n.a. - 12,178. 1.47 14,87. 1.8 14,2. 1.74. Committed Credit Lines n.a. n.a. - 82,346. 9.94 8,7. 1.8 86,49. 1.37 6. Other Contingent Liabilities n.a. n.a. - 42.. 7..6 499..6 7. Total Assets under Management n.a. n.a. -.. 91,932. 11.6.. B. Average Balance Sheet Average Loans 99,99. 36,216. 62.3 18,4. 62.2 34,72.6 67.89 72,43.4 68.6 Average Earning Assets 96,691.8 81,31. 94.14 77,931.3 93.64 78,8.4 99.77 841,79.2 1.88 Average Assets 94,144.3 844,67. 98.13 89,98. 97.7 823,793.8 14.9 9,17. 18.48 Average Managed Securitized Assets (OBS)......... Average Interest-Bearing Liabilities 879,62.6 786,14. 91.33 74,6.3 91. 76,989.8 96.62 82,26.4 98.27 Average Common equity 4,671.9 36,348. 4.22 32,924.3 3.97 33,736.4 4.28 3,231.2 4.22 Average Equity 43,676.3 39,33. 4.3 3,1.8 4.22 3,648.4 4.3 36,34.6 4.38 Average Customer Deposits 61,397.6 1,721. 8.29 484,2.3 8.42 473,499.4 6.12 472,49.4 6.63 C. Maturities Asset Maturities: Loans & Advances < 3 months n.a. n.a. - 7,117. 9.7 79,338. 1.7 77,733. 9.32 Loans & Advances 3-12 Months n.a. n.a. - 33,24. 4.1 32,84. 4.17 31,944. 3.83 Loans and Advances 1 - Years n.a. n.a. - 13,72. 16.38 12,881. 1.3 12,6. 1. Loans & Advances > years n.a. n.a. - 274,73. 33.8 27,26. 34.9 36,313. 36.71 Debt Securities < 3 Months n.a. n.a. -...... Debt Securities 3-12 Months n.a. n.a. -...... Debt Securities 1 - Years n.a. n.a. -...... Debt Securities > Years n.a. n.a. -...... Loans & Advances to Banks < 3 Months n.a. n.a. - 23,48. 2.83 27,497. 3.49 28,17. 3.37 Loans & Advances to Banks 3-12 Months n.a. n.a. - 4,81..,63..72 3,894..47 Loans & Advances to Banks 1 - Years n.a. n.a. - 4,313..2 4,361..,97..67 Loans & Advances to Banks > Years n.a. n.a. - 68..7 364.. 296..4 Liability Maturities: Retail Deposits < 3 months n.a. n.a. - 43,836. 4.77 44,869..97 413,34. 49.6 Retail Deposits 3-12 Months n.a. n.a. - 23,86. 2.87 2,311. 3.21 38,98. 4.7 Retail Deposits 1 - Years n.a. n.a. - 9,19. 1.11 6,212..79 6,239..7 Retail Deposits > Years n.a. n.a. - 2,444..29 2,391..3 2,492..3 Other Deposits < 3 Months n.a. n.a. -...... Other Deposits 3-12 Months n.a. n.a. -...... Other Deposits 1 - Years n.a. n.a. -...... Other Deposits > Years n.a. n.a. -...... Deposits from Banks < 3 Months n.a. n.a. - 17,47. 2.6 18,139. 2.3 27,891. 3.34 Deposits from Banks 3-12 Months n.a. n.a. - 1,49..18 1,7..22 3,3..4 Deposits from Banks 1 - Years n.a. n.a. - 7,18..87 2,891..37 2,77..33 Deposits from Banks > Years n.a. n.a. - 4,286..2 4,472..7 4,71..7 Senior Debt Maturing < 3 months n.a. n.a. - 29,791. 3.6 31,69. 3.94 3,63. 4.2 Senior Debt Maturing 3-12 Months n.a. n.a. - 22,161. 2.67 18,822. 2.39 22,267. 2.67 Senior Debt Maturing 1- Years n.a. n.a. - 4,343. 4.87 39,476..1 44,411..32 Senior Debt Maturing > Years n.a. n.a. - 28,664. 3.46 32,932. 4.18 32,948. 3.9 Total Senior Debt on Balance Sheet n.a. n.a. - 12,99. 14.6 122,299. 1.3 134,689. 16.14 Fair Value Portion of Senior Debt n.a. n.a. -...... Subordinated Debt Maturing < 3 months n.a. n.a. -.. 1.. 6..8 Subordinated Debt Maturing 3-12 Months n.a. n.a. - 889..11 9..1 28.. Subordinated Debt Maturing 1- Year n.a. n.a. - 86..1 2,218..28 4,81.. Subordinated Debt Maturing > Years n.a. n.a. - 9,123. 1.1 7,33..93 4,374..2 Total Subordinated Debt on Balance Sheet 19,1.3 16,994. 1.97 1,872. 1.31 9,63. 1.23 9,633. 1.1 Fair Value Portion of Subordinated Debt......... D. Risk Weighted Assets 1. Risk Weighted Assets 346,648.8 39,8. 3.99 296,319. 3.76 282,3. 3.87 278,66. 33.39 2. Fitch Adjustments to Risk Weighted Assets......... 3. Fitch Adjusted Risk Weighted Assets 346,648.8 39,8. 3.99 296,319. 3.76 282,3. 3.87 278,66. 33.39 E. Equity Reconciliation 1. Equity 44,6.1 39,381. 4.8 38,686. 4.67 33,76. 4.29 3,87. 4.29 2. Add: Pref. Shares and Hybrid Capital accounted for as Equity n.a. n.a. - n.a. - n.a. - n.a. - 3. Add: Other Adjustments......... 4. Published Equity 44,6.1 39,381. 4.8 38,686. 4.67 33,76. 4.29 3,87. 4.29 F. Fitch Eligible Capital Reconciliation 1. Total Equity as reported (including non-controlling interests) 44,6.1 39,381. 4.8 38,686. 4.67 33,76. 4.29 3,87. 4.29 2. Fair value effect incl in own debt/borrowings at fv on the B/S- CC only (21.4) (18.) (.2) (282.) (.3) (167.) (.2) (38.) (.) 3. Non-loss-absorbing non-controlling interests......... 4. Goodwill 1,14.8 1,24..12 1,61..13 1,3..13 1,188..14. Other intangibles 69.1 89..7 94..7 71..7 9..7 6. Deferred tax assets deduction 83. 21..6 33..4 13..1 771..9 7. Net asset value of insurance subsidiaries......... 8. First loss tranches of off-balance sheet securitizations......... 9. Fitch Core Capital 41,47.9 37,67. 4.31 36,419. 4.4 31,884. 4. 33,22. 3.98 1. Eligible weighted Hybrid capital 2,21.3 2,12..23...... 11. Government held Hybrid Capital......... 12. Fitch Eligible Capital 43,727.2 39,79. 4.4 36,419. - 31,884. 4. 33,22. 3.98 Exchange Rate USD1 = EUR.8937 USD1 = EUR.8237 USD1 = EUR.721 USD1 = EUR.779 11
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