11 May 2006 First Quarter 2006 Results Strong start to the year.

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


• 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*


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


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%


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


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


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


• 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


• 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


• 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


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 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


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


Results by Business line


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%


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


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


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


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



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


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




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)


• 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‘


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


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



Total income 1,521 1,444 5.3


%change

Additions to loan loss provisions -63 -82



Risk costs: 7 bps from 21 bps




Retail Banking



Total income 1,547 1,362 13.6


%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



Risk costs: 10 bps from 27 bps




ING Direct



Total income 607 487 24.6


%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


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


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


Strong start to the year


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.

www.ing.com

11 May 2006 First Quarter 2006 Results Strong start to the year.

Documents

Transcript of 11 May 2006 First Quarter 2006 Results Strong start to the year.