From Good to Better by William Connelly | ING Investor Day 31 march 2014

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From Good to Better by William Connelly | ING Investor Day 31 march 2014

  1. 1. Amsterdam - 31 March 2014 www.ing.com William Connelly Member Management Board Banking, CEO Commercial Banking From Good to Better ING Investor Day
  2. 2. Solid performance from a client focused Commercial Bank 2
  3. 3. A strong global client base, with almost 80% of the revenues coming from Europe Income by country / region FY2013 Income by Product FY2013 28% 12% 2% 14% 22% 22% Netherlands* Belgium/Luxembourg Germany Central & Eastern Europe Western Europe Outside Europe Solid results from a consistent strategy and strong client franchises 3 Client Focused Commercial Bank • ING Commercial Banking contributed 46% of total Bank pre-tax profit and RWA in 2013 • Solid results through the cycle and a successful 2013 • Risk costs beginning to decline • A strong, Europe-focused Commercial Bank • Comprehensive network throughout Europe • Extensive international client base crossing all regions • Global franchises • Industry Lending and Financial Markets • Trade Banking and Cash-Pooling (BMG) • Consistent client focus • European service offering for clients globally • A focus on international business • Strong industry expertise in selected sectors providing superior returns * Including international business booked in the Netherlands 25% 27% 11% 37% Industry Lending GL&TS FM BT, RE & Other
  4. 4. Resilient performance through the cycle 4 Return on Equity (based on CET 1 ratio of 10%) increased to 12.8%* Expenses and cost/income ratio continued its downward trend* Revenues and result before tax* (in EUR mln) Risk costs still elevated but expected to have reached its peak 5,350 5,071 5,200 5,412 2,218 2,071 1,784 2,160 2010 2011 2012 2013 Revenues Result before tax 2,643 2,524 2,461 2,386 49.4% 49.8% 47.3% 44.1% 2010 2011 2012 2013 Expenses (in EUR mln) Cost/income ratio (%) 9.7% 12.8%11.5%11.6% 2010 2011 2012 2013 490 477 955 867 33 35 72 68 2010 2011 2012 2013 Risk costs (in EUR mln) Risk costs (bps avg RWA) * Excluding Legacy FTP book transferred to Corporate Line; Including allocation of the Dutch Bank Levies in 2012 and 2013 from Corporate Line
  5. 5. Clear focus and cost discipline - supports redeployment of resources 5 138 185 260 315 315 2013 2014 2015 2016 2017 A robust business model combined with disciplined, effective execution • Strict cost discipline • Cost-reduction programme on track • Allows for selected strategic initiatives • Continue to review our cost base • Client relationships managed (and measured) on cross-border, cross-product global basis • Disciplined client selection and allocation of capital / resources • Strict profitability measurement per transaction and per client relationship • Robust and flexible model with broad reach • (Re)-allocation of resources, in line with changing clients needs • Exploiting opportunities as they arise • New technologies and further standardisation – the foundation for further growth Cumulative gross cost savings (in EUR mln) Cost /income ratio – Commercial Banking businesses in 2013* 52% 44% 34% 34% 69%71%73% 69% 68% 76% DB UBS CS SG BNPP Bar HSBC ING Nor San * Source: ING Internal benchmarking data based on analysis of published annual reports
  6. 6. However, we have been growing our Structured Finance assets (in EUR bln) Balance sheet actively managed… 6 General Lending assets decreased, reflecting weak economic growth, but undrawn commitments remained high General Lending assets - Committed Revolving Loans 0 10,000 20,000 30,000 40,000 2010 2011 2012 2013 2014 10% 15% 20% 25% 30% Outstanding amt Available amt Utilisation Real Estate Finance has been reduced and non-core Lease has been put in run-off (in EUR bln) • In recent years, ING’s Real Estate Finance portfolio has been reduced. The planned de-risking of our Real Estate Finance portfolio has been finalised • ING Real Estate Finance remains an integral part of the strategy of the Commercial Bank 34 24 11 7 2010 2013 Real Estate Finance Lease run-off 43 47 2010 2013
  7. 7. ...while the RWA impact of Basel 2.5 and 3 has been mitigated 7 9 13 135 145 127 135 -14 -5 -4 3Q11 Basel 2 Impact Basel 2.5 4Q11 Basel 2.5 Management actions Other 4Q13 Impact Basel 3 Future management actions Pro-forma Basel 3 RWA Commercial Banking (in EUR bln) • Risk weighted assets for Commercial banking were EUR 127 bln in 4Q13, down by EUR 18 bln versus 4Q11, largely driven by Financial Markets (EUR -12 bln) including the wind down of ING’s Strategic Trading Platform and the restructuring of the Mexico branch and New York platform • Basel 3 RWA impact is estimated at around EUR 13 bln of which EUR 10 bln relates to Financial Markets, partly offset by future management actions, of which EUR 2 bln for Financial Markets, EUR 2 bln for Lease run-off and EUR 1 bln for Real Estate Development/Investments
  8. 8. Leading commercial bank in the Benelux (2013) Netherlands Belgium We will translate our success in the Benelux to the rest of Europe 8 #1 #2 Leading Commercial Bank in the Benelux for the 5th consecutive year • ING is the leading Commercial Bank in the Netherlands for the 5th consecutive year. ING is the nr 2 Commercial Bank in Belgium • Strong client proposition differentiates us from the competition: • Full-service domestic product offering • Extensive international network Source: Greenwich 71 79 94 87 69 61 3134 51 ING Rabo ABN Total Relationships Core Relationships Lead Relationships Recognition • Best Bank in the Netherlands 2013 (Euro Money, The Banker) and 2014 (Global Finance) • Best Trade Finance Bank in the Netherlands 2014 (Global Finance) • Best Foreign Exchange Provider in the Netherlands 2014 (Global Finance) • Recognised as the leading bank servicing our Benelux clients in CEE 2013 (Global Finance) • Best Bank in Belgium 2013 (The Banker) and 2014 (Global Finance) 94 88 68 58 74 86 60 46 20 BNP Paribas ING KBC
  9. 9. Europe AsiaAmericas 27% 10% 63% Focus on servicing clients in Europe and beyond 9 24% 16% 60% 50% 29% 21% 47% 14% 39% 26% 26% 48% 23% 23% 54% 40% 8% 52% 15% 67% 18% ‘Local’ revenue** ‘Incoming’ revenue** ‘Outgoing’ revenue** Netherlands Germany CWE Belux CEE UK A strong global client base, with almost 80% of the revenues coming from Europe* * Above geographical split of revenues is based on internal servicing of Clients. Excluding Group items and excluding Run-off businesses ** Local revenue are revenues from local companies/institutions, booked locally; Incoming revenues are revenues from non-local companies/institutions, serviced locally and booked locally; Outgoing revenues are revenues from local companies, serviced non-locally and booked non-locally
  10. 10. Financial Markets has adapted and remained profitable despite the changing regulatory environment 10 1,254 1,439 871 1,336 1,179 1,266 1,328 1,124 2010 2011 2012 2013 Financial markets (reported) Financial markets (excl. CVA/DVA) 312 292 250 412 314316 472 217 127 357 423 226 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Income Financial Markets impacted by CVA/DVA and… (in EUR mln) 10.0% 16.8% >13% 0.2% 11.8% 8.0% 11.3%11.9% 6.7% 2010 2011 2012 2013 Indicative 2017 Financial markets (reported) Financial markets (excl. CVA/DVA) Ambition 2017 target of a RoE of > 13% (in %) ...seasonality income excluding CVA/DVA (in EUR mln) • Financial Markets results can be volatile due to • CVA/DVA • Seasonality • Ambition 2017 target of a RoE of > 13%
  11. 11. Strong industry knowledge supporting our clients, year after year 11 18.3% 18.3% 19.2% 22.3% 2010 2011 2012 2013 Industry Lending • Lending portfolio of EUR 72 bln, dominated by Structured Finance • Mature franchise built over 20 years • Expertise through experienced, long-serving teams • Deep-rooted relationships, with over 90% repeat business in 2013 • Selected industries Structured Finance • Oil & Gas, Metals & Mining, Power & Infra, Transportation, Commodities, Telecom & Media • Strong risk management and structuring capabilities - focused on solutions to clients needs • Risk costs Structured Finance 40-45 bps of RWA over the cycle • Structured Finance important for liability deployment into high margin own originated assets • Currently building local expertise centres in Germany and Belgium, e.g. through transfer of knowledge Structured Finance – RoE (based on CET1 of 10%) Source: Thomson Reuters Leading global player Industry Lending excl. REF 2013: MLA by number of deals No. Deals 1 Bank of America Merrill Lynch 281 2 Deutsche Bank 198 3 JP Morgan 185 4 Mitsubishi UFJ 181 5 Credit Suisse 179 6 General Electric 175 7 ING 163 8 Sumitomo Mitsui 162 9 BNP Paribas 161 10 Barclays 158
  12. 12. Video 12
  13. 13. Executive Summary 13 • ING Commercial Banking continues to show strong results despite a challenging commercial and regulatory environment • Clear focus and cost discipline supports redeployment of resources • Results achieved through strong European network and global franchises • Extensive international client base crossing all regions • Leading global Industry Lending franchise • New technologies and further standardisation are key to further leveraging our international platform • A foundation for improving the client experience and supporting innovation • As a result, we are able to grow our business, supporting our funding rich units, while delivering good returns
  14. 14. ‘From Good to Better’ - Transformation Programme 14
  15. 15. Integration, cross-regional regulation, standardisation • Clients demand banking services that support their commercial and regulatory requirements on an integrated basis • Clients require a predictable, standardised and uniform approach from their banks Global economic connectivity • Growing trade and investment flows between emerging markets drive global solutions • Emerging markets clients grow their businesses in developed markets and vice versa Fast moving technology • Clients are looking to transact and report anytime and anywhere, which requires comprehensive mobile solutions across a wide variety of products • Continuous innovation of service offering Transformation programme: simplification & standardisation + best-in-class operational excellence will deliver a differentiating client experience Based on anticipated trends we lay the foundation for further growth across the network 15
  16. 16. Our transformation programme will provide standardisation and an improved client experience… 16 2015 • Completion Financial Markets standardisation • Completion operations hubs • New products added to client portal 2013 • Programme kick-off • Created single Front Office & Client Services organisation • Established global operations hubs (Manila & Bratislava) 2014 • Implementation new Client Service model globally • Introduction new integrated client portal • New cross-border cash management platform • New online channel for trade • Single lending platform 2016 • Completion new Pan-European payments platform • IT decommissioning • Full service integrated client portal
  17. 17. …and also lead to efficiencies 17 • Simplification and standardisation of our product offering International Credit Transfers 140 different types 106 payables 5 payables • 700 client processes being completely re-engineered • 1,050 different systems being reduced to 100 • Consolidation of operations and processing locations 34 receivables 1 receivable SEPA / EUR regulated Credit Transfers 57 different types 38 payables 6 payables 19 receivables 1 receivable
  18. 18. Our clients will experience the benefits of our investments in seamless cross border solutions 18 Multi Device Platform ready for Web and App Multi Product Online client interactions in an integrated Portal Multi Country International reach, multiple languages and support Standardised products and channels • Single standardised product catalogue, simplified documentation and uniform transacting Harmonised client service model • Supports integrated financial decision- making, monitoring and reporting Improved pricing • Faster pricing (for FX, equity derivatives and trade) Harmonised back-office and IT • Increased reliability and stability • Quicker implementation and processing • Quicker time-to-market Consistent billing and reporting • Single invoice for all fee charges and consolidated billing across all payment products and countries • Strongly enhanced management information across all payment products Global on-line channel for trade • Faster and uniform transacting, especially for higher volumes Integrated client portal • Supports integrated decision-making, transacting and reporting across products and geographies • Provides secure and mobile access to information on multiple devices
  19. 19. Programme facilitates our payments strategy… 19 • Providing Payments services to clients is key for client intimacy, both in terms of (i) supporting the clients’ primary processes; and (ii) risk management and revenue opportunities Market position • Benelux market leader. • Europe solid top 10 player with largest European network Strategy • To become a top 5 pan-European competitor. Large investment program underway aimed at delivering a state-of-the-art client experience across Europe with improved cash management, product and channel capabilities SEPA impact Opportunities: • Target mass payers segment across Eurozone by leveraging our scale and efficient operations in the Benelux • Combine our Eurozone payment volumes Market size in volume (total)
  20. 20. …and solution rather than product selling 20 • Working Capital improvement is a key priority for our clients • Clients demand comprehensive integrated solutions encompassing their entire financial supply chain Customers (debtors) Our Clients Physical supply chain: Suppliers (creditors) Financial supply chain: Payables (current liabilities) Raw materials Purchase-to-pay process Finished products Order-to-cash process Supply Chain finance Receivable based finance Trade finance Payments and Cash Management Benefits for our clients • Cash-flow improvement • Financial ratio management • Funding diversification • De-risking • Enhanced pricing Benefits for ING • Enrichment of our client relationships • Cross-buy and deep-selling Work-in-progress Cash Receivables (current assets)
  21. 21. Disciplined delivery in combination with our transformation programme – foundation for future growth of our businesses 21 42% 39% 17% 20% 23% 21% 14% 12% 2% 6% 2% 3% 2013 Indicative 2017 Other Run off business Transaction Services General Lending Real Estate Finance Structured Finance Lending Assets growth and breakdown by product (in %) Lending Assets EUR 122 bln in 2013 Focus areas • Diversified asset growth, in Industry Lending, General Lending and Transaction Services • Prospect client list targeted • Sector “centres of expertise” being established in Germany and Belgium • Additional front office teams hired in challenger countries • Become a Top 5 European player in Transaction Services, most notably Payments • Become a European market leader in client satisfaction CAGR 5%
  22. 22. Executive Summary 22 • ING Commercial Banking continues to show strong results despite a challenging commercial and regulatory environment • Clear focus and cost discipline supports redeployment of resources • Results achieved through strong European network and global franchises • Extensive international client base crossing all regions • Leading global Industry Lending franchise • New technologies and further standardisation are key to further leveraging our international platform • A foundation for improving the client experience and supporting innovation • As a result, we are able to grow our business, supporting our funding rich units, while delivering good returns
  23. 23. Appendix 23
  24. 24. Industry lending portfolio well diversified geographically and by sector 24 65.7% 0.5% 33.8% Structured Finance (SF) Real Estate Finance (REF) Corporate Investments (CI) EUR 72 bln Lending assets Industry Lending (in %, 2013) Structured Finance (in %, 2013) Structured Finance (in %, 2013) 28% 25% 47% Energy, Transport & Infrastructure (ETIG) International Trade & Export Finance (ITEF) Specialised Financing Group (SFG) EUR 47 bln 15% 19% 66% Europe Asia Americas EUR 47 bln • Energy, Transport and Infrastructure Group (ETIG) includes natural resources, utilities power, infrastructure, transportation. The assets are a mixture of medium- and long-term assets • International Trade and Export Finance (ITEF) includes Structured Export Finance. The assets are largely short-term assets • Specialised Financing Group (SFG) includes Telecom and Media Finance, Structured Acquisition Finance and Local Structured Finance. The assets are largely medium-term assets
  25. 25. 40-45 bps across the cycle 147 1 129 74 6674 71 37 22 -66 -16-17 -1 -100 0 100 200 Structured Finance - risk costs are cyclical: average asset life circa 4 years 25 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 Structured Finance – risk costs in bps of average RWA Structured Finance – run off net lending assets 47.4 2014 2018 2022 2026 2030
  26. 26. Financial Markets provides hedging and financing solutions to corporate and institutional clients 26 FM – Income by product FY13* FM – Income by Geography FY13*,** FM – Client income by Client Segment, FY13* • Financial Markets (FM) is a well diversified business, exposed to developed markets and faster growing economies • FM is skewed to rates and FX, rather than credit * Excluding CVA/DVA ** Excluding Global Equity Products, DCM, CF & Other 10% 25% 18% 47% Rates & FX Credit Trading Global Equity Products DCM, CF & Other 48% 52% Developed markets Emerging markets 45% 55% Corporates Financial Institutions
  27. 27. Disclaimer 27 ING Group’s Annual Accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (‘IFRS-EU’). All figures in this document are based on the 2013 ING Group Annual Accounts. This document is unaudited. Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING’s core markets, (2) changes in performance of financial markets, including developing markets, (3) consequences of a potential (partial) break-up of the euro, (4) the implementation of ING’s restructuring plan to separate banking and insurance operations, (5) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower and counterparty creditworthiness, (6) the frequency and severity of insured loss events, (7) changes affecting mortality and morbidity levels and trends, (8) changes affecting persistency levels, (9) changes affecting interest rate levels, (10) changes affecting currency exchange rates, (11) changes in investor, customer and policyholder behaviour, (12) changes in general competitive factors, (13) changes in laws and regulations, (14) changes in the policies of governments and/or regulatory authorities, (15) conclusions with regard to purchase accounting assumptions and methodologies, (16) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (17) changes in credit ratings, (18) ING’s ability to achieve projected operational synergies and (19) the other risks and uncertainties detailed in the Risk Factors section contained in the most recent annual report of ING Groep N.V. Any forward-looking statements made by or on behalf of ING speak only as of the date they are made, and, ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities. www.ing.com

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