ING Groep NV's CEO Discusses Q1 2012 Results - Earnings Call Transcript

ING Groep NV (ING)

Q1 2012 Earnings Call

May 09, 2012 3:00 am ET


Jan H. M. Hommen - Chief Executive Officer, Chairman of The Executive Board, Member Management Board Insurance, Member of Management Board Banking, Chief Executive Officer of Ing Bank and Chief Executive Officer of Ing Insurance

Matthew J. Rider - Chief Administrative Officer

Wilfred F. Nagel - Chief Risk Officer, Member of The Management Board Banking and Member of The Management Board -Insurance

Patrick G. Flynn - Chief Financial Officer, Member of Executive Board, Member Management Board Insurance, Chief Financial Officer of Ing Bank and Chief Financial Officer of Ing Insurance


Spencer Horgan - Deutsche Bank AG, Research Division

Michael van Wegen - BofA Merrill Lynch, Research Division

Michael Huttner - JP Morgan Chase & Co, Research Division

Francesca Tondi - Morgan Stanley, Research Division

Francois Boissin - Exane BNP Paribas, Research Division

Unknown Analyst

Farooq Hanif - Morgan Stanley, Research Division

Hans Pluijgers - CA Cheuvreux, Research Division

William Elderkin - Societe Generale Cross Asset Research

Benoit Petrarque - Kepler Capital Markets, Research Division

Jan Willem Weidema - ABN AMRO Bank N.V., Research Division

William Hawkins - Keefe, Bruyette & Woods Limited, Research Division

Federico Salerno - MainFirst Bank AG, Research Division

Matthias De Wit - Petercam, Research Division



Ladies and gentlemen, thank you for holding. This is Yvonne, welcoming you to the ING Q1 2012 Conference Call. Before handing this conference over to Mr. Jan Hommen, Chief Executive Officer of ING Groep, let me first say that today's comments may include forward-looking statements such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statements. A discussion of factors that may cause actual results to differ from those in any forward-looking statement is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission, and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Jan. I will now hand the conference over to you. Please go ahead.

Jan H. M. Hommen

Thank you, and, welcome, everyone, to the ING first quarter 2012 results conference call.

First of all, let me say that we had a relatively strong first quarter, particularly when you see that against the backdrop of weakening economic environment and the ongoing sovereign debt crisis in Europe. The impact on markets and the de-risking continue to impact our results. They were down compared to the first quarter last year, but if I compare that with the Q4 of last year, significantly up, demonstrating, in particular, a strong commercial performance at both the bank and the insurance company. I will talk you through the presentation. Patrick Flynn and Wilfred Nagel and Matt Rider are here, and together, we will answer your questions afterwards.

Looking at Slide #2. You see the results. Underlying net of EUR 705 million, improvement compared to Q4, both for Bank and Insurance, but down compared to Q1 of last year. Underlying results in the Bank were up 65% up to EUR 1,126 million when I compare that with Q4, supported by lower impairments and lower de-risking losses, but despite a negative credit adjustment of EUR 304 million.

Insurance recovered from Q4, and operating results were reduced at EUR 475 million. Underlying results were heavily impacted by the mark-to-market result on hedges that we use to protect our regulatory capital. Successful in protecting our capital, but it had a price in our P&L.

Net result for the group were EUR 680 million. That included a gain on the sale of ING Direct U.S. That was EUR 489 million. Also included a charge in provision that we are taking for potential settlements of an investigation that we have been working with U.S. authorities into transactions that were conducted by our Commercial Bank prior to 2007. Capital ratios remained strong. ING core Tier 1 ratio is up to 10.9%, and the insurance IGD remains stable at 225%.

Slide #3. You'll see that the result's up in the Bank, 65%, compared with Q4. EUR 1,126 million is the number. And that despite the EUR 304 million loss that we took on -- or charge that we took on credit adjustments, consisting in credit and debit valuation adjustments in our financial markets business and also fair value changes on our own issued Tier 2 debt that we reported in the corporate line.

Adjusted for the negative credit adjustments, the bank result was, in fact, 6.8% lower than if we compare that with the very strong Q1 results of last year. Insurance underlying up to EUR 475 million. That is down slightly compared to Q4, and the results are driven by higher fees by premium base revenues and by very strong performance in investments. On an underlying basis, the result in insurance was a negative EUR 18 million, and they reflected the negative results basically to protect our capital in the Benelux and in the U.S. VA business.

Slide #4. You'll see in -- a comparison that we take out the special items, so that you have a better sense of what the, let's say, the more underlying numbers are, and then you see that the market-related impacts continued to have a negative impact on the results, but not as severe as we saw in Q4. The most significant item already mentioned is the EUR 304 million from CVA and DVA charges and fair value changes on debt on the Banking side. And of course, a significant negative revaluations of the hedges and insurance.

On Slide #5, you'll see that we are making good progress on the restructuring that was demanded by the EC. The sale of ING Direct U.S., we completed in February. We are now exploring options for selling our Asian Insurance and Investment Management business. We successfully addressed proactively asset disposals clauses in 3 senior debt security issues that were issued by ING Verzekeringen, with a total nominal value of EUR 2.6 billion.

In April, our Insurance operations in the U.S. completed a USD $5 billion unsecured credit facility, completely standalone. So on their own credit strengths, without support from the ING Group. It's a very important step to independence for our U.S. Insurance operations. And in March, we had a favorable court ruling on our appeal against the European Commission. And we have started discussions with the Dutch State, and together, we will soon start discussions with the European Commission. I must say, though, that we are committed and remain committed to the decision to separate Bank and Insurance, and that we continue to make progress as we prepare Insurance and Investment in the U.S. and Europe for standalone activities.

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