6-K 1 d589428d6k.htm 6-K 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the period ended 30 June 2018

Commission File Number 1-14642

 

 

ING Groep N.V.

 

 

Bijlmerplein 888

1102 MG Amsterdam

The Netherlands

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F       Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  

This Report on Form 6-K is hereby incorporated by reference into Registration Statements on Form S-8 (Files Nos. 333-215535, 333-172921, 333-172920, 333-172919, 333-168020, 333-165591, 333-158155, 333-158154, 333-149631, 333-137354, 333-125075, 333-108833, 333-81564 and 333-92220) of ING Groep N.V. and shall be a part thereof from the date on which this Report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

 

 

 


Table of Contents

Contents

 

Interim report

  

Interim report

     2  

Condensed consolidated interim accounts

  

Condensed consolidated statement of financial position

     8  

Condensed consolidated statement of profit or loss

     9  

Condensed consolidated statement of comprehensive income

     11  

Condensed consolidated statement of changes in equity

     12  

Condensed consolidated statement of cash flows

     14  

Notes to the Condensed consolidated interim accounts

     16  

Notes to the accounting policies

     16  

1 Accounting policies

     17  

Notes to the Condensed consolidated statement of financial position

     29  

2 Financial assets at fair value through profit or loss

     29  

3 Financial assets at fair value through other comprehensive income

     29  

4 Securities at amortised cost

     30  

5 Loans and advances to customers

     32  

6 Intangible assets

     34  

7 Other assets

     35  

8 Financial liabilities at fair value through profit or loss

     35  

9 Other liabilities

     36  

10 Subordinated loans and Debt securities in issue

     36  

11 Equity

     37  

Notes to the Condensed consolidated statement of profit or loss

     38  

12 Net Interest Income

     38  

13 Valuation results and net trading income

     38  

14 Investment income

     38  

15 Other income

     39  

16 Staff expenses

     40  

17 Other operating expenses

     40  

18 Earnings per ordinary share

     41  

19 Dividend per ordinary share

     41  

Segment reporting

     42  

20 Segments

     42  

Additional notes to the Condensed consolidated interim accounts

     43  

21 Fair value of financial assets and liabilities

     47  

22 Legal proceedings

     55  

23 Companies and businesses acquired and divested

     55  

24 Related parties

     57  

25 Subsequent events

     57  

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   1


Table of Contents

Interim report

Introduction

ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. ING Bank’s more than 52,000 employees offer retail and wholesale banking services to customers in over 40 countries. The Group consists of ING Groep N.V., ING Bank N.V. and other group entities.

ING Group evaluates the results of its Banking segments using a financial performance measure called underlying result. Underlying result is used to monitor the performance of ING Group at a consolidated level and by segment. The Executive Board and Management Board of ING Bank consider this measure to be relevant to an understanding of the Group’s financial performance because it gives better insight into the commercial developments of the company.

Underlying result is a non-GAAP financial measure which is defined as result under IFRS-IASB, excluding the impact of adjustment of the EU ‘IAS 39 carve-out’, divestments, special items and Insurance Other. Adjustment of EU IAS 39 Carve out relates to asset-liability management activities for the mortgage and savings portfolios in the Benelux, Germany and Czech Republic. These fair value changes are mainly caused by changes in markets interest rates. As explained on page 16, no hedge accounting is applied to these derivatives under IFRS-IASB. Special Items include items of income and expense that are significant and arise from events or transactions that are clearly distinct from the ordinary operating activities. Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations. In calculating underlying result for its Banking segments, ING Group also uses the measures underlying net profit, underlying expenses, underlying cost/income ratio and underlying result before tax, each of which are also non-GAAP financial measures. The executive Board of ING Group and Management Board of ING Bank consider these measures to be meaningful as it helps investors to compare its segment performance by highlighting result before tax attributable to ongoing operations and the underlying profitability of the segment businesses.

The breakdown of underlying net result by segment and the reconciliation between IFRS-IASB and the underlying net result is included in Note 20 ‘Segments’.

ING Group consolidated results

ING Group: Consolidated profit or loss account

 

                of which: Adjustment of     of which: Divestments    

of which:

   

of which:

 
    Total ING Group     the EU ‘IAS 39 carve out     / Special items     Insurance Other     Underlying Banking  

6 month period (1 January to 30 June)

  2018     2017     2018     2017     2018     2017     2018     2017     2018     2017  

Net interest income

    6,860       6,711       15                 6,845       6,711  

Net fee and commission income

    1,377       1,395               (2     (1     1,378       1,396  

Total investment and other income

    646       1,428       (91     670           20       (62     717       820  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income

    8,883       9,534       (75     670         —         18       (64     8,940       8,928  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses excl. regulatory costs

    4,441       4,379                   4,441       4,379  

Regulatory costs

    591       543                   591       543  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

    5,032       4,922         —           —           —         5,032       4,922  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross result

    3,851       4,612       (75     670         —         18       (64     3,908       4,005  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Addition to loan loss provisions

    200       362                   200       362  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Result before tax

    3,651       4,250       (75     670         —         18       (64     3,708       3,644  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Taxation

    995       1,226       (26     204               1,021       1,022  

Non-controlling interests

    51       44                   51       44  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net result ING Group

    2,605       2,980       (50     466         —         19       (64     2,636       2,578  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ING Group: reconciliation from IFRS-IASB to underlying result

 

6 month period (1 January to 30 June)

  2018     2017  

Net result ING Group

    2,605       2,980  
 

 

 

   

 

 

 

-/- Adjustment of the EU ‘IAS 39 carve-out’

    (50     466  

-/- Insurance Other

    19       (64
 

 

 

   

 

 

 

Net result Banking/Underlying net result Banking

    2,636       2,578  
 

 

 

   

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   2


Table of Contents

Interim report - continued

 

ING recorded a net result of EUR 2,605 million in the first half of 2018, compared with EUR 2,980 million in the same period of 2017. This decrease in result was negatively affected by EUR 516 million lower fair value changes on derivatives (including a positive impact under net interest income of ending some hedge relationships) related to asset-liability-management activities for the mortgage and savings portfolios in the Benelux, Germany and Czech Republic. These fair value changes are mainly caused by changes in markets interest rates. As explained on page 16, no hedge accounting is applied to these derivatives under IFRS-IASB. Excluding these fair value changes, the net result rose 5.6% to EUR 2,654 million compared with EUR 2,514 million in the same period of 2017, driven by continued business growth and lower risk costs. The result in the first six months of 2018 included a EUR 19 million net result from Insurance Other, reflecting the result on the warrants on the shares of Voya and NN Group, whereas the same period of last year included a EUR -64 million net result on warrants. At the end of June 2018, ING has only warrants on NN Group shares as the last warrants on Voya shares were sold in March 2018.

There were no divestments or special items in the first six months of both 2018 and 2017.

ING’s underlying net result banking, which is the net result excluding Insurance Other, increased 2.2% to EUR 2,636 million from EUR 2,578 million in the first six months of 2017.

Banking operations

Consolidated results of operations

ING’s banking operations posted a strong set of results in the first half of 2018. Net result rose to EUR 2,636 million from EUR 2,578 million in the same period of 2017. As there were no divestments or special items in both comparable periods, the net result is equal to the underlying net result. The effective tax rate was 27.5%, down from 28.0% in the first half of 2017, mainly caused by the corporate tax reforms in the US and Belgium.

The underlying result before tax increased 1.8% to EUR 3,708 million from EUR 3,644 million in the first half of 2017, supported by continued business growth and lower risk costs. Income was only marginally higher as the impact of strong loan growth was almost fully offset by adverse currency impacts, weaker Financial Markets performance and a EUR 97 million one-off gain on the sale of an equity stake in the real estate run-off portfolio recorded in the first half of 2017. Underlying operating expenses rose 2.2% on the first six months of 2017, while risk costs declined by EUR 162 million, or 44.8%.

Total underlying income rose 0.1% to EUR 8,940 million from EUR 8,928 million in the first six months of 2017. Excluding the aforementioned EUR 97 million one-off gain, income was 1.2% higher, despite the adverse currency impacts and weaker Financial Markets performance.

Net interest income rose by EUR 134 million, or 2.0%, mainly driven by continued volume growth in both customer lending and customer deposits. The interest result on customer lending increased due to higher volumes in mainly non-mortgage lending, partly offset by a slightly lower overall lending margin. The interest result on customer deposits slightly declined as the impact of volume growth in current accounts was more than offset by margin pressure due to lower reinvestment yields. The margin on savings remained stable compared with a year ago, supported by the further lowering of the client savings rates in several countries during the last twelve months. Net interest income was furthermore supported by higher interest results in Financial Markets (which was more than offset by lower other income) and Corporate Line. ING’s overall net interest margin remained stable at 1.51% compared with the first half of 2017.

Net fee and commission income decreased by EUR 18 million, 1.3%, to EUR 1,378 million from EUR 1,396 million in the first six months of 2017. In Retail Banking, net fee and commission income increased in the Netherlands and most of the Challengers & Growth Markets countries, partly offset by declines in mainly Belgium and Turkey. Total fee income in Wholesale Banking decreased despite the inclusion of Payvision as from the second quarter of 2018, and was mainly caused by lower Financial Markets fees. Total investment and other income fell to EUR 717 million from EUR 820 million in the first half of 2017, which included the one-off gain on the sale of the equity stake. Excluding this one-off gain, investment and other income declined by EUR 6 million, or 0.8%. Lower revenues in Wholesale Banking, mainly due to weaker performance in Financial Markets and negative revaluation results in Industry Lending, were largely offset by increases in mainly Retail Netherlands and the Corporate Line.

Underlying operating expenses increased by EUR 110 million, or 2.2%, to EUR 5,032 million. Expenses in the first six months of 2018 included EUR 591 million of regulatory costs, while the same period of 2017 included EUR 543 million of regulatory costs. Expenses excluding regulatory costs rose by EUR 62 million, or 1.4%, to EUR 4,441 million. The increase was mainly visible in the Retail Challengers & Growth Markets, mainly related to strategic projects and to support the continued growth in primary clients, and in Retail Belgium due to temporarily higher external staff expenses. In Retail Netherlands, expenses excluding regulatory costs declined reflecting ongoing cost savings. Within Wholesale Banking, expenses excluding regulatory costs were slightly lower. This decline was mainly caused by the legal provision recorded in Luxembourg in the second quarter of 2017 (which was partially released in the first quarter of 2018), partly offset by higher staff expenses and the inclusion of Payvision as from the second quarter of 2018. The underlying cost/income ratio increased to 56.3% from 55.1% in the first half of 2017.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     3  


Table of Contents

Interim report - continued

 

Net additions to loan loss provisions declined to EUR 200 million from EUR 362 million in the first half of 2017, reflecting the continued positive macroeconomic outlook, combined with a benign credit environment in most regions where ING is active. The decline was mainly visible in Retail Netherlands and Wholesale Banking. Risk costs were annualised 13 basis points of average risk-weighted assets (RWA) compared with 23 basis points in the first half of 2017, which is well below ING’s through-the-cycle guidance range for risk costs of 40-45 basis points of average RWA.

Retail Netherlands

Underlying result before tax of Retail Netherlands rose to EUR 1,239 million from EUR 1,043 million in the first six months of 2017, due to higher income, combined with lower operating expenses and risk costs.

Total underlying income increased by EUR 74 million, or 3.4%, to EUR 2,267 million, compared with EUR 2,193 million in the first half of 2017. Net interest income declined 1.3%, mainly reflecting lower lending volumes and margin pressure on current accounts due to the low interest rate environment, partly offset by higher margins on mortgages and increased volumes in current accounts. Customer lending declined by EUR 1.4 billion in the first half of 2018, of which EUR -0.6 billion was in the WUB run-off portfolio and EUR -1.4 billion in Bank Treasury. Excluding these items, net core lending grew by EUR 0.6 billion, predominantly in business lending, partly offset by a EUR 0.2 billion decline in residential mortgages. Net customer deposits (excluding Bank Treasury) grew by EUR 3.4 billion in the first half of 2018. Net fee and commission income increased by EUR 19 million, or 6.3%, due to higher funds transfer fees. Investment and other income rose by EUR 78 million, mainly due to higher allocated Bank Treasury revenues.

Operating expenses declined by EUR 43 million, or 3.8%, to EUR 1,078 million compared with the first six months of 2017. This decline was mainly due to non-recurring items booked in the second quarter of 2017, ongoing cost savings realised through the transformation programmes, and lower IT expenses, partly offset by increased regulatory costs.

The net addition to loan loss provisions turned to a net release of EUR 51 million, or -21 basis points of average risk-weighted assets, in the first half of 2018, compared with EUR 29 million, or 12 basis points, in the same period of last year. The net release in the first half of 2018 reflects the continued positive economic conditions in the Netherlands as well as operational improvements in the risk-measuring process.

Retail Belgium

Retail Belgium’s underlying result before tax decreased to EUR 231 million from EUR 377 million in the first six months of 2017, due to lower income, higher expenses and an increase in risk costs.

The underlying income fell by EUR 85 million, or 6.5%, to EUR 1,213 million. Net interest income declined by EUR 47 million, or 5.0%, mainly due to continued margin pressure on savings and current accounts as a result of the continued low interest rate environment, and lower interest results from Bank Treasury. This was partly offset by volume growth in the lending portfolio and in current accounts. Customer lending increased by EUR 5.7 billion in the first half of 2018. Net core lending (excluding Bank Treasury and the sale of a mortgage portfolio) grew by EUR 5.5 billion, of which EUR 1.2 billion was in residential mortgages and EUR 4.4 billion in other lending. Net customer deposits (excluding Bank Treasury) grew by EUR 2.7 billion, entirely in current accounts, while savings recorded a net outflow. Net fee and commission income declined by EUR 28 million, or 12.2%, mainly due to lower fee income on investment products.

Operating expenses increased by EUR 31 million, or 3.6%, to EUR 903 million compared with the first six months of 2017. This increase was mainly due to temporarily higher external staff expenses related to the transformation programmes and the successful integration of Record Bank into ING Belgium.

The net addition to the provision for loan losses increased to EUR 78 million from EUR 49 million in the first half of 2017, and was mainly related to several specific files in the mid-corporates segment.

Retail Germany

Retail Germany’s underlying result before tax increased by EUR 25 million to EUR 423 million from EUR 398 million in the first half of 2017, due to higher income, partly offset by increased expenses and higher, but still relatively low risk costs.

The underlying income increased to EUR 960 million in the first six months of 2018, compared with EUR 918 million a year ago. Net interest income increased 4.4% to EUR 857 million, mainly due to increased lending volumes and the impact of client savings rate adjustments, partly offset by lower interest results from Bank Treasury. Net core lending, which excludes Bank Treasury products, increased by EUR 2.2 billion, of which EUR 1.6 billion was attributable to residential mortgages and EUR 0.6 billion to consumer lending. Net customer deposits (excluding Bank Treasury) decreased by EUR 0.4 billion. Net fee and commission income decreased by EUR 6 million to EUR 93 million, due to higher commissions paid for the origination of mortgages. Investment and other income increased by EUR 12 million, mainly due to improved hedge ineffectiveness results.

Operating expenses increased by EUR 10 million, or 1.9%, to EUR 524 million compared with the first half of 2017. The increase was mainly due to higher costs to support further business growth, partly offset by lower marketing expenses.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     4  


Table of Contents

Interim report - continued

 

The net addition to the provision for loan losses increased to EUR 13 million, or 10 basis points of average risk-weighted assets, from EUR 6 million in the first half of 2017.

Retail Other Challengers & Growth Markets

Retail Other Challengers & Growth Markets underlying result before tax decreased to EUR 460 million from EUR 481 million in the first six months of last year, mainly reflecting higher expenses to support further commercial growth and higher costs for strategic projects, partly offset by revenue growth in most of the countries.

The underlying income increased by EUR 106 million, or 7.2%, to EUR 1,583 million from EUR 1,477 million in the first six months of last year. This increase was driven by strong revenue growth in most businesses, despite the impact from the low interest rate environment in most of the Other Challengers markets. Net interest income increased by EUR 111 million, or 9.3%, to EUR 1,310 million from EUR 1,199 million in the first half year of 2017, mainly due to higher volumes in most countries and increased interest income from Bank Treasury. The net production in customer lending (adjusted for currency effects and Bank Treasury) was EUR 4.9 billion in the first half of 2018, with growth mainly in Poland, Spain and Australia. The net inflow in customer deposits, also adjusted for currency impacts and Bank Treasury, was EUR 3.9 billion, with largest increases in Spain and Poland.

Operating expenses increased by EUR 111 million, or 12.5%, to EUR 1,001 million compared with the first half of 2017, mainly due to higher staff expenses in most countries to support further commercial growth and higher costs for strategic projects as well as higher regulatory expenses.

The net addition to loan loss provisions increased by EUR 14 million to EUR 121 million, or 49 basis points of average risk-weighted assets, compared with EUR 107 million in the first half of 2017, which included a release in Italy reflecting a model update for mortgages.

Wholesale Banking

In the first six months of 2018, the underlying result before tax dropped 9.6% to EUR 1,439 million from EUR 1,591 million in the same period last year. The decline was mainly caused by adverse currency impacts, weaker Financial Markets performance and the EUR 97 million one-time gain on the sale of an equity stake in the real estate run-off portfolio recorded in the first half of 2017. These negative impacts were partly offset by strong core lending growth in Industry Lending and General Lending & Transaction Services and a sharp decline in risk costs.

Underlying income declined by EUR 270 million, or 8.6%, to EUR 2,864 million in the first half of 2018. Excluding the EUR 97 million one-time gain on the sale of an equity stake, total underlying income decreased 5.7% mainly caused by adverse currency impacts and weaker Financial Markets performance. At comparable exchange rates, income in Industry Lending and General Lending & Transaction Services increased due to volume growth and the inclusion of Payvision as from the second quarter of 2018.

Net interest income increased by EUR 26 million, or 1.4%, on the first six months of 2017, mainly driven by continued volume growth in Industry Lending and General Lending & Transaction Services at resilient margins as well as higher interest results in Financial Markets (which was more than offset by lower other income). This was partly offset by adverse currency impacts and lower interest results in Bank Treasury. Net core lending (excluding currency impacts, Bank Treasury and the Lease run-off portfolio) grew by EUR 13.2 billion in the first half of 2018. Net customer deposits (excluding currency impacts and Bank Treasury) declined by EUR 1.4 billion.

Net fee and commission income decreased by EUR 24 million, or 4.2%, on last year, mainly due to lower fee income in Financial Markets and Industry Lending, partly offset by the inclusion of Payvision. Investment and other income fell to EUR 389 million from EUR 661 million in the first half of 2017. Excluding the aforementioned EUR 97 million one-time gain, total investment and other income decreased by EUR 175 million, mainly due to lower revenues in Financial Markets (as market conditions in the first half of 2017 were more favourable) and negative revaluation results in Industry lending.

Operating expenses were EUR 1,386 million, or 0.9% higher than in the first half of 2017. Excluding the impact from regulatory costs (EUR 125 million in the first half of 2018 versus EUR 98 million a year ago), operating expenses decreased by EUR 14 million, or 1.1%, on the first half of 2017. The decrease was mainly explained by the partial release of a provision which was taken in the first half of 2017 for a litigation linked to a business that was discontinued in Luxembourg around the year 2000. Excluding this provision, costs grew in line with higher headcount to support business growth and wage inflation. The underlying cost/income ratio in the first half of 2018 was 48.4%, compared with 43.8% a year ago.

Net addition to loan loss provisions declined to EUR 39 million, or 5 basis points of average risk-weighted assets, from EUR 170 million, or 22 basis points, in the first half of 2017. The decline reflects lower risk costs in all product groups driven by the benign credit environment in most regions where ING is active and included several larger releases on individual files.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     5  


Table of Contents

Interim report - continued

 

Corporate Line

The Corporate Line reported an underlying result before tax of EUR -85 million compared with EUR –246 million in the first half of 2017. Total income improved to EUR 54 million from EUR –93 million a year ago. This was primarily due to lower costs on net investment hedging and lower interest paid following the maturity of some high-cost legacy bonds, while the first half of 2017 also included EUR -9 million of DVA impacts (which directly impacts equity under IFRS 9). Operating expenses declined to EUR 139 million from EUR 152 million in the first half of 2017, due to a release of a specific provision, and despite higher shareholders expenses.

ING Group statement of financial position (‘balance sheet’)

IFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018. ING has applied the classification, measurement, and impairment requirements retrospectively by adjusting the opening balance sheet and opening equity as at 1 January 2018, and decided not to restate comparative periods. The net impact on shareholders’ equity of adopting IFRS 9 on 1 January 2018 was EUR -1.0 billion. For a reconciliation between the reported balance sheet at year-end 2017 and the opening balance sheet as at 1 January 2018, see note 1 ‘Accounting policies’.

To provide comparable balance sheet information to its users, below a condensed overview of ING’s balance sheet as at 30 June 2018 compared with the IFRS 9 opening balance sheet as at 1 January 2018.

Consolidated balance sheet

 

in EUR million

   30 June 18     1 Jan. 18  

Assets

    

Cash and balances with central banks

     38,276       21,992  

Loans and advances to banks

     31,627       28,690  

Financial assets at fair value through profit or loss

     151,503       128,248  

Financial assets at fair value through OCI

     31,500       37,601  

Securities at amortised cost

     48,966       48,480  

Loans and advances to customers

     584,714       562,776  

- customer lending

     589,691       568,045  

- provision for loan losses

     (4,977     (5,269

Investments in associates and joint ventures

     1,082       1,060  

Property and equipment

     1,775       1,801  

Intangible assets

     1,785       1,469  

Other assets

     12,269       10,626  
  

 

 

   

 

 

 

Total assets

     903,499       842,744  
  

 

 

   

 

 

 
     30 June 18      1 Jan. 18  

Liabilities

     

Deposits from banks

     38,776        36,929  

Customer deposits

     556,711        539,882  

Financial liabilities at fair value through profit or loss

     110,874        89,369  

Other liabilities

     16,124        15,444  

Debt securities in issue

     116,099        96,826  

Subordinated loans

     16,225        16,209  
  

 

 

    

 

 

 

Total liabilities

     854,808        794,657  
  

 

 

    

 

 

 

Equity

     

Shareholders’ equity

     47,957        47,386  

Non-controlling interests

     734        700  
  

 

 

    

 

 

 

Total equity

     48,691        48,086  
  

 

 

    

 

 

 

Total liabilities and equity

     903,499        842,744  
  

 

 

    

 

 

 
 

 

ING Group’s total balance sheet increased by EUR 61 billion to EUR 903 billion at 30 June 2018 from EUR 843 billion at 1 January 2018.

Cash and balances with central banks

Cash and balances with central banks increased by EUR 16 billion to EUR 38 billion, related to active liquidity management.

Loans and advances to banks and deposits from banks

Loans and advances to banks increased by EUR 3 billion to EUR 32 billion. Deposits from banks increased by EUR 2 billion to EUR 39 billion.

Financial assets/liabilities at fair value through profit or loss

Financial assets at fair value through profit or loss increased by EUR 23 billion to EUR 152 billion, due to an increase of reverse repo activity mandatorily at fair value through profit or loss by EUR 25 billion, partly offset by EUR 2 billion lower trading assets. On the liability side, Financial liabilities at fair value through profit or loss increased by EUR 22 billion to EUR 111 billion, mainly caused by EUR 17 billion higher repo activity designated at fair value through profit or loss and EUR 4 billion higher trading liabilities.

Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income decreased by EUR 6 billion to EUR 32 billion, mainly due to lower debt securities at fair value through other comprehensive income (sold and matured government bonds). The equity securities at fair value through OCI include, amongst others, our stakes in Bank of Beijing and in Kotak Mahindra Bank.

Securities at amortised costs

Securities at amortised costs increased slightly to EUR 49 billion versus EUR 48 billion at 1 January 2018.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     6  


Table of Contents

Interim report - continued

 

Loans and advances to customers

Loans and advances to customers increased by EUR 22 billion to EUR 585 billion from EUR 563 billion at 1 January 2018 due to an increase in customer lending. Adjusted for EUR 1 billion of negative currency impacts, customer lending increased by EUR 23 billion. This was caused by EUR 27 billion of net core lending growth, partly offset by a EUR 3 billion decrease in short-term Bank Treasury lending and a EUR 1 billion decline of the WUB and Lease run-off portfolio.

Customer deposits

Customer deposits increased by EUR 17 billion to EUR 557 billion. Adjusted for currency impacts and Bank Treasury, net customer deposits grew by EUR 8 billion in the first half of 2018, due to higher customer deposits at Retail Banking reflecting ING Bank’s strength as a deposit gatherer.

Debt securities in issue

Debt securities in issue increased by EUR 19 billion to EUR 116 billion from EUR 97 billion at 1 January 2018, caused by a EUR 25 billion increase of CD/CPs related to active liquidity management and the facilitation of short-term commercial activities. This was partly offset by EUR 6 billion of lower other (mainly long long-term) debt securities as maturities were only partly offset by new issuances (among others for TLAC purposes) in the first half of 2018.

Subordinated loans

Subordinated loans remained flat at EUR 16 billion, as new issuances in March were offset by redemptions in May.

Shareholders’ equity

Shareholders’ equity increased by EUR 0.6 billion to EUR 48.0 billion from EUR 47.4 billion at 1 January 2018. The EUR 2.6 billion net result for the first half of 2018 was partly offset by the EUR 1.7 billion payment of the final dividend for the year 2017.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     7  


Table of Contents

Condensed consolidated statement of financial position

 

     30      31  
as at    June      December  

in EUR million

   20181      20171  

Assets

     

Cash and balances with central banks

     38,276        21,989  

Loans and advances to banks

     31,627        28,811  

Financial assets at fair value through profit or loss 2

     151,503        123,221  

Investments

     n/a        79,073  

Financial assets at fair value through other comprehensive income 3

     31,500        n/a  

Securities at amortised cost 4

     48,966        n/a  

Loans and advances to customers 5

     584,714        571,909  

Investments in associates and joint ventures

     1,082        1,088  

Property and equipment

     1,775        1,801  

Intangible assets 6

     1,785        1,469  

Current tax assets

     401        324  

Deferred tax assets

     1,200        1,106  

Other assets 7

     10,667        13,087  
  

 

 

    

 

 

 

Total assets

     903,499        843,878  

Liabilities

     

Deposits from banks

     38,776        36,821  

Customer deposits

     556,711        539,828  

Financial liabilities at fair value through profit or loss 8

     110,874        87,142  

Current tax liabilities

     725        750  

Deferred tax liabilities

     341        362  

Provisions

     1,286        1,713  

Other liabilities 9

     13,772        16,064  

Debt securities in issue 10

     116,099        96,086  

Subordinated loans 10

     16,225        15,968  
  

 

 

    

 

 

 

Total liabilities

     854,808        794,734  

Equity 11

     

Share capital and share premium

     17,088        17,045  

Other reserves

     3,495        4,362  

Retained earnings

     27,374        27,022  
  

 

 

    

 

 

 

Shareholders’ equity (parent)

     47,957        48,429  

Non-controlling interests

     734        715  
  

 

 

    

 

 

 

Total equity

     48,691        49,144  
  

 

 

    

 

 

 

Total equity and liabilities

     903,499        843,878  
  

 

 

    

 

 

 

 

1 The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     8  


Table of Contents

Condensed consolidated statement of profit or loss

 

6 month period    1 January to 30 June  

in EUR million

   20181     20171  

Continuing operations

    

Interest income using effective interest rate method

     12,399       n/a  

Other interest income

     695       n/a  
  

 

 

   

 

 

 

Total interest income 12

     13,094       22,086  
  

 

 

   

 

 

 

Interest expense using effective interest rate method

     (5,435     n/a  

Other interest expense

     (799     n/a  
  

 

 

   

 

 

 

Total interest expense 12

     (6,234     (15,375
  

 

 

   

 

 

 

Net interest income

     6,860       6,711  
  

 

 

   

 

 

 

Net fee and commission income

     1,377       1,395  

Valuation results and net trading income 13

     393       1,090  

Investment income 14

     102       90  

Other income2 15

     151       248  
  

 

 

   

 

 

 

Total income

     8,883       9,534  

Addition to loan loss provisions 5

     200       362  

Staff expenses 16

     2,723       2,580  

Other operating expenses 17

     2,309       2,342  
  

 

 

   

 

 

 

Total expenses

     5,232       5,284  
  

 

 

   

 

 

 

Result before tax from continuing operations

     3,651       4,250  

Taxation

     995       1,226  
  

 

 

   

 

 

 

Net result from continuing operations

     2,656       3,024  

Net result (before non-controlling interests)

     2,656       3,024  

Net result attributable to Non-controlling interests

     51       44  
  

 

 

   

 

 

 

Net result attributable to Equityholders of the parent

     2,605       2,980  
  

 

 

   

 

 

 

 

1 The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.
2 Other income includes Result from associates and joint ventures, Net operating lease income, Net result on derecognition of financial assets at amortised cost, and Other.

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   9


Table of Contents

Condensed consolidated statement of profit or loss - continued

 

6 month period    1 January to 30 June  

in EUR million

   2018      2017  

Net result attributable to Non-controlling interests

     

– from continuing operations

     51        44  

– from discontinued operations

     
  

 

 

    

 

 

 
     51        44  

Net result attributable to Equityholders of the parent

     

– from continuing operations

     2,605        2,980  

– from discontinued operations

     
  

 

 

    

 

 

 
     2,605        2,980  
  

 

 

    

 

 

 
6 month period    1 January to 30 June  

in EUR

   2018      2017  

Earnings per ordinary share 18

     

Basic earnings per ordinary share

     0.67        0.77  

Diluted earnings per ordinary share

     0.67        0.77  

Dividend per ordinary share 19

     0.24        0.24  

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     10  


Table of Contents

Condensed consolidated statement of comprehensive income

 

6 month period    1 January to 30 June  

in EUR million

   20181     20171  

Net result (before non-controlling interests)

     2,656       3,024  

Other comprehensive income net of tax

    

Items that will not be reclassified to the statement of profit or loss:

    

Realised and unrealised revaluations property in own use

     (2     (5

Remeasurement of the net defined benefit asset/liability

     6       10  

Net change in fair value of equity instruments at fair value through other comprehensive income

     (161     n/a  

Change in fair value of own credit risk of financial liabilities at fair value through profit or loss

     75       n/a  

Items that may subsequently be reclassified to the statement of profit or loss:

    

Unrealised revaluations available-for-sale investments and other revaluations

     n/a       (103

Realised gains/losses on available-for-sale investments reclassified to the statement of profit or loss

     n/a       (71

Net change in fair value of debt instruments at fair value through other comprehensive income

     (43     n/a  

Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss

     (56     n/a  

Changes in cash flow hedges

     164       (397

Exchange rate differences

     (304     (436

Share of other comprehensive income of associates and joint ventures and other income

     4       3  
  

 

 

   

 

 

 

Total comprehensive income net of tax

     2,339       2,025  

Comprehensive income attributable to:

    

Non-controlling interests

     29       68  

Equityholders of the parent

     2,309       1,957  
  

 

 

   

 

 

 
     2,339       2,025  
  

 

 

   

 

 

 

 

1

The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   11


Table of Contents

Condensed consolidated statement of changes in equity

 

in EUR million

   Share
capital and
share
premium
     Other
reserves
    Retained
earnings
    Share-
holders’
equity
(parent)
    Non-
controlling
interests
    Total
equity
 

Balance as at 31 December 2017

     17,045        4,362       27,022       48,429       715       49,144  

Effect of change in accounting policy1

        (653     (390     (1,043     (14     (1,057

Balance as at 1 January 2018

     17,045        3,709       26,632       47,386       700       48,086  

Net change in fair value of equity instruments at fair value through other comprehensive income

        (165     4       (161       (161

Net change in fair value of debt instruments at fair value through other comprehensive income

        (44       (44     1       (43

Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss

        (55       (55     (2     (56

Changes in cash flow hedge reserve

        159         159       5       164  

Realised and unrealised revaluations property in own use

        (2       (2       (2

Remeasurement of the net defined benefit asset/liability

        6         6         6  

Exchange rate differences and other

        (278       (278     (26     (304

Share of other comprehensive income of associates and joint ventures and other income

        95       (91     4         4  

Change in fair value of own credit risk of financial liabilities at fair value through profit or loss

        75         75         75  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total amount recognised directly in other comprehensive income net of tax

        (208     (87     (295     (22     (318

Net result

          2,605       2,605       51       2,656  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income net of tax

        (208     2,518       2,309       29       2,339  

Dividends

          (1,673     (1,673     (27     (1,700

Changes in treasury shares

        (6       (6       (6

Employee stock option and share plans

     43          (7     36         36  

Changes in the composition of the group and other changes2

          (96     (96     31       (65
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at 30 June 2018

     17,088        3,495       27,374       47,957       734       48,691  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

Changes per type of Reserve components are presented in Note 1 ‘Accounting policies’.

2

Includes an amount for the redemption liability related to the acquisition of Payvision Holding B.V. and Makelaarsland B.V. that reduces the Retained earnings of the Group.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   12


Table of Contents

in EUR million

   Share
capital and
share
premium
     Other
reserves
    Retained
earnings
    Share-
holders’
equity
(parent)
    Non-
controlling
interests
    Total
equity
 

Balance as at 1 January 2017

     16,989        5,897       24,371       47,257       606       47,863  

Unrealised revaluations available-for-sale investments and other revaluations

        (108       (108     5       (103

Realised gains/losses transferred to the statement of profit or loss

        (69       (69     (2     (71

Changes in cash flow hedge reserve

        (395       (395     (2     (397

Unrealised revaluations property in own use

        (5       (5       (5

Remeasurement of the net defined benefit asset/liability

        10         10         10  

Exchange rate differences and other

        (459       (459     23       (436

Share of other comprehensive income of associates and joint ventures and other income

        94       (91     3         3  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total amount recognised directly in other comprehensive income

        (932     (91     (1,023     24       (999

Net result from continuing and discontinued operations

          2,980       2,980       44       3,024  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

        (932     2,889       1,957       68       2,025  

Dividends

          (1,632     (1,632       (1,632

Changes in treasury shares

        (2       (2       (2

Employee stock option and share plans

     54          (18     36         36  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at 30 June 2017

     17,043        4,963       25,610       47,616       674       48,290  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   13


Table of Contents

Condensed consolidated statement of cash flows - continued

 

Condensed consolidated statement of cash flows

 

6 month period              1 January to 30 June  

in EUR million

             20181     20171  

Cash flows from operating activities

    

Result before tax

           3,652       4,250  

Adjusted for:

   –     

depreciation

     267       260  
  

–  

  

addition to loan loss provisions

     200       362  
   –     

other

     (54     188  

Taxation paid

           (834     (885

Changes in:

   –     

loans and advances to banks, not available on demand

     (1,665     (971
   –     

trading assets

     1,660       (19,642
   –     

non-trading derivatives

     448       (2,236
   –     

assets designated at fair value through profit or loss

     (613     (114
   –     

assets mandatorily at fair value through profit or loss

     (24,374     n/a  
   –     

loans and advances to customers

     (24,078     (9,555
   –     

other assets

     (1,051     (184
   –     

deposits from banks, not payable on demand

     2,674       7,257  
   –     

customer deposits

     19,842       9,864  
   –     

trading liabilities

     4,478       5,507  
   –     

other financial liabilities at fair value through profit or loss

     15,996       (368
   –     

provisions and other liabilities

     322       (947
        

 

 

   

 

 

 

Net cash flow from/(used in) operating activities

     (3,130     (7,214

Cash flows from investing activities

    

Investments and advances:

   –     

acquisition of subsidiaries, net of cash acquired

     (111  
   –     

associates and joint ventures

     (47     (24
   –     

available-for-sale investments

     n/a       (14,936
   –     

held-to-maturity investments

     n/a       (2,423
   –     

financial assets at fair value through other comprehensive income

     (3,385     n/a  
   –     

securities at amortised cost

     (9,887     n/a  
   –     

property and equipment

     (133     (136
   –     

assets subject to operating leases

     (27     (22
   –     

other investments

     (135     (115

Disposals and redemptions:

   –     

associates and joint ventures

     54       197  
   –     

available-for-sale investments

     n/a       22,654  
   –     

held-to-maturity investments

     n/a       710  
   –     

financial assets at fair value through other comprehensive income

     9,032       n/a  
   –     

securities at amortised cost

     9,104       n/a  
   –     

property and equipment

     5       31  
   –     

assets subject to operating leases

     6       9  
  

–  

  

loans sold

       525  
   –     

other investments

     1       1  
        

 

 

   

 

 

 

Net cash flow from/(used in) investing activities

     4,477       6,471  

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   14


Table of Contents

Condensed consolidated statement of cash flows - continued

 

 

6 month period    1 January to 30
June
 

in EUR million

   20181     20171  

Net cash flow from/(used in) operating activities

     (3,130     (7,214

Net cash flow from/(used in) investing activities 

     4,477       6,471  

Cash flows from financing activities

    

Proceeds from debt securities

     72,330       50,101  

Repayments of debt securities

     (53,923     (50,898

Proceeds from subordinated loans

     1,746       2,224  

Repayments of subordinated loans

     (1,909     (1,280

Purchase/sale of treasury shares

     7       (2

Dividends paid

     (1,673     (1,632

Net cash flow from/(used in) financing activities

     16,578       (1,487

Net cash flow

     17,925       (2,230

Cash and cash equivalents at beginning of period

     18,977       16,164  

Effect of exchange rate changes on cash and cash equivalents

     206       148  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

     37,108       14,082  

Cash and cash equivalents comprises the following items:

    

Treasury bills and other eligible bills

     248       309  

Deposits from banks/Loans and advances to banks – on demand

     (1,416     (4,121

Cash and balances with central banks

     38,276       17,894  
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

     37,108       14,082  
  

 

 

   

 

 

 

 

1 The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Interest and dividend received and paid1

 

6 month period    1 January to 30 June  

in EUR million

   2018      2017  

Interest received

     13,447        22,772  

Interest paid

     (7,005      (16,375
  

 

 

    

 

 

 
     6,442        6,397  

Dividend received2

     67        102  

Dividend paid

     (1,673      (1,632
  

 

 

    

 

 

 

 

1 The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements as further disclosed in note 12 ‘Net interest income’. Prior period amounts conform to presentation as per Annual Accounts 2017.
2 Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value through profit or loss, and from Investments in associates and joint ventures. Dividend paid and received from trading positions have been included 2017 number has been restated to align to current year presentation.

Interest received, interest paid and dividends received are included in operating activities in the cash flow statement. Dividend paid is included in financing activities in the cash flow statement.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   15


Table of Contents

Notes to the accounting policies

Notes to the Condensed consolidated interim accounts

amounts in millions of euros, unless stated otherwise

Notes to the accounting policies

Reporting entity

ING Groep N.V. is a company domiciled in Amsterdam, the Netherlands. Commercial Register of Amsterdam, number 33231073. These Condensed consolidated interim accounts, as at and for the six months ended 30 June 2018, comprise ING Groep N.V. and its subsidiaries, together referred to as ING Group. ING Group is a global financial institution with a strong European base, offering a wide range of retail and wholesale banking services to customers in over 40 countries.

Basis of preparation of the Consolidated interim accounts

The Condensed consolidated interim accounts have been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’.

The accounting principles used to prepare these Condensed consolidated interim accounts comply with International Financial Reporting Standards as issued by the International Accounting Standard Board (IFRS-IASB) and are consistent with those set out in the notes to the 2017 Consolidated financial statements as included in the Annual Report on Form 20-F of ING Group (ING Form 20-F) except for the adoption of IFRS 9 ‘Financial instruments’ (IFRS 9) and IFRS 15 ‘Revenue from Contract with Customers’ as set out in note 1 ‘Accounting policies’.

These condensed consolidated interim accounts should be read in conjunction with ING Group’s 2017 Consolidated financial statements as included in the Form 20-F.

International Financial Reporting Standards as issued by the IASB provide several options in accounting principles. ING Group’s accounting principles under International Financial Reporting Standards as issued by the IASB and its decision on the options available are set out in the section ‘Principles of valuation and determination of results’ in the 2017 Annual Report on Form 20-F.

IFRS-EU refers to International Financial Reporting Standards as adopted by the European Union (‘EU’), including the decisions ING Group made with regard to the options available under IFRS as adopted by the EU. The published 2017 Consolidated annual accounts of ING Group are presented in accordance with IFRS-EU. The annual accounts of ING Group will remain to be prepared under IFRS-EU. IFRS-EU differs from IFRS-IASB in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition and Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk.

Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in accordance with the EU ‘carve out’ version of IAS 39. Under the EU ‘IAS 39 carve-out’, hedge accounting may be applied, in respect of fair value macro hedges, to core deposits and hedge ineffectiveness is only recognised when the revised estimate of the amount of cash flows in scheduled time buckets falls below the original designated amount of that bucket and is not recognised when the revised amount of cash flows in scheduled time buckets is more than the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro hedges cannot be applied to core deposits and ineffectiveness arises whenever the revised estimate of the amount of cash flows in scheduled time buckets is either more or less than the original designated amount of that bucket.

This information is prepared by reversing the hedge accounting impacts that are applied under the EU ‘carve out’ version of IAS 39. Financial information under IFRS-IASB accordingly does not take account of the possibility that had ING Group applied IFRS-IASB as its primary accounting framework it might have applied alternative hedge strategies where those alternative hedge strategies could have qualified for IFRS-IASB compliant hedge accounting. These decisions could have resulted in different equity and net result amounts compared to those indicated in these Condensed interim accounts. A reconciliation between IFRS-IASB and IFRS-EU is included below.

Both IFRS-EU and IFRS-IASB differ in several areas from accounting principles generally accepted in the United States of America (‘US GAAP’).

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   16


Table of Contents

Reconciliation shareholders’ equity and net result under IFRS-EU and IFRS-IASB:

Reconciliation shareholders’ equity under IFRS-EU and IFRS-IASB

 

     Total Equity  
     30      31  
     June      December  
     2018      2017  

In accordance with IFRS-EU

     49,984        50,406  

Adjustment of the EU IAS 39 carve-out

     (2,730      (2,655

Tax effect of the adjustment

     704        678  
  

 

 

    

 

 

 

Effect of adjustment after tax

     (2,027      (1,977
  

 

 

    

 

 

 

Shareholders’ equity

     47,957        48,429  

Non-voting equity securities

     0     

Non-controlling interests

     734        715  
  

 

 

    

 

 

 

In accordance with IFRS-IASB Total Equity

     48,691        49,144  
  

 

 

    

 

 

 

Reconciliation net result under IFRS-EU and IFRS-IASB

 

     Net result first half of  
     2018      2017  

In accordance with IFRS-EU

     2,654        2,514  

Adjustment of the EU IAS 39 carve-out

     (75      670  

Tax effect of the adjustment

     26        (204
  

 

 

    

 

 

 

Effect of adjustment after tax

     (50      466  
  

 

 

    

 

 

 

In accordance with IFRS-IASB (attributable to the equityholders of the parent)

     2,605        2,980  

Non-controlling interests

     51        44  
  

 

 

    

 

 

 

In accordance with IFRS-IASB Total net result

     2,656        3,024  
  

 

 

    

 

 

 

The difference in net result is fully reflected in the segment Wholesale Banking.

Certain amounts recorded in the Condensed consolidated interim accounts reflect estimates and assumptions made by management. Actual results may differ from the estimates made. Interim results are not necessarily indicative of full-year results.

The ING Group consolidated interim financial report has been prepared on a going concern basis.

Amounts may not add up due to rounding.

1 Accounting policies

Major new IFRSs

A number of new or amended standards became applicable for the current reporting period. ING Group changed its accounting policies as a result of adopting IFRS 9 ‘Financial Instruments’.

The impact of the adoption of IFRS 9 is disclosed in notes 1a and the new IFRS 9 accounting policies are disclosed in note 1b. The other standards and amendments, including IFRS 15 (refer to note 1c), did not have any impact on the group’s accounting policies and did not require retrospective adjustments.

Except for the amendment to IFRS 9 regarding prepayment features with negative compensation, ING Group has not early adopted any standard, interpretation or amendment which has been issued, but is not yet effective.

Upcoming changes in IFRS

The most significant upcoming change to IFRS that could impact ING, comprises IFRS 16 ‘Leases’.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   17


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Notes to the accounting policies - continued

 

IFRS 16 ‘Leases’

In January 2016, the IASB issued IFRS 16 ‘Leases’ the new accounting standard for leases. The new standard is effective for annual periods beginning on or after 1 January 2019 and will replace IAS 17 ‘Leases’ and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’. For lessee accounting, the new standard removes the distinction between operating or finance leases. All leases will be recognised on the statement of financial position with the exemptions for short-term leases with a lease term of less than 12 months and leases of low-value assets (for example mobile phones or laptops). A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The main reason for this change is that this approach will result in a more comparable representation of a lessee’s assets and liabilities in relation to other companies and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial leverage and capital employed. The standard permits a lessee to choose either a full retrospective or a modified retrospective transition approach. Furthermore the standard provides some practical expedients and exemptions to ease the costs of transition. ING has decided to elect the modified retrospective approach and will make use of several practical expedients and exemptions. Lessor accounting remains substantially unchanged. ING Group will adopt the standard at its effective date and is currently preparing for implementation of this standard.

For further information, reference is made to Note 1 ‘Accounting policies, b) Upcoming changes in IFRS after 2017’ in the Consolidated financial statements as included in the 2017 Annual Report on Form 20-F of ING Group.

Changes to accounting policies in 2018

IFRS 9 ‘Financial instruments’

ING Group has applied the classification, measurement, and impairment requirements of IFRS 9 retrospectively as of 1 January 2018 by adjusting the opening balance sheet and opening equity at 1 January 2018. ING Group decided not to restate comparative periods as permitted by IFRS 9. ING Group early adopted the amendment to IFRS 9, otherwise effective 1 January 2019, which allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract, to be measured at amortised cost or at fair value through other comprehensive income. ING Group decided to continue to apply the hedge accounting guidance of IAS 39 as explicitly permitted by IFRS 9. The revised hedge accounting disclosures as required by IFRS 7 ‘Financial Instruments: Disclosures’ as per 1 January 2018 have been implemented across ING Group.

 

a) IFRS 9 ‘Financial instruments’ – Impact of adoption

Transition

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below:

 

  Comparative periods have not been restated. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings and reserves as at 1 January 2018. Accordingly, the information presented for 2017 does not reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9;

 

  The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:

 

    the determination of the business model within which a financial asset is held;

 

    the designation and revocation of previous designations of certain financial assets and financial liabilities as measured at fair value through profit or loss (FVTPL);

 

    the designation of certain investments in equity instruments not held for trading as at fair value through other comprehensive income (FVOCI); and

 

    for financial liabilities designated as at FVTPL, the determination of whether presenting the effects of changes in the financial liability’s credit risk in other comprehensive income (OCI) would create or enlarge an accounting mismatch in profit or loss.

ING continues to test and refine the new accounting processes, internal controls and governance framework necessitated by the adoption of IFRS 9. Therefore the estimation of the IFRS 9 impact has changed slightly compared to what was presented in the Annual Report 2017 on Form 20-F of ING Group.

The following table reconciles the carrying amounts under IAS 39 to the carrying amounts under IFRS 9 on transition to IFRS 9 on 1 January 2018.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   18


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Notes to the accounting policies - continued

 

Reconciliation of carrying amounts of financial assets and financial liabilities on the date of initial application of IFRS 9

 

     Ref    Carrying amount
31 December
2017 IAS 39
     Reclassfication1     Remeasurement     Carrying
amount 1
January
2018
IFRS 9
 

Cash and balances with central banks

        21,989        3         21,992  

Loans and advances to banks

        28,811        (122     2       28,691  

Trading assets

   E      116,748        (51,264       65,484  

Non-trading derivatives

        2,231        577         2,808  

Loans and advances at fair value through profit or loss

   C, E      2,500        54,092       31       56,623  

Debt securities at fair value through profit or loss

   C      1,738        1,487       (96     3,129  

Equity securities at fair value through profit or loss

   D      4        184       16       204  

Available-for-sale

   A,C,D      69,730        (69,730     0       0  

Debt securities at fair value through other comprehensive income

   A      0        30,459       (22     30,437  

Equity securities at fair value through other comprehensive income

   D      0        3,800       0       3,800  

Loans and advances at fair value through other comprehensive income

   B      0        3,131       233       3,364  

Securities at amortised cost

   A      9,343        39,975       (838     48,480  

Loans and advances to customers

   B,C      571,909        (8,372     (761     562,776  

Other assets (financial and non-financial)

        18,875        (4,220     300       14,955  
     

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

        843,878        —         (1,135     842,743  
     

 

 

    

 

 

   

 

 

   

 

 

 

Deposits from banks

        36,821        108         36,929  

Customer deposits

        539,828        53         539,881  

Trading liabilities

   E      73,596        (35,362     0       38,234  

Non-trading derivatives

        2,331        326       0       2,657  

Financial liabilities designated at fair value through profit or loss

   E      11,215        37,264       0       48,479  

Other liabilities (financial and non-financial)

        18,889        (3,370     (77     15,442  

Deb securities in issue

        96,086        740         96,826  

Subordinated loans

        15,968        241         16,209  
     

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

        794,734        —         (77     794,657  
     

 

 

    

 

 

   

 

 

   

 

 

 

 

1

Includes the reclassification of accrued interest from other assets and other liabilities to the corresponding balance sheet item of the host contract.

ING Group’s accounting policies on the classification of financial instruments under IFRS 9 are set out in note 1b. As a result of the combined application of the business model analysis and solely payments of principal and interest (SPPI) test, the classification and measurement of the following portfolios has changed:

 

A.

The available-for-sale (AFS) investment portfolio, was split into a portfolio classified at amortised cost (AC) and a portfolio at FVOCI. The reclassification from AFS to AC resulted in a reduction of the unrealised revaluation gains in equity at transition date.

 

B.

For a specific mortgage portfolio, the measurement changed from AC to FVOCI as it meets the hold to collect and sell (HtC&S) business model requirements. As the fair value of the portfolio is higher than the AC, this had a positive impact on equity; and

 

C.

Certain debt securities and loans previously booked at AC or AFS are measured at FVPL as the cash flows do not meet the SPPI test. This measurement change has a limited negative impact on equity at transition date.

Furthermore, there are a few portfolios for which only the classification on ING’s Consolidated statement of financial position has changed without impacting equity:

 

D.

For strategic equity instruments, ING decided to apply the option to irrevocably designate these at FVOCI, instead of the IFRS 9 default measurement of FVPL. FVOCI equity investments will have no recycling of the revaluation reserve anymore to the Statement Of Profit Or Loss (SOPL) upon disposal. For these instruments only dividend income continues to be recognised in the SOPL; and

 

E.

Certain reverse repurchase portfolios are classified as financial assets ‘Mandatorily at FVPL’ instead of Held for trading. ING will use the fair value option for the related repurchase financial liabilities.

Other Assets and Other Liabilities include the impact of reclassification of accrued interest from other assets and other liabilities to the corresponding balance sheet item of the host contract (reclassification) and the remeasurement impact on deferred tax assets and liabilities relating to the IFRS 9 changes.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     19  


Table of Contents

Notes to the accounting policies - continued

 

Classification and measurement

The following table shows the original measurement categories in accordance with IAS 39 and the new measurement categories under IFRS 9 for the Group’s financial assets and financial liabilities as at 1 January 2018.

Classification and measurement of financial assets and financial liabilities on the date of initial application of IFRS 9 as at 1 January 2018

 

2018

  Note   Orignal
measurement
under IAS 39
    Orignal
carrying
amount
under

IAS 39
    New
carrying
amount
under
IFRS 91
   

New

measurement under
IFRS 9

   

Cash and balances with central banks

      Amortised cost       21,989       21,992     Amortised cost   Cash and balances with central banks

Loans and advances to banks

      Amortised cost       28,811       28,691     Amortised cost   Loans and advances to banks

Financial assets at FVTPL

  2           Financial assets at FVPL

-   trading assets

      FVTPL       116,748       65,484     FVTPL (mandatorily)  

-   trading assets

-   non-trading derivatives

      FVTPL       2,231       2,808     FVTPL (mandatorily)  

-   non-trading derivatives

-   other financial assets at FVTPL

      FVTPL       4,242       2,162     FVTPL (designated)  

-   other financial assets at FVTPL

                    57,795     FVTPL (mandatorily)   -   other financial assets at FVTPL

Investments2

           

-   equity securities (AFS)

      FVOCI       3,983       n/a      

-   debt securities (AFS)

      FVOCI       65,747       n/a      

-   debt securities (HTM)

      Amortised cost       9,343       n/a      
  3           Financial assets at FVOCI
              n/a     30,437     FVOCI   -   debt securities
              n/a     3,800     FVOCI (designated)   -   equity securities
              n/a     3,364     FVOCI   -   loans and advances
  4       n/a       48,480     Amortised cost   Securities at amortised cost

Loans and advances to customers

  5     Amortised cost       571,909       562,776     Amortised cost   Loans and advances to customers

Other assets

      Amortised cost       18,875       14,955     Amortised cost   Other assets

Total assets

        843,878       842,744       Total assets

Deposits from banks

      Amortised cost       36,821       36,929     Amortised cost   Deposits from banks

Customer deposits

      Amortised cost       539,828       539,881     Amortised cost   Customer deposits

Financial liabilities at FVTPL

  8           Financial liabilities at FVTPL

-   trading liabilities

      FVTPL       73,596       38,234     FVTPL  

-   trading liabilities

-   non-trading derivatives

      FVTPL       2,331       2,657     FVTPL  

-   non-trading derivatives

-   other financial liabilities at FVTPL

      FVTPL       11,215       48,479     FVTPL (designated)  

-   other financial liabilities at FVTPL

Other liabilities

      Amortised cost       18,889       15,442     Amortised cost   Other liabilities

Debt securities in issue

  10     Amortised cost       96,086       96,826     Amortised cost   Debt securities in issue

Subordinated loans

  10     Amortised cost       15,968       16,209     Amortised cost   Subordinated loans

Total liabilities

        794,734       794,657       Total liabilities

 

1 Includes the reclassification of accrued interest from other assets and other liabilities to the corresponding balance sheet item of the host contract.
2 Investments represented all securities other than those measured at FVTPL under IAS 39. Under IFRS 9 these Investments are classified as Financial Assets at FVOCI or Securities at amortised cost.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   20


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Notes to the accounting policies - continued

 

Impairment

As a result of the new IFRS 9 impairment requirements, the loan loss provisions (LLP) increased by EUR 795 million.

The following table reconciles:

 

  the closing impairment allowance for financial assets in accordance with IAS 39 and provisions for loan commitments and financial guarantee contracts in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ as at 31 December 2017; to

 

  the opening expected credit loss (ECL) allowance determined in accordance with IFRS 9 as at 1 January 2018.

Reconciliation of impairment allowance in accordance with IAS 39 to opening ECL allowance in accordance with IFRS 9

 

Allowance on:

   31 December
2017 (IAS 39
/ IAS 37)
     Reclassfication      Remeasurement      1 January
2018
(IFRS 9)
 

Loans and advances to banks

     8        0        (2      6  

Available-for-sale/Held-to-maturity debt investment securities and under IAS 39 reclassified to Securities at amortised cost under IFRS 9

     0        0        5        5  

Loans and advances to customers

     4,515        (8      761        5,269  

Available-for-sale debt securities under IAS 39/financial assets at FVOCI under IFRS 9

     0        0        20        20  

Loans and advances to customers under IAS 39/ Loans and advances to customers at FVOCI under IFRS 9

     0        8        0        8  

Loan commitments and financial guarantee contracts issued

     105        0        11        116  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,628        0        795        5,423  
  

 

 

    

 

 

    

 

 

    

 

 

 

The split of the ECL to different stages of ING Group’s portfolio is further detailed in the table below. The increase in the level of impairments due to the IFRS 9 transaction is mainly the result of IFRS 9 Stage 2 loans for which life time expected credit losses were calculated.

IFRS 9 transition impact impairments as at 1 January 20181

 

In millions of euros

   IAS 39 LLP     

IFRS 9 impairment stages

   IFRS 9
ECL increase
     IFRS 9 ECL  

Incurred but Not Reported (IBNR)

     726     

Stage 1 – 12 month ECL

     81        438  
     

Stage 2 – Lifetime ECL

     586        955  

Individually assessed provisions

     3,902     

Stage 3 – Lifetime ECL

     128        4,030  
  

 

 

       

 

 

    

 

 

 

Total

     4,628     

Total

     795        5,423  
  

 

 

       

 

 

    

 

 

 

 

1 Includes provisions for the credit risk on contingent liabilities.

The table below shows approximate carrying amounts and loan loss provisions of loans and advances to customers per stage.

Expected Credit Losses loans and advances to customers per stage as at 1 January 2018

 

     Carrying amount      ECL  

in millions of euros

             

Stage 1: 12-Month ECL

     512,358        402  

Stage 2: Lifetime ECL – not credit impaired

     43,777        952  

Stage 3: Lifetime ECL – credit impaired

     11,909        3,915  
  

 

 

    

 

 

 

Total

     568,044        5,269  
  

 

 

    

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   21


Table of Contents

Notes to the accounting policies - continued

 

Total net impact of transition to IFRS9 on opening balance equity

The following table analyses the impact, net of tax, of transition to IFRS 9 on reserves and retained earnings. The impact relates to the liability credit reserve, the fair value reserve and retained earnings. There is no impact on other components of equity.

Impact (net of tax) of transition to IFRS 9 on reserves and retained earnings

 

in EUR million

   Impact of
adopting
IFRS 9 at 1
January
2018
 

Liability credit reserve

  

Closing balance under IAS 39 (31 December 2017)

     0  

Reclassification of credit risk for financial liabilities designated as at FVTPL

     (190
  

 

 

 

Opening balance under IFRS 9 (1 January 2018)

     (190

Fair value reserve

  

Closing balance under IAS 39 (31 December 2017)

     3,650  

Reclassification of investment securities (debt) from available-for-sale to amortised cost

     (568

Reclassification of investment securities (equity) from available-for-sale to FVTPL

     (42

Reclassification of loans and advances to debt instruments at FVOCI

     175  
  

 

 

 

Opening balance under IFRS 9 (1 January 2018)

     3,215  

Share of associates, joint venture and other reserve

  

Closing balance under IAS 39 (31 December 2017)

     2,527  

Impact of application of IFRS 9

     (28
  

 

 

 

Opening balance under IFRS 9 (1 January 2018)

     2,499  

Retained earnings

  

Closing balance under IAS 39 (31 December 2017)

     27,022  

Reclassifications under IFRS 91

     182  

Recognition of expected credit losses under IFRS 9 (including lease receivables, loan commitments and financial guarantee contracts)

     (572
  

 

 

 

Opening balance under IFRS 9 (1 January 2018)

     26,632  

 

1 Net amount of reclassifications to retained earnings, to and from fair value reserves and to liability credit reserves, due to changes in classification and measurement.

Presentation

IFRS 9 resulted in changes to IAS 1 for the presentation of Interest income for instruments calculated using the effective interest rate method. The revised presentation requires it be shown as a separate line item in the consolidated statement of profit or loss. To enhance the relevance of the interest disclosures, ING Group changed its separate presentation of interest (i.e. ‘split interest’) for trading derivatives, trading securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and net trading income’. Similar presentation was applied to interest expense. The presentation of accrued interest in the balance sheet was also changed so that it is no longer separately presented, but rather included in the corresponding balance sheet item of the host contract. The new interest presentation was applied prospectively together with the other requirements of IFRS 9.

 

b) IFRS 9 Financial instruments – Accounting policies applied from 1 January 2018

Recognition and derecognition of financial instruments

Recognition of financial assets

Financial assets are recognised in the balance sheet when ING becomes a party to the contractual provisions of the instruments. Equity investments, debt securities financial assets and financial assets measured at fair value through profit or loss that require delivery within the time frame established by regulation or market convention (‘regular way’ purchases and sales) are recognised using trade date accounting. Trade date is the date on which ING commits to purchase or sell the asset. Loans and advances and repurchase agreements are recognised using settlement date accounting.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   22


Table of Contents

Notes to the accounting policies - continued

 

Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where ING Group has transferred substantially all risks and rewards of ownership. If ING Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer has control over the asset. The difference between the carrying amount of a financial asset that has been extinguished and the consideration received is recognised in profit or loss.

Recognition of financial liabilities

Financial liabilities are recognised on the date that the entity becomes a party to the contractual provisions of the instrument.

Derecognition of financial liabilities

Financial liabilities are removed from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished and the consideration paid is recognised in the statement of profit or loss.

 

i) Financial assets

General classification framework and initial measurement

From 1 January 2018, ING Group classifies its financial assets in the following measurement categories:

 

  those to be measured subsequently at fair value (either through OCI, or through profit or loss); and

 

  those to be measured at amortised cost (AC).

At initial recognition, the ING Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the statement of profit or loss.

Debt instruments

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows at initial recognition.

Business models

Business models are classified as either Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other depending on how a portfolio of financial instruments as a whole is managed. ING Group’s business models are based on the existing management structure of the bank, and refined based on an analysis of how businesses are evaluated and reported, how their specific business risks are managed and on historic and expected future sales.

Sales are permissible in a HtC business model when these are made due to an increase in credit risk, take place close to the maturity date, are insignificant in value (both individually and in aggregate) or are infrequent.

Assessing whether contractual cash flows are solely payments of principal and interest (SPPI)

The contractual cash flows of a financial asset are assessed to determine whether they represent SPPI. Interest includes consideration for the time value of money, credit risk and also consideration for liquidity risk and costs associated with holding the financial asset for a particular period of time. In addition, interest can include a profit margin that is consistent with a basic lending arrangement. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.

In assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, terms such as the following are considered:

 

  prepayment terms. For example a prepayment of an outstanding principal amount plus a penalty capped to three or six months of interest;

 

  leverage features, which increase the variability of the contractual cash flows with the result that they do not have the economic characteristics of interest. An example is a Libor contract with a multiplier of 1.3;

 

  terms that limit ING Group’s claim to cash flows from specified assets – e.g. non-recourse asset arrangements. This could be the case if payments of principal and interest are met solely by the cash flows generated by the underlying asset, for example in real estate, shipping and aviation financing; and

 

  features that modify consideration of the time value of money. These are contracts with for example an interest rate which is reset every month to a one-year rate. ING Group performs either a qualitative or quantitative benchmark test on a financial asset with a modified time value of money element. A qualitative test is performed when it is clear with little or no analysis whether the contractual cash flows solely represent SPPI.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   23


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Notes to the accounting policies - continued

 

There are three measurement categories into which the group classifies its debt instruments:

 

  Amortised cost:

Debt instruments that are held for collection of contractual cash flows under a HtC business model where those cash flows represent SPPI are measured at amortised cost. Interest income from these financial assets is included in Interest income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as a separate line item in the consolidated statement of profit or loss.

 

  FVOCI:

Debt instruments that are held for collection of contractual cash flows and for selling the financial assets under a HtC&S business model, where the assets’ cash flows represent SPPI, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in Investment income or Other income based on the specific characteristics of the business model. Interest income from these financial assets is included in Interest income using the effective interest rate method. Impairment losses are presented as a separate line item in the statement of profit or loss.

 

  FVPL:

Debt instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. This includes debt instruments that are held for trading. The interest result on a debt instrument that is part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss and presented within interest income or interest expense in the period in which it arises. Fair value movements on trading loans and deposits (mainly repo’s) are presented fully within valuation result and net trading income. ING Group may in some cases, on initial recognition, irrevocably designate a financial asset that otherwise meets the requirements to be measured at AC or at FVOCI as at FVPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. The interest result on financial assets designated as at FVPL is recognised in profit or loss and presented within interest income or interest expense in the period in which it arises.

ING Group reclassifies debt investments when, and only when, its business model for managing those assets changes.

Equity instruments

All equity investments are measured at fair value. ING Group applies the fair value through OCI option to the investments which are considered as strategic investments, consisting of investments that add value to ING Group’s core banking activities.

There is no subsequent recycling of fair value gains and losses to profit or loss following the derecognition of the investment if elected to measure the equity investments as FVOCI. Dividends from such investments continue to be recognised in profit or loss as Investment income when the group’s right to receive payments is established. Impairment requirements are not applicable to equity investments measured as FVOCI.

Other remaining investments are measured at FVPL since they are not part of ING’s core banking activities. All changes in the fair value are recognised in Valuation result and net trading income in the consolidated statement of profit or loss as applicable.

 

ii) Financial liabilities

Financial liabilities are classified and subsequently measured at amortised cost, except for financial guarantee contracts, derivatives and liabilities designated at FVPL. Financial liabilities that are measured at FVPL are presented as follows:

 

  the amount of change in the fair value that is attributable to changes in own credit risk of the liability is presented in OCI. Upon derecognition this debt valuation adjustment (DVA) impact does not recycle from OCI to profit or loss; and

 

  the remaining amount of change in the fair value is presented in profit or loss.

A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Such a contract is initially recognised at fair value and is subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions of IFRS 9 (see section “Impairment of financial assets”) and (b) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue recognition principle of IFRS 15.

 

iii) Derivatives and hedge accounting

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Fair values are obtained from quoted market prices in active markets, including market transactions and valuation techniques (such as discounted cash flow models and option pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Fair value movements on derivatives, are presented in profit or loss in Valuation result and net trading income, except for derivatives in either a formal hedge relationship and so-called economic hedges that are not in a formal hedge accounting relationship where a component is presented separately in interest result in line with ING’s risk management strategy.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   24


Table of Contents

Notes to the accounting policies - continued

 

Embedded derivatives are separated from financial liabilities and other non-financial contracts and accounted for as a derivative if, and only if:

a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract;

b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and

c) the combined instrument is not measured at fair value with changes in fair value reported in profit or loss.

If an embedded derivative is separated, the host contract is accounted for as for a similar free-standing contract.

ING Group decided to continue to apply the hedge accounting guidance of IAS 39 as explicitly permitted by IFRS 9. The revised hedge accounting disclosures as required by IFRS 7 as per 1 January 2018 have been implemented across ING Group.

 

iv) Impairment of financial assets

An ECL model is applied to on-balance sheet financial assets accounted for at amortised cost and FVOCI such as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities. Under the ECL model ING Group calculates the allowance for credit losses (loan loss provision, LLP) by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The LLP is the sum of these probability-weighted outcomes and the ECL estimates are unbiased and include supportable information about past events, current conditions, and forecasts of future economic conditions. ING Group’s approach leveraged the existing regulatory capital models that use the Advanced Internal Ratings Based (AIRB) models for regulatory purposes. For other portfolios that use the Standardised Approach (SA) to calculate regulatory capital, ING developed new ECL models.

Three stage approach

Financial assets are classified in any of the below 3 Stages at a quarterly reporting date. A financial asset can move between Stages during its lifetime. The Stages are based on changes in credit quality since initial recognition and defined as follows:

 

  Stage 1: 12 month ECL

Financial assets that have not had a significant increase in credit risk since initial recognition (i.e. no Stage 2 or 3 triggers apply). Assets are classified as stage 1 upon initial recognition (with the exception of purchased or originated credit impaired (POCI) assets) and a provision for ECL associated with the probability of default (PD) events occurring with the next 12 months (12 months ECL). For those financial assets with a remaining maturity of less than 12 months, a PD is used that corresponds to the remaining maturity;

 

  Stage 2: Lifetime ECL – not credit impaired

Financial assets showing a significant increase in credit risk since initial recognition. A provision is made for the life time ECL representing losses over the life of the financial instrument (lifetime ECL); or

 

  Stage 3: Lifetime ECL – credit impaired

Financial instruments that move into Stage 3 once credit impaired require a life time provision.

Significant increase in credit risk

A financial asset moves from Stage 1 to Stage 2 when there is a significant increase in credit risk since initial recognition. ING Group established a framework which incorporates quantitative and qualitative information to identify this on an asset level applying a relative assessment. Each financial asset is assessed at the reporting date on the triggers for significant deterioration. ING Group assesses significant increase in credit risk using:

 

  delta in the lifetime probability of default;

 

  forbearance status;

 

  watch list status. Loans on the watch list are individually assessed for Stage 2 classification;

 

  intensive care management;

 

  internal rating;

 

  arrears; and the

 

  more than 30 days past due backstop for Stage 1 to Stage 2 transfers.

The delta in lifetime probability of default is the main trigger for movement between Stage 1 and Stage 2. The trigger compares lifetime probability of default at origination versus lifetime probability of default at reporting date, considering the remaining maturity. Assets can move in both directions, meaning that they will move back to Stage 1 or Stage 2 when the Stage 2 or Stage 3 triggers are not applicable anymore (taking into account the regulatory probation periods). The stage allocation is implemented in the central credit risk systems.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     25  


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Notes to the accounting policies - continued

 

Macroeconomic scenarios

ING has established a quarterly process whereby forward-looking macroeconomics scenarios and probability weightings are developed for ECL calculation purposes. ING Group applies data predominantly from a leading service provider enriched with the internal ING Group view. A baseline, up-scenario and a down-scenario are determined to reflect an unbiased and probability-weighted ECL amount. As a baseline scenario, ING Group applies the market-neutral view combining consensus forecasts for economic variables such as unemployment rates, GDP growth, house prices, commodity prices, and short-term interest rates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit losses.

The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting the economy today and the forecast horizon. The probabilities assigned are based on the likelihoods of observing the three scenarios and are derived from confidence intervals on a probability distribution. The scenarios are adjusted on a quarterly basis.

Measurement of ECL

ING Group’s expected loss models (PD, LGD, EAD) used for regulatory capital, economic capital and collective provisions are adjusted for removal of embedded prudential conservatism (such as floors), provide forward-looking point in time estimates based on macroeconomic predictions and a 12 months or life time view of credit risk where needed. Lifetime features are default behaviour over a longer horizon, full behaviour after the default moment, repayment schedules and early settlements. For most financial instruments, the expected life is limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as credit cards, open ended assumptions are taken as these do not have a fixed term or repayment schedule.

ING Group applies a PD x EAD x LGD approach incorporating the time value of money to measure ECL. A forward-looking approach on a 12 month horizon is applied for Stage 1 assets. For Stage 2 assets a lifetime view on the credit is applied. The Lifetime Expected Loss (LEL) is the discounted sum of the portions of lifetime losses related to default events within each time window of 12 months till maturity. For Stage 3 assets the PD equals 100% and the Loss Given Default (LGD) and Exposure At Default (EAD) represent a lifetime view of the losses based on characteristics of defaulted facilities.

Definition of default

ING Group uses the definition for defaulted financial assets which is used for internal risk management purposes and has aligned the definition of credit impaired under IFRS 9 (Stage 3) with the definition of default for prudential purposes.

The definition of default may differ across products and considers both quantitative and qualitative factors, such as the terms of financial covenants and days past due. For retail and wholesale borrowers default occurs when the borrower is more than 90 days past due on any material obligation to ING Group, and/or ING Group considers the borrower unlikely to make its payments in full without recourse action on ING Group’s part, such as taking formal possession of any collateral held.

Credit impaired financial assets (Stage 3)

Financial assets are assessed for credit-impairment at each reporting date and more frequently when circumstances warrant further assessment. Evidence of credit-impairment may include indications that the borrower is experiencing significant financial difficulty, a breach of contract, probability of bankruptcy or other financial reorganization, as well as a measurable decrease in the estimated future cash flows evidenced by the adverse changes in the payment status of the borrower or economic conditions that correlate with defaults.

An asset that is in stage 3 will move back to stage 2 when, as at the reporting date, it is no longer considered to be credit-impaired. The asset will migrate back to stage 1 when its credit risk at the reporting date is no longer considered to have increased significantly from initial recognition.

When a financial asset has been identified as credit-impaired, expected credit losses are measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the instrument’s original effective interest rate. For impaired financial assets with drawn and undrawn components, expected credit losses also reflect any credit losses related to the portion of the loan commitment that is expected to be drawn down over the remaining life of the instrument. When a financial asset is credit-impaired, interest ceases to be recognised on the regular accrual basis, which accrues income based on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original effective interest rate to the amortised cost of the asset, which is the gross carrying amount less the related loan loss provision.

The loan loss provision for credit-impaired loans in Stage 3 are established at the borrower level, where losses related to impaired loans are identified on individually significant loans, or collectively assessed and determined through the use of portfolio-based rates, without reference to particular loans.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   26


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Notes to the accounting policies - continued

 

Individually assessed loans (Stage 3)

ING Group estimates individual impairment provisions for individually significant credit impaired financial assets within Stage 3. Individual provisions are calculated using the discounted expected future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each scenario is analysed based on the probability of occurrence and including forward looking information.

The best estimate of loan loss is calculated as the weighted average of the shortfall (gross carrying amount minus discounted expected future cash flow using the original effective interest rate) per scenario. The expected future cash flows are based on the restructuring officers’ best estimate when recoveries are likely to occur. Recoveries can be from different sources including repayment of the loan, additional drawing, collateral recovery, asset sale etc. Cash flows from collateral and other credit enhancements are included in the measurement of the expected credit losses of the related financial asset when it is part of or integral to the contractual terms of the financial asset and the credit enhancement is not recognised separately. The estimation of future cash flows are subject to significant estimation uncertainty and assumptions.

Collectively assessed loans (Stages 1 to 3)

Loans that are collectively assessed are grouped on the basis of similar risk characteristics, taking into account loan type, industry, geographic location, collateral type, past due status and other relevant factors. The collectively-assessed loan loss provision reflects: (i) the expected amount of principal and interest calculated under the terms of the original loan agreement that will not be recovered, and (ii) the impact of time delays in collecting principal and/or interest (time value of money).

Purchase or Originated Credit Impaired (POCI) assets

POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount net of impairments and are measured at amortised cost using a credit-adjusted effective interest rate. In subsequent periods any changes to the estimated lifetime ECL are recognised in the income statement. Favourable changes are recognised as an impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL at origination.

Write-off and debt forgiveness

Loans and the related ECL are written off, either partially or in full, when there is no realistic prospect of recovery. Write-offs are made:

 

  after a restructuring has been completed and there is a high improbability of recovery of part of the remaining loan exposure (including partial debt waivers);

 

  in a bankruptcy liquidation scenario (not as a result of a reorganisation);

 

  when there is a high improbability of recovery of the remaining loan exposure or certainty that no recovery can be realised;

 

  after divestment or sale of a credit facility at a discount;

 

  upon conversion of a credit facility into equity; or

 

  ING Group releases a legal (monetary) claim it has on its customer.

Presentation of impairment

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognised in OCI, instead of deducting the carrying amount of the asset. Impairment losses on debt securities measured at amortised cost is presented in profit or loss in addition to loan loss provision.

Significant judgements and critical accounting estimates and assumptions:

Considerable judgement is exercised in determining the extent of the loan loss provision (impairment) for financial assets assessed for impairment both individually and collectively. The loan loss provision for financial assets are based on assumptions about risk of default and expected loss rates. ING Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward-looking estimates at the end of each reporting period. Changes in such judgements and analyses may lead to changes in the loan loss provisions over time. The key judgement areas are:

 

  Assumptions used to measure expected credit losses, including the use of forward-looking and macro-economic information for individual and collective impairment assessment:

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   27


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Notes to the accounting policies - continued

 

Individually assessed loans (Stage 3): Individual provisions are calculated using the discounted expected future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each scenario is analysed based on the probability of occurrence and including forward looking information. In determining the scenarios, all relevant factors impacting the future cash flows are taken into account. These include expected developments in credit quality, business and economic forecasts, and estimates of if/when recoveries will occur, taking into account the structure of the financial asset and ING’s restructuring/recovery strategy. The macroeconomic forecast is captured, as the expected future macroeconomic situation serves as basis for the cash flows in the scenarios. For the individual assessment, with granular (company- or deal-specific) scenarios, specific factors can have a larger impact on the future cash flows than macroeconomic factors (i.e. for the country as a whole).

Collectively assessed loans (Stages 1 to 3): For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Expected future cash flows in a portfolio of financial assets that are collectively evaluated for impairment, are estimated on the basis of the contractual cash flows of the assets in the portfolio and historical loss experience for assets with credit risk characteristics similar to those in the portfolio. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. The outcome of the models reflects forward looking and macro-economic information.    

The use of different assumptions could produce significantly different estimates of ECL. As the inclusion of forward-looking macroeconomic scenarios requires judgement, a Macroeconomic scenarios team and a Macroeconomic scenarios expert panel were established. The Macroeconomics scenarios team is responsible for the macroeconomic scenarios used for IFRS 9 ECL purposes with a challenge by the Macroeconomic scenarios expert panel. This ensures that the macroeconomic scenarios are sufficiently challenged and that key economic risks, including immediate short term risks, are taken into consideration when developing the macroeconomic scenarios used in the calculation of ECL. The Macroeconomic scenarios expert panel is a diverse team composed of senior management representatives from the Business, Risk and Finance.

 

  The criteria for identifying a significant increase in credit risk:

When determining whether the credit risk on a financial asset has increased significantly, ING Group considers reasonable and supportable information available to compare the risk of default occurring at the quarterly reporting date with the risk of a default occurring at initial recognition of the financial asset. Significant judgement is required to determine the criteria for a significant increase in credit risk.

 

  The definition of default:

Judgement is exercised in management’s evaluation of whether there is objective evidence that an impairment loss on an asset has been incurred. Significant judgement is required in assessing evidence of credit-impairment and estimation of the amount and timing of future cash flows when determining expected credit losses.

 

c) IFRS 15 ‘Revenue from Contract with Customers’ – Impact of adoption

IFRS 15 is effective for annual periods beginning on or after 1 January 2018. IFRS 15 introduces a five-step approach for recognising revenue as and when the agreed performance obligations are satisfied. Agreed performance obligations are individual promises made to the customer that deliver benefit from the customer’s perspective. Revenue should either be recognised at a point-in-time or over-time depending on the service being delivered to the customer. The adoption of IFRS 15 had no significant impact on ING Group’s results or financial position.

ING’s net fee and commission income for the first 6 months of EUR 1,377 million in total is composed of EUR 2,037 million revenues and EUR 660 million expenses. The main revenue categories by product or service are fees from funds transfer of EUR 647 million (first six months 2017: EUR 577 million), fees from securities business of EUR 304 million (first 6 months of 2017: EUR 291 million), fees from brokerage and advisory fees of EUR 270 million (first 6 months of 2017: EUR 276 million). Other fees of EUR 816 million in total mainly include commission fees in respect of bank guarantees, underwriting syndicated loans and lending fees. Reference is made to Note 20 ‘Segments’ which includes net fee and commission income, as reported to the Executive Board of ING Group and the Management Board of ING Bank, disaggregated by line of business and by geographical segment.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   28


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Notes to the Condensed consolidated statement of financial position - continued

 

Notes to the Condensed consolidated statement of financial position

2 Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss

 

    

30

June

    

31

December

 
     2018      2017  

Trading assets

     63,817        116,748  

Non-trading derivatives

     2,743        2,231  

Assets mandatorily measured at fair value through profit or loss

     82,168        n/a  

Assets designated as at fair value through profit or loss

     2,775        4,242  
  

 

 

    

 

 

 
     151,503        123,221  
  

 

 

    

 

 

 

At January 1 2018, the classification of certain ‘Loans and advances to customers’ and ‘Debt instruments’ has changed to ‘Financial assets at fair value through profit or loss’ due to SPPI failure. As per 1 January 2018 certain reverse repurchase portfolios, amounting to EUR 54,825 million, are classified as financial assets ‘Mandatorily measured at fair value through profit or loss’, where previously reported as ‘Trading assets’ and ‘Assets designated as at fair value through profit or loss’. The related repurchase financial liabilities, amounting to EUR 37,161 million, are classified as financial liabilities ‘Designated at fair value through profit or loss’.

The total increase in Financial assets at fair value through profit or loss in the first six months of 2018, is mainly attributable to an increase of EUR 25.1 billion reverse repurchase portfolio included under assets mandatorily measured at fair value through profit or loss.

Trading assets and trading liabilities include assets and liabilities that are classified under IFRS as ‘Trading’ but are closely related to servicing the needs of the clients of ING Group. ING offers institutional and corporate clients and governments products that are traded on the financial markets. A significant part of the derivatives in the trading portfolio are related to servicing corporate clients in their risk management to hedge for example currency or interest rate exposures. In addition, ING provides its customers access to equity and debt markets for issuing their own equity or debt securities (‘securities underwriting’). Although these are presented as ‘Trading’ under IFRS, these are directly related to services to ING’s customers. Loans and receivables in the trading portfolio mainly relate to (reverse) repurchase agreements, which are comparable to collateralised lending. These products are used by ING as part of its own regular treasury activities, but also relate to the role that ING plays as intermediary between different professional customers. Trading assets and liabilities held for ING’s own risk are very limited. From a risk perspective, the gross amount of trading assets must be considered together with the gross amount of trading liabilities, which are presented separately on the statement of financial position. However, IFRS does not allow netting of these positions in the statement of financial position. Reference is made to Note 8 ‘Financial liabilities at fair value through profit or loss’ for information on trading liabilities.

As at 30 June 2018, Non-trading derivatives include EUR 0 million (31 December 2017: EUR 51 million ) and EUR 3 million (31 December 2017: EUR 2 million) related to warrants on the shares of Voya Financial Inc. and NN Group N.V. respectively. ING has sold its 7 million remaining shares in Voya during the first half of 2018.

3 Financial assets at fair value through other comprehensive income

Securities by type

 

     30      31  
     June      December  
     2018      2017  

Equity securities

     3,667        n/a  

Debt securities

     24,968        n/a  

Loans and advances

     2,865        n/a  
  

 

 

    
     31,500     

Available-for-sale investments

     n/a        69,730  

Held-to-maturity investments1

     n/a        9,343  
  

 

 

    

 

 

 
     31,500        79,073  
  

 

 

    

 

 

 

 

1 Under IFRS 9 these Investments are classified as Securities at amortised cost, reference is made to Note 4 ‘Securities at amortised cost‘.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   29


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Notes to the Condensed consolidated statement of financial position - continued

 

Equity securities designated as at fair value through other comprehensive income

 

            Dividend  
            income  
     Carrying      recognised  
     value      in 2018  

Investment in Bank of Beijing

     2,150     

Investment in Kotak Mahindra Bank

     1,198     

Other Investments

     319        8  
  

 

 

    

 

 

 
     3,667        8  
  

 

 

    

 

 

 

Exposure to debt securities

Reference is made to Note 4 ‘Securities at amortised costs’ for details on ING Group’s exposure to debt securities.

Changes in fair value through other comprehensive income financial assets

The following table presents changes in fair value of equity securities and debt instruments at fair value through other comprehensive income. The comparative amounts include equity securities and debt instruments that were classified as available for sale investments under IAS 39.

Changes in fair value through other comprehensive income financial assets

 

     Fair value
through other
comprehensive
income equity
securities
    Fair value through
other comprehensive
income debt
instruments1
          Total  
     2018     2017     2018     2017     2018     2017  

Opening balance as at 1 January

     3,983       4,024       65,747       78,888       69,730       82,912  

Effect of changes in accounting policy

     (184       (31,945       (32,129  

Additions

     11       325       3,376       21,276       3,387       21,600  

Amortisation

         (14     (146     (14     (146

Transfers and reclassifications

     (7     7       1         (6     7  

Changes in unrealised revaluations

     (196     21       (69     (1,030     (265     (1,009

Impairments

       (6           (6

Reversals of impairments

           3         3  

Disposals and redemptions

     (4     (79     (8,983     (32,709     (8,987     (32,788

Exchange rate differences

     64       (308     (226     (535     (162     (843

Changes in the composition of the group and other changes

     (1     (1     (54       (55     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

     3,667       3,983       27,833       65,747       31,500       69,730  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.

Reference is made to Note 14 ‘Investment income’ for details on Impairments.

Reference is made to Note 4 ‘Securities at amortised cost’ for further information on transfers and reclassifications of fair value through comprehensive income and amortised cost investments.

4 Securities at amortised cost

Securities at amortised cost

 

     30      31  
     June      December  
     2018      2017  

Debt securities at amortised cost

     48,966        n/a  

Held-to-maturity investments 1

     n/a        9,343  
  

 

 

    

 

 

 
     48,966        9,343  
  

 

 

    

 

 

 

 

1

Under IAS 39 these Securities were classified Held-to-maturity investments, reference is made to Note 3 ‘Financial assets at fair value through other comprehensive income’.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   30


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

Exposure to debt securities

ING Group’s exposure to debt securities is included in the following lines in the statement of financial position:

Debt securities

 

     30 June      31 December  
     2018      2017  

Debt securities at fair value through other comprehensive income

     24,968        n/a  

Debt securities at amortised cost

     48,966        n/a  

Available-for-sale investments

     n/a        65,747  

Held-to-maturity investments

     n/a        9,343  

Loans and advances to customers

        5,099  

Loans and advances to banks

        265  
  

 

 

    

 

 

 

Debt securities at fair value through other comprehensive income and amortised cost

     73,934        80,454  

Trading assets

     7,237        7,477  

Debt securities at fair value through profit or loss

     3,226        1,739  
  

 

 

    

 

 

 

Financial assets at fair value through profit or loss

     10,463        9,216  
     84,397        89,670  
  

 

 

    

 

 

 

At January 1 2018, the classification of certain Loans and advances to banks and Loans and advances to customers has changed to Securities at amortised cost based on the characteristics of these instruments.

ING Group’s total exposure to debt securities of EUR 77,161 million (31 December 2017: EUR 80,454 million) is specified as follows by type of exposure:

Debt securities by type and balance sheet lines

 

     Debt      Debt      Debt                
     securities      securities      securities                
     at FVPL      at FVOCI      at AC      Total      Total  
     30 June      30 June      30 June      30 June      31 December  
     2018      2018      2018      2018      2017  

Government bonds

     186        14,635        25,600        40,421        43,134  

Sub-sovereign, Supranationals and Agencies

     427        5,973        11,532        17,932        18,715  

Covered bonds

        2,255        7,009        9,264        9,409  

Corporate bonds

     181        1,005        816        2,002        2,254  

Financial institutions’ bonds

     1,485        5        2,369        3,860        2,548  

ABS portfolio

     946        1,095        1,641        3,682        4,394  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Bond portfolio

     3,226        24,968        48,966        77,161        80,454  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Approximately 99% (2017: 99%) of the exposure in the ABS portfolio is externally rated AAA, AA or A.

There are no borrowed debt securities recognised in the statement of financial position.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     31  


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

5 Loans and advances to customers

Loans and advances to customers by type

 

     30 June      31 December  
     2018      2017  

Loans to, or guaranteed by, public authorities

     43,215        46,372  

Loans secured by mortgages

     329,224        323,959  

Loans guaranteed by credit institutions

     2,153        1,979  

Personal lending

     24,656        23,236  

Asset backed securities

        2,209  

Corporate loans

     190,443        178,669  
  

 

 

    

 

 

 
     589,691        576,424  

Loan loss provisions

     (4,977      (4,515
  

 

 

    

 

 

 
     584,714        571,909  
  

 

 

    

 

 

 

As at 30 June 2018, Loans and advances to customers includes receivables with regard to securities which have been acquired in reverse repurchase transactions amounting to EUR 698 million (31 December 2017: EUR 421 million).

Loans and advances to customers by subordination

 

     30 June      31 December  
     2018      2017  

Non-subordinated

     584,563        571,429  

Subordinated

     152        480  
  

 

 

    

 

 

 
     584,714        571,909  

No individual loan or advance has terms and conditions that significantly affect the amount, timing or certainty of the consolidated cash flows of the Group.

Total Loan loss provisions by type

 

                                 30 June
2018
     31 December
2017
 
     12-month
ECL
     Lifetime
ECL not
credit
impaired
     Lifetime
ECL
credit
impaired
     Purchased
credit
impaired
     Total      Total  

Cash and balances with central banks

                 

Loans and advances to banks

     3        1              4        8  

Debt instruments at fair value through other comprehensive income

     9        1        4           15        n/a  

Securities at amortised cost

     12           4           16        n/a  

Loans and advances to customers

     432        928        3,615        2        4,977        4,515  

Guarantees

           84           84     

Irrevocable loan commitments

     5        7        6           19     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     462        937        3,713        2        5,115        4,523  

Provisions for other off-balance sheet items1

                 1        105  
              

 

 

    

 

 

 
                 5,116        4,628  

 

1

These amounts relate to off-balance sheet exposure in scope of IAS 37 for which stage information is not applicable.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

    

 

 

32

 

 

 

 

 


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

The following table shows the reconciliation from the opening to the closing balance of the total loan loss provision per stage.

Total Loans loss provision per stage

 

     30 June      1 January  
     2018      2018  

Stage 1 – 12 month ECL

     462        438  

Stage 2 – Lifetime ECL not credit impaired

     937        955  

Stage 3 – Lifetime ECL credit impaired

     3,713        4,023  

Purchased credit impaired

     2        7  
  

 

 

    

 

 

 

Total

     5,115        5,423  

The following table sets out information about the credit quality of loans and advances to customers.

Credit quality analysis : Loans and advances to customers (at amortised cost)

 

                             30 June
2018
    31 December
2017
 
     12-month
ECL
    Lifetime
ECL not
credit
impaired
    Lifetime
ECL
credit
impaired
    Purchased
credit -
impaired
    Total     Total  

Grades 1-10: Investment grade

     342,955       4,388           347,343       332,181  

Grades 11-17: Non–investment grade

     197,921       27,768           225,689       226,494  

Grades 18-19: Substandard grade

       5,632           5,632       5,703  

Grade 20-22: Non-performing grade

         11,025       2       11,027       12,047  

Loan loss provision

     (432     (928     (3,615     (2     (4,977     (4,515
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amount

     540,444       36,860       7,410         584,714       571,909  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   33


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

6 Intangible assets

Intangible assets

 

     30 June      31 December  
     2018      2017  

Goodwill

     958        816  

Software

     773        648  

Other

     54        5  
  

 

 

    

 

 

 
     1,785        1,469  
  

 

 

    

 

 

 

Goodwill

Goodwill is allocated to groups of Cash Generating Units (CGUs) as follows:

Goodwill allocation to group of CGUs

 

     30 June      31 December  

Group of CGU’s

   2018      2017  

Retail Netherlands

     14     

Retail Belgium

     50        50  

Retail Germany

     349        349  

Retail Growth Markets1

     262        307  

Wholesale Banking1

     283        110  
  

 

 

    

 

 

 
     958        816  
  

 

 

    

 

 

 

 

1

Goodwill related to Growth Market countries is allocated across two groups of CGUs EUR 262 million (31 December 2017: EUR 307 million) to Retail Growth Markets and EUR 76 million (31 December 2017: EUR 90 million) to Wholesale Banking.

Changes in the goodwill in the first six months of 2018 mainly relate to the acquisition of 75% of the shares of Payvision Holding B.V. and 90% of the shares of Makelaarsland B.V. The acquisition of Payvision and Makelaarsland resulted in a recognition of goodwill of respectively EUR 188 million and EUR 14 million. Other changes in goodwill are due to changes in currency exchange rates. Reference is made to Note 23 ‘Companies and business acquired and divested’ for further information on the acquisitions that took place in 2018 and the goodwill recognised.

No goodwill impairment was recognised in the first six months of 2018 (first six months of 2017: nil).

Goodwill impairment testing is done annually in the fourth quarter of the year unless there is a triggering event earlier.

Software and Other intangible assets

The increase in software and other intangible assets in the first six months of 2018, mainly relates to the recognition of intangible assets following the acquisition of Payvision. Reference is made to Note 23 ‘Companies and business acquired and divested’ for further information on the acquisitions that took place in 2018 and the assets and liabilities recognised.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   34


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

7 Other assets

Other assets by type

 

     30 June      31 December  
     2018      2017  

Net defined benefit assets

     531        542  

Investment properties

     54        65  

Property development and obtained from foreclosures

     137        137  

Accrued interest and rents1

     70        4,528  

Other accrued assets

     1,017        753  

Amounts to be settled

     6,312        4,097  

Other

     2,545        2,965  
  

 

 

    

 

 

 
     10,667        13,087  
  

 

 

    

 

 

 

 

1

As per 1 January 2018 accrued interest is included in the corresponding balance sheet item of the host contract, reference is made to note 1 Accounting policies.

Amounts to be settled are primarily transactions not settled at the balance sheet date. They are short term and volatile in nature and are expected to settle shortly after the balance sheet date.

Other assets – Other relates mainly to other receivables in the normal course of business.

8 Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss

 

     30 June      31 December  
     2018      2017  

Trading liabilities

     42,711        73,596  

Non-trading derivatives

     3,041        2,331  

Designated at fair value through profit or loss

     65,122        11,215  
  

 

 

    

 

 

 
     110,874        87,142  
  

 

 

    

 

 

 

At January 1 2018, certain repurchase financial liabilities, amounting to EUR 37,161 million, are classified as financial liabilities ‘Designated at fair value through profit or loss, which were previously reported as ‘Trading liabilities’.

The related reverse repurchase portfolios, amounting to EUR 54,825 million, are classified as financial assets Mandatorily at fair value through profit or loss.

The increase in Financial liabilities at fair value through profit or loss, in the first six months of 2018, is mainly as a result of an increase in repurchase portfolios of EUR 17.3 billion reported under Designated at fair value through profit or loss and due to an increase in trading loans of EUR 6.1 billion included under Trading liabilities.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   35


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

9 Other liabilities

Other liabilities by type

 

     30 June      31 December  
     2018      2017  

Net defined benefit liability

     413        476  

Other post-employment benefits

     81        87  

Other staff-related liabilities

     416        504  

Other taxation and social security contributions

     414        479  

Accrued interest1

     108        3,606  

Costs payable

     2,315        2,599  

Share-based payment plan liabilities

     13        23  

Amounts to be settled

     6,803        5,017  

Other

     3,209        3,273  
  

 

 

    

 

 

 
     13,772        16,064  
  

 

 

    

 

 

 

 

1

As per 1 January 2018 accrued interest is included in the corresponding balance sheet item of the host contract, reference is made to note 1 Accounting policies.

Other liabilities – Other relates mainly to period-end accruals.

10 Subordinated loans and Debt securities in issue

Subordinated loans

Subordinated loans mainly consist of Tier 1 and Tier 2 instruments that may be included in the calculation of ING’s capital ratios. Under IFRS these bonds are classified as financial liabilities and for regulatory purposes they are considered capital.

The increase in subordinated loans in the first six months of 2018 of EUR 257 million is mainly due to two new issued Tier 2 bonds (EUR 750 million and USD 1,250 million) and exchange rate effects, partly offset by the redemption of two Tier 2 bonds (EUR 1.7 billion).

Debt securities in issue

The increase in Debt securities in issue of EUR 20 billion, in the first six months of 2018, is mainly a result of an increase in commercial paper and certificates of deposits of EUR 17 billion, EUR 8 billion respectively. These were partly offset by a decrease in long term bonds, Covered bonds, savings certificates and mortgages backed securities.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     36  


Table of Contents

Notes to the Condensed consolidated statement of financial position - continued

 

11 Equity

Total equity

 

     30 June      31 December  
     2018      2017  

Share capital and share premium

     

– Share capital

     39        39  

– Share premium

     17,049        17,006  
  

 

 

    

 

 

 
     17,088        17,045  

Other reserves

     

– Revaluation reserves: Available-for-sale and other

     n/a        3,447  

– Revaluation reserves: Equity secruties at fair value through other comprehensive income

     2,263        n/a  

– Revaluation reserves: Debt instruments at fair value through other comprehensive income

     481        n/a  

– Revaluation reserves: Cash flow hedge

     422        263  

– Revaluation reserves: Credit liability

     (116      n/a  

– Revaluation reserves: Property in own use

     201        203  
  

 

 

    

 

 

 

Revaluation reserves:

     3,251        3,913  

– Net defined benefit asset/liability remeasurement reserve

     (394      (400

– Currency translation reserve

     (1,941      (1,663

– Share of associates, joint ventures and other reserves

     2,600        2,527  

– Treasury shares

     (20      (15
  

 

 

    

 

 

 
     3,495        4,362  

Retained earnings

     27,374        27,022  
  

 

 

    

 

 

 

Shareholders’ equity (parent)

     47,957        48,429  

Non-controlling interests

     734        715  
  

 

 

    

 

 

 

Total equity

     48,691        49,144  
  

 

 

    

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     37  


Table of Contents

Notes to the Condensed consolidated statement of profit or loss

Notes to the Condensed consolidated statement of profit or loss

12 Net interest income

Total Net interest income of EUR 6,860 million includes interest income and expense for instruments calculated using the effective interest rate method and other interest income and interest expense. IFRS 9 resulted in changes to IAS 1 for the presentation of Interest income for instruments calculated using the effective interest rate method, which ING reports as a separate line item in the consolidated statement of profit or loss as from current reporting period.

To further enhance the relevance of the interest disclosures, ING Group changed its separate presentation of interest (income and expenses) for trading derivatives, trading securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and net trading income’. The change in presentation is in line with the changed presentation of accrued interest in the balance sheet that it is no longer separately presented, but included in the corresponding balance sheet item of the host contract.

The new interest presentation was applied prospectively together with the other presentation requirements of IFRS 9.

The table below provides a reconciliation between the Net interest income and Valuation results and net trading income as reported in the first 6 months of 2017 and the comparable amounts applying the 2018 accounting policies.

Impact of adoption of IFRS 9 on interest income and expense presentation

 

            Reclassification      First 6 months of         
            of interest      2017 on         
     Reported in first      related to      comparable      Reported in  
     6 months of      trading assets/      basis to first 6       First 6 months of  

in EUR million

   2017      liabilities      months of 2018      2018  

Total interest income

     22,086        (8,558      13,528        13,094  

Total interest expense

     (15,375      8,488        (6,887      (6,234
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     6,711        (70      6,641        6,860  

Valuation results and net trading income

     1,090        70        1,160        393  
  

 

 

    

 

 

    

 

 

    

 

 

 

Refer to Note ’13 Valuation result and net trading income’ for the interest income and expense from trading assets and liabilities recognised in the first six months of 2018.

13 Valuation results and net trading income

In the first six months of 2017, Valuation results and net trading income included DVA adjustments on own issued notes designated at fair value, amounting to EUR 28 million. In 2018, in accordance with IFRS 9, the DVA adjustments are recognised in OCI.

In the first six months of 2018, Valuation results and net trading income includes EUR 19 million related to warrants on the shares of Voya and NN Group (first six months of 2017: EUR (62) million). Reference is made to Note 2 ‘Financial assets at fair value through profit or loss’.

In the first six months of 2018, Valuation results and net trading income includes EUR 18 million CVA/DVA adjustments on trading derivatives, compared with EUR 21 million CVA/DVA adjustment in the first six months of 2017.

Interest income from trading assets for the first six months of 2018 amounted to EUR 7,195 million. Interest expense from trading liabilities for the first six months of 2018 amounted to EUR 7,223 million.

14 Investment income

Investment income

 

     1 January to 30 June  

6 month period

   2018      2017  

Dividend income

     9        18  

Realised gains/losses on disposal of debt securities

     90        57  

Other investment income

     3        15  
  

 

 

    

 

 

 
     102        90  
  

 

 

    

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   38


Table of Contents

Notes to the Condensed consolidated statement of profit or loss - continued

 

15 Other income

Other income

 

     1 January to 30 June  

6 month period

   2018      2017  

Share of result from associates and joint ventures

     48        136  

Result on disposal of group companies

        1  

Other

     103        111  
  

 

 

    

 

 

 
     151        248  
  

 

 

    

 

 

 

Results from associates and joint ventures, in the first six months of 2018, mainly comprise the share of results of EUR 35 million (first six months of 2017: 34 million) from TMB Public Company Limited (TMB). First six months of 2017 included EUR 97 million from the sale of shares in Appia Group Ltd UK.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   39


Table of Contents

Notes to the Condensed consolidated statement of profit or loss - continued

 

16 Staff expenses

Staff expenses

 

     1 January to 30 June  

6 month period

   2018      2017  

Salaries

     1,666        1,646  

Pension costs and other staff-related benefit costs

     190        201  

Social security costs

     261        250  

Share-based compensation arrangements

     26        32  

External employees

     439        329  

Education

     41        36  

Other staff costs

     100        86  
  

 

 

    

 

 

 
     2,723        2,580  
  

 

 

    

 

 

 

17 Other operating expenses

Other operating expenses

 

     1 January to 30 June  

6 month period

   2018      2017  

IT related expenses

     354        359  

Office expenses

     276        293  

Advertising and public relations

     200        209  

Travel and accommodation expenses

     93        86  

External advisory fees

     158        160  

Audit and non-audit services

     11        9  

Postal charges

     25        25  

Depreciation of property and equipment

     155        163  

Amortisation of intangible assets

     100        85  

Impairments and reversals on property and equipment and intangibles

     7        3  

Regulatory costs

     591        543  

Addition/(unused amounts reversed) of provision for reorganisations and relocations

     (20      (5

Addition/(unused amounts reversed) of other provisions

     (35      75  

Contributions and subscriptions

     42        43  

Other

     353        294  
  

 

 

    

 

 

 
     2,309        2,342  
  

 

 

    

 

 

 

Regulatory costs represents contributions to Deposit Guarantee Schemes (DGS), the Single Resolution Fund (SRF) and local bank taxes. In the first six months of 2018 the contributions to DGS were EUR 216 million (first six months of 2017: EUR 204 million) mainly related to Germany, Belgium, the Netherlands, Poland and Spain, and contributions to the SRF of EUR 209 million (first six months of 2017: EUR 178 million). The contribution to the SRF in the first six months of 2018, comprises ING’s contribution for the full year 2018.

Impairments and reversals of property and equipment and intangibles

 

            Reversals of               
     Impairment losses      impairments     Total  
     1 January to 30 June      1 January to 30 June     1 January to 30 June  

6 month period

   2018      2017      2018     2017     2018      2017  

Property and equipment

     5        4        (2     (2     4        2  

Property development

     3               3     

Software and other intangible assets

        1               1  

(Reversals of) other impairments

     9        5        (2     (2     7        3  

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited

     40  


Table of Contents

Notes to the Condensed consolidated statement of profit or loss - continued

 

18 Earnings per ordinary share

Earnings per ordinary share

 

                   Weighted average                
                   number of ordinary                
                   shares outstanding                
     Amount      during the period      Per ordinary share  
     (in EUR million)      (in millions)      (in EUR)  
     1 January to 30 June      1 January to 30 June      1 January to 30 June  

6 month period

   2018      2017      2018      2017      2018      2017  

Basic earnings

     2,605        2,980        3,887.4        3,881.2        0.67        0.77  

Effect of dilutive instruments:

                 

Stock option and share plans

           2.1        3.2        
        

 

 

    

 

 

       
           2.1        3.2        

Diluted earnings

     2,605        2,980        3,889.5        3,884.4        0.67        0.77  

19 Dividend per ordinary share

Dividends to shareholders of the parent

 

     Per         
     ordinary      Total  
     share      (in EUR  
     (in EUR)      million)  

Dividends on ordinary shares:

     

In respect of 2016

     

– Final dividend, paid in cash in May 2017

     0.42        1,632  

In respect of 2017

     

– Interim dividend, paid in cash in August 2017

     0.24        933  

– Final dividend, paid in cash in May 2018

     0.43        1,673  
  

 

 

    

 

 

 

Total dividend paid in respect of 2017

     0.67        2,606  

In respect of 2018

     

– Interim dividend declared

     0.24        934  
  

 

 

    

 

 

 

On 23 April 2018, the Annual General Meeting of Shareholders ratified the total dividend of EUR 0.67 per ordinary share of which EUR 0.24 was paid as an interim cash dividend during 2017. The final dividend was paid entirely in cash.

ING Groep N.V. is required to withhold tax of 15% on dividends paid.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   41


Table of Contents

Segment reporting

 

Segment reporting

20 Segments

a. General

ING Group’s segments are based on the internal reporting structures by lines of business.

The Executive Board of ING Group and the Management Board of ING Bank set the performance targets, approve and monitor the budgets prepared by the business lines. Business lines formulate strategic, commercial, and financial policy in conformity with the strategy and performance targets set by the Executive Board of ING Group and the Management Board of ING Bank.

Recognition and measurement of segment results are in line with the accounting policies as described in 2017 Form 20F ING Group Consolidated financial statements, Note 1 ‘Accounting policies’. Corporate expenses are allocated to business lines based on time spent by head office personnel, the relative number of staff, or on the basis of income, expenses and/or assets of the segment.

The following table specifies the segments by line of business and the main sources of income of each of the segments:

 

Segments of the Banking results by line of business

  

Main source of income

Retail Netherlands

(Market Leaders)

   Income from retail and private banking activities in the Netherlands, including the SME and mid-corporate segments. The main products offered are current and savings accounts, business lending, mortgages and other consumer lending in the Netherlands.

Retail Belgium

(Market Leaders)

   Income from retail and private banking activities in Belgium (including Luxembourg), including the SME and mid-corporate segments. The main products offered are similar to those in the Netherlands.

Retail Germany

(Challengers and Growth Markets)

   Income from retail and private banking activities in Germany (including Austria). The main products offered are current and savings accounts, mortgages and other customer lending.

Retail Other Challengers and Growth Markets

(Challengers and Growth Markets)

   Income from retail banking activities in the rest of the world, including the SME and mid-corporate segments in specific countries. The main products offered are similar to those in the Netherlands.
Wholesale Banking    Income from wholesale banking activities (a full range of products is offered from cash management to corporate finance), real estate and lease.

The geographical segments for the Banking results are presented on page 45.

 

Geographical segments

  

Main countries

The Netherlands   
Belgium    Including Luxembourg
Germany    Including Austria
Other Challengers    Australia, France, Italy, Spain, Portugal, Czech Republic and UK Legacy run-off portfolio
Growth Markets    Poland, Romania, Turkey and Asian bank stakes
Wholesale Banking Rest of World    UK, Americas, Asia and other countries in Central and Eastern Europe
Other    Corporate Line Banking and the run-off portfolio of Real Estate

ING Group evaluates the results of its banking segments using a financial performance measure called underlying result. Underlying result is used to monitor the performance of ING Group at a consolidated level and by segment. The Executive Board of ING Group and Management Board of ING Bank consider this measure to be relevant to an understanding of the Group’s financial performance, because it allows investors to understand the primary method used by management to evaluate the Group’s operating performance and make decisions about allocating resources. In addition, ING Group believes that the presentation of underlying net result helps investors compare its segment performance on a meaningful basis by highlighting result before tax attributable to ongoing operations and the underlying profitability of the segment businesses. Underlying result is derived by excluding from IFRS the following: special items; the impact of adjustment of the EU ‘IAS 39 carve-out’, divestments and Insurance Other.

Underlying result excludes special items of income or expense that are significant and arise from events or transactions that are clearly distinct from the ordinary operating activities. Disclosures on comparative periods also reflect the impact of divestments. Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations. Adjustment of EU IAS 39 Carve out relates to asset-liability-management activities for the mortgage and savings portfolios in the Benelux, Germany and Czech Republic. These fair value changes are mainly caused by changes in markets interest rates. As explained on page 16, no hedge accounting is applied to these derivatives under IFRS-IASB.

ING Group reconciles the total segment results to the total result of Banking using Corporate Line Banking. The Corporate Line Banking is a reflection of capital management activities and certain expenses that are not allocated to the banking businesses. ING Group applies a system of capital charging for its banking operations in order to create a comparable basis for the results of business units globally, irrespective of the business units’ book equity and the currency they operate in.

Underlying result as presented below is a non-GAAP financial measure and is not a measure of financial performance under IFRS. Because underlying result is not determined in accordance with IFRS, underlying result as presented by ING may not be comparable to other similarly titled measures of performance of other companies. The underlying result of ING’s segments is reconciled to the Net result as reported in the IFRS Condensed consolidated statement of profit or loss below. The information presented in this note is in line with the information presented to the Executive and Management Boards.

This note does not provide information on the revenue specified to each product or service as this is not reported internally and is therefore not readily available.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   42


Table of Contents

Segment reporting - continued

b. ING Group

Reconciliation between IFRS and Underlying income, expenses and net result

 

                        Non-         
6 month period                       Controlling         

1 January to 30 June 2018

   Income     Expenses      Taxation     interests      Net result1  

Net result IFRS attributable to equity holder of the parent

     8,883       5,232        995       51        2,605  

Remove impact of:

            

Insurance other2

     18               19  

Adjustment of the EU ‘IAS 39 carve-out3

     (75        (26        (50
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Underlying result4

     8,940       5,232        1,021       51        2,636  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

1 Net result, after tax and non-controlling interests.
2 Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group. On 18 March 2018 ING sold it’s remaining part of warrants on the shares of Voya Financial.
3 ING prepares the Form 6-K in accordance with IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that applied under the EU ‘carve-out’ version of IAS 39. For the underlying result, the impact of the carve-out is re-instated as this is the measure at which management monitors the business.
4 Underlying figures are derived from figures according to IFRS by excluding the impacts from divestments, special items, Insurance Other, and EU ‘IAS 39 carve-out’.

ING Group Total

 

6 month period    ING     Other     Total     Legacy         

1 January to 30 June 2018

   Bank N.V.     Banking1     Banking     Insurance      Total  

Underlying income

           

– Net interest income

     6,864       (19     6,845          6,845  

– Net fee and commission income

     1,379         1,378          1,378  

– Total investment and other income

     711       6       717          717  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total underlying income

     8,953       (13     8,940          8,940  

Underlying expenditure

           

– Operating expenses

     5,040       (7     5,032          5,032  

– Additions to loan loss provision

     200         200          200  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total underlying expenditure

     5,240       (7     5,232          5,232  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Underlying result before taxation

     3,713       (5     3,708          3,708  

Taxation

     1,026       (5     1,021          1,021  

Non-controlling interests

     51         51          51  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Underlying net result

     2,636       (1     2,636          2,636  

Insurance Other2

           19        19  

Adjustment of the EU ‘IAS 39 carve-out

     (50       (50        (50
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net result IFRS attributable to equity holder of the parent

     2,587       (1     2,586       19        2,605  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

1 Comprises for the most part the funding charges of ING Group N.V. (Holding)
2 Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group. On 18 March 2018 ING sold it’s remaining part of warrants on the shares of Voya Financial.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   43


Table of Contents

Segment reporting - continued

 

Reconciliation between IFRS and Underlying income, expenses and net result

 

                         Non-         
6 month period                        Controlling         

1 January to 30 June 2017

   Income     Expenses      Taxation      interests      Net result1  

Net result IFRS attributable to equity holder of the parent

     9,534       5,284        1,226        44        2,980  

Remove impact of:

             

Insurance Other2

     (64              (64

Adjustment of the EU ‘IAS 39 carve-out’3

     670          204           466  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Underlying result4

     8,928       5,284        1,022        44        2,578  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

1 Net result, after tax and non-controlling interests.
2 Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group. On 18 March 2018 ING sold it’s remaining part of warrants on the shares of Voya Financial.
3 ING prepares the Form 6-K in accordance with IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that applied under the EU ‘carve-out’ version of IAS 39. For the underlying result, the impact of the carve-out is re-instated as this is the measure at which management monitors the business.
4 Underlying figures are derived from figures according to IFRS by excluding the impacts from divestments, special items, Insurance Other, and EU ‘IAS 39 carve-out’.

ING Group Total

 

6 month period    ING      Other     Total      Legacy        

1 January to 30 June 2017

   Bank N.V.      Banking1     Banking      Insurance     Total  

Underlying income

            

– Net interest income

     6,756        (45     6,711          6,711  

– Net fee and commission income

     1,397          1,396          1,396  

– Total investment and other income

     810        10       820          820  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total underlying income

     8,963        (35     8,928          8,928  

Underlying expenditure

            

– Operating expenses

     4,908        14       4,922          4,922  

– Additions to loan loss provision

     362          362          362  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total underlying expenditure

     5,269        14       5,284          5,284  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Underlying result before taxation

     3,693        (50     3,644          3,644  

Taxation

     1,038        (16     1,022          1,022  

Non-controlling interests

     44          44          44  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Underlying net result

     2,612        (33     2,578          2,578  

Special items

            

Insurance Other²

             (64     (64

Adjustment of the EU ‘IAS 39 carve-out’

     466          466          466  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net result IFRS attributable to equity holder of the parent

     3,078        (33     3,044        (64     2,980  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

1 Comprises for the most part the funding charges of ING Groep N.V. (Holding).
2 Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group.

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   44


Table of Contents

Segment reporting - continued

 

c. Banking activities

Segments Banking by line of business

 

     Retail                                Corporate        
6 month period    Nether-      Retail      Retail     Retail      Wholesale     Line     Total  

1 January to 30 June 2018

   lands      Belgium      Germany     Other C&G      Banking     Banking     Banking  

Underlying income

                 

– Net interest income

     1,755        898        857       1,310        1,922       105       6,845  

– Net fee and commission income

     320        201        93       212        553       (1     1,378  

– Total investment and other income

     192        114        10       61        389       (49     717  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total underlying income

     2,267        1,213        960       1,583        2,864       54       8,940  

Underlying expenditure

                 

– Operating expenses

     1,078        903        524       1,001        1,386       139       5,032  

– Additions to loan loss provision

     -51        78        13       121        39         200  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total underlying expenditure

     1,028        982        537       1,122        1,425       139       5,232  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Underlying result before taxation

     1,239        231        423       460        1,439       (85     3,708  

Taxation

     307        71        137       116        369       21       1,021  

Non-controlling interests

        6        1       36        8         51  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Underlying net result

     933        153        285       308        1,061       (105     2,636  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Insurance other

                  19       19  

Adjustment of the EU ‘IAS 39 carve-out’

                (50       (50
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net result IFRS

     933        153        285       308        1,012       (86     2,605  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Segments Banking by line of business

                 
     Retail                                Corporate        
6 month period    Nether-      Retail      Retail     Retail      Wholesale     Line     Total  

1 January to 30 June 2017

   lands      Belgium      Germany     Other C&G      Banking     Banking     Banking  

Underlying income

                 

– Net interest income

     1,778        945        821       1,199        1,896       71       6,711  

– Net fee and commission income

     301        229        99       193        577       (3     1,396  

– Total investment and other income

     114        125        (2     85        661       (162     820  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total underlying income

     2,193        1,298        918       1,477        3,134       (93     8,928  

Underlying expenditure

                 

– Operating expenses

     1,121        872        514       890        1,373       152       4,922  

– Additions to loan loss provision

     29        49        6       107        170       1       362  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total underlying expenditure

     1,150        922        520       996        1,543       153       5,284  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Underlying result before taxation

     1,043        377        398       481        1,591       (246     3,644  

Taxation

     262        123        134       118        438       (53     1,022  

Non-controlling interests

        3        1       32        7         44  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Underlying net result

     781        251        264       331        1,145       (193     2,578  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Insurance other

                  (64     (64

Adjustment of the EU ‘IAS 39 carve-out’

                466         466  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net result IFRS

     781        251        264       331        1,611       (257     2,980  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

ING Group Report on Form 6-K for the period ended 30 June 2018 - Unaudited   45


Table of Contents

Segment reporting - continued

 

Geographical segments Banking    

 

                                    Wholesale               
                       Other            Banking               
6 month period    Nether-                 Challen-     Growth      Rest of            Total  

1 January to 30 June 2018

   lands     Belgium     Germany     gers     Markets      World      Other     Banking  

Underlying income

                  

– Net interest income

     2,273       1,044       1,117       847       785        677        102       6,845  

– Net fee and commission income

     471       252       117       129       164        247        (1     1,378  

– Total investment and other income

     217       200       13       16       120        197        (46     717  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total underlying income

     2,960       1,496       1,248       991       1,069        1,121        54       8,940  

Underlying expenditure

                  

– Operating expenses

     1,454       1,051       594       584       596        608        146       5,032  

– Additions to loan loss provision

     (111     67       51       67       85        40          200  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total underlying expenditure

     1,343       1,119       645       651       681        648        146       5,232  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Underlying result before taxation

     1,617       377       603       341       389        473        (91     3,708  

Taxation

     398       103       204       109       83        105        18       1,021  

Non-controlling interests

       6       1         44             51  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Underlying net result

     1,219       268       398       231       261        367        (109     2,636  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Insurance Other

                   19       19  

Adjustment of the EU ‘IAS 39 carve-out’

     49       (35     (53     (10             (50
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net result IFRS

     1,268       233       344       222       261        367        (91     2,605  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Geographical segments Banking

                  
                                    Wholesale