ing investor day 2012: customer centricity in retail banking

Amsterdam –

13 January 2012

Customer centricity in Retail Banking

Eli Leenaars CEO Retail Banking Direct & International

ING Investor Day

ING Investor Day - 13 January 2012 2

Trends require continuous innovation in the way we offer our services

We are converging our three retail models into one model: Easy and fair, with low cost

ING Direct has to complete the transformation into a full bank

1

2

3

In emerging markets, our retail model is the basis to differentiate and position for future growth

ING has the ingredients to succeed in this environment: customer oriented and low cost from innovative distribution

4

5

Key messages


Trends require continuous innovation in the way we do business

In terms of what we offer our customers

Offer fair pricing, transparent products, easy access and excellent service

Customer Centricity

In terms of how we operate as a company

Streamline processes and improve efficiency as regulatory costs rise

Operational Excellence

And in how we manage our

balance sheet

Optimise the balance sheet to maximise returns and offset higher capital requirements

Balance Sheet Optimisation


Fair pricing –

e.g. lowest cost for customers for current accounts Consumer oriented brand attributes

A loyal customer baseNet Promoter Score ranking

Organic growth of customers since 2000: 20 mln

23

1

Can, Spa, Aus, Fra, Ger, UK, Rom, Pol, Bel

NL, Ita

0 100 200 300

NetherlandsBelgiumPoland

RomaniaGermany

FranceSpain

Italy MarketING

Easy to deal withTran

spar

ency

Good service

Is trustworthy

Goo

d V

alue

Delivers on promises

Treats me fairly

Knowledgeable

Rel

iabl

e

Putting the customer first is a key characteristic of ING

Supported by customer intelligence•

In-depth knowledge of 40 million retail clients•

Low acquisition cost supported by word of mouth•

Allows to develop into multi-product customers faster and cheaper (more cross-buy and higher revenue per customer)

•

Key in successful integrated channel approach


ING is also a leader in innovative distribution…

Leader in Direct•

Largest direct bank in the world •

Best quality contact centres

in most countries•

Direct if possible, advice when needed in the Benelux

•

Most internet bank in Poland

Frontrunner in branch management •

From service point to advice shops in the Netherlands, Belgium and Poland

•

Branch lite

concepts in Spain and Italy

Innovative in mobile and social media•

Mobile websites, highly rated mobile apps•

Social media as a new way to interact with clients

¹

Percentage of adults using internet ²

Percentage of households with internet access SOURCE: data published by Eurostat, EFMA, comScore. Internet World Stats (Nielsen Online, International Telecommunications Union, Official country reports, and other trustworthy research sources).

NL is a leader in online banking

0

20

40

60

80

100

0 20 40 60 80 100

Canada

GermanyUK

Netherlands

India RomaniaTurkey

ItalyPolandSpain

France

Austria

BelgiumAustralia

‘Self-first’

‘Multi

channel’

‘Online

adaptors’

‘Brick & Mortar’

Transformation to ‘Self-first’

is a matter of time

Internet access

Percentage², 2011

Online banking usage

Percentage¹, 2010


…resulting in lower cost

93 92 83 79 79108

2007 2008 2009 2010 3Q11 Market 2010

NetherlandsOperating expenses / Retail balances (bps)

ING DirectOperating expenses / Retail balances (bps)

14098

65 64 55 55 54 57 44 43 45

113

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3Q11 Market2010


Germany

UKIndia

Netherlands

Belgium

Spain

Italy

France

Canada

AustraliaRomania

Turkey

Poland

Thailand

Bubble size = ING Client Retail Balances 3Q11

Market share

(Savings and mortgages)

Market size

(Savings and mortgages)

25%

0%

ING Direct:

Winning organic growth

model in large mature markets

Benelux:

Strong platform

in mature markets

Emerging markets:

Strong platform

in growing markets

We have three different models in our footprint


Germany

Spain

FranceUK

CanadaAustralia

Poland

Netherlands

Belgium

Italy

For Customers: Easy and fair•

Customer centric culture, with care for customers

•

Limited number of transparent products, serving all customer needs

•

Consistent fair pricing •

Customer centric process management, with breakthrough simplicity

•

Direct when possible, advice when needed

Converging models

ING Direct

Direct (Low cost)

ING model

Easy and fair, with low cost

Mainly branch

based

Direct when

possible

We are converging to one model: Easy and fair, with low cost

Underlying economics: Strong low cost model, stable business•

Superior brand, number one customer choice•

Attractive client segment -

prone to be direct, low credit risk

•

Simplified product range •

Focus on direct channels •

Process excellence, low cost

Mono

product

Optimised product

range for customers

Broad

product

range

Bubble size = ING Client Retail Balances 3Q11


We started to move towards this model a while ago

ING DirectOptimising product offering

Payment account launches to become the primary Bank:•

2005: Spain•

2008: Germany•

2008: Italy•

2009: Australia, France•

2010: Canada

Introducing some face when required

Spain: Lite

branch network of 29 branches covers 83% of population (1)

Italy: 7 branches opened in 2011

(1)

% of ING Direct customers with a branch in their province

(Milan branch)

BeneluxReduction of product offeringNumber of retail savings products offered in NL

Move towards direct channelsIncrease in sales of products online Belgium

1.4% 1.7%19.9%

2.0%

37.4%26.8%

3.8%

29.6%

Investments Insurance Savings Accountsand Cards2009 2010 Aug-11

62

820

Pre MergerPostbank - ING

Post Merger Today

Variable Fixed Other


•

Second bank for clients•

Savings product main acquisition product

•

Direct channels•

Large investment portfolio

•

Second bank for clients•

Own-originated residential mortgages, mutual funds, e-

brokerage and payment accounts

•

Reducing investment portfolio

•

Primary bank for clients•

Full product range, increasing cross buy (share of wallet)

•

Exploring face-to-face

•

Balance sheet optimisation through asset transfers, Commercial banking integration

•

Margin on savings, thanks to cost advantage

•

Improved stickiness of savings

•

High volume, low-risk mortgage production

•

Additional margin from cross-buy

•

Higher yield from consumer loans,

•

Further income diversification and client stickiness

•

Higher yield from Commercial Banking assets

•

Deleverage

Complete, retail bank

Become primary bank

Your other

bank

Full bank

ING Direct has to complete the transformation into a full bank


…but is already a meaningful contributor to ING profits

132 214409

603 442 334697

873483

-123 -105

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3Q11

ING DirectPre Tax Result (EUR mln)

471 418 734 733

63257

373217

443 482

1

2001 2003 2005 2007 2009 2010 3Q11

ImpairmentsPre Tax Result exc. Impairments

Pre Tax Result

ROE* exc. Impairments 15%9% 14%6% 12%6%9%3%4%ROE* 10%5% 11%5%9% 14%9%3%4%

ING -

DiBaPre Tax Result (EUR mln)*

ING SpainPre Tax Result (EUR mln)*

ROE** 23%16%8%

2050 55 75 79 64

-42

2001 2003 2005 2007 2009 2010 3Q11ROE** 17%17%16%7%8%5%

* pre impairments**

Based on 10% core tier 1 ratio


ING-DiBa’s transformation into a full bank

Roland Boekhout, CEO ING-DiBa


ING-DiBa: A success growth story…

ING acquires remaining 51% in DiBa

ING Group buys 49% stake in

1965

1999

1994

1998

2003

2004

Acquisition of

2010

Acquisition of

2011

4 millionth customer

7 millionth customer

10

161

2001 3Q11

-

Integration with Commercial Bank

-

3rd largest retail private bank in Germany

Retail balances*In EUR bln

CustomersIn mln

Cost/Client Retail BalancesIn bps

ProfitabilityPre-tax (mln)**

0.5

7.4

2001 3Q11

113

35

2001 9M2011

1

482

2001 9M2011• Includes brokerage** pre impairments


Your other bank

Primary bank Full bank

Investment productsSavingsProducts Mortgages Payment

accountConsumer

loansIntegration with

Commercial Banking

...and most advanced in transformation into a full bank

Total client retail balances (EUR bln)

mln Clients

Distribution Mail Telephone Internet Brokers Mobile and social mediaAffiliatesReferrals

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3Q11

Savings Retail Investment Products Retail LendingPayment Account Clients (mln)

161*

113

10

7,4

* Client retail balances includes brokerage


…leading to a strong market position in a very large market with great potential ...

37%

11%

23%

24%

5% Sparkassen & LandesbankenVolksbankenGroßbanken*ING-DiBaRegionalbanken / Kreditbanken

* Großbanken: Deutsche Bank, Postbank, Commerzbank, HypoVereinsbank

Retail Customers in 2010Savings banks / Cooperative banks

Private Banks

Deposit market (Total: EUR 1,600 bln)

Mortgages Market (Total: EUR 800 bln)

32%

21%

21%

20%

6%Sparkassen & LandesbankenVolksbankenGroßbanken*ING-DiBaRegionalbanken / Kreditbanken

3.3 mln

4.0 mln

7.0 mln

7.1 mln

11 mln

14 10 24 mln

~ 30 mln

~ 50 mln

VR-Banks

3rd largest retail private bank in

Germany


…with ongoing strong and sustainable financial performance

(1) Icon Added Value Panes, March 2011

6.9 7.1 7.4

0.8

6.55.3

3.6

113

35353657 47

73

2001 2003 2005 2007 2009 2010 9M11

Clients (million) Cost per Retail Balances (bps)

136

121

113

120

35

49

107

Market average

Deutsche Bank (Retail)

Cooperative Banks

Deutsche Postbank

Savings Banks

Comdirect

ING-DiBa

*

Based on 10% core tier 1 ratio** pre impairments

4th year in a row as the most preferred consumer bank (NPS) in Germany(1)

Cost to client Retail balances clientsIncl. marketing expenses

With a solid profitability performancePre-Tax Profit (EUR mln)**

Substantial cost advantages (2010)

X3.5

63257

373217

443 482

1

2001 2003 2005 2007 2009 2010 9M2011ROE* 23%16%8%

10%

16%

11%

45%ING-DiBa

Three major German

retail banks


CB Assets Wholesale

funding

Retail

Lending

Investment Portfolio

Deposits

CB Assets

Retail

Lending

Investment Portfolio

Deposits

Intercompany

Pfandbrief

Assets

Align assets with liabilities

•

Merging of German Commercial Banking activities with ING-DiBa

•

Optimises capital use of ING-

DiBa

•

Transfer of Commercial Bank assets

Funding

Integration of ING-DiBa in ING term-funding strategy•

Use of high quality German residential mortgages and Pfandbrief (up to EUR 10 bln) established in April 2011

•

Inaugural issue: EUR 500 mln June ’11•

Strong track record in retail deposit generation

Liquidity

Leverage residential mortgage expertise for investments•

Intercompany transactions (EUR 9 bln):•

Purchase of Orange Lions (backed by Dutch residential mortgages)

•

Intercompany loan (secured by Dutch residential mortgages)

•

Improved liquidity of ING Bank NV

Move towards full bank will unlock further performance improvement

Previous situation (< 2011) Future situation (≥

2012)

Achieved•

EUR 1 bln:

One bank.de

-

Integration of Commercial Banking

•

EUR 9 bln:

Intercompany transactions

Potential•

EUR 1 bln:

Integration of Real Estate Finance

•

Balanced growth in Commercial Banking assets via organic growth and selected portfolio transfers (~EUR 5 bln)


A clear ambition going forward

ING-DiBa: Consequent execution of existing strategy

•

Balanced growth in Commercial Banking assets via selected portfolio transfers and organic growth of top Corporates

•

Capture full benefits of balance sheet integration

•

Limited product portfolio: attractively priced, profitable and transparent

•

Continued strong growth in new clients and deposits

•

Providing high quality of service with few and efficient processes

•

Transparency to all stakeholders


Spain: Zooming in on the economics of the transformation

Mobile Banking and Social mediaCarina Szpilka, CEO ING Direct Spain


Positioning Your other bank

Primary bank

Complete

retail bank

Mobile Banking and Social mediaInternet ATM’s BranchesTelephoneDistribution

Life InsuranceMutual,

Pension and Broker

SavingsProducts Mortgages Payment

AccountConsumer

Loans

ING Direct Spain: The transformation into a multi- product bank with integrated distribution

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 9M11Savings Retail Invtment. Prod. Retail Lending Payment Account Clients (mln)

Total client retail balances (EUR bln)

30mln Clients

2,4

19


6,800

19,50011,600

Savings only Payment +investment

+ Retail lending

Are more satisfied (%)Full bank customers have 2-3x more savingsAvg

balance per client (EUR)

Multi-product clients are more valuable

And generate more operating profitPer client (EUR)

73% 78% 83%

Savings only Payment +investments

+ RetailLending

49146

495

Savings only Payment +Investment

+ Retail lending

Conclusion•

35% of client base are multi-product•

Full bank customers have more savings, are more satisfied and have higher profitability

Multi-product clients




‘Lite

branch network’

brings additional acquisition and improves cross-buy

29 Branches

= 83% of population1

(1) % of ING Direct customers with a branch into their province

Increases acquisition of new clients outside Madrid1H11 vs. 2009

Lite

network of 29 branches

Branch contacts focuses on cross-buyChannel mix (Sep 2011 split)

Key points•

Branches are there to support moments of truth:

•

First account opening•

Some services, like lost credit card•

Cross-buy•

Branch contacts responsible for 30% of cross-buy

+32%

+63%

Without branches With branches

X 2

30%2% 1%

44%91% 83%26%

3% 12%

Cross-buy Transactions Inquiries

Branch Telephone Internet Mobile


A strong and sustainable performance, with continued growth

35%34%31%6% 8% 13% 25%

56 50 517370

128

75

2001 2003 2005 2007 2009 2010 9M11% Clients with more 1 productTotal expenses to Client Balances

Increasing cross-buy, continued focus on operational excellence

HesitantYes / probably yes No / Likely not

Four major banks in Spain1

TNS Benchmarking Financials Institutions 2010

4th consecutive year most preferred Consumer Bank1

Would you recommend your bank to friends and family?

51

109

ING Market

x2

Substantial cost advantagetotal cost / retail balances (in bps)

With a solid profitability performance3

2050 55 75 79 64

-42

2001 2003 2005 2007 2009 2010 9M11ROE2 17%17%16%7%8%16% 5%

ING Direct

-13% -20% -26%20% 43% 36% 32%

78% 44% 44% 42%

-2%

2

Based on 10% core Tier 1 ratio 3

pre impairments

ING Investor Day - 13 January 2012 24ING Investor Day -

13 January 2012 24

Social media, a new way to interact with clients

Client contacts (ING Direct Spain) (1)

•

Restore trust through transparency and fair pricing

•

Offer convenience and excellent service •

Reduce costs: streamline processes and improve efficiency

•

Keep on innovating

“We are where customers are” “A key channel to better meet and exceed consumer expectations”

(1) September 2011

ING Investor Day - 13 January 2012 25ING Investor Day -

13 January 2012 25

TO COME

We use social media for different purposes

Uses Customer service tool

Brand Dialogue # of countries

Benefits

•

Assisting customers •

Early detection, monitoring & fast follow-up

•

Effective method of gathering feedback and supporting the process and service improvement

•

An open and collaborative product development enables to build better products that meet the needs of Clients

•

Through crowd sourcing, trust is established with consumers

Examples

•

ING Webcare

Team actively participates in social media

•

By handling problems and complaints, answering questions and rebutting any factual inaccuracies

•

With the goal of helping the customer and improving our (online) reputation

2011:•

255.000 ING references•

2.700 dialogues

(3.5x 2010 levels)

•

THRiVE

Chequing

account was launched using crowd sourcing

•

Staff engaged and able to be involved in the product and its development

•

10,000+ clients involved in making product even better (77.000 accounts to date)

•

Winner of Product of the Year award 2011

Facebook (11)

Twitter (10)

YouTube (12)

Blog (4)

Flickr (2)

Other* (8)

*

Mostly dedicated platforms and local SM


•

Increasing market adoption of online banking through smartphones; *Mobile Banking via Smartphone Grew 40% in EU in 2011 (*Comscore May 2011)

•

ING offering mobile banking already in 14 countries, with more than 6% of mobile banking penetration

in our client base

•

Making use of international experience resulting in faster time to market, saving on costs and time, creating a learning loop. (i.e. French app development effort 7 months, Spain app development effort 3 months)

•

Already more than:•

2.5 mln clients already downloaded native applications (IOS-Android-BB)•

0.5 mln unique visitors using M-sites

•

Best in class mobile apps with excellent client ratings (Avg): •

iPhone (4,5) *****•

Android (4,3) *****•

*Others (4/5) *****[(* Others): Blackberry, Windows Phone 7, iPad, Android Tablets)]

Our ambition is to lead in mobile banking…


Emerging markets – differentiation and positioning for growth

Brunon Bartkiewicz, General Manager ING Direct


Progress towards the full bank modelStarting position

Most internet oriented/ modern bank in Poland

(4th player)

CurrentCountry

Innovative business model, >1mln satisfied

customers

(already 10th player)

Transition underway

(12th player)

Growing in line with the market (8th player among

privately owned banks)

Developing into

retail leader

(6th player)

Poland Strategic position from 1994 onwards, currently own 75%

Romania Started in Romania in 1994, Entered retail market in 2003

TurkeyAcquired in 2008

India Strategic position from 2002, currently own 44%

TMB Strategic position from 2005, currently own 30%

Branch network focusing on advice

Internet-oriented

Integrated distribution channels, focus on internet

Introduced savings led strategy

Developing

Internet/mobile

Modern IT solutions

Positioning as savings bank

Developing internet/mobile

Innovative self bank concept

Simplified product range

Positioned as savings bank

Most internet-oriented

position

Customer-driven processes

In our full banks in emerging markets, the retail model is the basis to differentiate and to position for future growth


Key points•

One of the first banks focusing on savings•

With a simplified offer, two products instead of nine

•

Aggressively marketed on ‘easy and free’

functionality

•

Attracting the right customer profile

In Poland ING also used savings as the acquisition product…

Number of retail clients* (mln)Number of accounts (mln)3.0

1.7

2004 2006 2008 2010 3Q11

Retail clients: Retail Balances (PLN bln)

2.2

0.5

2.00.9

Oct.2004 2006 2008 2010 3Q11

Savings accounts Current account

Note: retail clients excl. Mid-Corporates

EUR/PLN = 4.141235 -

average rate Jan-Sep. 2011.

2004 2006 2008 2010 3Q11Current accounts SavingsTerm deposits Structured productsAsset management MortgagesOther lending

41.331.719.2 50.0 51.8


…to develop more active and bankable customers

…and buying moreRetail balances per customer (PLN x1,000) up 70%

Making more transactions…Transactions per client per year x 4

1116 16 17 18

2004 2006 2008 2010 3Q11

1119

2534 38

2004 2006 2008 2010 3Q11

Leave more time to service the customersRetail balances per FTE (PLN x mln)

2.84.3 5.2

6.2 6.4

2004 2006 2008 2010 3Q11

Shifting fast to electronic channels# Branch transaction per customer per year

Total branch manual operations down by 28%

5.26.5

4.92.7 2.3

2004 2006 2008 2010 3Q11


0%

10%

20%

30%

40%

0

200

400

600

800

share of paper transfers (left axis)electronicpaper

148 347 502 758 1,146 1,541 1,856 1,9869%18% 25% 34%

44%56% 63% 65%

2004 2005 2006 2007 2008 2009 2010 3Q11

Number of ING BSK ON-LINE clientsClient base pentration rate

2005 2006 2007 2008 2009 2010 2011

Target to be ‘the most internet bank’

Key points•

Introduced no fee direct current account•

With no fees for internal payments•

Broad variety of transactions/services available on internet/mobile

•

Constantly considered as top 3 internet bank (compared with pure internet banks)

Number of ING BankOnLine

users (th.)Retail Clients –

transfers (December 2004 = 100)


Service points Selling units Advice shops

Stareo

project

1997 -

2001

Franchise network

2006 –

2011

Self service zone

Re-organisation 2011

New model touch and feel

ING Bank Slaski is a frontrunner in branch development


1,6971,821

2,064 2,136

2,5312,721

2,0292,206

2005 2006 2007 2008 2009 2010 9M10 9M11

Total Bank Retail incł. MC*

Solid growth in income and healthy profitability across the cycle

Healthy profitability and returnProfit before tax -

PLN m

Nice growth in income PLN m

CAGR 9.9% +8.7%

706753

787

563

738

934

693

834

2005 2006 2007 2008 2009 2010 9M10 9M11 Total Bank Retail incł. MC*

ROE14% 17% 17% 17% 11% 13% 14% 15%13%

+20%

* FA figures

CAGR 9.2%

+15%

+63%


Setting the agenda and priorities

Eli Leenaars, CEO Retail Banking Direct and International


Priorities

ING Direct -

complete

the transformation

into a full bank -

•

Continue to acquire new clients with our winning retail model•

Continue to lead in internet/mobile•

Optimise channel mix, introduce some face•

Migrate from securities portfolio to own-originated assets (Retail and Commercial Banking)

Emerging Markets -

differentiate

to be positioned for future growth -

•

Continue to fully focus on customer centricity•

Excel in business process management•

Lead in innovation and distribution

Clear priorities for ING Direct and emerging markets…


Netherlands

Belgium

Germany

Spain

Italy

France

UK

CanadaAustralia

Romania

Turkey

Poland

India

…resulting in a well balanced portfolio

Bubble size = ING Client Retail Balances Q3 2011GDP growth*

10%

*GDP Growth est

2012 -2015 –

IMF World economic outlook

Mix of businesses

ROE*

30%

0%

ING Direct:

Winning organic growth model in large mature markets also providing

funding and liquidity

Benelux:

Stable, high returns, but

mature

Emerging markets:

Established platforms for

future growth10%

20%


…while contributing to balance sheet optimisation at ING

Continue strong deposit growth

•

Continue growth of number of retail customers•

Continue growth of stable retail deposits in ING Direct and in emerging markets

•

Increase stickiness of deposits further through transformation into full bank (especially current account offering)

•

Optimise the cost of liabilities within the local markets

Reduce short-term funding •

Complete the balance sheet extension reduction

Replace low-yielding assets with customer

lending

•

Transfer of Commercial Banking assets•

Increase consumer lending•

Re-price assets in line with increased margins in the market

Transform investment book into liquidity

portfolio

•

Convert investment portfolio into liquidity purposes only•

Further shift to high quality liquid assets driven by favourable

maturity profile

Balance sheet integration

•

Fund assets locally•

Coordinate development of assets and liabilities within the countries


Key carrier: People and sharing of best practices

Retail Standards Board•

Define common standards•

Speed-up time to the market and reduce cost

People•

Strong winning culture, with clear and shared values•

Effective best practice sharing and focus on innovation•

Senior people movements across disciplines and cultures effectively distributes best practices

•

Attractive employer


Disclaimer

ING Group’s Annual Accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (‘IFRS-EU’).In preparing the financial information in this document, the same accounting principles are applied as in the 3Q2011 ING Group Interim Accounts. All figures in this document are unaudited. Small differences are possible in the tables due to rounding.Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING’s core markets, (2) changes in performance of financial markets,

including developing markets, (3) the implementation of ING’s restructuring plan to separate banking and insurance operations, (4) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in

borrower and counterparty creditworthiness, (5) the frequency and severity of insured loss events, (6) changes affecting mortality and morbidity levels and trends, (7) changes affecting persistency levels, (8) changes affecting interest rate levels, (9) changes affecting currency exchange rates, (10) changes in general competitive factors, (11) changes in laws and regulations, (12) changes in the policies of governments and/or regulatory authorities, (13) conclusions with regard to purchase accounting assumptions and methodologies, (14) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, and (15) ING’s ability to achieve projected operational synergies. ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. This document, and any other document or presentation to which it refers, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities.www.ing.com

ing investor day 2012: customer centricity in retail banking

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