6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 2017

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):  ☐

 

 

 


Table of Contents

Contents

Published ING Group Condensed consolidated interim financial information for the period ended 30 June 2017, as published on 2 August 2017.

 

Interim report

  

Interim report

     2  

Conformity statement

     7  

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

     13  

Notes to the Condensed consolidated interim accounts

     15  

Notes to the accounting policies

  

1

  

Accounting policies

     15  

Notes to the Condensed consolidated statement of financial position

  

2

  

Financial assets at fair value through profit or loss

     17  

3

  

Investments

     17  

4

  

Loans and advances to customers

     19  

5

  

Intangible assets

     19  

6

  

Other assets

     20  

7

  

Financial liabilities at fair value through profit or loss

     20  

8

  

Other liabilities

     21  

9

  

Subordinated loans and Debt securities in issue

     21  

10

  

Equity

     22  

Notes to the Condensed consolidated statement of profit or loss

  

11

  

Net Interest Income

     23  

12

  

Valuation results and net trading income

     23  

13

  

Investment income

     23  

14

  

Other income

     23  

15

  

Staff expenses

     24  

16

  

Other operating expenses

     24  

17

  

Discontinued operations

     25  

18

  

Earnings per ordinary share

     26  

19

  

Dividend per ordinary share

     26  

Segment reporting

  

20

  

Segments

     27  

Additional notes to the Condensed consolidated interim accounts

  

21

  

Fair value of financial assets and liabilities

     32  

22

  

Consolidated companies and businesses acquired and divested

     39  

23

  

Related parties

     40  

24

  

Subsequent events

     40  

Other information

  

Review report

     41  

 

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   1


Table of Contents

Interim report

Introduction

ING 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. 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 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 gives better insight into the commercial developments of the company.

Underlying result is defined as result under IFRS-EU, excluding the impact of divestments, special items and Legacy Insurance. 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. Legacy Insurance consists of the results from discontinued operations and the results from Insurance Other. Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations.

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

ING Group consolidated results

 

ING Group: Consolidated profit or loss account                                                        
     Total ING
Group
     of which: Divest-
ments / Special items
     of which:
Insurance Other
     of which:
Underlying Banking
 

6 month period (1 January to 30 June)

   2017      2016      2017      2016      2017      2016      2017      2016  

Net interest income

     6,711        6,515                    6,711        6,515  

Net commission income

     1,395        1,217              –1           1,396        1,217  

Total investment and other income

     758        766              –62        –136        820        902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total income

     8,864        8,498        –          –          –64        –136        8,928        8,634  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Expenses excl. regulatory costs

     4,379        4,314           17              4,379        4,297  

Regulatory costs

     543        571                    543        571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

     4,922        4,884        –          17        –          –          4,922        4,868  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross result

     3,942        3,613        –          –17        –64        –136        4,005        3,766  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Addition to loan loss provisions

     362        571                    362        571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Underlying result before tax

     3,580        3,042        –          –17        –64        –136        3,644        3,195  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Taxation

     1,022        893           –4              1,022        898  

Non-controlling interests

     44        39                    44        39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

net result from continuing operations

     2,514        2,110        –          –13        –64        –136        2,578        2,259  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net result from discontinued operations

        442                    
  

 

 

    

 

 

                   

Net result ING Group

     2,514        2,552                    
  

 

 

    

 

 

                   

 

ING Group: reconciliation from IFRS-EU to underlying result              

6 month period (1 January to 30 June)

   2017      2016  

Net result ING Group

     2,514        2,552  
  

 

 

    

 

 

 

-/- Result from discontinued operations

        442  

-/- Insurance Other

     –64        –136  
  

 

 

    

 

 

 

Net result Banking

     2,578        2,246  
  

 

 

    

 

 

 

-/- Divestments/special items

        –13  
  

 

 

    

 

 

 

Underlying net result Banking

     2,578        2,259  
  

 

 

    

 

 

 

ING recorded strong results in the first half of 2017, driven by continued business growth and lower risk costs. The net result was EUR 2,514 million, down 1.5% compared with EUR 2,552 million in the same period of 2016, but this decline was fully explained by the EUR 442 million net result from discontinued operations as ING sold the remaining equity stakes in NN Group in the first half of 2016. In the first half of 2017, there were no discontinued operations. The net result from continuing operations rose 19.1% to EUR 2,514 million from EUR 2,110 million in the first half of 2016.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   2


Table of Contents

Interim report - continued

 

In the first half of 2017, ING Group’s net result from continuing operations included EUR -64 million from Insurance Other, reflecting a lower valuation of warrants on Voya and NN Group shares compared with year-end 2016, as well as the result on the sale of 6.5 million of warrants on Voya shares. There were no special items in the first six months of 2017. ING Group’s net result from continuing operations in the first six months of 2016 included EUR –13 million of special items after tax, which were fully related to restructuring programmes in Retail Netherlands that had been announced before 2013, and EUR –136 million from Insurance Other, reflecting a lower valuation of warrants on NN Group and Voya shares compared with year-end 2016.

ING’s underlying net result Banking, which is the net result from continuing operations excluding special items and Insurance Other, increased 14.1% to EUR 2,578 million from EUR 2,259 million in the first six months of 2016.

Banking operations

Consolidated results of operations

ING’s banking operations posted a strong set of results in the first half of 2017. Net result rose to EUR 2,578 million from EUR 2,246 million in the first six months of 2016. There were no divestments and special items in the first half of 2017, whereas the first half of 2016 included the abovementioned EUR -13 million of special items after tax.

Excluding special items, banking operations posted an underlying net profit of EUR 2,578 million in the first six months of 2017, up 14.1% from EUR 2,259 million in the same period last year. The underlying effective tax rate was 28.0% compared with 28.1% in the first six months of 2016.

The underlying result before tax increased 14.1% to EUR 3,644 million from EUR 3,195 million in the first six months of last year. Income benefitted from robust commercial performance and was furthermore supported by a EUR 97 million one-time gain on the sale of an equity stake in the real estate run-off portfolio, while the first six months of 2016 included a EUR 200 million one-time gain on the sale of Visa shares. Underlying expenses rose 1.1% on the first six months of last year, while risk costs declined by EUR 209 million, or 36.6%.

Total underlying income rose 3.4% to EUR 8,928 million from EUR 8,634 million in the first six months of 2016, with negligible impacts from credit and debt valuation adjustments in both periods. Excluding the abovementioned one-time gains, income was 4.7% higher, Net interest income rose by EUR 196 million, or 3.0%, mainly driven by volume growth, in both customer lending and customer deposits. Net interest income on customer lending rose, mainly driven by higher volumes in non-mortgage lending, partly offset by a slightly lower overall lending margin. The interest result on customer deposits declined, as the impact of volume growth was more than offset by margin pressure on both savings and current accounts due to lower reinvestment yields. Net interest income was furthermore supported by improved interest results on Bank Treasury activities and in the Corporate Line, while Financial Markets interest results were lower. The underlying interest margin improved by one basis points to 1.51% in the first six months of 2017 compared with 1.50% in the same period of last year. Commission income rose 14.7% to EUR 1,396 million from EUR 1,217 million last year. The increase was recorded in most segments and products. Investment income declined to EUR 91 million, from EUR 243 million in the first half of 2016, which included EUR 163 million of gains on the sale of Visa shares related to ING’s direct memberships in Visa Europe. Other income rose to EUR 729 million from EUR 659 million last year. The first six months of 2017 included a EUR 97 million one-time gain on the sale of an equity stake from the real estate run-off portfolio, while last year included EUR 38 million of gains on the sale of Visa shares related to INGs indirect membership in Visa Europe. Excluding these items, other income increased by 1.8%.

Underlying operating expenses increased by EUR 54 million, or 1.1%, to EUR 4,922 million. Expenses in the first six months of 2017 included EUR 543 million of regulatory costs, while the same period of 2016 included EUR 571 million of regulatory costs. Expenses excluding regulatory costs rose by EUR 82 million, or 1.9%, to EUR 4,379 million. The increase was mainly visible in the Retail Challengers & Growth Markets and Wholesale Banking’s Industry Lending to support business growth. Cost savings and favourable currency impacts compensated for the impact of one-offs in both periods. The underlying cost/income ratio improved to 55.1% from 56.4% in the first half of 2016.

Net additions to loan loss provisions declined to EUR 362 million from EUR 571 million in the first half of 2016, reflecting improved macroeconomic conditions in most of our segments. The decline was mainly visible in Retail Netherlands and Wholesale Banking. Risk costs were annualised 23 basis points of average risk-weighted assets (RWA) compared with 36 basis points in the first half of 2016, 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 increased to EUR 1,043 million from EUR 661 million in the first six months of 2016, due to lower operating expenses and risk costs, combined with higher income.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   3


Table of Contents

Interim report - continued

 

Total underlying income increased by EUR 34 million, or 1.6%, to EUR 2,193 million, compared with EUR 2,159 million in the first six months in 2016. Net interest income declined 2.9%, mainly reflecting lower lending volumes (largely related to the WUB legacy portfolio) and margin pressure on current accounts due to the low interest rate environment, which could only partly be compensated by improved margins on savings accounts and higher volumes in current accounts. Customer lending declined by EUR 1.2 billion in the first half of 2017, of which EUR 1.5 billion was caused by the continued transfer of WestlandUtrecht Bank (WUB) mortgages to NN Group and the run-off in the WUB portfolio, whereas Bank Treasury related items increased by EUR 1.4 billion. Excluding these items, net core lending decreased by EUR 1.1 billion, as a EUR 1.7 billion decline in mortgages was only partly offset by EUR 0.6 billion growth in other lending. Net customer deposits (excluding Bank Treasury) grew by EUR 5.2 billion in the first half year of 2017. Investment and other income rose by EUR 56 million, mainly due to higher allocated Bank Treasury revenues, while last year included a EUR 18 million gain on the sale of Visa shares.

Operating expenses fell 19.9% compared with the first half year of 2016, to EUR 1,121 million. Expenses were higher in the first six months of 2016, mainly due to a EUR 126 million addition to the provision for compensation for SME clients with interest rate derivatives and some additional redundancy costs, but were also supported by benefits coming through from the ongoing cost-saving initiatives.

The net addition to loan loss provisions decreased to EUR 29 million, or 12 basis points of average risk-weighted assets, compared with EUR 99 million, or 35 basis points, in the first half year of 2016. Risk costs are low, reflecting the positive macroeconomic conditions in the Netherlands.

Retail Belgium

Retail Belgium’s underlying result before tax decreased to EUR 377 million from EUR 507 million in the first six months of 2016, mainly due to higher expenses and slightly lower income, partly offset by lower risk costs.

The underlying income fell by EUR 27 million, or 2.0%, to EUR 1,298 million compared with EUR 1,325 million last year, mainly due to the EUR 30 million one-time gain related to the sale of Visa shares last year. Net interest income declined by EUR 24 million, or 2.5%, reflecting lower prepayment and renegotiation fees on mortgages and lower margins on savings and current accounts. This was partly offset by volume growth. The lending portfolio increased by EUR 2.1 billion in the first half of 2017, of which EUR 1.2 billion was in residential mortgages and EUR 0.9 billion in other lending. Net customer deposits (excluding Bank Treasury) increased by EUR 1.6 billion, entirely in current accounts, while savings recorded an outflow. Commission income was up EUR 21 million, or 10.1%, mainly because of higher fee income on investment products. Investment and other income decreased to EUR 125 million from EUR 148 million in the first half of 2016, which included a EUR 30 million one-time gain related to the sale of Visa shares.

Operating expenses increased by EUR 142 million, or 19.5%, to EUR 872 million compared with the first half of 2016, which included a EUR –95 million one-off expense adjustment in procured cost. Excluding the expense adjustment, operating expenses rose by EUR 47 million, or 5.7%, partly caused by higher regulatory costs and accelerated depreciation for the branch network.

The net addition to the provision for loan losses declined to EUR 49 million from EUR 89 million a year ago, mainly due to lower risk costs in business lending.

Retail Germany

Retail Germany’s underlying result before tax declined to EUR 398 million from EUR 452 million in the first six months of 2016, mainly due to lower income, partly offset by lower risk costs.

The underlying income decreased to EUR 918 million in the first half of 2017 compared with EUR 985 million a year ago, which was supported by a EUR 44 million one-time gain related to the sale of Visa shares. Net interest income declined 2.1% to EUR 821 million, due to lower margins on both customer lending and customer deposits, largely offset by volume growth and higher interest results from Bank Treasury. Despite the reduction of client savings rates, customer deposits increased by EUR 3.8 billion in the first half of 2017. Net core lending, which excludes Bank Treasury products, increased by EUR 1.5 billion, of which EUR 0.9 billion was attributable to residential mortgages and EUR 0.6 billion to consumer lending. Commission income rose 19.3% to EUR 99 million. Investment and other income declined to EUR –2 million due to negative hedge ineffectiveness results from EUR 63 million in the first half of 2016, which included a EUR 44 million one-time gain on the sale of Visa shares.

Operating expenses increased by EUR 4 million, or 0.8%, to EUR 514 million compared with the first half of 2016, supported by a EUR 48 million decline in regulatory costs. Expenses excluding regulatory costs were EUR 447 million, or 13.2% higher than a year ago. The increase was mainly due to higher headcount to support business growth, higher costs related to primary customer acquisition and investments in Project Welcome which aims to digitise ING Germany’s platform further.

The net addition to the provision for loan losses decreased to EUR 6 million from EUR 22 million a year ago, reflecting the benign credit environment in Germany.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   4


Table of Contents

Interim report - continued

 

Retail Other

Retail Other’s underlying result before tax increased to EUR 481 million from EUR 422 million in the first six months of last year, which included in total a EUR 109 million one-time gain on the sale of Visa shares recorded in a number of countries. Excluding the Visa gain, result before tax rose by 53.7%, reflecting business and revenue growth in most countries, partly offset by higher expenses to support business growth.

Total underlying income increased by EUR 106 million, or 7.7%, to EUR 1,477 million from EUR 1,371 million in the first half year of 2016. When adjusting for the one-time Visa gain, total income was up EUR 215 million, or 17.0%. This increase was driven by improved commercial results across most of the countries reflecting continued client and volume growth. Net interest income increased 17.2% on last year, stemming from higher volumes in most countries and supported by increased margins on lending products, while margins on savings and current accounts and deposits declined. The net production in customer lending (adjusted for currency effects and Bank Treasury) was EUR 4.7 billion in the first half of 2017, with growth mainly in Australia and Poland. The net inflow in customer deposits, also adjusted for currency impacts and Bank Treasury, was EUR 3.8 billion, with largest increases in Australia and Spain.

Operating expenses increased by EUR 62 million, or 7.5%, to EUR 890 million compared with the first half of 2016, of which EUR 12 million was due to higher regulatory costs . Excluding regulator costs, operating expenses rose by EUR 50 million, or 6.7%. This was due to higher marketing and staff expenses, as well as higher investments related to strategic projects.

The net addition to loan loss provisions decreased by EUR 15 million to EUR 107 million compared with EUR 122 million a year ago, supported by a release in Italy reflecting a model update for mortgages.

Wholesale Banking

In the first six months of 2017, the underlying result before tax rose 24.1% to EUR 1,591 million from EUR 1,282 million in the same period last year. The increase was mainly due to higher income and lower risk costs, while expenses increased.

Underlying income rose by EUR 347 million, or 12.5%, to EUR 3,134 million in the first half of 2017, supported by a EUR 97 million one-time gain on the sale of an equity stake in the real estate run-off portfolio and EUR 31 million less negative CVA/DVA impacts (EUR –3 million in the first half of 2017 versus EUR –34 million in the same period last year). Excluding CVA/DVA impacts and the one-time gain, total underlying income was 7.8% higher, mainly due to higher revenues in Industry Lending and General Lending & Transaction Services, while income in Financial Markets was resilient.

Net interest income increased by EUR 69 million, or 3.8%, on the first six months of 2016, driven by continued volume growth in Industry Lending and General Lending & Transaction Services, albeit at lower margins. This was partly offset by lower interest results in Financial Markets and Bank Treasury. Net core lending (excluding currency impacts, Bank Treasury and the Lease run-off portfolio) grew by EUR 5.0 billion in the first half of 2017. Net customer deposits (excluding currency impacts and Bank Treasury) declined by EUR 2.5 billion.

Commission income increased by EUR 53 million, or 10.1%, on last year, mainly due to higher fee income in Industry Lending and General Lending & Transaction Services. Investment and other income amounted to EUR 661 million, up from EUR 436 million in the first half of 2016. This increase was for the larger part attributable to Financial Markets, which included the less negative CVA/DVA impacts, and the aforementioned gain on the sale of an equity stake in the real estate run-off portfolio.

Operating expenses were EUR 1,373 million, or 8.5% higher than in the first half of 2016. Excluding the impact from regulatory costs (EUR 98 million in the first half of 2017 versus EUR 104 million a year ago), operating expenses increased by EUR 114 million, or 9.8%, on the first half of 2016. A large part of the increase was explained by a provision for a litigation linked to a business that was discontinued in Luxembourg around the year 2000. The remaining costs growth was due to higher headcount to support business growth, wage inflation and IT investments. The underlying cost/income ratio in the first half of 2017 was 43.8%, compared with 45.4% a year ago.

Net addition to loan loss provisions declined to EUR 170 million, or 22 basis points of average risk-weighted assets, from EUR 240 million, or 32 basis points, in the first half of 2016. The decline reflects lower risk costs in General Lending & Transaction Services and Industry Lending, whereas risk costs for the Italian lease run-off portfolio increased.

Corporate Line

The Corporate Line reported an underlying result before tax of EUR –246 million compared with EUR –128 million in the first half of 2016. Total income declined to EUR –93 million from EUR 7 million a year ago, mainly due to the higher cost of net investment hedging and negative results on equity participations, while last year benefitted from the release of the TLTRO hedge reserve. DVA on own-issued debt was EUR –9 million in the first half of 2017 versus EUR 15 million a year ago. Operating expenses increased to EUR 152 million from EUR 135 million in the first half of 2016, due to higher financing charges and share-base payments expenses.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   5


Table of Contents

Interim report - continued

 

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

ING Group’s balance sheet increased by EUR 17 billion to EUR 862 billion at 30 June 2017 from EUR 845 billion at the end of 2016.

Cash and balances with central banks

Cash and balances with central banks remained flat at EUR 18 billion.

Loans and advances to banks and Deposits from banks

Loans and advances to banks decreased by EUR 1 billion to EUR 28 billion. Deposits from banks increased by EUR 7 billion to EUR 39 billion due to ING Group’s participation in the TLTRO.

Financial assets/liabilities at fair value

Financial assets at fair value through profit or loss increased by EUR 21 billion to EUR 143 billion, due to increased reverse repo activity, partly offset by lower trading derivatives. On the liability side Financial liabilities at fair value through profit or loss increased by EUR 4 billion to EUR 103 billion, also caused by higher repo activity partly offset by lower trading derivatives.

Investments

Investments decreased by EUR 8 billion to EUR 83 billion at the end of June 2017. The decrease mainly concerned debt securities available-for-sale.

Loans and advances to customers

Loans and advances to customers increased by EUR 5 billion to EUR 568 billion. This increase was due to EUR 6 billion higher customer lending, partly offset by EUR 2 billion lower securities at amortised cost. Adjusted for EUR 6 billion of negative currency impacts, customer lending increased by EUR 12 billion. This was mainly caused by EUR 12 billion of net core lending growth and a EUR 4 billion increase in Bank Treasury lending, partly offset by the repayment of subordinated debt by NN Group in the first quarter of 2017, the continued transfer of WUB residential mortgages to NN Group and a decline of the run-off portfolios of WUB and Lease.

Debt securities in issue

The decrease of EUR 4 billion to EUR 99 billion in Debt securities in issue was mainly caused by a EUR 5 billion decrease of long-term debt as maturities and redemptions outpaced new issuance of RMBS, senior debt and Tier 2 instruments. This was slightly offset by EUR 1 billion higher CD/CPs.

Customer deposits

Customer deposits increased by EUR 10 billion to EUR 533 billion. Adjusted for currency impacts and Bank Treasury, net customer deposits grew by EUR 12 billion in the first half of 2017, due to higher customer deposits at Retail Banking.

Shareholders’ equity

Shareholders’ equity remained flat at EUR 50 billion. The EUR 2.5 billion net result for the first half of 2017 was offset by the EUR 1.6 billion payment of the final dividend for the year 2016 and declines in the following reserves: currency translation reserve EUR -0.5 billion due to appreciation of the euro; cash flow hedge reserve EUR -0.4 billion; and the available-for-sale reserve EUR -0.2 billion.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   6


Table of Contents

Interim report - continued

 

Conformity statement

The Executive Board is required to prepare the Interim Accounts and the Interim Report of ING Groep N.V. for each financial period in accordance with applicable Dutch law and those International Financial Reporting Standards (IFRS) that were endorsed by the European Union.

Conformity statement pursuant to section 5:25d paragraph 2(c) of the Dutch Financial Supervision Act (Wet op het financieel toezicht)

The Executive Board is responsible for maintaining proper accounting records, for safeguarding assets and for taking reasonable steps to prevent and detect fraud and other irregularities. It is responsible for selecting suitable accounting policies and applying them on a consistent basis, making judgements and estimates that are prudent and reasonable. It is also responsible for establishing and maintaining internal procedures which ensure that all major financial information is known to the Executive Board, so that the timeliness, completeness and correctness of the external financial reporting are assured.

As required by section 5:25d paragraph 2(c) of the Dutch Financial Supervision Act, each of the signatories hereby confirms that to the best of his knowledge:

 

  the ING Groep N.V. interim accounts for the period ended 30 June 2017 give a true and fair view of the assets, liabilities, financial position and profit or loss of ING Groep N.V. and the entities included in the consolidation taken as a whole; and

 

  the ING Groep N.V. interim report for the period ended 30 June 2017 includes a fair review of the information required pursuant to article 5:25d, paragraphs 8 and 9 of the Dutch Financial Supervision Act regarding ING Groep N.V. and the entities included in the consolidation taken as a whole.

Amsterdam, 1 August 2017

R.A.J.G. (Ralph) Hamers

CEO, chairman of the Executive Board

J.V. (Koos) Timmermans

CFO, member of the Executive Board

S.J.A. (Steven) van Rijswijk

CRO, member of the Executive Board

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   7


Table of Contents

Condensed consolidated statement of

financial position

 

 

 

as at

in EUR million

   30 June
2017
     31 December
2016
 

Assets

     

Cash and balances with central banks

     17,894        18,144  

Loans and advances to banks

     27,987        28,858  

Financial assets at fair value through profit or loss 2

     143,143        122,093  

Investments 3

     83,441        91,663  

Loans and advances to customers 4

     568,237        563,660  

Investments in associates and joint ventures

     1,066        1,141  

Property and equipment

     1,938        2,002  

Intangible assets 5

     1,491        1,484  

Current tax assets

     350        314  

Deferred tax assets

     880        1,000  

Other assets 6

     15,624        14,722  
  

 

 

    

 

 

 

Total assets

     862,051        845,081  

Liabilities

     

Deposits from banks

     39,248        31,964  

Customer deposits

     533,210        522,942  

Financial liabilities at fair value through profit or loss 7

     103,202        98,974  

Current tax liabilities

     571        546  

Deferred tax liabilities

     682        919  

Provisions

     1,873        2,028  

Other liabilities 8

     17,598        16,852  

Debt securities in issue 9

     98,968        103,234  

Subordinated loans 9

     16,340        17,223  
  

 

 

    

 

 

 

Total liabilities

     811,692        794,682  

Equity 10

     

Share capital and share premium

     17,043        16,989  

Other reserves

     4,963        5,897  

Retained earnings

     27,679        26,907  
  

 

 

    

 

 

 

Shareholders’ equity (parent)

     49,685        49,793  

Non-controlling interests

     674        606  
  

 

 

    

 

 

 

Total equity

     50,359        50,399  
  

 

 

    

 

 

 

Total equity and liabilities

     862,051        845,081  
  

 

 

    

 

 

 

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 Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   8


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Condensed consolidated statement of

profit or loss

 

 

 

6 month period    1 January to 30 June  

in EUR million

   2017      2016  

Continuing operations

     

Interest income 11

     22,086        22,247  

Interest expense 11

     –15,375        –15,732  
  

 

 

    

 

 

 

Net interest income

     6,711        6,515  

Net commission income

     1,395        1,217  

Valuation results and net trading income 12

     420        351  

Investment income 13

     90        242  

Other income1 14

     248        173  
  

 

 

    

 

 

 

Total income

     8,864        8,498  

Addition to loan loss provisions 4

     362        571  

Staff expenses 15

     2,580        2,525  

Other operating expenses 16

     2,342        2,360  
  

 

 

    

 

 

 

Total expenses

     5,284        5,456  
  

 

 

    

 

 

 

Result before tax from continuing operations

     3,580        3,042  

Taxation

     1,022        893  
  

 

 

    

 

 

 

Net result from continuing operations

     2,558        2,149  

Discontinued operations 17

     

Net result from discontinued operations

        442  
  

 

 

    

 

 

 

Total net result from discontinued operations

     –          442  
  

 

 

    

 

 

 

Net result (before non-controlling interests)

     2,558        2,591  

Net result attributable to Non-controlling interests

     44        39  
  

 

 

    

 

 

 

Net result attributable to Equityholders of the parent

     2,514        2,552  
  

 

 

    

 

 

 

 

1 Other income includes Result on disposal of group companies, Result from associates and joint ventures, Net operating lease income, Income from investment property development projects, and Other.

 

6 month period    1 January to 30 June  

in EUR million

   2017      2016  

Net result attributable to Non-controlling interests

     

– from continuing operations

     44        39  
  

 

 

    

 

 

 
     44        39  

Net result attributable to Equityholders of the parent

     

– from continuing operations

     2,514        2,110  

– from discontinued operations

        442  
  

 

 

    

 

 

 
     2,514        2,552  
  

 

 

    

 

 

 

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 Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   9


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Condensed consolidated statement of profit or loss - continued

 

 

 

6 month period    1 January to 30 June  

in EUR

   2017      2016  

Earnings per ordinary share 18

     

Basic earnings per ordinary share

     0.65        0.66  

Diluted earnings per ordinary share

     0.65        0.66  

Earnings per ordinary share from continuing operations 18

     

Basic earnings per ordinary share from continuing operations

     0.65        0.54  

Diluted earnings per ordinary share from continuing operations

     0.65        0.54  

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 Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   10


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Condensed consolidated statement of comprehensive

income

 

 

 

6 month period    1 January to 30 June  

in EUR million

   2017      2016  

Net result (before non-controlling interests)

     2,558        2,591  

Other comprehensive income

     

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

     

Unrealised revaluations property in own use

     –5        8  

Remeasurement of the net defined benefit asset/liability

     10        –59  

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

     

Unrealised revaluations available-for-sale investments and other revaluations

     –103        –110  

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

     –71        –45  

Changes in cash flow hedge reserve

     –397        632  

Exchange rate differences and other

     –436        –191  

Share of other comprehensive income of associates and joint ventures

     3        –21  
  

 

 

    

 

 

 

Total comprehensive income

     1,559        2,805  

Comprehensive income attributable to:

     

Non-controlling interests

     68        12  

Equityholders of the parent

     1,491        2,793  
  

 

 

    

 

 

 
     1,559        2,805  
  

 

 

    

 

 

 

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 Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   11


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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 1 January 2017

     16,989        5,897        26,907        49,793        606        50,399  

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

           2,514        2,514        44        2,558  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     –          –932        2,423        1,491        68        1,559  

Dividends

           –1,632        –1,632           –1,632  

Changes in treasury shares

        –2           –2           –2  

Employee stock option and share plans

     54           –19        35           35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as at 30 June 2017

     17,043        4,963        27,679        49,685        674        50,359  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Changes in individual Reserve components are presented in Note 10 ‘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 1 January 2016

     16,982        5,759        25,091        47,832        638        48,470  

Unrealised revaluations available-for-sale investments and other revaluations

        –98           –98        –12        –110  

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

        –45           –45           –45  

Changes in cash flow hedge reserve

        621           621        11        632  

Unrealised revaluations property in own use

        8           8           8  

Remeasurement of the net defined benefit asset/liability

        –59           –59           –59  

Exchange rate differences and other

        –165           –165        –26        –191  

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

        –21           –21           –21  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total amount recognised directly in other comprehensive income

     –          241        –          241        –27        214  

Net result from continuing and discontinued operations

           2,552        2,552        39        2,591  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     –          241        2,552        2,793        12        2,805  

Dividends

           –1,590        –1,590        –31        –1,621  

Changes in treasury shares

        7           7           7  

Employee stock option and share plans

     4           40        44           44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as at 30 June 2016

     16,986        6,007        26,093        49,086        619        49,705  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   12


Table of Contents

Condensed consolidated statement of cash flows

 

 

 

6 month period    1 January to 30 June  

in EUR million

   2017      2016  

Cash flows from operating activities

     

Result before tax1

     3,580        3,482  

Adjusted for:

  

– depreciation

     260        260  
  

– addition to loan loss provisions

     362        571  
  

– other

     188        1,248  

Taxation paid

        –885        –914  

Changes in:

  

– loans and advances to banks, not available on demand

     –971        102  
  

– trading assets

     –19,642        –15,649  
  

non-trading derivatives

     –2,236        175  
  

– other financial assets at fair value through profit or loss

     –114        –2,312  
  

– loans and advances to customers

     –8,865        –20,599  
  

– other assets

     –184        –4,949  
  

– deposits from banks, not payable on demand

     7,257        2,050  
  

– customer deposits

     9,844        13,483  
  

– trading liabilities

     5,507        25,356  
  

– other financial liabilities at fair value through profit or loss

     –368        –35  
  

– provisions and other liabilities

     –947        2,230  
     

 

 

    

 

 

 

Net cash flow from/(used in) operating activities

     –7,214        4,499  

Cash flows from investing activities

     

Investments and advances:

  

available-for-sale investments

     –14,936        –15,470  
  

– other investments

     –2,720        –588  

Disposals and redemptions:

  

– associates and joint ventures2

     197        1,066  
  

available-for-sale investments3

     22,654        16,508  
  

– loans

     525        711  
  

– other investments

     751        227  
     

 

 

    

 

 

 

Net cash flow from/(used in) investing activities

     6,471        2,454  

Cash flows from financing activities

     

Proceeds from debt securities and subordinated loans

     52,325        69,024  

Repayments of debt securities and subordinated loans4

     –52,178        –69,323  

Changes in treasury shares

     –2        5  

Dividends paid 19

     –1,632        –1,590  
     

 

 

    

 

 

 

Net cash flow from/(used in) financing activities

     –1,487        –1,884  
     

 

 

    

 

 

 

Net cash flow

     –2,230        5,069  
     

 

 

    

 

 

 

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   13


Table of Contents

Condensed consolidated statement of cash flows - continued

 

6 month period    1 January to 30 June  

in EUR million

   2017      2016  

Net cash flow

     –2,230        5,069  

Cash and cash equivalents at beginning of period

     16,164        20,379  

Effect of exchange rate changes on cash and cash equivalents

     148        –570  
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

     14,082        24,878  

Cash and cash equivalents comprises the following items:

     

Treasury bills and other eligible bills

     309        845  

Deposits from banks/Loans and advances to banks

     –4,121        –2,088  

Cash and balances with central banks

     17,894        26,121  
  

 

 

    

 

 

 

Cash and cash equivalents at end of the period

     14,082        24,878  
  

 

 

    

 

 

 

 

1 Result before tax includes results from continuing operations of EUR 3,580 million (first six months of 2016: EUR 3,042 million) as well as results from discontinued operations of nil (first six months of 2016: EUR 440 million).
2 Disposal and redemptions – associates and joint ventures, in the first six months of 2016 includes EUR 1,016 million proceeds on the further sale of NN Group shares in January 2016 resulting in a loss of significant influence over NN Group.
3 Disposal and redemptions – available-for-sale investments, in the first six months of 2016, includes EUR 1,375 million proceeds on the divestment of the remaining shareholding in NN Group in April 2016.
4 Included in Repayments of debt securities and subordinated loans is a cash outflow of EUR 128 million related to the third and final tranche of mandatory exchangeable subordinated notes from the Anchor investors into NN Group ordinary shares in February 2016.

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

 

6 month period    1 January to 30 June  

in EUR million

   2017      2016  

Interest received

     22,462        22,427  

Interest paid

     –16,140        –16,426  
  

 

 

    

 

 

 
     6,322        6,001  

Dividend received

     41        34  
  

 

 

    

 

 

 

Dividend paid

     –1,632        –1,590  
  

 

 

    

 

 

 

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 Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   14


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 2017, 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’.

ING Group applies International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), which are IFRS Standards and IFRS IC Interpretations as issued by the International Accounting Standards Board (IASB) with some limited modifications such as the temporary ‘carve out’ from IAS 39 ‘Financial Instruments: Recognition and Measurement’ (herein, referred to as IFRS). This is consistent with the 2016 ING Group Consolidated annual accounts.

These Condensed consolidated interim accounts should be read in conjunction with the 2016 ING Group Consolidated annual accounts, including the Legal proceeding note (Note 45).

Under the EU carve out, ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging). For further information, reference is made to Note 1 ‘Accounting policies’, f) Principles of valuation and determination of results in the 2016 ING Group Consolidated annual accounts.

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.

1 Accounting policies

Changes in IFRS effective in 2017

Subject to endorsement by the EU the following amendments become effective in 2017:

 

  Amendments to IAS 12 ‘Income Taxes’: Recognition of Deferred Tax Assets for Unrealised losses;

 

  Amendments to IAS 7 ‘Statement of Cash Flows: Disclosure Initiative’; and

 

  Annual improvement cycle 2014 – 2016: IFRS 12, ‘Disclosure of interest in other entities’

If endorsed by the EU before 31 December 2017 ING will apply these amendments for annual periods beginning on or after 1 January 2017. The implementation of these amendments will have no significant impact on ING Group’s results or financial position. ING Group has not early adopted any other standard, interpretation or amendment which has been issued, but is not yet effective.

Changes in accounting policies, estimates, and presentation of the Condensed consolidated interim accounts and related notes

There were no significant changes in accounting policies, or estimates in the Condensed consolidated interim accounts for the period ended 30 June 2017.

The presentation has been modified from the 30 June 2016 published Condensed consolidated interim accounts to align more closely with 2016 ING Group Consolidated annual accounts. For a list of changes made see 2016 ING Group Consolidated annual accounts, Note 1 ‘Changes in presentation of the Consolidated annual accounts and related notes’.

Upcoming changes in IFRS

The most significant upcoming changes to IFRS, comprise IFRS 9 ‘Financial instruments’, IFRS 15 ‘Revenue from contracts with customers’ and IFRS 16 ‘Leases’.

IFRS 9 ‘Financial Instruments’

IFRS 9 ‘Financial Instruments’ was issued by the IASB in July 2014 and endorsed by the EU in November 2016. IFRS 9 will replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ and includes requirements for the classification and measurement of financial assets and liabilities, impairment of financial assets, and hedge accounting. The new requirements become effective as of 1 January 2018.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   15


Table of Contents

Notes to the accounting policies - continued

 

IFRS 9 program governance and status

In 2017 the IFRS 9 program is focussing on implementing the methodologies and approaches that have been developed thus far. A first ‘parallel run’ was conducted whereby a limited scope of ING Group entities reported IFRS 9 figures internally. In addition to gain a better understanding of IFRS 9 figures, the parallel runs test the processes and the ability of ING Group entities to report the required IFRS 7 disclosures. Two further parallel runs are planned for 2017 to ensure IFRS 9 readiness on 1 January 2018.

Overall progress on implementing the standard continues as expected, with model development and validation and technical accounting issues being finalised according to the execution roadmap.

Classification and Measurement

The classification and measurement of financial assets will depend on how these are managed (the business model test) and their contractual cash flow characteristics (the SPPI test). The business model documentation and SPPI testing across all ING Group entities is approaching finalisation, with the formal governance for embedding new organisational processes into everyday business taking shape. The governance will be put into place before 1 January 2018 to ensure continued compliance with IFRS 9 following transition.

Impact

ING is currently finalising the impact of IFRS 9 on the classification and measurement of its financial assets. As a result of the business model analysis, a few portfolios are identified for which measurement will change. Of particular note is the investment portfolio, which will be split into a portfolio classified at amortised cost and a FVOCI portfolio. ING has not yet determined what part will be classified as amortised cost. This change will have an impact on equity and regulatory capital at transition, but will reduce capital volatility in the future.

Impairment

Previous decisions regarding key concepts such as the measurement of expected credit losses (ECL) remain as described in the 2016 ING Group Consolidated annual accounts. The implementation of these concepts into central credit risk systems and the development and testing of impairment models is ongoing, with the models for the Group’s most material portfolios developed. In 2017, the methodological framework for multiple macroeconomic scenarios in the ECL calculation was set up. During the second part of 2017, ING will focus on implementing the macro economic scenarios into the models and finalising the validation.

Impact

ING expects that the increase in provisions at transition might lead to a negative effect on equity and may be partly offset by the release of expected loss elements currently included in the calculation of regulatory capital (i.e. the regulatory shortfall). Based on the IFRS 9 ECL model, a more volatile impairment charge is to be expected following macroeconomic predictions. ING will quantify the potential impact of IFRS 9 not later than in the 2017 ING Group Consolidated annual accounts.

Hedge Accounting

The previous decision to continue applying IAS 39 for hedge accounting including the application of the EU carve out as explicitly permitted by IFRS 9 remains in place. The revised hedge accounting disclosures as required by IFRS 7 ‘Financial Instruments: Disclosures’ as per 1 January 2018 are currently being implemented across ING Group and tested during the parallel runs.

Further information about the IFRS 9 program is available on pages 123-125 of the ING Group Annual Report 2016.

IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 ‘Revenue from Contracts with Customers’ is effective for annual periods beginning on or after 1 January 2018 and was endorsed by the EU in September 2016. IFRS 15 introduces a 5-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 delivers benefit from the customers perspective. Revenue should either be recognised at a point-in-time or over-time depending on the service being delivered to the customer. The standard may be applied retrospectively, although transitional relief is available.

Commission income is the key revenue stream in scope of IFRS 15 and ING Group is in the process of assessing the possible impact, though overall we do not expect it to be significant. Fees related to the effective yield of the loan that are presented in Interest income or bank guarantee fees are not in the scope of IFRS 15.

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’. IFRS 16 is not yet endorsed by the EU. The new standard removes for lessee accounting, the distinction between operating or finance leases, resulting in all leases being treated as finance leases. All leases will be recognised on the statement of financial position with the optional exceptions 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 options and exemptions to ease the costs of transition. Lessor accounting remains substantially unchanged. ING Group will adopt the standard at its effective date and is currently assessing the impact of this standard.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   16


Table of Contents

Notes to the Condensed consolidated statement of financial position

 

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
2017
     31 December
2016
 

Trading assets

     135,246        114,504  

Non-trading derivatives

     2,926        2,490  

Designated as at fair value through profit or loss

     4,971        5,099  
  

 

 

    

 

 

 
     143,143        122,093  
  

 

 

    

 

 

 

The increase in Trading assets in the first six months of 2017, is mainly attributable to an increase of EUR 26.8 billion trading loans and receivables, and EUR 2.3 billion in Trading equity securities. These were offset by a decrease of EUR 7.7 billion in trading derivatives mainly due to mark to market changes and expiring contracts.

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 7 ‘Financial liabilities at fair value through profit or loss’ for information on trading liabilities.

As at 30 June 2017, Non-trading derivatives include EUR 89 million (31 December 2016: EUR 175 million ) and EUR 14 million (31 December 2016: EUR 19 million) related to warrants on the shares of Voya Financial Inc. (Voya) and NN Group N.V. (NN Group) respectively.

3 Investments

 

Investments by type              
     30 June
2017
     31 December
2016
 

Available-for-sale

     

– equity securities - shares in third party managed structured entities

     161        170  

– equity securities - other

     3,775        3,854  
  

 

 

    

 

 

 
     3,936        4,024  

– debt securities

     69,199        78,888  
  

 

 

    

 

 

 
     73,135        82,912  

Held-to-maturity

     

– debt securities

     10,306        8,751  
  

 

 

    

 

 

 
     10,306        8,751  
  

 

 

    

 

 

 
     83,441        91,663  
  

 

 

    

 

 

 

Available-for-sale debt securities decreased by EUR 9.7 billion and is mainly related to lower positions in Government bonds, Sub-soverign Supranationals and Agencies, and covered bonds.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   17


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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:

 

Debt securities              
     30 June
2017
     31 December
2016
 

Available-for-sale investments

     69,199        78,888  

Held-to-maturity investments

     10,306        8,751  

Loans and advances to customers

     5,835        7,471  

Loans and advances to banks

     203        952  
  

 

 

    

 

 

 

Available-for-sale investments and Assets at amortised cost

     85,543        96,062  

Trading assets

     9,162        9,863  

Designated at fair value through profit or loss

     1,436        1,669  
  

 

 

    

 

 

 

Financial assets at fair value through profit or loss

     10,598        11,532  
  

 

 

    

 

 

 
     96,141        107,594  
  

 

 

    

 

 

 

ING Group’s total exposure to debt securities included in available-for-sale investments and assets at amortised cost of EUR 85,543 million (31 December 2016: EUR 96,062 million) is specified as follows by type of exposure:

 

Debt securities by type and lines per the statement of financial position - Available-for-sale investments and Assets at amortised cost  
    Available-for-sale
investments
    Held-to-maturity
investments
    Loans and advances
to customers
    Loans and advances
to banks
    Total  
    30 June
2017
    31 December
2016
    30 June
2017
    31 December
2016
    30 June
2017
    31 December
2016
    30 June
2017
    31 December
2016
    30 June
2017
    31 December
2016
 

Government bonds

    36,491       41,985       8,328       6,688       835       858           45,654       49,531  

Sub-sovereign, Supranationals and Agencies

    18,195       20,484       1,662       1,613       275       267           20,132       22,364  

Covered bonds

    9,221       11,297       100       100       416       1,820       154       882       9,891       14,099  

Corporate bonds

    1,317       1,345           879       791           2,196       2,136  

Financial institutions’ bonds

    2,003       2,020           352       351       45       70       2,400       2,441  

ABS portfolio

    1,972       1,757       216       350       3,078       3,384       4         5,270       5,491  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bond portfolio

    69,199       78,888       10,306       8,751       5,835       7,471       203       952       85,543       96,062  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-sovereign Supranationals and Agencies (‘SSA’) comprise among others, multilateral development banks, regional governments, local authorities and US agencies. Under certain conditions, SSA bonds may qualify as ‘Level 1 High Quality Liquid Assets’ for LCR.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   18


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Notes to the Condensed consolidated statement of financial position - continued

 

4 Loans and advances to customers

 

Loans and advances to customers by type  
     30 June
2017
     31 December
2016
 

Loans to, or guaranteed by, public authorities

     46,581        46,380  

Loans secured by mortgages

     319,910        318,630  

Loans guaranteed by credit institutions

     1,572        1,145  

Personal lending

     24,123        23,098  

Asset backed securities

     3,078        3,380  

Corporate loans

     178,007        176,205  
  

 

 

    

 

 

 
     573,271        568,838  

Loan loss provisions

     –5,034        –5,178  
  

 

 

    

 

 

 
     568,237        563,660  
  

 

 

    

 

 

 

 

Changes in loan loss provisions              
     6 month
period ended
30 June

2017
     year
ended
31 December
2016
 

Opening balance

     5,308        5,786  

Write-offs

     –476        –1,494  

Recoveries

     32        94  

Increase in loan loss provisions

     362        974  

Exchange rate differences

     –56        –55  

Changes in the composition of the group and other changes

     –11        3  
  

 

 

    

 

 

 

Closing balance

     5,159        5,308  
  

 

 

    

 

 

 

The loan loss provision, as at 30 June 2017, of EUR 5,159 million (31 December 2016: EUR 5,308 million) is presented in the statement of financial position under Loans and advances to customers, Loans and advances to banks, and Other provisions other for EUR 5,034 million (31 December 2016: EUR 5,178 million), EUR 13 million (31 December 2016: EUR 11 million) and EUR 112 million (31 December 2016: EUR 119 million) respectively.

The ‘increase in loan loss provisions’ is presented as ‘Addition to loan loss provisions’ in the Condensed consolidated statement of profit or loss.

5 Intangible assets

 

Intangible assets              
     30 June
2017
     31 December
2016
 

Goodwill

     868        903  

Software

     615        571  

Other

     8        10  
  

 

 

    

 

 

 
     1,491        1,484  
  

 

 

    

 

 

 

 

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Notes to the Condensed consolidated statement of financial position - continued

 

Goodwill

Goodwill is allocated to groups of CGUs as follows:

 

Goodwill allocation to group of CGUs              

Group of CGU’s

   30 June
2017
     31 December
2016
 

Retail Belgium

     50        50  

Retail Germany

     349        349  

Retail Growth Markets1

     347        375  

Wholesale Banking1

     122        129  
  

 

 

    

 

 

 
     868        903  
  

 

 

    

 

 

 

 

1 Goodwill related to Growth Countries is allocated across two groups of CGUs EUR 347 million (31 December 2016: EUR 375 million) to Retail Growth Markets and EUR 102 million (31 December 2016: EUR 109 million) to Wholesale Banking.

No goodwill impairment was recognised in the first six months of 2017 (first six months of 2016: nil). Changes in the goodwill per reporting unit in the first six months of 2017 are due to changes in currency exchange rates.

Goodwill impairment testing

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

6 Other assets

 

Other assets by type              
     30 June
2017
     31 December
2016
 

Net defined benefit assets

     567        609  

Investment properties

     65        65  

Property development and obtained from foreclosures

     157        184  

Accrued interest and rents

     4,897        5,588  

Other accrued assets

     843        884  

Amounts to be settled

     6,656        4,815  

Other

     2,439        2,577  
  

 

 

    

 

 

 
     15,624        14,722  
  

 

 

    

 

 

 

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.

7 Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss

 

     30 June
2017
     31 December
2016
 

Trading liabilities

     88,677        83,167  

Non-trading derivatives

     2,939        3,541  

Designated at fair value through profit or loss

     11,586        12,266  
  

 

 

    

 

 

 
     103,202        98,974  
  

 

 

    

 

 

 

The increase in Trading liabilities, in the first six months of 2017, is mainly as a result of an increase in funds on deposit of EUR 15.8 billion, and by a decrease in trading derivatives of EUR 9.8 billion driven by changes in mark to market value and expiring contracts.

 

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Notes to the Condensed consolidated statement of financial position - continued

 

The change in the fair value of financial liabilities designated at fair value through profit or loss that is attributable to changes in credit risk is EUR 27 million in the first six months of 2017 (first six months of 2016: EUR –15 million) and EUR 197 million (31 December 2016: EUR 170 million) on a cumulative basis. This change has been determined as the amount of change in fair value of the financial liability that is not attributable to changes in market conditions that gave rise to market risk (i.e. mainly interest rate risk based on yield curves). Reference is made to Note 2 ‘Financial assets at fair value through profit or loss’.

8 Other liabilities

 

Other liabilities by type              
     30 June
2017
     31 December
2016
 

Net defined benefit liability

     485        521  

Other post-employment benefits

     91        87  

Other staff-related liabilities

     403        498  

Other taxation and social security contributions

     357        495  

Accrued interest

     3,394        4,394  

Costs payable

     2,141        2,242  

Share-based payment plan liabilities

     22        26  

Amounts to be settled

     8,168        6,391  

Other

     2,537        2,198  
  

 

 

    

 

 

 
     17,598        16,852  
  

 

 

    

 

 

 

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

9 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 liabilities and for regulatory purposes they are considered capital.

The decrease in subordinated loans in the first six months of 2017 of EUR 883 million, is partly attributable to the redemption of EUR 1.1 billion 7.2% loan (Tier 1 capital) and exchange rate effects USD offset by the issuance of Tier 2 capital.

Debt securities in issue

The decrease in Debt securities in issue of EUR 4.3 billion, in the first six months of 2017, is mainly a result of a decrease in long term bonds, covered bonds and certificates of deposit of EUR 2.8 billion, EUR 2.4 billion and EUR 1.7 million respectively. These were partly offset by an increase in commercial paper of EUR 2.6 billion.

 

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Notes to the Condensed consolidated statement of financial position - continued

 

10 Equity

 

Total equity              
     30 June
2017
     31 December
2016
 

Share capital and share premium

     

-  Share capital

     39        39  

-  Share premium

     17,004        16,950  
  

 

 

    

 

 

 
     17,043        16,989  

Other reserves

     

-  Revaluation reserves: Available-for-sale and other

     3,653        3,830  

-  Revaluation reserves: Cash flow hedge

     382        777  

-  Revaluation reserves: Property in own use

     199        204  

-  Net defined benefit asset/liability remeasurement reserve

     –361        –371  

-  Currency translation reserve

     –1,221        –770  

-  Share of associates, joint ventures and other reserves

     2,321        2,235  

-  Treasury shares

     –10        –8  
  

 

 

    

 

 

 
     4,963        5,897  

Retained earnings

     27,679        26,907  
  

 

 

    

 

 

 

Shareholders’ equity (parent)

     49,685        49,793  

Non-controlling interests

     674        606  
  

 

 

    

 

 

 

Total equity

     50,359        50,399  
  

 

 

    

 

 

 

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   22


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Notes to the Condensed consolidated statement of profit or loss

 

Notes to the Condensed consolidated statement of profit or loss

11 Net interest income

Total Net interest income of EUR 6,711 million includes interest income and interest expense from trading and non-trading derivatives that are outside of hedge accounting relationships. Interest income from trading derivatives amounts to EUR 8,079 million (first six months of 2016: EUR 8,099 million). Interest income from non-trading derivatives with no hedge accounting amounts to EUR 226 million (first six months of 2016: EUR 347 million). Interest expense from trading derivatives amounts to EUR 8,180 million (first six months of 2016: EUR 8,215 million). Interest expense from non-trading derivatives with no hedge accounting amounts to EUR 409 million (first six months of 2016: EUR 275 million).

12 Valuation results and net trading income

In the first six months of 2017, Valuation results and net trading income includes DVA adjustments on own issued notes designated at fair value, amounting to EUR –28 million (first six months of 2016: EUR 15 million).

In the first six months of 2017, Valuation results and net trading income includes EUR –62 million related to warrants on the shares of Voya and NN Group (first six months of 2016: EUR –136 million). Reference is made to Note 2 ‘Financial assets at fair value through profit or loss’.

In the first six months of 2017, Valuation results and net trading income includes EUR 21 million CVA/DVA adjustments on trading derivatives, compared with EUR –65 million CVA/DVA adjustment in the first six months of 2016.

13 Investment income

 

Investment income              
     1 January to 30 June  
6 month period    2017      2016  

Dividend income

     18        13  

Realised gains/losses on disposal of debt securities

     57        55  

Impairments of available-for-sale debt securities

        –1  

Reversal of impairments of available-for-sale debt securities

     1     

Realised gains/losses on disposal of equity securities

     15        176  

Impairments of available-for-sale equity securities

     –3        –3  

Income from and fair value gains/losses on investment properties

     2        2  
  

 

 

    

 

 

 
     90        242  
  

 

 

    

 

 

 

14 Other income

 

Other income              
     1 January to 30 June  
6 month period    2017      2016  

Share of result from associates and joint ventures

     136        61  

Result on disposal of group companies

     1        1  

Other

     111        111  
  

 

 

    

 

 

 
     248        173  
  

 

 

    

 

 

 

Results from associates and joint ventures

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

 

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

 

15 Staff expenses

 

Staff expenses  
     1 January to 30 June  
6 month period    2017      2016  

Salaries

     1,646        1,606  

Pension costs and other staff-related benefit costs

     201        178  

Social security costs

     250        261  

Share-based compensation arrangements

     32        29  

External employees

     329        330  

Education

     36        31  

Other staff costs

     86        90  
  

 

 

    

 

 

 
     2,580        2,525  
  

 

 

    

 

 

 

16 Other operating expenses

 

Other operating expenses  
     1 January to 30 June  
6 month period    2017      2016  

Depreciation of property and equipment

     163        152  

IT expenses

     359        353  

Office expenses

     293        300  

Travel and accommodation expenses

     86        85  

Advertising and public relations

     209        192  

External advisory fees

     160        134  

Audit and non-audit services

     9        8  

Postal charges

     25        29  

Regulatory costs

     543        571  

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

     –5        114  

Intangible amortisation and (reversals of) impairments

     88        102  

Other

     412        320  
  

 

 

    

 

 

 
     2,342        2,360  
  

 

 

    

 

 

 

Regulatory costs respresent contributions to Deposit Guarantee Schemes (DGS), the Single Resolution Fund (SRF) and local bank taxes. In the first six months of 2017 the contributions to DGS were EUR 204 million (first six months of 2016: EUR 259 million) mainly related to the Netherlands, Germany, Belgium, and Poland, and contributions to the SRF of EUR 178 million (first six months of 2016: EUR 178 million). The contribution to the SRF in the first six months of 2017, comprises ING’s contribution for the full year 2017.

 

Intangible amortisation and (reversals of) impairments  
     Impairment losses      Reversals of impairments      Total  
     1 January to 30 June      1 January to 30 June      1 January to 30 June  
6 month period    2017      2016      2017      2016      2017      2016  

Property and equipment

     4        2        –2        –2        2     

Software and other intangible assets

     1        4              1        4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Reversals of) other impairments

     5        6        –2        –2        3        4  

Amortisation of other intangible assets

                 85        98  
              

 

 

    

 

 

 
                 88        102  
              

 

 

    

 

 

 

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   24


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

 

17 Discontinued operations

Total net result from discontinued operations comprises the results from NN Group.

 

Total net result from discontinued operations              
     1 January to 30 June  
6 month period    2017      2016  

NN Group

        442  
  

 

 

    

 

 

 

Net result from disposal of discontinued operations

     –          442  

NN Group

        442  
  

 

 

    

 

 

 

Total net result from discontinued operations (before non-controlling interests)

     –          442  
  

 

 

    

 

 

 

The tax effect on the result on disposal of discontinued operations for the first six months of 2017 is nil (first six months of 2016: EUR 2 million).

Net result from disposal of discontinued operations

During the first six months of 2016, ING Group sold its remaining shares in NN Group resulting in a net profit of EUR 448 million which is recognised in the statement of profit or loss in the line ‘Net result from disposal of discontinued operations’. Also included in this line, are deferred losses related to former insurance activities.

January 2016 – Loss of significant influence over NN Group

On 5 January 2016, ING sold a further 33 million ordinary shares of NN Group. As part of the transaction, NN Group repurchased 8 million ordinary shares. The gross proceeds to ING Group from the offering, including the repurchase by NN Group, amounted to EUR 1 billion. The transaction reduced the ownership of ING in NN Group from 25.75% (as at 31 December 2015) to 16.22%. As a result of the transaction, together with ING Group no longer having any nominees on NN Group’s Supervisory Board as of 14 December 2015, ING Group no longer had significant influence over NN Group and accounted for its remaining stake in NN Group as an available-for-sale investment. The sale transaction, together with the revaluation of the remaining stake, resulted in a net profit of EUR 522 million and is recognised in the statement of profit or loss in the line ‘Net result from disposal of discontinued operations’.

February 2016 – Final tranche exchange of subordinated notes: Anchor investors

On 2 February 2016, ING settled the exchange of the third and final tranche of EUR 337.5 million mandatory exchangeable subordinated notes which were issued in 2014 as part of the Anchor investment in NN Group. EUR 210 million of the notes were exchanged into 6.9 million NN Group ordinary shares with the three Anchor investors. EUR 128 million of notes were settled in cash with RRJ Capital. This transaction reduced ING’s remaining stake in NN Group from 16.22% to 14.09%. The transaction did not have a material impact on the shareholder’s equity or the statement of profit or loss of ING Group.

April 2016 – Divestment of remaining shareholding in NN Group

On 14 April 2016, ING Group sold its remaining shares in NN Group. The transaction involved the sale of 45.7 million ordinary shares of NN Group at gross proceeds of EUR 1,406 million and resulted in a net loss of EUR 66 million which is recognised in the statement of profit or loss, in the line ‘Net result from disposal of discontinued operations’.

 

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

 

18 Earnings per ordinary share

 

Earnings per ordinary share                
     Amount
(in EUR million)
     Weighted average number of ordinary
shares outstanding during the period
(in millions)
     Per ordinary share
(in EUR)
 
     1 January to 30 June      1 January to 30 June      1 January to 30 June  
6 month period    2017      2016      2017      2016      2017      2016  

Basic earnings

     2,514        2,552        3,881.2        3,872.7        0.65        0.66  

Basic earnings from discontinued operations

        442                 0.12  
  

 

 

    

 

 

          

 

 

    

 

 

 

Basic earnings from continuing operations

     2,514        2,110              0.65        0.54  

Effect of dilutive instruments:

                 

Stock option and share plans

           3.2        2.6        
        

 

 

    

 

 

       
           3.2        2.6        

Diluted earnings

     2,514        2,552        3,884.4        3,875.3        0.65        0.66  

Diluted earnings from discontinued operations

        442                 0.12  
  

 

 

    

 

 

          

 

 

    

 

 

 

Diluted earnings from continuing operations

     2,514        2,110              0.65        0.54  
  

 

 

    

 

 

          

 

 

    

 

 

 

19 Dividend per ordinary share

 

Dividends to shareholders of the parent  
     Per ordinary share
(in EUR)
     Total
(in EUR million)
 

Dividends on ordinary shares:

     

In respect of 2015

     

– Final dividend, paid in cash in May 2016

     0.41        1,590  

In respect of 2016

     

– Interim dividend, paid in cash in August 2016

     0.24        931  

– Final dividend, paid in cash in May 2017

     0.42        1,632  
  

 

 

    

 

 

 

Total dividend paid in respect of 2016

     0.66        2,563  

In respect of 2017

     

– Interim dividend declared

     0.24        932  
  

 

 

    

 

 

 

On 8 May 2017, the Annual General Meeting of Shareholders ratified the total dividend of EUR 0.66 per ordinary share of which EUR 0.24 was paid as an interim cash dividend during 2016. The final dividend was paid entirely in cash.

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

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   26


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 2016 ING Group Consolidated annual accounts, 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.

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 divestments and Legacy Insurance.

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. Legacy Insurance consists of the results from discontinued operations and the results from Insurance Other. Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations.

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 Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   27


Table of Contents

Segment reporting - continued

 

b. ING Group

 

ING Group Total                                   

6 month period

1 January to 30 June 2017

   ING
Bank N.V.
     Other
Banking1
     Total Banking      Legacy
Insurance
     Total  

Underlying income

              

– Net interest income

     6,756        –45        6,711           6,711  

– Net 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 expenses

     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  

Insurance Other2

              –64        –64  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net result IFRS attributable to equity holder of the parent

     2,612        –33        2,578        –64        2,514  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Reconciliation between Underlying and IFRS income, expenses and net result

 

6 month period

1 January to 30 June 2017

   Income      Expenses      Taxation      Non-
Controlling
interests
     Net result1  

Underlying

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

Insurance Other

     –64                 –64  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net result IFRS attributable to equity holder of the parent

     8,864        5,284        1,022        44        2,514  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 Net result, after tax and non-controlling interests.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   28


Table of Contents

Segment reporting - continued

 

ING Group Total                                   

6 month period

1 January to 30 June 2016

   ING
Bank N.V.
     Other
Banking1
     Total
Banking
     Legacy
Insurance
     Total  

Underlying income

              

– Net interest income

     6,559        –44        6,515           6,515  

– Net commission income

     1,218           1,217           1,217  

– Total investment and other income

     890        12        902           902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total underlying income

     8,666        –32        8,634           8,634  

Underlying expenditure

              

– Operating expenses

     4,870        –2        4,868           4,868  

– Additions to loan loss provision

     571           571           571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total underlying expenses

     5,441        –2        5,439           5,439  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Underlying result before taxation

     3,225        –30        3,195           3,195  

Taxation

     909        –11        898           898  

Non-controlling interests

     39           39           39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Underlying net result

     2,277        –19        2,259           2,259  

Special items

     –13           –13           –13  

Insurance Other2

              –136        –136  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net result IFRS (continuing operations)

     2,265        –19        2,246        –136        2,110  

Total net result from discontinued operations NN Group

              442        442  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net result IFRS attributable to equity holder of the parent

     2,265        –19        2,246        306        2,552  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

 

Reconciliation between Underlying and IFRS income, expenses and net result                       

6 month period

1 January to 30 June 2016

   Income      Expenses      Taxation      Non-
Controlling
interests
     Net
result1
 

Underlying

     8,634        5,439        898        39        2,259  

Special items

        17        –4           –13  

Insurance Other

     –136                 –136  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

IFRS (continuing operations)

     8,498        5,456        893        39        2,110  

Total net result from discontinued operations

                 442  
              

 

 

 

Net result IFRS attributable to equity holder of the parent

                 2,552  
              

 

 

 

 

1 Net result, after tax and non-controlling interests.

Special items in the first six months of 2016 comprise additional charges related to previously announced restructuring programmes in Retail Netherlands that were announced before 2013.

Reference is made to Note 17 ‘Discontinued operations’ for information on Discontinued operations.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   29


Table of Contents

Segment reporting - continued

 

c. Banking activities

 

Segments Banking by line of business                                                 

6 month period

1 January to 30 June 2017

   Retail
Netherlands
     Retail
Belgium
     Retail
Germany
     Retail
Other
     Wholesale
Banking
     Corporate
Line Banking
     Total
Banking
 

Underlying income

                    

– Net interest income

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

– Net 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 expenses

     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/Net result IFRS

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Segments Banking by line of business                                                 

6 month period

1 January to 30 June 2016

   Retail
Netherlands
     Retail
Belgium
     Retail
Germany
     Retail
Other
     Wholesale
Banking
     Corporate
Line Banking
     Total
Banking
 

Underlying income

                    

– Net interest income

     1,832        969        839        1,023        1,827        25        6,515  

– Net commission income

     269        208        83        135        524        –2        1,217  

– Total investment and other income

     58        148        63        213        436        –16        902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total underlying income

     2,159        1,325        985        1,371        2,787        7        8,634  

Underlying expenditure

                    

– Operating expenses

     1,400        730        510        828        1,265        135        4,868  

– Additions to loan loss provision

     99        89        22        122        240           571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total underlying expenses

     1,499        818        532        949        1,505        135        5,439  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Underlying result before taxation

     661        507        452        422        1,282        –128        3,195  

Taxation

     161        161        135        95        416        –71        898  

Non-controlling interests

        –1        1        33        6           39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Underlying net result

     499        347        316        293        860        –57        2,259  

Special items

     –13                       –13  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net result IFRS

     487        347        316        293        860        –57        2,246  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited  

30


Table of Contents

Segment reporting - continued

 

Geographical segments Banking                                                

6 month period

1 January to 30 June 2017

  Netherlands     Belgium     Germany     Other
Challengers
    Growth
Markets
    Wholesale
Banking Rest
of World
    Other     Total
Banking
 

Underlying income

               

– Net interest income

    2,256       1,079       1,050       748       742       763       72       6,711  

– Net commission income

    448       288       125       113       161       264       –3       1,396  

– Total investment and other income

    229       294       9       28       122       194       –55       820  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total underlying income

    2,933       1,661       1,184       889       1,025       1,221       14       8,928  

Underlying expenditure

               

– Operating expenses

    1,474       1,122       571       509       551       538       157       4,922  

– Additions to loan loss provision

    6       78       2       97       110       69       1       362  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total underlying expenses

    1,480       1,200       573       606       661       607       157       5,284  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underlying result before taxation

    1,453       462       611       283       364       614       –143       3,644  

Taxation

    365       161       204       85       79       174       –47       1,022  

Non-controlling interests

      3       1         40           44  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underlying net result/Net result IFRS

    1,088       297       406       198       245       441       –96       2,578  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Geographical segments Banking                                                

6 month period

1 January to 30 June 2016

  Netherlands     Belgium     Germany     Other
Challengers
    Growth
Markets
    Wholesale
Banking Rest
of World
    Other     Total
Banking
 

Underlying income

               

– Net interest income

    2,318       1,087       989       701       600       796       25       6,515  

– Net commission income

    401       268       120       72       137       221       –1       1,217  

– Total investment and other income

    157       264       76       54       226       123       3       902  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total underlying income

    2,875       1,618       1,186       826       963       1,140       27       8,634  

Underlying expenditure

               

– Operating expenses

    1,764       904       556       454       532       517       139       4,868  

– Additions to loan loss provision

    194       126       22       66       102       61         571  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total underlying expenses

    1,959       1,030       578       520       634       578       139       5,439  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underlying result before taxation

    916       588       607       306       329       562       –112       3,195  

Taxation

    225       183       186       94       62       215       –67       898  

Non-controlling interests

      –1       1         39           39  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underlying net result

    691       406       421       213       228       346       –46       2,259  

Special items

    –13                   –13  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net result IFRS

    679       406       421       213       228       346       –46       2,246  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

IFRS statements of financial position by segment are not reported internally to, and not managed by, the chief operating decision maker.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   31


Table of Contents

Additional notes to the Condensed consolidated interim accounts

 

Additional notes to the condensed consolidated interim accounts

21 Fair value of financial assets and liabilities

The following table presents the estimated fair values of ING Group’s financial assets and liabilities. Certain items per the statement of financial position are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair values presented below does not represent, and should not be construed as representing, the underlying value of ING Group.

 

Fair value of financial assets and liabilities  
     Estimated fair value      Statement of
financial position value
 
     30 June
2017
     31 December
2016
     30 June
2017
     31 December
2016
 

Financial assets

           

Cash and balances with central banks

     17,894        18,144        17,894        18,144  

Loans and advances to banks

     28,121        28,940        27,987        28,858  

Financial assets at fair value through profit or loss

           

– trading assets

     135,246        114,504        135,246        114,504  

non-trading derivatives

     2,926        2,490        2,926        2,490  

– designated as at fair value through profit or loss

     4,971        5,099        4,971        5,099  

Investments

           

available-for-sale

     73,135        82,912        73,135        82,912  

held-to-maturity

     10,371        8,809        10,306        8,751  

Loans and advances to customers

     583,225        578,596        568,237        563,660  

Other assets1

     14,835        13,709        14,835        13,709  
  

 

 

    

 

 

    

 

 

    

 

 

 
     870,724        853,203        855,537        838,127  

Financial liabilities

           

Deposits from banks

     39,405        32,352        39,248        31,964  

Customer deposits

     535,922        523,850        533,210        522,942  

Financial liabilities at fair value through profit or loss

           

– trading liabilities

     88,677        83,167        88,677        83,167  

non-trading derivatives

     2,939        3,541        2,939        3,541  

– designated as at fair value through profit or loss

     11,586        12,266        11,586        12,266  

Other liabilities2

     16,184        15,247        16,184        15,247  

Debt securities in issue

     99,805        103,559        98,968        103,234  

Subordinated loans

     16,899        17,253        16,340        17,223  
  

 

 

    

 

 

    

 

 

    

 

 

 
     811,417        791,235        807,152        789,584  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1 Other assets do not include, among others: (deferred) tax assets, net defined benefit asset and property development and obtained from foreclosures.
2 Other liabilities do not include, among others: (deferred) tax liabilities, net defined benefit and related employee benefit liabilities, reorganisation and other provisions and other taxation and social security contributions.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   32


Table of Contents

Additional notes to the Condensed consolidated interim accounts - continued

 

Fair value hierarchy

ING Group has categorised its financial instruments that are either measured in the statement of financial position at fair value or of which the fair value is disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. The fair value hierarchy consists of three levels, depending upon whether fair values were determined based on (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include for example illiquid debt securities, complex derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), and asset backed securities for which there is no active market and a wide dispersion in quoted prices.

Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on the Group’s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the market. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and certain credit spreads. Transfers into and transfers out of fair value hierarchy levels are recognised as of the date of the event or change in circumstances that caused the transfer.

Level 1 – (Unadjusted) quoted prices in active markets

Value is determined directly by reference to (unadjusted) quoted prices in an active market that ING Group can access. Transfers out of Level 1 into Level 2 or Level 3 occur when ING Group establishes that markets are no longer active and therefore (unadjusted) quoted prices no longer provide reliable pricing information.

Level 2 – Valuation technique supported by observable inputs

Value is based on market observables other than (unadjusted) quoted prices. The fair value for financial instruments in this category can be determined by reference to quoted prices for similar instruments in active markets, but for which the prices are modified based on other market observable external data or reference to quoted prices for identical or similar instruments in markets that are not active. These prices can be obtained from a third party pricing service. ING analyses how the prices are derived and determines whether the prices are liquid tradable prices or model based consensus prices taking various data as inputs.

If certain inputs in the model are unobservable, the instrument is still classified in this category, provided that the impact of those unobservable inputs on the overall valuation is insignificant. If the combined change in asset value resulting from the shift of the unobservable parameters and the model uncertainty exceeds the threshold, the asset is classified as Level 3.

Level 3 – Valuation technique supported by unobservable inputs

Value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive.

Further information on the fair value hierarchy is disclosed in the 2016 ING Group Consolidated annual accounts in Note 37 ‘Fair value of assets and liabilities’.

 

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Additional notes to the Condensed consolidated interim accounts - continued

 

The fair values of the financial instruments were determined as follows:

 

Methods applied in determining fair values of financial assets and liabilities (carried at fair value)  
     Level 1      Level 2      Level 3      Total  
     30 June
2017
     31 December
2016
     30 June
2017
     31 December
2016
     30 June
2017
     31 December
2016
     30 June
2017
     31 December
2016
 

Financial Assets

                       

Trading assets

     18,817        17,652        115,373        95,629        1,056        1,223        135,246        114,504  

Non-trading derivatives

        3        2,783        2,231        143        256        2,926        2,490  

Financial assets designated as at fair value through profit or loss

     297        502        4,153        4,141        521        456        4,971        5,099  

Available-for-sale investments

     67,675        76,238        4,959        6,153        501        521        73,135        82,912  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     86,789        94,395        127,268        108,154        2,221        2,456        216,278        205,005  

Financial liabilities

                       

Trading liabilities

     5,662        6,139        81,942        75,650        1,073        1,378        88,677        83,167  

Non-trading derivatives

           2,920        3,517        19        24        2,939        3,541  

Financial liabilities designated as at fair value through profit or loss

     1,202        1,348        10,274        10,795        110        123        11,586        12,266  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     6,864        7,487        95,136        89,962        1,202        1,525        103,202        98,974  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Main changes in fair value hierarchy in the first six months of 2017

In the first six months of 2017, the increase in Level 2 financial assets and liabilities is mainly due to increased (reverse) repurchase balances.

There were no significant transfers between Level 1 and Level 2.

In the first six months of 2017, there were no changes in the valuation techniques.

 

 

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Additional notes to the Condensed consolidated interim accounts - continued

 

Changes in Level 3 Financial assets         
     Trading assets      Non-trading
derivatives
     Financial assets
designated as at
fair value through
profit or loss
     Available-
for-sale
investments
     Total  
     6 month
period ended
30 June
2017
     year
ended
31 December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
     6 month
period ended
30 June

2017
     year
ended
31 December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
 

Opening balance

     1,223        1,146        256        168        456        338        521        693        2,456        2,345  

Realised gain/loss recognised in the statement of profit or loss during the period1

     –297        226        –113        –34        –16        76        8        200        –418        468  

Revaluation recognised in other comprehensive income during the period2

                          –144           –144  

Purchase of assets

     535        77           5        156        193        16        68        707        343  

Sale of assets

     –285        –71           –4           –76        –30        –183        –315        –334  

Maturity/settlement

     –111        –135                    –6        –9        –117        –144  

Reclassifications

                       9        –92        9        –92  

Transfers into Level 3

     5        21           62                 5        5        88  

Transfers out of Level 3

     –12        –43              –75        –75        –13           –100        –118  

Exchange rate differences

     –2        3                    –2        8        –4        11  

Changes in the composition of the group and other changes

        –1           59              –2        –25        –2        33  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     1,056        1,223        143        256        521        456        501        521        2,221        2,456  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 Net gains/losses were recorded in income from trading activities in continuing operations herein as ‘Valuation results and net trading income’ in the statement of profit or loss.
2 Revaluation recognised in other comprehensive income is included on the line ‘Unrealised revaluations available-for-sale investements and other revaluations’.

In the first six months of 2017, financial assets were transferred out of Level 3 on the basis that the valuation is not significantly impacted by unobservable inputs.

 

Changes in Level 3 Financial liabilities  
     Trading liabilities      Non-trading
derivatives
     Financial liabilities
designated as at fair value
through profit or loss
     Total  
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
     6 month
period ended
30 June

2017
     year
ended
31 December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
 

Opening balance

     1,378        1,239        24        1        123        198        1,525        1,438  

Realised gain/loss recognised in the statement of profit or loss during the period1

     –184        277        –5        12        –2        –3        –191        286  

Issue of liabilities

     444        53           11           4        444        68  

Early repayment of liabilities

     –342        –62           –11        –6        –13        –348        –86  

Maturity/settlement

     –155        –62              –1           –156        –62  

Transfers into Level 3

     19        16           11              19        27  

Transfers out of Level 3

     –85        –86              –4        –63        –89        –149  

Exchange rate differences

     –2        6                    –2        6  

Changes in the composition of the group and other changes

        –3                       –3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     1,073        1,378        19        24        110        123        1,202        1,525  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 Net gains/losses were recorded in income from trading activities in continuing operations included herein as ‘Valuation results and net trading income’ in the statement of profit or loss.

In the first six months of 2017, financial liabilities were transferred out of Level 3 mainly due to the valuation not being significantly impacted by unobservable inputs.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   35


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Additional notes to the Condensed consolidated interim accounts - continued

 

Amounts recognised in the statement of profit or loss during the period (Level 3)  
     Held at balance
sheet date
     Derecognised
during the period
     Total  
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
     6 month
period ended
30 June

2017
     year
ended 31
December
2016
 

Financial assets

                 

Trading assets

     –297        226              –297        226  

Non-trading derivatives

     –113        –34              –113        –34  

Financial assets designated as at fair value through profit or loss

     –16        76              –16        76  

Available-for-sale investments

        –3        8        203        8        200  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     –426        265        8        203        –418        468  

Financial liabilities

                 

Trading liabilities

     –184        277              –184        277  

Non-trading derivatives

     –5        12              –5        12  

Financial liabilities designated as at fair value through profit or loss

     –2        –3              –2        –3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     –191        286        –          –          –191        286  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Recognition of unrealised gains and losses in Level 3

Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the period that relates to Level 3 assets and liabilities are included in the statement of profit or loss as follows:

 

    Results on trading assets and trading liabilities are included in Other income – Valuation results and net trading income;

 

    Non-trading derivatives are included in Other income - Valuation results and net trading income; and

 

    Financial assets and liabilities designated at fair value through profit or loss are included in Other income - Valuation results and net trading income - Valuation results on assets and liabilities designated at fair value through profit or loss (excluding trading).

Unrealised gains and losses that relate to Available-for-sale investments recognised in Other comprehensive income are included in the Revaluation reserve - Available for sale reserve and other.

Level 3 Financial assets and liabilities

Financial assets measured at fair value in the statement of financial position as at 30 June 2017 of EUR 216 billion includes an amount of EUR 2.2 billion (1.0%) which is classified as Level 3 (31 December 2016: EUR 2.5 billion, being 1.2%). Changes in Level 3 from 31 December 2016 to 30 June 2017 are disclosed above in the table ‘Changes in Level 3 Financial assets’.

Financial liabilities measured at fair value in the statement of financial position as at 30 June 2017 of EUR 103 billion includes an amount of EUR 1.2 billion (1.2%) which is classified as Level 3 (31 December 2016: EUR 1.5 billion, being 1.5%). Changes in Level 3 from 31 December 2016 to 30 June 2017 are disclosed above in the table ‘Changes in Level 3 Financial liabilities’.

Of the total amount of financial assets classified as Level 3 as at 30 June 2017 of EUR 2.2 billion (31 December 2016: EUR 2.5 billion), an amount of EUR 0.9 billion (41%) (31 December 2016: EUR 1.0 billion, being 42%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.

Furthermore, Level 3 financial assets includes approximately EUR 0.5 billion (31 December 2016: EUR 0.5 billion) which relates to financial assets that are part of structures that are designed to be fully neutral in terms of market risk. Such structures include various financial assets and liabilities for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual components of these structures may be determined using different techniques and the fair value of each of the components of these structures may be sensitive to unobservable inputs, the overall sensitivity is by design not significant.

The remaining EUR 0.8 billion (31 December 2016: EUR 1.0 billion) of the fair value classified in Level 3 financial assets is established using valuation techniques that incorporates certain inputs that are unobservable. This relates mainly to assets that are classified as Available-for-sale investments, for which changes in fair value are recognised in the statement of comprehensive income on the line ‘Unrealised revaluations available-for-sale investments and other revaluations’ and do not directly impact profit or loss.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   36


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Additional notes to the Condensed consolidated interim accounts - continued

 

Of the total amount of financial liabilities classified as Level 3 as at 30 June 2017 of EUR 1.2 billion (31 December 2016: EUR 1.5 billion), an amount of EUR 0.7 billion (61%) (31 December 2016: EUR 0.9 billion, being 59%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.

Furthermore, Level 3 financial liabilities includes approximately EUR 0.1 billion (31 December 2016: EUR 0.1 billion) which relates to financial liabilities that are part of structures that are designed to be fully neutral in terms of market risk. As explained above, the fair value of each of the components of these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design not significant.

The remaining EUR 0.4 billion (31 December 2016: EUR 0.5 billion) of the fair value classified in Level 3 financial liabilities is established using valuation techniques that incorporates certain inputs that are unobservable.

The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and upper range mentioned in the overview represent the lowest and highest variance of the respective valuation input as actually used in the valuation of the different financial instruments. Amounts and percentages stated are unweighted. The range can vary from period to period subject to market movements and change in Level 3 position. Lower and upper bounds reflect the variability of Level 3 positions and their underlying valuation inputs in the portfolio, but do not adequately reflect their level of valuation uncertainty. For valuation uncertainty assessment, reference is made to section ‘Sensitivity analysis of unobservable inputs (Level 3)’ below.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   37


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Additional notes to the Condensed consolidated interim accounts - continued

 

Valuation techniques and range of unobservable inputs (Level 3)  
    Assets     Liabilities    

Valuation

techniques

 

Significant
unobservable
inputs

  Lower range     Upper range  
    30 June
2017
    31 December
2016
    30 June
2017
    31 December
2016
            30 June
2017
    31 December
2016
    30 June
2017
    31 December
2016
 

At fair value through profit or loss

 

               

Debt securities

    329       180         Price based   Price (%)     0     0     125     122
          Net asset value   Price (%)     0     10     0     19

Equity securities

    2       4         Price based   Price (%)     1     0     8     0

Loans and advances

    233       326       1       3     Price based   Price (%)     60     60     79     101
          Present value techniques   Credit spread (bps)     130       130       130       150  

Structured notes

    1       6       118       125     Price based   Price (%)     52     52     117     111
          Net asset value   Price (%)     n.a       19     n.a       19
          Option pricing model   Equity volatility (%)     15     16     28     34
            Equity/Equity correlation     0.0       0.0       0.7       0.8  
            Equity/FX correlation     –0.4       –0.4       –0.3       0.1  
            Dividend yield (%)     1     1     4     5
            Interest rate volatility (%)     n.a       n.a       n.a       n.a  
          Present value techniques   Implied correlation     0.7       0.7       0.7       0.7  

Derivatives

                   

– Rates

    554       486       486       457     Option pricing model   Interest rate volatility (bps)     26       22       300       300  
            Interest rate correlation     n.a       n.a       n.a       n.a  
            IR/INF correlation     0.5       0.5       0.5       0.5  
          Present value techniques   Reset spread (%)     2     2     2     2
            Prepayment rate (%)     5     5     10     10
            Inflation rate (%)     3     2     4     4

– FX

    367       642       367       688     Present value techniques   Inflation rate (%)     3     2     3     3

– Credit

    21       33       42       43     Present value techniques   Credit spread (bps)     3       0       347       1,596  
            Implied correlation     0.7       0.7       1.0       1.0  
            Jump rate (%)     12     12     12     12
          Price based   Price (%)     n.a       99     n.a       99

– Equity

    211       258       188       208     Option pricing model   Equity volatility (%)     6     0     140     140
            Equity/Equity correlation     –0.5       –0.1       1.0       1.0  
            Equity/FX correlation     –0.9       –0.9       0.8       0.6  
            Dividend yield (%)     0       0     24     13

– Other

    3           1     Option pricing model   Commodity volatility (%)     11     13     43     55
            Com/Com correlation     0.3       0.0       0.9       0.9  
            Com/FX correlation     –0.9       –0.5       0.8       0.0  

Available for sale

                   

– Debt

    38       55         Price based   Price (%)     65     0     97     99
          Present value techniques   Credit spread (bps)     339       339       400       400  
            Weighted average life (yr)     1.5       1.6       3.1       3.2  

– Equity

    462       466         Discounted cash flow   Financial Statements     n.a       n.a       n.a       n.a  
          Multiplier method   Observable market factors     n.a       n.a       n.a       n.a  
          Comparable transactions       n.a       n.a       n.a       n.a  
 

 

 

   

 

 

   

 

 

   

 

 

             

Total

    2,221       2,456       1,202       1,525              
 

 

 

   

 

 

   

 

 

   

 

 

             

Further information on equity securities, credit spreads, volatility, correlation and interest rates is disclosed in the 2016 ING Group Consolidated annual accounts in Note 37 ‘Fair value of assets and liabilities’.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   38


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Additional notes to the Condensed consolidated interim accounts - continued

 

Sensitivity analysis of unobservable inputs (Level 3)

Where the fair value of a financial instrument is determined using inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument the actual value of those inputs at the balance date may be drawn from a range of reasonably possible alternatives. In line with market practice the upper and lower bounds of the range of alternative input values reflect a 90% level of valuation certainty. The actual levels chosen for the unobservable inputs in preparing the financial statements are consistent with the valuation methodology used for fair valued financial instruments.

If ING had used input values from the upper and lower bound of this range of reasonable possible alternative input values when valuing these instruments as of 30 June 2017, then the impact would have been higher or lower as indicated below. The purpose of this disclosure is to present the possible impact of a change of unobservable inputs in the fair value of financial instruments where unobservable inputs are significant to the valuation.

As ING has chosen to apply a 90% confidence level already for its IFRS valuation of fair valued financial instruments as of end of 2014, the downward valuation uncertainty has become immaterial, whereas the potential upward valuation uncertainty, reflecting a potential profit, has increased.

For more detail on the valuation of fair valued instruments, refer to the 2016 ING Group Consolidated annual accounts, section ‘Risk Management – Market risk’, paragraph Fair values of financial assets and liabilities.

Valuation uncertainty in practice is measured and managed per exposure to individual valuation inputs (i.e. risk factors) at portfolio level across different product categories. Where the disclosure looks at individual Level 3 inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets.

Because of the approach taken, the valuation uncertainty in the table below is broken down by related risk class rather than by product.

In reality some valuation inputs are interrelated and it would be unlikely that all unobservable inputs would ever be simultaneously at the limits of their respective ranges of reasonably possible alternatives. Therefore it can be assumed that the estimates in the table below show a greater fair value uncertainty than the realistic position at period end.

Also, this disclosure does not attempt to indicate or predict future fair value movement. The numbers in isolation give limited information as in most cases these Level 3 assets and liabilities should be seen in combination with other instruments (for example as a hedge) that are classified as Level 2.

 

Sensitivity analysis of Level 3 instruments  
     Positive fair value
movements from
using reasonable
possible alternatives
     Negative fair value
movements from
using reasonable
possible alternatives
 
     30 June
2017
     31 December
2016
     30 June
2017
     31 December
2016
 

Fair value through profit or loss

           

Equity (equity derivatives, structured notes)

     146        262        

Interest rates (Rates derivatives, FX derivatives)

     69        80        

Credit (Debt securities, Loans, structured notes, credit derivatives)

     27        33        

Available-for-sale

           

Equity

     10        8        16        14  

Debt

     2        2        
  

 

 

    

 

 

    

 

 

    

 

 

 
     254        385        16        14  
  

 

 

    

 

 

    

 

 

    

 

 

 

22 Companies and business acquired and divested

Acquisitions

There were no material acquisitions in the first six months of 2017 and 2016.

Divestments

Divestments in the first six months of 2017

There were no material divestments of consolidated companies, in the first six months of 2017 and 2016.

 

ING Group Condensed consolidated interim financial information for the period ended 30 June 2017 - Unaudited   39


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Additional notes to the Condensed consolidated interim accounts - continued

 

23 Related parties

In the normal course of business, ING Group enters into various transactions with related parties. Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties of ING Group include, among others, its subsidiaries, joint ventures, associates, key management personnel and various defined benefit and contribution plans. Transactions between related parties include rendering or receiving of services, leases, transfers under finance arrangements and provisions of guarantees or collateral. Transactions with related parties are disclosed in Note 49 ‘Related parties’ in the 2016 ING Group Consolidated annual accounts.

24 Subsequent events

There were no subsequent events

 

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Other information

Review report

To: The Shareholders, the Supervisory Board and the Executive Board of ING Groep N.V.

Introduction

We have reviewed the accompanying condensed consolidated interim financial information as at 30 June 2017 of ING Groep N.V., Amsterdam (the ‘ Company’), which comprises the condensed consolidated statement of financial position as at 30 June 2017, the condensed consolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the period of six-months ended 30 June 2017, and the notes. The Executive Board of the Company is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope

We conducted our review in accordance with Dutch law including standard 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union.

Amstelveen, 1 August 2017

KPMG Accountants N.V.

M.A. Hogeboom RA

 

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Important legal information

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, except as described otherwise, the same accounting principles are applied as in the 2016 ING Group consolidated annual accounts.

All figures in this document are unaudited. Small differences are possible in the tables due to rounding.

Projects may be subject to regulatory approvals. 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 a number of factors, including, 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) potential consequences of European Union countries leaving the European Union or a break-up of the euro, (4) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit and capital markets generally, including changes in borrower and counterparty creditworthiness, (5) changes affecting interest rate levels, (6) changes affecting currency exchange rates, (7) changes in investor and customer

 

behaviour, (8) changes in general competitive factors, (9) changes in laws and regulations and the interpretation and application thereof, (10) geopolitical risks and policies and actions of governmental and regulatory authorities, (11) changes in standards and interpretations under International Financial Reporting Standards (IFRS) and the application thereof, (12) conclusions with regard to purchase accounting assumptions and methodologies, and other changes in accounting assumptions and methodologies including changes in valuation of issued securities and credit market exposure, (13) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (14) changes in credit ratings, (15) the outcome of current and future legal and regulatory proceedings, (16) ING’s ability to achieve its strategy, including projected operational synergies and cost-saving programmes and (17) the other risks and uncertainties detailed in the most recent annual report of ING Groep N.V. (including the Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which are available on www.ING.com. Many of those factors are beyond ING’s control.

Any forward looking statements made by or on behalf of ING speak only as of the date they are made, and ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.

This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities in the United States or any other jurisdiction

www.ing.com

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

      ING Groep N.V.
      (Registrant)
    By  

/s/ J.V. Timmermans

      Title: CFO ING Groep N.V.
    By  

/s/ N.R.Tambach

      Title: Group Controller ING
Date 1 August 2017