ING Groep N : Press release 3Q2022

Press release

ING Corporate Communications

Amsterdam, 3 November 2022

ING posts 3Q2022 net result of €979 million and announces additional distribution to shareholders

3Q2022 profit before tax of €1,380 million; CET1 ratio remains strong at 14.7%

• Net customer deposits growth of €10.5 billion and net core lending growth of €4.7 billion
• In net interest income, higher liability margins helped to offset the impact of the Polish mortgage moratorium
• Risk costs normalised reflecting the macroeconomic environment
• Additional distribution to shareholders of €1.5 billion

CEO statement

"I'm pleased with our solid performance, especially in light of the challenging economic and geopolitical environment," said Steven van Rijswijk, CEO of ING. "Our strategy and our strong, diversified balance sheet are paying off. Total income this quarter was €4,412 million. Without two exceptional items it would have been €5,043 million, as we benefitted from higher interest rates, supporting our revenues in both Retail and Wholesale Banking. Fee income was resilient, as higher fees from daily banking were offset by lower fees from investment products, due to a decline in stock markets and subdued trading activity. The two exceptional items were €343 million from new regulation in Poland for mortgages as previously announced, and a hedge accounting impact of €288 million, of which the mirroring positive impact will be recognised over the coming years.

"The exceptionally high inflation and high energy prices are affecting consumers and companies alike. Our own expenses were also impacted by increasing inflationary pressure and adverse currency developments this quarter, however controllable expenses were well contained. With our scalable Tech and Operations foundation, we're able to grow our business at marginal cost. One of the three main elements of this foundation, our ING Private Cloud (IPC), reached an important milestone this quarter: more than 50% of the workload is now on IPC, up from 34% in 2021, meaning we're well on our way to reach our 70% target by 2025.

"Risk costs remained in line with our through-the-cycle average and include overlays based on the macroeconomic outlook. We're confident of the quality of our loan portfolio, the strength of our diversified risk profile and our provisioning levels. Combined with our strong capital position this allows us to announce today an additional distribution to our shareholders of €1.5 billion, which is fully in line with our capital ambitions as presented at our recent Investor Update.

"We're committed to executing our strategy: to provide a superior customer experience and put sustainability at the heart of what we do. The continued growth in primary customers and the positive Net Promoter Score development are evidence that our customers value our services. In NPS, we are now number one in seven of our ten retail markets, up from five in the previous quarter.

"When it comes to sustainability, we aim to be a banking leader. Our 2022 Climate Report shows the progress we're making in climate action, including our Terra approach. I'm pleased that we've set intermediate targets for 2030 for all nine Terra sectors (the most carbon-intensive ones). This is helping us to steer our loan portfolio towards net zero by 2050.

"We're on track to reach our financial targets as communicated in June. I'm confident we're well positioned to face the challenges and capture the opportunities ahead of us, as we continue to create value for all stakeholders, support our customers and facilitate the transition to a low-carbon economy."

Investor enquiries	Analyst call	Media call
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Business Highlights

Primary customers	Net result	CET1 ratio
14.4 mln	€979 mln	14.7%
+139,000 since 2Q2022	-28% vs 3Q2021	unchanged vs 2Q2022
Mobile-only customers	Fee income	Return on equity (4-qtr rolling avg)

57%

in % of total active customers vs 53% at 2Q2022

€876 mln	6.8%
-1% vs 3Q2021	-2.0%-point vs 3Q2021

Customer experience

NPS score:

Ranked #1 in 7 of 10 Retail markets

Primary customers:

Growth of 139,000

Giving our customers a superior experience is one of our strategic priorities. We want to stand out with an experience that is relevant, easy, personal and instant.

That's why we're continuously improving payment experiences. In the Netherlands, department store HEMA will be the first retail chain to test an app, developed

by ING and CCV, a specialist in payment solutions, that turns mobile phones into payment terminals for contactless payments. Another example is a peer- to-peer payment application that allows users to pay simply by holding

their phones next to each other. It was developed by ING in the Netherlands in collaboration with Samsung and NXP. In Spain we launched a new daily banking account, co-created with customers, that offers an instant online onboarding process and personal services, such as online purchase protection.

In the third quarter we grew our primary customer base by 139,000. Together with the positive development of our NPS scores, including a number 1 score in the Netherlands, this is evidence that customers value our services and the digital experience that we offer.

Sustainability

Volume mobilised

€64.5 bln in 9M22

vs €57.3 bln in 9M21

Sustainability deals supported by ING:

306 in 9M22

vs 284 in 9M21

Sustainability is at the heart of what we do. We're determined to be a banking leader in building a sustainable future for our company, our customers, society and the environment.

After we co-advised our client Global- Connect, one of the leading digital infrastructure and data communication providers in northern Europe, on the structuring of a sustainability-linked loan last year, GlobalConnect updated its sustainability strategy in line with our recommendations. In the third quarter they mandated ING as sole sustainability structurer for both their €2.7 billion existing and €1 billion incremental financing. Both transactions contribute to our year-to-date sustainable finance mobilised, on our way to mobilise €125 billion annually by 2025. In the first nine months of 2022 we mobilised €64.5 billion, up 13% compared with the same period of 2021.

Steel is a carbon-intensive sector, accounting for roughly 7% of global emissions. The decarbonisation of this sector is urgent. Over the past year, ING has led a working group to design a climate-aligned finance agreement for steel. Together with five other banks, we

signed the Sustainable STEEL Principles, which will help banks measure and report the emissions associated with their steel loan portfolios compared to net-zero pathways.

A practical example of how we're helping to decarbonise the steel sector is our leading role in structuring and financing a complex €3.5 billion multi-tranche ECA covered project for H2Green Steel (H2GS). H2GS is planning to build one of the world's first large-scale green steel plants. By using hydrogen created by green electricity, H2GS is planning to eliminate 95% of CO2 emissions from the steelmaking process.

In Retail Banking we're offering eco- mortgages to stimulate more energy- efficient homes. After earlier introductions in the Netherlands and Poland, we've now also started offering them in Germany and Italy. It's our aim to have sustainable alternatives for our main retail products in all markets by 2025.

In addition, we've launched a carbon footprint calculator in the app in the Netherlands. This calculator can help create awareness on carbon literacy and is already live for 500,000 customers.

ING Press Release 3Q2022

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Consolidated Results

	Consolidated results
		3Q2022	3Q2021	Change	2Q2022	Change	9M2022	9M2021	Change
	Profit or loss (in € million)
Net interest income	3,332	3,388	-1.7%	3,465	-3.8%	10,212	10,241	-0.3%
Net fee and commission income	876	882	-0.7%	888	-1.4%	2,698	2,592	4.1%
Investment income	111	74	50.0%	31	258.1%	171	123	39.0%
Other income	93	304	-69.4%	297	-68.7%	612	911	-32.8%
Total income	4,412	4,648	-5.1%	4,682	-5.8%	13,694	13,866	-1.2%
Expenses excl. regulatory costs	2,533	2,565	-1.2%	2,524	0.4%	7,353	7,365	-0.2%
Regulatory costs1)	96	121	-20.7%	214	-55.1%	958	880	8.9%
Operating expenses	2,629	2,685	-2.1%	2,738	-4.0%	8,311	8,245	0.8%
Gross result	1,783	1,962	-9.1%	1,944	-8.3%	5,382	5,621	-4.3%
Addition to loan loss provisions2)	403	39	933.3%	202	99.5%	1,592	170	836.5%
Result before tax	1,380	1,924	-28.3%	1,743	-20.8%	3,791	5,452	-30.5%
Taxation	427	521	-18.0%	530	-19.4%	1,151	1,526	-24.6%
Non-controlling interests	-26	35	-174.3%	34	-176.5%	54	94	-42.6%
Net result	979	1,367	-28.4%	1,178	-16.9%	2,586	3,832	-32.5%
Profitability and efficiency
Interest margin	1.28%	1.38%		1.36%		1.34%	1.40%
Cost/income ratio	59.6%	57.8%		58.5%		60.7%	59.5%
Risk costs in bps of average customer lending	25	3		13		33	4
Return on equity based on IFRS-EU equity3)	7.7%	10.4%		9.2%		6.7%	9.8%
ING Group common equity Tier 1 ratio	14.7%	15.8%		14.7%		14.7%	15.8%
Risk-weighted assets (end of period, in € billion)	338.6	310.5	9.0%	335.9	0.7%	338.6	310.5	9.0%
Customer balances (in € billion)
Customer lending	649.7	619.2	4.9%	642.9	1.1%	649.7	619.2	4.9%
Customer deposits	664.3	620.1	7.1%	642.1	3.5%	664.3	620.1	7.1%
Net core lending growth (in € billion)4)	4.7	3.1		10.1		15.1	17.2
Net core deposits growth (in € billion)4)	10.5	-0.6		8.1		17.9	12.4

1. Regulatory costs comprise bank taxes and contributions to the deposit guarantee schemes ('DGS') and the (European) single resolution fund ('SRF').
2. The amount presented in 'Addition to loan loss provisions' is equivalent to risk costs.
3. Annualised net result divided by average IFRS-EU shareholders' equity excluding reserved profits not included in CET1 capital.
4. Net core lending growth represents the development in loans and advances to customers excluding provisions for loan losses, adjusted for currency impacts, Treasury and run-off portfolios. Net core deposits growth represents customer deposits adjusted for currency impacts, Treasury and run-off portfolios.

Total income

Total income in 3Q2022 was €4,412 million. Without two exceptional items this quarter, it would have been €5,043 million, supported by higher net interest income on liabilities and including positive currency impacts. The first exceptional item was €-343 million in net interest income for the expected impact from new moratorium regulation imposed by the Polish government, which offers customers the right to suspend up to eight instalment payments on their mortgage loans. Second, other income included an impact of €-288 million to unwind a macro fair value hedge of deposits, which leads to a timing difference with expected fair value movements on the hedging instruments. The mirroring positive impact of €288 million will be recognised over the coming years.

Net interest income, when excluding the impact of the Polish moratorium, increased mainly as a result of strongly improved liability margins. Year-on-year, net interest income was also supported by higher interest results from FX ratio hedging, reflecting higher interest rate differentials, mainly on the US dollar and Polish zloty. Net interest income from mortgages declined, albeit at a slower pace than in the previous two quarters, reflecting higher funding costs and a lower level of income from prepayment penalties. Interest income from other lending decreased, as higher average volumes could not fully compensate for lower margins.

Net interest income included a €71 million benefit from the TLTRO III programme compared with an €84 million benefit in 3Q2021 and €76 million in 2Q2022.

The net interest margin was 1.28% in 3Q2022. Excluding the impact of the Polish moratorium, this would have been 1.42%, up from 1.36% in the previous quarter, reflecting higher interest income on liabilities. In line with 2Q2022, the TLTRO III benefit contributed three basis points to the net interest margin.

Net interest income (in € million) and net interest margin (in %)

4,000					1.42%	1.5
	1.38%
3,000	1.37%	1.37%	1.36%		1.4
2,000	1.38%	1.37%	1.37%	1.36%		1.3
					1.28%
1,000						1.2
0	3,388	3,374	3,415	3,465	3,675	1.1
				-343
-1,000	3Q2021	4Q2021	1Q2022	2Q2022	3Q2022	1.0

Net interest income excl. Polish moratorium

Net interest income Polish moratorium

Net interest margin

Net interest margin excl. Polish moratorium

Net core lending growth - which excludes FX impacts and movements in Treasury lending as well as in the run-off

ING Press Release 3Q2022

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Consolidated Results

portfolios - was €4.7 billion in 3Q2022. Net core lending growth in Retail Banking was €0.9 billion and consisted of €1.9 billion of growth in residential mortgages (primarily in Germany and the Netherlands) and €-1.0 billion in other retail lending. In Wholesale Banking, net core lending growth was €3.8 billion, reflecting a strong increase in Lending.

Net core deposits growth - which excludes FX impacts and movements in Treasury deposits as well as in the run-off portfolios - was €10.5 billion in 3Q2022. The growth in Retail Banking amounted to €6.8 billion and was mainly attributable to Germany, Australia and Poland. Wholesale Banking recorded a net inflow of €3.6 billion, mainly reflecting higher balances at Bank Mendes Gans and in Financial Markets.

Net fee and commission income amounted to €876 million. The growth in daily banking fees due to higher fees for payment packages and new service fees was offset by lower fees on investment products, reflecting low stock markets and subdued trading activity. Fee income for Wholesale Banking was flat year-on-year; however, it rose quarter-on-quarter, driven by business growth in Lending.

Investment income in 3Q2022 included a €111 million annual dividend from our stake in the Bank of Beijing. The third quarter of 2021 had included a €97 million annual dividend from Bank of Beijing as well as €-34 million related to the transfer of ING's retail banking operations in Austria to bank99.

Other income was €93 million in 3Q2022 and included the hedge accounting impact of €-288 million, €100 million income from the transfer of our investment business in France to Boursorama, a €-43 million IAS 29 impact to reflect hyperinflation in Turkey (versus €-247 million in 2Q2022) and a €15 million impairment on ING's equity stake in TTB. Excluding the aforementioned items, other income was almost flat on 3Q2021, but it declined on 2Q2022 as the previous quarter was supported by strong trading results and positive marked-to- market adjustments in Financial Markets.

Operating expenses

Total operating expenses were €2,629 million, including €96 million of regulatory costs and €85 million of incidental cost items.

Expenses excluding regulatory costs and incidental items were €2,448 million and rose 5.0% year-on-year. Approximately half of the increase was attributable to higher staff costs, due to CLA increases and indexation as well as limited FTE growth. The remaining increase was primarily caused by a weakening of the euro and higher litigation costs this quarter.

Compared with 2Q2022, the cost growth was 3.5%, primarily attributable to higher staff and marketing costs.

Operating expenses (in € million)

3,000
				166		649					85
				385			159
2,500		233
				214
						96
2,000		121
2,331	2,396	2,296	2,365	2,448

1,500

3Q2021 4Q2021 1Q2022 2Q2022 3Q2022 Expenses excl. regulatory costs and incidental items

Regulatory costs Incidental items

Operating expenses in 3Q2022 included €85 million of incidental items, of which €75 million was for adding the interest-on-interest effect to the compensation for customers on certain Dutch consumer credit products, as previously announced. The remaining €10 million reflects the hyperinflation impact (IAS 29) on expenses in Turkey. By comparison, 3Q2021 had included €233 million of incidental cost items, including a €180 million provision for the aforementioned compensation to customers on certain Dutch consumer credit products. In 2Q2022, incidental item costs amounted to €159 million, mainly reflecting restructuring costs.

Regulatory costs decreased by €25 million year-on-year, mainly because of a lower contribution to the deposit guarantee scheme in Germany. Compared with 2Q2022, which included a €92 million contribution to the Institutional Protection Scheme in Poland, regulatory costs were €118 million lower.

Addition to loan loss provisions

Net additions to loan loss provisions amounted to €403 million in 3Q2022, equivalent to 25 basis points of average customer lending. This was mainly driven by €244 million of Stage 3 individual risk costs, including the review of existing Stage 3 files considering the more negative macroeconomic outlook. The update of the macroeconomic indicators resulted in a net addition of €116 million to the collective provisions. Furthermore, the overlay for risks from secondary impacts of the deteriorated macroeconomic outlook (such as an increase in energy prices, higher interest rates and inflation) was increased by €89 million, primarily in Retail Banking. The aforementioned increases were partly offset, mainly by a €77 million release of Stage 2 provisions for the Russian portfolio, reflecting a further decrease in our Russia-related exposure.

Addition to loan loss provisions (in € million)
1,000	987	100

500	39	346	62	202	403	50
0	3	22		13	25	0

-500-50

3Q2021	4Q2021	1Q2022	2Q2022	3Q2022
Stage 3
2%#9A',!*3"',%-oR*,!#R1&##2
'1)!-121',	.1-$4#0%#!312-+#0*#,"',%I,,3*'1#"K

ING Press Release 3Q2022

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Consolidated Results

Net result

The net result in 3Q2022 was €979 million, including the impact from the Polish moratorium and hedge accounting as well as higher risk costs. The effective quarterly tax rate was 30.9% compared with 27.1% in 3Q2021 and 30.4% in 2Q2022, mainly caused by the hyperinflation impact in Turkey, which is not deductible for corporate income tax purposes.

Return on equity ING Group (in %)

15
10	8.8	9.2	8.0	7.5	6.8
5
0	10.4	7.2	3.3	9.2	7.7
3Q2021	4Q2021	1Q2022	2Q2022	3Q2022

Return on IFRS-EU equity (quarter)

Return on IFRS-EU equity (4-quarter rolling average)

In 3Q2022, ING's return on average IFRS-EU equity was 7.7%. On a four-quarter rolling average basis, the return on ING's average IFRS-EU equity declined to 6.8% from 7.5% in the previous period. This was due to a lower four-quarter rolling net result. ING's return on equity is calculated using IFRS- EU shareholders' equity after excluding 'reserved profit not included in CET1 capital', which amounted to €848 million as per the end of 3Q2022. This figure reflects 50% of the resilient net profit in the first nine months of 2022, which has been reserved for distribution in line with our policy, minus the 2022 interim dividend paid in August.

Resilient net profit is defined as net profit adjusted for

significant items that are not linked to the normal course of business. In line with this definition, and consistent with the prior quarter, the impact of hyperinflation accounting has been excluded. Therefore, resilient net profit is €53 million higher than net profit.

ING Press Release 3Q2022

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