ING Press release 3Q2021 (PDF 0,1 MB)

Press release

ING Corporate Communications

Amsterdam, 4 November 2021

ING posts 3Q2021 net result of €1,367 million

3Q2021 result before tax of €1,924 million; capital position strengthens, CET1 ratio at 15.8%

• Strong growth in fee income of 20% year-on-year, net interest income resilient.
• Operating expenses remain under control. This quarter's expenses include €180 mln provision for compensation to Dutch retail customers with certain consumer credit products.
• Risk costs remain low as overall book quality is strong.
• Resumption of capital distribution through dividends and launch of share buyback programme in October.

CEO Statement

"I'm pleased with our results in the third quarter," said ING CEO Steven van Rijswijk. "We saw continued lending growth in mortgages, whereas loan demand from businesses was influenced by the economic effects of the Covid pandemic. Even so, our commercial lending margins were slightly higher and we saw strong fee growth in account package fees, investment products and lending.

"Expenses were under control, the quarter includes a €180 million provision we took for the compensation of Dutch retail customers for past interest charges that did not sufficiently follow market rates. On risk costs, we were able to release some of the additional provisions we took earlier. Other issues are moving to the forefront for clients, like disruptions to supply chains, rising energy prices and increasing inflation. We'll continue to support our clients wherever we can. I'm grateful for our customers' loyalty, as we gained about 95,000 primary customers since the last quarter, bringing the total number of primary customers to 14.1 million.

"We aim to digitalise processes in order to increase productivity and decrease the time customers have to spend on banking. At Interhyp in Germany, the digital mortgage platform called 'HOME' is used by customers, advisors, brokers and bank partners. Today, nearly 500,000 customers use the digital self-services the platform provides. This has led to a marked decrease in manual workload for advisors and partners, and a much faster decision for customers.

"In Romania, where over 70% of our customers connect with us through their mobile device, we now have a complete digital product offering, including personal loans, insurance, investments, savings, current accounts, shopping programmes, mobile card payments and virtual cards. Our mobile sales in Romania have more than tripled since 2019.

"We continued to take steps in the third quarter to be an action leader in the fight against climate change, sharpening our target for reducing our funding to upstream oil and gas and working to set net-zero targets for the eight other sectors in our Terra approach. Many of our clients trust us as their strategic partner in achieving their sustainability and long-term growth ambitions, such as leading data-centre provider Aligned. They're taking good steps on sustainability in the area of digital infrastructure. ING has received four consecutive sustainability-related mandates from Aligned over the past 12 months, helping them issue the first data-centresustainability-linked loan and the first green data-centre securitisation.

"We've launched a share buyback programme as we start on the path to optimise our capital while maintaining our focus on our customers. I am pleased we could return capital to our shareholders, and thank them for their understanding throughout the distribution restrictions during the pandemic.

"Our hybrid mode of working is beginning in ING countries around the world and colleagues are slowly starting to return to the office, but we need to remain vigilant until the pandemic is truly over. In the meantime, I remain grateful for everyone's flexibility and commitment."

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BusinessConsolidatedHighlightsResults

Primary customers

14.1 mln

+95,000 since 2Q2021

Mobile-only customers

50%

in % of total active customers vs 47% in 2Q2021

Customer experience

NPS score:

ranked #1 in 5 of 12 Retail markets

Sustainability

200 sustainability deals

supported by ING in first nine months 2021 (up 94% from year-earlier period)

Non-financial risk

KYC:

Strengthening our role in fighting financial economic crime

Net result

€1,367 mln

+73.5% vs 3Q2020

Fee income

€882 mln

+20.2% vs 3Q2020

The pandemic served as a catalyst for more consumers to shift to mobile banking, and that growth continues. The number of mobile payment transactions reached 246 million in the third quarter, an increase of 17% from last quarter. The total number in the first nine months surpassed all of 2020. Of all our digital customers, 50% interacted with us via their mobile device only, with high adoption in Turkey (85%), Romania (71%) and Spain (57%).

We supported 54 sustainability deals in the third quarter, bringing this year's total to 200 deals so far. That's nearly double the number closed in the same period last year.

We're honoured to be a trusted strategic partner for clients seeking support in the energy transition. ING was sole sustainability structurer and co-manager for Aligned Data Centre's first $1.35 billion green securitisation, the first green asset-backed security ever done for data-centre providers worldwide. It's the fourth consecutive sustainability-related mandate ING received from Aligned since we did their first sustainability-linked loan last year. Another example of how we empower clients to take action against climate change is in a strategic partnership

As a gatekeeper to the financial system, banks have an important role in the collective fight against financial and economic crimes. Know Your Customer (KYC) is an ongoing effort and is integrated into our daily business operations. We're continuously working to keep the bank safe, secure and compliant.

CET1 ratio

15.8%

+0.1%-point vs 2Q2021

Return on equity (4-qtr rolling avg)

8.8%

+3.7%-point vs 3Q2020

The number of customers who choose ING as their primary bank continued to grow, especially in Germany and Poland. In Germany, a high number of customers took out consumer loans this quarter, led by improvements in the pre-approved lending process for existing customers. Those who qualify can access these loans fully digitally, instantly and easily in just a few clicks.

with Australia's leading energy infrastructure provider, Jemena. We helped develop a green finance framework that specifies how the company will use proceeds from green bonds and loans: on renewable energy, energy efficiency, clean transport and climate adaptation.

We continue to take steps to align our portfolio with the goal of reaching net-zero emissions by 2050. We've sharpened our target for upstream oil & gas and now aim to reduce our funding for this sector by 12% by 2025 (from 2019). We'll set targets for the other eight sectors in due course. Details on the other sectors in our Terra approach can be found in our first integrated climate report, published in September 2021.

2	ING Press Release 3Q2021

Consolidated Results

	Consolidated results
		3Q2021	3Q2020	Change	2Q2021	Change	9M2021	9M2020	Change
	Profit or loss (in € million)
Net interest income	3,388	3,329	1.8%	3,340	1.4%	10,241	10,260	-0.2%
Net fee and commission income	882	734	20.2%	855	3.2%	2,592	2,240	15.7%
Investment income	74	103	-28.2%	10	640.0%	123	144	-14.6%
Other income	304	120	153.3%	312	-2.6%	911	824	10.6%
Total income	4,648	4,286	8.4%	4,517	2.9%	13,866	13,468	3.0%
Expenses excl. regulatory costs	2,565	2,502	2.5%	2,372	8.1%	7,365	7,465	-1.3%
Regulatory costs1)	121	111	9.0%	172	-29.7%	880	774	13.7%
Operating expenses	2,685	2,613	2.8%	2,543	5.6%	8,245	8,239	0.1%
Gross result	1,962	1,673	17.3%	1,973	-0.6%	5,621	5,229	7.5%
Addition to loan loss provisions2)	39	469	-91.7%	-91		170	2,466	-93.1%
Result before tax	1,924	1,204	59.8%	2,065	-6.8%	5,452	2,763	97.3%
Taxation	521	389	33.9%	566	-8.0%	1,526	942	62.0%
Non-controlling interests	35	27	29.6%	40	-12.5%	94	63	49.2%
Net result	1,367	788	73.5%	1,459	-6.3%	3,832	1,757	118.1%
Profitability and efficiency
Interest margin	1.38%	1.38%		1.36%		1.40%	1.45%
Cost/income ratio	57.8%	61.0%		56.3%		59.5%	61.2%
Risk costs in bps of average customer lending	3	30		-6		4	53
Return on equity based on IFRS-EU equity3)	10.4%	6.0%		11.2%		9.8%	4.5%
ING Group common equity Tier 1 ratio	15.8%	15.3%		15.7%		15.8%	15.3%
Risk-weighted assets (end of period, in € billion)	310.5	312.3	-0.6%	308.6	0.6%	310.5	312.3	-0.6%
Customer balances (in € billion)
Customer lending	619.2	607.6	1.9%	616.3	0.5%	619.2	607.6	1.9%
Customer deposits	620.1	605.6	2.4%	620.6	-0.1%	620.1	605.6	2.4%
Net core lending growth (in € billion)4)	3.1	-6.9		-3.7		17.2	-1.6
Net core deposits growth (in € billion)4)	-0.6	3.4		4.9		12.4	33.5

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 was strong at €4,648 million in 3Q2021, supported by higher fee income, an improvement in net interest income and the annual dividend received from the Bank of Beijing.

Net interest income was €3,388 million in 3Q2021 and included a conditional €84 million accrual for the ECB funding rate benefit from the TLTRO III programme under the additional special reference period, which started on 24 June 2021. In 2Q2021, a €83 million benefit was recorded, while 1Q2021 had included a €233 million benefit for the period 24 June 2020 until 31 March 2021.

Excluding the aforementioned TLTRO III benefits recorded in the respective periods, net interest income would have declined by €25 million compared with 3Q2020, mainly due to lower margins on liabilities, while average liability volumes increased as the Covid-19 pandemic reduced customer spending. Net interest income on lending increased due to higher average volumes (driven by the continued growth in residential mortgages) combined with a slight improvement in the total lending margin. Net interest income was furthermore supported by higher volatile interest results in Financial Markets and higher interest results from foreign currency ratio hedging (reflecting higher interest rate differentials). Sequentially, net interest income rose by €48 million, primarily

due to higher interest results from lending activities supported by higher margins, while the charging of negative interest rates partly absorbed the decline in net interest income on liabilities.

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

4,000						1.80
3,500	3,329	3,344	3,513	3,340	3,388	1.65
3,000	1.48%	1.44%	1.46%	1.40%	1.40%	1.50
2,500	1.38%	1.41%	1.42%	1.36%	1.38%	1.35
2,000	3Q2020	4Q2020	1Q2021	2Q2021	3Q2021	1.20

Net interest income

Net interest margin

Net interest margin 4-quarter rolling average

The net interest margin improved by 2 basis points to 1.38% compared with 2Q2021. In both this and the previous quarter, the TLTRO III benefit contributed 3 basis points to the average net interest margin. The increase in the net interest margin was primarily caused by higher margins on lending, predominantly in Wholesale Banking. The margin on customer deposits was almost stable, supported by an increased charging of negative interest rates to clients.

Net core lending growth, which is customer lending growth adjusted for currency impacts and excluding developments in

ING Press Release 3Q2021

3

Consolidated Results

Treasury lending and the WUB run-off portfolio, was €3.1 billion in 3Q2021. Net core lending growth in Retail Banking was €4.7 billion and consisted of €3.8 billion growth in residential mortgages (primarily in Germany, Poland and Spain) and €0.9 billion in other retail lending. In Wholesale Banking, net core lending growth was €-1.6 billion. This was primarily due to Lending, reflecting higher repayments on short-term facilities, while growth in Daily Banking & Trade Finance provided a partial offset.

Net core deposits growth, also adjusted for the run-off in Retail Austria and Retail Czech Republic, was €-0.6 billion in 3Q2021 as we work on limiting the inflow of deposits. In Retail Banking, net core deposits growth was €-1.9 billion. The net outflow was predominantly visible in Germany and Belgium and partly offset by increases in the Netherlands and the non- eurozone countries where ING operates. Wholesale Banking recorded net core deposits growth of €1.4 billion, mainly in Payments & Cash Management. The run-off of the remaining customer deposits portfolios in Austria and the Czech Republic is nearly completed, leading to an additional decline in customer deposits of €0.6 billion in 3Q2021.

Net fee and commission income amounted to €882 million, 20.2% higher than in 3Q2020. In Retail Banking, the increase was 22.3%, mainly due to higher fee income in daily banking products, supported by higher fees for payment packages and an increasing number of payment transactions, as well as higher fees on investment products in most countries. In Wholesale Banking, year-on-year fee income increased 16.6%, notably in Daily Banking & Trade Finance. Sequentially, total fee income rose 3.2% on the already strong 2Q2021, as higher lending and daily banking fees more than compensated for lower fees in Financial Markets.

Investment income was €74 million in 3Q2021 and included a €97 million annual dividend from our stake in the Bank of Beijing (versus €95 million in 3Q2020) as well as an estimated €34 million loss related to the previously announced agreement to transfer ING's Retail Banking operations in Austria to bank99.

catch-ups in the deposit guarantee scheme contributions following the Greensill insolvency, regulatory costs dropped by €51 million.

Furthermore, operating expenses in 3Q2021 included €233 million of incidental items. These items mainly consisted of a €180 million provision for compensation to customers on certain Dutch consumer credit products, €9 million of additional redundancy provisions and costs related to the accelerated closure of branches in the Netherlands, and a €44 million impairment on Payvision in Wholesale Banking following the announced phasing out of its services. In 3Q2020, operating expenses had included €140 million of impairments on capitalised software related to the decision to stop the Maggie project (recorded in Retail Other Challengers

• Growth Markets), whereas 2Q2021 had €39 million of incidental items (reflecting €17 million of redundancy provisions and costs related to the closure of branches in the Netherlands, and a €22 million IT-related impairment recorded in the Corporate Line).

Operating expenses (in € million)

3,000									84
						223			587
2,500			140			331					39			233
		111								172			121
2,000	2,362	2,361	2,345	2,333		2,331
1,500
3Q2020	4Q2020	1Q2021	2Q2021	3Q2021

Expenses excl. regulatory costs and incidental items

Regulatory costs Incidental items

Excluding regulatory costs and the aforementioned incidental items, expenses decreased 1.3% compared with 3Q2020. This was primarily due to lower expenses for third-party staff, professional services and marketing, which more than offset the impact of higher staff-related expenses, mainly caused by annual salary increases. The decline was fully driven by lower costs in Retail Banking. Compared with 2Q2021, expenses excluding regulatory costs and incidental items were slightly lower as cost savings absorbed a lower VAT refund.

Other income was €304 million in 3Q2021 versus €120 million in 3Q2020, which had been negatively affected by a €230 million impairment on ING's equity stake in TMB. Adjusted for the impairment, other income mainly reflected lower positive valuation adjustments in Financial Markets. Sequentially, other income was only slightly lower, supported by higher other income in Wholesale Banking and a €25 million gain on the sale of an associate in Retail Belgium, while a €72 million receivable (due to a better-than-expected recovery of the insolvency of a financial institution in the Netherlands) had been recorded in 2Q2021.

Operating expenses

Total operating expenses were €2,685 million. This included €121 million of regulatory costs, which increased by €10 million on 3Q2020, primarily reflecting a higher level of covered deposits. Compared with 2Q2021, which had included

Addition to loan loss provisions

Net additions to loan loss provisions were €39 million in 3Q2021. This relatively low level was mainly caused by some net releases from collective provisions combined with limited individual Stage 3 provisioning.

Addition to loan loss provisions (in € million)

1,000						100
500	469	208	223	-91	39	50
	30
0	14	15			0
	-6	3
-500	3Q2020	4Q2020	1Q2021	2Q2021	3Q2021	-50

Stage 3

2%#9A',!*3"',%-oR*,!#1&##2

Risk costs in bps of average customer lending (annualised)

4	ING Press Release 3Q2021

Consolidated Results

Although Covid-19 has had a negative impact on the global economy, defaults in our portfolio have been limited. This mainly reflects the quality of our loan portfolio and the impact of government support schemes. Despite strains on supply chains and spiking energy prices, economic activity continued to recover in 3Q2021 with robust GDP forecasts and improved risk indicators on our loan book. This resulted in a €96 million release of provisions (versus a €262 million release in 2Q2021), reflecting a partial release of management overlays applied in previous quarters. The release was recorded predominantly in Stage 1 and Stage 2.

Total net additions to Stage 3 provisions in 3Q2021 were €237 million (up from €173 million in the previous quarter), of which almost 60% was related to Stage 3 collective provisions and 40% to Stage 3 individual provisions. Stage 1 and Stage 2 risk costs (including off-balance-sheet provisioning) were €-198 million compared with €-265 million in 2Q2021. In addition to the partial release of management overlays, this also includes the impact of the improved quality of the loan portfolio.

Net result

ING's 3Q2021 net result was €1,367 million, or 73.5% higher than in the year-ago quarter, which had included elevated risk costs and €370 million of impairments on ING's equity stake in TMB and on capitalised software related to project Maggie. Compared with 2Q2021, the net result was 6.3% lower, as the increase in income was more than offset by the incidental cost items and the net addition in risk costs. The effective tax rate was 27.1% compared with 32.3% in 3Q2020 (when results had included a non-deductible impairment on our equity stake in TMB) and 27.4% in 2Q2021.

Return on equity ING Group (in %)

15
				11.2	10.4
10
		7.8
	6.0	5.6		8.8
5		7.7
5.1	4.8	5.4
0	3Q2020	4Q2020	1Q2021	2Q2021	3Q2021

Return on IFRS-EU equity (quarter)

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

In 3Q2021, ING's return on average IFRS-EU equity was 10.4%. On a four-quarter rolling average basis, the return on ING's average IFRS-EU equity increased to 8.8% from 7.7% in the previous four-quarter rolling period. The increase was caused by a higher four-quarter rolling net result combined with a slight increase in average equity. ING's return on equity is calculated using IFRS-EU shareholders' equity after excluding 'reserved profit not included in CET1 capital', which amounts to €2,840 million as per the end of 3Q2021. This figure reflects the total of the following: the amount originally reserved for the final 2019 distribution (€1,744 million, for which a share buyback programme started on

5 October 2021) as well as 50% of the 9M2021 resilient net profit, which has been reserved for distribution in line with our policy, minus the interim dividend 2021 paid in October.

For 9M2021, resilient net profit, which is defined as net

profit adjusted for significant items not linked to the normal course of business, is equal to net profit.

At the end of 3Q2021, the €1,874 million distribution paid in October (€0.48 per share) had already been transferred from shareholder's equity to other liabilities.

ING Press Release 3Q2021

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