ING aims to deliver its financial products and services in the way its customers want them delivered: with exemplary service, convenience and at competitive prices. This is reflected in our mission statement: to set the standard in helping our customers manage their financial future.

• Strategy: Adjusting to a new reality
• Update on strategy (9 April 2009): Taking ING back to basics

Financial institutions like ING have an important role to play in creating the conditions for social and economic progress, by taking and spreading the financial risks of individuals and companies. Yet, the credit crisis underscores that we can only do this if we are trusted by our customers. Earning and maintaining customer trust is therefore an absolute prerequisite for any financial institution to operate. As the increased complexity of the financial services industry has been a major cause of the crisis, going back to the basics of finance is inevitable.

ING has a clear eye for what lies at the heart of our business: collecting customer balances and redeploying these in the economy, by means of a self-originated loan book consisting of mortgages and corporate, private and other types of loans. We are well aware of our responsibilities and will continue to do our utmost to maintain the confidence of all our stakeholders and to contribute to a proper functioning of markets. We will align our long-term business strategy around a universal customer ideal: saving and investing for the future should be easier.

Going forward we will take steps to strengthen our financial position and adjust to the reality of the global recession while keeping focus on our long-term priorities. In the short to medium term, we will step up efforts to steer the business through these turbulent times, to stabilise our company and reinforce our credibility.

Our efforts will be focused on disciplined execution of these plans in 2009, specifically by:

• putting customers first;
• preserving a strong capital position, including divestments that free up capital;
• further mitigating risks; and
• bringing our costs in line with the operating environment.

The credit crisis has had a clear impact on customer needs, both in terms of product offering, as well as servicing models. These turbulent times prove once more that delivering an easier customer experience and going back to basics should be an essential part of our strategy. Hence, we will continue along the path chosen in 2007, when we launched our Easier programme, which emphasises the attributes that build customer trust and competitive advantage over the long term: customers expect us to be available when they need us, to provide them with a clear overview of their financial situation, to respond to their queries in a fast and efficient manner, to be open and transparent about our products and services and to provide them with objective and professional advice. Apart from the need to reinforce our efforts to deliver an easier customer experience, the crisis has created a shift in customer demand towards products that offer wealth-protection and risk reduction. Therefore, we will reposition our product portfolio to accommodate changing customer needs.

The economic environment has not only put pressure on the profitability of our business, but has also led to an internationally recognised belief that going forward, capital requirements for financial institutions should be higher. Although our capital position was above or in line with previously targeted levels and regulatory requirements, in October we decided to further strengthen our capital base in the form of the issuance of EUR 10 billion of core Tier-1 securities to the Dutch State. As a consequence, the ING Bank Tier-1 ratio rose to 9.32% as of 31 December 2008.

The current environment also forces us to reassess in what businesses and geographies ING has a strong market position that is sustainable for the long term. We aim to avoid asset growth in pressurised sectors and continue our efforts to deleverage our balance sheet and to reduce the volatility and complexity of our portfolio. We will make a number of selective divestments outside the core of our franchise to free up capital and simplify the organisation. We will do so in a disciplined manner. In February 2009, we sold our interest in ING Canada, the largest provider of property & casualty insurance products and services in Canada.

ING has been reducing risk across the balance sheet over the course of 2008. We aim to further reduce our risk exposure in the coming period. In 2008, we have started to reduce our real estate, private equity, corporate bond and interest rate exposure. We sold several equity stakes and implemented hedges. Moreover, we have begun to cap balance sheet growth for the bank and reduced market risk for insurance operations. In Taiwan, ING sold its life insurance business to Fubon Financial Holding, which resulted in a reduction of interest rate risk exposure.

In January 2009, ING and the Dutch State reached an agreement on an Illiquid Assets Back-up Facility term sheet covering ING’s Alt-A residential mortgage-backed securities. Market prices for these securities had become depressed as liquidity dried up, which affected our results and equity far in excess of reasonably expected credit losses. This transaction with the Dutch State as described in the term sheet would significantly reduce the uncertainty regarding the impact on ING of any potential future losses on 80% of the portfolio. In 2009, we will continue to reduce our risk profile. We believe in a strong risk management function that is fully integrated into the daily management and strategic planning of all our business units. ING aims to close this transaction in the first quarter of 2009, but the closing is dependant on the completion of final documentation and approval of various regulators.

With pressure on margins and investment returns, it is vital to contain costs. In 2009 we announced to cut operating expenses by EUR 1 billion in 2009. The structural expense reduction is expected to lead to annual savings of approximately EUR 1.1 billion from 2010 onwards. Of the cutback, 35% will come from a reduction of the workforce by approximately 7,000 full-time positions in 2009. The remainder of the expense reduction comes from decreasing costs for our head office, marketing, the Formula 1 programme, consultancy, third-party staff and the renegotiating of certain contracts with IT-vendors.

By taking these measures we are bringing expenses in line with the operating environment. This will make ING leaner and more flexible as we position ourselves for an eventual recovery.

We are convinced that it is in the long-term interest of all our stakeholders (customers, employees, communities, and shareholders) to do whatever is necessary to maximise business opportunities whilst maintaining the financial health and growth prospects of our company. Our focus on banking, investments, life insurance, and retirement services, enables us to provide retail customers with the products they need during their lives to grow savings, manage investments and prepare for retirement with confidence. With our wide range of products, innovative distribution models and strong footprints in both mature and developing markets, we have the economic, technological and demographic trends on our side.

We will continue to invest in our bank distribution platforms. We are able to serve our 85 million customers through different distribution channels – our direct banking channels and branches and also through tied agents, and via distribution agreements with other parties. Banks can fill many customer needs across a wide range of products from liquidity to lending and investing. Banking is also structurally well-positioned with many chances for customer interaction and long customer retention.

But even with the right mindset and structure in place, shielding customers from market risks while managing earnings volatility remains a challenge, especially in the uncertain market environment of today. Therefore, we also want to make sure that we continue to be able to generate a good portion of our own assets as well. Our wholesale banking activities will thus continue to play a fundamentally important role, as our expertise in this field helps us generate the high-quality assets in which we can invest our retail deposits. Our wholesale banking business also provides us with relevant skills in risk management, and gives us access to financial markets around the world. Lastly, our asset management will also remain key to our strategy. In order to optimise our asset management skills we will further strengthen our capabilities and investment expertise to deliver first-class investment performance for our clients.

High-growth markets continue to play an important role for ING. Yet, given the new economic and regulatory realities and the necessity to preserve ING's capital position, new investments will be tempered.

While drawing lessons from the crisis and the debate on the function of financial institutions in society, we will review the portfolio of the company in terms of markets, distribution models as well as product offering, in order to ensure our long-term competitiveness. We will focus on fewer, coherent and strong businesses. Also, we will simplify the organisation, improve the fundamentals of our business and invest in improving commercial processes.

Moreover, further strengthening of our brand around a universal ideal of delivering an easier customer experience remains a main objective, as awareness and appreciation of the ING brand is essential in building trust, a key driver for long-term business growth.

Last, but certainly not least, continued investment in our people is essential. ING is proud to have highly skilled and motivated staff. Hence, we will continue to promote people-oriented leadership, and to drive for excellence.

9 April 2009

• Announced measures to reduce cost, risk and leverage are on track
• Reducing complexity by operating Bank and Insurer separately under one Group umbrella
• Creating a predominantly European bank with one integrated balance sheet
• Further narrowing focus of Insurance to Life and Retirement services
• Fundamental shift in risk profile of US Insurance business
• Forming one Global Investment Manager including Real Estate Investment Management
• Over time divest EUR 6 to 8 billion in non-core activities as market conditions permit
  
  

At the bi-annual ING Investor Day, on 9 April 2009, CEO-designate Jan Hommen provided an update on the measures to reduce costs, risk and leverage and the change programme as outlined earlier in this year.

Since the announcement in January of measures to adapt ING to the new business environment, good progress has been made. De-risking measures are on track, with the Alt-A Back-up Facility finalised and equity and interest rate risk reduced significantly. EUR 55 billion of the target to reduce the Bank balance sheet by EUR 110 billion has been realised. The EUR 1 billion cost reduction initiative is well on track, with over half of the planned 7,000 FTE workforce reduction realised.

To build a stronger organisation, ING will reduce its geographic and business scope by building on positions in markets with the strongest franchises. Next to a number of leading positions in key markets, a group of smaller businesses with no clear outlook for market leadership consumes a disproportionate amount of capital. To address this over-extension, ING has made portfolio choices based on market leadership, capital intensity, return on capital, funding needs, earnings contribution and the overall coherence of the Group.

Earlier, ING indicated targeting divestments with total proceeds of EUR 2 to 3 billion. EUR 1.4 billion of this was achieved with the sale of ING Canada. The strategic review has resulted in increasing the divestment programme to a total of 10 to 15 businesses over the coming years. Total proceeds are now expected to be EUR 6 to 8 billion while EUR 4 billion in capital can be freed up. Any divestments will be pursued over time and as market conditions permit. “As a result of this process, ING will become a more focused group, with substantial earnings power and significant growth potential,” Jan Hommen said.

To reduce complexity, ING will operate the Bank and Insurer separately under one Group umbrella. ING’s banking activities will be based on its proven strengths: gathering savings, distribution leadership, simple propositions and strong marketing. The bank will be predominantly focused on Europe with selective growth options elsewhere. It will have one integrated balance sheet and one management team.

Key building blocks include the current Retail activities in the Benelux where ING is a leading internet-first bank focused on further capturing scale and efficiency gains. Retail Banking in Central Europe will aim to further strengthen activities in Poland, Romania and Turkey. The greenfield retail operation in the Ukraine will be unwound. ING Direct will continue to build on its strong position as the leading direct bank. The Commercial Bank will accelerate its current transformation process, focusing mainly on the Benelux and Central Europe while maintaining positions in European payment and cash management, specialised finance and financial markets.

The Insurance business will focus on its long-term structural leadership positions in life and retirement services. The business will be managed regionally with an aggregated balance sheet. Key building blocks will include the operations in the Benelux, US, Central Europe, Latin America and Asia/Pacific.

In the US a fundamental shift in the risk profile will be achieved by focusing on individual life and retirement services and a transition of the variable and fixed annuities business to low-risk rollover products. For the non-core businesses, including Employee Benefits, Group Reinsurance and the existing Annuity books, strategic options will be reviewed. The US Financial Products division will be reduced as assets mature. ING will sustain its leadership positions in the key growth markets in Central Europe, Latin America and key markets in Asia/Pacific. The life insurance activities in China and Japan are under review.

The Investment Management operations in Europe, the Americas and Asia/Pacific will be integrated into one Global Investment Management organisation which can benefit from synergies in marketing, operations and distribution and sales. This organisation will also include Real Estate Investment Management. Real Estate Development will manage down capital exposure and will become part of the Commercial Bank, as will Real Estate Finance.