Strong capital position
The capital position of ING Group remained robust during 2007, as adjusted equity increased from EUR 42.5 billion to EUR 44.9 billion. Shareholders’ equity decreased to EUR 37.2 billion from EUR 38.3 billion. Spare leverage, defined as the potential cash that can be raised at ING Group level if all capital ratios were on target, increased to EUR 4.8 billion from EUR 3.1 billion.
This increase was made possible due to net profit contributions from ING Insurance and ING Bank of EUR 5.6 billion and EUR 3.6 billion. Also, the ING Insurance target hybrid ratio has been increased from 15% to 25%. Spare leverage decreased due to dividends to shareholders, the share buy-back programme and the net balance of acquisitions and divestments.
All major capital ratios were within their target by year-end 2007. ING sets the targets to be consistent with the AA rating target that exists for ING Group, ING Bank and ING Insurance. The core debt ratio limit (core debt is debt which is on-lent as equity to subsidiaries) for ING Group is derived from the estimated diversification between ING Bank and ING Insurance.
Core debt ratios
| in percentages | Target year-end 2007 |
Outcome 2007 |
Target year-end 2006 |
Outcome 2006 |
|---|---|---|---|---|
| Group core debt ratio | 10.0 | 9.5 | 10.0 | 9.0 |
| Tier-1 ratio Bank | 7.2 | 7.4 | 7.2 | 7.6 |
| Insurance core debt ratio | 15.0 | 13.6 | 15.0 | 14.2 |
Financings in the market throughout the year raised further senior debt and hybrid Tier-1 for ING Group, the latter on-lent on a mirrored basis to both ING Bank and ING Insurance. Also a successful lower Tier-2 transaction was concluded for ING Bank. ING Insurance did not issue senior unsecured debt in 2007.
Access to the international capital markets was hampered during the second half of the year because of the turmoil caused by the troubled mortgage market in the United States. In spite of this turmoil ING Group executed a very successful hybrid Tier-1 transaction in the US retail domestic market in October 2007, albeit at wider spreads than were available earlier in the year.