Highlights
Launched as an innovative financial-services company in 1997, ING Direct celebrated its tenth anniversary in 2007 as the world’s leading direct bank. It is the leading direct bank in each of the nine countries in which it operates. The aim is to become the world’s most preferred consumer bank.
In all of its activities, ING Direct focuses on making banking simple for customers by offering a range of straightforward and transparent banking products at low costs, combined with excellent service delivered through direct channels. The low-cost base is maintained by the use of standardised, state-of-the-art IT systems and the absence of a branch network.
The ING Direct brand has been firmly established in all nine countries and currently the aided brand awareness exceeds 80% at most of its operations. A recent survey showed that on average 91% of our customers are likely to recommend ING Direct to friends, relatives and colleagues.
Value creation
ING Direct continued to invest in long-term value creation in 2007, with growth being generated in three ways: an increase in customers at existing operations, geographical expansion and serving a broader range of customer needs. ING Direct developed the business in four major product categories: savings (the entry product), mortgages (a stable product line providing healthy margins), payment accounts (which serve to ‘deepen’ the customer relationship) and investment products (a good complement to savings).
In what was a challenging interest rate environment, ING Direct focused more on mortgages and less on savings growth, but savings will remain the main customer acquisition product.
Geographical expansion
ING Direct USA extended its activities to new cities in 2007: Miami, Seattle and Houston. The company was already active in New York, Philadelphia, Boston, Los Angeles, San Francisco, Baltimore, Washington, Phoenix, Atlanta and Chicago. Further geographical expansion in the US is anticipated.
Preparations are being made for ING Direct to launch in the EUR 4.9 trillion Japanese savings market. ING Direct obtained a preliminary banking licence from the Japanese regulatory authorities in 2007 and is in the process of obtaining a banking licence.
Add-on acquisitions in US and Germany
Organic growth was complemented by the purchase in September of NetBank, the US’s oldest internet bank, for USD 14 million, which gave ING Direct an additional 104,000 customers with USD 1.4 billion in deposits. NetBank offers attractive prospects and cost synergies to our US business unit. The purchase in November of the online brokerage business of the US ShareBuilder Corporation for USD 220 million added 744,000 customers and USD 2 billion in assets under management.
ING-DiBa Germany bought a EUR 3.9 billion mortgage portfolio and customer rights from Hypo Real Estate Bank AG. The Munich-based bank’s portfolio includes 39,000 private customers with an average outstanding amount of EUR 110,000 per customer.
Further develop four major product categories
ING Direct accelerated its growth investments to a total of EUR 354 million to further support the growth of the business at the expense of short-term profit. Investments in mortgages, now firmly embedded as our second core product after savings, will continue, as well as in payment accounts and investment products.
Mortgages
The own-originated mortgages production reached a record high, with a net growth of EUR 29 billion (excluding currency effects), bringing the total residential mortgages portfolio – including bought pools – to EUR 97 billion at the year-end. ING Direct reached more than 50% of all funds entrusted outstanding in residential mortgages issued by ourselves directly or through intermediaries in 2007. Own-originated mortgages yield a better margin than bonds or mortgage pools purchased from other financial institutions.
ING Direct is now the largest retail mortgage provider in Germany in terms of new business and has become a major provider in the US for the first time. Throughout our business units, we have simplified our procedures – aiming for high quality and fast service as these are big differentiators in a competitive environment. An example is the launch of an online tool – the ‘Unmortgage Application Tracker’ in Canada that allows mortgage prospects to track the exact status of their applications. Another example is Germany, where all paperwork for mortgages has been minimised as part of the ‘Simplify ING-DiBa programme’. This programme makes the application process simpler and in many cases we are able to reach a decision on mortgage applications in as little as three hours.
The new ‘Rata Costante’ – a mortgage refinancing with fixed instalments and a variable term offered by ING Direct Italy – invites customers to switch from their current mortgage provider to ING Direct. This product was introduced following a change in legislation by the Italian government and has positioned ING Direct as a mortgage expert.
ING Direct Australia was voted second-best mortgage lender by brokers.
Payment accounts
Payment accounts were launched in Spain and the US and re-introduced in the third quarter in Germany, resulting in 598,000 new accounts and bringing the total to 853,000 accounts at year-end. Payment accounts are an important product category as they deepen relationships with customers and offer opportunities to cross-sell additional products. ING Direct plans to launch payment accounts in three other countries in 2008.
Investment products
ING Direct extended its retail investment product range in 2007. ING Direct France and ING Direct UK launched guaranteed investment products in August, following the success of earlier launches in Spain and Germany. In the US, ShareBuilder was acquired to accelerate the growth of our brokerage and investment product offering.
For the third consecutive year, the leading German financial magazine Focus-Money named ING-DiBa ‘Best Investment Fund Bank’, for its market-leading discounts on investment fund fees.
ING Direct UK
UK savers are more rate-sensitive than in other countries due to the wide availability of rate comparison tables and an active consumer press. The Bank of England’s interest rate increases as from August 2006 were not immediately fully translated into ING Direct UK’s customer rates, which meant they became less attractive to people with high balances. Consequently, ING Direct UK suffered savings outflows of EUR 11 billion, excluding currency effects. It took several management, pricing and marketing actions to reverse the trend and reposition the business. The customer rate on the ING Direct Savings Account was increased closer to the Bank of England rate and direct marketing initiatives were intensified to retain balances and win back and acquire new customers. As a result, outflows were reduced from EUR 5.1 billion in the third quarter to EUR 0.6 billion in the fourth quarter. These measures created short-term losses which will continue at decreasing amounts in 2008 as the financial assets will reprice over time. A new chief executive officer was appointed on 1 January 2008.
Making banking simple
At ING Direct, being simple and straightforward is important. Customers appreciate ‘simplicity’, as well as competitive rates. The aim is to always take the customer’s perspective to ensure simplicity in all of our products, processes, services and systems. Our ambition to become the world’s most preferred consumer bank will increase our size and complexity. To ensure that we continue to see the customer’s point of view, it was decided to introduce ‘Customer Advocate’ roles, one in each business unit. The Customer Advocate’s job is to act in favour of customers, make it easier for them to interact with us, find out what they want and how we can best continue to meet their needs.
People are key
Banking is first and foremost a people’s business and our employees are therefore key in executing our strategy. Significant time and effort are put into maintaining the culture and the quality of our workforce, which increased from 7,565 FTEs at year-end 2006 to 8,883 FTEs at the end of 2007. One of the tools we use to maintain our strong company spirit is our Business Management Programme, which more than 600 managers have attended. The course provides a shared understanding of the key success factors, including the company’s culture and strategy, and builds cross-company networks.
International mobility
Giving staff the opportunity to work in different countries is part of ING Direct’s human resources strategy. We offer short-term assignments (maximum three months) and long-term (one to three years) assignments. Both long- and short-term assignments have been steadily increasing in number and are expected to rise further in 2008.
State-of-the-art IT systems
Internet security is one of the most important issues for our customers, so we strive to minimise risks and use proven technology. We share best practices to optimise the development cycle. Strong IT is crucial for the business and ING Direct is always looking to achieve industry-leading reliability and provide flawless service to end-users to remain competitive. In 2007, the business continued to invest in systems to ensure that they are highly secure, in addition to being flexible and cost-effective.
Industry recognition
Our efforts have been recognised by the market: ING-DiBa Germany was voted ‘Best Bank in Germany’ by the business magazine Euro; ING-DiBa Austria’s customer service was ranked in the top three in a major Austrian survey; and ING Direct Australia was rated number one in the national Global Customer Satisfaction survey.
