ING Group reports on a challenging first quarter 2012

ING Group announced on 9 May an underlying net profit of EUR 705 million for the first quarter of 2012. The profit was down significantly from one year ago, but improved substantially from the fourth quarter of 2011.

Underlying pre-tax profit at ING Bank was EUR 1,126 million, lower than the first quarter last year, but higher than the fourth quarter in spite of margin pressure and the negative market impacts in the first three months of this year.

Insurance recorded a first-quarter underlying loss of EUR 18 million, compared with a profit in the first quarter of 2011. The decrease was largely the result of losses on hedges in place to protect regulatory capital. Results at Insurance improved significantly compared with a fourth-quarter 2011 loss, which was caused by a large one-off charge for the US Closed Block Variable Annuity business as well as hedge losses.

After including the impact of divestments and special items such as the net gain from the divestment of ING Direct USA and a provision for a potential settlement with US authorities, ING Group’s net profit was EUR 680 million.

Challenging operating environment continues

Commenting on the first quarter results, ING Group CEO Jan Hommen said: “The operating environment remained challenging in the first quarter, as the European sovereign debt crisis persisted, increasing volatility on financial markets. The impact of this environment was evident in our underlying results, which declined from a strong first quarter last year; however, earnings for both Bank and Insurance improved from the previous quarter. ”

“While ING welcomed the favourable court ruling on ING’s appeal against the European Commission, we remain committed to the decision to separate the banking and insurance operations, and are making good progress in preparing our Insurance and Investment Management businesses for stand-alone futures in Europe and the US.”

Bank

ING Bank’s underlying profit before tax rose 65.1% from the fourth quarter, supported by lower impairments, and despite negative market-related adjustments in the first quarter of 2012 related to market volatility. Expenses declined compared with prior both quarters, and loan loss provisions improved slightly from the fourth quarter, but are expected to remain elevated given the weakening economic environment in Europe.

Although competition for savings remained intense, putting some pressure on margins, ING Bank attracted EUR 5.3 billion in net inflow of funds, further strengthening the funding position of ING Bank. On professional markets, the Bank has raised EUR 9.2 billion of long-term funding so far this year, largely covering its refinancing requirements for 2012. The capital position strengthened further with a core Tier 1 ratio of 10.9%, reflecting the sale of ING Direct USA and ongoing capital generation.

During the quarter, ING Bank made progress on its strategy of combining and building on its banking businesses, and managing down the size and risk profile of its balance sheet while keeping lending available to customers. It also continued to focus on maintaining a strong relationship with customers through innovative distribution, and providing fair and transparent pricing.

Insurance

Insurance underlying profit before tax recovered from the fourth quarter, but was down on the first quarter of last year. Operating results were slightly lower than the first quarter in 2011 and flat compared to the fourth quarter, but remained solid, driven by a strong investment margin and higher fees as sales gained momentum in Asia, the US and Central Europe.

Insurance sales (APE) rose 5.1% compared to the first quarter last year and jumped 29.6% compared to the fourth quarter last year, with higher sales in all regions.

During the quarter, ING continued preparations for a stand-alone future of the European Insurance/Investment Management (IM) business. It also continued to explore other options for its Asian insurance/IM business and preparations for the IPO of its US insurance/IM business progressed.

ING Insurance/IM’s strategy of being a customer-driven business providing exemplary products and services through multi-distribution channels was recognised in several awards received during the period.

In Greece, ING Insurance took the title ‘Top Corporate Brand’ in the Insurance Services category for the second consecutive year. And ING Insurance Romania’s pension business won the ‘Company of the Year’ title in awards organised by PRIMM Magazine Insurance & Pensions, a major publication in the Romanian insurance and pensions sector. ING Insurance Romania also won the ‘Best Insurance Product of the Year’ award for adding a provision to its existing life insurance product which gives people the option of insuring themselves against critical illness.

FOR FURTHER INFORMATION

For further information, please go to the Investor Relations section of www.ing.com and then click on the
Results & Interim Accounts tab to access the Press Release and all other financial results publications including the Quarterly Report, Statistical Supplement, presentations and audiocasts.

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KEY POINTS

ING IN THE FIRST QUARTER 2012

UNDERLYING PROFIT BEFORE TAX

Bank: down 26.5% to EUR 1,126 million from EUR 1,533 million in the first qtr 2011
Insurance: a loss of EUR 18 million vs a EUR 428 million profit in the first qtr 2011