ING Groep N.V. 2020 Form 20-F Summary
Business context and reporting period
ING Groep N.V. is a Netherlands-based global bank serving 39.3 million customers in more than 40 countries through Retail Banking and Wholesale Banking. The filing is an annual report for the fiscal year ended 31 December 2020, not a standalone fourth-quarter filing. Financial statements are presented under IFRS as issued by the IASB for SEC reporting; management also reports selected results under IFRS-EU.
Financial performance and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total income | €17.637 billion | €18.306 billion | Down 3.7% |
| Net interest income | €13.604 billion | €14.079 billion | Down 3.4% |
| Net fee and commission income | €3.011 billion | €2.868 billion | Up 5.0% |
| Operating expenses | €11.153 billion | €10.353 billion | Up 7.7% |
| Result before tax | €3.399 billion | €5.653 billion | Down 39.9% |
| Net result attributable to shareholders, IFRS-IASB | €2.250 billion | €3.903 billion | Down 42.4% |
| Cost/income ratio | 63.2% | 56.6% | Up 6.6 percentage points |
| Risk costs | €2.675 billion | €1.120 billion | Up from 18 to 43 basis points |
Net interest margin declined to 1.44% from 1.54%, reflecting persistent low or negative interest rates, pressure on savings and current-account margins, and weaker lending demand. Higher fee income, particularly from retail investment products, partly offset the decline.
Total assets were €933.891 billion, compared with €888.520 billion at year-end 2019. Customer deposits increased to €609.517 billion from €574.355 billion. Loans and advances to customers declined to €593.970 billion from €608.029 billion. Shareholders’ equity was €51.619 billion and total equity was €52.640 billion.
Cash and cash equivalents increased to €111.566 billion from €54.031 billion. Operating cash flow was €101.243 billion, investing cash flow was negative €8.487 billion, and financing cash flow was negative €34.796 billion. The increase in liquidity was driven mainly by customer deposit inflows, lower credit demand and €59.5 billion of TLTRO III funding.
Debt securities in issue declined to €82.065 billion from €118.528 billion, while subordinated loans declined to €15.805 billion from €16.588 billion. Customer deposits represented approximately 72% of total funding excluding trading securities. The filing states that working capital and liquidity were sufficient for present requirements.
At 31 December 2020, the CET1 ratio was 15.45%, compared with a 10.51% regulatory requirement. The Tier 1 ratio was 17.31%, the total capital ratio was 20.09%, and risk-weighted assets were €306.324 billion. The leverage ratio and liquidity coverage ratio are discussed in the filing, but a clear year-end numerical value for each is not provided in the supplied text.
Material changes versus the prior comparable period
- COVID-19 caused a sharp increase in loan-loss provisions, higher Stage 2 and Stage 3 exposures, and greater uncertainty in credit-loss modelling.
- Payment holidays covered approximately 196,000 customers and €19.4 billion of loans at year-end; 93% of granted payment holidays had expired by year-end.
- Forborne assets increased to €19.816 billion from €9.492 billion, while non-performing exposures increased to €13.497 billion from €11.477 billion.
- Operating expenses included €1.105 billion of regulatory costs and €673 million of incidental items, including goodwill impairments, restructuring provisions and other impairments.
- Goodwill impairments totalled €310 million, including impairments related to Retail Belgium and Wholesale Banking. ING also recorded a €230 million impairment on its TMB investment and a €141 million impairment on capitalised software related principally to discontinuing the Maggie transformation programme.
- Retail Germany remained comparatively resilient, with net result of €615 million versus €627 million. Retail Belgium fell sharply to €71 million from €455 million, Retail Other declined to €39 million from €619 million, and Wholesale Banking declined to €278 million from €474 million under IFRS-IASB.
- ING changed its distribution policy to a 50% payout of resilient net profit, subject to capital and regulatory constraints. No 2019 final dividend was paid in 2020, and the 2020 interim dividend paid in February 2021 was €0.12 per share.
Outlook, management commentary, risks and unusual items
Management described the operating environment as dominated by COVID-19, persistent low or negative interest rates, increased regulation and accelerated digital adoption. ING expects the pandemic, expiring support schemes, unemployment, business insolvencies and delayed defaults to remain important sources of downside risk. Its December 2020 baseline scenario assumed a global economic contraction of 3.6% in 2020 followed by 5.0% growth in 2021 and 3.8% growth in 2022, but management emphasized substantial uncertainty.
ING applied €638 million of COVID-19-related management overlays and adjustments, including €394 million for expected time lags in defaults and €244 million related principally to payment-holiday and sector-specific risks. Reportable collective provisions were €3.276 billion, while a downside macroeconomic scenario produced unweighted collective ECL of €4.362 billion.
Strategically, ING stopped the Maggie transformation programme, created ING Neo, unified global Retail management, reduced its Wholesale Banking geographic footprint, and announced withdrawals from selected South American and Asian markets. Subsequent to year-end, ING announced plans to exit Czech Republic retail banking and review an exit from Austrian retail banking, while retaining Wholesale Banking activities in those markets.
Principal risks include COVID-19 and macroeconomic deterioration, prolonged low interest rates, credit losses, liquidity and funding markets, capital and distribution restrictions, regulatory and financial-crime compliance, litigation, cybercrime, operational resilience, benchmark-rate reform, Brexit, climate change and model risk. The filing identifies approximately €50.283 billion of non-derivative financial assets and €6.265 billion of non-derivative financial liabilities linked to benchmarks expected to transition, plus €600.203 billion of derivative notional exposure.
ING’s internal control over financial reporting and disclosure controls were assessed as effective at 31 December 2020. KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting.
Facts investors should verify
- Reconcile the €2.250 billion IFRS-IASB net result with the €2.485 billion IFRS-EU result and understand the €234 million IAS 39 carve-out adjustment.
- Assess the sustainability of the €2.675 billion 2020 risk-cost charge, including Stage 2 migration, Stage 3 exposures, payment holidays and management overlays.
- Verify the CET1 ratio against the 10.51% MDA threshold and review the effect of future Basel, TRIM and other regulatory changes on risk-weighted assets.
- Review funding dependence on customer deposits and TLTRO III, debt maturities, collateral encumbrance and the undisclosed numerical year-end LCR and leverage ratio.
- Evaluate goodwill, software and TMB impairment sensitivity to economic forecasts, discount rates, terminal growth and capital assumptions.
- Track the execution and financial effects of the Maggie discontinuation, Wholesale Banking restructuring, Czech retail exit and Austrian retail review.
- Review pending litigation, AML and KYC remediation, benchmark-rate transition exposures, and the potential effect of post-pandemic defaults after government support ends.