Business context and reporting period
ING Groep N.V. filed its annual Form 20-F for the fiscal year ended 31 December 2022. The filing covers a global banking group with Retail Banking and Wholesale Banking operations in more than 40 countries and approximately 37 million customers. Financial statements for SEC reporting use IFRS as issued by the IASB (IFRS-IASB); ING’s published financial statements otherwise use IFRS-EU. The filing does not provide a separate 2022 fourth-quarter financial statement.
Key financial metrics
| Metric | 2022 | 2021 | Change or comment |
|---|---|---|---|
| Total income | €30.418 billion | €20.093 billion | IFRS-IASB; strongly affected by fair-value movements |
| Income excluding EU IAS 39 carve-out | €18.561 billion | €18.490 billion | Up 0.4% |
| Net interest income | €14.593 billion | €14.000 billion | Up 4.2%; full-year net interest margin declined to 1.34% from 1.39% under management’s presentation |
| Net fee and commission income | €3.586 billion | €3.517 billion | Up 2.0% |
| Operating expenses | €11.199 billion | €11.192 billion | Broadly flat; cost/income ratio 60.3% versus 60.5% |
| Additions to loan-loss provisions | €1.861 billion | €516 million | 29 basis points of average customer lending versus 8 basis points |
| Result before tax | €5.502 billion | €6.782 billion | Down 18.9% |
| Net result attributable to shareholders | €12.126 billion | €5.951 billion | IFRS-IASB; includes a €8.451 billion positive EU IAS 39 carve-out reversal |
| Net result under IFRS-EU | €3.674 billion | €4.776 billion | Down 23.1% |
| Return on equity | 7.2% | Not clearly stated in the comparable table | Management reported a decline from 2021 |
| Cash and cash equivalents | €95.391 billion | €107.665 billion | Down €11.770 billion |
| Net cash flow from operating activities | €(11.112) billion | €(14.943) billion | Improved but remained negative |
| Customer deposits | €640.799 billion | €617.400 billion | Up €23.399 billion |
| Loans and advances to customers | €644.893 billion | €625.122 billion | Up €19.771 billion |
| Total assets | €976.834 billion | €949.250 billion | Up €27.584 billion |
| Debt securities in issue | €95.918 billion | €91.784 billion | Up €4.134 billion |
| Subordinated loans | €15.786 billion | €16.715 billion | Down €929 million |
At year-end, the CET1 ratio was 14.47%, compared with an applicable consolidated CET1 requirement including buffers of 10.58%. The Tier 1 ratio was 16.38%, total capital ratio 19.40%, and leverage ratio 5.1%. ING reported TLAC and MREL ratios of 30.4% of risk-weighted assets and 9.5% of leverage exposure, exceeding the stated requirements.
Credit exposure outstandings increased 2.6% to €938.1 billion. Non-performing loans declined to €11.7 billion from €12.0 billion, while Stage 2 exposures increased to €70.7 billion from €49.5 billion. Total IFRS 9 expected credit loss provisions increased to €6.1 billion from €5.4 billion.
Material changes versus the prior comparable period
- Higher interest rates supported liability margins, net interest income and customer deposit growth, although lending margins remained under pressure and mortgage prepayments declined.
- Credit costs increased substantially because of the Russia-Ukraine war, higher energy prices, inflation, rising interest rates, supply-chain disruption and a weaker macroeconomic outlook. Russia-related exposure generated approximately €533 million of 2022 risk costs.
- Wholesale Banking income increased to €6.325 billion, but IFRS-EU net result declined to €1.358 billion from €2.144 billion as risk costs rose to €1.220 billion from €117 million.
- Retail Germany net result increased 31.6% to €696 million, while Retail Belgium declined to €151 million from €437 million, partly because of a €247 million hedge-unwinding impact and restructuring costs. Retail Other declined to €541 million from €639 million.
- Operating expenses included €1.250 billion of regulatory costs and approximately €325 million of incidental items. A €75 million provision was recorded for compensation relating to certain Dutch consumer credit products.
- ING applied hyperinflation accounting to Turkey from 1 January 2022. The filing reports a €333 million net monetary loss and a €32 million impairment of Turkey-related goodwill.
- ING repurchased 159.9 million shares in 2022 for approximately €1.724 billion. A further €297 million related to the 2022 capital-return programme was paid in January 2023.
- Retail activities in France and the Philippines were discontinued, while Wholesale Banking activities in those markets continued. ING also continued to phase out Payvision’s payment-service-provider activities.
Guidance, outlook, management commentary, risks and unusual items
Management expected central-bank rate increases to continue during 2023, while acknowledging that higher rates could reduce loan demand, increase deposit and wholesale funding costs, pressure asset values and increase borrower stress. The filing’s macroeconomic baseline assumed weak or stagnant growth in many European markets and a negative balance of risks from persistent inflation, tighter monetary policy, energy uncertainty and a possible escalation of the war in Ukraine. No specific earnings guidance for 2023 is provided in the filing.
- ING’s strategic priorities are superior customer experience, digitalisation, scalable technology and operations, safety and security, sustainability, and development of its people.
- Primary customers increased by 585,000 to 14.6 million; net core lending growth was €18.2 billion and net core deposit growth was €25.1 billion.
- ING mobilised €101 billion of sustainable finance in 2022 and targets €125 billion annually by 2025. It also set interim 2030 climate targets for its Terra sectors and targets net zero in its own operations.
- Management targets a CET1 ratio of approximately 12.5% by 2025 and maintains a distribution policy of 50% of resilient net profit, subject to capital, regulatory and other constraints.
- Principal risks include credit deterioration, interest-rate and market volatility, inflation, geopolitical and sanctions exposure, Russia and Ukraine counterparty risk, liquidity and funding stress, regulatory capital and resolution restrictions, financial-crime compliance, litigation, cybercrime, operational disruption, model risk, competition, and climate and ESG transition risks.
- Year-end Russia and Ukraine exposures included €0.3 billion of local equity, €2.5 billion of credit exposures booked outside Russia and approximately €0.5 billion of Ukraine exposure. ING stated that it would not conduct new Russia-related business and would actively reduce remaining exposure.
- Unresolved or potentially material matters include AML-related investigations, customer compensation claims, mortgage and interest-rate derivative litigation, Polish Swiss-franc mortgage litigation, tax proceedings and other legal claims. The filing does not provide a clear aggregate maximum exposure for all proceedings.
- Benchmark transition remains relevant: approximately €495.3 billion of USD LIBOR-linked derivatives and €136.3 billion of WIBOR-linked derivatives remained to be transitioned at year-end, excluding instruments expiring before the relevant cessation dates.
- ING reported effective disclosure controls and internal control over financial reporting as of 31 December 2022; KPMG issued unqualified opinions on the financial statements and internal controls.
Most important facts an investor should verify
- Reconcile the €12.126 billion IFRS-IASB net result with the €3.674 billion IFRS-EU result and assess the sustainability of the €8.451 billion IAS 39 carve-out benefit.
- Review the €1.861 billion loan-loss provision, €453 million of management overlays and the increase in Stage 2 exposures for sensitivity to recession, inflation, interest rates and geopolitical developments.
- Confirm the year-end CET1 ratio after all dividends, buybacks and the €297 million January 2023 cash distribution, and compare it with the 2025 target and future regulatory-buffer increases.
- Assess liquidity and funding maturity concentrations, including €640.8 billion of customer deposits, €95.9 billion of debt securities in issue and the reliance on professional funding.
- Evaluate remaining Russia, Ukraine and sanctions exposures, including counterparty and derivative risks, rather than relying only on reported year-end carrying amounts.
- Review legal-proceeding disclosures and provisions, particularly Dutch consumer-credit compensation, Polish Swiss-franc mortgages, AML investigations and customer conduct claims.
- Verify the actual 2023 outlook, regulatory capital requirements, dividend approval and any subsequent events because the 20-F provides limited formal earnings guidance.