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ING posts 3Q underlying net profit of EUR 1,043 million

  • ing3Q underlying net result of EUR 1,043 million vs. EUR 727 million in 3Q2009 and EUR 1,202 million in 2Q2010
  • Net result of EUR 371 million impacted predominantly by goodwill write-down of EUR 513 million related to Insurance US
  • Net profit per share amounted to EUR 0.10; excluding goodwill write-down the net profit per share rose to EUR 0.23

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  • 3Q underlying net result of EUR 1,043 million vs. EUR 727 million in 3Q2009 and EUR 1,202 million in 2Q2010
  • Net result of EUR 371 million impacted predominantly by goodwill write-down of EUR 513 million related to Insurance US
  • Net profit per share amounted to EUR 0.10; excluding goodwill write-down the net profit per share rose to EUR 0.23
  • Shareholders’ equity increased by EUR 0.9 billion to EUR 42.5 billion; return on IFRS equity 11.1% for the first nine months of 2010
  • Underlying net profit for the first nine months climbed to EUR 3,262 million vs. EUR 706 million in the same period last year.
  • Bank posted strong increase in underlying profit before tax to EUR 1,513 million vs. EUR 250 million in 3Q2009
  • Improvement on 3Q2009 was driven by lower negative market-related impacts and risk costs, while margins remained healthy
  • Underlying results decreased slightly from EUR 1,613 million in 2Q2010 which included a capital gain on the sale of an equity stake
  • Addition to loan loss provisions continued to decline to EUR 374 million or 45 bps of average risk-weighted assets
  • Cost/income ratio of 56.5%, or 53.4% excluding impairments and other market impacts
  • Core Tier 1 ratio increased to 9.0% from 8.6% at the end of June 2010; capital generation of EUR 3.9 billion year-to-date
  • Insurance operating result showed good improvement; underlying result affected by assumption changes on VAs
  • Operating result increased for the third consecutive quarter, rising to EUR 473 million from EUR 393 million in 3Q2009
  • Investment margin jumped 39.8% from 3Q2009, or 29.4% excl. currencies, on higher investment spreads in the US and Benelux
  • Administrative expenses/operating income ratio improved to 43.4% on robust revenue generation
  • Underlying result before tax EUR 18 million impacted by EUR -356 million variable annuity (VA) assumption changes in Japan & US
  • Operational separation gaining momentum; preparing for a base case of two Insurance IPOs
  • Europe-led IPO with strong growth positions in developing markets; US-focused IPO with leading retirement services franchise
  • Actions planned in 4Q2010 and 1Q2011 to bring hedging and accounting for US business more into line with US peers
  • Changes would lead to a DAC write-down on US VAs of approximately EUR 1 billion pre-tax (EUR 0.7 billion after tax) in 4Q2010
  • ING is studying a move towards fair-value accounting on withdrawal benefit reserves for US VAs as of the first quarter of 2011
  • Fair-value accounting would result in an adjustment to book value of approximately EUR 1 to -1.3 billion as of 1 January 2011
  • Measures expected to improve US VA reserve adequacy, reduce earnings volatility and enhance reported profitability


CHAIRMAN’S STATEMENT

“We continue to make good progress towards our strategic priorities as we work to create strong stand-alone companies for banking and insurance. The operational separation is gaining momentum and costs for this year are coming in at the low end of our expectations. While the option of one IPO remains open, we are going to prepare ourselves for a base case of two IPOs for our insurance businesses: one Europe-led IPO with solid cashflow combined with strong growth positions in developing markets, and one separate US-focused IPO with a leading franchise in retirement services. For that reason, we are aligning our management structure for Insurance and taking action to bring the hedging and accounting for our US business more into line with US peers,” said Jan Hommen, CEO of ING Group.

“The bank posted another set of strong results in the third quarter, with an underlying profit before tax of EUR 1,513 million, up from EUR 250 million in the third quarter last year, as impairments and other negative market impacts diminished significantly. Compared with the second quarter, pre-tax results were down slightly from EUR 1,613 million, mainly due to a capital gain in the previous quarter. Volume growth was subdued given continued economic uncertainty, but spreads on lending and savings remained healthy, and the net interest margin edged up from the second quarter. Loan losses continued to trend downwards, particularly in Commercial Banking, although risk costs remain elevated for the mid-corporate and SME segment in the Benelux. Compared with the third quarter of 2009, operating expenses were significantly impacted by exchange rates and one-off items, but increased just 4.1% on a comparable basis due to higher marketing costs and selective investments in growth opportunities and system improvements as we continue to invest in the long-term future of the bank.”

“The insurance company showed steady improvement in its operating results as the measures set out in our Ambition 2013 programme begin to take hold. Operating results improved to EUR 473 million in the third quarter, up from EUR 393 million in the third quarter last year and EUR 419 million in the second quarter. The improvement was driven by an increase in the investment margin largely due to reinvestment into fixed income securities, as well as higher fees and an improvement in the technical margin. Administrative expenses increased, due in part to currency effects; however, the efficiency ratio improved. The underlying results for Insurance were impacted by assumption changes on variable annuities in both Japan and the US, and the net profit included a write-down of goodwill related to Insurance US.”

“As we prepare ourselves for a base case of two IPOs for Insurance, we are working to implement a number of changes to increase transparency and bring our US Insurance accounting and hedging more into line with US peers. These measures are expected to result in a write-down of deferred acquisition costs of approximately EUR 1 billion before tax (EUR 0.7 billion after tax) in the fourth quarter. In addition, a move towards fair-value accounting on part of the legacy variable annuity reserves would result in an adjustment to book value of approximately EUR -1 to -1.3 billion, which would be reflected in shareholders’ equity as of 1 January 2011. These changes will substantially improve the reserve adequacy on the legacy VA book, allow the company to better hedge interest rate risk, and will reduce earnings volatility going forward.
Separately, the US management is implementing a programme to sharpen the strategic focus of the US business on life and retirement services while reducing annual expenses by EUR 100 million per year from 2011. The aim is to create a strong and profitable US Insurance business that can be IPOed when earnings and market circumstances improve.”

Finance

Corporate treasuries under pressure need multi-banking trade finance technology

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Corporate treasuries under pressure need multi-banking trade finance technology 1

By Andrew Raymond, CEO, Bolero International

The pressures on corporate treasuries in global trade have continued to mount since an HSBC survey last December found many felt ill-equipped to meet the demands placed on them.

Since then the pandemic has caused massive disruption and has overturned many carefully-laid plans. The same pressures identified in the survey remain, but have intensified. Treasurers still face ever-more complex flows of information from multiple systems while relying substantially on manual processes. At the same time they are expected to drive change and provide strategic insight.

It was no surprise then that two-thirds of treasurers in the survey were planning changes to the technology they used as part of transformation programmes to increase efficiency and bring greater visibility to treasury operations.

Reliance on manual methods and paper documents makes little sense and is unsafe

As we move through the pandemic, pressure on cashflow and working capital remain potent factors. Many treasurers working for enterprises engaged in global trade know that continuing to use manual methods to manage credit lines, and important trade finance instruments such as letters of credit (LCs) or guarantees is hard to justify in an age of digitisation and multi-banking trade finance solutions.

Not least because of the constant problem of fraud and forgery in relation to paper documents, which has led some banks to withdraw from involvement in commodity trade finance. The allegations of prolonged major fraud against the oil trader Hin Leong in Singapore are a case in point, sending tremors through the trade finance world. Court documents reportedly allege the fraudulent use of 58 import letters of credit that were not supported by any underlying transaction. Forged bank statements, bills of lading, sales contracts and invoices are also allegedly involved in very substantial fraud designed to cover losses and give a false impression of liquidity.

The case has not just exposed the susceptibility of paper trade documentation to forgery – it has also prompted some well-known European long-term commodity finance banks to withdraw or review their activities in this field. None of this makes everyday operations any easier for corporate treasuries still using paper in trade finance.

Reducing fraud through digitisation of trade finance

With fraud such a substantial problem, treasurers need to think hard about digitisation and how it reduces the risks. Paper documents can be forged when out of sight while being couriered around the globe. Once a document is digitised, however, fraud or forgery become extremely difficult because of encryption and audit trails. The electronic document remains completely visible at all time, but only to those engaged in the transaction and only the legitimate holder can amend it.

Increasing the efficiency of each trade transaction through digitisation

Digitisation substantially reduces the chances of fraud, but it also transforms how treasuries manage credit lines, letters of credit and guarantees, vastly increasing the speed and efficiency of transactions. It also maintains relationships with preferred banks.

In a digitised workflow, automation takes care of the data-uploading for LCs, while transfer between parties is at the click of a mouse across secure digital networks. LCs are notoriously complex instruments requiring close attention to detail and strict compliance with the rules governing their use. Compliance-checking can also be automated to reduce the administrative burden on treasuries and increase accuracy.

These advantages are important because the use of paper under LCs can imperil a transaction at many potential break-points. Documents must be presented physically, often to a prescribed location. Yet being time-limited, LCs (and bank guarantees) often expire before they are used, or their presentation periods are found to have been exceeded. Prevention of these problems requires constant supervision and many hours of work. When lines expire, new and potentially more expensive credit must be negotiated, while failure to present on time threatens transactions, leads to substantial extra costs, delays in releasing cargo and poor relationships between counterparties.

Consolidating credit lines and trade finance on a single, easy-to-use platform

The most effective form of digitisation for corporate treasuries is through a multi-bank trade finance platform which will slash the time involved in supervising credit lines, LCs and guarantees. An exporter may have thousands of LCs and guarantees with dozens of different banks. Optimising their use still requires laborious logging in and out of banking portals. Finding a single LC or guarantee relating to a transaction can be very difficult.

If treasuries implement multi-banking trade finance solutions, they will eliminate the need to toggle between different bank portals. They gain quick and easy access to all their banks, along with far greater visibility and control of all their credit lines and individual LCs. From a single platform they can manage and edit all their trade finance documentation and electronic presentations, as well as open account transactions and electronic bills of lading. All tracking and reporting is accomplished with a few mouse-clicks, while communications with banks remain secure. This is a major advantage when remote working is on the increase in so many areas of the globe.

As the world changes, but the pressures intensify, there is an urgent need for treasuries to grasp greater efficiency and visibility in their management and optimisation of credit lines and trade finance. It makes the adoption of multi-banking trade finance solutions an obvious first move.

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Finance

How can financial services companies deliver great customer service and retain customer loyalty? 

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How can financial services companies deliver great customer service and retain customer loyalty?  2

By Chris Angus, Senior Director, 8×8

The reality many banks are facing now is that given Amazon Prime can deliver goods to our doors in less than 24 hours, even during a pandemic, consumers expect the banks they use to keep up with their needs.

People want to be able to access their bank accounts, services and speak to an expert within a matter of minutes, whether it’s via an app on their device, web-chat or over the phone – their expectations are high. Adding to this, the World Health Organisation has advised consumers to use cards instead of banknotes during the Covid-19 pandemic – changing the way consumers pay for products.

With the recent health crisis forcing contact centres to shift to home working, collaboration can be more challenging, especially without the appropriate IT systems and applications in place. A delay in communication or unavailable information can, over time, cause reputational damage.

According to Deloitte, the bank of 2023 will look very different from today, making it clear that financial institutions should consider how they  prepare for the future.

  1. Review your business communications strategy – both inside and out.

A crucial part of this preparation needs to be on reviewing business communications – both internally and externally – ensuring that employees can seamlessly collaborate and connect regardless of their location.

And technology is key to this movement, not only between teams, but also with customers. With the right communication tools in place, employees can gain better insight and deliver services that meet customer expectations. This results in not only satisfied customers, but also happier, and more motivated employees. All of which goes towards truly building a solid foundation for business recovery and continuity.

For many businesses right now, the future feels uncertain, so it’s important to consider the flexibility of solutions before deployment. Cloud computing, for example, allows businesses to stay nimble, scaling up and down their requirements to reflect the needs of the business and their customers.

  1.  Implement an ‘Operate from anywhere’ strategy 

The first half of 2020 was defined by the need for agility, an adjustment in how we operate our day-to-day lives and how we communicate both professionally and personally. The remainder of 2020 and beyond will focus on the application of technology to define how we reinvent working and connecting with each other, our customers, partners, and beyond.

Chris Angus

Chris Angus

To deliver great customer service, while ensuring employees are happy, productive and most of all safe, businesses need to be able to operate from anywhere. Yet, for many with contact centre requirements, this is not an easy transition. Enabling contact centre agents to work flexibly and from remote locations is now a critical component of business operations that must be top of mind for the entire C-suite.

Agents need to have the right tools to ensure they can continue to provide the same level of customer service, from any location. For an operate-from-anywhere strategy to be effective, organisations should consider how they can combine voice, team chat and video meetings on a single technology platform.

The use of multiple apps for multiple purposes can have the opposite effect than intended. Unifying communication channels enables collaboration and productivity while minimizing complexity. It also means a more streamlined and efficient experience for both employees and customers aiding great customer service.

  1. Meeting expectations is key

Not only have recent events affected contact centres operations, but the traditional, in-person branch experience has also been significantly impacted. Bank branches can now only accommodate a small percentage of customers. These restrictions have accelerated the impetus for businesses to meet their customers’ needs online, but also, the expectations of customers  have also evolved rapidly.  Virtual instant communication between businesses and consumers is now becoming a basic customer need. For financial services, this means considering digital-first applications, such as chatbots or instant messaging, where possible.

Businesses now also need to be where their customers are and offer them an omnichannel experience. Via the cloud, businesses can continue to serve customer needs through multiple channels such as voice, video, email, SMS and more.

While meeting expectations needs to be a priority – it’s not enough. Financial services institutions need to ensure they meet those expectations at speed, being the new battleground for competition. When it comes to finances, consumers expect their problems to be dealt with at speed and to the highest standards.

In summary, taking a technology-first approach which enables both employees and consumers to operate and access their data and communication tools from anywhere is the defacto business priority. Helping the financial services industry empower employees to better serve customer expectations with speed and accuracy – and ultimately delivering great customer service.

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Finance

How payments can help streamline operations and boost customer satisfaction in the vending industry

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How payments can help streamline operations and boost customer satisfaction in the vending industry 3

By Darren Anderson, Business Development Manager, Self Service, Ingenico Enterprise Retail

The COVID-19 pandemic has had an astounding impact on the payments industry, causing cash usage to plummet as contactless and card-not-present volumes soared. Of course, this phenomenon was not unforeseen by payments professionals, who had predicted such a movement away from cash, but not at the speed the virus guidelines facilitated. In fact, due in part to the hygiene perks of contactless payment methods increasing its adoption, 50% of customers think that cash will disappear completely at some point in the future.

The unattended market was ahead of the pandemic in terms of contactless alternative payment method (APM) adoption, and it continues to upgrade its offerings to suit a wider range of industries. Nevertheless, the pain point for vending operators is that they’re often not sure exactly how these technologies work, or how to implement them. And with payments offerings constantly evolving, it’s becoming harder for vending operators to know which solution would be the best fit for their business.

As such, one easy way for vending operators to ease this load is to partner with a knowledgeable payments advisor who can not only provide the best solutions for their business, but guide them through the process and any need-to-knows. It’s also important to investigate the payments trends across the vending market, what the future might bring and what vending operators need to know about newer payments technology and the value it can bring to their unattended retail business operations.

Vending through the pandemic

Coronavirus has impacted the unattended market in various ways. In some cases, vending machine use has decreased as a result of lower footfall and closed premises. However, the nature of vending being self-service, for many it’s just been a case of upgrading systems to meet new guidelines and hygiene recommendations to start boosting their usage again. As cash usage decreased over the course of the pandemic, cards and APMs stepped in to provide a host of benefits, and as customers use and enjoy these seamless technologies, they are fast becoming the preference.

These developments have provided the opportunity for vending operators to embrace newer technologies which, although ultimately positive, can prove daunting if such retailers are not accustomed to working closely with payments. Fortunately, the vending market is in a great position to take advantage of new contactless technologies, being already low on human interaction and having 24/7 capabilities.

Darren Anderson

Darren Anderson

What’s more, the market can not only cater to consumers’ evolving needs, but it can also provide the flexibility and reliability that consumers are relying on as the world around them is changing. Many new technologies can also improve the general operations and management of vending, offering features such as easier on-the-go stock management and maintenance notification technology.

Keeping the consumer in mind

Consumers today want to enjoy the latest innovations and best-in-class customer experiences. These shoppers believe that self-service is a time-saver, and they also view cashless and contactless as faster and more seamless ways to pay – a fact which is reflected in the recent consumer demand for a wider variety of APMs. Customers now expect even more options to pay for their goods and services, from QR codes, to in-app payments and more.

Alongside the cashless trend, data-security and customer experience are two other factors driving the vending market evolution. With constantly evolving fraud developments in the online world, good security is more pertinent than ever, and has to be a central consideration to vending operators – as well as ensuring a seamless customer experience.

From a customer usage standpoint, mobile payments are becomingly increasing popular, as driven by the Gen Z market. According to our research, 63% of Gen Zers have said they would pay more for a mobile experience[1].

Trust and a good experience are also considerable factors across all customer groups, with 95% of customers claiming their loyalties lie with a company they trust[2], and 86% willing to pay more for a positive experience[3].

To appeal to ever-hungry consumers, vending operators need to provide the options they want. In the unattended market, this is relatively simple – not only do they provide a convenient and reliable method of payment for customers, but they also avoid face-to-face interaction. They can also supply a range of different products and accept a variety of payment methods to appeal to all customers, no matter their preference.

Using payments to drive revenue

Driving revenue is a two-pronged approach – you need to appeal to customers to keep them coming, and streamline operations to reduce overheads. In order to meet both parties’ expectations, it’s important to respond well to new vending challenges, taking note of the solutions that enable merchants to provide their customers with the payment methods they prefer.

Payments are complicated, so there’s no need to worry if you’re not hugely familiar with the offering out there, or unsure where to start – that’s where a payment service provider (PSP) can assist. With the expertise that a PSP brings, along with the technological solutions they offer, vending operators can improve customer journeys in all unattended environments.

Such technological solutions are flexible and can cater to specific business needs, while providing easy, quick, and secure payment methods that protect both the business and the customer’s personal data. They can also improve operational efficiency, increasing business performance with features such as real-time reporting and smart transaction management, to provide a best-in-class customer experience.

With smart devices, a secure gateway and advanced acquiring capabilities, PSPs can help vending operators design a flexible vending solution tailored to their individual and specific needs. To find out more about unattended retail and how your company can benefit from Ingenico’s unique expert knowledge, get in contact with Ingenico Enterprise Retail today at www.ingenico.com/smartselfvending.

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