ING Group recorded an underlying net result of EUR 988 million in the first quarter of 2014, compared with EUR 1,170 million one year ago and EUR 493 million in the fourth quarter of 2013.

ING Group’s first-quarter results were driven by the strong performance of ING Bank and a substantial improvement in the results of NN Group’s ongoing businesses, particularly in the Netherlands. Commercial momentum was also robust across the Group. ING Bank recorded a significant increase in net lending, funded entirely with net deposit inflows that were attracted during the quarter. At NN Group, new sales (on a constant currency basis) rose by double digits both year-on-year and sequentially.

ING Bank posted a strong first-quarter underlying result before tax of EUR 1,176 million, reflecting lower risk costs and relatively stable income. Results were flat year-on-year, but they jumped 30.1% from the fourth quarter of 2013, which included the annual Dutch bank tax and additional restructuring charges. The net interest margin was 1.50%, up five basis points from the previous quarter, driven by higher interest results in Financial Markets, although overall Financial Markets results were down year-on-year. Risk costs declined as economic activity improved, and were 65 basis points of average risk-weighted assets. Operating expenses were 7.5% lower than in the previous quarter, but rose 1.9% from a year ago as the annual Belgian bank taxes were recognised in full in the first quarter of 2014.

ING Bank demonstrated strong commercial performance during the first quarter, extending a total of EUR 5.1 billion of net lending to both retail and corporate clients. The increase in lending was funded by a EUR 8.3 billion net inflow of funds entrusted, generated primarily by Retail Banking.

The operating result for the ongoing business of NN Group improved substantially to EUR 274 million, up 61.2% year-on-year and 28.0% higher than the fourth quarter of 2013. The improvement compared with the first quarter of 2013 was mainly driven by improved results in both Netherlands Life and Netherlands Non-life, as well as lower administrative expenses throughout the organisation. On a sequential basis, the improvement in operating result was mainly attributable to higher results in Japan Life, Netherlands Non-life and the segment ‘Other’. The first-quarter 2014 result before tax for NN Group was EUR -372 million, reflecting the EUR -541 million impact of making ING’s closed defined benefit pension plan in the Netherlands financially independent.

Total new sales (APE) at NN Group were robust at EUR 439 million, rising 20.6% year-on-year at constant currencies. Sales at Japan Life grew 20.0%, driven by increased demand for financial planning products. At Insurance Europe, APE rose 14.8% due to higher life sales across the region. Sales in Netherlands Life were up 28.4%, reflecting higher pension renewals. On a sequential basis, total new sales at NN Group jumped 53.0% at constant currencies, fuelled by seasonally higher pension contract renewals in the Netherlands and seasonally higher sales in Japan Life.

ING Group’s first-quarter net result was EUR -1,917 million, primarily due to the financial impact of various strategic actions which more than offset the EUR 988 million underlying net profit. During the quarter, ING Group recorded an after-tax loss of EUR 2,005 million related to the deconsolidation of Voya Financial, Inc. (“Voya”, formerly Insurance ING U.S.) and a EUR -1,059 million special item due to the successful finalisation of the agreement to make ING’s closed defined benefit pension plan in the Netherlands financially independent. Another significant special item was a first payment of EUR -101 million related to the nationalisation of SNS. Net gains/losses on divestments totalled EUR -1,764 million and were mainly attributable to the aforementioned loss due to the deconsolidation of Voya and a EUR 202 million gain following the deconsolidation of ING Vysya Bank (triggered by changes to the governance structure).

The net result from the discontinued operations of Insurance and Investment Management Asia decreased to EUR 5 million from EUR 66 million one year ago as businesses were divested. The first-quarter 2014 result mainly reflects the net results of ING BoB Life and Investment Management Taiwan (divested in April 2014).

The first-quarter 2014 net result from the discontinued operations of Voya was EUR 53 million compared with EUR -195 million one year ago. The improvement was primarily driven by an increase in the underlying result before tax for the US Closed Block VA, which was partially offset by an increase in minority interest due to the reduction of ING Group’s stake in Voya since the first quarter of 2013. After Voya was deconsolidated from ING Group’s accounts, the decrease in Voya’s share price resulted in a EUR -19 million impact for ING, which was also reflected in the net result from discontinued operations of Voya in the first quarter of 2014.

ING Group’s first-quarter 2014 net result per share was EUR -0.50. The Group’s underlying net return on IFRS-EU equity was 8.7%.

Other events

Capital Injection NN Group

In line with ING Group’s announced intention to ensure that NN Group is adequately capitalised ahead of the intended IPO, ING Group will inject EUR 850 million of capital into NN Group prior to its IPO. NN Group will use these funds to reduce debt owed to ING Group by EUR 0.2 billion, further strengthen the capitalisation of NN Life by approximately EUR 0.5 billion, and increase the cash capital position in the holding company by approximately EUR 0.2 billion. The capital injection from ING Group and the April 2014 issuance of subordinated debt will increase the IGD ratio of NN Group to a pro-forma 277% from 249% at the end of the first quarter of 2014. The capital injection will increase ING Group core debt by EUR 850 million. As a consequence of this pre-IPO capital injection, ING Group confirms that the intended IPO will comprise only secondary NN Group shares being sold by ING Group.

NN Group pre-IPO investments

On 30 April 2014, ING announced that it has secured important investments into NN Group totalling EUR 1.275 billion ahead of NN Group’s intended Initial Public Offering (IPO). In this context, ING Group has agreed to sell NN Group shares at the IPO to three Asian-based investment firms (RRJ Capital, Temasek and SeaTown Holdings International) and also to issue to these three investors subordinated notes that ING Group will over time exchange into NN Group shares.

The anchor investment in NN Group shares at the time of the intended IPO will total EUR 150 million. There will be no lock-up on these NN Group shares which will be acquired at the IPO transaction price.

In May 2014, ING Group will issue to each of the investors in this transaction mandatory exchangeable subordinated notes for a total amount of EUR 1.125 billion. These notes will accrue a 4% coupon, and will be mandatorily exchangeable into NN Group shares in three tranches according to a schedule specified in the ING Group press release of 30 April 2014.

The transactions are subject to the base case IPO of NN Group taking place in 2014. If the IPO does not take place in 2014, the transactions with these three investors will be unwound, and the subordinated notes will be redeemed.

Changes in governance and reporting of ING Vysya Bank

At the end of the first quarter of 2014, changes to the governance structure of ING Vysya Bank were implemented in order to better align with prevailing regulations. The regulatory requirements necessitated some governance changes. As part of that, ING has reduced the number of directors appointed by ING in ING Vysya Bank’s Board of Directors to be proportionate to its shareholding. Although ING Bank’s economic interest of approximately 43% remains unchanged, as a result of these governance changes, ING Bank no longer has a majority representation in the Board of Directors, and influence on ING Vysya’s operations is aligned with its shareholding interest. As a result, ING Bank has no effective control over ING Vysya and, therefore, as of 31 March 2014 ING Vysya is deconsolidated and accounted for as an associate under equity accounting.

Deconsolidation of Voya Financial, Inc.

ING Group has previously announced its intention to divest its remaining stake in Voya over time, in line with its strategy to separate and divest its insurance and investment management businesses. In this context, ING Group sold shares of Voya through an initial public offering in May 2013 and a follow-on offering in October 2013.

In the first quarter of 2014, ING Group sold a third tranche of approximately 37.8 million shares of common stock of Voya at a price of USD 35.23 per share. The gross proceeds for ING Group amounted to EUR 950 million.

The sale of the third tranche of shares reduced ING Group’s stake in Voya to approximately 43% from approximately 57% as at 31 December 2013, fulfilling the European Commission restructuring requirement to divest at least 50% of ING Group’s U.S. insurance and investment management operations before year-end 2014. Following this transaction, Voya was deconsolidated and is accounted for as an associate held for sale in the first quarter of 2014. The remaining investment in Voya was recognised at its fair value of EUR 2,914 million at the transaction date.

The share sale and the deconsolidation of Voya resulted in an after-tax loss of EUR 2,005 million which is recognised in the first quarter of 2014 in the profit and loss account in the line ‘net gains/losses on divestments’. This amount reflects the difference between the IFRS book value and the market value of ING Group’s 57% stake in Voya at deconsolidation, and includes the release of corresponding revaluation reserves.

Any further sale of ING Group’s remaining holdings of Voya shares is subject to a lock-up period of 90 days from 19 March 2014, the date of the offering pricing (subject to certain exceptions and the underwriters’ ability to waive lock-up restrictions). Voya Financial, Inc. shares trade on the New York Stock Exchange under the ticker symbol ‘VOYA’.

Accounting for GMDB in Japan Closed Block VA

As previously announced, NN Group has moved towards fair value accounting on the reserves for the Guaranteed Minimum Death Benefits (GMDB) of the Japan Closed Block VA segment as of 1 January 2014. As at the end of the fourth quarter of 2013, the difference between the current book value and the estimated fair value of the GMDB reserves was EUR 219 million before tax. Implementation of fair value accounting for GMDB represents a change in accounting policy under IFRS with a transitional impact of EUR -165 million after tax reflected in shareholders’ equity as of 1 January 2014. Results for comparative periods have been restated accordingly.

ING Bank had a strong first quarter reflecting a decline in risk costs and relatively stable income. The underlying result before tax was EUR 1,176 million, roughly flat versus a year ago but up 30.1% from the previous quarter, which included the annual Dutch bank tax and additional restructuring charges. Total underlying income declined slightly year-on-year due to negative CVA/DVA impacts, while higher interest results in Retail Banking were offset by lower Financial Markets revenues. The interest margin rose to 1.50% from 1.45% in the previous quarter, driven by higher interest results in Financial Markets which were largely offset by lower trading results. Risk costs declined as economic activity improved. Expenses fell 7.5% on a sequential basis, but were up 1.9% compared with a year ago due to the fact that the annual Belgian bank taxes were recognised in full in the first quarter of 2014.

Total underlying income declined 1.2% year-on-year to EUR 3,818 million, including EUR 66 million of negative CVA/DVA recorded in Commercial Banking and the Corporate Line, compared with EUR 48 million of positive impacts in the first quarter of 2013. Excluding CVA/DVA, underlying income rose 1.8%, notably in Retail Benelux and Retail Germany, reflecting a higher interest result; however, income declined in Financial Markets due to lower net trading income. Total underlying income was stable on a sequential basis, as higher income in Retail Banking and Bank Treasury compensated for a decline in Industry Lending and the EUR 99 million one-off result that was realised on the unwinding of the Illiquid Assets Back-up Facility (IABF) in the fourth quarter of 2013.

The underlying interest result grew 3.8% to EUR 3,027 million from a year ago, due to higher margins and volumes on funds entrusted. The interest result on lending declined slightly as the impact of lower volumes (partly caused by the transfer and sale of assets last year) was largely compensated by higher margins, particularly on mortgages. On a sequential basis, the underlying interest result increased 2.7%, mainly due to higher interest results in Financial Markets. The interest result on funds entrusted rose slightly due to a small improvement in the interest margin. The interest result on lending activities was relatively flat, reflecting an improved margin on mortgages which offset the impact of lower average volumes and lower margins on other lending. The first-quarter underlying interest margin of ING Bank improved to 1.50% from 1.45% in the fourth quarter of 2013, primarily reflecting higher interest results in Financial Markets.

ING Bank generated strong commercial momentum in the first quarter of 2014, recording a substantial increase in customer lending consistent with the long-term ambition to optimise the asset side of the balance sheet. Total net lending grew by EUR 5.1 billion, adjusted for currency impacts, the deconsolidation of ING Vysya Bank and the additional transfer of WUB mortgages to NN Bank. The net production of residential mortgages was EUR 0.9 billion and was generated entirely outside of the Netherlands. Other lending rose by EUR 4.2 billion, mainly in Retail Belgium as well as Structured Finance and General Lending in Commercial Banking, which more than offset further declines in Real Estate Finance and the Lease run-off business. Growth was funded through customer deposits, with ING Bank reporting EUR 8.3 billion net inflow of funds entrusted during the first quarter, generated primarily by Retail Banking.

Cost-saving initiatives at the Bank are on track, helping to offset the impact of inflation and higher regulatory expenses. Underlying operating expenses rose 1.9% year-on-year to EUR 2,174 million, mainly due to EUR 94 million for the annual Belgian bank taxes which were recognised in full in the first quarter of 2014 (whereas they were evenly accrued during 2013). Other contributors to the increase in expenses were higher pension costs, increased IT spending and business growth in Retail International. These increases were offset by the benefits from the ongoing cost-saving initiatives, the partial transfer of WUB staff to NN Group as of mid-2013, lower impairments on real estate development projects and favourable currency impacts. Expenses declined 7.5% from the fourth quarter of 2013, which included EUR 149 million for the annual Dutch bank tax (comparatives were restated for the allocation to the relevant business lines) and EUR 76 million of additional restructuring costs in Retail Netherlands. The underlying cost/income ratio for ING Bank was 56.9% for the first quarter of 2014, up from 55.2% a year ago, but almost stable when adjusted for the impact of the annual Belgian bank taxes.

Risk costs declined in the first quarter as economic conditions improved, resulting in a lower inflow of problem loans and a small increase in non-performing loans (NPLs). ING Bank added EUR 468 million to the provision for loan losses, down from EUR 561 million a year ago and EUR 560 million in the previous quarter. The sequential decline mainly reflects lower additions in Retail Benelux, particularly in the business lending segment. Risk costs for Dutch mortgages were 9.8% lower at EUR 74 million, with NPLs increasing to 2.0% from 1.9% at year-end 2013. Risk costs in Retail International and Commercial Banking also fell slightly versus the previous quarter. In Commercial Banking, a reduction in net additions for Real Estate Finance, Structured Finance and the Lease run-off portfolio was offset by higher risk costs in General Lending, mainly related to some specific files. Total NPLs at ING Bank rose to EUR 16.2 billion from EUR 15.9 billion in the fourth quarter of 2013, but remained unchanged at 2.8% of credit outstandings. Total risk costs were 65 basis points of average risk-weighted assets, versus 81 basis points in both comparable quarters. For the coming quarters, ING expects risk costs to remain below the average level seen in the previous two years, albeit dependent on a continued recovery of the economy.

The underlying result before tax from Retail Banking was strong at EUR 771 million and significantly higher than EUR 607 million in the first quarter of 2013. This improvement was primarily driven by higher interest margins on savings and lending in most countries. Expenses rose 4.3%, mainly caused by the annual Belgian bank taxes that were recognised in full in the first quarter, which more than offset the impact from existing cost-saving initiatives. Risk costs were down on both comparable quarters, particularly in the Benelux and Retail Rest of World. On a sequential basis, the result improved 42.3%, reflecting higher income, lower expenses and lower risk costs.

Commercial Banking showed a solid performance in the first quarter, with risk costs continuing their downward trend and net lending assets increasing compared with the fourth quarter of 2013. The underlying result before tax was EUR 471 million, 31.3% lower year-on-year due to lower results in Financial Markets, partly caused by negative CVA/DVA impacts, and lower results in General Lending & Transaction Services. Compared with the previous quarter, the underlying result was up 27.3% as the negative CVA/DVA effects were offset by higher results in Financial Markets and Bank Treasury.

The underlying result before tax of Corporate Line Banking improved to EUR -66 million versus EUR -124 million in the first quarter of 2013, mainly due to an improvement in Bank Treasury-related results, less negative fair value variations and lower DVA on own-issued debt.

ING Bank’s first-quarter net result was EUR 264 million. This included EUR -768 million of special items after tax and a EUR 202 million gain following the deconsolidation of ING Vysya Bank. Special items included EUR 653 million of after-tax charges for making the Dutch closed defined benefit pension plan financially independent, a first payment of EUR 101 million for the bank levy related to the nationalisation of SNS and another EUR 13 million for the previously announced restructuring programmes in Retail Netherlands. ING’s total bank levy related to the nationalisation of SNS is EUR 304 million and will be paid in three equal tranches in the first three quarters of 2014. The deconsolidation of ING Vysya Bank follows changes to the company’s governance, effected at the end of March 2014, which require ING Vysya Bank to be accounted for as an investment in an associate. This change in accounting resulted in a net gain of EUR 202 million.

The underlying return on IFRS-EU equity rose to 10.2% from 9.0% in the first quarter of 2013. This was, next to a modest increase in underlying results, mainly caused by a decline in the average equity base as dividend payments to ING Group outweighed net earnings. The Ambition 2017 target-range for return on IFRS-EU equity is 10-13%.

The operating result for the ongoing business of NN Group improved significantly to EUR 274 million, up 61.2% from the first quarter of 2013 and up 28.0% from the previous quarter. The year-on-year improvement was mainly driven by higher Disability and Accident (D&A) results in Netherlands Non-life, a higher investment margin in Netherlands Life and lower administrative expenses throughout the organisation. The result before tax was EUR -372 million, reflecting the EUR -541 million impact of making ING’s closed defined benefit pension plan in the Netherlands financially independent. On a constant currency basis, new sales increased 20.6% compared with last year.

The operating result from the ongoing business increased to EUR 274 million from EUR 170 million in the first quarter of 2013, driven by higher D&A results in Netherlands Non-life, a higher investment margin in Netherlands Life and lower administrative expenses throughout the organisation. This improvement was partially offset by lower results in Japan Life. Compared with the previous quarter, the operating result from the ongoing business increased by EUR 60 million, mainly due to higher results in Japan Life, Netherlands Non-life and the segment Other, partly offset by a lower operating result in Netherlands Life and Insurance Europe.

The operating result for Netherlands Life rose 11.4% from the first quarter a year ago to EUR 147 million, driven by a higher investment margin (reflecting an increased allocation to higher- return asset classes and higher invested volumes) and lower administrative expenses. Fees and premium-based revenues declined, mainly due to lower fee income on the individual unit- linked portfolio as of 1 January 2014 and on a decreasing individual life closed book. The technical margin decreased, due to lower mortality results. The operating result was 21.0% lower than the fourth quarter of 2013 (which included non-recurring benefits in the technical margin), partly compensated by higher fees and premium-based revenues as a result of seasonally higher premiums on pension contracts.

Netherlands Non-life’s operating result improved to EUR 22 million, reflecting favourable claims developments in D&A and management actions to restore profitability in the Disability portfolio. The results in Property and Casualty (P&C) remained stable. Compared with the previous quarter, the operating result increased by EUR 10 million as the previous quarter was affected by higher claims in P&C following heavy storms and incidentally large claims in Fire.

The operating result for Insurance Europe was up 7.1% compared with the first quarter of last year, largely due to higher fees and premium-based revenues reflecting a change in the amortisation of commissions and expenses in Turkey, as well as higher life sales across the region. Lower administrative expenses and higher investment income also contributed to the higher operating result, partially offset by a higher crisis tax in Belgium. On a sequential basis, the operating result decreased 6.3%, mainly due to an investment performance bonus in Poland in the previous quarter.

Japan Life’s operating result declined to EUR 66 million from EUR 83 million last year. A lower investment margin and higher DAC amortisation were only partly mitigated by higher morbidity and surrender results as well as higher fees and premium-based revenues reflecting continued strong sales. The operating result increased from EUR 15 million in the fourth quarter of last year, driven largely by higher fees and premium-based revenues, partly offset by higher DAC amortisation and trail commissions, both in line with the seasonally higher sales.

The operating result for Investment Management rose to EUR 39 million driven by one-off fee income of EUR 5 million and EUR 5 million of personnel provision releases.

The quarterly operating result for the segment Other was EUR -46 million, compared with EUR -115 million one year ago and EUR -73 million in the previous quarter. The year-on-year improvement largely reflects a higher result from the reinsurance business as the first quarter of 2013 was negatively impacted by a EUR 31 million non-recurring loss. Lower corporate expenses and lower funding costs also supported the improvement. The result of NN Bank improved by EUR 11 million year-on-year, fully attributable to higher income following the partial transfer of assets and liabilities from WUB on 1 July 2013. On a sequential basis, the improved results were mainly attributable to lower corporate expenses.

Total first-quarter administrative expenses for the ongoing business were EUR 437 million, down 5.0% from a year ago. Expenses declined despite higher NN Bank expenses resulting from the partial transfer of WUB to NN Bank, which added 369 FTEs and EUR 15 million of expenses in the current quarter. Excluding currency effects and the partial transfer, expenses for the ongoing business fell 7.1%, demonstrating the impact of the transformation programme in the Netherlands and strong cost control across all business lines. Expenses for the ongoing business declined 5.0% sequentially, excluding currency effects.

The result before tax of NN Group was EUR -372 million. The current quarter included a EUR -541 million special item related to the impact of the agreement to make ING’s closed defined benefit pension plan in the Netherlands financially independent. The first quarter of last year included EUR 945 million of gains on divestments and the fourth quarter of 2013 included a EUR 575 million charge in the segment Japan Closed Block VA taken to restore the reserve adequacy to the 50% confidence level. Non-operating items for the ongoing business amounted to EUR -28 million in the first quarter of 2014. Gains/losses and impairments were EUR 10 million, mainly reflecting gains on the sale of debt securities, partly offset by impairments on real estate. Revaluations were zero. Market and other impacts totalled EUR -37 million and largely reflected a movement in the provision for guarantees on separate account pension contracts (net of hedging) in Netherlands Life.

The pre-tax result of Japan Closed Block VA was EUR -36 million compared with EUR 162 million a year ago and EUR -423 million in the previous quarter. The loss in the current quarter mainly reflects the impact of various modelling refinements, leading to a one-off reserve increase of EUR 51 million. The result in the previous quarter included a EUR 575 million charge taken to restore the reserve adequacy to the 50% confidence level.

Special items before tax amounted to EUR -572 million, of which EUR -541 million related to the impact of the agreement to make ING’s closed defined benefit pension plan in the Netherlands financially independent. The Dutch pension plan is no longer recognised as a defined benefit plan and the related pension asset has been removed from NN Group’s balance sheet accordingly. The current quarter also reflects special items related to the accelerated transformation programme in the Netherlands.

The result on divestments and discontinued operations was EUR -11 million compared with EUR 1,029 million in the first quarter of last year. The deterioration largely reflects the expected loss on the sale of the Investment Management business in Taiwan, which was announced in January 2014 and closed on 18 April. The first quarter of 2013 included EUR 945 million of gains on divestments following the sale of the life insurance businesses in Hong Kong, Macau and Thailand. Results from discontinued operations decreased to EUR 6 million from EUR 84 million one year ago, mainly due to the sale of the businesses in Korea, Hong Kong, Thailand and India and the closing of the regional offices.

Total new sales (APE) at NN Group were EUR 439 million, up 20.6% from a year ago on a constant currency basis. Sales grew 20.0% in Japan Life driven by an increased demand for financial planning products. In Insurance Europe, APE grew 14.8% year-on-year due to higher life sales across the region. APE rose 28.4% in Netherlands Life driven by higher pension renewals. On a sequential basis, new sales grew 53.0% at constant currencies, fuelled by seasonally higher pension contracts renewals in the Netherlands and seasonally higher sales in Japan Life.

The net operating ROE for the ongoing business rose to 9.2%. This was driven by the increase in net operating result which was only partly offset by a higher average adjusted equity base.

ING Group

ING Group’s balance sheet, excluding assets held for sale, increased by EUR 21 billion during the first quarter of 2014 to EUR 945 billion. This was despite a EUR 6 billion decrease due to the deconsolidation of ING Vysya Bank. ING witnessed strong commercial momentum and increased customer lending, funded through growth in customer deposits.

ING Group shareholders’ equity decreased slightly by EUR 0.4 billion, mainly due to the quarterly loss of EUR 1.9 billion, which was only partly offset by positive revaluations of debt securities, net of deferred interest crediting to life policyholders.

The ‘defined benefit remeasurement reserve’ increased by EUR 3.1 billion to EUR -652 million, mainly due to a transfer of EUR -3.3 billion to ‘other reserves’ in equity. This is the result of the agreement to make ING’s closed defined benefit pension plan in the Netherlands financially independent, which also reduced other assets by EUR 0.8 billion reflecting the removal of the related net pension asset.

ING Bank

ING Bank’s balance sheet increased by EUR 17 billion to EUR 805 billion, despite a EUR 6 billion negative impact following the deconsolidation of ING Vysya Bank. ING witnessed strong commercial momentum. Excluding the deconsolidation of ING Vysya Bank, customer lending increased by EUR 6 billion, while customer deposits rose by EUR 13 billion. The loan-to-deposit ratio decreased to 1.02 from 1.04 at year-end. Shareholders’ equity decreased as retained earnings were more than offset by the dividend upstream to ING Group to repay the Dutch State. ING Bank further strengthened the total capital base by issuing CRD IV-eligible Tier 2 securities.

NN Group

Total assets of NN Group increased by EUR 1.7 billion over the first quarter of 2014 to EUR 147.7 billion, on a constant currency basis, mainly driven by an increase in the market value of debt securities and derivatives. Shareholders’ equity increased by EUR 0.6 billion to EUR 14.7 billion mainly reflecting a higher revaluation reserve debt securities.

CAPITAL MANAGEMENT

Capital ratios ING Group

Capital ratios ING Bank

Capital ratios NN Group and NN Life

ING Group, ING Bank and NN Group remained well capitalised in the first quarter. The core debt at ING Group decreased to EUR 3.8 billion following the sale of shares in Voya and a dividend from NN Group consisting of the proceeds and remaining stake in SulAmérica. ING Bank’s common equity Tier 1 ratio remained strong at the end of the first quarter, but declined to 10.0% mainly reflecting the removal of the net pension asset and the introduction of CRD IV. Continued strong capital generation at ING Bank enabled ING Group to make a penultimate EUR 1.225 billion payment to the Dutch State in March. NN Group’s IGD ratio decreased slightly to 249% in the first quarter of 2014.

ING Group

The amount of core debt at ING Group decreased to EUR 3.8 billion at the end of March 2014 from EUR 4.9 billion at year-end 2013. Total proceeds of EUR 1.1 billion related to the partial sale of ING’s stakes in Voya and SulAmérica were used to reduce core debt. Adjusted equity declined to EUR 48.5 billion from EUR 53.1 billion, reflecting the removal of the net pension asset and the payment of another tranche of core Tier 1 securities to the Dutch State. ING Group’s debt/equity ratio improved from 8.5% at year-end 2013 to 7.3% at the end of the first quarter

ING Bank

Following the implementation of CRD IV on 1 January 2014, ING Bank’s common equity Tier 1 ratio stood at 10.0% at the end of March 2014, down from 10.8% pro-forma reported at December 2013. The decline primarily reflects the reduction in the net pension asset and an increase in risk-weighted assets, related to the implementation of CRD IV. The dividend payment to ING Group of EUR 1.225 billion on 31 March to facilitate the payment to the Dutch State was only partially offset by retained earnings and the impact from the deconsolidation of ING Vysya Bank. With a fully-loaded common equity Tier 1 ratio of 10.1%, ING Bank remains well capitalised.

NN Group

The Insurance Groups Directive (IGD) ratio for NN Group has been restated from 257% to 254% at 31 December 2013 to reflect the move towards fair value accounting for the Guaranteed Minimum Death Benefits reserves of the Japan Closed Block VA segment. The IGD ratio decreased slightly in the first quarter to 249%. This was mainly due to a dividend payment to ING Group related to the proceeds and remaining shares of SulAmérica and the impact of the agreement to make ING’s closed defined benefit pension plan in the Netherlands financially independent.

The Solvency I ratio of NN Life improved from 223% to 235%, driven by a subordinated loan of EUR 600 million issued by NN Life to NN Group, partly offset by the impact of the pension fund agreement.

In April, NN Group successfully issued EUR 1 billion of subordinated debt, marking an important step in establishing its standalone capital structure.

In line with ING Group’s announced intention to ensure that NN Group is adequately capitalised ahead of the intended IPO, ING Group will inject EUR 850 million of capital into NN Group prior to its IPO. NN Group will use these funds to reduce debt owed to ING Group by EUR 0.2 billion, further strengthen the capitalisation of NN Life by approximately EUR 0.5 billion, and increase the cash capital position in the holding company by approximately EUR 0.2 billion. The capital injection from ING Group and the April 2014 issuance of subordinated debt will increase the IGD ratio of NN Group to a pro-forma 277% from 249% at the end of the first quarter of 2014. The capital injection will increase ING Group core debt by EUR 850 million. As a consequence of this pre-IPO capital injection, ING Group confirms that the intended IPO will comprise only secondary NN Group shares being sold by ING Group.

ING Group believes that all sustainable progress is driven by people with the imagination and determination to improve their future and the futures of those around them. At ING Bank, our strategy is centered on empowering people to stay a step ahead in life and in business. The Bank strives to achieve this purpose by creating a differentiating customer experience through innovation and by offering competitively-priced, easy-to-understand products, good accessibility and excellent services. The strategy of NN Group, which comprises ING’s European and Japanese insurance and investment management businesses, is to deliver an excellent customer experience by offering transparent products and services through various distribution channels.

Netherlands: an easier way to pay for small amounts

After a successful pilot in 2013, ING Netherlands launched a “contactless” payments method, whereby customers can conduct a transaction for amounts up to EUR 25 by simply swiping their debit card along the payment terminal. Customers do not have to type in a PIN code, making the entire payment experience at the cashier faster and easier. ING Netherlands plans to roll out this service to all debit card customers and has already issued 4 million new bank debit cards with this functionality in 2014.

Turkey: supporting growth of family-owned businesses

Turkey’s economy has grown strongly during the last decade and family-owned businesses play a major part, accounting for 75% of the country’s GDP. ING Bank Turkey introduced an innovative training programme to further support this sector’s growth, in Turkey and abroad, and prepare the next generation of leaders. The ‘Generation to Generation Family Business Management Academy’ is a one-year certificate program designed for small to medium-sized family enterprises. It trains participants how to enhance business competitiveness and sustainability, and strengthen their companies’ financial policies and governance. This initiative follows similar programmes launched by ING Bank in Belgium and in the Netherlands.

Global Finance magazine: ING best bank for Western Europe, Belgium and the Netherlands

ING Bank profiles itself as a European retail and commercial bank that has a strong international network and aims to provide a consistent One Bank experience regardless of country. ING’s efforts to anticipate and respond to its customers’ specific requirements have been recognised by Global Finance, a leading global magazine targeted at the financial industry. It named ING ‘Best Bank in Western Europe’, as well as ‘Best Bank in Belgium’ and ‘Best Bank in the Netherlands’.

LifeMappr: personalised insights into financial planning

Good financial habits should ideally be formed when one is young. This is one of the reasons why NN Group introduced a free financial awareness tool called LifeMappr (www.lifemappr.com) for the Romanian and Dutch markets. LifeMappr combines information about a user on social media sites such as Facebook and LinkedIn with national statistics and other general information, including average retirement age, salary and life expectancy, to visualise the user’s financial future and raise awareness about where a person might need financial planning. The visualisation is in the form of a personalised timeline, short video and financial infographic. Users can change specific parameters, which changes the outcomes and the video.

2013 Sustainability Report

In March, ING Group published its Sustainability Report 2013. It describes ING’s overall approach to sustainability and gives an account of its actions and performance over 2013. Some of the highlights are described below:

A stronger Environmental and Social Risk (ESR) Framework

ING’s Environmental and Social Risk policies guide business conduct and limit any negative impact that our business activities or those of our customers might have on the environment and communities. In 2013, ING’s ESR Framework was made publicly available through our website to provide more transparency and insight into our policies and their implementation. This followed an extensive review of the framework to reflect emerging best practices, resulting in strengthened guidance on key sectors and implementation by embedding the policies into the client onboarding and transaction approval processes. During 2013 and into 2014, nearly 900 colleagues in the front office and risk management were trained on the updated ESR Framework.

Responsible investment at ING Investment Management

ING Investment Management (ING IM), part of NN Group, strengthened its responsible investment approach during 2013 by, for example, expanding proxy voting activities in companies in which it invests and publishing active ownership reports. In order to broaden the level of integration of non-financial information in the investment process, ING IM expanded the Environmental, Social, and Governance (ESG) information and analysis in the standard equity research formats and developed an ESG risk analysis tool for its own portfolio managers as well as a dedicated ESG scorecard for external manager selection.

Sustainable Assets Allocated rise 14.8% to EUR 6.5 billion

ING is both a financier and an asset manager, funding a wide range of companies and projects around the world to stimulate the transition to a sustainable economy. We apply sustainability criteria in our lending and investment choices, which is reflected in the growth of our ‘Sustainable Assets Allocated’. Sustainable Assets Allocated reflect sustainable lending activities originated at ING Commercial Banking and ING Retail Banking, as well as specialised sustainable investment funds offered and managed by ING Bank and ING IM. In 2013, total Sustainable Assets Allocated grew across our business (banking, insurance and investment management) by 14.8%, or by EUR 845 million, to more than EUR 6.5 billion.