One of the Netherlands’ most prominent banking groups is seeking to win back investor trust after being forced to accept state aid in 2008. But how will it overcome bad press over bailouts and bonuses, asks Luisa Porritt
Such signals will be welcome news to ING's investors, whose confidence in the group as a whole was challenged three years ago when negative press poured out about the health of the overall institution.
At the time, a change in the psyche of investors also drove clients to spread their risk by placing deposits with different institutions, thereby taking the same approach to diversification with their banking as they did with their investments, says Adriaenssens.
But clients have since returned. "Clients came back. They were pleased with the relationship management they received," he says.
Larger stock-listed financial institutions are winning back the business they lost to state-owned banks and smaller boutiques, when their stocks fell on the back of public exposure about bailouts and sub-prime portfolios.
Boutiques had problems of their own, such as collateralised debt obligations (CDOs), funds tied up in the Madoff scandal and high-yield bond funds, but because they were not listed no one knew, according to Adriaenssens.
Now, smaller boutiques are the ones suffering, he argues. In 2004-07, boutiques tried to outperform the market by taking on a lot of risk. But there is a payoff of more risk in a positive environment, he says. In Belgium nowadays, boutiques are paying a lot of money to keep their clients happy, he claims.
ING is not the only large institution working to its position. UBS, which was losing money, is now recovering because it has shown it can deal with the problem properly and clean up, Adriaenssens adds.
But is the change sustainable? The corporate entity of ING certainly looks to be on the mend, as it recently announced a jump in both its underlying income and profit for 2010, compared with the previous year for both its banking and insurance operations.
Total underlying income for ING's banking business increased by 28% on 2009, while for insurance it rose by 7%. In terms of its underlying net profit, its banking business soared 262% on 2009. Its insurance arm posted a loss of €429m, almost double its losses in 2009, of €220m.
ING is intent on shedding non-core businesses to focus on banking, as part of a strategy to reduce risk. But clients, in an improving market, will be looking to increase their exposure to risk. Within its new confines, whether the institution will be able to meet those demands is another question.
"We will be eternally caught in a trade-off, between looking for better returns and decreasing the risks of clients' portfolios. Those two do not go hand-in-hand," Adriaenssens says. Lessons have been learnt since the crisis, but they might be forgotten in three years from now, he says. "Everyone is looking at the positive side of the coin; no one is looking at the negative side," he adds.
"It is the perception of the message. People don't like to hear bad news."
But by being open and transparent with clients he believes that they will stay the course, even when bad news needs to be delivered.
If ING maintains such an approach across the board, it will no doubt recoup credibility. www.ing.com
ING recovery in figures
|ING's total income for 2010||€54,887m||€47,765m (an increase of €7,122m)|
|Banking operations income||€17,734m||€12,293m|
|Insurance operations income||€37,488m||€35,808m|
|ING underlying net profit for 2010*||€3,893m||€974m (an increase of €2,919m)|
|ING's total net profit for 2010||€3,220m||€-935m|
*excluding the impact of divestments
|The amount the Dutch government paid to bail out ING in October 2008||€10bn|
|The amount outstanding for ING to pay back||€5bn|