DBRS Comments on ING Results – ING Bank of Canada Unchanged at AA (low), Negative

DBRS has commented today that its ratings for ING Bank of Canada (ING Direct Canada) are unchanged following the announcement of full-year 2008 results by ING Groep N.V. (ING Group or the Group). The Issuer & Long-Term Debt rating for ING Direct Canada remain at AA (low), with a Negative trend. The ratings reflect ING Direct Canada’s solid financial fundamentals on a stand-alone basis and the implicit support from its parent, ING Bank N.V.

The ratings for ING Direct Canada are driven by the financial profile of ING Bank N.V. and ultimately the overall Group because DBRS views ING Direct Canada as an integrated part of the Group. As such, DBRS would expect the parent to support ING Direct Canada in a stress scenario. The ratings also take into account the solid franchise of ING Direct Canada in Canadian online savings deposits, its sound financial profile on a stand-alone basis and its relatively stable profitability.

The results reported by ING Group on 18 February 2009 were broadly in line with its prior pre-announcement. ING Group recorded a net loss of EUR 729 million for the full-year 2008 and a net loss of EUR 3.7 billion for Q4 2008. The Group had earlier forecast an expected annual loss of EUR 1 billion and a loss of EUR 3.9 billion for the fourth quarter. DBRS views the Group’s 2008 results as weak, albeit not out of line with some of its competitors, given the challenging environment.

DBRS also recognises the strong support the Group continues to receive from the government of the Netherlands, which in January 2009 agreed to assume 80% of ING Group’s exposure to U.S. Alt-A residential mortgage-backed securities (RMBS). This transaction reduces ING Group’s exposure to U.S. Alt-A RMBS from EUR 18.8 billion to EUR 3.8 billion on a pro forma basis, improving ING Group’s risk profile. DBRS continues to view ING Group as a systemically important institution in the Netherlands that is likely to receive further government support, if needed.

DBRS will continue to monitor the evolution of ING Group’s business profile, in particular with regard to the Group’s commitment to ING Direct Canada. The Group is currently conducting a comprehensive review in order to identify non-core businesses that may be divested. ING Group also plans to cut its workforce by 7,000 full-time positions. The restructuring effort is aimed at reducing the Group’s complexity, risk and cost base.

DBRS notes that the ING Direct franchise, which started with the formation of ING Bank of Canada in 1997, has always been described as a core business by the Group. DBRS continues to view ING Direct Canada and the overall ING Direct franchise as an integrated part of the Group. Should the Group make any statements that could indicate a change in this view, DBRS will assess such statements in due course.

Notes:
The applicable methodology is Analytical Background and Methodology for European Bank Ratings, Second Edition, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.