Edgar Filing: ING GROEP NV

6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the period ended 30 June 2018

Commission File Number 1-14642

ING Groep N.V.

Bijlmerplein 888

1102 MG Amsterdam

The Netherlands

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Contents


Interim report
Interim report		2
Conformity statement		8

Condensed consolidated interim accounts
Condensed consolidated statement of financial position		9
Condensed consolidated statement of profit or loss		10
Condensed consolidated statement of comprehensive income		12
Condensed consolidated statement of changes in equity		13
Condensed consolidated statement of cash flows		15
Notes to the Condensed consolidated interim accounts		17
Notes to the accounting policies
1	Accounting policies	17
Notes to the Condensed consolidated statement of financial position
2	Financial assets at fair value through profit or loss	29
3	Financial assets at fair value through other comprehensive income	29
4	Securities at amortised cost	31
5	Loans and advances to customers	32
6	Intangible assets	33
7	Other assets	34
8	Financial liabilities at fair value through profit or loss	35
9	Other liabilities	35
10	Subordinated loans and Debt securities in issue	35
11	Equity	36
Notes to the Condensed consolidated statement of profit or loss
12	Net Interest Income	37
13	Valuation results and net trading income	37
14	Investment income	38
15	Other income	38
16	Staff expenses	38
17	Other operating expenses	39
18	Earnings per ordinary share	40
19	Dividend per ordinary share	40
Segment reporting
20	Segments	41
Additional notes to the Condensed consolidated interim accounts
21	Fair value of financial assets and liabilities	47
22	Legal proceedings	55
23	Companies and businesses acquired and divested	55
24	Related parties	57
25	Subsequent events	57
Other information
Review report		58


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		1

Interim report

Introduction

ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. ING Bank’s more than 52,000 employees offer retail and wholesale banking services to customers in over 40 countries. The Group consists of ING Groep N.V., ING Bank N.V. and other group entities.

ING Group evaluates the results of its Banking segments using a financial performance measure called underlying result. Underlying result is used to monitor the performance of ING Group at a consolidated level and by segment. The Executive Board and Management Board of ING Bank consider this measure to be relevant to an understanding of the Group’s financial performance because it gives better insight into the commercial developments of the company.

Underlying result is defined as result under IFRS- EU, excluding the impact of divestments, special items and Legacy Insurance. Special Items include items of income and expense that are significant and arise from events or transactions that are clearly distinct from the ordinary operating activities. Legacy Insurance consists of the results from Insurance Other. Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations.

The breakdown of underlying net result by segment and the reconciliation between IFRS-EU and the underlying net result is included in Note 20 ‘Segments’.

ING Group consolidated results

ING Group: Consolidated profit or loss account

Total ING
Group

of which: Divestments /
Special items

of which:
Insurance Other

of which:
Underlying Banking

6 month period (1 January to 30 June)

2018

2017

2018

2017

2018

2017

2018

2017

Net interest income

6,845

6,711

6,845

6,711

Net fee and commission income

1,377

1,395

–2

–1

1,378

1,396

Total investment and other income

737

758

–62

717

820

Total income

8,959

8,864

–

–64

8,940

8,928

Expenses excl. regulatory costs

4,441

4,379

4,441

4,379

Regulatory costs

591

543

591

543

Operating expenses

5,032

4,922

–

5,032

4,922

Gross result

3,927

3,942

–

–64

3,908

4,005

Addition to loan loss provisions

200

362

200

362

Result before tax

3,727

3,580

–

–64

3,708

3,644

Taxation

1,021

1,022

1,021

1,022

Non-controlling interests

Net result ING Group

2,654

2,514

–

–64

2,636

2,578


6 month period (1 January to 30 June)	2018		2017
Net result ING Group		2,654		2,514

-/- Insurance Other		19		–64

Net result Banking/ Underlying net result Banking		2,636		2,578

ING recorded strong results in the first half of 2018, driven by continued business growth and lower risk costs. The net result rose 5.6% to EUR 2,654 million compared with EUR 2,514 million in the same period of 2017. The result in the first six months of 2018 included a EUR 19 million net result from Insurance Other, reflecting the result on the warrants on the shares of Voya and NN Group, whereas the same period of last year included a EUR -64 million net result on warrants. At the end of June 2018, ING has only warrants on NN Group shares as the last warrants on Voya shares were sold in March 2018.

There were no divestments or special items in the first six months of both 2018 and 2017.

ING’s underlying net result banking, which is the net result excluding Insurance Other, increased 2.2% to EUR 2,636 million from EUR 2,578 million in the first six months of 2017.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		2

Interim report - continued

Banking operations

Consolidated results of operations

ING’s banking operations posted a strong set of results in the first half of 2018. Net result rose to EUR 2,636 million from EUR 2,578 million in the same period of 2017. As there were no divestments or special items in both comparable periods, the net result is equal to the underlying net result. The effective tax rate was 27.5%, down from 28.0% in the first half of 2017, mainly caused by the corporate tax reforms in the US and Belgium.

The underlying result before tax increased 1.8% to EUR 3,708 million from EUR 3,644 million in the first half of 2017, supported by continued business growth and lower risk costs. Income was only marginally higher as the impact of strong loan growth was almost fully offset by adverse currency impacts, weaker Financial Markets performance and a EUR 97 million one-off gain on the sale of an equity stake in the real estate run-off portfolio recorded in the first half of 2017. Underlying operating expenses rose 2.2% on the first six months of 2017, while risk costs declined by EUR 162 million, or 44.8%.

Total underlying income rose 0.1% to EUR 8,940 million from EUR 8,928 million in the first six months of 2017. Excluding the aforementioned EUR 97 million one-off gain, income was 1.2% higher, despite the adverse currency impacts and weaker Financial Markets performance.

Net interest income rose by EUR 134 million, or 2.0%, mainly driven by continued volume growth in both customer lending and customer deposits. The interest result on customer lending increased due to higher volumes in mainly non-mortgage lending, partly offset by a slightly lower overall lending margin. The interest result on customer deposits slightly declined as the impact of volume growth in current accounts was more than offset by margin pressure due to lower reinvestment yields. The margin on savings remained stable compared with a year ago, supported by the further lowering of the client savings rates in several countries during the last twelve months. Net interest income was furthermore supported by higher interest results in Financial Markets (which was more than offset by lower other income) and Corporate Line. ING’s overall net interest margin remained stable at 1.51% compared with the first half of 2017.

Net fee and commission income decreased 1.3% to EUR 1,378 million from EUR 1,396 million one year ago. In Retail Banking, net fee and commission income increased in the Netherlands and most of the Challengers & Growth Markets countries, partly offset by declines in mainly Belgium and Turkey. Total fee income in Wholesale Banking decreased despite the inclusion of Payvision as from the second quarter of 2018, and was mainly caused by lower Financial Markets fees. Total investment and other income fell to EUR 717 million from EUR 820 million in the first half of 2017, which included the one-off gain on the sale of the equity stake. Excluding this one-off gain, investment and other income declined by EUR 6 million, or 0.8%. Lower revenues in Wholesale Banking, mainly due to weaker performance in Financial Markets and negative revaluation results in Industry Lending, were largely offset by increases in mainly Retail Netherlands and the Corporate Line.

Underlying operating expenses increased by EUR 110 million, or 2.2%, to EUR 5,032 million. Expenses in the first six months of 2018 included EUR 591 million of regulatory costs, while the same period of 2017 included EUR 543 million of regulatory costs. Expenses excluding regulatory costs rose by EUR 62 million, or 1.4%, to EUR 4,441 million. The increase was mainly visible in the Retail Challengers & Growth Markets, mainly related to strategic projects and to support the continued growth in primary clients, and in Retail Belgium due to temporarily higher external staff expenses. In Retail Netherlands, expenses excluding regulatory costs declined reflecting ongoing cost savings. Within Wholesale Banking, expenses excluding regulatory costs were slightly lower. This decline was mainly caused by the legal provision recorded in Luxembourg in the second quarter of 2017 (which was partially released in the first quarter of 2018), partly offset by higher staff expenses and the inclusion of Payvision as from the second quarter of 2018. The underlying cost/income ratio increased to 56.3% from 55.1% in the first half of 2017.

Net additions to loan loss provisions declined to EUR 200 million from EUR 362 million in the first half of 2017, reflecting the continued positive macroeconomic outlook, combined with a benign credit environment in most regions where ING is active. The decline was mainly visible in Retail Netherlands and Wholesale Banking. Risk costs were annualised 13 basis points of average risk-weighted assets (RWA) compared with 23 basis points in the first half of 2017, which is well below ING’s through-the-cycle guidance range for risk costs of 40-45 basis points of average RWA.

Retail Netherlands

Underlying result before tax of Retail Netherlands rose to EUR 1,239 million from EUR 1,043 million in the first six months of 2017, due to higher income, combined with lower operating expenses and risk costs.

Total underlying income increased by EUR 74 million, or 3.4%, to EUR 2,267 million, compared with EUR 2,193 million in the first half of 2017. Net interest income declined 1.3%, mainly reflecting lower lending volumes and margin pressure on current accounts due to the low interest rate environment, partly offset by higher margins on mortgages and increased volumes in current accounts. Customer lending declined by EUR 1.4 billion in the first half of 2018, of which EUR -0.6 billion was in the WUB run-off portfolio and EUR -1.4 billion in Bank Treasury. Excluding these items, net core lending grew by EUR 0.6 billion, predominantly in business lending, partly offset by a EUR 0.2 billion decline in residential mortgages. Net customer deposits (excluding Bank Treasury) grew by EUR 3.4 billion in the first half of 2018.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		3

Interim report - continued

Net fee and commission income increased by EUR 19 million, or 6.3%, due to higher funds transfer fees. Investment and other income rose by EUR 78 million, mainly due to higher allocated Bank Treasury revenues.

Operating expenses declined by EUR 43 million, or 3.8%, to EUR 1,078 million compared with the first six months of 2017. This decline was mainly due to non-recurring items booked in the second quarter of 2017, ongoing cost savings realised through the transformation programmes, and lower IT expenses, partly offset by increased regulatory costs.

The net addition to loan loss provisions turned to a net release of EUR 51 million, or -21 basis points of average risk-weighted assets, in the first half of 2018, compared with EUR 29 million, or 12 basis points, in the same period of last year. The net release in the first half of 2018 reflects the continued positive economic conditions in the Netherlands as well as operational improvements in the risk-measuring process.

Retail Belgium

Retail Belgium’s underlying result before tax decreased to EUR 231 million from EUR 377 million in the first six months of 2017, due to lower income, higher expenses and an increase in risk costs.

The underlying income fell by EUR 85 million, or 6.5%, to EUR 1,213 million. Net interest income declined by EUR 47 million, or 5.0%, mainly due to continued margin pressure on savings and current accounts as a result of the continued low interest rate environment, and lower interest results from Bank Treasury. This was partly offset by volume growth in the lending portfolio and in current accounts. Customer lending increased by EUR 5.7 billion in the first half of 2018. Net core lending (excluding Bank Treasury and the sale of a mortgage portfolio) grew by EUR 5.5 billion, of which EUR 1.2 billion was in residential mortgages and EUR 4.4 billion in other lending. Net customer deposits (excluding Bank Treasury) grew by EUR 2.7 billion, entirely in current accounts, while savings recorded a net outflow. Net fee and commission income declined by EUR 28 million, or 12.2%, mainly due to lower fee income on investment products.

Operating expenses increased by EUR 31 million, or 3.6%, to EUR 903 million compared with the first six months of 2017. This increase was mainly due to temporarily higher external staff expenses related to the transformation programmes and the successful integration of Record Bank into ING Belgium.

The net addition to the provision for loan losses increased to EUR 78 million from EUR 49 million in the first half of 2017, and was mainly related to several specific files in the mid-corporates segment.

Retail Germany

Retail Germany’s underlying result before tax increased by EUR 25 million to EUR 423 million, compared with the first half of 2017, due to higher income, partly offset by increased expenses and higher, but still relatively low risk costs.

The underlying income increased to EUR 960 million in the first six months of 2018, compared with EUR 918 million a year ago. Net interest income increased 4.4% to EUR 857 million, mainly due to increased lending volumes and the impact of client savings rate adjustments, partly offset by lower interest results from Bank Treasury. Net core lending, which excludes Bank Treasury products, increased by EUR 2.2 billion, of which EUR 1.6 billion was attributable to residential mortgages and EUR 0.6 billion to consumer lending. Net customer deposits (excluding Bank Treasury) decreased by EUR 0.4 billion. Net fee and commission income decreased by EUR 6 million to EUR 93 million, due to higher commissions paid for the origination of mortgages. Investment and other income increased by EUR 12 million, mainly due to improved hedge ineffectiveness results.

Operating expenses increased by EUR 10 million, or 1.9%, to EUR 524 million compared with the first half of 2017. The increase was mainly due to higher costs to support further business growth, partly offset by lower marketing expenses.

The net addition to the provision for loan losses increased to EUR 13 million, or 10 basis points of average risk-weighted assets, from EUR 6 million in the first half of 2017.

Retail Other Challengers & Growth Markets

Retail Other Challengers & Growth Markets’ underlying result before tax decreased to EUR 460 million from EUR 481 million in the first six months of last year, mainly reflecting higher expenses to support further commercial growth and higher costs for strategic projects, partly offset by revenue growth in most of the countries.

The underlying income increased by EUR 106 million, or 7.2%, to EUR 1,583 million from EUR 1,477 million in the first six months of last year. This increase was driven by strong revenue growth in most businesses, despite the impact from the low interest rate environment in most of the Other Challengers markets. Net interest income increased by EUR 111 million, or 9.3%, to EUR 1,310 million from EUR 1,199 million in the first half year of 2017, mainly due to higher volumes in most countries and increased interest income from Bank Treasury. The net production in customer lending (adjusted for currency effects and Bank Treasury) was EUR 4.9 billion in the first half of 2018, with growth mainly in Poland, Spain and Australia. The net inflow in customer deposits, also adjusted for currency impacts and Bank Treasury, was EUR 3.9 billion, with largest increases in Spain and Poland.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		4

Interim report - continued

Operating expenses increased by EUR 111 million, or 12.5%, to EUR 1,001 million compared with the first half of 2017, mainly due to higher staff expenses in most countries to support further commercial growth and higher costs for strategic projects as well as higher regulatory expenses.

The net addition to loan loss provisions increased by EUR 14 million to EUR 121 million, or 49 basis points of average risk-weighted assets, compared with EUR 107 million in the first half of 2017, which included a release in Italy reflecting a model update for mortgages.

Wholesale Banking

In the first six months of 2018, the underlying result before tax dropped 9.6% to EUR 1,439 million from EUR 1,591 million in the same period last year. The decline was mainly caused by adverse currency impacts, weaker Financial Markets performance and the EUR 97 million one-time gain on the sale of an equity stake in the real estate run-off portfolio recorded in the first half of 2017. These negative impacts were partly offset by strong core lending growth in Industry Lending and General Lending & Transaction Services and a sharp decline in risk costs.

Underlying income declined by EUR 270 million, or 8.6%, to EUR 2,864 million in the first half of 2018. Excluding the EUR 97 million one-time gain on the sale of an equity stake, total underlying income decreased 5.7% mainly caused by adverse currency impacts and weaker Financial Markets performance. At comparable exchange rates, income in Industry Lending and General Lending & Transaction Services increased due to volume growth and the inclusion of Payvision as from the second quarter of 2018.

Net interest income increased by EUR 26 million, or 1.4%, on the first six months of 2017, mainly driven by continued volume growth in Industry Lending and General Lending & Transaction Services at resilient margins as well as higher interest results in Financial Markets (which was more than offset by lower other income). This was partly offset by adverse currency impacts and lower interest results in Bank Treasury. Net core lending (excluding currency impacts, Bank Treasury and the Lease run-off portfolio) grew by EUR 13.2 billion in the first half of 2018. Net customer deposits (excluding currency impacts and Bank Treasury) declined by EUR 1.4 billion.

Net fee and commission income decreased by EUR 24 million, or 4.2%, on last year, mainly due to lower fee income in Financial Markets and Industry Lending, partly offset by the inclusion of Payvision. Investment and other income fell to EUR 389 million from EUR 661 million in the first half of 2017. Excluding the aforementioned EUR 97 million one-time gain, total investment and other income decreased by EUR 175 million, mainly due to lower revenues in Financial Markets (as market conditions in the first half of 2017 were more favourable) and negative revaluation results in Industry lending.

Operating expenses were EUR 1,386 million, or 0.9% higher than in the first half of 2017. Excluding the impact from regulatory costs (EUR 125 million in the first half of 2018 versus EUR 98 million a year ago), operating expenses decreased by EUR 14 million, or 1.1%, on the first half of 2017. The decrease was mainly explained by the partial release of a provision which was taken in the first half of 2017 for a litigation linked to a business that was discontinued in Luxembourg around the year 2000. Excluding this provision, costs grew in line with higher headcount to support business growth and wage inflation. The underlying cost/income ratio in the first half of 2018 was 48.4%, compared with 43.8% a year ago.

Net addition to loan loss provisions declined to EUR 39 million, or 5 basis points of average risk-weighted assets, from EUR 170 million, or 22 basis points, in the first half of 2017. The decline reflects lower risk costs in all product groups driven by the benign credit environment in most regions where ING is active and included several larger releases on individual files.

Corporate Line

The Corporate Line reported an underlying result before tax of EUR -85 million compared with EUR –246 million in the first half of 2017. Total income improved to EUR 54 million from EUR –93 million a year ago. This was primarily due to lower costs on net investment hedging and lower interest paid following the maturity of some high-cost legacy bonds, while the first half of 2017 also included EUR - 9 million of DVA impacts (which directly impacts equity under IFRS 9). Operating expenses declined to EUR 139 million from EUR 152 million in the first half of 2017, due to a release of a specific provision, and despite higher shareholders expenses.

ING Group statement of financial position (‘balance sheet’)

IFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018. ING has applied the classification, measurement, and impairment requirements retrospectively by adjusting the opening balance sheet and opening equity as at 1 January 2018, and decided not to restate comparative periods. The net impact on shareholders’ equity of adopting IFRS 9 on 1 January 2018 was EUR - 1.0 billion. For a reconciliation between the reported balance sheet at year-end 2017 and the opening balance sheet as at 1 January 2018, see note 1 ‘Accounting policies’.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		5

Interim report - continued

To provide comparable balance sheet information to its users, below a condensed overview of ING’s balance sheet as at 30 June 2018 compared with the IFRS 9 opening balance sheet as at 1 January 2018.


Consolidated balance sheet
as at in EUR million	30 June 2018		1 January 2018			30 June 2018		1 January 2018
Assets					Liabilities
Cash and balances with central banks		38,276		21,992	Deposits from banks		38,776		36,929
Loans and advances to banks		31,627		28,690	Customer deposits		556,681		539,852
Financial assets at fair value through profit or loss		151,503		128,248	Financial liabilities at fair value through profit or loss		110,874		89,369
Financial assets at fair value through OCI		31,500		37,601	Other liabilities		16,612		15,834
Securities at amortised cost		48,966		48,480	Debt securities in issue		116,099		96,826
Loans and advances to customers		587,415		565,402	Subordinated loans		16,225		16,209

- customer lending		592,392		570,670	Total liabilities		855,267		795,018
- provision for loan losses		–4,977		–5,269
Investments in associates and joint ventures		1,082		1,060	Equity
Property and equipment		1,775		1,801	Shareholders’ equity		49,984		49,363
Intangible assets		1,785		1,469	Non-controlling interests		734		700

Other assets		12,053		10,338	Total equity		50,717		50,063

Total assets		905,984		845,081	Total liabilities and equity		905,984		845,081

ING Group’s total balance sheet increased by EUR 61 billion to EUR 906 billion at 30 June 2018 from EUR 845 billion at 1 January 2018.

Cash and balances with central banks

Cash and balances with central banks increased by EUR 16 billion to EUR 38 billion, related to active liquidity management.

Loans and advances to banks and deposits from banks

Loans and advances to banks increased by EUR 3 billion to EUR 32 billion. Deposits from banks increased by EUR 2 billion to EUR 39 billion.

Financial assets/liabilities at fair value through profit or loss

Financial assets at fair value through profit or loss increased by EUR 23 billion to EUR 152 billion, due to an increase of reverse repo activity mandatorily at fair value through profit or loss by EUR 25 billion, partly offset by EUR 2 billion lower trading assets. On the liability side, Financial liabilities at fair value through profit or loss increased by EUR 22 billion to EUR 111 billion, mainly caused by EUR 17 billion higher repo activity designated at fair value through profit or loss and EUR 4 billion higher trading liabilities.

Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income decreased by EUR 6 billion to EUR 32 billion, mainly due to lower debt securities at fair value through other comprehensive income (sold and matured government bonds). The equity securities at fair value through OCI include, amongst others, our stakes in Bank of Beijing and in Kotak Mahindra Bank.

Securities at amortised costs

Securities at amortised costs increased slightly to EUR 49 billion versus EUR 48 billion at 1 January 2018.

Loans and advances to customers

Loans and advances to customers increased by EUR 22 billion to EUR 587 billion from EUR 565 billion at 1 January 2018 due to an increase in customer lending. Adjusted for EUR 1 billion of negative currency impacts, customer lending increased by EUR 23 billion. This was caused by EUR 27 billion of net core lending growth, partly offset by a EUR 3 billion decrease in short-term Bank Treasury lending and a EUR 1 billion decline of the WUB and Lease run-off portfolio.

Customer deposits

Customer deposits increased by EUR 17 billion to EUR 557 billion. Adjusted for currency impacts and Bank Treasury, net customer deposits grew by EUR 8 billion in the first half of 2018, due to higher customer deposits at Retail Banking reflecting ING Bank’s strength as a deposit gatherer.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		6

Interim report - continued

Debt securities in issue

Debt securities in issue increased by EUR 19 billion to EUR 116 billion from EUR 97 billion at 1 January 2018, caused by a EUR 25 billion increase of CD/CPs related to active liquidity management and the facilitation of short-term commercial activities. This was partly offset by EUR 6 billion of lower other (mainly long long-term) debt securities as maturities were only partly offset by new issuances (among others for TLAC purposes) in the first half of 2018.

Subordinated loans

Subordinated loans remained flat at EUR 16 billion, as new issuances in March were offset by redemptions in May.

Shareholders’ equity

Shareholders’ equity increased by EUR 0.6 billion to EUR 50.0 billion from EUR 49.4 billion at 1 January 2018. The EUR 2.7 billion net result for the first half of 2018 was partly offset by the EUR 1.7 billion payment of the final dividend for the year 2017.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		7

Interim report - continued

Conformity statement

The Management Board is required to prepare the Interim Accounts and the Interim Report of ING Groep N.V. for each financial period in accordance with applicable Dutch law and with International Accounting Standard 34 ‘Interim Financial Reporting’.

Conformity statement pursuant to section 5:25d paragraph 2(c) of the Dutch Financial Supervision Act (Wet op het financieel toezicht)

The Executive Board is responsible for maintaining proper accounting records, for safeguarding assets and for taking reasonable steps to prevent and detect fraud and other irregularities. It is responsible for selecting suitable accounting policies and applying them on a consistent basis, making judgements and estimates that are prudent and reasonable. It is also responsible for establishing and maintaining internal procedures which ensure that all major financial information is known to the Executive Board, so that the timeliness, completeness and correctness of the external financial reporting are assured.

As required by section 5:25d paragraph 2(c) of the Dutch Financial Supervision Act, each of the signatories hereby confirms that to the best of his knowledge:

•

the ING Groep N.V. interim accounts for the period ended 30 June 2018 give a true and fair view of the assets, liabilities, financial position and profit or loss of ING Groep N.V. and the entities included in the consolidation taken as a whole; and

•

the ING Groep N.V. interim report for the period ended 30 June 2018 includes a fair review of the information required pursuant to article 5:25d, paragraphs 8 and 9 of the Dutch Financial Supervision Act regarding ING Groep N.V. and the entities included in the consolidation taken as a whole.

Amsterdam, 1 August 2018

R.A.J.G. (Ralph) Hamers

CEO, chairman of the Executive Board

J.V. (Koos) Timmermans

CFO, member of the Executive Board

S.J.A. (Steven) van Rijswijk

CRO, member of the Executive Board


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		8

Condensed consolidated statement of

financial position


as at in EUR million	30 June 2018¹		31 December 2017¹
Assets
Cash and balances with central banks		38,276		21,989
Loans and advances to banks		31,627		28,811
Financial assets at fair value through profit or loss 2		151,503		123,221
Investments		n/a		79,073
Financial assets at fair value through other comprehensive income 3		31,500		n/a
Securities at amortised cost 4		48,966		n/a
Loans and advances to customers 5		587,415		574,535
Investments in associates and joint ventures		1,082		1,088
Property and equipment		1,775		1,801
Intangible assets 6		1,785		1,469
Current tax assets		401		324
Deferred tax assets		984		818
Other assets 7		10,667		13,087

Total assets		905,984		846,216

Liabilities
Deposits from banks		38,776		36,821
Customer deposits		556,681		539,799
Financial liabilities at fair value through profit or loss 8		110,874		87,142
Current tax liabilities		725		750
Deferred tax liabilities		829		752
Provisions		1,286		1,713
Other liabilities 9		13,772		16,064
Debt securities in issue 10		116,099		96,086
Subordinated loans 10		16,225		15,968

Total liabilities		855,267		795,095

Equity 11
Share capital and share premium		17,088		17,045
Other reserves		3,495		4,362
Retained earnings		29,401		28,999

Shareholders’ equity (parent)		49,984		50,406
Non-controlling interests		734		715

Total equity		50,717		51,121

Total equity and liabilities		905,984		846,216

1	The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		9

Condensed consolidated statement of

profit or loss


6 month period	1 January to 30 June
in EUR million	2018¹		2017¹
Continuing operations
Interest income using effective interest rate method		12,402		n/a
Other interest income		695		n/a

Total interest income 12		13,098		22,086

Interest expense using effective interest rate method		–5,453		n/a
Other interest expense		–799		n/a

Total interest expense 12		–6,252		–15,375

Net interest income		6,845		6,711

Net fee and commission income		1,377		1,395
Valuation results and net trading income 13		483		420
Investment income 14		102		90
Other income² 15		151		248

Total income		8,959		8,864

Addition to loan loss provisions 5		200		362
Staff expenses 16		2,723		2,580
Other operating expenses 17		2,309		2,342

Total expenses		5,232		5,284

Result before tax from continuing operations		3,727		3,580

Taxation		1,021		1,022

Net result from continuing operations		2,706		2,558

Net result (before non-controlling interests)		2,706		2,558
Net result attributable to Non-controlling interests		51		44

Net result attributable to Equityholders of the parent		2,654		2,514

1	The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

2	Other income includes Result from associates and joint ventures, Net operating lease income, Net result on derecognition of financial assets at amortised cost, and Other.

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		10

Condensed consolidated statement of profit or loss - continued


6 month period	1 January to 30 June
in EUR million	2018		2017
Net result attributable to Non-controlling interests
– from continuing operations		51		44
– from discontinued operations

		51		44

Net result attributable to Equityholders of the parent
– from continuing operations		2,654		2,514
– from discontinued operations

		2,654		2,514


6 month period	1 January to 30 June
in EUR	2018		2017
Earnings per ordinary share 18
Basic earnings per ordinary share		0.68		0.65
Diluted earnings per ordinary share		0.68		0.65

Dividend per ordinary share 19		0.24		0.24

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		11

Condensed consolidated statement of comprehensive

income


6 month period	1 January to 30 June
in EUR million	2018¹		2017¹
Net result (before non-controlling interests)		2,706		2,558

Other comprehensive income net of tax
Items that will not be reclassified to the statement of profit or loss:
Realised and unrealised revaluations property in own use		–2		–5
Remeasurement of the net defined benefit asset/liability		6		10
Net change in fair value of equity instruments at fair value through other comprehensive income		–161		n/a
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss		75		n/a

Items that may subsequently be reclassified to the statement of profit or loss:
Unrealised revaluations available-for-sale investments and other revaluations		n/a		–103
Realised gains/losses on available-for-sale investments reclassified to the statement of profit or loss		n/a		–71
Net change in fair value of debt instruments at fair value through other comprehensive income		–43		n/a
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss		–56		n/a
Changes in cash flow hedges		164		–397
Exchange rate differences		–304		–436
Share of other comprehensive income of associates and joint ventures and other income		4		3

Total comprehensive income net of tax		2,388		1,559

Comprehensive income attributable to:
Non-controlling interests		29		68
Equityholders of the parent		2,359		1,491

		2,388		1,559

1	The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the Condensed consolidated interim accounts and related notes.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		12

Condensed consolidated statement of changes in equity

in EUR million

Share capital
and share
premium

Other
reserves

Retained
earnings

Share-
holders’
equity
(parent)

Non-
controlling
interests

Total equity

Balance as at 31 December 2017

17,045

4,362

28,999

50,406

715

51,121

Effect of change in accounting policy¹

–653

–390

–1,043

–14

–1,057

Balance as at 1 January 2018

17,045

3,709

28,609

49,363

700

50,063

Net change in fair value of equity instruments at fair value through other comprehensive income

–165

–161

Net change in fair value of debt instruments at fair value through other comprehensive income

–44

–43

Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss

–55

–2

–56

Changes in cash flow hedge reserve

159

164

Realised and unrealised revaluations property in own use

–2

Remeasurement of the net defined benefit asset/liability

Exchange rate differences and other

–278

–26

–304

Share of other comprehensive income of associates and joint ventures and other income

–91

Change in fair value of own credit risk of financial liabilities at fair value through profit or loss

Total amount recognised directly in other comprehensive income net of tax

–

–208

–87

–295

–22

–318

Net result

2,654

2,706

Total comprehensive income net of tax

–

–208

2,568

2,359

2,388

Dividends

–1,673

–27

–1,700

Changes in treasury shares

–6

Employee stock option and share plans

–7

Changes in the composition of the group and other changes²

–96

–65

Balance as at 30 June 2018

17,088

3,495

29,401

49,984

734

50,717

1	Changes per type of Reserve components are presented in Note 1 ‘Accounting policies’.

2	Includes an amount for the redemption liability related to the acquisition of Payvision Holding B.V. and Makelaarsland B.V. that reduces the Retained earnings of the Group.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		13

Condensed consolidated statement of changes in equity - continued

in EUR million

Share capital
and share
premium

Other
reserves

Retained
earnings

Share-
holders’
equity
(parent)

Non-
controlling
interests

Total equity

Balance as at 1 January 2017

16,989

5,897

26,907

49,793

606

50,399

Unrealised revaluations available-for-sale investments and other revaluations

–108

–103

Realised gains/losses transferred to the statement of profit or loss

–69

–2

–71

Changes in cash flow hedge reserve

–395

–2

–397

Unrealised revaluations property in own use

–5

Remeasurement of the net defined benefit asset/liability

Exchange rate differences and other

–459

–436

Share of other comprehensive income of associates and joint ventures and other income

–91

Total amount recognised directly in other comprehensive income

–

–932

–91

–1,023

–999

Net result from continuing and discontinued operations

2,514

2,558

Total comprehensive income

–

–932

2,423

1,491

1,559

Dividends

–1,632

Changes in treasury shares

–2

Employee stock option and share plans

–19

Balance as at 30 June 2017

17,043

4,963

27,679

49,685

674

50,359


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		14

Condensed consolidated statement of cash flows


		1 January to 30 June
in EUR million		2018¹		2017¹
Cash flows from operating activities
Result before tax			3,727		3,580
Adjusted for:	– depreciation		267		260
	– addition to loan loss provisions		200		362
	– other		–54		188
Taxation paid			–834		–885
Changes in:	– loans and advances to banks, not available on demand		–1,665		–971
	– trading assets		1,660		–19,642
	– non-trading derivatives		448		–2,236
	– assets designated at fair value through profit or loss		–613		–114
	– assets mandatorily at fair value through profit or loss		–24,374		n/a
	– loans and advances to customers		–24,153		–8,865
	– other assets		–1,051		–184
	– deposits from banks, not payable on demand		2,674		7,257
	– customer deposits		19,842		9,844
	– trading liabilities		4,478		5,507
	– other financial liabilities at fair value through profit or loss		15,996		–368
	– provisions and other liabilities		322		–947

Net cash flow from/(used in) operating activities			–3,130		–7,214

Cash flows from investing activities
Investments and advances:	– acquisition of subsidiaries, net of cash acquired		–111
	– associates and joint ventures		–47		–24
	– available-for-sale investments		n/a		–14,936
	– held-to-maturity investments		n/a		–2,423
	– financial assets at fair value through other comprehensive income		–3,385		n/a
	– securities at amortised cost		–9,887		n/a
	– property and equipment		–133		–136
	– assets subject to operating leases		–27		–22
	– other investments		–135		–115
Disposals and redemptions:	– associates and joint ventures		54		197
	– available-for-sale investments		n/a		22,654
	– held-to-maturity investments		n/a		710
	– financial assets at fair value through other comprehensive income		9,032		n/a
	– securities at amortised cost		9,104		n/a
	– property and equipment		5		31
	– assets subject to operating leases		6		9
	– loans sold				525
	– other investments		1		1

Net cash flow from/(used in) investing activities			4,477		6,471


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		15

Condensed consolidated statement of cash flows - continued


	1 January to 30 June
in EUR million	2018¹		2017¹
Net cash flow from/(used in) operating activities		–3,130		–7,214
Net cash flow from/(used in) investing activities		4,477		6,471

Cash flows from financing activities
Proceeds from debt securities		72,330		50,101
Repayments of debt securities		–53,923		–50,898
Proceeds from subordinated loans		1,746		2,224
Repayments of subordinated loans		–1,909		–1,280
Purchase/sale of treasury shares		7		–2
Dividends paid		–1,673		–1,632
Net cash flow from/(used in) financing activities		16,578		–1,487

Net cash flow		17,925		–2,230

Cash and cash equivalents at beginning of period		18,977		16,164
Effect of exchange rate changes on cash and cash equivalents		206		148

Cash and cash equivalents at end of period		37,108		14,082

Cash and cash equivalents comprises the following items:
Treasury bills and other eligible bills		248		309
Deposits from banks/Loans and advances to banks - on demand		–1,416		–4,121
Cash and balances with central banks		38,276		17,894

Cash and cash equivalents at end of the period		37,108		14,082

1	The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.

References relate to the accompanying notes. These form an integral part of the Condensed consolidated interim accounts.

Interest and dividend received and paid¹


	1 January to 30 June
in EUR million	2018		2017
Interest received		13,447		22,772
Interest paid		–7,005		–16,375

		6,442		6,397
Dividend received²		67		102
Dividend paid		–1,673		–1,632

1	The amounts for the period ended 30 June 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements as further disclosed in note 12 ‘Net interest income’. Prior period amounts conform to presentation as per Annual Accounts 2017.

Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value through profit or loss, and from Investments in associates and joint ventures. Dividend paid and received from trading positions have been included. 2017 number has been restated to align to current year presentation.

Interest received, interest paid and dividends received are included in operating activities in the cash flow statement. Dividend paid is included in financing activities in the cash flow statement.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		16

Notes to the Condensed consolidated interim accounts

amounts in millions of euros, unless stated otherwise

Notes to the accounting policies

Reporting entity

ING Groep N.V. is a company domiciled in Amsterdam, the Netherlands. Commercial Register of Amsterdam, number 33231073. These Condensed consolidated interim accounts, as at and for the six months ended 30 June 2018, comprise ING Groep N.V. and its subsidiaries, together referred to as ING Group. ING Group is a global financial institution with a strong European base, offering a wide range of retail and wholesale banking services to customers in over 40 countries.

Basis of preparation of the Consolidated interim accounts

The Condensed consolidated interim accounts have been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’.

ING Group applies International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), which are IFRS Standards and IFRS IC Interpretations as issued by the International Accounting Standards Board (IASB) with some limited modifications such as the temporary ‘carve out’ from IAS 39 ‘Financial Instruments: Recognition and Measurement’ (herein, referred to as IFRS). This is consistent with the 2017 ING Group Consolidated annual accounts, except for the adoption of IFRS 9 ‘Financial instruments’ (IFRS 9) and IFRS 15 ‘Revenue from Contract with Customers’ as set out in note 1 ‘Accounting policies’.

These Condensed consolidated interim accounts should be read in conjunction with the 2017 ING Group Consolidated annual accounts.

Under the EU carve out, ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging). For further information, reference is made to Note 1 ‘Accounting policies’, f) Principles of valuation and determination of results in the 2017 ING Group Consolidated annual accounts.

Certain amounts recorded in the Condensed consolidated interim accounts reflect estimates and assumptions made by management. Actual results may differ from the estimates made. Interim results are not necessarily indicative of full-year results.

The ING Group consolidated interim financial report has been prepared on a going concern basis.

Amounts may not add up due to rounding.

1 Accounting policies

Major new IFRSs

A number of new or amended standards became applicable for the current reporting period. ING Group changed its accounting policies as a result of adopting IFRS 9 ‘Financial Instruments’.

The impact of the adoption of IFRS 9 is disclosed in notes 1a and the new IFRS 9 accounting policies are disclosed in note 1b. The other standards and amendments, including IFRS 15 (refer to note 1c), did not have any impact on the group’s accounting policies and did not require retrospective adjustments.

Except for the amendment to IFRS 9 regarding prepayment features with negative compensation, ING Group has not early adopted any standard, interpretation or amendment which has been issued, but is not yet effective.

Upcoming changes in IFRS

The most significant upcoming change to IFRS that could impact ING, comprises IFRS 16 ‘Leases’.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		17

Notes to the condensed consolidated interim accounts - continued

IFRS 16 ‘Leases’

In January 2016, the IASB issued IFRS 16 ‘Leases’ the new accounting standard for leases. The new standard, endorsed by the EU, is effective for annual periods beginning on or after 1 January 2019 and will replace IAS 17 ‘Leases’ and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’. For lessee accounting, the new standard removes the distinction between operating or finance leases. All leases will be recognised on the statement of financial position with the exemptions for short-term leases with a lease term of less than 12 months and leases of low-value assets (for example mobile phones or laptops). A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The main reason for this change is that this approach will result in a more comparable representation of a lessee’s assets and liabilities in relation to other companies and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial leverage and capital employed. The standard permits a lessee to choose either a full retrospective or a modified retrospective transition approach. Furthermore the standard provides some practical expedients and exemptions to ease the costs of transition. ING has decided to elect the modified retrospective approach and will make use of several practical expedients and exemptions. Lessor accounting remains substantially unchanged. ING Group will adopt the standard at its effective date and is currently preparing for implementation of this standard.

For further information, reference is made to Note 1 ‘Accounting policies, b) Upcoming changes in IFRS after 2017’ in the 2017 ING Group Consolidated annual accounts.

Changes to accounting policies in 2018

IFRS 9 ‘Financial instruments’

ING Group has applied the classification, measurement, and impairment requirements of IFRS 9 retrospectively as of 1 January 2018 by adjusting the opening balance sheet and opening equity at 1 January 2018. ING Group decided not to restate comparative periods as permitted by IFRS 9. ING Group early adopted the amendment to IFRS 9, otherwise effective 1 January 2019, which allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract, to be measured at amortised cost or at fair value through other comprehensive income. ING Group decided to continue to apply the hedge accounting guidance of IAS 39 under the EU-carve out as explicitly permitted by IFRS 9. The revised hedge accounting disclosures as required by IFRS 7 ‘Financial Instruments: Disclosures’ as per 1 January 2018 have been implemented across ING Group.

a)	*IFRS 9 ‘Financial instruments’ – Impact of adoption*

Transition

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below:

•

Comparative periods have not been restated. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings and reserves as at 1 January 2018. Accordingly, the information presented for 2017 does not reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9;

•

The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:

•

the determination of the business model within which a financial asset is held;

•

the designation and revocation of previous designations of certain financial assets and financial liabilities as measured at fair value through profit or loss (FVTPL);

•

the designation of certain investments in equity instruments not held for trading as at fair value through other comprehensive income (FVOCI); and

•

for financial liabilities designated as at FVTPL, the determination of whether presenting the effects of changes in the financial liability’s credit risk in other comprehensive income (OCI) would create or enlarge an accounting mismatch in profit or loss.

ING continues to test and refine the new accounting processes, internal controls and governance framework necessitated by the adoption of IFRS 9. Therefore the estimation of the IFRS 9 impact has changed slightly compared to what was presented in the ING Group Annual Report 2017.

The following table reconciles the carrying amounts under IAS 39 to the carrying amounts under IFRS 9 on transition to IFRS 9 on 1 January 2018.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		18

Notes to the condensed consolidated interim accounts - continued

Reconciliation of carrying amounts of financial assets and financial liabilities on the date of initial application of IFRS 9


	Ref	Carrying amount 31 December 2017 IAS 39		Reclassfication¹		Remeasurement		Carrying amount 1 January 2018 IFRS 9
Cash and balances with central banks			21,989		3				21,992
Loans and advances to banks			28,811		–122		2		28,691
Trading assets	E		116,748		–51,264				65,484
Non-trading derivatives			2,231		577				2,808
Loans and advances at fair value through profit or loss	C, E		2,500		54,092		31		56,623
Debt securities at fair value through profit or loss	C		1,738		1,487		–96		3,129
Equity securities at fair value through profit or loss	D		4		184		16		204
Available-for-sale	A, C, D		69,730		–69,730				0
Debt securities at fair value through other comprehensive income	A		0		30,459		–22		30,437
Equity securities at fair value through other comprehensive income	D		0		3,800				3,800
Loans and advances at fair value through other comprehensive income	B		0		3,131		233		3,364
Securities at amortised cost	A		9,343		39,975		–838		48,480
Loans and advances to customers	B. C		574,535		–8,372		–761		565,402
Other assets (financial and non-financial)			18,587		–4,220		300		14,667

Total assets			846,216		—		–1,135		845,081

Deposits from banks			36,821		108				36,929
Customer deposits			539,799		53				539,852
Trading liabilities	E		73,596		–35,362				38,234
Non-trading derivatives			2,331		326				2,657
Financial liabilities designated at fair value through profit or loss	E		11,215		37,264				48,479
Other liabilities (financial and non-financial)			19,279		–3,370		–77		15,832
Deb securities in issue			96,086		740				96,826
Subordinated loans			15,968		241				16,209

Total liabilities			795,095		–		–77		795,018

1	Includes the reclassification of accrued interest from other assets and other liabilities to the corresponding balance sheet item of the host contract.

ING Group’s accounting policies on the classification of financial instruments under IFRS 9 are set out in note 1b. As a result of the combined application of the business model analysis and solely payments of principal and interest (SPPI) test, the classification and measurement of the following portfolios has changed:

A.	The available-for-sale (AFS) investment portfolio, was split into a portfolio classified at amortised cost (AC) and a portfolio at FVOCI. The reclassification from AFS to AC resulted in a reduction of the unrealised revaluation gains in equity at transition date.

B.	For a specific mortgage portfolio, the measurement changed from AC to FVOCI as it meets the hold to collect and sell (HtC&S) business model requirements. As the fair value of the portfolio is higher than the AC, this had a positive impact on equity; and

C.	Certain debt securities and loans previously booked at AC or AFS are measured at FVPL as the cash flows do not meet the SPPI test. This measurement change has a limited negative impact on equity at transition date.

Furthermore, there are a few portfolios for which only the classification on ING’s Consolidated statement of financial position has changed without impacting equity:

For strategic equity instruments, ING decided to apply the option to irrevocably designate these at FVOCI, instead of the IFRS 9 default measurement of FVPL. FVOCI equity investments will have no recycling of the revaluation reserve anymore to the Statement Of Profit Or Loss (SOPL) upon disposal. For these instruments only dividend income continues to be recognised in the SOPL; and

E.	Certain reverse repurchase portfolios are classified as financial assets ‘Mandatorily at FVPL’ instead of Held for trading. ING will use the fair value option for the related repurchase financial liabilities.

Other Assets and Other Liabilities include the impact of reclassification of accrued interest from other assets and other liabilities to the corresponding balance sheet item of the host contract (reclassification) and the remeasurement impact on deferred tax assets and liabilities relating to the IFRS 9 changes.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		19

Notes to the condensed consolidated interim accounts - continued

Classification and measurement

The following table shows the original measurement categories in accordance with IAS 39 and the new measurement categories under IFRS 9 for the Group’s financial assets and financial liabilities as at 1 January 2018.

Classification and measurement of financial assets and financial liabilities on the date of initial application of IFRS 9 as at 1 January 2018

2018

Note

Orignal
measurement
under
IAS 39

Orignal
carrying
amount
under
IAS 39

New
carrying
amount
under IFRS
9¹

New measurement
under IFRS 9

Cash and balances with central banks

Amortised cost

21,989

21,992

Amortised cost

Cash and balances with central banks

Loans and advances to banks

Amortised cost

28,811

28,691

Amortised cost

Loans and advances to banks

Financial assets at FVTPL

Financial assets at FVPL

– trading assets

FVTPL

116,748

65,484

FVTPL (mandatorily)

– trading assets

– non-trading derivatives

FVTPL

2,231

2,808

FVTPL (mandatorily)

– non-trading derivatives

– other financial assets at FVTPL

FVTPL

4,242

2,162

FVTPL (designated)

– other financial assets at FVTPL

57,795

FVTPL (mandatorily)

– other financial assets at FVTPL

Investments²

– equity securities (AFS)

FVOCI

3,983

n/a

– debt securities (AFS)

FVOCI

65,747

n/a

– debt securities (HTM)

Amortised cost

9,343

n/a

Financial assets at FVOCI

n/a

30,437

FVOCI

– debt securities

n/a

3,800

FVOCI (designated)

– equity securities

n/a

3,364

FVOCI

– loans and advances

n/a

48,480

Amortised cost

Securities at amortised cost

Loans and advances to customers

Amortised cost

574,535

565,402

Amortised cost

Loans and advances to customers

Other assets

Amortised cost

18,587

14,667

Amortised cost

Other assets

Total assets

846,216

845,081

Total assets

Deposits from banks

Amortised cost

36,821

36,929

Amortised cost

Deposits from banks

Customer deposits

Amortised cost

539,799

539,852

Amortised cost

Customer deposits

Financial liabilities at FVTPL

– trading liabilities

FVTPL

73,596

38,234

FVTPL

– trading liabilities

– non-trading derivatives

FVTPL

2,331

2,657

FVTPL

– non-trading derivatives

– other financial liabilities at FVTPL

FVTPL

11,215

48,479

FVTPL (designated)

– other financial liabilities at FVTPL

Other liabilities

Amortised cost

19,279

15,832

Amortised cost

Other liabilities

Debt securities in issue

Amortised cost

96,086

96,826

Amortised cost

Debt securities in issue

Subordinated loans

Amortised cost

15,968

16,209

Amortised cost

Subordinated loans

Total liabilities

795,095

795,018

Total liabilities

1	Includes the reclassification of accrued interest from other assets and other liabilities to the corresponding balance sheet item of the host contract.

2	Investments represented all securities other than those measured at FVTPL under IAS 39. Under IFRS 9 these Investments are classified as Financial Assets at FVOCI or Securities at amortised cost.

Impairment

As a result of the new IFRS 9 impairment requirements, the loan loss provisions (LLP) increased by EUR 795 million.

The following table reconciles:

•

the closing impairment allowance for financial assets in accordance with IAS 39 and provisions for loan commitments and financial guarantee contracts in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ as at 31 December 2017; to

•

the opening expected credit loss (ECL) allowance determined in accordance with IFRS 9 as at 1 January 2018.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		20

Notes to the condensed consolidated interim accounts - continued


Reconciliation of impairment allowance in accordance with IAS 39 to opening ECL allowance in accordance with IFRS 9
Allowance on;	31 December 2017 (IAS 39 / IAS 37)		Reclassfication		Remeasurement		1 January 2018 (IFRS 9)
Loans and advances to banks		8		0		-2		6
Available-for-sale/Held-to-maturity debt investment securities and under IAS 39 reclassified to Securities at amortised cost under IFRS 9		0		0		5		5
Loans and advances to customers		4,515		-8		761		5,269
Available-for-sale debt securities under IAS 39/financial assets at FVOCI under IFRS 9		0		0		20		20
Loans and advances to customers under IAS 39/ Loans and advances to customers at FVOCI under IFRS 9		0		8		0		8
Loan commitments and financial guarantee contracts issued		105		0		11		116

Total		4,628		0		795		5,423

The split of the ECL to different stages of ING Group’s portfolio is further detailed in the table below. The increase in the level of impairments due to the IFRS 9 transaction is mainly the result of IFRS 9 Stage 2 loans for which life time expected credit losses were calculated.

IFRS 9 transition impact impairments as at 1 January 2018¹

In millions of euros

IAS 39 LLP

IFRS 9 impairment stages

IFRS 9 ECL increase

IFRS9 ECL

Incurred but Not Reported (IBNR)

726

Stage 1-12 month ECL

438

Stage 2 – Lifetime ECL

586

955

Individually assessed provisions

3,902

Stage 3 – Lifetime ECL

128

4,030

Total

4,628

Total

795

5,423

1	Includes provisions for the credit risk on contingent liabilities.

The table below shows approximate carrying amounts and loan loss provisions of loans and advances to customers per stage.


Expected Credit Losses loans and advances to customers per stage as at 1 January 2018
in millions of euros	Carrying amount		ECL
Stage 1: 12-Month ECL		514,985		402
Stage 2: Lifetime ECL not credit impaired		43,777		952
Stage 3: Lifetime ECL credit impaired		11,909		3,915

Total		570,671		5,269

Total net impact of transition to IFRS9 on opening balance equity

The following table analyses the impact, net of tax, of transition to IFRS 9 on reserves and retained earnings. The impact relates to the liability credit reserve, the fair value reserve and retained earnings. There is no impact on other components of equity.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		21

Notes to the condensed consolidated interim accounts - continued


Impact (net of tax) of transition to IFRS 9 on reserves and retained earnings
in EUR million	Impact of adopting IFRS 9 at 1 January 2018
Liability credit reserve
Closing balance under IAS 39 (31 December 2017)		0
Reclassification of credit risk for financial liabilities designated as at FVTPL		–190

Opening balance under IFRS 9 (1 January 2018)		–190
Fair value reserve
Closing balance under IAS 39 (31 December 2017)		3,650
Reclassification of investment securities (debt) from available-for-sale to amortised cost		–568
Reclassification of investment securities (equity) from available-for-sale to FVTPL		–42
Reclassification of loans and advances to debt instruments at FVOCI		175

Opening balance under IFRS 9 (1 January 2018)		3,215
Share of associates, joint venture and other reserve
Closing balance under IAS 39 (31 December 2017)		2,527
Impact of application of IFRS 9		–28

Opening balance under IFRS 9 (1 January 2018)		2,499
Retained earnings
Closing balance under IAS 39 (31 December 2017)		28,999
Reclassifications under IFRS 9¹		182
Recognition of expected credit losses under IFRS 9 (including lease receivables, loan commitments and financial guarantee contracts)		–572

Opening balance under IFRS 9 (1 January 2018)		28,609

1	Net amount of reclassifications to retained earnings, to and from fair value reserves and to liability credit reserves, due to changes in classification and measurement.

Presentation

IFRS 9 resulted in changes to IAS 1 for the presentation of Interest income for instruments calculated using the effective interest rate method. The revised presentation requires it be shown as a separate line item in the consolidated statement of profit or loss. To enhance the relevance of the interest disclosures, ING Group changed its separate presentation of interest (i.e. ‘split interest’) for trading derivatives, trading securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and net trading income’. Similar presentation was applied to interest expense. The presentation of accrued interest in the balance sheet was also changed so that it is no longer separately presented, but rather included in the corresponding balance sheet item of the host contract. The new interest presentation was applied prospectively together with the other requirements of IFRS 9.

b) IFRS 9 ‘Financial instruments’ - Accounting policies applied from 1 January 2018

Recognition and derecognition of financial instruments

Recognition of financial assets

Financial assets are recognised in the balance sheet when ING becomes a party to the contractual provisions of the instruments. Equity investments, debt securities financial assets and financial assets measured at fair value through profit or loss that require delivery within the time frame established by regulation or market convention (‘regular way’ purchases and sales) are recognised using trade date accounting. Trade date is the date on which ING commits to purchase or sell the asset. Loans and advances and repurchase agreements are recognised using settlement date accounting.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where ING Group has transferred substantially all risks and rewards of ownership. If ING Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer has control over the asset. The difference between the carrying amount of a financial asset that has been extinguished and the consideration received is recognised in profit or loss.

Recognition of financial liabilities

Financial liabilities are recognised on the date that the entity becomes a party to the contractual provisions of the instrument.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		22

Notes to the condensed consolidated interim accounts - continued

Derecognition of financial liabilities

Financial liabilities are removed from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished and the consideration paid is recognised in statement of profit or loss.

i) Financial assets

General classification framework and initial measurement

From 1 January 2018, ING Group classifies its financial assets in the following measurement categories:

•

those to be measured subsequently at fair value (either through OCI, or through profit or loss); and

•

those to be measured at amortised cost (AC).

At initial recognition, the ING Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the statement of profit or loss.

Debt instruments

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows at initial recognition.

Business models

Business models are classified as either Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other depending on how a portfolio of financial instruments as a whole is managed. ING Group’s business models are based on the existing management structure of the bank, and refined based on an analysis of how businesses are evaluated and reported, how their specific business risks are managed and on historic and expected future sales.

Sales are permissible in a HtC business model when these are due to an increase in credit risk, take place close to the maturity date, are insignificant in value (both individually and in aggregate) or are infrequent.

Assessing whether contractual cash flows are solely payments of principal and interest (SPPI)

The contractual cash flows of a financial asset are assessed to determine whether they represent SPPI. Interest includes consideration for the time value of money, credit risk and also consideration for liquidity risk and costs associated with holding the financial asset for a particular period of time. In addition, interest can include a profit margin that is consistent with a basic lending arrangement. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.

In assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, terms such as the following are considered:

•

prepayment terms. For example a prepayment of an outstanding principal amount plus a penalty capped to three or six months of interest;

•

leverage features, which increase the variability of the contractual cash flows with the result that they do not have the economic characteristics of interest. An example is a Libor contract with a multiplier of 1.3;

•

terms that limit ING Group’s claim to cash flows from specified assets - e.g. non-recourse asset arrangements. This could be the case if payments of principal and interest are met solely by the cash flows generated by the underlying asset, for example in real estate, shipping and aviation financing; and

•

features that modify consideration of the time value of money. These are contracts with for example an interest rate which is reset every month to a one-year rate. ING Group performs either a qualitative or quantitative benchmark test on a financial asset with a modified time value of money element. A qualitative test is performed when it is clear with little or no analysis whether the contractual cash flows solely represent SPPI.

There are three measurement categories into which the group classifies its debt instruments:

•

Amortised cost:

Debt instruments that are held for collection of contractual cash flows under a HtC business model where those cash flows represent SPPI are measured at amortised cost. Interest income from these financial assets is included in Interest income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as a separate line item in the consolidated statement of profit or loss.

•

FVOCI:

Debt instruments that are held for collection of contractual cash flows and for selling the financial assets under a HtC&S business model, where the assets’ cash flows represent SPPI, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in Investment income or Other income based on the specific characteristics of the business model. Interest income from these financial assets is included in Interest income using the effective interest rate method. Impairment losses are presented as a separate line item in the statement of profit or loss.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		23

Notes to the condensed consolidated interim accounts - continued

•

FVPL:

Debt instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. This includes debt instruments that are held for trading. The interest result on a debt instrument that is part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss and presented within interest income or interest expense in the period in which it arises. Fair value movements on trading loans and deposits (mainly repo’s) are presented fully within valuation result and net trading income. ING Group may in some cases, on initial recognition, irrevocably designate a financial asset that otherwise meets the requirements to be measured at AC or at FVOCI as at FVPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. The interest result on financial assets designated as at FVPL is recognised in profit or loss and presented within interest income or interest expense in the period in which it arises.

ING Group reclassifies debt investments when, and only when, its business model for managing those assets changes.

Equity instruments

All equity investments are measured at fair value. ING Group applies the fair value through OCI option to the investments which are considered as strategic investments, consisting of investments that add value to ING Group’s core banking activities.

There is no subsequent recycling of fair value gains and losses to profit or loss following the derecognition of the investment if elected to measure the equity investments as FVOCI. Dividends from such investments continue to be recognised in profit or loss as Investment income when the group’s right to receive payments is established. Impairment requirements are not applicable to equity investments measured as FVOCI.

Other remaining investments are measured at FVPL since they are not part of ING’s core banking activities. All changes in the fair value are recognised in Valuation result and net trading income in the consolidated statement of profit or loss as applicable.

ii) Financial liabilities

Financial liabilities are classified and subsequently measured at amortised cost, except for financial guarantee contracts, derivatives and liabilities designated at FVPL. Financial liabilities that are measured at FVPL are presented as follows:

•

the amount of change in the fair value that is attributable to changes in own credit risk of the liability is presented in OCI. Upon derecognition this debt valuation adjustment (DVA) impact does not recycle from OCI to profit or loss; and

•

the remaining amount of change in the fair value is presented in profit or loss.

A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Such a contract is initially recognised at fair value and is subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions of IFRS 9 (see section “Impairment of financial assets”) and (b) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue recognition principle of IFRS 15.

iii) Derivatives and hedge accounting

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Fair values are obtained from quoted market prices in active markets, including market transactions and valuation techniques (such as discounted cash flow models and option pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Fair value movements on derivatives, are presented in profit or loss in Valuation result and net trading income, except for derivatives in either a formal hedge relationship and so-called economic hedges that are not in a formal hedge accounting relationship where a component is presented separately in interest result in line with ING’s risk management strategy.

Embedded derivatives are separated from financial liabilities and other non-financial contracts and accounted for as a derivative if, and only if:

a)	the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract;

b)	a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and

c)	the combined instrument is not measured at fair value with changes in fair value reported in profit or loss.

If an embedded derivative is separated, the host contract is accounted for as for a similar free-standing contract.

ING Group decided to continue to apply the hedge accounting guidance of IAS 39 under the EU-carve out as explicitly permitted by IFRS 9. The revised hedge accounting disclosures as required by IFRS 7 as per 1 January 2018 have been implemented across ING Group.

iv) Impairment of financial assets

An ECL model is applied to on-balance sheet financial assets accounted for at amortised cost and FVOCI such as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		24

Notes to the condensed consolidated interim accounts - continued

Under the ECL model ING Group calculates the allowance for credit losses (loan loss provision, LLP) by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The LLP is the sum of these probability-weighted outcomes and the ECL estimates are unbiased and include supportable information about past events, current conditions, and forecasts of future economic conditions. ING Group’s approach leveraged the existing regulatory capital models that use the Advanced Internal Ratings Based (AIRB) models for regulatory purposes. For other portfolios that use the Standardised Approach (SA) to calculate regulatory capital, ING developed new ECL models.

Three stage approach

Financial assets are classified in any of the below 3 Stages at a quarterly reporting date. A financial asset can move between Stages during its lifetime. The Stages are based on changes in credit quality since initial recognition and defined as follows:

•

Stage 1: 12 month ECL

Financial assets that have not had a significant increase in credit risk since initial recognition (i.e. no Stage 2 or 3 triggers apply). Assets are classified as stage 1 upon initial recognition (with the exception of purchased or originated credit impaired (POCI) assets) and a provision for ECL associated with the probability of default (PD) events occurring with the next 12 months (12 months ECL). For those financial assets with a remaining maturity of less than 12 months, a PD is used that corresponds to the remaining maturity;

•

Stage 2: Lifetime ECL not credit impaired

Financial assets showing a significant increase in credit risk since initial recognition. A provision is made for the life time ECL representing losses over the life of the financial instrument (lifetime ECL); or

•

Stage 3: Lifetime ECL credit impaired

Financial instruments that move into Stage 3 once credit impaired require a life time provision.

Significant increase in credit risk

A financial asset moves from Stage 1 to Stage 2 when there is a significant increase in credit risk since initial recognition. ING Group established a framework which incorporates quantitative and qualitative information to identify this on an asset level applying a relative assessment. Each financial asset is assessed at the reporting date on the triggers for significant deterioration. ING Group assesses significant increase in credit risk using:

•

delta in the lifetime probability of default;

•

forbearance status;

•

watch list status. Loans on the watch list are individually assessed for Stage 2 classification;

•

intensive care management;

•

internal rating;

•

arrears; and

•

more than 30 days past due backstop for Stage 1 to Stage 2 transfers.

The delta in lifetime probability of default is the main trigger for movement between Stage 1 and Stage 2. The trigger compares lifetime probability of default at origination versus lifetime probability of default at reporting date, considering the remaining maturity. Assets can move in both directions, meaning that they will move back to Stage 1 or Stage 2 when the Stage 2 or Stage 3 triggers are not applicable anymore (taking into account the regulatory probation periods). The stage allocation is implemented in the central credit risk systems.

Macroeconomic scenarios

ING has established a quarterly process whereby forward- looking macroeconomics scenarios and probability weightings are developed for ECL calculation purposes. ING Group applies data predominantly from a leading service provider enriched with the internal ING Group view. A baseline, up-scenario and a down-scenario are determined to reflect an unbiased and probability-weighted ECL amount. As a baseline scenario, ING Group applies the market-neutral view combining consensus forecasts for economic variables such as unemployment rates, GDP growth, house prices, commodity prices, and short-term interest rates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit losses.

The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting the economy today and the forecast horizon. The probabilities assigned are based on the likelihoods of observing the three scenarios and are derived from confidence intervals on a probability distribution. The scenarios are adjusted on a quarterly basis.

Measurement of ECL

ING Group’s expected loss models (PD, LGD, EAD) used for regulatory capital, economic capital and collective provisions are adjusted for removal of embedded prudential conservatism (such as floors), provide forward-looking point in time estimates based on macroeconomic predictions and a 12 months or life time view of credit risk where needed. Lifetime features are default behaviour over a longer horizon, full behaviour after the default moment, repayment schedules and early settlements. For most financial instruments, the expected life is limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as credit cards, open ended assumptions are taken as these do not have a fixed term or repayment schedule.

ING Group applies a PD x EAD x LGD approach incorporating the time value of money to measure ECL. A forward-looking approach on a 12 month horizon is applied for Stage 1 assets. For Stage 2 assets a lifetime view on the credit is applied.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		25

Notes to the condensed consolidated interim accounts - continued

The Lifetime Expected Loss (LEL) is the discounted sum of the portions of lifetime losses related to default events within each time window of 12 months till maturity. For Stage 3 assets the PD equals 100% and the Loss Given Default (LGD) and Exposure At Default (EAD) represent a lifetime view of the losses based on characteristics of defaulted facilities.

Definition of default

ING Group uses the definition for defaulted financial assets which is used for internal risk management purposes and has aligned the definition of credit impaired under IFRS 9 (Stage 3) with the definition of default for prudential purposes.

The definition of default may differ across products and considers both quantitative and qualitative factors, such as the terms of financial covenants and days past due. For retail and wholesale borrowers default occurs when the borrower is more than 90 days past due on any material obligation to ING Group, and/or ING Group considers the borrower unlikely to make its payments in full without recourse action on ING Group’s part, such as taking formal possession of any collateral held.

Credit impaired financial assets (Stage 3)

Financial assets are assessed for credit-impairment at each reporting date and more frequently when circumstances warrant further assessment. Evidence of credit-impairment may include indications that the borrower is experiencing significant financial difficulty, a breach of contract, probability of bankruptcy or other financial reorganization, as well as a measurable decrease in the estimated future cash flows evidenced by the adverse changes in the payment status of the borrower or economic conditions that correlate with defaults.

An asset that is in stage 3 will move back to stage 2 when, as at the reporting date, it is no longer considered to be credit-impaired. The asset will migrate back to stage 1 when its credit risk at the reporting date is no longer considered to have increased significantly from initial recognition.

When a financial asset has been identified as credit-impaired, expected credit losses are measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the instrument’s original effective interest rate. For impaired financial assets with drawn and undrawn components, expected credit losses also reflect any credit losses related to the portion of the loan commitment that is expected to be drawn down over the remaining life of the instrument. When a financial asset is credit-impaired, interest ceases to be recognised on the regular accrual basis, which accrues income based on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original effective interest rate to the amortised cost of the asset, which is the gross carrying amount less the related loan loss provision.

The loan loss provision for credit-impaired loans in Stage 3 are established at the borrower level, where losses related to impaired loans are identified on individually significant loans, or collectively assessed and determined through the use of portfolio-based rates, without reference to particular loans.

Individually assessed loans (Stage 3)

ING Group estimates individual impairment provisions for individually significant credit impaired financial assets within Stage 3. Individual provisions are calculated using the discounted expected future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each scenario is analysed based on the probability of occurrence and including forward looking information.

The best estimate of loan loss is calculated as the weighted average of the shortfall (gross carrying amount minus discounted expected future cash flow using the original effective interest rate) per scenario. The expected future cash flows are based on the restructuring officers’ best estimate when recoveries are likely to occur. Recoveries can be from different sources including repayment of the loan, additional drawing, collateral recovery, asset sale etc. Cash flows from collateral and other credit enhancements are included in the measurement of the expected credit losses of the related financial asset when it is part of or integral to the contractual terms of the financial asset and the credit enhancement is not recognised separately. The estimation of future cash flows are subject to significant estimation uncertainty and assumptions.

Collectively assessed loans (Stages 1 to 3)

Loans that are collectively assessed are grouped on the basis of similar risk characteristics, taking into account loan type, industry, geographic location, collateral type, past due status and other relevant factors. The collectively-assessed loan loss provision reflects: (i) the expected amount of principal and interest calculated under the terms of the original loan agreement that will not be recovered, and (ii) the impact of time delays in collecting principal and/or interest (time value of money).

Purchase or Originated Credit Impaired (POCI) assets

POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount net of impairments and are measured at amortised cost using a credit-adjusted effective interest rate. In subsequent periods any changes to the estimated lifetime ECL are recognised in the income statement. Favourable changes are recognised as an impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL at origination.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		26

Notes to the condensed consolidated interim accounts - continued

Write-off and debt forgiveness

Loans and the related ECL are written off, either partially or in full, when there is no realistic prospect of recovery. Write-offs are made:

•

after a restructuring has been completed and there is a high improbability of recovery of part of the remaining loan exposure (including partial debt waivers);

•

in a bankruptcy liquidation scenario (not as a result of a reorganisation);

•

when there is a high improbability of recovery of the remaining loan exposure or certainty that no recovery can be realised;

•

after divestment or sale of a credit facility at a discount;

•

upon conversion of a credit facility into equity; or

•

ING Group releases a legal (monetary) claim it has on its customer.

Presentation of impairment

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognised in OCI, instead of deducting the carrying amount of the asset. Impairment losses on debt securities measured at amortised cost is presented in profit or loss in addition to loan loss provision.

Significant judgements and critical accounting estimates and assumptions:

Considerable judgement is exercised in determining the extent of the loan loss provision (impairment) for financial assets assessed for impairment both individually and collectively. The loan loss provision for financial assets are based on assumptions about risk of default and expected loss rates. ING Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward-looking estimates at the end of each reporting period. Changes in such judgements and analyses may lead to changes in the loan loss provisions over time. The key judgement areas are:

•

Assumptions used to measure expected credit losses, including the use of forward-looking and macro-economic information for individual and collective impairment assessment:

Individually assessed loans (Stage 3): Individual provisions are calculated using the discounted expected future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each scenario is analysed based on the probability of occurrence and including forward looking information. In determining the scenarios, all relevant factors impacting the future cash flows are taken into account. These include expected developments in credit quality, business and economic forecasts, and estimates of if/when recoveries will occur, taking into account the structure of the financial asset and ING’s restructuring/recovery strategy. The macroeconomic forecast is captured, as the expected future macroeconomic situation serves as basis for the cash flows in the scenarios. For the individual assessment, with granular (company- or deal-specific) scenarios, specific factors can have a larger impact on the future cash flows than macroeconomic factors (i.e. for the country as a whole).

Collectively assessed loans (Stages 1 to 3): For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Expected future cash flows in a portfolio of financial assets that are collectively evaluated for impairment, are estimated on the basis of the contractual cash flows of the assets in the portfolio and historical loss experience for assets with credit risk characteristics similar to those in the portfolio. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. The outcome of the models reflects forward looking and macro-economic information.

The use of different assumptions could produce significantly different estimates of ECL. As the inclusion of forward-looking macroeconomic scenarios requires judgement, a Macroeconomic scenarios team and a Macroeconomic scenarios expert panel were established. The Macroeconomics scenarios team is responsible for the macroeconomic scenarios used for IFRS 9 ECL purposes with a challenge by the Macroeconomic scenarios expert panel. This ensures that the macroeconomic scenarios are sufficiently challenged and that key economic risks, including immediate short term risks, are taken into consideration when developing the macroeconomic scenarios used in the calculation of ECL. The Macroeconomic scenarios expert panel is a diverse team composed of senior management representatives from the Business, Risk and Finance.

•

The criteria for identifying a significant increase in credit risk:

When determining whether the credit risk on a financial asset has increased significantly, ING Group considers reasonable and supportable information available to compare the risk of default occurring at the quarterly reporting date with the risk of a default occurring at initial recognition of the financial asset. Significant judgement is required to determine the criteria for a significant increase in credit risk.

•

The definition of default:

Judgement is exercised in management’s evaluation of whether there is objective evidence that an impairment loss on an asset has been incurred. Significant judgement is required in assessing evidence of credit-impairment and estimation of the amount and timing of future cash flows when determining expected credit losses.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		27

Notes to the condensed consolidated interim accounts - continued

c) IFRS 15 ‘Revenue from Contract with Customers’ – Impact of adoption

IFRS 15 is effective for annual periods beginning on or after 1 January 2018 and has been endorsed by the EU. IFRS 15 introduces a five-step approach for recognising revenue as and when the agreed performance obligations are satisfied. Agreed performance obligations are individual promises made to the customer that deliver benefit from the customer’s perspective. Revenue should either be recognised at a point-in-time or over-time depending on the service being delivered to the customer. The adoption of IFRS 15 had no significant impact on ING Group’s results or financial position.

ING’s net fee and commission income for the first 6 months of EUR 1,377 million in total is composed of EUR 2,037 million revenues and EUR 660 million expenses. The main revenue categories by product or service are fees from funds transfer of EUR 647 million (first six months 2017: EUR 577 million), fees from securities business of EUR 304 million (first 6 months of 2017: EUR 291 million), fees from brokerage and advisory fees of EUR 270 million (first 6 months of 2017 EUR 276 million). Other fees of EUR 816 million in total mainly include commission fees in respect of bank guarantees, underwriting syndicated loans and lending fees. Reference is made to Note 20 ‘Segments’ which includes net fee and commission income, as reported to the Executive Board of ING Group and the Management Board of ING Bank, disaggregated by line of business and by geographical segment.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		28

Notes to the Condensed consolidated statement of financial position - continued

Notes to the Condensed consolidated statement of financial position

2 Financial assets at fair value through profit or loss


Financial assets at fair value through profit or loss
	30 June 2018		31 December 2017
Trading assets		63,817		116,748
Non-trading derivatives		2,743		2,231
Assets mandatorily measured at fair value through profit or loss		82,168		n/a
Assets designated as at fair value through profit or loss		2,775		4,242

		151,503		123,221

At January 1 2018, the classification of certain Loans and advances to customers and Debt instruments has changed to ‘Financial assets at fair value through profit or loss’ due to SPPI failure. As per 1 January 2018 certain reverse repurchase portfolios, amounting to EUR 54,825 million, are classified as financial assets ‘Mandatorily measured at fair value through profit or loss’, where previously reported as ‘Trading assets’ and ‘Assets designated as at fair value through profit or loss’. The related repurchase financial liabilities, amounting to EUR 37,161 million, are classified as financial liabilities ‘Designated at fair value through profit or loss’.

The total increase in ‘Financial assets at fair value through profit or loss’ in the first six months of 2018, is mainly attributable to an increase of EUR 25.1 billion reverse repurchase portfolio included under assets mandatorily measured at fair value through profit or loss.

Trading assets and trading liabilities include assets and liabilities that are classified under IFRS as ‘Trading’ but are closely related to servicing the needs of the clients of ING Group. ING offers institutional and corporate clients and governments products that are traded on the financial markets. A significant part of the derivatives in the trading portfolio are related to servicing corporate clients in their risk management to hedge for example currency or interest rate exposures. In addition, ING provides its customers access to equity and debt markets for issuing their own equity or debt securities (‘securities underwriting’). Although these are presented as ‘Trading’ under IFRS, these are directly related to services to ING’s customers. Loans and receivables in the trading portfolio mainly relate to (reverse) repurchase agreements, which are comparable to collateralised lending. These products are used by ING as part of its own regular treasury activities, but also relate to the role that ING plays as intermediary between different professional customers. Trading assets and liabilities held for ING’s own risk are very limited. From a risk perspective, the gross amount of trading assets must be considered together with the gross amount of trading liabilities, which are presented separately on the statement of financial position. However, IFRS does not allow netting of these positions in the statement of financial position. Reference is made to Note 8 ‘Financial liabilities at fair value through profit or loss’ for information on trading liabilities.

As at 30 June 2018, Non-trading derivatives include EUR 0 million (31 December 2017: EUR 51 million ) and EUR 3 million (31 December 2017: EUR 2 million) related to warrants on the shares of Voya Financial Inc. and NN Group N.V. respectively. ING has sold its 7 million remaining shares in Voya during the first half of 2018.

3 Financial assets at fair value through other comprehensive income


Securities by type
	30 June 2018		31 December 2017
Equity securities		3,667		n/a
Debt securities		24,968		n/a
Loans and advances		2,865		n/a

		31,500		n/a
Available-for-sale investments		n/a		69,730
Held-to-maturity investments¹		n/a		9,343

		31,500		79,073

1	Under IFRS 9 these Investments are classified as Securities at amortised cost, reference is made to Note 4 ‘Securities at amortised cost‘.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		29

Notes to the Condensed consolidated statement of financial position - continued

Equity securities designated as at fair value through other comprehensive income


	Carrying value		Dividend income recognised in 2018
Investment in Bank of Beijing		2,150
Investment in Kotak Mahindra Bank		1,198
Other Investments		319		8

		3,667		8

Exposure to debt securities

Reference is made to Note 4 ‘Securities at amortised cost’ for details on ING Group’s exposure to debt securities.

Changes in fair value through other comprehensive income financial assets

The following table presents changes in fair value of equity securities and debt instruments at fair value through other comprehensive income. The comparative amounts include equity securities and debt instruments that were classified as available for sale investments under IAS 39.

Changes in fair value through other comprehensive income financial assets

Fair value through other

comprehensive income

Total

equity securities

debt instruments¹

2018

2017

2018

2017

2018

2017

Opening balance as at 1 January

3,983

4,024

65,747

78,888

69,730

82,912

Effect of changes in accounting policy

–184

–31,945

–32,129

Additions

325

3,376

21,276

3,387

21,600

Amortisation

–14

–146

–14

–146

Transfers and reclassifications

–7

–6

Changes in unrealised revaluations

–196

–69

–1,030

–265

–1,009

Impairments

–6

Reversals of impairments

Disposals and redemptions

–4

–79

–8,983

–32,709

–8,987

–32,788

Exchange rate differences

–308

–226

–535

–162

–843

Changes in the composition of the group and other changes

–1

–54

–55

–1

Closing balance

3,667

3,983

27,833

65,747

31,500

69,730

1	Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.

Reference is made to Note 14 ‘Investment income’ for details on Impairments.

Reference is made to Note 4 ‘Securities at amortised cost’ for further information on transfers and reclassifications of fair value through comprehensive income and amortised cost investments.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		30

Notes to the Condensed consolidated statement of financial position - continued

4 Securities at amortised cost

Securities at amortised cost


	30 June 2018		31 December 2017
Debt securities at amortised cost		48,966		n/a
Held-to-maturity investments ¹		n/a		9,343

		48,966		9,343

1	Under IAS 39 these Securities were classified as Held-to-maturity investments, reference is made to Note 3 ‘Financial assets at fair value through other comprehensive income’.

Exposure to debt securities

ING Group’s exposure to debt securities is included in the following lines in the statement of financial position:

Debt securities


	30 June 2018		31 December 2017
Debt securities at fair value through other comprehensive income		24,968		n/a
Debt securities at amortised cost		48,966		n/a
Available-for-sale investments		n/a		65,747
Held-to-maturity investments		n/a		9,343
Loans and advances to customers				5,099
Loans and advances to banks				265

Debt securities at fair value through other comprehensive income and amortised cost		73,934		80,454

Trading assets		7,237		7,477
Debt securities at fair value through profit or loss		3,226		1,739
Financial assets at fair value through profit or loss		10,463		9,216

		84,397		89,670

At January 1 2018, the classification of certain Loans and advances to banks and Loans and advances to customers has changed to Securities at amortised cost based on the characteristics of these instruments.

ING Group’s total exposure to debt securities of EUR 77,161 million (31 December 2017: EUR 80,454 million) is specified as follows by type of exposure:

Debt securities by type and balance sheet lines


	Debt securities at FVPL		Debt securities at FVOCI		Debt securities at AC		Total		Total
	30 June 2018		30 June 2018		30 June 2018		30 June 2018		31 December 2017
Government bonds		186		14,635		25,600		40,421		43,134
Sub-sovereign, Supranationals and Agencies		427		5,973		11,532		17,932		18,715
Covered bonds				2,255		7,009		9,264		9,409
Corporate bonds		181		1,005		816		2,002		2,254
Financial institutions’ bonds		1,485		5		2,369		3,860		2,548
ABS portfolio		946		1,095		1,641		3,682		4,394

Bond portfolio		3,226		24,968		48,966		77,161		80,454


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		31

Notes to the Condensed consolidated statement of financial position - continued

Approximately 99% (2017: 99%) of the exposure in the ABS portfolio is externally rated AAA, AA or A. There are no borrowed debt securities recognised in the statement of financial position.

5 Loans and advances to customers


Loans and advances to customers by type
	30 June 2018		31 December 2017
Loans to, or guaranteed by, public authorities		43,215		46,372
Loans secured by mortgages		331,925		326,585
Loans guaranteed by credit institutions		2,153		1,979
Personal lending		24,656		23,236
Asset backed securities				2,209
Corporate loans		190,443		178,669

		592,392		579,050
Loan loss provisions		–4,977		–4,515

		587,415		574,535

As at 30 June 2018, Loans and advances to customers includes receivables with regard to securities which have been acquired in reverse repurchase transactions amounting to EUR 698 million (31 December 2017: EUR 421 million).


Loans and advances to customers by subordination
	30 June 2018		31 December 2017
Non-subordinated		587,264		574,055
Subordinated		152		480

		587,415		574,535

No individual loan or advance has terms and conditions that significantly affect the amount, timing or certainty of the consolidated cash flows of the Group.


Total Loan loss provisions by type
									30 June 2018		31 December 2017
	12-month ECL		Lifetime ECL not credit impaired		Lifetime ECL credit impaired		Purchased credit impaired		Total		Total
Cash and balances with central banks
Loans and advances to banks		3		1						4		8
Debt instruments at fair value through other comprehensive income		9		1		4				15		n/a
Securities at amortised cost		12				4				16		n/a
Loans and advances to customers		432		928		3,615		2		4,977		4,515
Guarantees						84				84
Irrevocable loan commitments		5		7		6				19

		462		937		3,713		2		5,115		4,523
Provisions for other off-balance sheet items1										1		105

										5,116		4,628

1	These amounts relate to off-balance sheet exposure in scope of IAS 37 for which stage information is not applicable.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		32

Notes to the Condensed consolidated statement of financial position - continued

The following table shows the reconciliation from the opening to the closing balance of the total loan loss provision per stage.


Total Loans loss provision per stage
	30 June 2018		1 January 2018
Stage 1 – 12 month ECL		462		438
Stage 2 – Lifetime ECL not credit impaired		937		955
Stage 3 – Lifetime ECL credit impaired		3,713		4,023
Purchased credit impaired		2		7

Total		5,115		5,423

The following table sets out information about the credit quality of loans and advances to customers.

Credit quality analysis : Loans and advances to customers (at amortised cost)


									30 June 2018		31 December 2017

	12-month ECL		Lifetime ECL not credit impaired		Lifetime ECL credit impaired		Purchased credit - impaired		Total		Total
Grades 1-10: Investment grade		345,656		4,388						350,043		334,807
Grades 11-17: Non–investment grade		197,921		27,768						225,689		226,494
Grades 18-19: Substandard grade				5,632						5,632		5,703
Grade 20-22: Non-performing grade						11,025		2		11,027		12,047
Loan loss provision		–432		–928		–3,615		–2		-4,977		-4,515

Carrying amount		543,145		36,860		7,410				587,415		574,535

6 Intangible assets


Intangible assets
	30 June 2018		31 December 2017
Goodwill		958		816
Software		773		648
Other		54		5

		1,785		1,469


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		33

Notes to the Condensed consolidated statement of financial position - continued

Goodwill

Goodwill is allocated to groups of Cash Generating Units (CGUs) as follows:


Goodwill allocation to group of CGUs
Group of CGU’s	30 June 2018		31 December 2017
Retail Netherlands		14
Retail Belgium		50		50
Retail Germany		349		349
Retail Growth Markets¹		262		307
Wholesale Banking¹		283		110

		958		816

1	Goodwill related to Growth Market countries is allocated across two groups of CGUs EUR 262 million (31 December 2017: EUR 307 million) to Retail Growth Markets and EUR 76 million (31 December 2017: EUR 90 million) to Wholesale Banking.

Changes in the goodwill in the first six months of 2018 mainly relate to the acquisition of 75% of the shares of Payvision Holding B.V. and 90% of the shares of Makelaarsland B.V. The acquisition of Payvision and Makelaarsland resulted in a recognition of goodwill of respectively EUR 188 million and EUR 14 million. Other changes in goodwill are due to changes in currency exchange rates. Reference is made to Note 23 ‘Companies and business acquired and divested’ for further information on the acquisitions that took place in 2018 and the goodwill recognised.

No goodwill impairment was recognised in the first six months of 2018 (first six months of 2017: nil).

Goodwill impairment testing is done annually in the fourth quarter of the year unless there is a triggering event earlier.

Software and Other intangible assets

The increase in software and other intangible assets in the first six months of 2018, mainly relates to the recognition of intangible assets following the acquisition of Payvision. Reference is made to Note 23 ‘Companies and business acquired and divested’ for further information on the acquisitions that took place in 2018 and the assets and liabilities recognised.

7 Other assets


Other assets by type
	30 June 2018		31 December 2017
Net defined benefit assets		531		542
Investment properties		54		65
Property development and obtained from foreclosures		137		137
Accrued interest and rents¹		70		4,528
Other accrued assets		1,017		753
Amounts to be settled		6,312		4,097
Other		2,545		2,965

		10,667		13,087

1	As per 1 January 2018 accrued interest is included in the corresponding balance sheet item of the host contract, reference is made to note 1 Accounting policies.

Amounts to be settled are primarily transactions not settled at the balance sheet date. They are short term and volatile in nature and are expected to settle shortly after the balance sheet date.

Other assets – Other relates mainly to other receivables in the normal course of business.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		34

Notes to the Condensed consolidated statement of financial position - continued

8 Financial liabilities at fair value through profit or loss


Financial liabilities at fair value through profit or loss
	30 June 2018		31 December 2017
Trading liabilities		42,711		73,596
Non-trading derivatives		3,041		2,331
Designated at fair value through profit or loss		65,122		11,215

		110,874		87,142

At January 1 2018, certain repurchase financial liabilities, amounting to EUR 37,161 million, are classified as financial liabilities ‘Designated at fair value through profit or loss, which were previously reported as ‘Trading liabilities’. The related reverse repurchase portfolios, amounting to EUR 54,825 million, are classified as financial assets Mandatorily at fair value through profit or loss.

The increase in Financial liabilities at fair value through profit or loss, in the first six months of 2018, is mainly as a result of an increase in repurchase portfolios of EUR 17.3 billion reported under Designated at fair value through profit or loss and due to an increase in trading loans of EUR 6.1 billion included under Trading liabilities.

9 Other liabilities


Other liabilities by type
	30 June 2018		31 December 2017
Net defined benefit liability		413		476
Other post-employment benefits		81		87
Other staff-related liabilities		416		504
Other taxation and social security contributions		414		479
Accrued interest¹		108		3,606
Costs payable		2,315		2,599
Share-based payment plan liabilities		13		23
Amounts to be settled		6,803		5,017
Other		3,209		3,273

		13,772		16,064

1	As per 1 January 2018 accrued interest is included in the corresponding balance sheet item of the host contract, reference is made to note 1 Accounting policies.

Other liabilities – Other relates mainly to period-end accruals.

10 Subordinated loans and Debt securities in issue

Subordinated loans

Subordinated loans mainly consist of Tier 1 and Tier 2 instruments that may be included in the calculation of ING’s capital ratios. Under IFRS these bonds are classified as financial liabilities and for regulatory purposes they are considered capital.

The increase in subordinated loans in the first six months of 2018 of EUR 257 million is mainly due to two new issued Tier 2 bonds (EUR 750 million and USD 1,250 million) and exchange rate effects, partly offset by the redemption of two Tier 2 bonds (EUR 1.7 billion).

Debt securities in issue

The increase in Debt securities in issue of EUR 20 billion, in the first six months of 2018, is mainly a result of an increase in commercial paper and certificates of deposits of EUR 17 billion, EUR 8 billion respectively. These were partly offset by a decrease in long term bonds, Covered bonds, savings certificates and mortgages backed securities.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		35

Notes to the Condensed consolidated statement of financial position - continued

11 Equity


Total equity
	30 June 2018		31 December 2017
Share capital and share premium
- Share capital		39		39
- Share premium		17,049		17,006

		17,088		17,045
Other reserves
- Revaluation reserves: Available-for-sale and other		n/a		3,447
- Revaluation reserves: Equity secruties at fair value through other comprehensive income		2,263		n/a
- Revaluation reserves: Debt instruments at fair value through other comprehensive income		481		n/a
- Revaluation reserves: Cash flow hedge		422		263
- Revaluation reserves: Credit liability		–116		n/a
- Revaluation reserves: Property in own use		201		203

Revaluation reserves		3,251		3,913
- Net defined benefit asset/liability remeasurement reserve		–394		–400
- Currency translation reserve		–1,941		–1,663
- Share of associates, joint ventures and other reserves		2,600		2,527
- Treasury shares		–20		–15

		3,495		4,362
Retained earnings		29,401		28,999

Shareholders’ equity (parent)		49,984		50,406
Non-controlling interests		734		715

Total equity		50,717		51,121


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		36

Notes to the Condensed consolidated statement of profit or loss - continued

Notes to the Condensed consolidated statement of profit or loss

12 Net interest income

Total Net interest income of EUR 6,845 million includes interest income and expense for instruments calculated using the effective interest rate method and other interest income and interest expense. IFRS 9 resulted in changes to IAS 1 for the presentation of Interest income for instruments calculated using the effective interest rate method, which ING reports as a separate line item in the consolidated statement of profit or loss as from current reporting period.

To further enhance the relevance of the interest disclosures, ING Group changed its separate presentation of interest (income and expenses) for trading derivatives, trading securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and net trading income’. The change in presentation is in line with the changed presentation of accrued interest in the balance sheet that it is no longer separately presented, but included in the corresponding balance sheet item of the host contract.

The new interest presentation was applied prospectively together with the other presentation requirements of IFRS 9.

The table below provides a reconciliation between the Net interest income and Valuation results and net trading income as reported in the first 6 months of 2017 and the comparable amounts applying the 2018 accounting policies.

Impact of adoption of IFRS 9 on interest income and expense presentation

Reclassification

First 6 months of

of interest

2017 on

Reported in first

related to

comparable

Reported in first

6 months of

trading assets/

basis to first 6

6 months of

in EUR million

2017

liabilities

months of 2018

2018

Total interest income

22,086

-8,558

13,528

13,098

Total interest expense

-15,375

8,488

-6,887

-6,252

Net interest income

6,711

-70

6,641

6,845

Valuation results and net trading income

420

490

483

Refer to Note ’13 Valuation result and net trading income’ for the interest income and expense from trading assets and liabilities recognised in the first six months of 2018.

13 Valuation results and net trading income

In the first six months of 2017, Valuation results and net trading income included DVA adjustments on own issued notes designated at fair value, amounting to EUR 28 million. In 2018, in accordance with IFRS 9, the DVA adjustments are recognised in OCI.

In the first six months of 2018, Valuation results and net trading income includes EUR 19 million related to warrants on the shares of Voya and NN Group (first six months of 2017: EUR –62 million). Reference is made to Note 2 ‘Financial assets at fair value through profit or loss’.

In the first six months of 2018, Valuation results and net trading income includes EUR 18 million CVA/DVA adjustments on trading derivatives, compared with EUR 21 million CVA/DVA adjustment in the first six months of 2017.

Interest income from trading assets for the first six months of 2018 amounted to EUR 7,195 million.

Interest expense from trading liabilities for the first six months of 2018 amounted to EUR 7,223 million.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		37

Notes to the Condensed consolidated statement of profit or loss - continued

14 Investment income


Investment income
	1 January to 30 June
6 month period	2018		2017
Dividend income		9		18
Realised gains/losses on disposal of debt securities		90		57
Other investment income		3		15

		102		90

15 Other income


Other income
	1 January to 30 June
6 month period	2018		2017
Share of result from associates and joint ventures		48		136
Result on disposal of group companies				1
Other		103		111

		151		248

Results from associates and joint ventures, in the first six months of 2018, mainly comprise the share of results of EUR 35 million (first six months of 2017: 34 million) from TMB Public Company Limited (TMB). First six months of 2017 included EUR 97 million from the sale of shares in Appia Group Ltd UK.

16 Staff expenses


Staff expenses
	1 January to 30 June
6 month period	2018		2017
Salaries		1,666		1,646
Pension costs and other staff-related benefit costs		190		201
Social security costs		261		250
Share-based compensation arrangements		26		32
External employees		439		329
Education		41		36
Other staff costs		100		86

		2,723		2,580


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		38

Notes to the Condensed consolidated statement of profit or loss - continued

17 Other operating expenses


Other operating expenses
	1 January to 30 June
6 month period	2018		2017
IT related expenses		354		359
Office expenses		276		293
Advertising and public relations		200		209
Travel and accommodation expenses		93		86
External advisory fees		158		160
Audit and non-audit services		11		9
Postal charges		25		25
Depreciation of property and equipment		155		163
Amortisation of intangible assets		100		85
Impairments and reversals on property and equipment and intangibles		7		3
Regulatory costs		591		543
Addition/(unused amounts reversed) of provision for reorganisations and relocations		–20		–5
Addition/(unused amounts reversed) of other provisions		–35		75
Contributions and subscriptions		42		43
Other		353		294

		2,309		2,342

Regulatory costs represents contributions to Deposit Guarantee Schemes (DGS), the Single Resolution Fund (SRF) and local bank taxes. In the first six months of 2018 the contributions to DGS were EUR 216 million (first six months of 2017: EUR 204 million) mainly related to Germany, Belgium, the Netherlands, Poland and Spain, and contributions to the SRF of EUR 209 million (first six months of 2017: EUR 178 million). The contribution to the SRF in the first six months of 2018, comprises ING’s contribution for the full year 2018.


Impairments and reversals of property and equipment and intangibles
	Impairment losses				Reversals of impairments				Total
	1 January to 30 June				1 January to 30 June				1 January to 30 June
6 month period	2018		2017		2018		2017		2018		2017
Property and equipment		5		4		–2		–2		4		2
Property development		3								3
Software and other intangible assets				1								1

(Reversals of) other impairments		9		5		–2		–2		7		3


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		39

Notes to the Condensed consolidated statement of profit or loss - continued

18 Earnings per ordinary share


Earnings per ordinary share
	Amount (in EUR million)				Weighted average number of ordinary shares outstanding during the period (in millions)				Per ordinary share (in EUR)
	1 January to 30 June				1 January to 30 June				1 January to 30 June
6 month period	2018		2017		2018		2017		2018		2017
Basic earnings		2,654		2,514		3,887.4		3,881.2		0.68		0.65
Effect of dilutive instruments:
Stock option and share plans
						2.1		3.2

						2.1		3.2
Diluted earnings		2,654		2,514		3,889.5		3,884.4		0.68		0.65

19 Dividend per ordinary share


Dividends to shareholders of the parent
	Per ordinary share (in EUR)		Total (in EUR million)
Dividends on ordinary shares:
In respect of 2016
– Final dividend, paid in cash in May 2017		0.42		1,632
In respect of 2017
– Interim dividend, paid in cash in August 2017		0.24		933
– Final dividend, paid in cash in May 2018		0.43		1,673

Total dividend paid in respect of 2017		0.67		2,606
In respect of 2018
– Interim dividend declared		0.24		934

On 23 April 2018, the Annual General Meeting of Shareholders ratified the total dividend of EUR 0.67 per ordinary share of which EUR 0.24 was paid as an interim cash dividend during 2017. The final dividend was paid entirely in cash.

ING Groep N.V. is required to withhold tax of 15% on dividends paid.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		40

Segment reporting - continued

Segment reporting

20 Segments

a. General

ING Group’s segments are based on the internal reporting structures by lines of business.

The Executive Board of ING Group and the Management Board of ING Bank set the performance targets, approve and monitor the budgets prepared by the business lines. Business lines formulate strategic, commercial, and financial policy in conformity with the strategy and performance targets set by the Executive Board of ING Group and the Management Board of ING Bank.

Recognition and measurement of segment results are in line with the accounting policies as described in 2017 ING Group Consolidated annual accounts, Note 1 ‘Accounting policies’. Corporate expenses are allocated to business lines based on time spent by head office personnel, the relative number of staff, or on the basis of income, expenses and/or assets of the segment.

The following table specifies the segments by line of business and the main sources of income of each of the segments:


Segments of the Banking results by line of business		Main source of income

Retail Netherlands (Market Leaders)		Income from retail and private banking activities in the Netherlands, including the SME and mid-corporate segments. The main products offered are current and savings accounts, business lending, mortgages and other consumer lending in the Netherlands.

Retail Belgium (Market Leaders)		Income from retail and private banking activities in Belgium (including Luxembourg), including the SME and mid-corporate segments. The main products offered are similar to those in the Netherlands.

Retail Germany (Challengers and Growth Markets)		Income from retail and private banking activities in Germany (including Austria). The main products offered are current and savings accounts, mortgages and other customer lending.

Retail Other Challengers and Growth Markets (Challengers and Growth Markets)		Income from retail banking activities in the rest of the world, including the SME and mid-corporate segments in specific countries. The main products offered are similar to those in the Netherlands.

Wholesale Banking		Income from wholesale banking activities (a full range of products is offered from cash management to corporate finance), real estate and lease.


The geographical segments for the Banking results are presented on page 45.


Geographical segments		Main countries
The Netherlands

Belgium		Including Luxembourg

Germany		Including Austria

Other Challengers		Australia, France, Italy, Spain, Portugal, Czech Republic and UK Legacy run-off portfolio

Growth Markets		Poland, Romania, Turkey and Asian bank stakes

Wholesale Banking Rest of World		UK, Americas, Asia and other countries in Central and Eastern Europe

Other		Corporate Line Banking and the run-off portfolio of Real Estate

ING Group evaluates the results of its banking segments using a financial performance measure called underlying result. Underlying result is used to monitor the performance of ING Group at a consolidated level and by segment. The Executive Board of ING Group and Management Board of ING Bank consider this measure to be relevant to an understanding of the Group’s financial performance, because it allows investors to understand the primary method used by management to evaluate the Group’s operating performance and make decisions about allocating resources. In addition, ING Group believes that the presentation of underlying net result helps investors compare its segment performance on a meaningful basis by highlighting result before tax attributable to ongoing operations and the underlying profitability of the segment businesses. Underlying result is derived by excluding from IFRS the following: special items; the impact of divestments and Legacy Insurance.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		41

Segment reporting - continued

Underlying result excludes special items of income or expense that are significant and arise from events or transactions that are clearly distinct from the ordinary operating activities. Disclosures on comparative periods also reflect the impact of divestments. Legacy Insurance consists of the results from discontinued operations and the results from Insurance Other. Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations.

ING Group reconciles the total segment results to the total result of Banking using Corporate Line Banking. The Corporate Line Banking is a reflection of capital management activities and certain expenses that are not allocated to the banking businesses. ING Group applies a system of capital charging for its banking operations in order to create a comparable basis for the results of business units globally, irrespective of the business units’ book equity and the currency they operate in.

Underlying result as presented below is a non-GAAP financial measure and is not a measure of financial performance under IFRS. Because underlying result is not determined in accordance with IFRS, underlying result as presented by ING may not be comparable to other similarly titled measures of performance of other companies. The underlying result of ING’s segments is reconciled to the Net result as reported in the IFRS Condensed consolidated statement of profit or loss below. The information presented in this note is in line with the information presented to the Executive and Management Boards.

This note does not provide information on the revenue specified to each product or service as this is not reported internally and is therefore not readily available.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		42

Segment reporting - continued

b. ING Group

Reconciliation between IFRS and Underlying income, expenses and net result

6 month period

1 January to 30 June 2018

Income

Expenses

Taxation

Non-
Controlling
interests

Net
result¹

Net result IFRS attributable to equity holder of the parent

8,959

5,232

1,021

2,654

Remove impact of:

Insurance Other²

Underlying net result IFRS

8,940

5,232

1,021

2,636

1	Net result, after tax and non-controlling interests.

2	Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group. On 18 March 2018 ING sold it’s remaining part of warrants on the shares of Voya Financial.


ING Group Total
6 month period 1 January to 30 June 2018	ING Bank N.V.		Other Banking¹		Total Banking		Legacy Insurance		Total
Underlying income
– Net interest income		6,864		–19		6,845				6,845
– Net fee and commission income		1,379		0		1,378				1,378
– Total investment and other income		711		6		717				717

Total underlying income		8,953		–13		8,940				8,940
Underlying expenditure
– Operating expenses		5,040		–7		5,032				5,032
– Additions to loan loss provision		200		0		200				200

Total underlying expenditure		5,240		–7		5,232				5,232

Underlying result before taxation		3,713		–5		3,708				3,708
Taxation		1,026		–5		1,021				1,021
Non-controlling interests		51		0		51				51

Underlying net result		2,636		–1		2,636				2,636
Divestments
Special items
Insurance Other²								19		19

Net result IFRS attributable to equity holder of the parent		2,636		–1		2,636		19		2,654

1	Comprises for the most part the funding charges of ING Groep N.V. (Holding).

2	Insurance Other mainly comprises the net result relating to warrants on the shares of Voya and NN Group.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		43

Segment reporting - continued

Reconciliation between IFRS and Underlying income, expenses and net result

6 month period

1 January to 30 June 2017

Income

Expenses

Taxation

Non-
Controlling
interests

Net result¹

Net result IFRS attributable to equity holder of the parent

8,864

5,284

1,022

2,514

Remove impact of:

Insurance Other

–64

-64

Underlying net result IFRS

8,928

5,284

1,022

2,578

1	Net result, after tax and non-controlling interests.

ING Group Total

6 month period

1 January to 30 June 2017

ING
Bank N.V.

Other
Banking¹

Total
Banking

Legacy
Insurance

Total

Underlying income

– Net interest income

6,756

–45

6,711

– Net fee and commission income

1,397

–0

1,396

– Total investment and other income

810

820

Total underlying income

8,963

–35

8,928

Underlying expenditure

– Operating expenses

4,908

4,922

– Additions to loan loss provision

362

–0

362

Total underlying expenditure

5,269

5,284

Underlying result before taxation

3,693

–50

3,644

Taxation

1,038

–16

1,022

Non-controlling interests

Underlying net result

2,612

–33

2,578

Divestments

Special Items

Insurance Other²

–64

Net result IFRS attributable to equity holder of the parent

2,612

–33

2,578

–64

2,514

1	Comprises for the most part the funding charges of ING Groep N.V. (Holding).

2	Insurance Other mainly comprises the net result relating to warrants on the shares of Voya and NN Group.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		44

Segment reporting - continued

c. Banking activities


Segments Banking by line of business
6 month period 1 January to 30 June 2018	Retail Netherlands		Retail Belgium		Retail Germany		Retail Other C&G		Wholesale Banking		Corporate Line Banking		Total Banking
Underlying income
– Net interest income		1,755		898		857		1,310		1,922		105		6,845
– Net fee and commission income		320		201		93		212		553		–1		1,378
– Total investment and other income		192		114		10		61		389		–49		717

Total underlying income		2,267		1,213		960		1,583		2,864		54		8,940
Underlying expenditure
– Operating expenses		1,078		903		524		1,001		1,386		139		5,032
– Additions to loan loss provision		-51		78		13		121		39		0		200

Total underlying expenditure		1,028		982		537		1,122		1,425		139		5,232

Underlying result before taxation		1,239		231		423		460		1,439		–85		3,708
Taxation		307		71		137		116		369		21		1,021
Non-controlling interests		0		6		1		36		8		0		51

Underlying net result/ Net result IFRS		933		153		285		308		1,061		–105		2,636


Segments Banking by line of business
6 month period 1 January to 30 June 2017	Retail Netherlands		Retail Belgium		Retail Germany		Retail Other C&G		Wholesale Banking		Corporate Line Banking		Total Banking
Underlying income
– Net interest income		1,778		945		821		1,199		1,896		71		6,711
– Net fee and commission income		301		229		99		193		577		–3		1,396
– Total investment and other income		114		125		–2		85		661		–162		820

Total underlying income		2,193		1,298		918		1,477		3,134		–93		8,928
Underlying expenditure
– Operating expenses		1,121		872		514		890		1,373		152		4,922
– Additions to loan loss provision		29		49		6		107		170		1		362

Total underlying expenditure		1,150		922		520		996		1,543		153		5,284

Underlying result before taxation		1,043		377		398		481		1,591		–246		3,644
Taxation		262		123		134		118		438		–53		1,022
Non-controlling interests		0		3		1		32		7		0		44

Underlying net result/ Net result IFRS		781		251		264		331		1,145		–193		2,578


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		45

Segment reporting - continued


Geographical segments Banking
6 month period 1 January to 30 June 2018	Netherlands		Belgium		Germany		Other Challengers		Growth Markets		Wholesale Banking Rest of World		Other		Total Banking
Underlying income
– Net interest income		2,273		1,044		1,117		847		785		677		102		6,845
– Net fee and commission income		471		252		117		129		164		247		–1		1,378
– Total investment and other income		217		200		13		16		120		197		–46		717

Total underlying income		2,960		1,496		1,248		991		1,069		1,121		54		8,940
Underlying expenditure
– Operating expenses		1,454		1,051		594		584		596		608		146		5,032
– Additions to loan loss provision		–111		67		51		67		85		40				200

Total underlying expenditure		1,343		1,119		645		651		681		648		146		5,232

Underlying result before taxation		1,617		377		603		341		389		473		–91		3,708
Taxation		398		103		204		109		83		105		18		1,021
Non-controlling interests		0		6		1		0		44		0		0		51

Underlying net result/ Net result IFRS		1,219		268		398		231		261		367		–109		2,636


Geographical segments Banking
6 month period 1 January to 30 June 2017	Netherlands		Belgium		Germany		Other Challengers		Growth Markets		Wholesale Banking Rest of World		Other		Total Banking
Underlying income
– Net interest income		2,256		1,079		1,050		748		742		763		72		6,711
– Net fee and commission income		448		288		125		113		161		264		–3		1,396
– Total investment and other income		229		294		9		28		122		194		–55		820

Total underlying income		2,933		1,661		1,184		889		1,025		1,221		14		8,928
Underlying expenditure
– Operating expenses		1,474		1,122		571		509		551		538		157		4,922
– Additions to loan loss provision		6		78		2		97		110		69		1		362

Total underlying expenditure		1,480		1,200		573		606		661		607		157		5,284

Underlying result before taxation		1,453		462		611		283		364		614		–143		3,644
Taxation		365		161		204		85		79		174		–47		1,022
Non-controlling interests		0		3		1		0		40		0		0		44

Underlying net result/ Net result IFRS		1,088		297		406		198		245		441		–96		2,578

IFRS statements of financial position by segment are not reported internally to, and not managed by, the chief operating decision maker.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		46

Additional notes to the Condensed consolidated interim accounts

Additional notes to the condensed consolidated interim accounts

21 Fair value of financial assets and liabilities

The following table presents the estimated fair values of ING Group’s financial assets and liabilities. Certain items per the statement of financial position are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair values presented below does not represent, and should not be construed as representing, the underlying value of ING Group.


Fair value of financial assets and liabilities
	Estimated fair value				Statement of financial position value
	30 June 2018		31 December 2017		30 June 2018		31 December 2017
Financial assets
Cash and balances with central banks		38,276		21,989		38,276		21,989
Loans and advances to banks		31,754		28,911		31,627		28,811
Financial assets at fair value through profit or loss
– trading assets		63,817		116,748		63,817		116,748
– non-trading derivatives		2,743		2,231		2,743		2,231
– assets mandatorily measured at fair value through profit or loss		82,168		n/a		82,168		n/a
– assets designated as at fair value through profit or loss		2,775		4,242		2,775		4,242
Investments
– available-for-sale		n/a		69,730		n/a		69,730
– held-to-maturity		n/a		9,378		n/a		9,343
Financial assets at fair value through other comprehensive income
– equity securities		3,667		n/a		3,667		n/a
– debt securities		24,968		n/a		24,968		n/a
– loans and advances		2,865		n/a		2,865		n/a
Securities at amortised cost		49,551		n/a		48,966		n/a
Loans and advances to customers		600,493		588,998		587,415		574,535
Other assets¹		9,620		11,744		9,620		11,744

		912,698		853,971		898,909		839,373
Financial liabilities
Deposits from banks		39,109		36,868		38,776		36,821
Customer deposits		557,255		540,547		556,681		539,799
Financial liabilities at fair value through profit or loss
– trading liabilities		42,711		73,596		42,711		73,596
– non-trading derivatives		3,041		2,331		3,041		2,331
– designated as at fair value through profit or loss		65,122		11,215		65,122		11,215
Other liabilities²		12,434		14,488		12,434		14,488
Debt securities in issue		116,883		96,736		116,099		96,086
Subordinated loans		16,345		16,457		16,225		15,968

		852,900		792,238		851,089		790,304

1	Other assets do not include, among others: (deferred) tax assets, net defined benefit asset, inventory, property development and property obtained from foreclosures.

2	Other liabilities do not include, among others: (deferred) tax liabilities, net defined benefit and related employee benefit liabilities, reorganisation and other provisions and other taxation and social security contributions.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		47

Additional notes to the Condensed consolidated interim accounts - continued

ING Group has categorised its financial instruments that are either measured in the statement of financial position at fair value or of which the fair value is disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. The fair value hierarchy consists of three levels, depending upon whether fair values were determined based on (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include for example illiquid debt securities, complex derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), and asset backed securities for which there is no active market and a wide dispersion in quoted prices.

Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on the Group’s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the market. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and certain credit spreads. Transfers into and transfers out of fair value hierarchy levels are made on a quarterly basis.

Level 1 – (Unadjusted) quoted prices in active markets

This category includes financial instruments whose fair value is determined directly by reference to (unadjusted) quoted prices in an active market that ING Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer markets, brokered markets, or principal to principal markets. Those prices represent actual and regularly occurring market transactions with sufficient frequency and volume to provide pricing information on an ongoing basis. Transfers out of Level 1 into Level 2 or Level 3 occur when ING Group establishes that markets are no longer active and therefore (unadjusted) quoted prices no longer provide reliable pricing information.

Level 2 – Valuation technique supported by observable inputs

This category includes financial instruments whose fair value is based on market observables other than (unadjusted) quoted prices. The fair value for financial instruments in this category can be determined by reference to quoted prices for similar instruments in active markets, but for which the prices are modified based on other market observable external data or reference to quoted prices for identical or similar instruments in markets that are not active. These prices can be obtained from a third party pricing service. ING analyses how the prices are derived and determines whether the prices are liquid tradable prices or model based consensus prices taking various data as inputs.

For financial instruments that do not have a reference price available, fair value is determined using a valuation technique (e.g. a model), where inputs in the model are taken from an active market or are observable, such as interest rates and yield curves observable at commonly quoted intervals, implied volatilities, and credit spreads.

If certain inputs in the model are unobservable, the instrument is still classified in this category, provided that the impact of those unobservable inputs on the overall valuation is insignificant. The notion of significant is particularly relevant for the distinction between Level 2 and Level 3 assets and liabilities. ING Group has chosen to align the definition of significant with the 90% confidence range as captured in the prudent value definition by the European Banking Authority (EBA). Unobservable parameters are shifted down and upwards to reach this 90% confidence range. The same 90% confidence range is applied to model uncertainty. If the combined change in asset value resulting from the shift of the unobservable parameters and the model uncertainty exceeds the threshold, the asset is classified as Level 3. A value change below the threshold results in a Level 2 classification.

Valuation techniques used for Level 2 assets and liabilities range from discounting of cash flows to various industry standard valuation models such as option pricing model and Monte Carlo simulation model, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations, and credit ratings), and customer behaviour are taken into account.

Level 3 – Valuation technique supported by unobservable inputs

This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument in its entirety is classified as Level 3 if a significant portion of the instrument’s fair value is driven by unobservable inputs. Unobservable in this context means that there is little or no current market data available from which to derive a price that an unrelated, informed buyer would purchase the asset or liability at.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		48

Additional notes to the Condensed consolidated interim accounts - continued

Financial instruments at fair value

The fair values of the financial instruments were determined as follows:


Methods applied in determining fair values of financial assets and liabilities (carried at fair value)
	Level 1				Level 2				Level 3				Total
	30 June 2018		31 December 2017		30 June 2018		31 December 2017		30 June 2018		31 December 2017		30 June 2018		31 December 2017
Financial Assets
Financial assets at fair value through profit or loss
– Trading assets		18,202		20,114		45,282		95,530		333		1,104		63,817		116,748
– Non-trading derivatives						2,706		2,146		36		85		2,743		2,231
– Assets mandatorily measured at fair value through profit or loss		70		n/a		80,928		n/a		1,170		n/a		82,168		n/a
– Assets designated as at fair value through profit or loss		142		319		1,713		3,558		920		365		2,775		4,242
Available-for-sale investments		n/a		65,310		n/a		3,940		n/a		480		n/a		69,730
Financial assets at fair value through other comprehensive income		26,864		n/a		1,229		n/a		3,408		n/a		31,500		n/a

		45,278		85,743		131,857		105,174		5,868		2,034		183,004		192,951
Financial liabilities
Financial liabilities at fair value through profit or loss
– Trading liabilities		5,802		5,770		36,656		66,753		253		1,073		42,711		73,596
– Non-trading derivatives						2,970		2,263		71		68		3,041		2,331
– designated as at fair value through profit or loss		1,031		1,285		63,890		9,829		200		101		65,122		11,215

		6,833		7,055		103,516		78,845		525		1,242		110,874		87,142

Main changes in fair value hierarchy in the first six months of 2018

Financial assets carried at fair value decreased compared to 31 December 2017 mainly as a result of the reclassification of EUR 34,988 million available-for-sale debt securities to amortised cost due to the transition to IFRS 9.

In the first six months of 2018, the increase in Level 2 financial assets and liabilities is mainly due to increased (reverse) repurchase balances.

There were no significant transfers between Level 1 and Level 2.

In the first six months of 2018, there were no changes in the valuation techniques.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		49

Additional notes to the Condensed consolidated interim accounts - continued

Changes in Level 3 Financial assets

Trading assets

Non-trading
derivatives

Financial assets
mandatorily
measured at FVPL

Financial assets designated
as at FVPL

Financial assets
at FVOCI

Available-
for-sale
investments

Total

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

Opening balance

1,104

1,223

256

n/a

365

456

480

521

2,034

2,456

Effect of changes in accounting policy

1,653

3,446

5,099

Realised gain/loss recognised in the statement of profit or loss during the period¹

–232

–45

–18

–12

–7

–273

Revaluation recognised in other comprehensive income during the period

–70

–5

–70

–5

Purchase of assets

610

–9

841

570

226

1,446

889

Sale of assets

–54

–326

–80

–92

–1,152

–1

–3

–43

–1,289

–462

Maturity/settlement

–43

–141

–2

–46

–1

–440

–24

–530

–168

Reclassifications

–2

–7

–9

Transfers into Level 3

Transfers out of Level 3

–798

–37

-23

–109

–319

–1

–13

–908

–392

Exchange rate differences

–2

–24

–26

Changes in the composition of the group and other changes

–2

–1

Closing balance

333

1,104

1,170

n/a

920

365

3,408

480

5,868

2,034

1	Net gains/losses were recorded in income from trading activities in continuing operations herein as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes EUR 40 million of unrealised gains and losses recognised in the statement of profit or loss.

In the first six months of 2018, financial assets transferred out of Level 3 mainly relate to swap positions revised to level 2 based on the ability to demonstrate independent sourcing of observable inputs for swap pricing requirements.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		50

Additional notes to the Condensed consolidated interim accounts - continued

Changes in Level 3 Financial
liabilities

Trading liabilities

Non-trading derivatives

Financial liabilities
designated as at FVPL

Total

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

6 month
period ended
30 June
2018

year
ended
31 December
2017

Opening balance

1,073

1,378

101

123

1,242

1,525

Effect of changes in accounting policy

Realised gain/loss recognised in the statement of profit or loss during the period¹

–33

–105

-6

–29

–67

Issue of liabilities

485

500

Early repayment of liabilities

–30

–399

–1

–9

–21

–39

–421

Maturity/settlement

–37

–187

–1

–38

–187

Transfers into Level 3

132

Transfers out of Level 3

–788

–111

–1

–9

–790

–120

Exchange rate differences

–4

Changes in the composition of the group and other changes

–1

Closing balance

253

1,073

200

101

525

1,242

Net gains/losses were recorded in income from trading activities in continuing operations included herein as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes EUR -29 million of unrealised gains and losses recognised in the statement of profit or loss.

In the first six months of 2018, financial liabilities transferred out of Level 3 mainly relate to swap positions revised to level 2 based on the ability to demonstrate independent sourcing of observable inputs for swap pricing requirements.

Recognition of unrealised gains and losses in Level 3

Amounts recognised in the Statement of profit or loss relating to unrealised gains and losses during the period that relates to Level 3 assets and liabilities are included in the line item ‘Valuation results and net trading income’ in the statement of profit or loss. Unrealised gains and losses that relate to financial assets at fair value through other comprehensive income are included in the Revaluation reserve – Equity securities FVOCI and the Revaluation reserve – Debt instruments FVOCI.

Level 3 Financial assets and liabilities

Financial assets measured at fair value in the statement of financial position as at 30 June 2018 of EUR 183 billion includes an amount of EUR 5.9 billion (3.2%) which is classified as Level 3 (31 December 2017: EUR 2.0 billion, being 1.1%). Changes in Level 3 from 31 December 2017 to 30 June 2018 are disclosed above in the table ‘Changes in Level 3 Financial assets’.

Financial liabilities measured at fair value in the statement of financial position as at 30 June 2018 of EUR 111 billion includes an amount of EUR 0.5 billion (0.5%) which is classified as Level 3 (31 December 2017: EUR 1.2 billion, being 1.4%). Changes in Level 3 from 31 December 2017 to 30 June 2018 are disclosed above in the table ‘Changes in Level 3 Financial liabilities’.

Of the total amount of financial assets classified as Level 3 as at 30 June 2018 of EUR 5.9 billion (31 December 2017: EUR 2.0 billion), an amount of EUR 3.5 billion (64.1%) (31 December 2017: EUR 1.0 billion, being 49%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.

Furthermore, Level 3 financial assets includes approximately EUR 1.0 billion (31 December 2017: EUR 0.4 billion) which relates to financial assets that are part of structures that are designed to be fully neutral in terms of market risk. Such structures include various financial assets and liabilities for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual components of these structures may be determined using different techniques and the fair value of each of the components of these structures may be sensitive to unobservable inputs, the overall sensitivity is by design not significant.

The remaining EUR 1.4 billion (31 December 2017: EUR 0.6 billion) of the fair value classified in Level 3 financial assets is established using valuation techniques that incorporates certain inputs that are unobservable.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		51

Additional notes to the Condensed consolidated interim accounts - continued

Of the total amount of financial liabilities classified as Level 3 as at 30 June 2018 of EUR 0.5 billion (31 December 2017: EUR 1.2 billion), an amount of EUR 0.05 billion (9 %) (31 December 2017: EUR 0.8 billion, being 66%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.

Furthermore, Level 3 financial liabilities includes approximately EUR 0.1 billion (31 December 2017: EUR 0.1 billion) which relates to financial liabilities that are part of structures that are designed to be fully neutral in terms of market risk. As explained above, the fair value of each of the components of these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design not significant.

The remaining EUR 0.4 billion (31 December 2017: EUR 0.3 billion) of the fair value classified in Level 3 financial liabilities is established using valuation techniques that incorporates certain inputs that are unobservable.

The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and upper range mentioned in the overview represent the lowest and highest variance of the respective valuation input as actually used in the valuation of the different financial instruments. Amounts and percentages stated are unweighted. The range can vary from period to period subject to market movements and change in Level 3 position. Lower and upper bounds reflect the variability of Level 3 positions and their underlying valuation inputs in the portfolio, but do not adequately reflect their level of valuation uncertainty. For valuation uncertainty assessment, reference is made to section ‘Sensitivity analysis of unobservable inputs (Level 3)’ below.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		52

Additional notes to the Condensed consolidated interim accounts - continued


Valuation techniques and range of unobservable inputs (Level 3)
	Assets				Liabilities				Valuation techniques	Significant unobservable inputs	Lower range						Upper range
	30 June 2018		31 December 2017		30 June 2018		31 December 2017				30 June 2018			31 December 2017			30 June 2018			31 December 2017
At fair value through profit or loss
Debt securities		898		386					Price based	Price (%)		0	%		0	%		132	%		161	%
									Net asset value	Price (%)		0	%		0	%		0	%		0	%
									Present value techniques	Credit spread (bps)		426						426
Equity securities		141		4				1	Price based	Price		0			1			5,475			54
Loans and advances		1,110		20		17			Price based	Price (%)		10	%		0	%		100	%		101	%
									Present value techniques	Credit spread (bps)		95			n.a			95			n.a
Structured notes						200		101	Price based	Price (%)		77	%		52	%		106	%		116	%
									Net asset value	Price (%)		n.a			n.a			n.a			n.a
									Option pricing model	Equity volatility (%)		15	%		14	%		27	%		23	%
										Equity/Equity correlation		0.6			0.5			0.8			0.7
										Equity/FX correlation		–0.5			0.2			0.1			0.4
										Dividend yield (%)		1	%		2	%		5	%		6	%
										Interest rate volatility (%)		28			n.a			80			n.a
										IR/IR correlation		0.7						0.9
									Present value techniques	Implied correlation		0.7			0.7			0.7			0.7
Derivatives
– Rates		191		490		159		485	Option pricing model	Interest rate volatility (bps)		23			23			300			300
										Interest rate correlation		0.8			n.a			0.8			n.a
										IR/INF correlation		n.a			n.a			n.a			n.a
									Present value techniques	Reset spread (%)		2	%		2	%		2	%		2	%
										Prepayment rate (%)		5	%		5	%		10	%		10	%
										Inflation rate (%)		n.a			4	%		n.a			4	%
– FX		0		477		1		479	Present value techniques	Inflation rate (%)		n.a			4	%		n.a			4	%
– Credit		42		10		60		48	Present value techniques	Credit spread (bps)		8			2			3,406			424
										Implied correlation		0.7			0.7			0.7			1.0
										Jump rate (%)		12	%		12	%		12	%		12	%
									Price based	Price (%)		95	%		n.a			100	%		n.a
– Equity		76		161		83		128	Option pricing model	Equity volatility (%)		6	%		5	%		100	%		129	%
										Equity/Equity correlation		0.0			0.1			0.9			1.0
										Equity/FX correlation		–0.8			–0.9			0.2			0.8
										Dividend yield (%)		0	%		0	%		14	%		21	%
– Other		2		5		5			Option pricing model	Commodity volatility (%)		12	%		9	%		37	%		42	%
										Com/Com correlation		n.a			0.3			n.a			0.9
										Com/FX correlation		–0.6			–0.6			0.3			–0.3
Available for sale
– Debt		n.a		14					Price based	Price (%)		n.a			69	%		n.a			90	%
									Present value techniques	Credit spread (bps)		n.a			n.a			n.a			n.a
										Weighted average life (yr)		n.a			n.a			n.a			n.a
– Equity		n.a		467					Discounted cash flow	Annual Accounts		n.a			n.a			n.a			n.a
									Multiplier method	Observable market factors		n.a			n.a			n.a			n.a
									Comparable transactions			n.a			n.a			n.a			n.a


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		53

Additional notes to the Condensed consolidated interim accounts - continued


At fair value through
other comprehensive
income
Debt	252				Price based	Price (%)	93	%	100	%
Loans and advances	2,865				Present value techniques	Prepayment rate (%)	6	%	6	%
	291				Present value techniques	Credit spread (bps)	331		331
Equity						Inflation rate (%)	3	%	3	%
						Other	63		80
					Price based	Price (%)	n.a		n.a

Total	5,868	2,034	525	1,242

Further information on equity securities, credit spreads, volatility, correlation and interest rates is disclosed in the 2017 ING Group Consolidated annual accounts in Note 37 ‘Fair value of assets and liabilities’.

Sensitivity analysis of unobservable inputs (Level 3)

Where the fair value of a financial instrument is determined using inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument, the actual value of those inputs at the balance date may be drawn from a range of reasonably possible alternatives. In line with market practice the upper and lower bounds of the range of alternative input values reflect a 90% level of valuation certainty. The actual levels chosen for the unobservable inputs in preparing the annual accounts are consistent with the valuation methodology used for fair valued financial instruments.

If ING had used input values from the upper and lower bound of this range of reasonable possible alternative input values when valuing these instruments as of 30 June 2018, then the impact would have been higher or lower as indicated below. The purpose of this disclosure is to present the possible impact of a change of unobservable inputs in the fair value of financial instruments where unobservable inputs are significant to the valuation.

As ING has chosen to apply a 90% confidence level for its IFRS valuation of fair valued financial instruments, the downward valuation uncertainty has become immaterial, whereas the potential upward valuation uncertainty, reflecting a potential profit, has increased. For more detail on the valuation of fair valued instruments, refer to the section ‘Risk Management – Market risk’, paragraph ‘Fair values of financial assets and liabilities’ in the 2017 ING Group Consolidated annual accounts.

In practice valuation uncertainty is measured and managed per exposure to individual valuation inputs (i.e. risk factors) at portfolio level across different product categories. Where the disclosure looks at individual Level 3 inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets.

Because of the approach taken, the valuation uncertainty in the table below is broken down by related risk class rather than by product.

In reality some valuation inputs are interrelated and it would be unlikely that all unobservable inputs would ever be simultaneously at the limits of their respective ranges of reasonably possible alternatives. Therefore it can be assumed that the estimates in the table below show a greater fair value uncertainty than the realistic position at year end assuming normal circumstances/normal markets.

Also, this disclosure does not attempt to indicate or predict future fair value movement. The numbers in isolation give limited information as in most cases these Level 3 assets and liabilities should be seen in combination with other instruments (for example as a hedge) that are classified as Level 2.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		54

Additional notes to the Condensed consolidated interim accounts - continued

Sensitivity analysis of Level 3 instruments

Positive fair value

Negative fair value

movements from

using reasonable

possible alternatives

30 June

31 December

30 June

31 December

2018

2017

2018

2017

Fair value through profit or loss

Equity (equity derivatives, structured notes)

145

222

Interest rates (Rates derivatives, FX derivatives)

Credit (Debt securities, Loans, structured notes, credit derivatives)

Available-for-sale

Equity

n/a

Debt

n/a

Fair value through other comprehensive income

Equity

n/a

Loans and advances

n/a

Debt

n/a

231

315

22 Legal proceedings

As previously noted ING Bank is the subject of criminal investigations by Dutch authorities regarding various requirements related to client on-boarding, money laundering and corrupt practices. ING Group has also received related information requests from the US authorities. ING Group and ING Bank have been cooperating with these investigations and requests. Management has concluded under IFRS that it is more likely than not that a present obligation exists and that an outflow of resources is probable, however is not able to estimate reliably the possible timing, scope or amounts of any fines, penalties and/or other outcome, which could be significant. ING has been engaged in discussions with the relevant authorities on a potential resolution of the issues but such discussions remain ongoing and their outcome uncertain.

23 Companies and business acquired and divested

Acquisitions

Payvision

ING Bank obtained control over Payvision Holding B.V. (Payvision), a fast-growing, leading international omnichannel payments service provider, by acquiring 75% of its shares on 13 March 2018. This is in scope of IFRS 3 ‘Business combinations’. The transaction will enable ING to strengthen its footprint in omnichannel payments services and expand its merchant services for its business customers, in particular in the fast-growing e-commerce segment. Total consideration paid of the 75% of shares was, including deferred and contingent consideration, EUR 260 million.

The share purchase agreement includes also an arrangement for possible acquisition of the remaining 25% shares of Payvision. This consists of a put option exercisable by the original shareholders as well as a call option exercisable by ING. In summary, the put is exercisable after 3 years with an exercise price of fair market value (FMV) unless the fair value of the total business is less than EUR 210 million, then the exercise price is EUR 1. The call option by ING has similar terms but is only exercisable after 5 years. In addition, there are some early redemption features at various prices at various times. The put option, exercisable by the non-controlling interest shareholders, is reported as financial liability with initial recognition through shareholders’ equity of EUR 87 million.

The following table summarises the acquisition date fair value of consideration transferred.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		55

Additional notes to the Condensed consolidated interim accounts - continued


Consideration transferred
	Payvision
Cash paid		213
Deferred consideration		25
Contingent consideration		22

Total purchase consideration		260

Contingent consideration is payable by ING to the original shareholders of Payvision in the amount ranging from EUR 0 up to EUR 25 million in 3 tranches upon achievement of 3 milestones. The milestones should be achieved within (1) 6 months after completion of the acquisition, (2) 6 months after achieving milestone 1 and (3) 3 months after achieving milestone 2 (with some additional grace periods of 4 months per milestone permitted). The amounts are payable in tranches of EUR 7 million, EUR 7 million and EUR 11 million respectively. The probability of achievement of the set milestones and the time value of money were taken into consideration in the measurement of the contingent consideration at fair value of EUR 22 million on the date of acquisition. Since the date of acquisition there were no changes in the assumptions used to develop the estimate of the fair value of the contingent consideration.

The incurred acquisition costs amounts to EUR 1 million and are included in the ‘other operating expenses’ in the Consolidated statement of profit or loss.

The assets and liabilities recognised as a result of the acquisition are as follows;


Assets and liabilities recognised as a result of the acquisition
	Payvision
Cash and balances with central banks		116
Loans and advances to banks		32
Financial assets at fair value through Other Comprehensive Income		2
Property and equipment		3
Intangible assets		125
Other assets		17
Customer deposits		1
Current tax liability		2
Deferred tax liability		30
Other liabilities		166

Net identifiable assets		97
Less; non-controlling interest		24

Net identifiable assets acquired		72

The fair value of the identified intangible assets are determined using an income approach.

The deferred tax liability comprises the deferred tax resulting from the initial recognition of intangible assets in the business combination. The other liabilities mainly include merchant payables that are part of the normal course of business of Payvision.

The amount of the non-controlling interest is determined based on the proportionate share of the subsidiary’s identifiable net assets.


Goodwill recognised
	Payvision
Total purchase consideration		260
Net identifiable assets acquired		72

Goodwill recognised		188

On 20 February 2018 ING acquired 90% of the shares of Makelaarsland B.V. for a total consideration of EUR 14 million. The acquisition of Makelaarsland B.V. led to a recognition of goodwill of EUR 14 million.

The total goodwill of EUR 202 million, from the acquisition of both Payvision and Makelaarsland recognised in the first half of 2018, comprises the fair value of expected synergies arising from the acquisitions.

Goodwill arising on these acquisitions is not expected to be deductible for tax purposes.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		56

Additional notes to the Condensed consolidated interim accounts - continued

The acquired businesses contributed ‘revenues’ of EUR 12 million and net profit of EUR 0 million to the group for the period from 13 March 2018 to 30 June 2018.

If the acquisitions had occurred on 1 January 2018, consolidated ‘revenues’ and consolidated net profit for the half-year ended 30 June 2018 would have been EUR 22 million, and EUR 0 million respectively.

Divestments

There were no material divestments of consolidated companies, in the first six months of 2018 and 2017.

24 Related parties

In the normal course of business, ING Group enters into various transactions with related parties. Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties of ING Group include, among others, its subsidiaries, joint ventures, associates, key management personnel and various defined benefit and contribution plans. Transactions between related parties include rendering or receiving of services, leases, transfers under finance arrangements and provisions of guarantees or collateral. Transactions with related parties are disclosed in Note 49 ‘Related parties’ in the 2017 ING Group Consolidated annual accounts.

25 Subsequent events

There were no subsequent events.


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		57

Other information

Review report

To: The Shareholders, the Supervisory Board and the Executive Board of ING Groep N.V.

Introduction

We have reviewed the accompanying condensed consolidated interim financial information as at 30 June 2018 of ING Groep N.V., Amsterdam (the “Company”), which comprises the condensed consolidated statement of financial position as at 30 June 2018, the condensed consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the six-month period ended 30 June 2018, and the notes. The Executive Board of the Company is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope

We conducted our review in accordance with Dutch law including standard 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2018 is not prepared, in all material respects, in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union.

Amstelveen, 1 August 2018

KPMG Accountants N.V.

M.A. Hogeboom RA


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		58

Important legal information

ING Group’s interim accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (‘IFRS-EU’).

In preparing the financial information in this document, except as described otherwise, the same accounting principles are applied as in the 2017 ING Group consolidated annual accounts.

All figures in this document are unaudited. Small differences are possible in the tables due to rounding.

Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.

Actual results, performance or events may differ materially from those in such statements due to a number of factors, including, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING’s core markets, (2) changes in performance of financial markets, including developing markets, (3) potential consequences of European Union countries leaving the European Union or a break-up of the euro, (4) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit and capital markets generally, including changes in borrower and counterparty creditworthiness, (5) changes affecting interest rate levels, (6) changes affecting currency exchange rates, (7) changes in investor and customer behaviour, (8) changes in general competitive factors, (9) changes in laws and regulations and the interpretation and application thereof, (10) geopolitical risks and policies and actions of governmental and regulatory authorities, (11) changes in standards and interpretations under International Financial Reporting Standards (IFRS)

and the application thereof, (12) conclusions with regard to purchase accounting assumptions and methodologies, and other changes in accounting assumptions and methodologies including changes in valuation of issued securities and credit market exposure, (13) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (14) changes in credit ratings, (15) the outcome of current and future legal and regulatory proceedings, (16) operational risks, such as system disruptions or failures, breaches of security, cyberattacks, human error, changes in operational practices or inadequate controls including in respect of third parties with which we do business, (17) the inability to protect our intellectual property and infringement claims by third parties, (18) the inability to retain key personnel, (19) business, operational, regulatory, reputation and other risks in connection with climate change, (20) ING’s ability to achieve its strategy, including projected operational synergies and cost-saving programmes and (21) the other risks and uncertainties detailed in the 2017 annual report of ING Groep N.V. (including the Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which are available on www.ING.com. Many of those factors are beyond ING’s control.

Any forward looking statements made by or on behalf of ING speak only as of the date they are made, and ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.

This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities in the United States or any other jurisdiction.

www.ing.com


ING Group Condensed consolidated interim financial information for the period ended 30 June 2018 - Unaudited		59

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		ING Groep N.V.
		(Registrant)

Date August 1, 2018	By	/s/ J.V. Timmermans
		J.V. Timmermans
		Chief Financial Officer