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Rating Action:

Moody's affirms A2 long-term ratings of ING Bank, ING Belgium and ING DiBa

18 Dec 2014

Outlook changed to stable from negative on the standalone credit assessments of the three banks

London, 18 December 2014 -- Moody's Investors Service has today affirmed the A2 long-term debt and deposit ratings of ING Bank N.V. and its Prime-1 short-term ratings. This action follows the affirmation of the bank's C- standalone bank financial strength rating (BFSR), which is equivalent to a baseline credit assessment (BCA) of baa1. This reflects Moody's view that the bank's risks and business profile remain compatible with the current rating levels, despite the challenges that it faces along with other Dutch and European banks in the current weak operating environment.

The A2 ratings for ING Bank continue to carry a negative outlook, reflecting Moody's view on heightened risks for senior unsecured creditors stemming from the adoption of the Bank Resolution and Recovery Directive (BRRD) in the EU. However, the outlook on the bank's C- BFSR was changed to stable from negative to reflect that a high degree of geographical diversification of its operations is positive for the bank's asset quality profile and profitability, which have both been resilient against the backdrop of a difficult operating environment in the Netherlands.

Concurrently, Moody's affirmed the A2 long-term ratings and Prime-1 short-term ratings of ING Bank's two main European subsidiaries, ING Belgium SA/NV and ING DiBa AG and changed the outlooks on their BFSRs (ING Belgium: C-/baa1, ING DiBa: C/a3) to stable from negative. It also affirmed the ratings of all subordinated and hybrid instruments issued by ING Bank and the group's holding company ING Groep N.V., their backed subsidiaries and issuing vehicles. The outlook on these instruments was changed to stable from negative and thus aligned with the stable outlook on ING Bank's BFSR, from which they are derived. Moody's also affirmed the A3 long-term supported ratings of ING Groep N.V., the group's holding company, with a negative outlook.

Please click the following link to access the full List of Affected Credit Ratings, which is an integral part of this Press Release and identifies each affected issuer:http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_178335

RATINGS RATIONALE

-- AFFIRMATION AND CHANGE IN OUTLOOK ON ING BANK'S BFSR DRIVEN BY RESILIENT ASSET QUALITY AND PROFITABILITY

The affirmation of ING Bank's C- BFSR and subsequent change in outlook to stable from negative reflects a combination of factors, including (1) the resiliency of the bank's asset quality profile and profitability stemming from a high degree of geographical diversification of its operations against the backdrop of a difficult operating environment in its core domestic market; and (2) the overall strengthening of ING Bank's financial fundamentals.

Operating conditions in the Netherlands, which is a key market for ING Bank, have continued to remain challenging despite some signs of improvement over the last two quarters. However, with only around 30% of its total exposures at default (EAD) to The Netherlands, ING Bank is materially less exposed to the Dutch economy than its domestic peers. ING Bank has reported declining cost of risk in recent quarters and has reduced its concentration to the commercial real estate sector, thus improving its overall asset quality profile. ING Bank has limited exposures to countries that are experiencing geopolitical issues such as Russia and its good overall asset quality profile has also been confirmed by the results from the recent ECB's comprehensive assessment.

ING Bank's widely spread retail and commercial operations generate stable and predictable earnings, which have allowed it to absorb increased credit costs in its domestic market since 2012. The credit costs account for around one third of its pre-provision income, which is a much lower proportion than those of its domestic peers and many international peers. The bank has been able to increase its net interest margins in the current low interest rate environment through deposit re-pricing and new loan origination at higher margins while keeping operating costs under check.

The baa1 BCA is also supported by the bank's leading franchise in a number of key markets outside The Netherlands (Aaa stable) -- which include Belgium (Aa3 stable) and Germany (Aaa stable) amongst others -- despite increasing competition in these concentrated markets. In addition, it has improved its capitalisation - mainly as a result of earnings retention -- and despite the cost entailed with the repayment of state aid and the one-off cost of moving to defined contribution pension plans for staff in The Netherlands. It reported a Common Equity Tier 1 ratio of 11.1% at end-September 2014, which remains adequate to the firm's risk profile, in Moody's view.

ING Bank's funding and liquidity position also remain sound, owed to the implementation of a group-wide asset-liability strategy in recent years aimed at reducing its loan to deposit ratio and achieve a better balance between assets and liabilities in the large jurisdictions where it is doing business. Moody's believes that the bank's large pools of liquid assets (and management's ongoing effort to lengthen the maturities of its funding profile and investors' base) largely mitigate liquidity and funding risks that arise from its reliance on relatively large amounts of confidence-sensitive market funding.

--- STANDALONE BFSRs OF ING BELGIUM AND ING DIBA AFFIRMED WITH STABLE OUTLOOK

ING Belgium's C- BFSR, mapping into a baa1 BCA, was affirmed and its outlook changed to stable from negative, following a similar action on the BFSR of ING Bank. The standalone credit assessment of ING Belgium is aligned with that on ING Bank, reflecting that some of ING Belgium's product lines are well integrated with those of ING Bank and that this entity has material exposure to its parent.

The C BFSR of ING DiBa, which is equivalent to an a3 BCA, was also affirmed and changed to stable from negative. This reflects that although the firm's standalone credit assessment is constrained by the credit quality and ratings of ING Bank N.V., it benefits from the stable outlook on ING Bank's fundamentals. Moody's maintains ING DiBa's BCA at a level no higher than one notch above that of the parent bank, based on the automatic transfer of ING DiBa's profits to its direct parent company, and Moody's considerations of correlation between the parent and the subsidiary in the areas of reputation and investor confidence.

-- AFFIRMATION OF SUBORDINATED AND HYBRID INSTRUMENTS WITH STABLE OUTLOOK

The ratings on all subordinated and hybrid instruments issued by ING Bank and ING Groep, their backed subsidiaries and issuing vehicles were affirmed at the current levels, following the affirmation of ING Bank's C- BFSR. The outlook on these instruments was changed to stable from negative and thus aligned with the stable outlook on the bank's BFSR, from which they are derived.

-- AFFIRMATION OF LONG-TERM DEBT AND DEPOSIT RATINGS; NEGATIVE OUTLOOK MAINTAINED

The affirmation of the A2 supported long-term ratings of ING Bank, ING Belgium and ING DiBA follows the affirmation of their BFSRs and unchanged systemic support assumption. Moody's maintains the negative outlook on the A2 ratings which captures the declining likelihood of systemic support for banks across the EU.

Moreover, the A3 supported long-term ratings for the group's holding company ING Groep N.V. were affirmed at the current levels owing to structural subordination (i.e., one notch below those of the corresponding ratings of ING Bank).

The negative outlooks assigned to the bank's deposit and senior debt ratings continue to reflect the fact that the implementation of the BRRD in the EU could have negative consequences for banks' creditors and increase the likelihood that Moody's might lower its systemic support.

Currently, ING Bank's and ING Belgium's A2 supported long-term ratings incorporate two notches of government support, reflecting a high degree of probability of support from the governments of The Netherlands and Belgium respectively. ING DiBa's A2 supported long-term ratings include one notch of government support from the German government.

WHAT COULD CHANGE THE RATING -- UP/DOWN

The negative outlook on all ING Bank's supported long-term ratings and the stable outlook on the other long-term ratings indicates that rating upgrades are unlikely in the short-term. However, some upwards rating pressure could develop if a material improvement in operating conditions in its domestic market were to lead to substantially improved asset quality and higher profitability levels. A reduction in reliance on wholesale funding could also be positive for the ratings.

Downward pressure could develop on ING Bank's ratings as a result of a higher-than-expected deterioration in its credit fundamentals, a weakening in its intrinsic creditworthiness, and/or if Moody's were to downgrade The Netherlands' sovereign rating. In addition, a downward revision of Moody's current assumptions of systemic support -- which may arise in the context of the new EU resolution package -- could also have negative implications for the A2 long-term ratings.

PRINCIPAL METHODOLOGY

The principal methodology used in these rating was Global Banks published in July 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings of rated entity ING Belgium International Finance S.A. was initiated by Moody's and was not requested by the rated entity.

The person who approved ING DiBa AG, ING Groep N.V., ING Bank N.V., ING Belgium SA/NV, ING Belgium International Finance S.A., ING (U.S.) Funding LLC, Internationale Nederlanden Bank N.V., Paris, ING Groenbank N.V., ING Bank N.V. (Singapore), ING Bank N.V., Tokyo Branch, ING Bank N.V., Sydney Branch, ING Capital Funding Trust III, ING (US) Issuance LLC and ING Americas Issuance B.V. credit ratings is Carola Schuler, MD - Banking, Financial Institutions Group, JOURNALISTS: 44 20 7772 5456, SUBSCRIBERS: 44 20 7772 5454

The person who approved ING Bank N.V. - Sao Paulo credit ratings is Maria Celina Vansetti-Hutchins, MD - Banking, Financial Institutions Group, JOURNALISTS: 212-553-0376, SUBSCRIBERS: 212-553-1653

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Andrea Usai
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's affirms A2 long-term ratings of ING Bank, ING Belgium and ING DiBa
No Related Data.
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