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Rating Action:

Moody's affirms ING Bank's long-term deposit and senior unsecured ratings of Aa3, outlook stable

02 Oct 2020

ING Groep's senior unsecured rating affirmed at Baa1 with a stable outlook

Paris, October 02, 2020 -- Moody's Investors Service, ("Moody's") today affirmed the Aa3 long-term deposit and senior unsecured debt ratings of ING Bank N.V. (ING Bank). The outlook remains stable. The rating agency also affirmed the Baa1 senior unsecured debt rating of ING Groep N.V. (ING Groep), ING Bank's holding company, with a stable outlook. ING Bank's Baseline Credit Assessment (BCA) and Adjusted BCA of baa1 were also affirmed, together with the other ratings of ING Bank including its short-term deposit and Commercial Paper ratings of Prime-1, its subordinated debt rating of Baa2, its long-term and short-term Counterparty Risk Assessments (CR Assessments) of Aa3(cr) and Prime-1(cr) respectively, and its long-term and short-term Counterparty Risk Ratings (CRR) of Aa3 and Prime-1 respectively. The agency also affirmed ING Groep's subordinated debt rating of Baa2, junior subordinated debt and preferred stock ratings of Baa3(hyb), and non-cumulative preferred stock rating of Ba1(hyb).

A full list of ratings is provided at the end of this press release.

RATINGS RATIONALE

BCA

The affirmation of ING Bank's BCA reflects Moody's view that the group's solvency and liquidity are robust and will remain resilient over the outlook horizon despite a likely deterioration in its asset quality and profitability due to the economic contraction resulting from the coronavirus outbreak.

ING Bank's loan portfolio is highly diversified, both geographically and by sector. While retail loans represent two-thirds of its exposure, the wholesale banking portfolio is large and encompasses material exposures to highly cyclical sectors such as the oil and gas industry and commercial real estate. Asset performance has nonetheless been strong from 2015 to 2019 with annual credit costs below 20 basis points of outstanding loans. The current crisis hit both the group's retail business lending book and some larger corporates in its wholesale banking book, driving the cost of risk in H1 2020 to 64 basis points. ING Bank's asset performance will remain under pressure over the coming quarters but in the absence of a material deterioration in the economy compared to its current assumptions, Moody's believes that the bank will be able to absorb credit losses within its recurring income.

Despite the pressure from the low interest rate environment, the group has preserved a good earnings-generating capacity over the past five years, including in H1 2020. Its geographically well-diversified income sources and good cost efficiency have contributed to the stability of its pre-provision income. Loan loss provisions in H1 absorbed 56% of ING Bank's pre-provision income.

The group's solvency is robust in Moody's view. ING Groep's tangible common equity (TCE) to risk-weighted assets ratio was 16.9% at end-June 2020. Even excluding the positive impact of the adoption of capital relief measures under the so-called "CRR 2 Quick fix" and other changes in the calculation of risk-weighted assets, the TCE ratio would still be around 16%, which the rating agency considers as offering comfortable buffer against unexpected shocks.

The group's funding structure is sound. Deposits represent around 70% of its funding mix. The increased issuance of senior debt eligible to the Total Loss-Absorbing Capacity (TLAC) and the Minimum Requirements for Own Funds and Eligible Liabilities (MREL) from ING Groep since 2016 has reinforced the lengthening of its debt maturity profile, ensuring a good coverage of its long-term assets by stable funding. Liquidity is ample and further improved at the end of H1 2020 as ING Bank borrowed €55 billion from the third iteration of the European Central Bank's (ECB) Targeted Longer-Term Refinancing Operations (TLTRO III) in June.

ING BANK AND ING GROEP'S RATINGS

ING Bank's Aa3 long-term deposit and senior unsecured debt ratings reflect: (1) the bank's Adjusted BCA of baa1; (2) three notches of uplift under Moody's Advanced Loss Given Failure (LGF) analysis, reflecting the extremely low loss rate that senior debtholders and depositors are likely to incur in a resolution scenario, given the large volume of senior unsecured debt issued by the bank and protection provided ING Groep's liabilities; and (3) a moderate support assumption from the government of the Netherlands (Aaa stable), which translates into an additional one-notch uplift.

With regard to ING Groep's senior unsecured debt, which is structurally subordinated to ING Bank's senior debt, the LGF analysis shows a moderate loss-given-failure, which results in no rating uplift from the bank's Adjusted BCA.

For the junior securities issued by ING Bank and ING Groep, the LGF analysis shows a high loss-given-failure. This leads to ratings positioned one notch below the bank's Adjusted BCA. For ING Groep's junior subordinated debt and non-cumulative preferred stocks, Moody's also incorporates an additional downward adjustment of one and two notches, to Baa3(hyb) and Ba1(hyb), respectively, to reflect coupon suspension risk ahead of failure.

OUTLOOK

The stable outlook on ING Bank and ING Groep's senior ratings reflects Moody's view that despite the negative pressures from the crisis, the group will maintain its sound fundamentals over the outlook horizon.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Although unlikely over the outlook horizon because of the deteriorating economic environment, ING Bank's BCA could be upgraded in case of a substantial improvement in its asset-risk profile and higher profitability or a strengthening of its capital position. An upgrade of its BCA would likely lead to an upgrade of all ratings of ING Bank and ING Groep.

ING Groep's senior unsecured debt ratings could also be upgraded if the holding company were to issue higher-than-expected amounts of long-term debt, junior instruments or both, leading to lower loss severity for senior creditors.

ING Bank's BCA could be downgraded in case of a higher than expected deterioration of the bank's asset risk and profitability, or a material weakening in its capital position. A downgrade of the bank's BCA would likely result in a downgrade of all ratings.

ING Bank's deposit and senior unsecured debt ratings, as well as ING Groep's senior unsecured debt rating, could be downgraded should changing regulatory requirements or management strategy lead to a reduction in loss-absorbing instruments, resulting in increased loss-given-failure.

LIST OF AFFECTED RATINGS

Issuer: ING Groep N.V.

..Affirmations:

....Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook remains Stable

....Senior Unsecured Shelf, affirmed (P)Baa1

....Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

....Subordinate Regular Bond/Debenture, affirmed Baa2

....Subordinate Shelf, affirmed (P)Baa2

....Subordinate Medium-Term Note Program, affirmed (P)Baa2

....Junior Subordinated Regular Bond/Debenture, affirmed Baa3(hyb)

....Preferred Stock, affirmed Baa3(hyb)

....Preferred Stock Non-cumulative, affirmed Ba1(hyb)

..Outlook Action:

....Outlook remains Stable

Issuer: ING (US) Issuance LLC

..Affirmation:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed Aa3, outlook remains Stable

..Outlook Action:

....Outlook remains Stable

Issuer: ING Bank N.V.

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Aa3

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Bank Deposits, affirmed Aa3, outlook remains Stable

....Short-term Bank Deposits, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed Aa3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-1(cr)

....Baseline Credit Assessment, affirmed baa1

....Adjusted Baseline Credit Assessment, affirmed baa1

....Senior Unsecured Regular Bond/Debenture , affirmed Aa3, outlook remains Stable

....Senior Unsecured Medium-Term Note Program, affirmed (P)Aa3

....Subordinate Regular Bond/Debenture, affirmed Baa2

....Subordinate Medium-Term Note Program, affirmed (P)Baa2

....Commercial Paper, affirmed P-1

....Other Short Term, affirmed (P)P-1

..Outlook Action:

....Outlook remains Stable

Issuer: ING (U.S.) Funding LLC

..Affirmations:

....Backed Commercial Paper, affirmed P-1

..No Outlook assigned

Issuer: ING Bank N.V. (Singapore)

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Aa3

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed Aa3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-1(cr)

....Senior Unsecured Regular Bond/Debenture, affirmed Aa3, outlook remains Stable

..Outlook Action:

....Outlook remains Stable

Issuer: ING Bank N.V., Tokyo Branch

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Aa3

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Bank Deposits, affirmed Aa3, outlook remains Stable

....Short-term Bank Deposits, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed Aa3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-1(cr)

....Commercial Paper, affirmed P-1

..Outlook Action:

....Outlook remains Stable

Issuer: ING Bank N.V., Sydney Branch

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Aa3

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed Aa3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-1(cr)

....Senior Unsecured Regular Bond/Debenture, affirmed Aa3, outlook remains Stable

....Senior Unsecured Medium-Term Note Program, affirmed (P)Aa3

....Commercial Paper, affirmed P-1

....Other Short Term, affirmed (P)P-1

..Outlook Action:

....Outlook remains Stable

Issuer: ING Groenbank N.V.

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed Aa3

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed Aa3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-1(cr)

....Senior Unsecured Medium-Term Note Program, affirmed (P)Aa3

....Other Short Term, affirmed (P)P-1

..No Outlook assigned

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/research/Banks-Methodology--PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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 have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

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.

Yasuko Nakamura
VP - Senior Credit Officer
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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