ING Groep(ING) - 2022 Q4 - Annual Report

Global Presence and Market Conditions - ING serves approximately 37 million customers across over 40 countries, indicating a significant global presence[48]. - The company has been adversely affected by the Covid-19 pandemic, which has impacted global economic conditions, including inflation and reduced consumer spending[55]. - ING's revenues and earnings are influenced by economic volatility in regions such as Russia and Ukraine, which could materially affect its financial condition[38]. - The ongoing geopolitical tensions and sanctions related to Russia's invasion of Ukraine have heightened instability in global markets, affecting ING's operations[52]. - Political instability and fiscal uncertainty in Europe and the US, along with ongoing market volatility, may adversely impact the company's business and financial condition[67]. Economic and Financial Risks - The company is exposed to risks related to interest rate volatility, which may negatively impact its business results[42]. - ING derives a substantial portion of its revenues from the Benelux countries and Germany, making it vulnerable to economic downturns in these regions[51]. - A sustained increase in inflation could lead to reduced disposable income for households, increased financial stress, and potential mispricing of products, negatively impacting results[61]. - Global inflation increased significantly during FY2022, which may result in decreased fair value of fixed income securities and increased interest expenses on debt securities[80]. - A significant increase in inflation may also lead to higher customer defaults as rising interest rates create payment stress for lower credit quality customers[80]. - The company may need to increase reserves and provisions in response to higher unemployment and lower corporate earnings during economic downturns, which could lead to lower overall earnings[51]. - The company is exposed to risks of borrower defaults and may need to increase provisions for loan losses, which could materially affect financial results[83]. Regulatory and Compliance Risks - The company faces regulatory risks, including compliance with various tax laws and financial regulations across different jurisdictions[43]. - Non-compliance with applicable laws and regulations could result in fines and other liabilities, materially affecting ING's business and profitability[89][90]. - ING faces risks related to regulatory supervision by the ECB, which has extensive powers to impose sanctions and restrict business activities if regulatory requirements are not met[100][101]. - Changes in capital, liquidity, and leverage regulations may require ING to maintain more capital or raise different types of capital, impacting its financial condition[102][104]. - The European Commission is reviewing the bank crisis management and deposit insurance framework, with anticipated revisions that may affect ING's operations[88]. Operational and IT Risks - Operational and IT risks, including cyber attacks and system failures, may adversely affect the company's reputation and business results[139]. - The company faces increasing risks related to cybercrime and compliance with cybersecurity regulations, which could adversely impact its operations[143]. - The company has experienced a rise in cyber attacks, including Distributed Denial of Service (DDoS) and ransomware, as it continues to digitalize its services[144]. - Compliance with new and existing legislation regarding cybersecurity and data privacy could increase the company's compliance costs and affect its reputation[145]. Customer Behavior and Digital Transformation - Over 95% of customers now interact with the company via digital channels only, reflecting a significant shift in customer behavior towards digital banking[58]. - In 2022, over 58% of customers used mobile banking only, up from 51% in 2021, with the highest adoption in Turkey (88%) and Romania (74%)[226]. - The Everyday Roundup digital product is used by over 1.1 million customers across six countries, helping customers save by rounding up transactions[230]. - ING launched Visa Mobile in Poland, allowing customers to make payments securely without using card data, enhancing digital payment options[228]. - The company doubled the number of remote video advice meetings compared to the previous year, indicating a shift towards digital self-service channels[232]. - In 2022, ING closed 94 branches as part of its strategy to optimize assisted channels and reduce physical presence[232]. - The new commitment-free account launched in Spain aims to attract new customers with a fully online and instant onboarding process[231]. - ING's updated strategy focuses on superior customer experience and sustainability, positioning the company as a leader in these areas[208]. Environmental and Climate Risks - Environmental and climate risks may impact ING's business, including potential losses from extreme weather events and reputational risks associated with community expectations[53]. - The transition to a low carbon economy may require the company to modify its lending portfolio, potentially leading to claims from customers[135]. - The company is exposed to physical risks from climate change, which could disrupt operations and impact asset values[132]. - ING aims for net zero in its operations and is committed to steering financing towards global climate goals[212]. Human Resources and Management Risks - ING's ability to attract and retain key personnel is critical for its business success, and any inability to do so may adversely affect its results[49]. - The company relies heavily on the quality of its senior management, and competition for key personnel is intense, which could impact its operations[167]. - ING Group is required to hold a shareholder binding vote on its Executive Board remuneration policy at least every four years, which may restrict competitive compensation offerings[168]. Competitive Landscape - The company operates in highly competitive markets, particularly in the Netherlands, where it faces pressure from both traditional banks and new financial technology entrants[149]. - The company may experience pricing pressures due to increased competition and consolidation in the financial services industry, which could adversely impact its profitability[152].