The stress test conducted using the scenarios, methodology and key assumptions provided by EBA show that the estimated consolidated Core Tier 1 capital ratio of ING Bank would change to 8.7% under the adverse scenario in 2012 compared to 9.6% as of end of 2010.
The estimated consolidated Core Tier 1 capital would change from € 30.9bn at the end of 2010 to € 33.9bn at the end of 2012 as a result of the assumed shock under the adverse scenario. This would suggest a buffer of € 14.8bn of the Core Tier 1 capital against the benchmark of 5% of Core Tier 1 capital adequacy ratio as agreed exclusively for the purpose of this exercise.
At 31 December 2010, ING Bank’s net sovereign exposure on a consolidated basis was € 86,039m of which € 49,588m in the AFS banking book, € 0m in the FVO banking book (MtM via P&L) and € 13,457m in the trading book. The PIIGS countries represented € 8,988m o/w € 5,702m for Italy. ING has, according to its disclosed tables, no credit risk exposure to PIIGS countries.
Under the adverse scenario, ING would see € 8,276m 2year cumulative impairment losses on financial and non-financial assets in the banking book and € 1,052m (o/w € 237m sovereign) 2 year cumulative losses from the stress in the trading book.
Our View:
ING Bank’s stress test results seem fairly decent certainly when considering that they do not include any surplus proceeds from the planned divestment of the insurance activities.
Conclusion:
We remain Accumulating with an unchanged target of € 9.0.