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.
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.
We remain Accumulating with an unchanged target of € 9.0.