When ING Direct issued a press release in mid-March announcing a five per cent increase in earnings in 2010, it attributed the result to "strong growth in savings, mortgages and new customers". But the bank's annual report, released subsequently, tells a different story. Operating income fell last year while expenses rose, and this weak performance was rescued by a big reduction in the bad debt charge.Growth in interest expense outpaced growth in interest income, with the result that the bank suffered a 3.7 per cent fall in net interest income. Net non-interest income was flat. Total operating income fell 3.5 per cent, from $649.3 million to $626.3 million.Operating expenses rose from $198 million to $208 million.The improvement in earnings can be attributed entirely to a reduction in bad debt expenses - down from $76.3 million to $29.2 million. The collective charge was cut from $12.5 million to $3.2 million, while specific charges were cut from $63.7 million to $26 million.At the same time, impairments rose. Specific provision for impairment went up from $53.6 million to $62.7 million, and collective provision for impairment went up from $27.1 million to $30.3 million.Loans and advances increased 2.8 per cent, from $39.3 billion to $40.4 billion.Loans past due but not impaired increased from 4.5 to 5.4 per cent of the loan book. Impaired loans increased from 0.9 to one per cent of the loan book.