ING Direct picks up momentum

After a flat result in 2013, as it went through a business transformation, ING Direct picked up momentum last year, with a 9.4 per cent increase in earnings.

The bank reported a net profit of A$297 million for the year to December, compared with $271.5 million in 2013. Net interest income was $638.3 million, compared with $590.4 million for the previous year.

ING Direct has spent the past few years transforming itself into an MFI (main financial institution) bank. The bank's chief executive Vaughn Richtor said the strategy was bearing fruit.

The bank uses transaction account numbers as a proxy for MFI relationships. ING Direct Orange Everyday account numbers grew 34 per cent in 2013 and 40 per cent last year to 270,000.

Richtor said the number of customers with more than one ING Direct product also grew 40 per cent.

Another part of the transition has been to get out of non-branded (white label) mortgage sales. The bank has sold a couple of loan portfolios and will sell more this year.

At is peak the non-branded book was worth close to $8 billion but by the end of this year will be down to $1.5 billion and will be in runoff.

Richtor said one outcome of this process was an improvement in the quality of the bank's mortgage book, which is evident from the fall in the bad debt charge from $12.6 million in 2013 to $4.6 million last year.

The branded loan portfolio grew by 7.8 per cent last year, which was ahead of system growth. The total value of the mortgage book (including branded and non-branded mortgages) was $38.8 billion at the end of last year.

The bank has no branch network and relies on brokers to sell its loans. In recent years it has also developed its online distribution, so that 15 per cent of home loan sales were done online last year.

Deposits grew by 3.7 per cent.

Richtor said the bank's transition had cost money, which resulted in the flat performance in 2013. "We are getting the profit growth going again," he said.

"We have made some investment in technology, which have improved work flow."

The bank has $1.1 billion in superannuation accounts - 78 per cent up on the previous year. So far all superannuation sales have been through the direct channel but this year the bank will begin distribution through advisers. It has 2500 advisers accredited to sell the product.