ING shed $1.5bn as savers panicked

ING Direct suffered a $1.5bn withdrawal of deposits last year as customers fled to the safety of the four major banks

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ING Direct, the Australian arm of the Dutch banking giant ING Group, suffered a $1.5 billion outflow of deposits last year as retail customers fled to the safety of the four major banks.

The outflow came as investors panicked amid widespread uncertainty about whether foreign-owned institutions were covered by the Government move in October to guarantee bank deposits, The Australian reported.

Since then the deposit base has stabilised. Latest figures show ING Direct, which specialises in online savings accounts, has $16.49 billion from household customers, up from the low of $16.32 billion in November.

However, low interest rates in Australia have scared off some savers, and ING Direct now has nearly $1 billion less in household deposits than in August last year -- the month before the Reserve Bank started to cut interest rates.

Despite the deposit outflow, the full-year 2008 accounts published for the local operations showed the bank made a $182.1 million net profit for 2008, up 6 per cent from $171.2 million in 2007. The improvement came after a 27 per cent increase in interest income and despite an overall rise in total operating expenses.

ING Direct chief executive Eric Drok said retail deposits had been returning to the bank since the guarantee was introduced and extended to foreign institutions.

"Our savings portfolio has been heavily impacted by changes in the market environment," Mr Drok said in the company's annual report.

"The key drivers of this result were the "savings war" resulting in a significant increase in price and a move to the Big Four banks.

"This final point was exacerbated following the introduction of the guarantee scheme in October with a number of our customers initially unclear as to whether ING Direct was covered," he said.

Despite the outflow of deposits, ING Direct had 205,817 new savings accounts opened in 2008.

Read the full story in The Australian.