Report of the Management Board

Retail

The Retail business unit provides online brokerage services for independent private investors in the Netherlands, Belgium and France. It provides these services in the Netherlands under the Alex and Binck labels and in the other countries under the Binck label only.

The Retail business unit's primary focus is on achieving the highest possible client satisfaction (amazing our clients with the quality of our services) and the fastest possible growth in our client base. In 2008, the business unit was occupied at the same time with the integration of Alex Beleggersbank, the resultant expansion of the product range and the launch of BinckBank's services in France.

BinckBank conducts regular surveys to measure its name recognition and perceptions of its services. The annual name-recognition survey which BinckBank commissions from TNS NIPO¹ came up with a notable finding in 2008: Alex and BinckBank scored significantly higher than the major banks for both 'top of mind' ('what is the first name that springs to mind?') and for spontaneous name recognition ('which other names do you know?'). BinckBank also conducts a monthly survey of its own client base to measure client satisfaction². According to the latest figures, satisfaction among Alex and Binck clients is very high at 8.1. BinckBank also monitors client satisfaction using the net promoter score method, which shows the ratio of promoters (satisfied clients) to detractors (dissatisfied clients). As in previous years, the net promoter score for 2008 was high, from which we may conclude that a large percentage of BinckBank clients would recommend our services to friends and colleagues.

As well as its own surveys, the Alex and Binck labels also strive to achieve the highest possible scores in surveys by independent third parties. Both labels were again named as the best and cheapest online brokers in the Netherlands in several polls in 2008. The result of this year's survey by Consumentenbond, the Dutch consumer association, was particularly gratifying: Binck came top with a score of 9.2 points, beating ten other banks and brokers.

BinckBank witnessed unprecedented growth in the number of account holders in 2008. We started the year with 206,933 accounts, of which 23,560 were savings accounts. As at year-end 2008, BinckBank had 284,709 retail accounts, of which 56,745 were savings accounts, representing growth of 38% and 141%, respectively. Comparing 2008 with previous years, it is clear that the growth in new account holders in absolute numbers is accelerating year on year. This growth has taken place despite significantly lower marketing expenditure for BinckBank and Alex Beleggersbank combined in 2008 (€ 10.6 million) than in 2007 (€ 13.5 million). The accelerating pace of growth is due partly to investors opening accounts on the recommendation of existing clients and partly to the low prices in the second half of the year, which prompted many investors to enter the market. BinckBank was also successful in raising Alex's rate of converting potential investors into actual account holders to the BinckBank level, through better management of the sales department.

BinckBank's strategy was revised after the acquisition of Alex Beleggersbank. The acquisition enabled us to expand our range of services via the Alex label, providing a strong foundation from which to pursue our ambition to be the leading European full-service online bank for investors. Additions to the range included an online savings account and online investment advice and management services. At the same time, we sharpened our focus on providing investment funds, utilising our distributive power and making essentially all services ultimately suitable for international deployment.

As part of our drive to expand the product range, we introduced an online savings account under the Alex label in 2008. Then, however, the savings account was only offered to clients with an investment account. The interest rate was raised in the first quarter of 2008 to make the savings account more attractive and in March 2008 the savings account was launched as a stand-alone product, supported by a national marketing campaign. This proposition generated a large number of new savings account holders. With marketing effort targeted on this specific group (cross-selling), we expect to be able in due course to persuade some of these clients to open an investment account.

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Competition for savings intensified sharply in the Netherlands in the third quarter. In an effort to capture as much of the savings market as possible, several banks started offering unprecedentedly high interest rates: finding it difficult to borrow money owing to the credit crunch, they went hunting for private savings to fund their credit portfolios. Other banks - assisted by the trend on the interest rate market - were offering high-interest time deposits with very short maturities. In the third and fourth quarters, some savers used part of their capital to invest in the stock market, where prices were by now sharply lower. The combination of increased competition and withdrawal of savings for investment purposes translated into a decrease in savings deposits in the second half of the year, despite the rapid growth in the number of savings account holders.

Lower priority was given to marketing for our online investment advice and management services in 2008, but we aim to address this aspect again in 2009. Existing account holders using these online services continued to benefit from the high quality of the product. Work also started in 2008 on growing BinckBank's share of the investment fund market, supported by an advertising campaign. Both the online investment advice and asset management services and the investment fund supermarket will help to broaden the product range.

More use was made in 2008 of BinckBank's distributive power. BinckBank's account holders represent an attractive target group for many financial services providers. Because BinckBank clients always have complete freedom of choice of products, via the Alex and Binck investment sites, BinckBank maintains its independence. In 2008, for example, we entered into a cooperative venture with ING for the distribution of Sprinters, a product similar to ABN AMRO's Turbos and Commerzbank's Speeders. BinckBank receives recurring income via the capital that clients hold in Sprinters. We intend to make even greater use of our distributive power in future. As a result of this campaign 190,000 free Sprinters transactions were executed in 2009, which is expected to end 1 May 2009. BinckBank expects additional recurring income amounting to € 1-2 million as a result of the Sprinter transactions in addition to regular commission income on transactions.

The historically low prices have attracted a new group of investors, alongside the highly active and buy-and-hold investors. These are financial consumers who have not invested before, but see the current low prices as a good opportunity to enter the market. Through the Alex Academy, Alex helps these clients make their new investment decisions and teaches them to manage the risks associated with investing. To supplement the traditional courses provided by the Alex Academy, an online version was launched in the second half of 2008 in order to reach a wider public.

The Belgian business is developing well. The number of brokerage accounts in Belgium grew from 13,557 to 22,269 in 2008 and the total number of transactions executed rose from 333,428 in 2007 to 560,335 last year. We intend to wait with the launch of a savings account in Belgium until conditions on the money market stabilise. The first steps in that direction have been taken in the form of action by the Belgian Ministry of Economic Affairs at the end of 2008 to cap the extremely high interest rate. Other products developed with a view to expanding the product range under the Alex label will be added progressively to the range offered in Belgium, taking full account of system integration and local competitive relationships.

The launch of the French services was successful. As in the Netherlands and Belgium, we are competing with the established order with aggressive pricing and comparative advertising campaigns, which have attracted considerable interest among French investors. By attuning our services fully to the needs of the French market, we have created a product that is attractive to the French online investor. As at year-end 2008, BinckBank had 3,082 French private investors as account holders.

Via the Alex branch in Spain which BinckBank acquired with Alex Beleggersbank, we are focusing - under the Alex label - on Dutch expatriates living in that country. In the near future, Alex in Spain will be turning its attention to Belgian expatriates.

1   TNS NIPO, January  2009

2   BinckBank client survey, December 2008

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