It's handy for ING Bank (Australia) that whopping losses on derivatives, thanks to cash flow hedge accounting, affected only balance sheet reserves and did not get recognised in the income statement.This accounting approach enabled ING to report a six per cent rise in net profit in 2008 to $182.1 million. This was almost offset by a loss of $176 million caused by a change in the value of derivatives.ING published its financial statements through the ASX on Tuesday. The Australian subsidiary of the Dutch bank now reports some financial data on a more timely basis since listing debt instruments on the ASX at the end of 2008.A loss of deposits over the year was the major theme of the year for ING Bank in Australia. Retail deposits declined $1.5 billion over 2008. At call deposits decreased by more than $3 billion, with short-dated term deposits picking up some of the slack.The outflow of deposits to big banks was, according to the CEO's review in the annual report, exacerbated following the introduction of the government guarantee in October 2008. The annual report is somewhat contradictory since it also notes that there was an improvement in the savings base since October.An alternative view is that the outflow of deposits at ING was well under way before the introduction of the guarantee and largely connected to the straitened conditions of Belgian Dutch banking group Fortis, and the wider stress in European banks at the time.Indeed, the outflows from ING Bank (Australia) appear to have been from one of several banks reporting above-average outflows that helped trigger the introduction of the guarantee of bank deposits in Australia.The bank offset gross outflow with new business and opened 206,000 new savings accounts during the year. ING also described itself in the annual report as Australia's fifth largest retail bank following the takeovers of St George and BankWest.On the asset side the residential loan book increased 11 per cent to $34.4 billion, double system growth. The commercial property book increased modestly to $3.1 billion.Asset quality remains excellent even though ratios are higher than the very low levels from 2007. The special provision increased to $10.1 million from $7.5 million, while the collective provision increased to $24.7 million from $14.3 million. Past due loans are low at $739,000 while impaired loans are $266,000.ING Bank increased its capital base by $1 billion over the year, through the issue of redeemable preference shares that counted as tier two capital.