Good morning, and welcome to the ABN AMRO Q4 2021 Analyst and Investor Call. During this call, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. I would now like to hand the call over to the Chairman, Mr. Robert Swaak. Please go ahead, sir.
Thank you very much. Good morning, and welcome to ABN AMRO's Q4 results. As always, I'm joined by Lars Kramer, our CFO, and Tanja Cuppen, our CRO. I'll update you on the progress of our strategic agenda and the share buyback that we announced today. Lars will go through our fourth quarter results in more detail, and then Tanja will update you on impairment developments in our loan portfolio and on capital. Let's turn to our fourth quarter results on slide 2.
Our Q4 results do reflect the underlying economic recovery, which was really gathering steam until December, when lockdown measures were reimposed.
Now, during the fourth quarter, the corporate loan book of the core bank increased by over EUR 5 billion. As a result, we met the TLTRO threshold, and we booked the additional funding advantage for 2021.
We saw strong fee income with our clearing bank again, turning in a good result. Our Q4 result was further boosted by the sale and leaseback of our head office. Combined, this led to a net profit of EUR 552 million for the fourth quarter. Now, over the full year, costs were in line with guidance at EUR 5.3 billion, excluding the AML settlement. In effect, we managed to absorb an increase of AML costs as well as handling costs for the variable interest compensation scheme. Loan impairment showed a strong reversal from previous year, and we ended with a net release of EUR 46 million over the year.
We proposed a dividend of EUR 0.61 per share, and I will later elaborate on the share buyback program of EUR 500 million we announced today.
Turning to slide 3, I want to look back on what we achieved in 2021. The wind-down of CIB non-core, which we talked about quite a bit, has been largely completed well ahead of schedule, and our attention is now turning to closing locations. We settled the AML investigation and progress on remediation is good. In terms of our growth agenda, we had a successful start of Moneyou mortgages and Enterprise and Entrepreneurs now live in Germany and Belgium. We further strengthened our digital and data capabilities and continue to further simplify our organizational structure. We introduced new payment packages for SMEs with a successful uptake. Last but not least, we resumed dividend payments, and today we also announced a share buyback program of EUR 500 million.
Looking forward to 2022 and beyond, we are for the time being, still faced with continued pressure from low rates. Next year I expect net interest income of EUR 5.0 billion to about EUR 5.1 billion. I do expect NII to bottom out sometime during the second half of 2023. Our strategic agenda defines a comprehensive approach to deal with the impact of negative rates. Growth in fee income helps the top line and leads to income diversification. I expect we can deliver a compound annual growth rate between 5% and 7% on fee income up until 2024. Excuse me. We continue to execute on our well-substantiated cost-saving plans, which will bring costs below EUR 4.7 billion by 2024.
We will benefit from the de-risking of our balance sheet as we now expect a through-the-cycle cost of risk of 20 basis points going forward. Of course, it's not all about financials. We will not lose sight of our clients. We will continue to work on putting into practice a personal bank in a digital age. I expect the full range of banking services to be available remote or digitally as of Q3. We're mindful that not everyone is able to switch to online channels and therefore we want to continue to ensure digital inclusivity for all of our clients. We are doubling the number of financial coaches our clients can turn to for help.
Also, we will continuously focus on AML going forward as this is our license to operate and also at the same time, our license to grow. Turning to slide 4, I'll update you on ESG.
As you know, sustainability is core to our purpose, and we firmly support the goal of limiting global warming to 1.5 degrees Celsius. To reduce our own carbon footprint, we are developing a Paris-proof campus, which will become our main office building. Through our clients, we can leverage our influence greater to drive the energy transition. For example, we incentivize our mortgage clients to improve the energy rating of their property by offering discounts as well as energy savings check. To support corporate clients achieving their sustainability targets, we can offer them sustainability-linked loans.
Now, these tailor-made loans link the margin to improvements in ESG rating or specifically sustainability-related performance indicator. We have developed a standardized version of the sustainability-linked loan, the transition loan, which is specifically tailored to SME clients.
Turning to our sustainability targets, we've made quite a lot of progress over the last year, and in many cases, we're already achieving our longer-term targets. Now, in order for us to maintain momentum, we've raised our target of sustainable client loans and investments from 30%-36% in 2024. Now, if you allow me a few words on the Dutch economy, which you'll see on slide 5. As we begin to emerge from the pandemic, the economy has proven remarkably resilient, reflecting healthy economic fundamentals and effective government support.
For 2022, Omicron and high inflation will have an impact on GDP growth. Yes, inflation is a source of concern.
However, we expect it to start coming down towards the closer to the second half of this year as supply disruptions are resolved. Bankruptcies were historically low in 2021, but are expecting to rise steadily again as government support measures are phased out. Meanwhile, house prices in the Netherlands will continue to rise, mainly due to the low mortgage interest rates and declining supply. We expect the price increase to continue, though at a lower rate. The number of transactions will therefore come down, however.
We expect the new government to implement measures to increase housing supply and curb demand. Now turning to slide six on capital. We announced a EUR 500 million buyback program which will start tomorrow. Now, let me talk you through our rationale behind this share buyback.
The choice we made was for a gradual release of capital, potentially resulting in multiple buybacks over a period of time, rather than a large buyback without follow up. Going forward, share buybacks will be an integral part of our capital management practice and a tool to optimize our capital position. Our current capital ratio puts us in a good position to discuss a subsequent share buyback with our regulator in due course. Now, given a gradual release of capital, the threshold is for the time being not constraining.
For share buybacks further out, we will evaluate the uncertainties we face at that point in time and reassess the appropriate size for our strategic M&A buffer. In dialogue with our regulator, we will then decide on the amount of capital we should prudently preserve and if there's room for a further share buyback.
Over time, I expect the amount of capital we preserve over and above our target to gradually decrease as we work through our regulatory changes and uncertainties are resolved. I trust this framework will lead to more predictable capital distributions going forward. Let me now hand it over to Lars to discuss fourth quarter results. Lars.
Thanks, Robert. I'll briefly highlight the full year developments. Last year's net interest income excluding incidentals, but including the TLTRO, amounted to EUR five and a half billion. The beat versus our NII guidance is mainly due to the higher than expected mortgage prepayment penalties. Comparing NII to 2020, the decline is mainly due to the non-core wind- down, the effect of margin pressure on deposits, and also the mix between margin and volume pressure on our lending products. The fee income rose year on year, driven by good results from clearing as well as private banking. Excluding incidentals, expenses amounted to EUR 5.3 billion as previously guided. In stark contrast to 2020, we booked a net release on impairments in 2021. I'm pleased with the good profit of 2021 and despite the impact of the settlement and the compensation schemes.
Moving to page eight, we can have a look at some of the loan volume developments.
Over the year, our mortgage portfolio grew by EUR 700 million, which reflects a stable market share of around 15%. Mortgage prepayments are generally higher towards year-end and this led to a small decline in volume during the final quarter. The corporate lending increased in Q4, supported by the TLTRO incentive that we were able to offer our clients. Consumer lending was actually stable this quarter. Looking at interest income on page nine. As I've just mentioned, last year's net interest income on a clean basis amounted to EUR 5.5 billion.
From this base, we estimate NII to decline between EUR 400 million-EUR 500 million in the coming year. There are four components to this decline.
One is the rapid wind down, which means that limited NII will come from the non-core activities going forward. We also expect further margin pressure on deposits, though to a lesser extent than last year. The margins on our lending business have declined, and this could continue during 2022. Treasury results include mortgage prepayment penalties, as well as interest income on our duration and hedging positions. We expect the treasury results to partly reverse the good results of last year as we expect mortgage prepayment penalties to be lower in 2022.
We estimate that these four components will decline around EUR 100 million each. Looking further ahead, we expect NII may bottom out towards the latter half of 2023.
Though treasury results may decline further, the non-core will only have a minimal effect in 2023, and a gradual rise in interest rates and growth in our corporate books should help to turn NII around. Moving to fees on slide 10 and other income. Here we delivered another strong quarter in fee income, reflecting particularly good results in our clearing bank, as well as in asset management fees. Our strategic initiatives are starting to materialize, for example, the new SME packages which have kicked in. Going forward, I expect fees to grow on average between 5%-7% through to 2024. Our other income, of course, was boosted by the sale and leaseback of our headquarters in Q4. Excluding the sale, other income improved from higher trading results as well as strong private equity gains.
It's worth noting that we don't expect the private equity to repeat the strong performance, so the income in this level will be lower in 2022. Moving to costs on slide 11. Excluding the incidentals, the total cost for 2021 amounted to EUR 5.3 billion as we guided. Over the year, the cost of AML increased and the regulatory levies were higher due to the AT1 tax clawback. We expect our cost base to start declining during 2022 and end below a level of EUR 5.2 billion.
The clawback will drop out this year, so regulatory levies will decline by around EUR 50 million. Also operating expenses in CIB non-core will come down further. Furthermore, strategic cost saving programs will broadly offset cost increases, and we do remain firmly on track to drive our costs below the EUR 4.7 billion level in 2024. At this point, I'll hand over to Tanja.
Thank you, Lars. Well, on impairments, in Q4, we booked impairments of EUR 121 million. These impairments are largely related to corporate loans, reflecting a management overlay for stage three loans in commercial banking and a limited increase on existing stage three files for both CIB non-core and commercial banking. The total management overlay now amounts to around EUR 424 million. Around half of the overlay is COVID-related, reflecting ongoing uncertainty as most government support measures are being terminated now.
The remainder is mainly related to portfolios in wind- down. For the full year, our cost of risk ended slightly below zero, reflecting the strong credit quality of the loan book and economic recovery after easing of COVID-19 restrictions. It's too early to give any guidance for this year, but I expect a more normal picture again, so without releases.
As Robert mentioned, we have adjusted our through the cycle cost of risk guidance to around 20 basis points from previously 25-30 basis points. This is mainly driven by the de-risking of our benefits from the wind down of CIB non-core and the tightening of our risk appetite as we communicated in 2020 at our strategy review. Now turning to slide 13 on capital position. We remain very well capitalized with a Basel III capital ratio of 16.3%. This includes a EUR 500 million capital reduction for the announced share buyback.
The decline versus previous quarter reflects a strong RWA increase, largely related to credit and operational risks. We implemented the DNB mortgage floor this quarter and have done some additional model reviews.
The wind down of CIB non-core, combined with seasonal balances reduction, more than offset the growth in our corporate loan book this quarter. For operational risk, we have updated our scenarios for revolving consumer credits with floating interest rates. As you can see in the chart on the right-hand side, the difference between Basel III and Basel IV RWAs has become limited. The add-ons we have taken in Basel III, combined with the accelerated CIB non-core wind down and a more positive Basel IV proposal from the EU, are the main reasons for this. With this, I wanna hand back to Robert.
Thanks, Tanja. Now then, turning to our long-term targets on slide 14. We managed to grow our mortgage portfolio over the year, and we remain well-placed in this competitive market. On cost, we hit our interim goal of EUR 5.3 billion for this year, and I am confident we can get our cost base below EUR 4.7 billion by 2024. A new through-the-cycle cost of risk of 20 basis points reflects the de-risked balance sheet following the accelerated wind down of our non-core loan portfolio. We announced a EUR 500 million share buyback program today.
Share buybacks are an additional tool to manage our capital position, while we aim for a gradual decrease of capital over time. Finally, we propose a dividend of EUR 0.61 per share based on our 50% of our full year profit.
With that, I'd like to ask the operator to open the call for questions.
Thank you, sir. We're starting the question and answer session now. If you have a question or remark, please press star one now on your telephone. May I remind you to limit yourself to two questions only. If you have any remaining questions afterwards, you can press star one again to rejoin the queue. Thank you. Star one now for your questions or remarks. Go ahead, please. Our first question is from Mr. Farquhar Murray, Autonomous. Go ahead, sir. Your line is open.
Morning, all, and apologies, I've actually got a slight chest infection. Two questions from me, if it's possible. Well, just coming back to the kind of 200 basis points that you're applying between the 13% target and the 15% threshold, can you just explain to us what that now represents? I mean, is that kind of still an M&A buffer that can be fully deployed, or is it really building in some degree of gradualness in the convergence towards the target over time from here? And when might you be able to revisit that?
And then more generally, is it plausible that we would be looking at a sequential buyback in the second half of the year, and what really are the kind of criteria for being able to do that?
Finally, just on the fee guidance, what gives you the confidence that you'll be able to do 5%-7% growth there? What are the kinda key elements behind that? Thanks.
All right. Thanks. Hopefully your cold gets better soon. Yeah. On your question on the share buyback and the threshold. Let me just start with the decision that we got to in determining what the share buyback should actually look like. What was the amount that we needed in order to ensure a gradual release of capital, as we talked about, but also to ensure that this is a gradual release that is applicable for multiple years. In other words, getting to a share capital, which is cognizant of the fact that this has to be a gradual release of capital, but also making it possible to do this more than once.
That analysis got us to a number of EUR 500 million. Now, particularly around that EUR 500 million, if we then say that will allow us to do multiple of capital returns or share buybacks, I should say, that gives us sufficient flexibility for the purposes as I've just stated. Therefore, the threshold as we have it is not relevant because it's not really getting close to the levels of our threshold at this point. There was no need for us to adjust any further anything further on the threshold. Now, as to your question, absolutely. You know, we talked about some of the components of that threshold.
Some of the risk has gone indeed out of the bank, as you can see in our through the cycle cost of risk adjustments that we've made. We've settled AML. We still have a number of uncertainties related to COVID, as we navigate coming out of COVID. There's regulatory pressure will continue. We have M&A as part of our strategy. That really hasn't changed. The most important consideration here is by applying the EUR 500 million, by allowing ourselves the flexibility to do multiple share buybacks, we did not get close to the threshold levels, and therefore there is no need to adjust the threshold.
Okay. Thanks.
Maybe on fees, we guided to 5%-7% CAGR to 2024. What we're actually seeing, I think Lars indicated that in our Q4 results, but that actually started to kick in in Q3. Some of the measures that we've taken to effect a change away from NII to fees are actually coming to fruition. Whether it's the payment packages that we've introduced, whether it's the ongoing strong performance that we're seeing in clearing, whether it's the continued strong performance on our wealth management side, you know, these are all bases for extrapolating what that could actually do in terms of opportunity.
We think the 5%-7% CAGR, based on what we're actually seeing over these last few quarters, is a good indication, a good proxy, and therefore good guidance for our fee development.
Okay. Thanks a lot.
Our next question is from Mr. Benoît Pétrarque of Kepler Cheuvreux. Go ahead, please. Your line is open.
Yes, good morning. The first one will be again on the share buyback. Just to ask the first question on the slightly differently, could you update us on the next round of share buyback already in 2022? I'm thinking, for example, during the second quarter reporting. Or will that be an update, let's say next year in the fourth quarter, 2022, so in February 2023? What is the kind of timing of a new potential round of share buyback? Did you have any discussion with your regulator on the total payout ratio? Now you have the 94% level at EUR 500 million.
Was that part of the discussion or not at all? Just, could you push it above 100% potentially? The second question was on NII. Well, I don't think the guidance are very useful in a way because I think you used a scenario end of November, I think five-year swap rate at minus 10 bps. In your statement that the NII will bottom out in H2 2023, at current level of rates, so probably around the 50 bps on the 5-year, when will that bottom out? Could you be a bit more specific, please? Also, where could you maybe surprise us a bit on the positive side? Because you've put a lot of negatives on the moving parts.
Where do you think you're being maybe a bit too conservative on the NII guidance? Just maybe briefly, if I may, on the EUR 4.7 billion cost guidance, how much SRF and DGS did you put in your figure in your EUR 300 million total? I was just wondering if you have adjusted slightly for the regulatory cost there. Thank you.
Thanks for the question. I'll ask Lars to comment on the NII guidance, and then on your question on DGS. Just, maybe, again, going back to the share buybacks. Just let me reiterate, it is our intention to use share buybacks on a regular basis. For very obvious reasons, because we wanna continue to optimize our capital position. I will continue to repeat that, it adds and it helps the predictability of how we manage our capital distribution. That doesn't necessarily have to be limited to an annual share buyback.
On the situation as is today, let's get through the execution of the share buyback now, and then we will reassess when and if we can get to a potential second round.
Again, just to emphasize, you know, this is a regular part of our optimization of capital position. It is something that we envisage that we would do multiple times, but I'd like to get through our first share buyback program first, and then we'll take the next steps. In terms of your question on the regulator, I would just say they were very constructive. You know we need to get permission from the regulator on the EUR 500 million. That was a good constructive dialogue. Therefore, you see the results today. As to your question on whether we're limited on a payout above 100%, I'm not aware of any limitations at this point. Maybe Lars-
Yeah, let me take your question on the NII and the November scenario. Now, I would say here that if you were to take rates as of today, there would be a little bit of an upside that you could factor in, but bearing in mind that you know, we are not as sensitive to the rate movements, and we do have quite a long duration book on the mortgages side and also in our replicating portfolio, that I would expect maybe the upside for this year, I'm talking 2022, which is what we're guiding on, to be maybe around EUR 25 million if the rates continue at this level.
Of course, surprising on the up, I would say the drivers there would be, you know, if the rates go even higher, if we are able to, you know, drive more volume in terms of our various products, I mean, these are all factors that help in terms of, you know, the NII. We'd also have to see a little bit how prepayment fees evolve on mortgages, because here, we definitely do anticipate some reduction versus last year. If refinancings continue, you know, that could provide some support. On the cost front, in terms of DGS, I mean, the one clear step down is the EUR 50 million in terms of the bank taxes.
That's a structural step down because that was a one-off in 2021.
The other area we do expect some step down is on the DGS. There's maybe a EUR 20 million step down on the 2021 levels. Then on the other hand, we're seeing an increase in our contribution to SRF. Overall it's apart from the EUR 50 million, I would expect it to be roughly flat. I mean, here, I would also caution a bit in terms of you know what happens on deposit volumes, because we saw a strong inflow again of deposit volumes, and that obviously impacts contributions to DGS as well. We are sensitive to that.
Sorry, on 2024, I think the contribution to the SRF should decline substantially. Same is true on the DGS, I think. Is that in your EUR 4.7 billion target?
There is a partial step-down built in, but there is definitely we are being on the cautious side of that. Let's see how that evolves, in terms of, you know, where the regulator puts the levels.
Okay, great. Thank you very much.
Thank you.
Our next question is from Mr. Tarik El Mejjad of Bank of America. Go ahead. Your line is open.
Hi. Good morning, everyone. Two questions, please. First one on capital return. I mean, thank you for explaining your buyback strategy. I was just wondering why you wouldn't step up a bit the cash payout component if there is no limitation of 100% payout over years, so you can potentially return the capital a bit faster. The second question is on your operating jaws. I was surprised you still stick to an absolute number in terms of costs, given the inflationary environment where we are.
If you assume there's a squeeze on the revenue side from what you described, and then the costs, do you think there's a risk that the costs come slightly higher than you estimate given the environment?
Are you actually working on extra measures to offset the inflation and deliver on your guidance? Maybe squeeze in last question on other income. What is the new run rate? In the past you were giving EUR 125 million per quarter. Should we come back to that kind of of payoff? Thank you very much.
Thanks for the question. Maybe on cost, Lars, you can take those two questions. Yeah, let me just confirm our thinking around the cash buyback was very much around the number that we would get to in terms of allowing us to gradually release capital. By again coming to the number that we now have, the EUR 500 million, that release can be consistent. It's a number that we can manage. Therefore it does increase the predictability. You know, I would choose a bit of a longer-term optionality in terms of the rounds of buybacks that we can do, rather than a short-term optimizing.
Because I do think it is very consistent with our capital policy, and that is something that we've continued to be very predictable and consistent about. That is why we came to our choices as we're discussing today. On cost, maybe Lars?
Yeah. I would say in terms of guiding the absolute number for costs, I find that provides very good discipline for the organization and a very clear target to go after. In terms of course, you know, with all the inflationary pressures and so on, there are continuous efforts being made to absorb that, and that is also what we're guiding for the longer term, that we are in fact trying to come out at even lower than the EUR 4.7 billion that we previously guided. That I think should tell you that we are, you know, making every effort also to address the operating jaws.
The other income, I would say, you know, clearly we've got quite a few incidentals in there this year. You know, strip those out.
It was a particularly good year in terms of our ventures and our equity participations, and I think that is not necessarily repeatable in the new year. We don't really give guidance on this line, but I would really say that you know if you were to look at what we achieved in 2021, we won't necessarily get the same tailwind from our ventures and our equity participations in 2022.
Okay. I mean, actually my question on capital return was really focused on the payout, the cash payout, so your 50% policy. I guess. I mean, when you get approved by the SSM, it was on the buyback size, I guess. The payout of 50%, some banks increased it to somewhere 60%-70%, and then on top you could do the 500, which could be as well predictable. That was really my question, was more on the cash payout components.
As I understand your question, it is a choice that we have made to stick to the 50% dividend policy. As you recall, actually, we communicated that dividend policy. We intend to stick to that dividend policy to not make changes along the way. Again, all in a continued effort to be predictable and to be consistent. It is absolutely my preference to hold on to a dividend policy we all know, and then we will design and we determine our share buyback starting with the EUR 500 million that we communicated today. When the opportunity arises for additional share buybacks, we know, again, that this EUR 500 million gives us a good starting point.
Okay. Thank you very much.
Our next question is from Mr. Stefan Nedialkov for Citi. Go ahead, your line is open.
Hi, guys. Good morning. It's Stefan Nedialkov from Citi. I've got questions around two topics, on NII and the buyback, unsurprisingly. On NII, wanted to understand from you, obviously you have done a lot of management actions on the cost side. You have done some on the deposit side, especially when it comes to negative deposit charging. What else are you doing when it comes to managing your deposit inflow in terms of conversion into, you know, fee producing assets or discouraging people from holding unprofitable, checking/savings accounts, et cetera?
Should we expect anything more in 2022? And is that included in your guidance potentially? Related to that NII question, I'm really trying to understand what is going to be the exit rate for NII in the second half of 2023.
Obviously you're cutting to a bottoming out at that time. If I just do some simple math, the exit rate potentially suggests quite a low level of NII into 2023 overall, and the beginning of 2024. On the buyback, two hopefully very short questions. Is the EUR 500 million structured as part of an official ECB authorization? How big is that authorization? What's the timeline overall? Or is it just like a standalone EUR 500 million one-off, and then you have to go back to the ECB for the second one? If I may, on the NLFI ownership, have you considered a targeted buyback as part of the EUR 500 million or in the future?
Thank you.
Yeah, thanks. Thanks for the question. Yes, let me take the share buyback, and Lars will expand on cost a bit more. The share buyback that we have today is a program that we agree with the ECB on a per program basis. The next time we determine we wanna do an additional round, we would have another dialogue with the JST with the ECB, and we would consider the circumstances at that time. This is not part of an overall discussion with the ECB. This is very much targeted at the individual share buybacks that we intend to do.
On your question as it relates to the NLFI, it clearly is up to the NLFI to take a point of view and as to how they wanna participate in the share buyback. Right now we've gotten to the result of a pro rata participation. Clearly that is at the prerogative of the NLFI.
Yeah. On the NII, in terms of, you know, we've now pretty much introduced our negative rate threshold all the way down to EUR 100,000, so that is effective as of January. In terms of the balance of the book, we now have, you know, it's roughly half/half of the deposit book that's being charged and that's not being charged. I think opportunities here become politically very sensitive in terms of going below the EUR 100,000 threshold. There's a lot of resistance there.
The opportunities we still have, though, are opportunities in terms of, let's say, high net worth individuals in the corporate space, in terms of the level of the rate that we charge. That is clearly an opportunity.
I mean, to some extent we have anticipated for that, you know, looking into the evolution. The other area that is something that we are really also looking at in terms of building out the business is very much on the wealth side, is also trying to see people transition from cash into more of an investment portfolio. Now, here again, this is also a bit timing of the markets. I mean, people are looking at where the levels of the markets are, and they obviously also want to see the right time to enter and exit those markets. This is definitely a strategic evolution for us as well. 2023, and we'll just have to see how things evolve before we get into specific 2023 guidance.
Thank you very much. Appreciate it.
Thank you.
Our next question is from Miss Giulia Miotto of Morgan Stanley. Go ahead, please.
Yes. Hi, and good morning. A follow-up question on capital from me as well. If we think about M&A buffer, how has your thinking evolved around this? Are you still very much looking at, you know, private banking opportunities, or could it be also commercial banking or, you know, retail banking in the Netherlands, for example? Any color there. My second question is on NII, and my question is about front-end rates.
Following the ECB on Thursday, you know, many economists are now expecting actually the ECB to hike rates back to zero by beginning of 2023. I understand ABN is more sensitive maybe to long end of the curve because of the replicating portfolio. What would be the impact of that potential 50 basis points hike, please? Thank you.
Thanks. Thanks for your questions. Yeah, on M&A let me just reconfirm what I've said all along is that we will continue to review opportunities on M&A. Any M&A has to be accretive to the strategy and therefore yes, wealth management has certainly been an area. Again, we would also look at opportunities that are potentially working into the feeder function of wealth management.
By that I mean one of the propositions that we've also started, and in a way that also helps our work and our transition to a more fee-related business model, is the enterprise and entrepreneur concepts that we've begun to introduce in Northwest Europe.
I would say everything that I've said in the past on M&A still holds, and we will continue to review the opportunities.
NII? Then, in terms of the NII, I mean, again, modeling out to the end of the year, as I've said, with current rates, we get to the EUR 25 million potential pickup. If you want to sort of start adding 50 basis point increases, then we'd also have to look a bit at the impact on our deposits, where we have the big negative rates, because at some point you would have to start following that up as well.
It's quite dependent on the pace of tracking on the deposit side, as well as, of course, the potential impact of an increase like that being passed on into the mortgage markets and how that affects mortgage behavior. It really is, I would say, you know, it could be quite a marginal impact for us initially.
Sorry, just to make sure I understand. If the ECB hikes 50 basis points, let's say tomorrow, just for simplicity, that does not have any impact on your deposits, is that because everything is replicated or why is that? Because I would've thought at least the balances with the ECB would see a positive impact, and then offset by the fact that you can't charge deposits anymore, fair enough. You know, the move to zero should have some small impact.
Yeah, that's exactly it. It's the small impact. It's not going to be a very material impact. I still say in terms of the tracking speed, where you now have sort of half your deposits at negative and half not, that's really where there'll be, you know, a balancing factor.
Thanks.
Thank you.
Our next questions are from Mr. Kirishanthan Vijayarajah of HSBC. Go ahead, your line is open.
Yes, sir. Good morning, everyone. Firstly, coming back to the share buyback and that pro rata participation by the NLFI. I was wondering, is the underlying thinking from the Dutch state that they want to preserve that majority stake, at least in the short term? In which case, you know, do you think this whole sort of pro rata participation thing is gonna be just a repeat feature for the next few buybacks, and whether that's already been agreed up front with the NLFI? I don't know if you can share some of those details.
Then secondly, coming back to your new fee growth ambitions, the 5%-7% fee growth. I wondered, how does that stack up by division, you know, between retail, the private bank, the corporate bank?
Are all three divisions kind of expected to be in that 5%-7% range? Also is the clearing business expected to deliver that 5%-7% fee growth as well? Just some color on you know divisionally where that 5%-7% fee growth comes from. Thank you.
Yeah, thanks for the questions. I'll take your question on NLFI, and Lars, if you could then take the questions on fees. On the decision by NLFI, clearly that is a decision by NLFI. I would call your attention to the fact that the Minister of Finance, in a statement to parliament, has said that they remain committed to reduce their shareholding as and when appropriate. In effect, that is a repeat of what the government four years ago had included in their statement. That statement has been made.
Now clearly it is then up to the Minister of Finance and NLFI obviously to take a decision at whatever point in time they decide to do so. For now, the share buyback is a pro rata share buyback.
I would say in terms of the fees by division, I'm really looking at this as an overall fee increase for the bank. I think there are potentially very many sort of different moving parts, and you pointed to one, which is the clearing. Another one is really where the markets are in terms of assets under management. Those are quite tightly connected to sort of market volatility and price movement. It's very difficult to try and pinpoint and say that every single division will be at 5%-7%. We certainly do expect fee increases across all of our divisions because we have got initiatives on the go in every single one of them.
In personal and business banking, in terms of fee packages, on the wealth side, clearly in terms of trying to get more movement from cash into securities. On the corporate side, you know, apart from the clearing, we also have the corporate finance activities. We're hoping to do more customer-focused and broader business with customers, which will have a fee component. It'll be broad-based, but I can't say that it's gonna be 5%-7% per individual unit.
Got it. Thanks.
Following question is from Mr. Robin van de Broek, Rabobank. Go ahead, your line is open.
Yes. Good morning, everybody, and thank you for taking my questions. The first one is again around NII. I mean, I'm a little bit confused with the EUR 25 million guidance on today's rate. I mean, is that EUR 25 million specifically for Q4, or is it for the whole year? Because I took some time modeling your replicating portfolio presentation, I think from September 2018. That would suggest that the upside from the curve movement would be a bit more material than what you're saying just now.
I'm just wondering whether the conservatism on the rates situation is also driven by maybe more fluid movements in other pockets that you're highlighting.
When I look at the mortgage margin, for example, on repricing for the 5- to 10-year bucket on maturity, it seems that pressure there could be substantially more than EUR 100 million per annum. Is this also part of your overall guidance to get to that EUR 5.0 billion-EUR 5.1 billion level for the year? In connection to that, given that you're still benefiting from TLTRO and H1, I was just wondering the exit rate for 2022 specifically, is it fair to conclude that that is closer to EUR 1.2 billion in the fourth quarter of the year?
And maybe if you can then also give the upside from rates for 2023 on the back of today's swap curve, I think that would be helpful.
Not recalibrating the CET1 target, I mean, you have been talking about that throughout last year, and now you're not doing so because it's not really a constraint. I mean, that probably was not the case, given these outcomes earlier in the year as well. I'm just wondering to what extent should we, you know, see any reluctance from the regulator to basically force you to change that capital target? Thank you.
Yeah, let me take that last question, and then Lars, you can answer the other questions. Again, what we did was, that is our initiative, we determined the amount of share buybacks given the considerations that I talked to you about before. Go back to a gradual release of the capital, being predictable, being able to do multiple rounds, and then have the conversation with the regulator. As we came up with the conclusion that a EUR 500 million share buyback would actually allow us to fulfill all those obligations or all those criteria, there really was not a reason to recalibrate the threshold.
Now, I did say that we would consider recalibration, and this is part of a consideration that you do at the time that you determine what your buyback's actually gonna be. If you then determine there is no at this point limiting factor from the threshold, there is then no reason to actually adjust that threshold. Now, clearly, as we move into subsequent rounds, and we will then take the circumstances into consideration at that time, clearly we'll have that conversation. It has to be part of any ongoing conversation in terms of determining share buybacks.
At this point, in the way we've designed our share buyback program, it is not a constraint, and therefore there was no need to adjust. Does that answer your question?
Yeah. I mean, I think it would have been helpful to give more transparency, you know, for the next few years to crystallize that little bit of extra excess capital that could be there. I think that's what's helping, I think, other banks in the space as well, is you just have the clarity on the go-forward level. Now, you know, that remains a little bit up in the air, I think. That's. We'll see it as it comes up.
Well, no, that's the other way. Let's look at the amount first. Thank you. Lars.
Yeah. As I think further in terms of NII, I mean, really what we are trying to do here is, you know, give you a full year guidance so that we, you know, stop the dance of trying to reconcile very detailed numbers every quarter. In terms of that broad-based guidance, there are a lot of moving parts, and you pick up on the mortgages. For sure, there is pressure on mortgages. We've seen that in terms of the new production, that the front book margin is lower than the back book margin. We've been starting to see some ability to pass on pricing in terms of also, you know, the cost of funding going up.
The biggest part of the impact though remains on the deposit side. In terms of where the pressure is the most, it stays with you know the deposit margin. We've tried to offset that as much as possible with the drop in the thresholds to EUR 100,000. That you know offsets about half of the expected impact this year. Then the other big step down that you have to factor in is the fact that we've now unwound the non-core activities, and that really does take almost EUR 100 million out of that line item on an annual basis.
The other impact of mortgages really manifests itself in the treasury line item, where, again, as I said earlier, we've had some very healthy prepayment fees for the whole of last year, and I do expect some more normalization in that space, going forward so that those prepay penalties benefits should be coming down.
Okay, that's helpful. Then maybe one more on ECB rate hikes. It was my impression that you basically have a net deposit exposure that would mean that a rate hike would initially be a negative element for NII. I think in an earlier question, you indicated that it's just a small positive. Could you maybe elaborate a little bit on that as well?
What we're saying is it really depends very much on how we track up, whether we follow a 50 basis points up immediately on the negative rates. I mean, bearing in mind EUR 80 billion, yeah, EUR 80 billion priced at, on average, negative 50, I mean that's EUR 400 million just there on a per annum basis. The question is, do we track that immediately or do we, as we did on the way down, have a bit of a slower tracking on the way up to protect some of that income?
Presumably it's a hard sell to clients to not track the ECB rate hike up until 0 at least. After that, it's probably easy to have a softer deposit beta, but.
This is always the thing we have to manage in terms of what's available for our funding. If you really look at where this funding is, it's in the corporate space and in the high net worth space. You know, ultimately high quality funding is in the retail space, and they are not being charged negative at the moment.
Okay. Thanks. I'm sorry for taking so much time.
Thank you.
Our following question is from Mr. Omar Fall of Barclays. Go ahead, please. Your line is open.
Hi. Thanks a lot for taking my questions. Sorry to belabor the Robin van den Broek's earlier questions, but we know that the sensitivity to rate changes is pretty minimal over 1 year because replication portfolio, you know, as per all your peers. I think it would just be helpful to everyone, what the sensitivity looks like to 50 or 100 basis point changes over a 3-year view. Because I know that this wasn't the current management's guidance, but you used to have, you know, a deposit margin guidance of -EUR 20 million per quarter when 5-year swap rates were at -40 basis points, which implies a lot of exponentiality on the downside.
I don't think it's unfair for shareholders to ask why, you know, that doesn't apply on the upside.
The second question would just be if you could update us on the non-core cost space, please. I see there wasn't much movement in Q4, which is as guided, but you previously said the licenses would start to be handed in, I believe in Singapore, Hong Kong, et cetera, as of last quarter. Just wondering what the progress is there and the plans into for this year. Lastly, I noticed, and it was obviously in the press last year, the Dutch Public Prosecution Service's investigation on dividend withholding tax credits.
If you have any updates on that, you know, if that's something that you're thinking about in terms of provision, you know, potential litigation charges and the materiality of that would be helpful. Thank you.
Yeah. Let me take the last question. The settlement with the Dutch Public Prosecutor is completed. This is. I'm just listening now to. I think you're intending. You're asking a different question than what I assumed. I thought you were asking the question on the Dutch Public Prosecutor settlement that we concluded.
No, I'm asking about. Well, I do recall that one. I'm asking about the
Oh.
investigation into the withholding tax credits. It's in your quarterly reports in the other risk developments.
Yeah. There's no further developments in that at all.
Okay.
Those are still what they are. Sorry for misunderstanding your question.
Yeah. On the non-core costs, I think we are running at about EUR 278 million in 2021, and we are expecting to see a step down of that, let's say by about EUR 60 million in this year. Again, as I've talked about this in the past, even though the size of the book has come down materially, and that clearly helps us in terms of better asset quality and lower loan losses, but it still takes us time to shut the businesses down and to exit locations. That is the clear focus now. But there is still a tail expected there, which takes us through to late into 2023, maybe even some into 2024.
Look, I appreciate also on the NII that you'd like more and more sensitivity and more and more detail, but we really have tried to now keep the guidance at this level on an annual basis. Let's see a little bit how things evolve, and how we explain that going forward.
Thank you.
I've told you the major moving parts, and I mean, those are the ones that we are tracking and trying to work on.
Fair enough. Thanks a lot.
Thank you.
Our following question is from Mr. Guillaume Tiberghien of Exane BNP Paribas. Go ahead. Your line is open.
Good morning. Thanks for taking my question. The one I had was on cost, the question earlier on resolution fund. You said it would go up a little bit in 2022. My question is, by how much, please, to what level? Because I can't remember the level. In 2024, do you assume that just for the resolution fund specifically, this goes to zero? The second question relates to your coverage ratio of NPL, being quite low compared with quite a few European banks.
I was wondering whether there's a risk that either you or the ECB decides that raising the coverage level is appropriate, to a much more significant level, let's say, I don't know, 40% or 50%, for example. Is that a risk that this may happen?
Thank you.
Tanja, could you take the question on coverage ratio and then maybe Lars on resolution?
On the resolution fund, you're saying going up in 2022. I think it's going down in 2022, in terms of the overall contributions. Well, in terms of the single resolution fund, there will be a bit of a step up in 2022. The overall contributions of bank levies and bank taxes and DGS should be net down by the EUR 50 million, you know, the one-off tax that we paid in 2021. Going forward into 2024, no, we have not assumed they're going down to zero. We're taking a cautious approach there. Let's see how that communication comes from the regulatory environment as to contributions.
As of now, we certainly aren't being that bullish, if you wanna call it that, to measure it down to zero.
Sorry, the resolution fund specifically, what is the contribution?
Well, we were contributing about EUR 160 million this year. Next year we expect it to be around the EUR 180 million mark.
Thank you.
As in 2022.
Thank you. I don't understand why you assume that it stays in 2024, because the law says that it should finish after 2023.
Yeah. We have to see if it is fully funded. We'll come back to that one.
Thank you.
Tanja.
Yeah. Maybe your question on the coverage ratio for our NPL book. Well, of course, it's important to compare ourselves to peers. On the other hand, we need to look at the actual composition of the balance sheet as well. Our balance sheet has a significant part in mortgages, as you are well aware, with a much lower coverage ratio and, of course, very well collateralized. Also our corporate book is mainly collateralized lending more than what you would see at peers.
We have a relatively small consumer lending book. That explains some of the. Well, that's the background of the lower coverage ratio. On your question with respect to the regulator.
The regulator has imposed this prudential backstop regulation. Basically meaning that for all the assets, all the NPL assets, a prudential backstop needs to be applied. In that way, there is also a deduction in capital for to well to add up to this minimum percentages that are set in the prudential backstop. Yeah, the regulator does play a role in the overall level of provisioning, be it not to our IFRS 9 provisioning, but in capital.
Thank you.
Thank you.
Our following question is from Mr. Jon Peace of Credit Suisse. Go ahead. Your line is open.
Thank you. Sorry for one more clarification on the buyback. I appreciate NLFI is making their own decisions in terms of what they do. But was there any sense, Robert, in how you're thinking about the pace of buybacks, that you would want to leave some flexibility to accommodate them if they were to decide to sell in the future, that you wanted to have some dry powder? Then my second question is on the cost of risk. Tanja had said earlier that it was a bit early to give guidance on 2022, but it should be a more normalized year. You are still sitting on those 400-odd of overlays, half of which are COVID.
I mean, assuming that the economy is reasonable and Omicron is not too problematic, is it a reasonable expectation that those COVID overlays could get released this year so that you could come in still decently below the 20 basis points through the cycle rate in 2022? Thanks.
Thanks, John, for the questions. Look, you know, I appreciate you wanting to get a bit more information as to the thinking of NLFI, and certainly, you know, the way the dialogue goes will determine how we wanna construct a share buyback program, and we then engage with NLFI, as you'd expect us to do. For this round, it's clear the outcome is a pro rata. On any subsequent rounds we'll have, the next round of conversations, I would say. It really is a decision that the NLFI needs to take. I would just point you to the statement that the new Minister of Finance has made, and in effect, she reconfirmed the government's intention.
Why don't I just leave it at that.
Okay. Shall I take the question on the overlays and whether they would be released this year? Well, the reason that we put in place overlays is because of the fact that our models, well, didn't capture the risks well from COVID. You've seen that as well with historically low bankruptcy rates. That's still the case. We do expect that this will go up again, but the question is, will that normalize during 2022, or will that take a bit longer? That will also determine how well how we will address these overlays so that can go into 2023 as well. I do expect that these overlays will, well, you could say, well, are they released?
I do expect that they will be absorbed by the models once they start performing again. This is our best estimate of what the outcomes of the model should be once the situation has normalized.
Thank you.
Our following question is from Miss Anke Reingen of RBC Capital Markets. Go ahead. Your line is open.
Yeah, thank you very much for taking my question. The first is just on, I would like to confirm that your 13% quarter one ratio target incorporates the potential countercyclical buffer in the Netherlands in case it gets reactivated at a similar level to reduction in domestic buffer last year. I guess it's right to assume you will resume the interim dividend this year. Secondly, just on your sustainability targets, you show us the targeted split in the loan book, for example, with sustainable mortgages.
Would that lead to, like, margin pressure as sustainable mortgages or other sustainable products come at lower margins than the non-sustainable part? Thank you very much.
Tanja, do you wanna take that first question on the countercyclical?
Yeah. I can confirm that is included.
Okay.
also on the interim dividend, that will be resumed.
Thank you.
On the sustainable loans that we continue to make available, the pricing thereof is really depending on the customer segments that we deal with. Those are assessments that we make at the time that we extend the mortgage offers. Clearly we are in terms of our own sustainability goal sets and having by 2030 all of the homes that we fund to be fully to have what we call a type A rating in terms of sustainability. That is our overall objective. Our pricing will be on a per individual case as we would always do.
Okay. Thank you.
Our following question is from Mr. Johan Ekblom of UBS. Go ahead. Your line is open.
Thank you. I can just come back to the revenue outlook for a second. On the NII, you're saying that you're estimating you lose about EUR 100 million on kind of volumes versus price on the lending side. Is that largely driven by front book pricing of mortgages or is there anything else there? Because I guess the impact of refinancing and prepayments, et cetera, is captured in the treasury.
We've lost you. I don't know if we've lost you.
We lost you, Johan. Yeah.
Mr. Oh, Mr. Ekblom, we're going to have to press star one again and re-dial. We continue with the other people. I have a follow-up question from Stefan Nedialkov, Citi. Go ahead please. Your line is open.
Hi guys. It's Stefan again. Just to follow up on a couple of points from our discussion this morning. On cost, I'm just trying to understand the resilience of the EUR 4.7 billion targets in the face of higher inflation. You've obviously signed the short-term CLA for six months. Is it fair to assume that that's going to be sort of more in line with the current inflation once the longer-term negotiations are concluded?
What sort of management actions over and above are you able to take to contain this higher inflation this year and potentially next year? Related to the cost, you had guided to, I believe, EUR 150 million of restructuring costs as part of the program.
If you can update us how much has already been taken out of the EUR 150, and how much is left that could potentially come this year. The second question on Basel IV. Now that you've put in the mortgage add-on buffer, and another one of your competitors is likely to be doing it with Q1 result, are you starting to see a bit more resilience in terms of the mortgage lending spreads? You did mention you're able to pass higher funding costs a bit more effectively. Are you maybe potentially optimistic that Basel IV is going to be a positive overall for mortgage pricing in the Netherlands, this year and next year?
Lastly, if I may sneak one last one in.
Your long-term ROE target of 10%, what level of rates do we need to have for you to reach that, in 2024, let's say? Thank you.
Yeah. Let me take your last question and I'll take your question on CLA. Then maybe Tanja you can take the question on Basel IV, and Lars can take the remaining question on cost. In terms of your of the CLA, look, we concluded a CLA to ensure we safeguard a social plan, which is what we did, and then subsequently agreed with the unions that we would revisit the CLA towards the latter half, the second half of this year. The reason we did that is we wanted to get more sight on what the longer term inflation outlook would look like.
At this point, we're still penciling in from our own economic forecast that there will be a reduction on inflation. To be fair, we're gonna have that conversation during the second half of this year. That's when we will reconvene with the unions.
Well, shall I take the question on Basel IV and the effect on mortgages? Well, it's maybe unrelated. We have taken the DNB floor already in our Q4 results. It's uncertain how that floor will relate to Basel IV. That is not clear yet from the regulations. On Basel IV for mortgages and pricing, we have already included Basel IV implications in pricing for some time because we knew it was coming. I don't expect it. The Basel IV results lend more or less in the area where we expected it, especially in the area of operational risk. The impact has been a bit lower than we had anticipated.
I don't expect any significant changes in our strategies with respect to mortgages.
Thank you, Tanja. Lars.
In terms of cost levers, I mean, we have a lot of programs on the go, and I would say that the most powerful levers in all of those is to try and get some acceleration. Obviously, as we implement these, and we go along, whether it is product rationalization or sort of process automation or centralization, I mean, there are always opportunities that we continue to find. I think that's where we will continue looking. In terms of the restructuring costs, I would say we have about EUR 150 million to go between now and 2024.
That's roughly a number that you can use. If I understood the question correctly, it was what sort of level of interest rates would we need to get to an ROE of 10%.
I think here we've previously said, look, we need to see interest rates sort of normalize. Now, if I was to put a sort of number on normalization, probably 100 basis points or so parallel shift in the curve would be, for me, some sort of level of normalization.
Thank you so much. Just to clarify, the 100 basis points is from here or as of the time you gave the long-term ambition?
Yeah, I think it takes it back to when we gave it.
As of then, add 100 basis points across the whole curve.
Yeah.
Okay. Thank you.
We have Johan Ekblom, UBS, on the line again. Go ahead, please, sir. Your line is open.
Thank you. Apologies for that, and hopefully it works better this time. Otherwise, I'll give you a ring afterwards. I just wanted to touch a little bit on the revenue outlook. You're entering 2022 with a 2.5% larger loan book than you had on average last year. That should be around EUR 100 million or so in revenues at constant margins. Is there anything on the margin side apart from what we're seeing on mortgage pricing?
You've gone again, Johan.
Yeah.
I can maybe just take the question in terms of the makeup. For sure, in terms of margins and mortgages, that is one of the bigger contributors on the asset volume to a decline. We, of course, also have the consumer loan book, which has seen both volume and margin pressure and continues to do so. I mean, people sitting on excess cash are repaying their consumer loans faster. I'd expect a little bit of offset on the positive side from corporate loans. I think that's a bit the interplay on the lending side.
We're not sure whether Johan is actually here to answer.
No. No. He hasn't, I think. His line is gone altogether now.
Okay.
I'll continue with Mr. Farquhar Murray. He has a follow-up question. Go ahead, sir. Your line is open.
Hi again. Just two quick follow-ups, if I may, both on NII. Firstly, that EUR 25 million extra if curves stay as they are at the moment, can you just confirm that's full year 2022, and presumably that incorporates replicating portfolio impact plus ECB rate rises and deposit pass-through. Is that right? Are there any other assumptions built into that, though, worth flagging? Secondly, I'm sorry, my voice is terrible. If we go back to the old NII commentary approach, you would have previously indicated, say a EUR 20 million quarter-over-quarter negative from the replicating portfolio on NII each quarter.
Could I ask what that would be now, given where swap curves are? Thanks.
Yes. I think the EUR 25 million number is really, for me, the pretty loaded number for the year. So it is a full year effect. In terms of the previous guidance, which was the EUR 20 million on pretty much deposit margins, we would see that number is probably at the moment down to about EUR 15 million a quarter sequential.
On the current curve?
Yeah.
Okay.
Well, you take away the EUR 25 million effect.
Okay. Thanks.
Next question is from Mr. Raul Sinha of JP Morgan. Go ahead, your line is open.
Hi, good morning. I'm sorry to keep you so late, but I've still got a couple of areas to ask about. The first question is on the contribution to NII of negative rate charging currently. If you could perhaps give us the number, if you disclose that. I'm sorry if I missed it. Also what you expect it to be before or for the changes that are coming in on first of January this year for 2022. The second question is on the operational risk add-on that you've taken.
I think you've taken EUR 2 billion add-on on operational risk for the evolving consumer credit issue. Can you give us a little bit more color on what you're assuming in terms of the changes in assumptions?
Is there any further risks from this issue going forward, please? Thank you.
Shall I take the second question?
Yeah.
On the operational risk. You know that the model that we have for operational risk is on the Basel III, is an advanced model using scenarios. We have indeed, so we update our scenarios periodically, and well think of scenarios, what could happen, and translate that into capital indeed. We are not disclosing our assumptions in these scenarios. If we would expect that things are, well, likely to happen or they meet the requirements to take a provision, then of course, we take a provision. This is for all the uncertainty that is out there based on what developments that we see in the market. Yeah, that's all what I can say about it.
I cannot be specific in the actual assumptions.
Can I ask if the assumption change was internal driven or was that driven by a dialogue with your regulator?
No, it's our own assessment.
Thank you.
In terms of the level of negative rate income, let's say as of the beginning of January, we've got EUR 83 billion of deposits being charged negative rates. You know, it's above EUR 400 million of negative rate income built into the NII for this year.
That's really helpful. Thank you so much.
Thank you.
Following question is from Giulia Miotto of Morgan Stanley. Go ahead, please.
Yes. Hi. I have a follow-up question on that 100 basis points that could lift the ROTE from 8% to 10%. Basically, that guidance was given in November 2020. Effectively, if I look at the curve, everything is 100 basis points higher today, except the front end. You know, I'm talking about five-year swap, ten-year swap, et cetera. And yet we are not getting anywhere close to that, you know, 100 basis points uplift in guidance. I'm having a very hard time essentially squaring how you can say that, you know, EUR 25 million more in NII for this year, from November to now, which is about 60 basis points move.
also in light of the fact that, when the curve is 100 basis points higher, as you had indicated in November, that doesn't seem to have much impact. Any more color you can give on the NII point would be very helpful.
Yeah, I think the point there is, as you said, the 100 basis points has come at the long end of the curve. Really here for us, we need to see the parallel shift, and it's the short end that will give us the most benefit, and I think that is what we haven't yet seen happen.
I thought you said previously that the short end would be a minor impact to NII.
Yeah, 100 basis points is, you know, that becomes more significant. Then you start also getting into, again, in terms of deposit pricing and getting into a more normalized environment also, you know, from the funding side.
Okay. Basically, you're saying that the first 50 basis points of the front end curve is not meaningful, but the further 50 basis points is what really makes a difference.
I think really then you start getting more, again, once you get above zero, you start getting more normal funding dynamics and customer behavior dynamics and also, you know, where deposit flows go. Yes, that could be, you know, in terms of a summary, it's getting back to normal to me is zero, and then you start seeing dynamics that are easier to model.
Thank you.
We have no further questions, sir. Please continue.
Okay. Well, thank you very much. That would then conclude today's analyst call. Thank you so much for the questions as always, and I look forward to speaking soon. Thank you.
This concludes the ABN AMRO Q4 2021 analyst and investor call. Thank you for your attention. You may now disconnect your line.