Welcome to ABN AMRO's Q3 2026 analyst and investor call. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. Sell-side analysts will have the opportunity to ask questions after the presentation. This can be done by pressing pound key five on your telephone keypad. I will now hand the call over to the speakers. Please go ahead.
Good morning, and welcome to ABN AMRO's Q3 2026 results presentation. I am joined today by our CFO, Ferdinand Vaandrager, and our CRO, Serena Fioravanti. I will cover the key messages, our progress on strategy, and our financial results for the quarter. After the presentation, as usual, we will open the line for your questions. Let me begin with the key third quarter highlights on slide two. ABN AMRO delivered another strong quarter, supported by solid commercial momentum, net impairment releases, and further strategic progress. Net profit increased by 52% year-on-year to EUR 940 million, bringing the return on equity year to date to 12.5%. Business momentum was positive with both lending and deposit growth. Commercial NII increased by around 7% quarter-on-quarter, and we have raised our full-year guidance to above EUR 6.9 billion.
We continued to deliver on cost savings, and our full-year 2026 guidance is unchanged at around EUR 5.5 billion. Credit quality remains sound. Model-related releases more than offset impairments on individual files, resulting in net releases of EUR 11 million. Our pro forma CET1 ratio was 15.3%, reflecting the acquisition of NIBC and continued capital generation. The progress on our strategic ambitions and the interest rate outlook provide a solid basis for updating our financial targets, which we will present together with our Q4 results. Let me now address each of our strategic priorities in turn. Starting with the growth ambitions for personal and business banking. The inclusion of NIBC as of August 1st has strengthened our position in both mortgages and deposits. We also added two new savings products, which give clients more choice besides regular savings accounts and time deposits.
Quarterly Savings rewards clients who keep their balances until quarter end, while Time-Lock Savings offers a more attractive rate with 45 days' notice for withdrawals. Wealth management brought in more than EUR 2 billion of core net new assets this quarter and continues to focus on entrepreneurs, next-generation clients, and female clients for its growth. The HAL IT integration is progressing well, while this quarter, we also completed the sale of HAL's real estate investment management portfolio. Corporate banking showed further growth in focus sectors. To support clearing's Asia-Pacific growth ambitions, we opened a new branch in Hong Kong. We are meeting our client onboarding targets for clearing, and in addition, we added actually two exchanges to our membership list. Now, turning to our progress on the cost base. We have completed 46% of the planned workforce reduction, keeping us on track for 2028.
External FTEs have fallen substantially over the past year, while we continue to invest in IT and cybersecurity. The sale of Alfam and the legal merger of ABN AMRO Mortgage Group marked two key milestones in simplifying our organization. At the same time, we continue to simplify our IT landscape and are expanding the use of AI to improve operational efficiency. So far, we have delivered around EUR 350 million of our roughly EUR 900 million cost savings ambition for 2028. Progress on cost saving and FTE reductions will not be linear, and we remain on track to deliver our 2028 cost savings ambitions. Now, turning to capital optimization. Since our CMD, we have achieved almost EUR 10 billion of RWA reductions, of which more than EUR 7 billion was in corporate banking.
This reflects the improvements we made in our data quality and winding down activities that were structurally below our return hurdles. Corporate banking's share of capital is already around our 2028 target of 50%, down from 58% at year-end 2024. The removal of the Dutch mortgage floor is expected to reduce RWAs by around EUR 7 billion next quarter. This was not known at the time of our CMD, so this reduction is in addition to our original plans. Overall, we have made substantial progress on capital optimization and are well-positioned against our 2028 ambition. Before I discuss our financial performance for the third quarter, I will briefly update you on the Dutch economy. Dutch economic growth remains resilient, supported by domestic demand and stronger-than-expected first half of the year. GDP is expected to grow by 1.8% this year before moderating to 1.5% in 2027.
At the same time, inflation remains elevated at just above 3%, reflecting higher energy prices and broader price pressures. Interest rates have also moved higher, and the ECB deposit rate is expected to reach 3% in Q1 next year. The Dutch housing market remains supported by income growth and the persistent shortage of supply, with house prices expected to rise by around 4% this year and 2.5% next year. Higher mortgage rates and affordability constraints are expected to reduce housing transactions, while unemployment and bankruptcies remain relatively low. Overall, resilient domestic demand and healthy household and corporate finances continue to provide a supportive operating environment, although inflation and geopolitical uncertainty remain elevated. I will now turn to client assets and deposits. NIBC added EUR 13.2 billion to our deposit base, split evenly between demand and time deposits.
Excluding NIBC, deposits fell by EUR 2 billion, mainly due to seasonal spending and a shift into securities. Wealth management clients moved around EUR 3 billion from current accounts and demand deposits into higher-yielding time deposits. Market movements had a modest positive effect on client assets this quarter. Core net new assets exceeded EUR 4 billion year to date, which keeps us on track for our annual growth ambition of EUR 5 billion-EUR 7 billion. Now turning to commercial NII. Commercial NII increased by EUR 110 million to around EUR 1.8 billion, up by 7% compared with the previous quarter. The main drivers were higher deposit margins and the inclusion of NIBC. Higher yields on our replicating portfolio supported deposit margins, leading to 8 basis points higher liability margins compared to Q2. Average deposit volumes were broadly stable quarter-on-quarter. On the asset side, mortgage volume growth is increasingly from capital-light, state-guaranteed mortgages.
This leads to a gradual decline in overall asset margins. NIBC made a good start, contributing EUR 63 million in net interest income since its consolidation on August 1st, and this is reported with other commercial NII. Clearing NII remained broadly in line with Q2, exceeding expectations. Higher liability margins and stronger-than-expected other commercial NII allow us to raise our full-year commercial NII guidance to above EUR 6.9 billion. Let me now move to the NII sensitivity based on the current rate environment. At current forward rates, future investments of our replicating portfolio will further improve its performance. How that improvement translates into higher NII depends on deposit migration, volume developments, and how margins develop. Today, around EUR 50 billion of current account volume is managed using our replicating portfolio. Assuming this volume stays constant, current interest rates lead to an incremental benefit of around EUR 20 million for Q4.
This rises to around EUR 215 million in 2027 and EUR 350 million in 2028 compared with projected full year 2026. These are illustrative amounts. This is not a guidance. Lower rates or clients moving into interest-bearing products could reduce the benefit. When we discuss future NII developments, we generally assume constant margins on saving and time deposits. However, saving margins have improved over the past few quarters and are now above historical levels. A sustained change of 10 basis points in our saving margin, up or down, would change annual NII by around EUR 125 million. We intend to provide NII guidance for 2027 with our Q4 results. Now turning to fee and other income. We are demonstrating structurally higher fee income levels. For the third quarter in a row, our fees ended above EUR 600 million.
Personal and business banking benefited from higher payment and card service fees and higher asset management fees, while NIBC also added EUR 7 million. Wealth management fees were broadly stable when ignoring some non-recurring M&A-related fees. Last quarter, corporate banking fees benefited from strong corporate finance deal activity, and this activity slowed down during the summer. Clearing fees remained strong, driven by volatile markets, though slightly lower overall volatility, as not all months sustained a high volatility level. We show other operating income here, excluding the EUR 85 million badwill from the NIBC acquisition. The increase to EUR 133 million in Q3 reflects higher equity participation results and better ALM results. Now turning to costs. Underlying operating expenses increased around EUR 65 million in Q3, of which EUR 30 million is due to NIBC. IT costs increased due to planned investment in a new data center and expanding our capacity in payments and cyber resilience.
Lower average internal staffing this quarter helped contain personnel costs. Q4 will include the Dutch banking tax, and we expect some higher seasonal expenditures. The negotiations on a new collective labor agreement have not yet led to an agreement, so the impact is still uncertain. Nevertheless, we remain fully on track for cost guidance of around EUR 5.5 billion this quarter, excluding incidentals and restructuring costs. We will start 2027 with a higher cost run rate, reflecting IT investments and the full NIBC cost base. After the legal merger of NIBC, which is expected around the summer of next year, we can begin to realize the planned cost synergies. Now turning to credit quality. Credit quality remains strong, with a cost of risk of - 2 basis points, bringing the year-to-date cost of risk to 3 basis points.
Portfolio quality continues to be supported by our highly collateralized portfolio and a robust Dutch economy. NIBC further contributed to this with a low-risk mortgage portfolio. This quarter, model-related releases on corporate loans more than offset impairments on individual files across several sectors. This resulted in net releases of EUR 11 million. Given continued geopolitical uncertainty, we have kept the weighting of our negative macroeconomic scenario at 55%. For full year 2026, we expect the cost of risk to remain below our through the cycle range of 10 basis points- 15 basis points. Overall, our credit quality remains strong, reflecting the strength of our loan book, prudent risk management, and strong collateral across our portfolios. Turning now to our capital position. The NIBC acquisition reduced our CET1 ratio by 70 basis points at the low end of our guidance. Our regulatory CET1 ratio is now 14.5%.
This figure excludes all profit contributions to capital, equivalent to assuming a 100% payout of those profits. The pro forma ratio I mentioned earlier is 15.3%. NIBC added EUR 6.6 billion RWAs, bringing the total to EUR 143 billion. RWAs remain broadly stable when you exclude NIBC. Business growth was largely offset by lower RWAs from applying the updated EBA loss rate data for immovable property. As I indicated before, next quarter, the Dutch mortgage floor will be removed, reducing mortgage RWAs by around EUR 7 billion. The sale of Alfam will reduce RWAs by around EUR 1 billion. We will update you on our annual capital assessment with our Q4 results. Let me now close with the key takeaways for the quarter. Today's results demonstrate continued execution against our strategic commitments. We are delivering on our priorities of profitable growth, rightsizing our cost base, and capital optimization.
Good business momentum continued across our core products and all our client segments. We raised our full year 2026 commercial NII guidance to above EUR 6.9 billion, and we are on track for cost guidance of around EUR 5.5 billion. The good progress we made on our strategic ambitions and the improved interest rate outlook give us confidence in achieving our 2028 targets. Therefore, we intend to update our financial targets and extend the horizon to 2029. We will provide the full details with our Q4 results. That concludes our Q3 results, and we will now open the line for your questions. Thank you.
Thank you. If you wish to ask a question, please press pound key five on your telephone keypad. If you wish to withdraw your question, please press pound key six on your telephone keypad. The next question comes from Tarik El Mejjad from BofA. Please go ahead.
Hi, good morning. Thanks for taking my questions. I have two, please. First on the costs. You are pointing to higher costs from 2027, including IT investments and NIBC integration. But if you look a bit big picture, you are a bank which is actually mostly Dutch mortgages, wealth management mostly in Europe, with the corporate, and the cost income guidance currently is 55%. I mean, consensus is much lower than that, but do you think the next plan will be actually a big focus on this? Because do you think you are a bank that should be having costs down in absolute terms in the medium term, while now consensus and your kind of guidance suggest that costs will continue to go up, ex even incidentals? This is the first question. Second one is on the net interest income.
Could you remind us the assumptions underneath your guidance for above EUR 6.9 billion, and the way you look at your sensitivity in terms of pass-through, but also what do you expect in terms of deposit growth from here? I mean, Q3 was seasonally weaker, ex-NIBC. What do you see in Q4, and what do you assume in your outlook? Thank you very much.
Thank you very much. I will take your question on cost, and Ferdi will answer on NII. On cost, first, let me remind you that this year, we have improved twice our cost guidance. If I may remind you, we started at EUR 5.6 billion, we lowered it to EUR 5.5 billion, and then at Q2, we said EUR 5.5 billion, including NIBC, and we are absolutely well on track to achieve this cost guidance. You can be fully, I would say, certain of our cost discipline and our focus on this topic and on delivering all the cost synergies we have committed for the current plan. We are still early in the plan, if I may say. This is one year in a three-year plan. I am not already working on the next plan. Nevertheless, do our ambitions stop with the current plan? Absolutely not.
As you can see, we are, I think, moving at pace in delivering on our ambitions.
Tarik, specifically on NII, we only have 1.5 months left in the year, so we are comfortable with the current underlying momentum with our upgraded guidance above EUR 6.9 billion. That is really on the back of the tailwind of the replicating portfolio, as you see in the expansion we have seen in the liability margin. In general, but that is also in earlier quarters, we assume constant margins on interest-paying deposits. What we try to do here on the sensitivity slide is provide some better insights in the split of liabilities and the potential tailwind on the current accounts. The only note I want to make here, as already said by Marguerite during her presentation, we are above historical margin on interest-paying deposits, and also the forward rate we based this on, this was based on the end of October.
If you look at the forward rate today, the forward rate of today is lower. Yes, we try to extrapolate the effect specifically on the current accounts, because that is normally a stable base. Overall, if you look at the outlook, you need to consider that currently on the interest-paying deposits, we are above historical margins, and you have also seen some migration over this quarter into terming out. Overall, comfortable with the tailwind remaining of the replicating portfolio, but also some caution not to try extrapolating the current trends.
Thank you.
Last question was deposit growth, underlying deposit growth. Sorry, Tarik. I am just looking. Underlying deposit growth, we said at the CMD that is 3%-4% underlying, so that would translate in our expectations of roughly EUR 10 billion per year.
Thank you. In terms of the higher NII coming from rates, you mentioned the clearing NII, could you give us a bit of the split there and how much clearing NII has contributed to the upgrade?
Overall, we said if you currently look at clearing, Marguerite said during the presentation it was slightly lower this quarter, because there was one month with less volatility. Overall, we provided last quarter an indication of EUR 600 million for other commercial NII, but we expect in the guidance that clearing will remain around current levels.
Okay. Thank you very much.
The next question comes from Shrey Srivastava from Citi. Please go ahead.
Hi, and thank you very much for taking my questions. My first is again on this mix shift point that you noted. I would think in the Netherlands, given your lower proportion of non-interest-bearing balances in the first place, there would be less scope for mix shift. But any sort of signs that you have seen on a more structural basis that mix shift could continue, or anything you could point us to from previous cycles, would be very interesting. My second question is on the net new assets in wealth management. I mean, your target of EUR 5 billion-EUR 7 billion, when you translate into a rate, screens lower than both the rate of sort of wealth growth and financial asset growth in the regions you operate, and also below some of your private banking peers.
Can you just elaborate on how much exits of existing relationships are included within that, and what you think the scope is to outperform there? Thank you.
Ferdi, I will let you take the NII question, and I will answer on wealth management.
Yes, to start on NII migration, as said, we introduced new savings products, a Time-Lock Savings and Quarterly Savings. Also, we just announced, I think earlier this week, that we offer also short-term time deposits below one year. This is really being meant for the more price-sensitive clients, also in wealth management, to offer attractive rates as an alternative. Most of the migration, but we said that already, we have seen over the past two years. So, if you look underlying here, the migration was still limited. Overall, for this quarter, it was roughly EUR 3 billion, but specifically from wealth management clients.
On wealth management, we are fully in line with the developments we had shared at our CMD regarding the growth of this business. As you remember, for wealth management, our ambition is for 2028 to have a total of EUR 335 billion of client assets. The underlying growth, indeed, if you take it on a yearly basis, is the EUR 5 billion-EUR 7 billion I referred to. As you also know, there is some seasonality in the wealth management business for us, because usually, the fourth quarter is the strongest one. The reason is that we have more than 35% of market shares in the Netherlands in wealth management. This is our primary market, and we are the house bank for clients. So usually at Q1, they pay their taxes from their ABN AMRO account when they have several banks. This is why you observe some seasonality.
But all in all, we are comfortable with the commercial momentum we have in this business. It is true in the Netherlands. It is actually also true in Germany, where I feel commercial momentum has been very strong, even though our colleagues at HAL and Bethmann had to also grow through an IT merger. So I am very happy that they remained very client-focused while going into this integration.
Thank you very much. Just a final one on the net interest income. On your main client savings rate, which is the main driver, when ECB rates initially went down, am I correct in assuming you did not pass on the vast majority of those rate cuts to your customers? So, in terms of the competitive dynamic and the need to pass on higher rates, any further comment would really be appreciated there too. Thanks.
We clearly do not comment on expectations of pass-through or our rate expectations here. Clearly, it was completely different when we went into negative rates, where we compensated clients with 0% up until EUR 100,000. But so far, we have seen a disciplined market. As said earlier, we are happy where we are today, and we are offering competitive products for clients outside just the base savings accounts.
Thank you very much.
The next question comes from Delphine Lee from JP Morgan. Please go ahead.
Yes, thank you for taking my questions. Just a few quick follow-ups. First of all, net interest income. For those new products that you have offered to clients, you are saying that the market has been quite disciplined. What drove your commercial push? Is it because you think that competition will sort of Are you trying to anticipate competition here? Or just trying to understand a little bit the dynamics. Is that intensifying as the rates are going to continue to increase? Are you planning more of these products to achieve your targets in terms of 10 billion of deposit growth? And at what cost does that come to your NII?
Second question is just a quick one on fees and commissions. I think you mentioned in Q2 that there were some non-recurring fees, I think in wealth management. If you might just quantifying what was maybe a little bit exceptional in your Q2 numbers. Really last one on the cost side, just going back to Tarik's question. Are you flagging for 2027, a start? Of course, because of full consolidation of NIBC, you are going to have a higher base. But considering your current targets for 2028, there should be, and considering your progress as well on cost, there should be more scope for further improvement in absolute terms in terms for the cost base. Or is the intention to invest more? Because you also mentioned quite a bit the IT investment. Thank you very much.
Thank you very much. I will take your question on new products, and Ferdi will respond on fees and cost. We are an innovative bank, so part of what we do, because that is in our DNA, is to actually launch new products. This is what we have done with these two new savings products launched this quarter, because we feel that it offers to our clients a broader scope of solutions and optionality that caters to all their needs. We do that in savings, but I would say we do that in all parts of the game. For instance, if you look at what we have been doing with BUX, which I am very happy with the progress. We are the only bank in the Netherlands to offer such a solution for teenagers and their families.
Innovating is just not a function of how we anticipate that the market will move, but also what we feel may be the best way to respond to our client needs. This being said, we always considered the Dutch market to be on savings, as in all products, a market that is competitive and very transparent. Ferdi, on the fees, the exceptional elements that we had in Q2.
Yeah, Delphine, maybe we were not as explicit last quarter, but number one, what you always see over the summer quarter, that you see lower capital markets, corporate finance transaction deals. That is an impact quarter-on-quarter you will see in the corporate bank. Marguerite says already clearing is elevated, but slightly lower in Q3. Number three is there were some non-recurring, but that is mainly related to M&A fees within wealth management. There were a few elements in there. What I would really look at, if you look overall at fees still shows 6% growth year-over-year, excluding M&A. That is still quite a bit above our 3%-4% that we provided at the CMD. Then on costs-
Yeah, on costs. I am sorry. Oh, go ahead. Yeah, you had a, Ferdi, on the cost question. Yeah.
No, maybe specifically on the cost outlook. Marguerite was very firm, and we stand with our cost target of EUR 5.5 billion. What you will see for next year, the NIBC effect, it is not only the seven additional months, but you are also going to see the integration costs. So overall, NIBC effect next year will be around EUR 150 million. Yes, IT investments, we expect them to remain in 2027 at a higher level, really reflecting further investments in areas such as cybersecurity and data center. At the same time, you will also see the impact of inflationary pressures impacting existing contracts, as well as a potential impact from the CLA. At the same time, we continue to deliver on our savings initiatives. So, we are fully committed despite the higher inflation environment on the EUR 5.5 billion in 2028.
But we also clearly want to flag you are going to see an increase in absolute cost in 2027 versus 2026.
Great. Thank you very much.
The next question comes from Giulia Aurora Miotto from Morgan Stanley. Please go ahead.
Hi, good morning. Thank you for taking my questions. I have two. First, just to be clear on this cost discussion, could you clarify how much restructuring cost exactly you plan to take next year? Also, consensus has got cost basis of EUR 5.674 billion in 2027, which is already quite an increase in 2026. I think you are flagging that costs are going up next year, but I think this is already reflected, or am I not understanding, and your goal is probably to push that EUR 5.674 billion number higher? That is on costs. Then secondly, on NII, on slide 10. I hear a lot of caution in your remarks, but I think this slide is actually quite conservative. I know the curve is now lower, I get that, but these columns are only on current accounts. There is no benefit here on the rest.
I hear you that probably the savings rate will go up. I get that. Still, there will be some benefit on that part of the NII, of your replicating portfolio as well. I was just curious to confirm that I understand this correctly, that this, let us say, EUR 215 million is only limited to EUR 50 billion of current accounts, which is less than half of your replicating portfolio, in fact. It is a partial disclosure of a bigger benefit, I guess, that you see. Thank you.
Mm-hmm. Thank you very much.
Yes, let us start, Giulia, on cost. Yes, I see consensus indeed, what was shared, reference to the EUR 5.674 billion, as you mentioned. That includes EUR 144 million in restructuring charges. I read this as, but correct me if I am wrong, excluding incidentals, consensus has EUR 5.5 billion. As I just said, the elements of the full year inclusion of NIBC, inflation, higher run rate in IT, and then you can go on potential higher levies as well with NIBC, that will have an impact. I just want to be clear, if you look at the restructuring charges overall, year to date, we booked EUR 110 million. We do not expect a lot residual for the rest of the year. As we said at the CMD, it will be roughly EUR 100 million annually in restructuring charges. So, we stick to that.
Then if you go to NII, I get you in saying, "Why are you just showing your current accounts?" The reason that we're just showing the current accounts, that we would just want to provide a better insight in what the tailwind is if this stays constant. The earlier liability margin potential we showed was really based on extrapolating the underlying margin trends. As said, currently we're quite a bit above historical margins, so if you are going to see price action in the markets, it will have an impact on that. So it's just a reflection of the sensitivity of the current accounts, and you should take into account that interest rates, migration, competition, all will have effect on the rest of the part of the total NII.
In general, we just assume constant margins on interest-paying deposits, but that assumption has become more optimistic now we're a quarter further than last quarter.
All right, thank you.
The next question comes from Benoît Pétrarque from Kepler Cheuvreux. Please go ahead.
Yes, good morning. The first question is on the extension of the time horizon to 2029. Will that be purely an update on the financial targets, or can we expect also some update on the strategy? I know the strategy presented last year was a very good one, obviously, but you had more time to develop that strategy. So any strategy consideration we should expect? Also maybe looking at the commercial and the corporate bank developments, any update we should expect there? Then, sorry to come back on the couple of questions on the NII. First of all, it would be very useful if you could provide a bit more details on where you stand on the margin on savings accounts versus historical average, whether it's 10%, 20% higher. That would be very useful. Do you expect some normalization of savings accounts margin in 2027?
Is that your current base case? I know that on the slide you show basically everything stable, but purely from a management standpoint, do you expect more normalization from current levels or further expansion? That's the question. Then maybe on clearing NII, because clearly, I think, Ferdi, you said that it's going to stay at current level also in the fourth quarter, but what about 2027? I was trying to understand what the clearing NII could do next year versus the current level. Thank you.
Thank you, Benoît. I will start with your question on all time horizon, and Ferdi will take two other ones. So at Q4, we will indeed provide you with a financial update for 2029. This is not going to be a new CMD or full strategic update. Of course, everything we are presenting, because we only commit on things that we can deliver, everything we will be presenting will be firmly grounded in business cases that we will have. So all our assumptions for 2029 will be indeed firmly grounded in what we see, but this is not a full strategic update. Ferdi, on NII?
Yeah. Benoît, for 2027, as Marguerite already said, we will make it transparent and provide absolute guidance at Q4. Specifically on where we currently are and how far above historic margins we are on savings margins, we don't disclose that, but we've also said over time, we expect a gradual normalization. Does that mean an immediate normalization next year? That would not be my current assumption. Then if you look at clearing, elevated level clearly this year on the back of higher volatility, but also underlying commercial momentum in clearing is a positive where we launch new products and where we onboard new clients. But we are always a bit more prudent and would expect some normalization next year in terms of volatility. So in being prudent for now, I would not extend the momentum we've seen in the past two quarters directly for a full year in 2027.
We do not split, but as you know, we will provide a quarterly report, annual report on clearing mid-next year. If you look last year, over 2025, it was around EUR 350 million in NII, but this year is clearly higher than that number.
The EUR 350 million still stands on a normalized basis, or this is going to be a bit higher than that?
On a normalized basis, specifically for clearing.
Yeah.
That is an indication on a normalized level, but as said, this has been a very good year for clearing, and it depends on what is structural versus what is cyclical. So, overall, we are confident.
Okay, great. Thank you very much.
The next question comes from Benjamin Goy from Deutsche Bank. Please go ahead.
Good morning. Just one question left, just to double-check on the NIBC asset quality. Now, we had a couple of months to look in very much detail. Seemingly, there was no need to book anything, but just double-checking, because historically, they had some corporate client exposures that were more volatile. So wondering how you think about potential sub-portfolios like fiber or anything that keeps you awake at night. Thank you.
I will answer your question, but pass it on also to Serena. We carried thorough due diligence, of course, when buying NIBC, and as you know, all the part that we considered non-core was actually sold at the time of the acquisition that was part of the deal we had with Blackstone. So, we are very comfortable with everything that came with NIBC, and we are also making sure that the provisioning framework is in line with ABN AMRO's prudent habits and ways of doing things. But Serena, maybe you want to elaborate.
No, thanks, Marguerite. As you can see, we have circa 70 basis points capital impact based also on our PPA, and this is incorporated up to Q3. In Q3, we had a net impairment release, and that includes also our review of NIBC. It has been a good quarter, and largely, therefore, we have confirmed what we have seen in the due diligence. There has been no material items as part of IFRS 9 alignment.
Thank you.
The next question comes from Anke Reingen from RBC. Please go ahead.
Yeah, good morning. Thank you for taking my questions. The first is on cost. I am just following up on Giulia's question. In the past, you always indicated that higher inflation, you think you will be able to offset with additional initiatives. Do you think your 2028 guidance, the EUR 5.5 billion of costs, is that now at risk from more headwinds than you expected? On net interest income, just on the lending margin, just confirming that the decline is in line with your expectations, and we should continue to see a trending downwards from the Q3 level. Then, sorry, just a small follow-up. On your liability margin, you talked about we are running above sort of like normalized levels. Where do you see your sort of like normalized level? Thank you very much.
Thank you. On cost, let me be very clear. We absolutely confirm our 2028 ambition of EUR 5.5 billion. There is no question on this commitment. On the lending margin, I will pass it on to Ferdi, but just bear in mind as we flag that on mortgages, we see a higher share of what is called NHG mortgages that benefit from state guarantees. These mortgages come with lower margin, but at the same time, no capital requirements. So basically, these are still profitable loans, but they have an impact on the overall asset margin given what they represent in our mortgage portfolio. This was in line with our expectation. On liability margin, Ferdi?
Yeah, on liability margin is we have said so far, we do not want to provide any sort of levels what is normalized or not. I really want to stick to the disclosures we provided here in the presentation, where we really show what the sensitivity is of a stable base of current accounts. You can start translating that to the EUR 7.2 billion we provided at the CMD, but for now, I do not want to provide any sort of deltas versus normalized liability margins, Anke.
Okay. Thank you very much.
The next question comes from Alberto Artoni from Intesa Sanpaolo. Please go ahead.
Good morning. Thank you for taking my questions. I have two follow-ups. The first is on other income. I would like to have a little bit more color on what is driving the good performance over the last two quarters. In previous quarters, the performance has been more subdued, and it seems that something has changed. Is there any particular trend, any particular macro development that is helping this line of the P&L? The second is just a follow-up on the cost of risk. It seems to me that even if we exclude the positive model contribution of this quarter, the underlying level of the cost of risk was very low. Also, in the past quarter, it has been very low.
Perhaps the normalization that we were expecting is not materializing, and it is fair to assume that the benign environment will last longer than we probably had anticipated before.
I will take your question on other income and pass it on to Serena on cost of risk. As you know, other income is volatile by nature. Therefore, we do not provide specific guidance, though historically, other income on average has been around EUR 100 million per quarter. What you see in this quarter's other income of EUR 218 million, you see mainly the reflection of NIBC, and excluding NIBC, the improvement is primarily due to higher equity participation results, and as I mentioned, also improved ALM results. This is how you should read that line. Serena, on cost of risk?
You are spot on cost of risk. Even if we were to exclude the model-related and overlays releases, we would be about 5 basis points, 6 basis points cost of risk, so far below our through-the-cycle expectations. This is across all business line. We have seen relatively mild additions, and we had even some releases. Therefore, you are right. The normalization is expected more slowly than we had predicted at the time of the CMD. We still think, though, that we shall be back towards the low end of our through-the-cycle as we move towards the coming years.
Yep.
Thank you.
The next question comes from Chris Hallam from Goldman Sachs. Please go ahead.
Yeah, good morning, and thank you for taking my questions. First, on CLA, when do you expect to conclude the CLA negotiations? Does the outcome have a significant bearing on where you end up on OpEx next year versus the EUR 5.67 billion of consensus OpEx? Are there levers you could pull elsewhere to offset perhaps a higher CLA outcome? Second question then, the size of your excess capital position, I guess, naturally points you perhaps further towards M&A. You are not going to get to 13.75% with 100% payout alone. So my question is, how far through the integration of NIBC would you need to get, and how far through the front-loaded self-help elements of your plan would you need to be before you would consider another deal? I.e., how quickly would you be able to stack up one deal after another?
As part of any deal, would you see a chance that the NLFI stake in ABN AMRO goes up again rather than trending lower? Thank you.
Thank you very much for your question. On our CLA, as you know, our negotiations on the collective labor agreement are ongoing. We will resume discussions with the unions on November 19, and we remain focused on reaching a good CLA through constructive dialogue with the unions. What I mean by a good CLA is a good CLA for all colleagues and also a good CLA for the future of our bank. I believe in a balanced outcome. I am not going to comment here any further because I believe that the CLA negotiations belong to the negotiating table, and this is where I want to keep them. On M&A, first, how have we progressed with NIBC? We are progressing at pace, the same way we have progressed with the HAL integration at pace. We are delivering on the timelines and the budget we had in mind.
For NIBC, we expect the legal integration, legal merger to happen next summer. When it comes to M&A, we have always reached a very clear criteria we have to consider inorganic growth. Basically, it has to fit with our strategic priorities, the five ambitions that we had outlined. Typically, HAL fits definitely with our ambition for wealth management, and NIBC fitted with our ambition of bringing scale to our retail business in the Netherlands. The criteria are very clear. Second, we look at M&A that will be accretive. If you look at the return on invested capital, for instance, with the HAL acquisition, that was roughly 15%, and with NIBC, roughly 20%. We look at accretive acquisitions, and we also always consider execution risk because we want integrations to be successful.
Good M&A is one thing, and then really the success comes with the quality of the integration. These are our criteria. On the last item of your question, I cannot speak, of course, on behalf of the NLFI, but my understanding is that the intention of the state has always been to fully return ABN AMRO to the market. I think this is the only comment I could make on this.
Thank you.
The next question comes from Farquhar Murray from Autonomous. Please go ahead.
Morning all. Just two questions, if I may. Firstly, please can you just outline the approval process and timeline from here to the capital return update at Q4? Within that approval discussion, will you fold in the refreshed targets you expect to outline at Q4 reporting? Secondly, might you be able to quantify your credit exposure to data centers and broader kind of hyperscaling trend? More broadly, what is your approach been in terms of underwriting and lending around that area? Thanks.
I will give your question on our exposure on data center to Serena, but it is a very moderate exposure. She will elaborate on that. When it comes to assessing our capital position, we basically do it with our Q4 results, and there we will also basically provide you with an update on our distribution for 2026. We have been very clear that our policy is up to 100% of our net result. On data centers?
On data center, obviously top of mind, we have limited exposure. In our case, it is below EUR 3 billion, including NIBC. We are talking about 1%, 1.1% of our total book. We have concentration limit in place, we have controls in place, and the quality of the portfolio is really strong, covered by long-term leases. I also would like to add that the AI-related exposure is minor. We also take an especially cloud kind of financing. We have really tight risk management on the topic, and we consider the risk manageable.
Yeah. To be very clear, our exposures are only in Europe, on prime locations, and as Serena mentioned, related to cloud, and not directly related primarily to AI, just to be clear on what we finance.
Okay, thanks.
The next question comes from Juan Pablo López from Santander. Please go ahead.
Yes. Good morning. Thank you for taking my question. I got two. Probably they are related. First one is on other commercial NII. We are seeing good progress there. It is more than EUR 100 million, third quarter versus third quarter last year. The second question is regarding your sovereign portfolio. The size is more than EUR 30 billion, if I am not wrong. If you could refresh us the strategy of this sovereign portfolio, duration, yield, potential higher contribution from the maturities, that would be helpful. Thank you.
Thank you very much. Ferdi will take your question on other commercial NII. Serena will take the one on sovereign exposure. Basically, what you should have in mind is that our sovereign exposure is primarily related to our liquidity reserves, and they are primarily Our sovereign exposure is basically primarily Dutch, German sovereigns, but I will let Serena comment on this. Ferdi, you want to start maybe with-
Oh, that's fine. I will start on other commercial NII. Yes, indeed, it's very good. At the CMD, we said it is around EUR 350 million-EUR 400 million, related back to the question asked earlier that was excluding HAL. So, the main part of that is clearing, but it's also interest-related fees. What we have added now is the impact of NIBC. So, that is the main delta you see here of around EUR 150 million expected for the full year. What you see here, we currently book all NII from NIBC in other commercial NII, and we will change that upon further integration. The reason for this is that NIBC treated deposits purely as funding source with the full margin reflected on the asset side, whereas we clearly split the margin between asset and liability NII with the replicating portfolio in between.
So, for now, it's booked in other commercial NII. That's why you will see the significant delta in there compared to previous quarter, but we will change this and split it in asset and liability once we're further down the integration.
On sovereign exposure, I think Marguerite said already quite a lot. I want to remind everybody that we don't take market risk, and we don't have material trading books, so we don't have proprietary P&L exposure. We do take certain sovereign risk in our liquidity investments and liquidity buffers that do impact our OCI, and the impact in Q3 has been really very minimal. When we look at the concentrations, I think Marguerite already commented on that. We don't have material concentration on France or other states, and the credit spread widening impact is also subdued. So, for the time being, no worries on our side.
Okay, thank you.
There are no more questions at this time. I will now hand the word back to the speakers for any closing remarks.
Well, we want to thank you very much for your questions, and well, at the latest, we will see you again for our Q4 presentation. Have a great day.