Earnings Call: Q3 2020

Nov 11, 2020

Good morning, and welcome to this ABN AMRO Third Quarter 2020 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 Mr. Robert Turok, CEO. Please go ahead, sir. Thank you very much, and good morning, and welcome to ABN AMRO's Q3 results. As always, I'm joined by Clifford Abrams, our CFO and Tonya Kuppa, our CRO. This time is different as each of us is dialing in from different locations, which reflects the reimposed lockdowns here in the Netherlands and also the UK. It shouldn't impact our results call though, but please bear with us during the Q and A session. You'll understand that our focus today is in our Q3 financials. I'll share Q3 highlights, update you on economic developments and our good progress on my priorities, including the wind down of CIB Non Core. We'll present on strategy and longer term plans and outlook at our investor update at the end of November. Clifford will go through the details of the Q3 results and run you through capital. Antonio will then update you on developments in our loan portfolio, including Q3 impairments and our latest guidance on full year 2020 cost of risks. So turning to the highlights. The Dutch economy is proven to be resilient as society adapted to limit the spread of COVID-nineteen. The Dutch government has the financial clout sustained large scale support measures and these measures indeed have been effective. Very happy to see that our impairments this quarter are moderating and the bank is returning to profit. Over the full year, we now expect impairments to be below the $3,000,000,000 guidance we gave last quarter and closer to our Q1 guidance of 2,500,000,000 dollars We remain cautious, however, looking forward. Interest rates remain low. Our NII is under pressure despite further action we are taking on charging negative rates. Our capital position is robust despite significant further TRIM add ons this quarter. I now expect Basel III to converge to Basel IV largely by the end of 2021. And during this period, we will continue to face capital deployment and uncertainty. I think we should ask everyone to go on mute. Thank you. So let's also make sure that to help you all callers go on mute until we're in Q and A that might help. So let me just pick up where I left off. I was talking about the expectation of Basel III to converge to Basel IV largely by the end of 2021. And so during this period, we will continue to face capital headwinds and uncertainties. COVID-nineteen is a big example of this. So I do remain cautious in coming quarters. Recent news on the development of a vaccine is very much encouraging, but it is, in all honesty too early to assess the full impact. We are progressing well on the strategic priorities I've set, especially the non core wind down, I'll come back to that later. I'll now update you on the Dutch economy on Slide 3. As I mentioned, the Dutch economy has been resilient. Two key metrics I'd like to highlight are the low unemployment rate and the bankruptcies are the lowest in 21 years. Now these metrics do demonstrate the strength of the Dutch economy as well as the effectiveness of support measures by both governments and banks. Payment holidays have ended and we've resumed servicing our clients via regular processes. Coming months will provide more insight in the payment behavior of our clients. Government support measures have been extended, the scope and eligibility is gradually being brought down. And we feel the impact of low rates, which we can only partially mitigate through negative deposit pricing. So I remain cautious looking forward. Also, let me give you some details on the Dutch housing market. I feel confident about the Dutch housing market, which has remained strong throughout the year. Low rates underpin the rise in our house prices and transaction volumes. The credit quality of our mortgages is very strong as loan to values continue to decline and unemployment remains low. Only a small part of our clients made use of the payment holiday and most have resumed regular payments. Our market share is stable and we now also offer competitive 30 year mortgages, which we originate to distribute. Looking ahead, based on the current pipeline of applications, I expect the market to remain strong and our market share to increase in the coming quarter. Let me now update you on the progress on our priorities on Slide 5. I'm pleased that the progress continues around these priorities. Let me highlight recent developments and how we're dealing with COVID-nineteen. On COVID-nineteen, our primary focus is the well-being of our clients and staff. Our video banking capabilities are proving its worth and we are taking extra care for special need groups. We are in an ongoing dialogue with all of our corporate and commercial clients and are closely monitoring developments of their businesses. I personally have been involved in quite a few conversations with clients myself to ensure service of the bank in these exceptional times. I briefly want to touch on our investor update, which we're finalizing. At the start of our strategy review, we decided to bring focus to CIB through exiting all non European activities, and I'll discuss progress in a minute. In order to ensure a clear navigation of any crisis, we need to be explicit about the vision of the bank post crisis. And this is why we continued and are now finalizing our strategy review. Yet we are in the middle of a global pandemic and that is why we also need to be realistic about the formulation of targets. Turning to Slide 6, I want to highlight our progress on the wind down. Progress on the wind down of our non core activities is orderly and good. I'm pleased our clients are able to find sources of funding elsewhere without difficulty, notwithstanding the current environment. This has allowed us to make good progress, reducing loan volumes by around 20% or almost $4,000,000,000 of loan volume. We are also driving down undrawn commitments. We aim to accelerate the natural rundown through loan disposals where value accretive. So provisions have been strengthened further for the added risk of the wind down. Overall, we maintained our loan loss reserves at 1,400,000,000 dollars while loans declined by 20% until provision coverage has increased materially. I'll now hand over to Clifford to take you through the Q3 results in more detail. Clifford? Thank you, Robert. As you said, we returned to a solid profit this quarter. As Robert explained, the Dutch economy showed resilience and this is reflected in moderating impairments for the Q3. Interest income is down due to continued pressure on deposit margins. I'm pleased with the gain on sale of our Paris office, which was a major real estate deal earlier this year. At the same time, impairments improved significantly from last two quarters. Tanja will run you through these developments later on. Robert described the good progress we're making on winding down our non core portfolio. However, from a P and L perspective this quarter, CRB Non Core has contributed not only to lower NII and fees, but also materially to expenses through restructuring provisions as well as impairments being mostly non core as well as taxes through the write off of DTA. We show the pro form a group P and L excluding CIB non core in the appendix on Page 25. And overall pro form a Q3 profit is €691,000,000 equivalent to an ROE of around 9% excluding incidentals. I will run through the details of CIB Non Core on Slide 8. On the right hand chart, you can see a good decline in trading commodity finance of 1,600,000,000 dollars Natural Resources declined reflecting quarterly reserve rebasing on current low oil prices. So these could go up in the short term if prices revert. The other category is mainly financial institutions, which have recently drawn on commitments, but we expect these to reduce in coming quarters. The consequence of the good initial reduction is lower income. Fee income almost halved driven by the strong reduction in undrawn commitments and off balance sheet products within TCF. Net interest income declined somewhat slower than the reduction in loans as margins are lower on the short dated secured and hedged TCF loans. Non core Q3 results included the one off cost of restructuring and the tax asset write off. The restructuring cost of €144,000,000 is lower than we indicated previous quarter as we no longer reserve retention costs, but rather book these each quarter as they're incurred. In Q4, we showed the net Q2, we showed the natural wind down profile of non core in analyst presentation, and we expect the portfolio to roughly half from the first half of twenty twenty to the end of 2021. You can see we're running a little faster than this today, but it remains early days. So we expect NII to broadly follow in line with the declining portfolio, while fees will be lower from 2021. Overall, the reduction in RWAs was partly offset by a pre TRIM add on in respect of non core of $700,000,000 and there may be further TRIM impact ahead as we are waiting the TRIM letter on commodity financing. Turning now to Slide 9. I'm pleased the lending volume of the core bank held up in challenging markets. Mortgage volume held up well given the strong housing market and high transaction volumes that Robert described. Commercial Banking volumes were slightly lower as clients currently have limited funding needs reflecting the current economic circumstances. We also see this in the limited intake in the various government guaranteed schemes reflecting support measures from the government. The overall client lending is expected to stabilize into next year for the core bank driven out driven by the phasing out of the support measures. I will now discuss interest rate developments on the next slide, Slide 10. As you can see, NII declined for the core bank, reflecting margin pressure on deposits. The decline in our NIM, our net interest margin, is mainly a reflection of the increase of our balance sheet from participating in TLTR-three and the corresponding increase in cash and liquid assets. Looking ahead, we face further deposit margin pressure of around $20,000,000 per quarter at current rates and which we can mitigate to a certain extent through negative deposit pricing. And as you know, the threshold for negative deposit pricing will be lowered from €2,500,000 per client to €500,000 per client from January 1 next year. The wind down of CIB non core leads to NII declining by around €10,000,000 per quarter and slowing down from here into next year. So I expect NII to be around €1,400,000,000 for the coming quarter Q4 and looking into 2021. This is based on end of October rates, so before the recent market reaction to vaccine developments. So far, these movements are not material to our guidance. Overall, we are cautious on being able to achieve the threshold for the low TLTRO rate given COVID-nineteen and the appetite from our clients and therefore no benefit for this is currently included in both our numbers and our guidance going forward. Also, we've not included in the guidance I've just given you the one off charge that we expect in Q4 due to an expected change in accounting estimate, the amortization of penalty interest on mortgages relating to recent client behavior. Now turning to Slide 11. Our other income this quarter was very strong due to a large gain from the sale of our Paris office of €263,000,000 before tax. We will move to a more energy efficient office building in due course, which is also smaller as employees will be increasingly working from home. Looking ahead, fee income in coming quarters is expected to remain low, while COVID-nineteen continues to impact credit card usage and asset management fees. I see this decline as mostly temporary as these are linked to the duration of restrictions and I expect fees to recover in the course. To support our fee income, we recently increased package fees, fees on current accounts for which new pricing started on October 1. Fees for CIB non core, which declined around £14,000,000 for Q3 will run off significantly into 2021. Now turning to costs on Slide 12. Cost reductions will remain a priority for us going forward and we will update you further at our November update on costs programs in the future. During this period, we have absorbed considerable increases in AML costs this year given our cost saving programs and good cost control we've delivered. AML costs are running at around €100,000,000 per quarter excluding provisions and are expected to land around €400,000,000 this year as we guided previously. However, we do see some upward pressure into next year. We have achieved €1,000,000,000 of cost savings to date and are well on track to reach our €5,100,000,000 cost target by the end of this year. With that, I'd like to hand over to Tonja to discuss asset quality developments. Thank you, Clifford. This quarter, we saw impairments moderating as we had limited individual impairments and no exceptional files. Most impairments were within CIB non core in total $171,000,000 This mainly consisted of a management overlay of 100 $6,000,000 on the CIB non core portfolio to capture incremental wind down risk for performing loans. The remainder were additions to existing Stage 3 files in offshore, oil and gas and food sectors. Within commercial banking, dollars 51,000,000 out of total impairments of $102,000,000 were related to the more negative outlook following stricter COVID-nineteen measures recently imposed by the Dutch government. Overall, our Stage 3 exposure remains stable as limited inflow offset write offs. Stage 2 declines as clients in impacted subsectors and classified as Stage 2 have now been individually assessed moving many clients back to Stage 1. For retail and private banking, very limited change on a net basis this quarter. As a consequence of lower consumer spending adding to a drop in past due rates. I now turn to Slide 14 to discuss the outlook of impairments for 2020. As mentioned by Robert, the support measures of the Dutch government have been very effective, leading to lower to low bankruptcy numbers. Q3 cost of risk was 42 basis points and lower than prior guidance reflecting support measures and following an economic recovery during the summer. For the full year, I now expect impairments to end below earlier guidance of $3,000,000,000 and closer to our Q1 guidance of 2,500,000,000 The bank's payment holidays have mostly ended and regular payment schedules have been reinstalled. Based on conversations with our clients, we do not expect a cliff effect. I remain cautious for next year as impact of the 2nd lockdown in the Netherlands is uncertain and it's too early to assess the impact of recent vaccine development. I expect impairments for impacted sectors to carry over into 2021. The outlook for 2021 is uncertain and I don't want to give a precise forecast at this point. Though our base case scenario expects impairments to remain below the 2020 levels. With this, I would like to hand back to Clifford. Thank you, Tanya. As you can see, our capital position remains strong with a CET1 ratio of 17.2% under Basel III and around 15% for Basel IV. Please bear in mind this ratio excludes the 2019 full year dividend that we reserved and which equates to some 50 6 basis points of capital. Basel III RWAs increased during the quarter, reflecting the €6,000,000,000 TRIM add on, partly offset by the implementation of the SME support factor and the wind down of CIB non core. The leverage ratio is strong and currently benefits from a temporary exemption allowing exclusion of Central Bank reserves from the exposure measure. TRR2 will be implemented next year, greatly reducing the clearing exposure measure around the same time the exemption ends. These effects more or less offset each other, so our leverage ratio remains strong going forward. I will now go into more detail on TRIM and Basel IV on Slide 16. Now that I've updated you on our Q3 results, I'd like to talk you through our capital outlook for next year. I want to give you this detail as it represents important background to our approach to capital management going forward and which we will set out at the Investor Update end of November. So first, let's look back to the announcement of the Basel IV framework at the end of 2017 and here the RWA inflation we were faced with was over 35%. On the chart on the left, you see this gap has closed considerably, largely the result of TRIM and model reviews and to a lesser extent due to Basel IV mitigations. We've currently taken a total of around $20,000,000,000 of RW3 add ons for Basel III and are still awaiting 2 additional letters as the TRIM process finalizes during 20 21. Also next year, the deferred DNB mortgage add on may well be implemented, which could add another $6,000,000,000 of RWAs. In addition, we tend to switch some portfolios to the Basel III foundation approach, leading to another $5,000,000,000 additional RWAs. These developments will largely close the gap between Basel III and Basel IV by end 2021. Against this backdrop, we expect headwinds and uncertainties on both capital position and capital generation. Low rates put pressure on NII and we expect further impairments from COVID-nineteen. In addition, we're facing the AML investigation. Our full year 2019 dividends are currently reserved and payment will be prudently considered following our Q4 results, taking into account the status of the ECB dividend recommendation as well as conditions and prospects at that time. Now handing back to Robert for the highlights. Thank you, Clifford. So to summarize, it is indeed good to see us returning to profit for the quarter. The bank is resilient, showing a good performance, especially including non core financials. We've made good progress on our non core portfolio wind down, although this has also impacted our P and L this quarter. We continue to be strongly capitalized with a Basel IV ratio of around 15%. Nonetheless, we remain cautious on the short term future given current circumstances. Looking ahead, it is indeed essential to have a clear vision on the bank we want to be, and this will be part of the investor update on November 30. So with that, I'd like to ask the operator to open the call for questions. As we are in different locations, I'll be a bit more disciplined about directing the questions as usual. So operator, may I have the first question? Thank you, sir. Ladies and gentlemen, we're starting the Q and A now. The question and answer Our first question is from Mr. Omar Fall of Barclays. Go ahead sir. Your line is open. Hi, thanks for taking my questions actually. So a few of them. So firstly, on NII, where I wanted to understand the drivers a bit divisionally. If I look at NII for retail, it's flat sequentially. It's also flat sequentially for Commercial Banking. But when I look at the chart on the right on Slide 10, you have basically the €34,000,000 or so of core NII headwinds, which would presumably relate to those businesses. Yet the decline in NII this quarter is really coming from non core in the corporate center. So could you explain what's happening there? Secondly, sorry to be pedantic, but when you say that NII should see a €10,000,000 decline to quarter from here, it makes a material difference, our 2020 one NII estimates like over €200,000,000 if the base we start with is exactly €1,400,000,000 in Q4 or is the Q3 level minus €10,000,000 So if you could get us give us a slightly more precise indication of how we should think about that so that there's no confusion? And then if I take the Slide 14 and I take a ruler out and I look at the chart on the right, it seems to be suggesting something around €2,000,000,000 impairment charge next year. I know your guidance is kind of below 2020, but is that kind of the message that you're trying to give us? That would be helpful. Thank you. Well, thank you for your question. I'll ask Clifford to take the NII and maybe Tanya, you can take the impairment. Yes, happy to take that. I think you're quite right regarding the segment accounting. Most of the reduction this quarter has been in group functions. And our approach to group functions is to pass on a lot of the funding costs to the businesses. And this quarter, we've had the benefit of TLTRO and we've passed on that funding cost. And so for this quarter, that has flattered the segment. So I would draw your attention to the bridge that we that you referred to on Slide 10 to give the underlying movements. In terms of NII, I won't be drawn on a second decimal point for our Q4 guidance for NII. So I was clear that it was around 1.4. So you know the rules around rounding. I won't be more precise than that. I think the headwinds into Q4 are the ones I referred to, which was the low rates and the rate guidance I gave reflect end of October interest rates, also non core and we gave an indication of that. But also during Q4, we're halfway through Q4, Q4, we see balance sheet development that's pretty muted, reflecting the partial lockdown that we're in. That gives us some caution into Q4, which is why around 1.4. And that should be the platform going into next year. Thank you, Clifford. Tania, if you could take the question related to impairments. Yes. Thank you. And yes, we have included a chart on this Page 14, but it was not intended to give any further guidance beyond what I've said. It's had a guidance I can share is indeed below the $2,720,000,000 level, but still elevated impairment. So above the through the cycle cost of risk. And I understand it's a very wide range, but it's also early days. So at this point in time, I'm not able to provide a more precise guidance. Great. Thanks. Thank you. Our next question is from Mr. Tarek El Nougat of Bank of America. Go ahead please. Hi, good morning everyone. A couple of questions please. First, I mean, it was more on top down the on your strategy, I mean, I was a bit confused why you would preempt your Investor Day by managing expectations. When I look at Constancis ROE and my numbers, we are quite low ROE in 2021 and 2022. So where do you think we should manage our expectations? Is it probably on costs where we think that you do something material. And that would link to the second question of on costs where you mentioned that there's an upward pressure on AML costs in 2021. Can you maybe give us more color on that and why you see this pressure is coming from? I mean, when do we expect AML cost to plateau actually? Thank you. Yes. Thanks for your questions. I'll take the question on strategy and Clifford, if you could take the AML cost. Look, what we are reflecting here is caution. That's what you're hearing in our disclosures around Q3. I think that is very reflective of the situation we all are in, in a COVID-nineteen period where there's a number of unknowns. And that's what you see coming through in the disclosures that we are utilizing today. I don't want to get ahead of what we're going to be talking about in November 30. I would leave it to say though that we will give an update on our targets. We'll give an update on our capital as well. And I'm actually looking very much forward to it as it would also entail an update on the overall strategy of the bank. With that Clifford, do you want to take cost? Yes. On AML, I think we gave some guidance on AML costs a few quarters ago, and we expected them to be sort of plateauing roundabout now. And the guidance that I refer to is we do see a little bit of upward pressure. I think it's in the low tens of millions, but it's material in the context of the AML costs. So we just wanted to guide on On the other hand, we feel good about the cost saving programs that we've had in place. And you can see those delivering. So we're on track for the €1,100,000,000 overall despite some of the lockdown challenges of 2020. And clearly, you'd expect costs to feature in our investor update at the end of November, particularly going forward. And we think that's the best time to talk about longer term plans and guidance. If I can just follow-up on the strategy question, maybe I'll rephrase my question is, I mean, the plan seeing 2021 as a transition year probably. So this is why I'm a bit confused why we wouldn't see true with the uncertainty over the next 18 months with your business model basically that will be a positive where you kind of suggest it won't be. But I understand we'll leave it here and maybe we reconvene in the end of the month. Yes, I suggest we do that. And then let's follow-up on your questions when we've given you the full insight into the strategy update. Okay. Thank you very much. Next question is from Mr. Albert Plueg, ING. Go ahead please. Yes, good morning. Thanks for taking my questions. I've got 2. Maybe first to come on the CIB non core wind down. It was clearly positive, surprising way and I think also ahead of your own expectations as well set out with the Q2 results. How should I think a bit about this looking at the Q4 and let's say your original plan wind it down by 80% by 2023. So how much acceleration can we see these clients? Apparently, we're able to find financing else more quickly. And also, yes, how should I square that also into the NII guidance? I'm sorry to come back to that one for next year as well. Can you get some insight, let's say, on what kind of NII guide or NII drops, so to speak, you have in terms of size in your mind for 2021 compared to 20 20 to also understand that a little bit better? Thank you. All right. Thanks for your question. Indeed, we are pleased at the progress we're making around the CIB non core wind down. But let me ask Clifford to comment on the effects of NII and any related issues on that. Yes, just picking that up and we haven't changed the overall profile of the CIB non core. So that 80% by 2023 remains. That profile reflected the natural wind down, but we're pleased that we're running a little bit ahead of that. But it is early days and that reflects largely the short dated portfolio and success there. In terms of NII guidance, I gave a few sort of angles and I'll just comment on those. I talked about £10,000,000 per quarter sequential. We also give a breakdown of non core numbers at the back of the presentation and we gave that last presentation. And you can I think you can figure out that if the portfolio will be roughly halving from the first half of twenty twenty to the end of 2021? And so that would mean, all things being equal, NII would shrink by a little less than 50% to work through the numbers. So it's more like 60%. But I think it's important. And the reason we obviously made that point is the shrinkage of non core, which is a good thing, obscures the underlying trends in core. And while we're cautious in the short term, we clearly see upside potential and that will be that will be something we'll talk about at the end of November. Okay. Thank you. And maybe one smaller follow-up on the alternatives to potentially accelerate or do and sell the portfolio. I know that this was also mentioned in Q2, but I mean many things are in flux in the world as well. But is there, let's say, you mentioned explicitly on the slide again, so has there been already some dialogue or that or interest expressed in potential parts of the book? I think there has been I mean, actually, the liquidity generally has been maybe better than we thought in Q2, I mean, globally for all assets we see in the equity market. During the quarter, we did sell, I'd say, a handful of loans at good value. So where we can safeguard value, we'll free the capital in the short term. But we're not looking to trade on value for an accelerated time frame. We don't think it's in our interest to do so. We don't think we need to do so actually. So we'll update you quarter on quarter, but so far so good and the conditions and we're doing a good job and I think credit to the team that are hard focused on that right now. Thank you very much for that. Next question is from Mr. Benjamin Goy of Deutsche Bank. Go ahead, sir. Yes. Hi, good morning. Two questions, please, from my side. 1st, on fee income, looking at the Q on Q but also year on year performance at the group level, but also when you look at retail, I think it's disappointing also as compared to peers. So just wondering, are you overly reliant on credit card fees as compared to your competitors? Or what else do you see as a reason? And what measures do you plan to address that? And then secondly, on net interest income and passing on of negative rates to deposits now above €500,000 I'm just wondering, theoretically, the repricing of those should be €150,000,000 on an annual impact. Now you say you only partially mitigate a €20,000,000 quarterly impact from lower for longer. So is there any behavioral effect factored in? Or why is it comparatively modest impact from charging negative rates to almost €30,000,000,000 deposits? Thank you. Clifford, do you want to Yes. I'll kick out both of those. I think on fees, you're quite right. I think we have seen a decline in retail. We're the largest credit card operator in the Netherlands. And credit cards actually in the Netherlands are used primarily for travel purposes. It's different behavior than in other markets. So we've seen fees really sharply down in that business. And we support credit cards, not just ABN AMRO, but for 3rd party issuers as well, retailers. Naturally, that's sharply down as well. So that was behind my car. I expect that to rebound in due course. And you'll have as good a view as me on the timing of that. On the negative deposit pricing, I think the €20,000,000 per quarter sequential based on current rates reflects all the deposits, if you like, not subject to negative deposit pricing. So those from 0 up. We've lowered the threshold to 500 1,000 and that will apply to roughly €30,000,000,000 of deposits. It's possible some flow out as clients spread their deposits across multiple banks. And the way I think that would absorb to that 1.5 quarters of headwind. So as you think about the reason we said into 2021 is there won't be a steady decline. So you'll see those headwinds coming in. We'll see some volume impacts currently reported that could pick up next year depending on the economy. We'll see a benefit in Q1 of the negative deposit pricing. And then all things being it will come down further. In this we don't charge below €500,000 In the case of fees, I said also that we raised package fees. So that kicks in, in Q4. It's a pretty modest amount, but it's double digits on an annualized basis. So you'll see that come through the retail banking fee line as well. Understood. Thank you. Thanks for the question. Next question is from Giulia Olora Nioto of Morgan Stanley. Go ahead please. Hi, good morning. A couple of questions from me as well. So the first one on capital, just a clarification. Basically, between the EUR 6,000,000,000 of mortgage potential mortgage add on and the EUR 5,000,000,000 of further TRIM. You are almost done with Basel IV. There is a difference of less than 10%. Do I understand this correctly? I assume yes. Yes. I think the full answer is yes. Perfect. So then a competitor so then the real question comes. A competitor of yours has announced a target of 12.5 CET1. And they will also use that for pricing purposes. So wouldn't it be rational to expect ABN to move to a similar level? Yes, sorry. Go ahead and ask your questions and then I'll take the Capital One. I'll stop there. Yes. Thank you. Yes. I don't want to, at this point, talk about any capital ratios. It is important to realize that we want to give an overall picture at our strategy review because it will allow us to give you the full scope of what we've been working on. So if you don't mind, I'd like to take that question when we discuss our strategy review and the outcome thereof. Okay. Thank you. Next question is from Ms. Anke Rijingen of RBC. Go ahead please. Yes. Thank you very much for taking my question. Just sorry, one question, sorry, on the NII. Your comment was that the NII decline should have like tracked the decline in volume. And is the Q3, does it already reflect most of the rundown in the volume? Or given the difference in decline, the hit to NII is yet to be seen? And then on the provision guidance, Jan, you said at 2 point will be down versus 2021 will be down versus 2020. I guess that's also true for the core bank rather than just a function of the non core coming down. And given I mean given your overall cautious Thank you. Or next year? Thank you. Or next year? Thank you. Thank you. Clifford, you can take NII and Tania, do you want to comment on the provisions? Yes. So on NII, on Page 8 of the presentation, you can see between Q2 and Q3 non core NII down, so it rounds up to $14,000,000 So you can see that slightly less than the 20% decline alone in advances. You get some averaging during the quarter. It's primarily the low margin TCF business that's running down. And we called out, we expect roughly €10,000,000 but slowing from here. So you get a sort of a geometric effect. So it is declining, but that rate of decline is slowing. And I refer you to the guidance I gave earlier looking at the annualized rates. Thank you, Clifford. Tania? Yes. Two questions basically on provisioning. First on our guidance for 2021. And although that was related to the core bank versus the non core bank. And indeed, we do expect also for the core bank as a total to be below the levels in 2020. So we see that across the board. For your second question on the guidance for 2020, indeed our guidance had been at Q2 at €3,000,000,000 for the full year. We then expected to see more impairments actually for commercial banking in the Netherlands on the basis of the fact that we expect government support measures to mature after the summer and also the payment holidays provided by banks. What we've seen since then is that governments have extended their support and also while the impact of measures has been positive. So we see that well, a limited number of clients run into problems. And you've seen our individual impairments for commercial banking have been around $50,000,000 which is more or less a normal quarter. But the outlook is still negative also on the basis of the 2nd wave that we are seeing. So especially for Commercial Banking, we do expect some impact to see in 2021. And yes, we cannot basically well go ahead of the game and front load this. We follow the IFRS rules for taking impairments. And that means that some of it will fall into 2021 once it's the companies run into problems. Thank you. Did you say that most of your payment holidays have expired now? Yes, Yes. So almost all we have 2 schedules. 1, we had an opt in approach for 3 months and some clients were given a second 3 months and some of these have not been have not matured yet. But for the opt in approach that was provided to the corporate clients, they did run from April 1 till September 30, and all of them have been reinstalled and had the first collection took place in October. And actually what we see there is that short term days past due are actually in line with what we saw pre COVID. So we don't see any immediate problems or any, well, kind of cliff effect because of that. Thank you. Thank you. Next question is from Ms. Daphne Zhang of Redburn European Markets. Go ahead please. Hi, thank you for taking my questions. 2 please. First on cost, you mentioned that KYC cost is now expected to stay slightly upward next year, while previously you guided it to be peaking this year. So what does it mean for your cost target for next year? Previously guided under $5,000,000,000 cost? Do you expect you have incremental cost saves from probably lockdown measures to offset the higher business as usual KYC costs for next year? Secondly, on NII, I understand that you on volume, you're impacted by the CIB wind down of $3,500,000,000 this quarter. However, even if I exclude that quarter on quarter, you're still down 2%. So just I think there are 2 parts to it. 1, can you please give some color on the underlying dynamic and whether you see some improvement close to the end of the quarter or post quarter? And secondly, in terms of meeting the Telstra requirements, it seems that you are 5% short compared to your 1Q level excluding non core wind down and mortgages. Is it your strategy in the coming quarters to try to bridge that gap by lowering potentially lending rates in order to help volume and potentially achieve the Petrol 3 bonus? Or do you see this as not commercially or economically meaningful to do? Thank you. Thank Let me take the Telstra questions and on NII and cost, maybe Clifford. So on Telstra, it's clear we're not yet at our thresholds. We're taking measures and we're being responsible about getting to those thresholds and we'll continue to do so over the course of the next period. So on cost and NII, Clifford? Yes. I think just maybe mischievous comment. I think it's going to be hard for the whole sector to deliver on the TLTRO, right? So because given the economic circumstances. So I think we're quite whilst we want to support our clients, we're cautious about sort of squeezing margins in the short term that we're going to have to live with over the term of the loans for that short term benefit. So that's how we're kind of managing through. On AML, I think I gave some guidance on AML because we wanted to be open given the guidance we've given in the past. So those extra costs are quite small in the context of the group, that increase. As we go into next year, I think there have been some benefits and lockdown measures, travel and the like. We don't pay huge bonuses to ABN AMRO. So we're not in a position to cut bonuses in the same way as other banks given our business profile. I think I'd also say that we have it's very hard to start new cost programs in lockdown. And so that's typically like a headwind that we're facing. And so we've been clear on regulatory pressure, not just AML, but all the trends that we talked about also cost money to address. So I would just it's my portion. We do see scope for further cost savings over time. Digital, for example, is coming to its own during lockdown and it will be a feature of our update at the end of November. So when will you feel comfortable with the 2021 cost being under? No, I didn't say that. I didn't say that. I didn't say that at all actually. Got it. So I'll refer you to my previous comments. On and I think frankly that was at a different time. We had under Robert's leadership, we've got the opportunity, the strategy review across the bank and we'll update fully on that at the end of November. On NII, I'm looking at Page 10 in the chart in the slide deck. And you can see on the right hand chart that it looks like CIB non core wind down contributes, I would say considerably less than half of the decline. The deposit margin pressure is around £20,000,000 down, which I referred to. Asset volumes and margins, so you can see aside from CIB noncore, during Q3, we've seen volumes down somewhat in CIB and the Corporate Bank, down marginally in mortgages. That's 1 quarter whilst the Dutch economy is resilient. I think that was recovered nicely during Q3, given the support measures that the banks and the government have been able to provide, funding needs have been fairly muted. So in a perverse way, as those support measures phase out, obviously, gives us some worries about impairments, but it will help volume loan volumes. And that was behind our view that we expect the core bank volumes to stabilize, grow modestly from here before any sort of strategic thinking that we might present to you at the end of November? So you're less cautious on mortgage, but remain conservative on corporate lending. Can I say that? Yes. I think on mortgages, you see with 15% market share, we see that rising into the end of the year. Margin conditions are okay. Robert talked a lot about the robust housing market. So we see good about, call it, the retail sector, the mortgage sector, personal finance. I think the commercial banking and corporate has different drivers. And there you heard both Robert and Tanya, I think, quite cautious about particularly the SME sector as support measures phase out. Got it. Very clear. Thank you. Our next question is from Mr. Womack Benoit Petrarque of Kepler Cheuvreux. Go ahead please. Yes, good morning everybody. A couple of questions on my side. The first one was on the accrued dividend for 2019. Can you put a bullet on your presentation mentioning that the payout or the release of this amount is subject to certain a couple of events, especially ECB, it's quite obvious, but also conditions and prospects. So I wanted to get your brain on, let's say, a situation where ECB will give a green light on dividends. Looking at the current lockdown and the fact that we have a vaccine now or I think it's quite efficient, let's say, also looking at your current macro assumptions, the ECB will give a green light on dividends, can we expect this accrued to be paid? That would be the first question. The second one is on NII. The €20,000,000 drag you've mentioned for Q4 and Q1, I was trying to understand also going into 2021, Q1, and the impression that looking at the shape of the curve that the pressure from low rates was definitely less than €20,000,000 a quarter. I'm talking about Q2, Q3 and probably Q4 next year. Could you confirm that? Or is the €20,000,000 drag per quarter kind of run rate for the full year 2021? And then just for you on following up on the moratoria. So you were at EUR 22,000,000,000 now. Now. How much do you have basically as of today in terms of outstanding, please? Thank you. Yes. Thanks for the question. I'll take the dividend and then maybe Clifford, you can take the question on NII, Tanja, on moratoria. Yes. So on dividend, and I appreciate that you're staying away from the ECB ban because clearly that's precluding us from doing anything. You've noticed us using the word caution and prudent and that's for a reason. I appreciate your comment about the vaccine. Financial markets. I would caution us because we are still in the midst of a pandemic. And I've said this before, in the Netherlands, we're now in a second lockdown. And so the reason why we're exercising caution on paying out dividends is because we do want to take an assessment at that time when that is relevant, which will be after our Q4. And for the reasons that I've talked about, we are in a period of uncertainty. We have COVID-nineteen still around us. We've talked about some of the expectations around Q4, Q1 and Q2. Clifford has highlighted in his discussion on results some of the capital headwinds that we're at this time dealing with and working our way through. So I think it's only reasonable to make a fair assumption, a prudent assumption at the time when that's relevant, which will be after our Q4. Clifford? Yes. I think on NII, I think the $20,000,000 is really a proxy. I think it's quite hard to calculate from the outside. We've given some guidance around the replicating portfolio, the shape of it, the size of it. As I look at our internal forecast, it seems to me that the guidance I gave of around 20 is pretty good. And as we've discussed, we expect negative pricing on that other tranche of deposits to kick in from January. There's always going to be a little bit of noise in these numbers. So even €20,000,000 is what is that? That's 1% or 2% of the quarterly number. So we're talking about the differences are quite small numbers, but that should give you a feel. I think the we had expected early this year that, that negative drag would abate. But then as we all know, rates took another step down for reasons we're fully aware of. And so that drag now continues. So I think actually it looks like we're not alone. Interest rates don't just apply to us by of things looking at the peer group this quarter. Thank you, Clifford. Tania, do you want to take the question more, Ettore? Yes, of course. Yes, and maybe just to remind people, we provided payment moratoria to a total exposure of $23,000,000,000 so both around these schemes of opt in and opt out. As of the end of September, however that says September 30, there was still €19,000,000,000 outstanding. But as of the 1st October, all the payment moratorium that we provided to commercial banking clients in the Netherlands did expire, and that is around €17,000,000,000 in total. So if you ask as of today, and well, I don't have the end of October numbers at hand, but that would be around €2,000,000,000 Next question is from Mr. Robin van den Broek of Mediobanca. Go ahead please. Yes. Good morning, everybody. I would like to start with a suggestion actually because the consensus following is focused on the group P and L. But I was wondering if you could maybe focus on the core and path because now you've got a speedy rundown of the CIB, which is also leading to impacts on NII and fees, which makes the comparison compared to consensus very, yes, in your disadvantage basically. And it's also distracting from the 9% growth return on equity that you've actually delivered on the core bank. So I was just wondering if that is an option for you to consider going forward. My first question is on your real estate deal in Paris. To me, it seems like you can actually utilize the benefits from working from home in that transaction. You take a gain on real estate and then basically downsize the office space, which hopefully will also lead to lower costs. Can you replicate that transaction in other parts of your business? Could you specify that? And second question is on volumes. I appreciate the wording you gave on mortgages and commercial banking already. But I was just wondering, in the last years, you've had sizable tailwinds for your mortgage book from housing prices, 7.5% you expect this year, but next year it will be 0. So just wondering on your mortgage book, we haven't really seen the positive effect from housing prices going in the size of your mortgage, which is also a reflection of feasible prepaying and the annuity framework, yes, basically giving pressure on the size of that book. So I was just wondering if we should also expect more pressure on the size of your mortgage book during 2021 on the back of flat housing prices. Thank you. Yes. So why don't I take the first two questions and maybe Clifford, you can talk to the volumes in our housing markets. So yes, thanks for the suggestion. Clearly, we're going to look at how we report out, because we don't want to mix noncore and core, and we are reporting this quarter on a group. We have included a pro form a at the back of our slide deck, but we will consider our reporting requirements going forward for sure. In terms of the deal in Paris, that was a deal that we were in the process of concluding and has now been concluded. I think more generically, we can say, I think as everyone is now facing the same kind of discussion, that as we've all gone through a lockdown and some of us now in a second lockdown, we're finding actually the bank's ability to be able to work off-site. It's actually working very well based on a digital infrastructure that this bank has. And therefore, as part of our any analysis that we do around ways of working, there is always considerations on how you can improve. And that is a consideration that we're currently looking at, as we've always done. Clifford, maybe to talk about the volume? Yes. No, I'm happy to talk about mortgages. I think the you're quite right that we do expect some moderation of the mortgage business into next year. I think we've all been actually pleased and positively pleased with how robust the housing market has been. But we expect that to moderate, maybe the unemployment picks up. What you see in market share terms, 15%, 15% is okay, But what it represents is 20% plus in the areas where we are highly competitive in the shorter maturity mortgages, but substantially lower than that in the 20 year plus segment. And you can see we've only recently introduced a 30 year product, which enables us to compete more effectively in that area. So we do see the mortgage market as attractive and building our capability and skills to make sure we tap the whole market. And I'm sure we'll talk about that at the end of November. Okay. And then the ability to replicate the Paris deal elsewhere is also something for end of November? I apologize. I was using my phone while I was still on mute. We'll give you an overview on our strategy in November. So let me now get ahead of that. Okay. Next question is from Mr. Thomas DeRosnet of Goldman Sachs. Go ahead please. Thank you and good morning. I wanted to ask my first question on the non core CIB. So I think you had said last quarter that you would try and preserve shareholder value And you reiterate that today, but I think what has changed is that you are opening the door to potential disposals as opposed to a pure amortization of your books. So I wanted to know whether you'd be open to give more detail on the type of assets that clients or investors might have appetite for? And those are rather longer maturity or shorter maturities. And my second question is on the redeployment of capital of this non core CID wind down. Your main competitor has lowered their capital target and therefore, as indicated, they would be able to compete a bit more. In European CIB. You have key competitors that have lower capital requirement than yours. So are you concerned at all for your ability to actually redeploy that capital efficiently if you are elsewhere, for instance, in mortgages trying to preserve the margins? If you could develop a bit on that as well. Thank you. Yes. Let me take that last question and I'll ask Clifford to talk about noncore. So what we've talked about is that the transaction that we are undertaking and the wind down of non core CRB will be capital accretive. That's going to happen over time. So we will see how that plays out, how the capital accretion actually takes place. And then we will take a responsible view on how we then redeploy that capital based on the strategic decisions that we are making. And then clearly, we need to be aware of any potential excess capital, but that's going to that's a discussion for the future. Let's first get the wind down, execute on the wind down. We will see how capital accretive it is. We will redeploy capital in a responsible manner and take any further decisions as necessary. Clifford, do you want to? I think that's a good summary. I don't think we've changed our approach. I think we said that on non core, we would we showed you the natural wind down that we would take sort of capital accretive. So if we can sell a loan very close to our wind down value, why not get the money upfront? Why not get the money now rather wait? And so that's the approach we're taking. So there's no change to strategy. But we're not in a rush because we've got capital as an organization. And so we don't want to encourage people to call us up and give us big discounts on things that we're quite happy to run off. That's not where we are. Orly was the word we use and orderly will be the word we continue to use. That's the approach we're taking. Thank you. Next question is from Mr. Johan Sohu, Morningstar. Go ahead please. Mr. Scholz? Hi, guys. Can you hear me? We can hear you fine. Two questions actually. First one, sort of top down question. I'm just backing to reconcile what I'm seeing in terms of provisioning coming through from the banks and some comments that we've seen from some of the regulators last month. There was a comment from the ECB that there's a severe but plausible scenario, NPLs could reach €1,400,000,000,000 in the euros are and then today there was another kind of bearish comment coming through from the single resolution fund. And I just battle to reconcile those 2. I know I'm looking at provisions and NPLs, but especially under an IFRS 9 situation, one would actually think that those 2 would be more closely aligned. And then secondly, just quickly on fees. Some of your competitors have indicated that they're increasing daily fees, introducing new fees, account fees and behavioral fees to offset pressure on NII. Is that something that's a feasible strategy going forward? Thank you. Yes. So maybe I'll take both those questions. And starting with your last one, we will we always review the appropriate fee level at a given point in time, take into considerations the circumstances that we're in, and then we'll make appropriate adjustments when and if necessary. On the overall provisioning, what you're actually now seeing is a Q3 provisioning that is very reflective of and indicative of the economic situations we find ourselves in, provisioning consistent with IFRS 9. There is overall assessments very much aware of what overall provisioning indeed can do in the Eurozone. I think what that points to is an uncertainty and I think we've highlighted that on this call a number of times, uncertainty around what's going to happen in Q4, Q1 and Q2 of next year. And whilst there's all kinds of projections around it, it is an uncertain time. So we really do need to see what happens in the markets now and some of these government measures begin to recide to recede, I should say, and then see what the actual effect in the economies are. And I think it's on the institutions to be consistent about provisioning, whilst at the same time recognizing what's going to what might play out in the markets over the next three quarters. Perfect. Thank you very much. Next question is from Mr. Stefan Nedialkov of Citi. Go ahead please. Hi, good morning. It's Stefan from Citi. A couple of questions on my side as well. So NII, just to wrap up the big discussion we've all been having, you are including in your guidance the deposit margin pressure. Obviously, you are not including the GOTRO and you are including the benefit from the negative deposit rate. Just to probe a little bit here, on the TLTRO 3, could you give us where you are in terms of your eurozone benchmark lending as of today? And a bit more color on your expectations of whether you will meet the 0% target by the end of March? Just a bit more color around that would be very helpful because obviously this does make a big difference. And also connected to NII, what are you guys seeing in terms of pricing when it comes to Dutch retail lending as well as commercial banking lending in light of Basel IIIBasel IV. You are obviously very close to absorbing most of the Basel IV impact, so are some of your peers. Are you seeing a change in how banks are approaching pricing on Basel III versus Basel IV basis on mortgages as well as commercial banking? Thank you. Yes. Thanks for your question. So let me just say your assumptions are correct. But Clifford, could you expand on it? Yes. No, that's right. I think you talked about 3 assumptions there, each correct. And the guidance reflects the negative deposit pricing that we've announced above €500,000 There's clearly some still some headroom there, but we've sized the deposits, but I'm not indicating any action on this call. The I think in terms of so I think that does with NII. In terms of well, in terms of meeting the threshold, I don't want to give a figure. The perimeter or the scope of those assets excludes mortgages and it's Eurozone Commercial. We've talked about, call it, the caution. Then you see the balances that we've given. So non core is all outside or primarily outside the Eurozone. So it's primarily core non mortgages. So I've seen some other banks. I think we're not a 1000000 miles away from where they are. I'd note that the deadline is quite soon, the end of next quarter, Q1. And so we will safeguard the quality of our portfolio over the medium term rather than sacrifice it to hit a hurdle in the short term that we'll have to live with. So you've heard us make cautious noises around that. And I think the key driver personally, I think, is not pricing so much as where the economy is, where the support measures are. And you've seen the Dutch government continue to support the real economy. So that hence our caution. I think in terms of pricing, big picture, I think we've been clear we've been pricing in barrels and fall for mortgages for some time and able to achieve actually good share based on our target segments and our good service. And in times like these, when borrowers want quotes and turnarounds quickly, our excellent service to the brokers is really worth something. So we see that really helping in terms of market share. I think in terms of pricing in the other non mortgage sectors, my view is that Basel IV has not been fully priced in yet, but that trim is effectively anticipating Basel IV for banks in Europe. We've been talking about it publicly for some time, but I've noted the statements about TRIM made by the peer group many, many banks actually this quarter. So not so much being written listening to the calls. So that's encouraging that there's a level playing field and that playing field is increasing in Basel IV 1. Okay. Thank you, Clive. Thank you. Our next question is from Mr. Kiri Vijay Arya of HSBC. Go ahead please. Yes, thank you. So a couple of questions from my side. So firstly, coming back to CIB Non Core, just trying to understand the revenue dynamics there. So look, as you notified clients that you won't be renewing the credit when it comes up to maturity, say in 1 or 2 years' time, Does that mean that client is taking their fee business elsewhere right now? So timing wise, you're losing or you seem to be losing fees faster than you're losing the NII certainly this quarter. So just trying to sort of understand the revenue attrition in the CIB non core between fees and NII. And then, please, on the ongoing CIB business, particularly on the clearing business, would you say that's kind of running above or below trend? I know you've had a bit of volatility this year, but in the 3Q, is that kind of sort of normal run rate? And then if you look out to some of the market volatility, the Q4, to what extent do you think that's been a good environment for your curing business, please? Thank you. Clifford, do you want to take those? Yes. I think the on fees, I mean, these are quite small numbers now in a group context, but the fees has fallen faster than NII noncore and that reflects we're doing much, much less new business, negligible because we're winding that business down and often new business comes with fees. We've also shrunk our kind of guaranteed off balance sheet business, which you'll see come through fees and not NII. So that's on fees. I'm just trying to recall the second question. Just remind me of that. The clearing business Yes. So clearing, I mean there's a few things going on in clearing. So Q3 was a I wish to say a more normal quarter, so volatility return. We have derisked that business for obvious reasons. So that would come that would come at the expense of fees as the business is operating on a much tighter risk framework. But at the same time, we've seen some market repricing in that sector, maybe also not surprising given the challenges that, that whole sector, including us had in Q1. So I think the market is behaving rationally. We won't chase volume in clearing. We're managing it within a tight risk envelope. Hope. It's pleasing to see fees holding up. Great. Thanks. Thank you. We have no further questions, sir. Please continue. Okay. Well, then, I would say that this concludes our analyst call. Thank you so much for all of your questions. And as I've referenced a couple of times during the course of this call, really forward to updating you on the strategy review and the investor associated investor update on November 30. So for now, we'll talk to you very soon. Thank you. This concludes the ABN AMRO quarter 3 2020 analyst investor call. Thank you for your attention. You may now disconnect your lines.