Good morning, everyone. Thank you for being with us today. I'm pleased to be joined by Tanate Phutrakul. Thank you, Tanate, for being with us. I have many questions for you, but let me ask a question to the audience first. What do you think is the main driver of ING share price over the next 12 months? NII, costs on the lower end of the guidance, which is 12.5-12.7, asset quality, continuing benign, continued capital distribution via buybacks, or capital reallocation towards M&A? Okay, we are going to get to NII.
Ready? Okay.
Yeah, you weren't expecting those questions, right? I want to start with M&A, in fact. What are the key criteria that ING would consider if you go for an M&A transaction?
Thanks, Giulia, for that question. I think, first of all, our key strategy for growth is organic, right? We have been setting ourselves a target to grow our customer base by a million customers per year. We're looking for balanced growth, both lending and deposits, by 4%, and that's our go-to strategy. Fee income growth. We came out of 2024 with a lot of organic momentum, and that's our go-to strategy. Having said that, I think the way we also look at it is that if there's an opportunity to accelerate our organic growth, if it's something which is ROE accretive, and if it's something that makes us less interest rate dependent, that's something that we certainly will look at. Those would be kind of the main criteria we would look at in terms of acquisition.
We made a small acquisition of a stake just announced a few weeks ago in a private bank in the Netherlands. That is a bit within that fee.
If I can just follow up on that, what would it take for you to buy the whole Van Lanschot Kempen estate?
At the moment, it's only a long-term financial stake. We're supportive of management, and we're happy where things are with the current time.
Got it. Just to round off the questions on this topic, through the years, you have done some disposals, right? Do you see more coming there?
What I think we have done in the past few years is that we have analyzed particularly the retail banking franchise. We looked at where scale does not really exist, and we have exited from those markets. For example, we exited from retail banking in the Philippines, in France, in the Czech Republic, to name but a few. I think we have optimized our franchise, so we do not have any major plans to optimize further our net worth. We did announce a plan that we have entered into a sale-purchase agreement to sell our Russian business. We have already indicated that we do not see a future for ING in Russia, and this is an execution of that optimization.
Very clear. Thank you. Let's get into NII then.
Yes.
With the Q4 results, you announced that you had already cut deposits for an equivalent of about EUR 600 million of NII. Have there been further cuts since then?
Yeah, so I think with our first quarter, sorry, Q4 results announcement, we have indicated that we have cut materially a number of deposit rates in a number of our major markets. We have further cut since our announcement, a further rate cut in Belgium. I think the only remaining major market we haven't cut rates is the Netherlands, right? Of course, we're thinking, you know, what is the right balance between maintaining balanced growth, net interest margin, and keeping in touch with competitors. Yes, the Netherlands deposit rate is a material decision for us to make.
Yes, very clear. In the meantime, since Germany has announced the most recent stimulus, forward rates have increased.
Yes.
How does that impact your 100 basis points deposit margin guidance for 2025?
Yes. This is quite a recent development, right, a few weeks old. I have to say, when we did our Q4 results, I think a number of analysts, a number of investors were asking me, "Tanate, can you simulate rates going to 1%? Can you simulate can ING survive at 0% interest rate to what we see now?" Right? It is quite a dramatic shift in tone. I think we need to wait a little bit to see how things settle down, right? Having said that, I think if the current rates were to remain where they are, I think we would benefit in two parts. We benefit because the forward curve is much more positive, right, which means our longer-term replication is more accretive. Also, the short-term rates have also seemed to plateau, right?
We were talking about rates going to 175, 150 in the short end, but now the talk is much more above 2%. Both of these are accretive. I do not think that it gives me a certain cause to say we need to revise our guidance, but it certainly makes me more confident that whatever guidance we give, the execution certainty has increased fairly significantly.
Perfect. If I can ask you about deposit campaigns.
Yes.
You do quite a few. You recently did, well, in Q4, you did one in Germany. Sometimes investors are confused because, you know, they see the day-one impact. I think for Germany was like EUR 50 million.
Yes.
What can you share with us in terms of the metrics that make this campaign appealing for you, payback time or, you know, any economics?
Yes. I think there's two flavors to deposit campaigns. The campaigns that we do to attract fresh deposit money, right? The payback period for that kind of fresh money campaign, of which we just completed one in Germany, is between 12-18 months, right, in terms of raising the money, seeing how much remains sticky, seeing how much flows into term deposits, flow into investment funds. Those kinds of campaigns have a fairly short cycle of returns, sometimes accretive already in 12, but at the longer end, depending on assumptions and behavior, 18 months. We then also do what we call payment accounts campaign. This is to attract new primary customers to our bank. Those campaigns have a bit longer payback period, between two to three years, right? That's really building the primary customer base for the future.
Thank you.
The fact that we do it almost every year, twice a year in Germany, means that it is working for us, right? That we analyze the assumptions of every campaign. We look at where the money flows from. We look at how much flows into our core deposits. This is a very analytical, very data-driven process that we go through.
Clear. Thank you. If I can ask one more on this important topic of NII growth, loan growth, and deposit growth, I mean, balances in general. The CMD has a 3-4% target. Where do you see the best prospects from growth?
It's more what I see is continuation of momentum in the retail bank, right? Particularly on mortgage growth, that we see good growth coming out of Q4 that continues into the first quarter of this year. And what I like is that the growth in mortgages I don't see in one particular market. It's across multiple markets, right? I think the trend line is strong. I think given what the German government has announced, I think it gives consumers even more confidence, right, that there's economic growth. I think that would bode well for both consumer lending growth as well as mortgage growth. Okay? Where we have seen more of a mixed picture is really in the wholesale bank, where I think we have seen a good build-up in terms of deals in pipeline.
Customers who would like to do an acquisition, do an investment in infrastructure, major programs. I think for the first period of this year, with all the talks about tariff, counter-tariff, and all that, I think it's a question of how much of that wholesale pipeline gets converted into actual loan growth. That would be a potential upside that we could see with what is announced by the German government.
Understood. You would say that year to date, you're tracking in line with the 3-4% ambition?
I don't want to give Q1 guidance, but I would say that the momentum we saw in Q4 continues to flow through in Q1.
Clear. Thank you. If I move on to SRTs.
Yes.
The ECB seems very supportive of this. ING is one of the few banks that has done almost nothing in this space. I understand, correct me if I'm wrong, that you are setting up a program to potentially do more SRTs in the future. How long does it take to set up such a program, and what is the potential?
Yeah. I think we have been a bit more prudent and conservative with respect to using SRTs, but it's something that we plan to do this year. We already have within our toolbox different other types of capital management initiatives in the wholesale bank, whether it's through actual loan sales, securitization, usage of insurance to ensure our portfolio. This is one further step that we take to complete our roster of tools that we would use to keep risk-weighted assets in the wholesale bank modus, right, the growth modus. We are in the process of working on some fairly sizable SRT this year, and we expect those deals to close in the second half of 2025.
Fairly sizable?
Yes, maybe I stick with that.
Right. If I can follow up, we had a document yesterday from the Commission on the Savings and Investment Union. Part of this is mobilizing savings, but part is also securitization.
Yes.
Do you see that bit to be additive, so to help even more than what the current framework already allows you to do, or not? What are your views there?
Yeah, I suppose the question is, is Capital Markets Union and Banking Union good for the banking system? I would say yes, right? I'm still more conservative how fast Capital Markets Union will bring in terms of actual P&L impact in the short term, right? It is all heading in the right direction, so we're supportive of these initiatives. I think looking at our plans, one of the big initiatives we have is to convert our savings clients into investment clients, and those investment clients to invest in securities, which are capital markets-driven, right? That theme plays well. Banking Union is less talked about, but I see also, hopefully, given this new momentum, that we would actually be allowed to see more momentum around Banking Union as well, right?
One example we give is that we have subsidiaries in Belgium and Germany, but the flows of liquidity and capital among our own 100% subsidiaries are still limited by constraints on regulation. Any small steps in that direction to allow a banking group like ING to actually move liquidity and capital among our own 100% owned subsidiaries will already be a great help in terms of optimizing our balance sheet.
Yes. If I can follow up to that, I was surprised that in the document yesterday, there was a mention of Banking Union, and specifically EDIS, the European Deposit Insurance Scheme. I basically thought that was not happening, and it was rather the Capital Markets Union piece. Are you slightly more encouraged even on the Banking Union front? You think that there is a chance there?
Yeah, I'm more optimistic by the tone and the reception of people within the regulatory stakeholders who are willing to consider both Capital Markets Union and Banking Union.
Okay. When I look at different banks in Europe, I think ING is precisely, as you said, the subsidiaries issue in Germany and Belgium.
Yes.
It would really benefit you.
Yes.
Have you ever quantified it?
We have. We don't disclose what it is, but I think you can imagine that we have a certain balance sheet which is asset-driven, like our Belgian balance sheet is more asset-driven, meaning we have more assets and liability. Our loan-to-deposit ratio is on the high side.
Yes.
We have our German bank, which is more liability-driven, right, where we have more deposits than loans, right? To be able to optimize that would be quite a good optimization of our balance sheet.
Thank you. Clear. My last follow-up on this regulatory discussion on the Savings and Investment Union, it would be nice if Europe managed to move some savings into investments.
Yes.
I think the Netherlands is actually a great example in terms of these occupational pension plans.
Yes.
Do you feel in your geographies that there will be material incentives to households to do that? I mean, in my view, it needs to be tax incentives, for example.
It's too early to tell, Giulia, but I think if the Capital Markets Union gets traction, if there's more securitization being done by the financial system, surely that bodes well for funds that would invest in this and that there would be a flow of savings into these funds.
Perfect. Let's go back then to the fees now.
Yes.
We have discussed NII, we have discussed capital. ING targets EUR 5 billion by 2027, and in 2024, you printed EUR 4 billion. Perhaps can you remind us of the key initiatives that are going to get you from 4 to 5?
First of all, I think we were extremely proud of making EUR 4 billion in fees in 2024. It is a record high for us in terms of franchise, right? It grew by almost 11-12% growth, right, which is pretty high historically speaking. What I think are the major biggest driver of that fee growth, which is why we talked about primary customer growth, right? Because primary customer deposit with us, have payment accounts with us, buy insurance with us, have investment accounts with us. That is why we target first around a million primary mobile customer growth. If you want to track ING and look at what is a leading indicator of our fee growth, it is that primary customer growth, right, which is bringing in the intensity of fees. The second thing that you look at is really in the three buckets.
One is daily banking fees, right? Fees that you have for customers to operate their payment accounts. Those fees have grown quite significantly over time, and we see room that we can increase those fees further. We have announced certain fee growth already in a number of markets we operate in, in particular, the Netherlands and Germany, for example. Daily banking fees are a big proportion. The second big pillar for us is really investment fees, right? These are fees related to trading, related to mutual fund sales. These fees are today around EUR 1 billion. Out of that EUR 4 billion, around EUR 1 billion is these investment fees. We have a focus on what we call alpha, is what we can do as management to drive those fees.
Last year, we were held by the beta, the market actually grew, right, in terms of asset under management, which helped fees in a number of markets and the trading volumes. That is a big bucket. I think what we track is the number of our customers. We have roughly 40 million active customers, of which around 4.5 million have an investment account with us. We keep tracking. We keep trying to increase the proportion of our customers who have an active investment account with us. That would be a second aspect. The third aspect is loan origination fees, in particular, origination debt capital markets, wholesale banking fees. These would be the three legs. We are confident with our guidance of 5-10% growth. That is why we want to achieve a further growth of EUR 1 billion over the next three years.
Thank you. Let me move on to costs now.
Yes.
Perhaps the market was taken a little bit by surprise with Q4, with the new guidance, 12.5-12.7. What came in worse than what you had expected versus the capital markets day first? Looking forward, you have a 3-4% growth range beyond 2025, which is when you have already guided. Given the new environment, higher rates, but perhaps higher inflation as well, should we assume ING lands on the high end of this range?
Yes. I think we gave two guidance. We gave a guidance for 2024 cost number of around EUR 12 billion, which we met. We also gave guidance for 2027 of 3-4%, right, which we commit to continuing to target that level. I think what we have also given more clarification is the step in between, right, which is the 2025 number. What we do see is that in 2025, two things happen. We think that the market momentum is there for us to invest more in client acquisition and that there are opportunities to invest to improve our platform in terms of developing segments that we are targeting, right? Mass affluent, private banking, certain aspects of the wholesale bank capability. Those are areas of investment which we expect to bear fruit over the coming period.
Our investment in our franchise comes in higher than perhaps the market expects. That would be one. The second one is also the fact that wage inflation has remained a bit more sticky than we had anticipated. That drives the explanation around the investments that we made. We are on track to deliver the scalability that we have in our franchise. That is why we guided the market that we would invest somewhere around 3% extra in 2025, with approximately 2% of that compensated by savings.
Clear. Thank you. Before I ask more questions, let me see if the audience has any questions. Okay. I'll ask you, I will ask you one on artificial intelligence.
Yes.
There is a lot of hype over artificial intelligence. Can you give us perhaps some examples and some use cases on how you're leveraging this for ING?
Yes. I think there's a distinction that you need to make around AI and generative AI, right? That AI, I think most banks, including ING, have deployed for quite a number of years, right? What is new for us is the use of generative AI. What I think we have already deployed in our activities are things related to, for example, using generative AI in our chatbot, right? That 60% of our replies are now actively involving generative AI, for example, okay? We also use generative AI to help with our coders who are programming, right? This is all done within a fairly controlled risk framework. Generative AI is also used in terms of coding as well. The third area that we use quite significantly is really using generative AI in terms of the processes around anti-money laundering, customer due diligence, right?
That these files, when we do a customer due diligence, you can prepare the files faster by having generative AI forming the files at which our analysts use to basically do the CDD for clients. It is something that is evolving, and it's baked into our plans that the use of this technology drives the scalability that I talked about already.
When you compare ING versus other banks, how do you feel you are on AI?
It's hard to say. I think I'm quite pleased with the progress that we make, right? You know us as a house tend to be quite prudent in terms of initiating new technology, but at the same time, quite innovative in terms of our ability and our deployment of such technologies. I think we are certainly on the spectrum of somebody who's wait and see and somebody who's scaling. I think we are certainly in the camp of people who are willing to scale generative AI tools.
Thank you. I'm going to ask you one on private credit. That's another hot topic, maybe more in the US, but in Europe, it is also growing. Do you see that as a threat to ING in the wholesale bank space, or perhaps is it an opportunity if you can offload some of your book?
It's a combination, right? I think private credit finances maybe half the financial assets of the world these days. I think that we also feel that they're both parties that we do business with and at the same time, to a certain degree, compete with, right? I think in terms of ING, we tended to finance really high investment-grade credit, highly collateralized credit. The level of competition we see with private credit is more limited in that space, where they tend to operate in a much more higher credit risk space than we're used to. We don't see so much cannibalization, but we do see it as both an opportunity and competition at the same time.
On the opportunity side, some banks have announced some partnerships.
Yes.
Do you have something similar?
No, we don't have any plans for partnerships. We work with them as clients, and we work with them on a transactional basis, but not as like a partnership, a joint venture. We don't do that.
Understood. Let me check if we have any questions from the audience. I think I see one there. Adia, yes.
I have two questions. The first is an ESG on whether you are ready to learn more on the defense space, given this is you are one of the strongest banks in terms of ESG topics. The second is the political tone in the Netherlands surrounding banks. It seems that now their politics are changing their stance. Whether it is changing something for you?
Yes. Thank you for that question. Two questions. I think in terms of ESG, we commit to our stated goals, particularly on sustainability, right? Our financing, for example, we do not shift our stance in terms of moving away from upstream oil and gas. Those actions, those continued mobilization of our funds away from carbon-intense industry into sustainable industry remains unchanged. At the same time, I also want to address that we are willing and more than happy to take a forward step in terms of financing the defense industry as well. We have our ESR policy to make sure that what we finance is responsible, but within that context, we are open to finance defense initiatives to safeguard European security. That is to address your first question. The second question is around the political stance in the Netherlands.
I think we see more recognition about the role and the important role of financial institutions to finance the economy. We do see a couple of developments, more or actually less talks about bank taxes, right? That seems to have come off the agenda to impose further bank taxes on banks in the Netherlands. That is a good development. The second development, there is a debate in the Netherlands about becoming much more risk-based around customer due diligence, anti-money laundering requirements. If you are more risk-based, you can actually optimize your processes more, deploy more generative AI tools to basically do customer due diligence and transaction monitoring. Both of that, I think, bodes well for further optimization of our cost base.
Thank you. Do we have other questions? Okay. Chase is entering Germany.
Yes.
What disruption do you think they can cause to the market and to ING specifically?
Chase is not the only one entering. There's been numerous neobanks who have entered the market, right? They're just one of the many big players that will come through. I want to say that to build a sustainable bank in any market, you have to have a multi-product strategy, right? It takes years to build that capabilities. I give you a sense in Germany, if you go back 10 years ago, ING was only a savings bank, right? We started with savings product. After we stabilized our savings product and scaled our savings product, we said, you know, we need to deploy that capital beyond investing in government treasury. We started a fairly sizable mortgage book, okay? That certainly gives balance to the market. After we had those two pillars, we said, you know, we need to do consumer loans.
We started consumer loans. We say we needed to be a complete bank. We started payment accounts for our customer. We say, we want more fees. We wanted to have investment products, right? You build a more complex environment, right? That is what I truly believe differentiates ING from the classical branch-based banks and the neobanks, to have a complete universal bank, but in a digital manner with a multi-product set, right? I am sure Chase, along with Revolut and others, will go through the same process of trying to build out a franchise, right? It takes time. It takes expertise to build out this multifaceted bank, right? Rather than simply offering a savings account, which I think through our experience, you cannot survive through every cycle on a monoproduct basis. You need a multifaceted balance sheet to do that.
Very clear. Thank you. I actually wanted to follow up to the question that Adia asked. On defense, in my understanding, the Netherlands is going to 1.9% to 3.5% of GDP spending, which is roughly, I think, EUR 20 billion, close to additional. Does that create an opportunity for ING or not?
Certainly, right? We are one of the three banks in the Netherlands. We're very active in the wholesale banking space. We are, as you say, we're responsive to the need for European security. If there's investments, whether in the Netherlands, in Germany, in France, our wholesale banking franchise is standing ready to participate in these investments.
Are you already seeing demand? Are there conversations or not yet?
It's been about two weeks, right?
Just checking.
I think we stand ready, right? In the past, we have not invested much in defense as a portfolio because there was not really a big demand for investments in Europe until recently.
Very clear. Thank you. Let me see if there are any final questions from the audience. Last chance. No? Okay. Thank you very much. Thank you, everyone, for listening.
Thank you very much.