Thank you for joining the ING third quarter 2020 media call. I am happy to give the floor to the Chief Executive Officer of ING, Steven van Rijswijk. Please go ahead, sir.
Yeah. Hi, thank you very much, and welcome, and thank you for joining us on this call. On the call with me is Tanate Phutrakul , our Chief Financial Officer and Interim Chief Risk Officer, as well as Karst Jan Wolters , the Head of Risk. We will give you an update of the developments of our results for the third quarter of 2020. The pandemic continues to have significant impact everywhere, with the second wave in Europe and the U.S. putting further pressure on consumers and businesses. Helping colleagues, customers, and communities safely through the pandemic remains a top priority. In that context, the current environment underscores the strength of our digital business model as we continue to grow primary customers. This quarter again, we had an additional 213,000 customers that has chosen us as their go-to bank.
We see the number of digital interactions with the bank continuing to increase, and within that, the proportion of mobile transactions is growing. Now, if you look back on the third quarter, ING's results were resilient. We saw increased fee income from diversified sources, coupled with good cost control and lower risk costs. We saw a reduction in net interest income resulting from margin pressure on liabilities, combined with lower lending demands. Mortgage lending continued to grow while corporate loan demand further declined, especially in wholesale banking. Overall, net core lending declined by EUR 6.9 billion, while customer deposits grew by EUR 3.4 billion. Taken together, that has resulted in a pre-tax profit of EUR 1.2 billion and a net profit of EUR 788 million. This is lower than the same quarter a year ago, but a strong improvement from the second quarter.
Our ambition to keep transforming into a leading data-driven digital bank remains firm. The challenging environment requires that we remain flexible in how and where we deliver on our strategy, and therefore, we are refocusing some of our activities. In wholesale banking, we will concentrate even more on how we deliver services to our core clients, and also simplify our geographical footprint, which will require fewer staff. This includes closing some offices in the regions of South America and Asia. We will considerably reduce the scope of Maggie, our program to provide a standardized customer experience and integrated product offering in four of our European challenge countries. In further developing our digital universal bank, we'll focus our efforts on three things. First of all, the global use of ING's technology foundation, which includes our shared data lakes, our clouds, but also the modular IT building blocks.
Secondly, the reuse where possible of already developed mobile app components, and thirdly, the rollout of global digital product offerings in the areas of insurance, investments, and consumer lending. We expect that this refocusing of our wholesale and retail activities will result in a headcount reduction of approximately 1,000 FTEs by the end of next year. Apart from these topics, in our disclosure of today, you can also find an update on our ongoing focus on our gatekeeper to ensure the security and compliance of the bank, and on the progress we make in the area of sustainability to live up to the transformational role we play in the economy. With that, we're happy to take your questions now.
Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. If you have a question or a remark, please press star one on your telephone. Go ahead, please, star one for questions or remarks. The first question is coming from Mr. Ruben Eg, De Telegraaf. Please go ahead.
Hello, good morning. I was looking at the presentation of the Investors Day from last year, where you saw the projects, Unite, the Model Bank, Welcome, the local the wholesale. Could you give some more color on what's still left of this presentation?
Hi, Ruben. I think on Welcome, that was already finalized last year because there we already then developed the app environment. With regards to Unite, we have integrated the Record Bank branches into ING. We integrated some of our IT systems, now we have put almost all the Belgian customers on the one app, one web environment. That is also the same app environment as the Netherlands. The largest part of Unite is in a finalizing phase. As you can see from Maggie, we have developed a number of components from Maggie and those we'll reuse. The project as such, we will largely curtail. That's where we are.
All right. Yeah.
Why are we doing that? I think that we're doing that because we have developed a number of elements already. We already have a one app, one web environment in the Netherlands, Belgium, and Germany, and we can use those components in other markets as well. We have developed a number of global propositions in insurance, in investment products, in consumer lending, which we can deploy in other markets. Of course, we have our foundational elements, and I think that's also part of the presentation, including TPA, so the software building blocks, clouds and the data lakes and all those foundational elements that you also will have seen in our presentation will be reused in other markets as well, including in the MEGI countries.
Okay.
We are shifting from, let's say, an intermediate stage to, let's say, the end stage, whereby we will reuse much more of all the building blocks we have developed so far in all of the markets.
The idea with Model Bank that you had 7 million customers at the end of next year from four countries, it seemed like if it's a year ahead that you had already been there or were you not completely on track with this?
The difficulty, and that's what we also have seen with Unite, is that the integration of the core banking applications between different markets is more difficult. We have seen that we can do it in a different way by using modular building blocks that I just talked about and realizing a similar effect, but by means of a different technology. That's why we're shifting.
Yeah. Are still the goals of, for example, the C/I ratio 55% and to run with less retail and IT FTEs, is that still possible in those markets?
Yes, it is, because what we do with those building blocks, we focus on scalability. Scalability on one hand, we try to reach through integration of core banking systems and integration of customer engagement layers in markets itself. Another way to do it is by using these building blocks and deploy them completely new to markets rather than trying to integrate the old. With all those components I just mentioned, indeed, that means that you can reach scalability in many markets, also beyond the four MEGI markets we just talked about.
Okay. Thank you.
The next question is coming from Miss Eva Rooijers, Financieele Dagblad. Please go ahead.
Yes. Hello, everybody. I also have a question about MEGI. Just if I understand it correctly, you are still aiming for one digital bank only by other means. Can you explain a little bit more about data lakes and modular building blocks? I never heard of data lakes, that term.
Yeah.
How is it different than what you were doing before, and does it have the same advantages, cost reductions, et cetera, the other, the old ways had?
Eva, thanks for the question. It is quite technical, next time I should have my Head of IT here as well. We were already also in the programs in integrating parts of the bank as a retail bank, building up those building blocks.
The modular software systems are such that each little part of software that is being written has to be written with the same program language and has to be put in the same library for everybody to be reused. Countries can reuse that through an API. For example, if you want to open your account, that is a piece of software code that is being written, and by which if you open your app, you can use that API is being used for you that if you give the command, "Open my account," that your account is being opened.
If you have developed that once, and that's what we call TPA or these software modular blocks, you do not need to develop that in every country in a different way. You can just take it out of the library and then deploy that in every app that you have in different countries.
Got it.
That's a way that we use it. That's one element. Two, if you have a product that you're developing, for example, insurance with AXA that we're developing. We are developing online real-time insurance products. For example, travel insurance. If you go on holiday, you switch the app to home insurance. If you return from holiday, you turn it off again, or you can do the same with well-being or house insurance. We do it amongst three teams. That we have then developed with AXA, and again, by means of this technology, you can deploy it in all of those different markets at the same time without the need to redevelop it completely from scratch. That's the way that we integrate our apps, our products, and the software that we use for it.
Okay.
Still, indeed what we said, okay, we will not use some of the technologies in MEGI. We will still use a number of them because what they have developed, and this goes very technical, are sales and service journeys. i.e. how do you buy certain products? The app is only the tip of the iceberg above the water. The sales and service journey then goes back into your data lakes and core systems to see, okay, what is the question of the client, and what is the product that the client desires? What they have developed there, we're going to reuse in the apps of other countries as well. We're going to use some of the building blocks.
I get it.
Developed by MEGI, but at the same point in time, the countries in MEGI will now start to use a number of the building blocks that we've developed elsewhere in the organization.
Okay. A lot more clearer than before. A more broad question. In the last decade, ING focused in becoming a fintech bank, a warehouse for all financial products. Are you still striving for that strategy? Is it still achievable by the means you were talking about now? As a big fintech bank with a warehouse for all financial products.
Yeah, look, I think that in the end, we are a bank that by nature is very digital. You can see that if you look at the analyst report, 87% of all our interactions with clients are mobile interactions. That is very big compared to any other bank.
The way that we are dealing with these elements that what I just talked about will help in creating that platform, in this case, a platform in ING, to on top of that build other products and services such as insurance. We do it on the one end, we do that in our own environment, which is the environment we just talked about. We also do that by developing other platforms separately from ING, that's in our innovation office. We do that by having partnership with, for example, these big techs. With Amazon, we have this collaboration on their SME seller platform, whereby SMEs can sell products on Amazon. I'm sure you're familiar with it. On that platform in Germany, if that SME then needs a loan for their working capital, they click through to ING.
We still develop it both on our own platform, in completely independent platforms, as well as on third-party platforms such as Amazon. We continue that direction.
Okay, last question, and then I will give the floor to somebody else.
Eva, you're fading.
Oh, sorry.
Yeah.
Last question, and then I will give the floor to somebody else. Besides Maggie, would you say there are other big changes to your innovation strategy?
Not necessarily. I read that this morning somewhere. The reason, because I think that one of the articles mentions that we are rotating innovation because we put it together. The reason why we put it together is because we believe that we can benefit from integrating the innovation efforts, in wholesale banking and retail banking by putting them together in one team, because then you can roll out innovations that you actually have developed, either by yourself or with third parties, much quicker over the entire bank to also benefit from cross links that are between retail and wholesale.
Okay, no big changes to your innovation strategy?
No.
Okay. Thanks very much.
Thank you.
The next question is coming from Mr. Koen Haegens, de Volkskrant. Please go ahead.
Good morning. Could you explain a little bit more about your new dividend policy? What impact will it have for your shareholders?
I give that question to Tanate.
Koen, what we have now is basically a new dividend policy, which is different than the last one. The previous one was a progressive dividend policy where dividend would rise on an annual basis, but now we have changes so that it's much more linked to the profits that we make on an annual basis. It becomes more predictable because you can look at the net profit of the company, and you can see that approximately 50% of that will be paid out as dividend. Okay. The second thing that we have discussed also is that if over time we see structural excesses in capital, we would then return that to our shareholders. This is the element of the changes to our dividend policy.
If you are looking at the last few years, would this new dividend policy have led to more dividend for your shareholders?
I think, if you think about it's a change in the way we distribute capital to our shareholders. In the past, you have this progressive. In the future, you would have what I would call business as usual dividend payment based on 50% payout ratio and possible maybe one-off returns to capital if we see structural excesses in capital.
Yeah, would it have been more with this policy?
If you look at the past, it would have been less because there, every time we would have had a higher dividend level. However, it does not preclude us to do one-offs. What it does is that if you have big provisions or certain gains for assets that you sell, that you do not take these into account when paying dividends. I think especially under the accounting rules of IFRS, whereby you sometimes take big provisions or you make big gains, at least from an accounting point of view, that then distorts the payment of dividends, and then you suddenly have to pay too much or too little, and we want to keep a much more balanced focus on that.
Okay. Thank you. At the stock exchange, ING is still lower. Does it mean that shareholders are not understanding it right, this new policy? Shouldn't I interpret it like this?
Look, I think it's not for me to comment on the share price. The share price is a result of supply and demand, and apparently there are more sellers than buyers at this point in time. What we will do is we are focused on our strategy and execution of our strategy, and that we'll focus on.
Thank you.
The next question is coming from Ms. Eva Smal on NRC. Please go ahead. Your line is open now.
Yes, hello. Thank you very much for taking my question. I have two questions. I was wondering why you are reducing the CET1 ratio ambitions. Secondly, you just said that the dividend policy will be more predictable. I was wondering if I look at the reactions of the FNV, the [Non-English content].
Yeah, unions.
Yes. Thank you. I was searching for the word. They say, well, if the shareholders will get a more predictable dividend, the people also want a more predictable outcome. Now in talks about the new CLA, ING said, "Well, we want to freeze the loans for the next three years." I was wondering if you could explain to me why you do one thing and do the other thing.
Thank you. I think that on the CET1 ratio, that is the amount of capital that we need to hold. We always have a minimum requirement by the supervisor. On top of that, we put a buffer. We calculate that buffer based on stress testing to assess, in certain circumstances, how much do we need to hold in excess to make sure that we do not get below the threshold as we require to hold from the supervisor. Now, in that buffer, also there were uncertainties about regulatory changes to capital that there still were, because we did not know where that would go, nor what the impact would be on ING. Now we largely know, and hence we can decrease the buffer that we need to hold on top of the requirement as set by the supervisor.
Decreased uncertainty requires to hold lower buffers on top of the minimum requirement. That's the reason why we lower the CET1 ambition level. With regards to the dividend policy, paying dividends is a normal activity that is employed by many a company. We did abort our dividend policy in the first quarter of this year as a result of the ECB measures, and hence we had no dividend policy anymore as of early of this year. This was about reannouncing the fact that we have a dividend policy, and the dividend policy is therefore more about the structure in which we pay. When we will pay and how we will pay will also depend, of course, on the uncertainty that is still presiding under COVID, and the supervisor views that the ECB has, their prevailing views on what they think banks in Europe can pay.
We take that into account, and we, of course, will abide by the supervisory regulations as well as the uncertainties that still remain in this market to see how much we will really pay, but this is the longer-term policy. I think that is good. I think also with regards to our shareholders, many shareholders are pension funds, out of which the contributors are our people, and they also need to have that return as part of their pension. I think that's good, is to have a dividend policy. I think that is in that sense important to have reinstated after we aborted for nine months. With the unions, we have basically also given a direction of what our opinion is on how we should deal with the CLAs over the next couple of years, given these uncertain times.
The discussions with the unions are starting. Clearly, it's also important that we take into account the well-being of the employees. Many of them are working from home, so we need to make sure their well-being is good, but we also can continue to grow their skill sets in a different environment than we currently have. Those are all elements, not only the pay, but also how we can best work with employees who are in a different setting that we will take into account in our discussion with the unions.
Yes, there's a difference between asking for a three-year freeze of what people are earning and more predictability on a dividend. If the ECB allows it, you will pay out a dividend. I don't think the unions will say you can't pay out dividends. Maybe they're asking, we would like to have the same, not a three-year freeze. If it's possible, pay out more also to your employees.
I understand your question. I think that it is important that we as a company, we have a stakeholder principle, and we find it important that we are balanced in that regard. We believe that as a company that we're balancing these interests well. In that sense, I think it's good to have a dividend policy also with regards to people who are behind our shareholders and to have a reasonable pay for our staff. That's the backbone and the background for the discussion that we will have with the unions.
Okay. Thank you for now.
Thank you.
Ladies and gentlemen, if there are any additional questions or remarks, please press star one. There is a follow-up question coming from Mr. Ruben Eg, De Telegraaf. Please go ahead, sir.
Some questions about the wholesale bank and the reductions there. Could you share some more light on the underlying reasons to, for example, close branches in South America and some in Asia? On ING Emerald earlier this year, the discussion was we are too small outside of Europe. What's your vision in this?
Yeah. Well, we're not too small outside of Europe. Basically, by the way, maybe I know that this highlights perhaps well, this is not about these markets per se. We are in the way that we look at interaction with our clients. We look at their behavior and how we can best interact with our core clients in the most effective way. For that, we need less people. Also in wholesale banking, we are becoming more digital, and we are requiring less people to interact with our core clients on a daily basis. That means that in a number of areas, we will decrease the number of staff, and for some smaller markets, we do not require a presence on the ground.
In this case, that is smaller offices that we have in South America, in Brazil, Argentina, and Colombia, and in some markets in Asia. That is Malaysia, Thailand, Kazakhstan, and Mongolia. These are relatively small markets. We will continue to service those clients out of the regional hubs in Singapore, Hong Kong, and in New York. We still remain a presence in around seven or eight markets in Asia, and we remain having a big presence in the U.S. as well as Mid-America, so Mexico, for example.
Of course, what I think is very important to mention is that we will be very careful in how to deal with our colleagues, and that we will make sure that we offer them solutions as we have always done in the way that we treat our staff, but also in terms of dealing with our clients to see how we can best service them going forward.
Yeah. Maybe I misinterpreted in your presentation where you focused on products like insurance and customer lending. If you look at the income of ING, one-third of your EUR 4.3 billion comes from the wholesale bank. Is it a wrong way to interpret it that you are focusing more on ING as a consumer bank than a wholesale bank?
No, we have a good wholesale bank and a good retail bank. We will continue with the wholesale banking as we currently have. We do that in a more efficient manner than we have done to date. Clearly, what we will always look at when we deploy capital is that we deploy capital where we can use it best. Therefore, if it's the case that businesses are underperforming through the cycle, so through good and through bad times, then we will take measures. This is not a direction to say that we're going to stop or decrease the wholesale bank at all.
Okay. Well, there are some business lines in the wholesale that are underperforming for a long time. We have talked about this for many years. In what way are you looking for a new refocus on that for, I would say, the coming months or year?
Yeah. There are business lines that are underperforming, but that's on a product basis, and we look at profitability on a client basis. We very much focus on how do we deal with clients and have a sustainable, beneficial relationship with clients. That includes lending, that includes payments, that includes working capital, that includes financial markets products. On that overall client P&L, if you will, we look at whether we make an adequate return. We do not look at it so much from a product-by-product point of view, because if you take out one product that is then sub-hurdle, you then say, "Oh, then you need to shift the cost somewhere else." Then you take the next product that's sub-hurdle, and before you know it, you shrink to glory.
We should never lose focus of the fact that we look at our clients and our relationship with clients rather than looking at it product by product.
You mentioned that we do more digital. If I would focus back to the Netherlands and COVID, if you look to the SME segment, there are some complaints what you hear, like it's difficult for an SME client to explain my personal situation because it's all standard in central divisions. There's no, in the old days at the NMB Bank, a banker in town who knows my situation and who knows the local situation. That's something you look into, especially in a situation like this.
Absolutely. I think it's very important to understand our clients well, and in COVID, we reached out to 100,000 clients across the globe to be in contact with them. Actually, we had an overview, a weekly overview to make sure that a number of clients that had received signals or gave signals that would be in difficulty, that we had in touch with them, both on the SME and mid-corporate side and in the wholesale banking side. It's a mix between digital channels and a digital way of working for simple business tasks. In times of more specific service requirements, those will be done by staff. We have still many relationship managers that are in country and in markets to deal with those people.
Not only to meet to the clients, not only physically, we also do these meetings by video because that was of course more difficult to visit our clients face-to-face because there are, of course, limitations as you well know. Hence we have many more video contacts, still with relationship managers and with our clients.
Okay. If I may focus a bit more on that. I hope I'm not taking too much time from other questions. If you look at the situation in the Netherlands, it seems like the impairments have a bit steadied itself. It's just a bit more than it was like a year ago. Could you explain a bit on where the problems and the non-problems are in business customers, that's the word, in the Netherlands?
Yeah. You talk risk costs now, right, Ruben?
Yeah, exactly.
Yeah. Okay. I think that if you peel the onion, so we have approximately EUR 469.64 million in risk costs. 69. That has three components. It's again Stage 1, 2, and 3. Stage 3, what is currently in default, and Stage 1 and 2 is typical expected loss provisions you take when you just do a loan. Always, you already reserve a part. In Stage 2, you reserve more if there is a higher risk perceived, let me put it this way.
Yeah.
This quarter, we would have had a release of EUR 380 million if we would just use the models as we had used them in the past quarters. The accounting rules stipulate that with your models, you look three years ahead. Since we're a quarter further, the second quarter or third quarter in this year is taken out of the model and the quarter somewhere in 2022 is being put on. That quarter is of course good, at least if you look longer term ahead. Means that if a bad quarter comes off and a good quarter comes on, that you get a release. We have not taken a release, we have made additional reservations for potential issues. Why have we done that? What we currently have is a strange crisis. We have GDP decreases.
If you look, for example, in the Netherlands, we expect a GDP decrease of about -5% to -7%. The same goes for Germany. If you look to Southern European countries, you more look at -10%. We see very little defaults. That's of course different from any other crisis that we have seen so far. Why do we see little defaults? Is because many of our clients that may experience difficulties have support from fiscal relief or banks that have provided payment holidays or guaranteed loans that are given by banks and supported by the government, or they have an external flexible layer in terms of personnel. Companies are using all these measures to actually not get into default. Now, the question of course is, when these measures stop, what will then the picture be?
We have limited visibility as of yet. Let me then explain that. We have given EUR 20 billion in payment holidays. Out of that, EUR 6 billion in payment holidays has resumed a normal schedule. A third approximately. What do we see? Nothing. All these clients until now have resumed their normal payments as they have done before they took the payment holiday. We still have EUR 14 billion outstanding. If you look at those payment holidays, those mortgages, but half of it was SME mid-corporate, largely in the Benelux. A number of those schemes are still continuing until the end of this year or the first quarter. Only then we will really see what happened to a number of the vulnerable sectors.
Hence, we have taken an overlay for especially those sectors which we consider higher risk, which includes leisure, transportation, clothing companies, some agriculture. There we do not see that much as yet, but it could potentially come, and that's why we've taken a provision.
Okay. If you look at retail, what sort of picture do you see in the Netherlands? Is there a difference? You mentioned clothing shops.
It really depends. For example, if you look at food retail, that's all going well. Actually, it's going super. It's going better than before. They grow. If you look at non-food retail, it depends on the segment. Do it yourself [Non-English content] are also doing well because everybody is refurbishing their house. Except for Tanate, he has a rental apartment, I guess. If you look at non-food retail in terms of clothing companies, there it becomes more difficult, you have to distinguish fun shopping and run shopping. Run shopping are non-food retail companies, like Zeeman, for example, that are not in big shopping malls where you go to just leisurely stroll and buy things that you like. Apparels, if you will.
These type of stores are close to supermarkets where you do your normal groceries, and then you also buy socks or underwear or whatever. These type of clothing companies do well. The higher segments that are more in the shopping centers, they experience more difficulties because that relates to the fun shopping.
Okay. Like HEMA, for example.
Except for Zeeman that I just commented on, I do not comment on any other individual clients.
Okay. Well, good try. Thanks so much.
The next question is coming from Mr. David Adriaen De Tijd . Please go ahead. Your line is open now.
I have a small question about the Belgian market. You're looking for a new Chief Executive Officer of ING Belgium. Are you looking for internal or external candidates?
As always, with these high-profile appointments, we are prudent. That means that we always look at internal and external candidates. We compare them, and then we will see what is best fit for the organization at that point in time. When we're done with that process, we also need to have supervisory approval. That can typically take some time, and after that, we make the announcement. That's how we go about these processes.
Okay. Will an announcement come this year?
As soon as we have the right candidate and the supervisory approval is there, the announcement will come. I can only make the announcement when I can make the announcement. Otherwise, I would have known, and I will only know as soon as I get the approval or as soon as we are done with the process.
Okay. Thank you very much.
Thank you.
The next question is coming from Ms. Eva Rooijers, Financieele Dagblad. Please go ahead.
Yes. Well, Ruben asked most of the questions I wanted to ask.
Next time, Eva, I will let you go first, because indeed, Ruben has a tendency to do that.
Thanks. Maybe a follow-up question on the small and mid corporates. How are you responding to them if they want an extension of the payment holiday? What's your approach there? We already talked about retail and how difficult it is for certain retail segments, and also leisure. What's your approach to these companies if they want a loan, a guaranteed loan scheme? Is that mostly impossible because they are having it so difficult, or is there still an option there for those kinds of companies?
Yeah. I think maybe I need to split the answer in two or three.
Yeah.
If you look at the payment holidays, those were payment holidays that were generic. We said, if you apply for a payment holiday until such and such date, then that payment holidays will be there for three or six or nine months. Those were standard schemes that were adopted by all the banks in this country in good collaboration with the government. When those payment holidays lapse, what you then do is that you look at were companies healthy when they went into the crisis? If there was something else going on, you need to do a better credit review because then it's about something else, it's not about the crisis.
Yeah.
You do a first test. When these payment holidays lapse, then these generic schemes are not there anymore. That's not to say that we will then not continue to support our clients, but then we will take much more a one-to-one approach than we've currently done with the schemes overall. We will then still continue to talk to and help our clients, and many clients can be helped, but then not anymore under the umbrella of the broader national schemes, but more on an individual approach that we take as a bank.
Okay.
That's maybe the first element. The second element that was a support scheme were a number of the guaranteed loans. These guaranteed loans already existed before there was COVID. There were already support loans for the MKB, the SME. You had the BMKB and the BMKB-C. There were different schemes that were following each other. These schemes have been somewhat amended to also cater for this situation, and they have been extended also to self-employed people, for example. These schemes, to some part, are still there, so people can still use those schemes. Again, that is subject to a test whether they are healthy by nature outside of COVID, for example.
Yeah.
That is maybe the second question. Those parts will continue. Of course, the government is currently looking at do we need to put other things in place, and we're part of those discussions. Maybe a final point. In the end, we urge all our clients to continue to talk to us, and we reach out to those clients as well when we see a signal that something is happening by means of which they would get into trouble. In the end, not all companies can be saved. There will be companies that will be unable to make it, that are not sustainably, sufficiently healthy to go through this crisis.
You have to be very careful to not push more debt onto a company if they are structurally unable to repay it, because then basically you're doing not the right thing for the company to even push them into a bigger difficulty in which they are currently already. If you call that, my Chief Risk Officer is now saying it's called over-crediting, but that's a technical term for what that means.
Yeah. Thanks a lot.
Thank you.
There's a follow-up question coming from Mr. Koen Haegens, "de Volkskrant". Please go ahead.
I have one more question, or actually two more questions about the wholesale bank. One of the unions, FNV, was talking this morning about maybe 200 or 300 jobs that could disappear in Amsterdam. How accurate is this estimate, do you think?
Yeah, look, I can say that we are present in 40 odd countries in wholesale banking. It was 43, and after what I announced this morning, it will be around 37 or 36. It's diversified spread over those countries. As you know, the Netherlands is also part of the wholesale bank, so it will also affect people in the Netherlands. We first want to talk to the people themselves, to the unions, and to the work council, before we become more specific.
Okay. Thank you. One follow-up question. I think Ruben was also talking about this, but I am not sure if I understood it right. Did you say that you are not focusing on certain sectors within this wholesale bank? Was that what you meant with the focus on clients and not on profitability and not on sector profitability?
No. Well, what I take from this question is that, let's all agree on this call that next time Ruben can only ask his questions last. I think that's a consensus on this call. No, I did not mean that. I said when I look at profitability, sustainable, good engagement with our clients, we look at a through the cycle, because we have good years and bad years, but longer term, good relationship and profitability with our clients. We do that on a client basis, not necessarily on a product basis, because one product will not make such good profitability, other product will make better profitability, and overall, you try to have a good, balanced and healthy relationship with your clients. It was more from a product point of view than from a sector point of view that I spoke.
Okay. Thank you. One last question about retail Netherlands. In the quarterly report, something is being said about EUR 30 million for provisions, among others, for legal claims. What is that about?
Yeah, we never talk about legal claims. We always have discussions here and there. We have legal claims, but not only legal claims, it's also the branch closures that we announced in July, for which we've taken a provision. That's in that amount as well.
Yeah, I understood that. I was wondering, because I didn't see it at the legal risk in the legal risk part, something about this, but maybe I missed something.
These are provisions that we now and again take, but this is a long provision in total inside of a bigger provision.
Okay. Thank you.
Thank you.
The next question is coming from Mr. Felix Holtermann, Handelsblatt. Please go ahead.
Hello, good day. Felix Holtermann here from Handelsblatt from Frankfurt. I have two questions. The first question is on the German retail business of ING. To my knowledge, ING is planning to introduce a lot of new fees for German customers. For example, a fee if you want to buy back a fund or other fees for the storage of money with ING in Germany on savings accounts. Could you comment on that? When will that start, and how many of new fees we will see in the future? Is that also a shift in your strategy in Germany, which you might extend to other countries, to other markets where you are active? I have one follow-up question, but perhaps we can start with that one.
Okay. Thank you very much. I think that fee scheme, that will be introduced in February of the next year. In general, we see a compression, of course, on interest income. There is negative interest rates, which is putting quite a lot of pressure on our liability income. Hence, where possible, we do introduce negative rates. At the same point in time, we remain careful with that to focus that on the higher amounts or in cases whereby clients would only store money with us without having further business. In Germany, that's more focused on that element. I think in general, in Germany. I think we are very much continued to work with our digital proposition there. As you know, we have zero branches there and over 9 million clients. This quarter, we again grew the primary customers in Germany with over 60,000 clients.
We're developing a business with them with regards to insurance but also into brokerage. I think we have done much more brokerage this year than we have last year. Our relationship with our clients in Germany develops itself very well.
Okay, wonderful. Thank you so much. One additional question. There are new discussions in Berlin about the future of the Commerzbank. Mr. Hamers had some talks with Mr. Zielke in the past about a potential merger with Commerzbank. Is ING still interested and still looking into Commerzbank or into other potential options to extend your German business?
As I've said before, we're very much focused on our organic growth strategy. That has worked very well. Every quarter we grow both our clients and our primary clients. In that sense, the organic approach is the way to go. If we would focus on acquisitions, we first look at the technical skill sets, so technology elements that can improve the interaction with our clients or an extension of the supply chain in terms of interaction that we have with our clients. That's bucket one. Bucket two would be buying additional skills. I talked about consumer lending and insurance and brokerage, but there are other services that you can think of that we would buy. Additional type of services that we can bring in a total proposition to our clients on our platform.
Three would be in-market consolidation as that gives the most logical synergy benefits from an operational cost point of view. If you look at cross-border consolidation, which I think that is what you are talking about, we've been strong advocates of the banking union because currently there are so many pockets of capital and liquidity that are trapped, and in the current circumstances that will not change with a merger. Currently we're very much focused on an organic and on the three pillars I just talked about.
Okay, wonderful. One last very short question. Are you still in contact with Mr. Hamers? How is he doing in Zürich?
This morning, actually, he sent me an app.
Oh, wonderful.
Yes.
What kind of app?
Good luck with today, congratulations, and all the best." Something in that tone. We still have in regular contact and now he has started, I think in September, sitting next to the then Chief Executive Officer, and as of the 1st November, he came into his role and I'm sure he will do very well there as well.
Okay, wonderful. Thank you so much. Good luck from Germany.
Thank you very much. Thank you for calling in.
The next question is coming from Miss Eva Smal, NRC. Please go ahead.
Yes, thank you very much. Two questions. You were talking about increased fee income and the declines of the net interest margin pressure. Maybe you could elaborate on that. Where do you see the fees grow and where do you see the net interest margins go down, except for the negative rates? You already told that. The second question is, you were talking about the loan schemes and the payment holidays, and the core in that is that all the companies should be healthy in the core before the crisis. The crisis is still there. How do you still see if a company is healthy in these days?
Yeah. Well, maybe to start with the last question, then you look through the cycle and how they have been performing before the crisis started. You can go back and say, "How did the company perform before the crisis, and what is happening now, and can we link that back to what we see happening in the crisis?
The crisis will maybe change the economy for a longer period. If a hotel, for example, is doing very well in the past, it's not a guarantee that it will do well in the future.
No, that is true. That's the uncertainty that we need to deal with. Hence, therefore, past the payment holidays, you need to take a more individual approach in terms of those declines, and do we believe that there will be sustainability in this company then going forward beyond the crisis, and then you have to take certain assumptions.
Okay. Thank you. The second question.
Yeah, on the question on, I think you were talking about the interest income and the pressure on that, right?
Yes. Also the fee income. I was wondering where you grow in fees.
Oh, sorry. Yes, in fees. Well, actually, the fees are actually growing in most parts and especially in retail banking. We do more in insurance. We do more in brokerage, so that is asset management. We do more in payment packages, albeit that given the payment volumes still now are lower than they were before the crisis. They have come back a little bit, but they are still not to the level that we had in the past. What you see in the debit cards payments, that there, the fees are still lower than they were before the crisis. In wholesale banking, we see sort of a rebound in lending because we closed a number of good syndicated loans. The syndicated market has come back a little bit where you underwrite and then you distribute the loan.
That has come back a little bit in the third quarter, whereas in the second quarter, there was not so much there. Those were only loans being done by banks individually, but not as a collective. The financial markets activity was a bit lower than in the third quarter because the volatility was relatively low. If there's lower volatility, then there is also less trades being done, and that impacts the fees on that front. Good in retail banking on most fronts, but still not at the level before crisis in daily banking. In wholesale banking, it's a mixed picture, but overall, you see that we've been able to grow our fee business 5% compared to the same period in last year. That's a good development.
Yes. The rental margin pressure, you are writing that there's subdued lending growth. Is that also in wholesale or also in retail?
It's largely in maybe a couple of calls. I always have to rely. They need to be long-winded. In wholesale, what you saw was a big spike at the end of the first quarter and the early second quarter. I call that emergency loan drawings. There were many large corporates who drew their recurring credit facilities. Those were facilities under which you can draw existing facilities.
They hoarded the cash because they want to make sure that they had the cash when they needed it. What you now see is that those companies actually see that they do not need the cash. The panic has a bit gone, and hence they don't need that money anymore, and hence they pay it back. In wholesale banking, you see the loan volumes coming down. In retail, the picture is mixed, because in retail, you can say, let's split it between SME mid corporates on the one hand, and then private individuals on the other hand. If you look at SME mid corporates, there you see in the Benelux that loans are about flat. Why is that? On the one hand, people need loans. On the other hand, the economic activity, as in wholesale banking, is also lower, so they don't need that much.
Moreover, especially in the Netherlands, clients could benefit from not only guarantees, but guarantees loaned by the government, by a flexible external layer, by fiscal measures. Hence, they have been able to offset pressure in various ways. The government should be applauded for that. I think that was better than in most countries. I think the Dutch government did a good job. If you look at Southern European countries, there you see that those measures were different, and there is much less ability to look at other pockets of cash. There you see the loan demand continue to increase. It's the tale of two cities, if you will.
Right.
If you look at private individuals, there you do see an ongoing growth in mortgages across the different countries in Europe.
Okay. Thank you very much.
Thank you.
The last follow-up question is coming from Ruben Eg, "De Telegraaf." Please go ahead.
Of course.
Yeah, I saved a few questions because I was afraid I would be accused of stealing everyone else's. There's a EUR 7 million legal provision in Spain. What's that for?
It has to do with mortgages. I think that has been a long debate, a discussion with regulatory authorities on what costs could be charged for mortgages or not, and this is the provision for that.
Okay. All right.
Which, by the way, is not the case for ING loans for all the banks. This was a generic measure.
I remember. Is there any news about the EUR 180 million impairment from the fraud case in Germany? Are you going to get it back?
We don't comment on individual clients, as you know. Other than that, we read with interest what's happening on that front.
There's no news you heard from the process about the rewinding of that customer, and if there's any money coming back.
No, that will take years to actually get that done.
Okay.
It'll take years.
Okay. That's all. Thanks.
There are no further questions. Please continue.
Okay. Thank you. To wrap it up, as the pandemic continues, helping colleagues, customers, and communities safely through the pandemic remains a top priority. We also talked about that quite a bit during this call. In that environment, our easy, smart, and personal digital-first offering keeps attracting customers with a net increase of 213,000 primary customers in the third quarter. Financially, we booked a resilient result with increased fee income and continued cost control, while interest income was affected by margin pressure and subdued lending growth, mainly in wholesale banking. Risk costs were sharply lower than in the previous quarter. We continued our ambition to keep transforming into a leading data-driven digital bank, which leads to some adjustments in the focus of our Wholesale and Retail operations. With that, we leave you for now. Thanks for your time.
Thanks for all your questions. I hope to talk to you soon. Thank you.
Ladies and gentlemen, this concludes ING.