Earnings Call: Q3 2019

Oct 31, 2019

Good morning. This is Annika Kriele welcoming you to ING's Q3 2019 Conference Call. Before handing this conference call over to Ralf Harmers, Chief Executive Officer of ING Group, let me first say that today's comments may include forward looking statements, such as statements regarding future developments in our business, expectations for our future financial performance and any statement that involve any historical fact. Actual results may differ materially from those projected in any forward looking statement. A discussion of factors that may cause actual results to differ from those in any forward looking statement is contained in our public filings, including our most recent annual report on Form 20 F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, working today's comments constitutes an offer to sell or solicitation of an offer to buy any securities. Good morning, Ralf. Over to you. Thank you very much. Good morning, everyone. Welcome to the Q3 2019 results call. As always, I'll take you through the presentation. I'll give you some kind of highlights per slide. And to Nate, our CFO and Stephen, our CRO, are here with me to answer some questions. Going through the key points, We posted a net profit of more than €1,300,000,000 in the 3rd quarter, leading to a 4 quarter rolling underlying return on equity of 10.3%. Negative interest rate environment continues to be a challenge, but as in the previous quarter, we have been able to counter the resulting pressure on income. In Retail, we retained real good commercial momentum with further growth of our primary customer base by 165,000 and now exceeding €13,000,000 It basically means that more than onethree of our clients see Plus as their main bank, as their primary bank, which for Digital Bank is a real testimony to our strategy. We also achieved loan growth in the retail businesses, specifically in mortgages, where we continue to improve margins in almost all of our countries. In the Wholesale Banking area, our lending business declined this quarter due to some external factors such as the oil price and some incidental large repayments, but I'll just leave that with you later. Overall, between wholesale and retail, the customer lending went down by €1,000,000,000 The loan growth in retail at the resilient margins, as indicated, by with very good fee growth, countered the margin pressure on customer deposits as well as the higher cost related to KYC. On the expenses besides the increase in regulatory costs, which is the real cash out, We saw an increase in legal provisions. Also, the KYC enhancement program continues to weigh all costs. The CET1 ratio improved to 14.6%. However, we do expect to see effects on capital from banking regulation and reviews in the coming quarters. As our key priority, we keep taking steps to counter financial and economic crime. We have further strengthened our organization, as you can expect from us, as well as our covenants related to KYC. We do see again the cost of KBC going up for this quarter. And as you can expect from us, we are using innovation and technology to make the management of our non financial risk more efficient and even more important, more effective. Now turning to the commercial momentum slide. You see continued commercial momentum in slide. Customer primary customer base went up again to €13,100,000 specifically growth in Germany, Australia, Poland, Romania. That's where we saw the most growth in primary customers. In terms of Net Promoter Score, which you know are very important components for us, we ranked 1 in 6 13 Retail Markets. Next to the core lending growth, we saw growth in Retail amounting to €3,600,000,000 Wholesale, €4,600,000,000 negative and that negative. So the decline in Wholesale Banking was mainly driven by oil price developments. As you remember, we also saw that in one of the quarters last year. Furthermore, Syndicate loan activity remained subdued given the favorable bond market. It also led to exceptionally high loan repayments in the 3rd quarter in our book. We don't think this decline is setting a trend for the quarters to come. So we maintain our ambition of 3.3% to 4% overall loan growth with a slightly lower loan growth on the Wholesale Banking 2% to 3%. To remind you, last year, we were the first to signal that due to market dynamics, loan growth in Wholesale Banking could slow down. It was exactly this quarter when I mentioned that first. We were putting caps already then at leverage loans as well as real estate finance. We also indicated to you that in view of some of the capital requirements and our own ambitions around that. We would focus on repricing on the wholesale lending side. So you see some of that coming through as well in this now. Customer deposits grew by €4,400,000,000 That's in line with the general market trend in the Eurozone countries, where we do not see the effect of increased funding due to low interest rates. We see rather the opposite. And not to repeat myself from last quarter, but analysis on customer deposits are increasing as loan demand pays and was already being met. And market uncertainties encourage savings rather than spending. What we also see is the underlying growth on customer cost for us is also related to clearly getting more and more customers, doing more with us on a current account basis as well. Turning to Slide 4. As indicated in the key points, it's one of the key priorities, if not the key priority. We continue to stake steps to counter financial and economic crime by improving our management of non financial risk. We started the rollout of our COBOC KYC enhancement program in 20 7 18. We're implementing that across all different countries in which we are present. As part of this program, we have both reinforced the way we governance this area as well as the pure strengthening of the KOC organization in terms of the number as well as the quality of the people. As you can expect from us, we also keep applied technology and our innovative skills to develop tools which increase the accuracy and the efficiency of the management of our non cash risk. Just to mention a couple of examples, and you see here on the slide, In the Netherlands, the tool was created to improve the product enhancement process for SME customers, and that would support our KYC strategy by digitalizing the data need and the FEED, really, into the transaction analysis. That is basically moving away from a cumbersome manual process to an automated one, saving time, be more efficient, but also reducing the risk of errors so more effective as well. Now on to Italy. I'm sure you will want to have an update there. We continue to implement our program there. We are leading up to the program that we presented on the improvements that were required by the Banca D'Italia. In the meantime, we will continue to refrain from onboarding new customers. But we are fully servicing and successfully servicing, I would say, the existing customer base. As I've said before as well, banks can't do this alone. So we need to work together with other banks, but we also need to work together with law enforcement as well as regulators. Together with our with 4 other banks in Holland, we will have asked the capabilities to cooperate on transaction monitoring, for example. We believe this represents an opportunity to put on knowledge and resources on one side. On the other side, to really strengthen the collective role that we have as a gatekeeper to the financial system. Turning to the next page. As you know, every quarter, we like to spend a few minutes highlighting one of our businesses. We've discussed Spain's successful model before. Having built a fully fledged digital bank in Spain with close to 4,000,000 customers now and growing, growing fast. This quarter, I want to actually zoom in to on Spain, more specifically on how we have reviewed and redeveloped and recalibrated our approach to mortgages and the success that we see there. As you know, mortgages is generally an advisory product. It's a challenge to successfully sell this product in a fully digital way. The new development the new relationship model that we developed, IIG Spain, provides customers with a dedicated mortgage adviser. I think that is the key here. And that adviser supports the customer throughout the process from start to finish. At the same time, we have reviewed the process itself, and we've also improved our risk acceptance process as part of that. Not changing our risk appetite, but the way you accept the risk. And so that newly developed model with this dedicated accounting manager, with this review process, with this new risk acceptance process. We've been running that model next to the old model. And here, you see a little bit the comparison. So when we compare the commercial results of the two models on and you see it on the right hand side of the slide, we see that the model, the new model is delivering really promising results, literally all over the different categories. So the number of incoming calls is really lower than for the old model, which is a cost savings in itself, and it shows the improved efficiency of the model. Also working on the customer satisfaction side, so you can actually get a higher customer satisfaction at a lower cost. You see that here as well, going up from 3.9 to 4.5 on a 5 point scale, so really, really good. Then the conversion in the whole process is almost twice as high. So the effectiveness of the whole process clearly supported by the personal approach, having this dedicated relationship manager throughout the process, leading to a much higher conversion. And all of that leading to a new production year to date that is 20% higher, and with that leading to a 1.5% market share increase. So additional market share of 1.5%. And maybe to round it off as a success story, the new production is also being produced at higher margins. So basically, whether it's from a cost perspective, efficiency perspective, a cost of satisfaction perspective, a conversion perspective and effectiveness, sales effectiveness as well as from a margin perspective and market share perspective. It's a real good example of how we continue to review. Even in a digital bank, you can have high market shares at good pricing at decreasing cost. So a real success story. Then turning to Slide 6. As you know, we have given you updates on this as well over the last couple of quarters. We are committed to do our part to combat climate change. And also this quarter, we've taken several actions, which reinforce these commitments. We're tracking several initiatives on this one, both on a global level as well as in the Netherlands specifically, as long as they're really, really fighting climate change. We can't do this alone. We realize that. One bank cannot do so much. Impact you get if you have a group of banks. And therefore, we're happy to see many of the other banks are joining us in signing these initiatives. These initiatives are the principle for responsible banking that we signed in New York, but with that also putting all of that in action. We signed the collective commitment to climate action, which is basically kind of a continuation of our commitment that we already kind of launched more than a year ago in the market that we would manage our lending portfolio in line with the Paris Accord on climate change. And a year ago, we did launch our own Terra approach that makes all of this measurable. You may remember, we launched that together with the 2 Degree Investing Initiative. And through that, we basically use a science based scenario per sector to see how you can actually decrease your indirect footprint per sector and how you can actually also get into a conversation with your customers in order to apply new technology in order for them to decrease their footprint and with that, increase our indirect footprint. Now with equipment comes also taking the accountability. And the accountability, you can only show by focusing the results of what you have set out and what you've committed to. And therefore, this quarter, we released our 1st Terra Progress Report, and we're proud to be the 1st bank to publish such a report showing climate alignment. In addition, we've also signed an initiative together with the European Investment Bank to support large business clients in the Benelux with sustainable projects, basically financing the transition to more sustainability. But it also works on the commercial side. So clearly, our stance on this is combined with developing specific skills and capabilities. So we saw another strong quarter with 12 sustainable bonds, sustainability bonds, 11 sustainability improvement loans, 5 green loans completed, again, including some firsts because we're really still developing these products as highlighted in this slide. To mention one of those transactions, Porsche is investing in its 1st battery electric vehicle and have tapped the green bond market, and we were a green adviser for a €1,000,000,000 green Schulzchein. So the first ever Schulzchein for Porsche and also a green one. So good commercial positioning right there. Now turning to the results. Slide 8. The underlying pretax result, as you can see here, is just over €1,900,000,000 in the Q3. That's €213,000,000 below the same quarter of last year. That's, as you can see, only slightly lower on income year on year, which is, I think, the good news in all of this, but with higher expenses, specifically on the KYC side and still relatively lower risk cost. Now year on year, underlying income as a component was €20,000,000 lower, reflecting the combination of higher margins and mortgages, higher fee income, and we'll certainly dive into that later. And that's offset by lower treasury related income and the margin pressure we see on customer deposits due to the low rate environment. So maybe a bit lower, but certainly of higher quality, and I think that's the good news in all of this. It's certainly a tick lower, but good quality earnings here income here. Sequentially, underlying income was down by €40,000,000 and that was fully driven by lower treasury related income. And as you know, that can always be volatile. Turning turning to Slide 9. If you exclude Financial Markets, L and I, it was a bit lower, just a percent year on year. While we clearly would rather see a growing NII, and we continue to aim for that, I believe it's actually a good achievement that we managed to keep NII stable, especially since the market rates have gone negative. You see that our model proves resilience, and we're keeping the commercial momentum. We have been able to achieve this as we continue to improve our mortgage margins, increase mortgage volumes as well, and that partially counts as the negative impact from margin pressure on customer deposits and the lower treasury related NII, as I mentioned earlier. Also going forward, we'll continue to focus on margin improvements and loan growth. We further benefit from our activities in the non euro retail companies, so that's also strong in our franchise and also negative rates that we can charge on our deposits for professional customers. Furthermore, the deposit tiering at ECB, which was announced some time ago, what will be or is enacted these days, that will help as it will largely cancel out the negative rates on deposits at the ECB. On the NIM, net interest margin specifically, that was slightly higher this quarter at 145 154 basis points. 154 basis points, get the numbers right, driven by Financial Markets. Our NIM guidance, here we go again, end of the year on NIM is that we stay in the high 140s. Aware that you and the market closely watches the NIM development. However, as we also see that some of the volatile items such as treasury and that have an impact in NIM as well as the slice of the balance sheet impacts the NIM, we believe it is better to look at the NII development. And that is good. I mean, that shows real resilience. And the NIM development over the last couple of quarters has shown resilience as well, by the way. Good. Then we turn to net core lending and just dive a bit deeper here. As I said, the net core lending decreased by €1,000,000,000 driven by a €4,600,000,000 decline in core lending and Wholesale Banking, an increase of €3,600,000,000 in growth in Retail. The The decline in Wholesale Banking was predominantly driven by the daily banking trade finance with oil price developments impacting the volumes in TCF. Core lending was also lower, as I mentioned, given the repayments of some of the larger loans. But we continue to grow underlying as well. So I mean, it's not like the machine has stopped. On contrary, the machine is in full production, but you have these 2 specific effects that doesn't show a net growth, but a net decrease for the quarter. Retail Netherlands, so turning to Retail, saw a modest growth both in mortgages as well as other lending. In Belgium, we see continued growth in the mortgage book. However, the overall core lending was €0.2 200,000,000 lower, mainly related to a large institutional client that we have there. Then retail challenges in growth markets, so it's a combination of Germany, but also all the other digital banks that we have and the growth and the ones that we have in the growth markets. We see that net core lending was up at EUR 2,700,000,000 also largely mortgages, but also a modest increase in non mortgage lending. So as I already mentioned, the commercial momentum is still there. Volume is there, new price is there and margins is there, and that's a good combination. Now turning to fees, Slide 11. If you adjust for a reclassification of financial markets related fees in both quarters, net fee and commission income increased by €40,000,000 year on year, and that's 5.8 percent, and that's coming in then at a strong €733,000,000 of fee income. That fee income was fully driven by Retail Banking. And so if you kind of make the analysis, the Retail Banking year on year increase is 9.4%. That's in mortgages, that's in daily banking, it's in insurance products, it's across all of the different countries. So this is really good quality commission income showing the strategies working in launching new products and continue to grow. So it's a good sign. If you zoom in even further, you see that Germany saw particularly strong growth in fee income, recording 21% higher fee income, mainly in Citibank, our mortgage broker. Wholesale Banking fee income adjusted for the aforementioned F and M reclassification was stable. Now sequentially, fees in retail also increased, while Wholesale Banking fees were lower, mainly due to lower lending related fees as transaction volumes were impacted by, as you already mentioned, oil price development. Coming at Financial Markets, an okay quarter. Total income was EUR 19,000,000 higher year on year. Income growth in several segments was more than offset by higher negative valuation adjustments. Sequentially, no. You see that the FFO income improved by €49,000,000 and that is because of a lower negative valuation adjustment. So the underlying business there is constant, if not growing. So that's the good news. Then the valuation adjustments, which have been negative for the last couple of quarters, you see them having an effect on it. But what we concentrate on is the real client related business, and that is solid. That is a solid development. Turning to the expenses, Slide 12. Excluding the regulatory costs, the expenses were down €20,000,000 So moving down, if you compare it to the Q2 of 2019, and I think that's a good result. At the same time, if you compare them to the same quarter last year, they were up €118,000,000 An important factor driving these higher costs, specifically if you look at the year on year RDKOC related activities. Quarterly cost increasing by some €50,000,000 compared to last year. And that's the enhancement program. It's the strengthening of our KOC activities across the board. Furthermore, specifically in this quarter, we took several legal provisions in the Challengers and Growth Markets amounted to EUR 40,000,000. That's across several countries, various underlying reasons. We also have to absorb CLA related salary increases across the markets, where we also see the effect of generally tight labor markets. And then we also had a VAT refund. So that helped us a little bit. You can expect from us to have a continuous cost focus. We do realize that KYC costs are increasing. We can't absorb those decreases by the negative cost developments on the back of the earlier transformation programs, but you can expect from us that over time, we will continue to look for further efficiencies and further digitization of our operations so that over time, these costs will be absorbed. Now on the quarter on quarter picture, results were lower, driven by the combination of the already mentioned VAT. But also, last quarter, we had a provision in Germany, which you may remember. And then this quarter, we had these higher KOC expenses and legal provisions. As you know, in the Q3, the cash out regulatory cost, which is the right hand side of the picture, the cash out regulatory cost in the Q3 are not the highest, but we do see increase here. And that increase is mainly due to an additional DGS distribution and higher costs in Poland. On a 4 quarter rolling average basis, the gross income ratio was 55.8%. This is more or less the same as last year. In the same quarter, it was 55.5%. We just see that over time, even with increasing costs, that we are able, from a CI perspective, to either work on the income side or continue to work on the cost side over time, and we will continue to focus on that. Turning to the risk costs, Slide 13. The 3rd quarter, we saw the risk costs coming in at EUR 276,000,000 That's 18 basis points of average customers lending. That's up from €209,000,000 in the last quarter and €215,000,000 in the same quarter a year ago. It's driven by some things in the Retail Products and Wholesale Banking as well. Compared to the 2nd quarter in the Netherlands, the main driver was a change in the house price index for mortgages, which strategically increases the LTVs, and that then leads to an addition the general loan loss provision. For retail Belgium risk costs were back to a more normalized level after a very low second quarter, and you can see that in the chart. In Germany, we saw actually a €7,000,000 net release versus €25,000,000 release last quarter. That all has to do with model updates on mortgages, the €7,000,000 Other challenges in growth markets reported lower risk costs, mainly driven by Turkey and Poland, if you compare quarter on quarter. Wholesale Banking risk costs were higher this quarter at €160,000,000,000 with a few non correlated individual C3 files in the Americas, Belgium, Poland. We don't see a trend here, but we can go into that in the Q and A as well with Steven there. Overall nonperforming loans for ING, as measured by the Stage 3 ratio under IFRS 9, were slightly higher at 1.6%, still low. And for the remainder of 2019, we continue to expect risk costs to stay well below the through the cycle average of around 25 basis points of average customer lending. Turning to capital, Slide 14. We're almost at the end, so hold your questions. CET1 increasing to 14.6%. Basically, we benefited from an inclusion of the €500,000,000 of interim profits. Just to remind you that we reserved last year's full dividend already now in the 1st 3 quarters, limiting the profit added in this quarter. But therefore, in the 4th quarter, a large part of the profit contributed to capital. Risk paid assets increased by €1,400,000,000 mainly caused by model impacts as we absorb the impact related to the ECB STRIM review of such SMEs, also the impact of a mortgage model update in Australia. Currency impacts, higher market risk weighted assets further contributed to an overall risk weighted assets growth, and that was partly, again, offset by positive risk migration and a lower operational risk weighted assets. Now with the 14.6%, we are still well positioned to achieve our CET1 ratio of around 30.5%. We may see risk weighted asset inflation in the coming quarters coming from other regulatory developments such as the finalization of the TRIM exercise on some of the corporate portfolios as well as the implementation of the new definition of default. That could impact CET1 levels in the coming quarters. As I said, though the magnitude and the exact timing of these risk weighted assets inflations remain uncertain. As you can see on Slide 15, we continue to perform very well against nearly all of our financial ambitions. Both CET1 and laboratory should remain well ahead of the mineral regulatory requirements. And despite the higher regulatory requirements, we continue to produce a very attractive return on equity of 10.3% for the quarter. That's a 4 quarter rolling average. And to reiterate, cost income is not how we run the business, but it certainly remains a very important input factor for our own analysis as to where we have to improve. And it's certainly also an important input factor to calculate your return equity. And we still have the ambition to, over time, to reach the 50% to 52%. Policy for 2019 on a dividend is to pay progressive dividend like we did in the past years. Good. To summarize, honestly, I think in view of the macro environment, the negative rate environment, we show good results, very good results maybe even on the NII in the 3rd quarter, and that leads to a net profit of €1,000,000,000 €344,000,000 We continue to see that pressure on the interest rate environment, but we are able to offset it with a continued strong commercial momentum on the retail side. For the volumes and margins, we see continued commercial momentum on the increase of primary customers with 165,000. But we also see an increase in cost, as said, besides the regulatory costs, the KOSC costs and the CLA costs, that really will have to absorb over time and make sure that we continue to run an efficient franchise. All of that in order to deliver a handsome return of 10.3% for the quarter, and that is fit in the ambition ratio of 10%. CET1 ratio improved to 14.6%, well above regulatory minimums. And I said and I will repeat it, we do expect to see some effects on capital from banking regulation reviews in the coming quarter. And with that, let me open the line for questions. The first question is from Mr. Stefan Nedialkov, Citi. Go ahead please. Yes. Hi, guys. Good morning. It's Stefan from Citi. Two questions on my end. Number 1, are you ready to give guidance for the net interest margin for 2020? And secondly, some press reports show that some of your shareholders are angling for M and A in Spain, specifically with much more traditional bank. Can you just comment what are the attractions and challenges of such an initiative and whether this is something that you could consider? Stefan, it's Ralph. I'll take the NIM question to Tienit. I'll pick up the second question now. As you know, we don't go into any of these comments of press and rumors around M and A. I don't expect us to do that in the future either, to contribute to that. Our strategy, as you see it again this quarter, is an organic growth strategy, very much focused on delivering a depreciating client experience. And with the innovation and with the new products and even with KOSV, knowing our customers even better, you can make that as much as an approval for our role of the gatekeeper, also a commercial tool. That's what you can expect from us, focus on organic growth. But we have said before that on M and A, we would be looking for, if any, for teams that have specific skills in some of the more lending products that we may not have our own skills in and then see how we can develop that or for specific technology players that can help us to deliver that differentiated customer experience. And I will repeat that when in a market in which we are active as a large bank, if consolidation is happening, we'll analyze whatever is happening. But with that said, nothing more, nothing less. On NIM, today? Yes, Stefan. On NIM, I think we keep our guidance pretty much looking forward for the next 6 months, where we guide towards the 140s in terms of net interest margin. And I think the high 140s. And then I think in terms of looking at the rates, I think it can be quite volatile. I think as you look at the August curve, it was really quite bearish where we see strong recovery in September October. That's why I think we are more comfortable driving the net interest margin over the next 6 months. Okay. So it's basically high 140s through the end of the Q1 of 2020? Yes. Okay. Thank you. The next question is from Mr. Pavel Dietsch, Goldman Sachs. Go ahead please. Sachs. Two questions from me as well. The first one is on the risk weighted inflation related to regulation and market potential policies and so on that you highlighted. I completely understand that details and market detail and timing, this is all uncertain at this point. But can you help us understand to what extent this inflation comes on top of the 15% to 18% risk weighted asset inflation guidance that you gave in relation to Basel IV. So in other words, are goalposts for ING, after the goalposts are moving up or this is more a timing issue? And the second question is somewhat related to that. It is on your dividend policy ICQ, you reiterated it. But we witnessed over the last 2 weeks the 1st buyback in the 1st major buyback in the Eurozone. And of course, that captures our imagination. So given all the uncertainty on, let's say, regulations at this point, Would you be in position to review your capital policy over the next 1, 2 years, you think? And would buybacks could potentially feature into those given the flexibility they could give you over the, let's say, progressive dividend growth policy and obviously at your current valuations? Thank you, Pavel. The risk of inflation will be taken by Stephen. So on the dividend policy, we launched a policy a couple of years ago. It's a progressive policy. We feel comfortable with it as we speak. We keep generating capital every quarter, and we continue to look at the how we manage that capital. Do we manage it to support growth? Do we manage it in order to support our capital buffers? Or do we manage it in order to pay dividends? That is how we can play this. Over time, we'll have to see and that's what Stephen will certainly fill in as to what the risk weighted inflation will bring. But if we would come into a situation where we feel as comfortable, we will always look at disputing capital to the shareholders. But again, it's the three purposes that we want to fulfill with capital generation. It is buffers or tackling risk weighted asset inflation. It is growth and it is a capital return, and we're not ruling out any additional return above our policy. But given what we're looking at for the next couple of quarters, I'll give the floor to Stephen. Yes. Thank you. So indeed, we may expect some impact on the finalization of the TRIM exercises and the definition of default inclusion under the new standards of the models that we need to apply on the ECE to an extent that is a prelude to Basel IV. The extent to which we will only know in more detail once we have received the final letters. But at this point in time, we remain comfortable also given the current capital ratio that we are at with 14.6% common equity Tier 1 to maintain our ambition of 13.5%. Thank you very much. I think 13.5% is clear, but is 15% to 18% risk weighted asset inflation still an accurate guidance over the next years? I think that's what On Basel IV it is? No, I think on all initiatives, right? Then we'll need to see what the impact is on the TRIM and a definition of default. But on Basel IV, we're still comfortable with that number. And overall, you would believe that this could be higher given the new initiatives? Apologies for drilling into this. I repeat myself in saying that we need to wait for the final letters to see the total and final impact. Okay, very clear. Thank you. The next question is from Mr. Robin van den Broek, Societe Banker. Go ahead please, sir. Yes, good morning, everybody. Thank you for taking my questions. My first question is a bit digging into the margin dynamics. You mentioned during the pre earnings call that you expect to see some pressure on generalized of general lending on the back of TLTRO 3 having better conditions, more liquidity coming to the market while demand, according to ECG data, seems to be dropping off a bit. I presume that, that pressure has not really hit your book yet and is more likely to come early stage next year. How is that factored into your guidance? Is that basically fully offset by the euros swaps bounce we've seen over the last quarter? That's the first question. And the second question is a bit on costs. I appreciate if you said your cost savings from the restructuring plan are more back end loaded than initially foreseen. But could you give us an update on where we stand? I mean according to the program, you would reach accumulated savings of €550,000,000 by the end of 2019 going to €700,000,000 by the end of 2020. Could you give an update on where we stand on that, please? Thank you. Yes. So Robin, on the so on basically the dynamics in loan growth, whether that's more the market dynamic, the ECB is kind of hinting at or our own dynamic. Whatever the ECB is hinting at, we don't see that necessarily. I can't really kind of come to that conclusion from how the lending develops in our own loan book because it's really a combination of our own strict repricing as we have announced in the beginning of the year. Specifically in the wholesale area, we felt that given where capital levels are going, we have to make our returns. And therefore, we have our return on equity hurdles that we apply here. That leads to some fewer deals on one side. At the same time, it doesn't mean there is less demand. Same with the repayments that we've seen this specific quarter. The fact that some clients tapped the bond markets rather than the banking markets doesn't mean there is no demand. So that's another dynamic here as well. So I wouldn't go to the conclusion, honestly. I would turn around more from our perspective. We don't see a trend yet, if there is one coming, that there is going to be lower demand. You know that we have exposure across the whole globe. And across the globe, we are still growing. Also on the wholesale banking side, even with this quarter, we're just short of the 2% growth on an annualized basis. We continue to guide that. Although Wholesale Banking will not grow as much as Retail Banking, we do expect it to grow 2% to 3% continuing. It's not a target because I don't like targets on the lending side, but it's certainly an ambition, but at the right price. So that's more or less on that side. Now the cost savings, actually the Transformation programs are delivering the cost savings. Actually, we had a review of those yesterday once again. But some of these cost transformation programs deliver these cost savings as specifically the Netherlands and Belgium program, maybe a little bit later. But in the other side, we also see some of these transformation programs will deliver more savings. And so all in all, we're not that much behind on delivering on the savings as we speak. But we have, specifically for the Netherlands and Belgium, for the Unite program, we have announced a change in tactics as per our Investor Relations Day in which we basically said that given where technology is going and given the opportunity that the technology is providing us, where the front end of the business should be connected to the mid end, if you want to call it like that, where the product sit or where your accounting sits or your account management sits through APIs that we felt it was better to disconnect and decouple the migration of clients in one go, the Belgium clients, all the systems in one go with products and accounts and everything in order to benefit from these digital channels. But connect the retail banking clients in Belgium directly onto these channels. And we're in the midst of that. And with that, we feel we can have better commercial momentum. So we are currently running a pilot with around 1,000 regional clients in Belgium as we speak, where they experience the digital channels. Channel where we introduce these digital channels, we see the app rating going up from just below 3 to more than 4, 4.5. So these are real good experiences that we're providing. We want the Belgium clients to benefit from that. We do expect that all clients will be migrating towards that front end by the end of 2020. And that will continue with that the commercial momentum that we currently see in Belgium. Because if you look at the Belgium numbers, although there's a bit of an uptick on cost, the income component is pretty impressive given where we are on the rate environment. And so that's a little bit what I can say from you. Overall, as I've said before, even in markets where we are lower cost inter ratio like in Germany, if we do see pockets where we can improve from an efficiency perspective by putting digitization in, we will do so. And you can expect that from us as a digital player. Thank you. And then maybe one follow-up. So your underlying cost base, is it fair to assume that your restructuring program basically can capture you basically said that KYC is not fully it's not going to be fully captured, but at least the other factors of CLA increases and stuff like that, is that basically captured by the program? Absolutely. Absolutely. And over time, even the KYC costs will be captured. Like we have been able to capture the €1,000,000,000 of cash out regulatory costs over the last 5 years. But you can't take €1,000,000,000 on the chin and compensate for it in 1 quarter. But we do this over time, continuously reviewing what can we do better, looking at new technology, as I said, which does maybe change tactics in some of these transformation programs, because new technology is available and we'll certainly apply that where we feel that it can improve both on customer experience as well as in efficiency. Thank you very much. It's very helpful. The next question is from Mr. Johan Ekblom, UBS. Go ahead, please. Just one question for me, please. Could you talk a little bit about development of mortgage margins? I think you mentioned that mortgage margins are up in most markets. And I guess a big what's the biggest driver of that has been the falling long bond yields, which, as you also mentioned, have rebounded somewhat. If I look at pricing in the Dutch market, for example, we can see pricing coming down, but still with the biggest spread to long periods than what we saw 6 months ago. But the direction is clearly less positive than what you saw in Q3. So how should we think about the potential impact of improved retail margins at the group level for the next couple of quarters? Stace? Okay. Thank you very much, Johan. I think overall, you we look at basically product margin and we split that through basically use of the FCP, right? That is the negative interest rate that we have seen from the ECB. Basically, the funding costs for our lending business has dropped quite dramatically because of that. Having said that, I think if we look through pretty much all of our geographies, we do not pass on that benefit to our customers, right, which means our product margin, particularly on the front book, you see improvements in margin. Specifically, what you talked about in the Netherlands, for example, indeed, we see some pricing competition coming in September where absolute pricing is under pressure. But I think overall, the evolution over the months has been actually quite positive. We do see absolute price improvement in Belgium coming in July August, moderating in September. And in one of the more competitive market like Germany, we also see product margin improvement there as well. And maybe just follow-up on that. I mean, could you comment how big is the difference kind of front versus back half now versus when we spoke to after Q2? Because I guess at this point, it would have been kind of the differential given where rates were. I don't think we basically see that information, but I think typically mortgage pipeline from origination to actually being booked is depending on markets anywhere from 3 to 6 months. So it's hard to say on such a quarter by quarter basis. But I think we do measure monthly our new origination margins. And so far, with a little bit of pressure in September, that has been accretive over time. Okay. Thank you. The next question is from Mr. Tarik Ahmadjad, Bank of America. Go ahead please. Hi, good morning everybody. Thank you for taking my questions. Two questions. First on the costs, clearly the compliance costs you mentioned a few times that are quite sticky and becoming a bit structural to your cost base. And you just mentioned in the question before that you've been solved within the current plan. Is that did I understand that well? Or do you need to put in place a new savings plan with new investments to deliver the savings to absorb these over time? The second question is on capital and dividend. I understand that it's still not clear about the impacts of TRIM and so on. But if all these things are actually front loaded, the TRIM, the definition of default and also the D and B decision to put forward the output I mean, the flows in terms of mortgages and so on, Would you be comfortable to keep still this progressive dividend policy despite seeing your CET1 actually falling quite sharply? I know it's like just a timing difference, but you still be in a position where CET1 and buffers will be lower than what you usually had. Thank you. Thank you, Tariq. Thanks for your so in terms of your first question, clearly, if we feel that current programs can be accelerated or can have a bigger impact, we will do so even if we've been reviewing all of the programs that are going on, all the initiatives on a quarterly basis are coming to our table because we run this on a quarterly basis. The investment programs that we have in order to deliver, for example, improvement of KYC, but also the investment programs that deliver on a better experience or further efficiency, we continuously rank that as to impact. And therefore, it may be a mix of the current programs and more effective implementation of current programs. Could be also new programs as the one that I was alluding to that we did in Germany just last quarter, And you can see the results already on the cost side this quarter. So if there is better programs than the current programs, we will certainly switch over to the ones that are better. But in the end, you have to make sure that you don't run into programs that you don't finish because in the end, it's also important to finish programs. But clearly, on a quarterly basis, we review all the programs that we have. We review all the investment, the discretionary investment money that we have in all of that as to the effectiveness of our own compliance, customer experience as well as efficiency, and that's how we kind of take our decisions. On the second one, I will give the word to you to date. I think it's really reiterating what Stephen has done. We have, in this quarter, continued to accrete capital at a good rate at 14.6%. And I think we are fairly confident our guidance on Basel IV is 15% to 18%. But I think for these new regulations on capital and the results of DoD and TRIM, we simply need to wait for those things to come along in the next quarters. So nothing more to add beyond that. I recognize this request for clarity, but I think we just need to wait for them to come. I mean, I understand the math and clearly that you are comfortable in terms of buffer in like sort of full picture, but it's just more the timing and how from management's perspective you feel you can see through a bit of a blip in terms of lower capital because it's just timing difference or you can't actually take that more than you have to basically keep that buffer at the level? So it's more like a strategic view than the math. I agree that on the math, we need to wait for clarity. I think if you look, we have a comfortable buffer, right, because our current NDA buffer requirement is 11.8%, maybe rising a little bit to 11.9% because of the countercyclical buffer requirement. But it needs to stand several basis points above that number. And given time, we believe we can adapt ourselves and our strategy to come back to that 13.5% or around 13.5% post Basel IV target. Okay. Thank you. Can I just follow-up very quickly on the cost line? The legal provisions, is that related to compliance issues you had in different jurisdictions? Or because I think, Ralph, you mentioned that that's in many countries. Yes. So this is related to several cases in several countries, and they're not necessarily compliant or AML issues altogether now. So it's a mix. It's a mix. Okay. Thank you very much. Coming back on the CET1 ratio and the capital effect there, just to reiterate, we have the 14.6% where we are. We have a minimum of 11.93%, whatever we need to have with regards to cyclical, it's quite a buffer. So, Eric, on your question as to strategically, Every quarter, we generate capital. This machine is really working very well, 10% more than 10% return on equity. So we do feel comfortable to absorb that. But again, timing wise, it could be 1 quarter a little bit more than the other, and we'll have to see how we manage that. But yes, so no specific worries on that side. That's very helpful. Thank you. The next question is from Mr. Ariam Cighi, RBC Capital Markets. Go ahead please. Hi there. Two questions from my side. The one question on cost of risk and one follow-up on cost, please. On the cost of risk, I understand that a large part of your cost of risk in Netherlands will keep your change in methodology in terms of the house price index. What would it have been under the old methodology? Would you have seen a big increase as well or would it have been differently? And maybe a follow-up on that. Have you seen any IFRS nine impact in the cost of risk increase? And then on the cost side, the KYC investments, the €50,000,000 this quarter, how much more do you expect to have to take in the coming quarters as part of this remediation program? And is this sort of something you have visibility into? Many thanks. Yes. I'll take the cost and then Stephen will take the one on the mortgages and the IFRS. So the KOC cost, clearly, we're running off these costs. And that's a combination of what we agreed, which is through look backs, that is almost done. It's about vital enhancements, which we're really on track, and it's about structured solutions. Now look back as well as final enhancements, that in itself will, at a certain moment, stop. And therefore, you could see the next quarters to kind of see the growth of cost stop there and even decrease there. On the other side, from a Structural Solutions perspective, that is something that we have to look at on a quarter by quarter basis as to how we can improve the effectiveness, but also the efficiency of that. So I can't really give you anything here. But clearly, the enhancement and the look back aspect of it is something that is temporary. And having said that, we will have to do continuous review of our clients. And so some of that capacity will stay with us. Adrian, then on your first question, regarding the price index from Dutch houses. If we would have been using the old index, the NVM index, the risk cost of risk would have been lower in the Netherlands. So this is a, I'd say, a more less volatile, a more stable, but also a more conservative index that we're currently using. With regards to IFRS 9, the impact is limited. It depends on the market. We have some we are seeing some better macroeconomic circumstances in Turkey compared to, for example, a number of quarters ago. But if you look at the overall scheme of things in risk costs, it has had limited impact. Thank you very much. The next question is from Mr. Raul Sinha, JMP. Go ahead please. Good morning. Hi. Thanks for taking my questions. Maybe on the recipe book for you to start with, could you give us some more color on what you're doing here? And how sensitive you are to the 30 basis points or so increase in the 5 year swap rate that we have seen since the lows in August. Should we start to think about that drag maybe potentially alleviating a little bit? Thank you very much for that. I think our credit pull point is really the 3 year, the 5 and 10, right, in terms of our replication. And I think if you look at perhaps the situation back in August, I think the picture looks a bit bleak even where the curve was at that particular point in time. Since then, as you know, we've seen really quite an improvement coming into September and now into October. So I think the picture varies, but I think it's improving given where the curve is today. And of course, we take various different hedging strategy in terms of hedging when we feel it's appropriate and that also has a positive impact on margin as you can see in Q3 as well. Thank you. Could I request for more disclosure on this, please, going forward? It would be really helpful, I think, from a market perspective to get a little bit more information around how it could impact your NII because I think, obviously, it's become quite key to the outlook into next year. We will have our Investor Relations be in touch with you there. Thank you. If I can just follow-up on NII then excluding the financial markets line. And I think, Ralph, you talked about the performance in this quarter has been down 1% It's obviously quite good in this challenging environment. But your volume growth is obviously being offset by a lot of the pressure you are seeing. Do you think this down 1% sort of performance is the best you can hope to achieve going forward? Or is there something you could do from a management perspective that could improve this NII growth, excluding the financial markets? Thank you. Yes. So, Arun, basically, the way we look at this is that given the commercial momentum that we have and the continuous growth of new customers that we get, and with that, not just the factor that the market is growing, but also that we are continuing to grow market share and improve margins. We think that over the next couple of quarters that we can offset the pressure on NII coming from more the savings side of it with growing in our lending, improving our margins, growing in non euro areas. So from an NII perspective, we expect to see a flattish picture. But clearly, if the yield curve improves, it may help us a little bit upward on that. Thank you. The next question is from Mr. Omar Fall. Please go ahead please. Hi, good morning. Just a couple of things for me. Firstly, could you just quantify the amount of RWA relief positive risk migration this quarter? Also where is that coming from given all the metrics you've discussed on credit and worsening macro and more broadly? And secondly, can you just give more color on the impressive performance on commissions, even if it's just a split in performance between account related fees and more market fees, please? And how much of that performance is related to the AXA partnership, for instance? Thank you. Okay. On the fee side, I'll take that and then Stephen will come back on the risk weighted assets relief. On the fee side, I'll give you a bit more insight here. As I said, year on year, it's a 9.4 percent. On the retail side, it's 5.8%, wholesale 5.8%, including wholesale. I think the what you should kind of realize now is that the onetime effect of the change of the composition of owned branches versus agent branches in Belgium. And the fee mix of that is now neutralized because that all happened in the Q3 last year, and so that is now here as well. So this is a real good comparison now. And therefore, the 9.4% on the retail side is a real 9.4% on the retail side. If you go deeper into that, you see that this is high quality improvement across the board because in Holland, we see an increase of just short of 5%. In Belgium, we see an increase of just short of 8%. Then in Germany, I already mentioned it specifically given the superb performance of InterHeap there as a mortgage broker, over 21%. Then other CNG, so these are all the other growth, but also the digital bags with new products or new fees being introduced or and including the AXA program, it's over 11% fee growth. So it's kind of a it's proving that focusing on this primary business, this primary relationship in a digital way, looking at how you can kind of offer simple transparent products to your customers digitally, that is really working. Now on your question specifically as to AXA, it's too early to give you insight there. We're in the Q1 now of this JV initiating new products. We launched 7 products across 4 different markets. That's really too early to tell you and give you insight as to how much fees we're making that. Actually, so basically, it is really early days. So the impressive performance of fees is not because of this. I mean, this was just launched, and it's not like this is now in there. So it's really because of other products as well. So AXA and the growth and the success of the joint venture with AXA will kind of help us going forward even more. Got it. And just as a quick follow-up on that. In terms of that split between account related fees and then more market sensitive fees that are within retail. Can you give us a sense for that? I don't have that here with me. So if you want to get a bit more insight, we'll see whether the Investor Relations guys can give you. I just don't have it here with me as we speak. So Omar, if you could call the lady and gentlemen of Investor Relations, that would be helpful. Great. That would be great. It's just the growth is so much higher than the pace of loan growth. So I just wanted to get a sense of that. Thanks. Yes. But it's not like we didn't kind of indicate our comfort that we would be increasing our fees between 5% to 10%. So we have been guiding that for the last couple of quarters. And so we're realizing it. So Absolutely. Okay. Thank you, Omar. Then Steven? Yes. Thanks, Ralf. Omar, on your question on risk migration. So for the quarter, that was a positive impact on CET1 of 19 basis points. So that's over €4,000,000,000 in RWA. It's actually realized across the board. So in the Wholesale Banking seen here in Netherlands, mainly on the back of increasing prices in the retail franchises and also banking driven by some LGD improvements in the structured finance. Got it. In 'nineteen. Thank you. The next question is from Mr. Bart Jooris, Degroof Petercam. Go ahead please. Yes. Hi. Just a follow-up question from my side. Could you give us a more quantified idea about how TLTRO III and deposit tiering can help your NII? I think, about on the deposit clearing, which has now come into effect, roughly we have €50,000,000,000 in deposits with central banks. So we will benefit from the tiering on that amount. Roughly, it will make it neutral, right? You can count on average, but we get negative 50 basis points until the Tierings team has come into place. From a TLTRO 3, I think we still look at it on an opportunistic basis. We are actually quite well funded for the year and going forward. So we may or may not participate on the TRO3. We'll just look at it on a pricing perspective going forward. So and the deposit tiering effect, is that already included in your NII outlook to stay focused? It's part of the outlook, indeed. The next question is from Mr. Iri Vijayaracha, HSBC. Go ahead please. Yes. Firstly, a follow-up on that tiering question. Does all of the benefit get booked in the treasury unit that sits within the wholesale bank? Could it feed through into some of the other divisions through the internal transfer price? And then second, can you just connect to the bottom decline in Belgium? I can understand about the repricing and trying to get a wider margin there. I wonder, is there any kind of change in risk appetite in Belgium mortgages? Are there any underlying worries about the Belgian housing market? And looking forward into next year, should we expect your market share in Belgium mortgages to maybe bounce back? Or just think it's all going to sort of stay a more subdued level or at least grow slower than the rest of the markets? Thank you. Thank you, Kiri. I'll take the second one. Tien Tsin, this is the first one. So on Belgium, the fact that you see a bit of a decrease there, that is not because of the development in the market's book. It is a particular client that has a bit of a swing in terms of outstandings drawdowns. Now on the underlying development on the mortgage book, we are increasing our mortgage book in Belgium. But as the market as a whole is growing, our market share may be a bit down because as said, we are very disciplined in pricing. So we try or we play a return game and not a volume game on this one. But with that, the mortgage book is increasing, albeit maybe at a bit lower market share, but the market as a whole is increasing. Thank you. Your question on the impact of the tiering. So as you know, we run a centralized treasury function, but these impacts we will just proceed into the business unit depending on the type of liquidity each unit has. So a lot of the impact will be in the retail bank. The next question is from Mr. Benjamin Roy, Deutsche Bank. Go ahead please. Two questions from my side. First, on negative rates and some competitors or in some markets increasingly discussions around passing that on to retail clients as well. How do you see that influencing competition and also deposit flows? You still see it as an opportunity to be in customers? Or is there increasingly cost associated with that? And then secondly, your Stage 3 loans went up a bit, in particular driven by daily banking. So just wondering what was driving the increase? Thank you. So Benjamin, the first one. So we do charge rates to the larger professional clients and the clients that have really large deposits with us. And we certainly also do so in different currencies. And that's basically where I think it where I can give any indication on that one. We are certainly looking at compensating the pressure on the savings side more in terms of looking for growth in non euro environments and growth in the lending book, the change in the asset mix, the repricing on the asset side? Sorry, that was in particular on retail clients. So I know you haven't charged it, but some others do. So just wondering how you see that going forward, significant deposit inflows? And then the second question, what do you do with it in case this materializes? Yes. Well, we don't see that. So I'll have to speculate on things that may happen. Okay. Understood. Yes. Regarding the NPL increases, there is indeed a benign overall NPL increase back to 1.6%, which is the same level as where we were in the Q3 of 2018. So it also you also see that a few of the portfolios had a slight increase and that gives the balance over from 1 5% to 1.6%. So it's not particular to daily banking. It's these are very small portfolios that have a slightly increased NPL level, as a result of which the move up is with 10 basis points. Thank you. The next question is from Ms. Alicia Chung, Exane BNP Paribas. Go ahead please. Good morning, everyone. Just one question for me, and it's really on the provision outlook for next year. I'd love to get your thoughts on that. I think what I'm wondering is, do you think it will start moving closer to your through the cycle cost of risk? I guess there are a few moving parts to how we should think about provisions next year. I mean, obviously, we're starting to see a little bit of an uptick in terms of provision normalization in wholesale banking, where provisions have deteriorated a little bit across a number of sectors. And secondly, I see that NPLs are obviously cracked up, but also the coverage ratio has now fallen to a new low of 29%. I'm just wondering if you see 29% as a sustainable coverage ratio going forward. And is a higher coverage ratio more prudent? I appreciate there is an asset mix within that. You do have a decent base of that within Wholesale Banking. And finally, I imagine you will want to start looking ahead to implementing each of the guidelines on calendar provisioning and definition of default, which certainly for some of the banks, which have started implementing the definition of default so far, taking it through higher P and Ls. To take into account the underlying provision normalization, your current view, very low coverage ratio and the upcoming regulatory guidelines on provisioning, how should we think about cost of risk next year? Thanks. Well, Alicia, thanks very much. So on the cost of risk, I mean, yes, there have been an increase in risk costs in this quarter, partially due to a changing benchmark in the mortgages in the Netherlands, provided, let's say, a year ago, we saw a release based on all the dates. There were a couple of files in Wholesale Banking that led to some higher risk costs. There is an even uptick in NPL, but that's a limited extent. We see here and there the watch list creeping up, but that's based on the control files. So I think it's too early to call to change the risk outlook for what Hatch had before. So the risk costs are still, if you look at over a 9 to 10 year cycle at the low end of the spectrum. And we see it here and there. We see a slowdown of GDP forecast and confidence here and there, but I think it's too early to call that this is a real change. If you then so in that sense, I would not change the outcome that I've given before, which is that for this year, we will be well below the year through the cycle average and risk costs. And for next year, I do not see at this point in time a change in that outlook. If you look at NPLs and the coverage ratio, I mean the coverage ratio in the end is an outcome of the way that we provision. And indeed, as you rightfully pointed out, the business mix that we have, we have a large mortgage book. In the end, the coverage ratios there are always relatively benign. And so the mix, what you see there is what you what we end up at. And in that sense, there is not a a change expected in that sense. If you look at the definition of default, indeed, that will likely come in the next coming quarters. We do not see an impact in that regard in cost of risk moving into our books. Thank you very much, Claire. If you don't mind, I wouldn't mind just one other question. Just going back in terms of capital and headwinds from here, is it fair to say that between now and 2021, known headwinds as far as you all are aware is the TRIM, the definition of default and potential RWA add ons? And I guess I would add to that calendar provisioning or is there anything else that you see in the pipeline? I thought it was enough, Alicia. Just to draw a line under this. Thanks. So, PRIM DoD and the macro prudential potential impact on mortgages in Netherlands is currently what we have on stock. Is there something new that I will report on that? Okay. And TRIM, just the corporate portfolio? Yes, TRIM is basically then. So the DRB, these mortgages. Okay. Thank you. Thank you. The next question is from Mr. Jason Kalamboussis, NDC. Go ahead please. Yes. Hi there. Good morning. A couple of things. The first one is on fees and commission. We agree that for those that want to hear you, Ralph, you were saying that the second half we could see an uptick in fees and commission. But I just want to look when I'm looking at consensus this year, this line specifically has come down by 5%. So effectively, the 5% to 10% growth target that you have was it enough already in a certain way? And when I look at also consensus, if I look at CAGR 'seventeen to 2021, it's probably at 3% or roughly about there. So how should we take how should we see the outlook in fees and commissions in the short or longer term? And do you speak to the 5% to 10%? Or is it more likely to be a 5% because at the end of the day, we even going forward, we are below that. And the second thing is on cost. The €118,000,000 just a small clarification, €118,000,000 differential, let's say €50,000,000 was for KYC. We had the legal provisions of €40,000,000 but that was more than offsetting that. So if anything, there is probably about the difference of €118,000,000 minus €50,000,000 would be EUR70,000,000 plus the benefit of the VAT is about €100,000,000 Is there any chance to get more granularity? Is it all CLA so that we have to wait there? And for FYI, the EUR 50,000,000, is it fair from your previous comments to assume that this is the kind of thing that we could expect year on year for at least the next 1 or 2 quarters until we get more clarification? Thank you. Thank you, Jason. Well, the fees, I'm not sure exactly what kind of numbers you're looking at, but don't forget that the fees are a net number, which basically means it's fees that we get paid minus the fees that we pay. And I mean, you're going through a couple of numbers pretty quickly, but one point and one part that is really distorting the fee growth picture historically is the real switch in Belgium, which we made from owned branches to agent branches when we merged the 2 branch networks of record and ING. Basically, we have opened much more agent branches and closed more own branches, which means that our costs goes down on one side, but we pay out more fees. And that payout of fees affects the net fee growth picture. Therefore and that's distorting the historical analysis. Therefore, I think this is the Q1 in which you see, but now we have been able to neutralize that effect year on year. So this quarter, last year versus this quarter, this year. But basically, you see that is more or less the same. The underlying fees paid out to these to the agents in Belgium. And now you can see the real growth. And based on that and based on the growth of our primary customer base, based on the introduction of new products, the behavioral fees that we're introducing some of the digital banks, some of the good mortgage production for which we get paid fees here and there as well. We do feel comfortable with continuing the guidance going forward of fee growth between 5% to 10%. That's 1. The second question on the cost. The I can't give you more granularity at this moment in time than what we have already given, which is the combination of the KYC increase of €50,000,000 Yes, that is what we think you can expect the coming quarters. And there will be a bit of an effect then of QOC costs going down because of the enhancement part being finished with some of the structural parts being fully on stream then. So it's you don't know exactly how that mix is going to look like. And then yes, we do have a pretty big impact on CLA increases across the globe. So we see that as well. Thank you very much. And clear on the fees, Just on the I need to know that you reiterated strongly the fact 10% outlook. On costs, just the record bank decommissioning, I think there was you had a hint in Q2 that was not necessarily going to come in second half. Is it just an estimate we should be keeping in mind for Q1 of next year? Yes. Well, that's I mean, in the scheme of things, that is like below €10,000,000 and it will be Q4. Okay. Thank you very much. The next question is from Mr. Jean Pierre Lambert, KBW. Go ahead please. Hello. Good morning. So two points, if possible. The first one is KYC. I look at the staffing in the Netherlands, it's been growing since the Q2 last year by 6.35 plus people half. So is that KYC or is that related to the Orange Bridge? And is KYC concentrated mostly in the middle of the KYC cost? First question is on your budget process, which you are probably undergoing for the moment, How do you look at the cost base? And how is that related to the pile of projects you have with finishing returns? You feel that next year you need to accelerate and add more projects to absorb the KYC? Or you feel things are safe as they are for the moment and you don't see the need to accelerate initiatives? Thank you. Thank you, Jean Pierre. Well, on the cost or the FTE growth in the Netherlands, it's really 3 components. The first one is that with the Unite program for the Netherlands and Belgium, we guided in the past already that you should look more and more at the combination of the cost factors and therefore also the FTE factors between the Netherlands and Belgium, if it comes from the perspective of domestic banking business. And so we are preparing the Dutch systems and the Dutch channels for migration of the Belgium clients. And therefore, we are less investing in some of the systems in Belgium and more in the Netherlands. And hence, you would expect to see some FTE and cost growth in the Netherlands in order to prepare for that. So that's one effect of what you see happening in the Netherlands in terms of FTEs. The second one is certainly also KYC, both for the domestic bank in terms of the file enhancement, the look backs and all the stuff that we need to do, but also the central KYC costs. So we have set up as we launched this program as a global program, we set up a central team, developing central tooling, which is partially in the Netherlands and partially in different other countries, working on that. And that also has a specific effect on FTEs in the Netherlands. And then thirdly, with a lot of the work coming from a more regulatory perspective, we do see also a further increase in people work on the risk side if it comes to, for example, the modeling aspects of risk management. The data knowledge in the data side is that we have to hire. And we hire them all over the place, but specifically also in the Netherlands. So yes, I mean, you can't just point at one factor increasing that explains the increase in staff and the Netherlands. It's a combination of all these three things. Now the cost base and the budgeting process, I think the only thing I can say there, because we don't give kind of cost guidance per se, You go back to the recipe that we have been using for the last couple of years, 6 years even, as to what you can expect from us, which is that over time, you should expect the cost in Market Leaders to go down because we do expect the income line to be flattish, if not negative. And therefore, the cost should go down faster, and that's what we're working on, programs to support further efficiency gains between the market leaders' activities, improving customer experiences, and with that and more digital experience and with that also lower cost. That is what's happening. So I expect cost to be decreased there. On the CNG side, honestly, we have good momentum. We're offering a good service. More and more customers choose for IG as their primary bank. We don't mind cost to grow there as long as we also see that it comes along with more business and good price business, so also better income. And as I said already, a large part of the fee growth comes from these digital franchises and the growth franchise that we have in CNG. So cost could increase, it could be an increase in the CNG environment, but we will certainly also look at the top line because if there is no top line, but only an increasing cost line, we will not accept that. And then the 3rd area where we look specifically at is the wholesale bank, in which we have a continuous program for efficiency running. Depending on the buckets that need improvements, you could expect if the Holstel Bank does not deliver on income growth, that cost will be stable, if not decrease. But for example, if you just take a look at the Financial Markets franchise, you know that we have had a real transformation program in that area for the last 2 years, centralizing a lot of the trading, canceling some of the product capabilities. Over time, the top line has been stable, if not increasing. And now I'm not counting the value adjustments, the client business. But just look at this quarter, costs vis a vis last year have gone down by 6% in financial markets. So it is very much specific programs in order to improve specific performances in areas in order to make sure that if an area is not performing according to our wishes, we're not making their hurdles. We will have to improve either on the income side, but also on the cost side. Great. Thank you very much, Maef. The next question is from Mr. Jose Pol, Sandler. Go ahead please. Hi. Thank you for taking my questions. The first one is on OpEx and more specifically on group salary costs. So when I look at the number of FTEs, it grows 2.8% versus Q3 last year. And your salary costs, they grow 2.1% in the 1st 9 months of this year versus the 1st 9 months of last year. So the percentage of whether this FTE growth is driven by compliance stuff, which should be non revenue generating stuff. And if so, whether they're making the same salary as your average base? The second question is well, I suppose it's too early to talk about dividend guidance, but this may be a silly but honest question on the dividend policy. When you say you have a progressive dividend policy, does this mean that the amount that you pay in dividends should grow? Or is it a payout ratio that should grow? If you could please clarify. Well, Jose, on the first one, yes, I don't know the specifics here. We should maybe come back to that question on your salary cost versus the increase in FTEs. It is clear that we are getting more and more people in on compliance in KYC. But it is something we need to do. So I mean, this is what it is. At the same time, also in that area, we see innovation coming through, that new technology coming through that both improves on the efficiency as well as the effectiveness side. So we'll continue to work on that. We also see temporary staff in that area in order to do the file enhancement. So that's also a picture that you see coming through right there. And so you see here that if you have kind of the external staff, some of these are also more expensive than internal staff, but they're also temporary. So it's a mixed bag really. It is really difficult to draw conclusions there. On the different policy, given the policy that we have had over the last couple of years is a progressive one. It's progressive in terms of that amount growth. Thank you. Thank you. I think those were the questions then. Okay. Then I'd like to thank you. Thank you for being here with us this morning and going through the quarterly numbers. I'm sure during the day, you may have more questions. The IR staff is there in order to answer more questions and more detailed questions as well. For now, just summarize the quarter. I think that the top line shows resilience in a time of real challenge, negative rate environment challenge. And that resilience comes from the perspective from the fact that we do have a franchise that grows. We do have capabilities to improve margins and combine volume growth. So that's helpful. At the same time, we see the fee guidance that we've given now actually coming through because we have a clear picture now year on year. So you see that these franchises, the richer franchises, if you make them primary client driven, that you see more cross buy coming through and with that also more fees coming through. So that's the resilience on the income side. On the bank side, 2 specific remarks to be made. 1 is the KYC and the other one, the overall cost CLA driven cost There's some one offs as a mix overall leading to a good picture of CHF 1,300,000,000 bottom line. And as I said, focusing on the client is important. And with that, KYC and understanding truly your client is important as well. Thanks very much, and I wish you a good day. Ladies and gentlemen, this concludes the ING 3rd quarter 2019 conference call. Thank you for attending. You may now disconnect your line. Have a nice day.