Ladies and gentlemen, welcome to the ING Investor Day 2019. Please welcome your moderator and Head of ING Investor Relations, Mark Milders.
Good morning. Welcome to Investor Day 2019. First of all, let me say how pleased I am to see many familiar faces here in the audience tonight, or this morning, I'm sorry. Looking for some more to arrive. We had some flight problems at Frankfurt Airport, I've been informed they're on their way. Also, a very good morning and warm welcome to our audience joining us digitally via webcast. Welcome here in Offenbach. Someone told me just before we started that when they got into the taxi and told him, asked where to go, he asked, "Are you sure?" If you look at this location, it's something that many people have been working on to transform, a word you will be hearing more today, this old factory into what you see here today.
Normally at the end, for me to thank all the people that have been working hard the last couple of weeks, and our events team and the technicians who made it all possible that we could see each other here today. It's going to be a full day, allow me to briefly take you through our agenda for today. Our CEO, Ralph Hamers, will take you through an update of our Think Forward strategy, followed by Tanate Phutrakul, our new CFO, taking you through the numbers and what lies ahead. Also Roel Louwhoff will join and will tell you and will show you what it means to be digital. We know that many banks and many other institutions speak about being digital. Everybody's got a platform, everybody is sustainable, everybody's got an app.
What it truly means is something different, which we are looking to show you today. We'll break for lunch, after lunch, Steven van Rijswijk and Isabel Fernandez, our CRO and our Head of Wholesale Banking, will take you through risk management and the nice things and good things we're doing to unlock value in our Wholesale Banking. We'll have a short break, we will have our part on our retail, our digital sides, and our countries presented by Ignacio Vilar and Roland Boekhout and Aris Bogdaneris, who will take you through the various elements of what it means to interact with a customer that you never see, that interacts with us via mobile, and all the things that we're doing in the specific countries of ING. Every block I just mentioned will be followed by a Q&A.
There's one thing that we changed given recent news events, that's to take you along and to show you what is our number one priority is keeping our bank safe and the measures that we are taking on KYC and AML. To that effect, that's where we want to start. Steven and Roel, but first, Ralph Hamers will take you through that, and we'll have a Q&A specifically on this topic, because me and the team have received many calls from you on this topic, and we thought it would be sensible also given that it's our priority to really take that block in a condensed form and start today with that, then take you through, as I said, our update on our Think Forward strategy and the deep dives. Thank you very much, and may I please invite Ralph Hamers to join me.
Thank you. Good morning. Good morning, everyone. As said, we will spend a large part of the day taking you through the Think Forward strategy, the update. What have we delivered? Where are we? What do we see going forward? We wanted to take one subject early on today and take you through what we're doing around KYC and AML. Given the most recent media attention that has come to this subject and specifically also to ING, I think it warrants a separate session. Me and Steven will take you through, Roel will join us on stage for Q&A there as well. From the moment the prosecutor and the Netherlands visited us in 2016, from that moment, we actually already started our own assessment.
In our own assessment, we also came to the conclusions that we had shortcomings in our processes, our procedures to prevent financial economic crime from happening. We didn't wait for the prosecutor to finish their investigation. Actually, on the back of that, we developed a program with those learnings to get the whole organization up to bench if it comes to making sure that you have the right policies, procedures in place. That's a program. It's a heavy program. We are rolling it out across 40 countries and 38 million customers. That will take some time. Having said that, the program is very thorough. The program basically has two elements.
On one side, it is all about KYC file enhancement, just going through all the clients that you have, the files that you have of these clients, making sure that you know that client very well, and that from there on, you keep that up to date. The other side, it is very much on the structural improvements that we need to make in ING, in the way we work, in the way we take these issues forward. That structural improvement program has five elements. It has the element of policy elements, the tooling around it, the monitoring of client activities, the governance, how do you put governance together, what kind of committees do you put together, and mindset, behavioral issues as well.
Steven will take you through that program, that five-pillar program there, and give you a little bit more insight there in order to lead into the Q&A. There's one thing I want to make absolutely sure, and it is that we should all understand that going forward, whether you're a digital bank or whether you're a platform, that the elements that build trust, given the fact that clients are interacting with you more and more through a digital channel only and not through physical channels, that the element of trust is so important. For that reason, embracing and mastering non-financial risk in the way you run a bank or a platform is as important as mastering financial risk that banks are known for. In the end, the program is the program, and the enhancements are the enhancements.
From there on, we have to make sure whatever we do that that skill is part of our DNA in order to ensure going forward that we manage this very effectively. For a further update on this program, I'm inviting Steven on stage to take you through. I'll be back for Q&A.
Thank you. Good morning, everybody. My name is Steven van Rijswijk. I'm the CEO of this bank. I am determined, together with the board and with the rest of the organization, to get sustainably better in our know-your-client policies and execution of these policies and processes. When a Dutch prosecutor came in in 2016 to investigate shortcomings in our execution of know-your-client policies, which led to the fine which was announced in September 2018, we already started with our root cause analysis. That root cause analysis led to a couple of things. First of all, the number of people that we wanted to work on this should increase dramatically. At this point in time, there are over 2,500 full FTE working on know-your-client in ING. The second thing is that we started with an enhancement program, and that enhancement program consists of two parts.
one, a file enhancement program that basically is focused on document due diligence, client identification, client verification, and client data. That's the first part, enhance your files. The second part are a number of strategic pillars to get sustainably better in know-your-client, KYC. There are five pillars. First pillar is about policies. We, of course, had global policies, but we updated our policies in line with the fourth anti-money laundering directive in Europe, including risk appetite statements, which sectors do we not want to deal with, which products are more risky than others and require enhanced due diligence, but also a SIRA, a systematic integral risk assessment.
It's not only the file due diligence that you do on your clients or name screening, but also adverse media screening and the transaction that you need to include to come to a holistic picture of who your client is and what they do. That, in turn, could lead to enhanced due diligence or higher frequency of the diligence. The second pillar is the global KYC digital service. That is a workflow tool. When do we need to act? What information do we need to have? When do we need to have that information by? Who is responsible to get that information? We've rolled out three proof of concepts, which were successful, and now we're going to roll out this tool across the globe. On governance.
We set up a central KYC organization, that central KYC organization guards the processes, the roles and responsibilities, and the workflow in the company, the work instructions. What do we need to do exactly? There are two committees which we set up. First of all, a KYC committee, that KYC committee we set up in every country, led by the CEO or the COO of that particular country, focused to track and trace progress on the KYC program. The second committee is a client integrity risk committee. We rolled out those committees in every country, chaired in this case by the CRO or the head of compliance of that particular country or business line.
That committee focuses on dilemmas that we have with onboarding of clients or potential offboarding of clients. This committee only focuses on compliance elements as an attribute of decision that we need to take with regards to onboarding or offboarding. If you look at the Netherlands in 2017, for compliance reasons, we exited 1,700 clients. In 2018, it was over 2,700 clients, which shows the increased focus that we have on this topic. The fourth pillar deals with monitoring and screening. Next to your information on your clients, you also transact with your clients. We are rolling out a tool globally on our post-transaction monitoring. It's not only this tool that is important because you need to develop risk scenarios.
What kind of risk scenarios do you develop for particular sets of clients or sectors to make sure you create the right alerts on which you start to investigate? This topic is so important for us in KYC that we also are working together with public authorities and other banks to become much more effective. If we do a transaction with a client, we only see one leg of it. Where does the client move money to? Where did the client get money from? Further legs or elements to those transactions to get a more holistic picture are hard for us to see. That's why it's so important for us to work with other banks and other public authorities to get sustainably better and much more effective. We're very happy that a number of these parties are very open to collaborate.
Clearly, it's in an infant stage, we need to make sure that we do this in line with our privacy legislation, it's a good first step, we are really focused also on that element of due diligence and of that element of collaboration. Last but not least, the mindset. You can have any tool you like, you can have any process or any policy, if the people do not work alongside those policies and do not feel they need to do this much better, it will all go to waste. The mindset is a key element. That's why we start. We are doing trainings, we're doing a lot of communication, I've also hired a team of people with a psychology degree to do behavioral risk assessments. In these assessments, people are being interviewed.
All the interviews are written down, anonymized, also fed into a tool that we with data analysis again, can analyze key patterns of high-risk behaviors in groups. To see where collaboration is imperfect. To see where people may not feel completely safe to speak up. To see where people are aware and they want to make it work, they lack certain abilities, i.e. skill sets or conditions, the right environment to do this in. That we can then take back in interventions. You see, it's not only about the program. The program will last until end 2020. We are reporting back to the DNB, the De Nederlandsche Bank, on a regular basis. That is a means to an end. It's not the end in itself, that is continuous learning what we need to do to get continually better in KYC.
This is where we want to go to. If you look at the left-hand side, we start with customer onboarding, with new information, screening, adverse media screening and name screening, those are tools that are running in the back continuously. Adverse media screening, we have already rolled out in most of the countries. You go to the right-hand side of the screen, which is continuous monitoring. You get these transactions in, which can generate alerts, which can generate hits or significant Suspicious Activity Reports that you need to provide to the authorities. Filters back into the left-hand side on your, either event-driven or periodic-driven KYC process. It will become a customer life cycle. Now, we are doing over 8 billion transactions per year, that basically means that we need a lot of data.
That fits well into our data strategy because data is in the heart of what we're doing, in the heart of our transformation and what we want to be as a company, a data-driven company. I'm sure you've heard of machine learning and of artificial intelligence. Here's how we apply it to KYC. I'll give you two examples. When you do transaction monitoring, which you see on the right-hand side, of 8 billion transactions per annum, that means you get a lot of alerts. You also get a lot of false alerts. Actually, alerts that shouldn't have been there in the first place. They need to be investigated. We use machine learning to take out these false alerts, the alert handler can focus on the real alerts and spend time to really focus on people that would want to perform anti-money laundering or money laundering.
Second example is on smurfing. Smurfing is a technique that is used by criminals to cut payments into little pieces to make sure that they are off the radar screen, so that they are not being picked off by systems, that people do not see them. There, we are rolling out in a couple of countries, a tool, again, based on machine learning, to pick up smurfing to make sure that we spot smurfing early on. Also machine learning and AI are important. I've told you about the tremendous determination and focus the entire organization has to bring KYC to a sustainably higher level. I told you about the progress that we're making. I told you about the program that we are having. I told you about where we're going with the customer life cycle.
I've told you about machine learning and artificial intelligence that we use as techniques to get better. I am determined, together with the board and the entire organization, to bring KYC to a sustainably higher level. That is our primary goal. Mark, can I give it back to you? Oops.
There's no mic. Is this working? Okay. Roel and Ralph, please join us for Q&A. Sorry, I have to see now. It's not working. I'll go to the mic. I promise not to sing. Thank you, Ralph and Steven. Roel, welcome as well. We'll now go to Q&A, let me start off with the number one question that the team and I have been receiving from analysts and investors from all over the globe, and that is the question, we've been in the news. Often we had the report on Russia and Belgium. Last week we had the news on Bank of Italy. What is there to say, or what can we say to give people more comfort on whether there's more to expect? Are there more interactions ongoing with regulators in our businesses and countries?
What is it that you can say there to at least give some guidance on whether there's more to be expected?
Thank you. We've always had, and we do have from various regulators, onsites and inspections on various parts of our organization, whether these are onsites on prudential risks or on our strategy, or in this case, on AML and KYC. Clearly, after the fine came in September 2018, there was a heightened scrutiny and a heightened way of different regulators to go into onsites, and deep dive into our organization. A number of them have started. A number of them were finished, and in this case, Italy came forward. Yeah, it's in a regular process that we get onsites on AML and KYC, and it will continue. That's maybe point one. Point two is, we are on a multi-year program that is bringing significant improvement, like I just explained, to the entire organization.
Okay.
We have already made improvements, but there are still a number of improvements to come, and that will take time.
Thank you very much. Ladies and gentlemen, I would like to open the floor now for questions. There are microphones, and I will try and keep track of your hands. I think, Benoît, you were first.
Yeah, Benoît Pétrarque from Kepler Cheuvreux.
Sorry, can you please stand up?
Oh, yeah. Yeah, couple of questions on my side. The first one was on how much time you need to basically complete the review of the files. I think KYC takes time, basically, to be implemented.
In which point in time can you tell us, we are comfortable with the control in place and also all the files we have in-house? Wanted to get a data point, if you want, in time for that. Second question was on Russia. This is a country which is screening weak on money laundering, basically. Are you committed to this subsidiary in Russia? It's EUR 5.5 billion book, pretty small, mainly important for you in the industrial lending. Can we expect decisions there in terms of keeping, closing, or restructuring this branch in order to decrease risk on a sustainable basis? Then around ALM, basically, what will be the cost, the incremental cost, potentially? You were saying that you have 2,000 people working full time on that. Do you expect more, or do you appear with the current cost base, basically, on this program? Yeah.
Okay. Thank you. Steven?
You go first. Yeah. I'll go first. With regards to the file enhancements, look, we have a number of higher risk files that we are looking at in our program to improve, and we will do that, as I said, in a program in 2019 and 2020. Enhancing files or getting your files in order or getting those files better is an ongoing element. That's why I set a program last until 2020. Currently we have the fourth directive, the AML, the anti-money laundering directive. In 2020, there will come the fifth anti-money laundering directive from Europe. Enhancing files will be something that we will do continuously, and only in a program we are enhancing a number of files. We use those learnings to continuously enhance the files.
Again, it's only part of doing due diligence on our clients, because it's only the file due diligence. Then you have name screening, adverse media screening, and transaction monitoring that I put on stage a bit earlier. I think that's the answer on question one.
Maybe to add to that one. After the initial enhancement, thereafter it's business as usual. The cycle that Steven explained, is that you will have to continue to update your files. With new directives coming in, you may even have to go beyond the level where you at that moment have them. The project aspect of it will fade away after 2020.
With regards to Russia. There have been news articles appearing in the paper. We do not comment on individual clients. What we saw two weeks ago were articles, amongst others, about Belgium. There we had a couple of correspondent banking relationships, which we did, by the way, exit in 2009 and 2010. There are a number of, or a couple of clients in Russia on which we did file SARs and which we exit as well. We've also filed SARs in the past, and still do, on the Netherlands. For example, we file over 4,000 SARs on Dutch clients alone in this country. If you look at financial economic crime, that is happening everywhere. We will continue to keep an eye on, of course, our Russian activities, and make sure that we deal only with those companies that we want to deal with.
The number of clients that we currently have in Russia is relatively limited. Typically, these are large blue-chip clients with international activities. At the same point in time, that comes back to one of the earlier elements with regards to Belgium, we have been reviewing in the past already our correspondent banking, and since the last five year, we've decreased the number of clients in correspondent banking with about 20%, and we will continue to review that.
On the cost side, maybe you can add to that as well. As Steven had indicated, we currently have some 2,500 FTEs working on this. These are not people who are just working on KYC or on the program. This is people across the board. Also IT people who are working on it or services people who are working on it. We have reprioritized quite some part of our change budget, as we call it, the investment budget, in order to develop new tools, as Steven was indicating in his presentation. The development or the introduction or the rollout of new tools, that's what you need to do. The digitization of the whole process, making sure that you have all the documents in a central place, checked from all the different perspectives. There's quite some investments going in that.
It's a couple of hundreds of millions of EUR that are going into it. At the same time, this is what it takes. If you want to be in banking, this is part of what you need to do. I actually think that if you can get this done really well, it can be a differentiator as well. You have to really dig deeper to know your client and make a thorough analysis and make sure that you store that data and learn from it in the continuous learning cycles as indicated. Maybe, Roel?
The only thing to add is what you actually alluded to before, which is the fact that there are two components. One is to get our files on hand and get it up to a certain level. A lot of that is project activity. That is getting ourselves in that status. On file enhancement on one hand, and on the other hand, getting all the projects in there to get the structural solutions in place. That should fade out at the end of 2020, because that's the moment that we have agreed with the De Nederlandsche Bank that will move away. Then it becomes business as usual, like every bank will have to comply with these laws and regulations.
Thank you. Please.
Hi, it's Pawel from Goldman Sachs. Maybe more specific question on Italy. You are banned from onboarding new clients. Can you give us a sense how long it can last so we can gauge a disruption that regulators can impose on a business? The second question is, do you believe that this on-site visit and a decision by Bank of Italy create a precedent for others to go into that direction, which will then possibly shorten the time you have to address the shortcomings?
The first one, we can't really comment on the measure itself. We were surprised by it, let me put it that way. It's for us to show that we have our act in order to make sure that ban gets lifted. We're working on this every day now in order to come up with a plan as to how we think we can work on this, not just fix it, but really structurally improve it. That plan will go to the Banca d'Italia, then we'll have to take a conversation as to how to take it further. The team is, as we speak, working on this day and night in order to do that. As to the precedence. I don't think you need this per se as a precedent. I think what Steven already indicated is that we get visits by regulators on a regular basis anyway.
They do inspections across different activities. Clearly, there's a heightened attention around this subject with us, but also many other banks. We'll just have to deal with it. What we do is that with every finding that we have ourselves, whether it's coming from our own audit area or in discussions with regulators in different countries, we do circle around that learning as soon as possible and see how we can pick it up and make it part of the Enhancement Program. In the end, what we're seeing coming from the Banca d'Italia and some of the elements in that report, it's all covered by our Enhancement Program. It's very much around processes and procedures in order to ensure that you have a good standard of KYC to prevent financial economic crime from happening.
Yes, please. Sorry.
Yes. Robbert van der Hoek from ABN AMRO Bank. I think you're indicating that you have had some lesson learned that you're also rolling out to other countries. Can you talk a little bit about how happy the regulator is with those enhancement that are coming through already versus trying to punish you for what you could have also done better in the past? That's the first question. The second question is, on exiting clients, I think your comment following the Belgium and Russia affair was quite helpful that you exited those clients in 2009. Can you talk about a little bit how it comes that these accounts were open for years longer, or whether that's true? I think in the answer to Bernard's question, you already said that in Russia, you also exited certain clients.
Is it fair to assume that the clients that used the Troika Laundromat amount were also identified with the ING Belgium case towards the regulator back then?
Maybe on the way we deal with our regulators, and then you take the more specific cases. We're in touch with the Dutch Central Bank continuously on this. We have this program that we agreed with them, that we are reporting on progress, and we enrich our initiatives with the learnings that come from different areas to the extent we feel that it's not covered by the program itself already. There's a complete open communication around that as to how we take these things on. This is on a continuous basis.
With regards to the clients in Belgium, how when you stop them as a correspondent bank, it does not prevent clients as such to make use of such bank themselves. There are many banks that we do not per se work with, maybe not for compliance reasons or not for other reasons, but it does not mean that those clients do not transact with other banks. In that sense, it's a different thing. As soon as you pick up signals on correspondent banks, which basically is a bit more distant, if you will, because correspondent banks have their clients and they just ask you as a bank to transact these transactions for their clients with clients of other banks. That is one element.
The second element is then is that you then look into, okay, are there particular companies that have particular links with these banks that I should take into account as well? You have to look at these clients in a different element. Correspondent banking on one hand, what are these banks doing, which are more using your systems because they do not have access to payment systems themselves, for example, in Europe, but they do transact through your systems with other banks, with other clients. Two, what are clients of yours doing? In that sense, it's a separate bucket.
Thank you.
Please, Martin.
Good morning. Jean-Pierre Lambert from KBW. Three questions. First of all, do you feel you need to increase your provision for litigation on the back of the events which may be simmering? Second question, can you express the additional cost, incremental cost as a percentage of the target EUR 900 million cost saving? Is it impacted at all? Thirdly.
Sure
Do you expect some kind of slowdown of client acquisitions as a result of more intense KYC, or do you keep expecting the same kind of growth? I think you reiterated to your target of EUR 14 million and increased it to EUR 16.5, I suspect not. Thank you.
Okay. Maybe if you take the first one.
Thank you, Jean-Pierre.
Yeah.
On the provision, basically you can only take a provision in IFRS if three elements happen. First of all, you need to be able to make a reasonable estimate of a potential fine if such fine were there to be the case. Two, then there would be a certain likelihood that that fine would take place. Three, it would actually lead to a potential cash out. Those are IFRS elements that are a condition to take up a provision. If you cannot just take provisions on potential views that someone may have or what in the future may happen. If you talk about Italy specifically, we have not been charged with a fine. We basically now have received an instruction to stop onboarding new clients and to enhance a number of our KYC processes and provide them with a plan before we can reopen.
They are in an administrative process that needs to be concluded, and that conclusion could lead to an administrative fine. Again, we don't know what it is, if at all. The second element is, at least I'm now reacting to press reports, is press reports appearing on an Italian prosecutor, but we have not received any message from the Italian prosecutor. We tried to get in touch with them, but they have not contacted us, and until now, we have not heard from them if there will be an allegation, if any. You can only take a fair provision if you know the substance, approximately the amount, and the likelihood of the outflow, and none of those things have happened in any of the countries in which we're active, so we cannot do that.
On your question in terms of how can you translate this into savings, I think that's not the way we look at it. This is what we need to do. This is what it is about banking. As a bank, you have to be a gatekeeper to the financial system. We have to beef up our efforts on that one, and that's what we're doing. The estimates are a couple of hundred million EUR that we're doing, but quite some of that is reshifted capacity of things we would otherwise do, because there's only so much you can do at the same time. It's a 2,500 FTE estimates across the organization. In terms of cost estimates, these are the ones.
It's not to be said that is an incremental cost on top of everything, because as I said, there's only so much you can do, and you reprioritize parts of some of these programs where you have to do this. On the growth aspect, clearly, onboarding and putting more scrutiny to onboarding is one that is absolutely crucial in order to ensure that you are a good gatekeeper to the financial system. I think, in many cases, we have the right processes already. Having said that, the ambition that we indicated is around primary customers. If you look at the number of customers that we have currently, which is more than 38 million, and then the number of primary customers that we have, we feel that working with these customers that we already have provides some opportunity. That's what we're looking at.
Thank you. Alicia? Sorry, could you bring a microphone over there to the lady?
Sorry.
Just three questions from me. Firstly, on the cost front related to the KYC program, obviously you started this back in 2016. It is now two and a half years later. You expect to finish it by 2020. Is there not a case to be made to try and expedite this and add more resources, increase your costs in the short term just to get this through either in this half year or by the end of 2019? Because it does sound like it is quite an urgent matter. Secondly, just on the terms of processes that you are putting in place. Obviously, you have talked a lot about being able to screen and identify client files that may look dubious, but there are other issues related to actually escalating problems, either at a divisional level or also at a group level.
Client files that might affect ING Belgium that have also affected ING Russia, for example. What is being done to make sure that there is a coordinated effort across the different countries and also to monitor at a management or a board level? One third question, just looking again at ING Italy, are the processes that you had in place there different from other countries? Why wouldn't we necessarily see the same issues elsewhere, or what are the big differences between them? Thanks. Bye.
Maybe on the ramping up FTEs and capacity?
The first question is around how do you really make sure and how can you basically make sure that you deliver and that you speed up. Again, two components. The first one is the file enhancements. We've committed to the Dutch Central Bank to have all of our file enhancements done by the end of 2020. Internally, we've got a different target, which is around the end of 2019, and currently we're on track to get there. You get to the structural solution. Since it's a structural solution, it means it's not like putting something just in place. It's literally building something up that enables us to stay compliant going forward as we are today.
That means that with all of the elements in there, Steven alluded to the workflow system that we have in there, but also some of the systems around transaction monitoring. We need to make sure that they are actually up to the standard and are able to be embedded in all of the local systems that we have. That takes a little bit longer, and that's why we get to the end of 2020.
On basically how do you make sure that whatever you find, in some cases with clients, that you make sure that other parts know that as well? I mean, a lot of the discussion, a lot of the enhancements that Steven was talking about, whether it is the governance enhancements, if it comes to KYC committees, which each one of us, the business leaders, chair themselves in order to go through client relationships and what has come out and what needs to improve and how do we deal with that, they take ownership around this. There is quite some tooling that has to go into that learning as well in order to ensure that that knowledge goes across as soon as possible as well. There is quite some of this structural enhancements geared towards that. Maybe you can add.
Basically it means that we need continuous learning in the organization also to share what we've done in one country, how we can do that in the next. If there are things that we learn from what we've seen in the Netherlands, we actually apply that to the program. You see that now with things that we learn from Italy, in terms of sharing, for example, SARs, how we start with sharing these where we can, because we cannot always, from a legal point of view, share suspicious activity reports. You're not allowed certainly in all countries to share these suspicious reports.
Where we can, we do share, so that we become better at recognizing when things go wrong with a subsidiary of one company in one area, what are the effects on the total company, but also maybe companies that deal with that company. You come back to, let's say, trade-based money laundering, which is relatively complicated because it's not limited to one subsidiary or even one company, but it's many companies and many entities across the globe. As soon as we see these things also happening from the past, because if you look at about the Troika Laundromat, you talk about 2009, 2010, that's 10 years ago. Even there, where we do look-backs, we take learnings from that and apply that over the entire organization to become better at this.
With regards to Italy, a number of the shortcomings that we have seen, actually, all the shortcomings that we've seen were known by us and were taken on board in the program. A number of these elements that we need to pick up, for example, the rolling out of our workflow tool systems, our tools are sequentially, and that basically means that they are on the calendar to get this on board, but we have not done it yet, and that needs to happen to make sure they become sustainably well.
Okay. Thank you very much. I would like to conclude this Q&A right now, and thank you, Raul and Steven, and give the floor to you, Ralph. Thank you to start a deep dive into our Think Forward strategy. Thank you. I think this was important, and we will have more time today, during the lunch and during the meetings, and each and every presentation, we'll tackle this subject as well in order to discuss this. We found it important that we could address this with you, that we took you along in what we're doing about that and what we can do about it and what we know at this moment in time. That's absolutely crucial. I think it shows that whereas non-financial risk management or compliance with laws and regulations in general, they are non-negotiable for us.
If you look at the Think Forward strategy as to when we launched it and how we're currently doing and what we see, that's what I'll take you through right now. As indicated, after me is Tinette that'll take you through the financials. Roel, that will take you and give you an update on the transformation itself. We'll have the business lines commenting on what they're doing. Wholesale Banking, Isabel, but Steven will be there as well in order to give you a peek into how we do credit risk management there. Clearly, his presentation will also still cover some of the non-financial risks that we discussed. Aris, Roland, and Ignacio will tackle the different aspects of the retail bank and how we're progressing there. We have a whole program there for you.
You should see my presentation as kind of the total overview of what we're doing and where we are currently. When we started Think Forward in 2014, we actually picked up on many of the changes that we saw coming at the banking industry, whether it was increased regulation, whether it was lower interest rates for longer, whether it was the upcoming power of technology, the new competition that was coming at us in platforms, we picked that one up. On the back of that, we started a program called Think Forward, a strategy called Think Forward to reinvent banking. Literally reinvent banking. As we've seen actually going into that, at a certain moment, we had to accelerate that.
To go back to Think Forward, that's the strategy that has at its core our purpose, and our purpose is to empower people to stay a step ahead in life and in business. There's two things I want to remind you of in our purpose. The first one is that it's about people. It's not necessarily about clients or customers, it's about people in general, which basically means that we take our role in society a little bit beyond what we are as a company or a bank. It's beyond supporting economic progress, it's beyond financial empowerment. It is also there to create a sustainable world for all of us going forward. There's a second aspect of our purpose I want to remind you of, is that it doesn't have the word banking or financial services in it.
Banking or financial service are not a primary need of our customers. Our customers need to eat, they need a house, they need to travel, they need to communicate, they need to network, they need to invest in their companies, they need to grow their companies. Those are primary needs. Banking service, the secondary need to facilitate the primary need. That's why the purpose is not mentioning bank or financial services. There's one thing more there, is that already at that moment, we saw that if you believe in a digital world and you believe in the digital interaction, then you come to a point where people are literally dealing with their primary needs in the same way that they're dealing with banking. Digital interaction.
That's what you see happening right now because you see that in that interaction point, you see that industry lines are getting blurred. Same apps are used for many different things. That's what we foresaw at that moment in time. One of the things that we saw as well is that products and banking were increasingly commoditized. You couldn't make a difference by having a new mortgage or a new savings account with bells and whistles. Honestly, that led to other issues. You had to do it on the back of creating a differentiating client experience. Clearly, the ones who were customer champion, not only in knowing the customer, but also in serving the customer, were the platforms already. Because they were able to deliver a service that was personal, instant, relevant, and seamless, and all at the same time.
That's the bench that we were up against, that's where we wanted to move. That's why the core of our strategy is to deliver a differentiating experience. Not a differentiating product, the experience. Another part of our one slide strategy that's really important for you to notice is operational excellence. Operational excellence goes beyond operational efficiency. In a digital world, operational excellence means operational resilience. I'll come back to that later, it's a concept that in a digital world, people expect you to be always on. Your system's always available. They trust in you as a digital icon, you have to do everything to protect that trust. Data security, IT security, non-financial risk.
When we were in this Think Forward strategy and delivering on it, just two and a half years ago when we were together last, we announced that we wanted to accelerate some of this. That some of the advantages that these platforms had, we wanted to take on board as well. For example, they were able to deliver the same customer experience in different countries. Literally the same. No difference. Uber is everywhere the same. Facebook is everywhere the same. Banks are everywhere different. Even if they're called the same ING. Makes no sense. It's not necessary. We could save money there and create cross-border platforms. That's why we started the transformation. That's what you see in the wheel.
We started to do that from the inside out, all the way from our support functions, IT, everything that supports the business, and then the platforms that we're creating around the United Countries, Belgium and Netherlands, and Model Bank on the other side. That is only in order to create scalability. There's an opportunity there as well. That opportunity is that it can actually get you to become a platform. If you believe in a platform world, both from the Wholesale Banking side as well as from the retail bank side, by the way, you have to make a decision. You could be a bank, connect to the platforms that are there and get your traffic. You could create your own platform. That's the ING on top.
Can your brand be so successful and so powerful that clients take you as a starting point for all of the services? That's what we're working on, the go-to place for financial services. In addition to that, we're developing independent platform opportunities. What you're trying to do with these platforms is that you're basically trying to shift a little bit forward in the value chain, where basically you deal with customers when they are looking for brokerage services, buying a house, rather than that you're confronted with a request for a mortgage because they've already decided to buy a house. Then you have three days to react, and the only thing you can do is pricing to win the deal.
If you know early on that they're actually looking for a house and you're active in a digital broker world. Then actually, you can expect what they want. That's the forward integration in the value chain. That's the platform world. We have been working really hard over the last five years on many of these aspects, creating a different genuine experience. Just over the last year, we have improved our Net Promoter Score on the Wholesale Banking by 14%. Over the last four years, we have been increasing our primary relationships by 50%. We've taken on a lot of innovation, done ourselves through boot camps, but also partnered up with other bright ideas. We took initiatives in the activities beyond banking, which are the platform initiatives. That's what you see right here.
Just coming back to our purpose, the fact that I made a specific reference to sustainability as part of our purpose. Our sustainability strategy basically stands on two legs. One is very much on how do we create a self-reliant society. The other one is very much around how do we create a low-carbon society. Both are completely aligned with UN Sustainable Development Goals. Completely. On the back of that, we are improving our reputation and actually doing quite some business. One thing that we're particularly proud of is the Terra approach. The Terra approach is a scientific approach as to how you can calculate the indirect footprint of your asset base. In the back of that approach, we have pledged to decrease or to develop our assets in line with the Paris Agreement.
What is really good to see is that many other banks have actually adopted this approach and say, "Well, we will go along," and have pledged to decrease their asset base as well, at least the indirect footprint of their asset base as well, in line with the Paris Agreement. That's the way we can fundamentally change how things are done on the globe. If you look at all of this, if you pick up the stories of today, you can see six different value creators for ING. Or value accelerators, if I may say. The first one is the growth of primary customers. A primary customer is a customer that is more loyal, that does more business with us and creates more profit. That's what we will see today.
On the back of knowing your clients so well because they are a primary customer, you can improve your cross-buy. That cross-buy, in a platform world, should not be limited to the product that you produce yourself. It should be open to third-party products. It should even be open to peer products, because if a peer can deliver the right product for our client's needs, we should be open to deliver it. That's the opportunity there. Clearly, with the transformation to cross-border platforms, we are creating cross-border efficiency, cross-border scalability. The additional value accelerator on top of that is the time to volume. What do we mean by time to volume? Just the example of Model Bank. Once you have Model Bank, clearly you have already operating leverage.
Beyond that, if you introduce a new product, rather than in the past having to introduce that product in four different ways in four different countries to reach 7 million, now I have one product and I can reach 7 million customers at once. That's time to volume. Another value accelerator. Today, we'll take you through the opportunity that we have on the value acceleration side if it comes to the fact that we are a net credit spread receiver. By virtue of our funding base being retail, and by virtue of our rating, we stand to benefit from a credit spread change and therefore pick up on that because we're a net credit spread receiver.
Last but not least, given what we are doing on the sustainability side, we actually really think, and Isabel will show you in her presentation, that there's quite some commercial opportunities on the back of that. That's where we are in a nutshell, and this is what we delivered for you. If you look at the NII over the last couple of years, it has increased despite low rate environment. By being able to grow, by being able to interact with your customers, by being able to offer them the right services, doing more business. At the same time, we have been able to manage our NIM on a stable basis. We have been able to offset the pressure on the savings side because of the decrease of interest rates in order to support the NII.
On top of that, we have delivered on our promise to grow our fee income by between 5%-10% over the years. We have delivered on operating leverage, a very powerful measure as you can see. Over these years, our cost, excluding regulatory cost, and these are the cash out costs, not the cost of regulatory programs in order to make sure that you comply with all laws and regulation. Has only increased by 5%, 1.1% per annum. Whereas the volumes that we picked up have increased by 15%. This is operating leverage. This is where you see digitalization happening. This is where you can see also in the future, cross-border scalability happening. This is a really important input factor to measure whether digitalization is really generating value. This is the one.
On the back of that, despite increasing capital requirements, we have been able to improve the return on equity. Now, this didn't just happen, right? On the retail banking side, we've really successfully engaged our customers digitally. We've grown the number of primary customers, but what is more important is that you see that most of these customers are increasingly digital. That what we already predicted, that the use of digital channels would increase very rapidly, that is exactly happening. Within the digital channels, you see that the use of mobile is growing even faster. That provides us with a massive opportunity in terms of how you deal with customers, because we know how to work this. On the back of that, you are able to engage with your customers, get more interaction with them, get more payment traffic with them, know them better.
You could become the predominant app in their daily lives. You can already see here that in the Netherlands, we're the number 10 app for daily usage. What does it mean, the number 10? Only the number 10? The number one through nine are all Facebook and Google-owned. We're the first non-platform app in the daily lives of the Dutch people. With that, we have improved the return on equity on our primary customers, and we made it to the best banks in the world on the Forbes list in 2019. On the Wholesale Banking side, you actually see the same thing. Already from the beginning, way back, we decided not to want to be everything to everyone in the Wholesale Banking world. We gave up on that ambition that many banks still struggle with.
We went for something that we knew very well, which is the sector approach, the sector knowledge. That's how we've grown our business. That's how we've grown our relationships, and we are increasing the number of primary relationships in the Wholesale Bank as well, and they tend to be more profitable as well. On the back of that knowledge, we have aligned our whole network. So the whole network, more than 40 countries, are doing exactly what we want them to do, focusing on these clients and making sure that the products they offer in terms of lending, transaction services, and financial markets, that they are all aligned to these sector clients. That's how we've become one of the most efficient wholesale banks around.
There's one other particular aspect to the strength of our Wholesale Bank, which is that we have a very specific, a very tightly managed risk appetite. You know it's my background, and I've talked to many of you before, is that in the world of competition, from the beginning, we've always said, "We'll be there. We know these sectors, but we'll never compromise on structure. We'll never compromise on our risk appetite." Because you know you're going to regret it, and we would just wait, and clients would always come back after a while. These are the strengths. Also on the Wholesale Banking side, we are really deploying a lot of innovation in order to stay ahead of our competition. Isabel will talk you through that. We see particular opportunities in the blockchain world. We're one of the leaders at this moment.
None of this could have happened if we wouldn't have started the transformation program and change from within, standardize from within in order to make sure that you can offer your customers in a standardized way across 40 countries, for example, in the Wholesale Bank. Roel will take you through many of these and give you an update on many of these, but I'll just give you a couple of highlights. If you just look at the Unite program, two and a half years into it, we delivered a full cross-border organization. We migrated 600,000 clients from Record Bank to ING Bank in Belgium. We closed 600 branches. We decreased the number of FTEs by 2,000. We took 16% of cost out, literally, over a period of four years in the United Countries, and we kept commercial momentum.
On the Model Bank side, we actually had a bit of a rough start. You're trying to align the value proposition to your client, and amongst four different countries, it tends to lead to some discussion. We finished that, and we agreed on a value proposition going forward. On the back of that, we built the Model Bank out of Madrid. We have the whole team working there in Madrid, and we have migrated already 400,000 Czech customers onto the Model Bank platform. In Welcome, right here in Germany, the team took that challenge to digitize as much as possible in a short time frame as possible. They both delivered on the savings even more, 12% decrease in the number of FTEs on the operations and services side, and improve the customer experience. Improve it.
They basically closed that program. This is closed now. It's done. On the Wholesale Banking side, we made further efforts and basically we have now all of our loan products on one and the same IT, transaction services on one and the same IT. We're getting closer and closer and delivering on the savings there as well. None of this could have happened if on the IT side, we wouldn't have made that part of everything we do. If you look at that, 45% of our IT workforce currently is deployed on cross-border projects already. 45%, non-localized, fully cross-border, 45%. We can see that we are building that platform. At the same time, investing a lot in the IT, saving a lot in the IT. Being able to keep the IT cost actually flattish. Only 1.1% per annum increase. It can be done.
Investing in IT to simplify will save you money in IT, and at the same time, may give you a better client experience. That's what we've done. If you believe in that platform world, and whether you're a digital bank or a platform, you should realize that there is a future where customers only see this or a tablet or a desktop, and they see your logo. There's almost no alternative to interact with us because there is no branches in many of the countries in which we're active or no relationship managers. If they call the call center, it's a chatbot. What they see is our logo, our app. If you have that logo as the only thing that builds trust, that orange line, then you better make sure that they can trust it.
The first thing to do then is make sure that your operations are resilient. People expect from us to be always on, and therefore your systems have to be always up and running. If during the day we're out for 10 minutes, social media is full of it. That's how people are used to wanting the availability of your app. On the Wholesale Bank, it's even higher, the threshold that you need to adhere to. The same goes for data security, data privacy in order to protect your reputation. IT security, and basically we test ourselves against the highest IT standards and security standards that tech firms do. That's what we test ourselves against. We hack ourselves against these requirements. We measure and we continuously improve on that. That's what's needed.
Of course, if you want to protect your reputation, you will have to always comply with each and every law and regulation. Therefore, KYC, therefore AML is of crucial importance and non-financial risk as a whole with IT, with data and everything that comes there, and availability has to become part of our DNA, just like financial risk management. What are the opportunities ahead for us? Let's first go back and take a look at what we see currently. On the economic side, low for longer. We see indicators that show that economic growth may not be as good as expected. We see confidence decreasing on the back of trade discussions, trade negotiations, trade wars, if you will. We see geopolitical discussions dampening confidence in the world, and we see a Brexit that has a very erratic impact on economic development.
On the customer behavioral side, we actually see the same change continuing. Clients and also bank customers, they are used to digital interaction, and they want more of it, more and more. We see the competition coming in from all different sides. The big techs that were maybe hesitant going into banking, there's no hesitation anymore. They are there already. The good thing is that we know how to deal with technology as well. That digitalization, artificial intelligence, robotization can help us to take on that competition. We're pretty convinced that we can deal with this also going forward. In the end, we'll develop more and more to what we call a dynamic digital player.
A dynamic digital player that has at its heart the customer and the customer experience, and the trust that that customer has in you because of what you offer and how you offer it to deal with their needs, not necessarily limited to your own products. They will expect you to deliver products that fit their needs better, whether or not they are your own products. That's the dynamic digital player future. Clearly, we may offer products that don't come from our balance sheet, we will continue to underwrite risk on our balance sheet because that's something we know how to do very well. You could expect the velocity of our balance sheet to increase, though, as to how we deal with it and repackage parts of it. That's what you could expect. This is the world the way we see it.
In that side, we do see the opportunity that if you take this on, that you can develop yourself more and more as a screen where banking is prominent. Let there be no mistake, we are a bank. With that, there's ancillary services around because they trust you and they trust your objectivity as to how you deal with their needs. They trust the way you compare energy usage for them. That's where a lot of the future will be. We're already making steps there. We're already making steps in becoming that go-to platform as ING with Payvision, with the FinCompare and funding options in the Atme sphere. That actually delivers the opportunity for us to do cater for clients that maybe we would not be able to service from our own risk perspective, others do have that appetite. You can help those and make fees.
I think that could really improve the quality of our earnings and the fee income going forward. Also on those initiatives in the platform world where we have more independent initiatives like Cobase and Yolt, we do see that there is opportunity to grow those businesses and also increase your fees on the back of that. What does this do to our ambitions? I know that you always want group ambitions. It's like, what is your Core Tier 1? What is your return on equity from a group perspective? How does your cost income develop? My answer is always that I can't answer that from a group per se, because you will have to understand what the underlying businesses are and what the recipe is for underlying business.
This is a slide that I also used the first Investor Day that I was on presenting you the Think Forward strategy. There's basically three different roles that we manage within ING that act and that can't do without each other, and for which a lot of the things that we're doing apply, but in a different way. In the Market Leaders area, we do expect, given the low for longer, that even with the commercial momentum, there will be some pressure on income. Whatever we do there from a cross-border scalability perspective, it will have to have an impact over time on your cost base. With that, improve your operating leverage.
In the C&G countries, the same effort of improving cross-border scalability will lead to a better time to volume, and that will further increase our income opportunity, and we can allow some cost growth in order to support that, but overall, improve your operating leverage. In the Wholesale Banking side, we're looking at how we can manage our income side on the commission income side, but also on the repricing of increased capital requirements, thinking that the income line will be a little bit supported, manage our cost base by our Wholesale Banking team, our continuous efforts to create cross-border scalability, keep costs flattish, and through that, improve your operating leverage. You heard me talk about operating leverage a couple of times.
It was already in the beginning in the slide where I showed you that from an operating leverage perspective, over the last four years, our costs only increased 5%, whereas the volume have increased 15%. The reason why we use that one is because that one determines whether what you're doing is really leading to efficiency. If you just look at cost income and you get a lot of regulatory costs on top of it, outflow regulatory cost, I can't cope with that within the same year. If you only look at income, I don't want to be lured into doing business that is outside of my risk appetite. Therefore, yes, cost income is an important input factor for us, but over the years, in order to see where digitalization helps you and cross-border scalability helps you, we're looking more and more at operating leverage.
Now, we do expect cost income to go down. That's not the point. We've shown it. Since 2013, we got an additional EUR 500 billion of regulatory cost. We absorbed it. In the Unite case, as you saw, we actually took 16% of our cost out over a four-year period of time. If you correct for regulatory cost, our cost income ratio is already below 50%, already in the top quartile of banks. That leads to the overall group ambitions. Now, given where Basel IV sits and how it impacts our capital needs, we haven't changed our ambition around that. 13.5 is our CET1 ambition, to manage around 13.5. The leverage ambition hasn't changed either. It's the 4% minimum that we want to comply with. From a profitability perspective, we will predominantly look at return on equity. This is what we really look at for you.
Cost income as an underlying input factor is certainly something that we will continue to track, but we will not be preoccupied by it. We'll be preoccupied by return on equity and by operating leverage. We do know that cost income is the way some of you look at this, and we'll continue to report on it. We'll manage it because it's an input factor in your return on equity, but it's return on equity that we really look at, and there's more things to work on return on equity. From a dividend policy perspective, we will continue with our progressive dividend policy. This is the summary of all the stories you're going to hear today. This is how it all fits together. With this, I'd like to give the floor to Tanate.
Hi. Good afternoon. My name is Tanate Phutrakul, and I'm the CFO for ING. I think I've taken on the job now for approximately a month or so. I'm relatively new in my role, but I have been with ING for quite some time. For the last 10 or 11 years, I've been in different jobs as divisional CFOs for various parts of ING. I'd just like to introduce myself a little bit. I think back in 2008, I was the CFO for what we call the Ops and IT division. It really gives me quite a good insight into our technology operations within that world. I was there in the Netherlands during the time when Postbank and ING Bank merged together as part of Project Tango, which you may have heard of.
After that rotation, I was then the CFO for what we call the Challenger and Growth Countries, where I think during my time there was quite a transformation ongoing with divestments of many parts of ING Direct in the U.S., in Canada, in the U.K., and a refocusing of our resources into other markets like in Germany, in Eastern Europe and Asia, and is what is C&G today. For the past four years, I've been CFO for ING Belgium, where, as you know, we're going through not only a domestic transformation of that franchise, but for the past two year, an operational merger with ING, the Netherlands. That's just a little bit about myself and perhaps my background before taking on this role as the group CFO. Okay?
Before I go through the presentation financially for ING, I like to maybe reiterate perhaps our company's belief about the environment going forward. Perhaps there are three or four things which I like to highlight for you. Number one is if we were sitting here six months ago to where we are today, I believe and the company believes that we're in an interest rate environment which will be much lower for longer than we would expect six months ago. That's the first point. The second point which I think I wanted to make is despite this low interest rate environment that we see, we believe that the credit spread being paid by financial companies in Europe will go up, and we believe that the credit spread that needs to be transferred to our customer, which is repricing, needs to go up as well.
As part of our financial management, repricing of our loan book is a critical process that we will go through in the coming years. Okay? The third point that I wanted to make in terms of our environment is that while for the past three to four years, balance sheet expansion or growing your balance sheet came with limited costs. Under the new regulatory regime, whether it's Basel IV, whether it's MREL, whether it's TLAC, leverage ratio, your balance sheet growth comes with a significantly higher cost than it used to in the past, which means we need to optimize our balance sheet growth and make sure that whatever asset mix, whatever lending product mix that we have, we make it count much more than perhaps companies in Europe or financial companies in Europe were able to do in the past few years.
Lastly, as we mentioned at the beginning, regulatory compliance and the programs around regulatory compliance will be something that we need to work through over the next few years as well. Okay? This picture, I think, just gives you a bit of a highlight about the evolution of the company over the past few years, but I'd just like to highlight two points. The first one is the box in the middle top, right? In terms of the rigor at which we manage our costs, and over the past four years, you can see that our underlying expenses have grown by approximately 1.1% per annum. Right? Below the inflation rate in our major blended markets.
The second thing, which is a reality for us, is the fact that our regulatory expenses, these are DGS, SRF fees, and in terms of bank taxes, these have grown by over 23% per annum. These are cost increases which are to a degree a little bit outside of our control, but it's something that we need to manage as well. This is one thing that we will talk a little bit more in my presentation, how to manage our expense base.
The second point which I wanted to make is that to reiterate the point that on the bottom right-hand side, that despite all of this, despite the challenges that we have, we have in essence increased our return on equity from 7.2% to over 11% during this period, despite the fact that we have gone from 10.5% Core Tier 1 to 14.5% Core Tier 1 over this period as well. Okay. The question that you may have is how have we done this, right? How have we been able to sustain the financial performance of the company over this period of time? I think one of the big driver is really the net interest margin of the company during this period, and that is shown on the left-hand bottom part of the slide. Right.
That not only from 2015 have we been able to sustain our NIM, in fact, our net interest margin has actually gone up. Right. It's gone from 146 basis points to sit now at around 153, 154 basis points. Right. This in light of fairly low interest rate having prevailed for us for quite some period already. Okay. If you look forward, the challenges are a little bit more, shall we say, pronounced, given the fact that these low interest rates are here for much longer period of time, and the fact that our ability to lower deposit rates in some of our home markets is actually getting much more narrow as we speak. Right. If you look at some of our home markets in Belgium, we're already at a statutory floor of 11 basis points.
In the Netherlands, we're at three basis point, and in Germany, we are already at one basis point. In fact, the ability to continue to lower deposit rates to counteract the compression in your liability margin is coming somewhat to an end. What can we do to try to mitigate some of this impact on our NIM? What can we do to basically try to slow down the impact on our net interest margin going forward? I'd like to take you through some of the actions that we're taking as a company. Okay. The first thing which I like to highlight is the fact that if you look at the balance sheet of ING in the past, we actually had quite a lot of liability on our balance sheet, which we could not deploy in terms of loans. Right.
You can see back in 2014, we have 38% of our assets, which are sitting as investments assets or liquidity investments, which carry no interest spread. What we have done over time is to rebalance our loan-to-deposit ratio by lowering the amount of liquidity investment that we have. You can see that over time, we have reduced it to 33% of the overall balance sheet, and we will continue to do this over time to basically optimize this a little bit further. Right. Not only that, we have also changed our lending mix. Right. Within the lending portfolio itself, we have also been changing basically the mix within that composition. On the right-hand side, you can see that the actual concentration in mortgages is coming down, being replaced by an increasing share of industry lending and now general lending and transaction services as well.
We're trying to make sure that we're changing the mix to optimize the NIM and the return on equity for the portfolio in itself. Apart from the optimization that you see in terms of balance sheet and in terms of our product mix, we have also been looking at optimizing our balance sheet in terms of geographical diversification. Right? You'll hear a little bit more from Aris this afternoon about our Challenger and Growth division, but you can see here that the share of Challenger and Growth assets have gone from 34% to 41% of the share of the balance sheet. You can see that from a revenue perspective, we've gone from 32% of revenue to now 37% of revenue coming from the Challenger and Growth Markets overall.
We expect this trend to continue given the interest rate and economic environment within the Challenger and Growth Markets, where we see significant room for continued growth in terms of assets as well as in terms of revenue base. Okay. If you look at this page, and I think I'd like to spend some minutes on this page because it's quite an important one for us going forward, is two things. Right? As Ralph mentioned in his speech, deposits or retail deposits is a major part of our funding base for ING. Right? You can see here on the right bar that over EUR 550 billion of our deposits come from there. This is how we fund ourselves as a company. If you look in more detail, over 67% of that is stable retail deposits. Okay? More than that, 22% are in current accounts. Right?
This is very significant. Over EUR 100 billion sitting in our current account, which on a blended basis is probably carrying 0% interest today. Right? This is quite a major, I think, key strength for ING in terms of how we fund ourselves. Okay? The second point I would like to make on this page is that we have a certain asymmetry in our balance sheet. Right? As a credit spread receiver and as a credit spread payer. Right? If you look on the left-hand side, you see that approximately EUR 600 billion of our balance sheet, we are actually a credit spread receiver. This is what we're working on in terms of counteracting the compression of our NIM to basically reprice the loan book to make sure that we widen the credit spread from an asset perspective.
It is true, of course, that we also pay credit spread, right, as a company as we raise capital market transaction. You can see there at the bottom that is a significantly less portion compared to other European peers in terms of how we fund our balance sheet over time. Okay? If you look on fee income, you can see there that we have been able to successfully grow our fee income by approximately 5.2% over time. That, if you think about the future, we're giving some guidance that we think we can sustain this pace of fee income growth into the future. Why we're optimistic about that is probably two points I'd like to make on this particular part. Number one is the fact that if you look at the fee income for ING, it represent roughly 15% of our total income.
We're not as fee intense as perhaps some of our peers. If you look at the Benelux banks, they're sitting at 19%. If you look at overall European banks, they're substantially higher. I think we have quite substantial room to basically improve in terms of fee income. Right. The point I would like to reiterate is that it does not mean that we're actually going to increase fees automatically to our customer. One of the big strategy that we have is that if we are able to get more primary customers, actually the engagement with those primary customers are better than what we have for the general population of customers that we have. With that better engagement, we also believe that it will drive more transaction with these primary customer, leading to higher fee intensity that we have as well. Okay.
If you look a little bit on expenses, I think we reiterate a little bit about the underlying expenses that we have of approximately 1.1%. On the right-hand side, you can see that one thing which has really grown over the past four years is regulatory expenses. Right? It has grown by over EUR 500 million in the past four years. To give you a sense of the pressure on cost income ratio of these regulatory expenses, they are now approximately EUR 1 billion out of a EUR 10 billion cost base. It's 20% of our cost, which are sitting in regulatory expenses. We do expect, however, that some of these regulatory expenses will start plateauing. Right?
We're all contributing as European financials to the DGS fund, into the single resolution fund, we expect that these contributions should plateau sometime between the end of 2023 and 2024. That's what we expect to happen. What I'd like to do now is to take you one step below the overall cost number for ING into the divisional cost breakdown within the company. Okay. These are our three key divisions, Retail, Benelux or Market Leaders, Challenger and Growth Countries, and Wholesale Banking. Right? You can see there that year-over-year within Market Leaders or within the Benelux, we have invested a lot in terms of our transformation, we're also seeing the fruit of that transformation as well. You can see that over the past four years, the cost has declined within Market Leaders by 4.2% over time. Okay.
We have chosen to basically make investments in Challenger and Growth Markets where we see positive jaw, you'll hear about that this afternoon, whereby we have increased cost by 66.3%, it's resulted in a much better top-line growth than the cost growth that you see here. In Wholesale Banking, the cost has grown by roughly 2.8% over time. As you'll hear from Isabel, our guidance is that our lending growth within Wholesale Banking, we are guiding for a slower lending growth in Wholesale Banking, we do expect the cost base in Wholesale Banking to start flattening over time. That gives you a little bit of guidance with respect to expenses. Okay. This page is also an important one. It gives you a bit of a summary about the transformation program. Right?
All the numbers that you see there, it only happens because of the investment that we make over time, over EUR 774 million, but it also means that we have to make savings to basically keep our P&L or our cost base relatively neutral. You can see there that we have made savings cumulatively of about EUR 650 million over the programs either started before or after 2016. I think Roel Louwhoff in his presentation will go into more details about where those savings and perhaps some of the reductions in FTEs are coming from. Okay. Now, to summarize, I think Ralph has already mentioned that we are looking at making sure that whatever we do from an expense perspective, we're getting operational leverage. Right?
Which is the point that we like to reiterate again, that if our strategy was to work well, and it is working well, that the cost increase should be less than basically the client balances growth that you see within the company. On the right-hand side, you can clearly see there that if you exclude some of the regulatory expenses that we have, the company on an underlying basis is already operating below 50% cost income ratio today. Okay. Now, I'd like to spend some minutes about capital, I think this slide gives you a sense of how we have evolved from a capital perspective from 2015 unto where we are today. Okay?
We started 2015 with a Core Tier 1 ratio of 12.7, you can see there that the profitability of the company has allowed us to accumulate additional capital, pay a reasonable dividend to our shareholders, absorb model changes, and allow for growth. Right? One of the benefits that we have or the tailwind that we have had is through from the last few years is also we're getting positive risk migration that has helped build our capital base to the fully loaded basis at the end of 2018 of approximately 14.5%. Right? The question that we get a lot is 14.5% enough to basically sustain or absorb the impact of Basel IV and TRIM and all the other impacts in terms of model changes? I'd like to spend some minutes about our thoughts on that. Right?
We have done an analysis, we have given market guidance about what we expect to be the impact of Basel IV on our risk-weighted assets and consequently on our capital base. Right? On the left-hand side, you can see there that we expect, it is reconfirming our guidance, that we expect the impact to be somewhere around 15%-18%. Right? The other point that I think we wanted to make is that the impact of Basel IV is much more front-loaded for us compared to maybe some of our Dutch peers. It's because I think ING is much more affected by input flows than output flows. Right? We expect that 80% of the impact of Basel IV will be visible in our numbers by the beginning of 2022. Okay?
Having said that, if you translate this risk-weighted asset ratio into capital, you can see there that the possible risk-weighted inflation calculated in terms of capital would be approximately a 2% reduction on 14.5%. That is what is our expectation. We now have a program running to see how much of that we can mitigate. Our estimation today is that we can mitigate roughly 30% of that 2% inflation in terms of risk-weighted assets, which gives you that number of 0.7%. I'll give you a little bit of detail about some of the programs that we are running today to try to make sure that mitigation stays within our guidance. If we are able to achieve these plans, you end up essentially at 13.2%, which is not so far away from our target of 13.5%. Right.
We have approximately three years to basically accumulate additional capital to get to our target of around 13.5% Core Tier 1 ratio. If I take you through a little bit some of the actions that we have, we have really from the left, things that we are saying no regret moves, things that we're working on, moving to the right, where we need to look a little bit at how the market evolves and how Basel IV regulations evolve. I would like to give perhaps two tangible things that we're working on. The first thing that we're busy working on is to make sure that in terms of the collateral that we have with our Wholesale Banking customers, that we link them very well into the data files and the loan files that we have for our wholesale customers. Right.
This will give, under the Basel IV regime, quite a significant capital relief by doing that. Right. We're also looking at possibly whereby we have non-rated customers, that if we are able to persuade the customer or if we take the initiative to get these customer rated, it also give fairly significant risk-weighted asset release. Okay. A second example that we would like to give is really about disintermediation and capital relief transactions. Right. Two examples I like to give on this one is, number one, in Q4, you may have seen in our press release that we did a synthetic securitization about German mortgages, right? They basically allowing us to lower the amount of risk-weighted assets that we have in Germany.
A second transaction that we announced also in the fourth quarter of 2018 is the fact that we have also decided to sell a legacy lease portfolio from our Italian business, which is quite risk-weighted asset intense. We are closing that transaction during the course of 2019, which will also give capital relief. You can expect from us more such transaction. We're in the early stages of actually developing this activity, but you can see already that in 2018, that we're taking some actions already in that space. Okay. To summarize, I think we'd just like to reiterate again our points in terms of our financial ambition.
As Ralph mentioned, roughly we have remained the same in terms of our ambition, whether it's 13.5% Core Tier 1 ratio, the leverage ratio being about 4%, in terms of our principal steering mechanism being at 10%-12% return on equity, that we do keep the 50%-52% target for our cost income ratio, but that we expect to take longer than 2020 to get there, and that we maintain our progressive dividend over time. Okay? With that, I'd like to end my presentation, and I would like to invite Roel Louwhoff to come on stage to give you a bit more details with respect to our transformation program. Thank you.
Thank you.
Yeah.
Thanks, Tanate, good afternoon, everyone. I'm here to talk to you about our transformation. Now, why a transformation? Transformation is a means to an end. We have as a purpose, empowering people. With that, we obviously mean predominantly our customers, but actually it's our own people as well. If you look over time, ING has been quite successful in actually transforming itself, renewing itself, putting itself on the space at any moment in time when it was needed. 1997, we started the first direct banks. Observers in the industry often call us the first world fintech. 2014, we started to look at how do we optimize local for local activities based on the learnings we had from the direct banks. Then basically in 2014, transformation was giving to us the platform strategy.
Think Forward was a strategy, we put a program in place called Accelerating Think Forward. The platform strategy is all about going across those boundaries, going across the local for local optimization, moving into standardization, using all the opportunities that technology is giving you nowadays. That's what our transformation is about. That's where our DNA is. I can imagine being an analyst, every day you're getting stories about how transformations are going, what digital really means, how successful the programs are, how much has been invested in it, therefore, it must get you results at some moment in time. What I tried to do is to give you at five points, explain to you how we look at digital transformations, what we think is important, where we think the value really sits. Let me start with the first one. It's all around customers.
In the end, it's all around customers. How do you deliver that customer experience at point of need? How do you make sure that whenever customers need specific information or want to transact, you actually are able to deliver it? The second one is all about adapting fast. Making sure you keep up to standards, to new regulations that are coming in, which are ever-increasing in the industry nowadays. Actually also new requirements that are coming in from your customers based on the fact that some of the big tech players sets new standards that you'll have to comply with, and you better do it on the spot because otherwise there might be fintechs or other banks out there that go first. The third one is digital is end to end.
Digital is not this newest mobile shiny app that you can show and see how great it is. That's like lipstick on a pig. It doesn't make the pig pretty. End to end literally means that digital needs to flow through from a customer perspective in order to deliver the value to you end to end. That means that a customer, yes, they need to have that shiny app, but they will see as well where it still takes you long in order for them to get delivered what they need to have, or for you, where it still needs to take people to get things done, i.e., it needs to be effective, it needs to be efficient. Above all, taking human interaction out of the steps that you need to do drives not only value, it gives you security, because humans still make mistakes.
The fourth one is around data-driven. How to become a data-driven company. Why is that? Well, obviously, again, it's around the customer. How do you deliver at point of need towards your customer that information that he or she needs? Maybe not knows, but needs. Actually, even more with all these regulations coming in, data helps you to understand what you need to do and where you are. The more data-driven you are, the more digital capable you are to absorb that information and move it into something that actually helps you to change you as an organization, the better you're prepared for the future and for the next steps. Then the fifth one is around how do you organize yourselves on a platform?
What's the architecture that you need to have in place, which on some level starts with a cloud infrastructure, in our case, but actually are also around what we call modularity, our Touchpoint platform. Which is all around building modules that you actually can use but reuse as well, making yourself more effective and efficient. I think that's the key point. All of these elements together make you successful. The amount of money you're investing in IT is not a proxy of whether you're successful or not. It's actually how efficient and effective you're able to put that money to work in order for you to deliver towards your customers. I have a short video for you to basically see how we think this works, how we think we're going to make this work. Actually at this moment in time, that's how it is going on.
Let's have a short video first.
Today's ING is a very different business compared to only a few years ago. Rather than each country and territory applying its own technological solutions, we all now share a multiple component pluggable platform called Touchpoint that allows us to connect and collaborate like never before. This platform operates around four main functions. OneGate strengthens our defenses with an improved authentication, approval, and security solution, ensuring we maintain the trust of our users, customers, and third-party partners. One PAM gathers all of our party agreements and permissions into one place, allowing us to more efficiently access and manage the data of our millions of customers worldwide.
One Experience allows designers and developers to create a more personal and engaging user experience by providing a unified design system for web and mobile, and a real-time communication solution that ensures the conversations we have with our customers are timely and relevant. One Connect uses APIs to connect services more easily across both the bank and with third parties. It also allows us to combine services in innovative ways to create new capabilities. By sharing this Touchpoint platform, we're increasing our flexibility, reusability, and scalability, cutting our time to market and time to volume, and simplifying how we roll out global solutions, actions that will help us deliver an unrivaled customer experience and create a competitive advantage over time.
We're also making entry into our new markets easier, such as in the Philippines, where our business was brought online faster than we've ever managed before, due to the instant accessibility to all of the features hosted on the platform. On top of this shared foundation, we are continually expanding a layer of uniform global products and services that use mini apps and APIs to deliver a consistent experience on any digital device. This approach allows us to open up these products and services to other platforms, placing them where the customer already is, like we've done for 11 countries with the upcoming PSD2 regulations. Additionally, we can do the same thing in reverse, bringing products and services from other companies onto our platform, where we can shape them into new propositions for our customers.
We have created a thriving internal marketplace where developers can take hundreds of pre-built components, such as the APIs, mobile and web elements, and immediately integrate them into the channels of ING, thereby improving and standardizing how we do business. Through the building and expansion of Touchpoint, we've created the digital foundation for the future ING, accelerated our transition towards a fully open banking approach, and reinforced our commitment to keeping our customers a step ahead.
Basically, the Touchpoint platform and the focus that we have of having these components build into modular elements that we can use and reuse is at the core of what we do on a day-to-day basis, That's how we can serve the business throughout, whatever unit it is. It also means that you get a flywheel effect, What I mean by that is that when you build these components and you can use and reuse them somewhere else, it means you gain speed. It basically amplifies every activity that you do, If you then continue to build these components, it amplifies it even more, That's how you get a flywheel. It also means that a lot of the things are interdependent. It really means that if you deliver a component to one of the activities, you actually benefit somewhere else as well.
That also makes it very hard to judge where an individual program is because it might be waiting for something that suddenly gets lifted up quite a bit, That's where for going forward, we will not report anymore on the individual programs. We need to look at where we are across the board with the ING transformation. There are also three things on this slide which talk about platform, three individual distinct strategies. The first one is ING itself as a platform. We offer our products and services and we deliver them, We also feel we have a responsibility that if we have a product or service which is not up to the standard as someone else has, to actually make sure we get that on our platform to deliver to our customers. It might also be new things like insurances, for instance.
The second thing is around needs, independent initiative, as we call it. Think of retail. If a customer comes to us and wants a mortgage within four days, actually we're too late because most probably that customer has gone out to three or four other banks as well. How you make sure you engage at the beginning of the journey, because ultimately that customer doesn't want the mortgage. That customer wants to buy a house, and in order to get that house, they need a mortgage. The earlier we are on the life cycle, the more we can make sure that we deliver towards our customers. The same is true at the business side. Bank Mendes Gans, aggregator, all financial products that we can see, we should be knowing more quickly than the company itself where is the financing need.
If so, then we step in and we basically deliver to the customer. What I next want to do is basically discuss with you where we are in the transformation. October 2016, we launched our transformation. When you start a big program, there are a lot of things you do know, and there are things you don't know. Did we anticipate all the costs coming in from new regulations, specifically around GDPR, PSD2, MiFID, KYC? Probably not. At the same time, we needed to make sure we continued to deliver. I think that's what we did. That's what you see on the right-hand side. The way we manage the business is in 90-day cycles in an agile way. We literally look what we need to deliver in the next 90 days.
We look back what we haven't delivered that we set from the previous 90 days and get it into a new bucket. That's how we manage the company, very agile, and in that way, we're able to basically deliver on all of those components that we need to deliver to. I think that shows what we have done on the right-hand side, set of good results. It's not just the EUR 650 million that we have delivered structural annual savings as of the end of 2018. Regretfully, it also meant that 5,200 people had to leave the company. It also shows that we have the ability to deliver continuously towards the momentum that we have from a commercial perspective, as well as the efficiencies that are out there.
What I next want to do is take you in some big steps towards the bigger propositions and units that we have and see where we are. In the afternoon, Isabel and Roland and Aris will take you through some more details. Let's start with Unite. Just think about this, right? The number one in the Netherlands, the number three in Belgium, bring them together on one platform. What did we do? Well, first of all, we harmonized the operations and IT activities. We literally have one operations and IT organization across the two countries, working as one. We integrated Record Bank in Belgium. Actually, from a technical perspective, there was not a flaw in it. It really went well.
In the same time, in the Netherlands, we're preparing the platform where both banks will go to, as well as we developed what we call the OneApp together with Germany. The OneApp is something that is going to be used as well in Belgium at the end of this year. That means at that moment in time, we have 20 million customers on OneApp. Just think about it, right? Instead of having three countries all developing their activities, we have one, all built with a modular approach, Touchpoint architecture. Going forward, by 2020, sooner than we expected, we will have retail harmonization for a digital platform. The SME, the mid-corps, and the corporate aspects will happen a bit later.
That will cost us a little bit more time in terms of delivering and therefore having a project organization which continues to run a little bit longer. At the same time, looking at what needs to be delivered and making sure we deliver in the right way, we think it's the right thing to do. Model Bank. Model Bank is there. It's working. It's working on a private cloud, and it has all of the digital infrastructure there that needs to happen. On the back of it, we drove efficiencies out, and we delivered to our customers. The next step is going to be having digital proposition for four countries by the end of 2020. Welcome. Welcome, I think is a great example where you see how all of those proof points that I talked about digital transformation come together. It is about end-to-end.
It is about having that digital proposition at the front end and having your mobile app available, that helps you to drive efficiencies, deliver towards your customers. For instance, in 2016, we had 6 million customer calls towards the contact centers. Today, we have 5.2 million. That's not just a reduction. Think about it. We've grown the business in the meantime as well, so the reduction is even more. Quite some opportunities as well going forward on this, while we make sure that Germany is going to be integrated in all of the other aspects that we continue to deliver. Wholesale target operating model. Wholesale target operating model has been around for quite some time and has delivered.
It's all about focusing on the customer at the front end, at the same time, making sure we drive efficiencies by harmonizing our platforms, harmonizing the product platforms and the overall platforms that are underneath. Looking at it from a customer perspective, in 2016, we had 450 customers on a digital interaction platform. Today, we have over 18,000. Going forward, we see an opportunity to take another EUR 120 million by the end of 2020 out of the cost base of wholesale, making sure that we basically drive down the cost by an additional 5% to keep it flat overall, as Ralph alluded to already earlier. The core of all of this is our foundation. Our foundation is key in everything we do. I talked about the modular approach that we're having.
I talked earlier about how important data is, you harmonize data at the front end to really make sure that you benefit as much as possible for what you only can do afterwards with artificial intelligence and machine learning. We put four service centers in place, actually, it's now five, because as Ralph said earlier, Model Bank in Madrid is one of the shared service centers that we have as well. Doing this requires a lot of effort from the IT organization. A lot of the things that you saw are IT related, technology related, I'd rather say. At the same time as making sure that we deliver on all of those individual components for the programs, we also transformed fully the IT organization itself. I think there are three ways to look at this. The first thing is around consolidation and simplification.
If you look at the number of data centers that we have reduced, the applications we have removed, the platforms that we have closed in order to harmonize and get to this end state that we want to get to, I think that's the first proof point we have. Then it's around modernizing and standardizing. Ultimately, the only reason you do that is, again, for your customer. Yes, you drive efficiency on the back of it. Ralph talked already about availability. Availability to transact, which is key in a platform world, and which is key with any digital player that's out there. Just look at today. 35 flights got canceled this morning. Why? Because there was a software issue at the tower. You can't transact. From a retail perspective, we currently have 99.7% availability of our systems, and therefore the availability for our customers to transact.
At the Wholesale Banking, it's 99.9%. Our target is 99.88% for this year. Even better, our future is ING Private Cloud. That has been running at 100% availability since 2018. On the right-hand side, it was already alluded to. Our cost base has remained flat with all of these IT investments and with renewing the IT organization and the way we move forward. Underneath, a lot of change has happened. Just look at the retail organization. Used to be 52% of our IT cost base. It's now only 39%, enabling us to invest in Challengers and Growth and in Wholesale Banking. Overall, we absolutely see the momentum from a commercial perspective. Even better, we also see the opportunity to continuously drive efficiency. Thank you.
Ralph, Tidjane, may I please invite you to join us for Q&A, please? Thank you all three, and I would immediately like to open up the floor for questions. Ben, Benjamin Goy, here in front, please.
Yes. Hi, good afternoon. Benjamin Goy from Deutsche Bank. Two questions, please. First, on net interest income, you highlighted your net credit spread receiver. I'm just wondering how this balances with replicating portfolio and whether you can give any margin guidance in that sense, and maybe also the repricing on the credit spreads, whether you can talk about some portfolios where you already have seen some repricing. Thank you. The second one is on fee income. The 5%-10% gross CAGR you have, just wondering what is kind of cyclical element of it to get to the low end or the upper end, or is it mainly your own ambition to convert customers into primary customers, which tend to have higher products then? Thank you.
Okay. Go ahead.
In terms of the overall context, as I mentioned, is that we see not only for ING but all financial companies, that the compression on your liability is there. It is our belief that every bank needs to try to compensate for that by increasing the pricing on its front book. That's what we track today. I give you a couple of examples of actions ING has taken. We have what we call the fund transfer price, the price at which we basically sell money, for want of a better word, to the front office. From that perspective, I think consistently in the last few months, we've been increasing that price over time. Basically, the front office has a certain rigor in terms of making sure that the new origination business is coming at a better or the same ROE despite this increasing pricing.
We have seen, it's still early days, we have seen better pricing discipline coming out of it. That's why you see that our guidance for loan growth is getting somewhat less because we are much more ROE focused than we had in the past. Okay? It is really driven much more by the liability compression than on the asset side.
On the fee income side, I think it's the combination of two. That's why I call them both value accelerators. It's the growth of primary customers themselves, which will buy more products because they're a primary customer. On top of that is actually the value accelerator of the cross-buy of having customers buy products that may not necessarily be ours. I think some of the examples that we've shown already there is, for example, with Payvision, where basically we offer a payment service provider services there for our customers on the merchant side.
The transfer made, it was indicated on the Wholesale Banking side, but for example, on the retail banking side, we have TransferWise, which we actually offer as well as a product in your app, where if you want to do a fixed transaction, that basically it shows you both opportunities, the one that you do with us or the one that you do with the other party, which is a third party doing exactly the same, but in the back of which we can earn fees. I think we haven't really started to see the opportunity that we have. I think we are recognized by many players as the principal player in a digital world if it comes to the financial services industry, because we have so many customers that only deal with us through digital channels.
We have the trust of many of these players that we can actually more and more interact with them. That's why AXA came to us. That's why we have this deal with AXA, and are looking as to how can we make insurance so simple, because insurance is generally not simple, and I know because I used to manage insurance. How can you make it so simple that people actually know what they buy and that it's a very transparent product? That's one of the opportunities right there as well. The fee income side is a combination of just growth in primary customers, but also the further improvement of the cross-buy with our own products, but even more so with third-party products.
There was a question way there at the back. Thank you. Hi, Stefan.
Hi, guys. It's Stefan from Citigroup. A lot of talk about platforms, but we still have a 10%-12% ROE target. We understand that ING is probably more of a platform than most banks, but not as much-
Also a bank
of a platform as non-bank platforms. How do you think about, I guess, the strategic opportunities and risks? Because Amazon, for example, is very much unlikely to have KYC, AML risks. Amazon doesn't have to pay EUR 1 billion of regulatory taxes. It's a very different setup. How do you guys think about, say, earnings right now? What are platform earnings for you as a percentage of the total today? How much do you think they can get to in the next two to three years, and then longer term? Are we talking about 20% today or 10% today versus 50% in the future? Or something very different from that? Thank you.
Well, that's a good question. We are a bank, there's nothing wrong with being a bank. Let's start with that. We know how to manage a bank, clearly there's many more regulations coming at us as a bank that we'll have to deal with. At the core, we are a bank. The way we deal with our customers provide us with the opportunity that they have so much trust in us also for other services, maybe financial services that are not produced by ourselves, but beyond that, services that aren't even financial services. Roland will basically touch upon that in his presentation as well as to a couple of examples as to where we are going there.
For the moment, the only way to translate this in the way we give guidance is that we do expect our fee income to continue to increase between 5% and 10% per annum, up to a percentage of 20% of total. Is that all caused by becoming a platform, therefore selling third-party services or peer products? Not necessarily the case, because there is also banking fees in that. There is also transaction fees in that on the back of our own banking activity. I do think, as Tanate already alluded to, you can't, as a bank, charge fees for something that doesn't add value. Many of our peers have charged fees for those products, in my view. That's why we're low on the fee side to begin with, because we are one of those banks that basically feel that you can't do that.
Therefore, the way we want to grow our fees is not just by increasing the fees on the products that we already offer. Clearly, they'll have to increase in order to go along with the cost that we have to make in order to provide those services. I think the days are over where we can just charge fees, and we've never done that. Honestly, the fee income growth is really on the back of value-added services, and a large part of that, in my view, will be through third party or peers. If you want to call that platform income, it is platform income.
Sorry. There in the back.
Hello, it's Nick Davey from Redburn. Three questions, please. The first one on costs. I think in a few different slides, you hint at running ING at about a stable cost base from here. Particularly the change from the Wholesale Banking having grown at 3% compound to flat is quite meaningful. My question is really, why don't you actively state that ING will be running roughly with a flat cost base? The second question is on dividend. I know it's a board decision, but you stick with the progressive language. At the same time, you're talking about 10%-12% ROE and bringing the Wholesale Banking loan growth down. Was there any discussion before today about changing the language about dividend?
If we just ran a spreadsheet exercise of what you're telling us will happen, we're all going to end up with very high levels of capital two or three years forward. Can you just talk to that? Thank you. Then the third question on the Wholesale Banking, I know the presentation's still to come, but just from an executive perspective, the target is for basically a stable return on allocated capital with some RWA inflation. Is that sufficient in your eyes? Was there any discussion, for example, of allocating the full 13.5% capital down to the division? Because on that kind of analysis, it's questionable whether the Wholesale Banking is delivering a sensible economic profit for the group. Any perspective there would be helpful. Thank you.
Okay. You go first on this?
Okay. Maybe I take your last question first.
Sure
We used to report up until the end of Q4 2018 on a 12% risk-weighted asset, and starting in Q1 2019, you'll see in our Q1 disclosure that we're running on 13.5% risk-weighted assets. You will see reflected there, which is much more aligned with the capital base that we have. The second question on your cost is, we really don't want to give absolute cost guidance, I think we wanted to stick with what Ralph has stated in his opening speech, which is we're focused on delivering the right return on equity of in the range of 10%-12% and making sure that consistently over time we deliver on operating leverage in terms of our costs. Okay. That's the second. The third point I didn't quite get, actually. Did you?
That's the dividend policy.
Oh.
Okay, let me pick up on cost.
Yeah.
Honestly, you should not want us to run a flat cost per se. Clearly, if we can do it, we will do it, and we've done it. If you really believe in the value accelerators that we have, we need to have a bit of freedom there. That's why we have gone over this slide where I show you three different recipes for three different parts of our bank. In the case of C&G, if the opportunity presents itself to grow faster because we can really accelerate the value creation, we will work like a digital dynamic player, not like a bank. We will look more like one of those platform companies, and we will have costs, and we will allow cost to grow if we feel that the growth that we can produce is profitable and value-creating. That's why we don't want to go there.
What we do always look at and will continue to look at is operating leverage. That is the way, in our view, you get a financial confirmation of being scalable. If one thing these platform guys are good at is the scalability, the cross-border scalability. That makes them grow at almost zero marginal cost. We're not there yet, but in a certain moment we'll end up there, and that's what we're kind of looking at. On the dividend policy, we've looked at that and clearly we make our own calculations. For us, we want to kind of see how TRIM and Basel IV kind of comes at us. We want to really manage this aspect of capital and with the three kind of levers that we have, profit, allocation to capital, allocation for profitable growth and dividend.
If down the line, we feel to be in the situation of surplus capital, we might consider a one-off that will not then influence the progressiveness of the dividend. We're not there. We really want to make sure that we take on TRIM, that we take on Basel. Clearly, you run the spreadsheets, we see things happening. We will take a look at it then.
Okay.
Yeah.
One more question before we break for lunch, where you can, of course, continue your questions. Please.
Hi, it's Bruce Hamilton, Morgan Stanley. Just a couple of questions, please, from me. Firstly, you mentioned briefly sort of PSD2. Where are you in terms of thinking through that as an opportunity or a threat? It sounds as though the application may be inconsistent, extracting data may not be that easy, your bank in theory looks like it's quite well positioned. I'd be interested in your latest on that.
Who wants to have lunch today?
The second question, maybe slightly quick one. On the payments business, Payvision, do you think that's sufficiently scaled and has the capability set to keep you competitive long term versus the likes of Adyen and so forth? Do you think you'll have to do more transactions perhaps to build further scale in that space?
PSD2, by the way, maybe you can give them an update as to where we are.
Thank you for the question, by the way, because PSD2 for us is one of those programs where actually you see that our platform strategy is delivering. Why is that? We have built a compliant PSD2 engine, which was one of the sort of 40%-50% of banks that were able to deliver last week to the first milestone you needed to deliver to across the board. Instead of delivering 19 engine in different countries, we just build one. That's the modular approach that we talked to, and it's working in practice. You're absolutely right. For us, PSD2 is not just about being able to deliver towards what the law and regulation is asking us.
We see it as a major opportunity, which you maybe saw as well in the movie that we had before, where you saw information going outside of the bank and coming back inside the bank. That will help our data strategy and to really make sure that we're going to deliver our customers going forward. It's both aspects, and we're in the well on track and delivering exactly where we want to be.
I have particular views on PSD2, and I'm sure most of you know them. I support PSD2. We support PSD2 because we do think it is good that you create that openness and that you create those options for your clients and your customers. Nevertheless, the way the PSD2 regulation has been enacted, approved and enacted, is one that doesn't create a level playing field with some of the parties that want to play in the same league. That is the point. We were supportive because we think it will make banks innovate more. Competition will increase from our challenger attitude. It really helps us. It doesn't create a level playing field.
What we are looking at and how we are discussing with, for example, Brussels, is that we feel that going forward, if it comes to the legal environment that makes you have to exchange data, that you should organize that around the type of data. What do I mean by that? Financial data have a specific value, whereas behavioral data on a platform may have a different value. If the deal in the PSD2 with regards to reciprocity is that if a platform player says, "Okay, I'll give you six months of behavioral data in exchange for 6 months of financial data," I may still not be happy because the behavioral data may be very unstructured data, maybe not as valuable as the financial data. Having said that, in the end, it's the customer that is in charge.
From a player's perspective, I do think that you have to organize around the reciprocity around the different types of data, but the customer in charge. Always a consent-driven, different approach to this.
I will remember the fourth question and come back to you, but I don't want to keep people from lunch. Thank you very much for that. That was the Payvision one. I'll make sure we come back to that.
Okay, good.
Thank you everyone, also for the audience in the webcast. We'll be back here, please, around two. Thank you very much and enjoy lunch. Thank you.
[Break]
Every day is the same. Nothing changes. Just the names and faces and situations. Who made up the rules that we follow? Who's the chosen fool? And the follower? Ain't it better anyway? Every day is the same. Nothing changes. Just the names and faces and situations. Who made up the rules that we follow? Who's the chosen fool? And the follower? Ain't it better anyway? Every day is the same. Nothing changes. Just the names and faces and situations. Who made up the rules that we follow? Who's the chosen fool? And the follower? Ain't it better anyway? Every day is the same. Nothing changes. Just the names and faces and situations. Who made up the rules that we follow? Who's the chosen fool? And the follower? Ain't it better anyway? Every day is the same. Nothing changes. Just the names and faces and situations.
Who made up the rules that we follow? Who's the chosen fool? And the follower? Ain't it better anyway?
Ladies and gentlemen, please take your seats. The program will start in a few minutes. Ladies and gentlemen, please take your seats. The program will start in a few minutes.
[Break]
Welcome back, everyone. I hope you enjoyed that lunch and getting in touch with each other and talking, and nice to have the time to engage with you as well. Welcome back also to our webcast audience. For the second part of today's Investor Day, let me please invite to the stage our Chief Risk Officer, Steven.
Good. Wow. Good afternoon. I hope you had a fantastic lunch. Since we need to energize you this afternoon, we're now going to talk about risk management. That should enlighten you. I, as a Chief Risk Officer, am here to protect the value and the reputation of the bank. It also means that financial risk and non-financial risk are equally important. In ING, the vast majority of our interactions is digital. That basically means that people are looking at the screen and are looking at a logo, and they should be able to trust that logo. They should be able to trust that screen, and therefore they should also be able to trust our digital channels. In our day-to-day business, we are continuously focusing on non-financial risk. Oh. Thank you. That is supported by our policy frameworks, our testing, and by innovation.
Let me give you an example. Here you see that screen. Here you see all the elements that we focus on when we focus on non-financial risk. One of the examples is how we manage IT risk. How do we now do that? If we provide an experience to the clients online and digital, it needs to be seamless, always on, twenty-four/seven, safely. In that regard, we have three focus areas in IT risk to make sure that we can be always on. The first one is operational resilience. In operational resilience, we need to make sure that when something happens to one of our assets, other assets can take it over, and we do that by testing. For example, we do a test which we call the hole in the ground.
It basically means we shut down one data center to see if other data centers can take it over. The second element is cybersecurity resilience, cybercrime resilience. You've all heard of cybercrime, DDoS attacks. Also there we perform tests. We have white-hooded hackers who hack our premises. We measure and monitor the traffic. We blacklist traffic. We have red and blue teams who play, let's say, cybersecurity war games against each other. One defender, one attacker. The third one is our data privacy. Like you all have on your computers where you have certain filters, spam filters for example, we also use spam filters and security filters. We also look at strange patterns of traffic to then see why that traffic is there, so that as we analyze, that we can prevent, detect, and respond to strange traffic that we see on our network.
That's how we manage IT risk, because the target is to be always on. Moving on to credit risk. If you look at our risk-weighted assets, the vast majority is for credit risk. Almost 90%, a bit over 10% is non-financial risk, and 2% is trading risk. What you need to remember from all the presentation that I'm going to give you right now is three things. We have clear policies and discipline. That's number one. Number two is that we compartmentalize and we diversify. The third one is that we do credit management proactively and with personal accountability. Those elements you will hear continuously when I go through the slides. Let's first move to credit risk. In 2016, in the Investor Day, we promised you a diversification of our credit risk. That's what we've done.
We've grown the credit risk book, we've grown it away from mortgages, albeit that we grew in mortgages, we also grew in consumer lending and SME and with corporate lending. Consumer lending, albeit still small, grew with 50% over the past four years. We also diversified in terms of geography. Where in 2014, over 40% came from retail lending in the Netherlands, that has gone down to a bit over 30%, to have a better balance between geographies when we lend. I see a number of familiar faces, I've spoken to a few of you also during the lunch break. When I go on roadshow, many of you ask questions about Wholesale Banking credit risk. That's what we're going to spend a bit of time on right now.
In Wholesale Banking credit risk, we work with clear appetite statements, those appetite statements make sure, here we go again, compartmentalize and diversify. We compartmentalize on clients, we set maximum limits on particular clients. We set limits on sectors. We set limits on countries. That's the first thing that we do. The second thing that we do is that we are nimble. We are making sure that we introduce caps on books at that point in time that we think we should do so. You can argue about whether we are on top of the cycle or not, at this point in time, not many of you will argue with me that at least we are at an up in the cycle. It basically means that we are introducing caps on our cyclical books.
Therefore, we've introduced caps on real estate finance and leveraged finance. The third element is that we close down or exit activities that are not fit for purpose within our risk appetite. We've exited real estate development, we've exited real estate investment management for the simple reason that a lot of the risk had to do with construction risk, and construction risk is very hard to manage. It's not typically that the bank understands. We also exited our lease portfolio in Italy. Here you see a few examples of how we proactively manage a couple of the books that are not fit within the risk appetite that we have. Last but not least, personal accountability. For each and every deal in Wholesale Banking, there is sign-off by someone in risk management, and there is sign-off of someone in the front office.
If that deal does not perform, we will look at the responsibility of the persons involved in the deal, most notably the front office, and we can apply measures also in variable remuneration, also a number of years back, to keep ourself honest. Looking at Wholesale Banking as a whole. If you can't convince them, confuse them. Four pie charts and many colors. Basically, this picture shows how we diversify. Diversification in different businesses, but also within the different geographies. In Europe, it is quite well-balanced between the different products, with a larger share in general lending. That is lending unsecured for corporates. In the U.S. or in the Americas, it is largely focused on project finance, because that is a very big and mature market in secured lending and project finance.
On Asia, we focus on shorter-term loans, and you see that at the right-hand side of the screen, whereby in the middle section of the pie chart, you see a lighter color gray, which basically shows you that many of our loans, more than half of our loans, have maturity date shorter than one year. That has to do with the fact that many of these loans are trade loans, LCs, guarantees, self-liquidating transportation loans. You look at the structures of our deals, we like our senior structures. We like senior loans. Therefore, over 99% of our loans is senior. Over 99% is senior. We also like security. Hence, two-thirds of our loans are secured, either partially or fully. What does that lead to? That leads at least through the cycle to relatively moderate risk costs.
You see that in the business that I just spoke about, amongst others, general lending, but also real estate finance. Although IFRS 9, which started from early 2018, will cause a bit of additional fluctuation and a bit of front-running of risk costs in times when economic circumstances deteriorate. At the same point in time, we are focused on keeping those risk costs moderate through the cycle. My role is it to shave off those peaks, to keep those peaks limited. Again, we do that by compartmentalization and diversification. It does not always go right. Sometimes a loan is deteriorating in profile. That means that you need to act swiftly. Because we are senior and because we have longstanding relationships with our clients, we can act very swiftly.
We act already upon early warning signals, whether these are digital early warning signals or offline early warning signals when talking to our clients. We act when they go in watch lists, which is a portfolio that doesn't perform as we thought they would do, so there is a risk of non-repayment. We act when clients go into forbearance, which is a time that we need to extend the loans, for example, because we see they are unable to repay the cash flows within the time limits that is originally set, and of course, we act when they go into credit restructuring. The proof point is that in 75% of the cases of clients that went into restructuring, there was zero loss, not for the clients, not for ING.
A second proof point is, and I'm pointing to the prudence that we apply in our provisioning, that our provisioning is outweighing the write-offs over the past 10 years that we needed to do, which is a good sign. I've basically told you how we manage our framework, how we deal with individual exposures, how we compartmentalize, how we diversify, how we are proactive in case a loan is deteriorating, but always the proof's in the pudding. What do you then do on particular portfolios? I've highlighted here four portfolios, and I would like to ask you at least, because I'm going to discuss one portfolio with you. The other ones you can also see in the presentation that you have been receiving as of this morning. I would like to discuss with you at least one portfolio.
By show of hands, we're very digital, but now we're not. By show of hands, who would like to talk about the leveraged loan portfolio? Oh, wow. I don't need to go any further. It's done. That's good. You think you don't have any other portfolios? Yes, I do, but I will do leverage finance portfolio. Experienced sponsors, largely in developed markets, who also have a track record of being able to restore value for themselves, but also for the bank, in case there is an issue with one of their assets. We do sponsor selection. Secondly, we are making sure that we build up a granular book. If you look of the average size on exposure in leverage loans, that is typically private equity owning a company, whereby we then issue a loan to them.
On average, our final takes are EUR 25 million. They're in all kinds of industries, as you see on the bottom right-hand side of the page. There is limited correlation risk. What we have done and what I just talked about, but let me reiterate that point, we have kept the leverage finance book because in the end, these are cyclical assets because the leverage is relatively big. We've kept the book at EUR 9.6 billion in aggregate, of which EUR 8.4 billion is outstanding. We've also kept the final take that clients can take, which is EUR 25 million, no more than EUR 25 million. We have kept the leverage to 6.5 times total leverage, and we basically do not do single underwritings.
If we underwrite a loan, because that's where the risk initiates before it is sold to the market, before you get to your final take, you want to make sure that you're not out there alone. That's how we manage the leverage finance book. Again, let me reiterate. We focus on strong policies, frameworks, and discipline. We focus on compartmentalization and diversification. We focus on proactive steering with huge knowledge of our businesses, and we apply personal accountability and responsibility. Thank you for your time. Mark? I would like now to invite Isabel Fernandez to the stage. Thank you.
Does the mic work? I think so. A very good afternoon to all of you. My name is Isabel Fernandez, and I have the immense pleasure of leading ING's Wholesale Bank. I'll give you a bit of personal background. I haven't met many of you. I'm half Dutch, half Spanish. I guess that explains the accent. I grew up in my childhood all over the world, North America, Latin America, and Europe. And by the time I was a teenager, I'd been to eight different schools in different continents. In my career, I worked across continental Europe, the U.K., and the U.S. A large part of my career I spent working for GE Capital, where I had the privilege of being at the forefront of a lot of change.
What I picked up during those professional and personal experiences is that change is not just about what you do, but also about how you think. I want to take you to what we've been up to in the Wholesale Bank since my arrival, trying to prepare ourselves for the world of tomorrow, one of inevitable change. The Wholesale Bank was built on a couple of core strengths. First and foremost, the conservative risk profile that Steven talked about and Ralph talked about. What's unique about us is that we have sector expertise in both the first and second lines of defense, and we have, indeed, risk awareness in the first line. The second thing we do well, we do our cross 40 countries, helping our clients and serving them wherever they need us.
Finally, we have a comparatively lean cost structure that really puts us among the world's best class wholesale banks. What did it get us? It got us solid underlying profit and growing ROE. Particularly that last one, the ROE, continues to be a core focus in the years to come. What got us here doesn't necessarily get us there. That's, as Ralph explained, there's continuous change, whether it's customer demand, whether it's technology, whether it's regulation. What have we done since I arrived? In early 2018, we made a number of changes in our strategic review. The first thing we looked at was our clients, and we learned from our net promoter score, the satisfaction that our clients give us and tell us about, when we learned that they only focus on a few key things that are really, really appreciated about us.
The first one is our consistency. The second one is ease of doing business. They love a proactive approach. Finally, they appreciate our ability to tailor and customize solutions. I'm really proud of the fact that we're seen as very client-focused, but we need to do more. We need to focus on our primary clients, not being everything to everyone, but really looking at where there's mutual benefit. The second thing we need to do is build on our foundation. Our foundation starts with truly and deeply knowing our customer. We are a first line of defense. We better make that an essential part of protecting our bank. We need to increase our service, and we need to be able to push and continue the efficiencies to ensure that we have that cost structure that we are so well-known for.
Now, our sector knowledge runs deep. You heard it a couple of times today. Our sector knowledge runs very deep, but we don't always use it to maximize the value to our clients. By integrating and institutionalizing the knowledge that we have, we believe we're much better able to serve them. The network needs to be simple. Access needs to be easy. It doesn't matter whether you're a CFO or a treasurer, you want to make sure that it's instant and seamless across the world. That's what we need to push for big time. Finally, we believe in open banking, radically improve and making banking easier. Let me get into a couple of these. First of all, the primary clients. How do you increase the value to your clients? Well, it starts by focus. You need to develop and nurture these primary relationships.
These primary relationships are, in all respects, much more attractive than a lot of our active clients. Our definition of a primary client is one that has and does business with us on more than one product and in more than one market. You could look at this page and say, "God, 16%, Isabel, isn't that really low?" I'm looking at it and thinking, "Gosh, imagine the opportunity of the 84 and turning those into primary clients." Also, on the active clients, there are many of them that just buy one product from us. Those clients are still very valuable. They're very valuable to the extent they're very profitable. We will continue to serve on their product or on their deal.
To the extent our active clients show us that they're not profitable, there's not a lot of potential, and we do not have a lot of mutual benefit, we will reallocate the capital to other parts of the business. Here you see in numbers what I just pointed out. On pretty much every metric, a primary client is much more attractive than an active client. We keep pushing for that. One of the most interesting things is when you look at the bottom right of this chart. In a year of unprecedented change, where we changed our organization and our approach to clients, not only did we grow our Net Promoter Score by 14% across the Wholesale Bank, but you can see here, we grew it by 24% in our primary clients.
The trick is not just to grow the number of primary clients, but also to ensure that NPS keeps going up. Now, client satisfaction starts with service and service delivery. You see here our transformation program. That is all about doubling down on the service we give to our clients, ensuring that the delivery is standardized across the globe and simplified, and that we speed up our way of working. A lot of people think that standardization and simplification means that the clients do not like it. Well, guess what? In a lot of the industries that we work with, our clients are doing exactly the same. They are standardizing, they are simplifying, they much rather have us offer a similar solution across the globe than to try to do complex things in any one market.
Agile, you can see here at the bottom, we have introduced across 4,500 employees. That, to our knowledge, is unprecedented, and we do this globally. Why do we do this? Because we believe that in a world of tomorrow, you have to be light on your feet, faster respond to what is happening around you. If there is one thing I want you to take away from this page, is that our Wholesale TOM program supported us big time in reducing our cost-to-income ratio, excluding regulatory cost, from 47.2 in 2014 to 44.4 in 2018. We will continue to push to be best in class here. Turning to sectors. A lot of traditional banks push products to clients, and it has been quite effective for a long time. You know what? In a world of commoditization of products, it does not work anymore. You cannot differentiate on that basis.
What are we doing? We are looking at the client and finding that they deeply care about working with a partner who understands their business and the challenges and opportunities of their sectors. What we have done is we mirrored our entire organization so that it mirrors the client sectors, the main ones that we play in, and uses that knowledge that we have in their support. The core of our strategy is to build a client-centric, product-agnostic, sector-specific organization. If we are brutally honest, there is an issue. We built enormous sector expertise over decades and decades. But if we are really honest to ourselves, we have primarily developed this sector expertise to assess and take credit risk. We are really good at it, and we continue to want to be good at it.
However, if you want to maximize the value you deliver to your clients, you better build on that expertise and use it also to support your clients in their ambitions. That is exactly what we are doing. Ultimately, this will grow more primary clients, empower their decision-making, and ensure that we do more cross-buy and increase our fees. I told you that our network, our clients really like our network, and here is how we operate it. We have virtual client teams across the globe comprised of all the skills needed to service a client. Yet you will never, ever see us try to maximize market share in any individual business or in any individual country. We do not care about league tables.
We care about servicing our client across a number of markets, allowing us to find the places where we deliver the value that they need, and having an honest conversation with the client that I certainly can do this for you in this market, but you are better off taking my neighbor in another market. Here is what that diversification strategy has resulted in. Our clients like it. This is essential to our business. I'd like to take you briefly through the process with a little video to show how we operate in practice.
In this Wholesale Banking customer journey example, our client is a German automotive company who wishes to borrow the equivalent of EUR 100 million in multiple currencies on a three-year term so they can upgrade an existing manufacturing facility in Poland to produce electric vehicles. Representing ING are the client's global relationship manager and the Polish-based local account manager. Before onboarding, the Polish subsidiary is guided through our KYC process, which is coordinated by the Center of Excellence in Amsterdam and supported by our shared service center in Bratislava, who use Vantage and other tools to ensure efficiency and accuracy in screening the client, in clarifying their main business needs, and in checking all the relevant records and documentation. Once onboarded successfully, the global relationship manager coordinates all of the relevant sector and product specialists in constructing the best solution for the client's needs.
This may include the sustainable finance team if the upgrade of the facility qualifies for a green loan, a solution that would help improve the client's sustainability rating and communicate their environmental awareness to stakeholders. Finally, we liaise with other product specialists to see whether there are any opportunities for additional cross-selling beyond the products linked to the facility. Having gathered the necessary information, a pitch is presented to the client who, happy with the proposal, asks for a formal quotation. This triggers a commercial review from the green light committee, whose members discuss the transaction, checking preliminary inputs from risk, that adequate covenants and collateral are in place, the potential for cross-selling opportunities, the level of profitability at transaction and global relationship levels, whether the transaction qualifies as sustainable, and any advice from syndication.
The green light support of the transaction triggers a term sheet to be sent to the client, subject to credit approval and acceptable documentation. Once the client accepts this, the credit proposal process begins with a credit application being drafted by the lending automotive specialist in consultation with the sector-based credit officer. Upon review, the senior credit officer gives positive advice to the deal via electronic signature, subject to certain conditions, one being that the maximum final take must be EUR 30 million equivalent. The credit package and decision sheets are then submitted through Vantage to the mandate holders, who confirm their approval within 48 hours. Once the documentation is agreed, the transaction is signed, launched, and syndicated, leaving ING with a EUR 30 million equivalent final take.
This example underlines ING's commitment to providing every client with best-in-class sector knowledge, the speed and efficiency of virtual agile teams, and robust and proven deal structures. A combination we believe keeps our clients a step ahead.
I see about 300 clients a year, and they always talk about how this works. It's particularly for us, a very consistent approach, and one that keeps us have real good control both over the profitability as well as over the risk side of that. Where does it leave us for the world of tomorrow? Clearly, the wholesale bank is entirely in line with the strategy of the overall company. There's a bunch of inputs on this page, and there's really one output. If there's one metric we deeply care about, it's ROE. As we reduce the growth of our assets, we will have to be much more frugal about resources and capital allocation, and we need to make sure that every EUR counts. The elephant in the room is obvious. It's Basel IV and TRIM.
We want to ensure that whatever we do, we deliver for you, our shareholders, the return you're looking for us for. I'll dive briefly into two areas, regulatory headwinds and financial markets. RWA will go up. It's my job and our job in the business to do everything we can to reduce some of that by taking smart actions. RWA will go up through TRIM and likely Basel IV. I want to say something on Basel IV. Given the fact that directive is still being worked on and being changed, we've got to be a little bit careful of taking action on businesses that might look unprofitable or unattractive under Basel IV, because you don't want to regret that you've done that right now, and then find that later on, there's changes to the directive.
TRIM will come first, so there's no regret moves now, and we gradually get better at the other things. I also want to point out here that our institution hasn't been at the management of the balance sheet as much as some other companies. There's real upside there. Let me start with some real no regret moves. Today, talk briefly about clients and ratings. If I just take the top 10 clients that we have in our wholesale bank that are not rated and support them with getting an external rating, it saves me EUR 2 billion in RWA. That sounds like a pretty much a no regret move. If I look at the collateral that we have, there's different types of collateral, and some receive much more fair and much more favorable treatment.
Why not use our structuring and work with our clients to ensure that our positions are such that I'm in a better position at a lower RWA? We have also some data points where you want to make sure that you're really accurate about putting into your systems every point that counts for the treatment of RWA. We started at this disintermediation game. I think Tanate talked a little bit about that. There's more and more to be done there. We have opportunities to look for significant risk transfers and to do a number of things that really make the use of our capital less. Ultimately, half of our book reprices before Basel IV. Really that is what we're having the teams focus on. The hurdle rates have been upped 13.5% Core Equity Tier 1 is in there.
Through the cycle risk costs are in there. The teams need to go out and bring us good business. As to Financial Markets, on the top left of this page here, you can see how we have really used the RWAs in Financial Markets and reduced the RWA density. This is a real testament to the team in Financial Markets by really dropping the amount of capital that they consume. They've also reduced the front office cost and the front office headcount, and we're working very hard together to try to find a way to look at operating expenses. Let me be very clear about one thing. Financial Markets is an essential part of our business. It helps us to manage market risk. It helps our clients, both in the Wholesale Banking as well as beyond, to be able to manage their risks.
They stood us in good stead when markets were bad and when times were tough. The question now is, are you in Financial Markets? The question is, how can we be most efficiently in Financial Markets? That's really what we're working on. Turning to the last two points here is one on innovation. We build, partner, and acquire. We're totally open towards what it is that it takes to change our company and to change our Wholesale Banking, and to build a better, smarter, faster, cheaper Wholesale Banking. Bank Mendes Gans and Catana are two examples inside our company where we show that we can deliver fees and we can innovate for our own sake as well as for that of our clients. In the trade space, Ralph talked about our distributed ledger technology or blockchain team.
It is considered world-class among the five corporates in the world, the likes of IBM and Alibaba and others, really in terms of blockchain technology. We use it particularly in our trade and commodity business to find ways to reduce the operating expenses that our clients have in our value chain. We believe that a mature blockchain plus a core infrastructure can take up to 30% of operating cost out of the value chain in trade. That's the kind of stuff our clients expect from us. The acquisition on Payvision. Payvision is a PSP that really is forward-thinking and helps our clients connect the online and the offline part of their companies, and we learn a ton from them. What's beautiful about this PSP is really linked to our client base, and they can add value there.
Ralph talked about sustainability, the last piece of what I wanted to tell you. It starts with our own accountability. Terra is what we launched back in September in San Francisco. I announced it at the Global Climate Action Summit, it talks about how we hold ourselves accountable, measuring in a smart and scientific way through each of our sectors what technological change needs to happen in order for us to align ourselves with the Paris Agreement. What it does is it engages the conversation with a client, out of that comes a lot of business because they tell us, "Why don't you help us finding ways to become more sustainable, let's figure out what investments we need to make?" The market itself, which we were on much earlier than many, is growing like weeds.
EUR 220 billion, according to Bloomberg, just in 2018. The majority of this is still green bonds and green loans, it is a growing market sustainability for us is not a nice to have, it's a must-have. I've given you a lot of information, it's all there online. In summary, I just want to let you know our core strategy is client-centric, product-agnostic, sector-specific, double down on the client experience innovate for the world of tomorrow. Thank you.
Steven, will you please join us?
Hot jacket.
Thank you very much. Isabel and Steven is coming on stage right now for a Q&A on the topic of risk management and Wholesale Banking. Any questions from the audience, please? Gentleman there in the middle, please.
Hi, good afternoon. Bart Jooris, Degroof Petercam. Question for the both of you, actually. Have you checked whether or not your mostly Benelux clients are Brexit ready, or have you helped them to become more Brexit ready? Could you give us some of your findings there?
Yes. Well, first of all, but this was already a while ago, we've done some stress tests. First of all, we looked at how much exposure do our clients have on the U.K. That is mainly in the SME and mid-core spheres in the Netherlands and Belgium, but also Wholesale Banking clients, as well as U.K. clients that are largely dependent on our support for them in the U.K. Then we've stress tested that. What you clearly see is that the dependency that our clients, in general, have on the U.K. is fairly limited, but that's from a firm point of view. Other than that, we have been in discussions with many of our clients already for many months to see what they can do to protect our risks. I think we have it relatively well under control.
Thank you, Steven. Gentleman in the back, please.
It's Andreas Thomae from Deka Investment. Question to you, Isabel. The risk-weighted asset efficiency. We saw a slide, how you want to produce results, but how do you deal with originate to distribute model? Could you enhance the efficiency by distributing out deals because other players are much more successful in it? First question. The second is financial markets, it's an unprofitable business at ING, even though it seems to be necessary for clients. You have shown a slide, revenues up, costs down. What are the ROE targets on a 13.5% quarter one? Thank you.
Okay. Well, first of all, you're absolutely spot on in terms of OTD, right? The idea is that if there's portions of the balance sheet that are less attractive for you to hold, you should find a partner who you work with to hold that for you or with you. I will say one thing, we're not a bank who brings business in and then sells everything off. Our clients expect a certain alignment of us with them. The amounts you hold clearly are different. In terms of origination, we started back about a year ago or so, we started our balance sheet management team, who looks at three individual things. One is, how can you take an individual transaction where your client is up against a certain limit, and how do you help them and the company protect against more exposure on the individual one?
Number two, how do you look at an entire asset class and look at what can you do to find ways to come up with a proposition that's better? Finally, which is the piece that I said other banks have been more focused on, is how can you look at your entire balance sheet and see which portion of what I'm holding today is not as attractive. Either you accelerate off-boarding of clients where we've agreed that there's not mutual interest, or you look at parts of your balance sheet that are more attractive to somebody else. As to financial markets, if I commit to an ROE of 10%-12%, I do that in behalf of the Wholesale Banking. Each and every one of these parts needs to contribute to that.
That doesn't mean that every individual part of the business needs to be at exactly the same return. FM is going through a tough time, partially because of low interest rate environment. What I'm trying to do is to make sure that the mix of the three gets an outcome that is really attractive to you as our shareholders. I'd say one thing, I didn't touch enough on the revenue side of the financial markets business. We have figured out that if you just look at our fair share, I don't even need to compete with anybody large out there. If I just look at my fair share of the business, so I have a small portion of a loan, can I get a small portion of the fees that are correlated with financial markets, that I have a 20% higher revenue by 2021.
You just look at we need to integrate this business more so that Financial Markets works in tandem with wherever we put our loans out.
Perhaps if I may add, another measure that was introduced already two years ago is that everything that we did and was presumed to be beyond the Basel IV implementation, we've already been pricing that off the 13.5. A large part of Isabel's business in the Wholesale Banking is a professional market player where we have proven to be able to reprice. That's part of the other income effect I would like to highlight. Next question, please.
Hi, good afternoon. This is Raul Sinha from JP Morgan. Isabel, can I ask you to talk a little bit about the funding strategy of the Wholesale Banking? Do you look at it from a singular Wholesale Banking funding perspective? Because if I look at the deposit base of the Wholesale Banking, it actually hasn't grown at all since 2016. I think you mentioned cash management over there. Could you talk a little bit about the initiatives? How do you position yourself for a cycle where-
Yep
wholesale funding costs are going up, as we can see from the market spread. What are the mitigating actions you can take as a management team to-
Okay
not let that affect ROE?
I think Steven is very eager to go first. I'll go after you.
It's a great question. I'll take the first question. No, we do not look at our funding strategy from a singular business point of view. We look at the entire business, which is then comprised of our deposit gathering that we have in many countries on the retail side, our deposit gathering that we have on the Wholesale side, and then our longer term Wholesale Banking or shorter term Wholesale Banking loans that we get from the market. From our counterparties. Typically, what you see in Wholesale Banking in terms of corporate deposits, they are relatively seen as not being sticky. Yes, we use Wholesale Banking as a funding mechanism, but if you then look at longer term loans, you want to, let's say, match asset liabilities. Those parts of the balance sheet are less useful from a funding perspective, but they are being used.
Steven and I, and all the board members are in the ALCO as well, which is where we on a monthly basis look, of course, at what are the cost of funding, what are we bringing in, et cetera. The second one was around cost. Remind me again, Mark. Mark, you heard the second part of the question around cost?
Second one was on cash management.
Yeah. Payments and cash management. I talked briefly about BMG for our clients. They are in cash pooling and netting. That's what they do. Let's say our transaction services business that does a lot of payments and cash management for quite some time was not operating at the level we wanted to, and it started charging fees, and that's been a very attractive strategy. They've been performing, and they will continue to perform. They bought Payvision on the payment side as well. I'm quite optimistic about our business on the cash management and the payment side. I think we will have a lot more opportunity to grow there, compared to the others. Anything you want to add there, Mark?
Did I answer your question?
Maybe to follow up-
Sorry. Mm-hmm.
I don't know if this is working. Yes. Maybe to follow up, how do you allocate the funding cost to the Wholesale Bank when the deposits are being generated in the Retail Bank?
I guess the heart of the question is funds transfer pricing. Are you taking the market spreads and applying that? If that is the case, you could argue that through the cycle, the Wholesale Bank probably needs to cover a higher cost of funding. That's essentially the part of the question I was trying to get at.
Yeah
How sensitive are you to that?
The FTP is one area. I will tell you what I'm doing at my end, most importantly, right? We have a global business, and you can allocate to different sectors. That Green Light Committee that you saw there, that is where we look. We have a hurdle, which we use on the base of what we call internally sanity checks. They ensure that each individual transaction and the client relationship that we have hurdles across above the 10% ROE, taking into account our 13.5% Core Equity Tier 1, and through the cycle risk cost, as well as an allocation of cost. We very much on a transaction-by-transaction, client-by-client basis, allocate and ensure that we have the right spreads. The typical conversation to be had with the front office is, well, if I have to do this transaction, what else is there?
If it's a little below hurdle, how much time is it going to take you? In that, we take into account what other commitments there are. When we have bleeders, individual transactions where we say, "This is not going anywhere," we then look at balance sheet management to see are there ways to end this relationship, and generally speaking, on the average life that we have with our clients, you're able to do that. That's very much we have global FTPs, and then transaction-by-transaction, client-by-client profitability measures and hurdles.
Maybe to come back to the first part of your question, the FTP is also applied for the bank all across. Basically, it's an internal transfer mechanism, whereby on the one hand, we look at what are the cost of funds that we need to pay for our liabilities. We pass those on as a revenue to our liability generators, then we look at what are the cost of those liabilities, plus the cost for our wholesale funding, and that we match to come to an internal transfer pricing mechanism for all of the bank, not for only Wholesale Banking. No?
Sorry, here the gentleman in front.
Thank you very much. Adrian Cighi from RBC. Just one follow-up question on the leverage loans presentation you had. What indicators would you look at to potentially lower that cap, the EUR 9.6 billion or the 6.5 leverage since we're, as you said, probably coming to the end of this cycle?
Yes. What we look at all the time is what are the leverage levels in the market? Are they going further beyond the 6.5? What is the tenor that the loans are going for? Are they going much beyond six or seven years? What does the pricing do? We look at these books, I come again back to the compartmentalization, is that when you look at, Okay, if you come to a downside, what would be the maximum loss that I could sustain from an overall P&L or balance sheet point of view? That's the way we set our caps for these books. What we typically do is that if these leverage levels go even further or/and if the pricing does not start to creep up, we will further curtail.
Thank you. Alicia.
Hi. A couple of themes that seem to keep coming up is, first of all, that we are now moving into a slower growth environment for ING, and moving past the peak of the cycle, in a sense. Secondly, that we are also now moving into a phase where capital requirements are going up, and you're trying to mitigate that with various actions. With that in mind, the cost of risk as a percentage of RWA guidance seems a little bit outdated. Are you able to give that now as a percentage of loans instead? That might be a bit of a cleaner way of looking at it. Even more helpfully, could you give us a view of what that might look like over the next couple of years? Thanks.
I will answer part of your question, and then I will defer to Mark. When it comes to the guidance for our cost of risk through the cycle, we've always said that our risk costs on average through the cycle are four to 45 basis points. That is an average, and it's basically an average based on what we've seen over the past couple of cycles. That is not how we directly steer our balance sheet because those we steer on the risk appetite statements and the measures that I showed you on the compartmentalization and the drivers of risk that I presented half an hour ago. That's how we do that. Like I've said before, we have been over the cycle. On average, we have risk of a four to 45 basis points.
We have seen now a couple of years of lower risk costs than the average in the cycle. If you see the risk costs, sorry, if you see Basel IV working with higher risk weights, indeed, then that can have an impact on the average, and that's why we're currently looking at how can we best represent the risk costs overall. Mark?
Yes. We have discussed that with many of you in the past, and I think the period of rapid balance sheet change that we went through as a company has basically come to a slow. The need to have it on RWA in a dynamic balance sheet is less urgent. We do agree that a guidance more on a basis points over loan book
Client outstandings is more relevant and also makes it easier comparable as it is an industry standard. We felt it was the right one while we were transforming. As of the first quarter of 2019, so in two weeks time, we'll start preparation for that one. We'll also show you the guidance also across the cycle based on basis points as a limit. The gentleman in the back.
Jason Kalamboussis , KBC. The first question is on real estate finance. On page 13, the first thing, what would make you start thinking about reducing the exposure there? The other thing, more specifically on what you think about the Belgian market, because it seems that one of your peers, and not us has mentioned that the market is about EUR 60 billion and that you have quite a big market share in there. I would be interested in your comments. The second thing is on Germany. In Germany, we have had a very good growth that has come also because you repatriated businesses from different areas to Germany as you concentrated your project finance and the sectors. If we have that finished, how can we isolate the pure growth in Germany, aside of this repatriation, if you want?
Also, is that the main and the core element of your growth in Wholesale Banking, or is there another element just?
I can talk about Germany.
Thank you.
Okay. Thank you. On real estate finance, we have already put a cap on that book, which is a bit over EUR 35 billion. What would change We look at different elements. We look at tenors, we look at loan to values, we look at pricing, we look at covers that we have, we look at DSCR. How much cash flow do we get over the particular loan? If that further starts to move in a negative direction with, for example, slower GDP growth or higher unemployment, which are two elements that have an impact on the real estate book, that may then lead to further measures. At this point in time, we said we want to cap it. If we want to do more, we need to sell tranches through the vintages.
Typically, vintages earlier in the cycle are better priced and therefore for the same or actually maybe better type of risk, you get paid better. If we want to do more, it basically means you have to sell through the vintage or through vintages of different years to sell assets to be able to complement. If these elements would start to change, I would have to look at it again. With regards to Belgium, yes, we have a reasonable market share as opposed to other parts of Europe. There has not been a large correction in the Belgian market. That's why we do not only steer on loan to value, because loan to value also goes up in times of economic progress.
It could be mistaken, because then suddenly, if there is a big calibration, then that loan to value would turn out to be much worse than you initially thought. We also look at cash flow capabilities of the tenants at hand, distribution of rents, and the weighted average life expectancy of the rents to make sure that we have more legs to stand on.
As to Germany. Germany is a really important market for us. You're absolutely right. Some businesses we run out of Germany, and to be honest, we are quite agnostic. I'm particularly, from my perspective, quite agnostic, where I book specific business in the world. Right. We have, for instance, our structured export finance book that is based in Germany. Yes, because we were gathering a lot of deposits here in the local market, we had a great opportunity to book assets on this balance sheet. There's also an interesting point when you look at our position in Germany itself. We're not a huge player in Germany on the wholesale side like we are on the retail side.
There certainly is growth, whether it is having businesses here that operate out of here and book on our German balance sheet, or whether it is just working for the local German market, both are really growth areas. Within EMEA, I would think that Germany is clearly one of the growth areas. What I try to point out a couple of times is that I try not to look at any individual domestic market to capture market share locally. I see these opportunities, but our whole point is to try to have a global business with a global sector strategy approach and find in the markets the transactions and the opportunities with your clients that are attractive. That's kind of how we think about it. I do not think that's how Nick thinks about it, but we do.
Thank you. By the way, we haven't stopped the centralization of these loans in Germany. We still have that vehicle.
Yeah.
Whenever we need to book assets there from other areas, we will do so. Nick, one final question before we go to the break.
Yes, hi again. It's Nick Davey from Redburn. I'll try two actually quick ones. The first one is, you've talked a bit about funding already, but I didn't hear any mention about the dollar funding of the Wholesale Banking. Are you near or at saturation for long-term dollar funding needs? The second question would be, how much risk-weighted asset inflation are you expecting in the Wholesale Banking for everything that you've talked about, more allocated capital TRIM and Basel? The idea of doing stable return on allocated capital if RWA is going up 25% seems quite ambitious. Just to try and scale
That impact. Thanks.
Let me start with that second one, and we can talk, all three of us, about the funding. In terms of RWA, I think we've given guidance, what, 15%-18% company-wide for RWA, and it will go up. What I'm trying to explain is that there are really a number of areas where it's coming down. We've got about, what, EUR 151 billion or so of RWAs, give or take, and I think that will go up in line with what we look at in the company. What my job to do is to look at the areas within our RWA that really we made the decision on a while ago, and you're actually thinking that is somewhat wasteful. There are other areas. I'll give you another example. We have our Italian lease portfolio that we have announced that we're about to sell.
That in itself releases EUR 800 million of RWA this year. It's a question of just working on all these individual pieces and then figure out how much you can afford. One thing ultimately in the end is repricing and making sure that your profit's there. Starting January, we have started to ensure that our origination takes into account higher cost. That's kind of how I'm thinking about it, the 15%. We have TRIM towards the end of next year and next year. Basel IV is really much further away. I'm looking at taking as much of that RWA growth and find other ways to compensate for that. I think there is.
I think especially.
Anything you want to add?
The pricing of Nick. Nick and I know each other. Nick has asked this question before. We've also answered it before. The first answer is, yes, there will be impact on some portfolios more than on others, and we've said on some parts of structured finance and some parts of FI, we can expect potentially more impact. Indeed, what Isabel says, the question is, can we reprice? That's what we currently are doing to say, okay, we need to reprice. If we cannot reprice to meet our returns, we will diminish the business. If we can reprice, we will continue. That goes for parts. With regards to funding on the US dollar, I think also we've mentioned that before. Yes, there are limitations on what we currently can do.
We have on the one side, we have the wholesale market with which we get funding. We have our corporate deposits that we get funding with, and we have our euro dollar swaps. If you now look at a number of these elements, we're nearing the levels that we can do this with, at least sustainably can do this with. We've also put caps on that. That will impact the growth in the US dollar business.
Okay. Isabel, Steven, thank you very much. Ladies and gentlemen, we've got half an hour break to reconvene here at a quarter to, please. Thank you very much.
Thank you. Isabel.
[Break]
Ladies and gentlemen, please take your seats. The program will start in a few minutes. Ladies and gentlemen, please take your seats. The program will start in a few minutes. Ladies and gentlemen, please take your seats. The program will start in a few minutes.
[Break]
Welcome back, everyone. For this last part of today, we have three presenters. We've got Ignacio Villar, we have Roland Boekhout, and Aris Bogdaneris to tell you and show you what it actually means in this new world, what it means is when you're digital, but even more important, where we're going when it's mobile. Because on a mobile, to interact with a client, to build a relationship, and actually have a commercial relationship, is something that few do better than we do. To show you how that is done, may I please invite Ignacio Villar to the stage. Thank you.
Hi. Good afternoon, everyone. I hope you had a great break, and you still have some energy for what is left. My name is Ignacio Juliá, and I've been responsible for the retail segment for the last three years. Before that, I was chief innovation officer of the group, and I was also running the retail business in Poland and in Spain. In this section, I want to answer one of the questions that you have been asking us over the last four years since we started the Think Forward strategy. This is how customer focus really drives value to this organization, and why are we so obsessed with bringing primary bank customers to this organization. This is the area that I want to focus today. We talked about becoming the go-to place for financial needs and beyond for our customers.
When we are focused, actually, we do a pretty good job. At the end of last year, we reached 12.5 million customers that were using ING for most of their financial needs. This is give or take 50% growth vis-à-vis four years before, because we have been adding 1 million customers every year to this journey, really using ING every time they think of a need in their financial needs. Where does value come? This is the formula we have used already today, stressed by Ralph, also by Isabel.
At the end, value comes from how many customers we have, how engaged, digitally engaged they are with the bank, so this is a primary bank relationship, and how many products they have per customer, and at the end, what is the value of the products and the services that we sell. Of course, there's something that has changed, because this was also true five years ago or 10 years ago when we were talking about banking, and this is the way the customers interact with the banks has drastically changed. The key question here is what do we need to do to have this digital engagement with our customers, to have a personal relationship with our customers in a digital world?
If we think about ING, these are the numbers that we have at the end of the last quarter, already 26% of the customers, they only use this device when they interact with the bank. How many of you only use the mobile to interact with the bank? Please raise your hand. It's more or less the same numbers that we have. It would be one quarter. We need to ask ourselves a lot of questions. Are we able to have a mobile-only relationship with our customers? Do we have all the products? Do we have all the services? Do we do it in a super easy way so that the customers can serve themselves?
Do we have the call center, do we have the branches adapted, having all the information, all the knowledge about the customers to be able to serve them when they really have a moment of truth? These are the questions and the homework that we do have as an organization if we want to be successful. There's one element, because that's thinking from the bank. When we think from the customer is, can we fulfill their expectations? Because their expectations, let's be honest, they are not driven by us. Their expectations are driven by the big techs that have been working already much longer than us on moving first to digital and then to mobile. This has been stressed already today, all their experiences are personal, are instant, are relevant, are seamless. This is what the customers expect also from a banking relationship.
There's a lot that has to be done if we want to be successful. We truly need to transform the way we are running our organization. For that, what we need, in an essence, is to reinforce what we call the virtual circle of engagement. We will know if we are successful at the end if three things happen. If customers come more to ING, so if the traffic goes up, so that every time they have a need, they come to us first. The first one is the traffic. The second one is what do we do with this traffic? Are we able to truly engage the customers every time they come to us? Do we have a better experience every time they come to us? Do we have a personal experience? Are we able to fulfill their needs?
That's the second thing that we have to work on. The third one is, are we able to translate this into the sales of products and services? This is the virtual circle that we have been working on over these years, at the end, if we do a good job there, this will translate into the monetization. Into the value, that this is what you're expecting. For today, I want to talk about three things. I want to show some proof points, so how are we doing in the journey? What are the numbers behind? I want to talk about why the private bank relationship, it's an acceleration of this funnel. That's the second thing that I want to talk about.
The third thing is this is a journey at the end of the day, we are transforming the way we are running our organization, and many pieces have to be changed. This has been stressed today during the day by Roel, by Ralph. This is about data, this is about culture, this is about many things. What I want also to show is where do we stand in this transformation, how are we doing across the different business models we have in the different geographies in ING, and then where do we see the future going as to untap basically the potential that we have with our 38 million clients that we have. Now let me go for the first one. That is the proof points on this transformation journey. In 2018, we had 3.7 billion interactions with our customers. That's a big number.
This is 700 million more than the year before, 500 million more than the year before. This is a big number. This is, as you see, mainly driven by the mobile. That is growing very fast. Why are we having so many interactions? We have been working hard on making the transactions easy and to have all the products and the services there. Also, we have been working hard in personalizing these transactions, so to truly give the message to the customers that we believe are relevant for them. In already close to 45% of the cases, of this 3.7 billion, we take a conscious decision of what we show to the customer to be relevant for them.
This can be about a product, this can also be about talking how the financial markets are doing because the customers were looking at the brokerage. It can be about a message because you have made a transaction and to give you confidence that the card was used and this gives you comfort. There are many things that you have to be there. Many times that I also speak with you tell me, "What is the true value? I am just looking at the app and I am looking at my balance, is there any value there?" For me, there, the proof is a bit on the pudding, as we say. Are we able to translate this into sales?
De facto, what you see here, this is the graph that you have over there, is that over the last couple of years, we doubled the sales that we have across the digital channels. Double. This is how many sales you have for every 1,000 customers. We are learning basically to move the sales, to move the relationship to a digital world. We have also started this journey in the mobile. There, the rate is exponential, it is at times 6, because we started very low. As you see there, the potential is magnificent, now let me go to this part of the graph. Today, 90% of our customers are already digital. What you see is that the mobile is picking up.
It is picking up as a mobile only, it is picking up also as a mobile and in combination with the rest of the channels. Therefore, we truly need to crack this nut to bring this relationship with the customers in a digital world if we want to be successful. There, we also see the assisted channels, as we call them. This is the call center, these are the branches, something that we call now remote advice. We are also transforming the way we are operating with our customers to get ready for a digital interaction, now, every time that the customer goes to any of these points, it is because it is a moment of truth where he really needs help with something. This is where we are also drastically changing the way we are operating our assisted channels to support this journey.
The next question, this is all fine, more traffic, better engagement, more sell. That is working. That is good, is this bringing value? At the end, that is the essence of the key question. There, the answer is yes. In this graph, in this PowerPoint, what you see are two things. First, the revenue, then the profitability and the return. Let me start with the revenue. By the way, I forgot to mention this, all the numbers in these presentations is about the individuals only. This has not SMEs or mid-corps that normally we always share this information when we talk about the retail, we wanted to talk specifically about the individual part today. We live in an environment in which the competition is growing drastically.
We live in an environment in which we have new players that are setting the standards in terms of customer expectations, but that have not figured out yet what is the revenue model, and this adds a challenge in the way we are doing things. We live in an environment in which interest rates have been at zero or close to zero for a long period of time. Actually, when we look backward, since 2014, we managed to increase our revenue from EUR 8.2 billion to EUR 9 billion. This is by having a stable revenue in the savings, and by basically leveraging on deepening the relationship with our customers in the rest of the products. There you have compound annual growth rate of around 8%.
We are doing it in such a way, in a digital way, so that we have accelerated our profitability, reaching EUR 3.5 billion profit and a return above 23%. This is what we are making by engaging more with our customers in a digital way and becoming the go-to place for them. Now specifically on this type of customers, what we call the primary bank customers, but these are those that have already decided that we are their main bank, that they want to bank, that they want to serve all their needs via us. Why is it helpful as an acceleration of the journey? In very simple terms, it's because they interact more times with us, four times more. They buy more products and service with us, twice more, and they are also more sticky, so they stay longer with us.
Basically, they accelerate this virtual circle that I was referring to. By doing this, they help us getting more resilient and getting more balanced in the way we are creating value, because they are 3.5 times more profitable than the non-primary bank customers. We are actually very happy with the different segments that we have across our customer base. What we see here is that those that are engaged with ING for most of their needs, they do have a better return on equity, close to 40%. These are big numbers. Also a cost to income that is also close to 40%. Actually, they accelerate the value.
We have a customer base of 38 million customers, the more we engage with our customers to basically use ING as their main bank, the stronger we will be untapping the value that we have in ING. This is in very simple terms, we are accelerating the revenue without increasing the cost. This is a concept that today we have been talking a lot, that is growing the business without growing the expenses at the same time, and not necessarily looking at the cost to income, but at the operational leverage. No? This is something that this helps. This is very easy to say, no? Now to show the results, we can feel proud. We are getting an acceleration of the funnel, so that's good. This is translating into value. That's also good. Getting a deeper relationship with our customers on a digital way.
This is happening. This is helping. That's also very good. The key question is, how to make this happen? This is what is actually very difficult. All the banks will talk about this, but I think it's really good to see that in ING, we have been working on this for years, and you see the proof points that this is possible, and that we are in the journey because it takes time. This is about redesigning the way you're offering your products, redesigning the processes, the end-to-end that Roel was referring to. This is about redesigning the way you communicate with your customers so that things are very simple, understandable. To translate data into insights, to become truly relevant for your customers.
This is truly about culture. You need to have your 50,000 employees really obsessed about creating a differentiated customer experience in everything we do and in every single day of the organization, because everything needs to be easy, everything needs to be personal, that's what we expect as customers, and everything needs to be relevant for these customers. In this journey, what I want is to stress that we have been doing this both on the businesses in which we were coming from the digital world, the old ING Direct, as we called it, and on the businesses that were more a brick-and-mortar bank, a traditional bank. I want to show two examples, because I also know them very well because of my past, of where do we stand in this transformation. You see a lot of colors, a lot of graphs, but please stay with me.
What I want here is to show on the facts. Where are the sales coming from in two business that historically were very different, Spain, that was a digital business, and Poland, that was a full bank. At the end of last year, when we look at the sales, 70% of the sales in both countries were coming from digital already, and 30% were coming from assisted channels, so by the use of human beings. This is the transformation that we have been working on years that really proves that we have managed to engage with our customers in a digital way to bring this relationship towards the digital world.
You also see, these are the sales that we have per type of products, you see we don't show savings, because FTDs, we believe, is relatively easy to do on the mobile, because it's just a renew. We show the rest of the products. There, what you see is that in the most difficult ones, like mortgages, the digitalization is still not that strong, although it's starting. Although it's starting, because customers are basically using their device for everything, and therefore, they start the journey there. In products like consumer lending, most of the sales today, 70-plus, 80%, are happening via the mobile. This is because we have drastically changed the full approach. You need to have a pre-approved loan for every single customer, so that in the moment of need, basically with a click, they have it.
That is drastically changing every single piece of the bank in order to make this happen. We are good at it, and we have been working very hard on this. Now, when we look at the different business models that we have in ING, we are aiming in all of them at this Ambition Orange part. That is, to have a deep digital relationship with our customers, where we really untapped this value that I've been referring to, and to do it in a very digital way, where the operational leverage that Ralph was referring to today is very, very high. This is where we are aiming at going. This is the journey in which we are present today. Of course, the journey is slightly different, depending if you're talking about the market leaders or if you're talking about the Challengers or the Growth Countries.
This is what Roland Boekhout and Aris Bogdaneris will be talking about after I leave the stage. There are two things that I would like you to remember on this journey. Creating a differentiated customer experience is the name of the game for this. Leveraging on the 13 countries that where we have been present in the retail has helped us through this journey, because we are able to copy and go much, much faster. That for the future is not good enough, because in a mobile-only world, where the expectations of the customers are going through the roof and they go very, very, very fast, the name of the game there is scalability. With this, what I want is to invite my colleague Roland.
Before that, because I was based more on numbers today, I also want to share a video where you see a bit what are the things that we have been working on over these years. Thank you.
Every day, thousands of new customers choose ING. Through our safe and secure mobile onboarding, we're making that process easier than ever. Once onboarded, customers can immediately experience ING's digital products and services. Open a savings account, apply for a credit card, or create an investment account, all from their digital device. As we get to know more about each customer, we learn how to better help them manage their daily financial transactions, such as predicting monthly cash flows based on historical patterns. Or splitting payments with friends. Our smart and easy solutions also help customers save for the bigger things in life. Everyday RoundUp allows spare pennies to be regularly saved towards a bigger goal, while we aim to provide the best available deals by opening our platform to third parties.
And by continually adapting our offers to customers' changing needs, we ensure we are always relevant, such as providing travel insurance just when it is needed. Our digital solutions also cover the more complex life events, such as buying a house. And if any part of that process needs more explanation, then Remote Advice provides easy access to our experts, making applying for a mortgage faster and easier than ever. Once moved into their new home, we continue helping customers to manage their finances. For instance, by comparing their utility spending to similar households in the neighborhood, and by providing an energy scan to find solutions to improve their house's energy efficiency. Upon which the customer can check their pre-approved consumer loan to see whether home improvements could fit the bill. No matter what the customer wants, we offer them a user experience that is easy, personal, and relevant.
An experience that helps us build and maintain primary relationships in today's digital world.
Thank you, Ignacio. Good afternoon, ladies and gentlemen. Since we haven't all met before, I'd like to introduce myself. My name is Roland Boekhout. I've been with ING since the year of the Lord 1991. I dramatize it a little bit because it's a long time ago. Most of that time since then I've been outside of the Netherlands actually with this beautiful company in the U.S., in New York, in Poland, in Mexico, and in Germany. When the crisis started, I was in charge of the Wholesale Bank in Central Eastern Europe, and in 2010 I was invited to come to Germany, to build a universal bank that we have there until the summer of 2017, when I was allowed to join the Management Board Banking. That's about me.
I'm going to talk to you about Unite Belgium Netherlands, give you a little bit of update, what's going on, what were the original thoughts behind it, where we're standing, and then demonstrate to you that while we go through this major transformation, we continue to deliver strong financial and commercial results. Before I go there, I want to build on the slides that Steven has introduced with you and that Ralph has spoken about, and that's about KYC and transaction monitoring. I'm not going to go through the whole spectrum again that Steven has done about the policy, about the governance, the tooling, the monitoring, and the mindset. I want to focus on one little part of it that makes it closer to the heart of all our people because it's not a hygiene factor. This is what we're about every day, everywhere.
How do we drive it home with all of our people? I think it was mentioned, very important for this is data. In order to do this effectively, transaction monitoring, collecting data of our customers, we need data. Data is an integral part of our strategy. Data we use to define market segments of N is one. Data are also the ones that we use to know everything about our customers. Data we can also use to track what our customers are doing and to make sure that they stay within the boundaries of what we're supposed to be doing, and that we notice when they're going outside of those boundaries, so we can make sure that we can report them. As a matter of fact, data are very close to us. Data are part of our strategy.
Data are what we can use in order to fulfill our obligations in fighting financial and economic crime as well. That brings it very close also to the purpose of our staff or our employees everywhere. We want to be there for them. Our customers have the right to know that they're banking with a bank that is safe and compliant and fulfilling its obligations. At the end of the day, we drive it home and we want to be the A-Team in fighting financial and economic crime. It's everywhere. To the program. It flipped one further than it should have. There. You saw this slide just now with Ignacio. It talks about the transformation towards where we want to be in the three blocks. I'm obviously talking about the block on the top left-hand corner, which is called Retail Benelux.
We also call it market leaders. The relevance of it is that the way that we do it and what you want to accomplish it is slightly different from the other two blocks. When you are a market leader, growth is not your primary instrument to grow into your potential or to grow out of a problem. You're already a market leader, so you have things at stake you need to be and maintain your market leadership position, and at the same time, you focus on unlocking cross-border capabilities of cross-border scalability to become a more efficient player in that market. By doing that, maintain your leading economic position as well. This is a slide of 2016 that was used as the reasons why we wanted to do it. Ladies and gentlemen, it's more true today than it was in 2016. Why do I say that?
One of the reasons was at that time, still a vision, maybe somebody not everybody took it as serious as it was pronounced at the time, as it was launched by Ralph. The world is becoming digital, and it's becoming digital much, much faster than anybody ever thought possible. Today we see that even our high expectation of the speed of digitization was underestimating reality. It's going much, much faster than ever considered possible. People are moving to the digital world and are expecting digital customer journeys that are unbeatable and that are seamless, much, much faster and much more intensely than we ever thought possible. We need to focus on it, and we need to do it faster. One of the reasons why it was then called the Accelerating Forward Strategy.
The other part is what Tanate has been talking about, that we see an economic reality in a low-for-long interest rate environment. One of the ways to solve that riddle, to contribute to the solution of that riddle, is of course enhanced efficiency in your model and lower your cost base. Those two reasons were already in there, but they're even more relevant today than they were in 2016. Give you an update of what we've been doing with Unite Belgium, Netherlands. We triggered a bomb in Belgium, to be honest. Everything was up in arms. We fought a massive transformation went down, particularly in Belgium in 2018. We redeployed 5,000 people. We asked people to take another job in another context with another task. A phenomenal task to do that. We took Record Bank and we migrated Record Bank onto ING Belgium. Roel mentioned it.
It was a process that went very smoothly. Of course, it's never 100% smooth. There's friction. You ask a customer to go from one to the other. You need to manage that process, but it went very well. We closed 600 branches in one year. Massive transformation going on, affecting every part of the organization, not in the least our employees and not in the least our customers. We pulled it off, and in that process, we reduced in Market Leaders the number of FTEs by 2,000, living up to the expectation of increased efficiency in that market. We also introduced the app that Roel referred to. It's the same app that we have in the Netherlands and in Germany. Where does it take us from here? What we're going to do next?
We're going to make that one app in 2019 also available to our Belgian retail customers, which means that we have the 20 million customers that have access to our app. 20 million. The relevance of that, I'll come back in a little bit in a different slide. We will continue to drive the efficiency model by reducing another 1,500 FTEs by 2021. We also change a few things compared to the original plan. We see the speed of the digitalization outperforming our expectations. We cannot afford to lose our leading position in this market. We need to be the first, we need to be the best, and therefore, we're refocusing our efforts to bringing digital solutions, digital customer journeys to our customers faster.
The second thing is that we see that we have been capable of diversifying our income sources, our composition of our P&L, away from Market Leaders a little bit by avoiding concentration risk. Aris is going to talk about that. It's working well, but it's still material. We want to de-risk our migration approach by cutting it up in pieces. We're doing these two things by focusing first on the digital transformation for our customers, clinging onto them, making sure that the alternatives that they have are limited, and at the same time, we move product by product, which means nothing more that it's going to take a little bit longer. We're not going to stop enhancing the efficiency in our model as we have in the past two years, and in the past four years, as Roel pointed out, 16%, which we can see on this slide.
It is possible under these circumstances and in this mature market to continue to become a more and more efficient business model. Over this period in time, where we've been able to, notwithstanding the economic pressure, the economic reality that was there, to keep the top line more or less flat, to reduce costs continuously, the financial performance that I alerted to before, but we've been commercially successful as well. As you see in the top right-hand side, the growth of primary customers, the essence of our existence, the primary customer. In the bottom right-hand corner, what has helped to maintain our top line was the growth of assets, retail assets on our balance sheet. It's not clicking. There. No, this is going too fast. It's now catching up. I'm sorry about that. It's going faster than it was supposed to. There.
One of the essential parts of accomplishing all of this is the agile way of working. When we create a company with one culture, one platform, one way of working, it has a significance that goes way beyond this one product or this one country. The agile way of working has two elements to it. One of the things is that it's much, much more efficient than the old way of working. We put cross-functional teams together. These cross-functional team deliver a functionality, for example, from the beginning till the end, and then they do the aftercare as well.
The old days where a marketing colleague had a brilliant idea and went to a product colleague and then to a communications colleague, and they made a plan, first having to find each other, and when they were done with the plan and they had the market research, went to IT and knocked on the door and said, "We have a great plan." The IT colleagues were then having to reprioritize it, see if they could fit it in, consider whether they also thought it was important. All of those things are gone. We don't have those handovers anymore because now we have these cross-functional teams that right from the very beginning, they are there, they're designing it, they're testing it, and delivering it. They're delivering it on very short time frames. Much more efficient than anything else that we've ever done before.
It's much quicker, which is also important in this digital time frame. We do not have the time to develop it in the way that in the old times we did it. Why not? Because the bench that we're looking at are the companies, the big techs that Roel mentioned all before. They all have a way of working similar to this one, delivering with the speed of lightning, new facilities, new capabilities, new innovations into their customer journeys. We have to do it this way if we want to keep up. Is this very far away from, very far removed from the way that we work, the way that we think? I don't think so, to be honest. We are not a digital immigrant. We are a digital native. We are a digital native. You can see it on the left-hand side.
Roel showed you this chart also. 10 names. We are number 10, but the nine names above it are the digital natives of the first hour, the Google and the Facebook. We rest our way right in there. Take your smartphone out and look at all the apps cluttering your phone and try to be the number 10. That's where we are, competing with nice films that people can look at, with a soccer app, with the dating app, with the newspaper, all of these things, and we end up at number 10 as ING. Which means that we are a digital native. We know what we're talking about. We are part of this digital system. You see in the middle, the bottom, what it really is. This era of digital consumers, it started a while ago, but it's still picking up speed.
Last year, we have almost a million more people that are using the app, and it's still continuing. Ignacio also alerted to it. It's still happening. You're not there. Let me drive this point home with you. It's by no means a walk in the park to meet your net stable funding ratio. It's by no means a walk in the park to meet your MREL requirements. To build up your capital layers and a capital position is not easy. It's tough. You have to do all of that.
If on top of that, you do not get this one under control, you're going to start losing customers on a daily basis, and you won't see it directly by them closing the account, but you'll see that the interactions that they have with you are going to come down, and they're going to go to the ones that offer the unbeatable customer journey. If the transactions are going down with you, if the interactions are coming down with you, it means that they're no longer a primary customer. This is the beginning of the end. You have got to do that to be in the game. It's working. If you look at the block in the middle, there's almost 5.5 million interactions with our customers a day in the notes. What does that mean? 5.5 million interactions, almost.
Let me demonstrate to you for a moment what that means. That's about five seconds. That's 300 interactions with a customer. That wasn't a long timeframe, was it? As a matter of fact, I just divided it by 24 and by 60 and by 60. Probably on a Monday afternoon at 4:30 P.M., it's probably more like 400. 400 interactions in such a short timeframe. Each of these interactions allows us to become more personal with our customer, to get closer to them, to understand them better. This is what is necessary, and this is why you have to have to be in that space and develop a quality product. In the right top hand side, you see what it is to have around 4.5 stars, both in the App Store and the Google Play Store.
The interactions lead to things that go beyond banking, to be with the customer on their journeys of what they want to accomplish. We are experimenting with it. The traffic offers opportunities that we haven't had before. Let me take you through a couple of examples that we hear. On the left top hand side is the ING Shop. Customers are coming to us. With the ING Shop, we use the traffic to make products available at attractive prices to customers and non-customers that come to the ING platform. These are A brand products that are offered in attractive prices. We're experimenting with it. This is not yet a revenue source for us. We're learning. We see how customers behave. We already have a turnover of EUR 30 million on this platform. We're copying it in the Belgium context, what's called ING+ deals.
It's a similar concept. As you see, it just started in the fourth quarter of 2018. We already have 50,000 users. Time to volume. On the right-hand side, on the top, you see Makelaarsland. People want to buy a house. They don't want to have a mortgage. We're trying to facilitate this with Makelaarsland, which is a platform that brings buyers and sellers together at unbeatable prices, by the way. They contribute themselves, too. For example, they show their own home to a buyer. The concept behind is that they know their home better than anybody else. They are very good at selling that and reaching the hearts of a potential buyer. The platform takes care of everything else. If it's an interesting transaction, ING can jump in and help solve with the financing as well. Similarly, at the right bottom side, funding options.
This is about empowering entrepreneurs. This is a place where we bring entrepreneurs together and introduce them with different ways that they can finance their businesses to grow. It's empowering them. If it's a product that we have in our arsenal, if it's a bankable situation, it may or may not end up with us. It's not the point. The point is to create a platform to attract activity on it, to have people on there, to come to it, the to-go-to place. I'm going to hand over to Aris in a moment. I just want to wrap it up for you. I hope I have been able to demonstrate to you that, one, KYC is in everything we do. It's not a second line. It's not a third-line responsibility. It starts with the first line. Everybody's involved with it. It's everywhere. It's not a hygiene factor.
Two, the transformation in Belgium, Netherlands has reached major milestones in 2018. Continues to build on towards that platform that we want to have in the future. It's delivering, continues to deliver financial and commercial performance in the process, notwithstanding the fact that everything is upside down. Ladies and gentlemen, ING is a digital native. We are in this game to win. We know what it takes. We know what it is to be in that app world, in that internet world, to be there where your customer wants to be and where your customer finds you and wants to go to. Thank you for your attention. Aris.
Good afternoon, everybody. Three years ago, I stood in front of some of you in Amsterdam at the last investor meeting. I told you about our pivot to be a primary bank. I also told you that we were going to diversify our business beyond mortgages and savings. We were going to diversify our earnings outside of Germany. I also told you that mobile is going to be a powerful and the most powerful interaction channel of the future. Finally, we talked about cross-border platforms. I told you that we were going to build one ourselves. Now I fast-forward, three years later, I'm in front of you again. We're going to spend the next 10 minutes and do a progress check on how well we've done. C&G encompasses 27 million customers in 10 countries. This is roughly 70% of the total customers in ING.
Over the last four years, we have added 4.7 million customers. More importantly, 70% of those customers that have been added are primary customers. You've heard from Ignacio earlier today, primary customers are three and a half times more profitable than non-primaries. On top of that, the growth in our primary customers has been broad-based. From Sydney to Madrid, Bucharest, Frankfurt, we're growing throughout our geographies, not just in Germany. On top of that, customers like us. We're transparent, we enable them digitally, we solve their problems, other things. It's not what I say that matters. It's what we measure. Our NPS, Net Promoter Score, you heard from Isabel, how customers rate us and recommend us to others, we're number one in 6 of 10 markets. In countries like Australia, Germany, and Spain, compared to our closest competitor, we're number one by a substantial margin.
Now, by the end of today, you've learned more primaries, more digitally enabled customers, you get more contacts. In the last two years, we've grown our digital contacts from 1.1 billion to 1.9 billion. That's 1.9 billion a year. This represents an incredible opportunity to engage our clients. As I promised three years ago, the number of interactions coming through mobile has tripled. In fact, mobile now represents 71% of all contacts. When you have more contacts, you have more insights. When you have more insights, you have more opportunities to cross-buy. You see the cross-buy figures have grown substantially. It's not just getting cross-buy, it's getting cross-buy in the products that matter. When I told you three years ago that we were going to diversify, you see today, we've now crossed EUR 100 billion in non-mortgage, non-savings volumes. That's consumer loans, current accounts, and investment products.
This has ramifications on your revenue stream, as you'll see now. As you drive these digital interactions, you see what's happening to revenues. Over the last four years, we've grown revenues 7% per annum. This despite the margin squeeze on savings. You see that in mortgage income and other income, we're growing double digit. In fact, non-savings revenues are now 60% of our revenue base. Of course, it translates to the bottom line. We've added almost EUR 500 million in profits over the last four years. All this despite substantial investments in strategic initiatives like Model Bank, like further digitizing our business. It also comes against heavy regulatory costs. You heard it from Tanate. Regulatory costs have grown 28% per annum since 2014. We're absorbing it. All in all, the financial is good. You've seen this. It's been shown throughout the day.
I'm not going to go over it again. There's two things to remember, at least in C&G. We remain focused on driving more primary customers and monetizing them increasingly and penetrating them, whether you're a challenger bank or a bank in our growth markets. For our challenger banks, it's about Model Bank, scaling, and also new product introductions where we have gaps. For our growth countries, it's to grow and to continue to digitize, to lower the cost to serve and improve operational efficiency over time. Let me give you some examples. Here are three businesses, Poland, Romania, and Australia, which together comprise today 40% of our profits in C&G. This is a far cry from a few years ago. What's interesting to note here is for our traditional brick-and-mortar banks that Ignacio referred to in Poland, in Romania, we've been cutting our physical footprint.
That cut in the physical footprint has not at all impacted our ability to drive more customers, more primary customers, and more digital interactions. There isn't a trade-off. In fact, it's enabled us to lower our cost base, our fixed cost base, and drive a better cost to income, and you see the impact on profits. For Australia, different bank, one of the original direct banks. It never had branches to cut. However, it's been able to increase its primary customer base sixfold in the last four years. Not only increase sixfold, but you see what happens when you increase your primary base, the number of digital interactions has multiplied, and also it comes down to the bottom line. Just three examples of how the strategy is being executed across our global footprint. You heard a lot about Model Bank, and I won't go through it all over again.
I just want to highlight two things. It's 7 million customers across four countries on one customer interactive platform. You've heard time to volume, you've heard innovation scale, you've heard all these things. What it means for us is the following. We believe this platform, when we're going to have our 7 million customers on it, and you heard that the Czech 400,000 are already there, it's a means to engage our customers even further. Engagement for us in Model Bank means being easy, being personal, and being smart when we interact with our customers. Easy means onboarding your customers irrespective of the product in a seamless way. It means mobile-first developments happening in one place and being spread to multiple countries. It also means personalization. You heard that word today. Personalization is getting down to the level where every interaction is unique to that individual.
When you talk to an individual with a segmentation of one, the relationship deepens. When the relationship deepens, cross-buy increases. Finally, it's about being able to manage people's money through mobile. Okay. That's financial management. Now, what you see there is those gray spots. Those gray balls are gaps. When the countries go on Model Bank, on our platform, these gaps will turn orange. Not only will they turn orange for these countries, but if we decide to go to a new country or any new thing, the scaling, automatically all these capabilities will come with it. It also matters, and you heard it from Ralph, new product introductions, new services, new features, automatically when you have a platform, are scaled out instantaneously to the other markets. This is really the benefit and the power of Model Bank, and it's the power of a platform.
You heard it earlier, 300 people in Madrid, 50 nationalities represented. We have software developers, we have UX talent, data specialists, product specialists. We're building this capability in one place, which will be shared across many millions of our customers. We've already now developed a plan to migrate the remaining 6.5 million customers over the next two years, and it's going to be a bit different for us because we're moving from managing and optimizing individual units to managing a platform. That's a big cultural change, and these people are breaking new ground. You've heard of our partnership with AXA, and our partnership with AXA is a signal that we aim to disrupt the protection business, like we disrupted savings 20 years ago in the original ING Direct. For us, it represents a big opportunity. We have the six countries there that you see. There's 13 million customers.
Today, the amount of protection that we offer the customers in those 13 million is virtually nil. They need protection. They're getting protection. They're just not getting it from us. That's a shame, and we're going to change it. There's two components of our AXA partnership. One is the business of linking credit protection on lending. For a country like Germany with a EUR 70 billion mortgage book, the amount of insurance today we generate from there is nil. This will change. There's the other aspect of this partnership. It's building on mobile insurance propositions that are seamless. So think about all the interactions we are getting today. Ignacio showed you billions. Imagine with these interactions on mobile, how we can use those insights to proactively cross-buy with our customers standalone insurance. It'll be seamless. It'll be mobile.
It'll be imagine underwriting and claims handling with fewer questions, fewer clicks, and basically building this business from scratch and being ahead of the curve. This market will grow. Mobile insurance will grow, and we want to be at the forefront with AXA. We have today 70 people sitting in Paris. We have the digital expertise of ING, the insurance expertise of AXA combined, and our first prototypes will come out later in the year. We're quite excited. It's a EUR 1 billion opportunity, cumulative in commissions over the next 10 years. I couldn't be in Germany today and not talk about the jewel in the C&G crown, and that's ING in Germany.
There's very few retail businesses in Germany who have the earnings power of ING in Germany, and not only the earnings power, but the loyal and dedicated customer base that they have with NPS scores that are miles ahead of the competitors. In fact, Germany is a microcosm of our overall strategy. You remember what I said at the very beginning. Our strategy is to increase the number of primary customers because long-term, they have tremendous value. Over the last four years, Germany has increased their primary customer base. They've doubled them. But as you notice, there's still a small proportion of the total 8.7 million customers that are in Germany. There's still plenty of upside. And again, you know it now, when you get more primaries, you get more cross-buy, you get more fee income, you get more volume in non-savings, non-mortgage.
You see it there in the top right. It goes without saying, when you get this all together, you heard about Project Welcome from Roel, you drive more efficiency and you get more digital, profits will also increase. We're very proud of the German story, this story will continue because believe you me, in terms of penetration levels on their product set, there's still room to go when you see the benchmarks, what they can achieve on consumer lending, current accounts, IP, and other things. In three years, if I'm standing in front of you again, what would I like to tell you and what would I like to show you? I would like to show you how we've continued to monetize our growing primary customer base.
I want to show you also how we continue to diversify our business more from non-mortgage, non-savings, more consumer lending, more IP, more protection, whatever. Sorry. I also want to show you that we're diversifying our business continually away from Germany. That Germany is an important component, but there's more earnings power in our other markets. I also want to show you that we have a platform. We have a platform that is engaging our clients, increasing cross-buy, is scaling fast, getting more volume. Not only has our products on this platform, but now has third-party products on this platform. This platform will not only help us set the tone of how we want to be a platform company, but will also allow us to continue growing as we've been doing up to now. Thank you very much.
Stay, sir. Thank you, Aris. Can I please ask Roland and Ignacio to join us for the Q&A of this last block? Thank you.
I got carried away. The front, yes there.
Gentlemen, let me immediately open up the floor for questions, please. Right here, Benjamin, you were the quickest once again. Oh, no, go ahead then. You got the mic first, so you're it.
No. Jean-Pierre, two questions, please. First on the platforms. The more you standardize, how do you use your management team? Are they redundant locally? Are they necessary? If you look at Google, they have rep offices. They don't need management teams. Second question is about expansion outside of your original countries. You could expand, I understand, in Philippines. Any markets you're interested in, and how fast could you move, or is there any plan for that? Thank you.
Of course, when you talk about building a platform, the whole idea is, as you centralize capability, you don't need that same capability in every individual country. Of course, you know it from IT. It's different elements, retail people, whatever. That's part of the process of Model Bank, that we are going to optimize our footprint of people. In Madrid, we're bringing capability together, you don't need to be redundant in many countries. There is an obvious optimization of your FTEs in terms of moving the capability around. In terms of building a platform, I think you heard it earlier today, when you build a platform, just like you see Netflix or others, you can go to a new country, the marginal cost of entering a new country is relatively light compared to building a bank in a country de novo. That's clear.
Using the same components, the same infrastructure, you could easily imagine that you could extend your footprint, right? Right now, our focus on Model Bank is, the next two years, getting these customers on the platform. Right?
Thank you. I promised Ben to ask a question here in front.
Thank you. Two from my side, Benjamin Goy, Deutsche Bank. First on the market leaders. We heard a lot about the heavy lifting, so to say, about restructuring. Maybe now a bit more on the benefits. You mentioned Record Bank is migrated, when can you switch off the IT? Also on the product side, when you say now you move bit by bit, when can we expect important IT migrations to happen and then to switch it off? I guess the cost curve from here is pretty much in steps to some extent. The second question is on Model Bank. In the past, you haven't spoken so much about France and Italy, but which could potentially big markets. Should we expect more on that front as you become much more, let's say, better positioned to compete here with Model Bank? Thank you.
Okay, first one.
I'll start with the market leaders question. Record Bank, we aim to decommission the IT of Record Bank towards the end of this year. In the Netherlands, it's more complicated there. When we built the target platform, we're going to make the customer journey, the digital channels on there first, move customers there, also from Belgium, then start migrating the products one by one. When that means that we will be able to start decommissioning things in Belgium, I can tell you at this stage. The reason why is that we then still have the segments of business, SME and mid corporates and Wholesale. We're not going to speed it up beyond our capability to accommodate it on a shared platform. This is not going to be dramatic in the financials.
As you see, we continue to drive for the efficiency, the efficiency and the whole venture doesn't only come from decommissioning IT systems. Right? It helps, yeah, it's going to be stretched out over time. I can't tell you right now when this last point will be set.
Your question on Model Bank in France and Italy, I think it was embedded in what I was saying, that when you build the capability in Model Bank, you'll bring that capability instantly that France and Italy lack. More importantly, the difference between a platform and running a country is a customer, whether he comes from Czech, Italy, France, Spain, or whatever, that's a marginal going onto the platform. You're more indifferent where the customers are coming from, because now you're running a platform and you're not trying to optimize in every country. That's the difference we see. Of course, when you increase capability on mobile in France and Italy, you're going to get more traction with your customers. That's a given.
Thank you very much. Please, Mark.
Jason Kalamboussis, KBC. The first one is for Ari. The deal with AXA is on protection. Why it wasn't done directly on many other products, especially the non-life products? The second question for Ron is on, we saw, I think it's on slide seven, where you show a great evolution of the Benelux. If we were to split the Netherlands and Belgium, in the Netherlands it's an excellent progress. If we look at Belgium, costs have gone up since 2014, revenues have come down. If we look at 2018, what would be your comments, and when are we going to start seeing progress? Is it in the first part of 2019, or it's so back-ended that we'll see it in 2020? The last question is, the number 10 app in the Netherlands is a very commendable position. For example, you introduce it in Belgium.
How quickly do you think you can achieve same kind of levels on a non-home market in a certain way?
Okay.
On the first question on AXA, I'm not sure we said life or non-life. I didn't think we excluded non-life. That's the first thing. Again, I just want to reemphasize, this relationship is not the typical bank insurance relationship where the provider gives you products from the shelf and you just sell them through your channels. That's not what we're doing. What we're doing, and I again underscore this, we're sitting together and co-creating products for our mobile customers, the customers that interact mobile. That's a very different proposition than what you normally see now today in the normal bank insurance partnership. It's co-creation for disruption.
To your question on Belgium. You know, Belgium has been suffering from a longer period of time already by the level of liability cost that wasn't allowed to go below the 11 basis points. Therefore you saw some pressure on the top line, besides some local competitive pressures that we have with players that have different IRE requirements, I guess, than we do. That has been putting some pressure on the top line. The cost in 2018, when I described the phenomenal intense transformation that was going on in Belgium, we learn things. We see how customers react, we need to make sure that we keep on servicing them appropriately.
We had to take some measures that were, let's say, compensating for the fact that service levels were not meeting the ones that we had promised them. This is settling in. Like I said, there's 5,000 people that got new jobs. Before they start being productive and to be able to do what you're expecting to do, it takes time. We'll see these efficiency gains coming in through 2019 gradually. When it comes to the app, when we launch it there, it depends a little bit on the penetration and the degree that the customers are willing to accept digitalization. We'll see. It's going to be exciting. I think when we launch it, we will climb the ranks very quickly in Belgium, too. Holland is probably one of the more digitized countries that we're in. There are some that are close to it.
Spain, for example. What means digitized? That customers are willing to embrace the new ways of being serviced. They have internet penetration, then you have the app penetration, the willingness for them to accept services on it. It's actually very different from country to country. The Netherlands is advanced in that. Spain is advanced in it. Belgium is less advanced in it. Now, does that create a level playing field because everybody is on that same lesser advanced digital market, and therefore you climb the ranks just as you do anywhere else? I don't know. I think it will. I don't know. I'm not sure.
If I may add, Jason, to your question on the cost. I would recommend to stop looking at individual countries as we are converging our operations to the extent that we are. As you saw today, we're already migrating and having one channel for all our retail digital customers as of 2019. The Netherlands is preparing a lot of the systems to receive processes. We're coming at an inflection point where you see the cost is also one of the reasons why today we showed you the combination, and that is something perhaps for going forward, if you want to look at where the costs are landing, it's going to be more of a Unite Belgium and the Netherlands. Next question. Stefan, please.
Hi, guys. It's Stefan from Citigroup. Just back on the new markets opportunity, how should we think about this? Are we looking at a return to the old days of ING Direct, where you were all over the world, and you sometimes struggle to find venues for your liquidity, so you end up investing in specific areas? Expanding within the EU is one thing. Expanding in the Philippines, that doesn't really give you liquidity synergies, for example. Do we think about this as a 1 to 2 countries per year type of expansion? How should we think about the IT systems? Okay, maybe you would use the Model Bank as a front end, do you have to build an IT system for every specific country, or can you use existing IT systems?
Just some color around the setup, the pace of expansion, and the overall benefits will be very useful. Thanks.
Today, our focus, as I mentioned earlier, is on getting Model Bank up and running. You are correct that in the Philippines, we have a bank. We have a presence in the Philippines for the last 30 years, and we've tested a mobile-only concept in the Philippines using components from the group, and this is what the TPA, what Roel talked about earlier, and it's more to experiment with ways in which we interact on mobile in a market that we've been present for a long time. In terms of more geographic expansion, that is not really in the cards for us now, although you've heard that we're in discussions in China with our joint venture partner already, Bank of Beijing. Beyond that, our focus is to continue to grow in our European, both in Eastern Europe and in Western Europe. That's where our focus is.
Would you add anything?
No.
No.
Sorry, please.
Hi there. Adrian Cighi from RBC. You talked a lot about this digital journey, part of this journey, of course, is where the industry and the customer behavior are going. In a sense, it's sort of running fast to stand still. Of course, the second part is doing more to be better, faster, smarter than the competition. Can you maybe help us guide what financial KPIs you use to understand which part is the first and which part is the second? Is it market share gains? Is it sort of profitability per customer? Do you use any financial KPIs to understand?
few.
Ignacio, maybe you showed me your KPIs the other day. It's probably best to explain to them how the retail world is run.
Absolutely. Actually, the KPIs that we use in the retail segment are very close to the story that I brought today. At the end, we are measuring how many primary bank relationships we are growing in the different countries. I'm not talking about number of customers, I'm talking about the customers that use us as their primary bank. We also talk about diversification. This is about getting a more balanced business. This is by getting more customers, but also how we're doing with the unsecured lending, how we're doing with the assets under management, how we're doing with all the fees-related products. We also talk about the digital transformation. Digital transformation, this is traffic, engagement, and sales. These are the things that we are focusing on, and specifically on the mobile.
There we are being very demanding with ourselves, as a result, we have the profitability and the revenue. This is how we are leading the retail segment within ING, truly to go through this transformation. How do we compare with the peers? We don't share. This is the question that you ask all of us all the time. You all say the same, you don't share the numbers. It's very difficult, actually. We do a couple of things there. We do benchmarks to objectivize this. Actually, we use external companies, one of them is Finalta, where we did a deep dive to see how we are doing in this digital transformation, to see if in relative terms, we can be happy with ourselves or we have to be more demanding.
That has helped us across the 13 units, and really to see who is good at what to team up to go faster. The second thing is to really compare ourselves with the best in class, so to dream high and to act upon it. That would be the first one. Last, there was a report, I think it was a couple of weeks ago, by BCG. There, they were saying that the best in class, they were at 30% more or less of sales digitally, when you look at the different banks in Europe and in the U.S. In our highest countries, we are at 70 plus. Actually, in relative terms, we are much more advanced in the journey, and we are moving to the mobile journey. For sure, we want to continue accelerating.
If there are no further questions, gentlemen, thank you so much.
Thank you.
Thank you.
Thank you. This has come to the point for me to say thank you and say goodbye, but not before inviting our CEO, Ralph Hamers, to the floor for his wrap-up comments of the day. Thank you very much.
Let me first start by saying thank you. Thank you for all of you being here today. Thank you for making it all the way over here, even on your delayed flights. Thank you for staying with us the whole day, because I know this has been very intensive, and just sitting in a room listening to us and having a bit of a Q&A, and absorbing all the information that we're giving to you, I know that's quite tiring. You're still here, and you keep asking the right questions, so we're very happy that you keep us sharp there as well. Clearly, we'll have some more time later as well. Another thank you for the trust that you have shown in us.
Also over the last couple of months, when we had a bit of difficulties there very clearly, and you kept asking questions, you tried to understand what was going on, you kept reaching out before coming to opinions, and I really, really appreciate that. That's the way we need to work in order to fully understand what's going on. A session like this today also helps us to convey a couple of messages as to how we're doing, what we're doing, and go a little bit deeper into some of these details. I think today can be summarized in two slides, and these are two slides that you already saw. The first slide is basically our strategy. That hasn't changed.
Ever since we developed it in late 2013, early 2014, when we launched it, I remember vividly with many of you in the room that when we put up this slide with a purpose and a strategy that was solely focused on the differentiating experience, that many of you were thinking, "What trends is this guy talking about? Is this really going to happen the way ING sees the world changing? Are customers really going to change their behavior as quickly as these guys want to transform?" Then two years into it, two and a half years ago when we met again, we actually both came to conclusion that we had to accelerate.
The things that we basically predicted indeed happened from a regulatory perspective, in economic perspective, from a technology perspective, from a competition perspective, they happened to us even faster than imagined, and we had to speed up. That's why we started the transformation. If you want to know what ING is doing, one part of the slide is the strategy, a purpose-driven strategy, empowering people to stay a step ahead in life and in business. The other side of the slide is a transformation program to become increasingly operationally efficient, to become a platform more and more from the inside out in terms of cross-border scaling, but also from the outside in terms of the way we interact with our customers and the opportunity we have in order to also offer third-party products and peer products. This is the summary.
Everything is on this slide. Everything we do, you can bring back to this slide, including the most important thing that we're currently working on, the number one priority, and I hope that came across today as well, which is fixing a lot of stuff that has to do with KYC and AML. Is right there in the strategy slide, earner operational excellence. It contains operational resilience as a word and a term that we have used a couple of times today, which we feel is of increasing importance in a banking world, a digital banking world, and as well as a platform world. Thanks again for being here. We still have some time to catch up. Many questions that may not have been asked. I know there's a lot of information we handed to you today.
There is many days also after today that our Investor Relations team is there and available to talk to you. We will be coming on roadshows as well. I will be traveling a lot. We will be seeing each other. I will be seeing some more shareholders as well. A lot of time to catch up on that. Just remember the following, these are our accelerators. The summary of the story, primary customer growth, cross-buy increases, cross-border scalability, time to value, net credit spread receiver, and the opportunity and sustainability. Thank you.