ING Groep N.V. (AMS:INGA)

Earnings Call: Q3 2018

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Nov 1, 2018

Good morning. This is the operator to welcome you to ING's 3rd Quarter 2018 Conference Call. Before handing this conference call over to Wals Hammers, Chief Executive Officer of ING Group, let me first say that today's comments may include forward looking statements, such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward looking statement. A discussion of factors that may cause actual results to differ from those in any forward looking statements is contained in our public filings, including our most recent annual report on Form 20F filed with the United States Security and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Ralf. Over to you. Good morning. Thank you, operator. Welcome, everyone, to the Q3 2018 results call. As always, I'll take you through today's presentation. Both our CFO, Koos Timmermans and our CRO, Stephen van Rijswijk, are here with me. The key points for today. Our net profit was lower at $776,000,000 this quarter, and that's because the 775,000,000 settlement agreement that we have with the Dutch authorities in early September. We clearly and sincerely regret that the outcome of the investigations identified serious shortcomings in the execution of our policies to prevent financial and economic climate ING in the Netherlands. We take this very seriously. We accept full responsibility for it. They will walk you through some of the initiatives that we have in place to strengthen the management of compliance risk as well. Now commercially, things have actually progressed very well this quarter. The underlying pretax result, which excludes the settlement impact, stood at just over €2,100,000,000 Primary customers continue to increase as well this quarter by 200,000 to 12,200,000. And we have a number 1 net promoter score position in 7 out of 13 retail countries. The 4 quarter rolling underlying return on equity improved to 10.7% in the 3rd quarter, and that's on the back of continued lending growth at resilient margins, continued strong fee income despite seasonality and a focus on strict cost discipline across the bank. Group CET1 ratio ended this quarter at a solid 14%. Now turning to Slide 2. I'd like to emphasize that we are committed to conducting our business with integrity. We want to conduct it in compliance with the applicable laws, regulations and standards in each of the markets and jurisdictions in which we're active. Therefore, already at the beginning of 2017, we initiated a bank wide Know Your Client program, Know Your Customer program, supervised by the Dutch Central Bank. The program includes activities to improve the accuracy of our client files transaction monitoring in the Netherlands, which includes redefining the drivers, which trigger an event not capping the number of daily triggers, monitoring clients at customer level. We also develop we're also developing bank wide processes and tooling to support improved client activity monitoring. Now the KBC program is just one of the many initiatives that we started within the bank. In addition, we have initiated to improve employee awareness around compliance, such as behavioral risk assessments, strengthen the internal compliance culture, strengthen the mindset The risk management function is sharing a client integrity risk committee, which takes compliance driven decisions on the client on and off boarding. With a further focus on the uniform execution of policies and procedures through more rigorous testing prior to implementation and also centralizing our operational KYC activities for ING in the Netherlands. We have also substantially increased the number of compliance with staff for IGT in the Netherlands from 150 early 2010 to 450 today. And lastly, we partnered with 3rd parties to better control to better combat money laundering. Now many of these initiatives we already started some time ago. So the cost of these, as they are being as we run them currently, because of these are in the plans. Compliance regulation is, however, continuously evolving. We will, of course, invest when and where needed in order to ensure that compliance risk and non financial risk in general becomes one of those categories of risk that bankers have to deal with like market risk and credit risk. It's going to become part of our DNA. Turning to Slide 4. This illustrates that we remain on track with regards to the execution of our Think Forward strategy. Primary customers went up 200,000 in the quarter to 12,200,000. And that's first the target of €14,000,000 by the end of 2020. So basically, we are progressing nicely towards that €14,000,000 In the 1st 9 months of the year, it's basically all of our countries contributing to the growth in on the primary customer growth side. And as you can see in the slide, Australia is doing really well. Germany is doing really well, but also countries like Romania and Poland and Spain are doing quite well. Again, this quarter, net core lending growth outpaced the net customer deposit growth, which helps us in this low rate environment, defending the NIM, the net interest margin. For the year to date, we have already exceeded our 3% to 4% loan growth ambition. However, particularly in the Wholesale Banking, we see more stiff competition in certain regions. And we have put in place stricter risk parameters in certain sectors, particularly in real estate finance and leveraged finance. In the Q3, as you can see also in this slide, we ranked 1 in 7 out of our 13 retail markets in terms of Net Promoter Score. And you know that Net Promoter Score is a compass for us and is certainly a leading indicator of more primary customers and more customers to come. So it's a real important indicator for us. In another three markets, we're actually number 2. Turning to the next slide, the integration of Belgium and the Netherlands. Given the importance of these 2 retail markets to ING, I thought that it would be helpful to briefly recap why we're integrating these and what's the progress that we have made so far. Parts of the slide that you see here are actually a copy of what we presented during the Investor Day in 2016 when we presented the business case. We're embarking on this Unite transformation program. Well, clearly, we have started it because we see that the mobile and digital data banking trend in Belgium continues to accelerate. And at the same time, our main IT components in Belgium are reaching end of life cycle, so we needed to invest. That is That is what we concluded at that moment. Furthermore, there was scope to integrate our 2 brands in Belgium, Record Bank and ING brand, and optimize the combined branch footprint, which was successfully completed in the Q2 of this year, where we reached the most important milestone today, basically the legal integration of the 2 banks. And with that also the migration of almost 600,000 record bank customers to ING in Belgium. At the same time, we have been reducing the physical footprint in terms of the reduction of branches in 1 quarter from 12.50 to 6.50. And over the period that we have been working on this transformation program, so the last 2 years now, the number of internal FTEs in Retail Banking in Belgium have gone down by 11.50. At the same time, we are preparing the target platform for the next step in migration of customers from Belgium all to this target platform, which we are running in the Netherlands. We are preparing this platform by introducing instant payments, 3 65 days a year. That replaces the batch based payments architecture with a real time solution. Also, the app that we have in Holland is very highly rated. So basically, you can see why that is the target platform to move to because it is really state of the art. The major next step will be to prepare the omnichannel Dutch banking platform further, also from a language perspective, to agree on the standardization of basically customer propositions across the two countries to manage expectations, and then we'll migrate to these customers. We are convinced that we can deliver this large scale transformation as we have extensive experience. For example, by integrating Postbank and ING Bank in the Netherlands. But now clearly, also, we are extending that experience into our Belgian labor force because they have done a major migration of the Rocketbank lines onto their own systems as well. So all of that is looks to be going quite well. Then turning to how we continue to innovate and improve the customer experience. As you know, the core of our strategy is to deliver a differentiated customer experience. So when customers get in touch with us, their experience should be simple, should be smooth across different channels, should be almost the same. So to this end, IG has built a common contact center platform for use in retail countries, providing customers with access to the same services. Basically, this means that if you are chatting with a customer online and you want to continue the same conversation over the phone, it's just one button to push and so that you can actually continue to service across all the different channels. That's what we're building, and that's what we're introducing in 12 of the 13 retail countries. On top of that, we'll have to continue to be open to new ideas and collaboration. If we look at other initiatives, our investment in the international payments platform, Transformate, is one of those examples that provides our customers and corporate clients with faster, cheaper, easier international payment solutions. It's a real good example of that. We've also extended our existing partnership with Trade IX. That's the world's first open platform for trade finance based on and that's entirely based on blockchain. And with COMGO, that's the other example that we have here, We take the earlier pilots of that we call EASI Training Connect. Remember that I updated you on how we basically digitized the total trade flow, trade and commodity flow with a couple of clients, traders and as well as shipping companies. That is actually now growing into a company. COMCO is one of those companies. In this company, we are agreeing to this as the standard while we partner with the industry players like Gunvor, like Mercuria, like Shell, but also with banks because one bank can't set the standard. So you have to agree on that standard. So EBITAAMRO, BNP, Citi, Societe are also on this. So here you see actually a disruption at in the making from a pilot into a business. With that, I actually do think that the whole the global trade flow in the end will be on DLT, distributed ledger technology, so faster, safer and more efficient as well. Turning to Slide 7. As a bank, ING makes the most climate impact through our financing, as you know. I mean, the footprint of banks the direct footprint of banks is generally managed well. It is also the it's also not big, but we can actually make the biggest income through well, impact through the management of the indirect footprint, which is through our customers and the money that we lend to our customers. We have a loan book of €600,000,000,000 across many sectors, and we will now be considering this towards meeting the Paris Agreement's 2 degree goal. Now we're able to do to start doing this by creating an innovative, accurate way to measure the climate impact of our portfolio, and that we call Terra. This approach is being co created by the 2 Degree Investment Investing Initiative, and it's a leading global think tank. And Terra looks at the technology shift that is needed across certain sectors to keep the risk of global temperatures to well below the 2 degrees Celsius. For example, in the automotive sector, it's not enough to lower the emissions by making fewer petrol powered cars, but it is you really need to produce more electric cars, right? Terra then measures the need shifted in technology against the actual technology clients are using today and planning on using it in the future. That's where financing comes in, and that's where we can have a major impact by having that conversation with our clients. I think it works basically on 2 sides. On one side, clearly, we are then together working on how we will comply with the 2 degree ambition that we have. On the other side, from a risk management perspective, it gives you control over mitigating the risk of ending up with stranded assets. So it works on both sides. It's an important thing to do. But from both the bank's perspective as well as the society's perspective. Now we clearly realize that we can't do this alone. We've made this terror approach now open source. Many banks have indicated their interest, and I hope they will kind of join us on this one. Clearly, if new technologies will come around or better methodologies are developed, we will move towards that as well. But we didn't want to wait for a global standard and everybody to agree it because it took already too long. So we launched our own in order to start really having an impact on climate with this. Now let me turn over to the Q3 results now. On Slide 9. If you look at Slide 9, you see the underlying pretax result, just over CHF 2,100,000,000 in the 3rd quarter, which marks one of the highest quarterly pretax results we've seen in the history of the bank. Quarter's pretax profit is largely a reflection of the 5.4% improvement in the underlying income that you see on the right hand side, and that's as a result of the loan growth. The fact that we are doing this and continue to do this at the resilient lending margins, but also higher bank treasury related items, solid net fee and commission income, as you will see later and the annual dividend from Bank of Beijing that is always in the 3rd quarter, but it was also remarkably higher. Furthermore, the 3rd quarter's strong result was supported by tight cost control and relatively low risk costs. Albeit risk costs were up versus both comparable quarters, as we will touch upon later in the presentation. Sequentially, the underlying result before tax rose 5%. Now if we zoom in to NII. NII excluding Financial Markets, I'm on Slide 10 now for those who are following me on the slide presentation. NII, excluding financial markets and the impact from and some of the hedge relationships increased 5.4% year on year. And that's mainly explained by a higher interest result in the retail challenges in growth markets, industry lending and general lending and transaction services. Year on year, net interest income on customer lending improved as we continued to lend at slightly higher overall lending margins. NII was further supported by a slight improvement in the interest result on savings due to the higher client balances at a broadly stable margin, whereas current accounts continued to be a drag. So this was one of those quarters in which we were still able to manage some of the effect on the savings side, and that is what you see here. Now the mix of these two effects actually led to a 1 basis points improvement on our net interest margin to 152 basis points, which is nicely in line with the guidance that we have given before that we expected this at the high 140s, low 150s guidance. Turning to lending growth. In the Q3, we recorded net core lending growth of €6,800,000,000 as you can see here. It is a more normalized pace when compared to the first half of twenty eighteen. Retail Banking growth outpaced Wholesale Banking this quarter. Retail Netherlands saw good growth in mortgages, even including the runoff book. Retail Belgium saw a drop. This is more the net effect because it is fully caused by a lower overdraft usage by a major client. If we exclude this impact, there was a growth in net core lending, almost fully in mortgages. Retail challenges in growth markets continues to grow on a strong growth continues on a strong growth trajectory with a majority in mortgages this quarter. And the Wholesale Banking net core lending growth was €2,800,000,000 predominantly recorded in general lending in the 3rd quarter. Our focus on return on appropriate risk may lead to lower growth going forward given some increasing competition and also some looser credit standards in the market. But we can also cover that during the Q and A. Turning to fees. If we adjust for a rebooking of capital markets related fees from other income to fee income, which is kind of the €27,000,000 that you see there in the bar. But if you even if you correct that, net fee and commission income came in at a strong €693,000,000 which is up 7.8% year on year. And you see it is nicely and increasingly diversified across the different segments. The year on year fee improvement was driven by increases in most retail countries, but particularly in the Netherlands and Germany, despite seasonality in areas like investment products. The 3rd quarter saw also higher fees in Wholesale Banking, and that's particularly due to an improvement in Financial Markets. Despite this, if you then look at the Financial Markets performance, Financial Markets had a more difficult quarter, impacted by the challenging market conditions, reduced client activity and low interest rates in Europe. You don't see, on the rate side, too much volatility as a consequence of which there is not a lot of hedging demand. And if there's not a lot of hedging demand, you don't see that coming through on the rate side. If we look at the total financial markets result and then we would include the business that we do for SMB and the corporate customers, the return on equity on our Financial Markets business would actually improve meaningfully. Nevertheless, we are looking at how we can kind of improve the performance of the financial markets going forward. Turning to cost now. If you look at the expenses, excluding regulatory cost, which are just like the 2nd quarter lower in the third quarter, the regulatory cost, our expenses were down €33,000,000 or 1.5% versus the 2nd quarter. And this reduction is mostly visible in Retail Belgium due to a continued reduction in FTEs, which I mentioned earlier already, but also visible in the Wholesale Banking side and the corporate line. On a 4 quarter rolling average basis, the cost income ratio improved to 55.5%. In the quarter itself, the cost income ratio was actually 49.7%. So you can conclude that we're committed to tight cost management here, where reductions in some areas are used to selectively invest in gross return areas. Combined, this is leading to a continued decrease of our costincome ratio. We remain committed to the 50% to 52% costincome ratio ambition that we had given to be delivered by 2020. Turning to the risk costs on Slide 14. Risk costs in the Q3 came in at €215,000,000 That's 27 basis points over average risk weighted assets, which is a more normalized level, especially when compared to the very low level of risk costs recorded in both comparable quarters. As you can see on the in the graph on the left hand side, Retail Netherlands recorded another release of €21,000,000 and that's particularly in mortgages. Risk costs in Retail Belgium are mostly related to business lending, while in Retail Challengers and Growth markets, it's a combination of business and consumer lending. Wholesale Banking risk costs were €108,000,000 in the quarter, and that's mainly caused by some larger Stage 3 files in the Americas and Belgium region. It's also across sectors, so there's no specific trend here to be detected. Nonperforming loans for IG, as measured by Stage III ratios, Stage 3 ratio under IFRS 9 remained at 1.6 percent, as you can see on the right hand side of this slide. Now for the next quarter, we would expect risk costs to stay well below the through the cycle average 40 to 45 basis points over risk weighted assets. Zooming in on Turkey now. Given the macroeconomic events in Turkey in the Q3, it's worthwhile that we spend some time here, and I'm sure some of you will have some questions around it anyway. But we have composed the slides so that you have kind of a good summary in front of you. Just to start, the Turkish loan book is just 2% of IIG's total loan book and is still performing well. The NPL ratio is at 2.3 as you can see in the Q3. Overall, the portfolio remains in good shape. But clearly, we expect some of our clients to be affected by the macroeconomic situation. You take comfort from the fact that all of our exposure to private individuals is in local currency, while we only provide foreign exchange loans to companies that have proven foreign exchange revenues. For larger corporates, we can make an exception if there is a parent guarantee or if there is an export credit agency insurance covering it. Furthermore, I think it's good to mention that our Turkish book has generally a short remaining maturity. You can see that in the slide as well. On the right hand side, you see that our remaining maturity of the lending the credit outstandings that we have in Turkish lira is just shorter than a year. The foreign currency is around 2 years, so short term books. And what we basically are doing now, the focus in Turkey and our team is working really hard on this, is to manage the risk in our portfolio by derisking where possible, particularly by not rolling over foreign exchange loans. The aim is to reduce intra group funding. And since the start of the year, we already reduced by €700,000,000 As I said, I can only complement the team on the ground in Turkey, which is doing an excellent job to control our risk and running the business during challenging times. Turning to the capital side, Slide 16. CTE-one ratio remained strong, ended the quarter at 14%, down 10 basis points quarter on quarter but still well above the SREP requirement of 11.8%. This is despite the fact that we had to add the full net profit in the quarter to the dividend reserve following the impact of settlement agreement. CET1 capital was further impacted by foreign exchange, lower XT securities reserve, which were only partly offset by lower risk weighted assets there. We remain confident that we will meet future capital requirements, including the potential impact from Basel and TRIM. We have a large set of potential management actions at our disposal to mitigate these inflationary risk weighted assets impacts. And that includes asset distribution, data enrichment to avoid punitive risk weights and lending mix optimization going forward as well. Maybe as an example of of one of the management actions that we have taken in the Q3 to test the readiness of the market as well as the organization here as we successfully closed a synthetic capital relief transaction on German mortgages. So there are things that one can do. Now finally, looking at the slide which show our ambitions. Both the CET1 and leverage ratios remain ahead of mineral regulatory requirements. We continue to broadly to be broadly on schedule with our large digital transformation programs, which will help us to bring down the costincome rates to our target range of 50% to 52 percent by 2020. Compared to the previous 4th quarter rolling average, We have already improved our costincome ratio now by 0.6% in the 3rd quarter. Finally, the 4 quarter rolling on a 4 quarter rolling basis, the underlying group return on equity increased to 10.7%. As we keep growing the franchise, are able to command higher margins in most segments actually. We focus on cost control across the different businesses and still have relatively low risk cost, while at the same time facing continuous pressure from the low rate environment. Maybe to wrap it up. Clearly, the Q3 in ING and reputation wise was overshadowed by the settlement that we agreed on the back of serious shortcomings in the compliance on the compliance side. Therefore, I can assure you that enhancing our compliance and non financial risk practices will have the highest priorities within this firm. And if you look at the underlying performance, you can actually also conclude that in the 3rd quarter that we keep executing well on our Think Forward strategy, whether it's on primary customers, whether it's on Net Promoter Score, whether it's on lending or fee growth. And that, combined with our focus on managing cost, optimizing operational excellence and executing our digital strategy, makes us confident that we will continue to improve on the financials side. Now lastly, I'm pleased to announce that we will hold an Investor Day on the 25th March in 2019. And then we can actually take more time to take you through some of the examples, some of the milestones, if you more updates as to where we are in the transformation, but clearly also on compliance. But today, we'll focus on giving you deeper insights in our capabilities and digital leadership. With that long introduction, I give the floor and open it for questions. Thank you, sir. Ladies and gentlemen, we're starting the question and answer session now. Our first question is from Mr. Robin van den Broek, ADO Bunker. My first question is on cost of risk. If you take your guidance of 40 to 45 basis points on RWA and you translate that to the loan book, on a loan book basis, you're between 20 25 basis points. And some could argue that that is a fair level for more a mortgage bank driven focus. I was just wondering, your other retail lending exposure is between €100,000,000,000 €150,000,000,000 at the moment. I was wondering if you could give a little bit more color on what underlying cost of risk you assume for that book and what level of collateral is in place for that part of the book? Then secondly, your dollar lending exposure is roughly at somewhere towards €100,000,000,000 I think. I was just wondering to what extent are you reliant on commercial paper and the swapping of euro deposits to dollars in order to fund that dollar lending book? And also if you could describe the dynamics you see at the moment versus your back book, whether there are negatives coming through or positives? Those are my questions. Thanks, Robin. This is Stephen. Regarding the cost of risk, yes, I mean the cost of risk for the last four quarters on average was 18 basis points. This quarter is a bit higher at 27 basis points. There are a number of files in Wholesale Banking and one source in Belgium and the U. S. That have caused that, that those are individual files. They do not bear a particular relationship. But if you look at the bank as a whole, we have approximately SEK 600,000,000,000 in lending. Approximately half of that comes from mortgages. So that makes we're not only a mortgage bank, but yes, we're significant and largely mortgages. There is a relationship between RWA and risk costs. On average, we see that over a longer period of 40 to 45 basis points. But what you actually currently see is that risk costs are relatively low across the board, so also in retail and in Wholesale Banking. So yes, there are risks in if you look at 10 hours and coverage in mid quarters, as you mean Wholesale Banking typically are a bit higher than in retail. That also causes higher RWA. But across the board, the risk costs as a percentage of RWA are currently low. I appreciate that answer. But my question is more a little bit about the other retail lending because if I look at the guidance of other banks on your on a loan book basis, I can basically make a fair estimate for mortgages and for your wholesale banking exposure. But for other retail lending, which is still a sizable part of the book, it's a little bit more difficult. So could you perhaps give a little bit more color on what your assumption is on that part of the book? Yes. I mean we are we do not disclose particular risk costs on particular segments of the book. But I can tell you that also for those segments, the risk costs are relatively benign. Yes. Maybe, Robin, it's Koos. So on the dollar book, you're right that we have a dollar book and that is in total, we have roughly $40,000,000,000 shorter term $70,000,000,000 longer term. Now what we normally do is the shorter term is funded with CP issuance and the longer term is funded by a number of sources, which is equity, a Tier 1 dollar denominated long term debt and also part of the MREL. So long term assets are funded long term. If you then particularly ask about back book cost and then I think you have the cost on is now rolling over CP more expensive over the Ultimo to fund the short term assets. We had seen that last year as well. So the Ultimo that was already completely covered. So that is not an issue. Okay. That's very clear. And perhaps I presume you match maturities in your funding, so there's no immediate impact if spreads moves, for example, on that perspective? That's correct. Thank you. Next question. Our next question is from Mr. Nick Davey, Redburn. I'll stick to 2 questions then, please. The first one on costs. It's obviously been a volatile year on the cost line. You've settled in now in the last couple of quarters towards about 1% growth, excluding regulatory expense. Is that a fair run rate from here? I feel like we've had a year of kind of confusion in understanding this interplay between expenses and underlying savings. Do you think this kind of underlying run rate of 1% cost growth is representative? Second question, I'll go with then wholesale growth. It does seem like there's a slight change in language here today. You talked about bringing in closer controls, I think you said, on real estate finance. So could you just talk about, is this a shift in strategy? Is this based on risk that you're seeing? Is it based on competition? I think you mentioned not getting adequate returns. Is it driven by a desire to build a bit more capital? Could you just talk a little bit around, if I'm right, in picking up a change in language? And if there is, what's driving it? Thank you. Okay. Thank you, Nick. So on cost. Well, on cost, the run rate, we haven't guided on run rate. We have guided on cost income. And I think that's also the way we run it actually in ING. So when we launched the strategy, we had like 3 recipes for 3 different activities. So the Market Leaders activity is expected to really decrease its cost base, like really decrease its cost base. These are mature markets. We're investing heavily in digital and efficiency is leading there, And that's where you can expect the cost to go down. In the C and G, the challenges in growth markets, if we see the year, there is profitable growth and we can keep the commercial momentum by running these digital banks, we don't mind to invest selectively and therefore even have a cost growth that is higher than the 1% that you're mentioning because it is the costincome ratio that we look at that. And on the Wholesale Banking side, from the beginning, we have said that within the sphere of wholesale, we feel that over a period of time that efficiency gains can be used to the center is opportunity to grow the front office in order to produce to be more commercially active. And that's a little bit how we run it. Now on any given quarter, this may be a little bit up or a little bit down because you see that sometimes we invest a little bit more in ATF in a given quarter and then some of the savings come through a little bit faster like we see this quarter and another quarter maybe a little bit the other way around. Certainly, in 2017 and 2018, we have indicated that those are 2 years of real investment in the Exelio to think forward. So that more towards next year, towards the end of next year, you should really see the effects. Now we see some of the effects already, which is what we're very happy with. It doesn't kind of give us room now to suddenly start growing the cost of the investment. That's not how we run it. We have a program to invest. We look at its effectiveness. And overall, we look at the development of the cost to income ratio. On also banking growth, here's our change of language. Now there is areas where we see a little bit more competition. Specifically, more on the U. S. Side, we see a little bit more competition. At least, we see pricing that in our strict pricing doesn't help us to do more business there. But there's many sectors where there is quite some business that does well. And that's how we look at things. So if you look at how we price our business, we keep the same discipline. Honestly, in this quarter, we saw the margins on the front book in Industry Lending being kind of in some areas a little bit under pressure, but overall, stable ish. Credit quality was actually better in the front book. But we have become a little bit more selective if it comes to, for example, the domain of real estate finance, which we have capped and leverage finance, where we actually see structures coming through and leverage ratios coming through that we don't feel good with. And as you know, we will never compromise on structure. That's the golden rule here. On the general lending side, also in wholesale, we see actually margins coming up a little bit. So So we have different areas, different sectors, different geographies, but we keep our pricing disciplined and sometimes we grow a little bit faster than others. From a risk perspective, The two areas as indicated, real estate finance capped and leverage finance capped as well. Can I ask just a couple of follow ups on the cost and just ask to focus on a couple of units? So mentioned about really trying to get absolute costs down in the particularly the Benelux retail. So this quarter, we're now at declining costs year on year in Belgium. Do you think we've got past the worst there? Do you think sort of we're into a period now where we can start to see those savings materializing? Is this the kind of tipping point quarter? And then sorry to ask the inevitable, but the Financial Markets business, which is now loss making, and I know it's a quiet quarter, but this does tend to happen in the second half of the year. Have you done enough on costs there? I understand your point about efficiencies and playing them into the front office, but it just doesn't seem to be bearing fruit. So is it acceptable to you to be losing money in the Financial Markets business in a quiet quarter? Good questions, Nick. So on Market Leaders, I mean, this is an area of major transformation where still some investments are being made. I wouldn't call it the worst is behind us. It's not the terminology that we use. We're investing in order to improve our client experience in order to continue to deliver to our clients in an efficient way. So over time, you have to expect those costs to come down. Absolutely. That's the recipe. Whether quarter by quarter, you can actually now start predicting the costs to come down, I can tell you that. There goes through investment there's investments going on there as well. On Financial Markets, I can see your question. As you know, we just finished a major transformation in Financial Markets also to decrease the costs further by centralizing our activities from 3 locations: Belgium, Netherlands London, onto the London platform. So we are reducing the cost there by these kind of movements. Clearly, the current situation is not something that is sustainable, and we will continue to look at how we can improve either on the revenue and volume side or on the cost side, absolutely. Okay. Thank you. Next question is from Mr. Farfar Murray, Autonomous. Go ahead sir. Your line is open. Good morning gentlemen. Just two questions if I may. Firstly, on the slower growth in Wholesale Banking, how will that impact on the group growth aspiration? Should we think of it as part of a trade off within the kind of 3% to 4% growth aspiration for the group? Or is that aspiration actually potentially coming down a little bit? And then secondly, just coming back a little on the money laundering issue, the DNB has kind of made clear that in future it intends to publish all sanction decisions barring exceptional circumstances. Could you give us a sense of how often we might have historically seen those kind of sanction decisions against ING? Would it have been like 1 a year, 2 years, just get a bit of a sense of frequency? And how do you see that kind of publication system developing? With regards to the loan growth in Wholesale Banking, I mean, first of all, we're not solely dependent on Wholesale Banking to grow. So what Ralf said is correct. Sometimes we grow a bit faster in Wholesale Banking and we're in Wholesale Banking and sometimes more in structured finance and sometimes in general lending. And then we grow more in mid corporate and then we grow more in mortgages. 2nd of all, the loan ambition is 3% to 4%, but it's an ambition, not a target. In the end, that is a in the end, we want to make our returns. And we have clear return hurdles in our company. We have clear risk structures that we adhere to. And if we cannot make the returns on the capital that we provide to our clients, then we will not lend and then we will keep it to either grow our capital or pay it in dividends. And that's the way that we manage that steady capital on the balance sheet. Regarding the sanction disclosures, there are in the past what DNB would do, they could give directives or instructions to banks. And there those are published in the local state price newspaper, if you will, the Dutch Staatskruent that is called. That has happened to a number of banks, including ING. I do not know the number by heart, but I think those directions or instructions have been given a couple of times over the past 5 to 10 years. Okay. Just a follow-up question then. I mean, would you given the kind of current pricing environment, would you see any difficulties kind of any opportunities you see across the business? Would there be any issues trying to meet the 3% to 4% ambition? Well, honestly, if you look at the current quarter, where we actually see margins across the board a little bit higher this is Ralf whether it is in Retail Netherlands on the mortgages, we see a bit higher margins. Germany mortgages, a bit higher margins. On the business lending side, the Netherlands and Belgium, we see stable margins. On the Wholesale Banking side, as I indicated, we see some pressure in some regions if it comes to industry lending. But in general lending and transaction service, we see improved margins in C and G challenges growth, except for Germany, we see also improved margins. So we see margins okay with that. Therefore, with our strict pricing policy, we can still get the volumes in. This quarter at 6.8% is just over 1% for the quarter, so which is more than the 4% if annualized even, even this quarter. I mean, it's lower than last quarter, but it is still annualized more than 4% this quarter. But obviously, on the other side, if with our selective pricing, and as you know, given the fact that we will have to kind of hold more and more capital because of Bavo, therefore, the returns and the way we price will give higher NIMs as well going forward. If that kind of decreases the volume growth, but you do it at good margins, we're also okay Because in the end, again, here, it is a costincome play. Next question is from Mr. Stefan Nedialkov, Citi. Go ahead. Your line is open. Stefan from Citi. A couple of questions on my end as well. First of all, on Turkey, could you elaborate a bit more on your funding strategy there? Intra group funding over time and deliver as much as possible? Or business strategy more in terms of replacing the intra group funding with syndicated lending down the line, given the successful syndicated rollovers we've seen from some of the Turkish banks recently? Secondly, if you could give us the delta in the number of compliance officers 300 people delta from 2010. I was just wondering what that number is from year end 2016. And related to that, whether you have had any communication from the regulator that the 450 Feet number needs to go up and by how much? Lastly, if I may, on loan growth, from Oreo number at the Investor Day back in 2016, your ambition was to grow by around 5% in wholesale. Is that still the ambition given the current trade outlook for 2020? Okay. So Steven will take Turkey and also Comply Staff. Yes. Yes. So I'll take the first four questions. So with regards to Turkey, I mean, you have seen that our intercompany funding has come down from €4,100,000,000 by the end of last year to €3,400,000,000 as per the Q3. We have a balanced strategy here. So gradually, we want to decrease the intercompany funding from ING to ING in Turkey. So if there is excess funding or excess capital from Turkey, then we will ask that to be repaid. But again, we do that in a balanced way. We have a franchise in Turkey, also with international companies being in Turkey and Turkish companies working abroad in our network. And again, with due care for our foreign currency structures, we gradually will bring that funding down. And it also means that we increasingly get more local funding tools, including securitization or syndicated loans or deposits or other public means of funding. And then that we will then balance with intercompany funding. That on Turkey. Then the delta in compliance stuff, yes, maybe I could rephrase it. This is not only the compliance staff, but also people who work to make ING and keep ING compliant from an AML, an anti money laundering perspective and the legislation that we have in that regard. So indeed, in the Netherlands, the number of people working on that increased EUR 450,000,000 to EUR 450,000,000. If you look at this on a global basis, then the staff working on these parts of the bank grew from 600 to 1800 over the past 6 or 7 years. So basically, that is ongoing. It is not the case that we have received a message from the regulator that the number has to be a certain number or whether it has to be more or not. That is not the case. Good. And Stefan, on your 5% loan growth ambition in Wholesale Banking, No, I don't kind of remember that we had a specific Wholesale Banking loan growth ambition. The 3% to 4% was the ambition. At the same time, we had the ambition and we still have the ambition to change the asset composition of our balance sheet away from mortgages and towards higher margin lending, which is also Wholesale Banking. There's a consequence maybe that is where you derive from. The only 5% number I remember is the one that the fees should grow with a minimum of 5%, and we're beating that. Okay. Thank you, Ralf. Just a follow-up on the compliance question. So what was the number at the end of 2016 in terms of AML compliance or global compliance? We do not disclose that publicly, but you can certainly assume that we are have been gradually moving those numbers up over the past number of years. Okay. Thank you. Our next question is from Mr. Maxence L'Ocovello du Tumath from Jefferies International. Go ahead. Your line is open. Yes. Good morning. Two questions. The first one would be on deposit. We saw an inflection point in Q3. Is it a seasonal impact or is it a change of policy on your side? And the second one will be on Germany. You launched a lot of investment and you moved to Agile Banking. What is the dynamic we should expect in the coming quarter? Thank you very much. Maybe, Max Ernst, the reference you make on its course here on deposit inflection point, what is it precisely that you're referring to? Lower growth and you mentioned also some outflows in France and Spain. Okay. No, I think what you see is the following. Overall, we are well, more approaching an inflection point because one of the things what you see is growth on the lending side with that enhances your margin more than attracting additional savings. At the same time, are we at the point that that is changing? Well, that has all to do with the whole interest rate policy going forward. But overall, we are quite happy that, yes, we do attract a fair bit of the deposits. If you then look at the deposits overall this quarter, I mean, there you talk more about seasonality because normally what you find is the quarters, quarter 2 particularly people they cash in their holiday allowances. So they get rich and they spend it in their holidays in Q3 and then they have a little bit less money. Okay. Thank you. Yes. Could you this is Ralf here. Could you repeat your second question? Yes. On Germany, you made some lot of investment and you made the announcement that they moved to Agile Banking on this quarter. Should we see an acceleration of the top line in term of fee generation? Because I believe you are going to be more active on that part? Or is it going to take a little bit more time? Is it a story of 1 or 2 quarter? Or is it more for next year? Well, so the additional investments are happening. As you indicate, the Agile way of working is currently being introduced. The what it will bring along is more efficiency, for sure, a platform in Germany that is more scalable than it currently is. So it will help over time the costincome ratio. I don't think it will be an accelerated effect that you can expect from that perspective. Now on the income side, clearly, this is still a business that is dependent on interest income. However, we are introducing several fees by moving towards a primary digital universal bank. Also in Germany, we get more and more primary customers, as you have seen in my report. With that, some more fees come along like behavioral fees that you introduce in order to ensure that clients are incentivized to behave if they withdraw money or how often they call and stuff like that. So you will see some of that happening. This is not going to be a very 1, 2 quarter acceleration, and that is the next level. But over time, you can expect a more diverse income picture in Germany as well with the introduction of more and more new products, which also generate fees. Thank you. Have a good day. Our next question is from Mr. Boisnock Petrarc from Kepler Cheuvreux. Go ahead. Your line is open. Yes. Good morning, everybody. Two questions on my side. First one was on the cost. Could you update us on the timing of the cost cutting for the €900,000,000 cost cutting expected. So you were expecting originally €300,000,000 by end of 2018 and €550,000,000 by end of 2019. So I'm just wondering here where you are and what you expect for next year. And the second question was just on the mortgages in Enel. I think you have been getting market share. So could you recall us what your market share is currently? And the impression that your front book margin is maybe slightly below your back book margin on the mortgages in the Netherlands, just wanted to confirm that statement. Thanks. Thank you, Benoit. Now on cost, yes, so the timing. You will not see those costs necessary to go really down there from an IG overall perspective because as I said, we don't mind to selectively invest in initiatives if that in CNG, for example, enhances the franchise and supports the growth. But we do measure internally the effect of the transformation and the investments in the transformation. We have a very rigid process around approving business cases as well as benefit management. So we do make sure that the investments make their return, but you can't necessarily rely on seeing that in cost numbers going down overall in ING because that's not how we work, as I just explained. On mortgages, Stephen will work on that. Yes. Thank you. So on mortgages, our market share in our balance is approximately 15%. If you look at the margin, I mean, the front book is actually better than the back book. And that has gone up mostly in the quarter, but it also includes an impact of a combination of, on the one hand, refinancing of bullets and the other hand, new to bank production, which is more annuity than in the past. And therefore, there is a composition of the front book. But if you look at it for products, the front book is better than the back book. Thanks. Just can we assume that by the end of 'eighteen, you will kind of realize a kind of €300,000,000 level of cost cutting out of the €900,000,000 So kind of onethree is achieved so far? Or are you No. I think what we do is the following. We have overall this year indicated that we will work with an cost income at around 55% and that might be slightly below and we are on our path of doing that. But I find it very difficult to do that precisely because part of the work look at this quarter, Benoit, that we've seen that we have spent money on accelerating forward, but that differs by €20,000,000 €30,000,000 per quarter. And that is just a kind of non standard activity, which is happening. That is why this exact guidance is difficult. At the same time, what you do see is that overall, we expect for this year to have the cost within that guidance of what we have given. And overall, for 2019 onwards, we will make the next steps towards the fifty-fifty 2. Next question is from Mr. Bruce Hamilton, Morgan Stanley. Go ahead. Your line is open. Hi, morning guys and thank you for taking my questions. Most of mine have been asked already, but I guess a couple on capital. In terms of the cost of the MLK, so that's absorbed in the quarter. But am I right to understand that the operational risk charge is probably still to come? And do you expect that to be sort of Q4 or later? And then secondly, on the capital optimization, obviously, you talked about sort of the originate to distribute model. Do you think that sort of using that to drive some capital relief will be the majority of your kind of mitigation efforts? Or do you also see the need to sort of reconsider some of the global sort of footprint? Are there any areas that you're thinking that might not be non core or thinking disposals? Or really you think you can mitigate just through the areas you discussed on Slide 16? Thanks, Rouss. So with regards to the operational risk weighted assets and so the capital, so yes, the fine we've taken as a cost in the Q3. But the impact on capital on our operational risk weighted assets will likely come when we update the model next year, but that will be a limited effect. Thank you. That's it. Our next question is from Mr. Paul Zitti. Sorry. We just have one more answer to give on the capital part. I'm sorry. If you look at the capital optimization, there is more things what we do. So we don't only rely on the originate to distribute. Things we can still do and have to work on is if you take our lending to specific corporates or conglomerates to optimize the covers which you have will help because that gives you different capital numbers. The other thing what we will do is we will work on the data to make sure that unrated corporates get a rating. So that will give you capital relief. But the other thing, and that's maybe the most important, is to make sure that what we started in 2013 onwards or so is to look at the pricing. So just to make sure that you adapt your pricing regime to the new reality. And I think those things, if you take that together, that will help you to optimize on the capital side. Great. Thank you. Following question is from Mr. Pavel Zhijic of Goldman Sachs. Go ahead. Your line is open. Good morning. So I will start up with a follow-up on your answer right now on management actions on risk weighted asset mitigation. Can you give us a sense what is the timing of those measures? I think you say that 80% of them could be implemented ahead of 2022, but should we see any impact in, let's say, next 1 or 2 years? That would be useful. And the second is just also a follow-up on the cost remarks that you made about your market leaders and especially in Belgium. You mentioned that you expect cost decline, but obviously you cannot guide quarter to quarter, it can be volatile. Can you walk us through what the next stage of and pending of timing migrations, what we expect to see operationally in 2019 And should we see a cost reduction in parallel to that? Thank you. On cost, I'll take the one on cost. Koos will come back on the management actions regarding capital. Now the Market Leaders business, as I updated you during the presentation, I think a lot of the groundwork and preparation is being done as we speak. More investment needs to be made on the target platform in order to receive those Belgium customers, and that will continue for some more quarters. So the although on one side, you can expect that the further FTE reduction just by virtue of efficiencies that are already being realized that you can see some of that, but we will still need to continue to invest at least the 3rd the 1st couple of quarters of 2019. And because the planning of the migration of the first batch of clients is probably towards the end of 2019. Only when all clients have been migrated onto the Targa platform, you can really start to switch off systems decommission stuff as well. So the real cost decrease is always going to be back ended in the whole program. Now what you can expect in 2019 though already as a cost side cost decrease in Belgium is the decommissioning of the record bank systems. That is for sure. They have now migrated. So slowly but surely, we will be able to kind of decommission and switch legacy systems off there. Yes. Maybe on the capital side, the and the management actions we state. So if I go through them, rating unrated corporate is something which we will do as soon as we have the data and that will be quick. But at the same time, it's not easy to see because we will get our frequent model updates and trims, but for sure this is one part we will do as quick as we can. If you look at cover reallocation, it's a similar point on that. If you look at the originate to distribute that will be a bit more feasible because over the next 3 years, yes, we like to do that. So the expectation to do $500,000,000 or $1,000,000,000 trades in a quarter on this type of activity, if markets allows, that would be something which would be interesting for us. But then at the same time, there's various things which play a role in making that happen. If you look at the pricing side, indeed, well, where we were already looking at longer dated pricing against a higher core Tier 1 ratio, we will right now start to focus also on the shorter term rating because as you know 80% of the increase of the Basel requirement is caused by the input floors and they have an earlier date. So that means that is the ones where we have to make sure that we focus a bit more on the short term lending repricing and that is something which will happen very soon. That's very helpful. May I just ask one follow-up? You mentioned TRIM. Do you have any more insights into what the impact could be as of now? Or it's still unclear? Yes. So regarding mortgages Netherlands, the impact is final. So we got the final letter. Of course, initially, you get an investigation. And then you there are initial findings. And then there is a discussion about it. And then you can respond to those findings and that leads to a final letter and then that also includes any impact on your model. So on Dutch mortgages that is finalized and that impact was almost negligent. And the next letters or finalization that we are going to have are on mortgages Belgium, on SME Netherlands and on the trading books that I expect IATCOM in the Q4 or the Q1. Then the TRIM exercise on the low default portfolios in Wholesale Banking only recently started, and that will only be in the course of next year that we see any outcome in that regard. But the only outcome we've received so far, the final outcome, was on Dutch mortgages and it was negligent. Our next question is from Mr. Alex Kvaenia on ODDO BHF. Go ahead please. Your line is open. Yes. This is Greg Kouigna from ODDO BHF. Two questions from my side as well. The first question is on the operational leverage. I think that if we look back to the last 6th quarter, this is the first time you're able to generate a positive operational leverage. I'm just wondering whether you are more confident on being able to do so in the next quarter. The last time I raised the question, you said that you were expecting that to happen basically on H2 2019. So how comfortable are you on your revenue growth? The second question is on the capital. Excuse me to ask the question, I should know, but the 200 basis points in fact from Basel IV, was that a gross or a net number from mitigation? And then also on the capital, the 13.5% target you are looking on the Basel IV, was that for 2020 or more in 2022? And how do you feel regarding your dividend policy? Are you still looking to grow your dividend? Or are you looking going forward to move more to, let's say, payout ratio than the progressive dividend? Thank you very much. So on the operating leverage side, so is it I think we have achieved more quarters, but this is certainly a quarter in which it is showing. We're very happy with that. So whether this is going to happen every quarter going forward from now, I can't guarantee you as I've indicated. But we are managing on a costincome ratio that gradually but surely will go down over time. And the costincome ratio is distorted because of regulatory costs anyway in some cases. So it's but the underlying, if that is what you want to track, then you should over time to suddenly see that going down and see that trend picking up as from, well, mid-twenty 19 for sure. On capital, the 200 basis points, and then I'll give the floor to Koos as well. It's an all in impact. And so basically, the idea is that it's a 200 basis points impact. Onethree of that is to be managed. That's your mitigation side. So twothree is left over then, so it's like 140 basis points more or less is left to be managed in a different way, of which 80% is what you need to solve or what we would need to solve by 2022 because that's the input floor side of things. So that 80% will that 1 €40,000,000 will then go down to €110,000,000 which is 35 basis points per annum because that's the remaining period to get there. So that's how it works. And that's also why we feel comfortable to be able to make that with a 13.5% CET1 ambition as a it's kind of a we have indicated that we want to manage capital around that number. So there may be quarters that we're going to be below that quarter that ambition. There may be quarters that were going to be a little bit above. That also has to do with our dividend reserving policy because, as you know, we want to reserve as much of the dividend in the 1st three quarters and keep it outside of capital. And then what are the remaining in the Q4, that will actually always up the CET1 number. So that's why we're we have indicated to manage it around that number. On dividend costs? Yes. Overall, if you look at this, Alex, we are happy with the level of dividend we are paying. So in that sense, I would see not a reason to change. What we always take into consideration is that in the future, Basel will become make risk weighted assets a little bit more stable. However, IFRS with Stage 2 migration might make things more volatile. So we always look at should we adapt also our capital strategy to that. And no, we haven't concluded. But please be aware that the level of what we are paying, no matter what formula you're looking, we are quite comfortable with. Thank you very much. Next question is from Mr. Jose Coll, Santander. Go ahead. Your line is open. Thank you. Two follow-up questions, please, on Turkey. You guys had a strong quarter in and Growth Markets and Industry Lending. So I wonder if you could give us some detail regarding what was the contribution of Turkey, including cross border lending to the strong performance? And my second question is, I mean, I appreciate the progress that you have made in reducing exposure to Turkey. But I wonder if we have already seen the lion's share of the reduction? Or should we expect much more wind down progress going forward? And I'm also wondering if you're currently allowed to pay dividends from Turkey to the parent company? Thank you. Yes. So on Turkey, the contribution of Turkey to the 3rd quarter results, actually, it was a good contribution, but it's a combination of the fact that on one side, clearly in that there is quite some repricing happening in that market as we speak. But on the other side, there is also devaluation on the profit that we make. So I think the overall contribution is what is normal. So it's not something that is extraordinary and therefore has caused the OCNG result to go up or down. So that's not what you can that's not a conclusion you can derive. So it's really the combination of improved margin. But given the devaluation in euro terms, it's kind of, yes, stable ish. The in terms of the reduction that has having taken place in Turkey, We have started this program quite some time already. If it comes to the decrease of intercompany funding, we will continue to do so. This is clearly the hard currency part of the funding as we are working on changing some of our foreign exchange exposure to our clients into local lira exposure. With that, you do free a foreign exchange capacity. And with that, you can expect us to continue to decrease the intercompany funding. So that will certainly continue. But again, we are a player in Turkey. We're committed to Turkey as a market, and we'll have to do this in close collaboration with our customers as well. The upstream of dividends from Turkey at this moment, It's not something we're currently discussing, but is there a specific idea behind your question there? Well, yes, the idea is whether if things turn even more sour in Turkey that you guys can lift CET ratios to the very bone and start trying to pull money back to the buying So loans, but also getting money back from your subsidiary? Yes. First of all, our capital there is relatively limited. You see basically that we're getting repays from our loans. So that is basically the way that we are reducing the exposure from ING Group to Turkey, but there are no capital controls in this regard. So we can freely distribute in terms of what we think we should distribute. All right. Thank you. Next question is from Ms. Alicia Chung, Exane. Go ahead. Your line is open. Good morning, everyone. Just a couple of questions from me. First of all, on back on the capital, it looked like for Q3, but also for a number for the last 3 quarters or 4 quarters that there has been quite a powerful tailwind for capital from positive credit risk migration. So it's added about 10 to 15 bps of capital per quarter over the last year. And that's obviously quite significant given that this broadly offsets the 15 bps negative impact from loan growth over the last quarter, for example. So I guess my question is how long do you expect to benefit from this positive tailwind from positive credit risk migration? And what is driving it in particular this quarter given that we are starting to see provisions creeping up? That's my first question. And then my second question is just on the Financial Markets business. You had flagged today that you are doing a review into the business and into the structural profitability of the business. Just wanted to get a sense for what kind of do you have any kind of update already this quarter around what kind of actions you would consider taking? You mentioned that you needed to do more on revenues and costs, but also is there more that you can do on RWAs? So over the last couple of years, we've seen RWAs in financial markets falling about €6,000,000,000 but that seems to have slowed now. Is there more you can do to optimize this? And how should we see that trajectory? Thank you. Thanks, Alicia. Regarding positive risk migration, yes, indeed, we have tailwind, but we still see that coming through. The NPLs are going down. Our forbearance are going down. The watch list books are going down. And that also impacts, let's say, the capital. And we therefore see that across the board that if you look at the last 5 to 8 years in that regard, which make up the larger composition of the calculation for our models, that still has an impact on our models. And therefore, you see capital coming down. Now how long will this last is, I think, the $1,000,000 question. Yes, until now, we still see credit migration in a number of these books. Risk costs are also low. Yes, they are a bit higher than they were over the past couple of quarters. Again, that came from a number of also banking files, which are largely unrelated. And at the same point in time, we do see that the macroeconomic cycle has been positive for a number of years. And that's why we also are more careful to some of the books which are more cyclical in nature, including real estate finance, including large leverage levels in the leveraged finance or acquisition finance space and sometimes in longer dated infra construction projects. There, we become a bit more careful to at least cater for a change in the cycle even when it occurs. Okay. On the Financial Markets business, just to be sure, so the way we report Financial Markets is from a wholesale bank perspective. If you look at flash markets, including SMEs and mid corporates business, they're not making the 10% hurdle, but they're making 3% to 4% of the different quarters. And the profitability is and all structures under review. Basically, you can think of any action from that perspective, but because I think if you really want to structurally review, you should consider everything imaginable from that perspective. Having said that, we do have a decent business across the different countries and across the different clientele. It's just that at this moment, specifically also in the rates business, it's a very slow business, as you know, from also the other banks as there is a low volatility on the rates. As a consequence, there is not a lot of demand for hedging. On the client side, we have a client oriented business, not so much a very big trading business. That's also why you have seen our risk weighted assets going down. And also on the operational side with the further centralization and the cleanup of systems, Also from that perspective, the operational risk weighted assets have also gone down. I don't think there is a lot of scope to decrease debt further per se. On expenses. I think that also there, if you look at what our new business models in Financial Markets also from an innovation and digitalization perspective, there may still be scope there to reduce expenses either within the activity itself or you basically start something next to your activity. And with that, you build a new activity, which has a completely different kind of expense composition. But as I said, and then you can already hear from my elaborate answer on this one, we are reviewing it as we speak. The moment that plan is ready, you will probably see some of that coming through. Great. And maybe just one final question. You obviously flagged the Investor Day in March. Do you have any initial views as to kind of what are some of the things that you would like to address? Well, I think the there's a couple of things that we certainly won't like to address. We are at that moment in the middle of the transformation that we announced late 2016, and we want to give you a real thorough update as to where we stand in terms of the major transformation programs like Unite and Model Bank to give you a feel for what we have delivered, where the milestones are or what you can expect. That's one side. And the other side, we also want you to experience some of the digital initiatives that we have taken, how some of these businesses are growing and why we feel that there is sales scope for further digitization and business growth in that side. So that's on one side. And the other side, I'll also take you through some of the things we're doing on the Wholesale Banking side. So this is kind of the that's a little bit the program. But we're we've announced it now. Clearly, in the next 4 or 5 months, we're going to work on it and see what are the deep dives that would be really interesting for you to take you through. Great. Thank you very much. Our next question is from Mr. Kiri Vijayarajah of HSBC. Go ahead please. Yes. Good morning, gents. First question, just really trying to understand the decline in shareholders' equity in the quarter. Obviously, paying the dividend, the interim dividend is the biggest item, but I just wondered how much of an impact Turkey and the devaluation of the lira had there through the FX line in shareholders' equity? And actually, has any of that been reversed, maybe recovered a bit post quarter end? And then just going back to the wholesale bank and your self imposed cap on leveraged finance and the real estate books. Just really, is there a case to be a bit more proactive and actually maybe manage down your exposures on those books if you're really turning a bit more cautious on those, maybe be a bit ahead of the curve rather than instead of a cap, actually manage down the riskier bits of the portfolio? Thank you. Yes, you're right On the shareholders' equity, so that has come down. There's a few reasons. First of all, yes, we accrue or we reserve all the profits. So that is clearly one thing. But the two things which play the role is the FX side. And on the FX, indeed, you've seen that the Turkish lira, for instance, that was at September 30th at a weaker rate around 7%, I believe, than where it is right now because right now it's around 6.32%. So FX played a bit of a role there as well. Dollar plays a bit of a role as well. And then the final one is the equity. So the valuation of the stakes played a role. So those are the negatives on the absolute amount of equity. Yes. Regarding the sales and post caps, I mean, if you look at that, the caps are only one element of how we manage these books. So in leveraged finance, if you look at the final takes that we take, those were not bigger than €35,000,000 per entity. These are all, by the way, in unrelated sectors, so there is no correlation risk. And in terms of covenants, and we look to certain structures that we want to abide by. Otherwise, we do not take part. In real estate finance, something similar. We only look at certain durations. We only look at certain cash flow and loan to value ratios. And beyond that levels, we do not take part. So the gaps are one thing indeed, but there are more ways that we are steering our portfolios within the risk EBITDA that we have. Understood. Thanks, guys. Next question is from Mr. Bart Jooris, Degroof Petercam. Go ahead, please. Yes. Hi. Two questions from my side. First of all, near the end of September, there was an article in the financial of Bergblatt stating that you will have to roll back part of the move to London of your dealers. Can you give some information on this on where you are in the talks with the ECB and which effect this could have on your cost saving? And then a second more short question, the last two quarters you had loan loss provision releases in the Netherlands in mortgages. Do you still see room for more of those in the coming quarters? Thanks, Bart. On the first one, while we never comment on discussions that we have with regulators, I can just assure you that clearly, there's a discussion around how do you organize for your EU 27 business going forward and how do you make sure that you can cater for your clients on the continent? We think we can do so. And the discussions that we're having will not materially change the business case of having everything centralized in London. So that's what I can tell you. Apart from that, we never comment on the discussions that we have with regulators, but it will not materially impact the business case. On loan loss for provision releases, I'll give the word to Stephen. Yes. Thanks, Bart. The most important factor or an important factor and the driver for loan loss provisions and a decrease in that regard is also the loan to value levels that we have, especially on mortgages. You see prices in this country going up. Every quarter, they have gone up quite steeply. And that, in the end, then also has an impact on our models and also on the stages in which our loan losses go to from 2 to 1, for example. And that means releases, yes, and as long as these prices go up, that then actually means further decreases in loan losses or leases. Okay. Thank you very much. Our next question is from Mr. Marcel Huben, Credit Suisse. Go ahead please. Yes, good morning. Thank you for the opportunity for taking my questions. I have 2 left please. On the net interest margin first, that's been holding up pretty well. And I'm just looking at the 20 nineteentwenty 20 level. Is it just a replicating portfolio that is pressing down the margins? Or because also on the lending side, on the asset side, you've been saying margins have been keeping up very well, including Belgium and Germany, which to me are a little bit competitive market. So is it just can you keep margins stable for 2019, 2020? Or is it other than the replicating portfolio pressing those down? That's my first one. And the second one is on capital. The language capital seems to be a little bit on more bullish, more upside there. Would you consider or what level would you consider having excess capital? Is it above the EUR13,500,000,000? Or is it above the requirement? So would you consider having paying out extra dividends on top of the progressive at the end of the year if you're below the 13.5 percent? On the NIM side. So clearly, you've seen that on the NIM side, we have been able to manage the pressure on the savings side very much by managing the savings rates up to now. And on the other side, we have also managed the NIM by making sure that we have disciplined pricing and actually that disciplined pricing. We have changed the kind of the composition of our balance sheet on the asset side of the balance sheet towards higher margin business. That That has always been part of the strategy even when we announced it 5 years ago that we wanted to be less dependent on the lower margin mortgages from a risk perspective. And that does support the continuation of a higher NIM, which is what you have seen. Now going forward, depending on how the replicating develops itself and that is all related to how the yield curve develops, Basically, we'll have to manage it with strict and disciplined pricing, which in the end will have to go up because you will have to keep more capital for it if you adjust towards Basel and also the continuation of the change of the composition of your asset side of your balance sheet. So those are two levers through which you can still manage your NIM. We don't give guidance all the way into 2020. But certainly, for the next couple of quarters, we expect to continue to manage the NIM in the high 140s in the next couple of quarters to low 150s. On capital, Faust? Yes. So on capital, as we have stated previously, we have an ambition to keep it at 13.5%. Now that's an ambition. And what does an ambition mean? It means basically that if we are at 13.2%, we're not falling off a chair, but it also means at 13.8% that we don't immediately say like now it needs to be redistributed. You look at a number of factors. The factors you look at is, is there anything procyclical like IFRS 9 which warrants that you need to keep it? But the other thing you look at is, are there any interesting lending opportunities? And do they give you a return which satisfies for you? And if the answer is no, nothing procyclical is happening and no, there's no interesting opportunities, then you consider like should you give it back because then the money has no employee in the company. But before we dare, we and first half, we see it as for the next 2 years to make sure that we accumulate over the next 3 years towards that Basel standard. But we will cross that bridge when we get there. All right. Just a follow-up, Ralph, on your on the net interest margin. Could you disclose the pressure from the replicating portfolio in the 1st 9 months of this year, please? If you look at the replicating portfolio then clearly what you see is the following. On the short term, so if you roll over your short term reinvestments, we start actually to make a little bit of money. And why is that? Because right now, the 3 year swap rate actually is higher than what the moving average was over the last 3 years. On the 5 years, it's kind of breakeven because I mean that's where it is. Where you find that you're still leaking in reinvestment is on the 7 and on the 10 year, because if you look at the 10 years over the last 10 years, the average was higher than where you currently reinvest in. So one tenth of your portfolio is still rolled over at a lower rate. So you find a bit of a drag, therefore, more on the current account because that's invested longer than that you see that on the savings because that's invested shorter. Thank you, guys. Next question is from Mr. Jason Kalamboussis of KBC. Go ahead please. Yes, good morning. Some follow-up questions, if I may. The first one is coming back to the compliance, the number of compliance people that you have since 2010, can you just confirm, so look at it in a different way, can you just confirm that there was no hike in 2016 and we have just a linear progression of the compliance people you have since 2010? The second thing is on Belgium. A quick one just on costs You elaborated on 2019 2020 and how a lot of things are back ended. But am I right to understand that Q4, we should still see a drop, notably due to the fact that you had a lot of people, that consultants, etcetera, that will be leaving? And on Belgium, on the impairment side, you gave a reason for the higher retail number. In wholesale. I think you say they are unrelated files. But so should we see them more as a one off? Or do you see more pressure in general in the Belgian market? And just finally, just a clarification. You did say that you can you see better margins in mortgages in Belgium. Is that correct? Thank you. Yes. So Jason, I'll kind of cover question number 2 and question number 4, And Stephen will come back on question number 1 and question number 3. So on the costs side, yes, as I said, the program is back ended. There is a continuing reduction of FTEs on one side. And the other side, as we said, there is also some backfilling going on in order to ensure that we can continue to service our customers. So how that actually plays out in the Q4, I'm not going to guide on that. But structurally, over time, the cost will go down. That is something why that's the reason why we did the transformation. It's a combination of improving the customer experience and also become more and more efficient. On the Belgium mortgage margins, indeed, over the last quarter, we have seen that we have at least been able to produce against a margin in which the new production, the front book, is a little bit better than the back book? Yes, absolutely. David? With regards to compliance staff, I mean, we have been building up over the years. So and we also but the increase, but also on the back of more legislation and stringent more stringent legislation over the latter years has caused the increase to be higher in the years 'fourteen, 'fifteen, 'sixteen than before. But still, we have been building that up, and not only in the Netherlands but on a global basis. So on a global basis, we went up from 600 at over to 1800 this year. When you look at the Belgium, the cost of risk, yes, there are a couple of files in Belgium. In Wholesale Banking, there were a number of files in Business Lending. If you look at the risk costs of Belgium over the past number of quarters over the past number of years, this is nothing out of the ordinary. And again, with Wholesale Banking, you see one quarter, you see popping up a few files in one country. In the next quarter. It is in another country, so this is not particularly a Belgium issue or something like that. Great. Thank you. The next question is from Mr. Adrian Citi, RBC Capital Markets. Go ahead. Your line is open. Hi there. Thank you very much. This is Adrian Chi from RBC. Just one question on fee income and one follow-up on Turkey, please. On fee income, you're growing at an adjusted rate of 7.7% year on year, but this growth rate includes Payvision contribution. Can you maybe help us quantify the underlying like for like growth and whether you still see the underlying growth picking up towards the 5% to 7% rate? Or does the 5% to 7% ambition include the contribution? And then one follow-up on Turkey. Do you have any contributions this quarter that you would define as one off, either from hedging or from CPI linkers? On Turkey, no. So there is no specific CPR links or hedging that has influenced the result in Turkey. I mean, we stay with our clients where we can, but we also try to reduce the foreign currency book and only focus on foreign currency lending to clients that also foreign currency income, except when we have clients, for example, foreign clients who give guarantees to their Turkish subsidiaries, then we will step away from it. But there are no particular one offs in the country that are worth mentioning here. Now on your fee question, Adrian, I think it's a good question to get that clear, yes, Payvision is included. Even if you correct for Payvision, I mean, it's a very small number. I mean, Payvision is going very fast. If you look at the fee number, it's a small number. It doesn't lead to a different conclusion. So it's but you can expect higher fees to come from that in the future for sure. But if you to correct it for this number now, it wouldn't come you wouldn't come to a different conclusion. Perfect. Very helpful. Thank you very much. Okay. There are no further questions, sir. Please continue. Okay. Thanks for being with us this morning, and thanks for attending this elaborate call. And just to summarize, clearly, the quarter the 3rd quarter has been overshadowed by the fine and the settlement that ING had with the prosecutor in the Netherlands on the back of the investigations that identified serious shortcomings in the execution of our policies to prevent financial economic crime. I want to repeat that we take this that we regret this, that we take this very seriously, and we take full responsibility for it and that we have already been working on this enhancement program for the last 18 months, and we will continue to do so in order to make sure that we do play our role as a gatekeeper thoroughly going forward. On the other side, we see a quarter with a continued primary customer growth, €200,000 increase in the 3rd quarter, continued net core lending growth at €6,800,000,000 a continued fee income growth at almost 8% from a year ago, and we see a strict cost discipline coming through. So on all levers, in terms of what is important to show that our strategy is working from that perspective, I think this is a good quarter. But again, it's all overshadowed also by the settlement itself. Thank you very much. And if you have further questions, you know to reach our Investor Relations guys. Thank you.

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