Earnings Call: Q3 2017

Nov 2, 2017

Good morning. This is Patricia speaking, welcoming you to ING's 3rd Quarter 2017 Conference Call. Before handing this conference call over to Ralph 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 historical fact. Actual results may differ materially from those projected in any forward looking statement. A discussion of factors that may cause actual results to differ from those in any forward looking statement is contained in our public filings, including our most recent annual report on Form 20 F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Operator. Good morning, everyone. Welcome to the Q3 results conference call. As you're used to, we'll walk you through today's presentation. With me are CFO, Koos Timmermansen and CRO, Stephen Verheijtraeg. Let's turn to the key points of the presentation for today. We posted a net profit of nearly $1,400,000,000 for the quarter, which marks a 2% increase year on year. On the retail side, we reached 10,500,000 primary customers, which shows that we're well underway to achieve our ambition 2020 level. As you know, we recorded lending growth of $8,000,000,000 this quarter at resilient margins. Net deposit growth stood at just over $4,000,000,000 at 4,200,000,000 dollars It kind of shows how well diversified we are from a geographical and product perspective that really provides for a strong foundation for this growth. We continue to invest in our digital transformation. Underlying operating expenses remain under control. I'd like to highlight the success of earlier transformation programs in Retail Netherlands where cost actually came down significantly. Furthermore, risk costs remain well below our through the cycle average, as you probably have seen already. We'll go into that later. And this all growth on one side, stable cost and the low risk cost contributed to a healthy 4 quarter rolling average return on equity of 11%, while our CET1 capital position remained stable in the quarter at 14.5%. That's the short summary, not a long summary. Turning to Slide 3. In the Q3, clearly, the Think Forward strategy is paving the way for a strong commercial performance. Given the pressure from the low rate environment on savings, I'm happy to see the lending growth is outpacing deposit growth yet again. You see the mobile device becoming ever more important as a channel for our customers. So, we're heading in the right direction in terms of where we want to invest and how we want to improve our customer experience. It helps us not only to grow in the number of customers and primary relationships but also in improving the cross buy ratio for those primary customers in the markets in which we operate. That's what you see there as well. Every region, we see an improvement there. And in the Q3, we made significant progress in the intended digital transformation. In the Benelux, amongst other staffs, decisions have been made on the rationalizing and or merging the local products into what we call a single shared future product catalog, which is a starting point in order to simplify everything that is that comes from there. Overall, we also increased our digital investment spend in the Q3. Accelerate the pace of innovation, we announced recently to increase our investment in FinTechs to $300,000,000 We launched a $300,000,000 investment fund, a venture fund, in order to support our strategy there and collaborating with Fintechs. Over the next 4 years, the Fund will focus on investments in both startups as well as companies that have gained already some market traction. The venture front will build on the success that the current approach has brought us in the past 3 years. In fact, our current 115 strategic fintech partnerships and the investments in order to keep improving the customer experience. As one of those examples in our new partnerships, we have Scalable Capital, which is a partnership with a robo advisor. Since the start of the collaboration, we have onboarded more than 1,000 customers every week in this new approach. Part of helping the people in business to say HEP is also to make sure that they that we prepare them for the world of tomorrow. And that is generally resolved in our efforts on the sustainability side of the business. I'm now on Slide 5. We have joined Modaser. And what Modaser does, they provide a so called digital material passport for buildings, and that stimulates the construction with recyclable materials. It stimulates the reduction of waste and encourages the investment in smart designs. In the quarter, we were also involved in some groundbreaking sustainable finance transactions, like, for example, the green bond that we did for the public utility, Anglian Water in the U. K. As well as a project finance deal for 1 of the largest solar plants in Australia. I'm particularly proud of our strong sustainability ratings. We once again are included in the Dow Jones Sustainability Index, both the World Index as well as the European Index, Banks. And also CDP awarded ING a position in its Climate A list again. A proud progress out of the transactions that we're doing, the collaboration that we're doing in this field in order to ensure that we truly prepare our customers for the world tomorrow. Well, let me take you through some of the results. Slide 5, these are the year to date results, the 1st 9 months. Underlying net result was nearly at €4,000,000,000 in the 1st 9 months of the year, which marks a 10% improvement over the same period of last year. Even though the group common equity Tier 1 ratio has increased to 14.5%, We managed to achieve an attractive return on equity of 11% on a 4 quarter rolling average. So higher capital ratios and higher return on equity. That's a healthy picture. That's a good picture. On the next slide, you can see some of the key drivers of these underlying results. Firstly, I'd like to highlight the net interest income, which showed, if we exclude Financial Markets, an increase of 4% year on year, and that's despite the continued pressure from the low rate environment. This increase in NII is very much a result of the continued lending growth that we report you on every quarter. And that is supported by relatively stable margins on the lending side. So that's what you see over the 1st 9 months. Our growth in fee income of 12% year on year was broad based and reflects an improvement in almost all segments and products, which with the relatively strongest increase in the retail Challengers and Growth Markets, but you will see that later on as well. On the expense side, again, the 1st 9 months of the year picture, excluding regulatory costs, the general and higher marketing and staff expenses to support the business growth. Also, very low risk cost at this moment to support the underlying result. Risk cost came in for the 1st 9 months at 21 basis points over average risk weighted assets. And if you combine all of this, the revenue picture, the cost picture, the costincome ratio is established at 53.8% on a 4 quarter rolling average basis, and that's the improvement as we move towards our $0.50 to $0.52 target range. So much for the 1st 9 months. Let's dive into the quarter specifically. Slide 10. On Slide 10, we see that the underlying pretax result was up 6.2% year on year to nearly $2,000,000,000 on the back of Verburst net interest income, also healthy commission income growth and the annual dividend from Bank of Beijing and the low risk cost, low if compared to the over if you compare to the through the cycle average. In the quarter, we continue to grow both our retail and wholesale loan books. Year on year, we do see some modest pressure on the lending margins in certain areas. And the pressure on the savings margins is alleviated somewhat by further cost core savings rate adjustments that we did in the quarter or just before. Net interest income was partly distorted by our decision to end some hedge relationships. That's where you see the uptick on the net interest income of $91,000,000 there in the chart. It's a positive impact on NII, but this is fully offset by a similar decline in other income. So the net effect of the ending of some of these hedge relationships is 0. Turning to Slide 11 then for you. Net interest margin was up 6 basis points for the quarter to 157%. But the quarter on quarter move is largely explained by the technicalities of the earlier mentioned decision to end some of the hedge relationships, and that is contributing 4 basis points to the NIM. But again, from a line by line perspective, that is offset in other income, but it distorts the NIM picture by 4 basis points. It's not structural. We can go into that later as well. And then we have the 2 basis points uptick from the higher interest result in financial markets that we kind of show you every quarter as well because that is somehow volatile as well. So overall, a good picture, stable NIM, if not increasing NIM. It's a good picture here. Correct is for the 2 items. As I said, we would have come out at 150 one basis points. And that's at the higher end of the range that we guide you for, which is the high 140s to the low 150s. Turning to the core lending. Slide 12. The 3rd quarter, we grew core lending at $8,000,000,000 This is actually above the 3% to 4% loan growth guidance on an annual basis. As you are used to, this growth comes at good returns, meets our current risk appetite framework, while we face tough competition. So, we're not changing our risk appetite. We're not changing our return hurdles, but we do see that the broad footprint that we have from a product and geography perspective, it gives us ample opportunity to find the right commercial opportunities. This quarter, we saw the strongest contribution from the wholesale bank, again, particularly in general lending and working capital solutions, to a lesser extent, the real estate finance business, but it's doing well as well. Growth of the Wholesale Bank underscores the strength of the franchise and the benefits of the diversification across the geographies and specifically also in the wholesale bank, the diversification across different industries and sectors. Except for the Netherlands, there was also strong growth in all of our retail segments. You see Retail Belgium growing. You see Retail Germany growing. You see the other CNG markets growing as well. If you dive a bit deeper, this is more skewed towards mortgages on the retail side. And just like in the Q2, it's important to point that there was again quite a meaningful foreign exchange effect, which we exclude from the core lending numbers to show you what is really happening. From a balance sheet effect perspective, though, you have to correct it for the FX effect, which is clearly a dollar weakening against the euro in which we Another way to look at our commercial growth is to Another way to look at our commercial growth is to compare the customer lending and the customer deposit growth. It also tells you something about how effective we are in further optimizing our balance sheet. We see it in 2 charts on Slide 13. Well, one of the main levers, as you know, to offset pressures from the low rate environment is to make our country balance sheets more efficient by originating lending, partly replace low yielding liquid investments. In our challenges in growth markets, it's the picture you see on the right hand side. You see that, that is really happening where you the gray bar, to the extent you have a color copy, but at least the top bar, the 33% you see going down to 22%. That is the investment portfolio. So we are basically using those balance sheets more and more for lending, which is which helps us in optimizing the balance sheet. On top of that, in our Challengers and Growth Markets and at the left hand side of the slide, we see that the customer lending is significantly outpacing customer deposits the last two quarters. And that is positive as well because it kind of shows that on one side, we are able to stem deposit inflow in order to ensure that we don't attract savings that may be loss generating on one side. But on the other side, we see that the commercial momentum in terms of attracting new customers is not dependent on savings anymore because the commercial momentum on customer growth is continuous both in number of customers as well as primary relationships. So, and it shows that we really have turned the savings franchises over the last 4, 5 years into digital universal banks. And that's what you see here from a commercial opportunity from a commercial momentum, we're not dependent on it. And from a balance sheet management perspective, we're not dependent on investment portfolio. And increasingly, we have the right assets in the places where we have the funding. All of that helps clearly protect the NIM. We move to Slide 14, which goes a little bit deeper into the commission income. The commission income rose 6.3% year on year, with $643,000,000 And again, that kind of shows that our bank wide focus on primary shifts through which the cross buy increases leads to fee income growing faster and NII. The increase in commission income was visible in all segments and nearly all products with relatively strongest growth in Retail Challengers and Growth Markets and Retail Netherlands. In Challengers and Growth Markets, the commissioning growth is driven by the increase in the number of primary ratios, as I said. They buy more products. We are increasing Italy diversified from a product range that we offer through our digital channels. So that really helps. The Netherlands is mostly attributable to the higher fee income on current accounts. Quarter on quarter, the fees are down. Wholesale Banking fees in the 2nd quarter benefited larger deals and increased M and A activity, which partly explains the drop explains the drop here as well as there is a modest impact from foreign exchange to explain the drop. Retail Belgium also had an exceptional strong second quarter with mutual fund inflow, which was not repeated in the 3rd quarter. And if you remember correctly, when answering your questions last quarter on which percentage of the fees were structural, an increase, We already indicated some of this. But we do see a structural increase year on year on the back of the change now model to an increasing primary focused primary client focused bank, which presents cross buy opportunities through digital offering. And with that, an opportunity to further increase the commission income. And that's what you see as an underlying picture here, and that's the good movement. Turning to the underlying expenses on Slide 15. It showed a good improvement quarter on quarter as particularly the ongoing cost savings initiatives in the Netherlands are setting digital investments as well as higher costs to support the business growth. You see more or less flat picture here from a quarter basis on the underlying operating expenses. Regulatory costs ticked up a little. And that if you compare it to last year, as the previous year quarter, and you may remember that, it included a lower DGS contribution in Germany. And that's what distorts this picture from a year on year basis for this Q3. As our expense base remains impacted by regulatory costs, we prefer to look at the 4th quarter rolling average costincome ratio. I mean, the regulatory costs are just too volatile to have any meaningful costincome picture derived on a quarterly basis. That's why we have gone to a 4 quarter rolling average. And you see that is a slight uptick here at 53 point 8%. Benefits from the digital transformation programs will be back end loaded. We stay committed, though, to our ambition to have the costincome ratio be between 50% to 52% by 2020. Turning to risk cost. The risk environment remains benign, very benign with the overall NPL ratio the bank at a favorable low 2%. Now clearly, that is because of effective risk management on one side. But on the other side, we just see that the economic This is why they are much lower than the below than the through the cycle average of 40 to 45 basis points. In fact, risk costs in the Netherlands were negative this quarter, as you can see, due to a release on the back of further improving macroeconomic and housing market conditions in the country. Similar pattern is visible in the Wholesale Bank, where risk cost came in at 46,000,000 dollars or only 12 basis points over risk weighted assets. And that's also supported by net releases for larger clients in Asia and the U. K, combined with some limited new additions during the quarter. So yes, it's a healthy picture. It shows as a good picture. It is far lower than the through the cycle average of 40 to 45 basis points. But this is cyclical. So let's not fool ourselves. Now we turn to ING's capital position. CET1 capital ratio was stable at 14.5%. The capital position benefited on one side from the inclusion of the $500,000,000 of net profits for the quarter and positive risk migration. And on the other side, this was offset by a modest increase in risk weighted assets due to the lending growth as well as higher operational risk weighted assets. Again, we decided to reserve an amount equal to onethree of the 2016 total dividend in the quarter, which leads to a total dividend reserve after paying the interim dividend of $0.24 in August of $1,600,000,000 Just to kind of remind you, last year, we decided that every quarter, we would reserve the dividend from our profit at in the first three quarters of onethree of the previous year dividend in order to ensure that we would have built a reserve to meet the same dividend payment in the last quarter. Depending on how the development is, we will decide on the progressiveness of the dividend. And if you look at the total capital stack, this has this is a strong position at 19.8%, supplemented by more than $5,000,000,000 of group senior debt issuance during 2017. And that laid the foundation for rating uplifts at bank level for both S and P as well as Moody's just this quarter. Finally, looking at where we are versus our 2020 financial targets. First of all, CET1 leverage ratio well ahead of minimum regulatory requirements, happy with the progress of cost efficiency. We will keep doing more in order to reach our costincome range to make our costincome target to meet the range in 2020. We have again reached important milestones with respect to the transformation programs, which will help us in that regard. And finally, on a 4 quarter rolling average basis, the group return on equity improved to an attractive 11% while we keep growing the lending book and face pressure from a low rate environment. With that, I would want to open the floor to questions, but not unless I have actually expressed my gratitude to our staff. And the reason for that being is that we see a consistent focus on the implementation of the strategy. We see recognition in the market for this. We see recognition like being awarded best bang in the world. And we can't do this without all of the 52,000 staff working for ING being committed to delivering on the strategy every, every day. So with that, I turn to the questions. Thank you, sir. We're starting the question and answer session now. Our first question is from Mr. Tarek L. Mayotte from Bank of America Merrill Lynch. Go ahead sir. Your line is open. Just one question actually on your dividend policy because as you highlighted within 9 months 'seventeen, you've accrued your paid dividend 2016. So if you look at on consensus numbers, you have to accrue less than 10% of your Q4 numbers to deliver the consensus dividend per share. So what's your thinking about that? Are you looking to the go to CET1 ratio to decide on the distribution of capital? Or you stick with your in like EPS growth kind of dividend per share growth. So what's your updated thinking on that? And how do you square that with the regulation and model? I'll start answering the question, and Koos will fill me in for sure. For the moment, we want to be cautious on this. We want to continue with our guidance that over time, we will pay a progressive dividend. We see a good operating environment for the moment, see that our strategy is working, that the capital is being generated. In the end, what we decide to do with the capital has generally 3 we can use it for 3 courses. The first one is how can we build capital in the future. 2nd one is how can we support growth in the future. And the third one is how do we pay a dividend. Now at this moment, going by current regulatory environment, we are well capitalized. But as you know, there's discussions around changing capital requirements, and we don't know exactly where this is going. I'm sure there's going to be follow-up questions on that as well. And therefore, we want to be careful in view of that. So that is kind of our way of thinking around the how we will deal with the dividend. Maybe Kaush, you can fill in. Yes. Maybe, so, Tariq, one other specific point to add. The way of accruing, distinctive from a policy. So, what we do is the way of accruing by accruing already the last year in the next three quarters. That is basically to make sure that we allocate some to our accrual reserve, but also add something to our equity. Our policy is basically something different and that is just we have a progressive a careful progressive policy and that hasn't changed. So that means like, yes, in Q4, we make up our mind, but don't expect major surprises because otherwise we would have announced a different policy. Okay. I mean, if you just can follow-up on that. I mean but on the level of capital, where we'd be comfortable? I know that you don't you can't disclose that yet because you don't know the rules yet. But it seems that for the last two quarters, you favored growing your balance sheet and capture profitable volume growth rather than trying to build capital ahead of any announcement. So would that fair to think that's a level around 14.5%, 14.8% is a level where you would feel comfortable this level. There's no need to rush and build capital ahead? I think overall, you have it exactly right that if we can grow whilst maintaining an ROE north of the 10%, that is something which we clearly like and that is what we are doing. What we find difficult, however, right now is to say whether 14.5% is the good number because we don't know the rules of the game going forward with Basel. But again, the first initial reaction internally is always, whatever new capital system we get, can we price new loans with an ROE of 10% against new final question is Our following question is from Mr. Benoit Petrarque from Kepler. Go ahead, sir. Your line is open. Benoit Petrarque from Kepler Cheuvreux. First question will be on the cost. I mean, clearly, Q3 shows that you get some impact from the transformation programs on the cost base. It will be clearly increasingly important going forward. We are 1 year from your update in November 'sixteen. You have been gathered at that time €200,000,000 of benefits in 2017 and €250,000,000 for next year. So I would like to understand where you are now, how much has been realized and whether you are still comfortable digitalization costs, I think you are on track to generate or to post a €170,000,000 investment in digitalization this year. I think you were going for a slight decrease next year to $120,000,000 Given all what happened on the digitization side, Are you still comfortable that you will your investment in IT will actually decrease in absolute term in 2018 versus 2017? That's the first question. 2nd question will be on, in fact, quite some undisclosed one off items, which make the analysis per division quite difficult, especially on the Dutch Retail. If I see the Q on Q development of the NII, I see an increase of €35,000,000 I was wondering how much is kind of the underlying development if you strip out the one offs there. I think you had a one off on the restaurant with Hertz again, Especially considering savings rates are now 0% in Netherlands, I'd like to understand what the Q on Q trend is and what your outlook is for next year in the current interest rate environment. And then maybe final question will be on the cost side in the Netherlands, down €75,000,000 Actually, it links a bit to the first question I had. Cost reduction program is clearly visible there. But how much is kind of coming from the 1 off provision release? I'd like to clarify that. Benoit, yes. So from a cost perspective, the transformation program, as announced a year ago, from an investment perspective, we're probably a bit behind in terms of the money that we are investing. And that is because of the different programs that we have launched. We have to make sure that they all land, that they're all aligned and that is happening on one side and the other side. In some scenarios, we need regulatory approval, which sometimes leads to a bit of a delay as well. So in terms of the cash spend in this transformation as well as the for building the digital bank. Property in the 2017 investment, a little bit behind. That's 1. Secondly, we do feel very comfortable that, that will not lead to further delays in terms of the savings to be reaped because the total period in which we are to generate the savings is the 2020, 2021, as we have indicated to you. So the savings from that transformation itself that we're going through the next couple of years will be a little bit more back ended. So that's for that program. Now what we see specifically coming in as savings for this quarter and also for the year and why Q on Q and year on year you see that our operational costs are more or less flat is that the savings from previously started programs, specifically in the Netherlands, but also some in the Wholesale Banking, specifically in the Netherlands, on the IT side and the actual decrease on the IT spend in the Netherlands, that's what we actually see coming in through the P and L. And that's why overall, you see a flattish picture from an operational expense perspective more or less. So that is what is happening there. Now specifically on the on your next question on the NII, I'll give the floor to Koos. Yes. I think overall, if you look at the NII and you refer to the Netherlands, there is some higher income related to mortgages. And indeed, it's a transfer to the value on which we make a one off profit. So if you look at the normal volumes and the normal lending, since their volumes are not growing, that is where you don't get the higher NII from. So we also had one other thing, and it was related to a company called Peconic, where we made more incidental profit. So overall, I would say a part of the increase in NII was attributable to more one off items. So underlying order was more or less stable. So that is, in essence, what you've seen on that side. You also mentioned the Netherlands on the cost side. Indeed, we have a significant improvement there. And part of it is indeed what Ralf alluded to. It's just the programs which we have run-in the past, and they lead to lower expenses now and they lead to lower third party staff right now and you don't need to take more provisions because of new programs announced. So that is a big part of it. And then, of course, the other part was what was mentioned, the CLA provision, and that contributed to it as well. Great. The following question is from Bruce Hamilton of Morgan Stanley. Firstly, so I just did details on picking up on the last question. Is it possible to actually size the benefits of the whatever with the mortgage book disposal in the top line in Netherlands and also the cost benefit from the provision release? Then secondly, I guess, looking at the Belgian business, clearly, I understand the seasonality in fees, but the NII dynamics and 5% Q on Q look particularly tough. Is that simply a function of no room to move on deposits and competitive dynamics on sort of new business? Or is there something else going on there? And then just finally, on IFRS 9, obviously, you've given us a narrower sort of guidance range for the first time impacts. But if I could maybe ask how you're thinking about the cross sort of cycle impacts on your management buffer given the procyclicality of the new rules and whether that would be an addition to the management buffer you've historically run with? Thank you, Bruce. I will take your question on Belgium, and then Koos will fill you in on IFRS 9. Regarding Belgium, yes, you do see here the impact on one side from the lower rate environment, the replicating portfolio that is producing lower returns versus a savings rate that you can't decrease further in order to offset pressure coming from a low rate environment. That's one thing. On the other side, we are growing in Belgium. We have commercial momentum in Belgium. So on the lending side, whether it's in mortgages, whether it's in an SME's or whether it's in midcorpits, we actually see the book continuing to grow at stable margins. So the margins Q on Q are rather stable. And the combined effect of that leads to the pressure that you see on the NII at this moment in Belgium. So there's no specific effects beyond that. It's business. It's pressure on return on the savings business versus a continuous growth of the lending book at stable margins. Of course? Yes, Bruce. So sizing benefits and cost. Overall, on the benefit, if you look at the sale of the mortgages, that's a low double digit number, which we had. So on that part, we give you that benefit. The one off on the cost side, we rather don't give it on the CLA. Side. There is we always have ongoing dialogues with our unions and everything. And sometimes you gain some, sometimes you lose some. So we rather say like there is something incidental in there, but we don't know a lot about that further. If we talk about start of IFRS 9 is giving us basically an impact in core Tier 1 terms of 10 to 30 basis points. The procyclicality on how that will develop over time, so if you have quarterly changes, we do not have that yet. We have early indications, but we find that too early to already test with you. I mean, we are working on a way right now to create structural scenarios because you don't provision on a base case but also on a worst case and a good case. And we are still in a testing phase of this. So no doubt, we will come back on that in the next quarter. Maybe one thing on the IFRS 9. So if you look at the impact of the 10 to 30 basis points, in fact, it is not because of higher provisioning. It is because we are reclassifying part of the investment portfolio. And in that process, more stable reval reserve, but you take a certain upfront capital hit. Thanks. That's helpful. Following question is from Mr. Alex Kowagna from Naxos. Go ahead. Your line is open. Yes. Hi. This is Alex from Naxos. A question from my side as well. I was just wondering on IFRS 9, just to come back on that. Thank you very much for the update. But what does that mean for your cost of risk going forward? Should we expect the cost of risk to go up like in 2018 due to the implementation of that? I don't know how we can read on implementation of that above the first time application. 2nd question is more on the contribution of loan to your balance sheet. I think that on your Slide 13, we see that mortgage represent 45% the balance sheet. Is that the number that you're pleased with? Are you looking for this contribution to decrease going forward? And I mean, what is the optimum in terms of breakdown of or the contribution of each type of loan to your balance sheet? Thank you. Yes. So, on the IFRS side, the question is, are cost of risk going up? First of all, we still make the same loans. So and is the loan losing or not losing money? That is the ultimate part. And in that sense, I would say that is not changing. So the question is, are we now provisioning more and therefore, releasing more in the end? Or are we provisioning earlier and then releasing that later? That is the real question around there. I think the way how we look at it is that probably due to what is called Stage 2 migration in when you enter into a negative scenario, you start to take your provisions somewhat earlier, but that will lead to reductions later on. So you get a slight shift in a cycle, and that is all what we see there. But we don't necessarily see Okay. Okay. Then to your question on the percentage of the loan book that is made of mortgages, Alex, when we launched the Think Forward strategy 4.5 years ago, we put up a picture in which we indicated that 54% of our balance sheet was made of mortgages. And we indicated at that moment that one of the things that we have learned from the crisis is that you can have good assets. If you have a concentration risk in good assets, it can still be seen as something bad by the market. And we wanted to move away from concentration risk in asset categories. Over the last 4 years, we have moved from the 54% to almost 50%. I'm talking ING overall. Picture that you are referring to on Slide 13 is the CNG numbers. The overall picture for ING is a move from 54% to 50% in 2016. And in our ambition 2020, we moved the percentage on mortgages down to 48% of our balance sheet. That is the way we think we should go. That is the way we're managing to composition our balance sheet. On one side, from a concentration risk perspective. On the other side from the perspective that as indicated, we're seeking for higher NIM loans as part of our balance sheet. And in order to ensure that we can do so, you reduce a little bit on the lower NIM percentage wise, which is generally mortgages. Okay. If I can have one last question. On Basel IV, I know that there is nothing stopped yet at this point of time. But I'm just wondering if you have any comment made on all the rumor or statement that was on the market lately around the 72.5 percent output flow. What does that mean for you in terms of implication and so on? Thank you. Yes. It's a good question. I we get these questions all the time. And my first line generally is that predicting Basel has become an art. And clearly, at this moment, what we hear back is that there is momentum to do a deal. I don't think we're creating a lot of playing field. I've mentioned that before. What we should be trying to do is creating a lot of playing field, ensuring that the same risk should be treated in the same way rather than the same assets, as they are called, are treated in the same way because mortgages in one country are completely different from mortgages in another country. Bankruptcy laws are different. The roles that bank play in on the continent versus the U. S. Are completely different. However, despite all these arguments, one way or the other, there seems to be momentum to do a deal if and when both sides of the ocean agree on credit risk approach, the operational risk approach, but also the fundamental review of the trading book approach. And that's basically where there is a where there is not an agreement yet. And that is what makes that the Basel Basel has not come to an agreement yet. That is one thing. The second thing is that indeed what we hear back is that there is some discussion around settling on, from a credit risk ratings perspective, a 72.5% floor of standard. And we know and all of the European banks know that for every bank leads to an outlier situation from the statement that this should not lead to a more than significant increase in capital. We haven't seen any bank where it would not lead to a more than significant from that perspective. So then we go back to the ECB and the SSM leaders indicating that, that would not allow Basel to lead to a more than significant capital increase for European banks because they are convinced that European banks are sufficiently well capitalized. Can also refer to the statement of the EC Commissioner, Dombrowski, who has said, well, we don't need higher capital for our banks in Europe, And therefore, we will not support that. You should realize that everything that people agree in Basel is just an agreement in Basel. It is not law. It has then to go into European law. So, that's where the next discussion will happen then. So before all of this will become something clear. It may take some time and that's where we currently are. Our following question is from Mr. Paul Zietzsik from Goldman Sachs. Go ahead, sir. Your line is open. Good morning and thank you for the presentation. Can I just start with following on your Basel IV remarks? So obviously, you said there is a lot of uncertainty as how the rules will be implemented and so on. Now most of the assessment studies that has been done, has been done based on the consultation papers published by Basel back in, I think, 2015 2016. And I was wondering, as you look at the proposals or maybe the sensitivities of new rules that are being discussed, have you seen any changes in the underlying framework when it comes to credit risk, operational risk, eligibility of IRB models and so on that would make the potential impact much softer than implied by, let's say, over 70% output floor. And I think this is something that very recently was published by one of the Eurozone Central Banks that actually a lot of changes has been done in the background. And the second follow-up on Basel IV is following. So the new Dutch government, it seems it lifted 4% leverage requirement. And I understand that this is not a constraint for ING, but do you view it as a perhaps a welcome signal that should the Basel IV be very harsh for yourself and the new government and new policymakers in the Netherlands are much more willing to work and potentially lower your OSII domestic buffer to account for that? Yes. So on the Basel IV assessments output floors, have there been a sort of tooling around with that? The answer is yes, Particularly on the mortgages side, over time, what you have seen is that the standardized approach has been changed somewhat. In a sense there is a form of a slotting approach on mortgages. So in other words, you have different buckets for LTVs. And that gives somewhat a relief on the output floor. That is what we have seen as a big picture over the last half year. So that is some relief. Nevertheless, there are many open questions still around it, as what Ralf was saying. So I wouldn't know, for instance, if American banks are having a standardized approach included op risk in there or not. So there are still quite some things where, as banks, we are a bit puzzled around. So still to be answered further. More going back to the question on the Dutch government. Indeed, what they have said is we want to move more towards European standards with regards to the leverage ratio. Now on the one hand, you can say that's a pretty gratuit thing in a sense that capital standards are going up potentially with Basel anyway. So if a leverage ratio standard goes down, I mean, that doesn't mean a lot. But you can also interpret it slightly different, and that is that Netherlands might be converging somewhat more towards European standards. And then obviously, we are also looking at our DSHIB buffer and the DSHIB buffer and see whether there is room for lowering that somewhat over time and moving more towards a level playing field on that element. So there's 2 ways how to interpret it. We tend to always look at it from the bright side of life. So we hope that we are moving slightly more towards European standards. Right. Thank you very much. And can I just maybe ask the second question and it will be just on your results and a very quick one clarification? Obviously, your impairments have come below €500,000,000 for 9 months so far and your previous guidance on the last call was €4,000,000,000 for the full year. Can you give us some clarification as to what to expect in the Q4? I understand there might be some pickup but perhaps quite modest. Yes. Thanks, Pavel. Clearly, I mean, risk costs in the 1st 9 months have been relatively benign. Basically, you see that on all areas, so both in the wholesale bank as in the retail bank. Of course, we remain careful with industries such as oil and gas and real estate and acquisition finance, and we carefully watch markets such as Turkey. Where at the same point in time, we see generally across the board the risk cost being benign on all fronts. And in that sense, we expect the risk cost to end up well below what we have seen in 2016. Our following question is from Mr. J. P. Lambert of KBW. Two questions. The first one is on the ending of the hedge relationship. So we have a shift up of €91,000,000 for this quarter. How should we look at this going forward? Is this €91,000,000 going to remain stable? Or is that going to taper off? Or is it a one off? Second question is regarding your fintech portfolio. Can you explain a little bit how you look at this and how you select the priorities? Is it based on return on investment? Is it based on the acceleration of transformation, the impact on the customer journey? You have a large portfolio. I wonder how you cluster and organize these investments. Thank you very much. Okay. Kaush, you will take the first one? Yes. So on the hedges, indeed, what we do is we have quite a lot of derivatives for hedging purposes. And we do that for mortgages. We do that for savings. So from time to time, we do 2 things. 1 is end hedge relationships, and that is where you particularly when you have short dated swaps. And the other is we try to, from time to time, reduce the amount of hedges as well. So that gives us room to clean up the portfolio. In this case, what happened is this quarter is indeed that we de designated some hedges and that means like you have a result of €90 1,000,000 and we expect that also in the next quarters to be there and that will only slowly start to taper off. What we will do is each quarter just tell you what the effect is so that you can Thank you. And then, Javier, on your question, Thank you. And then, Javier, on your question as to how do we deal with the different investment opportunities that we have and how do we prioritize. The highest priority is always everything that has to do with compliance. There is we don't need business cases for that. I mean, these are you need your license to operate. So everything that has to do with priority. Then all the other categories, whether it is from a foundational perspective, if you kind of take our strategy presentation, or from a support function perspective, a new business perspective, a improvement in client experience perspective, all of those need to have business cases. Business case in terms of improving the net promoter score, business case in terms of increasing revenue or a business case in terms of decreasing cost. So, all of those are subject to the same principles of business cases apart from the compliance one. And that's the way we do that. We have a very strict governance around this in terms of you can't start a project without an approval from a central committee that reviews all of this. It has the same standards on every project that compare these projects. That also checks the progress of these projects. And then in the Board, the Board, we are we review this every month. That is on the change investments that we have. Now on the investments that we do with FinTechs, which is related to the €300,000,000 investment fund. Where we look at that is that everything that we do there and every collaboration that we enter into needs to be aligned with our strategy. We are not a venture capital fund. And I will repeat that and I think the story from our perspective is clear. We're not here in order to look and find look for and find best investment opportunity that makes the best return, but has nothing to do with our strategy. No, we're looking at those index that can help us improving the customer experience, that can help us launching a new product like robo advice or the collaboration with Kabbage in entering into the SME markets in Spain, in Italy and France in a completely different way, in a challenger way, that's what we're looking at. And if in those cases, it is better to take also an equity participation or some kind of a risk participation in order to solidify that partnership, And we do that through this fund. And that is how we work. Great. Thank you. And on Germany, the expansion of the SME program, do you have an idea of a potential timing because this would be a very attractive market, the automated lending? The expansion of what? Of the The SME lending. So we are not so in terms of going into the SME markets, we started to do that in the Challenger markets in Spain first, collaborating with Kabbage. We have been working with them now for 2 years On the back of the experience, getting the algorithm right, getting the customer experience right, we have now chosen that as a platform to also go into Italy and France. We first want to see how it works there before we decide on other countries. Great. Thank you very much. But in Germany, we are for example, in Germany, we launched robo advise and depending on the success that we have with that, we will then also go into different countries. So, every country in every country, we take kind of a different initiative. And depending on the success, that will then become the standard for other countries to follow. Thank you very much. Our following question is from Mr. Alicia Yechung of Exane. Go ahead. Your line is open. Morning. Just a couple of questions for me. Firstly, going back on the costs, I noticed that in the Challengers and Growth Markets, it looks like cost has moved up quite markedly in the last quarter. Just wondering, is this the new run rate there given there is higher investment spend there and also higher growth? Or are there also some one offs in there that we should take into account that maintenance maybe going forward is a little bit lower? And then secondly, is it possible to give us an update on where we now stand with various litigation and investigation issues such as the Uzbekistan case, the EC investigations into anti competitive behavior across the Dutch banks? And also, can you quantify what the Spanish litigation provision is? Okay. Alicia, thanks for the question. On the cost itself, cost will grow in CNG. We have always indicated that we have different recipes for different areas. So, in market leaders, we don't expect revenues to go up. We expect cost to go down and hence improve return and improve cost income. In C and G, we have always said if there is growth and there is growth in revenue, we don't mind the cost to go up. So, we are investing in CNG to grow, to reach more customers, launch new products and through that improve revenue both on the lending side, on the interest related side as well as on the commission side. So, the fact that you see in some parts of CNG the cost go up, that is what it is. Now clearly, we see for this quarter, we see in CNG a cost inflation coming from the provisioning in Spain that we have indicated and Turkish foreign exchange rate. So that is those are 2 one offs from that perspective. But the trend in costs in CNG can be up as long as the revenues are up as well. If the revenues are not going up and the strategy is not working, we will also have to be much more stringent with cost growth in CNG. On the litigation, I give that to Bose. Yes. So, thank you. I think if you look at the litigation, we have the AML part, the anti money laundering. That investigation is about the onboarding of clients and the money laundering. On that one, we have not taken a provision yet because we cannot decide at the moment on both the timing as well as the size of what a provision would be. And since this investigation is ongoing, we cannot comment further on how this is progressing. If you look at the other part, the anti competition investigation, which happened or whether it's an investigation, I don't know, the rate which happened with our Nelance of Vereen, I think, Bankia's offices as this is happening there. I mean, we cannot comment on what is happening on that part because that is not necessarily in our Spanish mortgages, maybe on the Spanish mortgages, a couple of comments. This is about origination costs. So with regards to the provision, we cannot disclose what we provide because we are appealing in some cases as well. So in that sense, otherwise, we are undermining our own position and we just have to await jurisdictional clarity going forward In a sense, we think we are provided adequately for what we know at this moment, but we have to await further how that goes. Thank you very much. Our following question is from Mr. Stefan Nedialkov of Citi. Go ahead sir. Your line is open. It's Stefan from Citi. Two questions. First one is on fees and your strategy in that area. And the second one, unsurprisingly, on Basel IV. On fees, I was looking at the slides in your presentation where you talk about initiatives to drive fee income growth. And something stood out. You say that you're selectively increasing the lending and payment fees to corporate clients and also you're reviewing the daily banking fees across your different markets. Obviously, your model when you attract deposit relationships has usually been a very low cost one. I was just wondering how increasing fees effectively without really adding value to the customer has been your philosophy, how that is likely to affect your brand in, say, Spain, France, Italy, etcetera? Or are we basically talking about just a small catch up with the competition? Also on the fee side of things, could you just give us some color on the proportion of fees that are derived from 3rd parties in the various segments, so Belgium, Netherlands and also CGM. On Basel IV, I had a question on how the various buffers are likely to interact. Is it your understanding that the P2R and the P2G buffers already includes components for risk weights so that if Basel IV comes in, the ECB can effectively automatically reduce those buffers down? Or is it unclear whether risk weights are basically unaccounted for in those pillars? And also on the pitot tube versus the management buffer, what is your thinking if Basel IV comes on? Would you be willing to reduce your sort of undisclosed management buffer and make it coincide more or less with the P2G requirements? Or would you still be stacking a pretty significant management buffer on top of the P2G? Yes, you will. Thank you, Stefan. I will ask the question on your fees, and I think Koos will go into the above of 4 questions. Specifically on fees, let it be clear. We are here to truly empower our customers. And with that, we feel that investing in digital is the way to go in order to ensure that we do deliver a differentiating client experience. At the same time, we have said that while we're doing this, we have to develop a primary relationship and because we feel that the primary relations, at least we know from research, they're 8x more loyal and 4x more valuable than product relationships, regardless of the product. And hence, we are trying to develop relationships across the board, both in the Wholesale Banking side as well as on the retail banking side. Now if you develop these relationships across the board and you want to improve your cross buy, you need new products. And many of the new products come with fees rather than with interest income. And therefore, we do expect fee income to increase over time. And whether this is fee income that we charge directly to our clients or whether it is fee income that we get from third parties on the back of that, it really depends on the offering, on the product. It also sometimes depends on the local regulatory environment from that perspective. That's on one side. Now your specific question on the introduction of daily banking fees, I think it's a good question. It's one of the discussions that we have had. Petti, ING stands for an empowering brand. It stands for an efficient bank. It stands for a digital bank. And then you have to make sure that if you do charge fees and clients are to be paying fees, there is a reason for that. There is a value added for that. And therefore, before we introduce fees also on daily banking, it really comes with the package that we then offer to our clients through which they can see the added value. If we don't see the added value, it's going to be difficult to charge fees for it. And so we're very careful to do so because indeed, it may impact on our brand and we have to be very careful with that. With that, I'll give the floor to Koos. Yes. So, on the interaction of buffers and buffers on buffers, because we normally yes, we have a 4.5 minuteimum buffer, we have a 2.5 percent capital conservation buffer. Then on top of that, we need a buffer, which is then called the our systemic risk buffer. So that brings us already at 10%. And then we have our E2R. So that is a stress test buffer on top of that buffer that brings us with countercyclical around to the 11.8%. And currently, we are at 14.5%. So you might say there is a buffer between all the add up of these requirements. Will that be reduced if Basel IV happens? Normally, you hold a buffer because of uncertainty. And if Basel IV is clear, then we start to determine what the buffer will be north of the P2R requirement. So we will determine a management buffer, and that management buffer will include the P2G. But the size of it will be determined by a few things. Number 1, volatility, and that could be IFRS 9. Number 2, volatility because that could be based on our revaluation reserve or our FX swap sensitivity And then the 3rd element is RWA migration, which you might get because as you see, we are living right now in a pretty benign environment. At a certain moment, if a market turns, you have both IFRS 9 against you as well as that you have negative credit migration. So for these kind of things, you want to hold a buffer as compared to your P2R. But let's first wait what the Basel requirement will be. And from then on, we will say like, hey, what will be our buffer at that time. And maybe to add, clearly, we as Koos is indicating, we are making this case that if regulators think that we are sufficiently capitalized as we speak with the CET1 of €45,000,000,000 because discussing buffers and percentages, this is all very interesting. But in the end, dollars 245,000,000,000 of CET1 capital, is that sufficient for a bank with the risk that we have in our balance sheet? Yes or no. At this moment, they're saying, yes, it is. So whichever way you want to calculate things through Basel changes, whichever buffer you want to call or whichever percentage you want to determine because of whatever formula you think of, is €45,000,000,000 enough? Yes or not. And at this moment, they're saying, yes, it is enough. So if we go north from the $45,000,000,000 for whatever reason, the question can certainly be, do you need all those other refers, whatever you call them, and all those percentages in order to improve? And that is the only way to have this discussion because otherwise, we continue to trick ourselves into percentages that represent completely different numbers of the underlying risk. And that is the only way to have a clear discussion around all these subjects. I mean, we confuse ourselves to death as to how we want to calculate things and what kind of buffers and percentage we want to put ourselves through. But in the end, our bank like ING is €45,000,000,000 CET1 enough? Yes or no? That is the question. Yes. Ralph, just to follow-up on your observations. Completely agree with you. I mean Basel IV is effectively a change in regulatory accounting at the end of the day. But some of the comments and some of these comments are coming from central banks is that capital requirements were not set in absolute euro amounts. They were it was set in basically percentages. And in order for the ECB to offset this regulatory inflation, basically, which is not necessarily based in any economic reality, you might have to basically bring your P2R and a lot of the P2G is down to 0. So at the end of the day, in Europe, you might have to have just 4.5 plus 2.5 as an overall capital requirement at the CET1 level. And that just looks bad from the point of view of the ECB. So we as analysts are just and everybody, I guess, trying to square these two things off with each other. Same goes for us. Our following question is from Mr. Bart Jooris of De Hoegh Petercam. Go ahead. Your line is open. Two questions on the results. What do you see potential for further provision releases in the future? I understand that maybe in Retail Netherlands, there may be more limited that in Wholesale Banking. Could you give us some flavor on that? And then second, could you give us some more insight on your RWA growth? Could you elaborate on what caused the market RWA decrease and how that could evolve in the future? And what was the FX effect on the RWA? Okay. Thank you, Bart. With regard to future provisions, I mean, basically, at least in the short term, what we see for this year is that we believe that the risk cost will become well below what it was last year. But I mean, that's only a couple of months. And clearly, there are always volatile portfolios. And especially in Wholesale Banking, provisions can be relatively lumpy. So if you then look further ahead, it becomes a bit more difficult to predict. In the end, and I think also Ralf said that in the beginning, through the cycle, we look at a risk cost level of 40 to 45 basis points across a cycle. And also in this cycle, we do not see that to be different. At least for now, we do not see an immediate change in the economic environment. So for the short term, we continue to expect risk costs to be benign. But again, there are volatile sectors and there is lumpiness in the wholesale banking book, so we need to be careful there. When it comes to risk weighted assets, basically, this quarter, there was an increase of $700,000,000 which was comprised of volume elements, which is a growth in lending, which caused an increase of 3.3 and there was an operational risk increase of about 2.7. There were some risk migration in the model set, so an improvement of the macroeconomic environment. And there were decreases due to ForEx as well as a decrease in our market risk. And that, in the end, made up that combination made up the RWA or the relatively limited RWA increase of €700,000,000 And in the end then, that's what you also see when you look at the composition of our RWA, which is largely credited, to some extent, markets and operational risk. I mean, the largest driver, all things being equal, will be the increase in our loan book. Yes. But do you see more room for market risk decrease of RWA? Excuse me. Can you repeat the question? Do you see more room for further market risk decrease of the RWA? No. Basically, that depends on our activities. As you can see, our CVA is relatively limited. We always link our market activities to our client activities. When volatility are low, the risk rates in that regard are a bit lower. But in the future, of course, and Ralf also talked about as FRTB will be coming and that in a couple of years' time could have an increase in RWA as an effect. Okay. Thank you very much. Our following question is from Mr. Kiri Vijayarajah of HSBC. Go ahead. Your line is open. It's Kiri Vijaraja here from HSBC. I just wonder if you could share your thoughts on the impact of Dutch mortgage market and if there are potential changes to mortgage interest deductibility and if there's a risk you could see an acceleration in mortgage redemptions. But just your thoughts on that would be helpful. Yes. So the proposals of tax reforms are on different fronts. On the income tax, it goes hand in hand indeed with a proposal to further decrease the mortgage tax deductibility over time. Yes, it may mean that over time, you would see a further repayment or prepayment of Dutch mortgages, if that is the case. But we should all realize that these changes are happening over a period of 20 years. So it is something that goes gradually over time. And therefore, it will probably not necessarily disrupt the markets themselves and also certainly not the way we deal with our clients and the income profile of our business. I mean, it will just be a lengthy process. So that's the one on tax reforms on the income tax and the tax deductibility of mortgages. On the corporate tax, there's going to be a decrease. At least that's a proposal of corporate tax on one side. On the other side, there's a discussion about tax deductibility of leverage. On the other side, we don't know the specific wording there. And the so we'll have to wait until we see that effective whether that's going to affect us or not. Then yet, I think which is the news for investors is that there's a proposal to abolish dividend tax altogether, which should, I guess, be a positive. Thank you. That's very clear. Our following question is from Mr. Benjamin Goy of Deutsche Bank. Two questions on your loan growth, please. First, on the Netherlands, it feels like your net production is getting incrementally less negative. So wondering when we see a turnaround here and return to positive growth. And then secondly, on the wholesale bank, it feels like over the last three quarters, you are moving away a bit from U. S. Dollar lending and doing more in the Eurozone and general lending in particular. So wondering about the rationale here. Do you are you a bit more worried about, let's say, U. S. Dollar exposed credit cycle? Or do you just see more opportunities in the eurozone? Some more color would be appreciated. Okay. Thank you, Ben. Well, specifically on the Netherlands, yes, so we're increasing our market share in mortgages, for example. It has to do with the fact that we have a little bit more appetite on the longer end of the market on the back of the clarity that the mortgage credit directive gave us from a prepayment cost perspective. But also there, as you are used to, we do price longer assets, longer tenure assets, both on the retail side as well as the Wholesale Banking side in a different way from shorter in order to not to have a legacy book under whatever proposals come from Basel. But we do see that we're picking up on market share there, which is offsetting the automatic repayment that is under the portfolio as well as the Western Utrecht transfer that we do. That's on the mortgage side. On the SME side, we see demand picking up, which is almost equal to the current kind of level of repayments on that book. So basically, we see the market turning there, and that's the positive effect there. On the wholesale banking side, and Seifi will fill me in, it is not so much a worry. We see a lot of market activity in the U. S. Taking out bank loans, reprice at levels, which are not sufficiently attractive for us. As you know, we're very disciplined in the way we price our lending. We see actually more activity also in the general lending and the euro zone. Therefore, we can shift our activities there and grow there. And as said, we benefit from a diversification in product and geography, But we keep the same pricing hurdles irrespective of the activities also on the Wholesale Banking side. David? I mean, if you look then over the past three quarters, you see every quarter in the Wholesale Banking is something else. So the Q1, there was an increase in Structured Finance, then there was an increase in Ref and Working Capital Solutions. The Q3, there was an increase in general lending and working capital solutions. So there is not a particular concern about the U. S. Versus Europe in that regard. You see still growth continuing on both sides of the ocean. We have a well spread portfolio. And the reason why we grew faster this quarter in general lending and working capital solutions was, on the one hand, there were a number of larger corporate activities, including M and A, which then calls in terms big underwriting and loans, corporate underwriting and loans, it has increased general lending. And moreover, we're growing our working capital solutions business, that is our trade finance business, you will, whereby on the one hand, from supply chain finance, we focus on the higher rated corporates for the unsecured loans. And for the trade receivable portfolios, which is the secured receivables, we grow across the board. And the when the trading activity is picking up in Europe, I. E, in the eurozone, that book is growing. Our next question is from Mr. Matthew Clark of MainFirst. Go ahead. Your line is open. Good morning, everyone. Two questions on net interest income, please. Firstly, on the hedge treatment change and the accounting distortion, would you expect the impact to be at a similar level in coming quarters? Or is it a completely random kind of could be positive, could be negative depending on market moves and how that affects fair values, etcetera? And could you also if it's going to be persistent, obviously, it will distort the segmental revenue trends as well. So would it be possible to get the full breakdown of the segmental impact? I think you've only given the impact in Dutch retail and the corporate stento rather than presumably there's a residual that's also affecting the other divisions? And then second question also on net interest income. I mean, should we be worried that the kind of pressure we're seeing in Belgium this year we're going to see in Germany and the Netherlands next year, the year after as you run out of scope to cut deposits and deposit rates? Maybe if you could just give us some guidance on the medium term outlook for the, I guess, the savings margin there? Thank you. Yes. So on the NII versus NIM, because I think your last question is more on NIM versus NII. So yes, you can expect that from a NIM perspective, the income on the savings side of the business is in a pressure. So the margin is in a pressure. I mean, the replicating portfolios, in the end, get we reinvest at lower rates. And therefore, margins that we make, we normally offset with decreasing savings rates. And at certain moments, you have reached the bottom. We're not there quite yet, but there is margin pressure on that side. But from a NIM perspective, there is a couple of things we can do in order to still manage our NIM, which we have indicated already in the presentation. 1 is further balance sheet optimization. 2nd one is to change the composition of the asset side of the balance sheet by gradually, prudently but increasingly improving and or changing the percentage increasing the percentage of higher NIM assets. So that those are two things that we do in order to offset the pressure that we see on the savings rate. That's the NIM. Over time, given the fact that we are growing our book, the NII should increase, but it will but that's a different factor. I mean, we're growing the book and the NII will increase. And the NIM, we feel we can, for the foreseeable quarters, manage at the high 140s, low 150s. Specifically, on the effect of the hedge relationship, I'll give it I'll give the floor to Koos as well. Yes. So on that hedge relationship, Ed, so again, maybe to reiterate, we have $91,000,000 which is basically now part of interest result and not part of other. So overall, in the whole company, it's a wash. We expect that to be there the next quarter as well. Later on, we will guide for how long or when that will 7 in the corporate line and 3 in Belgium. But again, 7 in the corporate line and 3 in Belgium. But again, please remind that overall, it's just a different categorization. So in that sense, it's not a profit or a loss. So just coming back to the NIM for a minute. I mean, you had flat net interest margin for a couple of years broadly. And all the factors that you've mentioned, the balance sheet optimization, the mix shift away from mortgages has been present there and necessary to keep it flat. So I'm just wondering if we look beyond the next quarter or 2 to the next year or 2, when you don't have that additional lever of falling savings deposit rates, can you still maintain that high 140s, low 150s margin outlook? Or should we be more thinking mid- to high 140s and waving goodbye to the great low 150s result we've seen this year when you still have that scope to cut savings deposit rates? Yes. I think you have I can see that you spent considerable time on analyzing this like we do. In essence, what you see is that overall for the next half year, the high 140s, low 150s, we can guide. Also, remind that we have kept our NIM flat despite the fact that in some of the countries, say Belgium, we already have encountered that we hit a bottom in terms of what we can do with savings rate. So that means like it's not a matter of everything completely starts to change as of a certain date. This is already the case there. But you're right that both Netherlands as well as Germany, you start to, at a certain moment, hit a bottom in terms of how low can you go lower with your rates. But we still have the other levers. We can still be smarter about the mix. We can still grow, and we can still make sure that we reduce our investment portfolio sums further. So there is room to do that. So that gives us some comfort over the next half year how this goes. If you talk about 2 years out, please also note there that if you look at the forward curve, you see interest rates at a certain moment increasing as well. So if then your reinvestment starts to be somewhat higher and you don't change your savings rate, then you might get an uptick. So, it's all in all, I would say for next half year guidance, it's still around similar, so the high 40s, low 150s. And that is where we see it. And again, we are also looking forward to Mr. Draghi at this moment taking some actions, but we haven't seen that yet. But a forward curve points to some alleviation there at a certain moment after a year. Thanks very much. Our following question is from Ms. Sophie Pietrusens of JPMorgan. Here is Sophie Pietrusens from JPMorgan. I wanted to ask about your loan growth in the retail other and or main growth in Challenger and Growth Markets. It was €2,000,000,000 of this quarter. Could you just give a little bit more details from which countries or in which countries that you're seeing the highest loan growth? And my second question is on TRIM. Do you have any update on TRIM? What has the what have your discussions with ACV been so far? And when do you think, yes, you can give further details on TRIM? Stephen will answer the question on TRIM, and I'll come back on the loan growth thereafter. Yes. Thank you, Sophie. So, until now and we've told that before, in September, the on size on TRIM Starbit, The initial focus is on the mortgage books in the Netherlands and Belgium, then on the SME book in the Netherlands and then on all the trading models. And in 2018, the focus will be on the low default portfolios, which are the Wholesale Banking books. So until now, the initial focus has been on mortgages. I think the on-site in the Netherlands is largely done, and the Belgium is still ongoing. And as of early 2018, the SME portfolio NNMs will be reviewed. So those are the next steps. We've answered many questions. We've had lots of discussions. But official feedback from the ECB are an outcome, if that is what you are asking me, that will only come somewhere early 2018, at least from the initial part of the TRIM exercise. And then Sophie, to come back on your loan growth, which countries contribute? In principle, they all contribute, But specifically for the quarter, we've seen better performance in Poland, in Australia, in Spain and Romania. But then there is also we see growth across the different segments, across different asset categories. So it is mortgages. And specifically, in countries like Romania and in Poland, it is also SMEs and mid corporates. Thank you. That's very clear. The following question is from Mr. Prajesh Kumar of Citi, Kennedale. Go ahead please. Your line is open. Thank you and good morning all. Brajesh Kumar from SocGen Credit Research. Can you please talk about your 2018 issuance plan? You have little over $8,000,000,000 OpCo senior maturing in 2018. Is it fair to assume you would like to replace those with Holdco Senior? And what about Holdco sub debt, any plans out there? Thank you. Yes. Thanks for that question. If you look at issuance, broadly speaking, it with Opco Senior, so then we can fulfill our ELAGMREL requirements. So that is, broadly speaking, how 2018 would look like. More specific plans on that side, we don't want to give. If you look at the Tier 2 part, there what you've seen is we are well and comfortable within our Tier 2 jacket at this moment. Next year, you will have some grandfathering. And to be honest, so we already anticipated that. That is roughly speaking how our plan looks like. So lower on that part, a bit higher on the senior, but that is a recycling strategy. Okay. I guess, so you are done with your 2017 plans Or is there some room out there? We don't comment on exact issuance now, but we are always looking at markets. All right. Very clear. Thank you. Our final question is from Mr. Marcel Holben of Credit Suisse. Go ahead. Your line is open. Good morning. Thank you for taking my questions. I have 2 left. The first one is on the hedging strategy towards a change, the €91,000,000 in the NII. Can you just explain to me a little carefully what exactly means the Antler relationship? What were you hedged against? And does that not increase your risk profile to entire bank or volatility? Can you just just trying to explain what happened there? What was the reason for the ending of the relationship? The second one is on the Belgium. Obviously, you've seen in Netherlands quite a good performance on costs. I was just wondering when can we expect something similar for the Belgium market? Yes. Maybe so on the hedge relationship, 1st and foremost, it doesn't increase the real economic risk of a company if you relabel it from an accounting perspective. So a hedge is still there. It's only in another category. And what we do, again, what I said is like from time to time, you want to change some or you relook at your hedges and you say like, hey, can I do with a bit less and can I use hedge accounting a bit less? So there, what you can do is, say, particularly short dated hedges, which have low basis point values anyway, you move them a bit out of your hedge relationship. So that's exactly what we've done. But please note, it's more an accounting re classification what you do than to say that you lift the hedge or eliminate it. And Marcel, on your last question, specifically on Belgium, so we had a long negotiation with the unions. We changed some of the plans in the way they work out, softening or reducing the impact on our employees. From a business case perspective, it doesn't really change. We are currently going through or we just finished the process, the wave 1 in the redeployment process, which means that people working in specific areas have to reapply where there are jobs. There's less jobs. We realize that, but they reapply. So the first wave we have completed from that perspective. There was 2,000 girls impacted in that first wave. And people on the other side are picking up the packages, the redundancy packages that we are offering. Wave 2 of the redeployment is ongoing as we speak. It has to do more with the branches and the client services. Numbers, maybe Q4, but certainly Q1, Q2 next year, maybe Q4, but certainly Q1, Q2 next year, you should see some of the effect going through the cost line. Line. Okay. I think those were all the questions then. I'd like to thank you first for calling in again and going with us through the quarter. As always, your questions, your preparations, the way you follow us truly help us to steer this company as effectively and efficiently as possible. So again, my gratitude also to you that you keep calling in, that you keep asking the questions and keep us sharp in the execution of what is seen as a successful strategy. We retain strong commercial momentum in both retail and wholesale. And that's reflected in the growth of our customer numbers, core lending numbers. The risk costs are low. It reflects the current benign operating conditions that we see. So we're happy with the quarter. We're working on a successful strategy, growing our customers and growing our customer experience. So thanks for now. And for further and more detailed questions, you know that our team for Investor Relations is always happy to take your calls. Thanks a lot. Bye. Ladies and gentlemen, this concludes this conference call. On behalf of ING, thank you for attending. You may disconnect your line now.