Earnings Call: Q4 2016

Feb 2, 2017

Good morning. This is Saskia welcoming you to the ING's 4th Quarter 2016 Conference Call. Before handing this conference call over to Ralf Harmers, Chief Executive Officer of ING Group, let me first say that today's comments may include forward looking statements, such as statements regarding future developments in our business, expectations for our future financial performance and any statements not involving a historical fact. Actual results may differ materially from those projected in any forward looking statements. 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. Good morning, Ralph. Over to you. I hope everybody hears me. We have some technical problems here, but let's start nevertheless. Meanwhile, trying to get some more mics here around the table. Welcome to ING's 4th quarter 2016 results. This is a conference call. Thank you for joining us today. I'll talk you through today's presentation. Patrick Flynn is here, the CRO, Wilfred Nagel, our Patrick Flynn is here, our CFO Wilfred Nagel, our CRO is here from the Executive Board in order to help me answer some questions as well that you may have later as well. So let's go through the presentation, Slide 2. On GPAC posted a record underlying net profit of nearly EUR 5,000,000,000, which is an 18% increase on 2015. We have maintained very good momentum in primary customer growth, which continues to lead to a strong financial results aided by continued decline in loan loss provisioning. And as announced during our recent Investor Day, we have booked a CHF 1,100,000,000 restructuring charge in Q4 for the acceleration of Think Forward and that's taken below the line as a special item. Our group TT1 capital position ended the year at a robust 14.2 percent. And even with our strengthened capital base, we delivered a return on equity above 10% at the group. We're proposing a full year cash dividend of EUR0.66 in line with our progressive dividend policy. Those are the key points. Let's go into some of the details. Slide 3. As you can see on this slide, we continue to attract many new clients. In 2016, we had another 1,400,000 customers and a growing proportion of these customers are considered the primary client. We aim to continue this trend as we are now targeting 14,000,000 primary customers by 2020. Now this year alone, we have extended an additional €35,000,000,000 of loans and received €28,000,000,000 of customer deposits, both increasing by roughly 6% year on year. And as you know, our compass, the Net Promoter Score remains one of our most important KPIs in the business and forward looking KPI as to the continuance of our commercial growth. In the Q4, we were once again ranked number 1 in 7 out of the 13 retail markets in which we are active. Now all of these commercial results lead to a good and strong financial result, which you will see on Slide 4. The underlying net result for the bank was nearly €5,000,000,000 which represents a 16% compound annual increase since 2013, despite the headwinds we are facing from the low rate environment. And even though the fully loaded bank CET1 ratio has increased by a full percentage point this year, We further increased the bank's return on equity to 11.6%. The underlying income excluding CVADVA improved by 7.4% in 2016. I'm on Slide 5 now with an increase visible in all income line items. With net core lending growth of nearly SEK 30 €5,000,000,000 during the year, we've been able to grow net interest income by 5.2% compared to 2015. However, it's not just the NII that drives results, we also saw substantial progress in the fee and commission income line, particularly in our challenges and growth market. On the expense side, as you can see, we've managed to keep generalizing expenses stable this year. Existing cost savings programs have funded the growth initiatives that we have in both the challenges in growth markets as well as in the industry lending activities within the Wholesale Bank. In combination with a stronger income line, this has led to a 1.7 percentage point reduction of the costincome ratio to 54.2%, hedging closer to our 50% to 52% target range for 2020. In addition to that, we had low risk costs supporting the underlying results. Risk costs came in at 31 basis points for 2016, and that's well below our through the cycle average of 40 to 45 basis points. So good development on all accounts there. Turning to capital. The group CET1 ended up at 14.2%, which is up 70 basis points quarter on quarter and up 150 basis points compared to the end of last year. That's comfortably above the current 11.75% fully loaded requirement by 2019, excluding Pillar 2 guidance. For 2016, we proposed a full year cash dividend of €0.66 per share. This means that we will have a €0.42 final dividend since we already paid a €0.24 interim dividend in August 2016. The full year dividend is payable in May 2017 after the AGM. After accounting for this dividend payment, there is a total of EUR 2,100,000,000 of interim profits, the profits flowing back to the group capital and that explains much of the quarter on quarter increase in the CET1 of the group. Now in summary, if we compare all of this against the financial targets of 2020, the group CET1 ratio 14.2% and the leverage ratio of 4.8% are well ahead of regulatory requirements. We've made good progress on our cost efficiency this year and we're certainly confident that we can reach the 50% to 52% target range by 2020. We've been saying over the past few months that given the regulatory uncertainty that we think it's prudent to wait for further clarity before we announce a group return on equity target. And given the fact that there is not more clarity yet on Basel, we will not be able to give more clarity around the group return on equity targets for the moment. Nonetheless, we achieved a strong underlying group return on equity of 10.1%, and we continue our progressive dividend policy. So this actually sums up the full year results. So we have healthy growth, we have an improvement in capital, we have a healthy return on equity and we have an attractive dividend. That's basically the summary. So let's dive deeper now into how we're progressing for the future. I'm turning to the transformation programs now. Slide 9, you will recognize this picture. The recent Investor Day, this where we used this picture. We announced 4 different digital transformation programs. We've started to see tangible success of these programs with the project team now being established for the Model Bank in Spain. Germany has introduced a multi bank feature in its daily banking app, which is a very important step. You open up for 3rd parties as part of our philosophy. We believe in that, creating open platforms. We remain confident about the execution of these transformation programs for sure, including the €900,000,000 of annual savings they will deliver by 2021. As we had indicated 4 months ago, we took a €1,100,000,000 pretax restructuring charge in the 4th quarter. That's booked as a special item below the line. You also know that innovation is very important for our future, which is the next page. Innovation, the way we can summarize it is really about the 3 Cs, the C of customer experience because that's what the real focus is about. That's what's causing the success. That's what's causing the growth of 1,400,000 customers also last year. It's the culture that you need to be innovative. And it's the connection that you need with different ecosystems that you need in order to be innovative. And that's what you see. So in this spirit, we have developed innovations over the last year, such as Payconic in Belgium, which is more or less becoming the standard now in Belgium, instant lending in Romania. So many of the examples that you see here, you recognize because we have talked to you about these in the past. Now as I said, we can only innovate if we have the right culture. We build on our ING Direct heritage here. We have our own innovation program, PACE, as we call it, and we have an annual innovation boot camp, all of those in order to stimulate our employees to constantly think about creating a better product and a better service for our customers. And then the connection part, as I said, it's all about our own ecosystems. So how do you make sure that you get the right people in to talk to each other? How do they open up? How do they connect? How do they basically motivate each other? But these connections are not limited to what you do inside. You have to open up in order to get also the good ideas from the outside. I mean, we don't have a monopoly on good ideas. And therefore, we have partnerships with more than 70 Fintechs now aimed at improving the customer experience. The way we work with Fintechs has to be a little bit different from many of the other of our colleague banks. It is that we're not investing in them because of the upside in the fintech itself. We're investing in them because we believe they can truly improve what we're trying to do towards our clients. And that's a different fee. Turning to sustainability. I'd like to remind you how important that is to ING. And I think the annual results is a good moment to kind of give you an update. 4th quarter, we've seen further growth of our financing of sustainable projects as well as the social and environmental outperformance. And that portfolio of sustainable transitions finance, as we call it, the STF, has increased to €34,000,000,000 now. In November, we launched the Sustainable Finance Collective Asia, and that's the first of its kind. It's a funding initiative in the region where we basically group different parties together, look at different business models and see how we together can support the development of new circular models, climate neutral models and help each other. At the same time, in our Real Estate Finance Netherlands activity, we decided that we will only offer new financing to grain office buildings going forward. As you've probably already read and seen in the different newspapers, we also get strong external recognition for our sustainability policies. The new Sustainability and Responsible Investment Magazine, Corporate NICE, ranked us as the 5th most sustainable company in the world even, so we're pretty proud of that. And actually, we're also proud and specifically for all of our colleagues, we're very proud to have been recognized as the Global Bank of the Year 2016 by the Bank Magazine. Let's look into more detail now if it comes to the segment for 2016 as a whole. Turning to Slide 13 for reference. So this is a reminder of what we said during our Investor Day. Top left, you see the recipe that we repeated there. So this is a recipe that has been around since we launched Think Forward 3 years ago, in which we expect the market leaders not to grow income, but to really become more and more efficient. Challengers in the growth markets to grow fast, grow income, and then they will be allowed to grow on their cost side. And for the Wholesale Banking, we do expect income growth. However, we do expect the Wholesale Banking more or less manage on a flat cost base across the business. Now on the right hand side, you see the results. So we continue to see rapid income growth in our challenges in growth markets as we are becoming the primary bank for more and more customers and we grow fee income on the back of that, which you will see later today as well. And we're improving the cross buying. On the wholesale bank, we are continuing to grow our portfolio, particularly in industry lending, while we hold the cost flat and that's through the implementation of our efficiency programs. But in the Benelux, you see that the top line growth remains challenging as the persistently lower rate environment is causing margin pressure. And therefore, in order to drive the result of the future, we have to ensure that we become more digital, have better client services and with that also become more efficient. Let's take a closer look at the challenge here in Benelux. We see here over the years a lack of that revenue growth. In the Netherlands, this is largely caused by lower volumes. In Belgium, although we see reasonable lending growth, there's a pressure on savings in current accounts as we are at the legal floor in terms of our savings rates already. And you see that in that in this picture, you see the difference here between the Netherlands and Belgium coming through on the margin pressure. So the volume increases in Belgium help us to offset some of the pressure in Holland. We are keeping the margin being able to manage the margin, but we see a decrease in volume. So therefore, the focus across Benelux is mainly on cost efficiency. How do we adapt our model to a new more digital way that our customers can do their banking. Now the program that we announced is intended to further align the Dutch Unfortunately, this also involves the headcount reductions, and Unfortunately, this also involves the headcount reductions as announced, further rationalization of the Belgium branch network. And at this moment, we continue to work constructively on these proposals with relevant stakeholders. So there's a good debate there, constructive debate with the different stakeholders for these transformation programs. Turning to the retail side of challenges and growth now. You see the strong business performance on Slide 15. It's evident in all of these numbers. The NII for the segment has grown annually by 9% since 2013 versus the strong 8% growth for the fee income. We still expect the fee income will grow faster than NII in the coming years as we offer more and more products through the increasingly mobile and digital platforms. At the same time, while we have selected invested in business growth in countries like Germany and had to absorb higher regulatory costs, we have managed to improve the costincome ratio. So it's a real good story. At the same time, our growth is with a prudent risk approach, as you can see in the development of the risk cost. So lending growth is not coming in by becoming by moving away from our risk acceptance criteria, we keep the same risk acceptance criteria, but we get the clients in on the back of the superior experience. 20, and that's how it works. Now if you look at the CNG in total. So this is the picture Including Wholesale Banking, you can clearly result. We invest we continue to invest in our digital investment advisory capabilities, for example, through our through the form of Robert Vafi's billion. Turning to Wholesale Banking. We benefited from a well diversified business portfolio so that we can tap into profitable growth in different countries and industries. Underlying income growth is consistently higher than the operating expense growth, and that is resulting the positive jaws that we see in the Halterberg. And that will therefore leads to a further improvement of the costincome ratio to 45.3% in 2016, and that's well below the 50 percent to 52 percent target range for the group as a whole. As the macroeconomic environment continues to improve, we have seen a further reduction in risk cost also in the Wholesale Banking side with provision being low at 368 years ahead quarter. That's supporting the 6.5% increase year on year. Geographically, the lending growth comes from all regions with the exception of the Netherlands. We will see a modest decline in volumes. But this quarter, we saw the strongest contribution from Industry Lending. And the working capital solutions within the Wholesale Bank as well as from the mortgage book and retail challenges in growth markets. I have to mention that the industry lending growth was flattered a little by higher order anyway. We continue to improve steadily here. The NPL ratio for the bank as a whole came down slightly 1st Q3. It's now at 2.1%. In absolute terms, risk costs were a modest €138,000,000 for the quarter, only 18 basis points over our average risk weighted assets. If we take a closer look, in the 4th quarter, we benefited from a provision release on the German mortgage portfolio and also some releases in the Wholesale Banking book in Ukraine and Spain. This repo again recorded lower risk costs as well as business lending is now starting to turn a corner and the strong housing market conditions lowered TNPL ratios of the mortgage. Now to wrap it all up, I think we can all be proud of this underlying result for the bank, which is the evidence that we're on the right track and that the Think Forward strategy is effective and that the decision to accelerate the Think Forward strategy, focusing on customer experiencing and through that, getting the growth in, that is the best recipe also to weather some of the headwinds that we see. Same time, these headwinds will not go, so we'll have to keep a close eye on it, whether it is on the low rates, whether it is on regulatory costs, whether it is on client change behavior. So we do think that investing in digital capabilities, making sure that we create 1 scalable banking platform, that, that is the best way for the customers to stay a step ahead but also for the bank to stay a step ahead. And with that, I open the call to questions. Thank you, sir. We take our first question today from Tariq El Mejjad from Bank of America. Please go ahead. Just a couple of questions, please. First of all, on the dividend policy. I mean, your proposed dividend of $0.66 came 1 I mean, slightly short from the $0.67 consensus number. I mean, in Slide 7, you said that this is reflecting regulatory certainty and growth opportunities. So for regulatory certainty, we know Basel IV, we're waiting for that. I mean, first of all, do you have any comments on that? Because it's getting a bit confusing, a few messages out there. What do you think would be the expected outcome? But my main point is on the growth opportunities. Are you shifting here towards potentially higher volume growth than the 3%, 4% that you've been guiding before, if you see an opportunity there? Or you're restraining to that, but just expecting RWA, basically less positive immigration and RWA to start to grow perhaps faster than the 2016 level? Actually, I will limit it to this question. Thank you. Okay. I'll give an answer on the second part of your question, and I'll refer to it with Patrick for the first part. So on the growth that we pursue. So from the beginning, when we launched the strategy, we indicated we thought we could grow 3% to 4%. And for growth, you do need capital. We have a very good capital position. But also from the beginning, we have said, well, we need capital and the capital generation at the bank from 3 sources. The first one is in order to make sure that we improve our capital buffers. The second one is in order to make sure that we can continue to grow. And the third one is to make sure that we can pay a dividend over time. And when we came out with the policy, we said it was going to be a progressive dividend over time. Now that means that if you see, for example, growth opportunities that fit your risk profile, you can pursue that. And in some quarters, we grow a little faster than in other quarters, but you need capital for that. What we will not pursue growth opportunities that don't fit our risk profile. So do we expect to stay at this level of growth in our lending book? I don't know. It really depends on the opportunities and whether they fit our growth profile or our risk profile. That is really important. But that's one component, growth and the capital that you need for that. Then you have the component of dividends and the capital that you need for that. And then your last part is the capital that you need for improving your buffers. And there is some uncertainty remaining there, and I'll give the word to Patrick for that. Good morning, Tariq. Yes, in all 4, we're watching as you are. We don't have that much more insight than anybody else. And I think what you see is that the most recent or perhaps close to final proposals from the BAL Committee still would result in increases in capital requirements for post European banks above the threshold of 10%, above the no significant increase threshold. And hence, there was no agreement in early January. There are several authoritative voices across a number of countries who are saying that they will not accept increases in excess of that minimum threshold. But it remains to be seen whether under the pressure, and I'm sure it's a very big pressure to reach an overall consensus agreement, that line is held. We just don't know yet, and we're waiting to see the outcome as you are. Thank you. We now move on to our next question from Daniel Douthoy from JPMorgan. Please go ahead. Hi. I've just got 2 questions. The first one is on net interest margin, second one on provisions. On the first one, the underlying NIM of 152 basis points this year, I guess that's developed slightly better than you had thought just a few months back at the Capital Markets Day when I believe you guided for stable on them, which at the time implied about $150,000,000 or so. Given I mean, given these developments and also given the rise in bond yields that we've seen at the end of last year, Is 150 basis points still the right level? Or do you think you can deliver sort of in line with the second half of this year? And then secondly, on provisions, last quarter, you guided for the full year to be down in €15,000,000,000 You've now gotten to sort of €1,000,000,000 for the full year, 30 basis points of risk weighted assets. Just wondering what your thoughts are going into next year and whether that kind of level at around $1,000,000,000 is sustainable. Okay. In terms of NIM, I think the interest margin has sort of come out very much in line with how we thought it might and how we sort of tried to guide at the Investor Day. So nothing really changed there. If you exclude Financial Markets, which can be variable quarter on quarter, We said we think we can keep it in and around the $150,000,000 mark, maybe a little bit above $150,000,000 maybe a little bit below high $140,000,000 is what we said. And that's what's happened. Now again, we said that should pertain for most of 2017 because the actions were have been taken, including the asset mix, growing at healthy margins, which again we continue to do in the Q4. And also there's still some scope to manage deposit rates in line with the low rate environment. So the combination of all those three things gives us the ability to manage NIM, hopefully, at a stable level in and around the 1.50 mark. The best part of this year, that's what we said in October. It still remains the case. So I think Q4 is entirely consistent with the we guided on 3 October. Yes. On provisions, traditionally at the beginning of the year, we do give some indication of what our thinking is. If we look at the environment today, the range of possible outcomes is probably widening somewhat because of all the uncertainties out there. We're sharing the thoughts because that is really what we do here. I'd also like to make clear that internally, we do not budget risk cost as such. Risk cost in the end is the product of economic events and our ability to mitigate the impact of ING. And that mitigation comes from 2 things. 1 is the quality of the origination that we do. And second is our ability to deal with difficult situations and do workouts, etcetera. And we were to budget for these numbers, then it would become a matter of managing to a number, and that's exactly where we don't want to go. We do our best under the circumstances. We don't want to be influenced by some budget concept of risk costs. Having said all that, if we look at the trends and Rolf already in his presentation alluded to that, we still see in a large part the potential for some of the migration That will help us going into 2017. And at the same time, that thesis simply don't have a backlog of large restructuring spending in Q4. We had a very significant cash recovery in Ukraine as an example. There will be some more, but not to the extent that we saw it in 2016. There are also some portfolios discussed on these calls now that may create some additional risk costs. I just mentioned here shipping, the drilling side of our oil and gas book. Turkey is an uncertainty. So on balance, based on the current trends, I think our current idea around risk costs in 'seventeen, somewhere around 'sixteen, potentially a little bit higher than that, also reflecting the growth that Ralph was talking about. Okay. That's clear. Just on net interest income and on margins, does the rise in long term rates not at all affect the way that you think about net interest margin beyond 2017? I mean, I know there's a lot of hedging, but Beyond 2017, we'll need to get there to understand what it would look like when we're there, first. Secondly, I mean, we do have seen an increase in the long end of the curve, albeit very modest, 50 odd basis points. Directionally, that's good. We would prefer a positive EOI curve significantly higher than it is today. That is at least directionally beneficial. But we do not take outright interest rate risk in our business. Our loans and deposits are much funded into our treasury. And hence, that enables us in a falling interest rate scenario, which we've seen for several years, to manage our margins in a stable manner, hence the earlier question. And we have been doing that. And again, when rates fall, the impact is slow. And we have the need for us to try and make it as I said. Equally, on the upside, the positive impact of rising rates will take quite some time to manifest. And they would need, I think, to be significantly higher than we currently are. Okay. So significantly higher than the 50 basis points or so than you than we've seen so far before we see any kind of we should expect any kind of change to your NIM guidance? Yes. Unsustained for a long time. Our deposits are tranche. They roll over every quarter. It's not all one we spread these out over time. So the treasury buys them in each quarter, replicates them, and we'll be both in each quarter. Loans are originated and bought in and the margin fixed over time. So it's only when they come to renewal that higher rate might be seen on deposits. So this would need to be prolonged, sustained increase rates over a prolonged period were to start become manifesting with overall stocks. Okay. So the 50 odd basis points rate price so far, if it's maintained, should not materially change your view on the interest margin? No. Okay. That's clear. Thank you. Correct. That's clear. Thank you. You. We now move on to our next question from Bruce Hamilton of Morgan Stanley. Please go ahead. Yes. Good morning, guys. Thanks for the answer so far. Just going back to the dividend question and the capital build. I mean, clearly, the regulatory input is one of the key ones. And there's still quite a lot of fog out there. But I mean, are you expecting that we will get clarity by, say, the end of March? Or does that feel quite an aggressive timescale? And then secondly, on a separate point, in terms of your robo advice offering, is that in partnership with a fintech company? Or is that your own product? And can you talk a little bit more about it? Is it sort of a model, algorithmic driven model, which depending on inputs people give on risk will throw out what investments they should make? Or how does that sort of offering works? Obviously, gross sale looks kind of interesting. The first one, well, we were, as you know, almost there would be a definitive answer on this at the end of 'sixteen, by the end of 'sixteen. So January, we didn't get it. He's a brilliant player. I think that was the answer. Yes, we would hope that we will get clarity in March, but it's any guarantee. We'd like it, obviously. The better, the better. But again, it's something under control. I just don't know when they're going to reach conclusion. Okay. Then on Robert Wise, actually, Bruce, it's both. So we have launched different concepts to do investment management. For example, we launched in a couple of countries what we call My Money Coach, and that allows people to kind of make a short term and longer term financial picture of their own situation and generate advice as to how to kind of invest across different categories on one side. And then the investment itself is behind it is sometimes algorithmic driven, sometimes it's just a fund. But we also give recommendations on what peers would have done in their situation. So I think some kind of an Amazon like the people in your situation with your financial situation with your future plans have this and this and this for this and this reason. So it's kind of that's one way we do it in our own in house product called My Honey Coach. On the other side, it's probably about structural hydrates. We are working with different tags there just to get a sense for how some of these really work, some are more successful than others, as you know. And we're working very closely, one particular Fintech on this one as well in Germany. And that's really fully and quickly driven. But we're looking at this as taking a very overview as to all the possibilities and all the items that you have to take. Also, by the way, from a duty for Q perspective, which is something that you really have to keep in mind when it comes to investment advice or not investments. We move on to our next question from Benoit Petrarque of Kepler Cheuvreux. Good morning. Thanks for taking my questions. The first one will be on the dividend per share. So EUR 0.01 increase this year, clearly constrained by the Basel IV uncertainty. But how do we have to think about DPS growth going forward? I'm asking because Cosanx used to expect $0.17 next year in 'seventeen. It's a $0.04 increase versus just $0.01 increase we have seen now. So is there a kind of relationship ultimately with earnings growth? Or do you see kind of $0.01 kind of increase per year kind of the normal run rate going forward? Could you just guide us a bit on or the EPS going forward? Then the second question will be on commercial margins. Clearly, the risk cost outlook has been improving substantially recently. Do you expect any type of margin pressure? Or do you expect commercial marketing or different segments to remain at current levels? Great. Thank you, Bernard. Well, on the EPS growth, I mean, the policy that we released, which is saying that we at the time when we launched this force, we also indicated that we expected to be lower than the EPS growth. So that's the relationship there. It's going to be slower. Whether it's going to be now and it's going to be, again, next year, ambition at that moment in time? How do we look at surplus capital? How do we look at opportunities because we don't want to run into a stop and go into a stop and go scenario for your own growth, either. But you always have to make sure that your business are level to support growth going forward. This would be a handsome dividend to be paid and the progression. Now if we would ever come into a sort of true surplus capital, you would rather think of onetime distribution, so that's a one time, including this in some kind of a different trajectory at that point. Then on your commercial margins, we don't see the margin pressure coming in at this point in time specifically in the industry, honestly, and we've seen that in all of the different kind of activities. There's only a couple of banks that played it at Standard's business. The parties that you deal with are very professional. They know that risk control. So that's where you generally see the margins are holding up. But even in the other commercial banking products at this moment in time, the margins are holding up. Across the board on mortgages, we see some pressure now coming through in Belgium on the mortgage business. And in Belgium, we also see most of the pressure coming through on the savings side. So in Belgium, there's a particular more increasing pressure on both sides of the balance sheet in terms of margin pressure. Margins on the savings side generally in the in our activities can still be managed, but we still have some room to go before we leave a commercial or legal floor in the countries in which we're active. But again, besides Belgium, where we have already reached the legal floor. So that's a little bit the kind of the Benjamin Goy from Deutsche Bank has our next question. Please go ahead. Benjamin Goss from Deutsche Bank. Two questions, please. First, on loan growth. Maybe you can specify a bit how you think in the near term, so let's say 'seventeen, about your through the cycle loan growth guidance, considering you actually have a good momentum. You can say it's slightly improving even in European loan growth. I would be interested in your thoughts here. And then secondly, on the costs, regulatory costs were lower again in 2016. Is that a one off? Or could it help you also in the next year, say, 'seventeen or maybe even longer than that? Thank you, Benjamin. On long growth, the basically, what we have said, the 3% to 4% is still where we kind of guide. This year was particularly interesting for loan growth because of the sectors in which we're active and the countries in which we're active. Clearly, in the back of commercial growth, the number of clients, we will continue to see loan growth. On the back of the investments that we're doing in the Wholesale Bank, we will continue to see some loan growth. But there's 2 parts to this that you have to take into account. The first one is that we don't want to loosen our risk acceptance criteria in order to get more growth in. And the second one is the loan growth has to make the returns on ever increasing capital requirements. So those are 2 filters that we continue to use consistently. And by the way, you have seen that. You see that actually, we have been improving our return on equity, higher borrowers, we do see an improved return on equity. But at this point in pursuing loan growth that should protect us from future problems. And therefore, we're not going to go overboard if we see the opportunity. We'll stick with return on equity requirements and then we can do with the separate year on year. Now again, the 3% to 4% is not a target. It's a guidance. Some quarters, it will be higher. Some quarters, it will be lower. But that's what we see. On regulatory costs, our regulatory costs have increased, but they're lower than what we had expected in the beginning of the year. But they have increased by just over €200,000,000 to €845,000,000 for the year. But short of the expectation, that's true. And that is because when we don't understand schemes, whether they are deposit guarantee systems or whether they're bank tax systems, the moment we understand better, we also know how to manage them better a little bit in regards. And as I said, in some cases, we have been able to change a funded requirement into a funded payment application. Where we can do so, we will continue to do so. We move on to our next question from Kiri Vijayarajah from Barclays. Please go ahead. Yes. Good morning, gentlemen. Just a couple of questions on Belgium. You show on Slide 14 the margin, the net interest margin in Belgium underperforming, particularly the Netherlands. So really just what's your outlook there? Have we seen the worst of the Belgian margin pressure there? And I wonder if you could comment on customer satisfaction or customer retention data that how's Belgium the customer base in Belgium been faring after the announcements you made at the Investor Day? So any comments you could make on how the franchise is faring would be helpful. The them performing in comparison between the balance of Belgium, yes, they're 2 different countries. If you look at the Belgium situation, we're not sure we've seen the worst of the margin pressure in Belgium. All banks have raised more or less the legal fall on the liability side. So there's not a lot of room to manage your margin on the savings side. And there's quite some competition in the market on the lending side with pressure on the market there. So yes, we're not sure whether we have seen the worst, honestly. Assuming we haven't, that's why we feel that we have to improve we have to improve our efficiency. Now that goes directly to your second question is the announcements themselves don't change the customer satisfaction. The if you look at the earlier reactions in the media, they were not pretty. We had expected that. But if you look at the underlying development, whether it is in the growth and number of customers, If you look at the lending book and the savings book, it's just growing as expected also since Q3. So in terms of the conversion performance, we don't see any effect there. And obviously, it shouldn't because although that message for many of our colleagues what the consequence is of the country that we are very committed to our clients in Belgium. And that's why we're in order to make sure that we can continue to be committed. And basically, the clients see that, and they stay the same. We now move on to a question from Anke Reingen from RBC. Please go ahead. Yes, good morning. Just two follow-up questions. Firstly, on the provisions, I just wondered if you could be a bit more specific. I mean, obviously, the very wide range of Q4 'eighteen basis points for the year 'twenty one. Or should we maybe be looking more at the 9 month level for 2017 at 35 basis points? But any more like where you think you're relative to on these different ranges? And then just on your savings rates, I just wondered, I mean, you continue to cut in some countries in January, but is it like you think you've almost reached the floor or the potential for further cuts has come to an end, especially as due to the change in interest rate environment? Thank you very much. So on the provisions, Anke, the crystal ball that you're looking for, we don't love to have, but we don't. I think Q4, you should look at as extraordinarily low for a number of reasons. The better base to think about the projection is, as I said before, 2016 total, keeping in mind that there is quite a bit of uncertainty both in the world political and economic environment. And also, of course, keeping in mind, as always, that provisioning is a lumpy business, particularly in wholesale. There can always be incidents. So it's quite difficult to we still believe is generally one of positive collaboration. A couple of portfolios, oil and gas, particularly the drilling side, shipping, potentially offshore services are that we would see a bit of pressure in. I don't think we're going to be miles away from what we saw in 'sixteen. It could certainly be a bit different. And again, we also need to keep in mind when we look at the absolute number that the loan book is growing and most we expect the absolute number even if the basis points stay the same. Now our loan book guidance remains at the 40% to 45% range. Thank you. Okay. In terms of deposit rates, there was modest cuts in smaller entities in Q4 for instance in Australia. The Netherlands in Q1 is a small contribution of 5 bps. Spain also in I think the point is that other than in Belgium, where we are at a floor and other major markets, we still have capacity to manage rates down if that's justified. And that links into what I said earlier about being able to maintain a stable margin for 'seventeen. So there is room on the deposit side to active, as I say, justify it. No, we haven't hit a floor other than in Belgium. Thank you. We now take our next question from JP Lambert of KBW. Please go ahead. Yes. Good morning to you. Two questions. The first one, thank you very much for the Slide 30 with the breakdown by country. I have a question about France. As you know, Orange Bank is going to introduce banking services. They have 28,000,000 mobile phone customers. They are targeting 2,000,000 customers. You currently have 1,000,000. How do you see the impact of a new entrant from a mobile perspective on your business? Is there the read across you have from other geographies where you face such a competition? 2nd question is about innovation, Something you've announced on 31st January is blockchain experimentation, which you run-in 6 business areas in wholesale. So currently, you have a cost to income ratio, which is fairly low, 45%. I know these are pilot experimentation, but what kind of impact could it have on the cost to income ratio in wholesale? Thank you, Jean Pierre. Well, yes, the Orange Bank that will start operating, The well, I mean, there is more mobile operators around the world that are initiating banks and banking activities, and we see them as well. It's good to have competition. That's what we can say about it. How will it impact our business specifically? I still think that we have more to gain than to lose if you look at our market position in France. And we're challenged at different. What we can do, which not a lot of parties can do, is that going forward with our mobile bank, we will have a smaller standardized platform. As a consequence of which, our costincome ratio will be even lower to operate in our digital and mobile banking than we currently do already. As you may remember from the strategy presentation, we think that we're kind of further shift the efficiency curve door from already what we do in the direct franchises, which is already lower in comparison to the branch banks in the markets in which we're active. So we will push that cost to income ratio even lower with our model bank approach. Therefore, we'll be even more competitive. And yes, if there is 1 or 2 more additional competitors, I think it will only help us in markets in which we are a challenger. So it's good to see what's happening there. On the Blockchain specifically, these are all pilots. Some of the biggest impacts that we can envisage for Blockchain is to make the service that we give to our clients faster, for sure, for blockchain because then a lot of the paperwork that, for example, in a trade process is still needed will become digital. Apart from it becoming faster, it will also be safer because through a digital way, we think we can manage the fraud percentage down further. And it can be cheaper because if you digitize the manual processes that are still behind some of these activities in the wholesale bank, not only in ING but as a market practice globally that you can use for all 3, so faster, safer and cheaper. How will that impact the wholesale bank costincome ratio? It will just add to a further efficiency increase. But as we use most of the efficiency increase in the Wholesale Bank to also grow the front office in order to support the growth of the lending book, whether you're going to truly see it back in the costincome rates per se, I can't say yet. I mean, that's 1st, weigh the results of these pilots and see whether we can actually come to market standards because I mean, there's absolutely no use to have a blockchain standard in the banking area if it's not open, if it's not open to third parties, if it doesn't become a market standard. So before, it will really help your costincome ratio from a market standard, and then OpEx will benefit from it really. Thank you. From ABN AMRO, we have Mark Clouis with our next question. Please go ahead. Good morning. Borkelis, ABN AMRO. I've got a few questions. First of all, about the Netherlands retail. We saw there the RWA is coming down by 3 €200,000,000 per quarter. You mentioned it's due to risk migration in mortgages and business lending, but it's quite a material decline also compared to previous quarters. Could you, actually, mention what happened especially this quarter? And also, RWA waitings for Dutch mortgages, Belgium mortgages and the German mortgages? And my second question is more related to the regulatory expenses, which were €845,000,000 You had the release in Germany, of course, of around €15,000,000 Is it a future run rate and around €800,000,000 Should we think about 'seventeen? Those were my questions. In the Netherlands, you got to remember we have an estimate of your trade book and runoff, which is the runoff part of the new ones you can see each quarter. And you are seeing house prices improving, so there's some impact as well, a positive credit inflation is small, partly overall trend it's helped. I think average rating stayed the same at around 12 in the Netherlands. SME lending continued to decline for us. It's not something we particularly like or want, but we do see a number of portfolios of high NPL still, so we're trying to get the risk reward trade off right. But the outstanding balance which is probably driven to by the Fenus rig. Yes. To add to that, Cor, the risk weights on Dutch, Belgium and German are 12, 18, 22. The average weighted is 16. And following on from Patrick's comments on the business lending book in the Netherlands, I mean, the absolute level of NPLs and risk costs is still not quite positive. The trend is positive, but also contributes to the change in risk Okay. And Cor, on regulatory cost, well, you never know what new incoming governments kind of may pursue. If what we currently know stays, then the run rate will not be around €800,000,000 but will actually increase with the volume increase of our activities really. So because some of these or most of these are related either to balance sheet size or liability size or the size of the savings portfolio. So with the other, they are volume driven. So that's a good assumption, assuming that the programs that are currently running on the regulatory side will stay as they are. Okay. Thank you very much. Thank you. We now move on to a question from Pavel Tsiecic from Goldman Sachs. Please go ahead. Good morning and thank you for the presentation. One question on Financial Markets and then one follow-up on regulatory cost. On Financial Markets, it looks like it was a decent quarter, but over the years, your adjusted and underlying pretax profit has eroded. When you look forward to 2017, are you more hopeful that Unit can see some earnings recovery going forward? And on then on the bank taxes that you just mentioned, you said that politics remain one big uncertainty as to the level they're going to be going forward. But could you perhaps comment on that a little bit more? Do you see risk only to the downside of higher bank taxes that it was the case in the past? Or perhaps you hope that the levy can be lowered in the future. We've now seen a few examples of European countries where authorities managed to strike a deal with banks of lowering bank taxes? And it also seems that bank profitability is much higher on macro potential agenda, which would support such growth. Yes. Pavel, on Financial Markets, yes, we're very happy with the performance of Financial Markets in the Q4. We're specifically happy with the performance financial markets given the fact that over the last couple of years, it has been transformed really towards a business that is very much focused on client activity and supporting our clients. Now that's what we've seen in the Q4 on the rates business, on the FX business, on the equity business, good performances there. Now on a return basis, on a return on equity basis, we still do see room for improvement in our Financial Markets franchise, and our team is working on improving such. What we can see is that with improved client focus, with a further alignment between the different activities that we have in the Wholesale Banking, we actually think we can move the business forward and improve the profits going over time and returns over time. And that's what the transformation of the Financial Markets business is and that plan is really aimed at. On bank levies, it's honestly, I think it's a mixed picture. We've seen Poland actually coming in with higher bank levies. We've seen Belgium coming in last year with higher bank levies. And we see markets like Germany and other markets with decreased bank taxes. So it's truly a mixed picture. I don't think there is you can talk of a trend yet here. Are you right in terms of saying that there's sufficient new laws and new safety valves in order to make sure that barriers don't need to be built out, but they can be built in. And therefore, they are less and less reliant on being saved by governments. I fully agree with you. So therefore, the real reason to have banks levy specifically in the form of bank taxes, That argument has gone. But it doesn't mean that the bank tax itself will go. This progressive argument for levying them has gone. That's very useful. Can I have just one follow-up on your comments around transformation of Financial Markets Units? Should we expect a further risk weighted asset decline going forward? And could the magnitude be similar of the level of decline of risk weighted assets that was recorded in 2016 or perhaps at the run rate that we've seen in the Q4? No, not necessarily. When I'm talking about the transformation, clearly, there's a further focus on specific products, but it's also about centralizing some of the trading activities in one location rather than 3, taking out the cost and systems and support, for instance, further focus and a further alignment in client focus. It's all of that in order to actually stir up the results, but not necessarily to further decrease the growth rate assets. I mean, if there's more business to be done, we will do more business at the right return. Thank you. We take our next question now from Alicia Chung from Exane. Please go ahead. Good morning, everyone. Just a couple of quick questions for me. First of all, on the subject of rising rates, could you just give us a sense of what the impact would be on NII if the ECB were to increase their deposit rates from the current minus 40 bps to, say, 0? And also, on the same vein, more generally, what would you see as the sensitivity of capital to rising rates? And then if I just have one more. Some banks have started to talk about the TRIM process. Have you started this process? And can you give any color as to what will entail for ING and a little bit about timing and process? Okay. On NII, like I said earlier, small reductions in our increases in rates are to be welcomed. And it's fine. I would hope that the economy is performing better and the stimulus needed just below it. But I can only repeat that, certainly for 'seventeen, a small increase is unlikely to be that's visible in our results. We take a long term view in behaviorizing our savings. They are invested over multiple years. That's tranche. Lending is match funded at initiation, so directionally positive. We don't see 40 odd bps, that's our example, having a number of impact of NII that you could spike out now. In terms of capital, we disclosed in the press release those every quarter mark to market of debt securities and equities. So mark to market of debt securities is about $1,000,000,000 or $2,200,000,000 That would be impacted by rising rates were it to happen this year. Next year, you have IFRS 9 and the county may well change. It may vanish to disappear. As we published the number, again, within our capital at the moment, there's €1,200,000,000 of mark to market on bonds, which obviously subject to be influenced by rising rate. Trillie, for us, that will start in April, and it will start on the retail business and our models. And it's obviously very hard to predict what the outcome or implications went to be even prior to process starting. If you're thinking in terms of operational costs, we tend to do most of these things with in house people. So it's unlikely that you'll see spike in cost because of this exercise, but it does, of course, mean workloads and shifting of priorities from other things to this. If it has operational implications, I don't think you're going to see much in the numbers. I guess that it's very early to talk about impact. Mark would make on that is the actual net impact of whatever changes we make at the most positively we have the improvements that Basel IV exactly does. But the floors under the the lab comes are going to be calibrated. It may well be that the outcome of this exercise is going to be blunted quite a bit by what comes out of Basel IV. But again, we don't know where either is going to land. So it's just speculation to say more. Thank you very much. And just on that last part, do you have a sense of when the TRIM process will be finished as well? Or is this sort of just an ongoing? No, we don't exactly. We do know that the initial assumption has been that this was going to be 1 from Redburn for our next question. Two questions, please. The first one on volume growth. Interesting to hear you mentioned having an ROE hurdle rate when you conduct new business. Could you let us know a bit more about that, what ROV hurdle rate you actually target? And maybe just if you could make a couple of other comments around the same theme. I mean if I look at ECB data about where new loan rates are in most of your core markets, particularly on corporate loans now, 1.3% and 1.5%. It's quite difficult, I think, without starting loan rate, if I think about your funding costs, costincome ratio and your through the cycle cost of risk guidance to get to a bottom line margin, which gives you a very sensible ROE. So just be interested to hear whether or not that's the right way of thinking about these available loan rates that we can see. The second question, and sorry to come back to this net interest margin question and particularly around interest rate sensitivity, but you can tell there's a bit of confusion aside. One really helpful theme, if you'd be happy to elaborate on, would be this structural hedge on the deposit side. I realize you're not too willing to give us NIM guidance beyond 'seventeen, but the big variable for us really is to understand quite how big a contribution to net interest income the structural hedge makes. And therefore, if we can get an idea of the duration or the size of it, we could probably begin to understand better where long bond yields need to be for us to expect NIM compression or expansion? So any more guidance on that would be much appreciated. For quite some time, ING has operated on pricing for cost of capital. And it's no surprise that we're delivering 11.6 percent return on equity, which is progressively increasing as the slide shows. So the pudding is in the eating. But I don't know why you have a question about it, but we're delivering it. I would also point out the group as well as a 10% flow, not only is the bank delivering return on equity because it managed to do so, the group is also delivering it. The mechanics of that, we disclosed in the press release the ROEs by segment. For those from subsidiaries, we measure it on what they have in equity. For those who branches, we measure to be imputed from RWAs. Typically, we use 12%, in which you have to make a minimum 10% return. And the combination of business and the lending and fees and ancillary services delivers more than 10%, as you can see in the results. I think you're confused. I don't know where you get this point about structural hedge. We don't have structural hedges. I think that may be some feature of U. K. Banks. We've never talked about that. We don't have it. We simply replicate our deposits to the behavioral maturity. So both of our deposits are sticky long term. Once they may be available on demand, they stay with us. We do statistical measures linear regression to measure their stickiness through time and then invest those at the behavioral maturity, which is typically 3 to 4 years. Very simple tranche of deposits comes in, it's sold to Treasury at the behavioral rate that's back tested and validated. And then Treasury will place that into the market typically with interest rate swaps. Then as well, if it's a 3 or 4 year loan, you get the 3 or 4 year interest rate and credit margin on top. And the business has to make the margin over the cost of funds that the Treasury provided. It's a pretty simple basic ALM process, and there's no fancy hedge on top of it. Us. That's really helpful. I suppose the interesting part from our side is that 3 to 4 year interest rate swap because presumably, as that rolls off and a new interest rate swap is taken up, that there is a bit of lost income on that price. The cost it's a constant process that happens every quarter across multiple geographies. It's broken up. So it's not in lump sums. So that's why over we are able to address and mitigate lower rates because it's a slow process. It takes very many years to flow through. There's no onetime lump sum cliff effect. Understood. So it's over the past 2.5 years, and this is how we've been managing it. So as the deposit has come down, we've been able to trim deposit rates and hold deposit margins broadly stable. And we'll continue to be able to do that through 'seventeen. Understood. Thank you. Thank you. From Citigroup, we have Stefan Nedialkov with our next question. Please go ahead. It's Stefan from Citi. Two questions on my side. In terms of the savings rate in Germany, is there a reason why you're sort of 20%, 25%, even 30 bps above competition? Is there a strategic reason for that or a competitive reason that you can share with us? And my second question is on risk weighted assets. Again, just following up on the better than expected capital in 4Q. In the footnote to the presentation on Slide 28, you mentioned that 18 basis points positive was driven by regulatory items in CVA, IWA and negative 14 bps was driven by model updates. These on their own are quite large swings to my mind. Obviously, they do offset each other somewhat. But if you can just give us some color on the 18 bp regulatory item RWA movement and on the 14 bp model updates, that will be really good. Stefan, it's Ralph. On your first question, well, the way we look at savings rates, particularly in a market like a challenging market, yes, we certainly look at competition. We look at the competition that may also be challenging the incumbents. We look at our own position, challenging the incumbents. We also look at the client relationship. So savings is not necessary savings is not necessarily a product per se. It's also a starting point of a relationship that will evolve into a private relationship and therefore, will create value over time. And that's why we launched our strategy presentation 4 months ago, this formula, so that you understand a little bit how we go about growing the number of customers, getting them into private relationships, see what the cross buy opportunities are and manage the product value. So it's kind of a it has more aspects than just to compare it to the competition and whether we should match it or be a little bit above. Having said all of this, even with paying a little bit more than the competition there and rewarding our customers a little bit better, we are more efficient. We have a lower costincome ratio by far. Ours is about 40%. The next batch competitor is around 70%. The returns are beyond 20%. Return on equity in the German business is 25%, 26%. So we seem to be able to run a very efficient shop with very strong, sticky client relationships and not only producing P and L for today but also for tomorrow. And that's the way to build the franchise. For the risk weighted assets question, I'll turn to Wilfred. Yes. Maybe, Stefan, rather than going into this one item regulatory note, let me just give you a quick breakdown of the deltas in Q4 that might be the easiest way to look at this. So net net RWAs were up by €1,600,000,000 In that is a currency effect of a plus or about €3,000,000,000 So if you take that out, then you end up with a minus roughly €1,500,000,000 And the composition of that, at least the major components, are positive migration, minus 2 and a bit. It is the sale of our Kotak shares, minus 1. Then there is one that probably falls in the category that you were referring to. That is the risk weighting due to the CBA, which goes down by 0.6% in terms of risk weighted assets. Then there was a reduction in operational risk capital by 0.7% an update of the external ORRIG database that the bank's used. And then model updates, the other one that you're referring to, a total of 3.1 net. That consists mainly of some adjustments to some of our low default portfolios where, for example, project finance, we increased our balance in LGD. On Spanish Mortgages, where we have hardly any defaults, we increased somewhat. And there was a reduction in there on some of the models RWAs for derivatives. Net net, that comes down to the 1.6% that you see. I hope this helps you understand these swings. Yes, absolutely. Thank you. Thank you. We move on to Anton Krayochok of UBS for our next question. Just two questions, please. The first one on the Dutch mortgage market. Lending from banks to touch households has been on declining trend for about 4 or 5 years now. Do you think 2017 will be an inflection year from the volume growth point of view? Or do you think that, that market will keep shrinking this year? And the second question is, and sorry again to come back to the topic of the interest rate sensitivity, but just to summarize Patrick the points that you've made around deposit margins. So your back book is hedged. The front book is influenced by 3 to 4 years' operate. And if those improve, it takes on average 3 to 4 years for that to fully price into the deposit spreads on the back book. Is that broadly a message on deposit pricing? Thank you. On the Dutch lending to households, the well, it keeps shrinking. If you're looking at our portfolio, it is shrinking. That's a combination of a couple of things. The first one is that our book is shrinking because we are transferring an old portfolio to an end on an annual basis as we have as has been in place for quite some time. And that will continue until that portfolio has been completely transferred. So that's one explanation why our portfolio is shrinking in terms of lending to households in Holland. The second one is that our new production currently is lower than average given the fact that we are a little bit more cautious with pricing the long end of the market. So at the end of the part of the market, it goes beyond 10 years. So a little bit more cautious than some of our competitor competitors. And therefore, our new production is a bit lower than the repayment in of our portfolio. I would say that I do think that the total housing market is still and the trend there is still subject to a drive towards a lower LTV. And that drive will have an effect on the market that this will not be a super growth market, at least not in our portfolio. So that's just to explain how our portfolio is developing there. Our approach to asset liability management is pretty standard. I've seen it first when I came across, it was 25 years ago. So this is nothing super sexy here or really sophisticated. It's pretty basic standard ALM. But perhaps if you want to go through it in more detail, maybe it might be better to do so with IR after the call, Maury. Okay. But just maybe I shorten my question to just one simple sentence. Are we right to assume that it takes 3 to 4 years for your savings deposit margins to improve when interest rates rise? No. Well, I think the way it works is that this is a continuous process. So it's a combination of new money coming in and the way you price new money coming in, the book that you already have, how you price that versus the replicating yield for the matched kind of behavioral teller for that piece of the business. And this is a continuous process through which we adapt the replicating rate to the portfolio and the difference between the replicating rate, which is subject to change on a continuous basis, And the difference between that and the rates that we pay outside, both for new money and the existing money, that is what determines the margin. So it's a continuous process. So if you see a steeper yield curve, not so much a higher rate altogether, but you see a steeper yield curve, you can expect to see that coming back into our margins. If we would not give if that will not translate into a higher rate that we pay to the customers. So we'll manage more or less at the table margins as we have done so over the last couple of years going down in terms of rates. And you can expect so also from a competition perspective that some of that and also will kind of that we will need to pay that also to our customers. And honestly, they should benefit from some of that as well. Got it. So is the relationship between deposit pricing and the reference interest rate? Exactly. We now move on to Alex Cormier from Natixis for our next question. Yes. Hi, everybody. Just two follow-up questions from my side. On Basel IV, assuming there is no agreement because I guess today there is just too much difference between what should be the flow I think that we can have an agreement. What does that mean for European banks or what does that mean for you in term of RWA? I mean, can we assume that the ECB could just implement some of the Basel IV proposal or not? This is question number 1. Question number 2 is on the banking union. I guess that one of your Italian peers said that they were able to transfer capital from Italy. I was just wondering if you can assume that you can now move capital early And what does that mean for you in terms of managing your business and your margin and so on? Thank you. Well, in terms of PAL4, I mean, typically, the way it works is the EC have to try these things in legislation. There's no agreement, and there's nothing to put on the table for your legislation. It would be hard to envisage how that could be, whether it's a place. But we're speculating here. So we have to see what comes out of this, whether it's an agreement or a proposal or not and whether the EC will endorse it or not. We'll just have to see what happens. And in terms of capital, I think the ECB, who make fungibility of liquidity of capital, some of their core objectives, they have made progress on this, I think, in terms of we see that they are trying certainly to harmonize capital requirements across the various Bureau Land entities in which we operate. We do see more consistency between the requirements country on country. I think that's a helpful outcome. I mean, it will be a task that will take some time to fully get there. There are still some national legislative barriers and some national discretions that inhibit them in this. And we're pleased with the direction that ECB is taking and actually that they are making progress here. Still a long way to go. But if I just can ask a follow-up question. Can you today move some capital from, let's say, Germany to Belgium or to Netherland? We can get dividends up, and then we can inject them down if needs be. Thank you. Robin van den Broek from Mediobanca has our next question. Please go ahead. Yes. Good morning. Thank you for taking my question. Most of them have been answered, so I'll take the liberty to put in a more detailed question. Again, towards the Netherlands, the residential book is down 2%. Other lending is down 3% Q on Q. Still NII is up. So I was wondering if you could elaborate a little bit more on the Dutch margin in Q4 specifically. I saw that the margin for the year is flat, but maybe there's some one off in there or that the margin just improved in the Q4. And maybe a similar question to Belgium, where you basically see reverse trends with the book being up and NII being down quite substantially during the quarter. And I was wondering if you could comment a little bit on the prepayment penalties that the movement there Q on Q. Are you seeing that rates are going up? Do you see that basically the last part of the clients that can still refinance at more attractive rates are jumping in? Or are you seeing basically the prepayment levels are dropping off compared to Q3? Thank you. So obviously, the margin is a function of the numerator and denominator. So kind of the lending, which as I said already, particularly in SME is not something we virtually want per se. Doesn't mean to necessarily lead to a decline. In Dutch, overall book has been fairly stable. Looking at it in front of me here, it's maybe moved one basis points over the 5 quarters, so it is pretty stable. As Ralph mentioned earlier, when he did his geographic sort of force in the retail space, there has been a marginal improvement in mortgage margins in a number of geographies, Germany and the Netherlands being 1. As I mentioned earlier, deposits still are something that's pressurized by virtue of the low rate environment. But again, as I mentioned before, this is a slow lead through. You asked about prepayments. The market, where that principally happens is in Belgium, a little bit in Germany, but the bulk of what we saw, I think, was around €3,500,000,000 or €3,700,000,000 year to date or sorry, 2016 in Belgium. So that spiked in the middle of the year, so it seems to be trading back off now. So in our interest result, we do have a prepayment fee, and that's included in the margin. And I'm assuming that runs on terminate throughout the short period. Now it will erode the margin further. Hence, why we're so cautious and flagged the margin pressure in Belgium because it's markets with the highest payment amongst our family. So it's an order of magnitude of 13 odd bps 1,000,000, sorry, in terms of interest income effect. Sorry, can you repeat that last part? $13 odd 1,000,000 in the interest income in Belgium that will not recur because of prepayments. That's for the full year? Q4. That's very helpful. Thank you. From Santander, we move on to Patrick Leif with our next question. I just have a follow-up question on your robo advice initiative that you mentioned earlier and generally your fee income. Do you primarily see this robo advice as a cross sell opportunity to your existing primary customer base? Or do you see this as a tool to attract a new segment of customer that you are not attracting currently or maybe it's a mixture of both? And I think related to that in terms of the financials, if I look at your fee income as a percentage of total, mine usually is relatively low like 14%, 15% of your revenues from collections. And your commission income growth is usually broadly in line with NII or volume and this is what more or less what consensus has for you for the next few years. But given these initiatives in Global Advice and other fee income initiatives, do you have any longer term aspiration in terms of what is the right mix of interest income versus non interest income for you? Or can you see fee income growing faster than broadly more NII growth because of these initiatives in the next few years? So Patrick, on Robert Wise. Clearly, it's across an opportunity on one side. And on the other side, if you have the right product, every product can generate new customers as well. So whether it's savings, whether it's sandwiches, whether it's a Robo Advisor or any other brokerage service that we also do in a direct way. So new clients come in through different products. And once they're in, we try to make them primary customers because that means that they see us as their primary bank, and hence, that normally means they want to do more business with you. But we do see that given our substantial savings base in most of our Challenger markets, but also outside, that robo advice could be a real good addition to the product portfolio. And therefore, it will primarily be cross sell. But again, we will be happy if new clients come in through it as well. In terms of the fees and promotion of proportion of total income, we actually expect to debt going forward. As we launched the strategy, the acceleration of our strategy 4 months ago, we showed you a formula. And we also showed you some other numbers as well as where we expect it to go. And in the formula, we indicated that a large part of our clients currently generate interest income for us, whether on the savings side or on the mortgage side. That's where a bulk of our income is coming from as we speak. Fee income is low for a couple of reasons. First, the first reason is we don't believe in charging fees for the sake of charging fees. I think the success of ING is a challenge here in most markets is, because we want to be very transparent. We and if there is a fee to be charged, it is because we deliver at added value. Now that added value, we can deliver by offering different products going forward. And when we indicated the when we launched the acceleration of the strategy, we indicated that, yes, we want to grow on, for example, the robot product side in some of the challenger markets as well. And hence, we do think that as a proportion of total income, the fees will increase going forward. Perfect. Thanks. Thank you. Now move on to a question from Baart Horstin from Kempen. First, on a follow-up question on core lending growth in the Netherlands, especially on business lending. Looking at the economic developments in the Netherlands, they are very positive. So I was wondering whether you don't see any pickup in business lending at all. Or going forward, maybe in 2017, you may see some of that? And the next question relates to the settlement of the on the interest rate derivatives. We've seen some of your peers in the Netherlands raising the number of clients, which they will offer a settlement or raising the expectation for implementation costs. What's your expectation on that area? And there were some press reports on potentially broadening the claim settlement to semigovernment institutions, which would also be regarded as nonprofessional investors. And I was wondering whether you see that risk as well. Thank you. Yes. Bart, on the core lending growth, I'll start and maybe Wilfred will first. So we do see business standing proposals coming in, and that is increasing. They are approved with the same acceptance criteria. It's the same numbers, still around 80% of the requests are approved. So from that perspective, yes, we see the demand, and it comes in. And from a portfolio perspective, though, we do see companies still repaying their outstanding. And we have write offs, right? Just to for you to remember that the NPLs in our core lending book in the Netherlands are still close to 7.5%. So it's not the best book. I mean, the core lending book in the business in the Netherlands is one of the worst books actually globally. It takes some time there before you can really see an improvement, both in making sure that risk standards are accepted, but also the growth because the NPLs cause caution and also cause continuous write offs there. So that before you see a uptick in the portfolio perspective, it may take some time. Clearly, we hope so because more demand should cover that, and more demand means there is a true economic growth. And yes, we're happy to support so. Guilford, do you want to add there? Rolf, I think, has summed it up. The one bit of color that I would add to it is we shouldn't forget when looking at these numbers that they do include the short sea shipping book to a very large extent sits in this business lending environment, and that does have quite a big negative impact on the overall number. The underlying trend for the nonshipping part of this book clearly is more positive than what you see in the overall number. Okay. Thanks. And then on the IR derivative settlement, As you know, in comparison to some of our colleagues, we've been a very modest we have modest portfolio of issues here. That doesn't mean that every issue should be taken seriously. We do take every issue with a client seriously, so we're taking care of that. But the issue is just not as big for us as it is for some of our colleagues. On the expectation of the provisioning, I think Patrick has an update there. Yes. I mean, we took provisions in the course of the last year, early on in the year, which were more than sufficient. And the framework was finalized at the end of the year. And what we've done is consistent with that framework and visions we're out of within that context. Maybe a short remark on the semi government. I mean, the worst market was in the press about that. The situation there is that pretty much all of those clients have been classified as professionals. And that is the approach that we will take in that discussion if it arises. We do have 1 or 2 more questions, but the question is not coming through at the moment. So bear with us for a second. Okay. So either either we don't get the questions or they're not. Any questions for the ones who still have questions and we have not been able to answer them at this moment in time, our apologies. Clearly, our IR team is available to you to also for more detailed questions. Please take that opportunity. Just to wrap it up, 2016 has been a real good year. Customer growth, 1,400,000 customers lending growth, €35,000,000,000 savings growth, €29,000,000,000 leading to an underlying result of almost €5,000,000,000 So you see healthy growth coming through. You see an improvement in capital at 14.2% CET1 for the group. You see a healthy return on equity, 11.6% for the bank and 10.2% for the group. And you see an attractive dividend. So I think we're kind of delivering on our targets and ambitions on all accounts. Thanks very much for your attention and taking the time to go through these results with us. Again, if you have more questions, please raise those with IR. Thanks a lot. Have a nice day. Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.