Good morning. Good morning, everyone, and welcome to the ING Group Investor Day 2016. My name is Malcolm Brown. I'm head of investor relations. Now, it's wonderful to see a lot of familiar faces in the audience, and I particularly want to thank all those of you who've traveled to be with us in Amsterdam today. Though I think it's been a little harder work for some because a flight from London City was canceled this morning, we have lost a few people. I also want to welcome our global webcast audience. We've put together a really good program for you today. Of course, we have a number of presentations, but we also have plenty of time for Q&A, and I know you all like your Q&A, so I hope you've come prepared with lots of questions for our management team.
The first session starts with Ralph Hamers presenting his strategy update, Accelerating Think Forward. That will be followed by Roel Louwhoff, our COO, talking about the digital transformation. Patrick Flynn, our CFO, will explain how we're going to meet our financial targets. After that, the three presenters will be joined by our chief risk officer, Wilfred Nagel, and we will have about 45 minutes for Q&A before we break for lunch. At that point, we say goodbye to our webcast audience. After lunch, we're going to break you into two groups, one in this room, one in the next room, but you will all get presentations on our three main business units: the Benelux, the Challengers & Growth Markets, and Wholesale Banking. Again, with plenty of time for Q&A.
All of this information, your personalized agenda, and the presentations are available in the Investor Day event app, which I trust you all have on your tablets or smartphones. In fact, the mobile phone and its impact on banking is going to be a bit of a recurring theme as we go through the day. One more point I'd like to make. You probably saw in the lounge outside we have a number of stands with customer experience demos from different countries within our network. I would really encourage you to spend some time going around these demos to get a sense of the innovations that we're offering to our customers.
For those of you who happen to live in countries where, sadly, you cannot be an ING customer today, I think seeing these demos will really make a sense of what you're going to hear in the room today. All right, that's enough for the introduction. I'm sure we're going to have a very enjoyable day here together. Now it gives me great pleasure to introduce our CEO, so please give a warm welcome to Mr. Ralph Hamers.
Thank you, Malcolm. Is this mic on? Okay. Thank you, Malcolm. Well, welcome. Welcome here. I'm happy to host the first session of the 2016 Strategy Day for ING. The key points of the day are that since we started the Think Forward strategy three years ago, by focusing on our customer experience, we have gained more than 3 million new customers. We lend out EUR 56 billion. We have increased earnings, we have a strong capital position, and we actually have an attractive dividend policy as well. Basically, we're standing here in a strong position. The banking landscape is changing, and it's changing rapidly. Customer experience is changing very fast, and they accept nothing less in terms of experience that they can get with any other digital provider these days. They expect it from any bank.
Therefore, in order to prepare for the future and to continue our growth and success, as you have seen over the last three years, we're going to invest EUR 800 million in building the next generation digital bank. Investing in our digital transformation. With that, we'll build scalable banking platforms. We will also, next to catering for growth, cater for further efficiency. In the end, that should lead to EUR 900 million of savings by 2021. In terms of financial ambitions, the 2020 targets will apply to the group level going forward, and we confirm our progressive dividend policy going forward. Before I go on and talk about the plans in the future, let's just take a look at how we've done over the last couple of years. The left-hand side of the slide, you recognize fully. It's the strategy on a page.
This is something we dream about every day. This is on everybody's desk in ING, everybody's car, everybody's pillow. Some have wallpaper with this. It's the strategy on a page. It's nothing more. It's nothing less. One page of strategy. We're a purpose-driven organization to empower people to stay a step ahead in life and in business. We have a very simple strategy. Delivering a differentiating customer experience with one priority, increasing the number of primary relationships. If you truly focus every day on making banking easy, transparent, available anytime, anywhere, you will increase your client satisfaction, or the way we measure it, in Net Promoter Score. That has made us the number one in Net Promoter Score in seven out of the 13 countries in which we're active as a retail bank. The same we have as a wholesale bank in different units as well.
If you are so successful in delivering a differentiating experience and you rank number one, clients will come to you. As we have seen, more than 3 million new clients over the last two and a half years, 1.4 million primary relationships over the last two and a half years. We're almost meeting our target of 2017 to get to 10 million primary relationships. We're updating that target now to grow to 14 million by 2020. This is a picture that you know better because this is the picture we discuss every quarter with you. It's the financials. On the back of the commercial success that we have, both in retail and the wholesale bank, we have been able to extend customer lending, growing our lending at stable margins, hence increasing our net interest income.
At the same time, our risk costs have moved down to below average over the cycle. Increasing our underlying results to EUR 6 billion, and at the same time improving our capital ratio to 13.1% on a group level, fully loaded, beyond the 12.5% requirement that we have here in Holland. Just for the ones to recap of what we are, this is ING. We are a simple bank. We get savings in, and we lend it out. It is not more difficult than this. We have to do it in a very efficient way. We have 13 different units as a domestic bank in different markets, categorized around market leaders, basically the Benelux. Around challengers, our digital franchises that grow very fast. Our growth markets in Poland, Turkey, and Romania, and some Asian stakes as well, growing very fast as well.
Because of the success in the other categories, as well as in Wholesale Banking, you see that the relevance of the Benelux, of the market leaders, is decreasing. That is because we grow so fast in the other areas. At the same time, you also see that retail makes 60% of the total bottom line, and 40% is made by Wholesale Banking. Our Wholesale Banking model is also a simple model. At least we think it is simple. We focus on the things that we know very well and that we do very well. We are focusing on industry lending. I will get back to that later today as well. We focus on top corporate customers, local blue chips, and we cater for their business and service them in more than 40 countries around the world. That is ING in one page.
To show you some of the successes that we have continued over the last couple of years, and you know these. Germany, 1,000 new clients a day. Spain, 400 new clients a day. We continue to grow. The only reason why we continue to grow is because we constantly improve the way we work with our clients. It is a differentiating experience. We continue to be the number one in Net Promoter Score in these countries. At the same time, we have been able to diversify these businesses to make them more sustainable businesses, and have also grown now in the Wholesale Banking area. The growth of the client balance is that in earlier years, you saw more on the retail side.
You now see growth on both the consumer end of things as well as the corporate end of things, making them local, sustainable businesses by themselves from a balance sheet perspective. We do this, as I said, we can only do this if we continue to wow our customers with different tools, with different services. These are just a couple of examples, and during the breaks, you can experience some of these. The first one, the digital financial advisor that we launched in different countries. Next to your day-to-day banking, actually, you have forecasting tools so that you can actually take, as an uneducated, a normal retail customer, you can actually take wise and educated financial decisions yourself. Again, it is to empower customers to do it themselves. The SMEs, the ING 360, which is an SME omni-channel approach. Very successful at the moment.
You can check it there as well. On the payment side, we launched the Payconiq product. Just an app connected to a loyalty scheme as well. We've teamed up now, KBC teamed up with us as well, and we're growing this, and this will disrupt the card schemes. It's a simple app for you to pay with. Instant lending. If clients with these digital advisors can get answers instantly, can buy their stuff instantly, can call a cab instantly, they want the loan instantly. In many of the countries, we use pre-scoring models now based on new algorithms. Very successfully done now in Romania, Poland, as well as in Spain. We actually generate the money for the clients within 10 minutes. It's an application, an approval, and the money on the account. 10 minutes. That's what clients expect, that's what we can deliver.
Also on the Wholesale Banking side, on the back of the Wholesale Banking TOM, standardizing across all of the countries, the products as well as the systems and the processes. On the back of that standardization that we have done over the last five, six years, we actually provide a superior service for our clients. Our clients now have a multi-device, multi-country, multi-product information on everything they do with ING. Something that we don't talk too often about, and probably because it's so ingrained in everything we do, is the sustainability aspect of what we can do. If it comes to sustainability, we basically have three pillars. The first pillar is, what can we do as a bank ourselves? You know that the footprint of a bank is not so large. There is a limit to what you can do as a bank.
Yes, we can decrease our footprint. That's what we're doing. We have committed to take off, to basically use 100% renewable energy by 2020. That's what we can do ourselves, but it's limited. We have more leverage over what's happening in society. We run financial empowerment programs, making sure that while everybody goes digital and maybe lose the value of money while going digital. I don't know whether you have kids. My kids don't see cash money anymore. How will they ever understand the value of money? Have to make sure that you run programs to make them wise with money. Financial literacy is a big issue going forward. At the same time, the mobile technology gives you a lot of opportunities to reach clients that you would never reach. It's a mix in that program.
The third pillar is what we can do on the Wholesale Banking side in lending to sustainable transitions, renewable energy projects, you know that we've been growing that portfolio very rapidly. All of this is recognized by the ones who rate us. Sustainalytics rates us the number one in the world on sustainability. Dow Jones sees us as amongst the leading banks in sustainability as well. Just to recap of what we have been going through over the last couple of years. We had to finish the bank insurance restructuring. In total, we executed 50 transactions, generating EUR 40 billion of value. We repaid the state. We sold our insurance companies. At the same time, we launched the Think Forward program, we launched it successfully. We have the success that we wanted.
Nevertheless, we see there is a moment to start to invest for the future, which is basically now. I also realize that there is no strategy complete without a picture that gives you financial ambitions. I want to reiterate that this is not what we manage on a day-to-day basis. This is the outcome of all the efforts of our staff restructuring, transforming, developing new apps, developing new services. It's hard work. This is the financial outcome. On a Common Equity Tier 1, we want to manage that and continue to manage that above the prevailing requirements, 12.5% fully loaded. The leverage ratio, we will continue to manage that above the 4%. cost-income ratio, because of the program with commercial growth on one side and savings on the other side, we think we can manage down a little, 50%-52%.
Return on equity, we can have a long debate about this, but as long as whatever comes out of Basel is not clear, we don't think we should update our guidance. We can confirm our dividend policy going forward to be progressive in time. Basically, we're starting this new journey from a position of strength. You have to repair the roof when the sun is shining. Which puts us in a completely different category from many other banks announcing programs like this. We know how it works. We know how digital works. We have the growth. We're showing growth when nobody else is showing growth. We have the capital. We have the skills. If you look outside, you see that our customers, Wholesale Banking customers, Retail Bank customers alike, are influenced by the level of service they get from digital providers.
They set the bar, they have raised the bar vis-à-vis other industries, including the banking industry. Clients expect our service to be personal, instant, relevant, seamless. The service is borderless. Whatever you do with Uber in one country is exactly the same the way Uber works in the other country. Why would banking be different? The way Facebook works in one country is completely the same as it works in another country. Why would banking be different? If you realize that clients truly expect the level of service that digital providers can do, and that service can be the same everywhere, why would we have different service in every country? Why would we have different platforms in every country? They can do it with one platform, as the movie said as well.
We see the same trend in banking, where three years ago we saw the pick of digitization. Rapid in the Nordics, in the Netherlands. We basically see it now in about every country in which we work. You see on this axis that every country we see increase in mobile. Mobile, from that perspective, is overtaking online. The internet and going behind your desktop to do your banking stuff is moving out. First, branches were moved out, going online. Now online is being moved away for mobile. People do their banking on the go. Whereas normally they would do banking online once a week, and I'm sure that was your practice as well. Some check in with us five times a day. Five times a day. More traffic, real-time information, away from batch processing.
It seems so easy on an app, but you have to change so much in your operations to deliver it. If all these clients expect the same, and if that world is borderless, and if you believe that products are commoditized and that it's truly the customer experience that differentiates. One thing is for sure, clients don't want to spend their time on banking, but spend their time in all the other ecosystems. They love to be on Facebook. They love to go on Amazon. They love to work with WeChat. If they're in those ecosystems spending their time and not with you, how the hell are they going to think of us, ING, when they want to do a financial transaction? We have to be really appealing, and you have to create an ecosystem of your own. An ecosystem that is known for its simplicity.
Clear and easy banking, available anytime, anywhere. People should be able to bank with us wherever they are. Not just in the same country, wherever they are. If you are honest to your clients, you should also have an open platform, which means that third-party providers should be able to link to your platform as well. Like the App Store is an open store. If you can develop an app, Apple will check it, but you can go on it. It was successful. To the extent clients don't know you or are in those other ecosystems, you have to make sure you're connected to the other ecosystems. We have to make sure that our ecosystem is connected to all the other ecosystems where clients basically spend their daily lives. For them to think about you have to really have a strong brand.
We are successful, and we are recognized as a digital leader already. Nevertheless, we think we have to go to the next step. We have a very good starting position, not only financially. We have a very good starting position because of our brand, because of high client satisfaction, because we know digital, and because we already have a pan-European footprint. The challenges for us are to reduce the number of different banking platforms to one. To create one value proposition that is the same across the different markets where we work. That's the challenge. This challenge looks like a major program, and it is. Again, it is not because we're late. It is because we want to stay ahead of the competition. We will move on converging these platforms. We have shown you before this picture.
On the left-hand side, you see a picture that you've seen before. The different value propositions that we had and that we have, in the end, will all migrate and converge to one and the same. What we're announcing today is our intention to invest EUR 800 million to move to different platforms. At the same time, that allows us to build scalable platforms so we can continue our growth, we can continue the customer growth, we can continue the lending growth. We can continue our success. Meanwhile, becoming more efficient, saving EUR 900 million until 2021. Regretfully, it will also affect the number of jobs in ING, for which we'll have to take a redundancy provision. Going from where we are right now to that vision of one ecosystem is a huge step. It will cost a lot of money, and it's pretty risky.
That's why we cut this in pieces. We determined for ourselves an intermediate state of where we want to converge specific banking platforms to. Less risky, lower investments, making sure we take our current clients with us into the future and are attractive for future clients as well. What we intend to do here is that we have clusters of similar value propositions moving to the same value proposition, supported by the same platform, supported by a similar organization and a similar culture. The blocks of transformation that we distinguish are the following. First, the Orange Bridge. In Belgium and the Netherlands, we intend to move to one and the same experience, one and the same omnichannel experience. In countries like Spain, France, Italy, Austria, and the Czech Republic, we will move to a Model Bank.
We'll build a Model Bank and slowly but surely migrate them towards it. We'll get back to that later. In Germany, because of its current success, its unique positioning in the German market will have its own program to take the next step in digitalization, called Welcome. Clearly, given our success of the Wholesale Banking TOM already, you see scope for further improvements on the Wholesale Banking side. The Wholesale Banking TOM will also have a next step. None of this we can do if we don't have our foundation right, our foundation from a COO, CIO perspective. We'll move to global data management, global process management, one cloud, open IT architecture with common APIs. Because if we want to be open for the providers on our platform, we have to be able to link them.
Whether it's on the retail side with third-party providers or whether it's on the Wholesale Banking side, if you have to team up with your colleagues to provide a standard in the market based on blockchain. Because an ING standard doesn't get you very far in trade banking. You need a world standard. You have to align, and you have to connect this ecosystem. You need common APIs, open IT architecture. We'll grow some of the bank-wide shared services as well. Now, in underlying that, we've also asked all of the support functions, whether it's risk or finance, HR, procurement, IT, to come up with their own Target Operating Model indicating how they want to standardize and harmonize across the different countries. That's the picture. I'll go deeper into some of the programs now.
In Orange Bridge, we intend to move Belgium and the Netherlands onto one and the same platform. Through this, we expect to create an experience that is the best of both worlds. The Netherlands being very good at the omnichannel approach, a program we launched 2 years ago. Omnichannel being that regardless of the channel that you use to interact with us, they look the same, they work the same, they give the same information. Rather than having an environment per channel, a call center, a branch, an internet, a mobile. At the same time, Belgium excels at advisory and relationship management. That's the combination of the two that we want to create as a new value proposition. That's the intention.
The reason why we think we can do it now is, as I said before, in many of the other countries, we see that the move to digital is happening very fast, and we see that in Belgium as well. In Belgium, regardless of whether or not we do an Orange Bridge, we would have to invest in our IT to make it more digital. We do have legacy issues, and we have two brands with two separate branch networks. In this program, we now intend to move these branch networks together, to invest in IT, and then to operate as one between the Netherlands and Belgium. That's the intention. For this, we will invest EUR 450 million in this program, save EUR 550 annually, but also have to take a redundancy charge of EUR 830 million. That's the intention.
On the Model Bank, we're looking at harmonizing the different retail propositions to become one retail strategy, one retail proposition, delivered by one service organization, by one delivery organization. We see merit in this. We see merit in this for many different reasons. The first one is that, and you know this picture as well, that if we can build one platform to run different countries off, we have built a scalable platform. If you look at this picture, you see the orange line, which is the cost-to-assets efficiency line. The orange line is the branch bank line. You know that our ING Direct proposition already had a far lower efficiency curve, more efficient in cost over assets. We're pushing it even further down now with the Model Bank. That's one of the benefits. The second benefit is for our customers.
Through this, once we have this, our time to market for new products or new tools, new services, if successful in one country, it's much quicker to also introduce in another country. We're cheaper to also introduce it in another country. The third benefit of Model Bank is that once you have a scalable platform, it doesn't have to be limited to these first five countries. You can build more countries on it. It is scalable. That's what we intend to do here. Now, in Germany, we'll have a specific program for Germany, delivering on an omnichannel experience, but already becoming open to third-party providers. We're going to see how that works in Germany. Then the Wholesale Banking TOM, we'll just take the next step in improving our processes, improving our digital delivery to our Wholesale Banking clients here.
For that, we do take a redundancy charge as well. We'll save around EUR 60 million a year extra. It's a program you know, it's a program we report on every quarter. It's been successful both sides, the commercial momentum as well as the cost side. Also, we'll have to work on the operation side, as said. The support layer, but actually it's the foundation. This is where it will all happen. That's where also the preparations for the next step will happen in global data management, global process management, one ING private cloud. We will invest heavily in each and every area here, but we'll save up to EUR 250 million from that program. To sum it up, from an investment perspective and the changes we want to make, you can conclude that in the Model Bank, it's the big transformation program in itself.
We feel comfortable with that. We think we can do it. We've restructured ING from a bank insurance company to a bank. We've merged Postbank and ING Bank in the Netherlands, upgraded it, and moved to a brand-new IT environment just a couple of weeks ago. Big programs. Also, Banking TOM, it's been a program for five years, been successful. We can execute large transformation programs. We don't do the transformation programs for the sake of transformation. It's not like we're addicted to it. We do it because we feel we have a much better base to continue our commercial momentum. That's what we do it for. We do it because we are convinced that we will improve the customer experience going forward and get closer, if not beyond, what other digital providers are already setting as the bar.
How do we think we can keep up the commercial momentum? As I said, the priority in our strategy is how can we develop primary relationships. With primary relationships, I mean those relationships that you do quite some business with, because you do business with them, you know them better, because you know them better, you can do more business with them. Because you know them better, they are more satisfied. We've seen that also the primary relationships that we generate through our direct models, our digital models, are more loyal and more valuable. Hence our focus on growing the number of customers, growing the number of primary relationships, looking at how we can improve the cross-buy, introducing new products, looking at how you can create product value. That is the formula for our value proposition. Easy.
Now, in order to make this work, there's a lot of effort, clearly. Whenever we announce that we're increasing the number of customers, you should realize that over time, we will also increase the number of primary relationships. Over time, it will create more value. From that perspective, we're no different from any digital success. You onboard more clients that maybe for a moment may not be as profitable as you had expected. We sincerely develop these relationships, because they're more loyal over time, they're better than one-product customers. Again, we do this from a digital perspective, we're not talking about how we can cross-sell to these current clients. It's about cross-buy. It's the client who is in the driver's seat with ING. It's their decision to do more with us. This is what we think we can do on the income side.
As we're an open platform also to third-party providers, we can generate money through leads. Clearly, on the back of the strategy, we want to grow our lending as well. Lending in industry lending, as you know, in the sectors that we know very well. I'll come back to that later. Later today, you have a whole session with Chris Steane on that as well. Lending in consumer and SME financing, part of our strategy since the beginning, fees on the back of that lending as well. Also, in the fee area, we feel that once you start developing loyal relationships, they may be more open to also consider investment opportunities with us. Again, they're in the driver's seat. Same for insurance opportunities.
On the Wholesale Banking side, because of this primary relationship focus, be really interested in your relationship, to really know your relationship, and therefore be more credible in what you do with them, and also tell them what you can't do with them, because we're honest about it. We think we can do more financial markets business with them. As I said, a part of our strategy, as shown successfully over the last two and a half years, will continue, which is the lending growth. The lending growth in higher margin lending. Basically meaning industry lending, SME lending, consumer lending. This is where we expect things to go in terms of the balance sheet composition.
Already two and a half, three years ago, when I was on stage and we had the discussion, we indicated that we felt we had a mortgage concentration on our balance sheet. We basically told you that we would deliver on further diversifying our balance sheet. We've done so. That will just continue. At the same time, we will not only diversify in different asset categories, we'll also diversify in geographies. A core part of our strategy is industry lending. It's an area that we feel rather comfortable with. Plus, it's an area that we've been working in for the last 25, 30 years. Starting with a small team, now with close to 1,000 professionals around the globe. With a lot of history, knowing what can go wrong, knowing how to structure these deals.
With a good experience, even over the previous crisis in return on equity, as you can see. Diversified by virtue of the different sectors in which we work. On the consumer lending side, we expect to continue to grow as well. Here you see that specifically in consumer and SME lending, we've grown 15% over the last two and a half years. We want to continue this. You see that in Germany, we're gaining market share in this. We want to do this in a digital way. I've said to you before, we don't want to become an SME bank that opens a branch next to every church in every town. It's a very expensive model. We are working with different pre-scoring algorithmic solutions in order to do instant lending to SMEs.
Same time we have seen now the risk of going down in our portfolio within the risk appetite that we have set. As I said, overlying this whole thing in terms of how we want to grow our balance sheet and our lending book, there's one basically one core focus, which is diversification. Diversification between retail banking and Wholesale Banking. Diversification between the different sectors in Wholesale Banking. Diversification between different geographies around the world. That's what makes it a healthy portfolio going forward. With now risk costs that are below the average over the cycle. This is basically the picture that sums it up. We believe that the world is going to ecosystems. Clients spend their time in ecosystems. I don't know whether you know the story about WeChat, but they have 800 million subscribers, and people do everything in one app.
There's no reason for them to leave the app. How do you make sure that you get in there? How do you make sure you get connected? We think we have to move in the end to one ecosystem. That's a giant step. We determined for ourselves an intermediate step. Converging different value propositions in different countries. Making sure we take it step by step in order to improve the customer relationships. Improve the customer experience. Build scalable platforms. Continue to grow. If we do that well, both on the income component as well as the cost component, we will be able to manage the cost-income down to the 50-52 range. How do we sum this up in two pages? The first one, this is the recipe for our leaders in the different markets.
In the market leaders, we don't expect income to grow too much. If anything, it may go down. The cost will have to go down in order to improve cost-income ratio and to improve return on equity. For the Challengers & Growth Markets, we do expect to continue our growth. We are successful there. We have a differentiating experience for our clients. We get new clients every day. We do more lending every day. We expect income to grow fast, and therefore, we don't mind cost to grow. We actually hire people in these markets. With that, moving cost-income down, improving return on equity. On the Wholesale Banking side, we expect income to grow, keep costs flattish, improve cost-income, improve return on equity. That's the recipe. Now, I close with a repeat of the financial target slide.
As said, we want to manage CT1 above the 12.5%, currently at 13.1%. Cost-income going down to 50-52%. Leverage around 4% and higher, at least above 4%. Our return on equity will wait for regulatory developments, but we do confirm progressive dividend policy. With that, I probably have set the stage and summarized a lot of the presentations that you will get today with much more detail and a lot of room for Q&A as well. I'm only the storyteller, we have 52,000 people working on this every day. They do an incredible job. One of the persons who's going to do an incredible job also going forward is the Chief Operations Officer and Chief Transformation Officer as well, in the board, Roel Louwhoff.
Thank you, Ralph. Great to see everyone gathered here today in Amsterdam. I don't know many of you, so I'll just give a brief introduction. I joined ING around two and a half years ago, coming from different industries, different backgrounds. I was asked at that moment in time to help ING to standardize, to improve the customer experience, to drive up the efficiency towards better levels. I'm honored to be asked now to run this ambitious program as Chief Transformation Officer in addition as well. If you look at what I'm going to tell, it's all about the what, the how, and the when. It's around details that we will discuss on what we will do by when and how will we perform them. If you think about it, convergence is nothing new for ING.
2014, we already said we were going to converge as a first digital bank. Actually, I think we have achieved it. Ralph already showed some of these numbers. On the left-hand side, you basically see that we have seen a growth of 57% in mobile contacts in the last six quarters. 98% of all of the retail contacts that we have on a day-to-day basis are basically already digital. There are a few countries where we basically see that a lot of the activities we do are already just from a digital-first perspective. From Belgium, Australia, and Spain, the normal channel to be used there is actually the mobile. Then we have a few countries, Turkey, Romania, Poland, Luxembourg, where actually we see growth of beyond 100%, far beyond 100%.
We also see that where it used to be a sort of a push, you needed to do something with digital, we're now going to get a pull with technology developments that are happening at this moment in time. The world is revolutionizing. Just think about trends like smart mobiles that you use every day, the power of algorithms, user experience that's flowing seamlessly across devices and channels, then artificial intelligence that is starting to predict your behavior based on what you do today. That helps us to get to the scalable platform Ralph was talking about. What we see in the future where we need to emerge to is a world where physical and virtual has been merging, where customers are going to cross all the channels and devices they have. Where artificial intelligence and algorithms powered by smart machines will actually interact with customers themselves.
All of this enabled by all the channels that we have, enabled by customers that can absolutely deliver on all of these promises. Why do we think we can take advantage of all of this? Simple reason, because this is a company with digital in their DNA. We have been working digitally already for quite some time. We are able to really progress on that. The promise of it is what Ralph said. The promise is that actually we're opening up our ecosystem. Instead of just working on it in ourselves in the countries that we operate, we are able to reach out and get into other ecosystems as well. What I will discuss with you basically is how we're going to do this. Ralph talked about convergence, the fact that there are four value propositions that we migrate to.
In Netherlands and Belgium, the intention what we have there is to move to one back-end. We are going to make sure that our processes on top of that back-end will deliver towards the value propositions, therefore, the activities that we sell and service our customers with at the front-end. In Model Bank, we're going to move five countries onto one platform, operated from one location, making sure they have one digital front-end, which we already have developed called Genoma, deploy it for the rest of the countries as well. Germany, Welcome, is going to help us to digitalize back to front and front to back, having a new front-end helping us to attract even more customers. Also bank will just continue what it has done very well and move forward.
The power of this strategy is that what we're not going to do is build four monolithic systems. What we're going to do is modularize it. Each and one of these value propositions will build part of the proposition that we will need in order to get to one scalable platform. These modules will be built progressively over time and consumed by all of the other units as well. How we do that's the foundation you see underneath. Global data management, global process management, a private cloud, the modular architecture, supported by the shared service centers that we have, and the Target Operating Models underneath. I will discuss each and one of those in this presentation. Data management. As you can see out of the story, data is key for us. It's already key. It's key for our customers.
It will be even more key for our customers going forward, it's also key for what we do internally and towards our regulators. There are two elements of data management. One is you need to have the technical capability to deliver all the data at the right moment in time. The other element is the business side of it. In the first one, we have chosen a technical capability called data lakes that we are implementing in each and every country to really make sure that by 2019, we're able to pull all of the data out of the systems that we have in order to deliver to the front-end wherever we need. We already have data lakes in Germany, Poland, and we actually have them for group services as well, for where we cater for all of our support functions.
We're actually converging at this moment in time our data lakes in the Netherlands, Belgium, and Wholesale to get at that exactly the same back-end. We started to build in Spain, actually this week, we're going to start Italy and Romania. The rest of the countries will sweep up by 2017. The last three countries, Spain, Italy, and Romania, and the coming ones in 2017, all will be built directly on a private cloud, giving us already the ability to start sharing data across. The business management side of all of this means that we are making sure that we have all the same definitions going in each and every country and function that we operate in. Also making sure that those definitions can be translated from the country in their local language towards a central capability. That's what we call Esperanto.
We have developed Esperanto to really make sure we can cater front to back for all of the regulatory requirements that are needed. All of this will basically give us 95% of the core data flowing directly from our source systems toward the front-end, where we need it at any moment in time, according to the definitions we've set. Taking out quite a lot of manual activity we currently have in order to make sure we have the data, and also make sure we reconcile it in the right way. Modular architecture is the core of what we do in this. We've developed an architecture called TPA, TouchPoint Architecture, which basically consists out of five core modules.
Around that is our open API, the infrastructure that connects not only those five modules, but also enables us to connect to the outside world and backwards, making sure we can deliver on the promise of the ecosystems we said before. As we said, these modules will be built in each and every of the value propositions that we work on. Making sure that those value propositions will deliver not only on those modules, but will consume the modules as well that are built in the other value propositions, therefore, already catering for the possibility after 2019 to converge onto one big platform. Then we've got our private cloud. Private cloud is live in the Netherlands, and the first applications are running on it. We already have private clouds in Australia and Poland, and we're going to make sure they're all going to work in the same fashion.
We're going to use the same strategy for our private cloud, meaning in all of the value propositions, when we develop the applications, the modules that I was just talking about, we're going to make sure that we built them directly on a private cloud. So we only have at that moment in time to move the data across and not the old applications as we have, which makes it far more efficient to get it done. That means by 2019 75% of all of our applications will be on the private cloud. 15% will remain in different activities, different systems, and 10% will remain local. It enables us to basically go 10 times faster in deployment of new applications that we have in mind. All right. Can we go to the next slide? Global process management.
Global process management is basically all around making sure that the propositions we deliver in each and every country will become similar. Not the front end, not the proposition itself, but the way how we deliver it. That means that we have chosen 11 processes we're going to work on. We used to work quite a bit according to product or value chain, as we call it. We've changed that. We're now working along customer journeys, delivering end-to-end for a customer. Those 11 customer journeys, we have identified over the last year how we do compared in each and every country. What we learned is that we do things really well, and we have room for improvement. So let me give you an example. A customer loan. In a country, it takes us 10 minutes end to end. We have also countries where it takes us 10 days.
What we're now going to do is to really make sure that on average, four days that it takes us now, we're going to bring that down to one to two days. Where possibly, obviously, we'll move to instance. But there might be regulatory reasons, there might be the fact that we don't have all the data available to us, that that's impossible. But overall, driving the efficiency quite higher. That means that we're also going to deliver 20%-25% efficiency savings in each and every one of the processes that we touch. We're going to deliver 20-25 customer satisfaction improvement, and between 15% and 20% employee satisfaction improvement as well, all at the same time when we touch these processes. Shared services. We already have four locations from where we operate from. Manila, Bucharest, Bratislava, and also Katowice in Poland. And they're very successful.
Actually, a lot of the IT activities and a lot of the activities from Wholesale Banking are operated from there. We're going to do is to see what other activities we actually can migrate to those locations. We see if we cater for them in one location, we have better control, we can drive better efficiency, and those are markets where still skills are available that we need, and we can't get in the markets that we operate in. It's a big opportunity for us to drive some efficiency going forward. We have our Target Operating Models and business support functions. We're going to do there is really make sure that we understand how we end-to-end can deliver better for that specific function.
We've come up with a model where we basically look for each and every Target Operating Model to tell us how they're going to deliver the customer experience, what tool set is needed, what the processes are that are needed, and what they're actually going to deliver. That will deliver us best-in-class or top quartile performance according to external benchmarks by 2019 for each and every one of these functions, driving overall efficiency up by 20%-25%. In order to deliver such transformation, which is different for us to some extent, we have done transformations in country, in functions. This is going to be cross-border, cross-function, and actually make sure that the foundation underneath is completely similar across the globe. We therefore said we need to have a transformation officer helping the MBB and everyone else to start delivering on the promises we've made.
We've come up with a structure that we'll work in, we also make sure that the ING strategy is actually developed into all sorts of teams that will deliver our transformation key success factors and key performance indicators, in addition to the operational indicators we use on a day-to-day basis to deliver the value that we have in mind. We're going to work in an agile fashion, i.e., every 90 days, we're going to look back and see what it is that we have promised, what we have delivered, what the difference is, and how we're going to mitigate it. We're going to make sure we understand what needs to be delivered in the next 90 days as well. All of this will basically mean that we're going to build this exciting journey of a global scalable platform that can reach out to the world.
For that, we need investments of EUR 800 million, as alluded to already, savings of EUR 900 million by 2021 will be achieved. This is all on top of 2015 as a baseline and on top of current budgets and the programs that you already know. That's more around the details around numbers, that I'm gladly to hand over to Patrick to discuss more around those. Patrick.
Thank you, Roel. Good to be here. Good to see so many familiar faces. Roel may not know you well, but I do. You know me well. When we've been talking in the past, one of the most prominent questions you asked me, how will you navigate a low rate environment? Not the first, it's the second question. I haven't been able to answer you. I've given you hints. I'm answering you today. ING can navigate what we expect to be a low rate environment, a prolonged low rate environment, and deliver EPS growth. I'm going to tell you how we're going to do that. First of all, we do it, as Ralph said, from a position of strength. We've got a lot that's working very, very well. We've got strong momentum. We don't have to fix much about moving forward.
We have the capability to move forward now, and we are. The strategy's working. Ralph talks about the customers and the customer growth. You guys think of lending growth. One comes with the other. We have strong lending growth. You've seen it for the past couple of years. Guess what? We're going to keep doing that. That strategy is working. For the 3%-4% lending growth, we're going to keep it up. In addition, as has been explained before, we're going to take the digital strategy to the next level. We're going to invest EUR 800 million in a digital transformation, which will deliver us EUR 900 million of cost savings, and we'll get to 50%-52% cost-income ratio. We're from a position of strength moving forward. We're taking it to the next level.
Yes, that will require a restructuring provision of EUR 1 billion we'll take as a special item in the fourth quarter. We're talking about commitments and new promises for the future. You guys, by nature, are skeptics. I can see it in your faces. Who's smiling and saying, "Yeah, you can do it"? You're all skeptics. Let's look at the promises we made before and see how we've delivered on them. The last time we had an Investor Day, we put some ambitions on the page. We said, Core Tier 1 ratio, we'd get it above 10. Well, we have. It's at 12. We said we'd meet a leverage ratio requirement. You used to be worried about that, but you don't talk about it anymore. We've done that, too. You talked a lot about dividends.
We said we'd introduce a healthy dividend policy, EUR 0.65 progressive dividend. We did it. cost-income ratio, no, we're a little bit off. You know the reason for that. It's been the huge ramp-up in regulatory costs, which we think are broadly peaked. Growth in that from here forward will be more linked to organic growth. We're going to make that in the next cycle. Probably the most important of all is ROE. We said we would be 10%-13%, and we're near 12. Not only have we grown our capital, increased our capital ratios, we've consistently grown return on equity. That doesn't happen by accident. That happens because we run ING, deliver returns in excess of cost of capital. We're going to continue to do that. I'm going to go back to the strategy again.
The numbers come not out of a box. They come because we have a strategy that's working, and the strategy is delivering. Just examine what that strategy's been doing for us up to now. It's been delivering EUR 56 billion of lending growth on the back of strong customer growth. It's delivered EUR 67 billion of deposit growth. It's delivered top-line revenue growth in what you all know has been a really tough environment. Yes, risk costs have come down, but we've not compromised on risk standards. On the bottom left, we have a consistent pattern of profit growth. ROE goes up, not by accident, by design. As I said, probably the thing that differentiates us and our strategy enables us to do is to grow lending. Grow lending, own originated lending at healthy margins. That's been a key driver of NII.
The net interest income has grown steadily in line with our ability to grow lending. Also, it's really helped that we've managed to keep our margin stable. How we manage margin, interest margin. Couple of levers. We have trimmed deposit rates as market rates have come down. As you can see on the right, there's further room to do that, particularly in the Netherlands and Germany. In addition, again, one of the things we said in 2014 is that we would increase the proportion of higher margin assets within our balance sheets, particularly our Challengers & Growth Markets where I'll show you we're growing, and reduce the amount that's in liquid assets, idle pending investment. We've successfully done that. That really helps. Interest margin. Yes, we've held it stable through a combination of measures.
Even though we expect it's likely that rates will stay low for some time, we believe that we can hold interest margins stable-ish, high 140s, for the next 12-18 months. If the rates stay low and there is some decline thereafter, we are responding. We're responding now. What are we going to do? We're going to continue to grow lending, as I talked about. We will diversify our income sources, more fees, and we will deliver more on costs. Yeah, linking back to what we promised before. What do we say in the strategy? We talked about increasing the composition of higher margin assets within our portfolio. These are unoriginated. Here's some of the evidence of what we've achieved. Wholesale Banking. You'll hear more about that this afternoon.
I've talked about this is a 20-30 year investment in people and skill sets. 16%-17% growth. General lending, 8% up. Consumer lending, 14%. SME, not particularly exciting, 2.6%. There are some markets where the returns for SME lending have not met our requisite returns, so we did not pursue growth. In other words, it's disciplined. It's not about growing everywhere with everyone. As I said before, we try to grow to achieve terms of cost of capital. If we don't get them, we're disciplined. I think there will be further opportunities in SME going forward. In addition to top-line NII growth, we intend to grow fee income faster than we'll grow NII. We do intend to grow NII, even if we see NIM falling. Got that? The fee income come from a number of sources.
We intend to, as mentioned before, develop our capabilities, digital capabilities and advice. We intend to do more insurance linked to mortgages and consumer loans. More opportunities Ralph mentioned in Wholesale Banking to sharpen up on fee growth, also payment fees, account fees. Here, we're going to be selective. As was mentioned earlier, we have a pattern, a history, a track record of delivering primary relationship growth. We're building a customer franchise. That's an endowment value. We're building value for the future, building primary relationships. We have commercial momentum. I don't know if you saw the slide, but the biggest number growth is 10 to 14 on primary customer growth. We're not going to necessarily stick in account fees in franchises where we have that commercial momentum.
It's a balance here between, yes, getting fee income, but also investing in franchises and allowing that growth to continue. Costs. The programs we mentioned, it's a package really. There's interlinkages between them. Just to briefly run through them again, you've heard what they are before. Orange Bridge, the Netherlands, integrating two platforms to one best-in-class omni-channel capability, EUR 550 million cost savings. Wholesale Banking TOM, Target Operating Model, you've heard about it before, another EUR 60 million of savings in addition. Roel mentioned the various initiatives were taken in Target Operating Models, the cloud, et cetera, EUR 250 million of savings. Model Bank, five countries, and also Germany. With the Welcome program in addition. This is an investment in building scalability. It's not about cutting costs, it's about ability to grow the customers, primary relationships, without growing costs as fast as we've had to do so before.
Gives us more scalability, more leverage. What do they all mean? As you heard previously, we're going to invest EUR 800 million, deliver EUR 900 million of cost savings. That'll get us to the 50%-52%, but it will require a restructuring provision of EUR 1 billion, which we'll take the fourth quarter. It means 7,000 FTEs, unfortunately, will be leaving. Risk costs. A slide you've seen before, so I won't spend too much time on it. Risk costs are trending down in line with the environment, but important point to reiterate, the lending growth is not being done compromising credit standards. Two, IFRS 9, we're well on track to deliver that for 1 January 2018. Capital. Again, I've mentioned this before, but I'm going to labor the point. ING has generated significant amounts of capital. Core Tier 1 ratio up from 10 to 13. ROE has grown as well.
Not only do we grow capital, but we've grown returns. That shows some impressive discipline. We're going to continue to do that. Finally, one other view on capital Core Tier 1 ratio, fully loaded 13.1%. That compares to our regulatory requirement, which is some 300 basis points lower. We have a very strong buffer vis-à-vis regulatory minimum, regulatory requirements. Another fact point about our strength, the bottom quarter here, you can see that at the first half we've put aside for dividend sufficient to cover progressive dividend policy. The first half done. It means the restructuring charge we take in the fourth quarter will not negatively impact our dividend capacity, our dividend policy. The EUR 0.65 progressive dividend policy is unaltered and is reaffirmed. These restructuring charges do not in any way prejudice it.
Wrapping up, Ralph has shown you this before in terms of our targets. 421, we'll meet the prevailing requirement. Leverage, we'll do that as well. Cost income ratio, 50%-52%, tightened from 50%/53%. We'll make that from the initiatives we've given you and the momentum we have. ROE, as mentioned before, we're not updating the target yet. We're going to wait and see the outcome of Basel 3.5, Basel 4, and find out what that means. Dividend, EUR 0.65 progressive dividend policy is reaffirmed. That summarizes our financial ambition. Thank you.
I think we're having a Q&A session now. Bring some chairs up. Exactly. Ralph, Patrick can stay on stage. Wilfred, if you can join. We're going to put out a few chairs. A couple of things please for you. Please, when you ask your question, just wait for the handheld mic to come around so it can be picked up clearly. Secondly, please, let's keep it to one question each at a time so we can try and rotate the questions around as many people as possible. All right. Very good. Tarik, let's start with you at the back.
Hi, good morning, everyone. Tarik El Mejjad from Bank of America Merrill Lynch. Thank you very much for this presentation. Very clear, and I think your strategy in digital is really in front of many of your peers. My question is really, I'm being analyzed, sorry about that, on the ROE target. Clearly on the R of the ROE, your guidance are going upward in terms of revenues, fees, cost, and provisions, so can pass that. My issue is on the E. If you guide for 12% CT1 targets for a buffer, I think it still puts you in a safe side in terms of, impact on Basel IV and the rest. My question is, what is really actually refraining you to reiterate the 10%-13% ROE or to narrow the range for Because that would be helpful to understand the reason for it. Thank you.
The key point why we're not changing or updating the current equity target is there's a kind of considerable debate going on in Basel about 3.5 and 4. We've heard that's still ongoing. It's not done yet. Regulators increasingly talking about no significant increase. We know where Basel started was a hell of a lot higher than that, and that seems to be narrowing. It'd seem a bit silly for us to start committing to something before we know where the E is. When we do know where the E is, and if it does change, then we need to know where and how, and then we'll respond. You've seen before what we've done. The regulatory requirements have gone, as I said, from 10 to 12.5. We responded. In responding, we also increased return on equity.
I can't guess what they're going to do, and we're not in the guessing business. When we know what they do, if they do anything, we'll figure out how we respond.
Very good. Let's take one from this side. Cole.
Cole ABN AMRO. One question about your commitment to France, Italy, and Turkey. There were some rumors in the media that you might be less committed to that. If I look to your strategy and your presentation, it shows that you have a high commitment to that. Can you elaborate on those three countries, given that the market shares are somewhat on the low side in those countries? What's the route going forward? Maybe France and Italy are a little bit different. Also M&A related.
You know the strategic decision framework that we apply, in terms of how strong our franchises are and how we develop them. We look at the customer positioning, the market positioning, whether we can create a sustainable balance sheet there. Whether basically you have the local funding versus the local assets, and whether these units make the right return. For each and every unit, we constantly apply these requirements, and we focus on what they can improve. And that goes for all three that you've mentioned. It goes for literally every franchise that we have. We're not treating one different from the others. Where we feel that things need to improve, we'll have improvement programs. For Turkey, we do have a real improvement program. For Poland, we have an improvement program.
For France and Italy, in this one, basically, if we move to a scalable platform, this is the essence of the message that we want to get across, is that your local scale is not relevant anymore going forward. Whether we increase our number of clients in Italy, Spain, or France, once you have a scalable platform, we're happy with every growth. Clearly, if we move all together in the next step, it becomes a real borderless world as we see the other digital providers have as well. We're not there yet, all of the franchises are treated with the same discipline in terms of improving their activities.
Let's go to Guillaume now. Then Anton next when the mic comes back.
Guillaume Tiberghien here from Exane. Thanks for the presentations. The question relates to IFRS 9. I can understand why you can't give the ROE because you don't know the E, IFRS 9, I think-
Pretty much, no. Could you give us a flavor as to how much of an impact we should expect?
IFRS 9. It's implemented in a year's time. I think a couple of things. One, the impact that transition, which goes through equity, will be dependent on what the environment looks like at the point of change. You see in the trend line, at least for now, we seem to be in a more benign, low loss environment in Europe. That helps. It's a year away yet, but actually today looks better, shall we say, than maybe earlier. Secondly, you need to remember that for regulatory capital, we've already got an expected loss reduction of over EUR 1 billion. You need to combine the two of those things to figure out if there's going to be a net impact on them, which there might be.
All right. Let's go to Anton.
One question. Cost target. Do you think that is enough to offset the underlying cost by 2020? In other words, what is the underlying?
When we look at what we're doing, we're talking about growing, particularly in the Challengers & Growth Markets. As Ralph said, we're prepared to invest, to grow there. Our plans, when we look at them, they don't show a huge amount of cost growth, but that isn't a target. It's about matching our revenue growth and our cost growth. Hence, we talk about a cost-income ratio target. The challenge for us is going to be to dial both together. What are our costs going to be in 2021? Well, I would hope it's about half of our revenue. That's what I expect. Is it going to be up or down? I don't know. The challenge for us will be to make sure that we can control cost growth in line with revenue growth. Ideally, costs grow because revenues are growing.
Very good. Let's go to the back corner over there.
Good morning. Stephan Jacco from Citigroup. Just wanted to ask you a question on fees. Everybody is now talking about fees, from Spain to Italy to France, Netherlands, Nordics, et cetera. How much of increased competition have you factored into your ambition for 2020, in terms of cost of retaining customers, cost of converting regular customers into loyalty customers? I guess, in terms of cross-sell, do you anticipate that your current cross-sell ratio will continue into 2020 with the newly converted loyal customers? Or is it actually going to come down? Thank you.
Well, we're not focused on fees for the purpose of charging fees. I think we have proven to be a bank that if we think we have provided service for which we can charge a fee, we will do so. We do it in a very transparent way, and we do it in a way that the client understands and in a way that they can still take a decision whether they accept it or not. That's also why, from a percentage perspective, you see that our total income has a low percentage of fee, because that's the model that we run. That's the model that we want to run as well. If we want to increase our fees, it should really be on the back of services that you can charge fees for. The clients will accept those fees being charged for.
That's basically the philosophy. Now, where we are up against some of the competitors from that perspective, honestly, I think they have more to lose, and we have more to gain. We are moving from single or two-product franchises to multi-product franchises. We're moving from a single-product customer to primary relationships that we try to understand better and therefore can improve some of the cross-buy. I will continue to talk about cross-buy and not cross-sell, because that's our model, really. Clearly, if you grow very quickly in the number of customers, the way you calculate your cross-buy, it will not increase. If you don't grow your customers so quickly, your cross-buy could increase further. You have to put it in perspective, and that's why the formula kind of gives you the relationship as to some of the units grow very fast.
We're very happy with that growth because we also know that most of these customers, in the end, become primary relationships. Hence, they provide an embedded value, a true future value, as Patrick was saying. Some, it may be customers that are just there for the opportunity for a cheap product, which we value as well, but at a certain moment they may leave us as well, but it's okay.
Very good. Robin.
Yes, thank you for taking my question. Robin van den Broek from Mediobanca. I was just intrigued by your idea of one integrated platform. I was at the demonstrations this morning, looking at Spain, for example, where you have Kabbage, basically an algorithm tapping into other banking platforms as well. You're taking an intermediate step for the integration, basically. Does it also mean that you need some form of convergence from a regulatory perspective as well? Because I think in the Netherlands, probably also in Belgium, maybe even Germany, I don't know, it's forbidden to tap into other banking platforms. Your Kabbage idea basically doesn't work in other geographies. Can you elaborate a little bit on how you look at this importance basically of this regulatory environment changing and how that could affect your investment program, because now we also have a front-end investment, back-end savings.
It seems that this is just part of a journey that could last a lot longer than that, how important is that regulatory landscape shaping up to this one platform basically at the same time? How important is that for you guys? Thank you.
I want to separate the two things. First, whether a platform is open for other banks to tap into your data. Yes, that is the practice, and that's legal in Spain. It's legal in many countries actually. That's basically how regulators want to create more competition, because they want banks to open up on their data so that new players can actually rapidly grow and create competition. PSD2 will come in place January 1st, 2018.
2018.
Yeah. Which is a European law. That actually creates openness of platforms by itself, from a payments perspective, for example. We do see general laws and regulations going more towards openness in order to open up to new players, rather than closeness in order to protect. That's one. Clearly, you have data privacy laws as well, which are still more country by country. We'll have to take those into account as well. Those are the two dimensions from an open platform perspective for your customers. To which extent can you move to one platform from a true regulatory perspective? Really, you saw the footnotes here as well, some of the plans will have to sit down with local regulators and see how we can ensure that they also feel comfortable with how we provide services and stability in the countries in which we're active.
We'll have to engage with them and take them through our plans and convince them while we take the next steps.
Yeah. Thank you, Ralph. Maybe one follow-up on PSD2, because you rightly said it opens up the platform, which also opens up the market to maybe some new FinTech players. We probably all know the PwC and McKinsey, which has been part of the preparation of your presentation as well, saying that especially retail banks are set to lose 20%-60% of revenues on the back of this new world we're going into. ING clearly is positioned better than a lot of peers, should we look at, you're still 20% at risk, or how certain are you that this is really an opportunity, or should we look at it as a relative opportunity?
I actually think that they're talking about us as the ones to take the clients away. It's exactly what we're proving. In countries like Germany, Australia, Spain, Italy, it is happening. I'm not sure whether the amounts or the numbers they have in their reports are exactly going to be what it is. In countries like Germany, where we gain 1,000 new clients a day, it's kind of happening. We're basically seen as a disruptor in that market. In Spain, we're seen as a disruptor. In France, we're seen as a disruptor. In the Czech Republic, we're seen as a disruptor. From that perspective, they're talking about us as much as any new provider, any new FinTech. It will be a combination of banks that know how to change, that dare to disrupt themselves, like basically we're announcing today here.
New players and banks that in the end make a different choice, which is a valid strategy as well. Two and a half, three years ago, when we had the discussions around our strategy, when we saw this trend already, we basically said, "Well, which way do we want to go? Do we want to become the bank that knows the customers very well, and with that, we are in charge of our own destiny in terms of how we develop the business? Do we want to become an excellent balance sheet manager?" Which is a choice. It's a strategic choice to become an excellent balance sheet manager in terms of, okay, I have a balance sheet. We have all these disruptors out there. They can generate consumer loans for me. I will just ask them to do EUR 1 billion for me with this risk profile.
They can generate savings for me. I will ask them to generate savings with this tenor, average tenor, at this price. That's another proposition. It may be a choice. It's not what we've chosen. We think we are really good at the customer experience and delivering that. Others may go the other way.
Very good. Yeah, at the back. Bruce.
Thanks. It is Bruce Hamilton, Morgan Stanley. That all sounded extremely impressive, thinking about the continued digital transformation. I guess just coming back to the question on sort of equity, though. If I think at a group level, you said above 12.5. At the moment, your SREP plus your D-SIB is 12.5. It is not obvious to me that you can run with a lot less than 13.5 a group, but how do you think about the right management buffer level, and how does that change given the split in P2R, P2G? How should we think about putting Basel 3.5, 4 to one side?
Yeah, I think the first point is we are starting with a very strong buffer against where the regulatory minimum is today, so that is nearly 300 basis points. We are working through a period of finding out what Pillar 2 Guidance will be and how much it will be, both at inception and going forward. That is not nailed down yet. The other piece, regulation requirement, we will need to figure out
Until we know what the capital number is, all we can say is we have got a very strong buffer today. We are not constrained by capital requirements, and it is not something that we are worried about, the absolute level of capital, and probably are vis-à-vis the buffer. Vis-à-vis the minimum requirement, because it is so big. When this becomes clear, when we know what the Pillar 2G means, which will be helpful, it is coming. What the regulatory world means, then we can be a bit more precise about what the end state buffer needs to be. Right now, that is not a problem. It may not be for some time.
Ben, you had one? Next to you.
Thank you. Benjamin Goy, Deutsche Bank. On your loan growth, you reiterated a 3%-4%. This year you have nice momentum. In the shorter term, let's say over the next one or two years, what should change to stop this momentum, aside from why we won't get a commodity rebound probably every half year, but maybe a bit more on the shorter term?
There you go. I'll start. 3%-4% is something we're looking at per annum over a cycle, over the period. Yeah, it's fantastic that we're ahead of the curve now. We'll be happy that, you said this, sometimes you get positive, but a headwind, and we talked about this on the half-year results. Sometimes you get deal flow that goes your way, and it may be a little bit higher. We're not saying it's 3%-4% every quarter, it's a per annum number. Yeah, as I said, great that we're ahead of it again at the first half, but we'll be happy enough with sustaining 3%-4% per annum through the next coming years.
If I can just add. Clearly over the last couple of years, and we basically guided that as well, we've seen quite some growth in the Wholesale Banking side. Why can we continue to grow in the Wholesale Banking side? Because we have global sector expertise. We're not necessarily dependent on whatever happens in Europe, right under our nose. We're not necessarily dependent on what happens in one commodity category. That's basically where we find the opportunities. You can't predict the need for power and electricity infrastructure, oil, gas infrastructure, whatsoever. I mean, the world is growing. Asia is growing. The need for many services is growing. The Wholesale Banking exposes us to basically the globe on one side.
On the other side, we already hinted last time that before our engines in SME and consumer lending would be up to grow, and make a real difference here, it would take some time. Most of them that we have now kind of in order, we are really successful in, for example, Romania and Poland now, which is on the back of instant lending. We actually see some of those taking off now. Just by doing it in a different way, not by decreasing your risk standards. Truly by being able to give a loan within 10 minutes rather than three weeks' deliberation, and you say no to your client, it makes a crucial difference. You're not necessarily decreasing your risk standards, but just because you can give an answer quickly, a yes or no, that's how you can grow and take market share.
All right. Let's come back this side. Yeah. Down here.
Thank you. It's Ronald Rague, ABN AMRO. A very quick question. If capital would not be a limiting factor over time, would you still adhere to 3%-4%? It sounds stories for 10%-14% in consumer and SME. It sounds like you're gearing up for much more growth.
I think in everything, we have to be careful and modest. Also in this one. To a certain extent, we could grow faster in some areas. In the end, we're also managing balance sheet. We want diversification. Diversification plays a role there. Return over cost of capital plays a role there as well. We feel that if you grow it at the current speed, you can basically manage it, and you can manage your diversification in your total portfolio as well. Maybe you have a view there.
Yeah. I think growth at the moment, it is a function of all of the above. What is important is that we find the kind of loan demand of the quality that we want.
Exactly.
I'd say that we pretty much take whatever we like at this point, and we don't feel that capital at this point is a massive limitation. Of course, we need to be careful looking forward, Patrick alluded to that. On the day-to-day decision making, that is not so much of an impact. The impact is more what quality loan demand can we find. Ralph said in his presentation, Patrick also mentioned it just now, the growth doesn't come at the expense of the underwriting criteria. If you look at the inflow in the Wholesale Banking, by and large, what comes in at the moment in new production is about one notch better in terms of risk rating than the stock. On top of that, of course, given the environment, we have positive migration on the stock.
The outlook for the quality of the portfolio is good. We want to keep it that way. If we don't do that, our guidance on risk cost is going to be off, and we don't want to go into that territory. I don't think you should look at us as capital constrained and therefore not growing faster. We do what we like to do, and whatever we don't like, we simply don't take.
Very good. Staying on this side, Anke, did you have a question?
It's Anke from RBC. Just following up on the digital banking and the EUR 800 million of investments. I guess it's not really a closed program. I guess going forward, you will continue to invest, should we then always assume that additional investments will always be offset by cost savings? Then also, obviously, a lot of banks talk about digital banking. I understand your strong standing, but how do you make sure you're always ahead of the curve?
To start with the last question, that's obviously by looking outwards and not looking inwards. The story that we told is a story that comes from the outside world. It's the fintechs that actually we're embracing and understanding what they're doing. It's what we call the digital disruptors, that we try to understand and hear about, and elements that we actually put in our strategy ourselves. We continue to do that. It's not like we have now looked at it, to the outside world, and now we know, for the next five years, we want to go back into our rooms and move forward. We continue to look outwards and make sure we enclose that in what we do.
That will enable us as well to move forward with not only growing our revenues, but actually we see quite some opportunities to take our costs down as well going forward.
Investment
Like the investment in Kabbage. Is this like something you would envisage more going forward?
If we see opportunities out there, which are engines that you can buy, which are cheaper or better than we could do ourselves, obviously there's an opportunity. It's not necessarily one of the strategies that we have.
I think if it comes to the fintech sector, we have a bit of a different strategy from some of our peers. We're not just investing from a venture capital perspective. It's not like, okay, how much money can we set aside to invest and play around with these guys? We have our strategy, and we know exactly what we want. We know exactly where we want to improve the customer experience. If there's fintech players out there that can help us to get this experience to the next level, whether it's on aggregation, whether it's on payments, whether it's on robo-advice, whether it's on instant lending. On all of those, we're very interested to team up, either in a joint venture or a cooperation agreement or to buy them. That's what you've seen.
Don't expect hundreds of millions of money that we're going to invest in venture capital as venture capitalists in fintechs just to see what the hell is going on. We know pretty much where we want to go. We know in the market what is happening and who are the players, we'll approach them and see whether they can help us. They're very interested in teaming up with us for a couple of reasons. First, they know our model. Yeah. They know that we're one of the digital leaders from a banking perspective. They know we have a very strong brand in digital. Basically something that customers expect. We have 35 million customers. It's very interesting for them to team up with. They know we have a bit of the same culture. We know what entrepreneurship brings next to being a bank.
We understand them a little bit better, hopefully, than some of the competitors. Yeah.
All right. Let's take one in the front here.
Yes. Johan van der Lugt from Robeco. First of all, my compliments to you by providing excellent statistics on your number of clients. That's also what my question is about. If you look at the new clients, the 3.3 million since 2013. According to the disclosure, 1.4 were new primary customers. If I do the math, that happens to be the same increase in terms of the total stock of primary relationships. My question is, can you update us on the journey in terms of converting single-product customers into primary relationships? Because to me, as an investor, that's really key to the investment story, the value that ING is capable of adding to their clients.
If we onboard customers, like the 3.3 that you're referring to, it's not like 1.4 million out of those 3.3 have become primary relationships, right? Clients become a client because they engage with us on the savings side, on the mortgage side, on a current account, any different kind of product itself. The 1.4 million increase really comes out of the 33 or 35 depend over the time. That's where the growth comes from. It's basically the single-product customers or the ones that don't fulfill that definition that start to do more business with us. That's where the 1.4 comes from. It's not 1.4 out of 3.3. The opportunity is not necessarily by going out and getting new primary relationship.
It's by going out, onboarding new clients, and at the same time, getting to know the onboarded clients more so that you can do more, and they will become primary relationships. That's a little bit. Now, in the 1.4 on the seven whatever we started with, is a higher percentage than the three on the 32 that we started with. The primary relationships as a percentage of our total primary relationships is increasing faster than the new customers that come onboard as a percentage of the total customers that we have. That's what we would want to continue.
Just squeeze in a follow-up on this one. If you look at the 14 million, that is the ambition beyond 2020.
Sure.
What percentage of total customers would that number boil down to? If you take the first half, it's like around 50%. That
Would mean that it's higher than 50%, primary versus total?
It would be higher, yeah. It would be higher. That's because most of the practices that we have as a digital bank, we will actually introduce new products, like we're doing with instant lending, like we're doing with the current accounts in these countries. Yes, it will be an increasing percentage of the total amount of customers.
All right. In the middle over there. Yeah.
Hi. Good morning. Philip Siefers, Financiële Dienst Amsterdam. Thanks for taking my question. As you said, we are a skeptical bunch. When you were referring to Payconiq, you said that you want to, or will, disrupt the card schemes. I'm a little bit skeptical about that. First of all, why do you want to do that? Why don't you want to continue to partner with them? For example, they also invest heavily in digital capabilities for issuers.
Yep.
Secondly, how are you going to do that?
Yeah.
Thanks.
No, clearly partner with card schemes alike, the card schemes are being disrupted by Apple Pay, by many other offers as well. Alibaba have their own scheme behind it. WeChat have their own scheme behind it as well. I think you always have to be prepared for the future. While you team up with players on one side, you should also test what is possible on the other side. In Payconiq, you basically don't use any kind of guarantee between the card scheme, the provider to that card scheme, and the merchant. Because it should be a direct operation between the merchant and the merchant's bank and the consumer and the consumer's bank, for which you need the openness of the platform. By the way, that's what you need PSD2 for example. Or you team up with other banks that allow this to happen.
If you can do that and you have a better experience. I don't know whether you have experienced Payconiq yourself. Okay. You go into a shop, like a butcher, it recognizes you have Payconiq. The butcher has Payconiq as well. It recognizes who you are. Basically, you make your order, he puts in the amount, it comes on your screen, you say yes, it's done. He doesn't need cash registers whatsoever. He only needs an iPad. You only need an iPhone or a different phone. Doesn't really matter whether you have Samsung or an Apple one. It's so easy, if you connect the systems between the banks, you don't need the service that the card scheme provides, which is the guarantee in the middle. That's it.
We do have Payconiq on demo outside in case you want to try. Yeah. Alex at the back. At the back. Yeah.
Hi. Alex Gouagne from Natixis. Thank you for the presentation. Just one question for me related to commission. I do understand that you want commission to grow faster than NIM, I don't really understand what should be the breakdown of your revenues going forward, given that we have this growth. Today, I think that commission and fees represent 14% of your revenues. What should we expect by 2020 or 2021? Just related to that, looking at the primary customer, we have 2.5 product per customer. How this number should grow by 2020, given that this is a function also to get more fees? Thank you.
Yeah. I'd love to be able to give you precise composition by 2021, I guarantee if I try now, I'd be wrong because the world will change. What we can tell you is, as I said a bit already or tried to, by continuing to grow lending, we can grow top line NII. At some point, 18 months from now, we think it's likely that margins will begin to decline. With the momentum of lending, we continue to see positive trajectory for NII. Okay? In addition, we are going to grow fee income faster than NII growth, and that's through a combination of factors that I described earlier. I think later on today, Aris will also be talking more about fee growth. It's a balancing act as well.
As we said, partly because we can afford not to, we don't have to go into all markets and charge account fees because we've got a low rate environment, because we've got the strength that we do not need to do that and still make the required returns. We will balance the speed at which we introduce account fees, possibly against It's a bit, maybe you can think of it a buffer mechanism for us. We will balance the speed at which we introduce account fees across ING's world against the trajectory of overall results and against the speed at which we can onboard primary relationships. Very clearly, we would prefer to onboard more primary relationships and then take lower account fees.
If we can do that and the results allow us, then ideally, account fees are less and primary relationship growth is more. If the inverse is the case, then we may need to react differently. It's a bit of a valve here that you can use to control your revenue, but also it's a valve that can limit, if you apply it too aggressively, your primary relationship growth. I think the key point is that we have the strength within our franchise, and we have the commercial momentum to be able to choose how much we apply and how quickly.
I'm going to come back this side, down here. Yeah.
Hi, Justin Bandy from Artisan Partners. You guys have a strong capital position, and you should be generating a lot of capital going forward. Given a stock price that is currently meaningfully below ING's intrinsic value, why are you not buying back stock or at least talking about buying back stock with a portion of the excess capital that you should be generating in the future?
Hi, Justin. It's great to have someone who's so positive and change the tone. We've got to get you over across the pond more often. The whole world is worried about Basel IV and is it going to eat up all capital and more, and Justin wants us to do buybacks. I commend your optimism. I'd love to be in a position where the capital sky is so crystal clear and blue and there's no clouds on it. There are no threats that we could entertain thinking about that. That's point one. I have to say, I find it difficult to talk about the word capital buybacks. ING has been scarred by, at least I feel it, by some of its experiences before on that front.
If we did have a scenario where you paint a blue sky of no regulatory threats, no risks of capital inflation, and we have oodles of capital, I think we'd be looking more to the progressive dividend as a lever, at least I would, than necessarily buybacks. As I say, I remember coming in in 2009 when we were just trying to stop a buyback scheme that was driving us into a hole. Maybe it's me, maybe those scars will heal in the future, but I would prefer a dividend as a route rather than buyback.
Just to follow up. Sorry, just to follow up, Patrick, why the dividend? Why the preference there? Both take capital out from ING and give them to the shareholders, but at least with a buyback, you could take advantage of a market dislocation here and create value.
Again, maybe you're right, Justin. If the environment is right, maybe we can think about it. It's just I find it difficult to think about capital buybacks given our history. As I say, if we had that scenario, which, to be honest with you, I think we're more worried about what do the clouds look like and are they clearing and how fast? Dividend would be the area to go to first. Yeah, maybe if you want to be really optimistic that we could even think about that. Let's get to the point where the regulatory environment is clear first before we go down that road. It's great to have your optimism and your positivity.
Yeah, basically, the way we manage our capital hasn't changed from when we launched this strategy. In the end, whatever return we make, whatever capital we have, first we look at, do we have sufficient capital or not? What is the growth that we can pursue for which we need capital? What is an attractive over-time dividend? That's a little bit the way we want to balance the world. Now, if one is fulfilled completely, clearly you can look at the other two, and you also may come into your suggestion. At this moment, there's so much uncertainty around Basel that it's not something we're contemplating.
Marcel.
Marcel Huber, Credit Suisse. Thank you for your presentation. I have a question about the cost reduction programs in Belgium and the Netherlands. Could you elaborate a little bit more on the branch network? It seems that you have a quite extensive network in both Belgium and the Netherlands. Could you quantify the reduction, perhaps? Thank you.
Yeah. The intentions that we communicated today are specifically for Belgium intentions around can we integrate Record Bank and ING Bank? Can we invest in the IT environment to get it to the next level of digital banking? Can we prepare the Netherlands in order to, at a certain moment, become the host platform for some of the activities in Belgium? The intentions that we announced today are around many different aspects there for our Belgium franchise. If you specifically go down the route of how many branches do we have and where do we think we will end up? If you add the branches that we have under the brand Record and ING, we're moving to one brand. We'll probably move from around just over 1,200 to just below 700. In the Netherlands, we feel we have a right-sized branch network, really, with service points as well.
This is not an operation specifically aimed at branch network whatsoever. In that, what you should realize is that although we're a digital bank, we do believe in branches, but not for the transaction business, but for our advisory capacity. The question is, do you need to have a specific branch for people to come for that advice, or do your advisors go to their homes? We do think that in a total model, you need advisory capacity as well for some of the products. In some countries, in Spain, we have Just short of 30 branches, like 28 or 26 we have there. You cover 80% of the economy in Spain. Basically, the role of branches going forward is much more on the advice and less on the transactions.
All right. Probably time for two more questions. Jean-Pierre at the back.
Thank you. Jean-Pierre Lambert from KBW. I would like to come to the execution risk and the concentration of execution risk, because a large chunk of your planned cost saves are coming from Belgium, EUR 550 out of EUR 900. How do you see the execution risk given the heavy size of cuts in employment and also the IT convergence? A number of banks have tried to come to a single IT platform across border, they failed. You have some names in mind. I have some as well. What lessons have you learned from their failures, and what are you avoiding? Thank you.
Sure. Roel?
From the IT platform perspective is what we're trying to do is to move, as Ralph already said, the platform that we have in the Netherlands and going to evolve towards the new standard, that we're going to migrate the customers of Belgium too. I think that's a bit different. What we have had before was that basically at some moment in time, people were set to really move to a different way of working and forced to a standard that was out there at a certain moment. We now have two years to start evolving a Dutch platform to the level that it's actually going to be a combined platform. We're not only going to develop in the Netherlands a Dutch proposition, we're going to develop a proposition which is worthwhile for Belgium and the Netherlands as well.
By doing it in a modular fashion, at that moment in time, we can use those components, as said before, as well for the other propositions that we have, the other propositions develop components that we can use in the Netherlands and Belgium. It's not like this is the one monolithic proposition and you will have to go on it. It's going to be a balance of people who can choose and pick those things where they can be differentiating themselves at the front end, because that's where the customer sits. Indeed, in the back end, going to be way more similar as it is today.
Just to add, clearly in all of this, there's execution risk. We have run programs with pretty high execution risk. For example, on the Banking TOM, the only way you can standardize processes and products and systems across 40 countries is by having a lot of discipline as to getting there. That you continuously have a trade-off between what do you want to keep as a local proposition versus the global proposition that you're trying to build. It's not that you deliver exactly the same after the migration or the execution, in comparison to what you were delivering before. Something's got to give. As part of these plans, product simplification, product rationalization are some of the first steps to do in order to make sure that basically you decrease the execution risk.
There's quite some elements that basically lessons that we've learned ourselves as well, that we're going to put at work here as well.
All right. Very good. I've got time for one last question. Kiri in the front.
Yes. Thank you. Kiri Vijayarajah from Barclays. Ralph, in your comments earlier, I think you were alluding to revenues may be flat to even down. I think it was Belgium and the Netherlands collectively. Could you talk about what's maybe the trigger for that? Is it a really just a one-off from all the headcount and branch closures you're talking about? Or is it sort of more ongoing pricing, margin pressures driving the kind of flat to down revenue guidance there?
Patrick, correct me if I'm wrong. It is because of the pressure on the NIM from a savings perspective. If you look from a country perspective, in most countries we're growing, so that some of the pressure that you have on the NIM from the savings side, you are actually compensating with NIM improvement on the lending side and lending income. In the market leaders, we don't foresee growth to be so much on the lending side that it compensates for that.
Right
I think that's the story, right?
Yeah.
Yeah.
Also, we're trying to evolve, as was explained to Belgium and Netherlands to closer to a digital platform. In markets where we're closer to where we want to be, like Germany, for example, we've a lot stronger growth potential. We are more of a disruptor. Client growth is faster, the cost advantage is better, and we're able to grow quicker. It's the challenging growth markets are probably maybe closer to the end state than maybe the traditional ones. They can grow faster. Places like Romania, Poland, GDP growth is higher. Those combine to mean that they are areas where growth can be quicker than more mature markets where GDP isn't as strong. They're more mature markets with more banked and less inherent growth potential. Okay. Very good. Thank you for all your questions. Sorry for those of you who missed out.
I think my quick conclusion is no one's very worried about our risk cost outlook, Wilfred. That makes a nice change. Thank you, Wilfred, Ralph, Patrick, and Roel. We're going to break for lunch now. We say goodbye to our webcast audience, thank you for watching us today. All the management board members will be outside around at lunchtime, find the one you want to talk to and ask the questions you want. We gather again at 1:00 P.M., either in this room or the next room. It's in your app or someone of our support team will help you to find the right rooms. 1:00 P.M., and enjoy your lunch. Thank you.