Good morning. This is Cecilia welcoming you to ING's 4Q 2015 conference call. Before handing this conference over to Ralph Hamers, Chief Executive Officer of ING Groep , let me first say that today's comments may include forward-looking statements, such statements regarding future developments in our business, expectations for our future financial performance, and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statements is contained in our public filings, including our most recent annual report on Form 20-F, filed with the United States Securities and Exchange Commission, and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Ralph. Over to you.
Good morning. Welcome, everyone, to ING's full year 2015 results. I will take you through today's presentation as an introduction. For questions, we have Patrick Flynn, our CFO, Wilfred Nagel, our CRO, here with me from the executive board. Turning to page two, I'm very pleased with our achievements in 2015, as we have delivered consistent results against our Think Forward strategy. We really work hard, and we concentrate on it every day to improve our customer experience. It is very rewarding to report that we added another 1.4 million new customers in 2015. We have also been able to grow our customer lending by over EUR 21 billion during the year. This has clearly contributed to our strong financial results for the year.
The underlying net result banking increased by 23.2% from 2014 to EUR 4.2 billion. The return on equity was up to 10.8% for the year. Our capital position continued to strengthen as well. On a fully loaded Core Equity Tier 1 ratio of ING Groep and bank were respectively 12.7% and 11.6% at year-end. Given the good results and given the strong capital position, we are very pleased to propose a full-year dividend of EUR 2.5 billion or EUR 0.65 per share. We're committed to maintaining a healthy group Core Equity Tier 1 ratio in excess of the prevailing fully loaded requirements, which currently stand at 12.5%, also to returning capital to our shareholders. As such, we aim to pay a progressive dividend over time.
If we turn to slide three, basically you see that when we launched our strategy two years ago, we had one clear purpose: empowering people to stay a step ahead in life and in business. In order to empower people, innovation and constant improvements of service concepts are important. In the fourth quarter, in Poland, we launched Moje ING, which is a new omnichannel banking platform which gives customers insights in their personal finances in an easy and intuitive way, they can do their banking more and more themselves. In Spain and the Netherlands, we launched a new product as well. It's called Twyp. It's an acronym for The Way You Pay, it's a peer-to-peer payments app which allows consumers to pay small amounts to contacts on their mobile devices using their mobile phone numbers only, and you can do it in a few seconds.
After seven weeks, we already have more than 200,000 users on this app. Clearly, we're also looking at fintech innovations outside of ING that can help us strengthen our capabilities, and specifically on the lending capabilities, we are looking at fintechs in the area of consumer lending and SME lending. We recently announced an investment in a fintech called WeLab, which provides consumer loans in China and Hong Kong in a fully automated process. It only takes minutes from application to approval. I'm happy to say, if we turn to the next slide, that we welcomed another 1.4 million new customers. More importantly, as part of our strategy, we established 550,000 new primary banking relationships with particularly strong growth in the challenger and growth countries, as it is in line with our strategy.
If we continue to make progress on our strategic initiatives, and I'm sure we will, I'm confident we will reach our goal of at least 10 million primary customers by 2017. All of this clearly leads to growth in a commercial sense. On slide five, you see that our deposits are growing by 4% to EUR 509 billion, and our customer lending has increased to EUR 533 billion, despite further reductions in our run-off portfolios. If we zoom in on the core lending franchises on slide six, you can see that they grew by EUR 21.7 billion or 4.2% during 2015. Wholesale banking increased by EUR 13 billion, driven by growth in industry lending and general lending and transaction services, and retail banking increased by EUR 9 billion, mainly in Retail Belgium, Germany, and the other challenges in growth markets.
All of that, the focus on clients, increasing number of clients, increasing your clients' business, both on the deposit side as well as the lending side, in the end leads to better results, which is on page seven. Moving to the P&L, we posted strong results in 2015. The underlying net result of bank increased 23% from 2014, and the return on equity increased to 10.8%. If we were to exclude CVA and DVA, which was positive in 2015, the underlying result increased by 11.9%. Still a strong growth. That was explained by a couple of factors which are on page eight. The strong results were supported by a healthy income growth and lower risk costs. The net interest income, excluding financial markets, was increased 4.5% from 2014. That was clearly supported by the strong volume growth that we have shown.
Our risk cost of EUR 1.3 billion or 44 basis points of risk-weighted assets, are now in line with our long-term average of 40 to 45 basis points of risk-weighted assets through the cycle. If we then look at the underlying businesses on page nine, we see that the improved results are both in retail banking and wholesale banking this year. We see the relatively strong growth in retail banking driven by Retail Netherlands, whereas where the risk costs have come down sharply and Retail Germany. I think it's worth highlighting the performance in Germany in a bit more detail if we turn to slide 10. As you can see in slide 10, ING Germany continued its strong performance in 2015, reaching a pre-tax profit of EUR 1.152 million, EUR 1.1 billion.
For the first time, they are above the EUR 1 billion mark, which is an enormous accomplishment. The strong performance of Germany is mainly due to the customer-centric focus, resulting in achieving the award of preferred consumer bank for the ninth consecutive year. Focusing on customer services, improving customer services every day, making things easy, simple, and empowering your customers does work. Our customer base and number of primary customers continue to increase, while we are also diversifying our product offering to customers in order to increase the cross-buy. As customers see us increasingly as their primary bank, they do not only want to do savings and mortgages with us, they want to do the whole product spectrum in a direct internet-driven and digital way.
Consumer loans in Germany increased by 20% to EUR 5.7 billion in 2015, but we are also seeing an increase in the purchase of investment products, as said by our clients. The Wholesale Banking operations in Germany are growing fast. Wholesale Banking loans have increased further to EUR 13.5 billion at year-end as we continue to grow the franchise and optimize the balance sheet. One of the specific parts that shows how we work in managing cost-income is also shown here. Here we have a franchise in which it is okay to have cost increase, given the fact that it is growing so fast and the efficiency is only growing with the growth, that the cost-income ratio is rapidly coming down, whereas the cost line is increasing. Those strong results across the group have further strengthened our capital position.
The bank Core Equity Tier 1 capital increased to 11.6% due to the positive net profit, 26 basis points in the fourth quarter, and an increase in the revaluation results, which was partly offset by an increase in weighted assets. The group Core Equity Tier 1 capital increased to 12.7%, and that is largely mirroring the developments of the bank, but also including a EUR 600 million release from interim profits that had not been included in capital in the first nine months of 2015. January 2016, we further reduced our stake in NN Group to 14.1%, and that results in an uplift of 30 basis points in the group Core Equity Tier 1 ratio pro forma to 13%. If we would allow for the full divestment of NN Group, the pro forma group Core Equity Tier 1 ratio would be at 13.4%.
As far as the capital levels are concerned, for 2016, the group has a minimum Core Equity Tier 1 capital level of 10.25%, which is composed of the 9.5% Core Equity Tier 1 SREP requirement and a 75 basis points phase-in of the Dutch systemic risk buffer. The systemic risk buffer is scheduled to phase in by 0.75% per annum to 3% from January 1st, 2019. So our fully loaded requirement is currently 12.5%. As these capital levels are requirements for the group rather than for the bank, we have introduced a new target for the group Core Equity Tier 1 ratio. Firstly, we want to remain above the fully loaded Core Equity Tier 1 requirements, currently 12.5%. Secondly, we intend to grow over time into a management buffer over the fully loaded Core Equity Tier 1 requirements.
Taking into account these new capital requirements, including the 3% CRD buffer on top of the SREP, we have decided to propose at the AGM to pay a dividend of EUR 2.515 billion or EUR 0.65 per share. Going forward, we aim to pay a progressive dividend over time. Slide 13, you basically see an additional table, which is the Core Equity Tier 1 requirement on group level versus the bank. That's a change from the past. You see an ambition 2017 now on the group level, and you see the other ambitions on the bank level still being the same. Coming to those ambitions, actually, in 2015, we already reached most of our ambitions 2017 targets, and I'm pleased with the progress we're making on each and every of these metrics. Turning to the fourth quarter results. I'm now turning to slide 15.
In the seasonally weak fourth quarter, ING's underlying pre-tax result was solid at EUR 1.202 billion, despite significantly higher regulatory cost. Net interest income, excluding Financial Markets, has remained steady in the past year, supported by an ongoing volume growth. Turning to the NIM, the net interest margin was up from the third quarter by one basis point, that's due to net interest results in Financial Markets are a bit higher versus the third quarter. The commercial interest margins have been rather stable over the past year, and a large part of the six basis points reduction from a year ago is as a result of the lower interest result in the Financial Markets. We've touched upon this previously where you see the composition of the income in Financial Markets changing from a non-interest income to interest income and also changing it back.
You see also in this table how it moves, whereas the Financial Markets division is actually performing very well and in a stable manner. It's just that the composition of income changes so now and then, that does affect our NIM. That's why we keep explaining it. Looking at the NIM, we see lower margins on current accounts, they have been offset by higher margins on savings as a result of lower client savings rates. In line with market developments, we have further reduced these rates in several countries in December 2015 and January 2016. Focusing on the lending growth in the fourth quarter, you can see in slide 17, I guess we are. In our core lending businesses, they all increased, or most of them increased from the third quarter of 2015, with most growth actually in the Wholesale Bank.
As shown at the beginning of the presentation, our core lending fractions grew by 4.2% in 2015, that's fully in line with our guidance. In 2016, we expect this positive momentum to continue. Moving to expenses. Our expense base is more and more impacted by regulatory costs, you can see that in these tables as well. There seems to be no limit here in terms of what some of the countries are thinking about. We are confronted with a new bank tax in Poland, as you know. You see the increase here for 2015. Here we were trying to manage that, we are managing in it also in terms of further improvement of efficiency. This is the picture. If you look at our expense base, you see it's more and more impacted by the regulatory cost.
We also took a number of smaller redundancy provisions in Retail Benelux and also banking this quarter in an aggregated amount of EUR 120 million. These are expected to deliver annual savings of EUR 65 million by 2017. Adjusted for the redundancy cost and regulatory cost, expenses increased by 6.2% from fourth quarter 2014 and were flat from the third quarter in 2015. The risk cost. We have seen a small increase from the third quarter, but the trend remains positive year-on-year for sure, 2014, 2015. Total risk costs were 38 basis points over average risk-weighted assets this quarter. Below our through-the-cycle average. The NPL ratio also decreased to 2.5%, and that's an improvement for the third consecutive quarter, both in retail banking and wholesale banking. Zooming in on wholesale banking risk cost on slide 20. Risk costs in wholesale banking continued their downward trend.
They amount 33 basis points in 2015 as a whole, 26 basis points in the fourth quarter, and that's clearly below the long-term average. However, there are some uncertainties out there. The most obvious ones being the very low oil prices. The NPL ratio on our lending to the broader oil and gas industry is still low. It's at 1.8% and hasn't deteriorated in the fourth quarter. That's despite a further weakening of oil prices to around $30 a barrel. We cannot rule out that we will be hit in the future by instances affecting our wholesale banking loan book. For that, I go to the next slide. This slide gives you the overview on oil and gas exposure. It's a slide that is familiar to you. We started to include it last year in most of our presentations.
The slide shows that 85% of our lending to oil and gas is not directly exposed to oil price risk. That hasn't changed. The remaining 15% is exposed to oil price risk to some degree, although it is important to note that there are many different mitigants in place. Nevertheless, given the further decline of oil prices in the fourth quarter, the oil price risk in certain segments of our oil sector has increased. Overall, we expect risk costs for 2016 to be at or slightly above the level of 2015. If oil prices were to stay at around $30 or below and remain there for an extended period of time, 2016 risk costs may increase. In such a scenario, we estimate overall risk cost for the total bank could end up somewhere between the 2014 and 2015 levels, i.e., potentially between EUR 1.4 billion-EUR 1.6 billion.
That's overall risk cost, overall on the total portfolio. To wrap up. If you take one step back and you look at the results for this year, we actually have been able to deliver on three counts: growth in customer numbers, growth in lending, and growth in savings. Results, strong results, and the third one being strong capital and an attractive, handsome dividend that we start to pay. I'm confident that our story is on track. I'm confident that we can continue our strategy across our network, benefiting the shareholders as well as the customers. I would like to open the call to questions.
Thank you. If you wish to ask a question at this time, please press *1 on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow everyone to signal. In the interest of time, we kindly ask each analyst to limit yourself to two questions only. As a reminder to ask a question, please press *1. We will now take our first question from Anton Heese from UBS. Please go ahead.
Good morning, and thank you very much for taking my questions. Just two questions, please. Firstly, on the capital target for the group. Now that you have a clear capitalization level in mind for the overall group, would you be able to guide us on the target ROE that you would like to achieve in the group? We have the target for the bank, given that the focus is now shifting more towards the group, it would be helpful to know your ambition on ROE for the ING Groep rather than just the ING Bank. The second question, please, what proportion of your oil book is exposed to clients in the U.S., and have you seen an increased provisioning on your U.S. energy book? Thank you.
Thank you, Anton. The first question will go to Patrick, the second question I will give to Wilfred to answer. Patrick, go ahead.
Yes. As a consequence of the SREP and having the D-SIB come on top, we have to update our targets with respect of capital ratios. We have not done a full review of all our ambition levels, that will come on the next investor day we will have, which hopefully will be sometime towards the end of this year, maybe early next. In terms of ROE, we're still staying with the underlying result over the capital in the bank as the target. We'll have to factor in thoughts around the group in due course. The bank, as you know, is above the 10%, nearly 11%. I think the group average for 2015 was just around 9%. In terms of targets, ROE for the group is something we'll update with our next full strategy day.
Thank you.
On U.S. oil exposure. The main component of that is what sits in our reserve based lending business in the U.S., which is about $1.8 billion. There is beyond that, a bit of exposure to some of the U.S. global oil majors, but I wouldn't really call that U.S. exposure in the terms you mean.
Thank you. It's $1.8 billion?
That's correct.
Perfect. Thank you so much.
We will now take our next question from David Lock from Deutsche Bank. Your line is open. Please go ahead.
Morning, everyone. Thanks very much for the presentation. Just a couple from me. The first one, just to ask a little bit more on the management buffer that you point to in the presentation, growing into a comfortable management buffer over time. When we wind back to the investor day, you gave a 10%
target for the bank, but with an 11% in mind, including that buffer. Should we be thinking about a similar 100 basis points buffer for the group, obviously building into that over time? The second question I had was really around oil, but also thinking more on the impact potentially for your loan growth. Are you still confident you can hit 4% loan growth going forward given where oil is, and are there any other additional sensitivities you can give us around that? I appreciate the sensitivities on the risk costs, but just on the growth aspect, that'd be really helpful. Thank you.
Patrick?
I think the first thing to say is where we currently are at the phase-in, as Ralph pointed out, it was 10.25, pro forma we are at 13.4, so it is more than comfortable over 300 basis points today. That phase-in will happen over the next 4 years, if nothing else happens, just mechanically that buffer would diminish a bit as the phase-in continues. That said, there is a number of moving regulatory parts here that we have to just see how they play out. I think there is a growing recognition that the way the SREP process and the D-SIB buffers has played out in terms of how that translates into MDA is perhaps not the intended result. There may well be a revision to MDA levels. We are hearing talk of that.
That may take some time, but I would expect that to come to fruition in the course of that period. Also, in terms of domestic buffers and harmonization thereof, the EC is repeatedly saying it wants a level playing field in capital, and we are hopeful that will happen. Again, over that 3-year period, there is ample time to see that fall through. Sorry, it is a bit of a long-winded answer, but there are a couple of important regulatory moving parts that will determine what we might need in terms of a buffer.
Okay. David, yeah, on loan growth, there are 2 ways to go about your question as to what will it mean for growth. Honestly, in 2015, the growth in our book did not necessarily come from the oil and gas sector, given the lower oil price. Actually, certainly on the short-term side, it actually decreased. That was not leading to growth in our book. On the contrary, I actually think that we should all look at the positives of a low oil and gas price leading to further domestic demand, disposable income in most of the economies in which we are active, as a consequence of which a larger part of our loan book and a larger part of our clients will actually benefit from it.
Therefore, it does not necessarily alter our confidence in being able to grow our loan book the way we have guided up to now. Thanks a lot.
Thank you.
We will now take our next question from Ashik Musaddi from JP Morgan. Your line is open. Please go ahead.
Yeah, hi. Good morning, everyone. First of all, can I get a bit more color on risk cost? I think you've clearly mentioned that this year's risk cost, if oil remains here, would be a bit higher, give or take around 45-55 basis point. Let's say if oil demand here for next three, four years, how should we think about your risk cost? Will you be taking a one-off hit from oil in 2017, 2018, or will it be staggered in the risk cost? How does the accounting works on that would be great to hear. Secondly is on your NIM outlook. Clearly, your guidance is 150-155 basis points. Are you still sticking with that guidance given that you're still way away from that guidance at the moment? It's still, I think, what, 146 at the moment.
Are you still comfortable with that guidance? Thank you.
Risk cost, I'll give the word to Wilfred.
Yeah. Ashik, I think what you're going to see, if indeed oil prices were to stay low for a longer period, is a gradual development of the risk cost for a couple of reasons. One is different parts of the portfolio will have different timing in when they will be hit. If you take a large part of our reserve-based lending, that is likely to come somewhat early. This is a high OpEx, low CapEx business where the marginal profitability is very sensitive to oil prices, and these are the wells that are going to be shut down first, as we are already seeing at this point.
A large part of our book, however, is more exposed to the conventional development and exploitation, which means that this is a much longer cycle where even development projects that have already been started before the oil price drop hit are still continuing, and these fields will come on stream, will require servicing, will require rigs. If you look at our book, typically what we do is collateralized and cash flow based, i.e., in that segment of the business, what we look at in terms of thinking about provisioning in the end is going to be the NPV of the cash flows from the contracts that we have these rigs on versus the outstandings.
In many of these cases, you're talking about modern new rigs with contracts of 5 to 7 years, where, by definition, the problems, if they arise, will start showing up quite a bit later than, for example, in the reserve-based lending. You would expect a gradual increase of provisions there over a prolonged period. We're certainly not, at this point, seeing a big shortcoming.
Okay, that's very clear. Thank you.
Okay. Ashik, it's Ralph. On your question as to the NIM guidance. 150, 155 guidance that we gave was for 2017. We're touching it, honestly. I think it's 147. It's not that far away from the lower end of the range of 150. We're 98% there, to be honest. We have explained to you as to how the financial markets results influence this a little bit as well. We've been into the range, which is out of the range. One more remark to be made. Yes, we do feel comfortable we can get there.
We feel we can manage the NIM in the current circumstances because, in the end, when we guided the NIM range to go up to 150, 155 by 2017, we also indicated that was dependent on the change in asset composition, where we would grow more in higher margin assets, in industry lending, in some of the commercial banking activities, in SME lending and consumer lending, away from a concentration on mortgages. We are showing that every quarter that the asset composition is changing. That will also help us to move towards and maybe close into the range that we guided 2017.
Is it fair to say that your high margin asset shift, as well as some more deposit rate cuts, will still be able to absorb the risk you're seeing on the asset side? After the Bank of Japan stuff, basically the market is really worried about negative rates here as well. You're still comfortable. Okay.
Yeah. For 2016, we feel comfortable.
Okay, great. Thank you.
We will now take our next question from Bruce Hamilton from Morgan Stanley. Your line is open. Please go ahead.
Morning, guys, thanks for the presentation. Very useful. Just going back again to the sort of energy and metal mining exposure, could you give us what your undrawn committed line exposure would be? Obviously, certainly in the metal mining space, there's a risk, I guess, that those lines could be drawn down. Then secondly, in terms of the Dutch market, obviously, you've got further scope to take deposit costs down or savings deposits down. Where do you think the limit is on that? Are you still seeing any benefit in terms of mortgage front book pricing, or is that all now played out just in terms of the NIM for the Netherlands specifically?
Okay. Wilfred?
Yeah. Bruce, on undrawn commitments, the vast majority of that really sits in our trading commodity finance environment in the segments that you are talking about. On the actual project and pre-export finance deals, it is very limited. There is not a big percentage of the total book undrawn committed there.
Bruce, specifically on the Dutch market, we see the current mortgage market and the pricing there is higher than the average of the back book. That should improve the picture slightly. That is one. On the other side, you also know that our total exposure on mortgages in the Netherlands is decreasing with the transfer of the WestlandUtrecht Bank book to NN. From an NII basis, the development may be different than from a margin basis. Now, in terms of managing on savings rates versus managing on the asset side, the two different sides here, it is about how the market develops, how the customer relationships develop as to how we can go about pricing. I cannot really comment on how we will move there. There is scope. If you compare to other markets outside of the Netherlands, you see that the savings rates are much lower already.
Yeah. It depends on how the market develops as well.
Thank you.
We will now take our next question from Mr. Murray for Autonomous Research. Your line is open. Please go ahead.
Morning, gentlemen. Just two questions, if I may. Firstly, with regard to the EUR 0.65 full-year dividend, should we just regard that as a base dividend on a going concern basis, or is there any kind of excess capital distribution component within that? Over what kind of timeframe might ING be able to address any potential excess capital that it sees? Are we really looking at a kind of three-year timeframe to try and settle down regulation from here? Finally, just on a point of detail, what approach will ING take to the dividend accrual against capital for full year 2016? Obviously, last year, you stopped accruing profit to capital in the second quarter. I just wondered what approach you'll take this year. Thanks.
Okay. Thank you. In terms of how we thought about setting this, in the past, just a bit of a retort about what we said we would do. We said we'd pay a minimum dividend of 40%. We've done that, and we've topped it up, come up with EUR 0.65 per share, and we're aiming for that to be a progressive dividend to time. Now, in terms of surplus capital, did that play a role? Yes, it did, albeit given the SREP requirements, that quantum is a lot lower now. Mechanically, you can see it's just under EUR 3 billion. In terms of setting the base dividend for go forward, that was part of how we were able to set it at this level. Prospectively, the aim is to have a progressive dividend policy through time.
Ideally, we can try to grow this through time, and that would absorb capital generation from the bank and the reduced surplus as the group as well. In terms of accounting, mechanics are to stay the same. To pay a dividend, profits will have to be earmarked for dividend rather than for capital. That mechanic is the same. It counts them twice, as it were. Precisely what we do every quarter in terms of how much we put into each of the two buckets, the capital or the dividend bucket is something we'll work out in Q1.
Okay, thanks.
We will take our next question. Robin van den Broek from Mediobanca, your line is open. Please go ahead.
Yes, good morning. I was wondering if you could share your thoughts on the discussion with the Dutch Central Bank regarding the lack of level playing field on capital. Do you feel that if there's more clarity on Basel IV, for example, that the Dutch Central Bank might be more lenient to reduce D-SIB requirements? That's question one. Secondly, I thought in your slide pack, you also give some disclosure on your oil book about the maturity of the loan exposure. Could you maybe share some comments on your willingness to reduce exposure, especially the less than one-year maturity part of the book, and what potential margin impact that could have? Thank you.
Okay. Thank you, Robin. I will take the first question, and Wilfred will take the second one. Clearly, I think that the Dutch Central Bank knows that they have created an unlevel playing field with this high buffer that they put on the Dutch banks. They also know that there is some more regulatory change coming, and that may be impactful for many banks as well. We are in constant discussion with the ECB, with the DNB on each and every measure that we can see coming, whether it's from Basel, whether it is from the FSB, whether it is from different approaches that the central banks themselves take in terms of modeling and all of that, in order to show what the effects are. The only thing I can say is that this is a very open and constructive discussion.
Yes, we are dealing with an unlevel playing field here.
Okay.
Okay, on the exposure oil and gas shorter maturities and the development of the exposure. The short maturities that we have in the book consist of two things. One is, of course, the trade and commodity finance business, which by definition, most of that is shorter than one year. There is the maturities on the longer facilities. The underlying dynamic here is that the music in terms of new development basically stopped 18 months ago. What we still have coming, and that also goes back to the earlier question about undrawn commitments, is really mainly those facilities that we committed to before the CapEx largely stopped and that are being gradually drawn down. Obviously being that now almost two years behind us, a lot of that has been drawn.
On the other hand, a lot of these facilities, particularly the ones that are, for example, on the drilling side with rigs on contracts, are paying back, and there is not a lot of new business coming. Our view is that net-net, the exposure will gradually come down. We may well, and there is no intention to stop that at this point at all, simply continue with the shorter term trade and commodity finance business. I think what you're going to see is gradual translation of longer exposures into shorter and then maturing ones, and a continuation of the short revolving type facilities.
Your impact on margins, can you comment on that?
Well, given the fact that there's not a lot of new business, what you're going to see is project finance type margins continuing as the majority of the book for a while. On the TCF side, it is more a volume than a margin change that we're going to see. I wouldn't expect a massive impact on margins from this development net-net.
Okay, thank you very much.
We will now take our next question from Matthijs van den Adel from Orbis. Your line is open. Please go ahead.
Are you on mute?
Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment.
Can we ask for the next one?
We will now take our next question from Guillaume Tiberghien from Exane. Your line is open. Please go ahead.
Yes, good morning. It's a follow-up question on the net interest margin. Could you maybe help us quantify how negative the impact might be if the ECB announces new measure to put rates into more negative territory before any mitigation that you might be able to implement?
Maybe the way to think about this is we have a stable core deposit base that is not getting too technical. It's replicated over a reasonably long timeframe. Our results are to some degree resilient to immediate impacts. We're not a trading shop, so there isn't a daily mark to market in our banking book.
It's more a question of prolonged low rates will have a negative impact through time. The quantitative easing impact tomorrow will not show any immediate impact in results. Longer term, of course, the lower the rates are for longer, it clearly is a negative. As Ralph said, for 2016, we think the outlook is broadly similar to where we currently are, stable-ish, and the three levers apply. We look very carefully at the pricing of all our products, including deposits. We are very much focused on trying to grow our lending and improve the composition of our balance sheet. Balance sheet optimization and loan growth play a major part, too. We have been able to deliver that, are delivering that, and hope to continue to deliver that. Hopefully stable-ish margins, which is what we achieved in 2015 if you exclude FM.
Same thing, hopefully, for the coming quarters, 2016.
Thank you. Very small follow-up. Did you highlight whether you would think you're able to still grow volumes at around 3% or 4% this year or next?
Well, we did indicate so. That given the fact that the oil and gas price also has a positive effect on an even larger part of our portfolio, that in the end, that will support domestic demand and therefore GDP, and therefore a large part of our portfolio will benefit from it. Certainly, it should also lead to growth on that side. Where we saw this year with some uncertainties surrounding the global markets and specific markets, well, this year, 2015, I'm sure there will be uncertainties surrounding specific markets in 2016 as well. We have a good core franchise in Europe, and we have a very good global franchise from a commercial wholesale banking perspective that gives us ample opportunity to grow.
We will now take our next question from Alex Koagne from Natixis. Please go ahead.
Yes. Hi, everybody. Just two follow-up questions from my side. The first one is on the capital. I was just wondering whether you can share the potential impact of the IFRS 9 on your capital. Secondly, it's more on the cost side. I was wondering whether we can expect any new initiative to compensate the potential impact of the regulatory cost. Thank you.
On IFRS 9, it's a bit too early, really, to be definitive on the impact. We'll be working out very much focused on this now this year. Big picture is that, I think the broad view is that this will increase the quantum of provisions. If that happens, they would be taken through equity on transition as IFRS requires. Also we've got this expected loss deduction in capital today that should be released so that the net impact on capital is difficult to judge whether it'll be a net increase or not. We're working on trying to develop the models to compute this, and that will be something we're doing this year. Your second question was?
It was on cost initiative, we should expect a new cost reduction program to compensate the impact of the regulatory cost.
Yeah. This is something we're working on. We've done it in big numbers in 2014. We've done another one. There have been smaller ones in the course of 2015, and also the EUR 120 million we've announced this quarter. Cost discipline, cost focus, cost savings, it's just a constant theme, and it's something we're going to be working very hard on, something we want to improve on. Watch this space, there's a lot more work we have to do here and will do.
Okay. Thank you.
We will now take our next question from Kiris Vijayarajah from Barclays. Your line is open. Please go ahead.
Yes. Good morning, guys. Yeah, I've got a couple of questions on your RWA development. Could you give us more color on the model adjustments you flagged at the back, specifically, what are the kind of methodology changes? What's driving that? Are there more changes we've got to factor into our models for 2016? Then separately, on the more positive side, you've had some positive ratings migration as well. Which books are showing the improvement? Again, what's your outlook for ratings migration into 2016, please? Thanks.
Yeah, I think generally speaking, we're still seeing improvement in most of the books around the globe. Certainly the ones that were giving us some heartburn over the past few years are all improving. NPLs are generally coming down. We see certainly on the mortgage book, for example, here in the Netherlands also, the improvement in property prices having a positive impact on cure rates and on LGDs. Generally speaking, that migration, we think maybe at a slightly less rapid pace, will continue into 2016. We talked already about the oil and gas exposure, obviously that is going to show a slightly different development. Then looking at the models, there is a constant review of models going on where
Upgrading. We are also complying with new guidelines around these models. It won't be a surprise that models that present an increasing risk-weighted assets tend to go through the whole approval system a little bit faster, also with the regulators, than the ones that reduce RWAs.
Okay, thank you.
We will now take our next question from Tarik El Mejjad from Bank of America. Your line is open. Please go ahead.
Hi. Good morning, everyone. Thank you for the call. Just a couple of questions. First, follow-up on these discussions of SREP plus D-SIB. Thanks, Ralph, for your input on that, but can you specify what's the speed of these discussions? Would you hear more from the Dutch Central Bank around this year or when you'll be discussing the dividend next year again, or what's the timeframe on that? Secondly, what's your thought on the AQR or even the SREP for the next year? Because we understand this nine and a half can be moving up or down. Do you think they might include part of the stress on the commodities book this year, or is it not really on the table? Thank you very much.
Okay. Thanks there, Tarik. Well, on the discussions with the regulators. Well, first, the D-SIB is phased in. It's phased in over the next four years. We do fulfill the fully loaded already, so we fulfill that requirement already, but it's phased in. That in itself already shows the DNB taking into account that these things may take time. That's one thing. On the other side, at the Basel discussions, we hear many different things coming back out of Basel. On one side, we have seen a consultation round not leading to many changes. On the other side, we hear that there is quite some opposition to floors, not only from the industry, but specifically also from regulators. Honestly, we don't know where this is going to end up and when it's going to end up somewhere because timelines are being shifted as well.
I think we have to deal with what we have. This is what we know right now, which is this 3% phased in until 2019. We feel comfortable at these levels. We work with these levels. Based on that, we've also set our dividends. It shows as well as to how we feel about it. In terms of next year's SREP, I'm looking at my colleagues. TCF volatility, not sure that leads to a lot of risk cost in itself because that's all collateralized, and it goes up and down in our book from a volume perspective, but it doesn't show any kind of difference in risk experience. I'm looking at Wilfred. No, that is right. Certainly the commodities, the TCF side of the commodities business is not showing any particular stress at this point.
To the extent that the overall environment deteriorates, it will translate into higher risk weights through our models, and as such, find their way into the capital. I don't think there's going to be any particular reason for that to become a SREP topic in itself.
Okay, thank you. Just a quick follow-up, please, on your previous comments on the MDA. You mentioned that MDA levels could set some undesirable consequences. Do you think the MDA level could change in here? EBA is requesting to be pillar one and two. Some Nordics have only pillar one. What's your thinking in that?
Well, as I said, what we saw was also last year when the SREP first came out, there was quite a lot of confusion about how to interpret MDA in terms of SREP. There was an 8% number talked about. Should it be based on the SREP number, including buffers? There was quite a bit of confusion on that. There was clarification given earlier that it would be set based on the total including SREP. I'm also hearing a number of regulators indicating that was not necessarily an intended outcome, and that it's not where they necessarily wanted this to be. I think there's scope for this to be reviewed.
Revisions that change lower capital requirements in whatever form are not easy to get through, but there is discussion that the outcome of having MDA based on the fully loaded requirements is perhaps not what was intended at the beginning. Again, this may take time, but that is something that I do hear on the regulatory change agenda.
Okay. Thank you.
We will now take our next question from Robin Down from HSBC. Your line is open. Please go ahead.
Good morning. Apologies for about coming back to the energy book again, but obviously this is a big issue for the market. What I find interesting is that we've seen growth in a number of your subcomponents in that energy book, and I appreciate with the trade and finance, that's probably some element of drawdown of previous facilities. If I look at the reserve-based lending, that also seems to have grown by quite a high percentage in the fourth quarter. Obviously you guys are the experts and we're not. I'm just wondering what is it that gives you confidence, given everything you're saying about higher credit losses there, to go out and grow that book. Are there any sort of metrics you could share with us in terms of Maybe a sort of loan-to-value type equivalent, with a $30 sort of oil barrel.
Can you tell us roughly what % of the reserves you're actually lending against? Thank you.
Okay. On the actual movements, there is a couple of things going on here. One is a currency effect. Two is, there's always a little bit of undrawn commitment that gets drawn. What is important to keep in mind also is that the reserve-based lending is not just oil. There's a pretty big component, it's about 50/50, is gas. Whilst that is not totally uncorrelated, the market dynamic is different and we have seen one particular transaction in that area. I think your question was typically what kind of loan-to-value should you be thinking of in terms of reserve-based lending? Obviously, they vary a bit, but typically this is around 55%, 60% or so. It's important to keep in mind that our business in this particular area is purely senior and almost always secured.
I know there's a lot of talk in the market about high yield exposure to the energy sector. I don't completely recognize the concern around that because, as I say, whatever we do, certainly in the non-investment grade domain, is secured lending against cash flows and assets.
If you're putting on a new facility today with oil at, well, I guess we're just over $30. Are we effectively saying that you almost need to see that dropping down into mid-teens levels before you'd think that you might be at risk?
Well, if you're looking at a 60% loan-to-value, then you can see that there is a 40% cushion. Are we actively pursuing new deals at this point? The answer is no.
Okay.
If there is a particularly compelling situation with a very strong capital structure and a good loan-to-value, we might still do something, but we're not actively hunting for deals at the moment.
Okay, great. Thank you.
We will now take our next question from J.P. Lambert from KBW. Your line is open. Please go ahead.
Yes, good morning. I would like to come back to the fintech involvement in Kabbage and WeLab. The question is, how you see the implementation within your own operations, in terms of timing, pilots, what kind of results you can share with us. The second question is, again, on the oil and gas. More specifically on timing, you indicated you expect a gradual increase. The question is, can we expect a gradual increase in that scenario also on a quarterly basis this year, 2016? Thank you.
Okay. Jean-Pierre, thanks. It's Ralph. On the fintech question. First, I want to go back to innovation as a whole. Clearly, we innovate a lot ourselves as we have launched many different products ourselves in the payments area, in the customer loyalty area, and all of that. That's a promise that we made when we said, "Okay, we will want to deliver differentiating experience for our customers." It fits with what we're strong at and why we are so successful, because if you go back 10 years ago, we were probably seen as the fintech in the world, although it was not referred to as a fintech. You see also with the successes that we have in countries like Spain and Germany and Australia, that you can build a completely different model.
What we have also indicated in our strategy is that we are in need of developing new lending capabilities. Particularly in the area of SME financing and consumer financing. When we launched the strategy two years ago, we also indicated that we didn't want to go about, for example, SME lending, by building a branch next to every church in every village, because that's a very expensive way to build a platform to do SME lending. We had to look at alternative ways to do so. Clearly, if we can't develop those ourselves, or if we see a good practice out there, we've seen one called Kabbage in the U.S. We want to engage with this practice. That's what we did with Kabbage.
We took an equity investment as a more strategic player, not as a venture capital front, because that's not how we play. It has to fit our strategy. We look at how do these algorithms work? Can it fit our client proposition, et cetera. With Kabbage, we have a joint venture, in Spain as we speak. We started to do SME lending about five, six weeks ago. It's too early now to indicate to the market as to how we go about it, how the book is developing, how fast we're growing and all of that. We'll have to see how it develops. We are looking at it. With WeLab, that's on the other side. That's in Hong Kong, China-based consumer finance fintech, also instant lending.
We think their algorithms and their time to market to service their clients is one that fits our promise to our clients a lot as well. Therefore, we took a participation there. We are looking at it. We are working with them and taking a close look as to whether we can use some of their experience and their algorithms back into the franchises that we already have. This is not for opening new markets. This is really to look at how can we build the franchises that are already so successful in a broader client franchise.
Thanks.
I refer to Wilfred for the second question.
That was on timing on a quarterly basis of our provisions, which is quite an ambitious question, frankly.
Let me give it a try, though. If you peel the onion of the exposures that are sensitive to oil price, if I think about our services and drilling activities, most of these clients have contracts that will last them into 2017. There will be a bit of expiry in 2016. Frankly, we're not expecting very big issues there. The part that could still have a bit of impact on the 2016 provisions is largely going to be the reserve-based lending. There, we'll see the semi-annual reset in Q2. This is when we will start seeing if there is going to be more stress. We'll probably start seeing that show up then in the Q3 provisioning discussion. I can't tell you whether at this point we believe there are going to be problems.
If we did, we would be taking provisions, but we'll see what happens after the Q2. That's, I guess, the best I can say about what the timing of these things might be.
Thank you very much.
We will now take our next question from Andrew Coombs from Citi. Your line is open. Please go ahead.
Good morning. I think all the questions on capital and energy have been exhausted, perhaps I could have one on costs and one on loan growth. First on costs, if I look at the regulatory costs, you've actually come in slightly lower than expectation for the full year 2015, EUR 620 versus the EUR 650 guidance, yet you're increasing your guidance for next year from EUR 800 to EUR 850. Just trying to tie those two things together, what's led to the increase in expected regulatory costs for 2016? The second question would be on the core loan growth. Two aspects of that. The first is when I look at the Dutch retail lending, you've seen a EUR 1.6 billion contraction. That's accelerated Q on Q, and I think you identify lower business lending as the reason.
That seems slightly surprising when you look at the DNB statistic, which shows that SME loan demand is increasing. Perhaps you could elaborate there. On the flip side, industry lending, very strong loan growth this quarter. Quite a big increase from Q3. What drove that, please? Thank you.
On costs at least. What happened was that there was a legislative hiccup in the Netherlands and the DGS, which we expected to be implemented. Actually, we thought it was coming in in the mid-year, then it got delayed to the fourth quarter, and then it turned out there was a flaw in the legislation that got pushed back. That was a deferral. It's about EUR 40 a quarter. I mean, that's all it is a deferral. It all comes in. There's EUR 133 million comes in in 2016. That's the full year impact. The other thing that came in new was the Poles gave us a nice surprise of EUR 70-odd million on top, which has increased the 2016 estimate to EUR 840 million.
On lending growth. The growth for the quarter, actually, we're looking at the specifics. There's a couple of people now going through some of the pieces of material that we have in front of us, if you want to know it exactly. On real estate, there was certainly some growth, and in the structured finance area as well. It's actually spread across the different sectors that we have. There's not one sector that comes out here. We see that growth continuing. We have the teams in place. We actually see some of our competitors withdrawing from some of these markets. It's a combination of growing our teams and seeing that competitor withdrawal. We have real momentum there across the different activities that we have.
On the Dutch retail side?
The Dutch retail. Whatever the DNB statistics, we don't see the demand increasing. There is demand in the SME sector. It is stable. We haven't seen an increase over the fourth quarter, whereas we had expected. It hasn't come in as an increase. Approval rates are stable or improving even. That should show some pickup. In the end, the book runs off more quickly than the new production comes in, and it's a combination of the two that makes that the book has shrunk by EUR 400 million in the fourth quarter.
Okay. Thank you.
We will now take our next question from Pawel Dziedzic from Goldman Sachs. Your line is open. Please go ahead.
Hi, thank you for the presentation. I have two follow-up questions on growth and on regulatory costs as well. On your volume growth, you increased your core lending by EUR 22 billion in 2015, which corresponds to around 4% growth rate. If we look at this on a quarterly basis, nearly 70% of that came in the first half of the year. Is it fair to assume that although maybe the growth rates remain solid overall, the growth rate going forward will be somewhere below that 4%? On regulatory costs, a follow-up question as well. You increased your cost to EUR 850, but can you give us a little bit better idea what are the sensitivities around this number? For instance, in Poland, there are further talks about a Swiss franc scheme that could push regulatory costs higher.
Also, I was hoping if you can comment on any talks about potential elimination of overlap between the fees you pay on Dutch bank levy and resolution fund in Europe. Thank you.
Okay, thanks. On the growth, honestly, I would not look at a quarter-by-quarter picture, nor even a half-year by half-year picture here. It really varies. Certainly in the commercial banking book, these are sometimes larger deals, and therefore, in one quarter we have a higher growth than others. Even on the mortgage side, in some of the countries, depending on where the customer demand is and also the tenors, we grow a little bit faster and sometimes a little bit slower. The guidance, not specifically as a target, but the guidance that we have given when we launch a strategy of a growth of 3% to 4%, we still feel comfortable there across the different franchises that we have. On the regulatory cost outlook, Patrick is going to give you some more information there.
I hesitate to predict what this would be. What we can be clear about is we can compute what business growth will give us in terms of insurance schemes and deposits. What we're not able to predict necessarily is which countries decide to introduce a much bigger amount. As I said, I think the Polish piece, that was a surprise add-on was EUR 70 million. Right now, that's all we know, and hence we think the total is around EUR 840, which is the increase is due to, as I said, the Dutch DGS, which is implemented in full in 2016 rather than partially in 2015. That's EUR 133, and the Polish bank tax of EUR 70 is the bulk of it, and the remaining small increase is just due to business growth. Business growth is small. What would cause it to go significantly is another new tax.
In terms of foreign currency mortgages, I don't think that's in a bank tax sphere. By the way, we have a very, very small exposure there. Our Polish businesses, I think it's about EUR 300 million or EUR 400 million. Tiny. That's not a big issue for us. I think that's been translated more into minimum capital requirements for dividends for the entities in Poland rather than bank tax. There, given, again, we have a very small requirement, it's something we can manage around.
Wilfred?
Just briefly coming back to the question on loan growth in commercial banking. As Ralph said, it's spread pretty much across the board. The segments that stand out a bit as growing faster are transportation infrastructure, working capital solutions, export finance, and real estate.
Thanks, Wolfgang.
Thank you.
We will now take our next question from Anke Reingen from Royal Bank of Canada. Your line is open. Please go ahead.
Thank you very much. Firstly, on your risk cost guidance of flat 2016 versus 2015. I was just wondering if you can give us a bit more of an indication of where, of the different subsegments, looking at second half. You're saying Retail Netherlands, Belgium, more like flat and the growth increases coming then from the wholesale banking area. If you just could give a bit of indication of the subsegment. Secondly, on the dividend, obviously in the past you talked about the payout ratio of at least 40% of net profit. Going forward, should we be thinking about, is it like 60% of net profit in 2015? Is that sort of like a formula we could apply going forward, or should we just basically just look at the absolute level? Thank you very much.
Wolfgang.
Like we said on risk cost, generally in most businesses, we see improvement, certainly on the retail side, continuing maybe, as I said, not as quickly as it did over the past two years, but certainly will continue a positive trend. What would be adding to provisions potentially is, as we discussed, the energy sector. Generally speaking, of course, wholesale banking tends to be lumpy and could cause here and there through some bigger files also an uptick. In terms of subsegments, I think you've seen the development on business lending in the Netherlands. I think it's fair to assume that that will continue for a while. The mortgage book in the Netherlands will certainly also continue to improve as far as we can see. I think rest of the world generally is at healthy levels, might improve a bit.
I'm not expecting a massive change there.
Anke, on your question on dividends. We are moving away from a payout ratio. That's the way we've guided over the last two years as to what we, at that moment, thought was the best way to communicate it. I think there's more clarity now around capital levels, more clarity about the underlying performance for us as well, and therefore we have changed it to an absolute level of dividends. The statement is that we aim to grow the dividend over time.
Okay. Thank you.
As a reminder to ask a question, please press star one on your telephone keypad. We will now take the next question from Matthew Clark from Nomura. Your line is open. Please go ahead.
Good morning. Another question on costs, please. Just wondering what you think your gross cost inflation is underlying. If you strip out the regulatory costs, the redundancy costs, and the benefits from your legacy cost-saving programs. It looks like you were very high in 2015, at 4% or 5%. Is that a figure that you recognize? Why was it that high, and what do you see it being going forward? Thanks.
If you try to strip it down to the essence and look at what we see, things like inflation and labor schemes which mandate pay increases, it is much lower than the 4. It is maybe one and a half, is maybe where you might see a push factor on costs that come against us from those regulatory requirements to index labor costs.
Okay. Why was it that much higher in 2015 then?
I don't think the inflation on the underlying salary costs have increased. It's just that, as we have announced just over a year ago, we decided to invest in the Dutch franchise, which is EUR 100 million. We have indicated that we were investing in the industry lending franchise, that we don't mind investing in the challenger and growth markets if it is improving the cost income ratios. As we have shown you with the German picture, where costs are certainly increasing, but the cost income is rapidly coming down. The cost going up is not necessarily a bad thing. Those are the three areas that we specifically have decided to allow some cost growth. There's many areas where we don't allow it at all and where we're actually decreasing cost.
The underlying cost growth in terms of inflation and all of that, salaries, we more or less take into account that for 1% to 1.5%, at least last year. You have, as I said, EUR 100 million in the Netherlands, EUR 50 million in Germany, EUR 50 million in industry lending, EUR 50 million in foreign exchange on the cost. It's a USD cost and a EUR cost has increased. It's a combination of many factors there.
Do you expect that same level of cost increase driven by rising investments 2016 versus 2015, as you saw 2015 versus 2014? Or should the kind of growth cost increase just reflect more the inflation you talked about, the 1.5% or so?
The cost that we don't want to necessarily grow is the ones with inflation, and that's where Patrick indicated we would allow for 1%, 1.5%. However, we really manage cost income. We really manage efficiency. We see much more volume coming through, and it's the efficiency that we manage. Again, in certain areas, we don't mind cost growing, if in the end, we feel that it is positive from a cost income perspective and hence positive also from a return on equity perspective. That's the way we look at cost at this moment in time.
Okay. Thank you.
We will now take our next question from Bart Jooris from Petercam. Your line is open. Please go ahead.
Yes, hello. Thank you for taking my question. It's just one small follow-up question. Do you have any exposure towards the troubled Italian banking?
We don't have any exposures to Italian banks that we worry about. We concentrate very much on the top end there, and most of it is short-term interbank placements, but we don't really do a lot in the Italian market.
That's clear. Thank you.
We will now take our next question from Robin van den Broek from Mediobanca. Please go ahead.
Yes, thanks too for putting me on again. One follow-up question on your dividend versus capital framework. I was just wondering if you look at your return on equity and your loan growth, you could calculate that you need to retain 30%-35% of your capital generation to support your capital targets. If you look at consensus expectations for 2016, your payout ratio to be progressive is around 60%. I was wondering what implications that may have for potential M&A and fintech investments. If you see sizable opportunities, how will you deal with that? Could that go at the expense of dividends, or how should we look at that? Secondly, a more detailed question on the Netherlands. I believe that people that will refinance their mortgages and that are still on an interest-only framework, they cannot switch providers. Is that correct?
How do you look at that from a pricing perspective? It seems that you have flexibility to lift up the prices, again, that could also lead to some political pressure on that behavior. Thank you.
Okay, Robin. On the first one, this is the balancing act that we have. At the end of each year, we have a capital generation. Out of that capital and whatever capital requirement you at that moment have, you can make a decision between how do you firm up your capital even further? What do you want to reserve for further growth in your business? What is there for dividend? On the dividend side, I think we have indicated where we are going. We aim to pay a progressive dividend over time. That should give you an indication as to the dividend component of it. If it comes to M&A, I indicated previously as well, the core of our strategy is an organic strategy. Where we are looking at fintechs, these are very small amounts.
There are not huge acquisitions that use a lot of capital. These are small tactical amounts in order to get new abilities in through which we can grow organically ourselves. It may be teams and some asset portfolios which come with specific skills as well, we're not earmarking a lot of capital from that perspective. In the Netherlands, on your mortgage situation, it is the case that if you stay with the same provider and you refinance on interest only, then you do that within the same contract, as a consequence of which you're not ruled by the new law in which you have to adhere to an annuity under your mortgage from a tax deductibility perspective. If you switch providers, clearly you have to enter into a new contract because it's a different legal contract because you're taking it out with a different bank.
At that moment, a new law applies, that law prescribes that you have to repay your mortgages at least on an annuity basis, at least from a tax deductibility perspective. It's what the law prescribes.
Can you put a margin incremental on that? I guess so, because the monthly payments for your clients will be lower if they stay interest only.
No, we don't.
Okay.
No.
That was our final question. Thank you.
Okay, thanks for attending this call and for preparing these questions. It's always good to have these discussions around our set of numbers. I want to wrap it up very quickly. I think 2015 has been a particularly successful year for ING. We've really made progress on our Think Forward strategy, and we're hitting the three bases that you need to hit. The first one is growth in customer numbers, growth in lending, growth in savings. The second one is profitability. We're showing good profitability with good return on equity. The third one is capital levels and dividend policy. We're very happy that in 2015 we performed well on all three. Thanks for your questions and talk to you soon. Thank you. Bye.
This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.