Earnings Call: Q3 2015

Nov 4, 2015

Good morning. This is Alex welcoming you to ING's 3Q 2015 Conference Call. Before handing this conference call over to Ralph Hamers, Chief Executive Officer of ING Group, let me first say that today's comments may include forward looking statements, such as statements regarding future developments in our business, expectations for our future financial performance and any statements not involving historical facts. Actual results may differ materially from those projected in any forward looking statements. A discussion of factors that may cause actual results to differ from those in any forward looking statement is contained in our public filings, including our most recent annual reports 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. Yes. Thank you very much. Welcome, everyone, to ING's Q3 2015 results conference call. I will take you through the presentation as normal. With me are Patrick Flynn, our CFO and Rupert Nagel, our CRO. So let's start. Page 2. Clearly, I'm happy to present another good set of results today. Our underlying net profit amounted to $1,92,000,000 in this quarter, and that's supported by lower risk cost, a continued loan growth in our core lending franchises and an improved margins. Our capital position remains strong, and we're well placed to absorb regulatory impacts and to deliver attractive capital returns as we are currently doing. We also continue to make progress on executing our Think Forward strategy. And that's where I want to start the presentation. As you know, financial results just don't happen by itself. There's a lot of work there with our people focusing on the client and making sure that we improve the way we do business and that we're successful and competitive. And you all know that in March 2014, we launched our Think Forward strategy. And that had one clear purpose, empowering people to stay a step ahead in life and in business. And the core of our strategy was to create a differentiating customer experience. As you know, it's all about the customer here in ING. In the previous quarters, we have talked about some of the new innovations that we've developed internally. This quarter, I'd like to take you through some highlights of the innovation efforts that we have established in doing partnerships or actually acquiring FinTechs. And one of those I want to talk about includes Kabbage that will help us generating a new offer to our clients. At the same time, we are focusing on strengthening our sustainability, and that was focused by leading external sustainability benchmarks in their annual reviews. So whether we talk about the Dow Jones Sustainability Index, where we have improved our score to 86 points out of 100 or Sustainalytics, where we are the 3rd best performer amongst 409 reviewed international banks. Now turning to innovation and specifically turning to the partnerships there. In October, we launched a strategic partnership with Kabbage, and it's a leading U. S.-based technology platform that provides automated lending to SMEs. We will be ING and Kabbage together will soon be launching a pilot project in Spain to provide loans to small businesses. The loan application and approval process is both accelerated and easy for our customers. For example, a small business loan in this joint venture can be approved in less than 10 minutes in a paperless process. So that's on delivering the ING way. The goal of the pilot in Spain is to learn more about better ways to serve small businesses with lending capacity. And clearly, we're excited to bring this technology to our customers here in Europe. Expanding into new products like instant lending to small businesses aligns with our strategy to diversify the balance sheet. But it also checks check marks the advanced analytics focus that we have as well as delivering as much as possible in a digital and differentiating way. So it is it very much fits our strategic direction, this cooperation. Now moving to the P and L, Slide 5. We posted strong results in the 1st 9 months of 2015. NOI net result banking increased 18.1% for the 1st 9 months in comparison to 2014, and the return on equity was 11.6%. Now if you would exclude the CVA DVA, which was positive for the 1st 9 months in this year, and if we would exclude the redundancy increased by 7.2% on a like for like basis. So it doesn't really matter which comparison you make, you see progress on P and L. Turning to Page 6 then. These results were strong were supported by healthy income growth and lower risk cost. So you see the underlying income increasing, but specifically also the net interest result you see increasing. And excluding the financial markets, that increased 5.7% from the 1st 9 months of 2014, supported by strong volume growth. The risk approximately in line with the longer term average of 40 to 45 basis points of risk weighted assets that we have indicated. Turning the growth in the lending franchise, Slide 5. The core lending franchise grew by $17,200,000,000 or 4.5 percent annualized in the 1st 9 months of 2015. We've seen solid loan growth in Belgium, Germany, the other challenges in growth markets and CB Rest of the World. Net production in the Netherlands was down due to lower retail business lending and higher repayments on mortgages. Turning to Slide 8. When we launched the strategy, we indicated that we want to further diversify the balance sheet away from mortgages into other asset categories and preferably through our own asset generating capabilities. We have made steady progress on that. So you see that specifically also in the challenges and growth markets that we are creating more sustainable balance sheets by diversifying away from mortgages into other high yielding assets. And that is predominantly now through the growth of our commercial banking business in these countries, But also our SME and consumer finance businesses has grown in those countries because the balance sheets have grown. But as a percentage, it has not increased. Then we turn to capital. IG Bank fully loaded core equity Tier 1 ratio was stable at 11.3%. The positive net profit was offset by the negative impact from the decline in revaluation reserves, basically Bank of Beijing and foreign exchange as well as the negative impact from higher risk weighted assets. The group capital ratio remained also stable as the positive impact of a further reduction of our stake in NN to 25.8% was offset by an increase in risk include any of the 3rd quarter profit in the group co equity Tier 1 and capital, pending regulatory developments in advance of the Board's decision on the year end dividend payment. The pro form a capital ratio of the group after a full divestment of NN Group would come out to 12.8% at the end of this Q3. And if we were to include the 2,200,000,000 dollars of profits that is not included in the group capital, the group capital would come out at 13.5 percent at the end of the third quarter. Now with that, turning to Page 10, you basically see that in the 1st 9 months of 2015, we basically reached most of our ambition 2017 targets. And I'm pleased that we are making so much progress on all of these metrics. That's the 1st 9 months. Let's look at the specific quarter now. Turning to Page 12. So ING's 3rd quarter underlying pretax result was solid at $1,495,000,000 That was positively impacted by CVA, DVA, offset by negative impact from the capital losses and from capital losses and higher regulatory costs. Net interest income, excluding financial marks, has increased by 4.8% over the past year and 2.2% from the previous quarter, and that's supported by ongoing volume growth. And basically, we think that we show the strength of our franchise that we continue to grow our net interest income here. Looking at the margins then, turning to Slide 13. The net interest margin increased by 3 basis points from the 2nd quarter to 146 basis points, and that was driven by Retail Germany and Retail Other Challengers and Growth Markets. The net interest margin itself is down 7 basis points from the Q3 of 2014. But as you can see in this picture, that was entirely due to the lower interest results for Financial Markets. So if corrected, it would have been stable around 153 basis points. So basically, the underlying NIM in our lending and savings business has remained remarkably stable over the last year. Giving you some more details on the higher net interest income, that was driven by improvements in Retail Germany, other challenging growth markets. Commercial Banking also delivered a strong growth in net interest income on the back of volume growth in industry lending. Conversely, in the mature balance market, the net interest income is declining. In the Netherlands, the net interest income has declined from the same quarter last year due to lower volumes, while the net interest income in Belgium is down due to margin pressure. Then taking a look at the growth of our lending franchises. As you can see, the growth in our core lending business slowed from the first half of twenty fifteen, if you qualify it if you basically look at this picture. But it still increased by $1,600,000,000 driven by healthy growth in the Retail Banking. As far as Commercial Banking concerned, we continue to see increase in the longer term industry lending and general lending assets, but this was more than offset by declines in short term lending and structured finance as a consequence of lower commodity prices in Financial Markets. So basically, we see a €1,600,000,000 of core lending growth net. But if you would correct it for Financial Markets, dollars 1,600,000,000 we would come to $3,200,000,000 And if you would correct it for the short term commodity based lending, which was down because of lower commodity prices, you would have to add another 2.1 and then the lending would come actually would go up to €5,300,000,000 So that's a better like for like comparison as to how the underlying commercial business is doing. Page 16, expenses. Now our expense base is more and more impacted by regulatory costs, as you can see. These costs are booked at different moments through the year, and that creates a lot of volatility in our results. And we still have a lot of large amount of about $300,000,000 to go in the Q4. If we adjust for the regulatory costs, the increase the expense increased by 3.8% from the same quarter last year, but declined by 0.7% from the Q2 of 2015. In comparison to last year, the increase is due to Retail Netherlands. As you know, last year, we announced an investment program in the IT side in the Netherlands, and that's what you see as an increase in expense base. But also the expense growth in the Commercial Bank, as we have shown you in the previous quarter, we don't mind in some of the franchises the expenses to grow as long as their income is growing faster so that the cost income ratio is improving. And that explains the quarter on quarter basis of the comparison to 2014 expense growth. The decrease if you compare it to the Q2 of 2015 in cost is driven by lower quarter on risk costs. Risk costs were down from the Q3 of 2014 and the Q2 of 2015 to 2 $61,000,000 and that's driven by both Retail Banking and Commercial Banking. The total risk costs now are at 34 basis points of average risk weighted assets this quarter, and that's below our over the cycle average, with most of the businesses close to the longer term average as the overall economic environment gradually improves. Now the NPL ratio was also down to 2.6% with improvements visible in both Retail Banking and Commercial Banking. If we then focus more on Retail Netherlands, the risk cost in Retail Netherlands or in the Netherlands generally decreased sharply in the Q3 to $82,000,000 which is now down to 55 basis points of risk weighted assets in the Q3 of 2015. And that basically reflects the recovery of the Dutch economy. The NPL ratio has fallen to 3.2% with improvements in all segments, including the business lending segment, by the way. And we have said for several quarters that risk costs would lack the economic recovery. And that's what we've seen because the economic recovery already started earlier this year. But we now feel comfortable that the worst is behind us and that the risk costs may remain at a lower level going forward. Then on the risk costs for Commercial Banking, those risk costs also continued downward trends. They amounted to $97,000,000 or 27 basis points of risk weighted assets for the quarter, and that's down from the previous quarter, but up from last year. And last year, it included the release on a larger file. The non performing loan ratio has declined further to 2.9% this quarter. Despite this positive trend though, it's important to know and keep repeating this that the risk cost in Commercial Banking may remain volatile quarter on quarter as we can be affected by incidents in our lending franchise. These are large loans and you only need 1 or 2 cases for a real movement on the risk cost on this one. But the trend is down. It is 27 basis points for the quarter. So it's a healthy picture, but it could be volatile. Now to wrap it up, I think we presented another set of strong results in the quarter, underlying a very healthy continuing development, both on lending growth, on cost under control, except for the regulatory cost, on return on capital, the growth of the lending franchises. So I remain confident that our story is on track. We continue to execute our strategy across our network and deliver the benefits to our customers and our shareholders. I'd like to open the call for questions now. Thank And we have a question queued from Ashik Musali of JPMorgan. Please go ahead. Your line is open. So just a couple of questions. First of all, how should we think about your NIM here because clearly you had some negative impact on your NIM in second quarter, 143 basis points and it looks like you had a negative impact on your NIM in 3rd quarter as well. Is it fair to say that your underlying NIM has improved materially in this quarter? And is it just the dynamics of how you report your revenue on financial markets, I. E, it's like one pocket to other, I. E, sometime it goes into NII, sometime it goes into other income. So if you can explain that dynamic a bit, it would be very helpful. Secondly is your risk cost has gone down materially and you mentioned that the risk cost in the retail business is expected to remain low and commercial business would be lumpy. But any sort of guidance as to how we should think about the overall risk cost? Should is the current level of retail risk cost absolute flat? Should is that the right number we should think about? Yes, these two questions would be great. Thank you. On the NIM, I'll give the word to Patrick and the risk costs to Wilfred. Good morning, Ashik. Yes, I think you're right indeed. If you look at the NIM over the past year, excluding Financial Markets, So the commercial NIM is very stable. But we've managed to grow interest income. So interest income was up nearly 6%, as Ralph mentioned, year to date 2015 versus year to date 2014 and it's up 1.2% quarter on quarter. So, if you look at the NIM in the quarter, it's up 3 bps to 146 compared to prior quarter. We had real improvement in our the growth areas, retail challenger and growth markets from a combination of lower savings rate and improving our asset mix, again, executing on our strategy. And as you pointed out, we did mention last quarter, it was a couple of 1 offs, 2 basis points that have reversed this quarter. So that's plus 4. And yes, as you point out, there's a negative one from Financial Markets. So in the quarter, it's plus 3 with a drag of minus 1 on Financial Markets, but the commercial margin is very stable and has been over the past year. And basically, that's what we hope and expect it to be going forward this year and into the beginning of next year. Yes. Just to follow-up on that. I mean, how should think about the loss of revenues on financial market? Is it like one thing offsetting other? Your NII may be lower, but are you really losing the revenue from financial market or is it just like where is it getting recognized? I can if you go to Slide 13, you see at the right hand bottom corner, you see the income, the underlying income in Financial Markets. So there's 2 effects here. So the first one is that in the Financial Markets area, the revenues, the income is markets area, the revenues, the income is actually holding up, but it is less on the interest income, it's more on the non interest income. There's two sides to this. The first one is that in the financial markets area also due to regulatory changes, we're actually focusing more and more on the flow business, alignment of client business, etcetera, etcetera, etcetera, which brings a different income. And on the other side, it has to do with the accounting of some of the derivatives. And sometimes that goes more into the income side, and sometimes it goes more into the other income side. But you see that over the year and quarter on quarter, generally, the overall income in the financial markets has been stable. And therefore, that income has been more or less stable. And if you then correct the NIM, you see that the underlying commercial NIM between lending and savings has been rather stable over the last couple of quarters. So that's the explanation there. Yes. I'll give the word to Wilfred on risk cost. Yes. On the risk cost, what we're seeing is the typical pattern at the end of a recession. So on one hand, new provisions are lower. On the other hand, the old problem loans get resolved one way or the other. And that means both write offs as well as releases go up, which then needs to leads to a lower net addition to the provisions. It's therefore likely that 2015 is going to be below 2014 by a more considerable margin than we had earlier guided on. At the same time, I would caution that uncertainty does remain. First of all, the general pattern in Commercial Banking is that it tends to be lumpy, as we always say, and it is quarter on quarter in particular. You still have a lot of uncertainty around Ukraine, Russia, the energy market. So there is plenty scope for some noise in these numbers. And specifically, your question about how should we look at retail provisions or is this the number? Is it flat? Well, it moves in a cycle with the economic pattern. So it's never flat really. If I were to look at where we are today, I'd say there is probably a bit of scope for it to come down a bit further before we see it leveling off and potentially at some point going up again. Okay. That's very clear. Thanks a lot for this. Our next question comes from Anton Krotzok of UBS. Please go ahead. Your line is open. Good morning and thank you for taking the questions. Just a couple of follow ups please. Firstly, on net interest margin outlook. I've noticed that you were able to reprice your deposit base in the Netherlands at the start of Q4. Can you please give us an update on the competitive dynamics that you're seeing in the Netherlands around Dutch, around deposit repricing. Can you do more in the future? And is it one of the main levers you're going to pull in order to keep your commercial margins broadly stable? And then the second question, please, around capital return and your accumulated reserves. Can you please indicate how much capital have you set aside that will be available for the Q4 dividend distribution? I know that you have set aside Q2 and Q3 profits fully, but also you had a payment of interim dividend after Q2 results. So I'm just trying to understand how much cash have you set aside from this year earnings? And also what's your total cash reserve at the group level? And do you still disclose that number a couple of quarters ago? So maybe you can give us an update on that, please? Okay. Anton, it's Ralph. I will take the question on the NIM and the Dutch market, and Patrick will take the second question. Now on the first one, NIM outlook. Clearly, we're already in a longer period of low interest rates and both on the shorter end of the curve and the longer end of the curve. And that gives a bit of pressure. Now for the moment, we have been able to manage that on both sides of the balance sheet. There is scope to manage that even more so going forward, going by the different savings rates that we have. And I can kind of if I can point you to the slide that we have included in the fact that you are used to having us in the package 26, you basically see where we are in terms of savings rates in the different markets. Now that's one side of the NIM development going forward. So we feel we can still manage it for a couple of quarters. And the other side, as you know, as part of our ambition 2017, we were also to make progress to generating more higher yielding assets that had to do with changing the composition of the balance sheet that we updated you on in this presentation as well. And that will continue. So you will see in our balance sheet further growth of higher yielding assets, and that will have its effect on NIM going forward by strategy as well. Now then zooming in on the Netherlands and the situation in the Dutch market. Well, going by Page 26, you see that the interest the savings rates in the Netherlands are still somewhat higher than in the surrounding countries. So from that perspective, we are paying a very competitive rate to our clients. And I think that's also the way you should see it. In the end, savings rate is one that you have to connect to the earnings on savings, which given the fact that the replicating portfolio and the yield on that is decreasing, it will have a downward effect on savings rate in general. But in setting a savings price, it's always a discussion as to how do you make sure that you take the interest of your clients into account and how do you basically, how do you develop that relationship. And that's a careful balance that we are managing. Okay. Good morning. First thing to say about dividends is that there isn't an awful lot we can tell you that's new. We are applying the same approach and we have the same view as we did at the first half year. In terms of the mechanics, I think the numbers perhaps are on Slide 23, but I'm happy to take you through them. So in terms of how much capital have we set aside, $2,200,000,000 year to date 2015 has not been included in regulatory capital at the group level. We have kept that to one side or earmarked it so that we can maximize subject to the regulatory environment our flexibility for dividends. Now deciding how much that will be, it remains as it was at the half year, a decision we have to take at the full year, year end in February. So going back to that 2.2, that's the composition of that is the 708 percent in Q1, which was 40 percent 100 percent of Q2, which is 1.3 percent 100 percent of Q3 just under 1.1 minuteus obviously we have paid an interim dividend of 9.29 gives you the net 2.2 And in terms of the aggregate number, if you think of the total effective economic buffer on the slide, you see $4.8 percent. And if you were to add back, if you choose to do so, the 2.2 percent that we have set aside for dividend flexibility, you get to a total of 7. I think that's the number you were thinking of and that's referred to in the final above it in albeit small fund. Excellent. Thank you very much. This is very clear. So just to simplify this further, if you were to keep the capital ratio of ING Bank stable, you can pay out $7,000,000,000 and the capital ratio of the bank will not change if you fully divest your insurance operations? I think in terms of actually what we are paying and I don't want to mislead anybody. In terms of what we do pay, that's the decision we have to take at the year end. We will pay a minimum of 40% and I'm repeating what I said at the first half. And we are predisposed to return the insurance, if you want to call it that, surface progressively over time to shareholders. However, we have to be cognizant of the regulatory environment and how that evolves. And we'll take a balanced view of both of those, both our ambition and the regulatory environment at the year end. So that is how we look at it. Mechanically, you're correct, but I don't imply that we're going to actually do that. Of course. Thank you very much. This is very helpful. Our next question comes from David Lock of Deutsche Bank. Please go ahead. Your line is open. Good morning, everyone. I've got a couple of questions for me, please. The first one is on risk weighted assets. I know there's been a reduction in Retail Netherlands quarter on quarter, which is quite big. I just wondered what was the driver of that? I think it says it was better quality book, but what is the can you give us an update on what the risk weight of your mortgages is in the Netherlands and whether we should expect any other kind of model changes or further decline of that risk weighting going forward? And then my second question, I mean, you referenced the lower the impact on your lending volumes from kind of the oil trade finance book being lower than what you did expected. Is it fair to say that the effect of the lower oil price is now kind of baked into numbers? And I mean that not from an impairment side, but from a volume side. Do you feel that really this is the base that has been reset after that oil price change and therefore volume should grow from here? Or is there still a kind of headwind from the volume side that we could expect in future quarters? Thank you. Wilfred takes the first question. I'll take the second one, David. So on Retail Netherlands, obviously, this is mainly about mortgages. Risk weights have moved from 18% to 16%. That is driven by the improvement in the portfolio and the one that you can also see in the markets, predominantly at this point driven by PDs coming down as well as the cure rates improving on these loans. So it is the typical mechanical pattern of an advanced internal rating based model that is in action here reflecting the loss experience and the LTVs that we're seeing in the portfolio. If you look at the reporting on mortgages in a bit more detail, you would also see that the average loan to value in the book, for example, has come down from 88% the previous quarter to 83% now. And obviously, that number alone has quite a significant impact, particularly at these cure rates. That helps quite a bit. But the PDs are also coming down, as you can see, reflected in NPLs. And just on your second question on TCF, yes, it is a fraction of lower commodity prices, oil, but also some other commodities there. It's not necessarily a reflection of lower volumes. Actually, the volumes with a lower oil price actually tend to go up because there's more demand because of the lower oil price. So the volumes are actually up, but the value of those volumes actually is influenced by the commodity price. Now we saw a bit of a reset the 3rd Q4 last year when the oil price was dropping $110,000,000 $120,000 to the more $60,000,000 environment. And then we saw another drop then this quarter going down to lowest even like the $40 level. It's back up a bit again. But yes, I mean, we can talk about volumes because we can influence that ourselves. It's the client relationships, it's about pricing, it's about your franchise. But the value is influenced by the world markets, and that's something we can't influence. So as to the outlook on this one, if the oil price goes down further, there may be more demand. But if depending on the price, it will hit our books with a lower usage of our book. If oil price goes up, it will be up. Okay. Can I just have one follow-up on the risk weights? To the an 18% to 16% move, that feels quite big for a quarter on quarter move. I appreciate the advanced model kind of feeds into that. But I mean given the overall debate that's raging about Basel IV and the potential implications there, is there any mean presumably this model change would have been signed off by your regulator and you would have looked ahead to potential regulatory change in the future when making decisions like this? Or is it purely just an additional changes being made by management or by the regulator on the outlook for risk weightings here. Thank you. Thank you for making the question so long that you answered it. It is the second part of what you said. It's not a model change. It is simply mechanical update of the inputs here, which is how this process works. And it works also important to keep in mind with a bit of delays. So we're seeing now things reflected at our 2, 3 quarters ago. But this does not in any way try to anticipate what might change in terms of regulation and it is also not the regulator. Thank you. Our next question comes from Andrew Coombs of Citigroup. Please go ahead. Your line is open. Good morning. Just a couple of follow ups. Firstly, on the dividends, you're obviously accruing at around about an 80% payout ratio full year, but you still need to make the final decision at the end of the year and you say subject to regulatory developments. And given that it doesn't look like we're going to get any further clarity on Basel IV before the year end, Could you please clarify exactly what regulatory developments you are waiting upon? I'm just keen to get a bit more clarity on exactly how you decide upon that dividend decision. And then second, coming back to loan growth on Slide 15. You talked about the trade finance side of things. But when I look at the other commercial banking divisions, the volume growth there also seems to have shrunk somewhat Q on Q. And also Belgium, you've seen a contraction there. So perhaps you could elaborate on the drivers for those particular areas? Thank you. Yes. Patrick will answer the first one. I mean, in terms of dividend decisions, again, we'll have to see how much clarity we do get. I think, hopefully, the SREP process will be clearer between now and the year end. The ECB dividend guidelines, which relate to 2014, we expect them to be updated because they're out of date now. So we do expect a bit more clarity on that front. You may be right in terms of BAL4, it may be that there isn't a lot more clarity. But in the last quarter, there has been certainly in terms of tone, there has been some more color at least on how European regulators are beginning to think about that. I would hope that firms up a little further. So all of these things matter. So we will incorporate everything we see. No, at that point, it may not be perfect. I doubt it will. But we have to make a best estimate at that time in February of what we do know and what we don't know and then form a judgment. Then on the lending growth, Page 15. Bit volatile given one particular client that we have in the books there, which is basically that the Flemish government actually we do all their payments business and their financing, and these are big amounts. And they can actually show quite some volatility. But the underlying in Belgium is actually growth, both in mortgages as well as in business lending. Now then turning to the Commercial Bank Industry Lending, it's the same thing here. On Industry Lending, specifically the long term side is actually growing. We see that to continue. But these are large deals that take quite some time to work on before they are agreed, documented before the drawdowns happen and then they will show up in our book. So you can't really come to a conclusion on a quarter to quarter comparison here. And that's why we continue to refer to an analyzed figure in terms of core lending growth next to a quarter to quarter comparison. And the annualized figure over the 1st 9 months actually shows that we're growing by 4.5%, which is a little bit beyond what we had indicated when we launched a strategy. So on all of those with all of that input, we still feel comfortable that it grows like we have indicated. Thank you. You do very well. Our next question comes from Alex Cormier of Natixis. Please go ahead. Your line is open. Yes. Hi. This is Alex Corgne from Natexis. Just two follow-up questions from my side. The first one is on the revenue in the financial markets. Should we expect the contribution of net interest income to continue to decrease going forward? This is the kind of trend that we have seen for the last quarter. And one last question is again on the dividend policy. I do understand your point of view, but I'm still trying to understand. I mean, as of today, the consensus is expecting you to offer a 70% payout ratio, which is significantly higher than the 40% that you are guiding. How comfortable are you with the consensus number as of today? Thank you. Well, I'll take the second question. Patrick will take the first question. So on dividends, we haven't changed our guidance and we're not changing our guidance on this one. We have been very consistent in saying that when we launch the strategy in all the quarters thereafter that we pay a minimum 40%. And then at the year end, when we have to establish a total payout, we will look at where we are on strategy, commercial development, but particularly also the regulatory environment. And that's when we will make up our mind. So whatever estimates are out there, whatever expectations are out there, this is the guidance that we have been giving. And so you'll have to wait for another quarter. Be patient. In terms of financial markets, I'd be a brave man to try and predict the composition of FM revenues. As Ralph said, and he's looking at me here now. If I as Ralph said, if you look at it year to date, it's up versus in aggregate versus year to date last year. That's the important thing. One thing I will tell you that typically the 4th quarter in financial markets year on year is lower than in previous quarters for the Christmas effect markets closed down and shut up shop typically in early December, so you don't get a full 3 months activity. That I expect to continue that seasonal aspect. But as to the composition of revenues between the 2, we don't manage it. So it would be silly of me to talk about it. We don't manage it. We don't target them on any composition. We target them on the total revenue. So, yes, wish I could add more, but that's it. Thank you. We will take our next question from Pavel Gjercek of Goldman Sachs. Please go ahead. Your line is open. Good morning and thank you for the presentation. I only have one question from my side and it's on your fee income. Can you perhaps comment on the drivers behind the decline this quarter? I was wondering how much of that could be attributed to just seasonal factors? How much of that is driven perhaps by the lending by the lower lending volumes this quarter? And should we Yes. Yes, I think that's a good question. So basically on the commissions income, you see a decrease there. Partially, that is seasonality, for example, in Belgium in terms of the influence of mutual funds, that's seasonality. On the TCF side, with a lower value of the activity, the underlying activity, we also get lower commission income. So that is there is a direct relationship there. And then on the other structured finance business, if you close less deals in a specific quarter and you close more in the next quarter, then your upfront fees coming through these structures, they fluctuate just like your lending growth fluctuates 1 quarter to the other. But the underlying is the positive trend with the growth of the balance sheet and closing new deals. So that's a little bit how you have to look at it. So partially seasonality, if it comes to the retail side and inflow and mutual funds, partially is the shorter term side of TCF with a lower value of the transactions and hence a lower commission. And then on the longer term side of structured finance, it is just when do you close these deals and when do commissions become payable? Very clear. Thank you. Our next question comes from Guillaume Thibijon of Exane. Please go ahead. Your line is open. As we have no further questions queued, I would like to turn the call back to the speakers for any additional or closing remarks. I understand there's no questions. No? Okay, good. Well, thanks, ladies and gentlemen, for being on this call. Just to sum it up, I think that we've had a very good quarter showing that the underlying strategy is working, whether we talk about sustainability, whether we talk about innovation, whether we talk about the improvement of the differentiating experience for our clients or whether we talk about the actual result that comes from this, which is a commercial success across the different activities that we have leading into a profit of $1,92,000,000 a growth in the underlying lending portfolio with lower risk cost, stable capital, and we are delivering on return on equity. Thanks for the call, and well, talk to you later. There's more questions. Okay. Well, then the summary and we keep that for later. So we'll go back to the questions. Thank you. Okay. Apparently, there's a technical issue here that we don't get the question through. You know that our team from Investor Relations are open 24 hours, 7 days a week. So to the extent you did not have the you were not able to ask the question now, I really apologize, but let's make sure we get your questions answered by the Investor Relations team. Thanks a lot. As said, we're happy with this quarter. It shows strong underlying trend to continue. And with that, have a nice day. Thanks a lot. Bye. Thank you. That concludes ING's 3Q 2015 conference call. Thank you for your participation. You may now disconnect.