Ing Groep NV Q3 FY2025 Earnings Call

3Q 2025 Conference Call. Before I hand this conference call over to Steven van Rijswijk, Chief Executive Officer of ING Groep, I want to mention that today's comments may include forward-looking statements regarding future developments in our business, expectations for our future financial performance, and any statements not involving a historical fact. Actual results may differ significantly from those projected in any forward-looking statement. A discussion of factors that may cause actual results to vary is included in our public filings, such as our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission, and our earnings press release posted on our website today. Additionally, nothing in today's comments is an offer to sell or a solicitation to buy any securities. Good morning, Steven, the floor is yours.

Good morning. Thank you and good morning, and welcome to our results call for the third quarter of 2025. I hope you're all well, and thank you for joining us. As usual, I'm joined by our CRO, Ljiljana Cortan; and our CFO, Tanate Phutrakul. While macroeconomic and geopolitical uncertainty remains prevalent, we have again delivered a strong quarter as we continue to execute our strategy to accelerate growth, increase our impact, and deliver customer value. In today's presentation, I will start by sharing further insights on how our capital allocation will continue to fuel growth and increase returns. And I will also update you on our long-term capital target. Thereafter, Tanate will walk you through the quarterly financials. And as always, we will be happy to take your questions at the end of the call. And now let's move to Slide 2. This slide highlights our continued strong commercial momentum in the third quarter with solid growth across key areas. We have added nearly 200,000 mobile primary customers during the quarter, bringing growth in the last 12 months to over EUR 1.1 million, well ahead of the target set at our Capital Markets Day. Our loan book expanded significantly in both Retail and Wholesale, and Retail saw EUR 8.6 billion in net core lending growth driven mainly by residential mortgages. Wholesale Banking also delivered a strong quarter, supported by trade finance services and lending, reflecting increased client financing needs. Core deposits declined slightly following substantial inflows in previous quarters and this was largely due to the inclusion of promotional campaigns and seasonal spending patterns during the summer in Retail Banking. On the other hand, Wholesale Banking posted strong inflows, particularly in payments and cash management, financial markets and cash pooling. Customer balances grew at an annualized rate of 7% in the first 9 months of 2025, keeping us well on track to achieve our 4% annual growth target. Fee income also continued its upward trend. Year-to-date, fees grew by 12%, and we have raised our full year 2025 growth outlook to more than 10%. Our fourth quarter rolling average ROE stands at 12.6%, and we have also revised our full year ROE outlook upwards. Finally, we remain committed to supporting clients in our sustainability transitions with sustainable finance volumes up 29% compared to the same period last year. Now let's move to the next slide to discuss what this growth means for our capital generation. On Slide 3, we show how our continued commercial growth, further income diversification, and proactive cost measures have delivered strong capital generation. Over the past 4 quarters, we have delivered EUR 6 billion of net profit, which contributed an additional 2 percentage points to our CET1 ratio in line with the 2 prior years. This performance has enabled us to offer an attractive and sustainable dividend with an ordinary cash dividend yield of nearly 6% in the last 12 months, and part of the capital we generated was reinvested to support profitable growth across both our business lines. And finally, thanks to our strong capital generation, we have been able to announce and execute additional distributions amounting to EUR 4.5 billion over the last 12 months and EUR 12.5 billion over the last 3 years. Then I'll move to Slide 4, where we summarize the total distributions to shareholders, building on what I just mentioned. In our policy, we have consistently paid cash dividends and we have been executing share buybacks for several years. And these actions have delivered a highly attractive yield while our share price has risen significantly. The EUR 2 billion share buyback program, which started in May this year, was concluded earlier this week. And today, we are announcing an additional EUR 1.6 billion distribution. All that amount, EUR 1.1 billion, will be returned in the form of a new share buyback, which will have a lasting positive impact on both earnings and dividends per share. And in addition, we will pay a cash dividend of EUR 500 million in January 2026, helping us to meet the expected cash flow for the year. Looking ahead, we remain committed to delivering strong shareholder returns and we will provide you with an update with our first quarter 2026 results. Now let's move to Slide 5, where I will explain the rationale behind updating our CET1 ratio target. So here on Page 5, our expected fully loaded CET1 MDA has risen over a year from 10.5% in 2020 to around 11.2%, primarily due to regulatory changes. And consequently, we have revised our capital target and will now measure our CET1 ratio at around 13%. And this target gives us a buffer of about 180 basis points above the MDA threshold, which we consider appropriate given the resilience of our business model and the fact that a significant portion of the MDA, over 1 percentage point, is attributable to countercyclical buffers. Any CET1 capital above 13% will be treated as excess and factored into our future capital planning as evidenced by the additional distribution that we announced today. And in the previous slides, I'm now on Slide 6, I outlined how we have deployed excess and newly generated capital over the past years, delivering strong shareholder returns. And although we are no longer in a position of excess capital, we remain firmly focused on generating strong capital going forward, and our allocation priorities are well-defined. First, we will maintain an attractive shareholder return supported by our 50% dividend payout policy. Second, we will continue to invest in value-accretive growth, further diversifying income streams, expanding the loan book in a capital-efficient way and considering M&A opportunities that meet our strict criteria. And these investments will help us to accelerate growth and enhance earnings potential as the return on new business is higher than a return on share buyback. And finally, we will return any capital structurally above our CET1 target to shareholders. Moving to Slide 8, where we present our improved outlook for 2025. So far this year, we have added nearly 700,000 mobile primary customers and remain on track to achieve our annual growth target of 1 million in 2025. We have raised our expectation for fee growth and now anticipate fees to come in more than 10% higher than last year. And as a result, we have also increased our outlook for total income, which we now expect to reach around EUR 22.8 billion this year. Prudent expense management remains a key priority. We continue to take proactive measures to operate efficiently while selectively investing for growth. And despite additional incidental expenses this quarter, we continue guiding total costs towards the lower end of the EUR 12.5 billion to EUR 12.7 billion range. As explained earlier, our CET1 target has been updated to around 13%. And given our improved outlook for income and disciplined approach on costs, we have also raised our ROE expectation for this year to more than 12.5%. We will share our outlook for 2026 and revisit our 2027 targets with the fourth quarter results. And now I'll hand over to Tanate, who will walk you through the third quarter financial results in more detail starting on Slide 10.

Thank you, Steven. Yes, on Slide 10, we show the development of total income, which has increased further this quarter and was close to the record level we achieved a year ago. Commercial NII rose by a strong performance in Wholesale Banking Lending and the conclusion of our promotional campaign in Retail Banking Germany. These factors more than offset the impact of a lower average ECB deposit facility rate and a stronger euro. Fee income continues its upward trend, growing by 15% year-on-year. Most of this growth is structural, which is why we have raised our full year expectations. Finally, all other income, which includes other NII, investment income, and other income was supported by continued strong results in the financial market and treasury as well as the final dividend payment from our equity stake in Bank of Beijing. Let's discuss Slide 11, where we show the development of our customer balances. We delivered another quarter of strong loan growth across both our Retail and Wholesale Banking. Net core lending increased by EUR 14.2 billion. Retail contributed EUR 8.6 billion of that, driven by continued growth in mortgages and increasing consumer lending portfolio, primarily in Germany, Poland, and the Netherlands. Wholesale Banking Lending also posted strong growth as a relatively large number of deals originated in earlier quarters were converted in the third quarter. On the liability side, core deposits declined by around EUR 200 million after significant inflows in prior quarters. The decline was largely attributable to outflows in Germany and Belgium after the conclusion of the promotional savings campaign. Wholesale Banking posted a strong inflow, reflecting increased deposit volume in payment and cash management areas, financial market, and the cash pooling business. On Slide 12, you can see that commercial NII grew quarter-on-quarter. This increase is particularly strong in Retail Germany's liability NII after the end of the bonus rate for fresh money from a promotional campaign. This was also the main driver behind the 1 basis point improvement in liability margin. Lending NII also in Wholesale Banking Lending, the lending margin remained stable as the growth in Wholesale Banking Lending offset the impact of continued growth of our residential mortgage portfolio, which delivers a higher return on equity but lower average margin. For full year 2025, our outlook for liability margin and lending margin is unchanged at around 100 basis points and around 125 basis points, respectively. We expect commercial NII to come in between EUR 15.2 billion and EUR 15.3 billion. It is worth noting that the higher-than-expected NII growth in the third quarter was partly driven by a large number of transactions in the Wholesale Bank, which have been in the pipeline for an extended period of time. Turning to Slide 13. Fee growth remained strong with a 15% increase year-on-year, driven by structural revenue drivers across both Retail and Wholesale Banking. In Retail Banking, growth was supported by a continued rise in mobile primary customers, which boosted daily banking fees. Investment products had a strong quarter, reflecting an increase in the number of investment accounts and higher assets under management. Wholesale Banking delivered a quarterly record fee income of EUR 383 million, driven by strong performance in lending, supported by a greater number of lead roles, increased loan underwriting activities, and higher lending volume. Given the strong performance in the first 9 months of this year, we are confident that we can grow our fee income by more than 10% in 2025. On Slide 14, we show the development of all other income. Income from the financial market is mostly driven by client activity. We continue to support our clients through volatile market conditions, mainly with FX and interest rate management. Income from our financial stakes this quarter included a final dividend from our stake in Bank of Beijing, while other income also benefited from a gain on sale. Now on to Slide 15. Our expenses excluding regulatory costs and incidental items rose less than 3% year-on-year, reflecting our prudent approach. The increase was largely due to wage inflation and our ongoing investment in business growth and scalability. On the growth side, we continue investing in our customer acquisition and product development, including expanding our offering for new customer segments. Another good example is business banking, where we broaden our product suite and make it easier to digitally onboard customers. In terms of scalability, we focus on enhancing and strengthening our tech platform. At the same time, we are seeing benefits from operational efficiencies, which help offset part of the cost increase. We remain committed to digitizing our services to further strengthen our operational leverage going forward. We're actively integrating generative AI capabilities through our organization. Our GenAI chatbot is now live in 6 markets, providing customer support. And in consumer finance, we use AI to assist applications and process loan applications automatically. Incidental expenses mostly relate to restructuring provisions booked, which are expected to result in EUR 30 million in annualized cost savings once fully implemented. We still expect total expenses to finish at the lower end of the previously guided range. The outlook includes incidental items recorded in the first 9 months whereby continued focus on operational efficiencies will lead to some incidental costs in the fourth quarter. Now let's move on to risk costs on the next slide. Total risk costs were EUR 326 million this quarter, equivalent to 19 basis points of average customer lending, which is below our through-the-cycle average and reflects the quality of our loan growth. Net addition to Stage 3 provision amounts to EUR 361 million, mainly due to collective provisioning in Retail Banking and a number of newly defaulted files in Wholesale Banking. The Stage 3 ratio remains stable. Stage 1 and Stage 2 risk costs show a net release of EUR 35 million, mostly reflecting portfolio movements. Overall, we remain confident in the strength and quality of our loan growth. On Slide 17, we show the development of our core Tier 1 ratio, which increased compared to last quarter. Core Tier 1 capital increased on the back of strong capital generation, partly offset by dividend reserving and a lower market value of our stake in Bank of Beijing. The total risk-weighted assets were broadly stable. Credit risk-weighted assets, excluding FX impact, increased by EUR 2.2 billion, mainly due to volume growth. This was partly offset by a change in the profile of the loan book, equity revaluations, and various other effects. Operational risk-weighted assets remained flat while market risk-weighted assets decreased by EUR 1.7 billion. The announced additional distribution of EUR 1.6 billion has a pro forma impact of 48 basis points on the Core Tier 1 ratio, bringing it more in line with our updated targets. Now I'll hand back to Steven to wrap up today's presentation.

Thanks, Tanate. And before we move to Q&A, let me recap the key takeaways from today's presentation. We delivered another strong quarter, maintaining solid commercial momentum that is fully aligned with our growth strategy, and the sustained performance translated into robust capital generation, enabling attractive shareholder returns while continuing to selectively invest in our business. Today, we announced EUR 1.6 billion in line with our updated target. Going forward, we remain committed to deploying capital to fuel growth and further enhance returns. And finally, we have improved our outlook for 2025, expecting higher fees, stronger total income, and a return on equity above 12.5%. And with that, I would like to open the floor for Q&A. Operator, over to you.

We will now take our first question from Delphine Lee.

My first question is about capital. As you mentioned in your slides, your CET1 requirements have increased significantly. Do you believe we are entering a period of stabilization, or is there potential for more pressure? Additionally, do you foresee any possibility of that requirement decreasing, perhaps due to mortgage flow? It would be helpful to have better insight into how you manage your CET1. Also, regarding NII and deposits, the retail deposit options were quite notable this quarter, influenced by some seasonality. I'm curious about what trends you are observing so far this quarter. Have the trends seen in Q3, particularly in Wholesale Banking and the slight improvement in the liability margin, been confirmed for Q4 yet?

Thank you very much, Delphine. And on capital, yes, we currently do not see additional pressure on capital. So all the countercyclical buffers and other elements that we could see that could potentially have come and that we have factored into our capital targets. Of course, we continue to talk to supervisors about avoiding duplication or gold plating between different supervisors in different markets. And of course, we also talk about the mortgage floor that could come in, but only in 2032. So that's a long time away, but we'll also talk about that to see if that can be removed, but those discussions are ongoing. Then on deposits, yes, there was an outflow of about EUR 7 billion in Retail and an inflow of about EUR 7 billion in Wholesale. So our deposits are approximately flat and minus EUR 200 million. What we can see is that these deposit outflows for Retail came from a marketing campaign predominantly in Germany, which ended, and that always leads to part of outflows of the marketing campaign money that we got in. So that is that effect. Also, there was a third quarter effect, which is a seasonal effect, which then is the end of the holidays, and during the holidays, people spend more. So typically, with a higher spending pattern at the start of the third quarter, you also see deposits there coming down. So that's typically for this quarter. That is not a pattern that we would expect in the fourth quarter. And to date, if you look at the total deposits, we have an annualized growth in the first 9 months of 6%. So we're happy with our deposit inflows during the year.

And we will now take our next question from Namita Samtani of Barclays.

My first question is, how do you expect your lending margins to grow from 125 bps today to the 125 to 130 bps guidance over 2026 to 2027, given there's a lot of little private credit competition and many banks offering competitive pricing, especially in wholesale? So any thoughts there would be much appreciated. And secondly, I saw an article on Bloomberg that ING estimated that around 950 positions are at risk in the Netherlands by the end of 2026 as artificial intelligence was rolled out. I know it was just a forecast given to the country's employee insurance agency, but I just wondered why you aren't doing this AI initiative in other countries. For example, the cost income in the Netherlands looks decent compared to Belgium and Australia Retail, where it's 60% to 70%, which looks quite poor.

Thank you, Namita. I'll do the question on the 950 positions, and Tanate will talk about the lending margin. As a matter of fact, this is an announcement that we have to do with a collective announcement. And so this is an estimate that we then officially post with the labor insurance agency as a current estimate of how many jobs will be affected in this country. Now the jobs that are affected are part of it is in Wholesale Banking, as we announced earlier, and parts, it's in our processes such as less manual or personnel work in contact centers and or more digitalization in lending and consumer lending processes. By the way, we do this in the Netherlands, we do this everywhere around the world, so the GenAI chatbot has been rolled out or being rolled out in 6 countries already as an example. But it's just the announcement that we are compulsory to make in this country. It has led to the announcement that is not because we're only doing this in this country, but this pertains to employees in this country.

Namita, just on the margin to share mortgage financing in our mix. We do expect that, that will normalize going forward. Also, that's a factor that the funding profile of our mortgage-backed book has caused margin compression, which we expect that to subside over the next few periods and that we do expect return to growth in the Wholesale Banking loan growth, which comes with a higher margin. That's why we do expect that over time, our lending margin will range between 125 and 130 bps.

And we will now take our next question from Tarik El Mejjad of Bank of America.

I have two questions. First, I want to revisit your investments in technology and AI. You faced some AI and machine learning challenges a few years ago, particularly with increasing your full-time employees in KYC and client onboarding. Have you made any investments in AI in that area since then? Additionally, although you've already reduced some costs, are you continuing to invest in this area simultaneously? I would also like to know about your plans for integrating AI into your products in the future. My second question is about capital redeployment. Thank you for clarifying your outlook on capital generation; it's very clear. However, regarding consolidation and M&A, you've been open about your perspective. How has your thinking changed in the current interest rate environment, and what will your focus be moving forward?

Thank you, Tarik. Yes, first of all, tech AI investments. I think there are 5 main areas that we currently are deploying or starting to deploy GenAI, and we already worked with AI for the last 10 years, but GenAI, which is let's say, AI on steroids, if you will, there was a clear focus that is coding in the technology space, that is lending, that is hyper-personalized marketing, that is contact centers, and that is KYC. So for sure, we are investing in digitalizing KYC and also get this supported with AI and GenAI. And that will, of course, also have an impact on our processes and could also indeed have an impact on how we work with our staff. So yes, that could be and it is an interesting part of the business where we can use digitalization much more than we did that in the past. When it comes to capital deployment and our thinking on M&A, yes, it has not changed. I think that what we want to do is we want to make more impact and be more relevant in the markets in which we operate. That means that we are looking at market segments that we currently do not have, for example, business banking or consumer lending or private banking, wealth management type of activities, or we look to increase in size, which has scale benefits. Those are the areas in which we are looking. But of course, it has to make sense from an ROE point of view.

And we will now take our next question from Giulia Miotto of Morgan Stanley.

I want to start with a question about net interest income. Tanate, I believe you mentioned that the forecast for the year is between EUR 15.2 billion and EUR 15.3 billion. This surprised me because I expected it to lean towards the EUR 15.3 billion mark, especially since I anticipate NII to improve in the second half, particularly in Q4, benefiting from the conclusion of the Belgian campaign. Therefore, I thought a EUR 3.9 billion NII for Q4 was almost guaranteed. Additionally, you mentioned some Wholesale Banking transactions closing in Q3. Could you quantify if there are any nonrecurring items from Q3 that we should consider? I would appreciate your insights on NII for the remainder of the year. Furthermore, I've noticed several recent items affecting costs. Over the past five years, leverage has been around EUR 200 million annually. Should we regard any of these as recurring, or do you plan to avoid similar occurrences in the future?

All right. I give both questions to Tanate starting with NII.

Yes, Giulia. So I think we do have some tailwind coming our way. The ECB rates later today, we'll see what Christine Lagarde says, but I think we see a bottom to the short rates and a positive yield curve. So that's a good tailwind. And we do expect that, that will have a positive impact on our NII, not only for '25 but 2026 as well. The reason why we gave a tight guidance of EUR 15.2 billion to EUR 15.3 billion, is the fact that in Q3, we have seen quite a catch-up in the Wholesale Banking NII growth. If you remember in previous quarterly calls, we said that our pipeline in Q1 and Q2 were fairly robust, but customers were not converting them into loans or transactions, and that catch-up has happened in the third quarter in a pretty significant way. So that's why we gave this guidance of between EUR 15.2 billion and EUR 15.3 billion. Now on the restructuring provision. It's been our approach that we don't take big major program restructuring provisions over multiple years. But we take provisions when we have a clear business case, it is concise and that it can be achieved over 12 to 18 months, and that's our policy going forward. That's why we gave a bit of an outlook to the market that we do expect continued efficiency program and that we do expect to take additional restructuring provisions for additional efficiencies in Q4.

And we'll now take our next question from Benoit Petrarque of Kepler Cheuvreux.

Firstly, as an introduction, I'd like to hear your perspective on the results of the Dutch Election, which seem to be relatively positive. Now, moving on to the first question regarding the ROE target. You have upgraded the '25 target multiple times, but the '27 ROE remains the same. Do you agree that there is increased confidence in achieving the 14% target, with potential for exceeding it? I also want to know if you are currently observing stronger growth momentum than what you expected back in June '25 during the CMD. Secondly, regarding efficiencies, the technology side appears quite promising. You've noted that digitalization has been utilized much more than before, and there have also been restructuring charges in Retail. Are these efficiency gains included in the 3% to 4% OpEx CAGR target set for June '24? Or do you anticipate a quicker improvement in efficiency and digitalization?

Thank you for the questions. I'll address the topic of the elections. Tanate will handle the questions about growth and efficiency, although I suspect he'll mention that we'll provide more updates after our fourth quarter results in 2025. Regarding the elections, it's clear that a stable government and coalition capable of making long-term decisions is beneficial for society and the economy. The previous coalition lacked consensus, presenting a new chance for a more stable coalition that can focus on the long term. I'm hopeful for that. Additionally, the larger parties tend to be more pro-Europe, which can strengthen international relations from a business perspective. It's important to continue supporting the sales and investment union within a European context. Furthermore, consistency in policy, simplification, and sustainability initiatives would also be beneficial. Overall, having a government that fosters long-term stability would be advantageous.

From CMD, I think we are more confident about our 2025 CMD. Volumes are better than we planned. Fee growth we have basically upgraded in the last 2, 3 quarters, our ROE guidance for 2025. But I think I'll leave it to February to give you more formal guidance for the coming period. And then on cost reduction program, yes, these are plans which we have an ambition to deliver, and it's in line with our Capital Markets Day guidance.

We'll now move on to our next question from Benjamin Goy of Deutsche Bank.

I have two questions. First, I'd like to follow up on net interest income, specifically for Q4. In Q2, when you provided your guidance, you anticipated one more rate cut, which hasn’t happened and may not happen today. Do you think there is now potentially more upside in your guidance compared to August? Secondly, regarding the Wholesale Bank, could you provide more details on loan growth? Where is it coming from in terms of countries and product types? Additionally, for the newly defaulted files in Wholesale Banking, have you noticed any trends or specific industries? Any background information would be helpful.

I will discuss the growth in Wholesale Banking. Ljiljana will cover the risks or risk costs in Wholesale Banking, and Tanate will address NII. Regarding growth in Wholesale Banking, there are two main areas to highlight. Firstly, we are seeing larger underwritings and syndicated loans as companies engage in significant investments, leading to substantial transactions and underwritings on our part. As mentioned in previous quarters, we observed a strong pipeline in Wholesale Banking, which has been growing, although the conversion into actual business was lacking. This was likely influenced by market uncertainty. However, it's encouraging to see that companies are beginning to invest again, which has resulted in increased underwriting business and associated lending fees, reflected in our fee income. The second area of growth in economic activity is in trade financial services. These factors contributed to an approximate EUR 5.5 billion growth in Wholesale Banking, alongside around EUR 6.5 billion to EUR 7 billion growth in Retail Banking and mortgages.

Yes, you've seen the third quarter risk costs in general. We're at slightly below the cycle or at the cycle with 19 bps, let me say, and the same is valued for the Wholesale Bank specifically. So if you're looking at Wholesale Bank, they're slightly below through the cycle average and the majority of provisions correctly comes from the S3 provisions or Stage 3 provisions. However, they are higher than the previous quarter, but they are lower and significantly lower if you're looking at the third quarter '24. So if we are looking at the newly defaulted cases, I cannot say I see a specific sector-wide pattern. What we've observed is actually more a result of idiosyncratic events at certain clients rather than systemic observations. Needless to say, we remain vigilant because despite the global economy doing a bit better than we expect, there is still uncertainty around how the economic policy, specifically tariffs and regulation will impact it going forward. So far, so good, I would say.

And then on rates, Ben, I think the reduction in rates has no material impact on our 2025 financials. And I would refer you to the replication impact of the forward curve that we provided, which you see that it has a positive impact in '26 and '27, but is immaterial for '25.

And we'll now take our next question from Shrey of Citi.

Just on your 13% CET1 ratio target, you're obviously at 12.9% this quarter, pro forma for the distributions you announced. Looking forward, did you look to ask below this number on an interim results basis? And sort of what's the leeway within that circa 13% number?

Good spot. So indeed, we are comfortable with dipping into it a little bit. So this is what it shows today. So it is indeed around target, and I don't want to mathematically, every day of the week, be at 13%. It will be around that number. And you can see now that now it is 12.9%, so it's a bit below it. And what we then say is that what we say is that we have structural capital excess over 13%, then we call it an excess, and then we will look at distribution.

And we'll now take our next question from Chris Hallam of Goldman Sachs.

Just to begin with some Q4 housekeeping. The EUR 30 million of annualized cost savings you flagged on Slide 15, when do you expect those to be fully implemented? And then are there any reasons why fees would be down year-over-year in the fourth quarter? Just even if I assume flat, then I'm going to get to a full year number result of 4.6% and 4.4% on fees. And then second, on the strategy, there's a link obviously between deposit campaigns, the customer retention and then fee growth. Do you get a sense of that connection is that the strategy is becoming more predictable or more lucrative? And maybe on the other hand, if you look at what's coming in Germany, the more demand for borrowing, maybe a greater need across the banking sector for funding and liquidity in that market to kind of react to that borrowing demand, maybe a more competitive deposit landscape. Does that change at all the economics for ING of the deposit campaign pipe strategy in Germany?

All right. On the EUR 30 million cost savings, that will feed through in 2026 per annum. Then is there any reason for the fees to go down in the fourth quarter? Now that depends on economic activity. So you've seen the growth in our fees has been 75% alpha. Of course, we saw very strong lending fees in Wholesale Banking because of the execution or the conversion of the pipeline. So yes, there we need to see what is the level of activity, but we remain confident on our fee growth. And that's why we said the fee growth for the year will be higher than 10% rather than at the higher end of the 5% to 10% range. And then yes, just correct me if I understood your question in the wrong way, but you are wondering if there's a connection between growth in lending and in fees, and if there's more competition in deposits, that's how I translate your question. Was that your question?

Basically. If you think about your deposit as a loss-leading product to generate fee growth in the future. So you've got to think about the deposit cost as the investment of the ROI. So just this deposit costs do climb up. At what point do you think about revisiting the size and the scale of that campaign?

Yes. We consider deposits as a revenue-generating component rather than a loss leader. Generally, deposits are profitable for us, which is why we established ING Direct in various countries many years ago as a savings and deposit bank. Specifically regarding deposits in Germany and elsewhere, campaigns can target new deposits, which typically yield a positive return within 6 to 12 months for both existing and new customers. In contrast, campaigns focused on acquiring new customers tend to have a payback period of 2 to 3 years. We have been implementing these types of campaigns for decades, leveraging data to effectively monitor our target audience, the retention of deposits, and the subsequent business conducted with us. Moving forward, we will continue to apply these insights, making our campaigns increasingly targeted and efficient, as this is a key element of ING's success.

And we will now take our next question from Anke Reingen of RBC.

I have a few quick questions. Do you think there's more room to reduce your deposit rates now that it seems rates have stabilized? Additionally, regarding the lending margin, should we expect it to decline in Q4, considering your comments about the Q3 benefit in Wholesale Banking? Lastly, just to clarify on your capital update, you mentioned that the next update is in Q1. Should we expect it to follow the same schedule as the updates in Q1 or Q3?

Yes. Deposit rates. I think it's a balance, right? We don't give forward statements on rate cuts or commercial action, but it's a balance between volume growth, competition, and profitability. And I think we give our continued outlook that liability margin will remain at around 100 basis points for this year and rise to between 100 to 110 in 2026 and onwards. So that's on rate cuts. And sorry, your second question?

It was just fair to assume the lending margin declined in Q4 given your comment.

Got it. I think that really depends on Wholesale Banking and Retail Banking activity, mortgage mix, and Wholesale Banking loans. But I think our outlook is that the margin on lending will remain flat at around 125 basis points.

And we'll now take our next question from Farquhar Murray of Autonomous.

I had 2 questions, if I may. Firstly, on the recent Board appointments. So I just wondered if you might flesh out the reasonings behind those, and the actual term. Strategically, I'd expect probably a lot of continuity. But I just wondered if there might be any nuances we should read into those appointments in terms of skill sets for the future. I'm sure Ljiljana might actually have views to express of her own. And then secondly, on the increased CET1 target. Could I ask how those will be cascaded down into the businesses? And in particular, will that be incrementally priced into lending rates?

Thank you. Very good. Nice questions about the change of the Board positions. And yes, Ljiljana is sitting next to me. So I will not say anything else than nice words, obviously. But joking aside, I mean, Ljiljana has done and is doing a fantastic job in the risk domain and has not only good experience in risk, but also good experience in wholesale banking from in her previous life and knows the organization because she has now been with us for 5 years. And I think that with Andrew moving on to the nonexecutive phase of his life, I think I'm very happy with Ljiljana in that post to continuously drive the strategy that we have in Wholesale Banking and also further increase the capital efficiency and the ROE improvements that we wanted to make in. When it comes to Ida, Ida is a very experienced CFO in a large European bank with also risk and wholesale banking experience. So very broad-based. And I think she will be an excellent fit also giving external perspectives to ING to further improve and focus on our cost discipline that we have here in the bank and help me with potential M&A if we come across it. So that's the background of those candidates.

Now on the capital targets, you would have noticed that even in our third quarter results, the divisional ROE is now based on 13% of risk-weighted assets, so that will be communicated more widely to our teams. But I think we also look when we adjust to 13% at many of our Wholesale Banking peers also operate at around 13%. So we don't expect a competitive disadvantage of this new target materially in the Wholesale Bank.

And we'll now take our next question from Matthew Clark of Mediobanca.

I have a couple of questions about the two deposit campaigns and your retention rates. It seems that for the German campaign, your retention was lower than the typical two-thirds benchmark. Can you confirm that? Additionally, for the Belgium campaign, could you clarify if you achieved the expected return on investment for both campaigns and if there are any insights to be gained from them?

On the retention rates that were lower, we typically retain about two-thirds of the money, which is consistent this time. This applies to both campaigns. In Belgium, we anticipate a strong return on investment with good retention, and many of these customers are becoming primary customers. Overall, that was a very successful campaign.

And we'll now take our next question from Cyril of BNP Paribas.

I have 2, if I may. So one on fee growth. So the second upgrade in guidance we have for this year. So it does look like the momentum is quite strong and resilient. And I'm just wondering what elements of that momentum that we can take and extrapolate maybe into next year? And the second would be on SRTs. I know we have a transaction planned for Q4. And do we have any visibility on any other transaction maybe for 2026?

On fee growth, it begins with an increase in customers. More primary mobile customers lead to more engagement, as primary customers usually select ING as their main or one of their main banks. We are seeing growth in our customer base, with approximately 200,000 new primary customers this year, aiming to reach around 1 million annually. Additionally, we are enhancing the activities of our customers. For instance, the number of customers with trading accounts has risen to approximately 4.6 million, reflecting an increase from 4.4 million and 4.2 million in previous quarters, adding about 100,000 to 200,000 new trading customers each quarter. This is promising, especially considering we have over 40 million clients, indicating significant potential for growth. We are now focusing on this segment more than we have in recent years. Our fee growth, as shown in the bar chart, is steadily increasing and represents a stable revenue stream. Approximately 75% of the fee growth we observe is alpha-driven, and we are confident in our current momentum. This confidence is reflected in our updated fee growth guidance for the year, and we are optimistic about achieving our EUR 5 billion target for 2027.

Thank you, Cyril. Just on capital discipline. I think if you look at 2025 Q3, we saw for the Wholesale Bank, despite the volume growth, the capital usage or risk-weighted asset was almost flat, indicating strong capital discipline and capital velocity in the Wholesale Bank. And yes, we are in dialogue with our regulator to get the final approval for our SRT in Q4. We do expect that transaction to be done and it would have a roughly 10 basis point positive impact on our core Tier 1.

And we'll now take our next question from Seamus Murphy of Carraighill.

I have two questions, please. Could you briefly discuss the expected growth of full-time employees? I noticed that we have reached 63,000 in Q3, which is an increase of 5,500 since the start of this rate cycle, and we have also seen significant growth year-to-date, with an additional increase of 1,500. I appreciate the earlier question about potential savings from internal innovation. Should we anticipate continued net growth in full-time employees into 2027? The pace of growth has been surprising, especially considering the average salaries around EUR 120,000. Additionally, regarding net interest income, during your CMD, you mentioned a projected growth of 4% to 5% in total income, starting from a base of EUR 22 billion, which would translate to about EUR 25.5 billion at the top end by 2027. While fee growth is expected to be strong and other income is assumed to be relatively flat, I'm concerned about net interest income given the much more favorable rate curve now compared to then. The main issue seems to be that deposit betas have increased significantly in your retail Eurozone area, currently around 44%. Is there something we should be aware of regarding the dynamics of deposit pricing? I understand that you expect a deposit margin of 110 basis points early in 2027. However, given the advantageous rate curve compared to the CMD, net interest income should be considerably higher. Will this significantly improve by 2027 to align with your earlier expectations? How should we approach this?

Thank you very much. Regarding the full-time equivalents, the figure in the press release represents the internal number, which should not be viewed in isolation. We consider both internal and external full-time equivalents along with the work packages to determine costs. To provide some context, our total internal and external full-time equivalents have remained relatively stable this year, with an increase in internal positions, leading to the rise in that number. Ultimately, our focus is on investing in businesses to foster growth and enhance revenue relative to risk-weighted assets with an appropriate return, aiming for scalability to achieve positive growth margins. This aligns with the efficiency measures that were also mentioned. As for the potential growth in fee income and net interest income, it should benefit from the current rate environment and our lending growth, which is appreciated. We will share more updates on our outlook based on the fourth-quarter results in early 2026. Thank you for joining the call this morning. I wish everyone a great day and look forward to speaking again soon. We will connect again in early 2026 regarding the fourth-quarter figures. Thank you very much.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.