ING Groep NV Q1 FY2024 earnings call

• Strong commercial growth across customers, lending, and deposits: added 99,000 primary customers, mortgage book grew in Netherlands and Germany, Wholesale Banking captured loan demand. - NII was strong, keeping lending and liability margins stable and benefiting from volume growth. - Fees income grew double digits, with confidence in 5%-10% growth for the year. - Operating costs increased by 5% due to inflation and VAT ruling, but total operating expenses were 1.4% lower than last year. - High-quality loan book reflected in low risk costs (16 basis points). - Progress on strategy: superior customer experience with Net Promoter Scores #1 in 4 markets, sustainability focus with EUR 24.7 billion sustainable finance mobilized, and Capital Markets Day in June to discuss next strategy phase. - Announced EUR 2.5 billion share buyback to converge CET1 ratio to ~12.5%.

In Q1 2024, ING achieved strong commercial performance. In Retail Banking, they added 99,000 primary customers, with the mortgage book growing by EUR 2.4 billion, mostly in the Netherlands and Germany. Wholesale Banking captured loan demand while focusing on capital efficiency. On deposits, successful campaigns in Germany, Poland, and Italy led to growth. Financially, net interest income (NII) was strong, fees grew double digits, operating costs increased by 5% but were offset by lower regulatory costs, and risk costs were low at 16 basis points. Revenue contribution: NII was a key driver, fees showed double-digit growth, operating costs had inflation impact but lower regulatory costs, and risk costs were minimal.

• Announced a EUR 2.5 billion share buyback to converge CET1 ratio towards 12.5%. - Confident in fees growing 5%-10% in 2024. - Expect to continue delivering robust financial results while executing strategy, with Capital Markets Day in June to update on strategy. - Pro forma CET1 ratio around 14.1% with ample capacity to provide attractive returns.

• Regulatory changes and compliance risks, such as the impact of the Danske Bank ruling on VAT. - Interest rate fluctuations could impact NII, with liability margin normalization expected to happen gradually. - Market dynamics affecting fees from investment products and lending, including potential pressure on the unbalanced NII-fees mix in a normalized rate environment.

Q: On capital and capital return, with increased scrutiny on banking resilience in Europe, how comfortable is ING with running to 12.5% CET1 and plans for M&A?

A: Steven van Rijswijk said ING is comfortable with 12.5% CET1, sees good growth in customers and fees, and would look at M&A if it fits culture and digital operations. Tanate Phutrakul added comfort with diversified business model and gradual transition to capital-light revenue model.

Q: On NII trajectory, excluding volume growth, how is the liability margin pressure and lending margin outlook?

A: Tanate Phutrakul said liability margin normalization expected gradually, with simulations showing 50% pass-through, and Steven van Rijswijk mentioned lending margin increase from mortgages due to funding rate decrease.

Q: On fees growth, how to extrapolate future growth?

A: Steven van Rijswijk said fees growth driven by customer growth, payment package increases, broker contract in Belgium, and growth in investment accounts as market changes.

Q: On Basel IV impact and RWA in Wholesale Banking?

A: Ljiljana Cortan said Basel IV day 1 impact guidance remains around 20 bps, and Steven van Rijswijk mentioned focus on increasing return on equity in Wholesale Banking by becoming better at capital efficiency.