ING Groep NV Q2 FY2024 earnings call

• Strong commercial performance in 2Q with increase in lending and deposit customers. Mobile primary customers increased by almost 250,000 in 2Q, with over 900,000 growth in 12 months. - Increasing impacts for stakeholders: 13.7 million mobile primary customers, 65% using mobile as primary channel, net promoter score number 1 in 6 out of 10 retail markets. - Sustainable deals volume: EUR32 billion in 2Q, EUR57 billion in H1, EUR10 billion more than last year. - Financial results: Return on equity 14%, confident of over 12% for the year. Interim dividend of EUR0.35 per share announced. - Execution of Growing the Difference strategy: Highlighted by Romania's performance, including strong customer growth, digital onboarding improvements, and new value propositions for Gen Z and affluent segments.

Net interest income remained resilient with an increase compared to last quarter despite higher accounting asymmetry. Lending NII increased for the fifth consecutive quarter driven by higher volumes, while liability NII was resilient. Fee income was very close to EUR1 billion this quarter, on track to reach EUR4 billion for the year. Risk costs continued to be below the through-the-cycle average. Net interest margin decreased by 3 basis points due to increased accounting asymmetry. Core lending grew by almost EUR8 billion in the second quarter, with strong mortgage growth across markets. Core deposits grew by EUR14.7 billion in the second quarter. Revenue contribution: Net interest income and fee income were key components, with fee income showing double-digit growth year-on-year.

• Total income guidance updated to be above EUR22 billion for the full year. - Net interest income guidance: Excluding accounting asymmetry, upper end of range. - Fee income guidance: Confident of reaching EUR4 billion for the year. - Total expense guidance: Around EUR12 billion for the full year. - Core tier 1 ratio target: Around 12.5%, with updates on next steps in Q3 results.

• Impact of accounting asymmetry on net interest margin. - Macroeconomic outlook affecting risk costs, including transfer of Russian-related exposures from Stage 2 to Stage 3. - Temporary increase in risk weighted assets from quarterly model updates, though majority will reverse by year end. - Competition in deposit pricing and potential impact on liability margin.

Q: On net interest income, specifically lending NII and liability NII, and asset sales?

A: Steven van Rijswijk discussed strong lending NII growth driven by volumes, with mortgage growth in various markets, and asset sales in wholesale banking with EUR2 billion in loan sales this quarter. Tanate Phutrakul talked about liability NII resilience and the replication of income on deposit book.

Q: On margins by country and EUR6.5 billion temporary model increases?

A: Steven van Rijswijk noted mortgage margins better in Netherlands and Germany than Belgium, while Ljiljana Cortan explained the EUR6.5 billion temporary model increase is mostly reversible by year end with risk mitigations like SRTs and other transfers.

Q: On liability margins by country and cost outlook?

A: Tanate Phutrakul mentioned deposit margin drivers include volume, mix, and deposit rates, with stabilization of current accounts. Steven van Rijswijk discussed deposit gathering strategies in different countries. Tanate Phutrakul outlined cost guidance with around 3% increase in H1 and guidance for cost income ratio to rise to around 54% in 2025 and gravitate back to 52%-54% by 2027.

Q: On challenger markets and German deposits?

A: Steven van Rijswijk mentioned growth in challenger markets like Poland and Italy, and explained German deposit inflows relate to marketing campaigns with specific interest rate offers for certain periods.

Q: On costs, current accounts, and model updates?

A: Steven van Rijswijk talked about current account growth from holiday allowances and transaction fee impacts. Tanate Phutrakul discussed cost CAGR with sticky inflation in short term and normalization in longer term. Ljiljana Cortan explained model updates from low default portfolio in wholesale banking and risk transfer mitigations.

Q: On fees, risk cost, and Russia impact?

A: Steven van Rijswijk discussed fee growth from more customers using services, including investments and insurance. Ljiljana Cortan talked about risk costs below through-the-cycle average, with EUR39 million additional risk costs from Russian exposure transfer from Stage 2 to Stage 3.

Q: On model updates, deposit pricing, and mitigating actions?

A: Ljiljana Cortan explained model updates from low default portfolio in wholesale banking and risk transfer mitigations with no significant cost. Steven van Rijswijk discussed nimble deposit pricing strategy depending on growth and economic position