ABN AMRO Bank N.V.

Welcome to ABN AMRO's Q3 2025 Analyst and Investor Call. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. Analysts will have the opportunity to ask questions after the presentation. This can be done by pressing pound key 5 on your telephone keypad. I will now hand the call over to the speakers. Please go ahead.

Good morning, and welcome to ABN AMRO's Q&A results presentation. I'm joined today by our CFO, Berlinan von Raher, and our CRO, Serena Fioravanti. After our presentation, we will hold a Q&A session to address all your questions. Let me begin with the highlights of the third quarter on slide two before moving to the announcement of our intention to acquire NIBC. The third quarter was another solid quarter for ABN AMRO. Net profit reached 617 million euros with a return on equity of 9.5%. The inclusion of HAL contributed 26 million to our results. Across all products, we managed to grow this quarter. Our mortgage portfolio increased by 2.1 billion euros and corporate loans grew by the same amount. Net new assets increased by 4.3 billion euros. Cost discipline remains a priority, with FTEs declining by 700 in Q3, and by almost 1,000 years to date, excluding HAL. Credit quality remains strong, with 49 million in net impairment releases, reflecting recoveries in improved macroeconomic variables. Our CET1 ratio stands at 14.8%, and we finalized a 250 million share buyback in September. We will review our capital position in Q4 to assess the potential for further capital returns. Now turning to our other announcement of the day. I'm very pleased to announce that we have reached an agreement to acquire NIBC. This acquisition is fully aligned with our strategy and presents a unique opportunity to reinforce our leading position in the Dutch retail market and accelerate our personal and business banking strategy. NIBC is a well-run, primarily Dutch-focused entrepreneurial bank with a strong specialization in mortgage lending and savings products. It serves around 500,000 retail clients and around 175 corporate clients with a high-quality portfolio mortgage and very low REOs. NIBC will add around 28 billion euros of mortgages, significantly increasing our scale in this market, for the cementing or leading position in the Dutch mortgage market. Around half of the mortgage portfolio will be off balance, as NIBC has an attractive originate to manage franchise with long-dated mortgages. The acquisition also brings an attractive savings platform, saving 300,000 clients across the Netherlands, Germany, and Belgium. The savings offer an interesting cross-sell opportunity with our investment platform, Bucks. Given NIBC's domestic focus and the overlap of service providers, there is substantial potential for cross-synergies with limited execution risk. This transaction is expected to deliver return on invested capital of around 18%, 1.8%, and will increase our group's financial profile. The capital impact of approximately 70 basis points is anticipated at closing. The acquisition is of course subject to regulatory approvals and is expected to be completed during the second half of 2026. We look forward to welcoming NIBC's clients and colleagues and to the opportunities the acquisition will bring to us all. Now, turning to our third quarter results, I will start with the Dutch economy. While the Dutch economy continues to perform well, supported by a strong fiscal position and low unemployment, the housing market remains robust, with prices still rising, though at a lower pace than in the first half of the year. Employment continues to rise and is at a record high. The debt-to-GDP ratio of the Netherlands remains very healthy, and that's a French person telling you that. It is significantly lower than other European countries. The Dutch elections results have been announced and coalition talks have begun. Ideally, a quick and stable formation process will allow the new government to start addressing important national issues, for example, the housing shortage or the nitrogen issue. Given this economic context, on the next slide, I will discuss our results. We, again, showed a quarter with strong mortgage production growth thanks to a robust housing market. Our mortgage portfolio grew by 2.1 billion in Q3, with our market share and new production rising to 19%. We made some important amendments to our mortgage terms. We now automatically adjust risk premium after repayment, reviewing it monthly instead of only at the end of a fixed rate period. This led our mortgage products, obtaining the top rating in the intermediary market, which accounts for nearly 75% of new volume. We observed an immediate increase in new volumes for Invis. Today, we also announced a rationalization of our mortgage brand lineup. Going forward, we will focus on our core labels, namely Aben Amro and Florius, and we will discontinue the MoneyU brand. This allows us to focus investment in our core labels in technology and innovation to further improve our services. Moving to corporate loans, further organic growth and the inclusion of HAL resulted in 2.1 billion loan growth this quarter. Loan growth was partially offset by the wind-on of asset-based finance. This quarter, we sold our UK lease portfolio. Moving to deposits, HAL added close to 11 billion euros of time deposits within wealth management We also have provided targeted offerings starting in Q2, which have resulted in net new assets of over 4 billion this quarter. Given this positive development in our lending and deposit franchise, let's now look more closely how these have supported our net interest income. Our net interest income increased to 1 billion 500 million euros. House inclusion contributed positively to NII by around 34 million. The inflow of NHG mortgages and the adjustments we made in the mortgage stamp I just mentioned before led to slightly lower margins. However, the strong growth in our mortgage book offset this. Deposit margins declined partly related to targeted offerings within wealth management at reduced margins. Treasury results increased during Q3, however, the increase was a bit lower than initially expected. Based on last quarter's forward rates, the inflection point of the replicating portfolio yield was expected at the beginning of next year. However, current interest rates have brought this timing forward to this quarter, bringing the decline in the replicating yield to a standstill. In the coming quarters, we expect the deposit margins will start to become a tailwind. Looking ahead to next quarter, and assuming a modest increase in treasury NII and stable deposit margins, we expect full year NII of at least 6.3 billion euros, including HAL. Now, turning to fees. Looking at our third quarter fee income, the fee contribution from HAL becomes evident, increasing overall fee income by around 10%. Fees, excluding HAL, continue to increase, with fee income for the third quarter reaching its highest level in the past two years. Personal and business banking fees increased mainly from higher seasonal payment transactions. Wealth management fees rose primarily thanks to higher advisory and mandated business volumes. Other income is volatile by nature and ended at 28 million for Q3. The decline was caused by a number of factors, all having a negative impact on other income this quarter. Specifically, we booked lower equity participation results, lower other income within Treasury, and a negative fair value correction of past bookings related to some mortgages. Now, moving to our operating expenses. We have further reduced expenses as we worked on right-sizing our cost base. This quarter, FDE showed a significant reduction of 700, after which related to contractors in group functions. Since the beginning of the year, the number of contractors have declined by 1,100. To a limited extent, we onboarded externals for their skills, which explained the small increase in internal FDEs over the same period. The Dutch collective labor agreement increased wages by 3.75% on the 1st of July, leading to an increase this quarter in seasonal expenses. Thanks to our ongoing cost discipline, our underlying cost base declined this quarter. At the beginning of the year, we projected our underlying cost, excluding half, to be between 5.3 and 5.4 billion, and we are confident now of ending at the lower end of this guidance. Including how this now translates to a full year cost guidance between 5.4 to 5.5 billion. Now turning to our credit quality, which again remains very solid. Prudent risk management, support of strong financial results. Recorded impairment releases of 49 million this quarter, mainly related to recoveries in corporate loans and improved macroeconomic variables. We saw some inflow into Stage 3 for specific individual files, although this was lower compared to the last few quarters and fully offset by releases. The total Stage 3 ratio decreased slightly to 2% and our coverage ratio was broadly stable for each of our lending projects. Given the impairments year to date, the cost of RIF for 2025 will likely end around zero for the full year. Now, moving on to our capital position on the next slide. Our CET1 ratio remains stable at 14.8%, well above the regulatory requirements of 11.2%. The impact of the consolidation of HAL was offset by the quarterly contribution of our net profit. The total impact of FAO on our CET1 ratio as of Q3 is 40 basis points. Seven basis points of impact were already taken in Q2. The formal move of certain loan portfolios to the standardized approach has no impact on capital ratio. While RWA is increased by 1.6 billion, this was offset by lower capital deductions in our CET1 capital. During Q3, data quality improvements were realized around 1 billion of RWA reductions, mainly from data improvements on real estate collateral. Further progress on data remediation is anticipated, for example, related to the SME support factor, which may result in further reductions in Q4. Looking ahead, as I mentioned, NIBC will impact on capital ratio by around 70 basis points at closing. expected in the course of next year. Our capital position remains robust and our capital generation is strong. In Q4, we will review our capital outlook and incorporate all the relevant capital and RWA developments. Now, to summarise our third quarter results. For 2025, we expect net interest income of at least 6.3 billion and costs between 5.4 and 5.5 billion, both including HAL. We are delivering on our cost discipline, improving our data quality and sourcing, and are delivering profitable growth in mortgages and deposits. The seamless integration of HAL and closing the acquisition of NIBC are important strategic milestones as we build scale in our core markets. Looking ahead, we are excited to invite you to our Capital Markets Day in just two weeks' time, There we will present our updated strategy and financial targets with a sharp focus on right-sizing our call space, optimizing our capital allocation, and unlocking profitable growth opportunities. We look forward to sharing our vision for the future and the next chapter in our journey with you. With that, I would like to ask the operator to open the call for Q&A. Thank you.

Thank you. If you wish to ask a question, please press pound key five on your telephone keypad. If you wish to withdraw your question, please press pound key six on your telephone keypad. The next question comes from Julia Miato from Morgan Stanley. Please go ahead.