Ing Groep Nv

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The share buyback program that started in October last year, and overall yield in 21 was 9.4%, and the share buyback will improve earnings per share, dividend per share, and return on equity. And with a CET1 ratio of 15.9%, we have significant excess capital, and we are in constructive dialogue with the ECB about our distribution plans. We will announce next steps if and when we have received the necessary approvals. As you can see on slide 12, CD1 ratio is well ahead of our ambition. On RRE, it has improved significantly, and with continued growth, as well as focus on cost and capital, we maintain our ambition and very much intend to continue to provide an attractive total return. To reiterate, cost-income ratio remains an important input for RRE. We continue to work on 50% to 52% ambition in that regard, and as for distribution, as I mentioned, we propose a full-year dividend of 62 cents, subject to shareholder approval for the final dividend. Now let me take you through our fourth quarter results starting on slide 14, which we will try to go through a bit faster. Year-on-year, NII excluding TL3 roll was lower, slightly lower, primarily due to pressure on liability income and a minus 23 million reclassification from our income to NII. And this was partly absorbed by increased negative interest rate charging in the retail Benelux as compared to a year ago, thresholds in the Netherlands having gradually lowered, while in Belgium, charging was introduced as the beginning of 21. NII from lending was up, reflecting mainly higher average volumes and when looking at exclusionary reclassification, NII went slightly up quarter-on-quarter, as higher lending NII and increasing interest rates, negative interest rate charging, more than offset this quarter's pressure on liability income. Our net interest margin declined quarter-on-quarter by one basis point, totaling 37 basis points, driven by the aforementioned reclassification, as increased negative interest rate charging absorbed most of this quarter's pressure. Slide 15 shows net core lending growth. Overall strong growth continued in retail, while in the fourth quarter, wholesale banking also has strong contribution, resulting in a net core lending growth of 13.4 billion. In retail, mortgages were the primary driver of lending growth, with some growth also visible in consumer and business lending. Mortgage demand was strong in Germany, but also in Spain, Australia, and Poland. In wholesale banking, loan growth returned, with partly reflected TLTRO-eligible deals, so the number for the fourth quarter should not be extrapolated. However, when we look at the pipeline, we see signs that demand remains strong, and we are positive on loan growth in wholesale banking going forward. Net customer deposit growth was minus 2.1 billion, and retail savings were up by 2.7 billion, with inflows in the Netherlands and non-Eurozone countries, while we saw an outflow in Germany and France. This was mainly the result of the introduction of negative rate charging in November. Also, banking records an outflow of 4.9 billion, mainly in PCM. And turning to fees, off slide 16. Year-on-year fee income grew by 20% with both growth in retail and wholesale. Retail fees were up 70% with an impressive 27% increase in daily banking. This reflects growth in primary customers, the increase in payment package fees and a further recovery in the level of domestic payment transactions, which was basically back at pre-COVID levels. And international payment levels actually remain subdued in transactions. In investment accounts products, fees were 12% higher, reflecting growth in accounts, asset management and trades. In wholesale banking, fees were 26% higher, with growth across all product groups, and sequentially retail fees were 3% higher, driven by investment points and daily banking. In wholesale banking, fees were up 9%, mainly reflecting higher fees in financial markets and corporate finance. Slide 17 shows expenses, which this quarter included $166 million of incidental items, mainly reflecting $141 million of provisions and impairments, related to the announced closure of the French retail banking activities. Excluding regulatory costs on these incidentals, operating expenses remained under control. Year-over-year, these costs were slightly higher, mainly reflecting a lower VAT refund and higher staff expenses related to CLA increases and performance-related expenses, which were reduced to lower levels in the fourth quarter last year, so that's 2020. Quarter and quarter was also largely driven by the staff-related cost increases while also marking our tier expenses were higher. Regulatory costs were up, including the Dutch bank tax, which was 60% higher in 2021, and in 2022 this level should normalize again. Overall, I'm pleased with how operating costs are developing. Also, as we already see some effects of measures taken so far, we will always keep focusing on optimizing where we invest our capital, and further measures can always materialize. But at the same time, we also need to look forward, and we will invest in areas where we can get the best returns. And we go to risk costs. That's page 18. There were 346 million or 22 basis points over average customer lending. The increased level compared to previous core reflected our prudent approach in certain environments. We took hold of 30 million to reflect uncertainty in recovery scenarios and valuation in certain asset classes, mainly in wholesale banking, and in addition We took $124 million related to residential mortgages where increasing inflation and interest rates could affect customers' ability to pay, which could impact house prices. This was partly offset by $124 million releases of management overlays taken in previous quarters, mainly related to payment holidays and sector-based overlays, predominantly as a result of reductions on watch lists. Aside from these releases, in retail Benelux, risk costs mainly reflected a mobile update in Belgium and some individual Stage 3 releases. In regional challenges and growth markets, risk costs further reflected collective provisioning, mainly in Spain and Poland, and in wholesale banking, Stage 3 risk costs further included limited additions to mainly existing files. Finally, the Stage 2 ratio was slightly lower, and the Stage 3 ratio was stable. Slide 19 shows that our CET1 ratio increased to 15.9%. CET1 capital was 600 million higher, mainly due to the inclusion of 50% of net profit for the quarter. And with net profit being equal to resilient net profit, the other 50% was reserved for future distribution in line with our policy. RWA's increased, mainly due to the higher market and operational RWA, Credit RWA were done mainly reflecting overall improved profile of the loan book and regulatory RWA inflation known at this moment ahead of the 2025 Basel IV implementation has been almost fully incorporated. We still expect RWA impact from the postponed implementation of risk flow waiting for mortgage in the Netherlands, which we currently estimate at around 7.5 billion, but we expect this flow to be temporary as it is front-loading the output floor under Basel IV. And besides that, we will continue to see releases or additions to RWA from regular model updates. To wrap up with the highlights of the quarter on page 21, our customers continue to recognize our strengths, resulting in further growth of our primary customer base, as well as the number of sustainability deals. Our digital-only mobile first focus continued to pay off with mobile becoming the main channel through which customers interact with ing in 2021 and these factors support our efforts to diversify income with full year loan growth returning and fees increasing by almost half a billion or 17 and this offsets the continued pressure on liability income caused by the negative rate environment on costs We managed to keep full-year costs flat. Full-year risk costs were 560 million, or eight basis points over average customer lending, well below our through-the-cycle average, and this included some prudent adjustments to stage 3 provisioning on existing files. The CD1 ratio improved to 15.9%, with 50% of the fourth quarter resilient net profit reserved for future distribution. We propose a $0.41 final cash dividend, bringing the full-year cash dividend to $0.62, subject to AGM approval in April. That concludes the presentation, and I will now open the floor for Q&A.

Thank you, sir. We are starting the question-and-answer session now. If you have a question or remark, please press star 1 now on your telephone. In the interest of time, we kindly ask each analyst to limit yourself to two questions only. So, start one for questions and remarks. Go ahead, please. Our first question is from Mr. Benjamin Goy of Deutsche Bank. Go ahead, sir. Your line is open.