Ing Groep Nv

Good morning, this is Laura for conference call. Before handing this conference call over to Steven Wendt-Reisbach, Chief Executive Officer of ING Group, let me first say that today's comments may include forward-looking statements, such as statements regarding future developments in our business, expectation for our future financial performance, and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statement is contained in our public filings, including our most recent annual report on Form 20F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Steven. Over to you.

Thank you very much. Good morning and welcome to our results call for the second quarter of 2024. I hope you're all well. And as usual, I'm joined by our CRO Liliana Chortan and our CFO, Taneet Putrakul. In today's presentation, we'll discuss the strong quarter we had, and I will inform you about how we're progressing on the priorities we set out during our recent capital markets day. Tonight, we'll walk you through the financial of the quarter and show you how we're performing compared to our targets. At the end of the call, we will be happy to take your questions. Now let's move to slide two. Before going through our strong results in more detail, let's start with a recap of the key messages from our recent Capital Markets Day. First, we've shown that our entrepreneurship, our relentless focus on our customers, and our collaborative culture have made us a very successful bank, delivering value for all stakeholders. This DNA enables us to capture opportunities in the highly attractive markets in which we operate, By executing our growing the difference strategy, we will capture this potential and we will accelerate growth, increase our impact, and deliver value for our stakeholders. And I will now take you through how we have done so in the second quarter. On slide three, we show how we are accelerating growth. After a successful first quarter, we again had very strong commercial performance. In the second quarter, with an increase in the number of customers in lending and in deposits. The number of mobile primary customers increased by almost 250,000, with increases in all countries where we pursue growth opportunities. And with this increase, we've grown the number of mobile primary customers by well over 900,000 customers in the last 12 months, and we're well on track to reach our target of 1 million per annum. We have also grown our lending book, with a particularly strong performance in mortgages where we saw growth across all markets. Growth in wholesale banking lending was offset by loan sales as we continued to optimize capital usage. On the liability side, successful marketing efforts in retail banking and a stronger focus on deposit gathering in wholesale banking resulted in 15 billion inflow this quarter. annualized customer balance of growth, so that's lending and deposits combined, amounted to 6.2% in the first half year, exceeding the annual target of 4% we set during our capital markets day. Then I'm moving on to slide four, and there we show the increasing impacts for all our stakeholders. After growing by 430,000 in the first half year, we now have 13.7 million mobile primary customers. And this growth reflects the appreciation of our products and services. 65% of our customers now only do business via the mobile, and we are the most loved bank in many markets we operate, with a number one net promoter score in 6 out of the 10 retail markets. We have a highly engaged workforce, And we're proud that we're seen as a role model in advancing LGBTQI plus inclusion in workplaces worldwide. The number of sustainable deals has increased further with 32 billion Euro of volume mobilized in the second quarter and 57 billion in the first half year, which is 10 billion more than last year. More than 40% of the mortgage production in the Netherlands has at least an A label. And finally, we're showing excellent financial results for our shareholders. As a result of continuous strong profitability, we have announced an interim dividend of $0.35 per share, bringing the year-to-date yields to over 13% already. Slide 5 lists how we are delivering value. Net interest income remained resilient with an increase compared to last quarter, despite the negative impact of higher accounting asymmetry. Fee income was very close to 1 billion euro this quarter and we are well underway to reach the 4 billion this year that we stated earlier. Most of this growth compared to last year was driven by structural increases, as the NAIT will show you in more detail later. Risk costs continue to be below our through the cycle average and we remain comfortable with the quality of our loan book. And this has all resulted in a return on equity of 14%, and we're confident that we will end the year with a return on equity of more than 12%. We have achieved this return while operating at a healthy CET1 ratio. With the ongoing share buyback, we've made further steps converging our CET1 ratio towards our target level, and will update the market on next steps with our third quarter results. Then slide six. And on this slide, I would like to zoom in on an individual country and show how we're executing on our strategy in retail banking. In Romania, we've been the most preferred bank since 2016. And this appreciation of our digital products and services has resulted in strong growth in the number of total customers. And over half of these customers now use us as their primary bank. We've also been able to grow both sides of the balance sheet and make a very healthy return. And we firmly believe we can grow further and make more impact for our customers. For example, we completely redesigned our digital onboarding process that now really stands out in the country. And we've introduced a digital mortgage in Romania with digital financial approval and collateral appraisal. To increase presence in new segments, as we also talked about during Capital Markets Day, we have introduced dedicated value propositions for Gen Z, while we renewed our focus on the affluent segment. And we've increased cross-sell within business banking so that more customers use our daily banking packages, which helps to further increase fee income. Overall, Romania is a great example of how we're growing the difference. And now, I'll hand over to Tineit We'll take you through the results of the second quarter in more detail, starting on slide 8.

Thank you, Steven. As Steven mentioned in his introduction, net interest income was strong again this quarter and improved quarter on quarter despite a more negative impact from accounting asymmetry. Lending and I increased for the fifth consecutive quarter, driven by higher volumes, while the margin rose by one basis point. Liability and I continue to be resilient, as the expected normalization of liability margin was almost fully compensated by higher volumes. The overall net interest margin, which takes the development in the total balance sheet into account, decreased by three basis points, driven by the impact of increased accounting asymmetry. Now if you go to page 9, I'll show you more details on this. The point I'd like to make here is that the structural drivers of net interest income developed very well this quarter. While reported net interest income increased by 5 million quarter on quarter, however, when excluding the impact of one-offs and the increased accounting asymmetry, our net interest income actually increased by a strong 65 million compared to the previous quarter. As you know, the negative impact from accounting asymmetry on a net income is more than compensated by other income. I'll get back on this on slide 12. On the next slide, we'll show you the strong volume growth in both core lending and deposits. The commercial momentum that we had in the first quarter continues in the second, with strong net core lending growth of almost €8 billion. We have been able to grow our mortgage book in all of our retail countries. This was just not driven by recovery of the market, but also by increasing our market share in some countries. In the Netherlands, for example, we have grown our market share in new production to over 16% on the back of providing an excellent customer experience. Growth in wholesale banking lending was offset by loan sales as we continue to focus on capital efficiency. On liabilities, we saw core deposit growth by $14.7 billion in the second quarter due to strong performance in both retail and wholesale banking. In retail, we grew across many markets driven by effective marketing and supported by the inflows of holiday allowances in some countries. In wholesale banking, our focus on increasing deposit paid off with strong inflows in payment and cash management in particular. Now turning to slide 11, fee income year on year was again double digit as we made almost a billion euros in fees this quarter. This is a record. The growth was particularly driven by retail banking as we were able to grow mobile primary customer, active investment product customer, lifting income from daily banking, investment products and insurance. In addition, we paid low commissions to independent agents and brokers in Belgium. We also benefited from favorable market conditions that led to higher fees from mortgage brokerage and increase in the number of investment product trades as well. In wholesale banking, fees were slightly lower due to lending, but were still at a strong level. Given the strong performance across the bank, we remain confident that we can reach our $4 billion fee income outlook this year. Now on slide 12, we show what the developments in the different income lines in the first half of the year mean for our guidance for total income this year. We note that we previously provided an outlook for net interest income assuming a stable accounting asymmetry, resulting in a range of between 15 to 15.5 billion euros. However, as this asymmetry remained difficult to forecast, we have now excluded this impact from our outlook. Any impact from accounting asymmetry will be more than compensated in other income. As structural drivers of NII remain strong, we continue to guide for interest income, excluding accounting asymmetry to end up in the upper end of the range. We are confident that the fee income will reach the $4 billion outlook, and as a result, we have increased our total income guidance this year from around $22 billion to more than $22 billion. Now on slide 13, we'd like to explain a bit about the cost development. Total expenses in the first half of the year increased by roughly 3% compared to the first six months of 2023. In the same period, expenses excluding regulatory costs and incidental items were approximately 6% higher, which is in line with our outlook for 2024. This increase was mainly because of the impact of inflation on staff expenses, reflecting salary indexation and collective labour agreement increases across most of our markets. We also continued to invest in our business and had to pay a higher VAT following the implementation of the Danske Bank ruling in the Netherlands. Regulatory costs were significantly lower than last year because no contribution is required to the Eurozone Single Resolution Fund for 2024. For the full year, we continue to guide for a total expense base of around €12 billion. On to risk costs on page 14. Total risk costs were $300 million this quarter, or 18 basis points of average customer lending, still below our through-the-cycle average and demonstrating the quality of our loan book. In retail banking, asset quality continued to be strong and we benefited from strong improvement in the macroeconomic outlook for house prices. In wholesale banking, risk costs including additions to Stage 3 for a number of unrelated existing files. We have also transferred a part of the Russian-related exposure from Stage 2 to Stage 3, reflecting the worsening economic outlook in that country. At the end of the second quarter, we still have a stock of overlays amounting to €415 million. Page 15 shows the development of our Quartier 1 ratio, which was mostly impacted by the ongoing share buyback, which we announced last quarter. Quartier 1 decreased by 1.7 billion euros as the buyback was partly offset by the inclusion of net profit for the quarter after reserving for dividend. Total risk-weighted asset increased by 7.3 billion, excluding 0.6 billion of FX impact. Credit risk-weight assets again, excluding FX impact, increased by 7.7 billion, partly driven by an increase in exposure. A temporary increase from quarterly model updates had an impact of 6.5 billion euros, of which the majority will be reversed before year-end. This temporary increase has no impact on our capital outlook. Changes in the profile of the books resulted in a decrease of the credit risk-weighted assets by 2.1 billion. Operational risk-weight assets were stable. Market risk-weight assets decreased by 0.4 billion. The interim cash dividend of 0.35 cents per share will be paid on the 12th of August, and we will update the market with our Q3 results on the next steps in converging on our Q1 ratio to our target levels of around 12.5%. Then finally, on to slide 16. As Stephen and I have explained today, executing on our strategy has resulted in a very successful first half year with good commercial and financial performance. Mobile primary customer increased by 430,000 as more and more customers choose us as their primary bank, and increasing number of customers are using mobile as their preferred channel. Total income increased with strong NII, double-digit fee income growth, and we have updated our outlook for total income for the full year to end up above 22 billion. The development of operating expenses was in line with our outlook, while regulatory costs decreased significantly compared to last year. Core Tier 1 ratio continued to be high at 14%. Our four-quarter rolling return on equity remains very attractive at 14%, and we're confident we'll be able to provide an ROE of over 12% for the full year. Now on to the Q&A. Over to you, operator.