Ing Groep Nv

Good morning, this is Laura welcoming you to ING's 1Q2025 conference call. Before handing this conference over to Steven Van Vrieswijk, 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 businesses, expectations 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 20-F 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 Stephen, over to you.

Thank you very much Laura. And good morning, and welcome to our results call for the first quarter of 2025. I hope you're all well, and thank you for joining us. As usual, I'm joined by our CRO Liliana Chortan and our CFO Tine Putrakul, and we had a good start to 2025. Today I will show you how the strength of our franchise enabled continued commercial growth during the first quarter. As evidenced by exceptional growth in deposits and higher mortgage volumes, I will also explain how our strategy and strong business fundamentals enable us to navigate the current geopolitical and macroeconomic uncertainty. And as a leading European bank, we are well positioned to support the European economy and capture growth opportunities as we remain confident on our outlook. Later in the presentation, Tenaid will walk you through the quarterly financials, including the financial impact from the progress we're making on our strategic priorities. And at the end of the call, we will be happy to take your questions. Now let's move to slide two. And this slide gives more details on our strong growth trajectory in the first quarter. Our relentless focus on providing superior value for our customers has again proven to be a key differentiator. The total number of private individual customers increased to more than 40 million, and the number of customers choosing us as their primary bank grew as well. We also recorded significant growth in our loan book. Net core lending and retail banking grew by 8.6 billion euro, which was primarily driven by mortgages, while we also captured growth in business lending and consumer lending. In wholesale banking, we saw a modest decline in lending, mainly due to seasonal volatility in working capital solutions, but also as a result of consistent capital optimization. On the liability side, we saw exceptional growth driven by a strong inflow in retail Germany after a promotional campaign. Net core deposit growth in wholesale banking reflected higher short-term client balances in our cash pooling business. This commercial growth also resulted in a significant increase in fee income, which was 10% higher than the first quarter of last year. We continue to support clients in their sustainability transitions, with the volume of sustainable finance mobilized rising 23% from the first quarter of last year to €30 billion. And I'm proud to say that ING is the first global, systematically important bank to have climate targets validated by the Science-Based Targets Initiative. Slide 3 summarizes how our strategy and strong fundamentals enable us to navigate the current turmoil. Let me start by saying that the introduction of tariffs and the current macroeconomic uncertainty have led to lower growth forecasts worldwide. However, we remain confident in our ability to grow in line with our targets, as our diversified presence allows us to capture opportunities in different geographies and across various sectors. Most of our lending growth is driven by residential mortgages, which is less sensitive to changes in the economic outlook. And as one of the largest and most diversified wholesale banks, we are also well positioned to support the economy and benefit from the investment plans across Europe. On asset quality, although the potential longer-term indirect impacts from the tariffs are not yet clear, we are confident that our prudent risk management framework will also prove itself going forward. Around 65% of our portfolio is fully or partially secured. We have a large and growing residential mortgage book with historically low risk costs. And in our main markets, house prices remain high and unemployment rates remain low, as illustrated on the next slide. In wholesale, we have further increased the portion of our exposure to investment-grade clients. Then our funding and liquidity position remains very strong. As you know, around 70% of our balance sheet is funded by granular retail deposits, and we maintain strong funding and liquidity positions in all currencies. And lastly, on interest rates, we have again been volatile over the past weeks. We have proven our ability to manage our margins by taking disciplined repricing actions, and we can confirm our outlook for the liability margin for 2025-2027 periods. Then we move to slide 4, and here you can see how market dynamics in our position as a leading European mortgage bank enable us to achieve continuous growth, the outlook for mortgages is positive, and we expect the market to continue growing. Mortgage demand in some of our markets, such as the Netherlands, has already recovered after a temporary dip when interest rates went up sharply, and in other countries, such as Germany, we still expect a further recovery. In addition to this increased demand, volume growth is also supported by a sustained increase in house prices across most markets. At ING, we have been able to strengthen our mortgage offering and significantly increase our market share in those growing markets. In the Netherlands, for example, our market share in new production is currently 17% versus 10% a few years ago, supported by our strategy which focuses on digitalization and flexible operations to facilitate new production. The default rates in our mortgage portfolio remain very strong, mostly driven by the constant low unemployment rates in our largest markets. The average loan-to-value in our mortgage book is 56%, with a low Stage 3 ratio below 1%. And on the next slide, I will show that we see growth opportunities in wholesale banking as well. Because as we are one of the most geographically diverse hard banks in Europe, with leading positions in lending across many markets, we are really well positioned to support the investment initiatives. We have strong expertise in key focus sectors, such as infrastructure and TMT, and we have adopted a more proactive stance on defense-related funding. In this sector, we of course have an ESR policy to make sure that what we finance is responsible, But within that context, we're open to finance defense initiatives to safeguard European security. And demand there is picking up, and we see this reflected in our pipeline as well. And while we do see a growth opportunity in Europe, we will also remain focused on optimizing our capital usage in wholesale bank, as we have shown over the last few quarters. On slide 6, we highlight that our robust capital position and strong results have allowed us to consistently distribute cash and deliver value to shareholders. Our CT1 ratio came in at 13.6% at the end of the first quarter, and this includes the impact of the implementation of Basel IV and the 20% stake in Van Lansvoort Kempen. And with the acquisition of this financial stake, we have further increased the capital allocation towards retail banking in line with our strategy. Today, we announced another share buyback of €2 billion, and including this amount, we have distributed over €28 billion to shareholders since 2021, and we are committed to providing an attractive shareholder return going forward. Our CT1 ratio target is unchanged at 12.5%, but we're still to end this year at a slightly higher level as we take the prevailing macroeconomic and geopolitical uncertainty into account, in line with our distribution policy, And we now steer on the C to 1 ratio between 12.8% and 30% by the end of 2025. We will update the market on next steps with our third quarter results this year, as per our normal rhythm. That is about distributions, I mean. Then on to slide seven. I would like to emphasize again that we remain confident in our ability to execute on our strategy, even in these more volatile markets, and this is also reflected in our strong performance in the first quarter. And we therefore reconfirm our outlook for 2025, including the refinement of our C2-1 targets, and reiterate our targets for 2027. And now, I will hand over to Teneit, who will take you through the results of the first quarter in more detail, starting on slide 9. Teneit, over to you.

Thank you, Steven. I would like to start on slide 9. where we showed the development of our total income, which increased significantly compared to the previous quarter. Commercial NII was resilient and was supported by an exceptional growth in deposits and a continued growth of our mortgage portfolio. Fee income increased significantly and grew by 10% compared to last year. We're confident that most of this growth is structural, and I'll explain why in a few minutes. Lastly, all other income, which is a combination of other NII investment income and other income, was supported by strong client activity in financial markets and good results in Treasury. Now let's move to slide 10, where we show the growth in customer balances. What is clearly visible in this slide is that our commercial growth has continued in the first quarter of this year. Our net core lending grew by 6.8 billion euros. which was again mostly driven by strong performance in residential mortgage market. As Stephen already explained, we have been able to further increase our market share in a growing market situation, which resulted in $6 billion of growth in mortgages. We were also able to grow in consumer lending and business lending. In wholesale banking, we saw seasonal volatility in balances, for working capital solution and we continue our efforts to optimize capital usage. On the liability side, we saw core deposits increased by almost 23 billion euros in the first quarter due to strong performance in both retail and wholesale banking. This strong growth underscores our ability to attract deposits. In retail, Growth was particularly coming from Germany, mainly driven by a successful promotional campaign. In the wholesale segment, the growth mainly reflected higher client balances of our cash pooling business, which can be volatile. On slide 11, you can see our commercial NII was resilient. Liability NII increased as strong growth in customer balances, and our repricing action compensated for lower ECB deposit facility rates. It also included a structural shift from other NII to liability NII. On lending, NII was broadly stable. However, the growth in balances was offset by lower margin, which is driven by a continued mixed shift towards mortgages, which have a higher ROE but a lower margin. It also reflects the impact of having two fewer days in the quarter. On commercial, net interest margin, which is based on commercial NII, was stable quarter-on-quarter. Turning to slide 12, fee income growth, year-on-year was again almost double-digit, mostly driven by structural revenue drivers, or as we call it, alpha. Growth in retail banking was driven by strong performance in investment products as well as higher daily banking fees. The strong performance in investment products was driven by a further growth in active investment product customer and increase in asset under management and much higher customer trading activities. Daily banking fees rose on the back of strong customer growth and an updated pricing for payment packages. In addition, retail banking grew its fee income from insurance products and also from lending, but that was more than offset by lower fee from lending in wholesale banking. Given the strong performance across the bank, we remain confident that we can grow our fees income by the 5 to 10% this year and reaching our 5 billion euros goal target in 2027. On slide 13, we showed the development of all other income. Financial market had a strong quarter as it benefited from increased client activity and favorable market conditions. Treasury has a good quarter as well with income up on both comparable quarters, mainly driven by strong results from FX ratio hedging. And we also received an interim dividend from our stake in the Bank of Beijing. On slide 14, our operating expenses excluding regulatory costs and incidental items increased by just over 6% in the first three months of the year. This is in line with our guidance and we still expect these expenses to end up in line with our outlook for the full year 2025 of between 12.5 to 12.7 billion euros. This increase was mainly driven by the impact of inflationary pressure and our continued investment in business growth, particularly in customer acquisition, developing products for new customer segments, and in building and scaling our tech platform. Operational efficiency is compensated for a part of these increases as we continue to digitize our services and infrastructure to further increase our operational leverage. We have, for example, used generative AI to improve the customer proposition in contact centers and in our know-your-customer processes, which has also resulted in lower expenses. On the risk-cost side, on the next slide, slide 15, total risk cost was €313 million this quarter, or 18 basis points of average customer lending, which is below our through-the-cycle average. Net addition to Stage 3 provision amounted to $215 million and were mainly related to collective provisioning in the consumer and business lending portfolio. Individual Stage 3 costs decreased, reflecting lower new inflows and lower provision in wholesale banking, driven by repayments and recoveries. Stage 1 and Stage 2 risk costs were 98 million euros, mainly reflecting an update of the macroeconomic forecast, model updates and some risk migration. We remain confident in the quality of our loan book. This is also reflecting a decrease in Stage 2 and Stage 3 ratios. Slide 16 shows the development of our Core Tier 1 ratio, which is increasing slightly from the levels of year-end 2024, as higher risk weight was more than offset by strong capital generation. The impact of Basel IV and other model updates on our risk-weighted assets was a negative $1.4 billion, so that's an improvement on capital. If we exclude this impact and the impact from foreign exchange movements, credit risk weight increased by $5.2 billion, mainly driven by volume growth in retail banking. Operational risk weight remained flat, while market risk weight increased by 1.3 billion, again excluding the impact of Basel IV and other model updates. Today, we announced our next share buyback program of 2 billion euros, which will have a pro forma impact of 59 basis points on our core tier 1. Now Stephen would like to wrap up before going into Q&A.