Ing Groep Nv

Good morning, this is Laura welcoming you to ING's 3Q2026 conference call. Before handing this conference call over to Steven van Rijswijk, 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, 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 20F, filed with the United States Securities and Exchange Commission, and our earning price 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.

Hi, good morning and good morning to you all. Welcome to our results call for the third quarter of 2026. I hope that you're doing well. As usual, I'm joined by our CFO, Ida Lerner, and our CRO, Andrea Cesaroni. Since launching our growing the difference strategy in 2024 we have made significant progress delivering on our strategic priorities and performing well ahead of our financial targets. And today I will discuss how the disciplined execution of our strategy is driving profitable growth supported by structural drivers. After that Ida will walk you through the quarterly financials and at the end of the call we will be happy to take your questions. And with that we now move to slide number two. And on slide number two, you see that we continue to see strong customer activity across the franchise alongside clear momentum and profitability. Importantly, these developments go hand in hand. We are growing our customer base, becoming the primary bank for more customers, and we're deepening those relationships through more products and higher volumes. And increasingly, we do this through a scalable operating model, which drives income growth and diversification. It drives positive operating goals and it drives higher profitability. And that is the engine to our strategy, enabling us to grow, generate capital and deliver attractive shareholder returns. Now, in the third quarter, we added 259,000 mobile primary customers, taking our growth over the past 12 months to more than 1.1 million ahead of our capital markets day target that we set in 2024. Growing primary relationships is particularly valuable as it drives deeper engagement, greater cross-selling, higher balances and ultimately more income per customer. And this momentum is also reflected in strong loan growth of 6% annualized, supported by continued demand across our markets. And customer deposits also grew at an annualized rate of 6%, underlying the strength of our customer franchise and deposit gathering capabilities. Fee income increased 9% year-on-year, supported by customer growth and higher engagement across both retail and wholesale banking. Sustainable volume mobilized, that increased with 19% year-to-date, 1.9%, as we continue to support clients in their sustainable transitions. Overall strong customer activity translated into income growth of 6.6% over the last 12 months, while cost growth remained contained at around 2%. Positive operating jewels of more than 4 percentage points demonstrate the increasing scalability of our business and as a result we delivered a 16% return on tangible equity in the third quarter with our four quarter rolling ROTE improving by 2 percentage points year on year. Now let's now look more closely at what is driving the increase in our return on tangible equity on page 3. And on that page you see that we break down the roughly two percentage points year on year increase in ROTE and more than 80% of that improvement is supported by a number of strategic drivers. When we launched our growing the difference strategy we identified three key levers to structurally improve profitability and we've made strong progress on each with further runway ahead. First of all we have grown our fee business and diversified our income and we will continue adding capabilities to further deepen our customer relationships. Secondly, we have strengthened our operating leverage and improved the operating jaws, with further upsides as we increasingly support commercial growth with scalable solutions. and thirdly we have reallocated capital to improve our overall return profile and we will continue to shift capital from wholesale banking towards retail banking while unlocking additional risk-weighted assets through ongoing capital discipline. Now alongside these strategic levers, margins remain supportive to our overall profitability and we continue to optimize pricing across our customer relationships while benefiting from the tailwind through our replicating portfolio. Our third quarter performance underscores a clear message. The improvement in profitability is predominantly structural, supported by consistent strategy execution with further runway ahead. And in the next three slides, I will further zoom in on each of these three strategic levers, starting with fee income on slide four. and if you look at slide 4 and there we gave the example of retail banking there you see that how our retail banking growth strategy is translating into more customers into deeper relationships and ultimately higher fee income per customer And we continue to grow our customer base, adding 900,000 customers over the past 12 months, reaching more than 41 million in total. But more importantly, mobile primary customers even grew faster by more than 1.1 million. And as more customers choose ING as their primary bank, engagement deepens and product adoption increases, as reflected in the growing share of customers with three or more products. And that's important because primary customers are significantly more valuable and I've said it before. They are seven times more loyal, have four times more digital interactions and are two times more profitable. We also see these deeper relationships translating into a higher share of wallets. Average funds entrusted per customer, that's on the right hand side of the page, have increased driven by both higher deposits and higher asset under management as more customers choose ING for their investments. Higher engagement and product adoption also drive fee income expansion with average fees per private individual customer up 14%. So in short, we have a strong business model. We're growing our customer base, converting more of these customers into primary relationships and deepening those relationships subsequently. And this increases our relevance to our customers, drives higher value per customers, and creates an incredible foundation for future growth. Now, let me take you to slide five to discuss the second lever that we discussed on page two. And on slide five, we demonstrate how we increasingly are enabling scalable growth. Now, ING has a strong track record of digitalization with the vast majority Thank you very much. Thank you very much. And we see more opportunities ahead. In parallel with making the existing bank more digital and efficient, we are also developing new propositions that enhance customer value and create opportunities for future growth. And increasingly, we are building those propositions globally, enabling us to scale efficiently across markets. And in that, our global investment platform, for example, is a good example. Already live in the Netherlands, in Belgium, Italy and Romania. And it brings together ING's investment capabilities on a single platform. And that enables faster product development, a more consistent customer experience across markets, and greater responsiveness to changing customer needs. And together, these capabilities allow us then to capture increasing benefits of scale, supporting sustainable and profitable growth. Now let's go to slide 6, that was the third lever I was talking about, and on slide 6 we see the combined effect of consistently executing all the components of our growing the difference strategy. Growing our customer base, deepening relationships and diversifying income at scale is then driving that positive operating leverage and higher profitability. and then we deploy the capital generated towards profitable growth and selective M&A and then we return structurally excess capital to shareholders and this increasingly converts profitability into EPS growth and you see it on the left hand side of the page with EPS up 17% year on year. Now furthermore our capital generation is amplified by disciplined RWA management. On a year-on-year basis we consumed 10 billion euro of risk-weighted assets for business growth but that was however more than offset by increased capital efficiency. And that increased capital efficiency includes the execution of SRTs where in the third quarter we were active across both wholesale and retail banking realizing 3 billion euro of relief to our risk-weighted assets. So if you look at on a year-to-date basis, we have now freed up 16 basis points of our CT1 ratio through our SOT program. And overall, that's a strong demonstration of increased capital generation and disciplined RWA management at the same time. Let's now discuss slide 7, where I will show how this all results in highly attractive shareholder returns. So on that waterfall on slide 7, we now show how disciplined capital management has allowed us to announce a 1.9 billion additional distribution, while simultaneously improving our C to 1 ratio to 13.3%. Since our previous distribution in the first quarter, we have generated 3.8 billion of net profit, which is equivalent to 1.1% of CET1. And of that, 50% has been reserved for our regular dividend distribution policy, and the other 50% was also fully reserved outside of CET1, which over the course of two quarters added up to 1.9 billion euro that we have announced today for distribution. We were able to do this first of all on the back of the continued resilience of our business model and asset quality and secondly because of our increased capital efficiency as the incremental capital consumption from business growth was more than offset by improved capital velocity. And as a result we were able to reserve all profit generated over the past six months for distribution while further strengthening our C to 1 ratio by 30 basis points to 13.3%. and our distribution policy remains unchanged. Any capital that we consider to be structurally in excess of 13%, or in other words, capital that is not needed for operational, regulatory or inorganic purposes, will be returned to shareholders. And we will provide you with the next update on this with our first quarter results of 2027. Now, let's move to slide 9. That's the slide on the outlook. and I will again talk you through the main components of our outlook for 26 and 27 as I did in the last quarter. This year we are again on track to add 1 million mobile primary customers. In fee income we are performing well ahead of plan and we expect to already reach the 5 billion mark this year, one year ahead of our original plan. And on the back of strong momentum both in commercial NII and in fee income, total income is expected to Thank you very much. and what we had guided during our previous capital markets day. And combined with the progress in capital efficiency, we expect our return on tangible equity to exceed our capital markets day target for 27 by at least two percentage points to above the 16%. And it is evident that through the consistent execution of our strategy, we are delivering on a broad range of catalysts that will continue to support rising profitability and EPS in the years to come. Then we go to slide 10, and there we announce the next strategic step in wholesale banking. But let me first take a step back. We have a strong franchise in wholesale banking, serving more than 4,000 of the world's largest corporates and financial institutions across 36 countries on the ground. We play an important role as a gateway to Europe for multinational clients in the Americas and Asia-Pacific. while supporting the European economy by financing growth, financing innovation and the transitions that will shape the coming decade. Then, when we look at what we have done in recent years in creating greater value in wholesale banking, we have made good progress against our strategic priorities. We are diversifying income, we are growing deposits, we broadened our distribution capabilities and we increased capital velocity. And that gives us a solid foundation from which to take a next step and further develop our wholesale banking franchise. And as part of our ambition to be the best European bank, we are taking this next strategic step in wholesale banking to simplify and make it easier for our clients to do business with us. We will create a more streamlined structure which supports closer relations with clients to serve them with more impact and create better value. And as part of that journey, we're also renaming the units, so the wholesale bank, into corporate and institutional banking to better reflect our business focus. And due to these changes, a number of roles will change and we expect around 400 redundancies globally. and we will work of course with relevant stakeholders to ensure that we do this in the best possible way and help impacted colleagues find their next role inside or outside of ING. A provision of around 175 million is expected to be booked in the fourth quarter of 2026 leading to an annual cost reduction of around 75 million from 2028 onwards. And we're confident that these changes put us in a strong position to deliver on our ambitions. And with that, we move to slide 11. And today, yes, yes, here we go. We are announcing the date of our next strategy update taking place on the 14th of June next year. Since our previous Capital Markets Day in 2024, we've made significant progress on executing our strategy, delivering on our priorities, and we are ahead of our financial target, as I said. Having raised our outlook for return on tangible equity by an additional 2 percentage points compared to the original target of 27 and that increased profitability is supported by these structural levers where we see further runway also in the years ahead. So growing our free business, improving operational leverage and shifting capital allocation. And during our Capital Markets Day in 2027 we will present the next phase of our strategy, our priorities for future growth and how we will continue to create value for customers, shareholders and other stakeholders and together with that strategic update or strategy update we will also provide an updated longer term financial plan including targets for 2030 and guided by our strategic pillars step by step we're building a scalable universal bank with significant further potential to structurally improve profitability and I'm confident that we see the next phase of our strategy will that the next phase of our strategy will allow us to further build on the strong progress that we have made. And with that I will now hand over to Ida and she will walk you through our quarterly results in more detail starting with slide 13. Ida.

Thank you, Steven. Let me take you through the key drivers of our financial performance in the third quarter. On slide 13, we can see how the accelerated growth in commercial NII and our strong performance in fee income fueled a 6% year-on-year increase in total income. Commercial NII was supported by continued volume growth on both sides of the balance sheet, by disciplined commercial pricing and by the prolonged hedging tailwind in our replicated customer deposits. Fee income increased 9% year-on-year, benefiting from our growing customer base and from increased cross-sailing. All other income was affected by interest rate volatility, resulting in negative results from hedge ineffectiveness. However, this effect is expected to reverse over time. Overall, total income rose 6% year on year, driven by high customer activity across the bank. Let's now take a closer look at our volume growth, turning to slide 14. Here we show the development of our customer balances as we continue recording strong customer activity across the bank. Net core lending increased by 11 billion. Of this, retail banking grew its loan book by 8.5 billion. Demand for mortgages remained solid with good demand in the Netherlands, Germany, Australia, Italy and Spain. Growth in retail banking was further supported by increases in business lending and consumer lending across multiple markets. Wholesale banking delivered 2.5 billion on net core lending growth, Reflecting strong client demand. Net core deposit growth was 12.1 billion, underlying the strength of our customer franchise and deposit gathering capabilities. In retail banking, we added 2.7 billion in net core deposits. with continued customer inflows that have more than offset seasonal outflows related to holiday spending, the conclusion of several promotional campaigns, and net flows into investment products. Wholesale banking contributed 9.4 billion, driven by strong growth in our payments and cash management business across multiple markets. Now on to commercial NII on slide 15. Commercial NII grew by 161 million quarter on quarter and was 13% higher than last year. Lending NII rose by 28 million quarter on quarter, driven by higher lending volumes. The lending margin decreased slightly, mainly as a result of growth in lower risk density loans at attractive returns. Liability NII increased by 135 million, supported by higher deposit volumes, as well as a six basis points improvement in the liability margin. The higher liability margin reflects disciplined pricing, while the longer maturities of our replicating portfolio continues to roll over and recover from historically low interest rates. For the full year, we expect commercial NII to range between 16.8 and 17 billion, with a liability margin of around 110 basis points. Turning to slide 16. Our customer base growth, and they use us for more services, which is reflected in the 9% year-on-year growth in fee income. In retail banking, fee income rose 10% year on year, supported by a growing customer base and improved cross-selling. We see strong performance across a wide and expanding range of products and services. We maintained our growth in investment products, cross-selling our solutions to an additional 100,000 customers during the third quarter. Our success in investment products supports capturing a larger share of customers' overall financial assets, as demonstrated by the 20 billion year-on-year net inflow in asset under management. In wholesale banking, fee income grew 9% year on year, demonstrating the progress on further income diversification with strong support in particular from daily banking and trade finance. Quarter on quarter, fee income remained broadly stable as reduced customer trading activity was offset by a growing customer base and by increased cross-selling. For the full year, we expect to generate 5 billion of fee income, which is 400 million higher year on year, and implies we will reach our 5 billion target one year ahead of plan. With that, let's move to slide 17. On this slide, we showed the development of all other income. The heightened interest rate volatility during the third quarter had a negative effect on hedge ineffectiveness. It's worth remembering, however, that the P&L impact from hedge ineffectiveness is not economic in nature. It is accounting driven and reverses over time, as was also seen in the second quarter of 2026. Treasury income was lower sequentially, including the negative effect from higher interest rates on non-remunerated volumes under the minimum reserve requirement. Income in financial markets remained at an overall solid level, although slightly down compared to the second quarter due to lower income from trading activities and interest rate products. Overall, we expect all other income for the full year to be between 2.5 and 2.7 billion. Next, slide 18, moving to expenses. Expenses, excluding regulatory costs and incidental items, were up 3.6% year-on-year, reflecting ongoing investments into building future revenue streams. Of the 103 million increase year-on-year, 98 million was in our retail other countries, where we are expanding into new segments to capture a larger share of the local revenue pools. and 36 million was in wholesale banking, where we are investing in our transaction banking capabilities to further enhance income diversification as well as other initiatives. These investments in revenue growth were partially offset by lower costs in our largest markets, the Netherlands, Belgium and Germany, supported by ongoing efficiency gains. Expenses, excluding regulatory costs and incidental items, were broadly stable quarter on quarter, absorbing the 3.5% CLA impact of salary increases in the Netherlands through lower headcount and lower marketing expenses. On a year-to-date basis, our cost growth is tracking at 3%, in line with our previously communicated full-year outlook. Thank you very much. And as Steven already announced, for the fourth quarter we expect additional restructuring costs, including the 175 million as announced today in wholesale banking. These restructuring costs will support better long-term cost performance and enable continued positive operating jaws for a prolonged period of time. Now moving on to risk costs. Total risk costs were 403 million in the third quarter, including 111 million related to an IFRS model update. Excluding this model update and SRT-related charges, risk costs were well below our through-the-cycle average of 20 basis points, reflecting our prudent risk management and the quality and strength of our loan book. Net additions to Stage 3 provision amounted to 239 million. This mainly related to collective provisions in consumer lending, reflecting portfolio growth and model refinement. Stage 3 individual risk costs remained modest. Outside the model update and SRT-related charges, Stage 1 and Stage 2 risk costs were insignificant this quarter. Overall, we remain confident in the strength and quality of our loan book. And finally, let me take you to slide 20 to discuss our core equity tier 1 development. Capital generation was strong in the third quarter, supported by a combination of rising profitability, continued capital optimization measures. Overall, we generated around 80 basis points of core equity tier 1 in the quarter. This allowed us to reserve 100% of our net results outside of the core equity tier 1. supporting today's announcement of a 1.9 billion additional distribution while also further strengthening our core equity tier 1 to 13.3%. Risk-weighted assets decreased by 4.3 billion in the quarter driven by increased capital efficiency. This included 3 billion of relief from SRT transactions in wholesale banking as well as in retail banking. The 1.9 billion distribution announced today consists of a 1.65 billion share buyback commencing today and an amount of 250 million that will be paid out in cash in January. Both distributions will be fully funded from net results reserved outside of Core Equity Tier 1 and therefore will not affect our Core Equity Tier 1 ratio. And with that, Let me hand it back to Steven to wrap up today's presentation.