ING Groep N.V. (INGA) Earnings Call Transcript & Summary

Good afternoon and welcome. Fantastic to see you here in person today, and also a warm welcome to our audience joining our live webcast. It's been a while. Frankfurt 2019 was the last time we had an investor update. And since then, we've learned to live with lockdowns, working from home, [indiscernible] has become the most used sentence in recent history. Unfortunately, we saw an [indiscernible] piece in Europe. We see energy prices spiking, we see inflation rising, lack of workforce. And those elements that surround us today affect us daily and also today, many of you have wanted to be here, but we're unable to travel because either the outgoing airport or [indiscernible] or the lack of labor was so much that we couldn't handle traffic of passengers and planes and were canceled or baggage couldn't be handled. And COVID is still around us. Countries in the world are still in lockdown, and unfortunately, our Chief Financial Officer, Tanate Phutrakul is self-isolating because of it. He will be joining us virtually today. In Frankfurt, we also talked about this great company and what we would do. Growing fees, growing primary customers and also how we would focus our Wholesale Bank, and we did. And our management team will be here today to talk you through how we navigated the recent past and how we are well positioned to navigate the future. Let me take you through the agenda. First of all, our CEO, Steven Van Rijswijk, will take you through our strategy and our priorities. He will be followed by an Ron van Kemenade, our Chief Technology Officer; and Marnix van Stiphout, our Chief Operation Officer. Then we'll have a short break. And when we return, Pinar Abay and Aris Bogdaneris will take you through our great retail franchises. They will then hand over to Andrew Bester, who is leading our Wholesale Bank, and he will take you through that story. And then keeping our company safe on risk, our Chief Risk Officer, Ljiljana Cortan will expand on that. And we'll wrap it all up with Tanate Phutrakul our CFO, who will take you through the outlook and our ambitious targets. Now it's my great pleasure to ask to the stage our CEO, Steven Van Rijswijk. Steven, floor is yours.

Thank you very much, Mark, and welcome, everybody. Today, we're going to take you through a journey and it's the ING journey. But before I do so, I first want to introduce are members of the management team because these members are diverse, they are complementary, but they're also relatively new. And we start here with Pinar. Pinar started with McKinsey a number of years ago, has joined ING 10 years ago, also as the head or the CEO of Turkey and started in the Management Board as the Head of Market leaders in 2020. Then we have Marnix. Marnix is an ING veteran, if you will, he is it us over 20 years as the CEO also of Wholesale Banking and the CEO of Retail Banking, also working on the delivery of our ops foundations and scalability. Then next to him is Ron van Kemenade, we call them also the digital twins, the both of them. He has also been around for around 20 years. But before that, he was working in media and internet for KPN, the incumbent -- the telecom incumbent in the Netherlands. And he is very much being focused on developing the digital channels in this bank. Then we have Aris and Aris the net story, if you will, of the Board. He joined the Board in 2015. But before that, he worked in City, he worked in GE Capital and you also work in Raiffeisen. Then we have Andrew, a very seasoned global banker, and he worked a lot on providing on changing laws and transforming laws after the financial crisis. And before that, he worked in the Standard Charter where he worked on -- he was the head of the Greater China and of Africa. And then we have the Ljiljana Cortan and she was -- before she joined ING in 2021, early 2021, just like Andrew, she was with UniCredit, where she was both working in investment banking, corporate banking and risk capacity. And then on the screen, we have Tanate Phutrakul who you will see later today, has been with ING for 15 years, first he was a trained engineer and he has been the CFO of amongst others the [ C&G ] countries, Belgium, but also the technology franchise before he came to the Board in '19. So you see a diverse team, a complementary team but also a young team. Today, we will all talk about 3 things. We will talk about how we -- what our strengths are in ING and how this contributed to delivering value over the past years. We will talk about the fact that we had learnings to do over the past years and what that meant in terms of actions that we've taken. And we will talk about how the strategy will also deliver in the future -- value in the future for you. Because in the end, we as a team are united, and we are deliberate about the fact that we want to make sure that ING will reinforce its position as the best bank in Europe, the best universal bank in Europe. And we do that by focusing on the customer by providing a superior customer experience and extending our sustainability leadership. We do that by the fact that we focus there where we make the most impact and now retail, that means local scale. And we focus there not only in the strategy on the why and the how and on the what, but also on the how. We want to execute with discipline. Anyone will wonder what are then the strengths of ING. And what I'm proud of is the fact that we've always focused on the customer. Customer came first. Think of ING Direct 25 years ago. I'm proud of the fact that we have been improving our -- the quality of our income by diversifying into our fee income over the past couple of years. I'm proud of the fact that we have been a digital leader and that we have been working on all these technology foundations. I'm proud of being a pioneer and not only in digital, but also a pioneer in protecting the planet. I'm proud of how we protected our risk costs and kept our risk as low through the cycle and our strong risk management and appetite framework. And I'm mostly proud of our people, entrepreneurial workforce that has -- is value based, but also has made sure that we were able to adapt to all the changes in the world. [ Yes, I'm good ]. And that has led to the fact that we have been able to deliver strong results, not only as a bank but also compared to our European peers. We have been able to grow our fee business over the past couple of years despite the fact that we had corona, we have been able to have a resilient NII during the time whereby our liability income was under pressure. We kept our costs under control, and we have low risk cost. And that in the end, resulted in a good return on equity and attractive yield and we're here to tell you how we also are going to deliver attractive value to you in the future. Another reason why we were able to deliver this value is because we have a strong combination of Retail and Wholesale Banking business. And it gives 2 benefits. The first benefit is that it gives us diversified income because then we're able to actually diversify in terms of customers, in terms of products, in terms of geographies. The second reason is that it also gives rise to an attractive deposit base in retail, and we use that to fund our retail business, but it also supports to fund our wholesale business where we make an attractive risk return profile. And Ljiljana will talk later about that risk return profile and how we diversify our lending business. Also stand-alone, we make good returns. So we have improved returns over the past years. But with that, there was a lesson that came. And the lesson was about the regulatory requirements. The regulatory requirements have been increasing over the years. But I don't want to talk about why that increase. I want to talk about what that means for our business because these regulatory requirements not only increased but they also are compartmentalized. And it means compartmentalized in terms of local capital requirements, local liquidity requirements, local data requirements, but also local product requirements. And that means that we need to build local skill and retail, local skill to provide attractive customer propositions, local skill to attract the right talent and local skill to get the right return on equity in Retail. In Wholesale, we don't need to have that local skill. There, we can for the clients by having a very strong network and having very strong sector knowledge. And what we did there over the past couple of years, we focus there or where we have the most value for these customers in our network and in our sector strength. And as a result, we condensed our network a little bit. We moved some of the clients to some of the hubs like New York and Singapore. And we compress also the amount of clients. So we focus on a smaller number of clients. And in turn, also meant that we were able to keep our risk-weighted assets under control and manage our risk-weighted assets, and that has helped the returns improving in Wholesale Banking. I said that I was very proud of the way that we focus on the customer. And the fact that we focus on the customer and provide a superior customer experience is absolutely key. And the reason why it is key is because banking is commoditized. The way to differentiate yourself is by providing a superior experience. Here's where the second lessons come in. A number of years ago, we embarked on multi-country, long-term business integrations. And I also related coming back to the regulatory compartmentalization, but these business integration turned out to be very complex. And that's why we have decided to readjust and refocus our investment in that customer experience. So we stopped a number of these large business integration programs, and we'll refocus the investments into the customer experience. In the end, what we want is we want the customer experience to be relevant, easy, personal and incident regardless of the customer segment, although we appreciate the fact that the way we deal with it in different customer segments is different. But it starts with measurement. And for that, we can as far a measurement and start with investing and improving the customer experience, and we can do that by the support of our ops and technology foundations. Because with that, we can measure -- we can work on how personal we make the service, how digital we make the service and we measure that through -- straight-through processing. And in the end, we also measure it through our Net Promoter Score. Because if we have promoters, that means in the end that we will get more customers, and we will also have more customers that do more with us, that's what we call those our primary customers. And in turn, it also means that we make more fees, we get more fees, we get more lending income and as a result of a larger customer base, our cost to serve goes down. Digital is absolutely key and instrumental to realize that superior customer experience. Whether it's in private individuals, whereby we have a mobile-first approach or whether it's in Wholesale wherever our digital is more in the back. And we learned that lesson already a number of years ago when we started to greatly build ourselves into a digital leader that we are now. And it pays off. It pays off because we currently have more than half of our customers that only work with us through the mobile and nothing else. It paid off during the pandemic because during the pandemic, we were able to offer uninterrupted services with the same quality of service as we had before the pandemic. And as of the pandemic, as another example of proof points, we increased our digital investment accounts, our end-to-end digital investment accounts in Germany with 40% amongst which a number of new-to-bank customers. So digital has been important. Digital is important and also it's important to me, innovative digital to me as a CEO. And that's why I and the Board took a couple of decisions. First of all, I decided to split the roles of operations and IT. So we have a Chief Technology Officer and we have a Chief Operation Officer and I've done that to be able to focus on the 1 hand on the digital delivery and on the other hand, on our scalable operations. The second decision that we've taken is that we have refocused our investments in digital. So not so much anymore to these multi-country business integrations, but much more to there where we can make a difference for our customer. So investing in our processes end-to-end digital local for Retail, global for Wholesale, making reuse of our modular technology components and thirdly, extends the use of the [ senior ] excellence in operations, in our hubs. And what it will do for us is that we'll basically make sure that we will decrease the time to market and the time to volume for our customers. And in turn, that gives our revenue an uplift that is benefiting our revenue; and secondly, it will help our cost to serve. And that means that we can get our costs better under control. It is a good story, but it's not a story in isolation. Clearly, there have been a number of very uncertain macroeconomic circumstances and these circumstances have already aggravated as a result of the terrible invasion in Ukraine with the enormous loss of lives. What it also meant is that it also impacted a number of the macroeconomic circumstances. GDP forecast went down, energy prices went up, Mark already alluded to it, the energy, the supply chains have been disrupted further. And also the interest rates have been going up quite dramatically, while the inflation is currently at levels higher than we've seen in many decades. And again, Ljiljana will talk about how we keep the bank safe and we'll also talk about what we currently do about our Russian exposure like we've done with you previously as well and Tanate, I'm pointing at the screen, he will talk about how all these macroeconomic indicators impact our outlook, but also how we benefit from higher interest rates. But aside from these macroeconomic indicators, I want to point out that the longer-term trends were there and are still there but in an accelerated manner. So digital was nice to have a number of years ago, but currently it's needs to have and customers require a certain quality of service and therefore, superior customer experience, where we are going to meet, to measure all that detail that I talked about straight reprocessing, personalization. Environment was already important. But the past couple of years, it became in the hard society as it has of social SDG of governance. So if it's important for society, ESG and sustainability at large, it should also be important to us. We are a mirror of society. I already spoke about the growing regulatory requirements, but I don't need to speak about why they are growing. I want to talk about it means local compartmentalization and the need for scale in Retail. I'll repeat what I said before because it's important. And of course, with all these developments going on, we need to make sure that we attract the right talent. There's a fight for talent, there's a war for talent or whatever you want to call it. That's why being and reinforcing our position as the best universal bank in Europe with such strong digital and operational foundations is absolutely key to be able to attract and to retain the right talent. And all of those things, our strengths, the trends, the macroeconomic environment and our learnings, what we could improve brings into our strategy with 2 overarching priorities. First of all, to provide a superior customer experience; and then two, to put sustainability into the heart of what we do. And Pinar, Aris and Andrew will talk about these 2 overarching priorities. Mark [indiscernible] , will talk about two of the enabling priorities, which is how we are then going to provide a seamless digital experience and how can you make the best use of our scalable technology and operations. Ljiljana, will talk about how we keep the bank safe and secure in financial risk, but also on the nonfinancial area and Tanate will, of course, wrap it all up in the financial targets but we are not able to do this without our people. We need to be able to attract and retain the right people. And 1 of those elements that is key in that is that we have a diverse and then we have an inclusive workforce. I'll come back to that. In the end, like I said, the third thing we're going to talk about is not only on the why and the what of our strategy EBITDA also on the how, how are we then going to execute with discipline. Now on to that second pillar, our overarching pillar of our priorities, sustainability. Our priorities are informed by the 4 SDGs, the Sustainability Development Goals of the United Nations. And we can there play offense and we can play defense. If you look at the environmental dimension, we have pledged to be called net-zero support -- our lending portfolio net-zero by 2050, and it means that we need to develop road maps for all of our sectors to get there. Also, we can support our customers and we help them to finance their transition. On the defense side, we need to make sure that we integrate and that we are working currently to integrate climate risk management into our overall risk management framework, and we use our environment and social risk policy to actually check client by client, transaction by transaction, whether they are a line or not with that policy. So we [indiscernible] on it. When we talk about the diversity and inclusion I mentioned, I have a couple of comments to make here. First of all, societies are diverse. And we as a bank operating in 40 countries, around 60,000 people with 38 million clients. We are a mirror image of the society. So we need to be diverse as well. We should want to be diverse as well. And so we're also going to measure diversity, but also what we believe is the fact that if we have teams with contrasting perspectives, different mix of teams, it means that we will be more creative, will be more innovative and leads to better solutions. Look also at the diversity we have in the Board and we mirror and we try to mirror that in all the teams that we have. So we measure diversity but diversity and general diversity, but then general diversity is about the mix. And inclusion is about behavior and that's why also psychological safety is important to us as well as a vitality of our workforce. Now then the question, of course, is how do we then measure that? And -- like I said, we have a pledge to become net zero by 2050, but that means that the earth would not warm up with more than 1.5 degrees celsius, but 2050 is a long way away and that's why we need to set intermediate targets. And we've set those intermediate targets with a target at 2030, by which time at the globe, we should have limited global emissions and decreased global emissions by 45% by that date. We're currently developing road maps for all of our sectors. We've developed for -- in the second half of this year, we're going to develop an additional 5 road maps. And by the end of 2023, all of our lending portfolio will be road map, if you will, towards that target of 2030. For Wholesale Banking, we have also then set a target how much -- how can we mobilize then also our financing and our structuring support to support our customers, and we are committing ourselves to mobilize EUR 125 billion by 2025, and that's what Andrew is going to talk about as well. And we've also set targets for our business banking and private individual clients and by 2025, we're able to offer a green alternative to all of our Retail customers. Then on diversity. Like I said, we are measuring diversity and inclusion, and we have the 70% principle the mixes, which means no team should exist of more than 70% out of 1 nationality, 1 age group or 1 general group. And we have said that we want to target for our top management and with top management, I mean the top 350 approximately, that at least 30% of that group consists of women and that's not enough. So it's a target we set for now. I want to do this sustainably to get to that target. But in the meantime, we continue to work on plans. So therefore, we're also working on plans with target for a top 10% of our population, which is approximately the top 6,000, and our plans will continue and continue. To conclude, I've spoken about 3 things. I've spoken about the strength of ING and how they have helped to create value over the past number of years. I've spoken about the fact that we see a number of trends, but we also have some lessons learned and as a result of which we took some decisions and actions to keep on delivering value. And I've spoken about the fact how all of these trends and developments have informed us on our strategy going forward to continue to deliver in the future as well.n. All the Board members and I are united and determined to reinforce our position as the best universal bank in Europe. And we do that by 3 things, we focus on superior customer experience and we focus on extending our leadership in sustainability supported by our digital foundations. That's one. Secondly, we focus there where we make the most value for our customers and our Retail that means local scale and Wholesale means following the strength of our network and over [indiscernible]. And last but not least, the strategy is not only about the why and what. It's about how do we execute with discipline and how can we measure progress. I want to hand over to Ron and Marnix. And they will talk about 2 of these naming priorities, a seamless digital experience or seamless digital services and also our scalable technology and operations foundations. The reason I want them to speak first after me is because what they say is so instrumental for building that superior experience and will feed into all of the business presentations that you hear thereafter. Thank you very much.

Yes. Thank you, Steven. And indeed, let's talk about our scalable technology and operations foundation. So as Steven mentioned, over the past years, we tried these huge programs to harmonize our business across markets. And like Steven said, that turned out to be quite difficult right, because of regulation for many reasons. But the good thing that came out of that was that scalable underlying foundation. And what it basically means is we did create a couple of foundational capabilities and services, you could say, that allow our business to grow at marginal cost. And why is that so relevant? Because what we're talking about is roughly 40% of our total operating expenses. So if we can grow that at marginal cost, it has quite some impact on the cost of ING, right? Secondly, why it has such an impact is we are a very digital mobile-first bank. Look at the number already at 91% of all our customer interactions go through mobile and 99% if you include the web channel as well, which means that growing our business in a more digital way, not only has this very granular impact on cost, but there is a double lever in there while we use our digital first strategy. And you can actually see the impact. Well, we have grown our cost only marginally with a CAGR compounded average growth rate of our operating expenses of 0.3%. And we have consolidated now more than half of all of our mobile customers predominantly in the Netherlands, Belgium and Germany on OneApp, which is 1 of those business applications we build on top of this foundation. So let me elaborate a bit more on what the characteristics are of that foundational operations and technology platform, right? First of all, it's highly reusable. We build ones and we implement wherever relevant. Secondly, it's highly modular. So we have broken up our end-to-end customer journeys in smaller pieces. So where applicable, we do implement the modules that are common, and we can cater for local differentiation in markets where that needs to be. And thirdly, which is an important element, it's fully self-service. We have productized, if you will, all of those services and capabilities in such a way that engineers and ops people can easily make use of them without somebody to support them. So we have, you could say, taken out the middle man. Then it's highly digital and automated. Otherwise, it wouldn't scale, right? We try to take out as many human interaction as possible and preferably end-to-end straight-through processing. And then the final component is where we do have operational activities that require human intervention, we concentrate all the knowledge and experience in hubs. So we can again reuse across markets and segments. And Marnix in particular, will elaborate on the 2 last elements of this foundation. Now let me focus a bit more on the technology side. That's my job anyway. So what does it look like? At the base of it, we use our scalable cloud capabilities, both private and public. It's a highly converged, highly concentrated and fully standardized infrastructure. And all the applications reside on that, that we move over. Then on top of that, we have our so-called bank technology platform, and we call a TouchPoint. And what it is, it's a set of technologies, again, components on top of which we build customer-facing applications, think about our OneApp, think about OneWeb, think about our contact center applications and branch applications. It's where we touch the customer, that's why it's called a TouchPoint, then we can leverage this bank technology platform. And I'm actually quite proud of it and is quite unique for a bank to build such an extensive in-depth technology platform. And on top of that, we have this layer of reusable components and services. And how it works is when engineers start building customer journeys, propositions for our customers, they take everything that is available. They reuse where possible and then and on top local requirements. And those may be customer-specific, they may be segment or product specific or there may be regulatory specific. So a large part in many cases, now 50% of all the work that an engineer needs to do is already facilitated by this platform. And what it does bring is a superior digital customer experience. It does bring a faster time to market by reusing. It brings consistent quality, and it reduces our cost to serve, while we scale. Remember, I said we can grow our business at marginal cost. So then look at what has this brought to us because this is not about a future promise. This is actually reality, and we have shown already over the past 2 years that we can have impact. First of all, the ING Private Cloud and this is a substantial business case. It reduces our operating expenses over the years, more or less evenly spread by EUR 100 million. That's a huge impact on our operational expenses. And today, we're roughly at 34% of all the applications worldwide in ING run now on our Private Cloud. And we'll take that up towards 25%, bringing more countries to the Private Cloud to around 70% or maybe even a bit more. On the TouchPoint foundation, already today, 63% of all the online traffic through our web channels, mobile channels, 63% of all the online traffic goes through this platform. So 63% of all our customers who log on to our services are using this. We'll bring that up to roughly 90% over time. And last but not least, our engineers have a common set of tools that they use to develop, to test, to release all the software. Today, 40% of our engineers already use this platform for the applications they develop and manage and will again take that up to roughly 90%, which again has a huge impact on the way we deliver software on a time to market and on our cost to serve. And now on the more operational part of the foundation, I'd like to hand over to, like Steven said, my digital twin Marnix.

Thanks, Ron. Do you want to sit down?

Yes.

Go ahead. So let's remind us of scalable operations as I'll be talking about. And scalable operations in slightly different words than we just used this. Our ability to adjust to volume changes and priority changes across markets and products without raising our capacity nor our cost. That's really what we set out to do, and which we have set out to do over the last couple of years, a real impact on our productivity. And towards that goal, we got 2 big targets. First 1 is STP, already mentioned by Steven straight through processing, meaning that we don't touch the process manually, right? It's all straight through, quite obviously. And then we're going to go from 60% to 75%, and I'll talk about it in a minute. And the second target is to go with more than 50% of our workforce and operations to the capability hubs, the shared capability hubs. And again, Ron mentioned it also, this is something that exists today. It's proven, it's available. We just need to use it to leverage it even further scalable. And if I talk about the first target that I just raised, the 75% STP, up from 60%, that's a big deal to us. So what we have done, we have formulated the Digi Index for ING currently on Retail and Wholesale, which we'll do over the next couple of months. 350 of our largest customer journeys across the business, all of our units, all of our locations, touching 80% of our volumes in Retail. So it's really the bulk of what we do. And within that STP targets, the 15 percentage point uptick over the next couple of years, is really about the biggest pieces, the biggest factories that make it such a big deal. We talk about mortgages, daily banking, contact centers and KYC. And those are the heart in terms of the number of people that we employ in operations globally. That will measure on a quarterly basis, all of our progress on a quarterly basis through the index across the company again. And I think what's important to mention as well is that we not just talk about progress and how much have we gone up over the quarters, but also that we link it to NPS, Net Promoter Score. Steven also mentioned that basically, we need to know what the impacts on our customers, right? Are we actually being seen as improving? So we measure that per these bundles of customer journeys and how we improve them. And second is cost. As I said, these are the big factories of operations. So clearly, we need to make sure we also measure the impact through cost, which we are doing. And I think what is very interesting to mention, this is also back to what we've learned over the last couple of years that this is something that people can do themselves. People are really excited across all these locations that they can work on straight through processing. They see the impact for the organization, for their teams, for how they make life easy for themselves and for their colleagues and of course, declines impact back to NPS. So these things are really critically important for us to make them scalable. And then to our hubs. And the hubs is something, again, we have done over the last couple of years, and we really see the robustness of outputs and quality from those centers. And increasingly, we're putting extra work in those locations. And besides the fact that it's interesting from a productivity perspective because you can imagine today, if you look at lending operations, in Wholesale. We can work, which, by the way, largely coming out of these centers, we can work on U.S. lending business today, and we can work on Australian transactions tomorrow morning and the same logic applies to, for example, CDD, we can work on CDD for Belgium in private individuals, and we can switch that quite quickly to other markets because we're all bundled in the same location. And during an age of very, very stringent capacity constraints and where people really chase the same people and the same talent having those talents of us in capability hubs allows us to provide those individuals, those talents, new people coming in, but also people already in the bank with more profound and meaningful careers, which is, again, a very important thing for us to achieve. And then I want to go through some examples. One also had a couple of examples, and these are not exhaustive, right? I think we should be very clear, this is not all we're doing. But there's 3 big things that I want to talk through. First of all, STP overall, I said 75% and that 15% accounts stay off enough, it's really, really meaningful and has a big impact of what we do and how we do it and on our productivity. And when I talk about daily banking, 1 of those big blocks, we'll look at the things that you probably know, client onboarding, we talk about account opening, we talk about how we're getting alone across the markets, people do it themselves in the locations, but we do it across the different markets, except for Wholesale, clearly, where we've got a global approach. And it gets us to that 75% at least impact by 2025 happening today. And the second block, which sits in the middle, which is also at the core and the heart of our operational work is the contact centers. And what is interesting to mention, wherever you are, whether you're a private individual Retail client or a Business Banking client or you're a Wholesale Banking client, all of our clients go through the contact centers for their primary services, mainly Daily Banking. Wherever you are in the world, we got in all of our markets, large or small, we got contact centers. And you can imagine that the 75% I talk about in STP, a lot of that work will happen in those contact centers. All those proceeds going into the contact center, we want to automate STP is as a hub. And it will basically release work, and we can focus our attention on other more important value-add things. Another example is what we call pre-authenticated calls. It sounds difficult. It's only when I'm on an app or you are on app or Business Banking clients on their app or Wholesale Banking, all of our clients you go directly into a contact center. We know who you are, we know what you want and you're being directed automatically to the right person to the right desk, and that helps, again, our interaction with our clients and our productivity and, of course, also NPS. And that also goes for routing these calls to bots, which help us to even increase the productivity further. So all in all, we're saying in contact centers, where we've got 31 million calls or contacts in 2021, already down the years before to 2021. We want to take another 30% at least out, which gives us €50 million of benefits across these periods, largely equally distributed across the year. So that's happening today, again, back to the -- this is proven happening, which is important. And KYC. And I think this is where both STP and the capability hubs come together. We've rolled out almost to all locations. We're almost done or targets technologies, which help us a great deal and are putting the resources for KYC into those capability hubs to 60% by 2025, allows us to speed it up. It allows us to move capacity around, as I just talked about, from market to market, segment to segment. A lot more quickly, really dealing with priorities more swiftly. But also in terms of STP, we see that when we do this jointly in those centers, we're really bumping up the STP rates. And even today on low-risk CBDs for private individuals, we have already reached 95%. So you can see if you pull this together, how this further exacerbate or increases the productivity. So this is really, of course, very much in a nutshell what we're working on, and as I said, not exhaustive, but that gets me to the conclusion. And the way I look at this and also going back to what Steven said and what Ron said earlier, we've learned a great deal over the last couple of years or probably more than just a couple of years, things that have gone well and things that have gone not so well. And the way I look at it myself and using a small analogy, I think previously, we were going across all these markets, trying to put in exactly the same house, identical houses, irrespective of the commercial regulatory environments, et cetera. And it didn't really work for us, right? They didn't really go well enough. And we have moved on through these learnings and become more practical at this and say, we'll put in houses, but a difference, the commercial is a difference, the regulatory environment is different, everything is different in these markets. So let's make sure we adapt a house. But there's a big but, and the but is where we come in, largely, Ron and I, we use the same materials, we use the same process, the same plumbing and we put the same energy label on it. So we have the benefit of actually having productivity and efficiency but we don't squander or compromise probably is a better way to use our client proposition across these markets. So you could argue it's the best of both worlds through hard learning but also through proven pieces that we are reusing and leveraging. And that gets us ultimately to a situation where we become more digital, seamless digital, quicker to market, cheaper cost to serve, better quality, which is obvious, yielding a superior client experience. And we're doing all this over the next couple of years and even today, that's what 1 started. We still invest in scalable technology and operations, but we're absorbing largely the cost of inflation and the cost of volume growth. So that's where we end up. That's where we draw to a pause on technology and operations. Thank you. We got a 20-minute break, and then please back into the room. Thank you. [Break]

Thank you, and welcome back after the break. A kind reminder if you have turned on your phones to turn them off again. And it's with great pleasure that I invite Pinar and Aris to the stage to present our retail franchises.

It's great after seven years of working together to finally share a stage with you at an IR day.

[ Oh it is ].

So let's go ahead. So hi, everybody. I'm going to spend with Pinar, I'll stand here. The next 15 or 20 minutes or so to go over our Retail business and update you on our plans. The way it's going to work is, I'll quickly go over a few broad themes that cover all our franchise market leaders and ING. And then Pinar will come up and talk in a little more detail about market leaders and the developments there. I'll then take over again and do this ING part and then finish with just reiterating our ambitions for a Retail Bank, okay? So let's get started. We serve 37 million customers today in Europe, Australia and the Philippines. And as you can see, our portfolio is quite diversified and well balanced. And all the geographic clusters are contributing in a meaningful way. Equally important, 6 of the 11 countries have a leading NPS score, and that shows that our customers do appreciate us, of course, but we never take that for granted or even get complacent. And actually, it does the opposite. It actually forces us to continuously up our game to maintain our leadership position in the eyes of our customers. Since I last saw you all in, I think, 2019 in Frankfurt, we've been busy. We've been busy creating value in the franchise and creating value in 4 ways, really, in driving a superior customer experience, digital leadership, improving our revenue generating power and cost discipline. On the superior customer experience, you heard from Steven earlier today. We've added nearly 3 million primary customers since 2017. Digital leadership, you also heard that from Ron. 91% of the interactions now we have with our customers in ING is coming through the mobile channel, and that changes a lot of things. Low rates forced us to reexamine our revenue-generating model. And you can see here, we added [ €2 billion ] in what we call non-liability income, so nondeposit income over the period at a clip of almost 6% per year, and I'll come back to that in a second. And finally, cost discipline. We've lowered the cost over balances by around 6 bps, and this has come from 3 ways, I think, digitization, of course, and you heard about that as well this morning, footprint optimization and more recently, divestments we've made from some subscale markets. Altogether, these things have brought us an ROE roughly pushing 16% on average every year since 2017. So I'm going to quickly walk through a few of these now. Make no mistake about it, ING is a digital bank. And we've had this in our DNA since we launched ING Direct more than 25 years ago. And that legacy actually lives on in the way we're dealing now with mobile and our effort to increase mobile engagement, including mobile sales. It starts quite simply with ensuring that every product journey can start -- at least start on mobile and hopefully end on mobile. That's where our effort has been over the past few years across the franchise. More importantly, is linking these customer journeys with our other channels to create a very powerful 1 omnichannel experience. This also means harnessing customer data, the amounts of data we're getting now through the digital world. You have to harness this customer data responsibly and create insights for your customers so they can make better and more informed financial decisions. And this digital intimacy is the key driver for the sales on mobile that you see here. Now when you look at this chart, you see the progress has been substantial. We're not there yet, but I'm not surprised because like I said at the very beginning, we're ING and this is what we do. This is what we do. We master digital. Steven talked about this as well this morning. But at the end of the day, even in the bank, it's all about the customer. And what we avail ourselves to do is to provide a superior customer experience, relevant, easy, personal instant at every important customer TouchPoint with the bank. This influences the way we communicate with our customers and engage with them, the way we develop our value propositions, the way we onboard customers, even including KYC, and how we fulfill customer requests in the bank. At the end of the day, it also means having this ethos of what I call continuous improvement. And Marnix talked about it this morning of how we look at every process and find ways to make it faster, simpler and more digital. What you heard this morning about STP rates, getting those STP rates higher, not only improves efficiency, of course, but actually drives more engagement with our customers to help us realize our ambition that we set to be an NPS leader in every market and to drive and get 17 million primary customers by 2025. And the reason is simple. We know primary customers are far more engaged, buy far more product, far more loyal and obviously, far more profitable bank. One of the things at low rates, they say, well, they say necessities the mother of invention. And in the case with low rates, which hit us quite hard in the [ Euro zone ], it forced us to reexamine our revenue-generating model. And we looked at everything, the usual suspects, assets under management, insurance, Daily Banking, brokerage, we looked at it all, and we revisited how we're going to now create a meaningful fee business. And over the period, I'm happy and very proud to say that we've added [ 700 million ] in fees. And again, the better news is we still believe there's more runway ahead. And there's more runway 3 ways. First, continuing to grow primary customers, and it's in our plans. And you've seen and we've experienced and we measure this quite religiously, primary customers buy more product from us, and they especially buy more fee-generating products like funds and insurance. The second, no surprise for a big savings bank like ING with billions in savings the asset under management product line offers tremendous opportunity, which we've actually leveraged over the last 3 years. And there's still more growth there. More growth by tapping into our massive savings pool of customers to give them ETF offers that will help them diversify and even potentially find higher yield. But it's also in brokerage, not only e-brokerage but mortgage brokerage. Where we have a very strong and leading mortgage broker in a unit called Interhyp. And then obviously, it's the further optimization of Daily Banking fees. And we only started in outside the market leader countries in the ING Direct countries, we started introducing fees, and we started optimizing them, introducing behavioral fees and really working this lever where we saw and continue to see opportunity. And when you take all these 3 elements together, we're confident we can generate 5% to 10% fee growth each and every year out to 2025. Now it's your turn.

Thanks, Aris. Thank you very much. Thanks. So within this global -- great global Retail strategy. Now I would like to deep dive into Retail Netherlands and Retail Belgium. And these 2 units, these 2 great franchises capture roughly 58% of our global retail profit, 58% of our global retail profit. So let me start with Retail Netherlands. So Retail Netherlands is a truly digital universal bank. Just to give you a few facts. We have 4.5 million primary users in the Netherlands out of that 80% of which is active. In this country, we serve more than 600,000 entrepreneurs out of which, again, more than 80% of them is active. Give me a few more facts about the engagement levels that we have on this digital platform. Every single day to our global app in the Netherlands, here in this country, only we get 8 million log-ins of our clients. 8 million log-ins come are at every single day. It is actually very rare to find a financial institution being in the top 10 list of social digital platforms. ING Bank's mobile app iOS is actually in the top 10 list of active users in the digital social platforms following applications like WhatsApp and Instagram. So in Netherlands, we have a pretty active digital client base, whether it's the entrepreneurs, but also the private clients. And as iOS also indicated, digital is also ING spread and butter. It's in our DNA. So as a result of it, and thanks to all the investments that we have made in digital in the last 2 years. We have seen an increasing demand of our clients shifting from physical channels to digital channels that resulted in 35% less call volumes, more than 60% less demand for our physical channels. But we still have room to further improve our client experience because while doing all of this, our Net Promoter Score actually started to also improve as well. So going forward, there are 3 opportunities that we can still improve our cost to serve. Opportunity 1 is we still have ample room of opportunity to further improve and expand our digital offering on this mobile platform. One example, currently in this country, we can onboard only 1/3 of our clients, as Marnix has explained, straight through, meaning no human touch through digital platforms. Only in a few months, we will be able to onboard more than 70% of our clients with no human touch directly through the mobile platforms. And there are many examples like that why we will expand the offering that we have on the digital channels and especially mobile. Second, we also see anything that we cannot do instant and personalized as our clients wish on the app. We will leverage more and more ING hubs. We have already started using the hubs for our Retail operations in certain areas, primarily in KYC here in the Netherlands, but we see other opportunities where we can actually reach to more expertise and more scale at the same time. The third opportunity is what Ron explained on technology. Retail Netherlands has a very strong technology team. In the last few years, we have already decommissioned our mainframe, 1 of the few organizations actually who could do that, but we still see quite a bit of an opportunity to further simplify our technology landscape. So that our clients actually will get access to better future-proof technology, but also be able to reduce the cost of technology of providing all these great services to them. So ample room of opportunity to further improve our cost to store. Now let's look at the fees. And Aris has already mentioned that we have done great on fees. And Retail Netherlands, for sure has been a great contributor of that. One of the strong fee areas we have in the Netherlands is a daily mobile banking. So our clients actually really allow to get access to personalized mobile banking services for their daily banking needs. And they paid to us on a subscription model. So more than 70% of our Daily Banking fees here in the Netherlands is on a subscription model. And it will continue like that also going forward. But on top of that, we also see opportunities to further improve our investment and protection related fees. Again, I will give you a few facts on how less than only 10% of our clients today in the Netherlands have a protection product that they buy from ING. Only 6% of our clients actually invest with ING and of course, knowing that in the last few years, we have expanded our investments towards offering these clients better experiences especially on the digital platform so that we can actually improve our penetration, both on protection and investments. So resilient daily banking, primarily a subscription model, improved fees with investments and insurance will actually contribute significantly also in the future to the fee growth that Aris has mentioned in the global Retail. And I'm sure there are many people in this room who are wondering and will probably ask me also questions on NII in the Netherlands. But I'm going to leave that response to Tanate because Tanate will explain us globally for the whole balance sheet how and I will actually play into and he will deep dive into details of the assumptions that we have made for NII also in the Netherlands. So let's now take a look at year 2025. What do you see? First of all, we are a very big bank in this country. So that comes with an obligation. And back to what Steven explained on sustainability targets, we are fully committed to use our expertise, but also use our scale to create a big impact here. And we will produce more than 20% of our lending, whether it's mortgages or it's business lending in sustainable lending products by year 25. But there is another area where we are very passionate, especially in the Netherlands on financial health because we saw millions of clients in this country with rising inflation and increasing interest rates would actually face into challenges, and we will invest significantly to improve the financial health of our clients so that they can actually build savings buffers for the environment to come. So this is very important for us that we will leverage our scale and expertise to be an impactful bank here in the Netherlands to lead on sustainability. That's the first thing by year 2025. The second thing is we are addicted about our customer experience, and we will continue to improve that. We are already strong on Net Promoter Score, but we would like to be #1 by year '25 in the Netherlands, serving our clients with the best experiences. And the third thing is with all these improvements on cost to serve and on income side, as it is today, Retail Netherlands will contribute significantly the financial health of the group with a cost income of about 50% with a strong ROE contribution. So that's in some Retail Netherlands. Let me now cross the border. I move now to Retail Belgium. The first word that comes to my mind when I look at Retail Belgium is customer centricity, this is a bank that customer focuses in the DNA of this bank. I had the honor this year to celebrate together with our colleagues and also our employees to 150 years of us being in Belgium, 150 years. So we see entrepreneurs in this country not only in this generation, but also in the very few other generations in the past. And I can tell you, we are also fully committed to serve the entrepreneurs for many years to come. But we also need to do much better on improving our client experience because being 150 years in Belgium also comes with a responsibility that we need to be great in client experience. So first, I will tell you a few things about what we have done in the last 2 years. We have launched 1 [indiscernible] roadmap that Ron has explained in Belgium, not only for our private individual clients but also for SMEs and mid corps. So the entire Benelux currently operates on a single state-of-the-art technology on the app and web. We have actually launched a new consumer lending platform in Belgium, same as in Netherlands, operating a new technology stack. We have upgraded our investment platform and finalize our launch also especially serving different products for different segments with a new platform, also the same platform on Netherlands, but also in Belgium. We have radically improved our assisted channels and contact center to look it. So with all these actual improvements on technology, our intention is actually to improve the client experience. And our clients started to reward us by giving us better app ratings. But this is the start of it, and we will continue to further optimize and expand our offering going forward. So what are the opportunities for further optimizing our client experience but also reducing our cost to serve in Belgium, which I'm also equally sure that you'll ask me questions about it. So let me respond. So there is ample room of opportunity to further expand both daily banking services, but also several sales journeys to be put made available on the app, but also leverage the adoption for our clients. One example. This year, we have launched instant lending for our small entrepreneur clients in Belgium. Instant means no human touch, directly accessible for mobile. We are the first bank in Belgium, actually, who could do that. And we will, rest assured, expand that offering to not only that segment, but to the other segments to make lending much easier, accessible, personalized, instantly available through digital. But this is just one example. Another example, we have successfully managed to switch from a third-party provider doing our KYC services to ING hubs, working with our hubs in Warsaw and Manila with much better efficiency but more importantly, much better quality within less than a year. There are many other opportunities in ING Belgium both in the private individual segment but also for our entrepreneurs to further expand our digital offering. And not only that, our bankers will also benefit from these opportunities. Thanks to that, Belgium is a very branch-based market. with only the improvements in the last 2 years, we have actually managed to reduce our physical footprint by more than 30% in less than 2 years. And going forward, as our clients prefer digital services with all these improvements, we will continue to look at further optimization. So expansion of instant personalized delivery on the app with more straight-through processing, expansion of the usage of ING hubs, optimized footprint. And the last one is on technology. In Belgium in the last 2 years, we have really executed with a very strong discipline, the shift to ING Private Cloud. And what Ron has shown you as the overall business case of ING Private Cloud and most of which comes actually from a contribution of Netherlands, but also Belgium. But there are other components in our technology stack in Belgium that I can assure you step by step, not with a big bank, but every single month, every single quarter, we know how to decommission and move to future state technology that you will also see helping us on managing our technology costs, but also improving what we offer to our clients. So these are the areas where we will constantly and continuously improve our cost to serve with the primary intention to improve the customer experience for our clients. Now let me move also to the fees, how Belgium will continue on the fees. Daily banking, similar to Netherlands is a very important product for us, similarly with a model where we have a subscription base. But on top of it, Belgium is also one of our richest units in terms of fee contribution, both on investments but also in insurance. But also in Belgium, what we see is we have still room to go. We have room to go to penetrate the existing vaults of our clients because they have investments elsewhere. We also have room to go because some of our product propositions were missing. But all of that, we have invested in the last 2 years, and we are expecting increased penetration levels of both protection together with our insurance partners but also on investments going forward. So daily banking continued, investment penetration increasing and also insurance penetration increasing will contribute to the fees. This will, of course, be supported similar to Netherlands, with a strong private banking franchise. So overall, when I look at Retail Belgium, year 2025. First, again, we are large bank also in Belgium, and we are especially important for the entrepreneurs in Belgium, and we will put a big effort to offer sustainable lending products, supporting our clients transition for alternative energy sources. That is very important for us. Second, we are going to improve the Net Promoter Score in Belgium with continuous investments in the areas that we have explained. Towards Belgium cost/income despite rising inflation and inflation is everywhere I can tell you, but indexation is only in Belgium. Despite the inflation and indexation, we'll actually remain quite under control that we are committed to have Retail Belgium with less than 58% cost/income, which is a big improvement compared to today's level with, again, becoming a strong contributor to the ROE. And I'm quite confident that we will get there because I have, like many other teams that we have in ING, have an excellent committed team to reach to those numbers. So now I talk to you about 2 retail franchises and how we will continue to the group. And I would like to give it back to Aris because he's going to talk to you about another amazing franchise, Retail Germany with ample room of opportunity for growth, but also the rest of C&G, where I originally come from, so I will proudly listen to this. Back to you.

Thank you. I remember when I joined ING 7 years ago and I first met the CEO at the time, he's no longer with us. And I challenged him, why don't we do with such an amazing franchise, high NPS scores, digital, customers love them. Why can't we do more than mortgages and savings? And we had our battles at the time. Fast forward 7 years, and when you look at this chart, I think the answer has been given. We have had, thanks to low rates, oddly enough, the opportunity to diversify what I believe is one of the strongest franchises, not only in Germany, but in all of Europe as a digital franchise with a very strong customer following, but now has begun to scale. And as you see here, not only are the customers growing and the primary customer is growing, of course, it has to. But we're operating in what is the largest retail banking market in Europe by a mile, and we have a leading franchise sitting there. And so the role now and the game we play now is build additional firepower in our other products. We have a very strong mortgage business to begin with. Now savings becomes interesting again as rates start to climb. But when you now combine this fee business that we've created, both in brokerage, assets under management, business. On top of that liability franchise that historically has been very strong. You have a very, very bright future ahead. And I think one of the things we're also doing and we've learned that this strong brand can be leveraged, and we've actually now decided to leverage this brand in the smaller end of SMEs. And we recently launched a digital-only proposition -- in partnership also with Amazon. And this is a space we want to play in. The SME market in Germany is big, it's attractive and it's ripe for disruption. And we want to be there. It's a long road, of course, but we're going to stay there and see how we can also scale up there. As Pinar said, it's a bit about many things to continue the momentum. Of course, we're not going to take our foot off the fee pedal. We're going to continue to grow fees as we grow primaries, as we grow our asset management business, as we grow our brokerage business. And also, I mentioned earlier, Interhyp, which is actually brokering EUR 32 billion in mortgages every year and is getting fees for that, and they're growing their fee business every year double digit. The cost to income will come down over -- below -- I'm sorry, below 50%, again, leveraging the scalable tech and ops you heard about earlier this morning, particularly as Mark has mentioned, in the contact center, where we see massive opportunity as we scale. So that's the German story, but one must not overlook what I call other C&G. This part of our business, these are the businesses we run outside of market leaders and outside of Germany, contribute roughly 30% of our income and over 40% of our primary customers. And after the recent divestitures of our businesses in Austria, Czech and France, the profile of this cluster of units has increased dramatically in terms of their attractiveness. And again, like in the previous slide of Germany, you see growth. This is also a growth engine. And we benefit particularly from the fact that we have multiple units who operate outside the eurozone and still during the falling rate environment, we're still able to earn on liabilities, earn on both sides of the balance sheet, and you see the impact there it had on our financials. Similar to what you heard from Pinar, there's a lot of work as we grow, to grow profitably and grow scalability. And here again, we're going to be leveraging scalable tech and ops and particularly again on our assisted channels, as we mentioned, but we're also going to regain some of the liability margin and benefit from that as well. So these are NPS leaders. 5 of the 7 businesses here have a #1 NPS in their digital banks. And again, that's the place you want to be in these markets. And these markets are growing fast, faster than we see in Western Europe. Let me try and wrap up now. And we covered a lot of ground, and I'm not going to repeat some of the things you see on this page. But I think suffice to say is we have a very strong core of retail banks and a very attractive footprint. As you heard, we're digital, we're obsessed with providing a superior customer experience. We have a fee business now that's a serious fee business across the footprint, not just in market leaders. And we're focused, obviously, on cost to serve as we scale up. And now we have the technology solutions to enable us, more than ever before. Now to repeat the targets. We have talked about them a little bit. 17 million primary customers by 2025, income growth in line with the group guidance, 5% to 10% annual fee growth, and an overall franchise cost to income in retail below 50%, helping us generate ROE above 18% in 2025. But I would be remiss to not mention what our most powerful element is to realize these ambitions. And I'm sorry, Steven, it's not superior customer experience or digital, but it's our people. And you know it very well. You mentioned it as well. We have the best retail bankers across the footprint in every country who are delivering these results. And this is the secret sauce of ING, and we've been doing it for 25 years. And these are the people who are driving this NPS leadership and digital leadership and superior customer leadership, all the leadership that we exhibited in our countries. And I want to call out to them because they're making the big difference. So on that note, I'd like to stop, and I would like to ask Andrew to come on stage.

Good afternoon, everyone. Delighted to be here to talk about the wholesale banking business. My name is Andrew Bester and nice to see some familiar faces from my former life. But today is going to be about the ING story. And maybe I'll start out with, for me, personally, what drew me to ING. I competed against ING over the years. And the thing that I -- always struck me were a few features. Firstly, the unique position ING has in the eurozone in banking. Secondly, the very long-run reputation is a real sustainability leader. And you take that and you add the brand that we've heard articulated today. Innovation, digital, entrepreneurial, the traits that I think represents success in banking going forward. The other interesting feature about ING and our clients, clients love doing business with ING, and I'll talk about that a little bit later. But I'll pick up on Aris' final comment as well, 12,000 committed colleagues working across 40 countries, delivering and people with top quartile engagement, highly engaged colleagues working for their clients every day. So maybe let's just start and look at the track record of the Wholesale Banking business since 2017. And what I would say is it's been a period of focus. It's been a period of focus on the clients, where the fit of ING in those clients works. And let's bring that to life. 67% increase in the income we make per client group versus 2017. Secondly, this is an efficient, low-cost wholesale banking franchise. A cost-to-income ratio in the low 50% in industry where our peers are in the low 70s, a very long and strong track record of managing credit risk through the cycle. Loan losses of 39 basis points relative to our customer lending versus, again, our peers in the high 50s. But -- we're still only making 8.4% return on equity. Again, we can consult ourselves 4.5% [indiscernible] of competitors, but we know that we want to continue to create more value. But more about that in a second. We've also been able to increase our income to risk weights, and I'll dive into that a little later. So let me start, why do clients come to ING, circa 6,000 client groups who choose to work with ING. And for me, it's down to a few things. Firstly, the global reach, the 40 countries that we operate in, delivering, in particular, our strength across the eurozone to those global companies, be they U.S. multinationals, Asian multinationals, financial institutions looking to access into Europe, 35% of our income comes from delivering that network for our clients every single day around the world. The next aspect is the sector expertise that is at the heart of ING. And maybe a bit of history. That business was founded and came out of the bearing structured finance business of '90s, deep, deep sector experts. Experts that are able to take that expertise and work in complex situations and create solutions for clients. And that spans retail and infrastructure, our TMT franchise, how we support the commodities food and agricultural sector, transport and logistics, health care, financial institutions and indeed, our very strong energy franchise. This is not superficial client sector expertise. This is deep expertise delivered by colleagues every single day. What's particularly heartening is from 2017 to today, what we see is an over 60% increase in the number of clients that are back to do business with us. And then sustainability pioneer, something I care passionately about personally. And one of the reasons when I competed with ING, I said, look, well, look at what they're doing in sustainability. The bank that did the first sustainability-linked loan back in 2017. We mobilized, as Steven alluded to earlier, EUR 88 billion of support for our clients, be that advising them, financing them and thinking through that transition. We are pioneers in the sustainability space, and we're going to build on that. But you don't drive superior customer experience, indeed, client experience, unless you're serving your clients in a superior way every day. And I'm an old-fashioned client relationship banker. And their promoter score is plus 59. And what's been really heartening is that's 20 points better than 2017. It's also 12 points better than our competitors'. A relationship-based bank where client our relationship managers and a single client model are delivering to our clients every day. But clients, you can have great relationships. What you need to do is make sure you've got the product capability to be able to deliver for those clients. And for us, it's the sort of wholesale banking product stack that you would expect. It starts by providing corporate lending to our clients, the base funding of their needs across their global businesses. Secondly, the more specialized areas of financing, when complex grid clients are dealing with complex cash flows, complex situations, building on that sector exclusive, bringing that specialized finance capability. Crucially, with multinationals, the Treasurer's friend, thinking through what they do in managing their working capital every day, be that in trade, be that in managing their receivables, how they manage their cash across the world every single day. And then above that, helping our clients think about hedging their exposures, be that interest rates, currencies, commodity risks, the expertise of our financial markets platform delivering that. And when big events happen in clients to reach moments of transition, and they need more strategic support in their financing. We bring together our loan capital markets expertise, our debt syndicate expertise, our ratings advisory capacity and our targeted capability in corporate finance and equity capital markets for our clients. And all of that is done with prudent, sound risk appetite. 80% of our franchise is investment grade today. It is well diversified. You're going to hear from Ljiljana when she describes the diversity, not just by sector, but indeed by geography and the franchise. 2/3 of our business today is asset-backed, fully or partially secured. Our trade business is focused on supporting trading capital froze on the world focused and short-term self-liquidating transactions. And our markets platform is there to serve our clients and manage that flow. So what is the franchise? Broadly speaking, a top 5 loan syndications house in the Eurozone. Top 10 renewable finance -- renewable financing house, top 3 global trade and commodity provider. It is the leading global cash pooling franchise for large global corporates in the world under BNG, the Bank [indiscernible] proposition in our transaction services business. And we are a top 10 player in euro investment-grade corporate bonds. So our clients like us and we deliver this capability for them. But what do we need to do as we think -- as we go forward? What are our priorities to start to think about, higher returns on equity. And there are a few things that we think will support that. Firstly, we believe there is an amazing opportunity to support the green transition financing needs of our clients. Build on that sustainability pioneering positioning I described and support that. Secondly, running a modern wholesale bank, you need to be obsessive about returns and making sure you get the right return out of the capital you deploy. And you heard Ron and Marnix talk about what we need to do to scale our technology and operations and talk about how we do that in the wholesale bank using the expertise and capability that their teams bring. So let's start first and talk about the green transition. The International Energy Agency estimates that for us to achieve net zero by 2050, there will be need for $5 trillion of financing per year by 2030. We have the expertise through those deep sectors that I described earlier to start thinking about how we might support that transition. Interestingly, if you look at those charts above, you'll see quite an interesting map between the sector expertise that needs to fund that transition according to the agencies and our own capability. There's another also a very important part, and this comes to real credibility. When we started working on climate in the bank, we built a methodology we call Terra, which is detailed work driven by real experts, thinking about the carbon pathways between now and 2050. And our teams provide a very transparent analysis of where we are and where we need to get to. And if you read our integrated climate report, you'll get to see the detail with which we think about these themes. And as that top 10 renewable finance bank, we're also already providing 60% of our financing in power through renewables, as you saw Steven's highlight earlier. But to keep this position, we know we need to do more, that's why Steven articulated bigger targets for the whole bank. But in the wholesale bank, just to get into a little bit more detail, we are now revisiting our net zero pathways, bringing forward the targets across all our sectors to 2030. The teams have worked through that in 2022, building on the sectors that Steven highlighted earlier. But we're going another level deeper. With our largest clients across these major sectors, we're also building transition pathways, so we understand our major clients transitions as they think about how they finance that. And we're going to work inclusively with our clients to help them finance them. And as Steven said earlier, we believe that with that, the EUR 88 billion of financing we're financing and advice, we're providing our clients today, it can go to EUR 125 billion. So when we think about the transition to a greener, better world, we think of opportunity. We think about how we take our current capabilities with our teams and build an inclusive future. The Second topic, obsessively focused on increasing the capital efficiency of the Wholesale Bank. And it's maybe worth just giving you a little bit of context. Steven talks about some of the regulatory headwinds that we've had across the bank. But in Wholesale Banking, we started in 2017 with EUR 146 billion of risk weights. Those headwinds around different capital treatments, different regulatory rules meant that actually our capital increased EUR 35 billion, just under 25% increase in the amount of capital we needed to put aside for our Wholesale Banking business. As you would expect, we've been supporting our clients in recent years. So new volumes have come on top of that. And what we're able to do is bring that back with management actions, driving efficiencies, making sure that we improve the quality of the loan book to be able to get that back to be flat. So when we pull that together from an income to risk point of view, we've made some progress, 3.9% in 2017, today, 4.1%. And we need to continue to think about what we need to do. So what are we going to be doing and challenging ourselves more to do in the coming years. Firstly, we're going to continue that journey we've been on to make sure that we optimize our portfolio, that we keep deploying capital in those relationships where it's mutually beneficial, where our expertise and the clients' need to have a good match. Secondly, we need to continue to increase the velocity of the capital on our balance sheet, make sure that we contribute both in primary and the secondary business to get more velocity. Also make sure on the transactions that we are supporting clients that reduce the level of holes that we have. There's lots to do in terms of what -- how we know manage the data, how we structure our deals, to make sure we continue to optimize as well. And last but not least, and very importantly in Wholesale Bank, continue to focus on with these high-quality relationships we have, they can both build the capability and enhance our capability to grow our fees ever more. And we will do that through providing higher-value specialized solutions for our clients. So I've talked about capital efficiency. Now let's talk about what we need to do to make sure that we are also ensuring we're delivering efficient and seamless digital services. And Marnix talked about this. We're working very closely with Marnix and his teams and Ron's teams, thinking about how we can be more seamless in the customer journeys that we have, for example, in what we're doing in our end-to-end lending journey. For example, helping our clients open their accounts more easily. And in addition to that, making sure that our omnichannels are available for all our clients. Our clients are operating on different platforms, and we need to make sure that we're there for them. Our modern relationship manager also needs to be digitally enabled, we need to keep extending the tools. And last but not least, making sure we're providing relevant insights both for our clients and for our client facing colleagues. So if I pull that all together, we see the real opportunity to get to a 10% return on equity in the Wholesale Banking business. We're going to pull the income levers that I described. We are following wins in interest rates in our transaction services business. There are opportunities to grow our lending profitably. And that green transition opportunity I described. So we're growing, come in line with guidance. In addition to that, we're going to continue to drive efficiency, ensure the Wholesale Banking cost-income ratio stays below 50%, and we'll continue to improve our income to risk weights. And through that, keep up our strong track record of keeping our risk costs below and indeed very low through the cycle. And I believe if we put that all together, we will achieve 10% return on equity by 2025. So with that, I'd like to pass to Ljiljana, our Chief Risk Officer, who's going to run through her presentation. Thank you.

Good afternoon, everyone in the room. It's good to see you all here, and specifically for me, it's the first time in my role of Chief Risk Officer of ING Group, to talk to you. Well, I'm probably after Andrew, the one with shortest tenure in ING, but my blood is already orange. And I'm very keen today with you to share some of my views on risk management of ING Group, but as well as some of the key success factors that have enabled our strong risk positioning and as well to share some of priorities that are high on our agenda. Let me start with reiterating the context of uncertainties we live in. Disappointing post-pandemic economic growth, higher for longer inflation, no one ends -- no one sees an end to it. Late policy responses, broken supply chains, zero COVID policy in China, ideological and political polarization of the world. And all of these in times when the world would have to be stronger and more united than ever in order to face and fight some of the global, real global civilization challenges like climate change. On top of that, the terrifying war in Ukraine has aggravated and will aggravate some of the consequences of the challenges I mentioned. I've been asked recently, many times, if I'm worried. Of course, I am. I'm a Chief Risk Officer. My job is to be worried. But if you ask me if I'm confident that ING is well equipped and better positioned to sail through the rough seas ahead of us. I'm as well we're confident, and we will continue promising our clients and delivering on our promises and our strategy and make themselves and ourselves and all of our stakeholders safe, secure and compliant. Let me tell you how. Let's start with fundamentals. How we manage our credit risk. The strength of our credit risk management framework relies on the diversification principle. This is the hard lesson we all learned after the global financial crisis, where actually we face some of the concentration risk. That's why nowadays, we do have the [ caxton ] exposure according to the diverse criteria, being its geography, industry sector, specific clients or specific asset classes. But this is the end state that is defined in our risk policies. Where it starts from is a disciplined origination. Disciplined origination according to the well-cascaded granular risk appetite in the organization. As we've seen from the Andrew's presentation, our book is well diversified. Our structures are almost fully senior. We understand which risks we are onboarding and which clients we want to onboard, and we know how to manage these risks. So how do we do that? It's very important that we stay close to our clients that we have the insights in their behaviors, thus also a possibility to react to the early warnings or even to the early distress signs. This is what this is all about, proactive risk management. However, having product expertise, having strong industry expertise, this would not be possible without risk awareness and people and culture that are making these risk management principles being a daily principles of life. Actually, this approach is well confirmed and has resulted in a very strong credit risk position of ING portfolio. And I'm sure you all know these slides because we are giving it regularly in the updates, quarterly updates, but I'd just like to run you through some of the numbers to underpin my confidence. Starting with diversification. If you look by geography, ING portfolio consists more than 60% of its lending book into the strongest European zone economies, the Netherlands, Belux and Germany. If you look at the product diversification, more than 40% of our portfolio relates to residential mortgages, again, in our strongest markets. Andrew has mentioned as well actually, among others, one of the reasons why our RWA in the past and also currently has not grown as it should have based on the regulatory headwinds that we have experienced. And there are 2 of the KPI that I would like to share with you that are underpinning this statement because you'll see, for example, for the retail mortgages, that there is a continuous trend of decrease of our loan-to-value, which is now well below 60% despite as well clearly pandemic and also taking into account that the prices have gone up. This is fair to admit. However, also on the Wholesale Banking side, you'll see that our book structure in investment and noninvestment grade has never had actually better positioning. 80% of our book is in investment-grade area. So well diversified, well secured, well collateralized. 70% of our portfolio is, to some extent, covered by collateral. On top of that, we are dynamically increasing our coverage of Stage 3 exposure to a current, I would say, 34%, which is well diversified according to the segments, having in mind as well, as I mentioned, collateral behind. Track record adds to my confidence. Best-in-class already for years and throughout the cycle in the risk costs, but as well a remarkable NPE ratio of only 1.5% compared to the EU zone, but I would say as well to some global players, a remarkable result. A good proof point of everything I've said and the way how we manage and our approach to the risk management, but as well our risk management capabilities is how we manage our Russia exposure. And let me remind you that since 2014 and actually Crimea crisis, we have taken our job seriously and have started decreasing thoughtfully and through our disclosure to the Russia related entities. What does it mean as well? We have looked at the type of the products that we are having with this area, and we have also gone into the more collateralized part. So at the inception of the crisis in February this year of the invasion, unlucky invasion to Ukraine, we have started with EUR 6.7 billion, you will all remember the number from the press release of total exposure, that at that point of time was just below 1% of the total lending portfolio. What have we done in the last 90 days. We have defined a good business and risk strategy with which we said we will not do new business with the Russian counterparts, and we will engage strongly with the existing ones in order to find a way to preserve the value and to further derisk. And the results are obvious. In the last 90 days, we have decreased our Russian-related exposure by more than 25%. And I'm happy to share that also as of end of May, we are just below EUR 5 billion of total exposure. I think those are remarkable results in very difficult times, and I'm thanking to all of people who have contributed to that. So how do we do that? No big announcements, decisive derisking, decisive acting walking the talk. I've said a lot about what and what gives me also the reason for my confidence. I'd like to focus a bit on how and specifically on how we manage our nonfinancial risks. Operational resilience concept is a very important concept for the ING. And I also like us all to look back into the pandemic time and actually to remind ourselves that we have been operating without disruptions in a very challenging environment. Not just that we have provided an uninterrupted service to our clients, we have as well enabled our colleagues to work from home or to work in a hybrid model. During that time, we haven't experienced major incidents from external world nor have our internal processes or our internal IT systems contributed to higher operational risk losses. We have managed well throughout the pandemic. However, and as we know, this is the area that is most vulnerable in the banking industry and far out of the banking industry. If you have seen the risk study of the World Economic Forum, you would see that going forward, the people who were asking those are academics, people from the corporate world, banking industry have actually labeled 9 out of the 10 top risks for the future as being nonfinancial. So only the risk #9 is actually financial debt actually solving that crisis. All the rest is related to nonfinancial risks, including clearly the ESG component onto it. That's why it's extremely important for us to continue focusing on security of our identity access management, our fraud capabilities detection, but as well as cybersecurity. And how do we do that? We use data analytics to help us spot the anomalies and the patterns that will lead to certain detection. We are as well very much engaging with the third parties because we do believe these risks do not have the name, nationality or organization. They're cross-organizational, they're cross-border, and we need to act jointly in order to effectively manage those. Let me reassure you that safe, secure and compliant is one of the most important, if not or definitely conditions sine qua non for enabling or making the different strategy. And when we say that, we are committed indecisively to continue our efforts on building our strong and responsible position in society and being an effective gatekeeper when it comes to management of AML and other compliance risks. In the last years, we have increased strongly our capacities, both in terms of numbers, but as well, we have upgraded our skills on how we do that. We have implemented the global KYC and compliance organization, but we are also utterly committed, going forward, to the continuous roll on of the global standards, global tools and also global systems how to manage the KYC process and other compliance risk clearly throughout the life cycle of the relationship. We also wholeheartedly invite all our peers, regulators, policymakers and other interested parties in the society to cooperate on that important part because only jointly and together, we can spot certain patterns, and we can spot certain behaviors and act effectively upon those. What is next? So we are well positioned, but this definitely as well as our role of the -- and responsibility of protecting the value does not allow any self-complacency. We are to keep on being focused. We have to be -- keep on learning. We have to be reacting and actually adopting our business model to the environment. And as I said at the very beginning, environment is fastly changing, and it's changing in an uncertain way. So only with a strong risk culture of all of the people in the group, we are able to detect -- to be aware to understand and to detect and to act upon the risks of the future, and definitely emerging risks of nonfinancial side are the ones that deserve special attention. However, let's not forget that also the economic world around us has changed. Our plans have changed their business models. The way how we look at credit risk has changed. So we need to be adaptive to those. We have to learn and to adapt our frameworks to be able to manage those. So my priorities and priorities of the risk management organization for the future will be on ensuring that our risk management is furthermore -- even more effective and efficient. What does it mean? Look at our processes, our risk processes, end-to-end, our customer processes, end-to-end, and make sure they are as digitized and as automated as possible in order to decrease the operational risk that might arise out of those, in order to leverage on effective risk-based internal control system behind that. My second priority, we want to be forward-looking. We don't want to remediate. We want to act before it happens. And this is specifically important in the context of uncertainties in the context of fast change, and we have to have the right skills, the right people, clearly the right governance and organization to act upon those. And last but not least, we are here as well to enable opportunities. Banking is about risk taking. We need to understand with risks, which risk we can take because we know how to manage. And here, I'm happy and ready to support as well our changing customers' behavior in order to adapt our processes, adapt our products in order to be able to excel in that experience but as well to support the Wholesale Banking strategy of capital velocity. It all adds to the capital generation. Most importantly and also personally very important for me, is sustainable finance. It's how do we ensure and enable the transition financing? I'll stop where I started actually, on the uncertainties around us and on the need that we all act as a risk organization, and ING is risk organization. Each of us is a risk manager in interest of all of our stakeholders and to ensure that we continue protecting value in a way that we've done so far, but as well learning from our mistakes and adopting ourselves and our behaviors for the future. I'll stop here, and I'm happy to take any of your questions during the Q&A session. And I would actually invite now Tanate to the virtual stage, and I hope I will be able to do that. Thank you very much.

Hi. Good afternoon, everyone. Very nice to join you. And well, first of all, as Mark mentioned at the beginning, COVID is still with us. And sadly, COVID is still with me so I'm on recovery, getting better. and I'm sorry, I can't be there in person to be with you as well. But let me give you a bit of a kind of a reflection about what Steven said about strategy, the economic environment that we face and how we have set our financial target as part of this investor update. The first thing that I wanted to really say is that we have demonstrated a track record of dealing with the environment that we find ourselves in. And in the past 5 years, it's been a very different environment, the environment of negative interest rate where since 2019, we have lost over EUR 1.4 billion of liability income. But if you -- when you look at our top line, it hasn't moved. In fact, it has increased. It has increased because we have lend more money and we have grown our loan book. It's increased because we maintain pricing discipline. It's increased because we have taken steps to change our asset mix and it has increased because we have fundamentally changed the way we sell our services to our customer and generated new fee revenues, which have grown the fees to compensate for this compression in liability income. And last but certainly not least, we have also seen the ability to control cost. And for the last 3 years, our expenses have remained approximately flat. Now if you look at the world around us, we have seen something which is incredibly different. The world is certainly more uncertain than before, and it brings with it benefits and also challenges. The interest rate curve is different. Inflation is certainly much higher than before and the economic growth has become much more uncertain. That raises the question for us as a management. What does this mean in terms of potential loan growth going forward with rates rising so sharply, then we also see a potential compression and a potential normalization of our lending margin. That is the second big question for us. The third one, clearly, we will benefit from liability income increase because of higher rates but how much would we benefit. And lastly, of course, with inflation running at the pace it is running, how would that affect our cost base despite the programs and the efficiencies that we already realized and plan to realize in the future. Now let me take you through some of these different items. From a lending perspective, ING is prepared for a more uncertain outlook on loan growth. We have shown in the past that we have been able to grow our loans at twice the GDP growth. In the future, we expect our lending franchises, our customer intimacy to remain in place but we can continue to grow it along. But clearly, the outlook where the GDP is looking is more uncertain. And we think that we are targeting what we call profitable growth, only lending where it meets our risk parameter and only lending when we actually made the right return on equity that we need to achieve. Another point, which I think is important to note is that as rates start to rise quickly, there's a possibility that it takes us some time to reprice the loan to the level where we maintain our lending margin, okay? You see that in a number of markets with mortgage products where we are repricing multiple times in several months to try to pass on the increased 10-year rates to our customer, for example. And in a particular market, the Netherlands, we do see another structural shift in terms of margin is because we used to benefit from prepayment fees and that will be structurally less going forward. Having said that, for the Netherlands, the increase in liability income should keep the overall net interest income for the Netherlands resilient over this planning period. Now switching to liability side of the balance sheet. How does ING benefit from rising rates? I'd like to say that we are actually geared to rising rates -- if you look -- if you -- when you look at the total liability income of ING of EUR 670 billion, about EUR 460 billion of that is subject to replication. Okay. Of that, it's EUR 460 billion, about 75% is in savings, which carries an interest and 25% carries no interest. These are payment accounts held by our customer. To give you a sense why we're geared to rising interest rate, we changed the duration of our liability replication depending on interest rate outlook and depending on customer behavior. Now as rates are to rise, you can imagine that the duration of the liability replication gets shorter, okay? And as seen here, currently, given the current rates and the current client behavior expectations, we have 40% of our replication in less than 1 year. The remainder sits from the 1 year mark all the way to 15 years. So we are here to take advantage of rising interest rate. Now what does it mean for ING? If you take the -- when you take the curve in April, you see already that from a spot curve perspective, we already will benefit from rising long-term rates. And when the short-term rates move, we will benefit more. If you apply the April forward curve, you can see that the impact on ING's financial would be very significant, okay? But that significant increase in liability income will not, of course, be there because we would expect to pass on a certain portion of this benefit to our depositors. To give you a sense of scale of how much tracking would mean to our financial results, we provide you today with a bit more information that for every 10 basis points of tracking that we do, it provides EUR 350 million of transference of value from our replicated book to our depositors. The second thing which is important to recognize is the fact that negative charging is likely to end when rates go positive. And that has already seen a number of announcements by ING. First, in Germany a few weeks ago that we're stopping negative rates charging in September. The same in Belgium in September as well. And this morning, we have announced for our largest franchise, the Netherlands, that we will stop negative charging at the beginning of October. Now if you put some of these components together and do a simulation of 50% tracking. You can see here that what that would mean in terms of the results of our NII replication taking also into account the stopping of negative rates charging as well. Switching to fees. We are confident on the progress that we have made in terms of our fee-generating model. ING's fee-generating model is very different than it was 3, 4 years ago. We have a much broader base of customers who take services from us who pay us a fee. The geographical spread of our fee-generating income is much broader. You have seen that from Pinar and Aris and Andrew that we basically generate more fees across many, many geography and not dependent in one particular geography. Another important point is that we generate fee income from a much greater variety of products before. And that we have a much better balance between Wholesale Banking and Retail Banking fees. So I think the resilience of our model has improved significantly in the last few years. That's why we're confident in giving that guidance of 5% to 10% fee income. Turning to costs. Clearly, inflation outlook is uncertain. It could be even higher than this. It may not normalize, but this is now going in planning projection of what inflation would look like. Our guidance is that we will maintain cost below inflation. We are confident in giving this guidance because of what has been described today. We are optimizing our branch network, we're optimizing our channel. You have seen us taking steps in terms of reducing our focus from high cost/income ratio countries like Czech, like Austria, like France. You have seen us taking steps in terms of scalable ops and scalable tech. These are key components that give us the momentum to continue to bring efficiency and effectiveness to our operations. The last but not least, we also do expect that when the deposit guarantee scheme is filled in a number of markets as well as the SRF fund is fully reaching its target, we will get a reduction in 2024 in terms of regulatory cost contribution, we should add to our cost numbers becoming below inflation as well. So if you look at interest rates, rising interest rates, strong robust fee income growth, cost discipline, it gives us more confidence to reach the 50 to 52 cost/income ratio by 2025. And we give this graph to illustrate it would not be a hockey stick at the end. We expect to make progress every year. Talking about capital, we are committed to continuing to provide an attractive shareholder return. To give you a bit of our thinking around capital we have used the sell-side consensus forecast to give you a sense of how we would deploy capital. And if you look at these consensus forecast, it talks about the generation of additional capital by ING between 2022 to 2025 of roughly EUR 20 billion. On top of which, we already sit on an excess capital level above our 12.5% core Tier 1 of EUR 7 billion. Our commitment is that we have -- we will make the distribution of our capital based on our normal dividend policy of EUR 10 billion in this particular simulation. Also, in addition, we would actually converge on 12.5% and pay out the EUR 7 billion of excess capital over that period of time as well. What to do with the remaining EUR 10 billion? Well, we reduced that to increase lending growth. We will use that for counteracting or compensating for negative risk migration. We will use that for certain regulatory add-ons or new regulations that may come. We will use that potentially this inorganic opportunity for us to grow. But of course, if we don't use it for these different components, we will certainly look at additional capital returns to our shareholders. And the glide path that we look in terms of this convergence on 12.5%, we expect to do it in roughly equal steps during this period. Now bringing it all together, I'd just like to reiterate our financial targets. We think with the rising interest rates that we have seen, the strong fee growth that we are experiencing and we expect to continue to achieve. We expect to make our 3% cost -- our income growth over the period. Our cost discipline, combined with that income growth will deliver the 50% to 52% cost/income ratio and that we expect to actually reduce our capital level to 12.5% by the end of the period. A combination of all that should deliver a 12% return on equity for our shareholders. Thank you very much, and I hand it back over to you, Mark.

Thank you, very much, and good health, and I hope to see you back soon. Ladies and gentlemen, we'll have a short break. [Operator Instructions]. See you then. Thank you. [Break]

Welcome back, everyone. And again, may I please ask for you who had the urge to put their cell phones back on then to switch them off again for this Q&A, which will take roughly 1.5 hours. We have questions coming in, in a couple of ways. Of course, here in the audience, our analysts and shareholders present here today to ask questions. [Operator Instructions] Second source is through our -- the questions that are coming in via the chat function in our webcast. And some of the analysts who, as I said in my introduction, were unable to fly here because of logistical problems with flights and airports, they might be joining us virtually as they may raise their hand in our virtual room to ask questions. So ready to start. If there's any questions here in the audience, Raul?

This is Raul Sinha from JPMorgan. Thanks very much for doing this in person. Maybe 2 questions to start with. The first one is maybe, Steven, just on the geographic spread of the group. This has been an opportunity to reassess strategy and think about the future. How comfortable are you with all of the countries that ING is still present in, even though you've got very high Net Promoter Scores in most of them? Do you feel like this is the core group that would remain? Or do you -- are you still open to changing the footprint if economic conditions or something within strategy could change over the next few years? And maybe related to that, if you could talk about the decommissioning of the IT systems. I mean that's something that we've heard ING talk about quite a bit and a lot of other banks have talked about it as well. But I think banks find it very hard to actually fully decommission IT systems. So if you could give us some maybe detail on when especially Belgium, Netherlands, the kind of key IT systems go away. So that's actually, the first question.

No, those are 2 questions. But I'm used that so go ahead.

And then the second one is Tanate, just to make sure that he doesn't feel left out. I think the general summary from the market is that the interest rate sensitivity slide probably underplays the overall sensitivity of ING, NII to the current forward curve. So related to that, can I ask today for a clarification, the EUR 461 billion of replication eurozone excludes the equity element of ING, which is also in eurozone, which would be an additional NII sensitivity on top of that.

Okay. So I mean, as we also do with the quarterly figures, I will take the first question. I think this time, Ron, I'll give you the second question about -- I know you're smiling because actually, we have decommissioned the mainframe of IBM in the Netherlands, and I still intend to send part back to where it came from, but as a present. But it's indeed tough. But let me talk about the footprint first. So like I said, the footprint is not -- the footprint of choice isn't end of a choice. So if you -- like we said, so when you decide and see that despite what we hoped for after the ECB came to power in 2014 that, that would lead to regulatory integration, but instead it has led to regulatory fragmentation. It also means that what you then need in terms of your system requirements, data -- I come back to system requirement to, let's say, your liquidity and capital requirements, your data requirements and your product requirements remain different and with that, to some extent, also some system requirements remain different in that, that it means that if you have a sort of mortgage requirements for a country like Germany that is different from Belgium or Netherlands, it also means that the data you require in your systems and the functionalities are different as well. And that in turn then means that you actually require a local scale because if you can't realize local scale, where the bulk of your cost sits local due to all the things that I said, then you can never reach sustainable profitability. Now that means that since I became the CEO, we've really looked carefully in terms of where can we make it, where can we not make it. And we've taken a decision in that regard on Austria, on Czech Republic and on France. And that's where we currently are. We work very hard to further digitalize our offering because it also lowers the cost to serve and also to the remaining markets. And I will always keep looking. And so I will always keep looking at -- through the cycle, we can make adequate returns. And you saw on the graph that I saw that adequate returns was, which is at least above 10%. And if I do not believe that in the medium to long term, we can get to the 10%, we will take decisions. We think we can make it, we continue to invest. And of course, we still have some way to go in some of the markets. But if we get all these digital elements that Ron and Marnix talked about, on the road, we actually can benefit and get our cost to serve low and that's why we also put on the slide the cost-to-income ratio of the diverse markets. Ron say something about your journey of decommissioning and your confidence in the future.

Yes, my confidence in the future is very much based on, let's say, proven performance in the past. And as you mentioned, and I like the question actually, many banks, many enterprises actually have made a lot of claims about decommissioning, taking out applications, closing down data centers. But as Steven already mentioned, we have actually fully decommissions our mainframe. And the mainframe in the Netherlands alone, hosted like 50% of all of our applications. And we -- over a longer period, we're able to fully decommission that and in the process, modernize our IT landscape. You saw that on the slides, I said 34% of all our applications today already reside on a private cloud, and this will increase to 70%. And as we do, we further standardize and consolidate all of our IT landscape. We'll actually close down our data centers in Belgium and have fully migrated all of our applications from Belgium to the Netherlands by the end of this year, which is again yet another proof point or that we are actually actively standardizing and consolidating. And I believe that should provide you with sufficient confidence that this is not a future promise, but it's actually past performance.

Okay. Thanks, Steven. I think with respect to NII, clearly, there is a certain expectation of whether we are understating or not. And I think if you look at the content we use April, clearly used June, the curve would be significantly bigger. So I take that observation. And to answer your question, the equity is not replicated. It means so the impact on equity. It's on top of what you see the replication now. But just to make that point about the equity replication, you saw significantly longer duration and savings because that's a long-term part of our capital strategy.

Yes, Benoit from Kepler Shuo. So the first one is actually on the capital distribution. Can you refer to the conversions towards the 12.5% in equal steps? And I wanted to understand maybe thinking more about the short, medium term, 2022. Are we going to see capital distributions already by the end of the year? Or do we have to think about 2023 as a first step? That's the first one. Then we move into retail and the primary customer growth, we have seen a kind of slowdown over the past 2 years, obviously, we have COVID and so on but I wanted to understand better or you're going to move towards the EUR 17 million, which country you are aiming for or targeting there? And could you also tell a bit more about the cross-selling because I think we have a lot of primary customers already now? And yes, I just wanted to understand are you going to target more cross-selling going forward. And linked to that, it will be great to get an update on the insurance plan with AXA. Obviously, a couple of stuff changed already. So I just wanted to get an update on that.

Why don't you go first? This question we saw comment, I guess, on the capital distribution? And then I think ours on primary growth, fees and insurance?

Okay. Benoit, I think your answer is about 2022. And we have upcoming of course, our entering dividend in August. We still have a share buyback program that's running. And after that, I think we were open. We were asked, would we not do a capital return again in 2022. The answer is no, we're definitely open for that but we need to have a constructive dialogue with our regulators about this pace of return. So it's certainly an open question for us for 2020.

Aris, do you want to take one?

On the question of primary. So yes, indeed, there was a slowdown, and I would contribute that slow down to 2 things, probably. One would be COVID, of course, but also our focus on KYC and limiting amount of customers we wanted to onboard as we got our KYC processes up and running. So I think those 2 are the primary effects. And if you look at the rate of primary customer growth prior to that, it was growing at a rapid clip and had a good trajectory. Going forward where we see the primary growth I think in market leaders, we have a substantial number of primaries. It's more about cross-sell. It's more in Germany and in the other CNG markets where we see a big opportunity, particularly with Germany. And now that earning on liabilities again, then we'll earn on liabilities, we're going to leverage that to also drive more customer growth in, but smart customer growth, customers that can not be [indiscernible]. And in terms of insurance, you mentioned AXA. We recently decided to stop the program that we had with AXA to develop a centralized digital insurance proposition, which would then serve multiple markets. It was just very -- getting very complex, very difficult to materialize and got to be expensive also. What we're doing now is we have a strong insurance business that's local in every country. We've been growing insurance last year, this year, double digit. But we're having more local relationships even with AXA in countries. So we're going back on a local basis, where we have local partnerships with multiple providers. We focus with 2 or 3 multiple providers, but it's still a big opportunity for us to grow. You heard Pinar this morning about the penetration. We still have room to run. So it's, again, going back to the more traditional local partnerships to drive insurance penetration.

Thank you very much, Lars. Let's also turn to our audience online from questions. And there's one question via the chat, and that's for Ljiljana. What are the -- so you seem to be managing the controls of the Russian exposure quite well with the reduction. But what can you say about the secondary effects and how much of your portfolio will be in scope?

Yes. Thank you, Mark. Definitely, we have had a look clearly right after the direct impact on to the indirect impact as we have covered all of the segments actually by looking into it. we have defined group-wide some, I would say, objective criteria how to look at it in order to standardize this analysis. And I'll just give an example of criteria like clients that have revenues above certain percentage coming from Russia or clients that are experiencing significant supply chain disruptions because of the Russia or clients that they're having strong energy cost inputs for their own production or are within the energy industry, like, for example, utilities. And we've done that both for the wholesale banking part and for the business banking part. And what we actually looked at is actually -- what part of the portfolio that we have looked at, if I remember by heart, numbers of the scope was around EUR 200 billion for the wholesale banking, actually full business banking in the Netherlands and Belgium. And we have actually come to the conclusion that the inflow on the watch list or potential inflow of the watch list would be actually less than it was the outflow due to the pandemic. So actually, we would not experience increase in the watch list how much of this would really come to the impairment in case the situation does not develop well, depends as well on the response from the governments with respect to the subsidies for the certain industries, but as well to the alternative sources of supply chains and alternative sources of finding the revenue market. So for the time being, we are confident that our levels of the watch list will not significantly change. And we are currently looking as well at the structure of the overlays that we are having in place and going forward how to manage the secondary impact.

Okay. Thank you, everyone. Back to the audience here, Julia.

Two questions from me as well. Following up on the footprint. On the slide on capital, inorganic growth was mentioned. So what could be the potential target there? And if a traditional retail banking, brick-and-mortar bank were to come to market in one of your markets, would you look at it? So that my first question. And then on the 3% revenue CAGR, that may be more [indiscernible]. But if I understand it correctly, it's predicated on 5-year swap at 1% by 2025, which is basically half where it is now. So what would it be if we look at the curve today?

Thank you so much, Julia. And like I said, like I said before, typically, we have enough room to grow organically. But if I look at inorganic growth, then we would look at certain skill sets or certain products that we do not have. So for example, you still see that the number of customers that do certain fee business with us and certain product proposition with us, then only lending is quite small, but we still have room to grow. And Pinar mentioned, had a 6 and 10% in the Netherlands. So we have still an enormous amount of untapped potential in our current customer base. But if I see an opportunity to widen the product or service that we can work with our clients, I will take a look at it. And the second point is that goes about, I would say, local consolidation. So yes, we take the premise that retail is from a product capital liquidity until now at least, I still hope that at some point in time, we get harmonized regulation but let's not speculate. It also means that if local skill is important, then if there are opportunities coming in some markets where It can add to a local scale, as a result of which it will get more efficient and get cost efficiency or broaden our product base, I will certainly have a look at that. And then whether that would be a brick-and-mortar bank. I find it doubtful. We are a digital bank. So if that then would need to come with big restructuring, never say never but I'm not a big fan of that. We want to build on a digital position, and I do not want to get distracted in doing big business integrations and big restructurings because that is the threating us from the core value that we have, and that's for the customer. Tanate?

I mean, Julia, your question on NII and revenue growth of 3%. Clearly, if you were to apply today's prevailing rate, it would be better. But there's 2 compensating factors that we think are in this management. Number 1 is what rising rates will mean for lending growth and prospects for lending growth. And what does it mean for NII on lending, right? So it's a bit of a communicating vessel. So to answer your question is, indeed, would be with rising rates higher than 3% but you need to factor that in on the fact that you will get some compression on revenue growth as well. So it's a communicating vessel. And of course, we will update that from time to time as we always do in our quarterly numbers.

It's Anke Reingen from RBC. Two questions. First is on fee income and the growth in daily banking fees. I mean banking is a commodity. So how confident are you be able to implement those fees? Or is it largely because driven by your growth of primary customers and the goal in investment product fees. Is that related to the market or is it independent with you go on your customer buys the cross-selling that will be coming through? And then secondly, on capital and your assumption on risk-weighted asset growth. Is that in line with the 3% revenue growth and the near 12% ROE target? Is the capital we levered to the 12.5%? Or you still have the EUR 10 billion of capital?

Tanate, why don't you start with that capital question and maybe Pinar, you want to have a first go at fees and the current accounts?

If I can just ask your first part of the question was clear to me about whether we factored in the risk-weighted asset growth is in line with 3%. And the second part on capital, I didn't get. Can you repeat the question?

The second part, it was about to get to a 12% ROE. Do we assume 12.5% CET1 capital? Or do we still keep the EUR 10 billion on our books, which we have on one of the slides?

Yes. So to answer that second half directly, yes, we assume that we get to 12.5% core Tier 1 in our calculations to get to 12% and then the first one, we have given a certain number of assumptions to get there in terms of risk-weighted assets for lending growth, we say that if in certain simulation, the economy return risk migration would result in higher risk weight. We factored that in. We made certain estimations on regulatory impact, the calendar provisioning in the past as some people call it. we factored that in as well as potentially other regulatory add-on. So we have done a quite conservative and comprehensive look at where risk-weighted assets would end. But the point is we are planning to get to that 12.5% to get to 12% ROE.

Yes. So on daily banking fees, first of all, we are very confident that our daily banking proposition, which is primarily mobile, instant and personalized is actually quite competitive, right? So in markets, especially where we have such a good offer, we also bench towards competition, and we are quite confident that there is still room given also the greatness of the offer and also price competition that we come further improve it and expand the data banking fees. And we will closely follow up improvements in our offer and also the competition. But the fee CAGR that we shared, we are quite confident, but it varies in terms of how much of it will come in different markets that we operate. But the blended daily banking fee growth, we are quite confident. I think your second question was on investments. So on investments, we have different types of investment offerings from mass retail to absent clients and private banking. So in Germany, for instance, our offer is more based on execution only and simpler advice various in Benelux, we have that. And on top of it, we have a private banking offer. And as I explained, part of it will come from penetration of our existing client base because we know, for instance, both in Belgium, but also in Netherlands, not all of our clients invest with us. We also know why they do not invest with us because we do not have all of the product offerings we were actually supposed to have, which we actually now completed. So that's part of it. So primarily, it is penetration driven. And in our growth, we did not assume -- we did not make assumptions on equity market growth. So it's primarily based on market inflow -- client inflow.

Thank you very much. Looking at -- I'll get back to all of you, but just looking at that we have everyone also covered on our webcast. I haven't got any questions that have come in. just looking where one wants to ask a question there. Not for the moment, then let's move back to the audience and Tarik, please.

It's Tarik El Mejjad from Bank of America. So I have 2 questions. First, the big issue ING has is the pressure from negative rates and for you as simplified by the fact that you have high reliance on NII given your business model of savings schedule. I mean now you enjoy a few years of high rates but I'm now started thinking about the new next cycle already. And don't you think it's a great opportunity to give the excess capital you have to look for some insurance business in life and non-life or proper asset management to increase your fee part of the revenues? I mean we discussed a lot of fees today, but it remains very although 5%, 10% growth, but given we start from a very low base, it will take many, many years to rebalance the NII fees. So as a strategic question, would you consider going back into proper insurance and asset management business? That's the first question. Second question is on the Wholesale Banking. I mean, 10% is a good improvement to ROE. But given the volatile nature of that business, cyclical lumpy on cost of risk, but also in terms of growth, is there -- what's the way to go actually above 10%? Do you need probably more in-depth restructuring of the business in some areas? Or you think -- I mean just 10% is the first step and then you are confident you can grow it further?

I'll take the first question. You have a little of time to think about it. Yes, Tarik, I mean, look, it's a good question. And that's actually the people that's also calling to in the room. Actually, I'm happy you raise this question. We reversed this one that feel the pressure in continuing to grow our fee business. So that's good. But the question is more whether we should own products or whether we should distribute products. And I think that in the [indiscernible], you refer back to the platform, we still owned an insurance business, and we own an asset management business. Many of these businesses are about scale. And I think for us, the way to go for now is, you're right. If you look at our insurance business and even our asset management business, although our asset management is now approximately EUR 180 billion which is significantly higher, I think EUR 80 billion higher than 2 or 3 years ago. But for our bank, our side is still relatively small. So what we want to do now is to optimize the customer experience to move from simple fee products and simple investment products and leverage our distribution channels as much as we can. So I'm more looking at how we can broaden a product offering on our distribution channels that necessarily gone back now and buy an insurer or buy an asset manager.

So to your question, firstly, we don't start feeling that we need to restructure the business. If anything, what we feel we need to do is take advantage of the opportunities ahead of us. As I said in my presentation, the cost/income ratio is in the low 50s, end of last year, just over 50. So we think we can sustain that level of cost/income ratio. And then it comes back to the levers that we need to pull to try and drive that 10% ROE. On the income line, we saw an encouraging pickup in revenue last year, and we need to see how the revenue continues to build. What we are also doing in a very selective way is looking at how we, be it in our sector organization with our client teams and our product areas, start building adjacent capability that will see further growth on the income line. So that's on the income. I think on capital, we do need to continue to be even more efficient. I talked about the capital side of the equation. And we made progress in that exhibit, but we need to continue to make sure that we get more income from our risk rates from our clients. So to me, it's more organic. I think when we disaggregate the cost base materially, we generate good returns. So there's another aspect, which is a subset of what Tanate talked about around net interest income. We do have a leading pan-European cash management business, be that in bank that is in France or our broader transaction services platform. And actually, that creates a little bit of an income following wind, but also will help augment returns as well. So we're going to need to work those different levers. And I do think back to the risk point because you talked about volatility, 2 aspects on risk. Our Financial Markets business is a client flow-based business. So we think that, that provides a good stable client base growth over time. And then on the risk side, we continue to run good prudent through the cycle risk management. So we're going to focus on those strengths. And we think we put that together, get the teams thinking about the opportunity ahead of us. And I think we can get -- we can drive towards our 10% ROE over time.

Thanks very much. And it's always good to remember that we have -- many of our guidances are through-the-cycle guidance and not put in time. That's something that we will have to discuss often. I have someone joining us via digitally, Stefan Nedialkov for the next question. Stefan, nice to see you. It's nice here actually. So I'll come over next time.

Well, thanks for the Investor Day today, everybody, a couple of questions from London. The first one is on loan growth and NIM importations. You're now pivoting towards a profitable growth guidance rather than the 3% to 4%. What does that mean in terms of unprofitable growth? Was part of the 3% to 4% unprofitable just in order to maybe pick up volumes for a few years. What's the benchmark for profitable growth going forward? Is it the 10% in wholesale and 18% in retail, obviously, depending on the country? How should we think about the change from 3% to 4% to an actual number going forward? And I guess related to that is if I just want some very sort of back of the envelope numbers on your 3% revenue target and the 5% to 10% fee growth target. It looks like NII on the current curve is projected to grow around 1% to 2%. And if we assume 1% to 2% loan growth, you're basically saying flat NIMs in a raising rate environment going forward. Some color on that would be really, really welcome. Are you basically saying that lending margins are coming in? Are there any hedging impact that maybe we should be thinking about? So that's a loan growth in NIM. Apologies for the many questions in there. The second one on inorganic growth. You guys mentioned inorganic growth as a potential deployment of our capital of around EUR 10 billion. Obviously, depending on where loan growth ends up being, you will be consuming some of that for loan growth. When it comes to inorganic growth, are you thinking something along the lines of disrupting the German SME markets potentially getting to hold in the country? Are you thinking maybe something nonbanking related? Or are you just keeping the how to drive for the moment?

Okay. I'll give Tanate a little bit of time to think about why do we do profitable loan growth in the past and how he can revert from that statement although he did not make a statement. And I will first answer the question on inorganic growth. And look, clearly, Germany for us is an attractive market and still very much a market that where there's many players. And although we are a top 3 player. If you look at the composition of the market, I think the market is still weak to compartmentalize and at some point, that goes from many of the retail markets in Europe, consolidation is about to happen at some time. I'm skeptical given the limitation of the banking union progress about cross-border, integration are more hopeful about local mergers, if you will, so that we first start with local integration before we see pan-European moves although because of the compartmentalization of liquidity and capital. In Germany, and I think -- and that was also said by Aris, we have -- we want to build local scalable businesses, and we have 3 pillars to do that in. First of all, is private individuals. In Germany, where we're already big, but the number of primary customers, we have 9 million customers and how many were primary? EUR 2.3 million. No, they less even on the slide, but less it's small. So we need to increase that number. Two, we have an attractive wholesale bank, but it's just part of the network and their local scale is not necessarily of important. So I just look at it client by client and the global client profitability supported by the network in a sector. And the third one is the SMEs, so let's say, the business banking customers. And there, we have only a very limited presence. So if there are opportunities to actually grow in all the business lines, how we look at it. But of course, I'm building a third pillar. The third pillar is still very small. So if there is something attractive for us and primarily digital then I will for sure take a look at it.

Stefan, then to address your question about lending. What we mean by that is when you look at the current interest rate environment, you have to probably reprice your loan quite sharply to capture your origination margin. I take mortgages, for example, in Germany, we probably reprice 5, 6 times to try to pass on the cost to our mortgage taker. But at the same time, if the pricing isn't going enough, you could actually get some ROE returns for that marginal book. right? And that's what we need. I said we're not chasing market share. We're going to stick with our pricing discipline to make sure whatever we generate -- generated loans that we made. We make the right returns, and it depends, of course, on different products, what that returns would be. But in mortgages, it will be on the high end, given the light risk-weighted assets. So that's to address your question about what we need by profitable growth. We just don't see the visibility to give the same 3% to 4% guidance given the economic uncertainty. Now if you look at the questions on net interest margin and what that means, clearly 2022 is a year of rotation, right, with replication on savings, turning around. And also there's a number of factors that is affecting our results. Don't forget, we benefit significantly in 2021 on TLTRO funding, right? That benefit will phase out all the time. the ECB provides banks with tiering benefits that will also fade out with liability going above 0, right? So that's the number of factors that goes in, but I think we expect our net interest margin to stabilize in 2022 and starts to rise going into 2025.

It's Guillaume Tiberghien from BNP Paribas Exane. So 2 questions. One again on revenues and the other 1 on capital. On capital first, your local supervisor is a little bit harsher than average in Europe. And so if countercyclical buffer returns, is there a risk that by 2025, your 12.5% equity Tier 1 target might not be enough of a buffer to MDA? And the second, so you listed just some reasons why there would still be headwinds to NII, but simplistically, the EUR 2 billion incremental revenues, give or take, that you target between now and '25 is fully explained by the replication portfolio as at April rates. And so fee growth, volume growth is basically offset by other elements. And I know TLTRO and deposit tiering are some explanations, but what other elements are there for the margin pressure?

Okay. Tanate, I think that's 2x you.

Okay. The countercyclical buffer, indeed, we have observed a number of local regulators increasing the level of kind of countercyclical buffer, the latest one being our DNB in the Netherlands. But I think the way we look at targeted capital ratio is a long-term target that is used to help us price and control our businesses, right? So we don't move those ratio easily with these countercyclical buffers. And we look at the macro picture, we look at stress testing that inform us what is the right capital level. We have talked about potentially increases in countercyclical buffer. But in the Eurozone, there's also talk about compensating release of buffers as well, right? So it's a multifaceted discussion. Where we're comfortable to guide right now is on that 12.5%. And if there's significant changes in the future, we will monitor and we will look at it there. Your second question is really -- you're saying if we increase our replication by 50% or based on 50% tracking, there could be even more potential, and I would agree, given where the rates are. But exactly what I said is that rising rates beyond normalization of rents that we see could bring slower growth in lending. It could bring compression in terms of lending NII, right? And that's some of the potential downside in terms of net interest margin. But I don't want to say we're not bullish about our net interest margin. We do expect this year to stabilize and we need to grow, and we have taken some conservative assumptions over that period of time of how we get to 12% return by 2025.

Flora Bocahut from Jefferies. The first question is again on the NII. Sorry to come back to this. You've made the assumption in the slide pack of a 50% pass-through. You kindly give us the sensitivity for each 10 basis point move in the 10% move in the pass-through. So how should we think about it? I think you mentioned it's going to vary across the different geographies. So where do you think it could be best, worse? Is the 50% number realistic? Or is it one of the conservative elements you just alluded to? The second question still on NII is the prepayment fees. I don't know if you've ever quantified actually the prepayment fees, but this may be also a headwind versus the 2021 base. So how big is it? And should we consider that the Q1 NII was already clean and normalized maybe on that basis?

Tanate, why don't you take the first question, but let me then take the second first. So on prepayment. I think that Look, over the past number of years, we were benefiting, especially in these markets, but also in some other markets from having a higher prepayment fees as a result of which -- as a result of the prepayments at clients hit on the back of lower interest rates. So what we will now see and we saw it already in the first quarter that prepayment levels will go down, but also the prepayment fees will go down as well, given the fact that the interest rates are higher, so the differential will be smaller as well. So -- and on the other hand, that's going to be offset by the fact that we have more liability income. So in our forecast, we took that part into account as well. We have not disclosed what these amounts were, but we will, especially in 2022 will face headwinds of the lower prepayment amount coming in. Tanate?

Yes. And to address your question on tracking -- it really depends on competitive pressure on the market. It depends on dynamics of what's happening in other parts of the banking scene as well. But if you look at 2 examples that we have looked at, the U.K., right, the tracking is not anywhere near 50% when you're coming from ultra-low negative. Another market in one of our markets is Poland where again, the tracking has not been there, right? So I think if you think 50% is a conservative assumption. I think from what we see now, I would agree but it really depends on the magnitude of the interest rate. And what we see now, if you say around 1% to 2% kind of nominal rate, I think 50% is not a bad assumption to make.

Cor Kluis from ODDO . A couple of questions. First one, on the retail fees. You increased by EUR 7 billion in the last -- Since 2017. Could you give a split out of that, what was the price effect and what was the volume effect and also for the next couple of years? You have a 5% to 10% growth, what part will be priced and which is volume, we appreciate volume, of course. Little bit more than just the price part -- that's my first question. Second question is about Russia. In Q1, you basically took the big total effect already in your capital, smart part for the P&L, a big part via the RWAs of your capital. if later in the year, we don't know what's going to happen, of course, part of that loss will be recycled via the P&L. It will not be in quarter 1 impact because you already have it in it. That will impact your profits and that will impact your payout ratio and therefore your dividends. How do you look to that on returning that capital from the treasury part maybe because your profits will be low, your dividends will be lower. Will that extra profit then will be added to the EUR 7 billion. Would you also give an extra share buyback or an extra capital return because you already have it in your capital. And my last question...

Sorry, just to -- we already have it in that capital, what do you mean with that?

You increased your RWAs by, I think, EUR 30 billion or something in the first quarter. And so you already have the Russia effect in the capital. And if later, it might result into real P&L losses. You profit, of course, will be under pressure. Therefore, you will have a lower dividend. But yes, that should not impact your capital return because you already have the new capital, of course because RWAs will probably go up and therefore -- go down, and therefore, you have a capital lease again. So it's more -- will that impact your capital returns if you take the Russian profit in your P&L. And my last question is about Amazon. In Germany, you did a nice deal, of course, with Amazon. Can you give some update on that? Is it already progressing well? And are there other countries where you might have? So do these kind of operations like in Spain or our active number of countries.

All right. So there's 2 questions coming our way. First of all, can you split the volume and the price effect on the fee products? And so no, but I think you should elaborate a little bit of where it is coming from than before and what in terms of Amazon, we are starting a small SME business, how do we grow from there. And I think on the Russia, it's not so much of a risk question, it's more a dividend question that you're asking. I don't think that I agree with you but then I will list it for Tanate. I don't agree with you that it doesn't come back in profit because until now, it indeed partially. We took it away from profit by means of taking additional risk costs, that's up to EUR 201 billion. And because of an increase in our risk-weighted assets, our risk-weighted assets increased. And therefore, if you translate that, our capital increase or requirements increase with about EUR 1.5 billion, but that does not mean -- it does not get to our profitability. Currently, it's out -- there is no link with profitability from the second reasoning, the element. The question, of course, remains. What will happen if it goes back to normality or whether it goes completely South for us, right? And then the question is, will that then lead to real losses, and therefore, there will be capital release to some extent and there will be more risk cost, and therefore, the profit will be going down? Or will there be a reversal of RWAs, that's also not through the P&L, but that's only through RWAs. But therefore, also, will it have an impact on the risk cost that we already took. So those RWAs don't mix up with profitability because they're neither here nor there from a dividend payout perspective, but they do matter in terms of our capital and therefore, our return on equity. And now Tanate, the question, of course, is if you take more or less risk costs, so who that we're getting more or less or less or more. And you can answer depending on how you think is the answer.

I think the answer is, first of all, our capital as it stands in the end of Q1, already takes into impact about the more negative end of the Russian situation, right? So that capital reduction, it's already bad. I think your specific question is if we were to recycle that into the P&L in terms of losses in the P&L, will our dividend be changed. And the answer is yes. But then potentially, our capital returns from other nondividend could be increased. So I don't think it's a straight notion that because we had to take greater provision that we would actually lose that money, right? It's about the real loss of capital on Russia that matters.

Tanate, but in the end, if we have normal risk costs and in this case, it could be no more risk cost enter the cycle and then the profit is lower and then the normal dividend is lower.

Yes. So let me do the easy one first. On the Amazon. So Amazon is a partner, of course, that we have a relationship with in Germany and a strong partner at that. And what we do with Amazon, it's a distribution channel. So we help finance working capital of small companies on their marketplace, on the Amazon marketplace. But we also have direct business to SMEs in Germany. So we have other channels where we get volume. So the relationship now is relatively young. And obviously, we're their only partner now. And we're working well with them. That's not the issue. Obviously, they're in other markets. But again, Germany is a test case for Amazon. And also for us, to see how this embedded finance or be how we work with them to create volume, more volume for our business. That's where we stand there, and we're progressing. On the other one, it's a very. It's a good question, but a hard one to answer because we make fees in the following ways. We make fees on daily banking and we can increase prices or we can introduce new fees that not existed. For example, in Germany, we introduced 1 euro fee on Jira cards. So you have to look at daily banking. You have asset management, how do you make fees on asset management, distribution fees and management fees, but also on brokerage, on trades. So you get fees on trades. And so that's a volume and a price thing depending. Then you have insurance and you have -- you introduce new insurance, you get fees. You have existing relationships where you renegotiate prices where you also get higher prices after a negotiation. So it's a multifaceted across multiple products, and it's about introducing new stuff increasing prices on existing stuff and things like that. So it's not an easy question to answer but it's multifaceted, yes.

Thank you very much. Before I go back to the audience, the question from our online audiences to be and this is for Ljiljana. Can we be more specific and it's a question we got on the phone this morning also. We never guide for risk costs, but we do have a through-the-cycle guidance, could you elaborate a little bit on your views there?

Exactly. And this is where we're going to stand as well. So we expect going forward to remain through the cycle guidance for several reasons. We've navigated pandemic better than we thought as we all seen. So there is still a part of these overlays remained on our balance sheet, and we all know that. So that's a part of the -- something that we are going to use going forward for uncertainties. Secondly, as we've seen also from the volume growth, we have done -- went down to the lower range of that volume growth because we said we're not going to hunt for volume. So in uncertain times, adding to the profitable growth, we will also not go just to add volumes, but we will also look at the risk behind those. So having in mind that we have had for several years, if we take out pandemic here, lower cost and really through the cycle, adding to these uncertainties and being a risk manager, I would prefer to keep it there at 25 bps.

So Hari, thank you for that question. We have a question here in the audience as well, please.

[ Dimitrios Larios ]. A few questions on the funding. Is the intention at the moment to reverse the process of charging accounts, depositors in Germany and the Netherlands? And do you think that in the current environment, funding value deposits is a bit more meaningful than before? And how do you see the TLTRO IV playing out for ING? Could it be more meaningful than TLTRO III in your estimations? TLTRO IV being more profitable than TLTRO III, let's say, in the current environment with higher interest rates.

Okay. I don't know about TLTRO IV, but I'll leave that to Tanate. But if there is one. I mean, no, I don't think it's good. So I think that we went too far out and too long with TLTRO and I think it was -- on hindsight, I think we should not have gone that way because it's creating the wrong incentives in banking but also for our customers. But I will let Tanate answer in terms of the benefits of TLTRO. When it comes to the deposits, we already made announcements on Belgium whereby we will revert back to 0, right? On Netherlands, we made an announcement this morning, whereby we will not charge negative deposits anymore by the first of October. And in Germany, I think we made announcement in early May, whereby we went down from EUR 1 million to -- what was it Tanate?

500, 500.

500,000. So we have made already announcements to the -- at one of the slides, which shows how we benefit from replicating portfolio with the tracking of approximately 50%. That includes all those actions. So -- but clearly, I mean, that, of course -- and we've never said that deposits was not important for us, like I even said in my speech. When we opened -- I said there's 2 reasons why our bank have been also successful, which is a combination of the business and one was the diversification but the other benefit is, of course, the fact that we have a very stable retail deposit base. And it was only a matter of -- and each market is different that we charge appropriately for it. And depending on the circumstances of the markets or the customers of the patient systems that we make sure that we balance our balance sheets, but raising deposits has been important for us and has continued to be important for us even through the dynamic because there you saw that, I believe, in 2020 Tanate, how much other deposits grow in this year, about EUR 45 billion in aggregate. So even then the deposit strategy was important, but we -- also depending on the market circumstances that, look, we need to be able to charge for it because it costs us money and no business is able to survive long term as we provide a service that costs money which we cannot charge for. But as the curve starts becoming more upper solving again, we take it off. And therefore, we benefit in a different way and continue to build because it anticipate continuing that primary relationship. Tanate, when are we getting TLTRO IV benefits?

Yes. The answer is, Dimitiri, is I don't know because I don't think the rules for any new version of TLTRO is out there. I know Christian Lagarde has talked about a new version linked to sustainability loans increases. But I think what we are contemplating at the moment is that given where the interest rate rises are and given the terms of TLTRO III, we're debating whether we would repay the current TLTRO III funding or not, or to keep it over another year. So that's a bit the debate that we have. And once we make that decision, we can give you a bit of insight into how beneficial that would be for ING to extend the funding, but we are in the process of thinking about that.

Thank you very much, Tanate. Two questions from our online audience. Thank you. So what further RWA inflations are left structurally. So that's probably referring to regulatory and the normal ones like growth. And the second question, will you consider more buybacks now that for Dutch withholding tax purposes, a big cash dividend has already been paid?

Okay. Tanate, why don't you take the second and Ljiljana, you will do the first?

Well, on the RWA inflation, clearly, no one knows what the regulation in the future brings. But I would say from this point of time after the second quarter, we have actually taken into account the majority of all the regulatory headwinds. Clearly, we will have certain impact as well going forward from Tanate mentioned and feedback stop eventually are the shortfall. But I would say this is not structural but rather business as usual. Clearly, potentially negative risk migration, again, not structural. It depends on if Russia goes out, whether something goes in from the second order impact. So I do believe, structurally, we've taken the majority or if not all, and the rest is business as usual, we're going to manage.

And then just on the capital returns. Clearly, our preference given where our stock trades today is through share buyback, right? I think it's the best in terms of EPS enhancement. So that's what we're focused on doing. And as we mentioned at the Q1 results, we are looking for ways to see if we can make that return more flexible and not as linked to the cash return part. But -- so that's work in progress for us. But clearly, the preference is capital distribution through share buyback.

Thank you very much, Tanate. Farquhar, I saw you with the hand up for quite a long time.

Farquhar from Thomas Research. Two questions, I think, probably mainly for RS if that's okay. Firstly, just in terms of Slide 4 of your pack, where you showed the mobile sales were 97 per 1,000 clients. I just wondered if you could decompose how that splits between the key product sets. Just give us a sense of how might have developed and may develop. And then secondly, just on German SME, in terms of -- can you just outline what the strategy is to overcome the obviously incumbency advantages that some have in that market at the moment? Is it all about this kind of Amazon linkup or is it more than that? And just perhaps a related question, how much volume on the SME lending side do you expect to take in that kind of German push that you're anticipating?

Okay. First question, let's go to the first.

First is the 97 on mobile sales.

So again, here, I don't have the exact figures for you, but it's easy to think about the products that are more readily available on mobile payment products, deposits, that's where you're getting the bulk, early consumer loans. And then as you get higher up the value chain on mortgages and on asset management products, although we're still working on it, as I told you in my monologue, where we're trying to link with face-to-face channels to be able to close those sales, but it's primarily the payment and deposit and savings products that are the bulk and insurance as well, yes. And then on your question on SME, how do we compete with the incumbency. The same logic is how did ING Germany compete with the incumbent -- bank branch banking businesses when we launched ING Direct. And it's the same idea about the customer experience, the speed, the digital and tailoring to those SME clients, the smaller end who don't want to go to a branch to get a loan and who see speed and convenience as a key CTQ or a key factor in their buying decision. And then your question is how much volume, I mean, we don't set market share targets. What we do is with our risk appetite and with our different industry codes we look and we learned to build our scorecards and to build scorecards where we can make money and to offer our value proposition because it's a big market, we can be much more selective in Germany than in other places. So it's early days now, and it's really about building those scorecards to be able to understand how these customers react to pricing, all those things.

Yes. Thank you very much, is. We've got room for 1 more question. But one, please.

Actually, 2 questions from my side. The first one is on the NII, so to come back on that. The focus has been on the Eurozone NII. I think 25% of the deposit base is non-eurozone. So how much kind of additional liability income can we expect from the non-eurozone countries? That's number one. And on the cost side, I see on the slide, a 2.3% expected Eurozone inflation and you will be running below that level in 2023. I was wondering in terms of timing because there's a bit of a delay in terms of passing kind of the higher inflation into the cost base, thinking about CLAs. Also indexation in Belgium is delayed by a couple of months. So is that not a kind of maybe higher inflationary level looking basis in 2023 versus the normal level? Are you very confident that you will be managing the clean cost lower than the inflation also in 2023?

Yes. Let me take the first question on the cost then Tanate, you probably need to do a real better job in explaining our improvement on our liability income. So at least on the non-eurozone part. So yes, I mean, we know, of course, that there's indexation and there's higher -- and there's some countries indexation levels. We, of course, see higher inflation levels and that also means that it may filter through in loan cost as well. But clearly, in terms of what we offer our employees, not only the loan but also the learnings and the way they can develop themselves here, and we try to do that in the best possible way for our employees. That's maybe number one. Two, we -- you heard today that we are focusing on scale in retail. It has led us to certain decisions and the benefits of those decisions are only greatly starting to filter through. So it wasn't necessarily cost exercise. It was an exercise based on what skills do we require. But as a result of it, also cost is going to come out of the system and those benefits will fall through in '22 and '23. And as you heard from -- well, I think all the business leaders, including [indiscernible] is how we use the digital journeys. And Bernard said, okay, we need less physical prices based on the preference of our customers. But for that, you need to have a good diesel offering because you cannot just close branches, you just you have to provide a certain offering where as I look today, sorry, right close to luck with it, you have to have the same level if not better diesel quality of service to be able to do that. And all of these scalable tech of benefits will filter through and what we did is both on the technology side and on the offside, I give you just one example to say, okay, in using the cloud, we'll deliver you -- they deliver us EUR 100 million benefits in the next couple of years. And again, it's quite well linear over the few years. When we use the compact centers, the compact center 2.0, it delivers a benefit of EUR 50 million, also quite linearly benefiting the bank in the next couple of years. And those are ways that we're able to keep our costs under control below inflation while knowing what the indexation potential will be in a couple of the markets where we are active based on the current inflation rate. Tanate, liability income.....

Yes. I'll give you -- refer to the chart that talks about liability beyond the Eurozone replication. There's 2 small parts. There's a part which is related to wholesale banking, BMG, for example. And that benefit, of course, is there and the tracking is there. And I think Andrew referred to it in his answer about how we would achieve more than 10%. So that's potential upside that is referring to, with rates was arise and the replication that would happen. The second part is in our non-Eurozone franchise, so predominantly Poland, Romania, Turkey and Australia. And what I can tell you is that the duration for these markets are similar, even shorter than the duration you see in the Eurozone. So it will also positively impact our results, and that's already seen. And in certain markets like in Poland, the tracking speed is actually very slow the way we see it at the moment.

So on that note, we're going to end the Q&A. Thank you very much for all the questions here in the audience and from our online. And let me take this moment also to thank my team and the many ING colleagues that have been helping to realize this day. And of course, you for taking, doing the hard work today. And so Steven, for some closing remarks over to you.

Yes. Thank you very much. Let me first say, it was a pleasure to actually finally have you all in the room here today. We have spoken to many of you individually. And before we stop traveling out seeing many of you individually, and we've done some conferences also virtually, Julia, but now to have you all in the same room, it's also quite an experience for us, you really exist which is cool. So that's one. Secondly, just remember what we told you. We have a couple of innate strength in ING that we use to deliver value in the past. We made some clear choices, that we had some lessons learned from the past and we made choices in where do -- what do we want to be in a footprint, where do we want to invest in improving our customer experience. And that changes are a little bit of break from the past going back to the customer and investing with all the benefits that we can see on getting more customers, getting better customers, more primary customers and also diversifying our income. And last but not least, we talked about how everything also informed our strategy, not only on our customers but also on the social and sustainability dimension and how all the enabling priorities can help us to execute on it. And we talked to you about and show that to you as well, a number of benefits in terms of what does that actually mean because many people talk about the customer, many people talk about sustainability, many people talk about commoditization of banking services. And it's good, but it also depends on the DNA of the company how are you able to execute your strategy? And what we've shown you is that a number of these enabling priorities, what are the road maps until 2025. or even 2030, and all of the business lines have individual road maps on all these elements so that we're able to execute with discipline. And I said that when I started 2 years ago, and we'll continue to say that until they throw me out of the place. Which not so actually. So with that, we have then -- then leads. If you then listen to all that because everybody talks about all these 3 things to our financial targets. And we talked about our income our continuation of focus on diversifying our income and the fact that we still have a way to go given it's still a relatively low number of primary customers compared to our total customers and the fact that we're able to grow our customers as well as the fact that we are yet in a low environment still in where we started to charge our customers from the outset when we really start to step on that gas. Yes, as -- in 2020, -- we're also showing you some proof points how we get to the 50% to 52%. And I know that you have been asking me about that for the past number of quarters. Today, we show you proof of how we're going to get that to 50% to 52% by using our technology and operational foundations that will help to drive the cost to serve going down. And in the end, by moving to a CET1 ratio of 12.5% and Tanate said in equal type steps in the next 4 years. So I hope -- I'm sure that you're happy now. Now you hedge your target, and you have that date and you even have a trajectory of what it means in the next couple of years, year-by-year, then will lead to a return actually of 12%, which we believe is a very attractive return for our shareholders and in light of the external environment also compared to our European peers. Thank you for coming here. I want to thank you also for the people that are here to Investor Day for being here with us virtually. I know there's some of you who wanted to be here, but we're not able to join, and we're very pleased also to have the opportunity to talk to you individually for the next couple of hours also here, while we enjoy a little bit to eat and to drink. And I also wish you a very good travel and safe travel back to wherever you came from. Thank you very much.