Van Lanschot Kempen NV (VLK) Earnings Call Transcript & Summary

Hello, and welcome to the 2021 Half Year Results Analyst Call. My name is Jess, and I'll be your coordinator for today's event. [Operator Instructions] I will now hand you over to your host, Karl Guha, CEO, to begin today's call. Thank you.

Good morning, everyone. It's -- thank you for calling in. As usual, those of us -- those of you that have been following us for many years, you will know that this is a double act. I'll do the first bit and then Constant will for all the difficult bits. And then I'll come back for the last words and then we take your questions. So that format we're going to stick to. This is, of course, the analyst call, but we are well aware that there are many others that are listening in. Our friends in the media, quite possibly our friends, and further explained, meaning the regulators, perhaps the rating agencies, and who knows, maybe even the Chinese government. So on that happy note, these are -- I mean, allow me a bit of latitude this morning because it's the -- my last presentation of numbers. And it's good to sort of announce the set of numbers that we have presented this morning. We have had -- it's fair to say that we've had a very strong first half of the year. And if I look at the pipeline, the rest of it remains very robust and strong. So in a nutshell, the net results are at EUR 58.3 million, but pretax, it's at EUR 74 million. AUM growth and client asset growth has been also very strong. Client assets were at EUR 120 million, just slightly north of EUR 120 billion, and AUM slightly north of EUR 104 billion. NPS goes, across the board, very strong, if I compare it to last year. In terms of the acquisitions that we announced both with respect to Hof Hoorneman, and later, the 70% acquisition of Mercier Vanderlinden. All of that has been concluded and progressing well, although the numbers of Mercier Vanderlinden are not in the first half. It's important to note. And then in terms of if you look at the balance sheet and if you look at the risk profile and so on and so forth, robust, strong capital position at -- our core Tier 1 at 21.9%, well above our target of 15% to 17%. And then if you actually look at returns on core Tier 1, that's at 11%, well within the range that -- the target that we've set for ourselves, the 10% to 12%. If you look at efficiency ratio, we are at 73%, that's slightly above the 70% to 72% range that we talked about. In terms of actual sort of asset quality, it remains very, very strong. Constant will address that later. In fact, this half, you will see actually a release, which is, of course, a direct result of the strength of the portfolio, but also the conservative provisioning policies that we follow. So in a nutshell, I'm absolutely delighted that we are able to present with these numbers. And if you're the outgoing CEO, a great set of numbers to go out with. But allow me to reflect for a little bit in terms of the beginning of the journey in 2013. We had, of course, a couple of weeks into the -- in starting my job, we announced EUR 155 million loss in -- for 2012. At the beginning of 2013, that's what we announced. And we were sort of this rambly universal bank, to what we are today, which is going back to our core and basics and become, in effect, a wholly integrated independent for [indiscernible] wealth management house. And the numbers speak for themselves as part of that journey. And I think in terms of our ability to do all of this, has -- at its core and hard lives, of course, our focus on clients, from private clients through institutional clients to corporates in our merchant banking activities and in our corporate finance activities. But I think the essence of it is really defined that we've been able to refine a very personalized approach and marrying that with technology. That is the essence of our approach and we'll continue to do that in the future. So I think those of you that have followed us over that period of time will have seen that we have continued to invest, upgrade and adapt to the technological needs. And it would have been unimaginable a couple of years ago, if we said that we are basically progressing now with phone calls from clients with biometric voice recognition features. That's just an example, but there's a long range of things from data management, to AI, to how we actually use it. And combining it, as I said, with technology able to personalized approach has served us very well and forms the basis of how we're going to continue to approach our clients across the board, across the spectrum, I should say, and now and also in the future. So I also want to sort of come back a little bit that our ambition and goal and dream of the leading independent wealth management house in our relevant markets and geographies towards that we made considerable progress in the partnership that we have announced with Mercier Vanderlinden, that strengthens our case in Belgium quite significantly. And so if you look at the combined client assets in Belgium, we are slightly north of EUR 9 billion at the moment. And we will certainly build on that. That gives us a creditable mass and allows us to also have the diversification in our earnings that we were looking at from not just Netherlands, but also outside it and then pan-European across the sectors that we operate in our Corporate Finance and ECM activities and then some of the securities activities as well as on the institutional size of our business through our asset management business. So net-net, all of the things that we have talked about, we are pretty happy in terms of where we are. But that doesn't mean that we're going to sit on our laurels and do nothing. I think to succeed, as you know, you have to keep working hard and getting up every morning and fighting for the things that you believe in. And that means the client focus. So making sure that you take care of your clients, make sure that you take care of your shareholders, and make sure you take care of your own people. Those are the 3 pillars on which our story rests, and we believe it's a strong and a powerful story on those 3 pillars. So the other thing I want to mention is that I think I've been -- is if you look at our stock performance in the last 3 years that we've announced, we have clearly outperformed our Benelux peers, but also the private banking peers. And I think if you -- and I have seen some of you sort of putting a January -- as far as kind of -- as of this year, and that in itself is a bit of a misnomer because our stock didn't go down that much during the COVID period. So overall, when you look at it, the bottom line is -- it's -- we have stable earnings streams driven by fees and commissions. It's a different business model. But clearly, we have outperformed it given the context of COVID and given the context of all the other stuff that has happened. In a nutshell, we're very happy about -- to report and result these numbers. I shall hand it over to Constant for the details. And thank you for listening to me. And Constant?

Thank you, Karl. I would like to take you through the slide deck with respect to the numbers for the first half. And as Karl rightly stated, we can look back at a very strong first half, both in terms of profitability but also in terms of commercial success. As already noted, the net profit for the first half is EUR 58 million. And we are pleased also with specifically the growth in commission income, which is 18% year-on-year, and that's the core of our business and also the core of our strategy. Next to that, we see stable interest income, and we see a small release of loan loss provisions. We are extremely happy about the momentum we currently have in our private client business. We see EUR 2.4 billion of net inflow in our private client business, which is a true record for us. And -- yes, it seems that our offering, our unique offering, I would say, resonates well with existing clients, with new clients, and with entrepreneurs in particular. And that's also something that we strive to in our strategy. On the other side, we see outflow on the wholesale and institutional client base. That's mainly caused by the departure of 2 low fee institutional mandates. I'll elaborate on that later on. And as Karl already alluded to, we are pleased with the next steps we are making to extend our geographical footprint that deals about the U.K. business where we are building a fiduciary business but also the steps we are taking in Belgium with the acquisition of Mercier Vanderlinden, but also the organic growth we see in our Van Lanschot Belgium branch. On the next slide, you see the main numbers. Net result, EUR 58 million. Last year, it was less than EUR 10 million. As I said, commission income, plus 18%. Operating expenses are up by 5%, but there's a good explanation for that. I will elaborate on that later on. And client assets for the overall group now stands at EUR 121 billion, which is 5% up. Our capital position remains strong at 21.9%. On the next slide, you see the full P&L. I also would like to note that whereas in other years, we might see also some book profits on sales, et cetera. Basically, the first half of this year is pretty straightforward. There are not that much specials included in this P&L. As Karl already noted, Mercier Vanderlinden is not included in the numbers since the transaction but closed in July. And also, I would like to stress that while you see 1 line is restructuring charges, that has to do with the integration cost of Hof Hoorneman as we announced that already last year. Also I would like to make another note before we go in to the next pages, and that is the way we report our segments. Previously, we reported the segments private banking, asset management, merchant banking, Evi and other. And as we have changed our organization to a more functional model, we -- as of now, we will report based on client segments. And these client segments are private clients, wholesale and institutional, merchant banking clients and other. So that's a change in reporting. It also makes it difficult to make comparisons with the past. But I also like to note that the most important difference in the new way of reporting is that the old segment asset management now being split into private clients and wholesale institutional depending on the clients who is involved. On the next slide, Slide 11, you see that the waterfall from how we move from 2020 to 2021. You see the main components of the increase in the result is commission income, as I said, that's in the heart of our strategy. And we were very pleased with that. Next to that, you see that income from securities and associates and results from financial transactions show big increases. That has to do, of course, with also last year, and we had to report negative results on our structured product business and on our investments in our own funds. And this year, we see positive results on our portfolio as reflected in this flow chart. Then let me move to the segment private clients. I already noted that we see a record inflow. In fact, already the second half of 2020, we saw inflows increasing and that trend continued in the first half of this year, very strong. It involves existing clients, but also it involves a lot of new clients. As I said before, also, we see a strong appetite from entrepreneur segment. Also important to note that the split between discretionary accounts and nondiscretionary accounts is about 50-50, which is also favorable for the fee base. Overall, if you look at the flow chart, you see that we see an increase in private clients over the first half, of course, including market performance, which is 17.5%. Also good to see that if you look at the revenue composition of our private clients business, 61% is coming from commission income. As part of private clients, our Belgian franchise is included. And you see, in this graph, that our Belgian franchise already for a number of years is able to increase its book of business. So we see consistent strong growth. as you can see in the graph. Of course, Mercier Vanderlinden is now added to our Belgian franchise. And together with Mercier Vanderlinden, our total position in the Belgian market gets to EUR 9.3 billion. As you can see in the map, the geographical coverage has improved because this also gives us a strong presence in Brussels. Also as part of private clients, we have Evi, which we reported separately in the past. With respect to Evi, I can report that we saw a net inflow in Evi in the first half of EUR 89 million. So we see the clear momentum in our business. Also, I would like to note that the Belgian part of Evi, which consisted predominantly of savings money for that part, which was EUR 200 million. We decided to close the accounts in January and return the money to the clients. And the assets under management that were included in Evi Belgium were transferred to the private bank in Belgium. So as of now, the numbers as we report them for Evi are the Netherlands only. I think it's also good to see that the graph on the right-hand side shows the AUM growth of Evi over the past 2.5 years, and you see that we are able to increase our AUM and Evi by some 50%. And based on the results and the progress we made, we can also report that Evi, from a P&L point of view, has passed the breakeven level in the first half. Now let me move to the segment, wholesale and institutional. Wholesale and institutional clients is a segment which includes the -- our asset management business, serving institutional clients, either through fiduciary management or investment strategies. And next to that, also the investment strategies that we distribute through the network of wholesale distributors. As already said, we report a net outflow of EUR 2 billion in the first half. That involves mainly 2 large mandates, one fiduciary mandate for which the client merged with another pension fund, and that's the reason why we lost the mandate. And another mandate is in government bond mandate, which is not really in the core of our strategies, which we lost and both mandates go at a low fee. Next to that, also, we observed outflow in our credit strategies that basically follows the departure of a part of the team that happened last year. I can tell you that in the meantime, the new team is in place and is fully operational. And next to that, we see in this investment strategies, very strong inflow in our global small cap product and in the real assets. Of course, these are strategies that go at a high fee. Furthermore, in the first half, we made further progress in the -- in our less liquid solutions offering. As you can see, distressed debt pool, a farmland fund, and also we launched a second of our private equity fund, which is open for subscription as of now. Within wholesale and institutional, I would like to touch upon our U.K. franchise. Our U.K. franchise, we acquired that in 2015. At that point in time, it was a business of about EUR 4 billion. And you see the progress that we've made over the last 2.5 years in terms of growth in that business. We see growth in AUM consistently. And moreover, we recently had an agreement with what's called the Clara-Pensions group. They have selected us as their fiduciary manager. We think that provides a prospect to additional AUM in the U.K., and we think that the pipeline in the U.K. at this point in time is well filled. Then based on our -- the fact that we are focusing on commission income, let me tell a little bit about the focus that we have on our recurring management fees. On the graph on Page 17, you see the development of our recurring management fee on an annualized basis over the last 2.5 years on a sort of run rate basis based on the book of business for that -- at each specific point in time. And you see that over the last 2.5 years, thanks to inflows and also thanks to market performance, we can observe a growth of 43% of our recurring management fees in -- within private clients and institutional clients. Also on the next slide, we show the margins on AUM. For comparison reasons, we used the old segments, private banking, asset management. And you can see that the margins are very stable over the last period. So it's also good to see that the strong growth we observed doesn't come at the expense of our margins. Now moving to the merchant bank. The merchant bank had a first -- a very healthy first half with a number -- with a large number of transactions also spread over a number of countries. Year-on-year, commission income increased by 10% for the merchant bank. Also I would like to note that we brought the sales organizations closer to each other in our functional organizational model. And that's already bringing results. So we're seeing more referrals back and forth between Merchant Banking clients and private clients, but first successes have been recorded. Then a few words about our net interest income. We are able to show a quite stable picture over the past 1.5 years, despite, I would say, unfavorable market conditions. Of course, we are able to charge negative rates to our clients since last year. Next to that, we see an increase in our mortgage book and some other private clients lending, which basically offsets the further reduction we observed in our corporate banking book. With respect to charging negative rates on the graph on the right-hand side, you see the amount on which we can charge it based on the agreements we have at this point in time. And you see that it's increasing to EUR 2.6 billion in the second quarter. Also I would like to note that as of July 1, we lowered the threshold again. And based on, let's say, the current estimates, of course, we have to see how clients will behave. We expect that the amount on which we can charge negative rates will increase to EUR 3.5 billion in the second half. The underlying securities and associates, which includes our participation portfolio and the investments in our own funds. We see there good performance across the board. I also would like to note that the participation portfolio is doing well. And last year but also this year, we see almost no impact from COVID. So no businesses that are being affected heavily by COVID. The next page deals about our results on financial transactions. Last year, of course, result on financial transactions suffered a significant loss from our structured products. This year, we can report that our structured products activities, with a combination of some hedging costs, but also some new launches of new issues. The combined P&L for structured products structure policy is approximately neutral. We also told you last year that we decided to change for new transactions, the way of hedging from a macro hedge to back-to-back hedging. And as you can see in the graph on the right-hand side, the outstanding volume of structured products that is hedged on a macro hedge basis is coming down steadily. And of course, the new book is building up and that's built -- that is being hedged on a back-to-back. Our expenses are up by 5% or EUR 9 million, if you will, but that can be explained by a number of factors. First of all, the inclusion of Hof Hoorneman. In the first half of last year, Hof Hoorneman was not included in our cost base. That accounts for some EUR 6 million. And also, we see an increase in regulatory costs for about EUR 2 million. And next to that, of course, given, let's say, the higher profitability of our group, we also made higher accruals for variable pay. So all in all, we think that expenses are well in control if you take these elements into account. I would like to note that where we are today, we still see an under spend as a result of COVID because there's less travel. There's still less cost for other elements and also the fact that we see that some IT projects that are being planned are still in the start-up phase. And a few words about our loan book, which you can see on Page 24. We're happy to see an increase in our private client lending in particular, also our mortgage book is increasing. Next to that, the corporate bank, it's further down. It's now down to EUR 165 million. And also, our impairment ratio is further down. As you may recall, last year, the net loan provision was around 0. So also last year, we didn't have to report significant loan losses related to COVID. And based on the development of the portfolio, in the first half, we can report a net release from loan loss provisions of about EUR 3.5 million with underscores, again, the solid loan portfolio we have. On Page 25, we report our capital position and also the evolution of our capital position. As you can see, our CET1 ratio stands at 21.9% by the end of June, which was 24.3% in at the beginning of the year. There are a few reasons for which the capital ratio comes down. First and foremost, we report higher risk-weighted assets for market risk, not so much because we have a higher risk, but mainly, this is the result of new calculations in which we have taken a more prudent approach in calculating capital for market risk. Next to that, as already mentioned, we see higher exposures in lending, and also we made some further investments in our own funds. Last but not least, we also implemented new IRB models for our credit portfolio. This has resulted in some lower capital, but also has resulted in significant lower capital requirements from the Dutch Central Bank. Looking forward to the evolution of our capital on Page 26. We expect to be able to offset a part of the RWA increase that we just reported by further optimizing our balance sheet in the second half. We have a number of projects ongoing that will probably result in to that. Next to that, as already mentioned at the time of the announcement, the acquisition of Mercier Vanderlinden will have a negative impact on our CET1 ratio of approximately 3.6 percent points in the second half. Furthermore, as you know, the Dutch Central Bank announced to apply a minimum floor for risk weights for mortgage loans. And we expect, based on our portfolio that, that will have an impact of 2.5% points as of January 1, 2022. Further in time, of course, Basel IV will be implemented. We expect that the RWA related to Basel IV will be much less than the impact of the DNB risk-weight floor that will be implemented next year. However, it's not clear how the transaction from the mortgage floor to Basel IV will exactly go in the coming years. And about dividends. Dividends for 2019 and 2020, in total, EUR 1.95 were approved by our AGM. We're still reserved on the balance sheet, not included in the capital ratio. As ECB and DNB have indicated that their recommendation not to pay dividends will end in October, we decided to pay the EUR 1.95 per share to our shareholders immediately in early October. A few words about events in the third quarter. For the record, we completed the legal merger between Van Lanschot Kempen and Van Lanschot Kempen Wealth Management. That has a positive impact on our Tier 1 and our total capital ratio. As already mentioned, the partnership with Mercier Vanderlinden has -- the transaction has closed or affected mid-July. And next to that also, in July, 2 stakes in our participation portfolio were sold. And the 2 sales together resulted in a book profit of more than EUR 15 million, which was recorded in July. On Page 28, you see our financial targets and where we stand. Well, as Karl already mentioned, capital ratio well above the target. Our efficiency ratio almost at target and our return on common equity Tier 1 or so within the targeted range. So all in all, looking back, we look back at a very successful first half, both in terms of profit but also, in particular, we are very pleased with the inflow we see in private clients because we feel really we have momentum. In the next few slides also we'd like to take a little look forward how do we go from here. Because if we -- we are well positioned. As I said, we have momentum and we have basically completed our transformation to an integrated wealth manager. And so can I confirm to you that we have plans in place how we would like to go about future growth in the coming years. And for that purpose, we have developed a number of new plans. And let me share some of these plans with you. And these plans can be split into a few components. First of all, deepening the relationships with our clients and prospects; secondly, how to deal with fine-tune and expand our offering of products and solutions; And thirdly, how we can strengthen and extend our geographical coverage from here. Starting with deepening relationships with our clients and prospects. There, we see momentum, as we said. And also, we see that there's more appetite for bringing us in a strategic advisory relation with existing and large private clients. Also, we have seen the first examples of being able to co-create certain solutions with fiduciary clients. And typically, if we can do that also in a subsequent phase, we can offer these kind of solutions also to other groups of clients. When I mentioned our focus on entrepreneurs, and we will continue focusing on that in the coming years also with solutions for them. And we see momentum also in our lending offering to private clients, being a bridge loans to family offices or looking at more Lombard lending. It's also there, we see opportunities. Next to that, we also feel that there's an opportunity for us to fine-tune and expand our offering in terms of solutions to our clients. Already mentioned the strategic advisory part. We see opportunities in our merchant bank to go to executive niches, being in renewables and infrastructure. But also our offering in terms of sustainable solutions, will be further expanded. We made also progress in our liquid space for private and institutional clients. I already mentioned some of the recent introductions. And we see there are more opportunity for us to be a house that's focusing, amongst others on liquid products. On the next slide, also the geographical footprint. Of course, you see the Netherlands as our home country, we will continue to explore opportunities for M&A in the Benelux, so also including Netherlands. In Belgium, we made the step with Mercier Vanderlinden, and we think that offers opportunities for cross-selling, but also we think the combination of Van Lanschot Belgium and Mercier Vanderlinden will eventually provide a solid foundation to build further business also based on further M&A. We mentioned U.K. which is benefiting from the current industry trends that are happening in the pension world in the U.K. We're happy with the agreement with Clara-Pensions, and also in the U.K., which is really developing as our second home market for the wholesale institutional market. We think that there's opportunities to build further on that. And of course, the rest of Europe, the basic approach is to expand our distribution efforts mainly via placing agents. But of course, also our Merchant Bank has a pan-European approach and we'll continue to approach it like that. So I hope you feel that, well, we can look back at a very solid first half, but also clear plans for pursuing further growth in the coming period. And that's where I want to leave it and give the floor back to Karl.

Thank you, Constant. Ladies and gentlemen, I think there are a couple of key messages, if I may, I would like to leave with you, which are important from our perspective at least. I think the first and foremost point that I would like to make that one of the key to our success is our culture. And one of the key elements of our culture is the entrepreneurial spirit. And intertwined with this entrepreneurial spirit is our independence. Our independence is part of our key proposition to our clients and to our own people. So I cannot overstate the importance of those 2 elements, the independents and the entrepreneurial spirit. That's what makes us tick, that defines us and that underpins our success. The second, I would like to say is that for us, every client matters. Means that as a house, we have turned our size to our advantage and focusing on clients where every person in the house, every employee can have a real impact. And we've done that by, as I've said earlier, by marrying a personalized approach to our client with technology. This again underpins how we go about life in pursuing our business. And as a specialized wealth management house, this has been the goal objective. We made very clear choices in 2013, the direction of where we want to go. And today, we are a fully integrated wealth management house. I think there's a lot of talk, lose talk sometimes in the media, sometimes in general, about size, scale and all that sort of stuff and particularly given a recent acquisition by a very large American house in the Dutch market. That is a scale volume business. We have made very clear from 2013 that we are not pursuing a scale volume business. We are pursuing a specialized solution driven towards clients. We don't sell products, we sell solutions to our clients and integrated in terms of how we go about it from marrying the various skill set that exists within the house for our clients, be they private, be they institutional, be they corporate merchant banking clients. This integrated approach and this solution, again, is the -- 1 of the 3 elements that define us. Do we have the means and everything else to do it? I think, yes, we have a sound capital base. We stand on our own feet. And we've been around for almost 300 years. It's important that people forget, we stood on our feet -- on our foot during the crisis. We did not take any money from the government. We did not take any money from our shareholders, we fought. And that spirit is what defines us. And some of the arguments again around size is a little bit nonsensical because the way technology has evolved, has rendered many of those arguments not valid unless you're pursuing a volume game. So in a nutshell, we have a strong momentum, wind in our sails, and we're going to make every use of it, just as we have done in the past 18 months. Why 18 months? Because that's the period where COVID's been around and life, quite frankly, has been quite challenging and difficult on multiple fronts. But as you see that during that period, we had a net inflow of EUR 7.3 billion. So that says something about our approach and also who we are as a people. And our stock, as I've said, if you take the a period of 3 years and look at how we are, we have clearly outperformed this. So a return on capital is attractive. We have a motivated workforce. So all in all, it's a house that's well in its stride and looking confidently to the future. We have to fight. We have to work hard. We have to stay very attentive to our client needs. But I'm happy where we are. And as my last half year results in the presentation, it's a good place to leave the house in the hands of my colleagues. I have no doubt that they will take it to significantly higher heights than where we are today. So with that, I'd like to thank everyone and head back to the Q&As.

[Operator Instructions] And the first question comes from the line of [indiscernible] from ABN AMRO ODDO BHF.

Yes, first of all, Karl, thanks for all your contributions the many years you're in Van Lanschot and it's clear that you changed the company to a much better company. That's obvious. And it's always good that you could do the last figures with great results. So that's -- thanks for all.

Thank you, [ Cory ].

And a few questions, maybe first for you, Karl. What do you think that is the largest challenge for Van Lanschot going forward because things are going their own will, the sort of technology change for adapting. Could you elaborate maybe on that without, of course, putting too much into the answer of your successor? This is first question. Second question is on loan growth, especially in retail. We saw some of the flat loans in the last couple of years. We see now some growth there. Is this more a temporary thing? Or do you expect that trend to somewhat more loan growth to continue? What's the thinking behind that? And the other question is on RWAs. In detail, you mentioned the RWAs were somewhat higher due to market risk. You mentioned a more prudent approach. Could you still elaborate a little bit more on that? And which fields is this in trading? Is it structured notes? Is this an ALM? Where is this based on? And then related, of course, you mentioned that you were working on some projects in H2 to mitigate the RWA increase, could you also elaborate a little bit more on that? Can we expect EUR 200 million or some RWA decline planned for the second half of this year? That were my questions.

Okay. Thank you, [ Cory ]. I think the first question, as you said, is for me, and then the remainder, I think I'll hand it over to Constant to answer those 2 questions. I think the single biggest challenge with any house, but particularly in our case, is to make sure that we retain our focus. The focus on lines in terms of how we deliver, how we go about it and not losing that, focused on our cost control because that's equally important. And making sure that we are constantly making the right choices and trade-offs in terms of how we allocate our capital. And balancing, if you will, between the elements of that triangle, which I mentioned, our clients, our shareholders and our people. And what underpins at the end of the day in any house, particularly in our industry, as you know, our people and technology. And I think it's -- we've done so far a reasonably good job or even a decent job on that. And I think it's important to stay focused on that because I think the differentiating factor for our success is going to be not mass production, but our boutique approach and which means marrying technology continuously taking advantage of AI taking advantage of data management and making sure that we provide solutions to our clients. And that is not -- it sounds cliche, but it requires a constant day-to-day attention to that and making sure that we retain the right people within the house. it's a heated market, and the configurations as we have and the restriction that we have in the Netherlands does not in a competitive market makes it quite difficult from in terms of compensation because you want to make sure that your fixed cost base in terms of employee consultation remains low. But the way the variable compensation is seen and driven in the Netherlands that makes it particularly challenging for business models. That's something that we have to stay on top of and manage. So those are the challenges that I see. But I think in basic terms, I think the firm is very well positioned. We just have to make sure that we stay focused.

Okay. With respect to the other 2 questions. First of all, your question with respect to loan growth. I don't hope it's a temporary thing. What we see among our clients is more appetite. As I said, we also do more business with entrepreneurs. They have different kind of request sometimes stores, and where -- and it's not their business, but they're acting as a private client with us. We see also more appetite for Lombard lending in our portfolio, and we are pursuing further growth in the mortgage business. So it's a deliberate choice to seek growth there. It will not be a very high growth, but at least keeping the book step by step going up, I think that would be our objective here.

[ Cory ], just don't confuse it. We're not going back through the back door into [indiscernible] lending. That's not what we are doing. So just to be very, very clear. It's precisely what Constant said we are doing.

The other question with respect to RWA market risk. It is related -- as of course, you -- it's fair to note that last year, of course, we observed more market risk in our P&L, that I think also led to looking at the way we treat capital for that. It is broad. It's not related to something specific. It's brought in our portfolio that we took a more prudent approach. And as I said, we also identified a number of projects that could offset part of the RWA increase. Just to give you an example, we see over the last 1.5 years, quite some appetite in Lombard lending in our Swiss office. That Swiss office is not, let's say, optimally connected to our systems. And we can make that connection and then have a more favorable capital treatment for that Lombard lending. That's a project that's ongoing, and that will drop off some results, hopefully, in the second half of this year. Also, we've taken a close look to our balance sheet, of course, how we deal with our balance sheet positions. I'm not able to give you numbers because these are ongoing projects, and I would like to first deliver and then tell you what it has brought, but we are on top of this. I can assure you that.