Jan H. M. Hommen - Chairman of the Executive Board, Chief Executive Officer, Chief Executive Officer of ING Bank, Chief Executive Officer of ING Insurance, Member Management Board Insurance and Member of Management Board Banking Patrick G. Flynn - Chief Financial Officer, Member of Executive Board, Chief Financial Officer of ING Bank, Chief Financial Officer of ING Insurance and Member Management Board Insurance Wilfred F. Nagel - Chief Risk Officer, Member of Executive Board, Member of the Management Board Banking and Member of the Management Board -Insurance Doug Caldwell - Chief Risk of Insurance/IM Eurasia and Member of The Management Board of Insurance Eurasia (MBE)

Michael van Wegen - BofA Merrill Lynch, Research Division Farooq Hanif - Citigroup Inc, Research Division Farquhar Murray - Autonomous Research LLP Francesca Tondi - Morgan Stanley, Research Division William Hawkins - Keefe, Bruyette & Woods Limited, Research Division Michael Igor Huttner - JP Morgan Chase & Co, Research Division Andrew P. Coombs - Citigroup Inc, Research Division Francois Boissin - Exane BNP Paribas, Research Division David T. Andrich - Morgan Stanley, Research Division Jan Willem Weidema - ABN AMRO Bank N.V., Research Division Benoit Petrarque - Kepler Capital Markets, Research Division Steven Haywood - HSBC, Research Division Matthias De Wit - Petercam S.A., Research Division Anke Reingen - RBC Capital Markets, LLC, Research Division Lemer Salah - SNS Securities N.V., Research Division Benoit Feliho

Good morning. This is Camilla welcoming you to the ING's Q4 2012 Conference Call. Before handing this conference call over to Jan Hommen, Chief Executive Officer of ING Group, let me first say that today's comments may include forward-looking statements, such as statements regarding future developments in our business, expectations for future financial performances and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statements is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitute an offer to sell or a solicitation of an offer to buy any securities. Good morning, Jan, over to you.

Okay, thank you. Welcome, everyone, to the ING Fourth Quarter 2012 Results Conference Call. 2012 was a transformational year. We worked hard to restructure the group further and preparing Bank and Insurance for independent futures. Results held up well for the year despite the sovereign debt crisis in Europe and a weak economy, which we endured during all of 2012. I will now talk you through the presentation. Patrick Flynn and Wilfred Nagel are here with me from the Executive Board. Also, Delfin Rueda and Doug Caldwell, respectively, CFO and CRO of Insurance EurAsia are here with us. And Ewout Steenbergen, CFO of the Insurance Company U.S., is on the call. So all are available to answer your questions. Slide #2. Results held up well, came in at EUR 2.6 billion underlying net profits, which is down 5.2% from 2011. Fourth quarter results were impacted by the Dutch bank tax and various market-related items, leading to an underlying profit for the group of EUR 373 million. The Bank underlying result was EUR 184 million. And it had to deal with EUR 188 million negative credit adjustments, EUR 151 million of derisking losses and EUR 175 million of Dutch bank tax. The Insurance operating results improved compared to the third quarter, and they came in at a little less than EUR 300 million as the investment spreads strengthened, and the underlying result before tax rose to EUR 272 million. You see the full year results on Slide 3. Net profit for the group was almost EUR 3.9 billion, including the gains that we had on the sale of ING Direct USA, ING Canada and Insurance Malaysia. Net results also included a EUR 452 million restructuring charge, which will help to drive the future performance. We announced today an expansion of an…

[Operator Instructions] First question comes from Michael van Wegen from BAM.

Michael van Wegen from Bank of America Merrill Lynch. First question would be on the earnings outlook for the Benelux retail bank. Can you [indiscernible] how you see net interest income developing there for [indiscernible] in place in Q1 and also [indiscernible] Q1. That's question 1. The second question, on the disposal program, can you talk us through -- first of all, Japan, what alternatives you are considering; and b, you're talking with the U.S. IPO now about timing wise later this year. I think previously, you said that you potentially should be ready from Q2 onwards. Is there a change there in language, or how should we look at that?

Okay, the latter one is pretty simple. We have not changed our timing for the U.S. IPO. We are preparing them as quickly as we can. And you can see that in the way that they are progressing on the capital structure, but also on the filings they have done on the S-1. So there's language that -- actually, later this year, so later than today. So -- but we will do it. Our markets are already basically for us. Japan, we're working diligently on alternatives in Japan. We have a number, but I don't think we are at this moment at liberty to discuss them. Only can say that it requires a lot of discussion with local regulators in Japan. And we've been working on 2 or 3 different alternatives, but we are not ready yet to come forward with it. On the Benelux retail, Patrick, you want to do net income?

Yes, I think you asked about interest margin in the Benelux. If you look at the interest margin overall, as Jan mentioned, it's held up pretty well at 133 basis points, a decline in aggregate by 115 and partly in financial markets and also due to the lengthening of the funding profile, which comes at an additional cost. That was offset by reducing production [ph] in the balance sheet. The themes we've seen before pertained again in Q4. We've seen a mild strengthening in Commercial Banking margins where we continue to apply discipline. I mean that applies -- that discipline applies across the total bank and Netherlands as well, Benelux as well. And the weakness has been on the deposit side, where the declining interest rates have hurt margins and deposits. That said, in January and February of this year, we've cut deposit rates in The Netherlands by twice by 10 basis points; and in Germany by 25. So the outlook for the net interest margin overall, also applying in Benelux, is to stabilize by virtue of the reduction in pressure we see on deposits and the ability to reduce them. Longer term, we remain committed to the longer-term targets of 140, 145, which we will aim to achieve by continued focus on discipline and loan pricing. But we also need a little bit of help from growth in the economy to add some volume on the lending side to interest margin.

We've been saying for a while that we expected risk costs to remain at elevated levels, and indeed, Q4 showed that as well. And looking forward in your question being specifically about the Benelux business, if you look at what went on in Q4, developments that we expect to continue with softness in the business lending, the SME MidCorp book, the Real Estate Finance book, and also, we expect that the mortgage portfolio in The Netherlands. As you've seen, the NPLs showed another mild uptick, but it does keep going up. So we also see potential for, indeed, continued elevated risk cost there, so that's the outlook.

The next question comes from Farooq Hanif from Citi.

Just 2 questions on the Insurance businesses, if I can please. Firstly, just want to understand the improvements in investment margin that you had because of the release of the discretionary profit sharing with -- in Q4. I mean, is this something that could happen every fourth quarter, or should we just assume that your underlying guidance of investment margin declining at Benelux will continue from here? Could you please explain that? Second question is just on the RBC ratio in the U.S. Apologies if you've already answered this in your literature, but what would happen to the 531% ratio if you didn't have that sort of credit? Does it affect it? And also presumably, the debt that you've been able to raise recently in the U.S., presumably, that doesn't count towards the RBC ratio, if you could confirm that.

Well, I will just stay with the U.S. one first. The difference between the 531% and the 425% is about USD 1.5 billion, which's conveniently is somewhat similar to the CCL OC [ph] is. It's a little bit more complex than that because the CCL OC [ph] supports the offshore entity, which is measured on a CTE 95 overall aggregate basis. But what we've been saying is that our target is a minimum 425% RBC, and we want upstream capital to the holding company with a view to distributing it. And ideally, we would like to redeem the CCL OC [ph] , which, if we did, were going to be replaced cash. And the final part of the question?

The debt level?

Yes, the debt issuance is debt. It's not capital. So it's part of the funding profile and will contribute to the overall funding and sits within the maximum 25% leverage ratio that applies in the U.S.

Basically, what you're saying is, you don't really need a lot more capital in the U.S. because you'll still be above target if you repay today. But you're just waiting for the right time. Is that what you're saying?

Yes, I mean you talk about and I -- Jan mentioned, when your IPO companies are in need of adequate capital. So you might need a buffer as well, so like we said last time, around -- it's maybe -- it's nearly there, but maybe not quite there.

Yes, that's a discussion we will have to have with the investment banks by the time we go to market. So I think it's a little premature now, but we'll see what comes out of that one. Your question on the discretionary release is the following: We make accruals for that during the year. But at the end of the year, the management has the ability to decide whether to pay that, yes or no. And this time, the discretionary decision was that we don't pay that, given the overall results of the Benelux organization.

So it could happen again?

It could happen, and it could not happen, yes. I cannot give you a better answer. But that's why it is discretionary.

The next question comes from Farquhar Murray from Autonomous.

Just one question for me. With regards to the U.S. IPO, more recently we've seen some variable annuity block transactions with suggestions there's possibly more to come. Could such a transaction be an option for ING U.S., or realistically, given the IPO timetable, would have to go with the VA book in the first tranche presumably? In particular actually, could I also ask how separable is the legacy business in terms of legal entities?

I would say, in principle, we are looking at all the options that are there, including selling the VA block separately, but also including it in the IPO. So this thing will be excluded, but our base case used to be the IPO. And I did not get the question on the legacy.

The legacy question was actually just with regards to legal entities, i.e. is the variable annuity book within a separate legal entity, and therefore, immediately separable?

Yes, I mean, it's in the offshore Cayman business. I think it'd be premature to talk about it because we wouldn't know what or if any buyback structure might entail if there was to be one.

The next question comes from Francesca Tondi from Morgan Stanley.

A couple of questions going back to The Netherlands and the asset quality. I know you've given your guidance of still mild deterioration going into 2013. Can you just give us -- you provided very helpfully a stress test last year. Do you have an update on the mortgages, for example, in an increase in unemployment, decline in house prices, which seems to be faster right now? What your losses per session would be in that scenario? And then if you can give us just a couple of data, what is now your LTV for your mortgage book in The Netherlands on the mortgage -- on the retail side, if you could give us an update? And also, overall, what is your updates of coverage? You said 37% on a comparable basis. How was that the last quarter, and how you're expecting that to trend?

To start with your question on the stress test, I mean, the portfolio is fairly stable. It hasn't really changed in either composition or size since we did this last. So there is not really any significant development there. And we're still very comfortable that we're adequately provisioned for the book as it stands. Your question with regard to the cover ratio, it's hovering around 38%, between 37% and 38% already for a while. And that is a reflection of a very prudent provisioning process where we make the best estimate of expected losses on the NPLs. I don't see a particular trend there. We do this assessment every quarter for the larger chunks in the portfolio on a case-by-case basis. And this is the outcome of our best assessment.

And then with the LTV of your retail mortgage book in The Netherlands, if you could give us an update?

Yes, sorry, I missed that one. The last quarter number was 89% for the Dutch mortgages. And that was up 1% from the 88% it was in Q3.

And do you have the percentage of your mortgage book that has an LTV already above 100%, if you could disclose that?

That's not a number we track or disclose.

Okay. And just going back for a second to your stress test. If I remember correctly, and I've got a slide here, and please correct me if I'm not, if I'm not right. U.S. stress testing was effectively a 15% reduction house prices and then -- which -- sorry, 25% reduction in house pricing and 10% unemployment as a peak. The unemployment probably still seems quite high. Using the 25% reduction in-house pricing, given what we have seen already in the last few quarters of 2012, is still sufficiently conservative?

Yes, we think it is. I mean if you look at it from the peak, we're already down 16%. And certainly, our house view is that we will continue to see some declines in the next 2 years, but not to the level that the stress test suggests. And looking at employment again, it is trending up, but nowhere near the levels that were taken into account in that stress test. So we think, overall, we're well within the range that that test was considering.

Next question comes from William Hawkins from KBW. William Hawkins - Keefe, Bruyette & Woods Limited, Research Division: First of all, just following on again your comments about the strong standalone balance sheets for the U.S. and Europe that you made on Slide 6. Thanks for what you said on the U.S., but I wondered if you're thinking that there's any further action that may need to be taken in Europe with regards to total capital or the mix between capital and debt? And then secondly, to the extent that the strategic review of Commercial Banking is ongoing, is there anything that you're sort of thinking additionally to what you told us back in the third quarter? Again, you're referring to sort of future potential changes in the future. Or is the basic picture you gave us at the end of September still what stands there?

Yes, the Commercial Banking review, I think, is ongoing. But I don't anticipate, let's say, a significant adjustments here. We have basically done what we wanted to do already and announced that last time. With respect to the balance sheet, yes, by the time you go to market and by the time you split up your business, you need more capital. Now if you have capital at one level, it's more efficient to have it at 1 place than if you have it in 3, 4 different places. So you always will have regulatory questions related to capital. And the only thing we wanted to make sure is that we say, "Keep that into your minds when you look at our numbers." Plus, in particular, in Europe, we have no idea which way solvency will go. We had the Solvency II regime that was worked on for some time, and that's off the table today. So there is an uncertainty of what the capital requirements will be and the capital frame will be that companies will have to live by.

The next question comes from Michael Huttner from JPMorgan. Michael Igor Huttner - JP Morgan Chase & Co, Research Division: On the -- you said there was a EUR 7 billion more risk-weighted asset reduction to come. Can you say how much revenue will decline as a result of that? Because presumably, the revenue decline we're seeing is coming because you're reducing your balance sheet, so EUR 11 billion seems to equate at about EUR 200 million. And I wonder if EUR 7 billion would then equate to EUR 150 million, and does that make sense? And then asking Will Hawkin's question again, so the shareholders' equity in Insurance is EUR 27.3 billion. It was EUR 25 billion in September. What's the actual requirement to run this business? Is it EUR 27 billion, is it EUR 30 billion, is it EUR 20 billion? And I know you've kind of hedged it, you didn't really -- you said you don't know. But you certainly have a better idea than I do. Is there a number we can have here?

In respect of the RWA reductions, part of that can be simply non-P&L sensitive, such as netting and bank balance sheet optimization. And some of it could be run off. We've already said we were going to prioritize our leasing business, and some of those will also be run off. But I think that's already wrapped into the guidance we've already given you. Within that framework, we still fundamentally believe we will achieve our 10% to 15% ROE in 2015, so it has no bearing on achieving those targets.

Yes, capital requirements in Europe is -- Solvency II, we don't know what it is, but clearly, there's a Solvency I ratio there. And yes, we currently meet, obviously meet the requirements of Solvency I and to the entities we're in. Michael Igor Huttner - JP Morgan Chase & Co, Research Division: But a number would be really helpful if you have one.

I think the [indiscernible] solvency ratio gets published later in the year. All the markets publish at the same time, so we'll give it to you at that point.

Next question comes from Andrew Coombs from Citigroup.

I have 2 questions relating to the Bank, please. Firstly, I wanted to refer to Slide 13 in your revised cost target 2015 of EUR 8.8 billion. That's broadly in line with the EUR 8.9 billion target that you outlined at the January 2012 Investor Day, and that's despite an extra EUR 0.4 billion of cost savings. So I'm just interested to know, I mean, part of that seems to be a higher starting point. Those are the procurement initiatives that declined from EUR 0.5 billion to EUR 0.2 billion. So just interested to know what the moving parts are there on the cost side? Second question, just pertaining to asset quality. It would be very useful if you could please provide the coverage ratios for the 8 bucket that you identify on Slide 25? And if you could also just highlight any significant moves that there were during the quarter? I know you said a group level had been broadly stable.

In respect to the costs, first of all, the EUR 500 million we announced previously was procurement and other. And part of the other is probably -- we've announced both in Q3 and Q4. We will continue to manage costs diligently. In terms of the starting point, I think what we said at the Investor Day that we would try to absorb the impact of regulatory changes in inflation. What we've got now with the EUR 880 million additional cost saves that Jan referred to in the slide to 2015 is to actually bring it slightly below that. And we're aiming to reduce costs a little more in light of the weakness in revenues that we've seen, so we -- in the smaller business as well due to the divestments. So we still believe that we can achieve the 10% to 15% ROE. You also need to remember that the income is depressed, yes, it's depressed. But in the Bank, look at some of the reasons. In 2012, we had EUR 600 million costs due to derisking exercise. That program is finished, so that cost program will not recur. It's not to say we will not be diligent in derisking. CVA/DVA was a whopping EUR 600 million for 2012, so there's been some big one-off impacts there that have broadcast our revenues artificially lower. Nonrecurringly low is -- would be a better way to put it. Interest margins, as I said before, we still believe we can get it to 1 40 to 1 45, I won't repeat that. At the end of the balance sheet, we said we'd keep it around EUR 900 million. It's actually below that. And Jan mentioned we're ticking the box on Basel III fully loaded. We're ticking the box on LCR, and we're ticking the box on leverage ratio. So we don't have to do extra to achieve those. The cost/income ratio is high, 63, as we mentioned. But partly because of that, we are tackling that with these initiatives that have been announced of EUR 880 million by 2015. And then finally, the risk costs, which were another part of the program, they're elevated today. Average for the year is 73. The target for the -- in the normalized basis is 40, 45. So when you add all that up, we still believe that the 10% to 15% ROE by '15 is achievable.

And on the coverage ratios?

Yes, taking the main buckets from Slide 25, if you refer to residential mortgages, is about 20% stable from last quarter. Corporate loans, 51%, slightly, slightly down from previous quarter; leasing, 31%; the run-off at 24%; Real Estate Finance, 35%; SME and MidCorp, 42%; and Structured Finance, 38%.

And they were broadly unchanged quarter-on-quarter, is that correct?

There's small variations in most of them. There is an uptick in Real Estate Finance. That's the biggest move from 28% to the 35% I mentioned.

The next question comes from Francois Boissin from Exane BNP Paribas.

The first one on the Insurance. I just wondered whether the 132 basis points investment spreads on a 4-quarter rolling average was sustainable? And basically, just wanted to understand what drove the improvement there, and what the outlook would be for the coming quarters? And then the second question is on the Bank, if you look at, basically, the pretax underlying profits adjusted for one-offs, you get to about EUR 700 million this quarter. I just wanted to know if you see this as a kind of representative level for what we can expect in 2013.

A couple of things. On the 132 basis points that included the benefit we had the one time in the discretionary release in The Netherlands, so you should eliminate that. I think in general we have seen positive development in the U.S., where we saw more assets under management, equity markets being up that had an impact on the fees, so that was a plus. On the other hand, I think you will see a bit of a decline in The Netherlands, and that will certainly offset that. So I would think that this might go a little bit lower going forward. And then on the bank side, Patrick?

Yes, I mean, I think you also, you're right. We kind of added up the impact of the derisking, the impact of the CVA/DVA and the bank tax, which are in the fourth quarter. But that's not the only thing. You also got to remember that this is seasonally a very low quarter. You look back over our results for a number of years, you'll see fourth quarter's the lowest. Typically, financial markets starts low -- starts high and then the cadence throughout the year. And we expect that passion to sustain. So Q4 is typically a low quarter. And so I would not say that's representative of the full year.

Okay. And basically, the pace of loan loss provisioning is something that you could see going on in 2013?

Loan loss provisioning, yes, I think Wilfred mentioned already that this could stay elevated.

Next question comes from David Andrich from Morgan Stanley.

I just had a question on the mortality tables in The Netherlands. I was wondering, in terms of the provision that you guys made 15 years ago, how much of that is left, and how does that compare against what you expect to impact of this new mortality table? And then just in addition to that, do you have any large contracts coming up for a renewal?

We have Doug Caldwell, our CRO, in the room. Doug, can you take that question?

Yes, I think starting at the end in terms of how this develops, I think it's something that we have a portion of the business that comes up every year. I think there's been a trend continuing toward defined contribution plans, which impacts exactly how this will play. There's also been an impact of how these decisions are being made by clients. So in terms of exactly how this would develop, we're not really -- cannot make projections exactly, because there's still a lot of pieces that are moving and the way this can play out. The -- in terms of a figure, the best I can do is point you to the NN Life report from a year ago, which showed the reserve at EUR 385 million.

The next question comes from Jan Weidema from ABN AMRO.

Jan Weidema, ABN AMRO. Have your own thoughts of those at the Supervisory Board or the Dutch Central Bank changed following the news surrounding SNS REAAL, and that's one. Secondly, are you satisfied with your current maturity profile for funding? Thirdly, are you considering issuing a relatively more secure debt for funding needs in 2013 and '14, given what's happening to your unsecured debt yields? And finally, the normalized results in Q4 was up quite significantly sequentially. Can you indicate whether that result is sustainable or not?

I did not fully understand the question as my position at SNS. I don't think I work there. I work at ING. So I don't think that has any bearing. My position is that I have a contract until the annual meeting, and the Supervisory Board decides on my contract and on my succession. And I think we believe it was that until they have decided, I have nothing to add. They had a question on the funding. Patrick, you want to do that?

Yes, I think you asked about funding. Last year, they said in the slide we issued EUR 33 billion of debt with a tenure of more than 1 year as compared to EUR 18 billion, which is maturing. So we had significantly exceeded the funding requirement last year. We're a regular player in the program in the markets. We have diversified our funding profiles from public bonds. We tapped the Japanese yen market. So we have a diversified program, do RMBS as well. We've done some of that recently this year, and I think you can expect us to continue.

Next question comes from Benoit Petrarque from Kepler.

It's on the net interest margin, the first question. Do you think the savings rate decrease you have done in 2013 will be enough to offset the impact of the low interest rate around 19% in 2013? You have now a large debt equity portfolio, which is rather liquid. So I guess, average yield will come further down in '13? So that's question number 1. And maybe you could go through the different operations and tell us where you think you can further decrease the savings rate in '13? And then the question number 2 is on the commercial bank. Yes, volumes were down sharply in the fourth quarter. I think total loans were actually down 4.5% in just one quarter. Just wondering where it comes from with geographies, and what will be the kind of outlook for 2013 on volumes? Are you going to further decrease your loan book on the commercial bank? And sorry to come back on the funding profile lengthening, but are you done now with the lengthening? I mean, are you happy with the current maturity of the debt, or are you going to further work on this issue in 2013?

Yes, in terms of the net interest margin, the reductions we've seen in Germany, 25 basis points, 2 sets of 10 in The Netherlands. And there was some in late Q4 as well. We think that should lead to a more stabilization of the interest margin. If I go back a quarter, I think that's what we guided to and it sort of happened a bit. It's come out 1 basis point different. So in the near term, we think that's -- in the very near term, it should lead to some stabilization.

Commercial Bank. The Commercial Bank lending was a bit down, but we don't anticipate that that will continue. In fact, we anticipate that we will step up our lending and one big item. And that lending profile had to do with we were taking deposits away that we have with the Central Bank, European Central Bank. Funding profile, Patrick, one more time or Wilfred?

I mean, in the funding profile, yes, I think as I said, we've done a lot. We've got it into a good position. And there obviously will be maturities, so you need to replace them in due course.

Next question comes from Steven Haywood from HSBC.

You mentioned in your report that there's no dividends until all remaining Dutch state is repaid, and you meet your regulatory capital requirements. Can you just remind me what these regulatory capital requirements are to meet?

First of all, as long as we are a group, and we still have Insurance in our portfolio, we also have to look for other requirements in the insurance company. And that's why we have an uncertainty related to what are they exactly? In particular, in The Netherlands, where we don't know exactly where Solvency II will end up. Regulatory requirements, more and more, you see that before you can pay dividends, regulators will have to give you also approval for that. And that is basically a caution that we have given to you that even if we expressed what we want to, we also need to make sure that we don't have an issue with our regulators.

Next question comes from Matthias De Wit from Petercam.

Two questions, please. First on Alt-A. There's a -- Bloomberg headlined that a sale of the portfolio could trigger an interesting gains for ING. Could you be a bit more specific here on what the P&L and capital implications could be from any sale at current market prices? And then second, to come back on the investment margins in Insurance, on the outlook, you mentioned that you would expect a further erosion in spreads. What was this relative to the 130 basis points, including the provision release, or would you expect an underlying deterioration from current Q4 level?

No, I don't know where Bloomberg gets the gain from. We have indicated that if the government would sell their portfolio today based on what we know, the prices are that we think that they would make a gain. All that we will do is we will reduce some of the risk-weighted assets we have based on the guarantee that are -- and a small portion related to this Alt-A. But we have not commented on ING making a gain. Any other question?

[indiscernible]

On that investment spreads, it's, of course, difficult to predict the future. We have indicated that there is some pressure, not only in the Benelux, but also in the rest of the countries in Europe. I guess, that if you look at the 4-quarter rolling average and you see some decrease from there, that would be a certain indication for you.

But do you mean a decrease from the current reported level, including the provision reversal or excluding?

Excluding, so you should adjust the amount of the profit sharing, the EUR 51 million, and then basically there is a trend there.

The next question comes from Anke Reingen from Royal Bank of Canada.

I have 2 questions, please. First on the bank capital, I just wondered how often do you going to be reviewing the bank's capital for potential to upstream capital to the group. Is this going to be like an annual process, or how should we think about it? And then do you think the SNS development will have an impact on the supervisory in terms of how residential and commercial mortgages are risk weighted? And then just lastly -- sorry, on the cost income ratio target you had, of the 50% to 53%, I mean by 2015, clearly in the current revenue environment, it looks probably more challenging. So will you do more on costs, or is the target of 50% to 53% basically not set at the moment as long as revenues remain depressed?

Capital and upstreaming from the bank, we look at it on a regular basis, but we cannot say that we have a formal process. It's done on a regular -- based on capability. And of course, we do that in good consultation with our regulator because they will have to take a look at that as well. Cost income, our targets still are that we want to be at 50% to 53% by 2015. And the steps we are taking to reduce another EUR 1 billion of expense that we have announced today is a big step in that direction. Revenues, yes, I think we also would like to see our revenue increase. And if the economy begins to improve, it certainly will have an impact on revenues as well at the same time.

Just I had one question, please. On the risk ratings, do you think that this supervisor will take a more conservative approach on risk rating of mortgages or commercial real estate as a result of developments at SNS, or is there no discussions?

Well, if you talk about residential mortgages, that would be unlikely because they were not at all a major factor or even a factor at all in the whole SNS saga. And what was the case was in that comment was made by the Central Bank at the time of the announcement of the nationalization is that the commercial real estate book of SNS was described as one that was uniquely problematic. And indeed, if you look at public information about that book, it is very different from what most other banks would have on their books at this point. So and again, the problem was more on the provisioning and less credit underwriting standards than a specific risk-rating issue. So a direct connection between that and adjustment of risk ratings, we do not quite see.

The next question comes from Lemer Salah from SNS Securities.

Two questions from my side. First of all, on Slide 13, can you maybe give us a breakdown of the EUR 800 million, which you have reserved for the inflation investments? I'm just wondering because I mean, it seems that investments are, for the next upcoming years, will be quite high, also considering that the IT systems will decline by 50% in 2013? And my second question is with regard to the Alt-A portfolio. Let's presume that the Dutch state wants to sell this item. How much capital will be released, and what will you do with that capital?

Yes, what we have done with the item of inflation is we have looked at, let's say, labor contracts, which are the main reasons for inflation. We have looked at normal cost inflation that you see in energy and all type of cost categories. And that's how we have come to this increase of EUR 800 million. One of the targets that we have -- yes, that's a 2.5%, 2% to 2.5% increase. One of the targets and objectives, of course, is can we make that less? And part of that is by smarter purchasing, and you see that we do EUR 200 million reduction in purchasing expense, procurement. But maybe there are other ways that we can deal with that as well. It certainly is an item that we not put on the agenda and have on the agenda to constantly watch our exposure to inflation. And then your question on the Dutch State, they sell the Alt-A portfolio, was it a question?

The last question...

There was a question still on the Alt-A. I think if the state is selling the Alt-A, we will be able to release about EUR 2 billion of risk-weighted assets that we have as a guarantee on the portfolio that the Dutch State still has. It's a small guarantee, but it's about EUR 2 billion, maybe a little bit more, EUR 2 billion risk-weighted assets.

Last question comes from Benoit Feliho from Natixis Asset Management.

I have a question regarding asset quality. So basically, could you please tell us what the level of renegotiated loans? This is an item which -- on which I couldn't see any, any, any figure. And the last time I was able to see a figure on that was in 2010, it was about EUR 10 billion. So if you could give me some color on that, and how this has evolved and which type of loans are the most concern? That would be great.

Yes, this will come in more detail in the annual report. I think if you are talking about our watch list, which I suspect it is, then we are looking at the fourth quarter at an uptick of about EUR 0.5 billion to EUR 14.9 billion.

Excuse me, could you repeat the figure, please?

EUR 14.9 billion is the amount on our watch list, which is up about EUR 0.5 billion from a quarter earlier, if that is what you're asking?

What I'm talking about are the loans that have been restructured to avoid borrower to be in default.

We used to have that in the U.S., but that book is largely gone. And then there is a small amount of it in Spain, but that's about it.

As mentioned, that we'll come back in the annual report.

Yes, But in 2011, it was ...

I think we lost you. You have to answer your question one more time. You made a comment that we could not pick up. Any more questions? Okay, I understand that there are no more questions. I would say thank you very much for being on the call and spending an hour with us. I wish you a great day, and good luck. Thanks. Bye-bye.

That concludes the ING Analyst Q4 Results 2012 Conference Call. Thank you for participating. You may now disconnect.