Good morning. This is Patricia Closa welcoming you to ING’s Fourth Quarter 2017 Conference Call. Before handing this conference call over to Mr. Ralph Hamers, Chief Executive Officer of ING Group, let me first say that today’s comments may include forward-looking statements such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving an historical fact. Actual results may differ materially from those projected in any forward-looking statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statement is contained in our public filings, including our most recent Annual Report on Form 20-F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing of today’s comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Ralph. Over to you.

Thank you, operator. Good morning, everyone, and welcome to this full year 2017 results call. As always, I’m here with CFO, Koos Timmermans; and the CRO, Steven Van Rijswijk. We posted a net profit for the year of just shy of €5 billion, which is a solid 5.5% increase versus 2016. On the retail side, we reached 10.8 million primary customers, which shows that we are well underway to achieve our Ambition 2020. We recorded net core lending for the year in the growth percentage of 4.8%, which is again ahead of the 3% to 4% loan growth guidance with part of this growth has been trended by customer deposits inflow. We also continued to make good progress on commission income. Operating expenses rose in the quarter as we stepped up our digital investments. Risk costs remained well below our through-the-cycle average. The group’s CET1 capital position strengthened to 14.7% and we only expect a modest IFRS 9 from impact of around minus 20 basis points from the fully loaded CET1 position on the January 1, 2018. All of this puts us in a strong position to propose an attractive full year cash dividend of €0.67 especially when you combine this with our ability to capture profitable growth going forward. That’s a wrap – those are the key points of the things I’m going to take you through. Turning to Slide 3, you see that also in 2017 the Think Forward strategy continued to underpin our commercial momentum. We continued to focus on customer acquisition. We managed to strongly exceed our interim target of 10 million primary customers that we had set by the end of 2017. We’re actually at 10.8 million at the end of 2017, well on our way in order to meet the 14 million mark by…

Thank you, sir. Ladies and gentlemen we are starting the question-and-answer session now. [Operator Instructions] Our first question is from Mr. Stefan Nedialkov of Citi. Go ahead sir, your line is open.

Hi, guys. It’s Stefan. I just wanted to get a little bit of color on your potential timing for new capital targets, also capital return potentially via increased dividends, potentially special buybacks, etcetera; and how that ties in to Basel IV, the trend process as well? Thank you.

Thanks, Stefan. A few comments on this. So, what we have is we have the Basel IV update and what you see is if we would have keep same portfolio for 10 years in the same economic circumstance, then in essence we got 15% to 18% higher capital requirement. Now that amount seems manageable. If you look at it because I mean that is in terms of core Tier 1, that is around roughly 2%. What you see is our current capital ratio is around 14.7%. You know that our capital requirement is around 11.8% excluding buffers. So, that means like there seems to be room in the capital position although you need a buffer as well. So, that means like we might be nearly there with Basel. At the same time what you have to think about is we like the following. We make 10% ROE, we pay 5% we use for growth on our loan portfolio because we like new customers and we also pay roughly 53% out to you. So, that means like half of our profit goes there. This is something a practice we like to continue. What we need to do on our side is two things if we want to continue that is to make sure that we can cope with negative credit migration in the future and to make sure that we can cope with the procyclicality of IFRS 9. If we can translate these two into a buffer, then we can say further like how does it work in terms of adjusting payout and this work is something which we want to do and this is something which we hope to finalize by the end of Q1. So, this is the way how we look at it right now. For the moment, it just means we can continue our loan growth and we can continue our dividend policy.

And just as a quick follow-up in terms of the interaction between the different buffers. So on one hand, the management buffer versus P2G. Is it understanding that some of the risks that are covered by the P2G have historically been covered by your management buffer so maybe we’ll get a reduction in the management buffer on your side going forward? And on – as a second point on the DSIB of 300 basis points, is there some sort of timeline for the regulator and the Central Bank to basically come in and say look, we had actually put in X basis points for Basel IV. Now that this has been cleared and the impact is lower, we can actually lower the 300 bps down to X.

I think overall maybe on the two questions, one is the interaction between the buffers. We always hear a bit mixed stories about to P2G. I mean we have heard some comment from regulators who say like yes, you can dip into it; but if you dip into it, you’re at our mercy and that is not always a pleasant one and in that case it’s not a guidance, but it’s a hard buffer. So you can normally assume that our management buffer is overlapping, but maybe a little bit larger than the P2G. But this is something which we will establish. But the most important one is do we know with IFRS 9, the increased provision and the credit risk migration that the two of them, how much effect do they have around the same time and can we make sure that it doesn’t disturb our loan growth or our current payout and once we have figured that one out, then we can come back. The other part on the SRB, fully recognize that still we are working under a 2% higher capital requirement and for instance to Spanish banks or some of the French banks. So, this is clearly something where we are discussing with the DMB. Now they are not connecting it timing wise to Basel IV. What they are saying is we are connecting it more towards our size of banking versus the Dutch economy and by the time we are paying more in resolution funds and by the time that you – we become in that sense more European and that we have built up our TLAC, then that argumentation stops to be there. So the discussion is not directly linked to Basel IV, but it’s linked to us in fact becoming more European. So, this is an ongoing discussion and this is something which we continue to push for.

Great, thank you so much.

Our following question is from Ms. Alicia Chung. Go ahead your line is open.

Good morning everyone. Just a couple of quick questions from me. Firstly, just circling back on the cost. From the Capital Markets Day, you had previously guided to about €170 million of investments for 2018 with about €200 million additional cost savings. Given your comments, would you expect investments to be higher than this for 2018 so a bit front loaded and also is it fair to assume limited cost savings at this stage and so again that will be basically pushed back into 2019, 2020 overall. And then secondly on – in terms of net interest income, you previously indicated that for H1 we could expect the net interest margin to broadly hold the line, but that all else equal in H2 the net interest margin is likely to be under pressure unless rates rise. Can you give a sense of whether – to what extent the net interest margin would be under pressure from H2 next year? Can we expect a violent move or is it like to be very gentle and also would we expect that to be more than offset by the current level of loan growth? Thank you.

Alicia I’ll take your first question and Koos will take the second one. On your costs and the cost guidance, at least the additional investments that we were projecting, we are doing this according to the guidance that we have given. So, that’s how we do it over time. The investments are front loaded for the savings coming out of these programs, but at the same time we are benefiting from the savings coming out of the programs that we had before. You can actually see that in the annual results of, for example, Netherlands where we had quite some programs started three, four years ago and see the cost route truly going down there. So, what this means is that we will follow the pattern that we have guided to you in terms of the extra investments under the Think Forward strategy on one side and we do expect that savings will continue to come in from previous programs and that the savings from the ATF programs are more towards the end of 2019, 2020, the full savings in 2021. But from a cost/income ratio perspective and that’s I think the most important one is that we expect 2018 to be around this number, 2019 to go lower, 2020 to be back and making the rates that we have indicated at our Investor Day at 50% to 52%. So, that’s basically where we feel things will go and it is according to what we have guided before. On NIM, Koos?

Alicia, maybe on the NIM, my answer would be gentle and is based on the following. If you look at our total liabilities because that is where the pressure is on the savings, it’s €540 billion, out of that €540 billion roughly €320 billion is in savings. Savings we normally invest roughly in five years if you look at the swap. What you see currently is that the current swap market, current five years is already higher than the average of the swaps of the last five years. So that means that your leakage on savings, if I take this as a very crude proxy, is quite low. So where you do still have some leakage is on the retail current account, the €140 billion, because there our reinvestment rate is somewhat lower. But overall, it is gentler than what we would have expected last year given where the current yield curve is.

Thank you. And just to clarify in terms of the loan growth that we can expect so say 3% to 4%, would that more than offset the net interest margin pressure would you expect so we could still expect NII growth?

Overall what you see is that we have still so far over the last two years, we’ve always countered by being more efficient with the balance sheet and by the loan growth, we have countered the deposits now in the sense the deposits leakage. So, till so far we have been successful on that. We are always a bit on the careful side and say like well, now can we continue to do so? I don’t know, but this is why we are saying like well, relatively speaking the high 140s, low 150s is for the full year the guidance. Then again we are a little bit more optimistic than what we were in the past given where the current interest rates are. And in the end, loan growth for us it’s not a target as such. I mean we only do it once it passes a hurdle and when it’s profitable.

Thank you very much.

The following question is from Mr. Bruce Hamilton, Morgan Stanley. Go ahead please. Your line is open.

Hi. Good morning guys. On the – I mean you mentioned some interesting sort of use cases on blockchain, you’ve made the payments acquisition. It feels like you’re quite well positioned on PSD2. How do you think about sort of financial impact? Can this drive efficiencies to cost via blockchain on a three year view or in the current sort of mid-term plan or is it longer-dated and how should we think about the impact on sort of degrowth and on sort of non-NII growth from both the acquisition of the payments business and given the possible market share you could pick up from our PSD2? And then secondly, on the investment product growth, I mean you mentioned fairly encouraging sort of momentum there. Can you remind me I think this is third-party products and I assume mainly passive, but if there’s any color on what you’re successfully selling with clients, I’d be quite interested and where you see the scope for that looking out from here?

Thank you, Bruce. Actually the financial impact of these innovation plans remains to be seen on the blockchain side and why do I say that? What we have done on one side, on the energy side as well as on the soft commodities the soya side, we basically kind of rebuilt whatever paper process in a digital way with the different parties there and it seems to be working. It is more safe, it is faster and it’s more efficient. Now that’s one thing, that is one deal, it is one shipment. For this, we’ll really become a game changer for banks in terms of cost and for the other parties on this platform in terms of speed and efficiency. This needs to be adopted as a market standard because in the end, trade processes are global and for these processes, you need more banks than just a few that collaborate on the blockchain initiatives that we have launched. Having said that, they look to be very promising as I said, the soya one cutting back in days from 24 to 3. Honestly, I think there is no reason why you wouldn’t be able to cut it back to one. So over time when we get this to market standards, I think efficiency, speed and safety will improve a lot and that will be promising. But I think that’s not for the next two years, but we will charge ahead and see how quickly we can establish market standards and then it can have a major impact. On the payment side, your second question there on Payvision, you will not see this in our topline numbers yet. But what Payvision does is it caters for many clients across the globe. It’s a payment service provider that offers 80 different payment…

Great. Thank you.

The next question is from Mr. Johan Ekblom of UBS. Go ahead, your line is open.

Thank you very much. To come back to maybe to, I guess, following on – on this growth in AUM and things. If we look at the fee growth, clearly there was a big step up in momentum during 2017 and I think you commented before that maybe some of the particularly strong results in Q2 et cetera might have been a bit of one-off. But how should we think about fee income growth for 2018? Is there any reason to think that the sort of strong positive underlying drivers are not going to be there? And then maybe just to come back on your NIM guidance so you’re sort of at the top end of your range given the strong performance in the fourth quarter. So when you talk about sort of extending the guidance for 2018. How much would you say of that comfort are you getting from a better starting point and how much is because of the move you’ve seen in the swap rates? Just to get a sense of sort of how sensitive you are should swap rates move down again.

Thank you, Johan. I’ll take the first one and Koos will follow up on your second one. The fee growth momentum, I don’t think it’s a one-off. We are not in this business – we’re not optimistic in this business. We’re not charging fees because we can charge fees. We charge fees because we add value to our customers. And what we see is that over the last couple of years, we’ve really transformed our saving franchises to full-fledged banks. The whole philosophy behind the strategy is that if you have a primary relationship and that relationship thinks of a bank and they think of ING, it’s digital. And if that think of ING for their next product, we should be able to offer that product. Now, one of the products that generates fees is the investment product. We’re also looking at new products on the insurance side also work. So, you should see this fee income growth not as an opportunistic growth. Clearly it has to do with some of the market circumstances. It is a growth that is on the back of the number of customers as well because we’re growing there as well. It’s on the back of the growing savings flow coming in as well because in the end customers then tend to move their savings into investment products. And also now – also banking side, you see that the fee income is on the back of deals that we closed. If you then look at what is kind of more a momentum thing and what is more structural, the overall structural element of the fees is around like €650 for the year. So it kind of takes away – that answers your question on what is kind of a one-off, maybe there is a bit of one-off there. But there’s real structural improvements of our franchise, broadening our franchise and on the back of that, better fee income. NIM, Koos?

So the question is how comfortable. I mean again disregard the financial market side so you see 155% and it’s still 2 basis points higher 153% we’ve seen before. So in that sense, it’s good. The four ingredients which play a role there. One, loan growth and yes, we had good loan growth and we had good loan growth at different margins. We are quite comfortable there in the sense that what you’ve seen over the last quarter is that loan growth every time comes from something different. It doesn’t come from the Netherlands, but if you look at for instance the wholesale bank or if you look at the C&G, it always comes out of different areas. So, apparently we are able to generate the loans at decent margins from different sources. So, that clearly helps. Balance sheet usage, I also feel quite comfortable there. What you’ve seen over last year is now the name of the game in ALM just take deposits if you can make loans and what you’ve seen is we made €37 billion of loan and €19 billion of deposit. So, we didn’t need to bring a lot of money to the ECB unnecessarily. So, clearly that helps you and supports the margin as well. Like I mentioned, the leakage what you get on the savings side on the reinvestment starts to be lower because current rates are higher than average portfolio. If I take that simplified example of the swap, it’s slightly more complicated but nevertheless it’s better. So, the only linkage is a bit on the current account part. So in that sense, yes, we can be a bit more comfortable with the underlying structure. But again, and like I said before, loan growth we just make sure it’s not a stop gap to just protect the margin, we do it because we may pass a certain hurdle, that’s how. That’s always the uncertainty we have in there, but overall yes, we feel slightly more comfortable than what we had last year.

Okay. Thank you.

Our next question is from Mr. Bart Horsten, Kempen & Co. Go ahead, your line is open.

Yes. Good morning. I have a few follow-up questions on Payvision transaction, if I may. First of all, you mentioned you will focus on the merchants. To what extent do you also see yourself focusing more and more on the clients of these merchants because you obviously also obtained that data and do you see yourself becoming a payment initiation service provider or an account information service provider to that extent going forward? And as it’s also a scaled business, do you expect more acquisitions in this space? And my final question is a bit detail on Payvision itself. Could you elaborate on the segments in which Payvision is active and whether you may shift some focus during – because of know your customer requirements and things like that? Thank you.

On Payvision, yes, we will certainly focus on their clients, but we’ll also make sure that we offer Payvision to our clients. Payvision is a real strategic acquisition and it’s a fintech that has developed very, very, very fast with the latest technology. It’s easily scalable – easily scalable, which means that from the base they have, they can grow fast without too much additional investment and cost relative to what you can achieve with it. What you in the end create is a – you will – a go-to platform for financial services in that if you are able with an offering like Payvision combine all the different payment methods, but also a platform where buyers and sellers come together, merchants and the individual clients and indeed you have a platform through which you can also gain access to new clients. But that remains to be seen how we develop that, we certainly have our views around that and it looks to be very promising. Will we consider further acquisitions in this space? It really depends on how it develops. But as I said, if it comes to acquisitions, we look at where we can add skills and where we can add only innovation and this is certainly one of them. So, it fits the category of what I’ve always been kind of indicating to you as where we would see acquisitions coming and that’s that.

Our following question is from Mr. Maxence Le Gouvello of Jefferies. Go ahead. Your line is open.

Good morning. My first question would be on Belgium, quite surprising to have such a rebound of the lending activities especially on the mortgage. Can you give us some color and what we should especially on mortgages going forward? Second question is a follow-up regarding your comment, Ralph, on primary customers. You’re well ahead of your target over the year. Do you – can you please share with us your 2019 target and also how much of the acceleration of the fees is coming from these new primary customers buying more products? If you can able to quantify it a bit more on that side, it would be much appreciated. Thank you.

Thanks, Maxence. Yes. On the mortgage lending in Belgium, actually we’ve seen the mortgage book growing in Belgium over last couple of years. Clearly there has been moments in which particularly the Belgium book was kind of renewed on the back of the lower pricing that clients would get access to because of the low fees they needed to pay to refinance. So, you saw some movements in the books across different – across the market. We’ve always been kind of active in the market and in growing this at the speed building of growth. Again, there we are very disciplined in risk appetite and pricing and sometimes you have a bit of a higher market share and sometimes you have a bit of a lower market share. On the primary customer side, the 2018 target, we don’t really have an annual target honestly. We have the 2020 kind of target of €14 million and that’s what we kind of focus on. We kind of focus to make sure that we get there on one side and the other side we shouldn’t exaggerate it either. Sometimes new customers come in directly as a primary customer and sometimes these have been customers with us from a long time and now suddenly become a primary customer because of our offering. So, it’s a mixed bag. And as for the fees, I think that in the end and that’s the philosophy and that’s what we’re working on and once we have more information on this, we will certainly go about it. When we had the Investor Day, I showed you a formula, a formula in which we basically indicated that the client value was made of – or the value of the company was made of the number of clients versus the percentage…

I understand the logic, we saw all the figures growing and then now we need to – at a certain point to see a utilization of the acceleration of the revenues. Is it – when I’m listening to you it’s most likely going to affirm end of 2018, mid of 2019, is it a right assumption?

Yes, but you see the revenues already increasing. If you look at the commission income as I said, a lot of the commission income increase is on the back of the increase in share of primary customers. Of course it’s the primary customers that think of us as doing more business with us and looking at the different products from the initial products which they came in. Normal acquisition products for us are savings for sure or mortgage on the other side. But once they’re a client, the question is whether they can become a primary customer and then they produce the real fees because on savings we don’t make fees. On the mortgages in the Challengers & Growth Markets to the extent there is a brokerage model, we actually pay fees so it’s not an income generation on the fee side. So, fees that you see in the retail space is more or less related to how primary customers do more business with us.

Okay. Thank you very much.

Our next question is from Mr. Matthew Clark, MainFirst. Go ahead. Your line is open.

Good morning. My first question is on net interest margin. You mentioned better lending margins, could you just talk a bit more about which product areas or what’s driving that strength, why and whether you think that that’s sustainable? And then a follow-up question is on the dividend. It seems to be a statement of intent that you’re increasing the dividend by the €0.01. What would really have to change for you to materially increase the pace of the dividend increasing, is it really just the accounting issues around IFRS 9 and for cyclicality or is it really just a case of you saying we see ourselves as a growth story rather than a payout story? Thank you.

Maybe if I look at a few things of margin improvement. It’s Koos here. It’s structured finance looks good this quarter, we also see well, real estate finance was positive but marginally positive. If I look at general lending, it looked good. So, a lot of products on the wholesale side were quite good. PCM was flattish. If I look at the other contributors, if I look at the Netherlands, mortgage flattish; mid-corp did quite well actually similar in Belgium. So overall, the picture is slightly better on a number of the business like product. That is how I would summarize that. So in that sense, yes, on the margin side I’m quite happy. On the dividend side it is 1 basis point, but please remember that over the last year we have had quite a lot of RWA migration positive. So in that sense, this is something which at a certain moment can turn around. And also although the IFRS 9 impact at the start will be maybe only 20 basis points or something like that, for us the puzzle is how will – in a scenario where you move into a downturn, how will – at that time the stage migration that is called in technical terms in IFRS 9, how will that create additional or earlier recognition at provisions and that is exactly at the same time when you have negative credit progressing. This is the one we want to figure out and there we need to play around to be honest with our models for the next three months. By that time, we can translate that into a buffer and then we know if you take our current ROE how much is now for payout or how much is now for loan growth. So, if we can take these steps because we prefer the continuity of it rather than to be too quick and then later on create a sort of a start-stop in either loan growth or dividend. And so give us in that sense a little bit of time and we will come back on that. And by the way, overall payout is not that dramatic at 53%.

Thank you.

Our following question is from Mr. Alex Koagne of Natixis. Go ahead. Your line is open. Sir, your line is open. Hello. Mr. Alex Koagne.

Hi, this is Alex Koagne. Thank you. Two question from my side. The number one is on the cost of risk. I do understand your comment that the cost of risk should stay below the guidance, the through-the-cycle guidance but from the 22 basis point we have in 2017, what should we look for going forward for 2018? Is there any provision release we can activate or should we expect sentiment to have the implementation of IFRS 9 to have a negative impact on the cost of risk? The second point is on your operating expense guidance, I’m not sure I quite understand what you say for 2018 when you say that we should stay at the same level. Is it in term of overall cost or is it in term of cost/income ratio? Those are my two question. Thank you.

Alex, it’s Ralph. I’ll answer the second one quickly, it’s in terms of cost/income ratio. Note that’s already in terms of cost so the cost/income ratio we manage flattish for 2018. And then savings for the risk side?

For the risk side if you look at IFRS 9, the initial impact that we had both on the credit and the investment book is around 20 basis points negative. That also includes Stage 2 migration based on the new regulation, i.e. based on IFRS 9. What we currently see is a positive outlook on GDP and on the industry that means that in as far that continues, the stage migration to Stage 2 will be limited. So in that sense as long as we have that outlook, we feel that the risk costs for 2018 will be well below the long-term average.

Okay. If I may have an additional question, please. If there is any capital excess above the buffer and with the impact of IFRS 9 and the procyclicality, what is the use you’re looking for? Is that a special dividend only or is it also – it can be also a form of share buyback?

I think I’d like to have that luxury, but I first want to cross that bridge and think like okay, what is it now that we really need to keep and preserve the stability if we have crossed that bridge, then you can look at the means how you will get there or how you will pay that out because I mean you can add a – or you can say it is buyback, you can say it’s a one-off dividend or you can say it’s overtime. But let’s first figure out that in terms of buffers to preserve that loan growth what we have right now and to preserve dividend payout under also more economic difficult circumstance and then we get there.

Understood. Thank you very much.

Our next question is from Ms. Sofie Peterzens, JPMorgan. Go ahead. Your line is open.

Yes. Hi, Sofie Peterzens from JPMorgan. I just wanted to ask on your NII, the hedging had only a €8 million impact on your NII in the fourth quarter versus €91 million impact in the third quarter. Going forward what kind of impact should we expect? Is €8 million the run rate going forward or will it be a bigger impact? And my second question is if you could just give us an update on litigation. And thirdly, just a follow-up on TRIM. You said that you expected earlier impact on your risk-weighted assets in priority. Could you just give us an update on how your discussions with the regulator is going, when we should expect this impact to hit your RWAs? Thank you.

On the NII, expect actually nothing in the future in terms of hedging or other amounts in there or just above that symbolically.

On the litigation, there’s no other update than kind of repeating that we are subject to this investigation on fulfilling the requirements and conditions if it comes to client on-boarding, money laundering and fraud and the processes that we have in place. So, there is no update we can give you there. We’re in full cooperation with the prosecutor on this one and we expect more news in the coming months on that one. On TRIM, I’m referring to Steven.

So on TRIM for mortgages, so we have different parts of TRIM. So, that is they look at the portfolios and mortgages in the Netherlands and in Belgium. The Netherlands is largely done, Belgium currently underway. They look at – ECB looks at the SME portfolio in the Netherlands and there was a investigation as to the trading book globally. And later this year, there will be a look into the low PD portfolios or the low default portfolio largely in wholesale banking. Now with TRIM, what the ECB then will do is they will compare results between all the banks. So when we have now done the mortgage part from the Netherlands and a bit later for Belgium, it will need to be done for other banks as well, after which the ECB can make a comparison and only then they can give feedback. So, I do not expect feedback on the whole TRIM exercise this year. What I do expect is some feedback at least on the mortgage portfolio later this year. This remains to be seen.

Our next question is from Mr. Benoit Petrarque of Kepler Cheuvreux. Go ahead, your line is open.

Yes, good morning. Two questions on my side. Coming back on the procyclicality of IFRS 9, I mean you implemented already your models on the 1st of Jan. so could you maybe share with us the impact of different macro scenarios, say downturn scenarios, how much impact it will have in terms of well sharp deterioration of the macro for example? It would be interesting to know. And then the second question is on Basel IV. If you look at Basel IV like it stands now, what type of management actions are you planning in the coming years? I guess you will be working on pricing going forward a bit more while you are also working on pricing already, but what type of management actions. Do you expect, maybe derisking in some bucket of loans or I was curious if – to know more about the actions you could take potentially before the implementation? Thank you.

Good question on IFRS 9. I mean this also comes back to what was said earlier today about that we need to look at macroeconomic scenarios and what will it mean in different scenarios both for your risk, also in RWA. So, we’re not at this point that far that we can communicate what do macroeconomic scenarios exactly do.

On Basel, yes, there’s many different management actions you can take. We’re reviewing the different books and the way it impacts the different books. You can reprice, you can sell, there’s different ways to manage your balance sheet there, maybe stop some businesses altogether if they’re really unattractive or if you feel you really can’t at the scale. We don’t see any hints of that honestly. But for the moment we think it is going to be combination of a bit of repricing here and there and flexible – flexibility in the balance sheet in terms of which assets do we originate and which assets do we keep on our own books or which ones do we originate for parties that actually have a better return on the same asset because they are in a different regime like insurance companies for example or other investors.

Next question is from Mr. Jean-Pierre Lambert. Go ahead, your line is open.

Good morning. Have a general question. So, we see that your strategy in fintech is quite successful. There are something like 430 fintechs in the Netherlands so we have a good space to choose from. The question is more BigTech. If we see in India, they’ve already implemented PSD2 and Google is proposing a payment system – a mobile payment system so it’s not impossible that a BigTech would enter your market before the horizon of 2021. Which part of the magic formula you think the entry formula would be eroded or impacted by such moves? Thank you.

Thanks, Jean-Pierre. Challenging question here. I think you’re completely right. I think PSD2, which we have supported in view of innovation and risk competition and specifically smaller players have a chance for which there’s different kind of anti-barriers and I think that’s what PSD2 is supposed to kind of support. On the other side, there is a disadvantage in PSD2 and specifically if it comes to the powerful BigTechs who can come in and they already have a lot of data and then we have to give the client data if the client so allows and permits and requests and then they have the full client view and we don’t, which basically shows you the PSD2 is not creating a level playing field at all and that basically we’re serving all of the data on a plate to the ones who already have a lot of data. So from a market power perspective, it is something that is not necessarily desirable. Having said that, that’s not your question. Your question is which part of magic formula may be impacted. It is certainly the part of whether clients will see us as their primary bank. If clients start doing payment specifically with another party and basically that is an act of disintermediation and if they see that party as their most important day-to-day banking provider and you may escape their mind in terms of your brand as the bank to go to. So, that’s why we are charging ahead on being the primary bank and the bank of choice and building our own go-to platforms in financial services and it has always been in our strategy that we have to make sure that we do two things. One thing is that we build our own platforms and that we build those platforms in a way that clients really, really, really love us. That’s why the loved brand is so important, that’s why the net promoter scores are so important. So, I’m so happy that we’re actually in 9 out of 13 countries Number 1, because this is a real contest for us to improve. But on the other side, it’s also a predictor of future business and future customers to come on. On the other side, it’s important that you stay connected to third-party platforms as a service and also for that it is important that while these customers are in the social media or on those other platforms, they think of you if it comes to a financial service. So, branding is a core element to fight the BigTechs. If it comes to financial services, the trust element of banks should still help us there. But point is that if the BigTechs come in, yes, I mean we’re really at a competitive disadvantage because the PSD2 is a one-way deal in terms of giving client data not a two-way deal.

The next question is from Mr. Marcell Houben from Credit Suisse. Go ahead, your line open.

I have a couple on the Danish market, couple of P&L questions, if I may. First on the fee income line in the Netherlands, you see a 10% gross increase year-on-year. I was just wondering to what extent is that sustainable or can you expect a similar growth going forward? And on the costs in Netherlands as well we see a 2% increase year-on-year. Would you be able to expect to generate positive jaws for 2018 or will it come in 2019? And then on Belgium, the NII was negative 6% year-on-year despite a pretty strong growth there. What extent is it explained by low reinvestment yields or lower margins from competition? And also, we’ve seen in Belgium the OpEx line there a 5% increase. Again the same question as on the Netherlands, do you expect to see somewhat positive jaws in 2018 for Belgium or would you have to wait until 2019? Thank you.

Thank you, Marcell. On the fee income in the Netherlands specifically, yes, this is recurring. So, we’re seeing so much fee income growing. But for us, it is the change in the law in which we basically have to charge fees or at least suppliers have to pay mortgage provider or mortgage adviser and therefore there is fee income there. So, that’s recurring. We’re currently at a market share of 5.5%, at least that’s where we were in the fourth quarter in mortgage – in the production of new mortgages in the Netherlands. That’s kind of a recurring income stream if you keep that market share. There’s a recurring income stream in the Netherlands on the back of the payments and cash management business. There is a recurring income stream on the back of the investment products business as well. So yes, there is also there. We are a bank that is very transparent in what we do. This is what makes our reputation. This what makes our net promoter score. So, we’re not opportunistic on fees. We charge fees for services that clients actually see as valuable. Also in the Netherlands, the fees will be recurring. Now in the Netherlands, the costs – over the year you actually have seen a cost decrease in the Netherlands not a cost increase because you see actually the benefit of the earlier programs coming in in our cost line, in our cost line. Overall in any scenario, we –- in any country, in any business we try to manage or we manage for positive jaws. Whether we will make an overall positive jaw for 2018 with some of the investments that we want to continue to plan. We’ll see also how the income develops, but the units know that overall cost increases are only allowed if the results are with structural income increase and again it’s structural element of the income increase that we’re also showing in Q4. That is what we are looking at and not at the fluctuating part of the income increase because it’s about building a sustainable business that we look at. So. that’s kind of the answer to cost. Maybe on Belgium, I refer to Koos.

I think overall what you see is if I look at the year in total, then indeed you had the negative jaws in 2017. Particularly what you see is the lower savings and deposits income that plays a big role or that is the biggest contribution on there. As you know in Belgium, we stopped our rock bottom rate at 11 basis points rather than lower than that so we didn’t have the offset. But also in Belgium, what you will see is the investment yields on savings will start to come gradually better as the example I explained earlier and at the same time, loan production will help to a certain extent as well. The other point, which is clearly the case and that is – but that is an overall point, we’d like to make sure that we keep our cost in check. At the same if I look at Q4 of 2017 versus 2016 in Belgium, we can say that overall the total amount of cost increase was not that high in the Belgium portfolio. So nevertheless yes, we can be affirmative about 2018 and 2019 that the savings will be a bit better and loan production will be there and so we have to keep our costs somewhat in check.

The following question is from Mr. Bart Jooris, Degroof Petercam. Go ahead, your line is open.

Thank you for taking my question. Just a few follow-on questions as most of them already have been answered. Regarding the usage of your capital, you’re speaking of around 5% out of 10% return on equity going to loan growth and 5% to dividend. If we’re looking at loan growth, are we looking purely organic here or should we also look at non-organic growth so do you have any M&A plans that’s outside let’s say the fintech universe? And then regarding the cost outlook for 2018, does that still include a lot of restructuring charges or have those for the main part been taken?

Bart, thanks for your question. Basically how we have guided in the past and going forward, we do generate capital and the capital that you generate in the end, we have three uses for. The first one is making sure that we have sufficient capital because that is important in order to be a safe bank, it’s important to continue growth in the first place and play our role in the economies in which we’re active by lending. The second usage is to grow. And the third usage is to pay dividend. This is not in this order, I mean we rank them equally. I mean this is kind of how we manage bank all the time. Now from a capital perspective, we’re in a good shape but we have Basel so we’ll have to see how we kind of make sure we make it over time. If it comes down to the organic growth, you see again also this time around that organic growth is something that we do very well, that we have the right skills for generally. And what we have indicated as to where we would consider an acquisitionary strategy, it would either be in the area of when consolidation is happening in markets in which we are a player, we have to look at what will be the consequence for our own activity and from that perspective, we would have to decide at that moment in time to play with that consolidation or opt out like we did in India. We were forced to consolidate and we made our calculations and our organic plan was not generating the value that we could actually generate by a merger with Kotak Mahindra. You can expect that we go about these kind of things like that. Then the…

Okay. That’s very clear. Thank you very much.

The next question is from Mr. Adrian Cighi, RBC Capital Markets. Go ahead. Your line is open.

Hi there. This Adrian Cighi from RBC. Just one follow-up question on capital, please. You’ve articulated a very helpful framework for us to think around Basel IV, IFRS 9 and management buffers. However, in terms of the timing of regulatory headwinds, how do you see the potential overlap between TRIM and Basel IV? Thank you.

Yes. Thank you, Adrian. I mean in the end what TRIM potentially may do is that it may front run Basel IV to some extent that looks more particularly at [indiscernible]. Basel IV both looks at input sectors and output sector with a floor if you will. That introduction period’s after by the way political and regulatory endorsement will be 10 years in 2017, outcome of TRIM will be a bit earlier. What we have said before in terms of TRIM, we are quite positive in terms of that exercise because TRIM actually gives also input get better statistical models, Basel IV to some extent is moving back to standardization which is not something that we favor. But there is some overlap at least also in the timing. In terms of the pillars that we look at, Basel IV is Pillar I closure and TRIM is Pillar II. In that sense, there is a difference.

Perfect. Thank you.

Following question is from Mr. Robin van den Broek, Mediobanca. Go ahead. Your line is open.

Yes. Good morning everybody. First question relates to Basel IV and maybe some second other derivative impact on non-European exposure. If you look at your loan book, 37% is non-European and the impacts that you’ve seen before in Basel always indicated that the most part of your inflation is for European banks not so much outside. So, I was wondering how would that impact the level playing field and could that be part of your management actions on that part of the book? Second question is on robo advice in Germany, I think it’s a fairly new initiative and today you seem to earmark already that the first results are quite encouraging and boosting the fee. So, I was wondering if you could maybe spend a few words to specifically on that addition of services for customers? And maybe thirdly, Ralph, with BigTech would you rule out any collaboration there or do you think that would never consider that with a bank? Thank you.

Thank you, Robin. I will take the last two questions and Koos or Steven will take the first question. On the BigTech, a, you should never rule out anything honestly. You don’t know how things are developing and it may be very well be good to collaborate at a certain moment in time. Remember, we don’t see it but it could very well happen at a certain moment if it comes to providing payment services, through one way or the other you try to be kind of a favorite player in their platform. It remains to be seen. It remains to be seen whether they really want that and remains to be seen whether we would really want that because in the end it is about what will we actually get out of it. But I don’t rule it out at all. On robo advice, the reason we’re kind of doing this is clearly we’ve just started, it looks promising. It looks promising from a client’s experience perspective. It’s really simple, it’s digital, it is personal, all the things that are important as part of our strategy. Let’s face it, there is another side to it. At this moment, people don’t make a lot of money on their savings, but they are looking for alternatives. So on one side, we can label robo advice as a success because of what it does and the experience will soon understand that is the case. But It’s really also because clients are looking for an alternative and this plays to that in a way that fits ING, which is simple, understandable, transparent and matching the risk appetite of the customers. So if it’s a digital player, it’s our brand and that’s why we’re quite happy with the collaboration that we have with Scalable. Steven?

Regarding Basel IV, Robin, I mean like I said before, Basel IV in some instances brings us back to more standardized models than previously and has more impact on one bank than another, that has more impact on one region than another and hence, we have never favored Basel IV outside of Europe that could potentially impact the level playing fields, but is still relatively early days and there’s a long phase-in period. We’re still investigating a number of our asset portfolios. Our franchises are well profitable also outside of Europe. And so, we have time to take actions when needed in terms portfolio composition if and when needed or in terms of pricing if and when needed. So, we’re still looking into it. At this point in time, it’s too early to say that there would be an impact and so when that would be the case, we will come back to you.

Okay. Thank you very much.

We have a question now from Mr. Jose Coll, Santander. Go ahead your line is open.

Thank you for taking my questions. Looking at total income in the quarter, it came at €162 million which is roughly half the quarterly average for the year and it’s also half of the quarterly average of 2016. So, my question is this a one-off? What can we expect going forward? And my second question is concerning Basel IV, you please give us more color on what is driving most of the risk-weighted asset increases? I suppose it is credit risk, but is operational risk also an important factor? And within credit risk, could you specify by lending category? Is the specialized lending specifically a large contributor to that 15% to 18% risk-weighted asset increase that you mentioned?

Jose, could you repeat your first question because I didn’t quite understand it?

Of course. So I’ m looking at total other income in the quarter and it came at €162 million, which is roughly half of the average – of the quarterly average for the year and it’s also half of the quarterly average for 2016. So it’s significantly lower. So my question is this due to one-offs? What can we expect in total other income going forward?

Thank you. So specifically for the fourth quarter, a large part of that is in the FM side. We have seen that in order – in one of the slides as indicated that the total result of FM was actually going down to €227 million, but that the way the FM result is accounted for is much larger in interest income this time and that’s why the NIM is also uplifted. But the other part of the income of FM is actually much lower and that is one of – so it’s a lower FM income and within that a lower other income of FM. And on the – in addition to that, you know that the CVA/DVA has also impacted the other income and then exactly. And then the other part of the explanation of the other income is also what we explained under the NIM is the shift in the way we recognize the designation of the hedges. So, there’s three categories there.

So on RWA, there are several movements. So in terms of the volume that is the core lending increase, you see there an increase of €6.3 billion there is some negative effect from the credit mall [ph] and risk migration, which is €3.5 billion. Then there is some elements in there, which is minus €1.2 billion some negative or decrease in RWA of operational risk or non-financial risk based on a changing external database that we use for capital calculation of about €1.9 billion and there was a decrease of market risk of about €0.4 billion is then brings hardly way down from down from €311 billion in the third quarter to €309.9 billion in the fourth quarter. That’s the composition of the change in RWA. So, volume up and models and FX down basically. Then I thought you had a third question on Basel IV whether we could give some further insight in the composition or impact on portfolios. I won’t step back because that’s more the technical side of it. Input factors – we have input factors in our internal models and you have an output flow. The input factor is approximately a two thirds effect almost 15% to 18% to the output flow in the end will give a one third effect that’s approximation for now. Within that, different portfolios as far as we can see are impacted differently by and large. Areas which are more impacted are general lending for large corporates lending for financial institutions and mortgages other areas including structured finance are to some extent less impacted.

Perfect. Thank you very much.

We have no further questions, sir. Please continue.

Thanks, everyone, to stick with us for the last hour and half. Thanks for your attention. Also thanks for your questions. As always makes a good discussion, keeps all of us charged. To wrap up and to summarize. Fourth quarter, to summarize, was a real good quarter. And ATF is being implemented. We have good commercial growth whether it is about clients, whether it is about lending, whether it is about savings. We have good NII growth like real, sustainable, interest income growth have good commission income growth, also sustainable. And we have a NIM that is actually improving because of the way we do our lending. So, commercially been a real good quarter and that’s not only a commercially good quarter for this quarter in financial terms, but also going forward given the fact that we’re growing on the lending side, given the fact that we’re growing on the customer side. Next to that if you look at IFRS and the Basel IV impact, although we’re disappointed in the Basel IV impact and the outset of that is still not creating a level playing field. We do feel that both impacts are manageable, which is also good news. So overall, we feel it’s a good quarter. Thanks for your attention and see you next time. Thank you.

Ladies and gentlemen, this concludes this conference call on behalf of ING. Thank you for attending. You can disconnect your line now.