Good morning. This is Anita Trillin [ph] welcoming you to ING's Third Quarter 2019 Conference Call. Before handing this conference call over to 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 involved in any 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 constitutes an offer to sell or solicitation of an offer to buy any securities. Good morning Ralph. Over to you.

Thank you very much. Good morning everyone and welcome to the third quarter 2019 results call. As always I'll take you through the presentation. I'll give you some kind of highlights per slide. And Tanate our CFO; and Steven our CRO are here with me to answer some questions. Going through the key points, we posted a net profit of more than €1.3 billion in the third quarter, leading to a four-quarter rolling underlying return on equity of 10.3%. The negative interest rate environment continues to be a challenge, but as in the previous quarter, we have been able to counter the resulting pressure on income. In retail, we retained real good commercial momentum with further growth of our primary customer base by 165,000 and now exceeding 13 million. This basically means that more than one-third of our clients see us as their main bank, as their primary bank, which for a digital bank is a real testimony to our strategy. We also achieved loan growth in the retail businesses, specifically in mortgages where we continue to improve margins in almost all of our countries. In the Wholesale Banking area, our lending businesses declined this quarter due to some external factors such as the oil price and some incidental large repayments, but I'll discuss that with you later. Overall, between wholesale and retail, the customer lending went down by €1 billion. Now, the loan growth in retail the resilient margins as indicated combined with very good fee growth countered the margin pressure on customer deposits as well as the higher cost related to KYC. On the expenses, besides the increase in regulatory cost, which is the real cash-out, we saw an increase in the legal provisions. Also the KYC enhancement program continues to weight on cost. The CET1 ratio improved…

Ladies and gentlemen, we will start the question-and-answer session now. [Operator Instructions] The first question is from Mr. Stefan Nedialkov with Citi. Go ahead please.

Hi, guys good morning. It's Stefan from Citi. Two questions on my end. Number one, are you ready to give guidance for the net interest margin for 2020? And secondly, some press reports show that some of your shareholders are angling for M&A in Spain specifically with much more traditional bank. Can you just comment what are the attractions and challenges of such an initiative and whether this is something that you could consider?

Hi, Stefan it's Ralph. I'll give the NIM question to Tanate. I'll pick up the second question now. Yeah as you know we don't go into any of these comments of press and rumors around M&A. I don't expect us to do that in the future either to go into that. Our strategy and as you see it again this quarter is an organic growth strategy, very much focused on delivering a differentiating client experience. And with the innovation and with the new products and even with KYC knowing our customers even better, we can make that as much as an improvement for our role as a gatekeeper also a commercial tool. And that's what you can expect from us focus on organic growth. But we have said before that on M&A, we would be looking for -- if any for teams that have specific skills in some of the more lending products that we may not have our own skills in and then see how we can develop that or for specific technology players that can help us to deliver that differentiated customer experience. And I will repeat that when in a market, in which we're active as a large bank if consolidation is happening, we'll analyze whatever is happening. But this is it, nothing more, nothing less. On NIM Tanate?

Yes, hi Stefan. On NIM, I think we gave our guidance pretty much looking forward for the next six months where we guide now towards the 140s in terms of net interest margin and I think the high-140s. And then I think in terms of looking at the rate, I think it can be quite volatile. I think if you look at the August curve, it was really quite bearish where we see strong recovery in September and October. That's why I think we are more comfortable guiding the net interest margin over the next six months.

Okay. So it's basically high 140s through the end of the first quarter of 2020?

Yes.

Okay. Thank you.

The next question is from Mr. Pawel Dziedzic, Goldman Sachs. Go ahead please.

Good morning. Two questions from me as well. The first one is on risk-weighted inflation relative to regulation the macroprudential policies and so on that you highlighted. I completely understand that details and magnitude and timing this is all uncertain at this point. But can you help us understand to what extent this inflation comes on top of the 15% to 18% risk-weighted assets inflation guidance that you gave in relation to Basel IV. So in other words, are goalposts for ING, capital goalposts still moving up or this is more a timing issue? And the second question is somewhat related to that. It is on your dividend policy. I think you reiterated it. But we witnessed over the last two weeks, the first buyback in -- the first major buyback in the Eurozone. And, of course, that captured our imagination. So given all the uncertainty on let's say regulations at this point, would you be in position to review your capital policy over the next one, two years you think? And would buybacks could potentially feature into those given the flexibility they could give you over the let's say progressive dividend growth policy and obviously at your current valuations? Thank you.

Thank you, Pawel. The risk-weighted inflation will be taken by Steven. I'll start on the dividend policy. We launched the policy a couple of years ago it's a progressive policy. We feel comfortable with it as we speak. We keep generating capital every quarter and we continuously look at the -- how we kind of manage that capital, do we manage it to support growth, do we manage it in order to support our capital buffers or do we manage it in order to pay dividends. That is how we can play this. Over time, we'll have to see and that's what Steven will certainly fill in and so what the risk-weighted inflation will bring. But if we would come into a situation where we feel as comfortable, we will always look at distributing capital to the shareholders. But again, it's the three purposes that we want to fulfill with capital generation is buffers or tackling risk-weighted assets inflation, it is growth and it is capital return. And we're not ruling out any additional return above the policy, but given what we're looking at over the next couple of quarters. And I'll give the floor to Steven.

Yes. Thank you. So indeed, how we may expect some impact on the finalization of the TRIM exercises and the definition of default inclusion under the new standards or the models that we need to apply of the ECB to an extent that it's a prelude to Basel IV, the extent of which we will only know in more detail once we have received the final letters. But at this point in time, we remain comfortable also given the current capital ratio that we're at with 14.6% core equity Tier 1 to maintain our ambition of 13.5%.

Thank you very much. I think 13.5% is clear. But is 15% to 18% risk-weighted asset inflation still an accurate guidance over the next years? I think that was the...

On Basel IV it is. And we will need to see what...

No, I think all you need is you should…

And we will need to see what the impact is on the TRIM and the definition of default. But on Basel IV, we're still comfortable with that number.

And overall, do you believe that this could be higher given the new initiatives? Apologies for drilling into this.

I repeat myself in saying that we need to wait for the final letters to see the total and final impact.

Okay, very clear. Thank you.

The next question is from Mr. Robin van den Broek, Mediobanca. Go ahead please sir.

Yes. Good morning everybody. Thank you for taking my questions. My first question is a bit digging into the margin dynamics. You mentioned during the pre-earnings call that you expect to see some pressure on generalized -- of General Lending on the back of TEU Article 3 having better conditions more liquidity coming to the market while demand according to ECB data seems to be dropping off a bit. I presume that that pressure has not really hit your book yet and is more likely to come early stage next year. How is that factored into your guidance? Is that basically fully offset by the euro swaps pounds we've seen over the last quarter? That's the first question. And the second question is a bit on costs. I appreciate if you've set your cost savings from a restructuring plan are more back-end loaded than initially foreseen. But could you give us an update on where we stand? I mean, according to the program, you would reach accumulated savings of €550 million by the end of 2019 going to €700 million by the end of 2020. Yes, could you give an update on where we stand on that please? Thank you.

Yes. So Robin, on -- basically the dynamics in loan growth and whether that's for the market dynamic the ECB is kind of hinting at or our own dynamic, whatever the ECB is hinting at, we don't see that necessarily. I can't really kind of come to that conclusion from how the lending develops in our own loan book, because it's really a combination of our own strict repricing as we have announced in the beginning of the year, specifically in the wholesale area we felt that given where capital levels are going, we have to make our returns. And therefore, we have our return on equity hurdles that we apply there at least to some fewer deals on one side. At the same time, that doesn't mean there is less demand. Same with the repayments that we've seen this specific quarter, the fact that some clients tapped the bond markets rather than the banking markets doesn't mean there is no demand. And so that's another dynamic there as well. So I wouldn't come to the conclusion. Honestly, I would turn it around more from our perspective. We don't see a trend yet, if there is one coming that there is going to be lower demand. You know that we have exposure across the whole globe. And across the globe -- whole globe we are still growing. Also in the Wholesale Banking side even with this quarter, we're just short of the 2% growth on an annualized basis. We continue to guide that. Although, Wholesale Banking will not grow as much as Retail Banking, we do expect it to grow 2% to 3% continuing. It's not a target because I don't like targets on the lending side. It's certainly an ambition, but at the right price. So that's more or…

And then maybe one follow-up. So your underlying cost base is it fair to assume that your restructuring program actually can capture , you basically said that KYC is not fully -- is not going to be fully captured but at least the other factors of CLA increases and stuff like that. Is that basically captured by the program?

Absolutely. Absolutely. And over time, even the KYC cost will be captured like we have been able to capture the 1 billion of cash out regulatory cost over the last five years. But you can't take 1 billion on the chin and compensate for the one quarter. But we do this over time, continuously reviewing, what can we do better, looking at new technology as I said, which does make us change tactics in some of these transformation programs because new technology is available. And we'll certainly apply that where we feel that it can improve both our customer experience as well as in efficiency.

Thank you very much. Very helpful

The next question is from Mr. Johan Ekblom, UBS. Go ahead please.

Thank you very much. Just one question from me, please. Could you talk a little bit about the development of mortgage margins? I think you mentioned that mortgage margins are up in most markets. And I guess, the biggest driver of that is still the falling long bond yields, which as you also mentioned have rebounded somewhat. If I look at pricing in the Dutch market for example, we can see pricing coming down, still with the biggest threat to long bond yields than what we saw six months ago but the direction is clearly less positive than what we saw in Q3. So how should we think about the potential impact of improved retail margins at the group level for the next couple of quarters?

Tanate?

Yes. Okay. Thank you very much, Johan. I think overall, we look at basically product margin and we split that through basically use of the FTP right? And with the negative interest rate that I think we have seen from the ECB, basically the funding cost for our lending business has dropped quite dramatically because of that. Having said that, I think if you look through pretty much all of our geographies, we do not pass on that benefit to our customers, right, which means, our product margin, particularly on the front book you see improvements in margin. Specifically, what you talked about in the Netherlands, for example, indeed, we see some pricing competition coming in in September, where actually absolute pricing is under pressure. But I think overall the evolution over the months has been actually quite positive. We do see absolute price improvement in Belgium coming in in July and August, moderating in September. And in one of the more competitive market like Germany, we also see product margin improvement there as well.

And maybe just a follow-up on that I mean, could you comment how big is the difference kind of front versus back book now versus when we spoke after Q2? Because I guess, at that point there would have been kind of the big differential given where rates were.

I don't think we basically give that information but I think typically mortgage pipeline from origination to actually being booked is depending on markets anywhere from three to six months. So it's hard to say on such a quarter-by-quarter basis. I think we do measure monthly our new origination margins. And so far with a little bit of pressure in September, that has been accretive over time.

Okay. Thank you.

The next question is from Mr. Tarik EI Mejjad, Bank of America. Go ahead please.

Hi, good morning, everybody. Thanks for taking my questions. Two questions. First on the costs, clearly the compliance costs you mentioned a few times that are quite sticky and becoming a bit structural to your cost base. And you just mentioned in the question before that will be absorbed within the current plan. Did I understand that well? Or do you need to put in place a new savings plan with new investments and deliver the savings to absorb this over time? The second question is on capital and dividend. I mean, I understand that it's still not clear about the impact of TRIM and so on. But if all these things are actually front loaded the TRIM, the definition of default and also the DNB decision to put forward the output -- I mean the floors in terms of mortgages and so on would you be comfortable to keep still this progressive dividend policy despite seeing your CET1 actually falling quite sharply? I know it's like just a timing difference but you'll still be in a position where CET1 and buffers would be lower than what you usually had. Thank you.

Thank you, Tarik. Thanks for your -- so in terms of your first question. Clearly, we feel that current programs can be accelerated or well can have a bigger impact we will do so even if we reviewing all of the programs that are going on or all initiatives that on a quarterly basis are coming to our table because we run this on a quarterly basis. The investment programs that we have in order to deliver for example improvements of KYC but also the investments programs that deliver on a better experience or further efficiency, we continuously rank them as to impact. And therefore, it is maybe a mix of the current programs and more effective implementation of current plans -- programs. Could be also new programs as the one that I was alluding to that we did in Germany just last quarter and you can see the results already on the cost side this quarter. So if there's better programs than the current programs, we will certainly switch over to the ones that are better. But in the end, you have to make sure that you don't run into programs that you don't finish because in the end, it's also important to finish programs. But clearly, on a quarterly basis, we review all the programs that we have, we review all the investment, the discretionary investment money that we have in all of that as with the effectiveness on compliance customer experience as well as efficiency and that's how we kind of take our decisions. On the second one I will give the word to Tanate.

I think it's really reiterating what Steven has done. We have in this quarter continued to accrete capital at a good rate at 14.6%. And I think we are fairly confident about our guidance on Basel IV, the 15% to 18%. But I think for these new regulations on capital and the results of DoD and TRIM, we simply need to wait for those things to come along in the next quarters. So, nothing more to add beyond that. I recognize, it's a request for clarity but I think we just need to wait for that to come.

I mean I understand the maths, and clearly that you are comfortable in terms of buffer in light of sort of full picture. But it's just more than timing and how from management's perspective, you feel you can see through a bit of a blip in terms of lower capital, because it's just timing difference or you can't actually take that onboard and you have to basically keep that buffer reasonable levels. So, it's more like on a strategic view than the maths. I agree that on the maths, we need to wait for clarity.

I think if you look we have a comfortable buffer right, because our current MDA buffer requirement is 11.8%, maybe rising a little bit to 11.9% because of the countercyclical buffer requirement. But I think we still stand several basis points above that number. And given time we believe we can adapt ourselves and our strategy to come back to that 13.5% or around 13.5% post-Basel IV target.

Okay. Thank you. Can I just follow-up very quickly on the cost line? The legal provision, is that related to compliance issues you had in different jurisdictions? Or because I think Ralph you mentioned that that's in many countries.

Yeah. So, this is related to several cases in several countries and they're not necessarily compliant or AML issues altogether now. So it's a mix. It's a mix. So, maybe coming back on the CET1 ratio and the capital effect there, and just to reiterate we have the 14.6% where we are. We have a minimum of 11.93% whatever we need to have. With the countercyclical, it's quite a buffer so -- Tarik on your question strategically, every quarter we generate capital. This machine is really working very well 10% more than 10% return on equity. So we do feel comfortable to absorb that. But again timing-wise, it could be one quarter a little bit more than the other and we'll have to see how we manage that. But – yeah, so no specific worries on that side.

That’s very helpful. Thank you.

The next question is from Mr. Adrian Cighi, RBC Capital Markets. Go ahead please.

Hi there. Two questions from my side. The one question on cost of risk and one follow-up on cost please. On the cost of risk, I understand that a large part of your cost of risk in Netherlands, there's been some change in methodology in terms of the House Price Index. What would that have been under the old methodology? Would you have seen a big increase as well or have been differently? And maybe a follow-up on that have you seen any IFRS nine impact in the cost of risk increase? And then, on the costs side the KYC investments, the €50 million this quarter, how much more do you expect to have to take in the coming quarters as part of this remediation program? And is this sort of something you have visibility into? Many thanks.

Yeah. I'll take the cost and then Steven will take the one on the mortgages and the IFRS. So the KYC cost, clearly we're running up these costs. And that's a combination of what we agreed which is do look-backs. That is almost done. It's about file enhancements which we're really on track. And it's about structural solutions. Now look-backs as well as file enhancements that in itself will as for the moment stop, and therefore you could see the next quarters to kind of see the growth of cost stop there and maybe even decrease there. On the other side, from a structural solution perspective, that is something that we have to look at on a quarter-by-quarter basis as to how we can improve the effectiveness, but also the efficiency of that. So I can't really give you anything there. But clearly the enhancement and the look-back aspect of it is something that is temporary, but having said that we will have to do continuous review of our clients. And so, some of that capacity will stay with us.

Okay, Adrian. Then on your first question regarding the price index from the Dutch houses, if we would have been using the old index, the NVM index, the cost of risk would have been lower in Netherlands. So this is, I would say, a more -- a less volatile, a more stable but also a more conservative index that we're currently using. With regards to IFRS 9, the impact is limited. It depends on the markets. We have some -- we are seeing some better macroeconomic circumstances in Turkey compared to for example a number of quarters ago. But, if you look at the overall scheme of things in risk costs that has had limited impact.

Thank you very much.

The next question is from Mr. Raul Sinha, JPM. Go ahead please.

Good morning. Hi. Thanks for taking my questions. Maybe on the replicating portfolio to start with, could you give us some more color on what you're doing here. And how sensitive you are to the 30 basis points or so increase in the five-year swap rate that we have seen since the lows in August. Should we start to think about that drag maybe potentially alleviating a little bit?

Thank you very much for that. I think our critical point is really the three year, the five and the 10, right in terms of our replication. And I think if you look at the perhaps situation back in August, I think the picture looks a bit bleak given where the curve was at that particular point in time. Since then as you know we've seen really quite an improvement coming into September and now into October. So I think the picture varies, but I think it's improving given where the curve is today. And of course, we take various different hedging strategy in terms of hedging when we feel it's appropriate, and that also has a positive impact on margin as you can see in Q3 as well.

Thank you. Could I request for more disclosure on this please going forward? It would be really helpful I think from a market perspective to get a little bit more information around how it could impact your NII, because I think obviously it's become quite key to the outlook into next year.

Okay. We'll have our Investor Relations team touch with you there.

Okay. Thank you. If I can just follow-up on NII, then excluding the Financial Markets line and I think Ralph you talked about the performance in this quarter being down 1%. That’s obviously quite good in the challenging environment, but your volume growth is obviously being offset by a lot of the pressure you're seeing. Do you think this down 1% sort of performance is the best you can hope to achieve going forward or is there something you could do from a management perspective that could improve this NII growth excluding the Financial Markets line? Thank you.

Yes. So Raul, basically the way we look at this is that, given the commercial momentum that we have and the continuous growth of new customers that we get and with that not just the factor that the market is growing, but also that we are continuing to grow market share and improve margins. We think that over the next couple of quarters that we can offset the pressure on NII coming from more of the saving side of it with growing in our lending, improving our margins, growing in non-Euro areas. So from an NII perspective, we expect to see a flattish picture. But clearly if the yield curve improves it may help us a little bit upward on that.

Thank you.

The next question is from Omar Fall, Barclays. Go ahead, please.

Hi, good morning. Just a couple of things for me. Firstly, could you just quantify the amount of RWA relief from positive risk migration this quarter? Also where is that coming from given all the metrics you've discussed on credit and the worsening macro and more broadly? Then secondly can you just give more color on the impressive performance on commissions even if it's just a split in performance between account-related fees and more market sensitive fees please? And how much of that performance is related to the acts of partnership for instance? Thanks.

Okay. On the fee side, I'll take that and then Steven will come back on the risk-weighted assets relief. On the fee side, I'll give you a bit more insight there. As I said year-on-year, it's 9.4% on the retail side. It's 5.8% wholesale -- 5.8% including wholesale. I think the -- what you should kind of realize now is that the, onetime effect of the change of the composition of owned branches versus agent branches in Belgium and the fee mix of that is now neutralized because that all happened in the third quarter last year and so that is now here as well. So this is a real good comparison now. And therefore the 9.4% on the retail side is a real 9.4% on the retail side. If you go deeper into that, you see that this is a high-quality improvements across the board because in Holland we see an increase of just short of 5%. In Belgium, we see an increase of short of 8%. Then in Germany, I already mentioned specifically given the superb performance of Interhyp there as a mortgage broker over 21%. But then other C&G, so these are all the other growth -- but also the digital banks with new products or new fees being introduced or -- and including the AXA program. It's over 11% fee growth. So it's kind of a -- it's proving that focusing on this primary business -- this primary relationship in a digital way looking at how you can kind of offer simple transparent products to your customers digitally that that is really working. Now on your questions specifically as to AXA, I think it's too early to give you insight there. We are in the first quarter now of this JV initiating new products. We launched 7 products across 4 different markets, that's really too early to tell you or give you insight as to how much fees we're making that. Actually - so basically it is really early days. So the impressive performance on fees is not because of this. I mean this was just launch and it's not like this is now immense. So it's really because of all other products as well. So AXA and the growth and the success of the joint venture with AXA will kind of help us going forward even more.

Got it. Thank you. And just as a quick follow-up on that. In terms of that split between account-related fees and then more market sensitive fees that are put within retail. Could give us sense to that?

I don't have that here with me. So if you want to get a bit more insight, we'll see whether the Investor Relations guys can give you -- I just don't have it here with me as we speak. So Omar, if you could call the lady and gentlemen of Investor Relations that would be helpful.

Great. That will be great. It's just that the growth is so much higher than the pace of loan growth side. So I just want to get a sense of that. Thanks.

Yes, but it's not likely we didn't kind of indicate our comfort that we would be increasing our fees between 5% to 10%. So we have been guiding that for the last couple of quarters and so we're realizing it. So yes. Thank you Omar. And Steven?

Thanks Ralph. Omar on your question on risk migration, so for the quarter that was a positive impacts on CET1 of 19 basis points, so that's over €4 billion in RWA. It's actually realized across the board. So in Wholesale Banking, C&G in Netherlands, and mainly on the back of increasing prices in their retail franchises and Wholesale Banking driven by some LGD improvements in that finance.

Got it. Thank you

The next question is from Mr. Bart Jooris from Degroof Petercam. Go ahead please.

Yes. Just a follow-up question from my side, could you give us some more quantified idea about how the TLTRO III and the positive it could help in your NII?

I think about on the deposit tiering which has now come into affect roughly we have €50 billion in deposits with Central Banks. So we will benefit from the tiering on that amount. Roughly it will make it neutral, right? You can count on average that we get negative 50 basis points until the tiering scheme has come into place. From a TLTRO III, I think we still look at it on an opportunistic basis, we are actually quite well funded for the year and going forward so we may or may not participate on the TLTRO III. We just look at it on a pricing perspective going forward.

So on the deposit tiering effect is that already included in your NII outlook to stay flattish?

It's part of the outlook indeed.

Okay. Thank you very much.

The next question is from Mr. Kiri Vijayarajah, HSBC. Go ahead please.

Yes. Just quickly firstly a follow-up on that tiering question. Does all of the benefit get booked in the treasury unit that sits within the Wholesale Bank or does it feed through into some of the other divisions through the internal transfer price? And then secondly, can I just come back to the volume decline in Belgium. I can understand about the repricing and trying to get a wider margin there. But I wonder, is there any kind of change in risk appetite in Belgium mortgages. Are there any underlying worries about the Belgian housing market? And looking forward into next year, should we expect your market share in Belgium mortgages to make it bounce back or do you think it's still going to sort of stay more subdued lever at least grow slower than the rest of the market? Thank you.

Thank you, Kiri. I'll take the second one. Tanate is the first one. So, in Belgium, the fact that you see a bit of a decrease there that's not because of the development in the mortgage book. It is a particular client that has a bit of a swing in terms of outstandings and drawdowns. Now on your underlying development on the mortgage book we are increasing our mortgage book in Belgian because the market as a whole is growing. Our market share may be a bit down because as said we are very disciplined in pricing. So we try or we play a return game and not a volume game on this one. But with that the mortgage book is increasing, albeit may be at a bit lower market share. But the market as a whole is increasing.

Thank you.

Your question on the impact of the tiering. So as you know we run a centralized treasury function. But these impacts we would distribute into the business unit, depending on the level of liquidity each unit has. So, a lot of the impact will be in the retail bank.

Got it. Thanks guys.

Next question is from Mr. Benjamin Goy, Deutsche Bank. Go ahead, please.

Yes, hi, good morning. Two question from my side. First, on negative rates and some competitors or in some markets increasingly discussions are on passing debt on to retail clients as well. How do you see that influencing the competition and also deposit flows? Do you still see it as an opportunity to gain customers or is there increasingly a cost associated with that? And then secondly, your Stage three loans went up a bit in particular, driven by daily banking. So just wondering what was driving the increase? Thank you.

So Benjamin, on the first one, so we do charge rates to the larger professional clients and the clients that have really large deposits with us. And we certainly also do so in different currencies. And that's basically where I think -- where I can give any indication on that one. We are certainly looking at compensating the pressure on the savings side more in terms of looking for growth in non-Euro environments and growth in the lending book, the change in the asset mix, the repricing on the asset side.

Sorry there was a particular on retail client. So I know you don't just charge it, but some others do. So just wondering how you see that going forward significant deposit inflows and then the second question what do you with it in case it materializes?

Yes well we don't see that so let's not speculate on things that may happen. Steven?

Regarding the NPL increases, the needing benign overall NPL increase back to 1.6% which is the same level as where we were in the third quarter of 2018. So, it also -- you also see that a few of the portfolios have a slight increase and that tips the balance over from 1.5% to 1.6%. So it's not particular to daily banking. These are very small portfolios. It has a slightly increased NPL level as a result of which the move up is worth 10 basis points.

Thank you.

The next question is from Ms. Alicia Chung, Exane BNP Paribas. Go ahead, please.

Good morning everyone. Just one question for me. And it's really on the provision outlook for next year. I'd love to get your thoughts on that. I suppose what I'm wondering is do you think it will start moving closer to your through-the-cycle cost of risk because I guess there are a few moving parts to how should we think about visions next year. I mean obviously we're starting to see a little bit of an uptick in terms of provision normalization in Wholesale Banking where provisions have deteriorated a little bit across a number of sectors. And secondly, I see that NPLs are -- they've obviously crept up, but also the coverage ratio has now fallen to a new low of 29%. I'm just wondering, if you see 29% as a sustainable coverage ratio going forward and is a higher coverage ratio not more prudent -- appreciate there is an asset mix within that. But you do have a decent way to within Wholesale Banking. And finally, I imagine you will once start looking ahead to implementing ECB guidelines on calendar provisioning and definition of default, which certainly for some of the banks which just started implementing the definition of default so far taking it through higher P&Ls, so taking into account, the underlying provision normalization, your current view very low coverage ratio and the upcoming regulatory guidelines on provisionings. How should we think about cost of risk next year? Thanks.

Wow Alicia. Thanks very much. So, on the cost of risk, I mean, yes, there have been an increase in risk cost in this quarter, partially due to changing benchmark in the mortgages in the Netherlands. But I'd say a year ago, we saw a release based on some older dates. There were a couple of files in the Wholesale Banking that led to some higher risk costs. There isn't an uptick in NPL, but that's a limited extent. We see here and there the watchlist creeping up and that's based on a couple of files. So I think, it's too early to call to change the risk outlook for what I have said before. So the risk costs are still if you look at over a nine to 10 year cycle at a low end of the spectrum and we see an uptick here. We see a slowdown of GDP forecast and confidence here and there. But I think it's too early to call that this is a real change. If you then -- so in that sense, I would not change the outlook that I've given before which is that for this year we will be well below the sort of cycle average in risk cost. And for next year, I do not see at this point in time a change in that outlook. If you look at NPLs and the coverage ratio, I mean the coverage ratio in the end is an outcome of the way that we provision. And indeed as you rightfully pointed out the business mix that we have we have a large mortgage book and hence the coverage ratios there are always relatively to be benign and so the mix what you see there is what you -- what we end up at. And in that sense there is not a change expected in that sense. If you look at the definition of default, indeed that will likely come in the next coming quarters. We do not see an impact in that regard in cost of risk moving into our books.

Thank you, very, very clear. If you don't mind, I wouldn't mind just one other question. Just going back in terms of capital and headwinds from here, is it fair to say that between now and 2021 the main non-headwinds as far as you all are aware is a trend definition of default the macro potential how do we add-ons and I guess I would add to that calendar provisioning or is there anything else that you see in the pipeline?

I thought it was enough Alicia. So no that going -- TRIM, DOD and the macro potential impact on mortgages in Netherlands is currently what we have on stock, if there is something new that I will report on that.

Okay. Great. And TRIM is just a corporate portfolio.

That's TRIM. That's basically TRIM. So TRIM DOD Dutch mortgages.

Yeah. Okay. Thank you.

Thank you.

The next question is from Mr. Jason Kalamboussis, KBC. Go ahead please.

Yes. Hi, there. Good morning. A couple of things. The first one is on fees and commission. If we agree that for those that one to two year Ralph you were saying that you know the second half we could to see an uptick in fees and commission. But I just wanted to look when I'm looking at consensus this year that line specifically has come down by 5% so effectively the 5% to 10% growth targets that you have was eaten up already in a certain way. And when I look at also consensus – if I look at the CAGR 2017 to 2021 it's probably at 3% or roughly about there. So how should we think – how should we see the outlook on fees and commissions in the short or longer term and do you stick to the 5% to 10% or is it more likely to be a 5% because at the end of the day we even going forward we're well below that? And the second thing is on cost. The EUR118 million just a small clarification the EUR118 million differential let's say EUR50 million was for KYC we've had the legal provisions of EUR40 million but then the VAT was more than offsetting that. So if anything there is probably about the difference of EUR118 million minus EU50 million would be give you EUR70 million plus the benefit of the VAT is about EUR100 million. Is there any chance we get more granularity is it all CLA? So, that we have an idea. And for the KYC the EUR50 million is it fair from your previous comments to assume that this is the kind of thing that we could expect year-on-year for at least the next one or two quarters until we get more clarification? Thank you.

Thank you, Jason. Well, the fees I'm not sure exactly what kind of numbers you're looking at. But don't forget that the fees are a net number, which basically means, its fees that we get paid minus the fees that we pay. And I mean, you were going through a couple of numbers pretty quickly, but one point – one part that's really distorting the fee growth picture, historically, is the real switch in Belgium, which we made from owned branches to agent branches when we merged the two branch networks of record and ING. Basically, we have opened much more agent branches and closed more own branches, which means that our cost go down on one side, but we pay out more fees and that payout of fees affects the net fee growth picture. Therefore, and that's distorting the historical analysis. Therefore, I think this is the first quarter in which we see because we have been able to neutralize that effect year-on-year. So this quarter last year versus this quarter, this year basically you see that as more or less the same. The underlying fees paid out to the agents in Belgium, and now you can see the real growth. And based on that and based on the growth of our primary customer base, based on the introduction of new products, the behavioral fees that we're introducing some of the digital banks, some of the good mortgage production for which we get paid fees here and there as well. We do feel comfortable. We're continuing the guidance going forward of fee growth between 5% to 10%. That's one. The second question on the cost, can't give you more granularity at this moment in time than what we've already given which is the combination of the KYC increase of EUR 50 million. Yes that is what we think you can expect the coming quarters. And we'll be a bit of an effect of KYC cost going down because of the enhancement part being finished, but some of the structural parts being fully on stream then. So it's – we don't know exactly how that mix is going to look like. And then yes we do have a pretty big impact on CLA increases across the globe. So we see that as well. Okay?

Thank you very much. Very clear on the fees. Just on the – and good to know that you reiterate strongly the 5% to 7% outlook on cost. Just the Record Bank the commissioning I think there was – you had said I think Q2 that it was not necessarily going to come in second half. Is it this an item that we should be keeping in mind for first quarter of next year?

Yeah. Well that's – I mean in the scheme of things that is like below EUR10 million and it will be in Q4.

Fantastic. Thank you very much.

The next question is from Mr. Jean-Pierre Lambert, KBW. Go ahead please.

So two points, if possible. The first one is KYC. I look at the staffing in the Netherlands. It's been growing since the second quarter last year by 635 people staff. So, is that KYC or is that related to the arranged bridge? And is KYC concentrated mostly in the Netherlands the KYC cost? Second question is on your budget process, which you are probably undergoing for the moment. How do you look at the cost base and how is that related to the pile of projects you have with diminishing returns? Do you feel that next year you need to accelerate and add more projects to absorb the KYC? Or you feel things are safe as they are for the moment and you don't see the need to accelerate initiatives? Thank you.

Thank you, Jean-Pierre. Well on the cost or the FTE growth in the Netherlands its basically three components. The first one is that with the Unite program between Netherlands and Belgium, we guided in the past already that you should look more and more at the combination of the cost factors and therefore also the FTE factors between the Netherlands and Belgium, if it comes from the perspective of the domestic banking business. And so we are preparing the Dutch systems and the Dutch channels for migration after Belgium clients. And therefore, we are less investing in some of the systems in Belgium and more in the Netherlands. And hence, you would expect to see some FTE and cost growth in the Netherlands in order to prepare for that. So that's one effect of what you see happening in the Netherlands in terms of FTEs. The second one is, certainly also KYC. Both for the domestic bank in terms of the final enhancements the look-backs and all the stuff that we need to do. But also the central KYC cost. So we have set up as we launch these programs as a global program. We set up a central team, developing central tooling, which is partially in the Netherlands and partially in different Nordic countries, working on that. And that also has a specific effect on FTEs in the Netherlands. And then thirdly, with a lot of the work coming from a more regulatory perspective, we do see also a further increase in people working on the risk side, if it comes to for example the modeling aspect of the risk management. The data knowledge and the data scientists that we have to hire and we hire them all over the place, but specifically also in the Netherlands. So, I…

Great, thanks very much, Ralph.

The next question is from Mr. José Coll, Santander. Go ahead please. José Coll: Hi. Thank you for taking my questions. The first one is on OpEx. And more specifically on group salary cost. So when I look at the number of FTEs it grows 2.8% versus third quarter last year. And your salary costs may grow 2.1% in the first nine months of this year versus the first nine months of last year. So, the question is whether this FTE growth is driven by compliance staff, which should be non-revenue-generating stuff. And if so whether they're making the same salary as your average base? And the second question is well I suppose it's too early to talk about dividend guidance. But this may be a silly, but honest question, on your dividend policy. When you say you have a progressive dividend policy, does this mean that the amount that you pay in dividend should grow? Or is it the payout ratio that should grow, if you could please clarify? Thank you.

Well, José on the first one -- Yeah. I don't know the specifics here. We should maybe come back to that question, on your salary cost versus the increasing FTEs. It is clear that, we are getting more and more people in on compliance in KYC. But it is something we need to do. So I mean this is what it is. At the same time also in that area we see innovation coming through, that the new technology coming through, that both improves on the efficiency as well as the effect of the site. So, we will continue to work on that. We also see temporary staff in that area in order to do the final enhancement. So that's also a picture that you could -- that you see coming through, in right there. And so you see there that if you have kind of the external staff some of these are also more expensive than internal staff, but they're also temporary. So, it's a mixed bag really. It is really difficult to draw conclusions there. On the dividend policy -- the dividend policy that we have had over the last couple of years is a progressive one. It's progressive in terms of that the amount grows. Thank you. José Coll: Thank you.

I think those were the questions then. Okay then, I'd like to thank you. Thank you for being here with us this morning. And go through the quarterly numbers. I'm sure during the day you may have more questions. You know the IR staff, is there in order to answer or more questions and more detailed questions as well. For now just summarize the quarter. I think that the top line shows resilience in a time of real challenge, a negative rate environment challenge. And that resilience comes from the fact that we do have a franchise that grows, we do have capabilities to improve margins and combine volume growth. So that's helpful. At the same time we see the fee guidance, that we've given now actually coming through because we have a clear picture now year-on-year. So you see that these franchises, these digital franchises, if you make them primary client-driven that you see more cross buy coming through and with that also more fees coming through. So that's resilience on the income side. On the cost side, two specific remarks to be made, one is the KYC and the other one the overall cost CLA-driven cost, and some one-offs as a mix overall leading to a good picture of EUR1.3 billion bottom line. And as said, focusing on the client is important. And with that KYC and understanding truly your client is important as well. Thanks very much. And I wish you a good day.

Ladies and gentlemen, this concludes the ING Third Quarter 2019 Conference Call. Thank you for attending. You may now disconnect your lines. Have a nice day.