Good morning. This is Saskia, welcoming you to ING's Fourth Quarter 2023 Conference Call. Before handing this conference call over to Steven van Rijswijk, 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 a historical fact. Actual results may differ materially from those projected in any forward-looking statements as 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. Noting in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Steven, over to you.

Thank you very much, Saskia. Good morning, and welcome to our results call for the fourth quarter. I hope you're all well and had a good start of the year. And as usual, I'm joined by our CRO, Ljiljana Cortan; and our CFO, Tanate Phutrakul. In today's presentation, I would like to highlight our exceptional results in 2023, discussed that the developments that we saw in the fourth quarter and share our outlook for 2024. And as always, there will be room for questions at the end of the call. First, I will start with explaining how we were impacted by the developments in the world around us on Slide 2. Notably, we live in a world with increasing geopolitical tensions and conflicts in many countries, resulting in the loss of many lives. And we're saddened and concerned by the devastating impacts that these conflicts are having and the threat that they pose to international stability and security and these tensions also have an ongoing effect on the global economy and have led to heightened economic uncertainty and increased pressure on supply chains. At the same time, inflation remained elevated for most of 2023 and only came down towards the end of the year. To take this inflation, central bankers around the world have increased policy rates at an unprecedented speed. And now with inflation at a much lower level, the market expects rates to come down during 2024. The economies have proven to be resilient and the IMF is forecasting '24. We've also witnessed political and regulatory uncertainty in 2023. Several government elections have already had a surprising outcome and other important elections are coming up in '24. On the regulatory side, we've seen increased volatility following the collapses of Silicon Valley Bank and Credit Suisse. And in the…

[Operator Instructions]. And first up, we have [indiscernible] Mori from Autonomous.

Just two questions, if I may, both kind of digging into the outlook statements on Slide 20, if possible. Firstly, you're indicating that the Eurozone replicating income will increase in 2024. Could I just ask, is that driven by volumes? Because I would have thought the replication yield would actually maybe dip a little bit this year before moving better in '25. And then secondly, just following on from that. What is driving then the convergence of the liability margin towards 100 bps since if the replication yield is not coming down, I presume the suggestion is that deposit rates will be sticky downwards. So kind of which side is pressuring the margin in '24?

Okay. I'll get this question to Tanate.

I think if you look at our simulation on Page 20, in volume increases. But for the sake of this simulation, we don't. And in Q4, we also see continued increase in the level of replication income that we have, okay? But a couple of other points to mention, in particular, on Q4 is that we actually increased the deposit for core rate for the Netherlands and Germany, which is two of our biggest books, right? And when you increase the call rate, it priced the whole savings book. So that's something to take a note of. And I think as for the future, I think it's not so much that the replicated income will come down. It's more a reflection of the fact that the ECB curve is expected to reduce next year by 150 to 200 basis points. That's more the reflection why we have said that liability margin, which is on the high side at the moment, will go to the historical average of 100 basis points.

Thank you. And our next question now comes from Giulia Miotto from Morgan Stanley.

Two questions from me as well. I mean, I know that you have given the 2024 NII guidance, but I was trying to ask a question about 2025. Essentially, looking forward and assuming an interest rate of 2%, is the direction of [indiscernible] downwards because you think liability margins will go down to 100% or in fact, given that in 2025, you can cut the deposit remuneration, NII can stay stable or even grow. So this is my first question. And then on the second question, in terms of, sorry, actually, let me stick to one. This is my most important question.

Tanate?

Yes. So I think if you look into 2025, it's a question of the different levers that would happen. I think, one, if you look at replicated margin -- replicated revenue, , given the fact that we have roughly half of our replicated book in the bucket of below one year, okay? But having said that, there are other levels that are at play in our NII line. Number 1 being clearly loan growth, potentially higher spread in terms of lending and deposit growth numbers. So these are also positive impact that would negate to a certain degree. And then the last one, which, of course, we don't give guidance on is what we do in terms of deposit rates offered to our customers, right? That you would imagine in a lower rate environment, we would start tracking downwards, but that's something for the future.

Thank you. And next, we have Tarik El Mejjad from Bank of America.

Just a couple of questions, please. First, on NII. So to come back to that again. But just to understand really the liability margin dynamics. So now we are at . You guide for the full year will be But I guess the downward trend will continue into '25 of the liability margin before we hope to see some improvements in the back end of '25 when you can start to cut deposit rates. Is that the way to look into it? And then obviously, volumes and asset spreads another discussion. And then secondly, on the costs. [indiscernible] I mean the waterfall chart is very useful, and we can have my view on the different moving parts. But when you talk about additional savings, can you discuss a bit more what kind of savings you would be implementing? And should we expect the kind of savings we had in the last 2, 3 years, we would exits from some geographies in the Retail and some businesses or will be more kind of work -- here and there some better cost efficiency.

I think on NII, I think it's not the right assumption to say that we expect deposit margin to go below 100%. There's a number of actions that we would take in that case in terms of promo rates to customer, in terms of core rate reductions, in terms of deposit growth, variability there. So I think from that perspective, we see the 100 basis point NII as more of a long-term levels that we're confident we can manage at that kind of particular level. So that's really the question on NII. And to ask your second question in terms of cost reduction, what's contained in that 2% or €200 million. It's not about the impact of reducing our footprint, right? It's really about digitizing the core operations of ING. And maybe I can call out what some of the big highlights for those €200 million reduction would be. One would be clearly a reduction of front office staff and branches, that would be one area. The second is the positive impact in terms of optimizing and automating our KYC processes. That would be the second. And then the third would be reductions in terms of our tech investments from the -- of our digitization spend from the previous year. So these would be the three buckets that would drive those cost reduction more about digitizing the core of ING rather than footprint reductions.

Very helpful.

Thank you. And from JPMorgan, we have Raul Sinha with our next question.

Two questions from me, one follow-up and one on capital distributions. Firstly, the follow-up, Tanate. I just come back to this because it seems to be very important. You're indicating that the liability margin, you can maintain at 100 basis points, which you're expecting to hit that level by the end of 2024 based on the forward curve, which implies that there will be further rate cuts in 2025. So essentially, what you're indicating to us is that your liability margin, you can manage around 100 basis points even in 2025, even if you have rate cuts. Is that a fair conclusion?

You had two questions. Do you want to ask both questions?

And the second one is just on the capital ratio on the distribution, and this is more for Steven. I mean, I'm sorry to flag this, but the capital ratio has actually increased to 14.7% from 14.5% last year despite your best efforts to get -- to reiterate the target of 12.5%. So I guess the real question is, what are you actually planning around this? It appears that doing capital return every 6 months is not enough based on the trajectory you have. So are you thinking about an acceleration? Because you're not mentioning this in your outlook for 2024. Could you even consider maybe moving to every quarter in terms of capital distribution, perhaps including some special dividends if you're not able to buy back -- enough, just to get some thoughts on where -- what gives you comfort that you can actually reduce the capital target towards the capital target when actually your capital ratio is going up.

Yes. Thank you very much, Raul. And thank you for calling out the fact that indeed, our capital went up compared to last year from 14.5% to 14.7%. That is correct. That also has to do, of course, with the performance. So I can't complain. But it also means because we gradually towards -- around 12.5% by end of 2025 that we will continue with looking at how to optimally do our capital distribution and we maintained the rhythm that we have that we have maintained for the past two years -- will come back and the next time, therefore is during our first quarter results, in which we come back with explaining what we will do in terms of capital distributions at that point in time, including potential share buybacks.

And to confirm, yes, our view is that we can maintain for the long term and interest rate margin of around 100 basis points on liabilities.

Thank you. And we're now moving on to our next questioner, which is Benoit Petrarque from Kepler Cheuvreux.

So a few questions on my side. I wanted to come back on the Slide 20 on the NII outlook. So if I sum up everything, my impression is that your convergence towards the 100 bps is clearly quicker than expected in '24. Now you will maintain that in '25. But trying to understand why you expect now in '24 this guidance. Obviously, you expect ECB rate to be cut quite aggressively. And it seems that you expect well, that adjustment will be more back-end loaded, i.e., competition forces will play. You might not be able to cut deposit rates as much as you might want in '24 and the cut might more becoming in '25, i.e., allowing you to maintain your say, liability margin -- stable also in 2025. So I just wanted to kind of confirm this view. Also on this chart, I wanted to come back on the lending margin because you assume flat lending margin -- margins. And I will expect in the low interest -- to see kind of more positive trends on lending margins. So just wanted to check if I missed something here. And then final, just a short question on the top line. I think you said it will be somewhat below the '23 level at 22.6%. Can we assume something around the €22 billion just to help us to model the bank?

I think on liability margin, there's a number of views that you have to take, and this is one possible scenario, right? And you heard from the Federal Reserve last night that the liability or the discount rate could be delayed, right? So that could be a driving factor. And then as I reminded you at the beginning, half of our replicated portfolio is below one year. So we are driven to a certain degree by what happens to the discount rate by the ECB. So that's a simulation, that's a discussion point. The second one that you mentioned is what do we expect in terms of tracking speed in terms of on the way down. It really depends on how sharp the ECB rate comes down, right? If the ECB brings rate down in a gentle manner, then you would expect that tracking will be slower, but if the ECB bring the tracking speed down in a dramatic fashion, then rates would be -- the market will be more open to our faster tracking speed on the way down. I think that will be my opinion. Then on the lending margin itself, yes, it is an assumption that we have shown here. It's a one possible scenario. But one thing that you could already see in Q4 for ING is that the mortgage margin when rates come down, that margin opens up. So that's a potential different scenario, a more positive scenario than what we've shown here. And then the last question on guidance on total income that we do not give at this time.

Sorry, Tanate, the tracking speed, just to come back on that, did you assume a relatively slow tracking speed in '24 versus the speed of the ECB rate cuts?

Sorry, that we don't give us guidance, but what we say is that we're confident we can manage the liability margin to around 100 basis points.

And we're now moving to a question from Sam Moran-Smyth from Barclays.

So just the first one. So on the bridge in Slide 20, I apologize -- appreciate on this, but the other segment, which includes the MRR, I just wondered if you could outline the assumptions behind that, you're modeling an increase to 2% and then even further in a scenario where it does increase to 2%. Do you think you could get some kind of dispensation on the fact that you're having to take -- gross deposits, which for your business are quite different [indiscernible] should we think about the €8.5 billion doubling if you do go from 1% to 2%. And then secondly, just on the loan growth assumptions of 4%. Could you possibly take us through the assumptions you have on different geographies and different products or at least where you see particular opportunities for volume growth?

Yes. Thanks, Sam. With regards to the MRR, indeed, when you talk about the €8.5 billion, which is a deposit rate of 4%. If we don't get anymore, you -- then you get to the €300 million that we have there, if that would not account for 2%, then actually you double that, that means that the 1% growth is 2%, then basically, you double that amount. So that means that, that would have an impact of an additional €300 million on our P&L. So that's what it would mean. And again, they are studying it that we have said already, we find that we will find it strange given the fact that the more [indiscernible] ECB is focused on bringing inflation down. And the on the one hand and have higher interest rates, on the other hand, would charge banks for their deposits. That means that banks would move their deposits somewhere else to the capital markets, and that would then bring interest rates down again. So it will almost be counterintuitive to monetary policy. But let's just see what happens there. The second one is on loan growth. I mean, actually, we see that across the Board happening now. If you look at the fourth quarter loan growth of Wholesale Banking of around €3.5 billion is that is if you extrapolate that to the year, you get to around 4%. That was more or less the average over the last decade or so, excluding the year 2023. So that is coming back. That was actually quite subdued. And also in the mortgage markets, we see, for example, the number of houses being sold this year increase, depending on the market, with a number of percentage points compared to last year. And the Netherlands, the number of dwellings sold, came down with 6%. In the coming year, we expect that to increase again with 3%. You see that more than half of the offers made is above the asking price, which again shows that it's going to be a sellers market again. So we see actually growth on all fronts, both on private individuals and the mortgages and on Business Banking and the Wholesale Banking.

We're now moving on to a question from Kiri Vijayarajah race from HSBC.

Yes. A couple of questions from my side. So firstly, coming back to the NII guidance, I'm afraid. So the deposit margin assumption, I just wondered, are you baking in another repeat of the aggressive deposit-led marketing campaign you did earlier on in 2023? I know it helped you add to customer numbers. But also you were standing optimistic on deposit volumes. So what have you baked in there in terms of repeating what you did last spring, I think it was primarily in Germany. And then second question, turning to the costs on Slide 22 and your 3% of the cost growth in that waterfall coming from business investments. I just wondered how should we think about that? Is that to drive those operational efficiencies you show on the same slide? Or is it more about you need those investments to drive the kind of the volume growth assumption, the 4% or to drive the uptick in the fee growth your -- marks for 2024. So how do you think about the investment cost growing, adding 3% to your cost base?

Yes. Thank you very much. Yes, look, in terms of marketing campaigns, yes, we will not announce a front when we will do specific marketing campaigns. That's how it works. But what we have penciled into our P&L is investments in marketing to grow our customer base. For example, we have a target in Germany to grow our customer base by 2025 to 10 million coming from 9 million in 2023. So there is a target, and I am confident to meet it, and that's also why we need to invest in marketing. And in that setting, there are three buckets, if you will, where we invest. First of all is to -- is in growth and the marketing is part of that, but the investments in marketing will be there to support customer acquisitions in selected markets. The second bucket is to make investments in -- payments of infrastructure. As you know, we are a top quartile, cost-efficient payment infrastructure. In Europe, we want to get to top decile because then you get more payments on your system and you can broaden your services. And for that, we make investments and we in the same [indiscernible] also make investments in enhancing our financial markets business to also being able to diversify further in financial markets. And the third bucket is that we continue to strengthen the core banking operations as both the core banks, our , our end-to-end digitalization journeys in G6 that we invest in that helps us to gain more customers, helps our customers to become more primary customers and do more with us, but at the same time, also realize those operational efficiencies that you also see on that page. But those are the three buckets. So marketing, payments infrastructure and financial markets infrastructure and strengthening core banking and [indiscernible] journeys.

And up next, we have Mike Harrison from Redburn Atlantic.

Two aspects, please. One, margin, one on capital. The guidance you're giving for the NII outlook, I assume that's predicated the replicating portfolio sitting in [indiscernible]. Why this increase from -- I think it was 45% last quarter, and it was 40% about a year ago. And might be the mix of -- duration mix of the replicating portfolio shift as rates fall. And then second, just a numbers question really, just on your RWAs. I think your -- RWAs grew by €3.5 billion this quarter. Is that the 20 bps for the standardization of [indiscernible] flagged in the previous quarter? Or is that something different?

I'm sorry, I take the question on operational risk-weighted assets. That is not the 20 basis points, but that is based on a change in our operational risk-weighted asset model that has caused that change. Sometimes it goes up, sometimes it goes down. You can also see it in previous quarters. So that is not different. In the end, by the way, we will go to standardized on operational risk-weighted assets. And that is what that 20 basis point is relating to .

Then your question on replication, why we are shortening the replication. We basically manage that on interest rate outlook, client behavior, their sensitivity to kind of rate movements. And given the current rate environment, we just feel that our models indicate we should be shortening the duration, and that's what happened between Q3 and Q4. So it's more driven by balance sheet stability, earnings stability than any particular interest rate strategy.

[Indiscernible] is based on where rates -- what rates look like in the fourth quarter, not necessarily what the forward [indiscernible] with pricing at the end of the year.

It's a combination. We run various different interest rate scenario and also customer behavior sensitivity to rate movements. So it's a combination of factors.

Understood. Thank you.

And we're now moving on to Marta Sanchez Romero from Citi with our next question. Marta Sánchez Romero: Thank you very much. So you're stocking down today almost 9% because of an NII miss that was long in the making and I think, a result of a lack of transparency. So my question is, have you consider improving your disclosure? I'm not sure that [indiscernible] today are very helpful. And when I see other banks in Europe, they do provide a framework that allows the market to have a better picture about NII trajectory, and there is no disconnect that we are seeing today. And my second question is on deposits. Can you give us an outlook for deposit volume, deposit growth for your three key markets, the Netherlands, Germany and Belgium? You've lost [indiscernible] of deposits in the Netherlands. What is the expected trajectory? And then related to this, what has been the retention rate on the campaign you launched in Germany back in April?

Yes. I will respond on the first question and Tanate will respond to the second question. Thanks for the feedback. And I think that we have been very clear in what we guide for 2024, and we will -- thanks for the suggestion, we will look at it. But for now, I think that the rates are where they are, and I think we were very clear on what that means for 2024. Tanate?

And then the reduction in deposits in the Netherlands is more -- I think if you're looking at the table, more treasury-related declines, not so much on our core deposit numbers, which are somewhat up, actually. And in terms of deposit campaigns in Germany, you shouldn't take that as an indication for what may happen in Germany in 2024. That was an exceptional campaign. What we can say is that competition for deposits in Germany seems to be coming down in light of what what rates are doing and what rates per year. So I think 2023 was more exceptional than normal.

And we're now moving on to Johan Ekblom from UBS.

Just two clarifications on NII, please. Just first of all, do I understand it correctly that the rate assumptions you've used are forward curves as of the end of December, which would imply to be at at the end of this year? And then secondly, just on this accounting asymmetry, which I think has caused a lot of the volatility or uncertainty in recent quarters, you make an assumption that it doesn't change from the Q4 run rate. Can you talk a little bit about to what extent that is a kind of simplifying assumption or if that's a prediction of what you think will happen in 2024 because I think in the past two quarters, you said that it should reverse over time. And I guess, at least my interpretation was that it was in the kind of medium term rather than something that will stay for years and then gradually reverse at some point?

So on the deposit curve, yes, the simulation was done on the basis of December curve. And then on the guidance on NII and other income that you see in treasury, we provide more stability now and more guidance on that. And our expectations is that it would remain during the course of 2024, but that, of course, where there such arbitrage opportunity would continue to exist or not. But for now, our guidance, [indiscernible] would exist in the same pace in '24. And if that were to change, then obviously, you can see that in our quarterly results announcement through the course of this year.

Thank you. And we're moving on to a question from

Two more questions on the liability margin. I'm afraid. So the first one is to understand, does the liability margin as you presented include the drag from the treasury rate differential effect? So am I right to think that, that's based on statutory NII? So if you were to give an adjusted liability margin, it would be even higher, is that the right way to look at this? And then secondly, this 100 basis point normalized level, how do you get to that? What time period or what's your frame of reference to get to that level because presumably you're having to look quite a long way back to find a previous normalized rate environment to base that on. So just to understand where you get your confidence in that 100 basis point end point from, please?

Okay. On the confidence of the 100 basis points, well, we have been through a number of cycles and have seen that we are able to actually manage it at that level. Secondly, if you now look and you can also see it in the appendix of the presentation, how much the amount of current accounts compared to the number of savings accounts that are still relatively high. So that still means that we have a lot more to -- a lot more cushion in that sense. And thirdly, in the previous cycles, we had a lot more savings only customers and now we have a lot more primary customers that are a lot more sticky than we have seen in the past. And that gives us the confidence that we can manage this at 100 basis points.

Then to answer your question, Matthew. And I hope I understand your question correctly to say that if we don't have these arbitrage trades in the treasury line with our NII be higher? And the answer to that will be yes.

But specifically, it would be in the liability margin.

It would be in the liability margin indeed.

[Operator Instructions]. We're moving on to Hugh Moorhead from Berenberg.

Just a quick one on other income. I appreciate that you're assuming stable accounting asymmetry in the 2024 NII guidance. But what sort of assumptions around other income and retaining that €3 billion 2023 figure are in your guidance for revenue to be somewhat lower in 2024? And then the second one on cost of risk. You're currently guiding for through the cycle level of [indiscernible] in your 12% 2024 ROE guidance? And could that level be reviewed as part of your CMD engine?

Sorry, can you repeat the second question, please?

Yes, of course, 25 basis points through the guidance cost of risk level, is that being assumed for 2024 cost of risk in your 12% ROE guidance? And could you review the 25 basis point level at your CMD as part of your kind of refresh of CMD targets in June.

Okay. Thank you very much. So I think, clearly, we don't guide for risk costs in a particular year. So we also don't do that for 2024. But what we have said is that our risk costs through the cycle are around the 25 basis points. Clearly, you see how we're doing on risk costs over '23. We are quite confident in our loan book and the strength of our assets and , we have factored in, but we have not given a specific guidance for 2024.

And then you see that our other income is somewhat elevated in 2023 . And I think part of that is the symmetric accounting treatment between NII and other income, but partly is also driven by really strong financial results from Financial Market division and Treasury division in 2023. And that we don't give guidance on, but just to say that the results in '23 were very strong.

And as there are no further questions in the queue at the moment, I would now like to hand the call back over to you, Mr. Van Rijswijk for any additional or closing remarks.

Well, thank you very much for your time. Thank you very much for your attention and the good questions. All the best during 2024, and we look forward to seeing you again soon. Thank you.

And you may now disconnect.