Earnings call transcript: ING Groep’s Q2 2025 performance and strategic initiatives

ING Groep NV’s recent earnings call for the second quarter of 2025 highlighted a robust financial performance, driven by increased income and strategic innovations. Currently trading at $16.93, InvestingPro analysis suggests the stock is undervalued, presenting a potential opportunity for investors. Despite economic uncertainties, the company showcased growth in various segments, with a focus on digital transformation and market expansion. The stock remained stable, reflecting investor confidence in the company’s strategic direction, supported by a notable revenue growth of 14.36% in the last twelve months.

Key Takeaways

• Total income increased from the previous quarter, supported by net interest income growth.
• Fee income rose by 12% year-on-year, enhancing revenue diversification.
• The company launched a digital bank account for teenagers in Spain, expanding its product offerings.
• ING Groep is targeting €5 billion in fee income by 2027.
• The housing market recovery contributed positively to the company’s mortgage lending performance.

Company Performance

ING Groep reported a solid performance in Q2 2025, with total income rising due to customer deposit repricing and volume growth. The company saw a notable increase in fee income, which grew by 12% compared to the same period last year. This growth aligns with ING’s strategy to diversify its income streams and reduce reliance on traditional banking revenues. With a return on equity of 10% and an attractive dividend yield of 8.13%, InvestingPro data reveals the bank’s strong fundamentals. The company’s focus on digital banking and innovation, such as the introduction of generative AI-powered chatbots, is expected to further enhance its competitive position.

Financial Highlights

• Revenue: Increased compared to the previous quarter.
• Net Interest Income: Supported by customer deposit repricing and volume growth.
• Fee Income: Grew by 12% year-on-year.
• Expenses: Rose by 4.5% year-on-year due to wage inflation and business growth investments.
• Risk Costs: Totaled €299 million, reflecting 17 basis points of average customer lending.

Outlook & Guidance

Looking ahead, ING Groep expects to grow its fee income at the higher end of the 5-10% range, with a target of €5 billion by 2027. Analysts tracked by InvestingPro forecast EPS of $2.34 for FY2025, supporting the company’s growth narrative. The company anticipates continued growth in commercial net interest income in the second half of 2025. Despite economic uncertainties, ING maintains a positive outlook on its lending margins, expecting a recovery to 125-130 basis points by 2026.

Executive Commentary

Stephen van Rijsvik, CEO, emphasized the company’s focus on diversifying income streams, stating, "We continue to grow our fee income because that is diversifying our income streams." CFO Tanate highlighted the company’s revenue strategy, noting, "We are more fee intense in terms of our revenue which is more ROE accretive." These statements underline ING’s strategic direction towards enhancing profitability and shareholder value.

Risks and Challenges

• Economic Uncertainty: Potential impacts on long-term corporate lending.
• Wage Inflation: Continued pressure on operating expenses.
• Regulatory Changes: Possible implications for banking operations.
• Market Competition: Intensifying competition in digital banking.
• FX Sensitivity: Impact on revenues due to currency fluctuations.

Q&A

During the earnings call, analysts inquired about the company’s FX sensitivity and its impact on revenues. ING’s management addressed these concerns by explaining their deposit campaign strategies and potential corporate lending recovery. The discussion also highlighted the drivers behind the company’s improved return on equity (ROE) guidance.

Full transcript - ING Groep NV (INGA) Q2 2025:

Tanate, CFO, ING: Thank you, Steven. I would like to start on slide 11 where we show the development of our total income which increased further compared to the previous quarter. Commercial NII was supported by the repricing of customer deposits and continued volume growth which almost fully compensated for the impact of the lower ECB deposit facility rate and a stronger euro which Stephen alluded to earlier. On a sequential basis, the appreciation of the euro had a €37,000,000 negative impact on the commercial NII. Fee income increased significantly and grew by 12% year on year.

Most of this growth is structural which is also why we expect our expectation for the full year have increased. Lastly, all other income which is a combination of other income, investment income and other income was supported by good results in financial market, treasury and higher income related to our stake in Van Lanschott Kempenbank. Now let’s discuss slide 12 where we show continued growth in customer balances. We recorded another quarter of strong commercial momentum particularly with our retail banking business. Net core lending rose by €15,400,000,000 driven by record growth in retail, which grew by over €11,000,000,000 We continue to do well in mortgages, grew the loan book in most of our markets in the second quarter.

We also saw an increase in business lending portfolio notably in Belgium, The Netherlands and Poland. Wholesale Banking also grew net core lending driven by working capital solutions and short term trade finance related financing. Demand for long term corporate loans have remained subdued due to the ongoing economic uncertainty. On liabilities, we saw core deposit increase by more than €6,000,000,000 this quarter due to a strong performance in retail banking, which benefited from the payment holidays allowances. In wholesale, growth in PCM and money market was more than offset by lower short term balances in our cash pooling business.

On slide 13, you can see our commercial NII was resilient. Liability NII was affected by the pressure from lower ECB deposit rate and the full quarter impact of the successful promotional campaign in Germany launched in the first quarter. These effects were almost fully compensated by repricing of customer deposits and strong volume growth. I’d like to note that the liability margin would have been stable without the impact of the German savings campaign. Lending NII was impacted by the appreciation of the euro relative to other currencies, but still grew versus the previous quarter supported by volume growth.

The lending margin contributed to be affected by the mix shift towards our more profitable retail business with significant growth in mortgages which have a lower lending margin but a higher ROE. I will give more insights on this in the next slide. The progress on our strategy to allocate more capital towards more profitable retail banking business is visible on this slide 14. At the time of our Capital Markets Day, the distribution of capital between the two business lines was roughly equal fifty-fifty. We set the target to changes to 55% retail and 45% wholesale by the 2027.

By the end of the second quarter, the share of capital allocated to retail has already exceeded 53% reflecting strong growth momentum in retail banking and the focus on capital optimization in the wholesale bank. The ROE of retail lending is higher than in wholesale lending as despite lower lending margin the relative RWA consumption and risk costs are lower. As such faster growth in retail banking has a positive impact on the group return on equity but a dampening impact on the overall lending margin. In the second quarter, the impact of this shift was roughly two basis points. Turning to slide 15.

Fee growth year on year was again double digit driven by structural revenue driver or what we call alpha. Wholesale banking fee came in at $360,000,000 a quarterly record for our franchise driven by strong fee income in lending, daily banking and trade finance. Growth in retail banking was fueled by a continuing increase in mobile primary customer, which also resulted in higher daily banking fees. Investment product had also a strong quarter, reflecting growth in the number of investment accounts, increase in asset under management and higher customer trading activity. In addition, retail banking expanded its fee income from insurance product by 8%.

Total fee from insurance product now amounts to almost €70,000,000 this quarter. Given the strong performance across the bank, we’re confident we can grow our fee income at the high end of the 5% to 10% range this year and reach our $5,000,000,000 target in 2027. Slide 16, we show the development of all other income. Income in financial market is mostly driven by client activity. We continue supporting our clients in turbulent times and this is evident in the results.

Treasury has again a strong quarter which income on both comparable quarter mainly driven by results from our FX ratio hedging. And we benefited from positive revaluation of derivative for the forward purchase contract for our stake in Van Laanschott Kempen. Following the regulatory approval received last week, we now hold a 20.3% stake in this bank. Next slide 17. Our expenses excluding regulatory costs and incidental items rose 4.5% year on year but was stable compared to the previous quarter.

The year on year increase was largely attributable to wage inflation, continued investment in business growth, mainly in customer acquisition, in enhancing and scaling our tech platform and developing product for new customer segments. In Spain for example, we have launched a dedicated digital bank account to support customer between age 14 and 17 with a tailor made experience in the existing ING app. Operating efficiencies compensated for part of the cost increase and we continue to digitize our services and infrastructure to further increase operating leverage. We have for example deployed our one app in six different retail markets and have introduced generative AI powered chatbots in The Netherlands, in Germany, in Belgium, Romania and Spain. Incidental expenses also included $85,000,000 for rebalancing of our workforce in Wholesale Banking resulting in around two thirty redundancies.

As a result of our focus on expense management, we have improved our outlook for 2025. We now expect total expenses including incidental item recorded in the first half of this year to end up at the lower end of the range we gave earlier. Now on to risk costs on the next slide. Total risk costs were €299,000,000 this quarter or 17 basis points of average customer lending, which is below our through the cycle average and demonstrate the quality of our loan book. Net addition to Stage three provisions amounted to $221,000,000 and were mainly related to collective provisioning in various retail markets.

Individual Stage three cost decreased reflecting limited inflow of newly defaulted files. This is also reflecting a further decline of our Stage three ratio. Stage one and Stage two risk costs were $78,000,000 including addition to reflect update of the macroeconomic forecast. We remain confident in the quality of our loan book. Slide 19 shows the development of our core Tier one ratio, which came down compared to last quarter.

The decrease in core Tier one capital is fully to the reduction of capital from the ongoing €2,000,000,000 share buyback, which is partly offset by the inclusion of €800,000,000 from the quarterly net profit for this quarter. This decrease was partly offset by lower risk weighted assets. Credit risk weighted assets excluding FX impact increased by $5,200,000,000 this quarter. This is mostly driven by volume growth, partly offset by impact of positive model updates and the change in the profile of the loan book. Operational risk weighted assets remained flat while market risk weighted asset decreased by $2,400,000,000 due to hedging and FX activities.

The interim dividend over the 2025 is $0.35 per share and will be paid on the August 11 continuing our established track record of providing an attractive return to our shareholders. Now Stephen would like to wrap up today’s presentation.

Stephen van Rijsvik, CEO, ING: Indeed. Thanks, Suneet. And I would like to recap a few messages before going into Q and A. To start, I would like to say that despite the ongoing geopolitical and macroeconomic turmoil, we have been able to generate continued commercial growth in this quarter. Commercial NII was resilient and we expect this to grow in the second half of this year.

Fees have grown by 12% compared to 2024, and we feel confident we can grow fees at the higher end of our 5% to 10% range this year. And costs remained well within our guidance. We are taking proactive measures to ensure we continue to operate efficiently and our forecast total expenses to end up at the lower end of the 12,500,000,000.0 to €12,700,000,000 range we indicated earlier. On all, this translates into an improved outlook for profitability in 2025, and we now expect to deliver a healthy return on equity of around 12.5%. And with this, I would like to open the floor for Q and A.

Operator?

Conference Call Operator: Thank you. And our first question comes from Julia Aurora Miotto from Morgan Stanley. Please go ahead.

Julia Aurora Miotto, Analyst, Morgan Stanley: Yes, hi. Good morning. Thank you for taking my questions. I have two. The first one is, perhaps we underestimated the FX sensitivity that ING has.

Would it be possible to have a disclosure around revenue and cost mix so that we can estimate it going forward given that the euro dollar is being quite volatile? That would be my first question. And then secondly, you mentioned that corporates, the loan demand is still muted considering that there is uncertainty. Is that do you see any signs that this can change in the coming quarters, especially in Germany or not really too early to say? Thank you.

Stephen van Rijsvik, CEO, ING: All right. I will talk about the corporates and then I will talk about the FX sensitivity. Yes. So what we have seen this quarter was a growth in the Wholesale Bank of €4,000,000,000 but that was largely working capital solutions and trade related financing, so short term receivable type of financing structures. On the longer term, it be term loans.

We saw more syndicated loans than we saw previous quarter, but not the big jumbo deals that we saw previously. And of course, we did offset there was a limited growth in the term loans, but that was offset by capital velocity that we used to bring that down again. So there was a bit of growth in corporate term loan, but that was still muted. In that sense, it’s a bit too early to call whether that will change or not. So of course, there is now a trade deal.

Let’s see if the signatures will be put on paper. That should then alleviate some concern, but it’s for now a bit too early to say.

Tanate, CFO, ING: Julia, yes, we’ll consider a bit of our disclosure if this volatility of U. S. Dollar will continue. But to give you a sense already with an 8% reduction in the U. S.

Dollar against the euro in Q2 that has an impact of €37,000,000 in NII and an overall impact of maybe around $60,000,000 to $70,000,000 on total revenue, right? We do benefit from less cost because of translation results, but it’s not so impactful on our ROE given that risk weight is also

Julia Aurora Miotto, Analyst, Morgan Stanley: Got it. Thank you. That’s very helpful. Do you have the number for the costs? You gave the number for revenues?

Do have the number for costs?

Tanate, CFO, ING: No, we don’t. But we’ll consider it in future disclosure.

Julia Aurora Miotto, Analyst, Morgan Stanley: Thank you.

Conference Call Operator: Thank you. And up next, we have a question from Benoit Petrarque from Kepler Cheuvreux. Please go ahead. Your line is open.

Benoit Petrarque, Analyst, Kepler Cheuvreux: Yes, good morning. So the first question is actually on Commercial and I. I get the reason of the downgrade, which is really coming from the FX rates. Just wanted to talk about the underlying Commercial NII trends, if you are satisfied with all the trends you see around replicating income, lending margin, whether this is all in line with plans, so ex FX impacts? The second one is on Commercial NII guidance.

So when you look at the Q4, implicit Q4 guidance, I get to a 2.5% to 5% quarter on quarter improvement in the fourth quarter. So I’m just wondering if you could walk us through the moving parts around this improvement in the fourth quarter. And just maybe last one, Stephen. We’ve seen an interview in the Dutch Financial Daily a few days ago. I think you referred to to the lack of level level playing field regarding capital requirements in Europe.

And I think you mentioned that moving the head office to to the German border will be very efficient from a from a capital standpoint. I think we discussed that quite a perhaps for some time ago, but could you maybe talk about that? And are you kind of serious to consider a plan move the head office to Germany? Thank you.

Stephen van Rijsvik, CEO, ING: Yes. Let me talk about the Gelsenkir kind of remark I made in the newspaper and then Tanate will talk about NII and the fourth quarter implicit guidance in terms of what you mentioned. So I think in that article, I said a few things. First of all, that in Europe, we have still many trade imperfections between countries in and of itself with our own import tariffs between markets and our own non harmonized regulation and that goes for many sectors. And we need to work on that in Europe because we need to become more competitive.

Then talking about the banking sector, you see that there as well. So and I gave an example, but that was a stylistic example of if I just moved the head office to Gelsenkirchen, which is just across the border from The Netherlands. Then with the same activities that we have, given the current regulation, I need to hold less capital and I will pay less taxes. Yes, that is strange. And I want also in this country, and I’m concerned about the business climate in this country, that a country also needs to have strong banks to also make sure that businesses can and households can thrive in good times and in the bad times.

And you should as a country wants to have strong banks and not try to chase them away. So in that sense European rules are not harmonized enough And I find it all that banks from, for example, Germany and France, even if they serve clients here, have to hold less capital. And the same goes then for those banks then also have to pay less taxes, because we pay taxes over our business abroad in this country and others then will not. And I think we should also in this country think much more about how to make our banks competitive.

Tanate, CFO, ING: Thank you, Stephen. I think if you ask about our commercial NII, what’s positive compared to last quarter and what may be more challenging? I think what remains the same is the path of the ECB rate cut, The facility rate going to 175 that remains per plan. And the steeper forward curve is also what we were expecting then and what we see now. So those are things which remain the same in terms of our outlook.

What I think has changed in a positive front is the fact that the volumes have come in higher than planned both on lending and on deposits. So I think that is also quite strong and positive. And then maybe on the challenging side is that the demand for long term lending in wholesale banking has been more soft, continuing to be soft and the outlook remains challenging. I think these are the moving parts that I like to cover.

Benoit Petrarque, Analyst, Kepler Cheuvreux: Thank you. Maybe on the Q4 improvements?

Tanate, CFO, ING: Yes. I think on the Q4 improvements, I think the big driver is really volumes and maybe less impact on FX in Q4. At the same time, we never comment on further rate actions, but you can imagine that we will manage our margin at around 100 basis points on liability and rising to 100 to 110 in 2026.

Johan Ekblom, Analyst, UBS: Thank you.

Conference Call Operator: Thank you. And Tariq Elmejad from Bank of America has our next question. Please go ahead. Your line is open.

Tariq Elmejad, Analyst, Bank of America: Hi. Sorry, good morning, everyone. Just a couple of questions from my side, please, focused on M and A and deposit strategy. So can you give us a bit of an update on what have been your main deposit gathering campaigns in Q2 and those that you probably launched in Q3? And then on the M and A, is my understanding is correct to see that the focus you would have you have at the moment is more into buying deposits and kind of going back to your ING Direct DNA of making much more spread on deposits versus targets on fees, where for the fees you’re still mainly focusing on getting more primary clients and cross selling?

Those are my two quick questions. Thank you.

Stephen van Rijsvik, CEO, ING: All right. Talking about the deposit strategy first. So we didn’t have really big campaigns in the second quarter. We had a big campaign in Germany in the first quarter that led then to an increase in deposit with EUR 23,000,000,000 in aggregate, of which about EUR 16,000,000,000 came from Germany. That campaign is now ending.

And then you that means that some of the money that we then gained will flow out in the third quarter of this year, which could have an impact on our deposit growth for the third quarter. Also because it coincides with people going on holiday, so they spent more money than they received in the second quarter. So that could have an impact. But there’s no big campaigns going on at this time. And the impact by the way of these campaigns is what we see in Germany is similar to what we have seen in previous campaigns at about two thirds of the money is sticky and one third of the money leaves.

That is good. With regards to M and A, but also our activities, no, I think that what we are doing is that we’re diversifying our business. So on the one hand, we become more specific in the type of services that we offer to existing customers. So not one size fits all, but Gen Z and expats and mass affluent and affluent. So we become more specific in targeting those customer segments.

And that then helps also to get more mobile primary customers in. And the second and who do them more business with ING, diversified business. And secondly, we try to fill in the blanks in markets where we are already active, but where in some markets only active in Wholesale Banking, so the top end and private individuals, the low end, if you will. And then we need to want to fill it out with SME, self employed, mid corporates, private banking, wealth management. So we try to broaden the business.

And that’s what you also see reflected in our figures that we’re actually growing. Yes, of course, we grow in lending and deposits. And I’m happy with that because we’re a good bank and people like to do business with us. But I’m particularly proud of the fact that we continue to grow our fee income because that is diversifying our income streams and that’s what we want.

Tariq Elmejad, Analyst, Bank of America: Thank you very much.

Conference Call Operator: Thank you. And our next question now comes from Chris Hallum from Goldman Sachs. Please go ahead. Your line is open.

Chris Hallum, Analyst, Goldman Sachs: Hi, good morning everyone. Just a few clarifications, I guess. So first of

Johan Ekblom, Analyst, UBS: all,

Chris Hallum, Analyst, Goldman Sachs: commercial NII guide with regards to savings rates cuts in H2? And is the planning there around the rates, maybe in response to your own planning or, I guess, relative to competition, I. Are you driving to a predetermined liability margin outcome? Or are

Speaker 8: you just paying what needs to

Chris Hallum, Analyst, Goldman Sachs: be paid relative to peers? And then second, on market share. What are you seeing on mortgage market share, particularly given the extra capital you’re putting to work there? And do those share trends differ much across your main markets? Thank you.

Stephen van Rijsvik, CEO, ING: I think on the market share in mortgages, clearly, by the way, we price the mortgage to the return. So we don’t grow for the sake of growing. We grow when we also can make the right return on that. But we have, over the past year, improved our processes and made them more easy in digital, whereas direct selling or through the brokers. And that has meant that in some markets, most notably The Netherlands, have been increasing the market share of the new production, which now hovers around 17%.

So it’s now stabilizing. So but that’s where we currently are. And we’re happy with the growth that we show there.

Tanate, CFO, ING: And Chris, obviously we can’t give any guidance around any further deposit rate action in the future. But I think as you see we manage commercial NII on margin. And we have been able to manage the liability NII at around 100 basis points this year and that continue to be our guidance. And you can see that despite the rate action we’ve taken earlier this year liquidity remains strong and deposit growth remains strong.

Chris Hallum, Analyst, Goldman Sachs: Okay. Thank you very much.

Conference Call Operator: Thank you. And from KBW, we have Hari Sivakumaram with our next question. Please go ahead.

Hari Sivakumaram, Analyst, KBW: Hi, I just want to

Stephen van Rijsvik, CEO, ING0: ask on the fee guidance. I appreciate you improved it to the upper end of the 5% to 10%. But you’re currently running at kind of 11% year or half half one versus half one last year, that’s SEK2.2 billion. Is there anything that’s kind of holding you back from going above 10% fee growth this year? And then my second question is on the wholesale business.

And I appreciate the slide on the change in the mix of capital consumption. But the ROE has sort of been stuck at around 10.5% for the last two quarters. I’m just wondering if there’s anything more that can be done to improve that. Thanks.

Stephen van Rijsvik, CEO, ING: Thank you very much. So let me first start with ROE in the Wholesale Bank. So we have given guidance on 2025 for an ROE combined of 12.5% or around 27 of 14%, and we’re confident on both counts. And we also want to make improvements in both businesses. For both, it means we need to diversify more.

I just talked about retail, but the same goes for wholesale. So we have been investing consistently in transaction services and financial markets to cross sell next to the big lending engine that we have in Wholesale Banking to get to higher returns. That’s one element. The second element to improve our return there is to improve capital velocity, which means we want to do more with the same capital or the same with less capital. That’s also why you see a shift in capital from Wholesale to Retail.

But we are still embarking on our first SRT, which will come in the second half of this year and it will also help the return of Wholesale Banking. And as in only the first and then in 2026, we will continue with SRTs in the years thereafter as well. When we talk about fee guidance, yes, look, we’re yes, indeed, we have very good growth with 12%. We have been able to show average growth of 5% to 10% over the last five years. We continue to give that guidance over the period 2024 to 2027.

So, yes, we’re happy with what we’re doing. We of course want to sustain these levels, but we stick now for now to our guidance of 5% to 10, albeit at the higher end of the 5% to 10%, so we become more specific.

Stephen van Rijsvik, CEO, ING0: Thanks.

Conference Call Operator: Thank you. And from Barclays, we now have Namita Samtani with our next question. Please go ahead.

Stephen van Rijsvik, CEO, ING1: Good morning. I’m actually taking my questions. Just my first one. Just wondering on the liability margin when you guide to 100 bps to 110 bps in 2027 when the replicating portfolio becomes the severe tailwind. To me, 110 bps would be the floor.

Would you agree with that? Or what stops the group from printing above 110 bps liability margin in 2027? And secondly, I just wanted to ask Stefan, I just wondered related to Ternate’s intentions to step down as CFO. In the press release, you write after seven years as CFO on the Board, it’s a logical moment for Ternate to step down. I just wondered why it’s a logical time.

ING has targets up to 2027, which we’re yet to see if they can achieve. And I also wondered if you’re looking at internal or external candidates as CFO. Thanks very much.

Stephen van Rijsvik, CEO, ING: All right. Thank you very much. And by the way, I heard it’s your birthday today. Is that correct?

Stephen van Rijsvik, CEO, ING2: It’s nice to be 16.

Stephen van Rijsvik, CEO, ING: Very good. Congratulations, in any case.

Stephen van Rijsvik, CEO, ING2: Thank you.

Stephen van Rijsvik, CEO, ING: Yes. Look, the seven years logical time to step down, I think what I meant with that, look, this has been a very good period. Tanate and I know each other for a long time. We have been working together since, I believe, the year 2000 when we were both stationed in Asia. And I’m very grateful that he has been with me for seven years at the Board.

And now Tanate is retiring from ING, and this was my expression to be grateful. There was not anything particularly meant by seven years or what it should be exactly, but this is a very good time at our Board, which I’m very grateful for. Nothing more, nothing less. And in terms of candidates, yes, we never disclose who we are we who we are exactly looking for. But of course, you can be assured that this is a rigorous process and we have ample time to announce a successor before the AGM of twenty twenty six.

Tanate, on liability margin.

Tanate, CFO, ING: Yes. More to mundane topics, liability margin for next year. I think look it’s always a balance when you look at liability margin around competition in the market, our ambition to grow our volumes and managing margin right. And if we look historically what we see is that the margin has been around that 100, 110 over the long cycle. So that’s something that we plan on.

Maybe something that I think gives me comfort around that one hundred and one hundred and ten is that the mix of our deposits have stabilized, The current account has now normalized to before the zero rate level. The level of term deposits are coming down. The level of savings is going up. So that also bodes well for improving the net interest margin on liability. So it is to summarize it’s a balance between volume and margin.

Stephen van Rijsvik, CEO, ING1: Thanks very much.

Conference Call Operator: Thank you. And our next question now comes from Farquhar Mouri from Autonomous. Please go ahead. Your line is open.

Stephen van Rijsvik, CEO, ING3: Good morning, Just one question from me and really just a follow-up to an agree on Harry’s question earlier on fees. Mean I the upper end of five percent to 10% for full year 2025 seems a bit more confident than earlier in the year. I just wondered if that is indeed slightly more confident. And also, what kind of products or geographies are behind that? And then more generally, what kind of proof points can you give to for your kind of view that, that’s alpha driven rather than beta?

All

Stephen van Rijsvik, CEO, ING: right. Thanks, Raghur. Well, indeed that shows more confidence than given just the range. And why is there more confidence? Now we see good mobile primary customer growth.

We see the number of and as a result of it, you also then do more payments. We see a higher percentage of our customers becoming primary customers. We see a growth in our number of trading accounts that was last year 4,660,000 is now 4,900,000. So the number of people that trade with us is increasing. We have put in place over the past couple of years insurance products in private individuals and in Business Banking.

And now you see and I would say insurance is, I would say, sort of a snowball. It’s it rolls down the hill. And step by step by step by step, it becomes a bit bigger. And we saw also the number of the lending deals in Wholesale Banking increased, the syndicated loans, so that all helped. But there you see that by broadening our customer base, by broadening the type of shares that we provide, we are making this step by step bigger.

And you see and therefore, we are seeing with these actions that a number of people that do fee business with us is just larger, and it helps us in our confidence.

Stephen van Rijsvik, CEO, ING3: Just a follow on. Would you have a magnitude on the insurance revenues now?

Stephen van Rijsvik, CEO, ING: Yes. It’s it is for the first time that we put it in the presentation, it’s now EUR 69,000,000 this quarter. We split that out now.

Conference Call Operator: Thank you. And up next, we have Benjamin Goy from Deutsche Bank. Please go ahead.

Stephen van Rijsvik, CEO, ING4: Yes, good morning. Two questions, one follow-up and one more general question. The first on the implied increase in the Q4 NII. I was just wondering, and to make you mentioned volume growth is part of the assumption there. Is there any specifics that you can share?

Is there an uptick expected in long term corporate lending that you would need to see to get this increase or volumes across the board, loans and deposits? And then secondly, your digital business banking, part of your growth area in the retail business. And in Germany, you ended the Amazon partnership. I mean, I know it’s only one partnership and probably don’t want to over interpret it, but never looked promising and it seemed to be below expectations. I was just wondering how successful is the digital business banking in your markets without branch based networks and how much can you both be driven by that?

Thank you.

Stephen van Rijsvik, CEO, ING: All right. I’ll answer on the business banking and to Nate on NII. If you look in general in Business Banking, Business Banking consists of three parts: self employed, SME and mid corporates. And self employed is being done fully digitally, like private individuals. SME is being done mostly digital first, supported by sales teams who are remote and mid corporates or what you perhaps in Germany would call Mittelstands or maybe even lower Mittelstands, you would do with a relationship model and with sector knowledge supported by digital.

So a large part of activities in business banking are digital. And in Germany, in particular, we started from the low end because we are already with private individuals, and then the move towards self employed and SME is not so difficult to make because we already have a number of the digital services. Now in the past, we only did that through indirectly through a partnership with Amazon, but now we approach these customers directly. Now compared to the significant mortgage and customer lending book and wholesale banking book that we have in Germany, business banking in Germany is relatively small, but it’s almost like with the insurance, like I just said, it starts small and then we do it step by step by step. We grow it to diversify our business.

Tanate, CFO, ING: Benjamin, just on the commercial NII development in the fourth quarter. I think we look at a number of factors in giving our scenario. I think we look at volume, right? We have a longer term planning estimate of 4%, but we’re ending up at least the first half year higher at around 7%. So that’s something that factor in our thinking.

We’re still planning on another ECB facility rate cut in September of 25 basis points. And we will take the necessary rate action to maintain a margin of 1%. So those are the consideration that goes into our guidance of our commercial NII. Thank

Stephen van Rijsvik, CEO, ING4: you very much.

Conference Call Operator: And from UBS, we now have Johan Ekblom with our next question.

Johan Ekblom, Analyst, UBS: Just maybe if we can come back to NII and look a bit further ahead into next year. I mean you flagged in the presentation a further headwind from the replicating book, but then I guess there are some tailwinds on the deposit repricing. If I add those up, that’s about a SEK 400,000,000 tailwind into next year. And then you plan on 4% volume growth. Are there any other significant drivers then that we should think about in terms of NII ’26 versus 2025?

Because I guess that pickup you’re flagging for Q4, it should really continue throughout all of next year, if I’m not mistaken. And then maybe digging a bit deeper on the volume side. I mean we’ve seen a couple of quarters of very strong volume growth. And I think you flagged in the past that the strong mortgage growth at a system level in The Netherlands is probably not long term sustainable at these levels. But maybe if you could give us an update on what you’re seeing there?

And I also noted that there was quite a strong pickup in the Belgian loan book, in particular, in the nonmortgage side. Is there anything structurally going on there? I mean you’ve been losing share in Belgium for a number of years. Is there any chance of a decent turnaround there?

Stephen van Rijsvik, CEO, ING: Right. I’ll take the view on mortgages. If we look at mortgages in the different markets, we see actually sales volumes that are growing in all these markets. And the reason being that is that there are still shortages on houses. So that’s what we are seeing.

Of course, there was a dip in new mortgages in a number of the countries with the uncertainties coming in as a result of the war and the supply chain challenges that we have seen in 2022 and 2023, but that is largely gone. It’s gone in The Netherlands and it’s gone in Belgium. So if you look at the Dutch housing markets, there’s a 17% year on year increase expected in terms of number of houses sold in this country. If you look at the Belgium housing market, We also see an increase of about 15% when we talk about building permits in some of the months and 18% mortgage production year on year up in total compared to the previous year. So we’re also benefiting from that.

Same in Germany, whereby we saw mortgage lending coming down, new mortgage lending quite steeply to about 60% of what was normal over years 2022 and twenty twenty three and twenty twenty four gradually recovering, but now really recovering well. So with a 35% increase in terms of houses sold. So in that sense, we’re benefiting from that. Again, we have been working on improving our processes over the past years, and therefore, that helps us in our mortgage share on new production. But in the end, we will only print if we also can make adequate returns.

So that is on mortgages. Sorry. Then regarding in Belgium, in Business Banking, there we saw higher balances, but that has to do with a very large client, which can be volatile quarter on quarter.

Tanate, CFO, ING: So in terms of looking to 2026, I think on the lending side, plan on recovery in terms of lending margin from 125 for 2025 to between 125 to 130 in the coming period. I think that kind of better outlook is driven by the fact that we have seen higher business banking loan growth, right? That is coming in with better margin, high consumer lending growth again with better margin and more return to normalization in terms of corporate lending, which has higher margin. So these are driving our expectations for higher lending margin. And then if you talk about the liability side, I think we give now a bit more details about the impact on replication on page 26 of our presentation where you do see that based on the curve prevailing in June that there’s a €300,000,000 reduction in terms of replicated income.

But we have also given a better look into 2026 that without any further rate action on savings we expect that the 1,000,000,000 additional income from savings repricing would go to €1,300,000,000 and term deposits would go from 400,000,000 to €800,000,000 So that helps compensate from that additional headwind from replication.

Johan Ekblom, Analyst, UBS: Thank you.

Conference Call Operator: Thank you. And we’re now moving on to a question from Matthew Clark from Mediobanca. Please go ahead. Your line is open.

Speaker 8: Good morning. So a few questions again on NII, I’m afraid. Firstly, in terms of the German deposit campaign for the first quarter, should we still be expecting an outflow from that to come through in the third quarter? I think the special interest rate period ended during the second quarter, but near the end. So just wondering whether we’ve seen any of that outflow effect yet or whether that’s still to come?

Second question is on commercial NII in the third quarter, which you’re guiding flat. I’m just trying to understand why it can’t be more positive. You’ve got a very positive kind of volume tailwind even despite the FX and actually FX has rebounded quarter to date and then flat margin guidance effectively for both the lending margin and perhaps even implicit a bit of an improvement in the liability margin guidance in order to meet that full year 100 basis point guide. So why can’t we see commercial NII up already in the third quarter is the question. Yes.

Stephen van Rijsvik, CEO, ING: Thanks, Matt. On the positive campaign, yes, we that campaign indeed, you have seen it rightly that we started in the first quarter and ended early June. So there was some outflow, but we continue we’ll continue to see some outflow in the third quarter. At least we expect that based on also what we have seen in previous campaigns, typically two thirds of the money stays and one third of the money goes. So that’s why we also said that that may also have an impact in deposit growth in the third quarter because also in the third quarter, people are typically going on summer holiday, and that means that they spent a bit more money than they do in other quarters.

So that could be a seasonal effect that we can see in the third quarter. Ternit,

Tariq Elmejad, Analyst, Bank of America: NII?

Tanate, CFO, ING: Yeah. NII guidance, I think what you see is not the full impact of foreign exchange impact in Q2. We expect the full impact in Q3. That’s why we think that the impact on FX would be more significant in Q3. Hence our guidance on flat commercial NII.

Speaker 8: Can I just follow-up your guidance on FX? What FX date is that based on? Is that based on the end June? Or is that based on July 30 FX rate?

Tanate, CFO, ING: That’s based on the June FX rate.

Hari Sivakumaram, Analyst, KBW: Okay. Thank you.

Conference Call Operator: Thank you. And from RBC, we now have Anke Rangen with our next question. Please go ahead.

Stephen van Rijsvik, CEO, ING2: Yeah. Thank you so much for taking my question. Just very simply first on the liability margin. Is it as simple as given the German campaign has finished that the liability margin should everything else being equal go back to the 100 basis points in Q3? I mean, obviously, else being equal.

And then on your upgrade to the 2025 ROE, I mean, do you think it’s I mean, 2027 is also obviously also some time out, but do you think that we’ll have the better 2025 trends are leading to structurally a better outcome in 2027 as well? Or is it more of a timing effect, some of the measures coming through quicker?

Stephen van Rijsvik, CEO, ING: Okay. Look, we don’t give current new guidance on 2027, but we are comfortable about 25%, but we’re also very comfortable on 2027. Thanez, on liability margin,

Hari Sivakumaram, Analyst, KBW: How is Yes. It

Tanate, CFO, ING: On like for like basis, with the German campaign ending, liability margin would be at around 100 basis points. In fact, a little bit better than 100 basis points.

Conference Call Operator: You. Thank you. And we’re moving to another question now coming from Juan Pablo Cobo from Santander. Please go ahead. Your line is open.

Hari Sivakumaram, Analyst, KBW: Yes. Good morning. Thank you for taking my question. First one is regarding expenses. I believe you could give us a bit more detail.

You are mentioning that you are doing some initiatives on KYC and contact centers. It could be useful if you could give some color on how much are you spending on this and if there is any additional room to cut cost there. Maybe related to still in expenses regarding the incidental items. And maybe just to have some feeling about future initiatives, what could be the payback, for instance, of the €85,000,000 wholesale banking business initiative? So what’s the savings that we could expect in the future?

And then my second question is regarding your ROE guidance. I don’t know if you could give us also a bit more detail that upgrades, where does it come? Because also it’s true that equity is coming down of the probably because of the FX impact. So that upgrades on ROE, what part is coming from actually better net income and what part is coming from lower equity? Thank you.

Stephen van Rijsvik, CEO, ING: All right. I’ll talk about expenses and then the initiative that we’ve taken on Wholesale Banking and Tanate talks about ROE. So talking about expenses and look, I mean, we have experienced so far still higher inflation levels that came in, in our cost line from previous years. We of course are investing for growth. So that is end marketing and new products and that we’re partly offsetting by digitalizing our operations further.

And there we do and we’re looking currently in various initiatives. And these initiatives have to do with KYC, how can we digitalize that? How can we further utilize our contact center operations with AI, but also with GenAI chatbots. We look at GenAI in lending. We look also at GenAI in coding.

So those are all initiatives that are currently being developed, centrally steered. And step by step, we will integrate them in our operations. And as soon as there are outcome from that, we will let you know. With regards to the initiative that we’ve taken in Wholesale Banking, where we did the restructuring in the front office side of Wholesale Banking, the two thirty FTE, Therefore, that we took a provision of €85,000,000 Annualized, the benefit of that will be €40,000,000 but that will only start to come in, in the course of 2026.

Tanate, CFO, ING: And then, Juan, just in terms of the composition for our updated outlook on return on equity, it’s a combination of factors. I think we are more fee intense in terms of our revenue which is more ROE accretive, right? This is part of our strategy even going to 2027. I think we operate in the lower end of our cost guidance that also improves profitability and a combination of that improving fee intensity, lower cost drives different guidance on ROE.

Conference Call Operator: Thank you. And up next, we have Delphine Lee from JPMorgan. Please go ahead. Your line is open.

Stephen van Rijsvik, CEO, ING5: Thank you for taking my questions. Just wanted to go back to NII to understand a little bit sort of the improvement that you expect in 26%, 27% on the lending margin. So from what you said previously, I think it is basically the result of some improving mix with a better growth in kind of higher margin product. I mean is that is there anything else? Or if you could just comment a bit because, you know, it’s yes, I’m just trying to understand a bit like how much pickup we should expect from that.

And on the liability margin, just to

Julia Aurora Miotto, Analyst, Morgan Stanley: go back

Stephen van Rijsvik, CEO, ING5: to another question on the liability margin in 27%. I mean, from what you’re saying, you do have more than $1,000,000,000 pickup in the replicating income. And it feels like you’re basically saying the deposit mix is improving and you’re still getting volumes as well. So I’m not so sure why the liability margin could not meaningfully exceed 110 basis points and your guidance is unchanged at 100 basis to 110 basis you.

Stephen van Rijsvik, CEO, ING: Tanate?

Tanate, CFO, ING: I’m not sure how many different ways I can answer the same questions, but I think really on the lending it’s about resumption of commercial lending growth in the wholesale bank, right? That has been soft the last two quarters. And in our outlook for the next couple of years we expect that to resume to more normal pace. And I think we also expect that consumer loans and business banking loans will take a greater share and that’s why our guidance of one hundred and twenty five and one hundred and thirty basis points. And then coming to the liability margin, yes, we have some positive tailwind coming at us, right?

The pressure from liability the facility cuts by the ECB according to the forward curve is coming to an end. So the long term replication is getting there. But at the same time we think competition will be normalized which means that we need to balance between margin and volume and deposits and that we think the guidance of 100 to 110 it’s a good number to plan for.

Stephen van Rijsvik, CEO, ING5: Thank you very much.

Conference Call Operator: You. And as there are currently no further questions in the queue, I’d now like to hand the call back over to you, Mr. Van Reijsvik, for any additional or closing remarks.

Stephen van Rijsvik, CEO, ING: Thank you very much, and thanks, everybody, for your time and your questions. I know it’s probably a busy time for you as well, given that many companies are coming out with the figures in this week. So I hope that you deal with that all well, and I hope that you can also enjoy a summer break. Thanks again, and we’ll speak in any case in three months’ time again. Thank you.

Conference Call Operator: Thank you for joining today’s call. Ladies and gentlemen, you may now disconnect.

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