ING Groep NV (ING) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for holding. Good morning, this is Yvonne, welcoming you to ING's Q1, 2013 conference call.

Before handing this conference call over to Mr. Jan Hommen, Chief Executive of the 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 statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statement is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission, and our earnings press release as posted on our website today.

Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation to offer to buy any securities.

Good morning, Jan; over to you.

Thank you. Welcome, everyone. We are here with Patrick Flynn, our CFO; Wilfred Nagel, our Chief Risk Officer. We will answer the questions. And we also have here Delfin Rueda and Doug Caldwell, our Chief Financial Officer and Chief Risk Officer from EurAsia, available, in case we need any help with questions.

Let me go to slide 2, and you see that we have made steady progress on restructuring. We have launched the successful IPO in the US. Our results in the Group are up to EUR800 million, up on both quarters.

The Bank profit rebounded from Q4; it was supported by improvements in the net interest margin. I think we had good cost control, and we had a slight improvement in our risk costs.

Insurance EurAsia did better, on an underlying basis, mainly due to lower market-related impacts. And operating results were lower, reflecting that investment margins are under pressure, as a result of the low interest rates. Also Non-Life was not coming in at a positive number here, but we have taken steps to cure that.

Solid results from the ongoing businesses in the US, supported by higher fees, saw growth in assets under management, and a resilient investment margin.

You see that the good progress reflected on slide number 3. Of course, the launch of the IPO in the US. We closed the sales of our Insurance activities in Hong Kong and Thailand, as well as our ING Vysya Life business.

The sales process for Korea and Japan is ongoing, and we aim to have our European operations ready for the base case of an IPO in 2014.

The launch of the US IPO was successful. Shares began trading on the New York Stock Exchange on May 2, and it is pretty clear that we see that as a major step in the journey towards the standalone future for the US, but also for the restructuring of the ING Group. And we're getting into a new phase now; you can say we are getting into the final phase of the restructuring here.

The proceeds from the US to the Group is about EUR500 million. That will be upstream to the Group, and we plan, together with EUR1.5 billion upstream from the Bank as dividend, to reduce the double leverage by EUR2 billion. And that reduction will take place in the second quarter, and so that will bring the double leverage down to EUR5 billion.

Now we tried to help you here on a look-through basis, including the valuation of the remaining 75% of ING US and the stake we still have in SulAmerica. That will leave us with about EUR1.5 billion of double leverage to go.

Now then, when you look at the leverage in the Insurance holding company, that currently stands at EUR5.6 billion. If you take in the proceeds that we had on the sale of CMF and KB Life, as well as the replacement of intercompany debt by own issuance in the US and Europe, that will reduce that to EUR1.5 billion.

The reduction of leverage increases flexibility as we prepare our European Insurance business for a base case IPO, but we need to come back on what type of target capital and leverage ratios we still need to determine. And we'll come back on that, hopefully, in the second quarter, so that we can help you with that fact as well. We clearly need to do that before you can get the full picture here of our capital position.

On slide 6, you see that the core Tier 1 has improved to 12.3%, in Q1, and if we include the upstream of the EUR1.5 billion, it will come down to 11.8%. Still, if you convert that into Basel III, full implementation, the ratio will come down to 10.4%, well above our target of 10%.

In Q1, we also applied IAS 19R, for employee benefits, and it came into effect on January 1, 2013. We had to reduce the equity at January 1, this a reduction of EUR2.6 billion, and this application will increase the volatility of equity, going forwards.

As far as the pension costs are concerned, a high quality corporate bond rate is now used to set the assumed return on pension assets, and is locked in each year at the end of the year on the December 31, which is not, I think, an ideal date if you look at the liquidity that we have in the market at that time.

The AA bond curve declined to 3.7% versus 5.5% a year earlier, leading to a material increase in the pension costs for 2013. And, you can see here that the curve has already picked up another 40 basis points, if you compare that with the end of March 2013.

We also have given you a slide where you can compare the costs of the restatement we did in 2012 and compare that with the actual numbers for pension costs in 2013. And you see that we have an increase of EUR59 million mainly as a result of that.

Looking at the underlying profit, it was EUR800 million, both better than Q1 and Q4 last year. The net profit came in at EUR1.8 billion, but that included the gain mainly of the sale that was closed on Insurance Hong Kong, Macau and Thailand.

And, of course, it had some other effects as well of divested units and some special items, mainly related to the cost reduction programs we have in the Netherlands and other places in Commercial Bank as well as in Insurance.

Let me go to the Bank. A strong recovery from the fourth quarter, supported by an increase in the net interest margin to 138 basis points, and the impact of cost savings really becomes now clear.

Risk costs remained elevated amid the weak economic climate in Europe, but improved slightly compared to Q4.

Net interest margin was supported by higher financial market results and a lower average balance sheet. Also, we saw a moderate increase of the loan book at higher margins, particularly in our Structured Finance business.

Savings margins started to stabilize as the impact of the low investment rate environment was largely offset by lowering of the client rates.

The balance sheet optimization program that we started in 2011, and in particular 2012, I think has worked well and has positioned our Bank for selective growth in our loan book.

Net funds entrusted came in an impressive EUR16.5 billion in Q1 and that, of course, helped to further improve our funding profile. The net loan growth was EUR2.5 billion, and was mainly driven by Retail Belgium and by our Structured Finance business.

Expenses were flat, compared to a year ago, reflecting the impact of cost saving initiatives which offset significantly the higher pension costs that we had.

Excluding the EUR59 million higher pension cost from IAS 19, operating expense declined by 2.5%. And our cost income ratio improved to 55.2%, and we're getting closer to our range of 50% to 53% that we have set for 2015.

On slide 15, you see that our cost saving programs are tracking well, that annual expenses will be reduced by EUR800 million by 2015. And so far, we have realized EUR216 million of cost savings, of which EUR54 million took place in Q1.

The risk costs remain elevated amid a weak climate in Europe, but we saw an improvement, compared to the fourth quarter, to 81 basis points of average risk-weighted assets. For the coming quarters, risk costs are expected to remain elevated at around these same levels here. And through the cycle, we expect the risk costs will come down to between 40 basis points and 45 basis points on average risk-weighted assets.

Risk costs declined by EUR28 million, if you compare that with Q4, and improvements mainly from Structured Finance and General Lending, but the risk cost in Dutch mortgages increased. NPLs increased slightly to 2.6%.

Risk costs from Business Lending in the Netherlands were down, versus Q4, which included some very large files, so we are roughly in line with the past quarters here.

Risk costs on Real Estate Finance remain elevated; remain relatively stable compared to the last few quarters, but elevated at EUR111 million, and they are expected to remain at around these levels for the quarters to come.

Turning to the Dutch mortgage book, risk cost increased to EUR82 million. That came from EUR33 million last quarter, reflecting recent declines in house prices, rising unemployment levels, and a lower cure rate. The NPL ratio increased marginally as unemployment remains relatively low at 6.4% in March.

Given the continuing weakness in the housing market and the broader Dutch economy, loan loss provisions on mortgage portfolio are expected to remain at around this level for the coming quarters.

Slide 21, you see that house prices have declined, on average, by about 18% since the peak in June 2008. And that leads to an average loan to value of about 90%. But if you look at that, the loan to values do not include additional collateral that we have built up by savings or via investments or life insurance mortgages.

While around 52% of our portfolio are interest-only mortgages, most of these are interest-only combined with other types of mortgages. Therefore, 78% of mortgages are accumulating additional covers for at least partial repayment.

Then we have a slide on tax reform. As of January 2013, we have seen important housing market reforms, including a gradual reduction of tax deductibility for both existing and new mortgages. Furthermore, interest on new mortgages is only tax deductible for mortgages that fully amortize over 30 years, which will impact affordability.

House prices are already down 18% from the peak, and low interest rates have brought affordability to levels that we have last seen in 2000. So the move to a fully amortizing mortgage will further impact affordability by about a negative 5 percentage points, likely to lead to further declines in house prices in 2013.

However, certainty about future tax treatment and economic recovery should help to stabilize the market, going forward. We believe we have seen most of the decline in the housing market already.

Underlying result before tax, from Insurance -- and I'll turn to the Insurance section -- rose from the first quarter of 2012 and the previous quarter, due to lower impact of market-related items. However, operating result continued to be affected by the low yield environment that had an impact on investment margin, and by the economic downturn in the Netherlands which was driving Non-Life results lower.

Sales were flat, compared with one year ago, but up strongly compared to the previous quarter. Income came down from Q1, driven by the investment margin, which was impacted by lower yields on new investments.

In [Life & IM] administrative expense declined by 3.3%, compared to Q1 last year, reflecting that we have continued good cost control as well as lower expenses for preparation on Solvency II.

Turning to Insurance US; the ongoing business in the US posted a solid quarter, supported by a resilient investment margin. Sales rose on Q1 and Q4, mainly driven by respectively strong retirement sales; and also, seasonality had an impact here as well.

Underlying results from the US Closed Block continued to reflect market volatility as hedges are focused on protecting regulatory and rating agency capital, rather than mitigating IFRS earnings volatility.

Reserve adequacy has improved to the 73% confidence level, and as a result, reserves are projected to remain adequate, even though we would see a 25% shock scenario in the equity markets.

So to wrap it up, we have demonstrated steady progress on our restructuring. We launched a successful IPO for our US Insurance business. We posted EUR800 million of profits underlying, up from both Q1 and Q4, mainly driven by the Bank.

And I think we would now like to open it up for your questions.

(Operator Instructions). Andrew Coombs, Citi.

If I could ask one question on the Bank and one on Insurance, please? On the Bank, you've clearly had a decent result from the impairment side, down 6% Q-on-Q, and it's the best climb we've seen for some time. I'm just interested, on the wording you've used in the presentation; you talk about commercial real estate and Dutch mortgages staying elevated, but you used the specific words, at these levels, whereas I note for Dutch SMEs you talk about the impairments remaining elevated, but there's no specific mention of, at these levels, on that slide.

Perhaps I'm reading too much into the wording there, but I'd be grateful if you could just elaborate a bit on those trends, and what you're expecting in terms of Group impairments, or Bank impairments as a whole for the remainder of the year. That's my first question.

Second question, I was hoping -- I'm on page 10 of the quarterly report, you helpfully provide a breakdown now between the Insurance businesses. Is it possible to go one step further and break down the revaluation reserve in Insurance EurAsia between Europe and Asia? I don't know if that's possible. Thank you.

Okay, Andrew. I think Wilfred will take your first question and Patrick will take the second one.

On the impairments, I think you're indeed reading maybe a little bit too much into the exact wording there. What happened in the Business Lending between Q4 and the first quarter of this year is really the difference between a couple of larger files being provisioned additionally in Q4, and we had a bit less of that in Q1. I don't think you should read that as a trend; we do expect the provisioning levels to stay around where they've been for the past few quarters.

In respect to the split of the revaluation reserves, we give it for EurAsia and the US; we don't split it between Europe and EurAsia. It's on page 10, as you say. We'll have to come back to you with a drill-down of the split between Asia and Europe.

Okay, that's fine. Just coming back to the point on impairment; when you look at the NPL increase, and it's most prominent this quarter in Real Estate Finance, but perhaps if you could just elaborate on where you think the biggest risks lie in the book, going forward, for the remainder of the year. Is it the Real Estate Finance book you're most concerned about, or would it be that Business Lending segment?

Well, we're indicating that we're expecting both to stay at roughly the levels where we are. So there's no particular choice between the two, if that's your question.

Francesca Tondi, Morgan Stanley.

Sorry, I'm going back also a little bit to NPLs and risks costs. On the NPLs on Dutch mortgages, and the cost of effectively provisioning, you indicate it should be staying at this level. However, we've seen a consistent NPL increase of at least 10 basis points each quarter. You're also flagging this quarter you're obviously adjusting the provisioning as house prices are coming down; you flagged that you expect, given the trends, that the affordability has [projected] to come down again. How can you see the provisions stable at this level?

And how does this look in the context of the stress test that you gave indication of I think at the last investor day? You were talking about EUR250 million, more or less, additional provisions. We're already running above that. If you could comment a little bit.

And on Real Estate Finance, could you add a little bit of -- the NPLs increase has been due to which kind of positions effectively going wrong, and how do you see that also again in the context of potentially pricing coming down, especially in the Netherlands? Thank you.

Okay, on the Dutch mortgages, the way to think about these provisions is that the addition to the provisions is linked to the pace of deterioration of the portfolio quality. So that means, as long as the pace stays the same, you can expect to see similar levels of addition to the provisions.

What you saw in the second half of last year was that, for a while, the pace of deterioration slowed down somewhat; the drop in the indexes of the house values in the Netherlands was much less in the second half of the year than it was in the first half. Consequently, we also saw our provisioning levels come down.

The deterioration picked up again in the first quarter, and that's why you see these slightly higher levels. We expect that pace to continue roughly at the same level, and therefore, we expect roughly the same level of provisions.

[What] do you think actually caused this increased pace of deterioration in the first quarter?

Sorry, could you repeat the question?

What was the reason for the increased pace of the deterioration in the first quarter?

Well, there's two things going on. One is that we see unemployment in the Netherlands going up faster; and secondly, we see also an acceleration in the drop of house prices. And the two, of course, are the main drivers for this.

With regard to your question about the stress test, we are approaching the levels, in terms of unemployment at least, that we stressed at, so it is logical that the provisioning numbers that you see are also approaching the outcome there.

Thank you. And on the Real Estate Finance, what actually caused that increase in the NPL ratio?

Well, it's not a huge increase, as you've seen, but looking at the underlying numbers we saw a bit of an uptick in the Netherlands; we saw a bit of an uptick in Spain, and a little bit in the UK, but nothing really stands out there. If you look at the risk cost, there was one existing big file in the UK that we did additional provision, and there are two new ones there.

If you look at Spain, there aren't really any new defaults in that book since about a year, so all we're seeing there is a bit of incremental provisioning on existing files. And then the market in the Netherlands continues to weaken, so we have some inflow of new problem loans there as well.

And as a last question, would you be able to give us the coverage for these NPLs as you normally are able to do every quarter?

I think you can get those details from our Investor Relations team.

Francois Boissin, Exane.

A few questions, please. Can you give a bit of outlook in terms of net interest income, going forward, and maybe a split impact of low interest rates -- I mean lower investment rates, and the impact of lower credited rates on your Savings books?

And two other points on Insurance, can you comment on where you stand on upcoming disposals, Korea and Japan, namely Japan and what you intend to do with the VA book?

And finally on Insurance, can you give a guidance maybe on the Insurance and investment margin, or the investment spread margin that we can expect for EurAsia, given the current low interest rate environment? Thank you.

On the net interest margin in the Bank, as you see it has improved to 138 bps from 134 bps. That's because we're focusing on three things that we said we would do. We are repricing the loan book; we got some moderate lending growth this quarter, EUR2.5 billion, as Jan's pointed out, which [is at] healthy margins in places like Structured Finance; and Savings margins have stabilized somewhat.

We've seen reductions in the deposit rates in the Netherlands of about 30 basis points in the quarter, Belgium 20 and Germany 25. Now going forward, we intend to keep to the same recipe, so we will continue to focus on repricing. We think the Savings margins should stabilize; there's been a further 10 basis points cut in deposit rates in the Netherlands.

And hopefully, we can continue to see some moderate loan growth again at healthy margins, so stabilizing around the current level.

With respect to the disposals in Japan, we're working actively with a number of interested parties. The problem here is that we do have a VA block and we have a COLI business that are basically run in the same organization and with the same systems, and splitting them is not easy and certainly not the preferred route by the regulator in Japan.

So we are looking at some alternatives here as well, how that can be put together. It's not an easy one I must say, but we're hopeful that we can find a solution.

And then the investment margin, Patrick.

Yes, in respect of the investment margin in Europe, it has come down somewhat; we are looking to see can we re-risk. We have deliberately reduced and de-risked to protect capital, as we've pointed out before. That has led to a significant amount of German and Dutch Government bonds which are relatively low yield. So we are looking at options to replace these, but this will be gradual.

We're looking at asset losses that provide greater spread, including loan programs, private placements, government related loans, perhaps mortgages, high quality corporate bonds. This will be a gradual process; we will take our time and do this selectively over the course of 2013 and '14. So it will take some time for this to start to feed in; we'll do it in a prudent manner.

As Jan mentioned earlier in the call, we are due to come back to you when we reset our capital ratios, and we will also then come back with more detail about our expectations in respect of interest spread for Insurance at the same time.

Okay. But I understand that repricing the investment book is going to be tough, but can you do something on the guarantees on the liabilities side; can you try to reduce credited rates or guarantee, to a certain extent, or is this largely fixed and a bit constrained for you guys?

Yes, as I said, I think the best thing is we will wrap this up in one package and come back to you in more detail on the outlook for Eurasia.

Okay. Thank you very much.

(Operator Instructions). William Hawkins, KBW.

First of all, just a small question of detail. Your pie chart for the breakdown of the loan portfolio is now showing 52% of interest-only mortgages. I think the last time you gave this data was at the Morgan Stanley presentation and there it's showing 60%, so that's quite a big change. I'm assuming it's just a restatement, but if you could help me understand that, that would be kind.

And then secondly, could you talk a little bit more about the issues going on in the disability market in the Netherlands? I think you've been precise that the negative development has shifted from group to individual, and so I'd just like to understand that a bit more please. Thank you.

On your question regarding the interest only, the difference between the two is the inclusion of WestlandUtrecht Bank portfolio in the numbers.

Thanks.

Yes, in respect of the Non-Life in the Netherlands you're right, it was in group disability previously. There has been a migration into individual disability [claims] as well, and we are taking several measures to rectify this, including premium increases and resetting the parameters around these policies. This will take some time to flow through; the corrective measures will take some time to come through.

I think we need to take this also on a longer-term basis. This has been a very good business over time, and we're sitting now in a down cycle, but with the steps taken we believe the long-term cycle will be still quite an attractive one. So it is a dip, but the long term it's still a viable business.

Thank you.

Farooq Hanif, Citigroup.

Just a quick question on Insurance, just one very brief follow-up. The Dutch regulator for life insurers is moving to a model of looking at economic capital, when it decides whether you're well capitalized or not and deciding how much dividend you can pay out. Is this something that worries you; are you very happy with your economic capital position in your Dutch Life book? That's the only question, thank you.

Yes, we do have both the regulatory capital, and of course, we've an economic capital model as well which we are continuing to refine, aligning that with both Solvency II and MCEV guidance. So this is something we evolve and keep current.

In respect of what the Dutch regulator is doing, I think they have announced principles around how they intend to go forward, with I think it's a form of stress test to accompany the existing regulatory framework, and the parameters of that stress test haven't been defined yet. So we will have to wait and see how that stress test detail comes about. I think it'll complement our existing regulatory and economic capital framework.

Okay. Thank you.

David Andrich, Morgan Stanley.

My first question I guess is mostly related to the Bank, but I was noticing on slide 34 of your presentation that there's a note saying that DNB has allowed Dutch banks to apply regulatory adjustment in terms of the impacts of IAS 19 on available capital. And I was just wondering if you could describe what the regulatory adjustment was, what the impact was around that, and just whether that was only for the Bank, or whether there was something with the Insurance business as well? So I guess the first question is related to that.

And then second of all, I was just wondering in terms of discussions you're having with DNB around the European IGD ratio, I was just wondering what are kind of the topics that are involved in that? Thank you.

In respect of the pension change, it impacts the Bank regulatory capital, and what the Dutch regulator has done is said that you can phase in that change over time, so it moves from a spot to a phased-in basis. It's EUR2.5 billion and you can see that on slide 34.

Thank you.

With the Dutch regulator we are in constant discussion on the capital framework. Those discussions have not resulted yet in, let's say, firm positions; we are in very close contact with them and we have presented ideas that they are studying. So we'll come back on that as soon as we have more information on this, but we're still in dialog with the Dutch regulator here.

Thank you very much.

Martin Leitgeb, Goldman Sachs.

Just two questions. Please. The first one on loan loss provisions; you mentioned that you expect the provisions to normalize to a level of 40 to 45 basis points. I think that's equivalent to what we have seen back in 2011. And you also mentioned that we might have seen the worst with regards to a reduction in house prices. So just wondering what might be a fair assumption when we might see loan loss provisions normalizing, would 2015 or something like that be a fair estimate?

And the second question with regards to the outstanding [development] date, given the progress now made on reducing double leverage, is there any change with regards to your planned repayment for the outstanding EUR2.25 billion? I think the due date at the moment is for the last tranche May 2015; are you more comfortable now that you might be able to repay earlier? Thank you.

Okay. On the first question about provisions, I don't think we said that we believe we've seen the worst of the house price declines. What we said was we're seeing an acceleration in the pace of deterioration between Q4 and Q1, specifically that related to the level of provisioning that we expect for the Dutch mortgage book, which, as we said, we expect to stay at the levels where we are for now.

As to when we expect to see a normalization of provisions, we may see a bit of decline in 2014, but we don't obviously know at this point. So your estimate that that might become a bit more clear in 2015 is probably not unreasonable.

With respect to the repayments of the Dutch State, we still have to repay them indeed EUR2.2 billion. And on the one hand, we like to do it as quickly as possible; on the other hand, we need to do it in a prudent way, so that by the time we pay we don't have to come back and regret that we did that because we have some other things still to be done.

So we're working on a very detailed plan, both on the Bank side as well as on the Insurance side, on how to generate capital. We have a very detailed plan how we can bring Insurance to the markets, and that all has to fit together. And if the result is that we do have excess funding and excess capital, we certainly will put the Dutch State at the top of our list. But at this moment, we want to be a bit careful and stay with the schedule that we have.

Okay. Thank you very much.

Michael Huttner, JPMorgan.

Just one the core Tier 1, the 10.4%, what would it be after the EUR1.1 billion Dutch State repayment in November?

And the other question, is there any particular condition if you were to resume a dividend, do you have to ask permission of the Dutch State first, or do you have to have repaid all of the Dutch State aid first; how does that work? Thank you.

Well, in respect of the impact of the repayment, it's a little less than 40 basis points, but of course, between now and then we would hopefully make some profits as well.

And on the dividend?

Dividend, yes you're right, we have to pay the Dutch State before we are in a position to pay dividends. So we have an interest to make sure that we pay them quick, as quick as we can, but at the same time, to do it in a prudent fashion.

Excellent. Thank you.

Benoit Petrarque, Kepler.

First of all on the Dutch mortgage book, you mentioned the high unemployment rate and falling housing price, but is also the number of mortgages underwater currently in the Netherlands. So how do you see the NPL coverage ratio moving in the coming quarters? And could you actually give us the level of NPL cover ratio on the Dutch mortgage book at the end of Q1? That would be useful.

And again on Dutch mortgages; it seems that Dutch households are deleveraging repaying their mortgage, much more than they have done in the past; I think that you have flagged that also in Q1 in press releases. But what shall we expect in terms of decrease of the mortgage book outstanding per year in the current environment? What is your assumption there?

Then second question is on the core Tier 1 ratio. You were at 10.4% last quarter; you are again at 10.4% this quarter on the Basel 111 basis. So is 10.4% a level at which you think you can start to upstream capital to the holding?

And then on IAS 19. You get this regularity approval -- I don't think that's what I've seen at other banks in Europe so far that have taken the hit in this quarter. So for how long to get this approval, because that was also clearly a big reason for you to [up some] capital already this quarter and not wait the end of the year.

And I see in the quarterly report that is a positive EUR800 million from [re-measurement] of net defined benefits liabilities in Q1. So I was wondering if your IAS 19 adjustment has actually been lowered in Q1 significantly. Thank you.

In respect of the dividend, the 10.4% in both quarters is a bit of a coincidence. It's not as if we're planning to maintain it permanently at that level and we'll always upstream above it. We're very pleased that we have the capital strength to push the dividend up, but in terms of the future, we'll evaluate it on a case by case basis.

On the mortgages, your question I think was with regard to the number of mortgages underwater and how do we see the coverage ratio. The coverage ratio is stable at about between 10% and 11%; we're comfortable with that. The outcomes of the actual foreclosures that we have do not suggest that we're insufficiently covered there at all.

Obviously, what we try to do is make sure that our provisions are ahead of our write-offs, and they are. They have been consistently and they still are at this point. So we're not, at this point, concerned about that cover ratio, also because we know that the way we define our NPLs is quite conservative, compared to a lot of our peers.

You asked about the reductions in the book. What we are seeing is an acceleration of prepayments and, obviously, the new production is fairly limited, so overall we expect the book to come slightly down in this year.

Sorry, could you please repeat your last question?

That was on IAS 19. So basically, I think in the quarterly report is EUR800 million re-measurement on net defined benefit liabilities in your Bank equity that's a positive adjustment. So I was wondering, is that relating to the IAS 19 adjustment?

And then linked to that, you get the approval from the Dutch Central Bank, while most of the banks in Europe are actually taking the hit already in Q1 on IAS 19. Avoiding the hit on IAS 19 is allowing you to up some capital to the holding. So I was wondering for how long you get this approval from the Dutch regulator, basically.

I think there's two separate things here. The accounting is the accounting, and we have to rebase equity for the change in the discount rate every quarter and that's what we're doing. And you see the credit at EUR1.1 billion in the equity account.

In respect of our capital ratios, I think the important point is that on a spot basis, we're over 10% now. Even after paying the dividend, we're over 10% spot, so it's not a question of playing with spot implementation here. We have the capacity, even on a spot basis, to pay this dividend up.

Okay. Thank you very much.

Matthias de Wit, Petercam.

I have two questions, please. First on Insurance US, you mentioned that your capital targets were met. Does this imply that all incremental IPO proceeds could be fully upstreamed to the holding? And could you also provide some color on how the contingent capital facility has been, or will be replaced, over there?

And then second on Japan, could you shed some light on how the reserve inadequacy developed in the first quarter, considering that equity market performance has been quite strong? Thank you.

Okay. On the US proceeds going forwards, yes, from now on all proceeds will come to the Group, so the remaining 75% will be to the benefit of the Group. And we showed that already in the slide that you could see that we have allocated then to repaying further the double leverage.

Contingent capital, same thing. They do have the ability now in the capital base to reduce the contingent capital support that they got from ING and we are planning to eliminate that in Q2.

And then on Japan, Patrick.

We mentioned before that there was a reserve inadequacy in Japan. That has improved, it is now down to EUR0.3 billion, and that's a consequence of the improving equity markets and the falling yen has led to that improvement. And of course, that is culmination of the net of the COLI business which is positive in Japan VA, so the net position is down to minus [EUR300 million].

Okay. And just to come back on the contingent capital facility; you mentioned you would eliminate it, but this will not require any injection from the holding then, if I understand correctly?

No, that's correct. No injection from the holding.

Okay. Thank you.

Steven Haywood, HSBC.

Can you just tell us what the current plan is for your Alt-A portfolio, whether it's just continue run-off or are you looking at other options here?

And also, can you tell us what the deadline date is for the over-allotment on the US IPO please?

The over allotment date I have not here with me. I'm looking around whether anybody knows here, but maybe you can ask Investor Relations. 30 days, I'm sorry. Thank you very much.

And then with respect to the Alt-A; the Alt-A, at this moment, as you can see from the slides creates a positive number for the government and it's up to them to decide what they want to do. And we have had good discussions with them, with the Minister, and will wait his decision there.

Thank you.

Sir, there are no further questions.

Okay. Then I'd like to thank everyone for being on the call and wish you all a great day. Thank you.

Thank you, sir. Thank you ladies and gentlemen, this does conclude today's presentation. Thank you for participating, you may now disconnect.