ING Groep NV (ING) 2022 Q4 法說會逐字稿

Good afternoon, everyone. This is Priscilla welcoming you to the ING 4Q 2022 Credit Update Call. Please note, today's conference is being recorded. Before handing the conference call over to Mr. Jaap Kes, Global Bank Treasury 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. A discussion of factors that may cause actual results to differ from those in any forward-looking statements is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission, and our earnings press release as posted on our website today.

Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good afternoon, Mr. Jaap Kes, over to you.

Thank you, operator. Welcome all, and thank you for joining us today for the ING credit update call of the 4Q 2022 figures. My name is Jaap Kes. And since July, I'm the Group Treasurer of ING Group, but I've been with the bank for the last 2 decades.

Today, I'm here together with Mark Milders, Head of Investor Relations. In this call, we will take you through the high level 4Q '22 results, ING's capital position and issuance plan for the coming year. And at the end of the call, we will have some time for Q&A.

Before we get started, I would like to point out that the credit update slides to accompany this call are available for download from our website. After the presentation, we'll be happy to take your questions. With that, let me hand over to Mark.

Thank you very much, Jaap. Good afternoon, all. Allow me take you through a couple of slides, and I understand there's another call coming in Frankfurt. But let me take you through some of the slides and some of the highlights of today's result presentation.

Starting with Page 2. Again, after 2 years of pandemic dominating the headlines, '22 was again a turbulent year with events that we would not have been able to foresee or talk about before that. Primary customer growth, however, if you look at it even at the low savings rates, that was very successful again in 2022 with more than 0.5 million of new primary customers. You see that our channel, the mobile -- our cheapest channel, the mobile-only is growing end-to-end digitization as we explained at the investor update, which is a driver of efficiency is growing. Volume mobilized is the amount of money that we are able -- to enable our customers to invest in the transition is growing. And on top of that, the hot topic, of course, with the current rate environment and the increases growing, NII, and our distribution to shareholders over '22 of EUR 4.8 billion.

Moving on to Slide 5. Our targets, which we communicated at the investor update, we are on track to meet those, especially on the back of improved outlook on interest income, we upgrade our total income growth target from the previous 3% to a new range of 4% to 5%. This is based on the CAGR for the period '21, '25. It is not linear as '23, we'll see more than 10% increase in total income with the shape of the curve, a lowering of the growth in the outer years coming to a CAGR of 4% to 5%.

On the cost side, we expect to see some pressure from the full year effect of inflationary pressures, and we continue to invest in our business and to execute our strategy. And we look to improve our cost-to-income ratio in '23 and expect to land between 55% and 56%.

Moving to Slide 11, where we highlight our funding profile, which is well known to you. But clearly, the return to positive interest rates in '22 demonstrates the benefit of our funding profile with a high share of sticky retail deposits and a limited -- relative limited dependence on a more volatile wholesale funding. After years of significantly compressed deposit margins, we're now seeing a swift normalization. We're not yet there, as I'm pointing to the middle graph, but we are pleased with the progress.

These developments are also visible when we look at total income, which grew by EUR 1 billion in 2022 when correcting for the net TLTRO impact and the Polish mortgage moratorium.

On to expenses on Slide 13. Expenses were well contained in a high inflationary environment. While we continue to invest in our customer experience, our basis for future growth, excluding regulatory costs and incidental items, expenses increased over '22 by 2.3%, and that against compared to just in Eurozone already of a larger than 8% inflation.

Looking ahead, we expect to see some cost pressure in '23, and we'll continue to focus on cost control to keep our expenses contained, delivering an improvement of the cost-to-income ratio in 2023, as mentioned. Regulatory expenses came in slightly lower in '22, and we expect another slight decline in '23. Note that we will still foresee regulatory costs to decrease by EUR 400 million by 2025 compared to the levels of '21, which is coming from the finalization of the buildup of the resolution fund and European DGS.

Skipping quite a few slides to Slide 23 on -- for a bank, the important risk cost section. Again, we reiterate the strength of our loan book, the high quality of our loan book. This quarter included a further release of EUR 112 million in Stage 2, mainly related to our Russian exposure, which we reduced again this quarter, and the EUR 46 million release of management overlays for potential impact of second order effects of the current macroeconomic environment. In total, we have built up EUR 453 million in management overlays at the end of 2022.

Now in the graph in the middle, you noticed that the Stage 2 ratio increased. This was -- in the previous quarter, this was caused by stricter PD backstop methodology. This quarter, you also see an increase, but that is driven by the denominator as we repaid EUR 29.5 billion of our TLTRO funding, which was included in credit lending outstandings. Overall, in absolute amount, Stage 2 actually declined.

I would like to hand over back to Jaap to take you through the capital and funding.

Thanks, Mark. So maybe then turn to the slide on our capital ratio on Slide 26. There, we see the bar chart that shows the development of our CET1 ratio, which remains strong at 14.5%. The additional distribution of EUR 1.5 billion, as announced on the 3rd of November has been completed. The impact of this was partially offset by the inclusion of EUR 500 million of interim profits and by lower RWA. The RWA decreased by EUR 7.1 billion, mainly reflecting the FX impact on credit RWA caused by the depreciation of the dollar as visible on Slide 25. With a 1.9% AT1 ratio and 3% Tier 2 ratio, ING is fully benefiting from the CET1 capital relief provided on Article 104a.

Then turning to Slide 29 on TLAC and MREL. Let me start with TLAC on the left. ING Group meets the end-state TLAC requirements with a TLAC ratio of 30.4% of RWA and 9.5% of TLAC leverage. However, for ING, the most constraining requirement is the MREL target as a percentage of RWA, which we show on the right of this slide.

As you can see, we have met our intermediate MREL requirements, while we also amply meet the MREL requirement of 28.71% early June '24. This is including the announced CCyB increases. Our current MREL capacity is over EUR 100 billion with an approximate surplus of EUR 10 billion based on RWA.

Before we open the floor for Q&A, I will elaborate on our issuance plan for '23 on Slide 30. Now we have done some prefunding late last year, allowing us to stay sidelined in our very short issuance window early January. This proved to be a very crowded period. This year, ING plans to issue around EUR 7 billion to EUR 9 billion of HoldCo senior subject to our balance sheet developments clause, and this is slightly lower compared to last year where we issued around EUR 11 billion. The planned HoldCo issuance is driven by the refinance of EUR 1.6 billion of our HoldCo redemptions in 2023, and of course, potential RWA growth on the back of high risk optimization due to the current macroeconomic environment.

Building of internal buffers is also paying a role on MREL taking FX volatility and market access into account. The aim to optimize our MREL stack by replacing the CET1s with previous senior OpCo over time is obviously the last target. For AT1 and Tier 2, we strive towards optimization of our capital structure. We feel comfortable with the current AT1 ratio of 1.9% and Tier 2 ratio of 3%. Several Tier 2 instruments totaling EUR 3 billion have a call or maturity date coming up in '23. The first common call date for AT1 is only in April '24. We expect that corporate bond activity through bank and subsidiary will pick up in 2023 to prepare for further TLTRO repayments. We expect to issue EUR 4 billion to EUR 7 billion in secured formats from various ING entities. We still see a limited need to issue OpCo senior due to the current overall liquidity position of the bank. However, if need be, we will also look at that funding source.

I suggest I stop talking now and open the floor for some questions. Operator, back to you.

(Operator Instructions) It appears there is no further questions at this time. I would like to turn the conference back to you for any further instruction. Thank you.

Thank you, operator. I think we've been very clear. So thanks, everyone, for joining us today, and success with your call with (foreign language) in Frankfurt. The Investor Relations team is obviously available for your follow-up questions, just reach out and obviously, have a very nice day. Bye-bye.

Thank you for joining today's call. You may now disconnect.