ING Groep NV (ING) 2025 Q4 法說會逐字稿

Good morning. This is Laura, welcoming you to ING's 4Q 2025 conference call. Before handing this conference call over to Steven van Rijswijk, Chief Executive Officer of ING Group, let me first say that today's comments may include forward-looking statements such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving a historical fact.

Actual results may differ materially from those projected in any forward-looking 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 of an offer to buy any securities. Good morning, Steven. Over to you.

Thank you very much, operator. Good morning, and welcome to our results call for the fourth-quarter of 2025. I hope you're all well, and thank you for joining us today. As usual, I'm joined by our CRO, Ljiljana Cortan; and our CFO, Tanate Phutrakul.

And today, I'm proud to walk you through another year of outstanding commercial growth and financial performance driven by the continued execution of our strategy.

These results strengthen our confidence in the year ahead, as reflected in our outlook for 2026, and I will also share our updated and upgraded outlook for 2027, which further underlines the strength and resilience of our business.

After that, Tanate will give you more insight into our income and cost expectations for 2026 and present the quarterly financials. And as always, we will be happy to take your questions at the end of the call. And with that, let's now move to slide 2.

This slide highlights the continued commercial momentum we saw in the fourth-quarter with outstanding growth across all key markets. We added more than 350,000 mobile primary customers during the quarter, bringing total growth for the year to over 1 million, fully in line with the ambitious target we set at our Capital Markets Day.

Loan growth was also robust with absolute growth doubling versus the prior year and resulting in an 8.3% increase since the start of the year. In the fourth-quarter alone, retail banking delivered EUR10.1 billion in net core lending growth, driven mainly by residential mortgages.

Wholesale Banking added EUR10.3 billion, supported by strong demand in lending and working capital solutions as our clients' financing needs increased. We also saw healthy deposit development. Core deposits rose by EUR38.1 billion for the full year or 5.5%.

In the fourth-quarter, retail banking contributed EUR11.3 billion, benefiting from targeted campaigns and normal seasonal inflows and Wholesale Banking recorded a small net outflow, mainly due to lower short-term balances in our cash pooling activities.

Fee income also continued the positive trends. For the full year, fees grew by 15%, supported by continued customer growth and increased cross-sell, essentially doing more business with more customers. And the fourth-quarter also included a one-off benefit of EUR66 million.

All of this translated into very solid financial results. Our return on equity for 2025 was 13.2%, well above the guidance provided at the start of the year. And finally, we remain fully committed to supporting our clients in their sustainability transitions.

Our total sustainability volume mobilized reached EUR166 billion for the year, representing a 28% increase versus 2024. Now let's move to the next slide to look at how the commercial momentum drove our financial performance. On slide 3, you can see that commercial NII remained very strong at EUR15.3 billion.

This result was supported by the significant increase in customer balances, both on the lending side and in liabilities. The volume growth largely offset the expected margin normalization. Fee income was also strong, increasing 15% compared to 2024, and they now account for 20% of total income.

And this reflects structural drivers such as customer growth and increased cross-sell. Investment products performed particularly well with strong increases across all metrics, the number of customers, assets under management and the number of trades.

And taken together, the strong NII and fee performance fueled total income growth, which reached a record level for the third consecutive year. And with that, let's now move to slide 4.

On this slide, we highlight actions taken to strengthen operational leverage, reinforcing our disciplined approach to cost management. We continue to invest in growth and diversification while increasingly leveraging new technologies.

We were able to offset these investments by enhanced operational efficiency as the model becomes more scalable. In 2025, for example, we reduced customer friction by increasing the share of customer journeys handled without any manual intervention.

We also introduced our chatbot in several retail markets, providing customers with faster and more accurate answers in their questions and resulting in annual savings as a large part of the chats are resolved without any human support.

These improvements have contributed to a customer experience that is highly appreciated as reflected in our strong NPS positions across all markets. In retail banking, we maintained our number one position in 5 out of 10 markets.

And in Wholesale Banking, we achieved an NPS of 77, demonstrating both the quality of our client service and the value of our continued investments in expertise and sector knowledge. And our investments in scalability are also translating into higher efficiency, and this is visible in our FTE over customer balances ratio, which has improved by more than 7% since 2023.

Then we move to slide 5, where we show how our robust commercial growth, strong development of total income and proactive cost measures have resulted in strong capital generation. Over the past year, we delivered more than EUR6.3 billion in net profit, contributing almost 2-percentage-points to our CET1 ratio.

And of this EUR6.3 billion, 50% is distributed as a regular cash dividend, offering shareholders an attractive and predictable cash yield. Around 50% of the capital we generated has been used to fund profitable growth across our markets, and this percentage would even have been higher without the steps we took to optimize capital efficiency in Wholesale Banking, such as the 2 SRT transactions completed in November.

Finally, we announced additional distributions to a total amount of EUR3.6 billion, which also helped bring our CET1 ratio closer to our target level. And on the next slide, I will show how these distributions have resulted in a higher, highly attractive shareholder return.

And then we move to slide 6, where we summarize the total distributions to shareholders, and I will build on what I just discussed. In line with the distribution policy, we have consistently paid cash dividends and have been executing share buybacks for several years.

Together, these actions have consistently delivered a highly attractive yield, including in 2025, a year in which our share price increased by almost 60%. The share buyback program we announced in November is currently underway and is expected to be completed in April 2026.

And in addition, we paid out EUR500 million in cash earlier in January, which helps us to meet the cash hurdle for this year, now finalized at EUR3.3 billion. Looking ahead, we remain fully committed to delivering strong shareholder returns, and we will provide an update on our capital planning with our first-quarter 2026 results.

And now starting on slide 8, I will guide you through how our strategy continues to accelerate growth, increase impact and deliver value. Now on this slide, I'm talking about slide 8, we highlight our key strategic priorities supporting our Growing the Difference strategy, building on our successes over the past years.

Firstly, we will continue to grow and diversify our income by adding more customers and doing more business with them. And a good example is the further expansion of our investment product offering.

We have also introduced a subscription model for retail clients in Romania, and we will roll out this concept in other markets as well, which will help grow income from daily banking services. Our affluent customer base continues to grow rapidly, and we see further growth potential, and we're targeting this with dedicated propositions designed specifically for their needs.

We're also stepping up our engagement with younger generations. For example, we introduced new products for Gen Z, including an investment fund focused on improving financial awareness within this group.

And in business banking, we successfully launched our propositions in Italy and Germany, where we are seeing strong and ongoing customer growth. And in Wholesale Banking, we are expanding our range of fee-generating capital-light products to support sustainable and diversified revenue growth.

Now secondly, we will further improve our operational leverage by scaling processes, people and technology while maintaining strict cost discipline to further utilization and scale of Gen AI will enhance efficiency and will help us to reach our FTE over customer balances target ahead of schedule.

Finally, we remain firmly focused on generating strong capital going forward, and our allocation priorities are well defined in that regard. We will maintain an attractive shareholder return supported by a 50% payout policy.

Secondly, we will continue to invest in value-accretive growth, diversify income streams as fund the loan book and a capital-efficient way and consider M&A opportunities that meet our criteria. And thirdly, we will return any capital structurally above our CET1 target to shareholders.

We will also further increase the capital we allocate to retail banking and optimize the capital usage in the Wholesale Bank and note that we have already increased the capital allocated to retail banking to 54%. And with our strategy, we are confident in our ability to become the best European bank.

And with this confidence, we have raised our expectations for the coming years. And then we move to slide 9. And then I'll present our outlook for '26 and '27.

And for 2026, we expect total income of around EUR24 billion, and this outlook is supported by continued volume growth and an anticipated 5% to 10% increase in fee income. Total operating expenses, excluding internals, sorry, incidentals are projected to be in the range of EUR12.6 billion to EUR12.8 billion.

We will continue to manage our CET1 capital ratio at a target of around 13%. And in addition, we will transition from a return on equity metric to return on tangible equity.

And for the full year 2026, we expect an ROE of 14% and ROTE to be higher than 14% and note that the delta between the two metrics was around 40 basis points, 40 basis points in 2025. Then looking ahead at 2027, we are introducing a new outlook for total income.

We now expect it to exceed EUR25 billion, which is at the upper end of our previous target range. This income number includes a higher fee income outlook, which we now expect to exceed EUR5 billion in 2027. And we've moved away from the cost/income ratio and instead provide a clear hard outlook for operating expenses, again, excluding incidentals of around EUR13 billion.

And this reinforces our continued focus on cost discipline and operational efficiency. And taken together, this outlook translates into a return on equity of 15% and a return on tangible equity of more than 15%.

And now I'll hand over to Tanate, who will give more insight on our outlook for 2026 and who will walk you through the fourth-quarter financial results in more detail, starting on slide 10.

Thank you, Steven. As this is the last time I'll talk you through these numbers as the CFO of ING, I'm very pleased that I can close on such a strong result and provide you with an upgraded outlook. On slide 10, let's start with commercial NII, which will benefit from increasing support from the replication portfolio.

We also assume continued customer balance growth of around 5% per year, above the guidance that we gave at Capital Markets Day and reflecting the commercial momentum in our franchises. The liability margin is expected to be at the lower end of the 100 and 110 basis point range, while the lending margin is assumed to remain stable compared to the fourth-quarter.

Fees are expected to grow by a further 5% to 10%, building on the strong performance we achieved in 2025. All other income is expected to be around TRY 2.8 billion, excluding incidental items.

This is driven by continued strong performance in financial markets, while in treasury, we expect less income from foreign currency hedging given the current lower interest rate differential between the euro and other currencies such as the US dollar and the Turkish lira.

Based on the current rate environment, taking 2024 last quarter as a run rate would be a fair starting point. Taken together, total income is expected to reach around EUR24 billion in '26. And then on the next page, I'll walk you through the drivers behind the expected cost development.

We expect total annual cost to be in the range of EUR11.6 billion to 11.8 billion, excluding incidental and regulatory costs. The main driver of the increase remains inflationary pressure, which will again predominantly impact staff expenses.

We will also continue to make selective investment to support business growth and further improve efficiency, as Steven highlighted earlier. These investment costs will be more than offset by operational efficiencies driven by increased scalability of our processes, people and technology, further utilization and scaling of Gen AI and continued optimization of our footprint.

Given the strong income outlook, this modest cost growth results in a positive jaw for the year. Now let's move to the quarterly financials starting on slide 13. On slide 13, you can see that our commercial NII increased driven by very strong volume growth and a slightly higher lending margin, while the liability margin remained stable.

Fee income continues its upward trend, driven by customer growth and strong performance in investment products and insurance. This is more than offset by lower fee income in wholesale lending. As a reminder, fee income in the fourth-quarter included a EUR66 million one-off in Germany.

All other income was supported by continued strong results in financial markets, although seasonally lower compared to the previous quarters. As a whole, total income came in 7% higher than the same period last year.

Now moving to slide 14, where we will show the development of customer balances. As you can see, we delivered another quarter of strong loan growth across both retail and wholesale banking. Net core lending increased by EUR20 billion.

Retail banking contributed EUR10.1 billion, driven by continued mortgage growth, increases across both business lending and consumer lending portfolios. Wholesale Banking also posted strong growth of EUR10.3 billion, reflecting strong performance in lending and somewhat elevated client demand in working capital solutions.

On the liability side, core deposit increased by 9.5 billion. retail banking drove the bulk of the growth, particularly in the Netherlands, Spain and Poland, which benefited from targeted campaigns and seasonal inflows.

Wholesale Banking saw a small net outflow as increased deposit volume in PCM were more than offset by lower short-term balances in our cash pooling business. The other category of deposits were impacted by seasonal reductions in treasury.

On slide 15, you can see that the commercial NII grew by more than EUR100 million quarter-on-quarter and was almost 5% higher than last year. Lending NII was up EUR75 million in the fourth-quarter, driven by volume growth and a one basis point improvement in lending margin to 126 basis points.

The liability NII also increased by EUR30 million, supported by sustained volume growth in retail banking and higher net interest income from our cash pooling business and PCM in Wholesale Banking. Turning to slide 16. Fee growth remained strong, increasing 22% year-on-year.

Excluding the EUR66 million one-off retail banking fees in Germany, fees grew by 17% compared to last year. This was driven by structural factors such as continued customer growth, significantly higher insurance fees and increase in daily banking fees. Investment products also performed really well across several metrics.

For example, 9% growth in customers, 16% growth in assets under management, of which roughly half came from net inflows and 22% more trades. Although wholesale banking fees decreased sequentially, wholesale still delivered a strong quarter, supported by solid results in Financial Markets and Corporate Finance.

Slide 17 shows the development of all other income. Income in Financial Market is mostly driven by client activity. We continue to support our clients through volatile market conditions, mostly with foreign exchange and interest rate management.

Treasury was impacted by lower results from foreign currency hedging. Next, slide 18. Expenses, excluding regulatory support growth. The decrease is mainly driven by structural savings from previous restructuring and VAT refunds recognized in the fourth-quarter.

These effects more than compensated for wage inflation and ongoing investments in customer acquisition and product development, including expanding our offering for new customer segment.

Regulatory costs include the annual Dutch bank tax, which is always fully recognized in fourth-quarter and then allocated across segments. Incidental item related mostly to restructuring provision for planned FTE reductions in corporate staff and retail banking.

Once these are fully implemented, these measures are expected to generate approximately EUR100 million in annualized cost savings. When excluding these incidental items, we ended the year with expense below the outlook range we provided earlier. Now let's move on to risk costs on the next slide.

Total risk costs were EUR365 million in the quarter, equivalent to 20 basis points of average customer lending. This is in line with our through-the-cycle average.

Net addition to stage 3 provision amounts to EUR389 million, mainly driven by individual stage 3 provisioning for a number of new and existing funds in the wholesale bank. This was partly offset by releases of existing provision due to repayments, secondary market sales and structural improvements.

As a result, the stage 3 ratio increased slightly. For stage 1 and stage 2, we recorded a net release of $24 million, reflecting a partial release of management overlays and updated macroeconomic forecast. Overall, we remain confident in the strength and quality of our loan book.

On slide 20, we show the development of our core Tier 1 ratio, which declined compared to last quarter. Core Tier 1 decreased, reflecting the 1.6 billion distribution that was partly offset by the inclusion of our quarterly net profit. Risk-weighted assets increased by USD 4.5 billion this quarter.

Credit risk-weighted assets rose by 1.5 billion, excluding FX impact, driven by volume growth. This was offset by the risk-weighted asset relief from 2 SRT transaction executed in November.

Operational risk-weighted asset increased by EUR2.2 billion, while market risk-weighted asset increased by EUR0.5 billion. We'll pay a final cash dividend of EUR0.736 per share on April 24, 2026, subject to our Annual General Meeting's approval. Now I hand back to Steven to wrap up today's presentation.

Yeah. Thank you, Tanate. And for the ones who have been here longer with us, this is Tanate's last analyst presentation. We have been knowing each other today for more than 25 years, and we've been in the Board together already for seven years and more. So thank you very much for working with us all these years.

Tanate will still be with us until the AGM of 2025, which will take place in April. But I just want to take the opportunity also here to thank Tanate, also for the friendship, also for the leadership and the sharp mind that you have here with us.

And I'll come sure visit you when you're back in Thailand at some point. So prepare for that. Now we move to Q&A, but let me recap the key takeaways from today's presentation. We have delivered another strong quarter end year, successfully executing our strategy, accelerating growth, increasing impact and delivering value.

We achieved a record total income for the third consecutive year. We maintained cost discipline and operational efficiency gains, and they more than offset our investments in business growth. And we delivered another strong year of capital generation and returns, enabling continued attractive shareholder distributions.

And with our strategy, we remain confident in our ability to stay on track to become the best European bank. And with this confidence, we have upgraded our expectations for the coming years with a very strong outlook for 2026 and a more ambitious but realistic outlook for 2027.

And with that, I would like to open the floor for Q&A. Operator, back to you.

(Operator Instructions) Benoit Petrarque of Kepler Cheuvreu.

All the best. I guess you will not miss the Dutch winter, but in Thailand. So it's an interesting time to live actually. It's the first-quarter I actually see the volume growth benefiting fully the commercial NII as the negative effect of lower interest rates is getting smaller.

I was wondering on the guidance of EUR25 billion total income, what type of assumption do you take on growth? I think you've put somewhere in the slide 5% volume growth. I was wondering if that's the right number, given you are growing actually more than 5%.

And also second question is on liability margin assumptions in your more than EUR25 billion total income. Wondering where you stand on '27 on liability margin. And then maybe on Wholesale Banking, where are you on the risk-weighted assets growth plan for the wholesale?

I think you were planning some optimization there. But I do see wholesale growing quite sharply again in the fourth-quarter. So where do you see growth in wholesale going forward?

All right. I'll take, thanks, Benoit. And yes, Tanate, for sure, will not miss the Dutch winter. Neither would I, by the way, if I would go to Thailand. But in any case, I'm here.

If we look, I will talk about the question about RWA and Wholesale Banking and then Tanate will talk about the NII and the growth for '26 and '27. So if you look at Wholesale Banking there we have been seeing good lending growth in the second half of this year, and the pipelines are also filled well now.

So we want to continue to grow there as well. At the same time, to your point, we did 2 SRTs in November that had an impact of around 12 basis points on our CET1. For '26 and '27, by the way, we want to continue to do these SRTs.

So we have just started with our more improvements that we have been making. So the first ones we did at the end of last year. This year, we continue to do SRTs, and we expect that to have an impact, a positive impact on CET1 of 15 to 20 basis points, so a bit higher than we realized over 2025. Tanate?

Yes. Thanks, Benoit. I think in terms of the major assumptions we use in terms of giving out outlook, we have assumed 5% balance growth, and you say that, that is potentially conservative given what you see in Q4. I think what Q4 shows us is it gives us more confidence in achieving our target.

That would be the first answer. The second one is really what curve did we use in terms of our projection. We use the December curve to do that projection, which is quite constructive in our view. And then the third margins.

I think the three impacts that you see is really the continued reduction in the short-term replication negative impact on our results, the continued positive accretion because of long-term replication and the effect of deposit rate cuts that happened in 2025 that affects '26 and will continue to be accretive going into '27 as well. Our forecast for liability margin is on the lower end of the 100 to 110 basis points.

This is also for '27?

I think we don't give that outlook there. But I think if you see the replication on page 30 that we show, the momentum continues to accrete in '26 and '27.

Benjamin Goy of Deutsche Bank.

My first question is on loans versus deposit growth. So another strong quarter of loan growth in particular, and I think it's the third-quarter where your core lending growth has clearly outperformed core deposit growth.

Is that something that you need to work on to be more balanced? Or are you happy to increase your loans faster as there are opportunities? And then secondly, on the costs, for the underlying cost guidance, but there has been historically a bit of incidentals every year.

Should that now be smaller than in '25 going forward? Or what's best to assume for the incident that come on top of the cost guidance?

Yes. I think that on the loans versus deposit growth, I mean, if you look at 2025, the loan growth was about 8%. The deposit growth was about 6%, so EUR57 billion against about EUR38 billion. We've also seen years where that was the other way around. In the end, you want to balance the balance sheet.

So long term, we want to approximately have same growth over a longer period with loans and with deposits. But one year can be a bit higher in loans and one year can be a bit higher in deposits. I think on both sides of the balance sheet, we see continued good growth with people continuing saving.

Also, if you look at the deposit growth projections macroeconomically in the markets in which we are active, we continue to see that. And we do see significant loan growth in the different segments in which we're operating, most notably mortgages.

But there, in the end, we want to balance the balance sheet, and we will always work on that. When we talk about the incidentals, yes, look, we continue to work on our cost discipline as we do. So on the one hand, we want to grow our customers, and we want to grow and diversify the activities in which we are active.

And you've seen us doing that. We invest in more specific segmentation in existing retail segments. We have been rolling out business banking, for example, in Germany and Italy. We have been investing in diversifying our capital-light income in wholesale banking and transaction services and in financial markets.

At the same time, we have seen since 2023, our FTE over balances decreased with 7%, and we believe we can reach our target that we gave in the Capital Markets Day in '24 of a decrease of 10% earlier than we anticipated what we then said in 2027. So we'll work towards this year. So we will work on both levers.

But we always do this in a buy-side thing. So what you've seen, for example, with restructuring costs in 2025, those restructuring costs should deliver us a benefit of EUR100 million in 2026.

And each time that we have a process or area where we can realize better servers, better process optimization, better digitization, better use of Gen AI, then we will announce it because I just want to make sure that front to back, once we announce it, we can execute and we can execute while continuing to grow, and that's how we have been operating for the past five years, and we will continue to do so.

Giulia Miotto of Morgan Stanley.

Thank you for your patience answering our questions and all the best for the life after ING. But now I have two questions, please. So the cost outlook beyond '26, '26 looks quite a bit better. I think it's encouraging to see operating jaws being able to grow the costs much less than the revenues.

Should we expect this trend to continue also in 2027? Consensus has got 3% year-on-year growth. I guess, I don't know what we are seeing could suggest something better than that. And then separately, Steven, I wanted to pick your brain on M&A.

We have seen some headlines on Romania, but also Spain and Italy have been in focus in your comments, although we don't see much actions. So any comments on what you're thinking strategically on the M&A front?

All right. On M&A. So look, we show good growth. You see that both in existing activities and also in diversification on the various fronts, both in lending and in fees, by the way, on investment products and insurance.

Still, and I've said this before, we've also started with filling in the blanks in countries where we don't have all activities, such as business banking and private banking and certain types of investments in asset management in certain countries.

Still, if we can accelerate that growth by means of acquisitions, then we will look at it. You've seen us taking a financial stake in private banking of (technical difficulty) last year. In the fourth-quarter, we announced buying the majority and thereby in the end 100% of an asset manager in Poland, integrating that asset manager into ING, we bought that from Goldman Sachs, the 55%.

And we continue to look. We don't comment on individual markets. Also in Romania, what I can say is that the business is successful. We have been increasing the numbers of customers that we serve. We have been growing, again, also lending deposits and fees.

And we have a very strong return on equity there. We consider ourselves one of the most successful, if not most successful bank in that country. But also there, if we can have opportunities to increase scale or add segments that we do not have, we will look at that as in any other market.

And then the caveat, it needs to fit. It needs to add to that local scale and diversification, and we want it also to be accretive for shareholders, and that's the construct in which we're working and which we are willing to consider M&A. Tanate, the jaws.

Yes. I think given the outlook, we have now turned the corner in terms of positive jaw for '26, and we're confident that we'll continue that positive jaw in 2027.

If you look at the three drivers of our cost growth in '27, the first one is inflation impact, which we expect that the stickiness of inflation impact should moderate in '27 compared to '26. We will continue to invest in our franchise in client acquisition.

In fact, if we can do more, we would do more in terms of accelerating our client acquisition. We have some big programs in terms of investment, financial market infrastructure, payment capabilities, investing in segments that we are not currently present, as Steven has mentioned.

And if you have seen in our '26 guidance, we upgraded our ambition in terms of cost reduction from 2% to 3%. So that trend is expected to continue into 2027 as well.

So I take away that probably growth will be more modest than what is to be expected in '27?

You can do your analysis, Giulia. We've given our guidance.

Tanate Didn't even blink when he asked that question.

Tarik El Mejjad, Bank of America.

Tanate, thanks for the very interesting interactions we had all these many years and good luck for what's to come. Just from my side, two quick questions, please. With a follow-up one on the liability margins more in 2027. I mean just trying to back solve a bit what market expects, assuming asset margin are quite stable or growing a bit the volumes.

We can put your assumptions with even some extra buffers and replicate portfolio, we kind of understand now how it works and so on. It's just the -- in my view, is it fair really to think that the gap between -- I mean the downside potential risk is for the market expect consensus is too optimistic, perhaps, assumptions of rate cuts or no rate raise in the core saving deposits in '27?

Because if you use the forward curve as of December, clearly, you would also take a view on what's your ability to navigate the core savings deposits in Netherlands and other markets. And the second question is on costs is more really to want to understand how you think about the investments? Because, I mean, you have some headroom now created on the revenue side, higher growth and very comfortable to reach your targets.

And then on the cost, the pressure from salary negotiation should come down with inflation. So that extra headroom, I want to understand how you think about the next two years in terms of investments in AI and tech. I mean, yes, you have the machine learning and with the compliance aspect, the Gen AI that you've already started to roll out with some early benefits we see. But what about the next step in AI and tech? And how much of more investments needed to deliver your ambition on that front?

Let me take the question, Tarik, on AI and then Tanate will talk about the margins. Look, I mean, we do clearly see benefits of AI coming through. I mean we have been working with AI already for a decade and then with Gen AI, we work with that in the last couple of years. But there, you see both on, let's say, the -- on the client side and on the operational leverage side benefits coming through.

And let me give you a few examples. If you look at PI onboarding, the STP increased last year from 66% to 79%. So that means that close to 90% of our private individual clients were onboarding through STP. We do end-to-end (technical difficulty) delivery. We increased that approvals with 11% last year. So the time to (technical difficulty), therefore, improved.

We do about 60 million in customer lending without manual intervention. So you see a number of customer benefits coming through. When we talk specifically about GenAI and also in chatbot, we have better scores, CSAT scores, which are sort of satisfaction scores for our customers. So we do see benefits coming through for GenAI, both on the revenue side, doing more with our customers and having more satisfied customers and on the operational leverage.

We do that in five areas at current. So we took the five big wins that we see starting with contact centers, in IT, coding, in lending, in personalized marketing and in KYC. So those are the big areas. We do these benefits, we see them coming through. Every quarter, you see announcement, you've seen announcements whereby we say, okay, what impact does it have on our staff, what impact does it have on our operations? And you see it also coming through in FTE over balances.

And we're actually quite optimistic on the impact it will have on our operational leverage going forward for '26 and also in 2027. And we will make announcements as we move along and when we can say this is now the next step that we will take, including, of course, good reskilling of our staff and making sure we can grow and continue to grow our franchise sustainably.

And Tarik, to your second question, I think we also see based on the December curve that the accretion and replication in '26 going to '27 and '28 are quite strong. The real debate is what -- how do you balance that additional revenue in terms of margins and in terms of mix, right? And what we see is that we are looking at the dynamics of maintaining growth in customer growth in volumes and making sure that we take into account the level of competition we see in the market.

And if you look pre negative rates environment, ING operated on a liability margin of around 90 to 100 basis points. We have updated our guidance to 100 to 110. And we think we're comfortable with that rate given the balanced dynamics of growth, competition and to be remaining competitive while at the same time, being accretive to our shareholders.

I mean I don't want to put words in your mouth, but basically, to deliver on the consensus or market numbers means that market has to be much more bullish on the volume growth and lending and probably be less positive on the margin side. But I'm just trying to reconcile a bit what your guidance outlook, which is very helpful versus where market is positioned.

Delphine Lee, JPMorgan.

Also I want to take the opportunity to send my best wishes to Nate, thank you for everything. So my two questions. First of all, sorry, I just want to follow up on Tarik and other questions around NII. But -- so if we look at your guidance for 2026, which implies about EUR600 million increases for liability margins. But if you look at the repricing actions that you've done in '25, I mean, the impact on '26 is already EUR700 million.

And then on top of that, you have some small benefits from -- well, your replicating income as well on '26 more, but like still. So I'm just kind of wondering like what is your current assumption and in terms of the deposit cost and deposit pass-through from 42% in Q4? And if you could just sort of elaborate a little bit on what are you seeing on competition on deposits at the moment? What do you expect for '26 and onwards?

My second question is on cost. So you've done a good job of trying to kind of contain a little bit of inflation with the savings. I'm just trying -- just trying to understand a little bit if 2%, 3% is really kind of like the run rate that we should expect like even beyond '27. Is that something that you're trying to achieve in the long run? Yes, just trying to understand a little bit the moving parts of that cost number, you've provided this for '26.

But even beyond that, like what are the savings? You've mentioned a couple of benefits from FTE reductions, but just kind of trying to quantify a little bit what else can we expect in the long run?

All right. Thank you very much. I think that on the costs, you see the effects of our digitalization and scalability now really seeing take shape. And we saw that now also in the fourth-quarter, but also I'm pointing again at FTE over balances. You also now see that when we look at 2026 about the operational leverage and efficiencies that we have compared to the increase in investments.

So the operational efficiencies are higher, and that's where we want to be. We want to make sure that when we make additional investments, we can have operational leverage that is higher than that. So that's maybe a little bit of direction to give you or guidance to give you in terms of where we want to end up. And indeed, therefore, you will see in '26 and '27 improved cost to income to what we have been showing and positive jaws territory that we have now been gotten into and I want to stay in that territory.

And at the same time, we continue to want to grow our investments where we can grow our clients for long-term clients and shareholder benefit. But that's a bit of guidance towards the cost. Then Tanate, on the deposit cost of margins?

I think we gave a bit of detail on page 20 of our presentation showing the movements in terms of commercial NII. I think the lending NII is driven by basically stable margin and approximately 5% loan growth. And similarly, for liability NII, we also assume 5% liability growth. Of that EUR600 million we show, part of it is due to volume, about half. The other half is through the improvement in margins.

As you say, the replication is getting better, but there's some short-term impact that still need to feed through our numbers and the EUR700 million is factored into that guidance.

Namita Samtani, Barclays.

The first question I have is on German retail. There's quite a lot of cost growth in 2025 there. I think it's around 11% year-on-year, and it's a lot higher than other regions. So I wondered what are you exactly spending on in Germany? And is this defensive spend given the new players entering the market? And then I think about your liability margin, which is, of course, at group level, but are you telling us that we're at peak earnings for Germany in retail given high expense spend and (technical difficulty) spend to gather deposits?

And my second question, based on your updated '27 targets today, the cost to income implied in '27 is maybe 51%, 52%. It's hardly a standout amongst European banks, even ABN is now going to below 55%. I just wondered, given the digital model ING has or aspires to have and the use of AI, what's holding the group back from delivering a better cost to income target?

Yes. Thank you very much. On the cost to income side, our main opportunity is to grow our revenues. Our revenues over our client balances, our diversification in Wholesale Banking, our revenues over RWA and as a result, but that's then a consequence of it also that will have a positive impact on our cost to income. But what we need to do, that's why our strategy is called grow the difference is grow our revenues.

Because that's where we can make the biggest difference in further improving our returns and then indirectly also our cost to income. And so the digital model has brought us a lot in terms of presence in markets, but that's why we're talking about doing new activities in these markets or doing more with customers in these markets because that is the next step in our evolution, what we're currently doing. Tanate?

Yes. The German cost income ratio is a robust one despite the increase in investments that we make in Germany. One thing that you have to remember is that the client growth that we have, 1 million customer per year, a very significant portion comes from Germany, which is our main market. So that's why the investments in client acquisition, in creating new products, creating new segments is very strong in Germany. very, very much like the rest of ING seeing a turnaround in terms of the momentum in terms of revenue and cost in Germany.

And we do expect that the positive jaw will return to Germany in 2026, while continuing to invest in our franchise, both in terms of the fundamental platforms as well as client acquisition.

Cyril Toutounji, BNP Paribas.

So I've got two. One on lending margin. So we had an improvement this quarter, which is welcome and I think pretty good news. And you're saying it's due to mortgages. I'm just curious in which market has happened? And if you can give us more indication whether this can continue maybe a bit? And the second one would be on deposit campaigns.

Can you update us on the ongoing campaigns right now? And I don't know if you can give this indication as well, but should we expect more or less campaigns versus the 2025 run rate?

Yes. Thank you, Cyril. I'll take the question on deposit campaigns and Tanate talks about the lending margin. So yes, about the deposit campaigns, look, we have these campaigns regularly. We had them also in the fourth-quarter with Black Friday in some markets or in Germany, as they call it Black Friday. So we will continue these campaigns, and we typically see that there's a good response in getting either new money from existing clients or getting new clients in.

And then typically, we see that we get money to stick to around 2/3 of the money that after campaigns will stick with ING and therefore, we can gain new primary customers and increase our deposit levels. So for us, that works well. And what we work on every time is we make them more bespoke to certain customer segments and we make them more data-driven, so we can target them more and more.

So we are very happy with the approach we've taken. We are confident about what we are doing, and we will keep on having these campaigns and we make them more bespoke about a year. Tanate, about the margins?

Yes, So I think we are also pleased to see that we have stabilized our lending margin and that it's improved by one-basis point. And to your specific questions on mortgage margin, it's been stable or increasing across the board. I think some of the markets where the new production margins are improving is in Belgium, increasing in Germany, increasing in Italy and Spain. So it's quite widespread in terms of margin improvement, but we do see a bit of pressure in terms of new production margin in the Netherlands.

Johan Ekblom, UBS.

Thank you for everything, Tanate, and best of luck. Just most questions have been answered. But at the Capital Markets Day, we spoke a lot about the business banking opportunities, and I guess, in particular, in Germany. How should we, from the outside, try and measure your success there? Because it's very difficult to track where you are in terms of the rollout.

And I guess also when you are expecting to see volumes start to come through in a more meaningful way. So any update on kind of how the business banking rollout in Germany is going would be much appreciated.

Yes. Thank you very much, Johan. Indeed, business banking is one of the levers that we pull to diversify. To give you a few data points, we -- the third largest growth we had in business banking customers in terms of number of customers this year was Germany. So that already shows you that we're starting to grow quite well in Germany. It starts from a very small base.

Obviously, because we started from virtually zero. So that's one. Two, we also get very good deposits in from our business banking customers in Germany, so also there. So increasingly, that will become more sizable. But compared to our business banking franchises in the Netherlands and Belgium, for example, of course, it is very minimal because we have EUR114 billion business banking lending book.

And in Germany, we're just starting. So that will take time. But it is almost like you saw with the insurance fees there you see in the fee income line, as an example, it was not even a separate fee line. And there you see step by step-by-step, it's almost like a snowball. We do more and more and more. And at some point, it will become a sizable business, and that's also what we see happening in business banking in Germany.

Shrey Srivastava, Citi.

Thank you, Tanate, for answering all the questions over the previous quarters. I just want to look more top down because obviously, following on from previous questions, we've talked about the upside on the replicating income versus your guided liability margin still at 100 to 110 basis points. A, is your sort of 5% volume growth guidance predicated on further deposit campaigns to get you within this 100 to 110 basis points? Or is any sort of upside to volume growth from that incremental to the 5%?

And secondly, what are sort of the hurdle rates you have in mind when thinking about going forward with a new deposit campaign? Because obviously, as you've heard sort of many of us to get from the assumptions we have when plugging your replicating income into the model to the liability margin of 110 basis points would require some sort of pretty significant deposit campaigns. So what are some of the things you think about when deciding to give up that short-term upside for sort of longer-term growth?

All right. Tanate, can you give the elements of our replication income or lease liability margin again?

Yes. I think the 5% deposit growth, I think it's a good base number, right? And I think you look in the context of 2025, where the growth is around 5%. So that trend line, we expect to continue despite competition, despite quantitative tightening. So I think it's a good number to assume 5% growth. Does campaign play a big role in that? It continues to be the case, right, that we have campaigns in many markets we operate in.

We continue to use that as a tool, but we also get additional flows coming into the bank all the time. And what I look at really is the growth in our primary customer, the intensity of which we have a relationship with our customer is there. And I think looking at the replication, it's still the three moving parts, right? It's really the impact of the short-term replication still having a tail impact is continued accretion of long-term replication coming through and the actions that we would take in terms of rate increases or decreases over time.

And I think we like to reiterate that we don't give guidance for '27 in terms of liability margin, but we expect it to operate in '26 at the lower end of the 100 to 110, and we're comfortable that we can achieve our target with that guidance.

Seamus Murphy, Carraighill.

Sorry, I'm coming back again to a lot of the questions that have been asked in one sense just in terms of the guidance. So I suppose you've guided 16 to -- sorry, EUR16.3 billion to EUR16.5 billion for commercial NII in 2026. But in Q4, it was EUR3.928 billion. So that suggests an exit rate of just over EUR4 billion into Q1 2026. That's already in the bag.

And if I annualize that, I'm kind of getting EUR16.2 billion at the start of the year, just before anything else happens and the upper end of your guidance, therefore, only needs 2% growth to achieve the 16.5%. And obviously, we have -- so I suppose question one, is there anything wrong with the math as you start the year that you have kind of EUR16.2 billion of NII heading into the -- sorry, EUR16.2 billion into this year at the start?

And the second question then is, obviously, we have growth, so there's only limited growth needed. But the second question then is, you mentioned earlier on the call that the long end of the replication portfolio is a positive further into '26 and '27. Two things have happened. Your current account balances have grown EUR5 billion, I think, to EUR175 billion now.

And secondly is that, obviously, the curve has deepened. So it would be super useful if you could tell us how much the long end of the replication portfolio will contribute in '26 and '27. And the last question, I asked this also on the Q3 call because it's becoming more and more important for banks, I think, is that do you expect FTEs to fall as we look into '27 and '28 at the group level?

Thanks, Seamus, for your questions. Well, we do expect FTE over balances to fall. So this is about, of course, a continuous focus on growth and then on a marginal basis, doing that with less marginal cost. And that's why we use the metric FTE over balances, whereby we continuously accept -- sorry, see an improvement or expect an improvement based on our digitalization and AI and GenAI and better process management as we have been doing over the past years.

And that trend we see continuing. At the same time, we want to grow because we need to diversify and grow our revenues over our balances and our RWA. But from an FTE over balancing perspective, we should see further improvements. Tanate, how does it work with that?

Yes, Seamus, we will see each other in London, so we can go into a bit more detail. But I think it's a dangerous game to take Q4 and then extrapolating it. But I think if I look at full year to full year, the impact is over EUR1 billion, right? That's a 7% growth in net interest income, which I think is a strong number and strong guidance.

And I also -- we don't give replicated income in such details of how much the long end would contribute, except that we have disclosed in our presentation that 55% of our replication is long dated. And I also noted the fact that the drive of our primary customer is driving increasing current account and that increasing current account means better margin. So we do recognize that.

(Operator Instructions) Anke Reingen, RBC.

But firstly, thank you very much, Tanate, and all the best. And then to questions. So firstly, can you just talk a bit about your expectation on lending volume growth in 2026? I guess the 5% applies here as well, but I suppose, Q3, Q4, you've seen very strong growth. So where do you see sort of like the mix falling into 2026? I mean I hear your margin comment, but maybe just more a bit in terms of the mix.

And then you commented earlier on about the SRTs of 15 basis points benefit. Can you just clarify, is that per year? Or is that over the two years, '26 and '27 --

Thank you very much, Anke, for your questions. If you look at the SRTs, the impact in '25 was 12 basis points and that impact remains there. So once we have taken, let's say, the first loss piece of our balance sheet, it will remain (technical difficulty) of our balance sheet. But in '26, we're going to do an additional number of SRTs that should benefit an additional 15 to 20 basis points on our CET1.

And we, of course, will then also continue for '27 and thereafter. But on those years, we haven't yet given guidance. When we talk about lending growth, we see good growth across the board, like you've seen in the third and the fourth-quarter that both in and mortgages and in business banking and wholesale banking, we continue to see good growth. The pipelines are good.

Clearly, especially with the underlying macro drivers, there is shortage of housing in many of the markets in which we operate, in this case in the Netherlands, that is the case in Belgium, that is in Germany. That is the case in Spain. We are -- we have a total mortgage book of EUR370 billion. So we are a top three mortgage provider in the region in Europe.

And in many of the markets in which we are active, we see there are good macroeconomic fundamentals to continue that growth, low unemployment levels, good salary increase over the past couple of years, shortage of housing, lower number of people in individual households, so an increase in the number of households and those fundamentals continue to be there. And that's why that is going to be a significant driver of the loan growth in 2026 and '27.

Matthew Clark, Mediobanca.

So firstly, coming back to this EUR25 billion target for 2027 revenues or greater than EUR25 billion. I mean, are you trying to talk down consensus there, which is EUR25.8 billion, I think? Or do you think that's still consistent with the greater than component of that target? So I just want to understand your thinking for framing that target that way against the context of a higher consensus?

And then secondly, on wholesale lending, why is now the right time for you to be putting your foot down on wholesale lending? What's changed in terms of risk reward, et cetera? And I guess asking that in the context of an uptick in credit losses on wholesale this quarter.

Yes. Thank you very much. Well, let me put it this way for 2027. So we said that the revenues are larger than EUR25 billion. So we are confident about our growth, and we're also confident about '27. So don't forget the larger then sign in EUR25 billion for '27, but yes, that's where we currently are. And we're very comfortable with that level.

When you talk about wholesale bank lending, well, look, we had slow quarters in the first half of 2025, and then it picked up very well in the second half of the year. In the end, what we want to realize in Wholesale Banking is higher revenues over RWA and a higher return over RWA. And in that regard, we have been investing and we are continuing to invest in transaction services and financial markets.

That will help us to drive the diversification in wholesale banking and do more with our customers next to lending, but lending, of course, is also good. And secondly, we're attacking, let's say, our capital there. Our capital was about 50-50 in '24. Now we said for '27, we had a target of 55% in retail and then 45% in Wholesale Banking. It's already at 54% for retail and 46% for wholesale banking.

So we're on a good path quicker than we initially anticipated. And that's why we continue also to work on the SRTs to make sure that also on the capital side in wholesale banking, we can do more with less capital to help with return going up. So it's not a particular focus on lending alone. In the end, we're focused on return.

Farquhar Murray, Autonomous.

Obviously, congratulations, Tanate and best wishes for the future. Coming back to the day job though for now, two-questions, if I may. Firstly, please, can you reconcile the indication of EUR0.4 billion of hedging tailwinds into '26 of 4Q with kind of flat replicating income on a year-on-year basis on slide 29. Is that simply a matter of how things came through in the quarters?

And perhaps can you just flesh that out through '25 and into '26? And also, is there a quarterly pattern to that hedging impact and also maybe the short-term effects you mentioned earlier? And then secondly, if we look last year, lending outpaced deposits, if we look at the 8% versus the 5% I know you said the kind of planning assumption as a kind of balanced 5%, but what's your general sense about where customer demand is at present?

I think that -- so on the customer demand at present, I mean, we -- actually, we do see continued good mortgage growth, again, because we see the macroeconomic elements that we saw in there, we see them continuing. And therefore, if you look at the number of houses being sold last year in a number of our main markets in the Netherlands, Belgium and Germany, they all have increased.

And also, we see increases in a number of these housing markets to continue in 2026 and '27. So again, we're very positive towards that end. I think in business banking, we have also been improving our processes, and therefore, we've made it easier for our customers to borrow with us. So I think there, it's also an improvement of capabilities that we have had and by the way, rolling out business banking step by step by step in Germany, Italy and potentially also in other markets that we're looking at.

We've spoken about Spain before. And then in wholesale banking, it's always more lumpy, funny enough, whereby you do see geopolitical uncertainty on the one hand and the PMI index being relatively low, we've seen sort of a catch-up demand of wholesale banking lending in the third and fourth-quarter. The pipeline is still good.

Yes, probably that wholesale banking in that sense is always a bit more choppy in terms of growth than the other elements. But the main consistent element in the lending growth sits in the mortgage side. Then on the hedging tailwinds, there, I want to give the floor to Tanate.

Thank you very much, Farquhar. I think what we see is that if you look at our quarterly commercial NII, it reached a trough in Q2, improved from EUR3.7 billion to EUR3.8 billion and from EUR3.8 billion to EUR3.9 billion during the course. So you already see signs of that replication impact. I think what the EUR400 million refers to is the fact that the short end pressure that we see is decreasing.

We see the fact that in Q4, we also have the benefit of the rate cuts already materializing into the numbers and that 55% of the long end is already positive. So it's a combination of all these three factors that drives the EUR400 million tailwind.

Chris Hallam, Goldman Sachs International.

I just have one question left. And obviously, good luck, Tanate. I'm sure you're going to miss all these questions on replicating income and liability margins when you're relaxing in Thailand. But just on this question on the corporate side, you talked about increasing levels of working capital lending and lower deposits.

Are those two-points linked, ie, are corporate customers building up working capital and therefore, draining their cash balances in anticipation of higher activity later in the year? And if so, how long should that working capital cycle last for? And would we notice any impact on NII through this year as and when it reverses, either on the lending margin or on the liability margin?

Yes. Thanks, Chris. And yes, Tanate will miss those questions. But luckily, we have Ida Lerner, our new CFO, and she already told me yesterday, said she's really looking forward to all these questions. So next quarter, you can expect her to answer these. On the working capital side, yes, I mean, on the wholesale side, you saw that EUR10.3 billion lending and working capital solutions growth.

So part was indeed working capital solutions. That had to do with a couple of large deals, very large companies doing very large deals, and we were leading those deals. So that doesn't necessarily have a link with each other that those are, let's say, seasonal swings that sometimes you have and sometimes you don't have.

Clearly, those working capital solutions deals because they are typically short term and self-liquidating or collateralized or they have a borrowing base behind it. They have lower margins. But we have many of these. And so that doesn't have a particular big impact on the lending margin. When we talk about the cash pooling business, that's the pooling both in our payments and cash management and the notional pooling business, typically, clients at the end of the year, they will consolidate their positions and net them off.

And because they net them off, they net them off in our accounts, and therefore, you see a lower amount coming in there. So a seasonal pattern.

There are no further questions in queue. I will now hand it back to Steven Van Rijswijk for closing remarks.

Yes. Thank you very much. I think we can -- we are very proud of our 2025 numbers and also very confident about '26 and '27, hence, the improved and heightened outlook. And I want to thank you for all your questions and observations today, and again, Tanate, for the fantastic collaboration, and you are a great friend and a great colleague. Thanks very much, everybody, and I hope you have a great Thursday.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.