ING Groep N.V. American Depositary Shares 2026 Q3 Earnings Call

Hi, good morning, and good morning to you all. Welcome to our results call for the third quarter of 2026. I hope that you are doing well. As usual, I am joined by our CFO, Ida Lerner, and our CRO, Andrea Cesaroni. Since launching our Growing the Difference strategy in 2024, we have made significant progress delivering on our strategic priorities and performing well ahead of our financial targets. Today, I will discuss how the disciplined execution of our strategy is driving profitable growth, supported by structural drivers. After that, Ida will walk you through the quarterly financials, and at the end of the call, we will be happy to take your questions. With that, we now move to slide number 2. On slide number 2, you see that we continue to see strong customer activity across the franchise alongside clear momentum and profitability.

Importantly, these developments go hand in hand. We are growing our customer base, becoming the primary bank for more customers, and we are deepening those relationships through more products and higher volumes. Increasingly, we do this through a scalable operating model, which drives income growth and diversification. It drives positive operating jaws, and it drives higher profitability. That is the engine to our strategy, enabling us to grow, generate capital, and deliver attractive shareholder returns. In the third quarter, we added 259,000 mobile primary customers, taking our growth over the past 12 months to more than 1.1 million, ahead of our Capital Markets Day target that we set in 2024. Growing primary relationships is particularly valuable as it drives deeper engagement, greater cross-selling, higher balances, and ultimately more income per customer.

This momentum is also reflected in strong loan growth of 6% annualized, supported by continued demand across our markets. Customer deposits also grew at an annualized rate of 6%, underlying the strength of our customer franchise and deposit-gathering capabilities. Fee income increased 9% year on year, supported by customer growth and higher engagement across both Retail Banking and Wholesale Banking. The sustainable volume mobilized, that increased with 19% year to date, 19, as we continue to support clients in their sustainable transitions. Overall strong customer activity translated into income growth of 6.6% over the last 12 months, while cost growth remained contained at around 2%.

Positive operating jaws of more than four percentage points demonstrate the increasing scalability of our business, and as a result, we delivered a 16% Return on Tangible Equity in the third quarter, with our four-quarter rolling ROTE improving by two percentage points year on year. Let's now look more closely at what is driving the increase in our Return on Tangible Equity on page 3. On that page, you see that we break down the roughly two percentage points year on year increase in ROTE, and more than 80% of that improvement is supported by a number of strategic drivers. When we launched our Growing the Difference strategy, we identified three key levers to structurally improve profitability, and we've made strong progress on each, with further runway ahead.

First of all, we have grown our fee business and diversified our income, and we will continue adding capabilities to further deepen our customer relationships. Secondly, we have strengthened our operating leverage and improved the operating jaws with further upsides as we increasingly support commercial growth with scalable solutions. Thirdly, we have reallocated capital to improve our overall return profile. We will continue to shift capital from Wholesale Banking towards Retail Banking while unlocking additional RWA through ongoing capital discipline. Alongside these strategic levers, margins remain supportive to our overall profitability and we continue to optimize pricing across our customer relationships while benefiting from the tailwinds through our replicating portfolio. Third quarter performance underscores a clear message. The improvement in profitability is predominantly structural, supported by consistent strategy execution with further runway ahead.

In the next three slides, I will further zoom in on each of these three strategic levers, starting with fee income on slide 4. If you look at slide 4, there we gave the example of Retail Banking. There you see that how our Retail Banking growth strategy is translating into more customers, into deeper relationships and ultimately higher fee income per customer. We continue to grow our customer base, adding 900,000 customers over the past 12 months, reaching more than 41 million in total. More importantly, mobile primary customers even grew faster by more than 1.1 million. As more customers choose ING as their primary bank, engagement deepens and product adoption increases, as reflected in the growing share of customers with three or more products. That's important because primary customers are significantly more valuable, and I've said it before.

They are 7 times more loyal, have 4 times more digital interactions, and are 2 times more profitable. We also see these deeper relationships translating into a higher share of wallets. Average funds entrusted per customer, and that's on the right-hand side of the page, have increased, driven by both higher deposits and higher AUM as more customers choose ING for their investments. Higher engagement and product adoption also drive fee income expansion, with average fees per private individual customer up 14%. In short, we have a strong business model. We're growing our customer base, converting more of these customers into primary relationships, and deepening those relationships subsequently. This increases our relevance to our customers, drives higher value per customers, and creates an incredible foundation for future growth.

Now, let me take you to slide 5 to discuss the second lever that we discussed on page 2. On slide 5, we demonstrate how we increasingly are enabling scalable growth. ING has a strong track record of digitalization with the vast majority of our key customer journeys now fully straight through and requiring no human intervention. That is critical not only to delivering a superior customer experience, but also to achieving true cost efficiency. Alongside our high level of digitalization, we've built strong foundational capabilities that allow us to scale more efficiently. Our global hubs network brings together a substantial part of our operations workforce and tech employees in a fully integrated and scalable organization that drives productivity and strengthens operational resilience.

These key capabilities, in turn, have allowed us to absorb significant commercial growth and to invest further in further expanding our business without requiring additional resources. If you look year on year, we have reduced our headcount by 1.5%, and we are significantly front-running our productivity targets that we had set for 2027. We see more opportunities ahead. In parallel with making the existing bank more digital and efficient, we are also developing new propositions that enhance customer value and create opportunities for future growth. Increasingly, we're building those propositions globally, enabling us to scale efficiently across markets. In that, our global investment platform, for example, is a good example, already live in the Netherlands, in Belgium, Italy, and Romania, and it brings together ING's investment capabilities on a single platform.

That enables faster product development and more consistent customer experience across markets and greater responsiveness to changing customer needs. Together, these capabilities allow us then to capture increasing benefits of scale, supporting sustainable and profitable growth. Now let's go to slide 6. That was the third lever I was talking about. On slide 6, we see the combined effect of consistently executing all the components of our Growing the Difference strategy, growing our customer base, deepening relationships, and diversifying income at scale is then driving that positive operating leverage and higher profitability. Then we deploy the capital generated towards profitable growth and selective M&A, and then we return structurally excess capital to shareholders. This increasingly converts profitability into EPS growth, and you see it on the left-hand side of the page with EPS up 17% year on year.

Now, furthermore, our capital generation is amplified by disciplined RWA management. On a year-on-year basis, we consumed EUR 10 billion of risk-weighted assets for business growth, but that was, however, more than offset by increased capital efficiency. That increased capital efficiency includes the execution of SRTs, where in the third quarter, we were active across both Wholesale and Retail Banking, realizing EUR 3 billion of relief to our risk-weighted assets. If you look at on a year-to-date basis, we have now freed up 16 basis points of our CET1 ratio through our SRT program. Overall, that is a strong demonstration of increased capital generation and disciplined RWA management at the same time. Let us now discuss slide 7, where I will show how this all results in highly attractive shareholder returns.

On that waterfall on slide 7, we now show how disciplined capital management has allowed us to announce a $1.9 billion additional distribution while simultaneously improving our CET1 ratio to 13.3%. Since our previous distribution in the first quarter, we have generated EUR 3.8 billion of net profit, which is equivalent to 1.1 percentage point of CET1. Of that, 50% has been reserved for our regular dividend distribution policy, and the other 50% was also fully reserved outside of CET1, which over the course of two quarters added up to EUR 1.9 billion that we have announced today for distribution. We were able to do this, first of all, on the back of the continued resilience of our business model and asset quality. Secondly, because of our increased capital efficiency as the incremental capital consumption from business growth was more than offset by improved capital velocity.

As a result, we were able to reserve all profit generated over the past six months for distribution while further strengthening our CET1 ratio by 30 basis points to 13.3%. Our distribution policy remains unchanged. Any capital that we consider to be structurally in excess of 13%, or in other words, capital that is not needed for operational, regulatory or inorganic purposes, will be returned to shareholders. We will provide you with the next update on this with our first quarter results of 2027. Now, let us move to slide 9. That is the slide on the outlook, and I will again talk you through the main components of our outlook for 2026 and 2027, as I did in the last quarter. This year, we are again on track to add 1 million mobile primary customers.