ING Groep Bank of America 31th Annual Financials CEO Conference

Yeah. 40 minutes even. Wow.

Yeah. Let's do a longer answer.

Thanks. So maybe just a quick, just to start into it smoothly on the budget day was last week, and the striking thing for this room is that there wasn't anything in that.

Yeah. Look, like you rightly point out, it is a minority coalition. Last week, Tuesday, there was the budget day debate, and now that minority coalition needs to find support for the budget, which then needs to be ratified later this year. So it's still not final. At the same time, it wasn't a budget that is focused on economic growth and stimulating investments in the country. It's also a government that supports the further integration of Europe. The Netherlands is also part of that E6 group that focuses on the integration of Europe and especially banks within Europe. There's also a stimulus of focus on more investments. There was an announcement made on the National Investment Institution, that the government is supporting and financial institutions will support. So I think that's also good.

So in that sense, nothing regarding banks, as you say, and more bank levies. To be honest, we already pay quite serious bank levies in the Netherlands. As a matter of fact, in the Netherlands, we pay bank levies based on our global balance sheet, which of course, I am discussing on a regular basis also with the government. But I think I've been making clear consistently that I think we should change that. But if not, then at least we should avoid increasing that. So far, that has been the case.

Yeah. Well, look, first of all, we have seen good commercial activity translating in good and higher revenue growth, more scalability on the operations and cost side, and I think disciplined capital management. If you then translate that in terms of what it means compared to Capital Markets Day 2024, our renewed guidance basically means that we are upgrading with 2 percentage points in ROTE from 14% to over 16%, and that comes in three areas. First of all, on the revenue side. Our revenue is growing with an additional EUR 1 billion compared to what we said two years ago. That comes from more activity in lending and deposits. Our growth in primary customers continues to be at 1 million per annum, which is also what we then said, and we continue to track at that.

We also then see that both in terms of NII deposits, not only the margin increase, but also the deposit growth that we have been having over the past two and a half years. We have been growing with about EUR 100 billion in deposits. We also see good lending growth coming through. Year-to-date lending growth annualized was about 8%. That's one element of that additional growth. The second element of the growth is the fee growth, whereby we said back then that we would grow with about 5% to 10% to get to a fee of about EUR 5 billion for 2027. We already reached that number by this year. The fee growth has increased with an additional EUR 300 million to EUR 500 million for the year thereafter in 2027. That's the revenue element of it. The second element is the cost element.

Despite that additional activity, I spoke about 1 million primary customers per annum, but you also see that 8% growth in lending, and you see about 7% growth in deposits. You see about 100,000 to 250,000 additional investment customers coming through every quarter. We do more insurer distribution. There's many levers that we pull to actually grow and develop, hence growing the difference. We want to make more revenues with our customers. We have a lot of upside, doing much more with our customers in all four segments that we currently do. But you see that despite that increase in volume that we have across the bank, that we're able to use the scalability, increasingly use the scalability of our operations with all the hubs, and sitting in certain centers doing KYC or contact center activities or operational processing activities.

Increasingly also with our functional technology, which is our cloud environment. All these elements support the scalability of our operations. Still a long way to go, but that also therefore helps, despite the faster growth and keeping the costs under control. It means that what we then said is that our costs will grow at 3% to 4%, to about EUR 13.3 billion in costs as per end of 2027. We now will hover around EUR 13 billion. We are coming out with about a EUR 300 million lower cost guidance than we initially did. A third element of it, why we increased the ROTE with 2 percentage points, is our capital discipline. Despite the strong growth, and you also saw it in the presentation on the second quarter figures, despite a strong growth in lending, our capital growth has been limited, especially due to wholesale banking.

We started with SRTs, Significant Risk Transfer, as of last year. We only could start with that last year because we had to do a lot of remodeling to make our models built, or the models in line with the requirements of the European Central Bank. By last year, and also continuing this year, we have been finalizing those models. It also means that with those new models in place, we can also therefore do risk transfers, which we started to do last year. Last year, we did about 12 basis points. This year, we will do 15 to 20 basis points. We already did, this year to date, four basis points, so additional 11 to 15 to go. It basically means that we are tilting the risk-weighted assets composition of the bank more towards retail, towards the higher end of the return on equity spectrum.