ING Groep(ING)2024-11-02 04:18Financial Data and Key Metrics - Total income reached a record level in Q3 2024, with fee income exceeding €1 billion for the first time [6][10] - Annualized customer balances growth (lending and deposits combined) was 5.3% in the first nine months, surpassing the 4% expectation set during Capital Markets Day [10] - CET1 ratio increased to 14.3% at the end of Q3 2024, with a four-quarter rolling return on equity of 13.8% [14][41] - Total risk costs were €336 million in Q3, or 20 basis points on average customer lending, in line with the through-the-cycle average [39] Business Line Performance - The lending book grew by €9 billion, with strong performance in mortgages, particularly in the Netherlands where market share increased due to digitalization and flexible operations [8] - Wholesale Banking saw growth in lending and financial markets, partially offset by capital optimization efforts [9] - Retail Banking experienced a net inflow of €5.5 billion in deposits in Belgium due to a successful marketing campaign [9][29] - Fee income in Wholesale Banking increased due to higher deal flow in global capital markets and corporate finance [36] Market Performance - ING Poland is one of the largest franchises with income of around €2 billion, showing strong growth in customer balances with a CAGR of 9% since 2019 [17][19] - The company has €28 billion of sustainable volume mobilized in Q3 and €85 billion in the first nine months, a 15% increase compared to the previous year [13] Strategic Direction and Industry Competition - The company is focusing on digitalization, with the rollout of a one-app solution for business banking clients in Germany [11] - ING is committed to sustainability, with €250 million provided to the National Heat Fund in the Netherlands to make buildings more sustainable [13] - The company is expanding its Terra approach to include aluminum and dairy sectors, and has updated its oil and gas policy to stop new financing for pure-play upstream oil and gas companies developing new fields [20][22] Management Commentary on Operating Environment and Future Outlook - Management expects total income to exceed €22.5 billion for the year, with a cost/income ratio of around 53% and a return on equity forecasted to be more than 13% [25] - The company is confident in maintaining a liability margin between 100 to 110 basis points, with expectations for 2025 to be at the lower end of this range [34][95] Other Important Information - ING announced an additional distribution of €2.5 billion, including a €2 billion share buyback and a €500 million cash dividend in January 2025 [15][16] - The company has been recognized as a top employer in five European countries and continues to invest in improving the employee experience [12] Q&A Session Summary Question: Replicating income and deposit repricing confidence [44] - The company is confident in maintaining the margin due to volume growth, lower deposit costs, and strong replication tailwinds [47][48] Question: M&A strategy and cross-border consolidation [51] - ING is focused on organic growth but is open to domestic consolidation in retail and acquiring new skill sets or product capabilities [52][53] Question: Volume growth drivers and cost optimization [55] - Growth is expected mainly in retail, particularly in mortgages, with cost optimization ongoing through digitization and operational efficiencies [56][62] Question: Belgium deposit inflow and treasury income [65] - The Belgian deposit campaign aims to convert customers into primary clients for cross-selling, while treasury income is volatile but expected to range between €200 million to €300 million [66][68] Question: Wholesale Banking RWA efficiencies and Germany Mittelstand sector [71] - RWA efficiencies are expected to materialize in 2025, with a focus on digital offerings in the Mittelstand sector [73][74] Question: Belgian deposits and replicating portfolio [77] - The €5.5 billion deposit inflow in Belgium was partially offset by outflows from business banking, and the replicating portfolio distribution remains unchanged [79][80] Question: Asset quality and deposit margin balance [81] - Risk costs are managed through the cycle, with vigilance in sectors like commercial real estate and automotive, while deposit margins are maintained through competitive pricing and promotional campaigns [84][89] Question: Lending NII and liability margin outlook [92] - Lending NII is expected to hover around 130 basis points, with liability margins guided to be between 100 to 110 basis points in 2025 [94][95] Question: Retail lending margin and treasury income trends [98][102] - Retail lending margins were stable in Q3, and treasury income has declined due to ECB reserve requirements but is expected to stabilize [100][104] Closing Remarks [106] - Management thanked participants and expressed confidence in the company's strategic execution and future performance [106]