ING Group 4Q 2025 Earnings Call - Commercial momentum funds record income and an upgraded 2027 outlook

Laura, Conference Call Operator, ING: 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.

Steven van Rijswijk, Chief Executive Officer, ING Group: 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 I thank you for joining us today. As usual, I’m joined by our CRO, Ljiljana Čortan, 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.

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 EUR 10.1 billion in net core lending growth, driven mainly by residential mortgages. Wholesale banking added EUR 10.3 billion, supported by strong demand on lending and working capital solutions as our clients’ financing needs increased. We also saw healthy deposit development. The deposits rose by EUR 38.1 billion for the full year, or 5.5%.

In the fourth quarter, retail banking contributed EUR 11.3 billion, benefiting from targeted campaigns and normal seasonal inflows. Wholesale banking recorded a small net outflow, mainly due to lower short-term balances in our cash pooling activities. Fee Income also continued its 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. The fourth quarter also included a one-off benefit of EUR 66 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. Finally, we remain fully committed to supporting our clients in their sustainability transitions. Our total sustainability volume mobilized reached EUR 166 billion for the year, representing a 28% increase versus 2024.

Now, let’s move to the next slides to look at how the commercial momentum drove our financial performance. On slide 3, you can see that commercial NI remained very strong at EUR 15.3 billion. This result was supported by the significant increase in customer balances, both on the lending side and in liabilities. Volume growth largely offsets the expected margin normalization. Fee Income was also strong, increasing 15% compared to 2024, and they now account for 20% of total income. 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. Taken together, the strong NI and fee performance fueled total income growth, which reached a record level for the third consecutive year. With that, let’s now move to slide 4.

On this slide, we highlight actions taken to strengthen operational leverage, reinforcing a 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 our 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 seven 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 five out of 10 markets.

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. Our investments in scalability are also translating into higher efficiency. This is visible in our FTE over customer balances ratio, which has improved by more than 7% since 2023. 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 EUR 6.3 billion in net profit, contributing almost two percentage points to our CET1 ratio. Of this 6.3 billion, 50% is distributed as a regular cash dividend, offering shareholders an attractive and predictable cash yield. Around 15% of the capital we generated has been used to fund profitable growth across our markets.

This percentage would even have been higher without the steps we took to optimize capital efficiency in wholesale banking, such as the two SRT transactions completed in November. Finally, we announced additional distributions to a total amount of EUR 3.6 billion, which also helped bring our CET1 ratio closer to our target level. On the next slide, I will show how these distributions have resulted in a higher, highly attractive shareholder return. Then we move to slide six, where we summarize the total distributions to shareholders. 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. In addition, we paid out EUR 500 million in cash earlier in January, which helps us to meet the cash hurdle for this year, now finalized at EUR 3.3 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. Now, starting on slide eight, I will guide you through how our strategy continues to accelerate growth, increase impact, and deliver value. Now, on this slide, and I’m talking about slide eight, 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.

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. In business banking, we successfully launched our propositions in Italy and Germany, where we are seeing strong and ongoing customer growth. In wholesale banking, we are expanding our range of fee-generating capital-like 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. The further utilization and scaling of Gen AI will enhance efficiency and will help us to reach our FTE over customer balances targeted 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, expand the loan book in a capital-efficient way, and consider M&A opportunities that meet our strict 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 uses in the wholesale bank.

Note that we have already increased the capital allocated to retail banking to 54%. With our strategy, we are confident in our ability to become the best European bank. With this confidence, we have raised our expectations for the coming years. Now we move to slide 9, and there I’ll present our outlook for 2026 and 2027. For 2026, we expect total income of around €24 billion. This outlook is supported by continued volume growth and an anticipated 5%-10% increase in fee income. Total operating expenses excluding incidentals are projected to be in the range of EUR 12.6 billion-EUR 12.8 billion. We will continue to manage our CET1 capital ratio at around target of around 13%. In addition, we will transition from a return on equity metric to return on tangible equity.

For the full year of 2026, we expect an ROE of 14% and ROTE to be higher than 14%. Note that the delta between the two metrics was around 40 basis points for zero basis points in 2025. Looking ahead to 2027, we are introducing a new outlook for total income. We now expect it to exceed EUR 25 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 EUR 5 billion in 2027. We’ve moved away from the cost income ratio and instead provide a clear hard outlook for operating expenses, again excluding incidentals, of around EUR 13 billion. This reinforces our continued focus on cost discipline and operational efficiency.

Taken together, this outlook translates into a return on equity of 15% and a return on tangible equity of more than 15%. 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 100-110 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%-10%, building on a strong performance we achieve in 2025. All other income is expected to be around EUR 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 rates environment, taking 2024 last quarter as a run rate would be a fair starting point. Taken together, total income is expected to reach around EUR 24 billion in 2026.

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 EUR 11.6 billion-EUR 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 draw 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 increase, driven by very strong volume growth and a slightly higher lending margin, while the liability margin remains 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 EUR 66 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 EUR 20 billion.

Retail banking contributed EUR 10.1 billion, driven by continued mortgage growth, increases across both business lending and consumer lending portfolios. Wholesale banking also posted strong growth of EUR 10.3 billion, reflecting strong performance in lending and somewhat elevated client demand in working capital solutions. On the liability side, core deposit increased by EUR 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 was 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 EUR 100 million quarter-on-quarter and was almost 5% higher than last year.

Lending NII was up EUR 75 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 EUR 30 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 remains strong, increasing 22% year-on-year. Excluding the EUR 66 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 high 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 asset 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 market and corporate finance. Slide 17 showed 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 costs and incidental items, decreased slightly year-over-year, reflecting our continued cost discipline while still investing to support growth. The decrease was 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 segments.

Regulatory costs include the annual Dutch bank tax, which is always fully recognized in fourth quarter and then allocated across segments. Incidental items related mostly to restructuring provisions for planned FTE reductions in corporate staff and retail banking. Once these are fully implemented, these measures are expected to generate approximately EUR 100 million in annualized cost savings. When excluding these incidental items, we ended the year with expenses below the outlook range we provided earlier. Now let’s move on to risk costs on the next slide. Total risk costs were EUR 365 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 three provision amounts to EUR 389 million, mainly driven by individual stage three provisioning for a number of new and existing files 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 EUR 24 million, reflecting a partial release of management overlays and updated macroeconomic forecasts. Overall, we remain confident in the strength and quality of our loan book. On slide 20, we show the development of our CET1 ratio, which declined compared to last quarter. CET1 decreased, reflecting the EUR 1.6 billion distribution that was partly offset by the inclusion of our quarterly net profit. Risk-weighted assets increased by EUR 4.5 billion this quarter. Credit risk-weighted assets rose by EUR 1.5 billion, excluding FX impact, driven by volume growth. This was offset by the risk-weighted asset relief from two SRT transactions executed in November.

Operational risk-weighted assets increased by EUR 2.2 billion, while market risk-weighted assets increased by EUR 0.5 billion. We’ll pay a final cash dividend of EUR 0.736 per share on the 24th of April 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, Tanate, for more than 25 years, and we’ve been in the board together already for seven years or 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 minds that you have here with us. And I’ll come for sure to 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 and 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 disciplines 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. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. And in the interest of time, we kindly ask each analyst to limit yourself to two questions only. Thank you. We will now take our first question from Benoit Pétrarque of Kepler Cheuvreux. Your line is open. Please go ahead. Yes, good morning. All the best, Tanate. I guess you will not miss the Dutch winter, but after 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 EUR 25 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 EUR 25 billion total income. Wondering where you stand on 27 around 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?

Thank you. All right, I’ll take thanks, Benoit. And yeah, Tanate, for sure, won’t miss the Dutch winter. Neither would I, by the way, if I were to go to Thailand. But in any case, I’m here. If we look, I will talk to you about the question about are there ways in wholesale banking and also, and then Tanate will talk about the NII and the growth for 2026 and 2027. 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 2026 and 2027.

By the way, we want to continue to do these SRTs that 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 a positive impact on CET1 of 15-20 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 our 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 used a 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 happen in 2025 that affects 2026. And we’ll continue to be accretive going into 2027 as well. Our forecast for liability margin is on the lower end of the 100-110 basis points. This is also for 2027? 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 2026 and 2027. Yes, thank you. Thank you. And we’ll now take our next question from Benjamin Goy of Deutsche Bank.

Your line is open, please go ahead. Yes, good morning. 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 deposits 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 cost, thanks for the underlying cost guidance, but there has been historically a bit of incidentals every year. Should that now be smaller than in 2025 going forward, or what’s best to assume for the incidental that come on top of the cost guidance? Thank you. Yeah, 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 EUR 57 billion against about EUR 38 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 the same growth over longer periods 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. We will always work on that.

When we talk about the incidentals, yeah, 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 and wholesale banking intersection 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 2024 of a decrease of 10% earlier than we anticipated what we then said in 2027. So we’ll work towards this year.

So we 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 EUR 100 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 GenAI, 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. Thank you, and all the best to Tanate. Thank you. And we’ll now move on to our next question from Giulia Miotto of Morgan Stanley. Your line is open, please go ahead. Yes, hi, good morning.

Tanate, thank you for your patience with answering our questions and all the best for the life after ING. But now I have two questions, please. So the cost outlook beyond 2026 looks quite a bit better. I think it’s encouraging to see operating growth being able to grow the costs much less than the revenues. And 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’re 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? Thank you. All right, on M&A, so look, we show good growth.

You see that both in existing activities and also in our diversification on the various fronts, both in lending and fees, by the way, on investment products and insurance still. And I’ve said this before. Sorry, and 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 in Valence 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 it 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 data 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 to also be accretive for shareholders. And that’s the construct in which we’re working and which we’re 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 2026, 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 2027, the first one is inflation impact, which we expect that the stickiness of inflation impact should moderate in 2027 compared to 2026. 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 2026 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. Thanks. So I take away that probably growth will be more modest than what the street expects in 2027. You can do your analysis, Julia, given our guidance. Thank you. Tanate didn’t even blink when he answered that question. Thank you. And we’ll now move on to our next question from Tarik El Mejjad of Bank of America. Please go ahead. Hi, good morning. And from my side as well, Tanate, thanks all 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 the follow-up one on the liability margins, more in 2027.

I mean, just trying to backsolve a bit what markets expect, assuming asset margins 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 savings deposits in 2027? Because if you use the forward curves of December, clearly you 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 cost.

It’s more really to understand how you think about the investments because, I mean, you have some headroom now created on the revenue side by 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 would think about it in the next two years in terms of investments in AI and tech. I mean, yes, you had the machine learning and with the compliance aspect, the GenAI 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? Thank you. 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 with GenAI. We worked with that in the last couple of years. But there you see both on, let’s say, 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 mortgage delivery. We increased that approvals with 11% last year. So the time to yes therefore improved. We do about EUR 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 announcements, 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.

We’re actually quite optimistic on the impact it will have on our operational leverage going forward for 2026 and also in 2027. We will make announcements as we move along. 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. Tarek, to your second question, I think we also see, based on the December curve, that the accretion in replication in 2026 going to 2027 and 2028 are quite strong. The real debate is how do you balance that additional revenue in terms of margins and in terms of mix, right?

What we see is that we’re looking at a dynamic 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. If you look pre-negative rates environment, ING operated on a liability margin of around 90-100 basis points. We have updated our guidance to 100-110. 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. Thank you. I mean, I don’t want to put words in your mouth, but basically, to deliver on the consensus of 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’ve just sort of reconciled a bit what your guidance outlook, which is very helpful versus where market is positioned. Okay, thank you. And we’ll now take our next question from Delphine Lee of J.P. Morgan. Please go ahead. Yes, good morning. Also, I want to take the opportunity to send my best wishes to Tanate and thank you for everything. So my two questions. First of all, sorry, just want to follow up on Tarek and other questions around NII. But so if we look at your guidance for 2026, which implies about EUR 600 million increases for liability margins, but if you look at the repricing action that you’ve done in 2025, I mean, the impact on 2026 is already EUR 700 million. And then on top of that, you have some small benefits from, well, your replicating income as well on 2026 small, but still.

So I’m just kind of wondering, what is your current assumption 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 2026 and onwards? My second question is on cost. So you’ve done a good job at trying to kind of contain a little bit of inflation with the savings. I’m just trying to understand a little bit if 2%-3% is really kind of like the run rate that we should expect even beyond 2027. Is that something that you’re trying to achieve in the long run? Yeah, just trying to kind of understand a little bit the moving parts of that cost number if you’ve provided this for 2026, but even beyond that, 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. Thank you. All right. Thank you very much. I think that on the cost, you see the effects of our digitalization and scalability now really seeing take shape. We saw that now also in the fourth quarter, but also I’m pointing again at the 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 2026 and 2027 improved cost 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. And Tanate on the deposit cost and 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 EUR 600 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 EUR 700 million is factored into that guidance. Great. Thank you very much. Thank you. And we’ll now take our next question from Namita Samtani of Barclays. Please go ahead. Morning, and thanks for taking my questions, and thank you to Tanate. 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?

Is this defensive spend given the new players entering the market? Then I think about your liability margin, which is, of course, a group level, but are you telling us that we’re at peak earnings for Germany in retail given high expense spend and need to spend to gather deposits? My second question, based on your updated 2027 targets today, the cost income implied, 2027 is maybe 51%-52%. It’s hardly a standout amongst European banks. Even ABM is now going for 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 income target? Thank you. Yeah, thank you very much. On the cost income side, our main opportunity is to grow our revenues.

Our revenues over our client balances, our diversification, and also making our revenues over RWA. And as a result, but that’s then a consequence of it also that we’ll have a positive impact on our cost income. But what we need to do, that’s why our strategy is called Growing 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 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 customers 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 product, creating new segments is very strong in Germany. We’re 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. Thanks very much. Thank you. And we’ll now take our next question from Cyril Toutounji of BNP Paribas. Please go ahead. Hi, thank you for taking my questions. And good morning, everyone. So I’ve got two. One on lending margin.

We had an improvement this quarter, which is welcome, and I think pretty good news. You’re saying it’s due to mortgages. I’m just curious in which market that happened and if you can give us more indication whether this can continue maybe a bit. The second one would be on deposit campaigns. Can you update us on the ongoing campaigns right now? I don’t know if you can give this indication as well, but we should expect more or less campaigns versus the 2025 run rate. Thank you. Yeah, thank you, Cyril. I’ll take the question on deposit campaigns. Tanate talks about the lending margin. Yeah, 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 two-thirds of the money that after the campaign is over 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 by the 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. Thank you and all the best, Tanate. Thanks. Thank you. We’ll now take our next question from Johan Ekblom of UBS. Please go ahead. Thank you very much. And thanks 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 volume 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. Yeah, 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, 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 EUR 114 billion business banking lending book. Yeah, 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. Thank you. Thank you. And we’ll take our next question from Shrey Srivastava of Citi. Please go ahead. Hi, and thank you for taking my questions. And 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 100-110 basis points. Is your sort of 5% volume growth guidance predicated on further deposit campaigns to get you within this 100-110 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? Thank you. All right, Tanate, can you give the elements of our replication income or at least 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 the continual accretion of long-term replication coming through, and the actions that we would take in terms of rate increases or decreases over time.

I think we like to reiterate that we don’t give guidance for 2027 in terms of liability margin, but we expect it to operate in 2026 at the lower end of the 100-110. And we’re comfortable that we can achieve our target with that guidance. Thank you. Thank you. And we’ll take our next question from Seamus Murphy of Carraighill. The line is open. Please go ahead. Hi, thank you. Sorry, I’m coming back again to a last question that had been asked in one sense just in terms of the guidance. So I suppose you’ve guided EUR 16.3 billion-EUR 16.5 billion for commercial NII in 2026, but in Q4 it was EUR 3,928. So that suggests an exit rate of just over EUR 4 billion into Q1 2026. That’s already in the bag.

If I annualize that, I’m kind of getting EUR 16.2 billion at the start of the year just before anything else happens. The upper end of your guidance, it therefore only needs 2% growth to achieve the EUR 16.5 billion. Obviously we have, so I suppose question one is, is there anything wrong with the math? As you start the year, did you have kind of EUR 16.2 billion of NRI heading into, sorry, EUR 16.2 billion into this year at the start? The second question then is, obviously we have growth, so there’s no 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 2026 and 2027. Two things have happened. Your current account balances have grown another EUR 5 billion, I think to EUR 175 billion now.

Secondly, obviously the curve has steepened. So it would be super useful if you could tell us how much the long end of the replication portfolio will contribute in 2026 and 2027. 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 2027 and 2028 at the group level? Thank you. Thanks, Seamus, for your questions. Well, we do expect FTE overbalances 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.

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 balance perspective, we should see further improvements. Tanate, how does it work with that? Yeah, 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 EUR 1 billion, right?

That’s a 7% growth in net interest income, which I think is a strong number and strong guidance. And I also 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. Thank you. Thank you. If you find that your questions have been answered, you may remove yourself from the queue by pressing star two. And kindly be reminded, this is limited to a maximum of two questions only. Thank you. And we’ll now move on to our next question from Anke Reingen of RBC. Please go ahead. Yeah, thank you very much for taking my questions.

But firstly, thank you very much, Tanate, and all the best. And then to the question, 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 I just clarify, is that per year or is that over the two years, 2026 and 2027? Thank you very much. Thank you very much, Anke, for your questions. If you look at the SRTs, the impact in 2025 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 away from our balance sheet. But in 2026, we’re going to do an additional number of SRTs that should benefit an additional 15-20 basis points on our CET1. And we, of course, will then also continue for 2027 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 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, the Netherlands, that is the case in Belgium, that is in Germany, that is the case in Spain. We have a total mortgage book of EUR 370 billion. So we are a top three mortgage provider in the region, in Europe. And in many of the markets in which we’re active, we see there are good macroeconomic fundamentals to continue that growth, high, 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 2027. Okay, thank you. Thank you. And we’ll now take our next question from Matthew Clark of Mediobanca. Please go ahead. Hiya.

So firstly, coming back to this EUR 25 billion target for 2027 revenues or greater than EUR 25 billion, I mean, are you trying to talk down consensus there, which is EUR 25.8 billion, I think, or do you think that’s still consistent with the greater than component of that target? So 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, etc.? And I guess asking that in the context of an uptick in credit losses on wholesale this quarter. Thank you. Yeah, thank you very much. Well, let me put it this way for 2027. So we said that the revenues are larger than EUR 25 billion.

So we’re confident about our growth and we’re also confident about 27. So don’t forget the larger than sign in EUR 25 billion for 2027. But yeah, that’s where we currently are. And we’re very comfortable with that level. When you talk about wholesale banking 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 2024. Now we said for 2027, 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 that return going up. So it’s not a particular focus on lending alone. In the end, we’re focused on return. Thank you. Thank you. And we’ll now take our next question from Farquhar Murray of Autonomous. Please go ahead. Morning all, and 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, could you reconcile the indication of EUR 0.4 billion of hedging tailwinds into 2026 outlook for Q with the 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 could you just flesh that out through 2025 and into 2026? 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’ve set the kind of planning assumption as a kind of balanced 5%, but what’s your general sense about where customer demand is at present? Thanks. I think that, so on the customer demand at present, I mean, we actually do see continued good mortgage growth.

Again, because we see the macroeconomic elements that we saw in there, we see them continuing. 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. Also, we see increases in the number of these housing markets to continue in 2026 and 2027. 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. 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. Funnily 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 or fourth quarter. The pipeline is still good. Yeah, probably that the wholesale banking in that sense is always a bit more choppy in terms of growth and 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. Yes. Thank you very much, Francois. I think what we see is that if you look at our quarterly commercial NII, it reached a trough in Q2, improved from EUR 3.7 billion to EUR 3.8 billion and from EUR 3.8 billion to EUR 3.9 billion during the course.

So you already see signs of that replication impact. I think what the EUR 400 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 a EUR 400 million tailwind. Thanks. Thank you. And we’ll now take our next question from Chris Hallam of Goldman Sachs. Please go ahead. Yeah, morning everybody. I just have one question left. And obviously, good luck tonight. 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, i.e., 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? Thank you. Yeah, thanks, Chris. And yeah, Tanate will miss those questions, but luckily we have Ida Lerner, our new CFO, and she already told me yesterday, she 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, yeah, I mean, on the wholesale side, you saw that EUR 10.3 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 seasonal pattern. Okay, thank you. Thank you. There are no further questions in case. I will now hand it back to Steven van Rijswijk for closing remarks. Yeah, thank you very much. I think we are very proud of our 2025 numbers and also very confident about 2026 and 2027, 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. Thank you. This concludes today’s call. Thank you for your participation. You may now disconnect.