AAVMY (AAVMY) Q2 2026 Earnings Report, Transcript and Summary

Welcome to ABN AMRO's Q2 2026 Analyst and Investor Call. Please note, this call is being recorded. [Operator Instructions] I will now hand the call over to the speakers. Please go ahead. Marguerite Bérard-Andrieu: Good morning, and welcome to ABN AMRO's Q2 '26 Results Presentation. I'm joined today by our CFO, Ferdinand Vaandrager, and our CRO, Serena Fioravanti. I will cover the key messages, our progress on strategy and our financial results for the quarter. After the presentation, as usual, we will open the line for your questions. But first, let me begin with the key second quarter highlights on Slide 2. ABN AMRO delivered another strong quarter, supported by continued client activity and high fees. Net profit increased almost 30% year-on-year to EUR 781 million, with return on equity improving to 12.1%. We saw continued business momentum with growth in lending and deposits. Commercial net interest income increased strongly, and we have raised our full year '26 guidance to around EUR 6.8 billion, now including NIBC. Fees increased further, reflecting strong growth of EUR 25 billion in client assets and another quarter of good Clearing results. Progress on cost reduction is ahead of schedule, and we have lowered our full year '26 cost guidance to around EUR 5.5 billion, also including NIBC. Credit quality remains solid with another quarter of limited impairments. Our pro forma CET1 ratio strengthened to 15.9%, supported by growth in capital-light businesses. We set our interim dividend at EUR 0.68 per share based on 40% of our year-to-date net profit. These Q2 results reflect our progress on the strategic priorities of delivering profitable growth, rightsizing our cost base and optimizing capital allocation. Let me now address each of these strategic priorities in turn. We are pleased to have completed the NIBC acquisition. It strengthens our position in attractive client segments and adds capabilities that fit well with our strategy. Including NIBC, we have realized around 3/4 of our deposit growth ambition and around 80% of our mortgage growth ambition. In July, we announced the partnership between Worldline and ICS. This partnership will strengthen our credit card offering, enhance customer experience and accelerate innovation. This outsourcing concerns up to 450 FTEs and will deliver further efficiency gains. Turning to Wealth Management, client assets grew by more than 7% this quarter, reflecting strong market performance and commercial efforts that generated EUR 2.3 billion of core net new assets. We are gaining traction in our priority segments, females, Next Gen clients and dual-client business owners. Inflows are typically higher in the second half of the year. So we remain on track to deliver between EUR 5 billion to EUR 7 billion of net new assets annually. Following the legal merger of HAL in June, our focus now shifts to the technical IT integration in Q4 and the delivery of synergies. Corporate Banking is also on the right track with increased cross-sell and another strong quarter for Clearing. We also continued to grow in sectors linked to European transition themes, including defense. Now turning to our progress on the cost base, we continue to simplify our organization and improve efficiency. In the second quarter, FTEs declined by around 250, mainly internal FTEs. While the pace of reductions has moderated, the cumulative FTE reductions are ahead of schedule at 45% of our '28 target. Over the past 1.5 years, we realized around EUR 300 million of our EUR 900 million savings target for '28. The savings mainly reflect our ongoing organizational transformation and the streamlining of our IT landscape with a growing contribution from automation and GenAI initiatives. We now have around 50 use cases in production, including our GenAI-powered client voicebot and a GenAI knowledge assistant for KYC and AML analysts. As we scale, tokenomics helps us manage AI token use across these applications, balancing consumption with quality, risk and business value. This enables us to select the right model for each use case. Recently, we also announced our partnership with Mistral. Access to European AI models is important because it gives us greater choice in selecting the right model for each use case. Now turning to capital optimization, since our Capital Markets Day, we have realized EUR 9 billion of RWA optimization in total, including around EUR 2 billion this quarter. Corporate Banking has contributed EUR 6 billion to these reductions and achieved more than 60% of its strategic RWA reduction ambition. Looking ahead, we expect a number of significant RWA developments in the second half of the year. On the one hand, consolidating NIBC will add around EUR 6.6 billion next quarter. This is expected to reduce our CET1 ratio by around 70 to 75 basis points. On the other hand, in Q4, the termination of the DNB mortgage floor is expected to reduce RWAs by around EUR 7 billion. The slide does not show several smaller items that will also affect RWAs. The annual update to the EBA property loss rate will reduce RWAs by around EUR 1.5 billion in Q3. The sale of our personal loan business, Alfam, will reduce RWAs by a further EUR 1 billion in Q4. RWA increases are expected from business growth and potentially some other updates. These are harder to quantify today. We will conduct our capital assessment in Q4, our first under our distribution policy of up to 100% of net profits. Now turning to the financial performance for the second quarter, starting with the Dutch economy on Slide 7, Dutch GDP grew by a healthy 0.4% in the second quarter, better than expected and positive for this year's outlook. At the same time, inflation remains elevated with further upside risk to energy prices from the conflict in the Middle East. The ECB deposit rate is expected to reach 2.5% by year-end following a rate hike in September. The Dutch housing market has cooled somewhat following years of significant price increases, but prices are still expected to rise by 3% this year and 4% next year. Transaction volumes are expected to decline by 3% in '26 and 4% in '27. However, the persistent shortage of supply continues to put a floor under the housing market. Other macroeconomic indicators also remain robust, particularly unemployment and bankruptcies, which remain low. Overall, resilient domestic demand, a healthy housing market and gradually rising interest rates provide a supportive [indiscernible] operating environment for the bank. Now turning to client assets and deposits, total client assets grew by just over EUR 25 billion in Q2, mainly reflecting strong market performance in Wealth Management. Personal & Business Banking also delivered a strong quarter, a growth of more than 4.5%. The shift from cash and time deposits towards advisory and discretionary products continued. Client deposits increased over EUR 5 billion. Growth reflected both seasonal holiday allowance payments and progress towards our strategic ambitions. And next quarter, NIBC will add to these numbers. Now turning to commercial net interest income. Commercial NII increased 5% compared to the previous quarter. The main drivers for this increase were higher liability margins, strong Clearing results and higher liability volumes. To put some numbers around this, our liability margin improved by 5 basis points, driven by higher yields on our replicating portfolio. Average liability volume increased by EUR 4 billion, reflecting both our strategic focus on deposit growth as well as seasonal effects. Finally, other commercial NII rose mainly due to increased financing demand from existing Clearing clients and an expanding client base as we deliver on our Clearing growth ambitions. Moving to assets, the margin there declined by 2 basis points, reflecting the high share of government-backed capital-light mortgages in new production. These capital-light mortgages are profitable, so this reflects only the difference in margin. Mortgage volume increased by EUR 1.7 billion this quarter with a market share of 18%. The market is currently very competitive, and we remain disciplined rather than seeking to maintain market share at all costs. Now moving to our guidance for the full year, at the time of our Q1 results, geopolitical developments have pushed interest rates higher, but it wasn't clear whether those levels would persist. So it was too early to change our NII guidance. Today, forward rates remain broadly at those levels, and we have just reported strong interest results for Q2. We are, therefore, now in a position to raise our full year commercial NII guidance to around EUR 6.8 billion, including NIBC. As our chart shows, the interest rate environment continues to be a tailwind to our liability margin. For this year, we now assume other commercial NII of around EUR 0.6 billion. This reflects higher clearing NII. And from August 1, we will book NIBC's NII in this line item. Following further integration, NIBC's mortgages and deposits will be booked in asset and liability NII. Now turning to fee and other income, fee income increased 2% quarter-on-quarter and reached a record level. Positive market performance lifted Wealth Management fees during Q2. Corporate Banking rose as well. Clearing continued its strong Q1 performance and cross-sell led to several large corporate finance deals this quarter. P&BB fees were broadly stable quarter-on-quarter. Other income improved strongly to EUR 106 million. This was mainly due to favorable ALM results from economic hedges. Together, record high fees and improved other income contributed to a 6% quarter-on-quarter increase in operating income. Now turning to costs, our priority is to deliver on our strategic targets, which require disciplined cost management. I am pleased with the progress we have made so far. Our efficiency is improving with positive developments in areas such as lower IT costs. These developments are reflected in our full year '26 cost guidance. Our headline cost guidance remains EUR 5.5 billion. However, this figure now includes NIBC. Second half cost will -- second half of the year cost will depend on the outcome of the collective labor agreement negotiations, which will resume in September. We are not updating our cost target for 2028. The remaining savings will be more spread over time and the full cost reductions from synergies and outsourcing will only be achieved beyond '28. We also need to invest in areas such as data centers, AI, cyber resilience and commercial initiatives. That said, our good start has created some headroom, but it is too early to change the targets that we presented less than a year ago. Turning to credit quality, credit quality remains solid with a cost of risk of 4 basis points and a stable Stage 3 ratio at 2.1%. Our Stage 3 coverage ratio declined, and it is now around 14% despite strong provisioning discipline. The decline relates to the derisking of our corporate loan book, the runoff and write-off of highly provisioned files and the greater share of mortgages in the total portfolio. A recent backtest of our coverage ratio shows that it remained consistently above historical write-offs even during downturns. Impairments were low at EUR 24 million despite ongoing macroeconomic uncertainty. They were largely attributable to a small number of individual files across various sectors. Following the renewed escalation in the Middle East, we maintained a higher weighting of our negative macroeconomic scenario for Q2. Overall, our credit quality remains solid, reflecting the strength of our loan book, prudent risk management and strong collateral across all our portfolios. Turning to our capital position, our pro forma CET1 ratio increased to 15.9%. This improvement was driven by the quarterly profit, minus 50% dividend reserve and broadly stable risk-weighted assets. Our reported CET1 ratio, which deducts all profit in line with regulatory requirements, remained stable at 15.3%. Turning to the key RWA developments, within credit risk, business growth was largely offset by further RWA and portfolio optimizations. Lower market and operational risk contributed further to the decline in our RWAs. Our strong capital position enables continued investment in profitable growth while maintaining a robust capital buffer. Let me close with the key takeaways from the quarter. Today's results demonstrate disciplined execution against our strategic commitments. We advanced on our priorities of profitable growth, cost base rightsizing and capital optimization. Strong momentum continued across our core products and client segments. We completed the NIBC acquisition and now include its NII and cost in our full year guidance. We raised our full year commercial NII guidance to around EUR 6.8 billion and effectively lowered our cost guidance to around EUR 5.5 billion, both now including NIBC. 15.9% pro forma CET1 ratio provides capacity to invest in our strategy and pursue profitable growth. Year-to-date, with the bank tax spread evenly across the year, our pro forma return on equity was 10.9% and our cost-to-income ratio was 56%. We are, therefore, confident without being complacent that we can achieve our financial targets. This concludes my presentation, and we will now take your questions.

[Operator Instructions] The next question comes from Giulia Aurora Miotto from Morgan Stanley.

So my first question, Marguerite, and the quarter was great. But of course, I'm going to focus on capital, 15.9% and with some tailwind also coming by year-end. Can you give us an update on the distribution? Because you are well ahead the 13.75% even if we take 15.3%, assuming 100% distribution, that is still well ahead of the 13.75% target. So I guess the market expects some excess capital distribution. And why -- second part to the question, why do we need to wait until full year results? A lot of banks do interim excess capital distribution decisions. So why wouldn't ABM be able to do that? Marguerite Bérard-Andrieu: Thank you. We are committed to returning at least EUR 7.5 billion of capital and paying out up to 100% of net profit over '26 to '28. As we already shared, we will do our annual capital assessment with Q4, and we do not want to speculate ahead of that. We are pleased today with the strong capital position we have and the progress we made on our strategy delivery, but we should also all realize that we are still early in our strategic period, only 2 full quarters year-to-date in a 3-year plan. So as also mentioned in our CMD and also shared at Q1, if over a period of time, our capital position remains significantly above our target and if we're delivering on our strategic ambitions, we may consider additional distributions.

Understood. And sorry, a follow-up on the targets. Since you are very close or ahead some of the targets, when would be a good time to give an update on beyond 2026? Would it be a year from the CMD, so perhaps Q3? Marguerite Bérard-Andrieu: As I said, we're very pleased with the progress we're making so far, and this is why we've been able to already update and upgrade our commercial NII, but also our cost target for '26. But we are still early in the plan. So for the moment, we are not changing our '28 target. But our mission doesn't stop there, and it doesn't stop in '28.

The next question comes from Namita Samtani from Barclays.

The first one is just on the corporate banking loans in the Corporate Banking division, which were EUR 59.7 billion in the first half of '26 versus EUR 56.5 billion in 2025. It's on Page 9 of the report. So that growth is 11%. I was just wondering, do you think that's a sustainable level to grow and the right thing to do given it's a lower ROE business than personal banking, for example? And secondly, just relating to that, could you tell me or give an impression of what the margin is like on the corporate loans? And can you give an idea on front book versus back book? And is it, for example, a lower margin than the mortgages? Marguerite Bérard-Andrieu: Thank you very much. So as we shared at our CMD, I think the key marching order for CB is profitability. So we're pursuing profitable growth for CB. And you've seen that in our RWA capital optimization, but you also see it in our disciplined client selection framework. So the loans we originate, and we're also happy with the commercial momentum aim at pursuing profitable growth. This is really the name of the game for CB, and this is what you see in the increased volumes that we shared at Q2 of EUR 2.7 billion. This being said, we also see because this is a competitive market, margin pressure on the asset side. A lot of the pressure is the outcome, as I mentioned in my presentation, of NHG-backed mortgages in our business mix. So this is also what you see in the slightly lower margins that we shared in our investor presentation slides.

The next question comes from Benjamin Goy from Deutsche Bank.

One follow-up and your -- about the mix of the commercial NII going forward because your asset NII is remarkably stable despite the loan growth you just mentioned. So should we expect something similar and then the pickup in the second half to come by liability NII in particular? And then secondly, your -- similar question on capital levels. So very strong even with 100% payout seems to be difficult to get close to your target. So just wondering now you have done 2 acquisitions, both seem to be going well and a bit ahead of time, whether you still have appetite for more deals also potentially looking at more cross-border initiatives. Marguerite Bérard-Andrieu: Thank you very much. I hope I heard you well because the line was a little bit dim, but that's okay. Ferdi will answer your question on NII. If I understood correctly, your second question was whether we are considering M&A given our strong capital position. I hope I understood that correctly. So right now, we are very -- we're very happy with the 2 acquisitions that we've recently made. HAL in Germany that boost our Wealth Management franchise in this country, which is effectively our second market, and NIBC, where we only did the closing on August 1. So right now, we are very much focused on making these acquisitions a success and making them successful by fully also integrating them in our group. This is really what we focused on. We also shared at the time of our CMD that when it comes to M&A, we have a very strong discipline. We would only consider targets that we would fit in our strategy. We would only consider acquisitions that would be accretive for shareholders, and we would only consider acquisitions where we think execution risk is manageable. So this is really a very disciplined M&A policy approach. Maybe, Ferdi, do you want to comment on commercial NII development?

Yes. Benjamin, maybe underlying coming out of the presentation as well, the drivers of commercial NII were both on the liability side and other commercial NII. Asset NII indeed stable, but underlying, you see healthy growth in mortgages and corporate loans. So why is it stable is specifically the offset in lending margins. They were down quarter-over-quarter by 2 basis points. As mentioned already by Marguerite, the biggest driver of this is the lower RWA density of our mortgage portfolio that has even amplified under Basel IV for the state-guaranteed mortgages. And you might also see going forward that part of the benefit of the mortgage floor removal will also be partly passed through. The second effect is the lower LTVs. It's now around 54%. So also there, you have the risk premium reduction. And you should also keep in mind that Alfam will be sold in Q4 consumer loans but average higher lending margins. So overall, the outlook is good, specifically for corporate loans is more or less stable, but also the portfolio, specifically the lower density is the main driver of lower asset margins.

The next question comes from Shrey Srivastava from Citi.

One short term and one longer term, please. The short-term one is we've seen system volume growth in the Netherlands, even excluding this holiday balance effect of 6% to 7% versus you guiding to 3% to 4% underlying. So are you sort of willing to not compete on price and cede some market share because quite frankly, you can afford to do so? And my second question is you've now made acquisitions in German Wealth Management. You've made acquisitions in Dutch retail. When you look at the size and the shape of your business, particularly in Wealth Management, what are the key areas you can see to grow above market? Is it market share gains in Germany? Is it potentially inorganic in, for example, Belgium and France or any other area that you see? Marguerite Bérard-Andrieu: Thank you. I will take your question on M&A and Wealth Management, and Ferdi will comment on volume growth later on. On M&A, right now with the acquisition of HAL and Bethmann that we already had in Germany, we have a very strong position of #3 in the Wealth Management market in Germany. And so our goal is to thrive. Our goal is to extract the synergies that will derive from this acquisition. This is why following the legal merger that we achieved for HAL mid-June, we are now fully focused on the IT technical integration that will happen at Q4. Right now, as I said, our energy is focused on making our recent acquisitions, be it HAL or NIBC to be profitable. We do believe, and that's what we shared at our CMD and that the ambition we have of achieving overall EUR 335 billion of client assets by '28 will be achieved beyond the acquisitions that we have already announced through organic growth. And so this is why we focus very much on commercial momentum and productivity with our clients. This is about leveraging our own franchise, which is very strong. On the volumes?

Yes. Maybe on the liability side, indeed, it's very strong. If you look at client funding, it was underlying, if you correct for the short-term custody inflow in Q1, it was plus EUR 5.3 billion. So on an annualized basis, you see an underlying growth of 11%. Yes, indeed, part of it is seasonal. You normally see the holiday allowances in personal and business banking. And last year, you always see increased spending over the summer period, but also part of it might be more structural because savings tend to increase when uncertainty increases, for example, due to the geopolitical developments. But also what you see here, while the market -- deposit market in the Netherlands grew the first half of the year with 6% to 7%, our market share slightly increased. So also here, we have a market share between 14% and 15%. So even a slight increase on a very healthy growth market in the Netherlands, and that's the main underlying driver of our healthy deposit growth.

And if I may, just a very quick follow-up. The system is growing 6% to 7%, you're gaining market share. Is it time to relook at the 3% to 4% underlying assumption?

Maybe it's too early to start looking at that. As Marguerite said already, we're comfortable with the target we set for 2028. And also here, as I said before, let's also look how much is structural or not. And it's always depending with increasing rates and increasing margins, what the competition element will do. So for now, we're very comfortable with the targets we set during the CMD.

The next question comes from Anke Reingen from RBC.

The first is just on other commercial NII. It's running above your previous guidance. Is there -- is this just a more volatile Clearing result? Or is there any structural reason that we can extrapolate from the '26 guidance ex the NIBC impact to the next years? And just on liability margins, the 119 basis points, do you think that's sustainable? Or is there anything in the competitive dynamic in the Netherlands? I think Rabo raised some of the rates that could potentially put some pressure on it? And then sorry, secondly, on cost, the guidance you put the comment out it's subject to the CLA agreement. Can you just confirm that there isn't a risk -- you don't expect the risk to your cost guidance from depending on the outcome from the CLA? Marguerite Bérard-Andrieu: Thank you very much. I will take your question on cost and Ferdi will answer on other commercial NII, but also liability margins. Yes, we refer to our collective labor agreement because, as you know, we started the negotiations in June, and they will resume mid-September. In the assumption we shared at our CMD, we said that in our financial plan, we had taken a hypothesis for inflation of 2%. And I believe we also gave the guidance, I mean, the information at Q1 that 1 percentage point above that would amount to between EUR 30 million and EUR 30 million full year. So I think you have from that, the necessary ingredients. We also shared at the time of our CMD that anything that would go beyond the equities we had taken in our financial plan would also be compensated by additional savings.

Yes. On other commercial NII, the quarter was very good at plus 30%. And the biggest driver here is higher financing needs from our clearing clients. If you look at our overall guidance, EUR 350 million to EUR 400 million we provided was also based on a clearing NII, if you look at full year '25 of just above EUR 300 million. So it's elevated levels there. Also in here are the interest-related fees. So those are the underwriting fees, which are amortized. And as said by Marguerite, for the coming quarter or maybe quarters, we have added NIBC to our overall guidance on other commercial NII that adds up to slightly below the EUR 150 million. So underlying in the guidance, you would see around EUR 450 million, what we expect for other commercial NII for the year. Then if you look at the liability margin, yes, 5 basis points increase. So that really reflects disciplined deposit pricing. And you start to see the prolonged tailwind of our replicating portfolio, which started already end of last year. So going forward, we expect to benefit from the structure of the replicating portfolio as the higher-yielding swaps will be rolled in more gradually. But always, you are dependent on competition potentially impacting volumes and also potential migration shift. So for now, we're comfortable. We expect the liability margin trajectory to continue as we earlier guided on during our CMD.

The next question comes from Matthew Clark from Mediobanca.

Just a couple of follow-up questions on the other commercial NII and the liability margin, please. So on the other commercial NII that is implicit, I think, in your new guidance that it drops back down to the former run rate. So if you could just confirm that? And then also, would you -- or should we expect the same to happen to the strong Clearing-related fees that you talk about this quarter? And then secondly, on the liability margin trajectory, the chart on Slide 10, I'm struggling to understand, it looks -- when I compare that to the same chart last quarter, it looks like there's around about a 10 basis point uplift to the April curve scenario. So I'm just a bit unclear why the trajectory has improved for that, if we look at that static April curve scenario between last quarter's outlook and this quarter's outlook. Marguerite Bérard-Andrieu: Okay. Ferdi on other commercial NII.

Yes, on other commercial NII, will it move back? We said other commercial NII of the guidance we provided at CMD EUR 350 million to EUR 400 million. As I've said, clearing is elevated levels. So that is the biggest explanation why we expect it to be around EUR 450 million for the full year, if you look at the underlying guidance of EUR 600 million. So that is the underlying explanation. If you then look at the chart, what will happen on Slide 10 to the liability margin. Indeed, looking forward on the current forward rates, we expect, for example, in 2028, the liability margin roughly 10 basis points higher than the chart we presented during the CMD. But you should take into account that rates are volatile and potential impact of migration or mix shift once the margin increases further. So overall, the underlying assumption, as we said before, on the replicating portfolio, we expect a full pass-through on interest paid deposits. And we expect the full benefit from the current accounts, which is around EUR 50 billion. So that is the explanation why on current forward curves, 2028, the expected under this assumption, liability margin will be roughly 10 basis points higher compared to CMD and November last year.

Sorry, just to come back to that. My question is specifically on the April curve. So you presented last quarter projections based on the April curve. And then you've shown a reconciliation this quarter also on an April curve, and it's meaningfully higher now than you're expecting last quarter based on that April curve scenario. And so it's the comparison with last quarter rather than the CMD, which I struggle to understand why you think your projection is the same.

Yes, yes. Sorry, the starting point, Matthew, I got you now. So sorry for that. It's just the starting point in the assumption we have a full pass-through of interest paid deposits. But so far, I started my answer, we've been very disciplined on pricing, and you have not seen any changes in our deposit pricing over the past period. So that is the explanation of that.

Okay. Thank you.

The coupon is still 1.25% and that is since the 1st of May last year. So that's the explanation. So every quarter when the forward curves improve, the starting point will be higher.

But the starting point is 5 basis points higher this quarter, but the projection is 10 basis points higher. Is that just a fully phased benefit of the higher starting point?

I'm not sure if I get you completely. The 10 basis points is a translation of the sensitivity slide you see at the back of the report, but it's all under the assumption that you see a full pass-through and that the overall mix and overall volume will stay constant. So you really should look at the underlying assumptions for that. And maybe I will ask Investor Relations to provide you some more detail on those underlying assumptions because they're unchanged to what we provided at the CMD.

The next question comes from Juan Pablo Lopez Cobo from Santander.

I got a follow-up, sorry for that. On the liability margin, I would like to ask if your NII guidance, you mentioned that you assume constant margins on interest-bearing deposits. I don't know if you could give us some sensitivity on your guidance if we include higher liability margins as shown in Slide 10. And my second question is in OpEx regarding the ICS Worldline transaction agreement. Is my understanding that the cost savings were already included in the Capital Markets Day, your target. But if you could give us any color regarding the cost savings and the phasing of those cost savings, if there would be some cost -- higher cost at the beginning and then some cost savings later. Marguerite Bérard-Andrieu: Yes. I will take your question on ICS and Ferdi will follow up on liability margin. Basically, in the agreement we're making right now with Worldline, so okay, a small part, part of it was included in our cost target ambition presented at the CMD for '28. But a fair amount of the synergies, i.e., the full benefit will be only in '29. And this being said also, there will be restructuring costs that will be taken at the beginning of the period. But also, as we shared at our CMD, you should consider that restructuring cost on average represent for us on a yearly basis, around EUR 100 million. So we are not changing also this EUR 100 million target for '26. Liability margin, Ferdi.

Yes. The liability margin. No. I mean it's an important question, right? So our guidance, to be clear, also for what we said at the CMD that the full year '28 could rise to EUR 7.2 billion. That was based on a liability and also the chart we provided there of around 1.25% and now in the chart, you see 10 basis points higher. So yes, you could simply translate that in plus EUR 250 million. But again, I would say rates are volatile. You might see migration shifts and competition might increase as well. And the key question is the income of the replicating portfolio is based on constant volumes. But clearly, in the guidance we provide on NII, we take into account our CAGR we provided in terms of deposit growth. That is extremely important for us, and that is also a clear strategy. And also, we take into account what we don't disclose clearly, what our expected price actions are.

The next question comes from Alberto Artoni from Intesa Sanpaolo.

I have 2. Just a follow-up on liability margins and just a clarification on costs. So on the liability side, I just wanted to understand what's your view on the competition for deposits in the Netherlands and particularly given that some fintechs are very aggressive. What do you think how you see the competition playing out in future quarters? And on costs, just a quick clarification. The EUR 5.5 billion guidance for this year, does it include restructuring costs or it excludes the restructuring costs? Marguerite Bérard-Andrieu: Thank you very much. So on cost of EUR 5.5 billion guidance excludes restructuring costs and includes NIBC, just to be fully clear of what's in and what's out, okay? On competition on the savings market in the Netherlands, this is a healthy, competitive, transparent market. So of course, pricing evolves on the basis of interest rate curve, client behaviors, behaviors from competition, whether it comes from incumbents or whether it comes from newcomers and fintechs. At this stage, and I think this is what we've also demonstrated at Q2, the growth in our liability margin comes also from our strong commercial momentum because we've been able to keep growing our market share, again, in a very healthy market. But of course, we keep watching all developments in the market.

Yes. And maybe just to add to Marguerite, so it's also clear for all the analysts. Yes, our guidance excludes restructuring costs, but it also excludes incidentals, right? Marguerite Bérard-Andrieu: Yes.

An earlier incidental, we had to relief on the pension that's also excluded. Marguerite Bérard-Andrieu: Absolutely.

From the cost guidance. Marguerite Bérard-Andrieu: That was the Q1, if you remember.

The next question comes from Chris Hallam from Goldman Sachs International.

I just have 2 questions on capital and costs. So on capital, you said that if over time, your capital ratio remains significantly above your target, i.e., greater than 13.75%, you may consider extraordinary distribution above the 100% level. So to me, it feels like that over time in that sentence is doing a lot of the heavy lifting. Is it fair to assume that Q4 results in February are just too early to expect distribution above 100%. That's really something for '27 or 2028 rather than the earlier part of the plan. And then on cost, secondly, I think I'm still a bit confused on the guidance, just what's included and excluded in the cost guidance versus what you report as underlying expenses. So just to confirm the guidance of EUR 5.5 billion, that's your headline operating expenses and then excluding restructuring. And I think you also just said excluding incidentals, i.e. EUR 82 million in the first half. If we look at H2 versus H1, your guidance implies about a 13% pickup H2 versus H1. There are a couple of things in there. I guess, first of all, there's obviously the NIBC contribution in the second half, which will lift cost optically. And then there's the levies that happened in the second quarter or second half of last year were about EUR 135 million. And I guess if I adjust for those, I'm sort of getting mid- to high single-digit cost H2 versus H1. Does that sort of sound like a fair reflection of the cost development you're seeing in the business? Marguerite Bérard-Andrieu: Ferdi will go through your cost question. And indeed, there are some, as you rightly pointed out, some costs that we only book at Q4, including, for instance, the banking tax. What -- regarding our distribution policy, indeed, what we said is that if -- and I know you want more details on that, what I mean by over a period of time, our capital position remains significantly above the target, we may consider additional distributions. Indeed, we still consider that right now and that in the first year of our plan, this is still early stage because this is a 3-year plan. But we are very happy with the progress we're making. And I don't want to speculate about what will be coming next, but we are very confident about our targets and the strength of our capital position.

Yes. And I think, Chris, I agree with your calculation. Just take into account mentioned earlier also the CLA negotiations ongoing, and that will impact the bridge towards the second half of the year. It's a banking tax, it's the inclusion of HAL, you'll also see, if you look, for example, for NIBC, if you look at ICS for the announcement we did in the outsourcing, we expect there to take a provision in Q3 of around EUR 30 million. If you look year-to-date, restructuring versus pension exit fee more or less balances out. But we take out incidentals, we take out restructuring and take into account, you always see a cost bump in Q4 and you have your regulatory levies then as well.

The next question comes from Farquhar Charles Murray from Autonomous.

Just 2 questions, if I may. Firstly, if I recall from the CMD, those targets did factor in a kind of mix shift towards NHG and a drift lower on LTVs and then the associated decline in asset margins, which I think was around about maybe 15 bps across the full planning period. How does what you're seeing currently compare to that kind of target trajectory? And do you feel like you're wandering off that? Or is what we're seeing consistent with that? And then secondly, just on the cost side, what is the regulatory cost expectation for full year '26? And for full clarity, is that also in the EUR 5.5 billion? Marguerite Bérard-Andrieu: Ferdi.

Maybe on the regulatory cost, yes, banking tax, you need to start adding NIBC. So I would say tax going forward around EUR 150 million is a rough indication. Then on your second question was specifically on expected migration shift or specifically on mortgage margins? Marguerite Bérard-Andrieu: I think it was more mortgage margins given the share of NHG-backed mortgages in our mix.

Yes. And I think that is it, had the mix shift there. And now the majority of the new production is up until 10 year and also within the NHG guarantee. So that has a larger effect maybe than expected in during the CMD. Number two, we implemented automatic adjustments on the back of LTV. That's also an effect. We still see an outflow of higher-yielding mortgages that this may be element #3 and maybe element #4, but you know that the derisking of interest-only mortgages, we tightened our criteria for new production up till an absolute cap and the underlying margins of IO was higher than the average. So I think there are quite a few elements in here, and it's still to be seen what the effect of the removal of the mortgage floor is if part of that will be priced through in the market as well. So there are quite a few elements in here, Farquhar. I can always discuss that in more detail later.

And just to follow-up, the EUR 5.5 billion, does that include the regulatory costs of EUR 150 million that you just suggested?

Yes.

There are no more questions at this time. I will now hand the word back to the speakers for any closing remarks. Marguerite Bérard-Andrieu: Well, thank you very much all for joining us today, all the more that I expect that some of you are still on vacation, probably dialing in from the vacation. So we're very happy to have you with us. And we do hope that for those who are in Europe, some of you we may be able to enjoy the eclipse tonight. In the meantime, have a great day.