Good morning. This is Patricia Klosauf welcoming you to ING’s First Quarter 2019 Conference Call. Before handing this conference call over to Ralph Hamers, 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, Ralph. Over to you.

Thank you, Patricia. Good morning, everyone, and welcome to the first quarter 2019 results call. As always, I’ll take you through the presentation that you have been provided with. With me are our CRO, Steven van Rijswijk; and our new CFO, Tanate Phutrakul. Welcome Tanate. During the Investor Day the end of March, we were already able to cover a wide range of topics. It was really a pleasure to spend quite some time with many of you in Germany. And you’ll see that many of the things that we talked about there are covered and reflected in these first quarter results. So let’s turn to the key points of this quarter’s performance. ING Group posted a net profit of €1.1 billion in the first quarter. That’s leading to a four-quarter rolling underlying return on equity of 11% for the quarter. So strong performance there. On the retail side, we recorded a net inflow of 150,000 primary customers to reach 12.6 million. Australia and Germany were the strongest contributors for this quarter’s growth, but we see growth everywhere on primary clients. First quarter was another strong quarter for loan growth with net core lending up by €8.7 billion, again, well diversified by the businesses and the geographies. You will see that later. And the net customer deposit inflow of around €5 billion. Next to the loan growth, resilient margins. Results were supported by solid fee income despite challenging market conditions and the release of a currency translation reserve related to the sale of Kotak. The cost side, we maintained a good cost discipline, as we had expected. The Retail Benelux costs are continuing to trend down, showing the effect of the transformation program. The group CET1 ratio came in at a strong 14.7%, up from 14.5% at the end of…

[Operator Instructions] Our first question is from Mr. Stefan Nedialkov, Citi.

A couple of questions from me. On the fee side of things, could you please update us in terms of your partnerships? For example, Scalable Capital was supposed to be rolled out to other countries. I believe it’s still only in Germany. And how much of the sort of weakness versus consensus that we’ve seen today would you say is seasonal versus more structural? Obviously, you’re paying more fees to exert on brokers in Germany. At the same time, fees in Belgium seems to be quite resilient, et cetera. Just trying to understand the seasonality versus structural trends here in terms of fees. And the second question is in terms of your German strategy. Obviously there’s been quite a few headlines. I’m not going to be mentioning specific names, but if you could just tell us in what kind of context would having more branches make sense for you in Germany. Thank you.

Thanks, Stefan, for the questions. So looking at fees. As we have indicated in the Investor Day, getting – every day, we’re getting closer to being a dynamic digital player and platform, if you will. Every day, we are adding more primary customers. So every day, the opportunity for us to kind of also offer third-party products or even peer products to our customer base, we’re getting closer to that. So the opportunity for us to increase our fee income is near. Now – and that’s why we are very confident that the fee income over the next couple of years will increase by 5% to 10% per annum. However, if you now look at this quarter results specifically, we paid away a little bit more fees on the mortgage origination in different countries. Although in Germany, we actually – we had a bit less origination there, so therefore, you will see the fees going up on mortgages. We see behavioral fees coming through in Germany as well. We see fees in The Netherlands coming up as well. So where you see a bit of a dampening effect on the fee income growth, it is on paying a little bit more fees away for mortgage origination. And in Belgium specifically, it is related to the assets under management, as I indicated already in my introduction. And it’s on the back of more volatile equity markets in the fourth quarter that came off at a kind of a lower – or well, a weaker start. And that’s where we see lower fees coming in. So our partnerships like the AXA one, like the TransferMate one, like the Payvision one as well, they will generate more fee income and more partners to be sought after and looking at how we can roll…

Next question is from Mr. Benoit Petrarque, Kepler Cheuvreux. Go ahead please.

Three questions, two on NII. First one is around the replication drag, especially in the Netherlands Q-on-Q. I will assume this drag to continue in the year. But is the Q-on-Q trend – or can the Q-on-Q trend be replicated for the rest of the year? Or do you assume a bit lower pressure going forward? And also, broadly speaking on replication drag, do you feel you can push client rates further down on maybe SME, mid-corporates segment or take all actions like maybe on the investment side to offset clearly low interest rates, which is likely to continue? That’s the first question. The second one is on the Wholesale Banking, NII down 6% Q-on-Q. Surely the accounts has been a drag there. But do you see commercial margin pressure? Because I’m a bit confused with Ralph’s statement that you have the ability to reprice, to pass on this transfer pricing to clients. So are we going to see more pressure on the commercial side in the Wholesale Banking or is that a temporary issue in the first quarter? And the last one is on the costs, up 2% clean year-on-year. Is the 2% the kind of run rate for 2019? Or do you think cost savings will materialize in the summer, especially around the restructuring, and we could end up definitely below that level on a clean basis towards year-end? Thank you very much.

Benoit, so maybe I’ll just – this Tanate. I’ll just give you a bit of a comment on the savings replication question that you have. I think it would not be fair to look at the NII reduction in the Netherlands and do an extrapolation on that because it’s a combination of two factors. I think within those numbers, you see some volatility from Bank Treasury results in there as well as the actual replication in itself. But indeed, we do see compression in terms of savings margin that is happening in the Netherlands given the fact that we are now at a very low level in terms of our deposit rates in that market. To address that question, how you should look at it, I think our replications is anywhere between the three, the five and the 7-year part of the curve. So you can work it out depending on how those curves moves, how difficult or how good it would be in terms of replication, right? Having said that, I think we are taking steps whereby, as we mentioned in the previous quarterly call, that we are increasing the fund transfer pricing to the front office in terms of lending origination. And that is happening across the whole of ING, which means that the origination margin that you see going forward is actually quite robust, right? As Ralph mentioned just now, in Retail Banking, particularly in mortgages, which is a major part of the Netherlands, you see margin improvement across the whole of our ING mortgage book in all of our geographies. So that is part of the mitigation that we are taking to make those steps. Okay? In terms of Wholesale Banking NII, I think it’s again a combination of things. Because within that NII, it reflects…

Our next question is from Mr. Adrian Cighi, RBC Capital Markets. Go ahead please.

Two questions from my side, please. Just one follow-up on the potential banking consolidation theme. Very helpful color on the criteria for potential acquisitions. Can you maybe talk about any specific return hurdles and over what period you would hope to achieve these should you pursue any acquisitions that may be done with the capability or the skills criteria you outlined? And then on the capital progress this quarter, you’ve showed a positive risk migration of 28 basis points. Can you maybe help us understand how much of this would impact of the Basel IV guidance that you’ve provided or not? Thank you.

Okay. So on the first one, Adrian, so in inorganic growth, as we were indicating in terms of seeking additional lending capabilities, it’s been there over the last couple of years as focus points, where basically, we indicated in the beginning of the Think Forward strategy that we felt that we had a too high concentration risk in our balance sheet if it came to mortgage exposure. And we wanted to diversify our balance sheet, our asset mix into more consumer lending, SME lending, mid-corporate lending and Wholesale Banking lending. Now for a lot of Wholesale Banking activities, we had our own kind of specialists already. And we grew our sector units there. On mid-corporates and SMEs and consumer lending, we’ve always been looking at new technology being applied in those areas with instant scoring and instant lending, but also to the extent available, specific portfolios. And from a return on equity criteria, our return on equity is – the ambition is what it is. So we would always look at the same kind of criteria as – on the basis of which we run our own business. So that’s how we would look at that. On CET1, I will give that to Steven.

Yes. Thank you. Thanks, Adrian. So if you look at the risk migration, it is largely due to a number of impacts. We are doing some better collateral and data quality management. There were some write-offs that we’re going through the books, as a result of which it is taken out of RWA sort of letter releases. There were some price increases in both the housing prices in retail as well as in our real estate in Wholesale Banking. So these are temporary blips up, but the blips could also go down to the other side. In that sense, we do not change our guidance on Basel IV, which again is 15% to 18%, so based on our RWA balance sheet at that point in time, which – with about 1/3 that we can achieve lower as a result of management actions. And 80% of that increase will come due by the year 2022 because Basel IV mostly depends with us on input factors. Thank you.

Our next question is from Mr. Farquhar Murray, Autonomous. Go ahead please.

Just two questions, if I may. Firstly, on the NIM outlook. The performance of 1Q 2019 is quite solid and you referred to stable moves on commercial margins mortgages. Could you now extend the kind of guidance for high 140 to 150 NIM to the end of this year then on the back of that? And then secondly, just on the new risk costs guidance of 25 bps on average customer lending. How does that compare when you look at your internal analysis versus the kind of previous guidance? And would you actually be able to give us some indication about what that means in a kind of segmental business cycle also down to Wholesale Banking? Thanks

Okay. Thank you. Well, on the NIM outlook, indeed. And looking at how we have been able to manage it over the first quarter, where basically you have the pressure more on the savings side and how you can kind of manage that pressure on the savings side at least from an interest income perspective. Maybe on the asset side, repricing is an important driver there. And repricing, we do in two ways. This is by shifting the FTP with the internal funds, pricing – transfer from pricing. And the other one is the commercial margins on top of that. So – and both we’re doing and so vis-à-vis the client charging – being able to charge a bit more helps you kind of offsetting the pressure that we have on the savings side. On the back of that, for the next two quarters, we can guide as you are used to, that we can manage the NIM around the high end in 40s and low end in 50s. As to the cost of risk guidance, I’ll give it to Steven, where we move from a guidance of risk costs over risk-weighted assets to the lending assets.

Yes. Thanks. I mean, basically, the 25 basis points is a translation or an FX translation, where we were with the 40 to 45 basis points guidance over RWA. Please note that, that is a through-the-cycle RWA, as a result of which, you cannot compare directly to what it is today based on the current RWA of €310 billion. But if we look at through-the-cycle RWA, it will come back to a translation the 25 basis point. So in that sense, there is no shift in our risk appetite and our policies and the legal and the ongoing levels that we have. It has remained the same as before. We give that guidance on a bank basis only. This is not – this is a broader risk appetite, but we of course steer our risk appetite much further into detail, into countries, product sectors, legal and obligors and the way that we deal with our security and our, I’ll say, restructuring units. That’s the way we manage the risk and the risk costs. And this is a guidance to basically translate it into a figure for the markets. So no change there.

Our next question is from Pawel Dziedzic, Goldman Sachs. Go ahead please.

Two follow-up question. So first one, maybe on cost. You mentioned that you have a good performance overall. There is some seasonality in 1Q. If we look at your 4-quarter rolling average, your cost to income is at 55%. And I know this is now not a primary target, but to what extent do you expect to make some progress towards lower level this year? Now would we see more one-off costs rate at the client acquisition perhaps or rollout of project investments, KYC, later this year as well? So to what extent you have a capacity to go below this 55%? That’s the first question. And the second question is also a follow up and it’s on cost of risk. Your guidance, 25 basis points. And I wanted to ask if – ask it a little bit differently and it is in what operating environment, what would need to happen for you to actually be at the basis points? Or should we expect to see your current low levels to continue in the foreseeable future? Thank you.

Thank you, Pawel. I’ll take the one on costs and then Steven will come back on the risk cost question. So looking at cost here, clearly there’s a lot of seasonality built in from a regulatory cost perspective. That’s why we kind of calculate the 4-quarter rolling average. If you look at the coming year, we are still in a major transformation in Unite, where you could expect further cost decreases to come in. As we have kind of briefed you on in Frankfurt in the Investor Day. We do expect FTE decreases over time. At the same time, where we are on the Unite transformation program, we have made almost all strategic milestones, but at the same time, we decided that, going forward, we want to kind of speed up the client migration from Belgium to the omnichannel digital interaction layer, basically for them to benefit from all the digital interactions with the bank. And so we are actually moving that forward and moving the migration of products a little bit later as a consequence of which, some of the cost benefits will also come a bit later. So if you then look specifically for the year, clearly, we managed to further decrease cost in the market leases environment in C&G. We’ll always play it by ear if we see the opportunities, and we would allow some cost growth. But for the year, we’re cautious there as well and the Wholesale Banking as well because we really want to see how we kind of go through this year, so I can’t really guide you on cost income on this one, but you can expect from us to really be focused on the cost developments vis-à-vis the transition that we’re going through. On cost risk, Steven?

Yes. As I think, Pawel, in general, a worsening of – significant worsening of macroeconomic circumstances over the years impact from risk cost and 25 basis points is the average over a longer period, so it’s hard to directly pinpoint exactly what the exact services are because there are many factors impacting this. Like I also said during the Investor Day presentation, now also here to manage the tops-down, if you will, or the peaks. We look at more so by compartmentalization and then with risk where it goes in the first and second line of personal accountability. And if you look at this year, the current circumstances actually seen in previous years, we would expect this risk cost thing to remain below the long-term average.

Next question is from Mr. Robin van den Broek, Mediobanca. Go ahead please.

Yes. My first question is on NIM the ability to put in higher cost in the internal transfer pricing model. In Q4, credit spreads widened materially, which probably gave you the rationale to do that in Q1. In Q1, though, credit spreads tightened significantly so I was just wondering if that offset is structural in your view or that we could see that to dissipate going forward leading to some more NIM pressure on the longer-term. That’s the first question. And the second one, I think your answer on cost of risk, the changing guidance seems to imply that your RWAs are somewhat understated from a point in the cycle perspective. I was just wondering how that would feed into your fully loaded Basel IV target level of 13.5%. I mean should be either assume that you want to be above that level given where we are in the cycle? Or should we start to factor in more DPS progression at €0.01 a year and given the fact that you basically are where you want to be on a headline level today. Thank you.

Okay. Thank you, Robin. While on the internal FDP and the credit spreads tightening, specifically, we don’t manage that necessarily on a quarter-by-quarter basis, but we do look at where the margins are in terms of new production as well. And that’s where we see that over a higher FDP, and the margins specifically on the wholesale bank side have been flattish to maybe even a little bit improving. So that’s – so a higher pricing all together there in the new production for the first quarter. In terms of the other businesses, we see and we’ve seen in the first quarter the mortgage margin in The Netherlands improving, in Belgium improving and the businesses – the business lending margins over the entire internal FDP to be flattish. And so this, I’m talking new production here, right? So I’m talking what happened in the first quarter of 2019. So that’s what I can give you on that one. On the costs of risk, I’ll give it to Steven.

Yes. Thanks there, Robin. I mean clearly, we are at – from an economic point of view and sort of at a high point in the cycle. It seems and also therefore a lower point in cycle in terms of RWA. If you look at the past five to six years, you have seen a risk migration coming in on a quarterly or yearly basis. And when the cycle changes, one would expect certainly impact of that risk migration going back. So in that sense, it doesn’t change our guidance and that’s why we said if you look at the average cost of risk through the cycle with ups and downs, we go to a 40 to 45 basis points, translated now into 25 basis points on lending assets through a cycle, and that’s what we will remain at. In terms of capital return, I don’t think that you should read anything into this. I mean at this point in time, also with what we have in the quarter, there are some blips off and definitely there is positive risk migration that is relatively benign. That doesn’t change our overall guidance on dividend policy.

Okay. Ralph. Just to come back on the margins. I think you’re saying that commercial rates are basically higher, but the margin is sort of stable on the back of the higher FDP. But again, if credit spreads tightened significantly, isn’t that an issue?

I can talk what we – I can talk about what we saw in the first quarter, so – and specifically, on the credit spreads, we look at it specifically in the wholesale market. It is really on a client by client basis. It’s a sector-by-sector basis, so that’s how we manage that. So whatever happens in the capital markets specifically, does not necessarily influence the client rates directly.

Next question is from Mr. Nick Davey, Redburn. Go ahead please.

Two quick questions, please. The first one on KYC costs. Could I just ask for a bit more detail about the charges that have appeared in Q1 and the outlook there? Was there any sort of temporary one-off costs in there that would mean Corporate Line cost could fall from here? Or conversely, is this, as you’ve outlined at the Investor Day, a bit of a project for the year? So any expectations we should have for higher costs from that source, is in Wholesale Bank or Corporate Line? And then a second question. Just coming back on the Challengers & Growth Markets. I think the question was already asked about stable pre-provision income and the pace of cost growth. The only question I would have is, if you could just provide the impact of FX in the Challengers & Growth Markets in general just so we can get a feel in constant currency terms about how revenue and cost growth is progressing. If-I don’t know if you have that at hand or is it the kind of thing you’d be able to provide in the future?

Nick, I’ll give the second one to Tanate to follow up on either now on the call or maybe later. On KYC, as we’ve indicated there are – there’s two components to the program that we’re running. One is the structuring improvements. And for the structure improvements, we are beefing up the organization. We’re hiring more people, and we’re investing in systems and processes. And that basically, we do by clearly increasing the investments in that area, but there’s only so much you can do. So we are reprioritizing some of the investments that we had envisaged to do in other areas towards this area. So although it may – although we’re investing more in that area, it doesn’t necessarily lead to a big cost increase from that perspective. So that’s the more structure improvements, which we really kind of reprioritize some of the investments that we are making on the IT, et cetera, et cetera, et cetera. Now in the total KYC organization, as we were indicating, we have some 2,500 full-time employees now working on it and it’s growing. Around 500 are working on the non-structural business, which is more the project-related part of this program, which is the final enhancements. So when we are through the final enhancements, it goes to what we would call business-as-usual in terms of your KYC element of this. And then, basically, you can – the costs on the FTE side will go down. But at this moment, it’s 2,500 for the total. We envisage some increases there. The underlying actual investments are being reprioritized from all areas into this, so that’s the picture I can give to you. So the one to hold on to maybe for you is then the 500. And once the fine enhancements are done, that, that is something that is – that you can expect as the cost going down. But having said that, the structural improvements going through in this area will continue for a while and will be reprioritized from other areas. Tanate?

Just to address your question, Nick, on the cost evolution in C&G. As Ralph mentioned, half of that is in Germany. The other half is in the other Challenger & Growth countries. And your question on foreign exchange, it’s predominantly driven by Turkish lira against the euro and the positive impact of that in Q1 is approximately €10 million to €15 million year-on-year.

Okay, thank you. And just following up on the KYC. Ralph, Am I then okay to assume that plausibly these KYC charges could drift up to the course of this year, whilst you’re making some of these permanent investments and running the 500 staff on top and then the reductions may come in 2020? Is that fair?

Yes. So the enhancement for our side, you should expect during 2020 to call – that, that will actually come off. On the structural improvements, that will stay also during 2020, yes.

Okay, thank you.

Next question is from Mr. Bart Jooris, Degroof Petercam. Go ahead please.

Yes. First question. The negative valuation adjustments in wholesale banking financial markets were rather big if I look at Slide 21 with the negative €58 million. Could you give some more color on that? Is that MBA, CVA, DVA? Why is this figure so large compared to the previous quarters? And then a little bit on the timing of data. I heard some comments that you’re already on your Basel IV, but that depends on the actions to reduce the impact. How is that the timing update? Could you give some more color on where you are? What measures you are still planning to take?

Thank you, Bart. The first one, I give to Tanate. The second one is for Steven.

Bart, so yes, indeed, the value adjustment in financial market in Q1 was more pronounced than previous quarters. I think it’s driven by two impacts. I think the first one is really in terms of our position in terms of bonds again, which we do credit default swaps to hedge. And in this particular quarter, in terms of the funding value adjustment, it was more than the normal. Let’s put it that way because of lower liquidity in the market. And the second impact is really from our credit-rating desk where we do macro fair value hedges on them. And there are certain movements between long-dated credit positions against short-dated credit positions, where again we have negative value adjustments. But both of these on a like-for-like basis should go back to par over time.

Yes. Thanks, Bart. On Basel IV management actions, on the one hand, we are still in the years to come to Basel IV. So firstly, you have, of course, the outcome of TRIM. That still needs to come on a number of the portfolios, which is a prelude to Basel. So it start with TRIM that is then partially offset in Basel. So that is still to come. In terms of management actions, we have, of course, and you can see it in the press release, in the segments financials. We also show the results based on our 13.5% CAT on RWA results for different segments, so we also steer on that in terms of pricing, which basically means we need to price up to be able to meet the return hurdles that we have, and we have been talking about it during this call. Secondly, we continue to work on improving our covers on our loans, and you’re seeing a bit of that creep through in the risk migration that you saw in the first quarter. We work – we continue to work on, let’s say, external ratings for corporates. As a result of which, that will limit the rating in that regard and that will help us also in terms of our RWA requirements, and we continue to see if there are portfolios, which consistently have a lower risk cost over a longer period of time because if that is the case, you can become eligible for lower risk rates. And then over the last place, we continue to work on the originator distribution whereby portfolios that would become more hurt by Basel IV that are less favorable from a return point of view, we see how it may shift the mix in our activities to cater for this. That’s ongoing.

Could you give a timing on how we can see that evolving in this year, next year?

I mean all elements will continue to go on continuously to be able to mitigate the effect of Basel IV of 15% to 18% with 1/3, and that is something that will – we will come through over the next couple of years on an ongoing basis. So that’s not something that is being done in one quarter or something like that. That will be ongoing.

Okay, thank you very much.

Next question is from Mr. Bruce Hamilton, Morgan Stanley. Go ahead please.

Hi, good morning guys, thanks for taking my quesiotn. Most of the questions had been asked, but maybe just following up on consolidation. And Ralph, you’ve given us very useful color there. But when you talk about you then wanting to dilute the return, the return to obviously the bank at least it’s good news. But do you give us sort of time line for any, say, larger deal that you hope to get up to that sort of double-digit ROE? And how appealing is this sort of redomiciling? I mean to – get any benefits in terms of reduced domestic SIFI buffer? And then finally, I mean just on cross-border deals. Generally, do you think that sectors as a whole is close? I mean how do you think about the timeframe and likelihood of deals happening from here?

Yes. Again, I won’t comment to the specific rumors that are going around. I can talk about – in general about what I expect in the European banking landscape to happen, and we are a supporter of the banking union as the most pan-European bank I guess around, with so many kind of local activities in several European countries and Eurozone countries. But for the banks as a whole, including ours, to benefit from that banking union, we need to finalize the banking union. So from a – from an – a regulatory perspective or a supervisory’s perspective, it is being done. We have the SSM, the single supervisory mechanism, that works. Works quite well actually. We have the single resolution board as well in order to make sure that with banks fail, that there is a recipe through which we manage these failures and thus, the front to support the resolution of banks. It’s also being filled, as we speak. So that’s done as well and will be done over time. But there’s a third part, which is how to protect depositors and bank failures as well, for which we have to come to some kind of a common deposit guarantee system, which basically needs to be finalized before banks can actually benefit on an additional two out of three benefits that consolidation can bring. So there’s three benefits that consolidation can bring, which is the – a cost benefit, that is always there, which is, generally, if you can’t do cross-border scalability the way we can, you – it will be limited to what you can do in a country. Then the second one is liquidity optimization. And the third one is capital optimization. Now the second and the third one will not be there, not to a large extent in my view, if we don’t finalize the banking union in full. So basically, what banks need to focus on then is to which extent you can actually have cost synergies. And therefore, I think for most banks, this will limit the opportunity to local M&A for the moment. So that’s it, and do that’s the color I can give. Thank you.

Thank you.

And the next question is from Mr. Jean-Pierre Lambert of KBW. Go ahead please.

Most questions have been answered. Just to follow-up on the digital indication of activity, which was up quite a lot, I think 25% or 26% year-on-year, but this is maybe inflated by people just checking their jobs on a more regular basis on their mobile. Can you distinguish between the sentimental transactions and basically review of outstanding or situation of accounts?

Now jean-Pierre, I think you’re completely right from the perspective that an element of the number of interactions is inflated by the changing behavior of customers that, while they do their banking on their mobile, they’re just checking more often on something that they wouldn’t check in as frequently in a desktop environment or let alone going into the branch five times a day to check your balance. Having said that though, I mean you have to look at it from the different perspectives. That if you build a platform in which you have a daily interaction, just like people checking the news five times a day on news sites, that basically just provides banks with a great opportunity to build a broader relationship with those customers who maybe indeed only checking to check their accounts a couple of times a day, but nevertheless, you are in touch with them. So yes, if you would only look at what that provides for an opportunity as a bank only, then yes, there will be further upside because you have more interaction and you will get to know your customer a little bit better in terms of behavior and the whole digitalization will be able to generate more intelligence around the client. But if you look a little bit beyond that, and you have the traffic, and you think of yourself as a platform a little bit more than a bank, then the opportunities are much broader. That’s why on the Investor Day, when we alluded to the fact that, for example, in Holland, we are the number 10 app in daily usage for the average Dutch person, whereas the number one through number nine are all Facebook and Google Apps, that is what shows the opportunity that you have. So you have to think beyond your role as a bank and start thinking platform. And then these digital interactions do matter, but clearly, there is certainly some inflation there.

Thanks, very much.

Our next question is from Mr. Marcell Houben, Crédit Suisse.

Good morning, thanks for taking my questions. The first one is on the fee side here. So Ralph, can you give a little bit of color on the fee growth within the retail division or I mean the drivers, the key drivers? I know I understand the ambition of 5% to 10% growth. But there’s asset under management and investment product, the line in there. It just seems there was a lot of volatility you’ve seen in the past couple of quarters within Retail Germany, in Belgium, Holland as well as the other channels in growth. Can you just give us a little bit of the key drivers here to give a better accurate model capabilities for us as analysts? So that was my first one. Second one was on the wholesale lending or lending growth. This quarter, we see some nice lending growth of close to 6% annualized. Large part of it is driven by wholesale lending, which if I remember correctly, you wanted to slim down the exposure a little bit. How should we read into this lending growth in this quarter outside of wholesale bank? And then if I could just go through a third quick one on the cost-income ratio target. I know it’s not a key focus anymore, that six – the 62% but you dropped away the timing up by 2020. In your base case scenario, what – when would you expect to reach this level? Is it best 2020? Or is it delivered there or in that for example?

Thank you. Well, on the fee growth, so there’s different dimensions in which you can grow fees as – and we use all the dimension here. So the first one is for the services that you already offer, depending on how the cost, the underlying cost develop, you increase your fees. For example, in daily banking activities for the use of your current account, your car, the additional services that you offer, around salary accounts, you can increase fees just because the services are increasing and the cost may be going up as well. Then there is an element in that same area where which is what we would call behavioral fees. So basically, how do you kind of make sure that people who interact with us, either by withdrawing cash from an ATM or making calls into our call centers, how do you make sure that people really do that if they need it? So how do you make sure that people don’t go to your ATM five times a week for €25, but they go one time a week for €125. So there’s just aspects like that, but specifically in the challenger markets, it’s important for us because we don’t have our largest ATM networks there, but we pay fees to other banks on the back of the behavior of our own customers. And then clearly, the third element that comes to fees is the more primary customers you have and the better you know these customers, the more – and the more services that you either develop yourself or offer from third-party – third-parties, whether this is investment products or whether this is insurance or whether it is non-banking in the future, that’s the real upside because you should realize that the success of our model has…

Thank you. Thanks, Marcell. So regarding the loan growth, as you look at the total loan growth of €8.7 billion this quarter, approximately €4 billion comes from Wholesale Banking. Within that, approximately half of that within Wholesale Banking comes from trading commodity finance on the back of higher oil prices, and we’ve seen it also in previous quarters. In previous years, sometimes the price goes up and goes down immediately with the same lending volume. The value goes up because of that higher oil price. When we look at the remaining growth in Wholesale Banking, quite a significant part of that is by further drawdowns on revolving credit facilities, so again that is radically cyclical, so we still stick to the 3% to 4% loan growth over the year, and you will see some quarters which are impacted by these type of events.

That’s very helpful. Can I just follow-up on the fees? Like, do you – can you disclose the assets under management per retail division?

We can’t – we don’t.

All right, thanks.

Our next question is from Mr. Kiri Vijayarajah of HSBC. Go ahead please.

Yes, good morning everyone. Can I just come back to the weaker fee result in the wholesale bank and linking that to your lower risk appetite there? So just wondering if that lower 1Q fee number in the wholesale bank’s kind of the good level going forward? Or could it compress a bit further if those self-imposed exposure caps start to bite a bit more as the year progresses? So you do kind of less of the leveraged loan and so less fees from that. And then secondly, just very quickly. Could you give us an update on Italy? Any impact that the ban on onboarding new customers? Has that had any impact on the underlying franchise at all? And any visibility on how long with that ban will stay in force?

Thanks, Kiri. While on also the banking fees, clearly, if we have restricted risk appetite, and we’re cautious to enter into deals that don’t kind of fulfill our requirements from risk appetite perspective or from a structure perspective that, that does limit the – our ability to do large deals, and with that, it will and may have an effect on our fee income. Having said that, I’m willing to take that because in the end, they will never pay. And clearly, in the leverage finance business, we do see that there is a risk appetite in the market that doesn’t match ours and that does have a dampening effect on fees in the Wholesale Banking side. In addition to that, in the first quarter, from a markets perspective, whether it is more debt capital markets or equity capital markets, it wasn’t a very strong fee quarter either. And at a certain moment in time, you would expect that to come back. So over time, in the markets that – or in the sectors that we know very well, we do expect that business will just continue, whether it is in the transportation business, in the oil and gas business, the sectors that we really know, we don’t think that there’s going to be like strange players coming through, so we’ll be able to do our deals and so we will be able to charge arrangement fees and distribution fees there. And also, on the DCM side, we do expect that market to be back, and on the back of that, be able to kind of increase our fee income there as well. Then turning to Italy. And now clearly, the customer ban is not good news for the franchise itself in terms of, how do you maybe motivate your people, right? Having said that, what we need to do there is important, which is you’re having to ensure that we do play a role as the gatekeeper the way the regulator expects from us. And that’s what we’re doing. So the enhancement plan that we rolled out globally is clearly also being implemented in Italy and was already implemented to – in the process of being implemented in Italy. So we will continue with that. And so how that influences the timing of the customer ban itself? I don’t know. I – we don’t – we will have to kind of further work with the regulator to get a feel – or the supervisor to get a feel as to when that can be lifted. We don’t have that as we speak.

Okay. That’s very clear, thank you.

Our next question is from Mr. Maxence Le Gouvello du Timat of Jefferies International. Go ahead please.

Yes, good morning everyone. Most of my question have been answered. Just the last one regarding the appointment of Mike Rees at the Supervisory Board. It’s quite the surprise considering Mike’s profile on the what’s said on the Asian exposure. And we’re just wondering how it fits with your strategy on digital Retail Banking or his focus would be only on the Wholesale?

Thanks for the question. So Mike comes with a whole set of experiences, including Asia experience where we are active. And as a wholesale bank, we’re also active. As a digital bank, as you know, we are testing, for example, the Philippines market. So his Asian experience comes in. His wholesale Banking experience comes in as a welcome experience as well as he’s also a formidable banker. And yet, the core of what we do is still banking, and so it’s good to have good bankers on board.

Okay, thank you.

Next question is from Mr. José Coll, Santander. Go ahead please. José Coll: Thank you. Two questions, please. The first one would be well, according to the press about two weeks ago, they claim that you are in the process of closing down your SME business in Spain, which arguably was small. But I felt this was a segment in which you wanted to expand. I guess this fits with your previous comment on minding the operating leverage. But could you comment further on this move? And is this something we can expect happen – could happen in other C&G units? And my second question is on Turkey. I see that total lending, net of FX, decrease about four percentage points in the quarter, which considering that the Stage three ratio is quickly rolling from 2.8% to 3.1%, might not be too impressive. So I wonder if you can give us some guidance in terms of lending reduction for the rest of the year, and what is your target or guidance for intergroup lending by the end of the year.

Thanks, José. So on the first one, I’ll give the answer, the second one, Steven will take that. So on the – how do we go about SME business? So in Spain, we start the SME business, and we also work with Kabbage on that one. And as you know, the way we do these kind of things, we look at whether they develop well, whether they, in the end, we feel they can become profitable. And if not, and this is the way we kind of go over these things as an innovator is that, in innovation, you also have to dare to pull the plug if things don’t look to become successful in the way you have approached them. And that is what we’ve seen there. That doesn’t mean that this is also for the rest of C&G. So we have to look at it country-by-country and the SME business that we do in many other C&G businesses, specifically in Poland and Romania, we’re very committed to that and it’s doing quite well. On Turkey Stage three, I’ll give the word to Steven.

Yes. Thanks, Jose. I mean in Turkey, the book went down with about €1 billion in the first quarter this year. Part of it is currency difference, but the largest part is just a rolling off of loans as well as client deleveraging. So we’re still, in that sense, conservative and focused on derisking. If you look at the entire company balance sheet or intergroup funding, that came down in the first quarter with an additional €300 million, so we had €3 billion by the end of the year coming down to €2.7 billion now and we said the Stage three ratio went up a bit from 2.8% to 3.1%. And in that sense, we keep a keen eye on making sure that we remain also with a risk appetite in that country. And a large part of the book is Wholesale Banking. We stay close to our clients, but clearly, especially on FX loans, we are very strict in that and we also need to see revenues in foreign currency before we actually grant also loans in that currency. José Coll: So maybe just a follow up on Turkey. So is it fair to assume that the rollout in – of the first quarter is sort of the run rate for the rest of the year in terms of both the lending book and intergroup funding?

No. That would be a bit too straightforward to assume that. But clearly, we manage the risk in Turkey on a daily basis. Part of the loan increase also came from clients improving order loans because also clients are deleveraging in that respect. But we remain conservative. José Coll: Thank you very much.

With no further questions, sir, please continue.

Okay. Thank you very much then. Well, thanks for taking us and for giving us all these questions. It’s good that you raised them. I’m sure that after going through the material, you may have some more. You know that our team is always ready to take you through and give you some more insights where we are able to. Just to summarize the first quarter, underlying, you see a continuing good commercial momentum, which we’re happy – very happy to see. And we’re keeping discipline on the costs side, although you have to kind of differentiate between the different areas that we manage, market leaders versus C&G versus Wholesale Banking. And we continue to improve the way we manage non-financial risk. So from that perspective, we are satisfied with the performance also financially. And thanks for your interest and support. That’s it. Thank you.