ING's Q3 2025 Earnings Call: Conflicting Signals on CET1 Targets, German Deposit Strategy, and M&A

Date of Call: None provided

Financials Results

• Revenue: €22.8B, raised 2025 outlook to around €22.8 billion (total income)

Guidance:

• Fees for full-year 2025 expected to grow >10% (raised).
• Total income for 2025 expected around €22.8 billion.
• Commercial NII for 2025 guided at €15.2–15.3 billion.
• Liability margin ~100 bps for 2025; lending margin ~125 bps (125–130 bps target into 2026–27).
• Total costs guided toward lower end of €12.5–€12.7 billion; incidental restructuring costs expected in Q4; €30m annualized savings from planned FTE reductions.
• ROE for 2025 expected >12.5%; CET1 capital target managed at around 13%; announced additional €1.6bn distribution.

Business Commentary:

* Commercial Momentum and Customer Growth: - ING Groep N.V. added nearly 200,000 primary mobile customers during Q3, bringing growth in the last 12 months to over 1.1 million, exceeding the target set at the Capital Markets Day. - This momentum was driven by successful promotional campaigns and an increased focus on digital banking and investment products.

• Capital Generation and Shareholder Returns:
• The company generated €6 billion of net profit over the past four quarters, contributing an additional 2% to their CET1 capital ratio, consistent with previous years.

• This performance enabled an attractive dividend yield of nearly 6% over the last 12 months and additional distributions of €4.5 billion over the last 12 months.

• Deposit and Lending Trends:

• Core deposits declined by €200 million in Q3, mainly due to promotional campaigns ending and seasonal spending patterns.

• The company saw robust growth in lending, with retail expanding by €8.6 billion and wholesale banking by €14.2 billion, supported by strong demand in trade finance services and lending margins that remained stable despite growth in mortgage financing.

• Fee Income and Structural Growth:

• Fee income grew by 15% year on year in Q3, driven by increased primary mobile customers and higher activity in investment products.
• ING's focus on expanding fee revenue across both retail and wholesale banking, supported by digital and data-driven strategies, contributed to the strong growth.

Sentiment Analysis:

Overall Tone: Positive

• Management: "we have again delivered a strong quarter"; raised fee-growth outlook to >10%; "total income ... around €22.8 billion"; four-quarter net profit €6bn contributing +2pp CET1; announced €1.6bn additional distribution and CET1 target ~13% — all indicate constructive momentum and shareholder returns.

Q&A:

• Question from Delphine Lee (Unknown): On capital — do you see CET1 requirements stabilizing or could they rise further; any chance of requirements easing (e.g., mortgage floors)? And on NII/deposits — retail deposit outflows were significant; what are you seeing so far in the quarter and are Q3 trends (wholesale strength, slight liability margin improvement) confirmed for Q4?
  Response: No additional upward capital pressure seen today; mortgage-floor discussions ongoing (timing uncertain). Retail outflows (~€7bn) were driven by ended promotional campaigns and seasonality; wholesale inflows offset them so deposits ~flat (‑€200m); management expects no repeat of Q3 seasonal effect into Q4 and is comfortable with annualized 6% deposit growth YTD.

• Question from Namita Samtani (Barclays Bank): How will lending margins move from ~125 bps today to 125–130 bps in 2026–27 given private credit competition and wholesale pricing? And regarding the ~950 positions reported at risk in the Netherlands from AI rollout — why not similar disclosures elsewhere and why concentrate in the Netherlands?
  Response: Lending-margin compression to 125 bps reflects higher mortgage share and specific funding profile; management expects mix normalization and higher-margin wholesale lending to lift margins to 125–130 bps over time. The ~950-job estimate was a mandatory Netherlands filing and not unique to deployments there; GenAI initiatives are being rolled out across markets (six countries live).

• Question from Tarik El Mejjad (Bank of America): Have you invested AI in AML/KYC and onboarding given past AML issues; what about embedded AI in products? And on capital redeployment/M&A — how are you thinking about deals in the current rate environment?
  Response: ING is deploying GenAI across coding, lending, hyper-personalized marketing, contact centers and KYC (including digitalizing KYC/onboarding); AI investments will affect processes and staffing. M&A focus remains market-by-market to fill product gaps or scale where ROE-accretive; discipline unchanged.

• Question from Giulia Miotto (Morgan Stanley): On NII — why guide €15.2–€15.3bn (not higher) given Q4 tailwinds and Q3 catch-up in wholesale closures; any non-recurring items in Q3? And on incidentals — are restructuring provisions recurring or one-offs?
  Response: Q3 benefitted from wholesale pipeline catch-up (one-off timing), so guidance is tight at €15.2–€15.3bn; positive rate path helps but Q3 transactional catch-up tempers visibility. Restructuring provisions taken only when clear, concise business cases exist (12–18 month execution); additional efficiency-related provisions expected in Q4 but firm policy is targeted, short-duration programs.

• Question from Benoit Petrarque (Bernstein Autonomous LLP): Given upgrades to 2025 ROE, do you see upside to the 2027 14% ROE target? Is growth momentum stronger than at CMD? And are tech/digital efficiency gains accelerating beyond the 3–4% OpEx CAGR target from CMD?
  Response: Management is more confident on 2025 and the path to 2027 ROE but will update longer-term targets with Q4 results; volumes and fee growth have outperformed CMD plans and cost discipline remains strong; cost-efficiency ambitions remain in line with CMD, with further updates in February/next reporting cadence.

• Question from Benjamin Goy (Deutsche Bank AG): On NII upside vs prior guidance given rate moves (one less cut than assumed) — is more upside now baked in? Also, more color on wholesale loan growth (products/countries) and the nature of newly defaulted wholesale files?
  Response: Rates have limited 2025 impact; replication shows positive effects in 2026–27 but immaterial for 2025. Wholesale loan growth came from large underwritings/syndications and trade finance as pipelines converted; newly defaulted wholesale cases are idiosyncratic rather than sector-wide; wholesale risk costs remain below through-the-cycle averages.

• Question from Shreya (Citi): On the circa-13% CET1 target — you are at ~12.9% pro forma for distributions; are you comfortable temporarily being slightly below 13% and what leeway exists around that target?
  Response: Yes — target is an around-13% operating level, not a rigid daily floor; small dips (12.9% pro forma) are acceptable; structural capital above ~13% will be returned to shareholders via distributions.

• Question from Chris Hallam (Goldman Sachs): Timing for the €30m annualized cost savings to be fully implemented? Any reason fees would be down YoY in Q4? And does competitive deposit campaigning (Germany) change economics of using deposits to drive future fee income?
  Response: €30m annualized savings will feed through in 2026. Management sees no structural reason for Q4 fee decline and remains confident fees will exceed +10% for the year. Deposit campaigns are data-driven with expected paybacks (6–12 months for fresh money; 2–3 years for new-to-bank); deposits are typically profitable and campaigns remain part of customer-acquisition ROI calculus.

• Question from Anke Reingen (RBC Capital Markets): More potential to cut deposit rates now that rates plateaued? Will lending margin likely decline in Q4 given Q3 wholesale benefit? And confirm cadence for capital updates (Q1 & Q3)?
  Response: Management did not provide forward commercial rate moves but reiterated liability margin guidance (~100 bps for 2025, 100–110 bps into 2026+). Lending-margin outlook remains ~125 bps for 2025; Q4 evolution depends on product mix and activity. Capital-update cadence will remain at end-Q1 and end-Q3.

• Question from Farquhar Murray (Bernstein Autonomous LLP): Rationale behind board appointments (Ade Lemma and Ljiljana Čortan) — any strategic nuance? And will higher CET1 target be cascaded into pricing (e.g., higher lending rates)?
  Response: Appointments emphasize continuity and depth: Ljiljana brings risk and wholesale experience; the incoming CFO brings broad CFO experience to support cost discipline and M&A. Divisional ROE already uses the 13% assumption; management does not expect the 13% target to create a material competitive disadvantage or require explicit repricing in wholesale.

• Question from Matthew Clark (Mediobanca): On deposit campaign retention — did you retain less than typical two-thirds in Germany; did both German and Belgian campaigns deliver expected ROI?
  Response: Management confirms typical ~two-thirds retention patterns held; Belgian campaign delivered strong retention and good ROI with conversion to primary customers; campaigns are considered successful overall.

• Question from Cyril (BNP Paribas Exchange): On fee momentum — which elements are sustainable into next year? And update on SRT (securitization) transactions—any visibility beyond the Q4 planned one?
  Response: Fee momentum is driven by growing primary/mobile customers, rising investment-account activity and insurance distribution (structural drivers); management is confident for continued fee growth and 2027 fee targets. An SRT for Q4 is expected to close (~10 bps CET1 benefit); no additional specific SRTs disclosed for 2026 currently.

• Question from Seamus Murphy (Carrigeal): On FTE trends — internal FTEs rose to ~63,000; should we expect net FTE growth into 2027? And on deposit beta dynamics and impact on NII vs CMD expectations through 2027?
  Response: Reported internal FTEs have risen due to internalization vs external FTEs; total internal+external FTEs are broadly flat year-to-date and management focuses on scalable investments and positive jaws. On NII vs CMD, management notes the current rate environment and fee/NII momentum are favorable but will provide further clarity with Q4/early‑2026 updates.

Contradiction Point 1

CET1 Target and Macroeconomic Uncertainty

It involves a change in the company's strategic response to macroeconomic uncertainty, which could impact investor perceptions and capital allocation decisions.

With rising CET1 requirements, is a stabilization phase expected, or will pressure continue? - Delphine Lee (Barclays Bank)

2025Q3: We do not see additional pressure from countercyclical buffers, and the mortgage floor is not expected until 2032. We are in discussions with supervisors about avoiding duplication and gold plating. - Steven van Rijswijk(CEO)

Was the CET1 target increase due to ECB requests, and will you return to 12.5% if geopolitical tensions normalize? - Giulia Miotto (Morgan Stanley)

2025Q1: The higher CET1 target is not due to ECB requests but reflects macroeconomic uncertainty. If conditions normalize, a return to 12.5% is possible. - Steven van Rijswijk(CEO)

Contradiction Point 2

Deposit Strategy and German Market

It pertains to the company's strategic approach to deposits, particularly in the German market, which is crucial for revenue and cost efficiency.

With the rise in CET1 requirements, is a stabilization phase ahead, or could there be more pressure? - Delphine Lee (Barclays Bank)

2025Q3: Deposit outflows: There was an outflow of €7 billion in retail and an inflow of €7 billion in wholesale. Total deposits were flat. Outflows due to promotional campaigns in Germany and seasonal spending patterns. Despite these, we have an annualized deposit growth of 6% in the first nine months. - Steven van Rijswijk(CEO)

Can you explain the German deposit strategy and its impact on liability margins? - Tarik El Mejjad (Bank of America)

2025Q1: The deposit strategy leverages data-driven targeted campaigns to attract new customers. - Steven van Rijswijk(CEO)

Contradiction Point 3

M&A Strategy and Capital Deployment

It involves the company's strategic approach to M&A, which can impact growth, returns, and capital allocation decisions.

How are you approaching M&A and capital deployment given current interest rates? - Namita Samtani (Barclays Bank)

2025Q3: We remain focused on growth and returns, pursuing market segments we don't currently serve, like business banking or private banking. We look for ROE benefits and potential skill synergies. - Steven van Rijswijk(CEO)

Are you considering M&A in Spain and Italy? - Giulia Miotto (Morgan Stanley)

2025Q1: Regarding M&A, ING is open to opportunities in its strategy, focusing on expanding product offerings and local market positions without excluding acquisitions if they enhance domestic market position and meet strict M&A and ROE criteria. - Steven van Rijswijk(CEO)

Contradiction Point 4

Deposit Growth and Marketing Campaigns

It involves the impact of marketing campaigns on deposit growth, which directly affects a bank's financial health and strategy for customer acquisition and retention.

For NII and deposits, are there any Q4 confirmations? - Delphine Lee (Barclays Bank)

2025Q3: There was an outflow of €7 billion in retail and an inflow of €7 billion in wholesale. Total deposits were flat. Outflows due to promotional campaigns in Germany and seasonal spending patterns. Despite these, we have an annualized deposit growth of 6% in the first nine months. - Steven van Rijswijk(CEO)

For German deposit growth, were there specific inflows or outflows, and where were they directed? - Samuel Moran-Smyth (Barclays)

2024Q2: Germany was the main growth driver with €15 billion, which we attribute to the strong campaigns we ran in the first part of the year. - Steven van Rijswijk(CEO)

Contradiction Point 5

CET1 Capital Ratio and Distribution

It involves the bank's CET1 capital ratio and plans for capital distribution, which are critical for regulatory compliance and shareholder returns.

Are you comfortable temporarily being slightly below the 13% CET1 ratio? - Shreya (Citi)

2025Q3: Yes, we are comfortable dipping slightly below the 13% target. We maintain an excess capital buffer and will look at excess capital for distribution. - Steven van Rijswijk(CEO)

How do you plan to grow diluted EPS with the higher capital target? - Farquhar Murray (Autonomous)

2024Q2: We are on track to deliver the 2025 ROE and CET1 capital ratio target of 12.5%. We are introducing a new CET1 target of 13% by 2027. - Tanate Phutrakul(CFO)