ING Groep N.V. (INGA) Earnings Call Transcript

Good morning. This is Laura. Welcoming you to ING's 2Q 2026 Conference Call. I'm handing this conference call over to Steven van Rijswijk, Chief Executive Officer of ING Group, let me first say that today's comments may include forward-looking statements such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statements. 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 Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's conference, constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Steven, over to you.

Thank you very much. Good morning, and welcome to our results call for the second quarter of 2026. And thank you for joining us today. I hope that you're all doing well. I'm joined by our CFO, Ida Lerner; and by our new CEO, Andrea Cesaroni. Through our growing the difference strategy, we have accelerated growth in both our customer base and customer balances and our excellent second quarter results demonstrated its commercial performance is translating into improved operating leverage and sustainable earnings growth. And there, I will discuss the drivers behind these results, the value we continue to create through the consistent execution of our strategy and how our strong progress so far this year has enabled us to further upgrade our outlook for 2026 and 2027. After that, Ida will walk you through the quarterly financials. And at the end of the call, we will be happy to take your questions. And with that, let's start with Slide 2. We are pleased by the continued strong customer activity that we see across the franchise as well as by the clear upward momentum in our profit. And what is particularly encouraging is that these are not separate developments, they are part of the same growth strategy. And we continue to attract more customers and more customers choose us as their primary bank allowing us to deepen the relationships with more products and higher volumes. And we increasingly do so through a scalable operating model, and this translates into further income growth and diversification positive operating jaws and higher profitability. And the self-reinforcing cycle is the core engine of our strategy and allows us to grow our business, generate capital and offer attractive shareholder returns, all at the same time. And looking at the second quarter, we've added 377,000 mobile primary customers, bringing our growth in the last 12 months to over EUR 1 million ahead of the target set at our Capital Markets Day in June 2024. And let me remind you that mobile primary customer growth is not just about acquiring new customers. Mobile primary customer growth indicates that we are deepening the role that ING plays in their financial lives, and it is economically important and the fundamental strength of the ING brand because primary relationships are the foundation for deeper engagement, more cross-selling, increasing balances and ultimately higher income generation per customer. And this is what we clearly see reflected here on the slide as well. Loan growth, again, strong at an annualized pace of more than 8% with continued demand from customers across our markets. We also saw strong inflow of deposits from our customers at an annualized pace of 8.5%, supported by successful deposit-gathering campaigns aimed at both existing and new to bank customers. Fee income that grew by 4% year-on-year, benefiting from our growing customer base and from increased customer engagement, both in retail banking and in Wholesale Banking. And finally, our sustainable volume mobilized has increased 28% in the first half of '26 as we remain committed to supporting our in their sustainable transitions. And overall, this continued momentum in customer activity has translated into income growth of more than 5% over the past 12 months, while head count was reduced by more than 1% and cost growth and cost growth remained well contained at around 2%. And these positive operating jaws of more than 3 percentage points clearly demonstrates how we are increasingly enabling scalable growth. And as a result of that, the ROTE, the return on tangible equity reached 17% in the second quarter, while our fourth quarter rolling ROTE improved by 1.5 percentage points year-on-year. Now let me move to the next slide where we will take a closer look at how we are progressing against some of these strategic priorities. And we move to Slide 3. And this slide shows how we have doubled our growth since launching our growing difference strategy starting at the Capital Markets Day mid-2024. And besides clearly illustrating the accelerated growth in customer balances, we see even stronger growth in income diversification. First, turning to the loan book. As a leading European mortgage bank, we continue helping people financing their homes. And this has been a strong driver for overall lending growth, which is furthermore supported by diversified growth across business banking, consumer lending and wholesanking. And we're growing the book where we see attractive risk opportunities while remaining disciplined on capital consumption. And this allows us to support our customers, capture profitable organic growth and generate attractive return. Our deposit franchise remains a fundamental strength and cornerstone of ING. Our deposit book is large, it's highly granular, predominantly in short and ever growing. And it provides stable anniversed funding while the combination of accelerated growth in deposits and stronger inflows and assets under management clearly shows that we are capturing a larger share of our customers' overall financial assets. And this interplay of a strength, customer loyalty, and continued growth provides a strong foundation for continued bank expansion. And I already mentioned the strong net inflows in asset under management and our success in investment products is a key contributor to accelerated growth in overall fee income as well. In fee income, we see improved momentum across all our businesses, benefiting from a growing customer base, broadening our product offerings and from increased customer activity across both retail and wholesale. In short, our strategy is delivering accelerated and value-accretive growth across our franchise. And with that, we move to Slide 4. And now on the previous Slide 3, you have seen how our growth strategy has successfully translated into results. But this slide, Slide 4, there highlight a few examples of consistent strategy execution across our business segments which will further drive commercial growth in the future. In private individuals, start with that first, we focus on accelerating growth by increasing impact and value for our customers, for example, through agent mortgages, which is already live in production. Agentic mortgages are a prime example of how our AI capabilities allow us to achieve true scalable growth, and we use AI to significantly reduce the time to yes. That's a time to approval, and we service a greater number of customers without adding additional FTEs. On the commercial side, we are rolling out a new global subscriptions model designed to make daily banking easier and to deliver greater value for customers and this move marks an important step in our strategy to evolve from a product-based banking towards more relationship-based propositions, combining banking, protection, lifestyle benefits within 1 single offering. And soon, we will start to roll out conversational banking in our mobile app, which is a personal assistant of the genetic AI capabilities, providing a significantly enhanced digital experience to our customers. In summary, we continue to make banking simple fixtures for our customers, on the 1 hand, on the other hand, delivering increasing value and impact in accelerating our growth. Building scale in more market segments and playing a bigger role in the overall economy was another key theme of our strategy. And in business banking, talking about building scale, we are deploying our high-return model in other countries as well. We have launched Germany and Italy business banking. And early next year, we will be launching in Spain. And we are also increasingly adding new capabilities to our offering. And over the past 6 months, we have seen a doubling of our net customer growth. Then private banking, we are building a third retail pillar based on the strong synergies with our other business segments. And we've launched our private banking proposition in Italy, providing tailored wealth management, investment strategies and financial planning with a mix of digital tools and personal advisers. And we will soon follow a similar approach in Spain, where in addition, we have acquired a stake of approximately 40% in the Spanish leading Spanish wealth manager, a Singular bank and Singular Bank will continue to operate as an independent entity in the Spanish private banking market with a profit offering a product offering that is complementary to the ING. And together with Singular's management team, we will focus -- we will work on further commercial cooperation in identified opportunities for growth. And if we look ahead, private banking will be a key contributor to overall income diversification and is therefore very encouraging to see that a 30% year-on-year fee income growth was achieved in this segment. And then Wholesale Banking, there, we've made strong progress in diversifying our income and increasing capital velocity. Wholesale Banking fees income keep increasing quarter-over-quarter and is now 11% ahead of the prior year, supported by a wide range of products and services. And furthermore, our focus on attracting customer deposits is paying off with a CAGR of almost 10% in the last 2 years. Now we stay with Wholesale Banking a little bit. Let's move to Slide 5, and there I will zoom in on the progress that we made in capital optimization. And this slide, Slide 5 shows how our disciplined RWA management accelerates the enhancement of our overall ROTE profile for the group. While our loan book expanded significantly year-on-year, our growth in risk-weighted assets has been limited. The strong performance in RWA management is mainly driven by capital optimization measures in wholesale banking, where RWA consumption came down in absolute terms by EUR 4.6 billion year-on-year despite growing its lending book and revenues. Wholesale Banking has managed down its RWA consumption through the increasing use of secondary loan sales, insurance and overall client portfolio optimization as well as through SRTs, including a EUR 1 billion RWA benefit from our first SRT transaction this year. Again, at our Capital Markets Day in 2024, we announced our expectation to shift the capital allocation between retail and wholesale from 50-50 at that point to 55% for retail banking by the end of 2027. And since then, the combination of accelerated client activity in retail banking and the disciplined RWA management and wholesale banking has enabled us to already exceed that target today 18 months ahead of plan. Going forward, we will continue to optimize capital allocation to further enhance our overall RTE profile. Now we go to Slide 6. And on that slide, we see the financial effect of consistently executing our growing the difference strategy, our ability to grow our customer base, deepen relationships with customers and the reverse income and while doing so in a scalable way. is translating into positive operating leverage and higher profitability. And we then deploy the capital we generate efficiently, investing in profitable growth in selective M&A and returning structurally excess capital to our shareholders. And as a result, we are increasingly converting our profitability growth into a higher earnings per share, with EPS increasing by 16% year-on-year. Over the past 12 months, we have delivered EUR 6.7 billion of net profit equivalent to 2 percentage points of CET1. And of this EUR 6.7 billion, 50%, has been reserved for our regular dividend distributions. Around 10% has been used to fund profitable growth and around 40%, the remainder has been allocated to additional distributions, selective M&A or has been reserved outside of CET1. And overall, this is a strong demonstration of increased capital generation and disciplined capital allocation. And let's discuss on Slide 7, where I will show how these results in highly attractive shareholder returns. On Slide 7, in line with our distribution policy, we have consistently paid cash dividends, and we have been executing significant share buyback programs for several years. And together, this results in consistent and attractive total distribution per share. The share buyback program we announced in April is currently underway and is expected to be completed in October this year and looking ahead, we remain fully committed to strong capital discipline and strong shareholder returns. We maintain our semiannual rhythm of assessing the potential for additional distributions, and we will update you again with our third quarter results. And now before handing over to Ira, let me conclude with Slide 9. On Slide 9, we show how our strong progress this year has enabled us to further upgrade our outlook for '26 and '27. We're well on track to add 1 million mobile primary customers per year. Our fee income growth is tracking well a health plan, and we expect to already reach the EUR 5 billion mark in fees this year, 1 year ahead of our original plan. For 2027, we upgraded our outlook to the range of EUR 5.3 billion to EUR 5.5 billion. On the back of strong momentum both in commercial NII and fee income, we also increased our outlook for total outcome where we now expect more than EUR 24.5 billion in 2026 and more than EUR 26 billion in 2027. While client activity and volumes were significantly stronger than previously expected, our operating expenses are tracking well in line with our full year outlook, which is therefore reiterated which ensures an even stronger operating leverage than previously planned. Combined with the strong progress that we've made in enhancing our business mix and ROTE profile, we're now upgrading our ROTE outlook by 1 percentage point for both years. Now expecting an RoTE of more than 15% in 2026 and more than 16% in 2027. Through the consistent execution of our strategy, we are delivering a good range of catalysts that will continue to support the upward part of our ROTE and EPS in the years to come. I will now hand over to Ida who will take you through our quarterly results in more detail, starting with Slide 11. ida?

Thank you, Steven. It's my pleasure to walk you through the key drivers of our strong performance in the second quarter. On Slide 11, we can see how the sustained growth momentum in commercial NII and fee income drove an increase in total income by 10% year-on-year. Commercial NII is supported by continued volume growth on both sides of the balance sheet by disciplined commercial pricing and by the prolonged hedging tailwind on our replication customer deposits. Fee income also continued its upward trend, benefiting from our growing customer base and increased customer activity, up 14% compared to the same quarter last year. All other income recovered from the heightened market volatility that affected the previous quarter and was furthermore supported by stronger trading income in financial markets. Overall, total income increased 8% quarter-on-quarter and 10% year-on-year driven by stronger customer activity across the franchise. Let's take a closer look at the volume growth. Turning to Slide 12. Here, we show the development of our customer balances. As you can see, we delivered another quarter of strong commercial growth. Net core lending increased by EUR 15.2 billion. Retail Banking grew its loan book by EUR 12.1 billion, Demand for mortgages remains solid with strong production in the Netherlands, Germany, Italy and Australia. Business lending also increased alongside growth in consumer lending. Wholesale booking delivered EUR 3 billion of net core lending growth as client demand for financing remained robust. On the liability side, customers have continued to interact more of their savings with us as reflected in the net core deposit growth of EUR 15.9 billion. Retail Banking contributed EUR 16.7 billion, supported by successful deposit gathering campaigns as well as seasonal inflows related to holiday allowance payments. We saw strong net inflows, particularly in Germany and in the Netherlands. Wholesale banking deposits declined slightly. We continue to see positive momentum from new mandates in our payments and cash pooling business. However, this was offset by outflows from higher volatility deposit balances, particularly in financial markets. Now on to commercial NII on Slide 13. Commercial NII grew by EUR 114 million quarter-on-quarter and was 10.7% higher than last year. Lending NII rose by EUR 16 million quarter-on-quarter, driven by 8% annualized growth in lending volumes. The lending margin decreased slightly, mainly as a result of growth in lower risk density lines. Liability NII increased by EUR 97 million, supported by higher deposit volumes and a 3 basis points improvement in the liability margin. This higher liability margin is a reflection of the prolonged hedging tailwind on our replicated deposits. The incremental benefit from higher replication income was partly offset by higher campaign related deposit costs, which had been particularly low in the previous quarter. Looking ahead, on the back of a very strong first half of the year, we expect a higher level of commercial NII than previously guided for the full year. We now expect commercial NII for the full year to be between EUR 16.8 billion and EUR 17 billion. We have also slightly upgraded our 2026 liability margin outlook and now expect the full year average margin to be in the upper mid range of 110 basis points. Turning to Slide 14. The development in fee income clearly reflects the appeal of our customer proposition and increased customer activity across the franchise. Total fee income grew by EUR 42 million quarter-on-quarter and was up 14% year-on-year. In Retail Banking, our fee income rose 16% year-on-year supported by growing customer base and improved cross-selling selling. We see strong performance across a wide and expanding range of products and services. Our investment products, in particular, continued to perform very well. Customers are increasingly using our services with an 8% rise in number of customers who hold an investment account with ING and with EUR 21 billion of net flows over the past 12 months. As Steven already mentioned, we are successfully capturing a larger share of our customers' overall financial assets. demonstrated by the combination of the EUR 26 billion year-on-year net inflow in retail deposits and EUR 21 billion net inflow in assets under management. In Wholesale Banking, fee income grew 11% year-on-year across several products, demonstrating its progress on further in coiversification. For the full year, we expect to generate EUR 5 billion in fee income, which is up EUR 400 million year-on-year and that we will reach our EUR 5 billion target 1 year ahead of plan. With that, let's move to Slide 15. On the slide, we show the development of all other income. The previous quarter was impacted by hedge ineffectiveness and by lower financial markets results resulting from the heightened market volatility and the sharp increase in interest rates. In the second quarter, we saw a strong recovery in the hedge ineffectiveness result on the back of reduced market volatility. Financial Markets also recovered a stronger quarter with improved trading income. Year-on-year, when excluding for positive results from hedge and effectiveness, all other income decreased. This is largely due to lower results from foreign currency exchange hedging in treasury, where the benefit from interest rate differentials between our main currencies has gradually come down over the past 12 months. Overall, we expect all other income for the full year to end somewhere between EUR 2.5 billion and EUR 2.7 billion. Next, Slide 16, moving to expenses. Expenses, excluding regulatory costs and incidental items are up 4.2% year-on-year. Besides annual salary increases, this mainly reflects higher marketing costs which were particularly low in the first quarter. On a year-to-date basis, our cost growth is tracking at 2.7%, which is well in line with our previously communicated full year outlook. And as a reminder, within this full year outlook, we had already absorbed EUR 30 million of previous quarters incidental items. and we will similarly absorb the roughly EUR 30 million of incremental costs this year from the consolidation of TFI. Incidental items in the second quarter and those that may be booked in the subsequent quarters will be incremental to the full year outlook. In the second quarter of the year, we have booked EUR 41 million of incidental items, which will result in roughly EUR 40 million of annualized cost savings once fully implemented. Continued digitalization and our scaling of AI solutions increasingly allows us to enable commercial growth through a scalable operating model. As a result, we have improved our full-time employees over customer balances ratio by almost 7% year-on-year. Now let's move to risk costs on Slide 17. I Total risk costs were EUR 279 million in the second quarter, equivalent to 15 basis points of average customer lending. This is well below our through-the-cycle average of 20 basis points reflecting prudent risk management and the quality and strength of our loan book. Net additions to Stage 3 provision amounted to EUR 270 million, including releases related to the sale of nonperforming loans in retail banking. Stage 1 and Stage 2 risks were insignificant. The impact from changes in the macroeconomic forecast was offset by a partial release of the management overlay for interest-only mortgages in the Netherlands. Overall, we remain confident in the strength and quality of our line book. And finally, let me take you to Slide 18 to discuss our core equity Tier 1 development. On Slide 18, we owe the development of our core equity Tier 1 ratio, which improved to 13.1%. Capital generation has been strong, supported by rising profitability and continued capital optimization measures. Overall, we generated 65 basis points in core equity Tier 1 in the quarter. which allowed us to reserve 100% of net results outside the core equity Tier 1 capital. Risk-weighted assets decreased by EUR 2.4 billion in the quarter, a EUR 0.5 billion FX impact and risk-weighted asset growth from business activity were more than offset by EUR 1 billion of relief from an SRT transaction as well as model updates a partial reduction in our stake in TTV and lower market risk-weighted assets. Within Wholesale Banking, risk-weighted asset management was particularly strong reflecting continued capital optimization efforts. Wholesale Banking risk-weighted assets decreased EUR 5.3 billion in the quarter despite strong lending growth. And with that, let me hand back to Steven to wrap up today's presentation.

Thank you, Ida. Before we move to Q&A, let me recap the key takeaways from today's presentation. The consistent execution of our growing the difference strategy is delivering increasing value with strong progress across all segments. We are building a larger and deeper customer franchise, increasingly diversifying our income and serving that growth at a lower incremental cost, creating a self-reinforcing cycle of customer growth, earnings growth, capital generation and increasing shareholder value per share. The rebalancing of the group's profile is progressing ahead of plan with the allocation of capital to higher return segments. Furthermore, our continued capital efficiency allowed for a full reservation of quarterly net profit while still increasing the CET1 ratio to 13.1%. And as a reflection of strong and disciplined execution of our strategy, we are upgrading our ROTE outlook by 1 percentage point now expecting an ROTE of more than 15% in 2026 and more than 16% in 2027. And with that, I would like to open the floor for Q&A. Operator?

[Operator Instructions] We will now take our first question from Benjamin Goy of Deutsche Bank.

Maybe you can give a little more color on the liability margin going forward now with deposit campaigns should we expect a modest increase in list margin going forward? Or is that 3 basis points of good momentum given the apparent you have in eradicating portfolio? And then the second question on Private Banking. Maybe can you give us a bit more color first on why 40% is a good number rather than a full acquisition. And also more color on the general strategy for this pillar because almost 2 years and now you have a bit more numbers, but still look better to understand the strategy. Is it mainly about gaining wallet share? Or is it also gaining new clients in these markets?

All right. Thank you much, Ben. I will take the question on Private Banking and Ida will talk about the liability margin. About private banking, but let me start just in general to say, look, we want -- and we are diversifying our bank. And we have a fantastic customer base where we can become much more impactful and relevant with that customer base. That starts in private individuals, for example, where we have 41 million customers by offering them investment products, and we are increasingly doing so. So we're broadening and deepening the product propositions to our private individuals. And therefore, we see the assets under management growing that now grew with 27% to EUR 322 billion. Every quarter, we grow the number of people that are investing with us with about 100,000 to 125,000 every quarter, We see it going up. And currently, there's about 5.3 million people investing through ING and that's very good because it's growing. But 5.3 million compared to the 41 million, all this still shows that there is an enormous amount of upside. And then secondly, we're developing a customer segment that also use these investment products, but it's also a way of serving customers, which is private banking, which is for people who have more money to invest. And we set up that third pillar as a separate pillar in the retail banking a couple of years ago, now rolling it out in all markets because we have a private banking segments in some markets like the Netherlands or Belgium, but in many markets that did not exist. So we're setting that up. And in doing so, we also look at, is there an opportunity to speed up the ability next to organic growth that we can provide new services to the same and to new customers. And in Spain, we did that with buying a 40% stake in Singular. Singular is a fantastic private bank with a great customer base. And we are taking a stake in them, therefore, elaborating with similar bank in doing more with their customers, but also providing our customers with the opportunity to invest in Singular. And this is also for us an opportunity to learn how to develop private banking in a market in which until now did not develop private in activities. And that's why we bought the 40% with an option we said already in the press release to buy the total at a later point in time. liability margin.

Thank you, and thanks for your question. As you noted, the liability margin increased by 3 basis points in the quarter and is now at 107 basis points, this reflects a disciplined deposit pricing and also, of course, a continued benefit from the replication portfolio and the tailwind that we already started to see in the second half of last year and continues to see now. We are also seeing this quarter that we have a good uptick in deposits in a lot of different markets, but also driven by campaigns in several of our countries. And in addition to that, of course, we point to Germany bringing in EUR 7.8 billion this quarter in deposits. We are not saying anything in terms of campaigns going forward. But if you look at this quarter and compare it to the first quarter, we're more pointing to a normalization of compaign activity following a fairly quiet first quarter, and that's also how I would look at it going forward. When looking at the liability margin outlook, we're saying that we expect to be in the upper mid end of our guidance in terms of 100, 110 basis points this year. But in '27 and '28, we say also expect to be above 110 in a period of time and then to be normalized going forward back to the levels that we have seen historically. Also driven by the composition of the portfolio, where you know that we have a larger reliance on savings than current accounts, but that's also, of course, dependent on the growth going forward.

And we will now take our next question from Shrey Srivastava of Citi.

I'd just like to ask about the nature of some of the deposit growth you've seen in the quarter, which has been really quite strong and particularly Germany, you may. Is it largely sort of new to bank customers and of the customers you attract, there's been a lot of debate around sort of the nature of some of these customers. So if you could provide a bit more detail on what's the age profile? How many products do they take up with you and so on. And just following on from that, my second question is around the nature of some of these, I think you tended below the line deposit campaigns. Could you provide some more detail around how you do the targeting for these campaigns and just the strategy of each market.

All right. Thank you, Shrey. So on the deposit growth, there was a deposit growth of about EUR 16 billion this year, this quarter. Actually, we grew deposits in all markets. So that's, of course, then largely with existing customers. And of course, we acquired 380,000 new customers, but it was across the board. Two countries stand out one is the Netherlands, whereby the holiday allowances on the salaries are typically paid in the second quarter, and that causes them additional inflow in the Netherlands. And in Germany, we did a below-the-line campaign, so that's a campaign to existing customers, whereby we then do fresh money campaigns, to which also therefore increase the deposits over there. So on the first question, the answer is largely with existing customers. Now on the campaigns, but I think that you asked for quite a bit of detail. But let me just tell you that the campaign activity varies market by market, and it depends on where we see the most opportunities and that can sometimes be attracting new to bank customers or we encourage fresh money inflows from existing ones. And if you look at new-to-bank customers, a [indiscernible] or cashback is in a way to get customers on board and then they get to experience our Apple service model, after which many of them remain active clients. And typically, we say when we will campaign 2/3 of the fresh money will stay and 1/3 will flow out after the campaign ends. If you look at existing customers, that was below the line campaign that we did this time around in Germany. Those fresh money campaigns are a tool to increase the share of wallet, and then we give attractive retention rates and short payback periods. And in the second quarter, we see that now happening in Germany. So always when we do these things, it's always highly data-driven. It's always tailored to local objectives to the local customer base. and local market condition and customer dynamics. So that's what I can say about that.

And we will now take our next question from Giulia Miotto of Morgan Stanley.

I have 2. So first of all, on the packages that you have launched this quarter, how is the take-up going if you can share any stats on that would be interesting to hear. And then Secondly, the ROTE guidance has been upgraded above 16% for next year. But Steven, you are already ahead of a few targets of the previous Capital Markets Day and the capital allocation, the profitability. So in European banks in general are approaching ROTE is closer to 20%. So can we start dreaming about high teens ROE, especially as we look into 2028? And when can we hear about your midterm ambitions next.

Thanks, Giulia for your questions. On the subscription packages, so we used a subscription for subscription packages in a number of our markets earlier this year. And to date, 17 million customers have been migrated and by default, customers migrate to an equivalent package and the upselling because you have more and then you have max, those are the higher packages. And so as far as, of course, with basic banking services, but then you can also buy protection services and you can buy even lifestyle packages on television or online media or travel. So there's many things that you can do to upsell, and basically, we do that because we want to then offer an integral package because customers are asking for that to make their lives easier to buy a bundle of these services than buy them all separately. So that's also why I said in my presentation, we're moving from a product -- more product-based offering to a more integral client-based offering, depending on the profile of the customer. Now that upselling requires time, and we will -- but we believe that we can see the benefits of that fee income to start going through later in this year. Also taking into account any surprise incentives that we put in place to allow customers to get use these additional offering incentives that we put in place to allow customers to get use these additional offerings. So first are good, very positive reactions a number of thousands of people have already moved to the higher packages and where we can likely more show about that in the second half of this year. When you talk about the R&D outlook, that's why I started to smile. Yes, look, of course, we update it. I think what we're doing is very good. We see that, that machine is humming. That's why we are able to update the outlook for '26 and '27. And like I also said in the presentation, we keep on working also in the years after to further increase our ROTE. More to come about that at a later point.

And we will now take our next question from Benoit Petrarque of Kepler.

So the first 1 is on the sustainability of this very strong commercial momentum. You are growing lending and deposits more than 8% for quite some time actually. So can we expect your 4% to 5% range to be conservative? And do you think you can sustainably grow more than 4% to 5%? And do you think it is basically a sustainable number to grow above the 5% like you've done in the past quarters. And also linked to that, you've been you've been growing the number of mobile primary customers by almost 400,000 numbers. A lot of banks are fighting for primary customers nowadays. So what is the reason behind this very strong achievements, and I guess your new subscription model will also have not yet contributed to that number and will probably contribute in the coming quarters. And the next question is on the liability margin. Could you remind me what is your marginal pass-through rate assumption in your liability margin guidance? Is that still around the for the coming ECB rate moves basically.

All right. Let me start with answering the question on the sustainability of the commercial momentum, and then Ida will take the question on liability margin. So the commercial momentum starts with getting more customers in and doing more with customers. You also alluded to that 380,000 new mobile primary customer number. So but -- and the question there is, okay, but how do you then do that? Well, in the end, it's about providing a -- start with providing a superior experience. So continue to work on taking friction away, making it easier, making it simpler. And that's why we also gave you examples in the presentation about the agentic mortgages. I mean, we have -- we do also mortgage with AI and online mortgage said, for example, in Germany, we have online mortgages with AI that we can -- that people can do in 30 minutes. When it's a more difficult flow, such as -- then we can use Agentic because then you need additional information or additional steps need to be taken to get risk approval. And in the Netherlands, therefore, we launched Agentic, and we're also going to roll that out in other markets as well. And then we start also with conversational chats in contact centers also through GenAI. And all these things we continue to do in detail, we measure what are the key journeys, how do we improve? What is the NPS overall? What is the NPS per journey to become better and better and better. And that's why we also measure in how many countries are we #1? What's the reason for #2 and which journeys are we better are they better to actually be able to grow that? And then the question, of course, is that's why we want to have them as a primary customer is to do more with them so that the client base becomes sticky and that the lifetime value of the customer then increases. And that has to do also with becoming a broader bank. We are now growing the insurance fees. We're growing the investment fees. We're not going to grow the investment accounts. We're going to introduce better packages. We're going to become more specific in business banking and private banking all to become more relevant in the lives of our customers and do more with our customers because when we know them better, we can also serve them better. And that also then comes back to deposits and lending, because we're driving that primary mobile growth, not only growth, but people who want to use ING as their main bank or 1 of their main banks, we are continuing to be able to get deposits and provide lending and in that setting, that specifically, we do see continued mortgage demand in many markets. That's why we believe we can continue to grow mortgage at a relatively high pace. We are rolling out business banking that is also driving there for more activity in business banking. And also banking the momentum is there. I think that will be a bit more cyclical in wholesale bank. So there we see a relatively lower growth. So the growth will be higher in retail and lending than in wholesale. And at some point, in a longer-term time we believe that lending and deposit growth will hover around the 5%. But in the shorter term, we believe these will remain at elevated levels.

Thank you. And on the liability margin, we don't provide insight in terms of our estimates around pass-through rates. But overall, I think it's important just to highlight that profitability is the guiding principle when it comes to growth independent of where that growth comes from, either if it's lending or if it's deposits or if it's other type of growth, and that also shows in terms of the underlying development that we're seeing this quarter as well as what we've seen in previous quarters. There is continued strong competition in the market and also on deposits and is expected to be that going forward. But we continue to focus on profitability and continue also to focus on cross-sell, as Steven rightly pointed to as well.

[indiscernible] Bank of America. Please go ahead.

Just a couple of questions from my side. First, on the NII the liability margin. I was pleased to pick a ban on the deposit flows in the future because I mean, the improved outlook, I understand is from a stronger deposit growth, which could be seasonally but also less frequent and less I guess, aggressive deposit campaigns that you've done in the previous year, especially in Germany and Belgium. So clearly, you've changed your way to attract those deposits. My question is how confident you are not this quarter or next quarter, but in the medium term, you still given your deposit franchise in these countries, is to be able to gather those flows into you just mentioned an increasing competition in those 2 countries. So really, I just want to understand your view there because I guess we can only see it in next if you continue the same strategy. And my second question is on capital. Just a clarification. So you're accruing 100% of earnings. You give the policy is 50%. But because you pay those extra distribution, are you then required by ECB to accrue 100%, but doesn't mean you will pay 100%, you adjusted full year or that means you actually incented? I just want to get those [indiscernible].

All right. I'll talk about the conference about the liability and deposit flows and Ida will talk about the capital. Look, I mean, we are becoming more and more precise about how we do if we do campaigning, how we do campaigning. And in the first quarter, there was a relatively low activity. And the second quarter was more activity that were a little bit below the line campaigns, and we are alternating between these campaigns where we see fit in terms of existing customers or whether where we want new customers, or whether we want to focus on broadening our activities with existing or doing that with new customers. And we have been proving that. So I pointed our track record for the past many years. And that gives us confidence also that we're able to do that, especially given the fact that we continue to grow our mobile primary clients. So that is a proof point that more clients want to do more business with us. And of course, there is competition and that competition is diversifying, and we see that. And in different markets, there are either existing banks or neo banks or banks coming from different jurisdictions. We never should underestimate that, and we don't underestimate that, but we're also confident about how we position us in that and it starts and stops with giving your customer a spare experience, and making sure that the customer chooses you as their primary bank. And that will then bring that benefit of a higher lifetime including deposits. On capital, IDA.