Recession Risk in Europe Has Come Down: ING Bank CEO

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00:00Earlier today, we sat down with Steven van Rijswijk.

00:03He is the CEO and chairman over at ING Bank

00:06to get his perspective on the European economy

00:08and which countries are showing signs of strength.

00:14The first point I want to make on our quarterly three fairs was the growth.

00:18We grew our primary mobile customers with about 200,000.

00:22We tried to grow our customers on an annual base with about a million.

00:26Now, if you look now back Q3 on Q3,

00:28we came up with about 1.1 million, so that's good.

00:31The second lever we pulled to grow is fees,

00:34so less dependency on interest income.

00:37There you saw that our fees grew in the third quarter

00:40compared to the same quarter last year with 15%.

00:42So that's really good, more diversification.

00:45And last but not least, also lending growth was good with 14 billion.

00:49On average, we grow our lending with about 3% to 4% per annum.

00:54This time around, if you look, it is about 7%

00:56compared to the same quarter last year.

00:58So we grow really well.

01:00And diversification is the key word

01:02because we have a bank that is 80% dependent on interest income,

01:0620% fees, and we want to grow that fee part.

01:09And we're sitting here in New York City, of course,

01:11and we spent a lot of time talking about the American economy.

01:14I would love to get your perspective on what is happening in Europe right now

01:17because you talked a little bit about, of course,

01:20the payouts that you plan to make.

01:22And there's this idea that choosing to be a little bit more cautious

01:25on drawing down your reserves has been taken as maybe a signal

01:29that there's some caution about the economy ahead.

01:31And I would love to hear your thoughts

01:32on which direction you think things are going.

01:35Yeah, we increased our capital reserves a little bit

01:38because there has been a bit of creep in our capital requirements in Europe,

01:42especially counter-cyclical buffers have been going up over the past five years.

01:45And that's why we want to have a good caution between our actual requirements

01:49and, let's say, the buffer that we have.

01:51And that's why we moved our capital level up to around 13% CET1.

01:56But in general, I think, despite the fact that we thought

01:59in the past six or nine months there would be a recession in Europe,

02:02that risk has come down a little bit.

02:04We see Europe grow close to 2%, a little bit lower than the US,

02:08but still positive.

02:10There is a bit more discussion about making more investments in Europe.

02:14For example, you see in Germany a 500 billion infrastructure fund.

02:19You see talk about defense investments.

02:20You see talk about digital investments.

02:22So there is more a business accumulate in Europe

02:24than there was, let's say, a year ago,

02:26maybe also on the back of the Drago report.

02:28So there was also a bit of a wake-up call.

02:31So the talk is good, but we still need to do more in action

02:33to invest more in Europe.

02:35Absolutely.

02:36I mean, just taking a look at the performance

02:38of the European stock market this year,

02:40I think that has surprised many people.

02:41It seems like European defense is one of the talking points of the moment.

02:45But talk to us about how that economic activity,

02:48that it seems that recession risk is a little bit lower

02:51than maybe it has been in previous months.

02:54How has that translated into deal-making from where you're sitting?

02:58We've seen a little bit of a resurgence

02:59when it comes to the American side of things.

03:02Have we seen a similar pickup when it comes to Europe?

03:05It's starting.

03:06And we saw it in the third quarter

03:07because we had a lot of deal activity

03:09or at least deal pipeline in the first and second quarter,

03:12especially in our wholesale bank.

03:14That did not convert into real transactions.

03:16But in the third quarter, you saw it coming through.

03:18Big lending volume in wholesale banking

03:20that grew with about 7 billion

03:22and a very large portion that also translated

03:24in lending fees and financial markets fees

03:26that we did not see in the first two quarters.

03:28So we had a stellar quarter for the wholesale bank.

03:31So it's a bit early to call

03:32whether that will be consistent or not.

03:34But these are positive signs.

03:36Is this something that I think is, I guess, specific to Europe?

03:40Are we going to see, I guess, an opening of this market

03:44in terms of capital markets over in Europe

03:46in a way that I think has been lacking,

03:49at least relative to what we've seen in the U.S.

03:51over the past couple of decades?

03:53Well, one thing that could help Europe

03:56is if we have a savings and investments union.

03:59If we currently look at Europe,

04:00we have a 16, 17 trillion GDP.

04:03We have a 12 trillion amount of savings sitting in the banks.

04:07But if we could invest that more

04:08into European companies, European stocks,

04:10that would help as well.

04:12That has now been an ongoing conversation

04:14in the European Union and the European Committee.

04:17If we could do that,

04:18that would really help furthering

04:19and boosting investment into Europe.

04:21What's the fear amongst regulators

04:23in actually approving that?

04:25I think that the difficulty

04:27is not so much that there is fear,

04:29but there are different fiscal regimes

04:30how to really stimulate private investors to invest.

04:34It also means a different stance

04:35towards people investing rather than saving.

04:39So there's one discussion about

04:41how good is it for Europeans to invest

04:43versus to keep your money safely in the bank.

04:45And secondly, how do you fiscally stimulate that?

04:47Those are the two discussions on the table.

04:49And I mean, speaking of that sort of question,

04:53investing versus saving,

04:54something that we've seen really

04:55in the last couple of years

04:56is this big rush into money market funds

04:59when it comes to U.S. consumers.

05:01This idea that perhaps they're taking

05:03what would be sitting in deposits out of bank

05:06and putting them in cash and money market funds

05:09and getting that higher yield.

05:10Are you having similar discussions?

05:12Are you seeing similar trends,

05:14that sort of behavior happening in Europe?

05:15A little bit, but that's more about private markets.

05:19So when we now look at, let's say,

05:20the type of investments that people do.

05:22So if you talk about personal banking,

05:25private banking,

05:26then you see more and more people

05:27being interested in private markets.

05:29That we haven't seen before.

05:31Investing in money markets,

05:33there are different regulatory regimes in Europe

05:34than in the U.S.,

05:35so I don't see that coming very quickly.

05:37And it's tempting to talk about Europe as this monolith,

05:40but let's get specific

05:41and talk about some of the different countries here

05:43because you bring up retail banking, for example.

05:45I know that you had particular growth there.

05:48Where are you seeing the most strength coming from?

05:50What are some of the countries

05:51that are driving that growth?

05:53Yeah.

05:54Well, for example, if you look at Germany,

05:56we have about 10 million customers in Germany,

05:59both on the private side,

06:01like personal banking and wholesale banking.

06:03There we see a lot of growth.

06:04The market is recovering

06:05from where we saw a dip in the mortgage market in the past

06:09that is now recovering.

06:10We see more people investing.

06:11We grow our investments accounts

06:14with about 100,000 to 200,000 customers per quarter.

06:18So we see a lot of growth coming from there,

06:20but that also has to do with our strength

06:22of our own franchise in the market.

06:24But we also are being helped now

06:26with a more positive business climate environment

06:28in Germany

06:28where at least the companies and the government

06:30are willing to invest.

06:31But again, that is early days, but I'm hopeful.

06:34Has there been any discussion

06:35about maybe having some sort of partnership

06:37with some of the private capital companies here in the U.S.?

06:41Obviously, we've seen a lot of direct lenders

06:42partner with the traditional banks.

06:44One of your management board members

06:45was asked about this a few weeks ago

06:47and seemed to suggest that

06:48that actually wasn't an option right now for ING.

06:52No, what we see as ING,

06:53we want to really grow in the particular markets.

06:56Like you said, Europe is not a monolith.

06:58Different markets behave differently

07:00in terms of regulatory regime,

07:01capital, liquidity, products,

07:04product culture even, I would say.

07:05So what we need to do is to, first of all,

07:08grow in these markets

07:09and become more specific

07:10in the services that we offer to our customers.

07:13Secondly, fill in the blanks

07:14that we have in these markets.

07:15For example, we do have business banking

07:17in Romania, Poland, Belgium, and the Netherlands,

07:20but we don't have that in Germany, Spain, and Italy.

07:23So fill in those blanks

07:24so we can actually grow in width

07:26and breadth of our services.

07:28But of course, also, if we can see companies

07:31or banks that have good customer bases there

07:33and we can take them onto our technology platform

07:36and thereby increase in scale, market by market,

07:39we will look at that as well.

07:40That is currently our priority.

07:42Steven van Rijsvik, CEO and Chairman

07:44of the Executive Board

07:45over at Amsterdam-based ING.

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