ABN AMRO Group's (ABNRY) CEO Kees van Dijkhuizen on Q1 2019 Results - Earnings Call Transcript

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About: ABN AMRO Group N.V. (ABNRY)
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Earning Call Audio

ABN AMRO Group NV (OTCPK:ABNRY) Q1 2019 Earnings Conference Call May 15, 2019 4:40 AM ET

Company Participants

Kees van Dijkhuizen – Chief Executive Officer

Clifford Abrahams – Chief Financial Officer

Tanja Cuppen – Chief Risk Officer

Conference Call Participants

Pawel Dziedzic – Goldman Sachs

Nick Davey – Redburn

Benoit Petrarque – Kepler

Adrian Cighi – RBC

Benjamin Goy – Deutsche Bank

Bruce Hamilton – Morgan Stanley

Alicia Chung – Exane

Kiri Vijayarajah – HSBC

Albert Ploegh – ING

Marcell Houben – Credit Suisse

Stefan Nedialkov – Citi

Jason Kalamboussis – KBC

Raul Sinha – JPMorgan

Robin van den Broek – Mediobanca

José Coll – Santander

Operator

Good day, ladies and gentlemen. Thank you for holding, and welcome to the ABN AMRO Q1 2019 analyst presentation. At this moment, all participants are in listen only mode. And after the presentation, there will be an opportunity to ask questions.

I would like to hand over the conference to Mr. Kees van Dijkhuizen. Please go ahead, sir.

Kees van Dijkhuizen

Thank you, operator. Good morning, everybody. Welcome to our investor and analyst call for Q1 results. Apologies for we could not get connect you. We have connection until one minute before the meeting started and then something went wrong. We don’t know why. So we’re on all set at the moment. Sorry for that. I’m joined by Clifford Abrahams, our CFO; and Tanja Cuppen our CRO. And I will take you through the process – progress we are making on the execution of our strategy and financial targets. Cliff will then go through the details of our first quarter results. And after that, Tanja will update you on developments in our loan portfolio.

If I go to Slide 2, I will run through the highlights of the first quarter. I’m pleased to see good progress on embedding our strategy, as we expect economic and interest rate environment to become more demanding we’re taking the necessary actions. We remain focused on strict cost discipline and as you can see our costs continue to turn down. We’ve actively de-risk parts of our loan portfolio in 2018 and I’m pleased to see this reflected in improved impairments this quarter.

We have made further progress in sharpening our business focus. We’d announced sales of a majority stake in Stater and our private bank in the Channel Islands. That makes us now a focus on shore private bank in our core markets, The Netherlands, Germany, France and Belgium. That’s more to do and our corporate bank to improve ROE. But our targeted RWA reduction is now largely delivered. Our Basel III capital position is strong and we are well positioned to manage the transition through TRIM and Basel IV. This is more demanding environment, we are – we remain clearly focused on our financial targets.

So our strategy execution is well on track, and I will update you here on Slide 3. As I said in my introduction, we are making good progress and like securing our strategy. We’re increasing income through new sustainable proposition such as a mortgage facility allowing homeowners to invest up to €25,000 in energy efficiency measures for their homes and a mortgage solution for seniors to cash out home equity without selling their property with the first large bank in The Netherlands doing that.

We also introduced a new app can do a digital platform offering asset management services for investments starting at €50. We are working on building a future proof of bank through continued IT improvements, product and process rationalization, optimization, while maintaining firm cost and pricing discipline. Strong compliance is our license to operate, and we remain vigilant in detecting financial crime. So we are further scaling up our FTEs to accelerate our client due diligence remediation programs and we are making the necessary progress here too.

Now I would like to update you on the economic environment and the effects on our business on Slide 4. We have recently revised down, our economic outlook for this year and next. But that economy remains resilient with Dutch GDP expect to continue to outperform the euro zone. During the quarter, we grew our commercial banking book, but almost 3% from Q4 to Q1, reflecting the strong Dutch economy. Also the Dutch housing markets remains robust, although we see some signs of scooting off with house price increased slowing and transaction volumes moderating.

While competition in the Dutch mortgage market remains strong. We saw a mortgage market share stabilize at 14% this quarter. And looking forward we see clearly positive developments in our mortgage pipeline. So our market share will increase in Q2 again. We also expect the ECB to keep interest rates on hold for longer, at least till the end of 2020 and pressure on deposit margin will remain. So as the income environment becomes tougher, we are working hard to mitigate is through our focus on margins, developing new revenue opportunities and further reducing debt deposit rates. We also continue our strict cross disciplines to mitigate headwinds related to general price inflation, compliance and regulatory costs. As I said, we remain focused on our financial targets.

Now moving to our capital position, Slide 5. I remind you here of our capital story. We’re strongly capitalized under Basel III, as we have built up capital ahead of Basel IV comfortably within our targets range. Our Basel IV show at yearend 2018 was 13.5% before mitigations and over 14% including mitigations. At Q1, this is largely unchanged. So we are already well kept alive for Basel IV and already well positioned to meet our Basel IV target of 13.5%.

We do see headwinds going forward from TRIM model and provision reviews, but these were largely impact our Basel III capital ratio only. If so, we will lower our Basel III target range accordingly. Following the legal merger of the summer, the leverage ratio will no longer be an issue.

Now I would like to hand over to you, Clifford to take you through our first quarter results.

Clifford Abrahams

Thank you, Kees. Turning to Slide 6, our net profit during Q1 was €478 million. This quarter, our net interest income and fees are lower. I will explain the reasons for this later. I’m pleased to say that both operating expenses and impairments are down in Q1. Tanja will give you more background on our cost of risk at 15 basis points.

So first, I will go through these results in more detail, starting with net interest income development on Slide 7. So here we’ll first run through Q1 and then discuss longer-term trends in net interest income. As you can see on the right, Q1 net interest income was down €69 million versus Q4 last year, reflecting elevated liquidity management costs various one-offs in Q4 and the limited impact from continued low interest rates.

The elevated liquidity management costs relates a non-euro liquidity position, which was temporarily higher in Q1 largely related to Brexit. We prudently increased on non-euro position ahead of a possible no deal Brexit at the end of March and this led to a shift of around €14 million of interest income to other income quarter-on-quarter. The remainder of the decrease in net interest income of €30 million from Q4 last year related to various small one-offs in Q4 positive ones and only to a limited agreed less than €10 million due to the adverse effect of low interest rates in Q1. I consider around €1.6 billion to be a normalized level of net interest income this quarter.

Now moving to long-term trends, we continue to see net interest income in 2019 to be slightly lower than 2018. While we expect total lending volume and asset margins to remain broadly stable this year, deposit margins are gradually declining due to low interest rates. The pressure on our NII will continue into 2020, if interest rates stay low through that year.

As Kees mentioned, we’re working hard to mitigate the impact of the low interest rate environment. For example, for Moneyou we have lowered our savings rate in The Netherlands by 5 basis points to 20 basis points in early May and there’s still room for some further reductions in deposit rates for Moneyou and other savings accounts.

Turning now to fees and other income on Slide 8. Fee income is down modestly compared to Q1 last year. For private banking, this reflects lower client assets following the market downturn late 2018 and more clients opting for execution only. Clearing income was also affected by low market volatility in Q1 2019. In particular, it’s good to see the equity markets have recovered strongly from their lows at the start of the year and this should fee through to improving fees in the private bank later in the year.

You can see Q1 is more or less in line with Q4 fees adjusting for the annual payments to ICS that took place in Q4. We expect total fees to remain stable in the short-term growing after that as our growth initiatives start to kick in. Other operating income was below the €125 million guidance in this quarter. As you know, the €125 million is based on the average we’ve seen for the past year – past few years and we stick to our guidance, but this quarter private equity gains in particular were very low. And we took a provision of €34 million for client compensation, SME derivatives and this is booked in other income. I’m pleased to say that we’re nearing the end of settling compensation relating to SME interest rate derivatives.

Now moving to costs on the next slide, Slide 9. I am pleased with our performance on cost, which continued to trend down. As you can see from the left hand chart, personnel expenses continue to decline reflecting lower FTEs. We’ve achieved 12% reduction in FTEs since year end 2015 and are well on track to reach our target 14% in 2020. Other expenses excluding incidentals and levies are stable, despite pressure from compliance and regulatory costs.

Please note the regulatory levies were very high this quarter at €161 million compared to €131 million in Q1 last year. This is due to the fact that last year part of the SRF contribution was in fact paid in Q2, not Q1 as was the case this year. This exacerbates the seasonal effect of levies this quarter on return on equity and cost/income.

And the right hand chart, you see we have delivered further cost savings of €37 million versus Q1 last year, bringing total cost savings delivered since 2015 to a run rate of around €740 million. As you know, we target a total of €1 billion cost savings including CIB and we’re on track to reach cost base of around €5 billion by 2020.

I will now hand over to Tanja to pick up impairments on Slide 10.

Tanja Cuppen

Thank you, Clifford. First quarter impairments are down compared to all quarters last year, where the cost of 15 basis points. While the impairments we have seen are predominantly in the same specific sectors in CIB as last year. I’m pleased to see they are considerably lower. This is partly due to active derisking of specific portfolios in offshore and diamonds in 2018. And for diamonds, we continued to focus on reducing our exposure to the sector. Inflows and provisions are low this quarter.

And CB we’ve seen a number of small impairments across multiple industry sectors. We reconfirm our full year expectation of below the two the cycle cost of risk of 25 basis points to 30 basis points.

And now we’ll hand back to Clifford, who will take you through the capital ratios.

Clifford Abrahams

Thank you, Tanja. Our Basel III CET1 ratio for this quarter was 18% and comfortably within our target range. This quarter, we did not add part of the interim profit CET1 capital unlike previous years. This follows strict interpretation of the rules in close consultation with the regulator. If we would have accrued profit based on 62% pay-out sustainable profit is dividend, which was the pay-out ratio of last year. Our CET1 ratio would have been 16 basis points higher.

Of course, at the end of the year, we will add full year profit, not paid out as dividends to the capital position in the normal way. During the quarter, our RWA increased from seasonal volume recovery TRIM model reviews and the Private Banking acquisition in Belgium.

We are pleased with the progress made by CIB to refocus as the targeted RWA reduction of €5 billion is now largely delivered. Our reported RWA to CIB of €36.9 billion down from €38.8 billion at Q1 2018, €36.9 billion includes around €3 billion to TRIM model reviews. So excluding these we’re already around €34 billion versus €39 billion last year like-for-like.

We expect headwinds from further TRIM model and provision reviews, which will mainly impact our Basel III number, so we will lower our Basel III target ratio accordingly. As Kees mentioned, our Basel IV CET1 ratio remained largely unchanged compared with year end 2018. Basel IV also does not include interim profits and Basel IV is more stable than Basel III as it is not affected by TRIM and model reviews. Our leverage ratio is 4.1% and on completion of the merger, the leverage ratio will improve by around 20 basis points and so it will no longer be a constraint. As Kees said, we have a strong Basel III capital position and now well positioned to manage the transition through TRIM and Basel IV.

I would now like to hand back to Kees to update on our targets.

Kees van Dijkhuizen

Thanks very much, Clifford. So we are well on our way to achieving our financial targets and I would also like to emphasize that both ROE and CI ratio reflect seasonally high regulatory levies this quarter. If we do fight regulatory levies evenly over the year, CI ratio would be over three points lower at 60.2% and the ROE around 1% higher at 10.2%.

I’m pleased with our cost performance and our capital position and capital generation remains strong. We expect a further impact from TRIM model reviews on the Basel III and if this materialized we will lower the capital target rates accordingly. So before we go into Q&A, I would like to briefly recap the highlights on Slide 13.

So all in all, I’m pleased with our progress and operational delivery on our banking for better strategy, which will underpin our future financial results. Our Basel III capital position strong and we’re well positioned to manage the transition through TRIM and Basel IV. While the environment is becoming more demanding, we are taking action to deliver on our promises and we remain focused on our financial targets.

Now, I would like to ask the operator to open the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we’ll start the question-and-answer session. [Operator Instructions] The first question is from Pawel Dziedzic, Goldman Sachs. Your line is open. Please go ahead sir.

Pawel Dziedzic

Good morning and thank you for the presentation. I have two questions. And both are on your top line. And the first one is on the comments you made on NII pressure, and in particular on Slide 7. So if we strip out noise around the impact of liquidity management and take on board your comments on strong mortgage pipeline and potential mitigating actions still on a deposit. Do you still expect to be able to deliver NII run rate of €1.6 billion to the rest of the year. If you can maybe give us an idea about that. In other woods, you showed here in this slide, €29 million of other NII decline and how recurring that would be in the coming quarters. So that’s the first question.

And the second question is on your other revenues and it’s essentially how comfortable do you feel about your income guidance over on €125 million you gave us before. Again, we can strip a number of one of this quarter and we still end up with quite a low number. So any comments there would be helpful. And in particular on private equity to the expected to rebound, how the sale of a part of your stakes in last year impact at the run rate. Thank you.

Clifford Abrahams

Thank you very much, Pawel. Your first question around the developments you mentioned, I think that’s fair to say, if you take the €40 million as mentioned, we are about €1.6 billion this quarter with an improvement of the mortgage portfolio, we do actually expect at least in the coming quarters, we can’t of course make a forecast for all the quarters in the coming year or next year. But for the coming one, two quarters, I would say, guidance at €1.6 billion above should be possible. The guidance around other income stays at €125 million. And I set private equity gains were very low this quarter, €10 million, €150 a year ago. So that was low. That’s very much depends of course on stock exchange. So we cannot give that as a separate part of the €125 million, but in general, €125 million you can use for the coming quarters.

Pawel Dziedzic

All right. That’s very clear. Thank you.

Operator

The next question is from Mr. Nick Davey, Redburn. Your line is open. Please go ahead sir.

Nick Davey

Good morning, everyone. Three questions, please. The first one, if I could ask you to comment a bit on the move towards not occurring any capital as any earnings into capital. I understand your comments in the release about prudency, but it is an unusual step and you’ll see making the point about discussions that regulator. So could you just give us any insights into what that discussion is actually about, if not about dividends because no other bank is reading the rules in the same way as you are.

The second question please on domestic mortgage margins, one of your orange peers is more enthusiastic these days about the trend in margins. So I just wondered whether you had seen anything that makes you equally enthusiastic. And then the third question please on a Dutch corporate lending trends, I’m just looking at some Central Bank data, which seems to suggest decline or increase the problem through the quarter in terms of Dutch corporate lending. Yes, when I look at your balance sheet trends, it seems actually quite encouraging growth. So I’m just trying to square those two if you're seeing anything changing in terms of corporate appetites and/or if you're offsetting that with international growth. Thank you.

Kees van Dijkhuizen

Well, thank you, Nick. Cliff will answer the first question, I will take two and three. Domestic mortgage market margins, yes. We see increased margins indeed due to develop in the long-term interest rate and also the market developments in general with players in the market and less in the market. So that's the reason why we also guided up 14% market share last quarter, Q1 will increase in Q2. So we're positive about that because margins are very important here. And as we said, we have been disciplined. That was the reason we're only at 14% in Q1 and we see improvement going forward.

Dutch corporate lending, we had a very good quarter with 2.8% growth on a quarterly basis. That actually is a yearly rate of over 10% So that is not something we normally guide and also not expect for this year actually going forward. But this was a good quarter and we do not see at the moment, people in trouble and not taking up loans at this moment in time. So let's see. We did well in the first quarter, very well, but we're still positive about the market also the rest of the year. Clifford?

Clifford Abrahams

Nick, I'll pick up the punch to influence profits and just spend a little bit of time on it, so we're all clear. Just to make the obvious statement. The money is still in the bank, so this is just merely a reporting thing. But an important one, which is why we've highlighted it. We don't feel we're being prudent per se, this far as you said, a strict to interpretation of the rules in close consultation with a regulator. The rule in question is see our article 26.2 and you need approval of the regulator to book interim profits as capital. And the relevant clause is the institution, that’s us, needs to demonstrate the satisfaction regulator that any foreseeable charge or dividends has been deducted from those profits.

And now in our case, our dividend policy, as you know, is a minimum of 50% plus additional distributions. So a strict interpretation of that, of what I indicated means that we're excluding the full amount. I would say theoretical, so we're making no commitments or comments about dividends at this stage, but it reflects that strict interpretation when we have a lower bound to our payout ratio, but not the upper bound. And I think, my expectation is, this approach would be adopted across the sector, but one needs to take into account the dividend policy in the context of this rule. So I hope that's clear and happy to pick it outside the call.

Nick Davey

Okay. Thank you.

Operator

The next question is from Mr. Benoit Petrarque, Kepler. Your line is open. Please go ahead, sir.

Benoit Petrarque

The first one was on net interest income. So just to come back on your €1.6 billion guidance. So it seems that we're going to stay around that level in the coming quarters. Just looking into Q1, so it seems that you indicated a €10 million direct from low rates Q-on-Q. This type of pressure – the pressure you also expect in the coming quarters and also going into 2020. Is that just something we can plug in the models? Second one was on the originate and distributes model you plan to implement on the 20 year-plus mortgages in the Netherlands. Just wondering where you are? Have you started actually to produce for third-parties? And how fees you will expect – fee growth you will expect from that. And then last question was on the NPE coverage ratio. I think that was one of the item you mentioned last quarter. Do you have an idea about kind of the impact you could expect and could you guide us a little bit more on this item specifically? Thank you very much.

Kees van Dijkhuizen

Thanks, Benoit. With respect to the guidance around interest, I would say the €1.6 billion, so let's be careful not to really guide above that. Perhaps that's the right thing we guide. And it shows – it goes through of course, upward pressure from more mortgages, but I said, there's also downward pressure from interest rate development in general. With respect to the originate to distribute 20 years mortgages, I think also look into. That's work in progress. I think we're going to do our first deal this year. That's the plan, fees aligned to it, not yet clear I think at this moment in time. So let's see what the first charge will be and then we can update you on that. NPE Tanja?

Tanja Cuppen

Yes. So the developments on NPE are that the European Commission in the meantime has approved registrations, which forced banks to take a potential backstop in pillar one for a newly originated efforts. We also have the ECB guidance and we need to see how we deal with our existing NPE from before these days. So all these makers are coming in right now and I think we can update you in Q2 more on what these all new regulations mean if you bring them all together.

Benoit Petrarque

Okay. Thank you.

Operator

The next question is from Mr. Adrian Cighi, RBC. Your line is open. Please go ahead, sir.

Adrian Cighi

Hi there. This is Adrian Cighi. Thank you very much for taking my questions. Three questions from me please. The first one is on the cost. The environment has deteriorated quite considerably since you've said the initial cost reduction target. Do you think you have the ability to increase this a bit further? The second one is a follow-up on the cost of risk, your guidance remained unchanged to 25 to 30 basis points, potentially a meaningful increase in the Q1 level. Do you see any reason for this to increase, or is this just a particularly conservative guidance? And then on the Basel IV, just a clarification. You said it remained largely unchanged quarter-on-quarter despite obviously prior to bank acquisition and the lack of the organic capital belt. Are we seeing some of the initial results of mitigation or what explains that sort of unchanged despite the headwinds? Thank you very much.

Kees van Dijkhuizen

Thanks, Adrian. I would say cost and Basel IV for Clifford and then cost of risk Tanja.

Clifford Abrahams

Yes. So picking of costs, in terms of the more demanding environment, we seen some pressure on income from lower, longer that we discussed earlier on the call. And that's likely to extend into 2020. So in that sense, income has got more demanding, which challenges the cost income ratio. And then on compliance on regulatory costs. Yes, we do see incremental costs coming through. I think as Kees said, we're focused on our financial targets. So next year at the target of 56% to 58% cost income ratio remains our target. We reconfirmed that in November and then February this year it's got a little bit more difficult to achieve, but we're working hard to deliver on further cost savings in order to mitigate that had was to be see regarding costs.

You'll recall the presentation we gave in particular around IT at our Investor Day and we're working hard to deliver more for less in our IT area. Moving on to Basel IV, I think that we were just trying to call the difference in Basel III and Basel IV. So Basel IV is down 0.4% in the quarter, Basel IV is down, less negligible amount, which is why we reconfirmed is largely unchanged. And that reflects the movements you've talked about earlier. It's less the benefits in mitigations that we expect to see over time and more relates to the fact that the trim and model review impact that has an adverse impact on Basel III. And we've disclosed the amount a little over €1 billion does not carry through to Basel IV because on a different basis. So those two approaches are converging slightly during Q4, during Q1 rather.

Tanja Cuppen

Okay. And your question on cost of risk. Of course, we are pleased with the impairment levels, this quarter. But you cannot extrapolate this forward. That's some of the provisions are quite lumpy. And also we remain cautious on that, we share that with you before, especially in oil and gas also for the diamond sector we remain cautious. So, that's why we stick to the guidance that we have provided before.

Adrian Cighi

Thank you very much. Very helpful.

Operator

The next question is from Mr. Benjamin Goy, Deutsche Bank. Your line is open. Please go ahead, sir.

Benjamin Goy

Yes. Hi, good morning. I have two questions please. Maybe one follow-up on cost of risk and in particularly in your commercial bank, we've seen some trend around €60 million per quarter or 60 basis points roughly. Initially it was driven by a senior sector and now it feels more broad-based, so wondering whether it is also the guidance going forward for the segment. And then secondly, on costs, it would rather conservative approach to capitalizing software investment. Now the European Commission might change that and you could get benefits in your capital if you capitalize, so wondering, whether it is something you currently think about changing your approach here? Thank you.

Kees van Dijkhuizen

Thanks, Benjamin. Tanja, can you take the first question and Cliff at second.

Tanja Cuppen

Yes. On the commercial banking indeed, how we see – also risk levels for CB well in the similar range as we saw last year. And indeed, what you see right now is that impairments are taken more across sectors. There's really not a real trend to be seen there. We still see some elevated provisions in the healthcare segment. But apart from that it's actually across sectors. It's too early to say or that there is a trend, but definitely a certain sectors are struggling a bit more. And then you need to think of every business and retail where clients are struggling. But as said it's too early to say that it's a trend. And we don't provide cost of risk guidance by segments. So I can also tell you in there any further.

Clifford Abrahams

Ben, I'll pick up the approach to IT. As you know, we charge our IT spend through the P&Ls is very little capitalization going on, which we think is the right thing to do in terms of running the business. And we've been following developments closely. We understand that Aviva will opine on this principle by the end of next year. So it could come into force in 2021. So that's a little way off. We'll monitor it closely to see if there are potential benefits. We do want to be consistent our reporting, but also we want to be aware of regulatory developments and adapt to that. So we don't take a principled approach here. We're open-minded and we will follow developments as they take place.

Benjamin Goy

Okay. Thank you.

Operator

The next question is from Mr. Bruce Hamilton, Morgan Stanley. Your line is open. Please go ahead sir.

Bruce Hamilton

Hi, good morning. Good morning folks. Thanks for taking my questions. So actually, one on capital, I realize, it were sort of converging between Basel III in Basel IV, but could you just remind me what the trend impacts where in Q1? And then any sort of quantification of TRIM and the sort of guidance on NPEs through the rest of the year? Or is it can’t quantify, which should we expect we'll be bigger and how will they fall across the quarters?

And secondly, on the NII, really looking to 2020 in terms of mitigants, could you just summarize again what those are? I think you mentioned deposit costs of it. I didn't think there was much scope there. I guess volumes would be another, but is it going to be more driven by across the fee growth trying to offset NII? Or is that something else that would help? And then finally on the cost of risk, I guess the coverage ratio has dropped a little and you get some explanation in the report, but it's sort of sub 30% still optically lease looks quite low. Can you remind us reason, why that's not the case or what we should bear in mind that drives maybe coverage ratio larger than some of your peers? Thank you.

Kees van Dijkhuizen

Thanks, Bruce. Clifford, can you take one and two and Tanja on number three?

Clifford Abrahams

Yes. So on – we call it TRIM model reviews and the amount we took in Q1 was €1.3 billion. And in addition to the €5 billion in Q4, I think TRIM is a process that will take place over time. But, it's important for us as management to see the early signs of TRIM and book the possible effects of that early if we see it's appropriate. So we're seeing somewhat phasing in of that, as some of the information comes to live regarding TRIM. So it's quite possible there will be further impact of model reviews this year, ahead of call it the final determination of TRIM, which may well extend into next year or even beyond. And that we’re clearly flagging in our disclosures this year.

I think NPE make a broadly similar point. I mean, I think there are a range of rules regarding NPE come out of Aviva and the ECB, many of them point to 2020 and beyond. But it is possible that the effects of this take place earlier and which is why we have used the term provision reviews, which captures NPE, but with possible other factors. And so I can't give any more specific guides of that, but it may be – the effect is earlier than the formal target dates which extend often to the future. And that's kind of you comment further, when she responds on the cost of risk.

I think on 2020, I think we've been clear on the more demining environment, but also the action we're taking. Kees talked about volume and we will pursue volume where we can profitably and we gave the example of mortgages where we've been encouraged by recent developments. I think, we gave example of many you, we’re also looking carefully at – and how we were passing on negative rates. So our corporate clients received negative rates. But it can be appropriate to extend that elsewhere, particularly clients have very large balances and we would consider that particularly if rates stay low for longer. So we do see some scope there as well as fees from the, whether it's new products or originate to distribute, which Kees talked about. And we're working hard on those initiatives in particular.

Tanja Cuppen

Okay. On your question, with respect to the corporate ratio indeed, that has dropped a bit comparing Q4 to Q1. And the reason for that is, and I think indeed in the report is that’s we have written off some exposure with a large – with a high coverage ratio. Also we are focusing on our non-performing exposures, especially when it's around for some time to actively work that out. So that's one reason. And secondly, we saw some new inflow where we – well took some impairment as well, but at a lower coverage ratio. So that combination led to some of that are dropped, but well thinking of around 30%, that is the level that you should think of. So this is, yes, just – yes, I was going off the developments that happened in the last quarter.

Bruce Hamilton

Thank you.

Operator

Next question is from Ms. Alicia Chung, Exane. Your line is open. Please go ahead.

Alicia Chung

Good morning, everyone. Just a couple of questions from me. Firstly, on cost, I mean, costs of spend has clearly been very encouraging for a number of quarters now at ABN and it has tended to surprise on the upside. And underlying cost came in constantly on the €5.1 billion last year. So I suppose my question is, can we expect an improvement on the fifth year given that you still expect to have thought of €150 million of cost savings to come in your strategic plan. So in absolute time, can we improve on the less than €1.1 billion underlying that we saw last year? And in particular now that you've completed the RWA deleveraging in CIB, can we expect a greater focus on restructuring the business from here, particularly, given that staff numbers are still 4% or 5% higher than they were two years ago? That was my question on cost.

And then just to go back on the point on provisions and coverage ratios. I appreciate that of course, parts of the reason for the drop in the coverage ratio pulling back to 2% to 29% was because of the de-risking of the portfolio. But also can you help us to try and understand why we are still reducing the NPL coverage ratio at a time when you have concerns around headwind from calendar provisioning? When I look – particularly when I look at your coverage ratio in CIB for example versus peers, it already looks quite low and I wouldn't necessarily assume that is because it is – because you have a lower risk business mix?

And then actually if I may, just one final question on your capital target, you've flagged that of course the Basel III and Basel IV ratios now appear to be converging because of TRIM and model updates that are affecting Basel III. And you said that as that – if that convergence continues, which you expect it to you will update your target equity Tier 1 rate, which is of course, still on the Basel III basis At what point do you expect to update that ratio and how should we think about how that will move going forward? Thanks.

Kees van Dijkhuizen

Thanks, Alicia. With respect of costs, I would say. we, as Clifford already mentioned also, we are very much focused on that, especially when there is pressure on the income line as explained, and I think Clifford mentioned all the examples where we're working on. So we indeed want to bring down cost, also notionally, on the notional value, absolute value. With respect to CIB indeed, in general by the way, the leverage ratio, was constraining indeed sometimes, some parts of CIB for instance, Clearing department. So that's helpful. That this constraint is, well presumably no longer, they are somewhere over the summer, so that's good.

The second question, Tanja will answer that one with respect to your last question, capital target and converting in the lights and update our update on target. While we set accordingly, so that depends, if a lot happens in the second quarter, we might do it after the second quarter. If not much happens, we might do it later, but that's more or less, it will be driven by the underlying, what happens on the line and we will do it like that. But the second part, it could be the first moment. Yes, Tanja.

Tanja Cuppen

Coverage ratio, I know you're alluding especially on the CIB, as you mentioned, it is indeed related to the fact that we have been de-risking that portfolio very much focused on the more of a cyclical segments there, you see the back as well in the amount of impaired exposure in this business line. And that is explaining as well, taking out the assets with higher provision, the influences, the coverage ratio. And I feel comfortable with the coverage ratio that we have today for this business. And I said 12, the levels around the 30% is something you should think of for us.

Alicia Chung

Okay. Thank you. And just to circle back on the costs, you mentioned that you will of course aim to bring down costs, but is that in 2019, or are you or is that more for the later years?

Clifford Abrahams

Yes, we're focused on the target the next year. And we did around €5 billion. I've given you a sense of headwinds. I mean there are genuine headwinds. We are upgrading our focus and resources around compliance in particular as we should. So that's €5 billion has got a little bit tougher, which is why we're working hard in it. But I wouldn't give any further guidance on 2019 versus 2020 and clearly some while we feel well provisioned for our existing cost plans, if we do, if we come up with extra things will happen – were, they may well be costs associated with those. So we're managing all that carefully with a view to frankly delivering on our commitments for next year.

Alicia Chung

Okay. Thank you very much.

Operator

The next question is from Mr. Kiri Vijayarajah, HSBC. your line is open, please go ahead, sir.

Kiri Vijayarajah

Yes, good morning everyone. Just a couple of questions on the scaling up of the due diligence, capabilities there. To really just get a sales for where are you in the process in terms of ramping the FTEs and one of your close peers that they're talking about sort of special projects within that. So maybe some of the costs falling away in 2020 or is it more a case of – all of the build out you're doing is kind of recurring costs that you're putting on. And then in kind of similar topic, but on the revenue side, are you finding any kind of client relationships that need to exit because they don't meet those higher due diligence requirements, that just some color on how that whole sort of project is impacting your business? Thank you.

Kees van Dijkhuizen

Thanks, Kiri. With respect to due diligence. I think we step up at this moment in time with €85 million, we took has provision in Q4, especially this year and next year. So put two years period. Having said that and already Clifford also mentioned it, of course depends on developments going forward. But at this moment in time, we have of course a amount of people have 1,000 which are working on it already. The extra four on that this is actually planned for, well also to remediate backlogs we have at this moment in time, especially in the commercial banking asset and in our credit card department. We have set up, by the way, a special – a special product here, we call it the detecting financial crime with well allocated people and budgets, and a lot of focus. So it was really top of mind in the bank at this moment in time.

But it's too early to say something about after 2020, I would say, at this moment in time, of course, we hope that we have solved a lot of, well – that'd be assault the problems anyway. But and then also are able in our processes to have it more ingrained there and lower cost again going forward. But that's too early to speculate about that. With respect to client relationship. We do not comment on that, but indeed, of course our two deal can lead to exiting clients. But we do not comment on that publicly, but that's indeed of course can be part of, can be resolved. But it's not harming – but not harming our business in a way, that you would see that in our phase.

Kiri Vijayarajah

All right. Thanks.

Operator

The next question is from Mr. Albert Ploegh, ING. Your line is open. Please go ahead sir.

Albert Ploegh

Yes. Good morning. Thank you for taking my questions. I've caught two. First coming back on the TRIM and model reviews, it's clearly more, more goodwill to look at Basel IV impact as you will alluded to and that you will reflect also going forward, your Basel III capital pockets in case of future impacts. Can you say something on the timing of that potential review of the target is this still possible that that will cure or somewhere in the second half of this year? Or is this more, let's say Q4 kinds of general updates when we moved into a 2020? That's my first question. And the second question is a bit of a broader on the topic of M&A, with let's say with the NII headwinds probably being there longer than may be expected to, let's back at the capital market stay. In terms of order of priorities is – M&A let's say, higher on the agenda to bit more proactive to certain files than maybe before or just – anything you can add on, let's say M&A appetite is this welcome. Thank you.

Clifford Abrahams

Thanks Albert. With respect to your question around the review, accept I, it may be the next quarter, it may be the quarter after, to quarter after depending about what happens around TRIM and model review in that quarter, which is to bolt-on related. And then depending on what happens, we will come up with a review of the target, or lowering of the targets at that moment in time. So it can be from Q2 onwards potentially. With respect to M&A, we happen to open for bolt-on acquisitions and private banking already for sometimes, for some time as illustrated by the way sufficient last year before in Germany, two times. We still open, in Germany, France and Belgium for bolt-on acquisitions in private banking. We also look at other areas where we can find perhaps few options or interest generating options. So we are looking more broad. We'll be bolt-on if we do it, and the more broader M&A discussion, I think well that's a different one. We, you know, are working on standalone basis and that's what we're going to continue in the future. Thanks.

Albert Ploegh

Yes. Thank you.

Operator

Next question is from Mr. Marcell Houben, Credit Suisse. Your line is open. Please go ahead sir.

Marcell Houben

Good morning. Thank you for taking my question. I have two left please. On the fee side, especially in the retail business, there was quite a significant drop Q-on-Q, whereas I thought that sort of behind 90s was sort of the run rate. Is that all driven by like online brokerage? So, people not trading much in the first quarter or because the majority, I thought it was just current account pricing and that was sort of stable going forward. That was my first. And my second was more, I know it’s quite early in the year, but just a narrative on the capital and excess capital return. is it your ambition to grow the capital base beyond for example, the 18.5. So if we issue, so it was payable as that, that the capital target doesn’t change, would you aim to grow those capital base or do you think we will never see the higher Q1 ratio of 18.5 for example. Thank you.

Kees van Dijkhuizen

Thanks, Marcell. With respect to fee side, perhaps Clifford you can take that question.

Clifford Abrahams

Yes.

Kees van Dijkhuizen

And with respect to capital return, it’s indeed, as you say, early in the year. That’s true. So we have not set a lot about the dividend yet. 18.4 last year went down to 18 Q1. And what we actually expect is set due to when there is Basel IV, elements the TRIM and the model reviews earlier on. And actually, that will lower the difference between Basel III and Basel IV. So that’s actually more, I would say some downward pressure on the CET quarter one, Basel III then upper, well I’m not going to say anything about never something, but so the pressure is more in the other direction I would say. Clifford, can you say something please?

Clifford Abrahams

Yes. Maybe just a little bit building on that. Just maybe a different angle. I think clearly, we’re in a transition period, between Basel III and Basel IV, it’s a challenge. We continue to feel that the right way to communicate your target range is Basel III, because that’s our reported basis. But the principle is, we want to keep them well aligned and you can see this quarter we set Basel IV is on change from Q4 when it was 13.5, so well capitalized, and 18 is in the middle of that is our compounds are three ranch. So, they’re well aligned.

Now, TRIM and model reviews makes the misaligned. Then, we’ll look at it in this case that it could be as early as Q2. It’s the alignment that we’re looking for to ensure that we manage that smooth transition. So, I think looking at the sequential trends, Q4, actually Q4, I’ll put it this way, it was a little bit high. So, Q4, in retail, benefited from the ICS payment or credit – due to our credit business or credit card business. And that was sort of a high single-digit amount. And if you look at the year-on-year, they’re actually more or less in line. So, there’s some seasonality to our fee. And that explains most of the movements between Q4 and Q1. And Kees commented on the outlook going forward regarding fees.

Marcell Houben

Got it. Thank you.

Operator

The next question is from Mr. Stefan Nedialkov from Citi. Your line is open, please go ahead, sir.

Stefan Nedialkov

Hi guys, it’s Stefan from Citi. A couple of questions on my side. So, a lot of questions on TRIM. Let me throw mine as well. TRIM basically €3 billion of RWA thus far, you have guided overall Basel IV inflation of €30 billion to €40 billion effectively for RWAs 30% to 40%, call it €30 billion to €40 billion of RWAs. So, we’re really only talking about 10% of the Basel IV impact having been faced in. Would you say that probably there’s another 10% be faced in by 2020. So overall, really, the vast majority of the Basel IV impact will happen from 2022 onwards rather than being front-loaded before 2022. And I would just know that that’s different from your other orange beer, who is facing an 80% of the impact in the next one to two years. Do you agree with the statement or not, basically that’s my question. The second question is on costs. Retail costs surprised positively, retail banking costs surprised consensus quite positively. We don’t really have too much granularity in terms of what has driven that, if you can comment and how sustainable that beat is going forward. And related to that cost question, what did I talk about headwinds on the cost side of things from compliance, you did indicate in the pre-close call that compliance costs on an ongoing basis are likely to rise by – from sort of a €100 million or €125 million per year. So that’s just the €25 million negative delta in the context of €5 billion cost base that it doesn’t strike me as a huge negative delta. Yes, you are talking about compliance cost pressures. Am I missing something here?

Kees van Dijkhuizen

Thanks, Stefan. With respect to TRIM, I think the €3 billion you mentioned, if we take Q4 and – Q4 last year, Q1 this year, it’s altogether already €6 billion, which is around – which is more of course, year-to-date already. Forecasting this is not easy, because it depends very much also on what regulators discuss with you and decide upon the discussions – around discussion. So, it’s not easy to forecast, but the figures you mentioned are, I would say low actually for what we would expect. sort of two times to 10%, I would say low. Can you say anything on the retail costs?

Clifford Abrahams

Yes. I think I’m looking at the sequential, I think it’s important to just break out some of the incidental, so Q4 to Q1, which costs were down a decent amount. You go to look through the allocation of levies. And also, this Q4 is a heavy levy quarter. And also Q4, we booked the provision for CDD remediation. A lot of that fell on retail. So, I wouldn’t – I don’t think, I’d be calling out specific trends on costs regarding all our businesses. I think the retail bank is focused on costs, because some of those income headwinds are landing on that business in particular. But if you look at it over time, I think the performance is more or less in line with some of the other businesses.

Stefan Nedialkov

Thanks. And just to follow up on the compliance pressures of €25 million extra per year?

Clifford Abrahams

Yes. I think in the comment, we had booked to provision for a compliance first. They were some very specific programs. So, we expect to – we expect the run rate of compliance-related costs to go up from – roughly, a 100 that we’ve seen in previous years of that order of magnitude. And I think as Kees said, we’re not expecting an imminent reduction in those costs. We’re not going to declare victory and stand down the teams. I think we expect the environment to remain rightly focused on this and we’re putting the resources behind it appropriately.

Stefan Nedialkov

Okay. Clifford, just to confirm here, so that you’re saying that the pressure from compliance cost is around €25 million per year. is that correct?

Clifford Abrahams

I think we’ve given previous indication, I don’t want to update every quarter on compliance cost. We see compliance and regulatory, generally as a source of headwind on costs, which is how we characterized it. But we remain focused on overall targets as – and I think the guidance we give in the next year remains appropriate in that context.

Stefan Nedialkov

All right, thank you.

Operator

The next question is from Mr. Jason Kalamboussis, KBC. Your line is open.

Jason Kalamboussis

Yes. hi guys. Jason from KBC. I just have a couple of questions. The first one is just coming back on M&A. I mean there have been news mentioning, possibly that the prospect in Belgium would open for discussing a sale. now putting aside, I’m sure that you cannot comment on specific files and cases. but putting that aside, given that it would be something that’s going to be worth just north of €1 billion. I was wondering if within – if you’re bolt-on would extent to what I would call or I think you called your running profit. So if that fire power, basically, you would look at it and say, look, within my running profit it actually goes roughly to €1 billion. It’s something that they would consider or do you find that this is exceptional? And in general, if you could comment, would you go for something that is a larger deal at this stage, because that could help to alleviate the pressure that we can see over the next couple of years at least on your top line.

the second question was on diamond, €7 million low. but it can change a lot in quarters. I just wanted to have a quarter now to kind of comment if there is in general some improvement in the market versus what we have seen last year or if it’s still very much a market that hasn’t shown any such signs.

And the third quick question is on NII, I mean from both questions that came on it, is it fair just in general to assume that this quarter, the €10 million is roughly the impact that for that we should assume. So that this year, the $10 million per quarter you absorb it by increasing your market shares et cetera. But I think Bruce was mentioning, for example, in 2020, it is roughly a good number to use everything staying, everything else being equal. So of course, our action is you can take to alleviate that, but without giving guidance for 2020 is the €10 million per quarter, a good figure to have in mind? Thank you.

Kees van Dijkhuizen

Thank you. Yes. Thanks, Jason for your question. in these M&A deferrals, we will not comment on that of course, but you’re more, general question, what kind of size would you look into? if I take the last three deals, I think two were in the range of €5 billion to €10 billion assets under management, one was €5 billion, so €10 billion is the latest one. I would say, it’s not – it’s not the case that we would only look at €5 billion or €10 billion. It might also be larger. So, we will look at every specific situation and of course, specifically, at the business case around that. Diamonds, Tanja, you can comment on that. With respect your NII guidance at €10 million and absorbing it by a volume growth that’s I would say to ride guidance. So, we can confirm more or less this reasoning you have. Thanks. Tanja?

Tanja Cuppen

Yes. And on diamond things as you mentioned, this quarter, limited additions and provisions, but as I mentioned already, we remain cautious with respect to this market. It’s a market and the pressure, you see consolidation and competition also from, I think you call them artificial diamonds. So, you see pressure on the sector and we expect that to remain. So, we remain cautious as well.

Jason Kalamboussis

Thank you very much.

Operator

The next question is from Mr. Raul Sinha, JPMorgan. Your line is open, please go ahead, sir.

Raul Sinha

Hi. Good morning guys. Thanks for taking my questions. Just maybe a couple. I think on fees, we have had this discussion already, but I just wanted to link back, especially your comments on the Investor Day, where you talked, I think about stable fees in the short-term and then a modest pickup from growth initiatives. I was wondering if you could refresh for us a little bit of timing. How you expect the growth initiatives begin, maybe over the rest of the year into next year in terms of driving that fee income line.

And then the second one is just slightly more specifically on the Stage 3 book. if I look at the disclosure, and correct me if I’ve got this wrong, I think the Stage 3 corporate loans are up something like €600 million in Q1, from €4.3 billion to €4.9 billion. And I think you’ve talked about inflows and outflows, and obviously, the point on its coverage is obviously very clear already, but my question was more €600 million increase in the stage 3 corporate loans is obviously quite a big number. Is there any color you can provide in terms of what sector is driving well? thank you.

Kees van Dijkhuizen

Thanks, Raul. Cliff will answer question one and Tanja, question two.

Clifford Abrahams

Yes. I think all fees have liven up there. I think we have made disposals of some fee heavy businesses. And that’s a headwind on number. So, I think we should factor that in. I also think, Q1 was impacted by the downward movement in equity markets at the end of Q4. So, there’s some – of course short-term factors that are impacting the number that is perhaps extending out the period from which we hope to grow fees. So, if I look at the prospects going forward, whilst I’m pleased with the fee initiatives working on, and Kees talked about the mortgage fund on Kendu and all of these will add fees in due course.

I think taking the mortgage fund as an example, it will take frankly a few years to build up to a meaningful stock on which we’d earn fees that would be meaningful to the €400 million or so that we report each quarter. And the same is true of the investments. But going forward this year, now clearly, markets can be volatile. But we were pleased to see the market picked back up again. And you see that in the value of our investments, that’s meaningful to fees going forward. And I think it’s more of those tactical cyclical things that will drive the movement in the next few quarters as we work on these more medium term fee initiatives.

Raul Sinha

Got it.

Tanja Cuppen

Okay. And then on the stage 3 book, any inflow, there, well, it’s, I would say it’s too much to say the data advancing in certain sectors. but I can pull out a few. So, we saw some inflow from offshore energy, a sector that we have for very much in focus. We also saw some inflow in insurance shipping, and food and beverage. and I would say the rest is across the board. And well as mentioned, looking at these files and also the impairments level that we filled our appropriate, there are well below the average coverage ratio that we have for total book, so that explains the coverage ratio as well.

Raul Sinha

Thank you. That’s really helpful. I guess, I was wondering whether these are largely domestic or largely international in terms of exposures?

Tanja Cuppen

I think it’s a combination. So, some of that you see domestically and some of that is international. So yes, it’s really a combination. And I would have not had the number to say, well, it’s really 50-50, but it’s not that it’s – that you can say it’s purely domestic at all.

Raul Sinha

Thank you so much.

Operator

The next question is from Mr. Robin van den Broek, Mediobanca. Your line is open, please go ahead, sir.

Robin van den Broek

Yes. Good morning, everybody. Thank you for taking my question. my first one is related to comments, your pyramid in the Netherlands and that is that they were using higher SDP rates for the lending side of the bank, basically implying that commercial rates were up, lending margins were sort of flat. And to me that gives the impression that the higher credit spreads movements of Q4 were basically passed on within the bank. And given the sizable tightening of credit spreads year-to-date. I was just wondering whether that is sustainable or not. I believe we’ve talked about rates. Is this a pressure factor? Credit spreads are down as well, so just wondering also on the mortgage side that you're more supportive of the margin. Is that not more just a factor of the lack of pricing in new commercial rates? Or is it really something sustainable? So that's my first question.

Second question, sorry for coming back to this. It’s about lowering the budget. You said that depends on – yes, the significance of the move between the quarters that you could potentially updated in Q2, but apparently 6 billion of RWA placed on the back of TRIM model updates. That's not high enough, so I was just wondering if you could give us a number there.

And in relation to the gap between Basel III and Basel IV, I think last year we were expecting some tailwind on the operational risk RWAs to come through due to meeting the disclosure requirements of the ECB. I was just wondering what happened to that if there is still something to come? Or that is doesn't even matter on the Basel IV scope? And last question is just something to get confirmation on…

Kees van Dijkhuizen

Is that a question?

Robin van den Broek

I'm sorry. I was just wondering about the procyclicality on the Basel IV, I mean, presumably because it's mostly output driven, I presume that is – not a reason at all to be above your target range on capital.

Clifford Abrahams

Okay. I'll try and tackle most of that and maybe Tanja you can chip in on operational risk if I need help. I think on STP, I saw those comments. We have a similar methodology by which we pass on credit spreads if they go up, we pass – we seek to pass them on. There is some, call it, smoothing around that. It's an automatic. We have a methodology there. But that – I think we behave in a similar way.

I think in terms of mortgages, there are a number of things going on around mortgages, competitive behavior where the pension and insurance companies are, where the other banks are. We find it helps to focus on our own measures of hurdle rate and profitability and let the share take the strain. And as Kees said, look, we're encouraged by the pipeline. And we – I can't forecast how long will that be maintained. I think around – I'm happy to tackle this again sort of the target range. I think, I refer back to the comments we made about alignment and we don't want to keep moving the Basel III range as our Basel IV numbers change or TRIM change. Our strategic focus is to be to meet the 13.5 under Basel IV early in the phase in.

And then based on that, we triangulate the appropriate Basel III target that we will seek to maintain, where remains aligned with that Basel IV goal. And so you pick Q4, you can make the case for Q3, why didn't we raise the target range? So we don't want to keep moving it around and we have a view of forward looking developments and we try and factor that in. But it's clear as of today that we're well capitalized under Basel IV at unchanged from year-end 13.5 comfortably within our range. So they seem quite well aligned and if TRIM moves the alignment, we would change the range to bring them back into alignment. I think op risk, can you...

Tanja Cuppen

Yes, op risk, what I can say there is that the model in the meantime that we have – has been reviewed by the regulator. And as a consequence of that, we could reduce some of the add-ons in capital. But as you see and it's also in our quarterly report. We've also updated scenarios for the developments in the market and that led net-net to somewhat of increase in operational risk, RWA. And this is a problem of Basel III, and the Basel IV we don't expect a big change for operational risk, but the exact guidance is still uncertain there. So we need to wait as well for the regulation to settle to exactly know what it will be for the operational risk.

Clifford Abrahams

Okay. Thanks Tanja. And on the – go ahead.

Robin van den Broek

I'm sorry. I had to come back on the first one. Could you guys talk whether credit spreads coming down directionally as an headwind and whether that has been absorbed in the €1.6 billion on the high guidance. And then still – the next question was on procyclicality, which I think is still open. I'm happy to leave and take it offline.

Kees van Dijkhuizen

I think the – we aren't going any further add to the 1.6. I think we're getting too granular in terms of micro movements. I think on – I can confirm what you said. I mean Basel IV is the more stable metric and less influenced by credit because we're quoting the fully loaded sort of end state position and that's part of the rationale for the stability we've seen in the last quarter or two. As you say, happy to discuss it offline.

Robin van den Broek

Kees, thanks and sorry for the mechanic questions.

Kees van Dijkhuizen

No problem. Thank you very much. Operator, I think there is still one question.

Operator

Yes. There is from Mr. José Coll [Santander]. Your line is open. Please go ahead sir.

José Coll

Hi, thank you. Three quick questions please. The first one is the 5-year your LIBOR swap is down more than 20 basis points year-to-date. So I wonder you could quantify how much of the €30 million falling various impacts in NII would be due to the swap portfolio repricing and what level of impact you would expect in the coming quarters? Second, does the cost to income guidance of below 55% by 2022, include expectations of interest rate hikes. If so, how much and when?

And the third question is, do you expect the Basel IV will have an impact on AMRO requirements? In other words, do you think that the AMRO requirement as a percentage of over risk weighted assets will remain constant when calculated over Basel IV RWAs? Thank you.

Kees van Dijkhuizen

Thanks, José. Clifford, if you can take questions one and three. Number two question is CIO, you mentioned 65%, it’s below 55% or below – 55% CI 2022, which we have communicated at Investor Day. It's mentioned in a way that it's related to – at that moment in time economic forecast, so both grow interest rates in like. So it's linked to that. And of course, we will see later on how these things develop. Clifford?

Clifford Abrahams

Yes, I think on – I think, I'll answer your first question in this way. This €30 million that we called barrier was not impacted by the interest rate you referred to. And if you look at the quarterly movements, it was actually related to positive one offs in Q4, not negative one offs in Q1, that €30 million, which is why we were guiding to around €1.6 billion. Just to reflect the FX swap impact that we talked earlier?

And we can take any further details there, offline. I think around AMRO, I think in the short term, we are focused on the RWA related target. So, to the extent that we take TRIM and model review additions to Basel III RWAs that will raise the AMRO requirement, in the short to medium-term. And in the long term, yes, it's possible it changes, but I don't really want to speculate at this stage on possible regulatory release that may in fact not take place.

José Coll

Thank you very much.

Kees van Dijkhuizen

Thank you very much. Operator, I would like now to conclude this Q1 results update. I would like to thank you all very much for your questions and goodbye. Thanks.