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ING Groep(NYSE: ING)
Q4 2021 Earnings Call
Feb 03, 2022, 1:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. This is Patricia [Inaudible]. Welcome you to ING's fourth quarter 2021 conference call. Before 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 statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statements is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Steven, over to you.
Steven Van Rijswijk -- Chief Executive Officer
Thank you very much, operator. Good morning, and welcome to our full-year 2021 results call. I hope you are all well and I'm joined by our CFO, Tanate Phutrakul; and our CRO, Ljiljana Cortan. And I'm happy to take you through today's presentation.
After that, we will take your questions. A year ago, we were looking forward to circumstances normalizing again. And now reflecting on 2021, we're not yet back to normal as COVID-19 is still there and world faces strained supply chains, staff shortages, and rising prices. On the positive side, consumer confidence is up and businesses have become more optimistic.
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Economies have shown resilience and the same applies to ING. And I'm proud that our customers recognized our strength, resulting in further growth of our primary customer base and the number of sustainability deals. Our digital-only, mobile-first focus continues to pay off with mobile becoming the main channel through with customers interact with ING in '21. And these factors support our efforts to diversify income and offset the continued pressure on liability income caused by a negative rate environment.
Loan growth has always been important to counter this pressure. In 2021, loan growth returned on the corporate side, contributing to the overall EUR 30.6 billion net core lending growth. At the same time, we were able to stand the inflows of deposits. Fees grew by 70%, which is quite an accomplishment.
On costs, we managed to keep full-year cost broadly flat, which means we absorbed CLA increases and higher costs related to employee performance and marketing, which were reduced in 2020, reflecting COVID-19 impact. Full-year risk costs were EUR 516 million or eight basis points over average customer lending, well below our through-the-cycle average. On asset quality, the stage three ratio was lower at 1.5%, and we remain confident on the quality of our loan book. The CET1 ratio improved to 15.9%, a 50% of the fourth quarter resilient reserved for future distribution.
And we propose a EUR 0.41 final cash dividend, bringing the full-year cash dividend for EUR 0.21 to EUR 0.62 subject to shareholder approval in April. Now before we go over to this year's figures, let me spend some time on some key aspects of our strategy being our efforts to grow our primary customer base, our focus on the mobile channel and on income diversification. Slide 4 shows that also in 2021, customers recognized our strength, resulting in almost half a million new primary customers in '21. And keep in mind, this is net growth as we have also taken actions to reduce savings, which resulted in some reduction of primary customers and it excludes the retail markets that we exited in '21.
Growth of primary customers continue to be a strategic priority, and we'll come back on this during our strategy update in June this year. We've talked before about the transition opportunity and how ING is well-positioned to benefit from that. The exponential growth of sustainability deals support in '21 prove that clients turn to us for financing solutions related to transition challenges. And one transaction we're highlighting this quarter is a sustainability loan for CEMEX, active in the cement industry, which is a good example of our support authorization activities in the hearts to abate CO2-intensive sectors.
We believe that as a bank, we play an important role in financing the transition to a low carbon society. And we will continue to focus on providing this support with our inclusive approach. We are working on translating this also into more concrete targets, which we will address on our Investor Day in June. And as I said before, we can't do this alone.
As the urgency for climate action increases, corporations, governments, and regulators have to work together to define new ways of doing business that aligned economic growth, with positive environmental and social impacts. On Slide 5, you can see that our focus on the digital -- mobile-first customer proposition has benefited us, as we saw customers increasingly turning to these channels during the pandemic. Also in 2021, the share of mobile-only customers increased, and mobile is not a main channel through which our customers interact with us. It is also reflected in a number of mobile interactions growing to a 91% share, while the number of total interactions continue to grow as well.
We also saw a strong upward trend in our mobile product sales. Over 2020, we highlighted our digital investment economy Germany as an example of how we successfully offer a digital only and differentiating customer experience. Now looking at '21, we see the success of the story continued. We open 390,000 new investment accounts, outpacing the 226,000 over 2020.
And also worth mentioning that over 20% of those new accounts were opened by customers who were new to ING, demonstrating our digital offering continues to attract new customers. Now on to Slide 6, our ability to grow primary customers and focus on diversifying income support income growth in '21 despite the continued liability drag. And fees have been an important contributor grown by 17% in '21 and by a 7% CAGR over the past five years. In that period, the share of fee income on total income increased from 15% to 90%, helping to reduce dependency on NII and I reiterate our 5% to 10% growth ambition going forward.
Looking at loan growth, net core lending growth was back at levels more comparable to pre-COVID. Half of the growth was in mortgages for over '21. Wholesale banking grew as well, which partly reflected TLTRO. We also see a strong pipeline so that is a positive signal going into 2022 and it supports our 3% to 4% loan growth ambition.
Our actions to delimit deposit inflow have also paid off mostly visible in Retail Germany but are introduced negative interest rates in November. The pressure from low-interest rates are clearly visible in the declining contributing -- contribution of liability NII. And I want to emphasize that this graph is backward looking and the development of income components is not a guidance going forward. And specifically a liability income, it is not a linear drag as we generally invest in maturities ranging from overnights to 10 years and it quarterly impacts -- depends on what rolls off and how we reinvest.
Pressure on the liability income will continue into also the longer maturity in our replicating portfolio having repriced to today's environment. And having said that, the yield development curve is positive for us and we expect pressure on liability income to reduce from that in '22. Over '21, the pressure was clear though. However, we have been able to more than offset this and we continue to focus on diversifying our income.
Slide 7 shows full-year NII and fees. And first, NII. And as you saw in the previous slides, liability NII has been declining and the leaves the counter pressure was successful until the pandemic started in 2020. And '21, loan growth again offer some support.
However, liability pressure remains high. And if we exclude TLTRO benefits, NII was done. And while we're optimistic looking at the yield curve development is continuing pressure, reinforce our strategy to diversify income and reduce dependency on NII. 2021 was a very successful year with fee growth fully compensating lower NII while excluding TLTRO benefit, and we believe this higher fee level is largely structural as it is driven by primary customer growth, structural fee growth in daily banking, and growth in investment accounts and asset under management.
Future fee growth is supported by the fact that we are not back at pre-COVID levels for international transactions and also lending fees are still at the lower level. In Germany, the consent process for new and increased fees is well underway. And for the Netherlands, an increase in package fees has been announced. Aside from that, we see several factors and drivers, the first being the continued growth of our primary customer base.
Secondly, we see possibilities to further increase daily banking fees, which we also have to do as the cost of operating an account has been increasing for banks. And some of our largest markets fee levels are still low, and peers initiate either or they follow an increase, while in other markets, we are still cheaper than peers. And thirdly, on our products, we continue to work on new and improved propositions. The digital investment proposition in Germany is an example where it is clearly materializing.
Now you -- we go to expenses on Slide 8. Regulatory costs for up mainly reflecting an incidental 50% increase in Dutch Bank tax. '21 expenses for included EUR 522 million incidental items are mainly reflecting provisions for strategic measures we announced over the past two years, such as [Inaudible] from several European Retail Banking Markets, and a further reduction of the branch network in Retail Benelux. And also includes the provision for compensation of certain consumer credit products.
Excluding these items, operating expenses were broadly flat compared to 2020 and our focus on costs almost fully offset contractual salary increases and higher expenses related to performance and marketing as these returned to more normal levels after being reused in 2020. And going forward, we could expect to see some inflationary pressure in our expenses and CLAs. Overall, we will continue to focus on managing costs and aim to absorb inflationary effects and keep costs at least flat in 2022. Slide 9 shows a risk of developments with 2021 risk costs coming in and EUR 516 million.
In stages one and two, we saw an overall release of around EUR 470 million, mainly driven by releases of management overlays taken in previous quarters, as further reflects clients being removed from watch lists and moving back to stage one. Total additions in stage three included a total of EUR 254 million specific provisions taken in the fourth quarter which I will come back to later on. The remaining stage three provisioning was largely in retail banking and included several more updates in Retail Belgium and collective provisioning in our challenger and growth markets. Stage three additions in wholesale banking was limited and mainly reflected these additions to existing files.
And our stage three ratio remained low at 1.5%. And although the current environment is not without challenges, we feel confident about the quality of our loan book supported by the fact that this is well-diversified and avoid concentration risk. The loan book is practically all senior and well-collateralized. And in wholesale banking, we mainly work with investment-grade companies.
And finally, historically our provisioning has been prudent without surprises when we do move into the recovery phase. Now on Slide 10, you see ROE. And that recovered from the low level in 2020, primarily reflecting lower loan loss provisioning as our factors remained unchanged, such as high incidental costs and high capital levels. And we look at ROE through the cycle.
And the recovery of our ROE level in '21 supports our belief that we can reach the 10% to 12% ambition. And going forward, it should be supported by several factors such as forward growth of primary customers, loans, and fees, combined with continued discipline on controllable expenses. And at the same time, we intend to reduce equity level over time, and we take management actions to control RWA and is bringing the CET ratio more in line with our ambition level. Now on Slide 11.
In line with our distribution policy, we intend to pay out a final dividend of EUR 0.41 per share over 2021 subject to shareholder approval. And this means that the full-year dividend over '21 amounts to EUR 0.62 per share. And this year, we nearly completed the 1.7 billion share buyback program that started in October last year. And overall yield in '21 was 9.4%.
And the share buyback will improve earnings per share, dividend per share, and return on equity. And with CET1 ratio at 15.9%, we have significant excess capital. And we are in a constructive dialogue with ECB about our distribution plans. We will announce next steps if and when we have received necessary approvals.
As you can see on Slide 12. CET1 ratio is well ahead of our ambition. Our REIT has improved significantly and with continued growth as well as focus on costs and capital, we maintained our ambition and very much intend to continue to provide net positive total return. To reiterate, cost-income ratio remains an important input for ROE.
We continue to work on 50% to 52% ambition in that regard. And as for distribution as I mentioned, we proposed a full-year dividend of EUR 0.62 should subject to shareholder approval for the final dividend. Now let me take you through our fourth-quarter results on Slide 14, which we'll try to go through a bit faster. Year on year, NII, excluding TLTRO was lower -- slightly lower, primarily due to pressure liability income and a minus EUR 23 million reclassification from our income to NII, and this was partly absorbed by increased negative interest rate charging in the Retail Benelux as compared to a year ago thresholds in the Netherlands have been gradually lowered.
While in Belgium, charging was introduced as the beginning of '21. NII from lending was up, reflecting mainly higher average volumes. And when looking at -- excluding -- except for reclassification NII went slightly up quarter on quarter as higher lending NII and increasing interest rates -- negative interest rate charging more than offset this quarter pressure on liability income. Our net interest margin declined quarter on quarter by one basis point to 137 basis points driven by the aforementioned reclassification as increased negative interest rate charging absorbed most of this quarter's pressure.
Slide 15 shows net core lending growth. Overall strong growth continued in retail, while in the fourth quarter wholesale banking also has strong contribution, resulting in a net core lending growth of EUR 13.4 billion. In retail, mortgages were the primary driver of lending growth with some growth also visible in consumer and business lending. Mortgages were strong in Germany but also in Spain, Australia, and Poland.
In wholesale banking, loan growth returns with partly reflected TLTRO-eligible deals, so the number for the fourth quarter should not be extrapolated. However, when we look at the pipeline, we see signs that demand remains strong. And we are positive on loan growth and also banking going forward. Net customer deposit growth was minus EUR 2.1 billion and retail sales are by EUR 2.7 billion with inflows in the Netherlands and one Eurozone countries, while we saw an outflow in Germany and France.
And for Germany, this was mainly the result of the introduction of net negative rate charging in November. Wholesale banking records an outflow of EUR 4.9 billion mainly in PCM. And turning to fees on Slide 16. Year on year, fee income grew by 20% with both growth in retail and wholesale.
Retail fees were up 70%, with an impressive 27% increase in daily banking as it reflects growth in primary customers, the increase in payment package fees, and further recovery. And the level of domestic payment was actually -- which was basically back at pre-COVID levels. And international payment levels actually remained subdued in transactions. In investment accounts products, fees were 12% higher, affecting growth in accounts as I mentioned.
In trades, the wholesale banking fees were 26% higher with growth across all four groups. And sequentially, retail fees were 3% higher driven by investment products and daily banking. In wholesale banking, fees were up 9%, mainly reflecting higher fees in financial markets and corporate finance. Slide 17 shows expenses which this quarter included EUR 166 million of the incidental items, mainly reflecting EUR 141 million of provision and impairments, related to the announced closure of the French Retail Banking activities.
Excluding regulatory costs and incidentals, operating expenses remained under control. Year over year, these costs were slightly higher, mainly reflecting a lower VAT refund and higher stock expenses related to CLA increases and pro forma related expenses, which were reduced to lower levels in the fourth quarter of last year. So that's 2020. Quarter on quarter was also largely driven by the staff-related cost increases, while also marketing activity trends were higher.
Regulatory costs were up, including the Dutch Bank tax, which was 50% higher in '21 and '22. These levels should normalize again. Overall, I'm pleased with our operating costs are developing. Also, as we already see some effects of measures taken so far, we will always keep focusing and optimize where we invest our capital, and further measures can always materialize.
But at the same time, we also need to look forward and we will invest in areas where we can get the best returns. Now we go to risk costs, that's Page 18. There were EUR 346 million or 22 basis points over average customer lending. The increased level compared to previous quarter reflected our prudent approach.
In certain environments, we do hold the EUR 30 million to reflect uncertainty in COVID scenarios and valuation shorten asset classes, mainly in wholesale banking. And in addition, we took hold EUR 24 million related to residential mortgages, for increasing inflation and interest rates could affect the customer's ability to pay, which could impact house prices. This was partly offset by EUR 124 million releases of management overlays taken in previous quarters, mainly related to payment holidays and sector-based overlays predominantly as a result of reductions in losses. Aside from these releases, Retail Benelux risk was mainly reflected and more based in Belgium and some individual stage three releases.
However in challenging growth market risk was further reflect the collective provisioning mainly in Spain and Poland and the wholesale banking, stage three risk costs for included limited editions too many existing files. Finally, this stage three ratio -- sorry, stage two ratio is slightly lower and the stage three ratio was stable. Slide 19 shows that our CET1 ratio increased to 15.9%. CET1 capital was EUR 600 million higher, mainly due to the inclusion of 50% of net profit for the quarter.
And with net profit being equal to resilience net profit, the other 50% was reserved for future distribution in line with our policy. RWAs increased mainly due to the higher markets and operational RWA. Credit RWAs were down mainly reflecting overall improved profile of the loan book. And regulatory RWA inflation known at this moment ahead of the 2025 Basel 4 implementation has been almost fully incorporated.
We still expect RWA impact from the postponed implementation of risk for waiting for mortgages in Netherlands, which we currently estimate at around EUR 7.5 billion. But we expect this for it to be temporary as this [Inaudible] and the outlook for under Basel 4. And besides that, we will continue to see releases or additions to RWA from regular mobile updates. To wrap up with the highlights of the quarter on Page 21, our customers continue to recognize our strengths, resulting in further growth of our primary customer base, as well as the number of sustainability deals.
Our digital-only, mobile-first focus continue to pay off, with mobile becoming the main channel through which customers interact with ING in 2021. And these factors support our efforts to diversify income with full-year loan growth returning and fees increasing by almost half a billion or 17%. And this offsets the continued pressure on liability income caused by the negative rate environments. On costs, we managed to keep full cost -- full-year costs flat.
Full-year risk costs were EUR 560 million, or eight basis points over average customer lending well below are through-the-cycle average, and this included some prudent adjustments to stage three provisioning on existing files. The CET1 ratio improved to 15.9% with 50% of the fourth-quarter resilient net profits reserved for future distribution. We proposed a EUR 0.41 final cash dividend be bringing the full-year cash dividends to EUR 0.62, subject to AGM approval in April. That concludes the presentation and I will now open the floor for Q&A.
Questions & Answers:
Operator
Thank you, sir. [Operator instructions] Our first question is from Mr. Benjamin Goy of Deutsche Bank. Go ahead, sir.
Your line is open.
Benjamin Goy -- Deutsche Bank -- Analyst
Yes. Hi. Good morning. And two questions, please, from my side.
First on cost maybe just to double-check in the absence of restructuring costs at any incidental, should we expect then that the underlying cost base is stable? And you can also absorb investments bank and the likes in 2022? And then secondly, you're obviously guiding toward payouts about 100% -- yeah, 100% going forward. Was just wondering how the discussions with regulators have evolved over the last month? I mean, we saw a large appeal of you announcing effectively that plan. Do you think the likelihood of that has also become more or has increased for ING? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Thank you very much, Ben. I will answer the first question and then, Tanate will answer the question on payout. Yeah. I mean, so the cost base is stable.
Please know that the fourth quarter was impacted also by CLA and by performance-related salaries, and, of course, by slightly increased marketing and R&D expenses. On the back of growth because we want to continue to grow our business as well. Now, gradually, we see some of the impacts that we made as a result of the announcements that we made on some of our retail markets and some of our other activities kicking in that is gradually kicking in over 2021 but will continue to kick in over 2022. And that means that despite what we see and currently see in inflation and CLA pressure that we intend to keep our costs at least flat over the year 2022.
Tanate?
Tanate Phutrakul -- Chief Financial Officer
Hi, Benjamin. So I think just on capital returns, I think our discussion with the regulators are constructive. You know, look at what we announced so far, EUR 0.41 in dividend payments EUR 1.7 billion share buyback, which is coming to its conclusion and rising levels of core tier ones. So that capital strength means our conversation with the regulator has been constructive, as we say.
And these discussions are ongoing, but we expect that we would conclude our discussion before we announce our first-quarter results.
Benjamin Goy -- Deutsche Bank -- Analyst
Understood. Thank you.
Operator
Next questions are from Mr. Benoit Petrarque of Kepler Cheuvreux. Go ahead, please. Your line is open.
Benoit Petrarque -- Kepler Cheuvreux -- Analyst
Yes. Good morning, guys. So the first one will be on NII. So the red curve is moving quite fast now.
I just wanted to discuss basically this gradual positive effect into the replicating portfolio. Especially at which points -- or when do you expect the kind of loan growth at a 3%, 4% level to offset the pressure on liability income? And are we getting closer at current levels to that point? I was wondering that -- if that could be something we will start to see in 2022. And also, little bit awful on the rate increase. What is your sensitivity again to have 50 bps hike of ECB rates on NII.
That would be very useful, please. And then the second question will be on the fees. Just -- do you see fees, you know, going in 2022? I mean, you're coming from a very strong year at almost 20% year on year. Do you still expect some of these uplift? Do you think that includes some structural and market-related effects? Or do you see this growth into '22 basically? That will be very useful.
Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Thank you very much, Benoit. And I will answer the question on fees, and Tanate will talk about NII. If you look at fees, I mean, most of the elements that we currently see in our fee buildup are structural. We have increased the number of people that have investments, public accounts with us.
For example, if you look at Germany, in 2020, we grew the number of accounts for investments with 326,000. This year, it was three 390,000. So in total, more than 2 million clients in Germany are currently investing through us. We increased the number of payments -- we increased the payment packages in some countries, as a result of which our fees went up as well.
And we also do more insurance with a number of our clients in the different countries. But please note, we also continue to grow our primary customers. And if we grow our primary customers, that means that we have clients that do more with us. And like we always have said, clients who do more with us are more sustainable from both sides from [Inaudible] but also from our side in doing business together.
And you see that on one of the pages in terms of mobile sales. That also increased quite dramatically in this year compared to the year before. So all those elements play a role. So higher number of primary clients, increasing payment packages, more clients that do investment with us, more clients that do insurance with us.
And I think that was -- and the reason why I am confident is that if you look at the lending fees in wholesale banking, that is not quite yet back at the level that we saw pre-COVID. If you also look at the international payment volume, that's completely not back where it was before the COVID crisis. Yeah. We saw domestic payments coming back -- the international payments going back, and that is a significant part also of net income.
So in that sense, I'm positive. I'm confident. And therefore, we continue to guide a growth in fee income of 5% to 10% per annum also for the years going forward. Tanate, on NII?
Tanate Phutrakul -- Chief Financial Officer
Benoit, just on NII maybe I give you a bit of color in terms of what is some headwinds and what's some tailwind. Clearly, going in assumptions for 2022 is that the TLTRO program will end. OK? And with that ending of the TLTRO program, it means that we will be missing somewhere around EUR 300 million NII compared to 2021. Having said that, if you look at the other components, we were fairly confident given what we see in Q4.
The 3% to 4% loan growth is there, and we think it will be there across the board whether retail or wholesale banking. We also believe that we see a strong pickup in high-margin business in our central European business, which I think will also be contributing to that NII uplift. The other couple of things to point out is that negative charging for liability is continuing, not about the future, but the current actions already taken. And that for the full year 2021, we have a positive impact from that negative rate charging of approximately EUR 220 million.
And that would raise to about EUR 300 million for 2022. These are kind of also some positive tailwind that you could see. And to address your question on the curve movements, we do expect that the negative rates compression that we will see in '22 will be, you know, significantly less than what we saw in 2021. But I think it's not so easy to just say what would a 50-basis-point uplift would mean.
It's a much more dynamic calculation that would -- we would have to make. But I would say that these rates movements that we see now is really helpful in terms of mitigating some of the compression we saw in 2021.
Benoit Petrarque -- Kepler Cheuvreux -- Analyst
This is very useful. On the 50 bps, I was just mentioning the short end of the curve. So the currency rate, let's say from the ECB will kind of act by 50 bps. Any guidance on that?
Tanate Phutrakul -- Chief Financial Officer
Well, I think we do our replication in a barbell, and we see really good evolutions in the long end. So indeed, if the short end would move, it would be very, very helpful.
Benoit Petrarque -- Kepler Cheuvreux -- Analyst
OK. Great. Thanks.
Operator
Our next question is from Mr. Stefan Nedialkov, Citi. Go ahead. Your line is open.
Stefan Nedialkov -- Citi -- Analyst
Yeah. Hi, guys. Good morning. I want to ask a couple of questions here.
The counter-cyclical buffer have gone up by around 20 bps at the group level. I'm assuming that's the buffer -- increase in the buffer. So we're now at 10.7% swap, which means that buffer to the management target has shrunk by 20 bps. Is this something that you're, so to say, going to absorb within the management buffer? Or are you thinking that maybe as regulator states in the counter-cyclical buffers across Europe, the 12.5 might move higher, maybe closer toward 13% or so? So that's one question.
And the second one is on costs. It's encouraging to see that you're aiming to absorb inflation for '22. That will presumably come via restructuring in the business as you have been doing over the past couple of years. Is it fair to assume that the flat guidance -- or at most flat guidance is exclusive of any restructuring costs that we may be seeing from the various businesses? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Yeah. Thanks so much, Stefan. I will do the question on costs, and then Tanate will do the question on the counter-cyclical buffers. We took quite some -- I mean, first of all, you're right.
So yes, that's [Inaudible]. What I guide on is the -- of course, excluding these restructuring amounts if they would come. We've done quite a bit of restructuring in 2021 with Czech Republic, Austria, France, also provisioned some of the branch networks in the Benelux. Not all of those benefits have yet to materialize.
So the announcement that we made earlier in the year still means that it takes us quite a lot of time to actually run all those businesses. Let me take the Czech Republic and Austria that have taken until the end of this year to roll off. So that takes time. So benefits of some of these announcements that we make -- made in 2021 and 2020, by the way, will also materialize in 2022, and that will help us.
But indeed, it is excluding new restrictions if these would take place. Tanate?
Tanate Phutrakul -- Chief Financial Officer
Stefan, so just addressing the question on counter-cyclical buffer. So we clearly have issued a press release on our new MDA target. And in calculating our 12.5% capital targets, we already take a certain assumption about rising levels of counter-cyclical buffer. So far, I think about six or seven countries of material size have increased our buffer which is contained in our numbers, but we stick with our 12.5% core tier one guidance.
Stefan Nedialkov -- Citi -- Analyst
Great. Thank you.
Operator
Next question is from Mr. Omar Fall of Barclays. Go ahead, please. Your line is open.
Omar Fall -- Barclays -- Analyst
Hi there. You mentioned the very helpful impact from higher policy rates. So just to clarify, is there an expectation then that if and when actual policy rates increase, you'd be able to maintain the negative rate charging you're currently doing and the EUR 300 million benefits and then you'd have some positive beta there for some periods? Then the second question would just be, to help us with our modeling. Could you give us the cost base of France, Retail Austria, and Czech Republic or, you know, just some slightly better clarification of the component of opex that you'd expect to see removed in 2022? That would be very helpful.
Steven Van Rijswijk -- Chief Executive Officer
Thanks, Omar for our questions. So on our policy rates -- I mean, and clearly you also mentioned, what is the beta there? And then that is a good word, because it depends on the beta tracking that we then will do. Clearly, as long as the rates are negative, the beta will probably be higher and if the ratio is positive, then the beta tracking will probably be a bit lower. But it also depends on what competition is doing and how the rates not will only move in the short term and also in the long term.
So it's not a one-sided answer that you can give. What will, of course, help is that now we already see that the market rates on the low end are increasing. Those are -- and we see that mortgage rates are more linked to the long end of the spectrum, and the ECB is more focused on the shorter end of the spectrum. But, yeah, we will need to wait, and also the ECB are all going to announce as of today, but also the next quarter.
So we will need to remain seen. But if you look at it overall, a gradually increasing interest yield curve upward sloping will be helpful for us both on short term and on the long term of the yield curve. Then on the cost base of France, Czech Republic, and Austria, we do not disclose individual cost basis. But Tanate will give you some flavor.
Tanate Phutrakul -- Chief Financial Officer
I think we -- as Steven mentioned, we don't disclose the absolute cost number. But we did disclose the number of employees affected by these closures. And for Czech, for Austria, we have announced numbers of around 560 staff. And for France, as we announced recently, it will affect 460 FTEs.
Omar Fall -- Barclays -- Analyst
Thank you.
Operator
Next questions are from Giulia Miotto of Morgan Stanley. Go ahead. Your line is open.
Giulia Miotto -- Morgan Stanley -- Analyst
Yes. Hi. Good morning. Can you hear me?
Steven Van Rijswijk -- Chief Executive Officer
Yes. Very well.
Giulia Miotto -- Morgan Stanley -- Analyst
Perfect. OK. Thank you. So two questions on my side.
I want to go back to the NI sensitivity question. So the perception of investors that we have in ING might be less sensitive with respect to peripheral European banks because the mortgage book is mostly fixed. And if I look at what you disclosed in the annual report, I think there is a EUR 60 million impact for 100 basis points move in one year, which is basically a negligible impact. But what we have seen through the years is clearly a much higher impact.
So it will be very helpful if you could give us any sort of sensitivity for either a parallel or a front-end move. So that's my first question. And then my second question on fees. So I totally understand the structural, you know, discussion around the retail fees.
But my question is on wholesale banking fees actually. So EUR 322 million in the quarter is pretty high also by pre-COVID standards. Is that sustainable? What is driving that? Any color that you can give us on wholesale banking fees? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Thanks very much, Giulia. You're correct. The wholesale banking fees were good this quarter. And that was a result of more event-driven fees also in financial markets and corporate finance.
So in that sense, that was good. But if you look at the lending fees within that, because most of the fees that we make in wholesale banking are still from, let's say, the syndicated loans and underwriting activity that we do, and that market is not completely back. It's typically still a taken hold market, or a number of these elements will be held by M&A, of course. That has more M&A that also more underwriting, but that is to come.
So, yes, we benefited this quarter from some one-off -- positive one-offs in terms of event-driven fees, but we have not yet benefited from the syndicated loan market coming completely back. That's on wholesale banking.
Tanate Phutrakul -- Chief Financial Officer
And, Giulia, I think your question is, as you know, in most of our markets, we do fixed-rate mortgage loans. But it does not mean that we keep that long-dated interest rate position. From a hedging perspective, we -- as long as we originate the loans we start swapping the position down to the level of interest rate risks that we are comfortable with. OK? So I think if you want to see the sensitivity, you should look at the three to five to seven-year piece of the curve.
And also, you know, if -- as we mentioned before, if the short end of the curve, kind of the six months will start moving materially, that really will be quite positive on ING's results -- net interest income results.
Giulia Miotto -- Morgan Stanley -- Analyst
Thank you. And maybe just a follow-up to this last point. In terms of your replicating portfolio, can we assume that about two-thirds of the deposit in terms of size or any more color on that?
Tanate Phutrakul -- Chief Financial Officer
We don't give that information. But about EUR 600 billion of liability are fairly significant part of Eurozone based indeed. Yep.
Giulia Miotto -- Morgan Stanley -- Analyst
Thank you.
Operator
Next question is from Mr. Kiri Vijayarajah of HSBC. Go ahead, please. Your line is open.
Kiri Vijayarajah -- HSBC -- Analyst
Yes. Good morning, everyone. Couple of questions. So firstly, on the wholesale bank and the rapid lending growth you're seeing there.
You know, if you go back, you have been doing some de-risking there when you first became the CEO. So my question is really, you know, how do we get comfortable when you haven't simply kind of backtracked on your kind of risk appetite in the wholesale bank and give us comfort. You haven't just gone back and restarted some of the old lending in wholesale banking. And then the second question more on the retail side in the extra revisioning you're taking there.
You've planned higher inflation and higher interest rates, risk of falling property value. And I just wondered what early warning signs you're seeing that was the trigger there? You know, whether you're seeing that maybe some of your peers aren't seeing yet? And just putting them in reading between the lines, is it fair to say Turkey was a fairly minor elements? You did mentioned it in the slides, but you didn't really mention it in your verbal commentary. So just curious as to where Turkey fits in to the extra provisioning you've taken on the retail side this quarter? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Sorry, Kiri. The last part was? We couldn't quite get that. Turkey and what else you said?
Kiri Vijayarajah -- HSBC -- Analyst
When you flagged the extra provisioning triggered by debt servicing, higher inflation, higher interest rates, and also falling property values –
Steven Van Rijswijk -- Chief Executive Officer
All right.
Kiri Vijayarajah -- HSBC -- Analyst
-- for the extra provisioning. And, yeah, a lot of your peers haven't really been flagging that yet and maybe you're ahead of the curve, but I wondered what early warning signs has been the trigger for you to actually take those extra provisions.
Steven Van Rijswijk -- Chief Executive Officer
Right. OK. Clear. So Ljiljana will answer the questions on the provisioning and early warning signs or signals that we see.
I will take the question on lending and wholesale banking and also respond to Turkey because we -- because you -- I believe you asked Turkey as well. But this was not in our -- it was in the slide, but not in the verbal comments. If you look at the lending and wholesale banking, I mean, yeah -- I mean, I used to work in wholesale banking, and then I was a CRO and I became the CEO. And -- but I have not become yet schizophrenic, I hope, in a sense that we did change or tighten some of the policies over 2017.
And that had made to do with the more cyclical sectors in real estate, finance and leveraged finance, because we saw that then at least in leveraged finance, some of the structure is not being conducive to what we would like to do, which means the final takes or the underwriting standards in terms of the governance. And the same was going for, let's say, some of the indicator levels is your loan to value in terms of our real estate finance book. And that's what we then tied it. We never changed that since.
So if you look at what's the growth in wholesale banking currently is, which we see is fully in line with the policies that we have had since then, which is largely investment grade. In this quarter, also a bit of a pull-forward due to TLTRO. Short-term facilities also in trade, also supported by higher oil prices or higher commodity prices. That's what it is, so there is no -- has not been a change of tax in what we do in wholesale banking.
I will leave the risk costs to Ljiljana.
Ljiljana Cortan -- Chief Risk Officer
Hi, Kiri. Yes. The early warning signs that you mentioned, let me please clarify that these are not related to the asset quality that we see in the fourth quarter on contrary. We do see the signs in all of the metrics of further strong and improving asset quality.
The early warning signs that we talked about is more related to the forward-looking macro indicators that have been, I would say accelerated in the fourth quarter, specifically with the outlook on inflation is it going to stay high for longer and definitely its impact and eventually amplification effect on other macro variables. And just let me give you a few of the numbers that has made us think of what could happen going forward. Clearly depending on the monetary response is the fact that in December, as we know, the Eurozone inflation has peaked to the highest since the euro introduction. Not just that, but also fourth-quarter inflation year on year has almost doubled in some of our core markets compared to the third quarter driven by the strong energy increase of the prices, which actually horizon of the end is not yet there.
And let us not forget that in the last few years during pandemic, we have seen a double-digit growth in our overall markets with respect to the property valuations. And we have seen quite benign I would say outlook and position of the household incomes. So all of these coming together with what we see on the longer end of the curve, which is increasing interest rates. And looking forward to today's announcement as well of ECB and how they look into it, we are taking this prudent stance.
Let me just add that most of these provisions have been taken on the, I would say, more vulnerable part of our portfolio which is primarily stage three, having in mind that we expect eventual impact first to material on this weaker part of portfolio. So they are not taken systematically for the whole book.
Kiri Vijayarajah -- HSBC -- Analyst
Very clear. Thank you.
Operator
Our next questions are from Mr. Farquhar Murray, Autonomous. Go ahead, please. Your line is open.
Farquhar Murray -- Autonomous Research -- Analyst
Good morning, all. Just two questions if I may. Firstly on costs, you mentioned the impact of a risk profile reduction on regulatory costs in the quarter. Can I just ask if you could elaborate on the mechanics of that? And in particular, has that only really just kicked in for this final quarter, or did it support the whole of the year? And then secondly, just coming back to the counter-cyclical buffer.
Are you willing to elaborate on the assumptions you build into the target for that? And then just more generally, maybe even philosophically, can we all -- we can all mechanically just increase the counter-cyclical buffer and it narrows the headroom to MDA. But is the target exercise really so bottom-up mechanical? And can we just take everything else as a given within that? And I asked him that because obviously, if we do move to a landscape with much larger counter-cyclical buffers. And does the domestic buffer of 2.5% really makes sense in that case, because it looks like it was built for a different environment? Thanks.
Tanate Phutrakul -- Chief Financial Officer
OK. So -- and you have to guide me a little bit how you exactly -- what exactly mean with your question. But I think that your -- that the first question related to the higher bank taxes that we saw in the fourth quarter in terms of DGS and so -- or lower. But I mean, can you just repeat what that question exactly was?
Farquhar Murray -- Autonomous Research -- Analyst
Sorry. That's my fault. Actually, the other component, obviously the higher incidental component, which I understand. But actually, below that, you seem to essentially have had a slight reduction on the rest of the regulatory costs.
And you seem to be attributing that to a risk profile reduction, which I think related to leverage. And I'm really just trying to understand what's the timing and mechanics of that. And sorry if it wasn't clear to start with.
Tanate Phutrakul -- Chief Financial Officer
OK. So just on -- if I call on the calculation of DGS. DGS calculates based on any banks given matrices of different dimensions. And one of the driver of the contribution of DGS is the level of leverage ratio that you have.
And given the improvement in the leverage ratio of ING how contribution to DGS came down?
Farquhar Murray -- Autonomous Research -- Analyst
Did all of that just kick in in the fourth quarter?
Tanate Phutrakul -- Chief Financial Officer
Principally, yes. Yep.
Steven Van Rijswijk -- Chief Executive Officer
Yeah. And then on counter-cyclical buffer, it is really a bottom of exercise that -- well, in the end, yes. So basically, what it comes down to is that these countries can include these counter-cyclical buffers or not. What we have done when we came to our levels of 12.5% -- or around 12.5%, because the changes, for example, the Netherlands made in the local SRB buffer that was -- it -- that was here for ING for a long time, they decreased that.
But in return, there was an opportunity for the Dutch Central Bank to start levying a counter-cyclical buffer. So in our buffers, we take into account the possibility that some of the counter-cyclical buffers will materialize at some point, and that's when we include it. So based on what we currently know, based on what has been introduced, we have currently no intent to change our guidance on our CET1 ratio.
Farquhar Murray -- Autonomous Research -- Analyst
OK. Thanks a lot.
Steven Van Rijswijk -- Chief Executive Officer
Thank you.
Operator
Our next questions are from Mr. Tarik El Mejjad of Bank of America. Go ahead. Your line is open.
Tarik El Mejjad -- Bank of America Merrill Lynch -- Analyst
Hi. Good morning. Just coming back, please, on the question on the counter-cyclical buffer. I mean, I understand that you seeing compensation of the higher potential buffer in Netherlands through the lower -- sorry, domestic cyclical buffer that you had in March 2020.
But the question is really the 2.5%, how volatility is in the context where, you know, LTVs are lower since the last 10 years it is in place, the [Inaudible] fund almost failed, you have much higher RWAs on mortgages. So what's really your discussion with the DNB about this 2.5%? Because clearly, we are in different contexts. And in a European context, it sounds very elevated. And when you think about still the ambition to take the CCYB to 2% in next two years, are we not in spirits where the DNB will be in a loop of stacking up capital for the Dutch Banks? So the second question is on costs.
So in your 10% to 12% ROTE, you mentioned in a bullet point that you're counting on termination or the filling up of the [Inaudible] fund. So what's your expectations of all that from 2024? Do you think it will fully stop the contribution, or it's only the contribution regarding the increase of the size of the fund? So what's your view in there?
Steven Van Rijswijk -- Chief Executive Officer
OK. Thank you very much. When it comes to the 2.5% systemic risk buffer that we here -- have here in the Netherlands, that is high compared to systemic risk buffers that our national competent authorities are levying. I have been advocating against that for quite a long time already.
This is based on the premise that banks who are systemic are systemic for the country, and the intent of let's say the banking union with the three pillars was -- which is the -- having an SSM, having one resolution agency, and having also one deposit guarantee system that there was not so much dependency anymore on one country, but there will be dependency on Europe. And in my view currently, where I feel, doubling this. So I understand and appreciate the prudence, but I think that this is not justified anymore in terms of where we're going. And I'm continuously -- I don't think what was good is that the percentage was changed in March 2020 as you rightly mentioned.
But I still think from a euro -- in a European context, this is not where it should be and it also goes against level-playing field. So that's my first remark. And by the way, this is not a secret to the Dutch Central Bank. We have quite open discussions about it.
And it comes back down to the second element, which is, yeah, the banking union should help with that. And one of the pillars is that European DGS funds. The contribution to that continues at the current level into 2024, and then it will be tapering off. We do not think as yet that will go to zero completely, but it will go down as from that time onwards.
Does that answer your questions?
Tarik El Mejjad -- Bank of America Merrill Lynch -- Analyst
Yes. Just following very quickly on the first one. But don't you think the ECB -- the -- sorry, the DNB is in the mindset of really locking up and -- capital within the Dutch Banks, because I'm sure they understand all the arguments we're putting forward and still detect any opportunity to keep buffer. So it was clearly potential for them to decrease further the systemic buffer and then compensate.
So they haven't done that. So do you think -- and does it make you more cautious when it comes to capital return and rundown excess capital over time or not?
Steven Van Rijswijk -- Chief Executive Officer
That's a great question. The answer is no. Look, I cannot comment on the future views of DNB. That's for the DNB.
But I'm I don't have particular concerns in that regard. And it's for sure not a -- an element that we currently discuss around the table when we talk about the distribution plans. So the answer on that question is no.
Tarik El Mejjad -- Bank of America Merrill Lynch -- Analyst
Thank you very much.
Steven Van Rijswijk -- Chief Executive Officer
Thank you.
Operator
Next questions are from Mr. Jon Peace of Credit Suisse. Go ahead. Your line is open.
Jon Peace -- Credit Suisse -- Analyst
Yeah. Thank you. So my first question, just following on from Tarik's points, I think it would be quite helpful to manage our expectations if you could give us a rough idea of how quickly you plan to get to your 12.5% targets. I know you've mentioned maybe a couple of times last year the phrase, a couple of years.
I mean, could you just maybe clarify, are you still thinking two to three years rather than four to five years to return to a 12.5% target? And then my second question, please is on the cost of risk. How much do you see that normalizing in 2022 given you still have some overlays, given the underlying run-rate is still pretty good? Should we still expect it to be below or even well below the through the cycle rates? And is Q4 a good proxy for the potential cost of risk next year, or would that be a little conservative given you took some extra provisioning? Thanks.
Steven Van Rijswijk -- Chief Executive Officer
So Ljiljana will do the question on the cost of risk. And regarding, I would say, how quickly we will get to 12.5%, look, we have been saying that we will do this in the next couple of years. I'm not going to speculate what's the exact number of years we'll be. But it's clear that if you look at our current levels of 15.9% we have, compared to 12.5%, we have EUR 10 billion of excess capital.
We started last year with a share buyback based on the capital we already had reserved. We've told you that we will -- before the first-quarter figures, we'll come with the conclusion of our current discussion with the ECB on paying further excess capital. And we will then work step by step toward our 12.5% common equity tier one in the next couple of years. Ljiljana, is the fourth quarter any predictor of what it will be in '22?
Ljiljana Cortan -- Chief Risk Officer
Well, I would not take it as a proxy for '22 extra provisioning. As we explained, we have taken a specific management overlays this quarter. And they are very specific to certain macro indicators that will in the end realize or not in '22. What I believe is important to look at the overall cost of risk for the year which are at 8 bps well below the -- through the cycle.
And actually, we remain with our guidance going forward as well in line through the cycle. So in short, answer is no. We do not expect this to continue in the same trend, and we were prudent for the reasons that we have mentioned before.
Jon Peace -- Credit Suisse -- Analyst
Thank you.
Operator
The next questions are from Mr. Jean Neuez, Goldman Sachs. Go ahead, please. Your line is open.
Jean Neuez -- Goldman Sachs -- Analyst
Hi there. I have two questions, please. One is on -- for the net interest income, the pricing component. So you noticed in one of your slides, that there were strong volumes in Q4.
And you noted that some of them were due to the ramp-up toward TLTRO, I guess, one out of two for the cutoff date. I know it's early in the year, but are you noticing changes, now that the threshold has been passed in time, in competitive behavior when it comes to phone book pricing, in particular for non-financial corporates in the various markets where you operate? I'd expect that the comments you made on the EUR 300 million TLTRO is all else equal for the loss of income. But I also think that the TLTRO over time had its desired effect from a monetary perspective, which was to bring down cost of lending for the -- for companies. So I'm just trying to understand whether that can reverse or partially reverse? And my second question is on the cost line.
I wanted to understand when you say that the cost would be roughly flat or at least flat in 2022. Whether you could give us some example of what you're doing to achieve this and to counter inflation, which is picking up, and essentially to try to understand how more there is to go in the years that continue or whether that -- those are actions which are point in time as opposed to structural.
Tanate Phutrakul -- Chief Financial Officer
OK. Thank you very much. In terms of loan volumes, there was some full force of the loans in wholesale banking use of TLTRO. In the end, we still see that there's a lot of liquidity in the market.
And that is, of course, determining the price levels in their particular loan book. What we have seen, and like I said also in a presentation, we do see a good pipeline. And again, I particularly pointed out the pipeline that we currently see. So that's also encouraging for our loan growth in 2022, which I said, we should -- you should not extrapolate the fourth quarter in '21.
But we're still aiming for -- typically for 3% to 4% long rows, which we're doing as well. And when there is more normalization in economies, you see the economies that continue to grow also for the coming years. The outlook in that sense is good, despite the uncertainties that we all know. And, of course, we have the whole transition ahead of us.
And it also means that we have to -- that the Europe companies need to make massive investments and elsewhere, by the way, to go through that transition. And also that will be a positive stimulus for demand. So in that sense that we're optimistic but not a particular impact currently on pricing. On costs, first of all, in the end, we focus on growing our customer experience.
And if we are increasing and improving the customer experience, we will get more -- we will get more primary clients. We will get more traffic, and we will then also do more transactions and business with those clients. That's what we believe in and that's what we are very successful in. In that, if you then can do it in a better, digitalized way that will both improve the customer experience as well improve the quality experience, but it will also impact our cost to serve.
And therefore, in building that more personalized, smart, and instant customer experience, digital is the key. And you see already that over 50% of our retail customers are mobile only, and over 90% of all are complex are digital. So basically, we will pull also the digital lever to -- and improve the customer experience by entering digitalization and use scalable technology and operations to further improve our cost-income levels as part of the overall equation. So that's what we do structurally.
And then what we also do, and we have been doing it over the past one and a half years, and I see one of your fellow colleagues was asking about that, we have -- we are not only going to reviewing our businesses, we will continue to review business as always, to see if they long-term adds sufficient scale, talking about retail and shorter markets, or as sufficient individual deliverables also for other markets so we can make a applicable return in that regard and the return targets are clear. And if that shorter cycle is not the case, then we take our conclusions to deploy that capital elsewhere where we do have sufficient client business and scale in certain particular markets. Now I will never run ahead of myself in announcing these things or what I will announce, but the first lever we pull is digitalization that is structural; and the second one, which is business reviews that is more, I would say, one-off, depending on where we operate and how successful we are.
Jean Neuez -- Goldman Sachs -- Analyst
OK. So just to clarify, in another word, you're not combating inflation by freezing investments or delaying things that you would otherwise have done that we could then have to kind of see a payback further than the years. Right?
Tanate Phutrakul -- Chief Financial Officer
No. Not at all. Because in the end, you always need to focus on continuously improving your client experience. That's the only way that you can compete long term.
And if you –
Jean Neuez -- Goldman Sachs -- Analyst
OK.
Tanate Phutrakul -- Chief Financial Officer
Good. Thank you.
Jean Neuez -- Goldman Sachs -- Analyst
Thank you.
Operator
Next question is from Mr. Guillaume Tiberghien, Exane BNP Paribas. Your line is open. Go ahead.
Guillaume Tiberghien -- Exane BNP Paribas -- Analyst
Thank you. Good morning. I've got two questions and, sorry, two clarification. So the two questions are, could you provide us the fees that you generated from international payments in '19 and in '21, because you highlight that as a source of growth? So I wanted to see what the base was and what it is now.
And secondly, could you give us a flavor about how your commercial real estate portfolio is developing in a changing world with people working less from the office and going less to shops? And the two clarification are, number one, on the Belgian EUR 23 million NII transfer to other income. Does that represent a new normal, a new run-rate for NII, or is it just a one-off movement and we go back to previous level? And the second clarification is about the cost of risks. The question earlier was, is 22 basis points a good reflection of what you would expect for 2022? And I think the answer was no, it's not, because we had some provisions that were one-off in nature. But your usual guidance is 25, so actually, the Q4 number is very close to that.
So is the Q4 number actually a number we could annualize for '22? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Thank you. I will answer a couple of questions, and Ljiljana is deliberating on the real estate portfolio. So if you look at the level of fees from international payments in 2019 and 2020, we don't disclose it as such. And if you look at our payment fees, they consist of two parts.
The first part is the monthly package fees that people pay. And secondly, depending on the type of package that you get, you also pay for transactions. Now on the second part, and it depends per package and it depends per country, the international payments of that second part is the lion's share of the second element of daily banking fees. So not of the monthly packages as such, but on the transaction payments, then international banking, and international payments are very important, especially in the Netherlands and Belgium, which is largely a debit card -- which are largely debit card-driven markets.
And that's what I want to say on first one. If you look at the minus EUR 23 million, so that came from other income to interest income and therefore was minus 23 million. That was a one-off. So you can ignore that going forward for [Inaudible].
Then on cost of risk, if you look at the guidance and if you look at the real estate portfolio, I will give the floor to Ljiljana.
Ljiljana Cortan -- Chief Risk Officer
Thank you, Steven. Thank you, Guillaume. As we said, 25 bps is our through-the-cycle average, not necessarily for the year. So we do believe that what we've done in fourth quarter was one-off to the management overlay.
However, 25 bps should be looked as a longer-term average and through the cycle. We remain confident on the quality of our book and the level of provisioning. And when it comes to the commercial real estate portfolio, I think it's important to say that over the four years, we have kept the growth in that area in order to, I would say, manage the concentration risk. And specifically with COVID coming in place, we have revised as well some strategies in the office and retail space.
However, in terms of the overall outstandings, they're very stable. They're approximately at EUR 49 billion, and it's quite low and even decreasing clearly LTVs of approximately 48%. Also, with respect to the asset quality in that area, we are at a very low and lower-than-average NPL ratio of 1.2%. So we do remain cautious, but we do remain as well monitoring our portfolio and so far now even [Inaudible], I would say, in that area.
Guillaume Tiberghien -- Exane BNP Paribas -- Analyst
Thank you very much.
Operator
Next question is from Anke Reingen of RBC. Go ahead. Your line is open.
Anke Reingen -- RBC Capital Markets -- Analyst
Yeah. Thank you very much for taking my question. The first one is on cost the risk as well. I just try to -- wanted to understand the EUR 124 million management overlay related to residential mortgages.
I understand stage two and stage three. But I mean, just trying to understand how EUR 124 million doesn't seem a large number if you're really concerned about customers' ability to pay and changing property valuations. So how much of a risk is that if that number keeps on going up in the next quarter? And then just on the capital return. I mean, I guess that could have been expectation you announced a special dividend and a new buyback program today.
Is that basically because -- it's not happening because the discussions are still ongoing? I mean, I understand that I saw that the buyback program significantly slowed down so it's not completed. But at some point, it looked as if you were done today so is it really just because the discussions are still ongoing? And then just the special dividend. Is that just a full-year event? Or would you potentially consider also a special dividend with half-year [Inaudible] with the half year or interim dividend? Thank you very much.
Steven Van Rijswijk -- Chief Executive Officer
OK. First, we go to the EUR 124 million overlay. Ljiljana?
Ljiljana Cortan -- Chief Risk Officer
Hi, Anke. And yes, it's correctly you mentioned it does not seem large. It's also as I said, because we haven't taken the overlay on the overall portfolio. We have with combination of deteriorating some of the macro indicators taken that overlay predominantly on the significantly increased credit risks in the portfolio, meaning it's stage three and somewhat stage two.
That's why the amount is as well as not big as if it would be if we would be really looking at the overall mortgage portfolio. I hope this answer your question.
Anke Reingen -- RBC Capital Markets -- Analyst
Yeah. But does that then provide comfort? I mean, I guess if you review that overall portfolio and the potential risk on higher rates and inflation should we not expect more to come?
Ljiljana Cortan -- Chief Risk Officer
Well, we do not see that risk for the whole portfolio, as we said, because our underwriting principles and our originating LTVs are very low. So I would say the worry is not on the overall level. It's more on the combination of the credit repayment capabilities of the more, I would say, worrying part of the portfolio or lower-income part of the portfolio and combination of developments on inflation and housing prices.
Anke Reingen -- RBC Capital Markets -- Analyst
OK. Thank you.
Steven Van Rijswijk -- Chief Executive Officer
OK. And, Tanate, on dividends?
Tanate Phutrakul -- Chief Financial Officer
Yeah. Thank you. So we have three touch points with respect to capital returns, right? The first clearly we have a policy of having an interim dividend payment. So that happens at the end of the Q2 results.
We now have, of course, the final year dividend that we just announced. And in terms of the further capital returns, we have done the share buyback. We're still doing the share buyback to finish it. And that we have indicated to you that the discussion with the ECB is constructive.
And we will give you some messages on that by the end of the Q1 results.
Anke Reingen -- RBC Capital Markets -- Analyst
OK. But the special -- potential special dividend or extra dividend, that would be a full-year consideration?
Tanate Phutrakul -- Chief Financial Officer
No. So we have announced a cash dividend for the full year. Any further capital returns, it may be, you know, approved. If it's approved, it may come in the form of cash.
It may come in the form of share buyback. That's something to be decided later.
Anke Reingen -- RBC Capital Markets -- Analyst
OK. Thank you very much.
Operator
Next question is from Ms. Flora Bocahut of Jefferies. Go ahead. Your line is open.
Flora Bocahut -- Jefferies -- Analyst
Yes. Thank you. Good morning. I have two questions I wanted to ask you more specifically on your Belgian business.
You know, first of all, on the NII, even if we adjust for the EUR 23 million reclassification this quarter in Belgian NII, we still have the NII down high-single digit versus Q3. And that's despite loans that were roughly flat. So that implies actually that there has been quite a deterioration in the mean in Belgium this quarter. Just wanted to understand maybe what happened there and if you could elaborate on this? And then on Belgium, but this time on the cost side.
If I look at the cost, ex regulatory costs, they were actually down 2% year on year in Q4. And that's despite inflation of this year, reaching very high levels in a country where core inflation gets passed directly to wage inflation. So that's a strong performance. I just wanted to understand to what extent is it because you've managed to offset the wage inflation with savings elsewhere? Or is it just that there's a delay and we should expect actually the wage inflation to kick off more likely in Q1? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
OK. If you look at -- thank you very much, Flora. If you look at the NII down in Belgium, if you look at -- that was EUR 23 million. If you look at the production in Belgium, then you see actually a positive lending margin in our new prediction compared to what we saw in the previous quarter.
So in that sense, we -- and that is largely due to also a lower cost of funds. But also the price to the street has been going up. So the biggest impact that we currently see on our portfolio in Belgium has to do with a EUR 20 million reclassification, not with the pricing that we currently level to the street. OK? And then we talk about Belgium costs are OK, but there is, of course, wage inflation.
Tanate?
Tanate Phutrakul -- Chief Financial Officer
We have plans in Belgium with respect to what we call our Route 24, which is the digitization and the efficiencies program in Belgium. That program is on track. And we expect that, despite the inflations that we see in terms of wages, we expect that through branch rationalization reductions in staff over the coming period, that we're able to offset that wage inflation in Belgium. But, of course, the situation becomes somewhat more challenging with expected, you know, wage bill in Belgium to be somewhat higher than what we planned in our budgetary process.
Flora Bocahut -- Jefferies -- Analyst
OK. Thank you.
Operator
Next question is from Mr. Robin van den Broek of Mediobanca. Go ahead, please. Your line is open.
Robin van den Broek -- Mediobanca -- Analyst
Yes. Good morning. So, first of all, on the buyback. It was my understanding that you've outsourced that.
So can I think -- I don't know if you know the answer to this question. But how come the pace of the buyback has slowed down materially since mid to end of December? And I was also wondering to what extent does that -- well, what kind of liquidity do you think your shares offer to do buybacks in general? You mentioned EUR 10 billion of excess capital. But how much can your liquidity absorb in a one-year window? That's the first question. And the second one is a bit more about the Netherlands.
I mean, the timing of the CLA was quite fortunate before the inflation pickup started to happen. But do you think there's any risk of a catch-up when the CLA ends that you basically have to catch up on the inflation we've seen in the intermediate period? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
OK. Thank you very much for all -- for your questions. I mean, in terms of the slowdown or the buyback. Yeah.
We did outsource it. And there is, of course, market abuse regulation. So there's no first interfere with, but it is not helpful. Let me put it this way.
Then the related question was on that EUR 10 billion excess capital and how much liquidity we can absorb, I'm not sure I understand your question. If you talk -- look about overall liquidity, of course, we have very strong liquidity. But I'm not sure -- but I don't think that that's your question. Maybe it has to do with liquidity in shares.
But we have not really taken any decision as to the future how we would distribute excess capital to -- for our shareholders. So in that sense, we still need to wait for the further announcement that we would intend to make either at or before first-quarter figures. But if you then would look at -- if you then really say I would do EUR 10 billion all-in shares, but this is very theoretical example, and you would not want to move the share price, then it will take us approximately up to two years to do that. But it's -- let me put it this way.
It's quite unlikely that we will do EUR 10 billion in share buyback. So let me put it this way. So the ways that we distribute capital can be different. And we've said previously, it will be largely in cash and maybe depending on the share price partially by means of capital distribution.
Then is there a risk of catch up in inflation when the CLA in the Netherlands ends? Well, since the 1980s of the last century, many European countries decoupled inflation growth with CLA growth. By the way, that's not completely the case in Belgium that the previous question asked -- that was stipulating. So in Belgium, that is the difference. What you do see is a bit increasing pressure given the high level of inflation end of the last year or this year to couple that a bit more.
So there is inflationary risk in that regard, not only in the Netherlands, but also in countries outside of the Eurozone, where the inflation rates are a lot higher. But it also comes with higher growth and also clearly comes with higher interest rates. So you need to look at it in conjunction. But from what we see now for 2022, we are and should be able to absorb the CLA and inflation levels in our cost and keep them flat or lower.
Thank you.
Robin van den Broek -- Mediobanca -- Analyst
Clear. Thank you.
Operator
Next question is from Mr. Raul Sinha of JPMorgan. Go ahead. Your line is open.
Raul Sinha -- JPMorgan Chase and Company -- Analyst
Hi. Good morning. Thanks so much for taking my question. I've got two, please.
The first one is just on the RWA efficiency of new lending. I think 2021 was quite a good year for you. Loans were up almost 5% and RWAs are only up 3%. I think that was also the case in Q4, where your RWAs actually went down on the credit side.
Should we expect some of this to reverse next year as you kind of do 3% to 4% loan growth? Or do you think you can still maintain this gap between loan growth and RWA growth? I guess mix will probably chain effect? And then the second question I've got is on just the structure of ING savings since you obviously taken over -- there's been quite a few market exits. You've obviously taken a few decisions around what used to be that [Inaudible] program. You talked about the nose of the plane of the cost [Inaudible] heading downwards. So I guess my question is, are you done with market exits? Or do you think there's still more to go in terms of reshaping the sort of profile of ING? And, you know, I see you're guiding to sort of broadly flat cost for '22 and inflation, obviously different.
Are you sort of no longer thinking about getting the nose of the plane more medium term in terms of costs? Thank you.
Steven Van Rijswijk -- Chief Executive Officer
Thank you very much. And thank you also for referring to the nose of the plane. Well, talking first about RWA efficiency lending. I mean, if you look at the loan growth versus RWA in '21, you're correct that from an RWA perspective that was quite efficient loan growth, which also had to do with that most of the loan growth was in mortgages and in investment grades shorter-term corporate facilities or trade facilities in wholesale banking.
And typically for those sectors or segments the RWA density is low. Now that may not necessarily continue. We do see, of course, that the markets are improving. We see that the economic growth is growing.
And we see that for -- if the supply chains are getting less and less disrupted, there will also be growth in things like project finance or sustainable finance, especially for which many companies need to make many investments as well. And that then could then also increase the risk rates on certain of these financings because that also there are different segments. What you should not forget is that, regardless on which -- in which sectors it takes place, we will continue to price the deal against the return. And the return is partially dependent on the revenues or costs, but also your risk base and the capital that we have to put against it.
So that we will always take in a mix. And then clearly, we continue to work on the efficiency of our capital. You've seen also, despite the regulatory increases on our models under Basel 4, we have been able to quite -- keep it quite well under control. So we're working on our capital efficiency as much as we can.
And the third lever that we pull, of course, is capital velocity can we also underwrite. And then sell things to the market so we can optimally use our capital. So that's maybe one. Then if you look at the exits of the market.
And again, I would like to reiterate, we're not just exiting for the sake of exiting. In retail, we -- the belief has not changed that we want to create a differentiating customer experience by having a superior digital offering, and we're good at it. And we will keep you -- keep work on it. And as part of it, apart of the benefit of being so digital is that you can also scale that more and that you can also be -- that you also are able to influence your cost income with that.
So we focus on cost income. The second element that we have set, what we believe in is that we need to have local scale in retail, not necessarily in wholesale but in retail. And if the retail -- the scale is sufficient, and you can see at some of the markets, you make through-the-cycle adequate returns, you continue to invest to grow and broaden the customer franchise and broaden also the offering that we make in retail customer franchise. And in some markets -- but again, it's not a goal.
It's an input to the goal. That has not been the case. And then you choose to redirect your capital and your investments to markets where you do make the applicable return. Now in that total mix, like I said to one of the previous colleagues, decisions -- or footprint decisions are more erratic and more one-off, but we will continue to work on improving our customer experience by end-to-end digitalization and by our scalable technology and operations platforms.
And that is going to help us to keep the costs under control. And what I said for '22 is that we at least want to keep the nose of the plane flat despite all the CLA and inflationary pressures.
Raul Sinha -- JPMorgan Chase and Company -- Analyst
Thank you.
Operator
Next question is from Mr. Stefan Nedialkov of Citi. Go ahead. Your line is open.
Stefan Nedialkov -- Citi -- Analyst
Yeah. Hi, guys. It's me again, I just got a couple of quick follow-ups. Sorry for coming back.
Number one, could you please tell us a little bit on your ECB discussions as much as you can? Obviously, as far as I know, there's no official limit on the buyback in terms of -- or any capital distribution really in terms of payout ratio. So you could theoretically return 100%. But in reality, you're discussing your capital return levels with the ECB. Is there a soft ceiling that you are noticing in your discussions with the ECB? Or is there much more of a push by the regulator to limit overall distribution -- ordinary special dividends and buybacks at 100%? So hard versus soft or none at all? Those would be my three options here.
The second question is on fees. One thing I don't fully understand in your wholesale lending business. So unit production was really strong around EUR 6 billion, which was close to half of your overall net production. So really, really good.
But when I looked at fees, they were actually down sequentially and quite a bit below where I would have expected them to be. I'm assuming most fees within wholesale lending are lending-related fees. Lending -- new lending volumes are up significantly. Why are fees not tracking that? Thanks so much.
Steven Van Rijswijk -- Chief Executive Officer
Thank you, Stefan. I will answer the question on fees in wholesale banking. And then at Tanate will give you his views on the ECB discussions. Then when we talk about fees in lending, it's a good observation that you make.
Because indeed, you would expect if we make good lending growth and we did good make lending growth that you would also see the fees going up. That did not take place, because many of these lending were focused on short-term financial markets, short-term investment grade, short-term trades, and then overall to TLTRO facilities. So these are not the typical big underwritings, big loans that you can syndicate out to the market. And that's where you make the fees.
These are more one-to-one relationships that we have with our clients, and we benefit from these good relationships. That's also a benefit of having these long-term relationships, that you can call on each other to help each other. But it also means that when we -- when the market is not increasing on short-term trade that we could greatly see or short term working capital that these companies greatly want, that these are not so much syndication facilities, but much more one-on-one facilities and therefore, there's no syndication fees. [Inaudible] expect if the economies return the growth path that we currently see and also the syndication market will then return and it can then have a benefit on our fees in lending.
Tanate Phutrakul -- Chief Financial Officer
Stefan, just to give you a bit of color on capital returns in capital management. I think if we go back, it seems a long time ago. But when we were looking at November, December, we really didn't know how the whole omicron situation would pan out, right? Things have turned out well. Things could have turned out quite differently as well.
OK? So that's part of our capital management, you know, prudence. But having said that, our discussion with ECB, as we mentioned, is constructive. They do recognize that for us to converge on 12.5%, that would mean more than 100% capital return per annum to make that number. So that is well-informed by us to the ECB.
And as we mentioned, these discussions are ongoing. And we will give you an answer before the end of Q1 this year results time.
Stefan Nedialkov -- Citi -- Analyst
That's very clear. Thank you, guys.
Operator
There are no further questions. Sir, please continue.
Steven Van Rijswijk -- Chief Executive Officer
Thank you very much. And thank you very much for your time. And I'm sure that we'll speak again in three months' time. Have a great day.
Operator
[Operator signoff]
Duration: 93 minutes
Call participants:
Steven Van Rijswijk -- Chief Executive Officer
Benjamin Goy -- Deutsche Bank -- Analyst
Tanate Phutrakul -- Chief Financial Officer
Benoit Petrarque -- Kepler Cheuvreux -- Analyst
Stefan Nedialkov -- Citi -- Analyst
Omar Fall -- Barclays -- Analyst
Giulia Miotto -- Morgan Stanley -- Analyst
Kiri Vijayarajah -- HSBC -- Analyst
Ljiljana Cortan -- Chief Risk Officer
Farquhar Murray -- Autonomous Research -- Analyst
Tarik El Mejjad -- Bank of America Merrill Lynch -- Analyst
Jon Peace -- Credit Suisse -- Analyst
Jean Neuez -- Goldman Sachs -- Analyst
Guillaume Tiberghien -- Exane BNP Paribas -- Analyst
Anke Reingen -- RBC Capital Markets -- Analyst
Flora Bocahut -- Jefferies -- Analyst
Robin van den Broek -- Mediobanca -- Analyst
Raul Sinha -- JPMorgan Chase and Company -- Analyst
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