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Following are excerpts from a CNBC interview with Ralph Hamers, CEO of ING, and CNBC's Geoff Cutmore and Steve Sedgwick.
GC: Well a collection there of commentary, particularly around the situation in Europe, and whether we are seeing any weakening trends here. Ralph Hamers is with us, the CEO of ING. Ralph, interesting to talk to you, because obviously, you see, through credit growth, just exactly how the underlying economy is behaving. Are you seeing any real deterioration in consumer sentiment, at the moment?
RH: We don't see it as yet in what we produce, clearly we read about it in the macro reports, right? We do see a bit of uptick of, you know, inflow, in some of the restructuring activities, but it's very small. So there's no real signs there that there is a recession on the horizon, for sure not. The slowdown is-, is to be expected, over a lot of uncertainties that are going on in the world, that does influence, you know, investor conference, corporate confidence, consumer confidence, and if you put that in the mix, yeah, there will be a bit of a slowdown, and we'll have to work with that.
GC: But-, but you would begin to see that, I would suspect, in terms of, uh, deposit sizes increasing, as consumers, reluctant to spend and take risks, perhaps, are just pushing their money in to-, in to the bank.
RH: Um. We don't see that exactly, I think deposit inflow is-, is just continuing as always, there is not more deposit inflow, going in, or people basically taking their money off the table, in-, in-, in the markets. Clearly, we have seen volatile markets, at the end of last year, but again, that's much more, in my view, on the back of uncertainties, and I think the markets were overdoing it a little bit, and therefore you see the correction in January, as well.
SS: What is the best thing that the ECB can do next?
RH: Uh, the ECB? I think they should just continue on the current path of keeping the policy as where it is, just see how things pan out. There is quite some uncertainty around US and China trade, the question is, is it a trade war, or is it all about technology, or is it even beyond that? There is quite some uncertainty around Brexit, you know. Is there going to be a deal? Looks like-, looks like not so likely. Are they able to then postpone it, and buy some more time to get a deal? Or is it going to be no deal Brexit? Now, the third version is one that, you know, we're all preparing for, and we all have our contingency plans, and we prepare for the worst, and hope for the best, but we don't know what we're getting in to, if it happens. So, from that perspective, at this moment, I-, I-, I would just stay with what we are doing, and just react, on the back of some of these developments.
SS: But, I mean, the low interest rate environment, and we-, we've touched upon this, many times, over the years, Ralph, has dented savings, it gives no incentive to save, as well, it-,
SS: Dents net interest margin, as well, there are a whole host of issues, and, in fact, it creates complacency, in many ways, from a lot of corporates, who think they can just go to the bond market, benefit from low spreads, and perhaps use funds in-, in not the best fashion, not the most economic fashion. But there are ill effects, which Axel Weber talked to you about, two years ago, here in Davos, and, well, I'm just wondering if you're seeing more of those coming through now.
RH: Well, clearly, you know, if it comes to leveraged finance, and all of those, that has been very aggressive, towards the-, the third quarter of last year. We basically stopped-, we-, we capped all of our exposure in the leveraged finance market, we capped our exposure in the real estate finance markets, the-, the first two where, basically, you see cheap money flow go in to, and-, and-, and increase asset prices. So that's-, that's what we saw in the market, covenant-lite structures, and-, and basically, we pulled-, we-, we capped the exposure there, in order to manage the risk. We don't see that going wrong, as yet, let's be honest, but clearly cheap money will cause these effects. On the other side, you know, if you look at the underlying economic growth, estimated to be anywhere between 1.6, 1.7, for-, for the Eurozone, what can you do? And-, and Draghi has been very clear, he doesn't want to increase the rates, just to build a reserve so he can manage the next downturn. He wants to establish his policy, in order to get the inflation going up, and get the economic growth up. So that's probably what he's still doing, and I think that, given the uncertainties that are out there, that bring a lot of volatility, I would just stay quiet, and see what happens.
GC: Ralph, you, like a number of European banks, were caught up in money laundering-,
GC: Fines, and issues, last year. I think that took a lot of people by-, by surprise, because-,
GC: It was some of the most respected banks that seemed to suffer this, through the course of 2018, obviously raising concerns among consumers, about trust, and-, and so forth. Do we have a problem with regulation, either at the national level, or at the European Central Bank level, that these things were not picked up earlier?
RH: Um. That's difficult to say. I think we should just look at-, at our own responsibility, on this one. Serious shortcomings were found, in the way we had our processes and procedures in place, as a consequence of which, we were just not up to par, to prevent financial economic crime, and it's for us to improve on that, and to work on that. We have that whole plan out there, we started at two years already, I mean, the fact that it comes out in 2018 doesn't know that we didn't know about it already in 2016, so we-, we didn't wait for the enhancement programme, for the settlement to come out, I mean, those are two totally different things. Clearly, it came to the public last year, but we had been working on it for 18 months already, and we shall continue that. You can have a discussion about the effectiveness of how we're trying to prevent financial economic crime, and the money that all the banks are putting in to this, and, you know, in a discussion with-, with the likes of Europol, there must be ways that we can be much more effective as a system, not only banks, but also authorities, and-, and crime fighting authorities, if we could only deal with some of the data privacy issues that we have to deal with. And if we can be a little bit more open, on some of this, we can be much more effective. Now-, so, can it all be improved? For sure. Is there a discussion going on, on a European level, that this has to be improved? For sure. Is there a discussion going on, on a global level, that this needs to-, to improve? Yes. But then, as a bank, you are responsible to comply with whatever the regulation is on this, and-, and we didn't.
GC: That raises some fascinating questions, around whether GDPR is effective, and whether it's actually allowing misbehaviour to take place at this point, but Ralph, I think we've got to let you go. Thank you so much for coming in, Ralph Hamers, the CEO of ING.