Farquhar Murray : But just a more general question. If I think of things as normalizing from here, should I build in a structurally negative NII for FM? Is that the kind of permanent structural outcome?
Tanate Phutrakul : No, I think it just depends on movements, right? You have, for example, opportunities, trading opportunities, product mix from customers. So I wouldn’t structurally put it in like at the levels that you see in Q2, but at the same time funding costs are higher.
Farquhar Murray : Equally, should I maybe transition back to history? Would that be a more reasonable guesstimate?
Tanate Phutrakul : I would not say that, that would be a good guidance in light of current interest rate environment.
Farquhar Murray : Great. Thanks, Tanate.
Operator: The next question comes from Matt Clark from Mediobanca.
Matt Clark : Good morning. Two questions, please. Firstly, on risk-weighted assets, looking at template CR8 in your Pillar 3 disclosure. You’ve had kind of a tailwind for IRB risk-weighted assets from asset quality in the past few quarters and also a tailwind from the other category there of a couple of billion per quarter. I was just hoping you could give some explanation there about why your asset quality is getting better to the counterintuitive and what the other benefits to your risk-weighted assets, which has been quite meaningful, has been? And then secondly, on the kind of cross-currency interest rate arbitrage trades. If this impact started around third quarter last year and you seem to be saying it’s going to last a bit more into the third quarter this year, is it the right conclusion to draw that you put these trades on with a kind of 12 months duration?
Just trying to work out how long you’re willing to tie up your balance sheet for in these trades as a general rule when the opportunity arises. Thanks.
Steven van Rijswijk: Okay. Tanate, the Treasury cross FX rates.
Tanate Phutrakul : That trade and that — the environment for that trade continue to exist, but it should decline over the next three months. But guidance for 12 months, that I think just too many factors to factor in. So I think the trade exists, it’s going to decline somewhat in Q3.
Matt Clark : But if I understand it right, you put these trades for a defined term and you kind of lock in at the inception, the economics spread will be defined at the outset.
Tanate Phutrakul : I understand your question, yeah. No, I completely understand your question. These trades are tended to be short in duration.
Matt Clark : And by short you mean?
Tanate Phutrakul : I don’t think we’re going to give our trading positions on an analyst call. But let’s say that the trade exists, it will decline in Q3, and that’s our guidance.
Matt Clark : Okay, thanks.
Steven van Rijswijk: Okay. Ljiljana, RWA.
Ljiljana Cortan : Okay, thanks. And as you know, RWA size and dynamics depend on a number of factors and it’s subject to volatility based on both internal and external factors. What you have noticed based on the decrease due to asset quality is driven by several reasons. The most significant one is successful derisking of Russian exposure, which has taken a huge amount of our RWA in the ’22 and is now at €4.5 billion compared to even €13.5 billion a year ago. So that’s one that is first. Second one is clearly the structure and quality of your loan book impacts the RWA from the perspective of the tenure, so what’s the structure of your short term versus long term exposure but as well what is collateral that you’re having.
Third, there is clearly a dynamic in the portfolio where there are certain repayments of the higher rating classes — worst rating classes in favor of the ones better rated. And all of these together might have offset some of the negative example, impacts from the environment like housing price. But let’s not forget there as well we do have floors on some of our portfolios. So these negative impacts from the environment might have been already encountered for. So in general, that’s the overall picture.
