Q4 2024 KBC Group NV Earnings Call
And for the duration of the call your lines will be on listen only mode.
Speaker Change: Everybody will have an opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point. Please press star zero and it can be connected to an operator I will now hand over the call to your host Kirstie bonds.
Speaker Change: <unk> of Investor Relations to begin today's conference. Thank you.
Kirstie Bonds: Thank you operator.
Speaker Change: A very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the <unk> Conference call.
Speaker Change: Today is Thursday, the 13th of February 2025, and we are hosting the conference call of the fourth quarter and full year 2024 results of KBC.
Speaker Change: As usual, we have your own test group CEO with us as well as group CFO Butler buildings and they will both elaborate on the results and add some additional insight.
Speaker Change: As such it's my pleasure to give the floor to <unk>, who will quickly run you through the presentation.
Speaker Change: Thank you very much good and also from my side, a warm welcome to the announcement of our quarter four results of 2020 to 24, and then obviously given the last quarter of the year. The full year results of the same year.
Speaker Change: Well, let me start with the main message.
Speaker Change: <unk> engine has been firing on all its bank insurance cylinders, we have posted.
Speaker Change: Quite a significant result in the fourth quarter with 1.116 billion Euro and that is indeed.
Speaker Change: Very nice number it's influenced by one off which is related to the exit in islands that has a $318 million tax benefit which is kicking into the result, but nevertheless, if you look at the underlying lines.
Speaker Change: Indeed, then the bank insurance machine has been firing on all cylinders as a matter of fact, if I look at the split up between net interest income and non net interest income well than we have in this quarter for a split 49 51 perfectly in line with what we have seen in previous quarters and it also shows that are diverse.
Speaker Change: Vacation of income in KBC group is quite significant now.
Now in terms of where we are with the net interest income side, while the good news is net interest income was up on the quarter and was actually then consequently, resulting in a higher than guided.
Speaker Change: Full year result, 2024 net interest income this is due to amongst others. The transformation result, which was all but also the fact that we have increased significantly our loan book.
Speaker Change: Book and our customer deposits same can be said about the fee and commission business, which was sharply up on the quarter.
Speaker Change: The insurance sales both on the non life side as on the life insurance side, we're significantly off so in that perspective, all those income lines had been contributed contributing significantly to the result, partly offset by a lower net result from financial instruments at fair value and not net other income.
Speaker Change: <unk>, which is due to a one off anyway in terms of impairments. They are lower and also their the credit cost ratio is significantly lower than the guidance, which we have given with 10 basis points or if you exclude the.
Speaker Change: The geographical emerging brisk Buffalo it stands at 16% significantly below the guidance we.
Speaker Change: We do have.
Speaker Change: Hey.
Speaker Change: Cost.
Speaker Change: The cost evolution, which is perfectly under control and is also up but well within the guidance, resulting in a cost income ratio of 47%. All included but if you would exclude the bank taxes that at a very good 43% on the insurance side cost thing. The combined ratio was at 90% also below.
Speaker Change: The guidance of 91% and the.
Speaker Change: The number is as you know heavily influenced by the storm brought us and mainly in central Europe. When you look at the solvency position very solid with a 15% common equity tier one ratio and so on the liquidity side very solid with.
Speaker Change: And as of our ratio is 139, and an LCR ratio of 158%. We will provide you also with an updated guidance I will go through that in more detail later on but on the on the dividend side, we are going to.
Speaker Change: Gross dividend over the full year of $4 85 Euro of which 70 cents is already paid in May 2024, which was the payout of the surplus capital above the 15% threshold CET one.
Jonathan: The Jonathan.
Jonathan: The dividend is for 15 Euro Consequently of which one euro is already paid as an interim dividend in November and the remaining will be paid in may 2025 after approval by the <unk>.
Jonathan: Now if you add up those numbers and you include the 81 coupons, we will end up at a payout of 51% of the 2024 net.
Jonathan: Right.
Jonathan: Further detail on whether you're going to be with our dividend policy going forward that will be provided in may with the.
Jonathan: With the announcement of the first quarter results. Let me walk you through a couple of other things very briefly the split up between banking and insurance activities is now roughly.
Jonathan: 13% on the insurance side and the remainder 87 is on the banking side. What is very important for KBC is the result of our investments on the digital side the AI implementations.
Jonathan: <unk> fire Kate.
Jonathan: Taking into our customer servicing more and more customers are picking up Kate and $5 3 million of our customers are already using Kate in one or the other way and the autonomy, which means that the the the solution Kate is able to answer the questions of our customers.
Jonathan: Independently from any other help from our KBC employee now stands at 70%, which means indeed that seven out of 10 out of 10 questions all provided with solutions via Kate.
Jonathan: On the next page you can see a couple of things on the sustainability side KBC was once again granted.
Jonathan: A listing on the carbon disclosure project and we are very proud on this one.
Jonathan: But coming back to more numbers of the year then on page six you can see the list of exceptional items.
Jonathan: Referred already to do the biggest one that is the.
Jonathan:
Jonathan: 380 million Euro tax benefit, which is generated through the liquidation of KBC Bank Ireland.
Jonathan: Or.
Jonathan: The remaining shallow which is called <unk>.
Jonathan: 380 million Euro there is another one off that is 38 million euro in Hungary, which is linked to a legal case.
Jonathan: Bringing the total to 270 million Euro exceptional items post tax let me then go into the more.
Jonathan: Important P&L line, starting as usual with net interest income well again, we are able to to.
Jonathan: Increase our net interest income this is due to 3% up on the quarter and 5% on the year. This is due to the further increase in commercial transformation result in previous calls we already made reference to it is that this has to do with the way KBC has hatched this portfolio and therefore, it's quite.
Jonathan: The mitigating towards the rate cuts off the ECB and this once again proven here in the fourth quarter and NII results on the auto side on the other hand, we do have also further increasing lending income, which was driven by strong growth of the loan volumes and thereby we are.
Jonathan: Also beating our own guidance the loan growth now stands at 5%, which is more than the guide at four 4% in terms of the net interest income we do have a one off which is linked to a special accounting treatment in Bulgaria on the mortgage brokerage fees.
Jonathan: 9 million euros will be aware of that but otherwise all the other elements are contributing positively to the results.
Jonathan: The net interest income amongst others.
Short term cash management was up 8 million euro or the mineral reserve requirements, where reserve sorry, we're a little bit better than the than the than the run rate so in desk perspective.
Jonathan: The result is pretty significant up despite the fact that that's the number which we already provided for in previous Ah.
Jonathan: Previous sessions, despite the fact that the negative impact on that net interest income due to the state note kicked in in this quarter for 22 million Euro.
Jonathan: What about margin stayed flattish at 208 basis points.
Jonathan: What about the evolution of our loan book, 2% to 5% quarter end year result, which is split up on the mortgage side wanted to 4% in terms of the evolution of our deposits very significant increase of the current accounts and savings accounts and also you can clearly see here also a negative evolution in term deposits.
Jonathan: All these numbers are of course influenced by the further roll off of the effects of the state note, but it's quite clear that the trend, which we have seen.
Jonathan: First and foremost in central Europe, and Czech Republic, where we have seen due to the rate cuts of the policy rates by the Czech National Bank that customers are shifting back again from term deposits maturing term deposit to current accounts and savings accounts, we do see the same trends in the eurozone asphalt, which is the repeat of the trends.
Jonathan: Indicating already in the second quarter and definitely in the third quarter of 2024 in Belgium as well.
Jonathan: Total amount on the customer money five 4 billion up on the quarter, bringing us to roughly 20 billion more customer money in the full year 2024, let me highlight already here two things first of all the strong evolution will turn to positive which is linked to the state note in that test.
Jonathan: In the fourth quarter definitely a positive effect on net interest income going forward in 2025, but also the record results on the mutual fund business, where we have it cross sorry, net sale of more than $5 billion.
Jonathan: Which makes immediately the bridge through the fee and commission income 700 million Euro in one single quarter is a record high.
Jonathan: Due to two things first of all strong performance on the asset management services fees, which is obviously linked.
So the further increasing.
Jonathan: Monies, which we have assets under management, which we have available.
Jonathan: We had in this quarter.
Jonathan: The fact that we as you know had already record results in the first nine months of this year.
Jonathan: We still had a positive inflow in quarter four of two 382 million Euro, resulting as I said the total net in net sales to 5.030 billion Euro.
Jonathan: Of which 1.6 billion is linked to the regular investment plans.
Jonathan: Trading some stability going forward 'twenty five 'twenty six in terms of the.
Jonathan: Gross sales also fourth quarter was almost at the same level as the same period last year.
Jonathan: In terms of.
Jonathan: Perhaps to the next page.
Jonathan: Terms of insurance sales for the other diversification factor well, we have a growth of 8%.
On a year on year, but if you exclude the FX effect.
Then the growth is 9%, beating again the guidance, which we have given at the beginning of this year for the non life insurance sales. So in this perspective.
Jonathan: 2024 has been a rock solid year on the insurance side also on the side of the quality with a combined ratio of 89, 7%. It's been solid definitely if you know that borders the storm, which affected significantly central Europe.
Jonathan: It's pretty absorbed in that number if you would exclude bonus to see what is the underlying result of the book well then the combined ratio stands at 88%, which is indeed, a very strong number life sales compared to previous quarter, which was a record third quarter as well hold up pretty strongly.
Jonathan: More or less the same it's clearly down on the unit linked product side, but it's clearly on the interest guaranteed products and on the hybrid products.
Jonathan: With.
Jonathan: Specific numbers plus 19% on the quarter for interest guaranteed products at 35% on the year. So also in this perspective.
Jonathan: The life insurance sales for the full year of 25 were up.
Jonathan: On the year, 25%, which is indeed, a very strong number financial instruments at fair value. This is a more volatile.
Jonathan: Contributor to the P&L well it was a it was deteriorating with roughly 32 million euro for the quarter, which is linked to an essence. The L. M derivatives. Most of most of it is linked to the ineffectiveness of hedge accounting and on the increase of the check at 10 year into.
Jonathan: Rest rates, which has kicked in negatively as well for $7 million.
Jonathan: The last part was.
Jonathan: Lower decrease of the one year interest rate on the receiver swaps, which were linked to the state node. So in total this is the full explanation of the difference between third quarter and the fourth quarter.
The dealing room results was slightly up on the quarter 2 million Europe, but not shifting the needle. Let me go to net other income there is a big difference well. The difference is due to the fact that we had a legal case.
Jonathan: Hungry.
Jonathan: Which would be a provision of 28 million euro normally this would not have happened. We would have ended up with 55 million Europe, which is perfectly in line with the run rate for this net other income P&L line.
Jonathan: Going to operating expenses, well operating expenses are seasonally up.
Jonathan: This is linked to the seasonally higher marketing cost and professional fee expenses, mostly also the invoices for the ICT cost come in and you have obviously asphalt.
Implementation of the.
Jonathan: Regulatory costs, which as you know are always going up so giving that seasonal effect total income sorry, the total cost side increased by 6% on the quarter to 3% on the year, but remained perfectly within the guided number.
Jonathan: And cost increase if you exclude the bank assurance, Thanks and commission space.
Jonathan: Of one 6% perfectly in line with the guidance, which we provided for cost to income ratio. Therefore also stands at a solid 43% if you exclude the bank insurance, Texas.
Jonathan: Which is similar to last year and.
Jonathan: There are certainties in life that certainty in life. The bank insurance, Texas are normally growing 623% to 623 million% that would be great.
Jonathan: 623 million Euro which is.
Jonathan: Down because of the single resolution fund contribution we dropped to zero, but unfortunately, it was partly compensated by other elements in the bank, Texas part. It's now stands at 12% of our total expenses, which is quite significant as you can see on slide 13, all the split up.
Jonathan: Between the different countries.
Jonathan: And in essence bank taxes.
Jonathan: Very high in two countries, Belgium and for sure also hungry, let me go to impairments, while impairments are at the level of 78 million euro more or less in line with previous quarter to buildup is into two parts 1 million Euro loan loss impairments, which are linked directly linked to the lending book.
Jonathan: And that is offset by a model driven.
Jonathan: Release of the geographic emerging risk buffer of 55 zero million Euro.
Jonathan: Totaling $50 million Euro net impairments.
Jonathan: On top of that we have 28 million euros other impairments, which are in essence, a software impairments. If you exclude the $4 million of modification losses, then you have the total number.
Jonathan: And emerging.
Jonathan: Geographically emerging risk buffer, we still hold 117 million Euro and as I said there is this fully model driven also going forward in terms of credit cost ratio now stands at a solid 10 basis points. If you take into account the geographical and macroeconomic uncertainties, but if you would exclude them.
Jonathan: And up at 16 basis points also there once again well below the through the cycle 25, 30 bps guidance, which we gave before so also there we achieved the guidance as it was indicated impairment impaired loans ratio now stands at 2% came down compared to previous quarter.
Jonathan: And also in terms of the EBA definition, if you would use that KBC stands significantly below the average of the European sector. Now if you wrap up all these numbers and you translate that into solvency numbers, then our fully loaded Basel III CET one ratio stands at 15%, let me remark too.
Jonathan: Things.
Jonathan: First of all.
Jonathan: There is an increase of our risk weighted assets for 3 billion, which is driven in essence by volumes 2 billion extra because of the strong growth of our SME and corporate book and roughly.
Jonathan: $800 million for the year.
Jonathan: Year end traditional year end review of the operational risk weighted assets, which is also driven by the size of our balance sheet. So the increase of all these risk weighted assets for 100% linked to the business performance of KBC.
Jonathan: Let me remind you as well that.
Jonathan: There's in particular thing on the deferred tax assets of off of.
Jonathan: Ireland, the 380 million Euro as you know is taken in two different treatments are first of all in capital. It is neutralized, but SB do accrue 50% of that dividend going forward you will have a gap on your allocation of the capital in.
Jonathan: And the ratio CET one.
Jonathan: In essence, we do lack of 13 basis points because of this effect, which is just an accounting effect and that accounting effect will be recuperated.
Jonathan: In the 25 and vast majority in 'twenty five.
Jonathan: And in a little bit in 2026, so that 13 negative 13 basis point negative impact will be recuperated going forward in 2025.
Jonathan: Brings us to the the buffer slides definitely when you compare it with the OCR in the MDA buffer well the buffers remained very solid with.
Jonathan: 4.1% 3838.
Jonathan: 8%.
Speaker Change: Sorry, Triple and 5%, respectively on the OCR side and the MTA site.
Speaker Change: Not going to develop two long upon this on the next page you can see the leverage ratio is five 5% for the full year compared with last year is that a difference and this is mainly driven by the fact that we have higher cash and cash balances with central banks on our balance sheet negatively influencing.
Speaker Change: Positively negative sorry negatively influencing that leverage ratio. They give me the ratio as already mentioned the solvency ratio of the insurance company stands at 200%.
Speaker Change: Solidly above the required levels.
Speaker Change: <unk> therapies.
Speaker Change: Which brings us to the guidance going forward well for 2025.
Speaker Change: On the back of the.
Speaker Change: Amongst others.
Speaker Change: Evolutions, which we do see taking.
Speaker Change: Taking into account the forwards of early February.
Speaker Change: We do also start from the position what you know what.
Speaker Change: Decisions on governments have been until until now and we continue to apply as always very conservative pass through well. If you take all those elements into account, we will end up within our guidance, which will.
Speaker Change: Which says that we will have at least $5 7 billion Euro of net interest income, which is also build upon the growth of the loan book of roughly 4%. That's a net interest income of at least $5 7 billion in combined within at least growth of the insurance side of 7% allows us.
Speaker Change: To say that we will have in total income increase of at least five 5%.
Speaker Change: We continue to apply as we have introduced last year the floors and the ceiling approach. So this is for us definitely a floor on the cost side to be considered the cost increases to be below two 5% on a year basis. So we do have a ceiling.
Speaker Change: If you.
Speaker Change: You would take both numbers into account then we have a draw which is at least 3% 40 year 2025 on the insurance side combined ratio in all the credit cost ratio, we stick to the guidance, which we have also given last year that is well below.
Speaker Change: 25, 30 bps for the cost of credit cost ratio and below 91% for the.
Speaker Change: The combined ratio in the life.
Speaker Change: If you translate those numbers in the period to come 24, sorry, 'twenty five 'twenty six 'twenty seven well then as more or less similar also once again, we see a strong performance on the net interest income side, where we do predict that we will have CAGR of at least 5% so a floor.
Speaker Change: We do apply at least 7% for the insurance revenue again, a floor and that results in a total income floor of at least 6%.
Speaker Change: Operating expenses are sealed to or have a ceiling of max deeper sense or they will remain 3%.
Speaker Change: Remain below 3%, giving us a draw of again at least 3% the guidance when combined ratio for non life and credit cost ratio from our lending book is the same as always so in this perspective, it's a rock solid.
Speaker Change: Guidance, which is actually building upon the the realizations of.
Speaker Change: 2024 definitely also on the different P&L lines, which I mentioned in this guidance there is nothing new on the <unk>.
Speaker Change: Guidance for the.
Speaker Change: Base before evolution, so that was already.
Speaker Change: Announced a while ago. So 1 billion first time application and the remainder is the tale of gear, which is 2020, sorry, 2033, which is a long time to go.
Speaker Change: Let me go into them.
Speaker Change: The wrap up well like ABC remains to be a very well diversified growth group and I also want to emphasize that in that perspective, we are diversified in two ways first of all geographically.
Speaker Change: North.
Speaker Change: One part of our book is linked to Western Europe and acids, Belgium. The other part is linked to central Europe. There was a clear difference between for instance, the GDP growth. This year in these countries also going forward.
Speaker Change: In Western Europe, we expect a GDP growth of roughly.
Speaker Change: Depends on the year roughly between 0.7, and one 1%, whereas in central Europe.
Speaker Change: The GDP growth is forecasted to be at least double the other diversification factor is the split up between net interest income and non interest income contributions being.
Speaker Change: The insurance activities and the asset management activities.
Speaker Change: This is resulting in a top line diversification a 50 50 split up net interest income.
Speaker Change: Net interest income and we do see this going forward as well and 24 567.
Speaker Change: I think I can conclude with that on the next slide you have all the details, but I think it's far more useful to to answer your questions. So please coast.
Speaker Change: Thank you I open the floor for questions I'm pleased to restrict the number of questions to two too low for a maximum number of people to raise questions. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please signal by pressing star one on your telephone keypad, we will take the first question from Patrick from cabinets. Jamie. Your line is open up. Please go ahead.
Patrick: Yes, good morning again.
Speaker Change: Good set of results.
Patrick: So the first question is.
Patrick: Back on the net interest income in the quarter.
Patrick: Yes.
Patrick: Just for the impact of the term deposits.
Patrick: September we've seen you.
When you get to a 50 million delta improvement quarter on quarter.
Patrick: So I appreciate that it's all simulation results.
Patrick: Sometimes there's a bit of this is.
Patrick: It's a bit of a strange.
Patrick: Timing in terms of reinvestment cycle, but it seems that Q4 has been extremely strong on that side. So.
Patrick: Maybe you will.
Patrick: Tell us a bit more about the moving parts.
Patrick: On a quarter over quarter on quarter basis.
Patrick: And then if I kind of start with DNI.
Patrick: Q4 at one for Q4, excluding the 9 million one off mitigated by four I get already to the $5 7 billion NII do you expect to do so.
Patrick: I did my libido sequential improvement, especially in the second part of the year.
Patrick: Is that still something you would expect just wanted to get.
EBITDAR venerate.
Patrick: The quarter over quarter.
Patrick: Moving out in the 25 and then the.
Patrick: Yes.
Patrick: Question will be able to 'twenty several NII cargo.
Patrick: It looks extremely positive this will be the hood caveat on the potential measures for all the good restaurants and I wanted to check with you.
Patrick: What what you have in mind potentially from the new Global road is that a real risk or not thank you very much.
Patrick: Well. Thank you for your question has been why we could not hear everything because the line was a bit difficult but anyway.
Patrick: So let me come back to the first part of the evolution of our results net interest income quarter on quarter.
Patrick: But actually it's true for actually the evolution of over the last four quarters. While net interest income is mainly driven by the fact that our commercial transformation results. So the replicating portfolio is evolving in a way, which we have indicated already before that is that it has continued to increase despite the rate cuts and has obviously to do with the way how we have hedged our.
Patrick: Book.
Patrick: So we always said that we were hedged for longer and in that perspective, we are now benefiting.
Patrick: And.
Patrick: The higher end the higher yields on that portfolio does is clearly translated in in quarter three for evolution, but also in quarter, one two and three evolution. So this is nothing new this is something which we indicated before and this is also something which we are going to see in 2020.
Patrick: Five and 26 as well. So this is the reason why we also in our net interest income guidance for the longer term are pretty solid in terms of the delivery.
Patrick: Next to that in quarter four of this year. We also had a very strong increase of our lending income.
Patrick: The volume growth was quite significant as I indicated 2% more and the margins were holding up pretty well there is commercial pressure, there's no doubt about that but still in this perspective. This quarter. It was all in the same direction. So if if I take into account these elements and I would.
Patrick: [noise] extrapolate that for 2025, but also further well for 2020.
Patrick: Five.
Patrick: On the lending side, so on the on the commercial transformation as a result, I already indicated the second goal, whether it's going to happen, but on the on the lending side.
Patrick: The expectation is that for 2025 loan growth will be roughly 4% now if you compare it with what do we have seen in 2020 for GDP growth is linked directly linked to our loan growth with.
Patrick: With K B C J.
Patrick: GDP growth this year is roughly.
Patrick: Zero definitely in Belgium, and Central Europe is roughly 150 basis points higher.
Patrick: It's roughly 0.7 up two 1% and in central Europe between two and roughly 3% while the forecast for the GDP growth in the in our in Belgium, and Central Europe for 25 is 10% to 20 basis points at least higher so there's no reason why we cannot achieve the four.
Patrick: [noise] percent loan growth going forward. So if you combine the two.
Patrick: Then you have to clear explanation between quarter three quarter four and you also have an indication of what it is going to be for 2025 SPF guidance.
Patrick: And then your last question what about so he has indeed, we do have a new government in Belgium.
Patrick: Finally, I would say.
Patrick: What is the impact going to be for instance, on net interest income well to be very open.
Bit difficult now if you read today issued a report of 200 pages, which is the guideline for their upcoming government period, but the document is not necessarily crystal clear on the elements, which are important for us and for answering your questions for instance on.
Patrick: The.
Patrick: On net interest income side, there are no elements in the document which indicates that there would be a negative impact that is the whole discussion going on on the loyalty premium in Belgium, but it has no impact for us in 2025 for sure.
Patrick: And the decision is not taken yet it needs to be discussed by the new Minister of finance.
Amongst others the European authorities, because as you know there isn't there is discussion ongoing.
Patrick: This is <unk>.
Patrick: Acceptable for the European authorities or not but let me cut long story short.
Patrick: As you know on net interest income in the document of the government that are there's one element, which might have an impact on the longer term on net interest income, but for 2025 the impact of zero. The other element, which is in the document which is unclear.
Patrick: Has to do with the calculation of the the bank taxes, but that's something which is or stable or might be negative that is unclear on the basis of the document.
Speaker Change: Thank you very much.
Patrick: Benoit.
Okay. Good afternoon, and good morning, everyone.
Patrick: I would like to and you already referred to that earlier, but they're reminded indeed, indeed, NII and particularly in the lending income. We have this one off in Bulgaria of $8 5 million Euro, which you should not extrapolate.
Patrick: Yes, thank you very much.
Speaker Change: Thank you we'll take the next question from Julien.
Julian Mitchell: Julian Mitchell from Morgan Stanley. Your line is open now please go ahead.
Julian Mitchell: Yes, hi, good morning, I'll ask two questions. Please the first one in your NII guidance.
Julian Mitchell: Positive mix shift do you assume.
Julian Mitchell: Exactly.
Julian Mitchell: Do you assume they come back Oh, you know kind of accounts.
Julian Mitchell: Or or or stable.
Julian Mitchell: The level and then secondly.
Julian Mitchell: I understand why you would expect the 2025 cost of risk to be well below through the cycle again, but I'm trying to <unk> seven mm why wouldn't you expect a normalization what do you see that already makes it quite confident even on the longer term. Thank you.
Julia: Thanks, Julia for for your questions.
Speaker Change: It is indeed, an important one that where do we stand with the deposits mix and how will it further continue to evolve going forward well.
Speaker Change: What we have taken into account as a conservative approach.
Speaker Change: But we do have changed our position on the evolution of current accounts savings accounts towards term deposits.
Speaker Change: As you know in 2024 and that has also driven a negatively influenced by the state node in Belgium, there was a massive shift from current accounts saving accounts towards.
Speaker Change: Time deposits.
Speaker Change: That's massive shift you will not see in 2025, six and seven.
Speaker Change: We do continue to see shifts or we do take into account shifts from current accounts, having out to term deposits part two a significant lower extent than what we have seen in 2000 2024.
Speaker Change: For good understanding we do already see in the numbers.
Speaker Change: I highlighted during my presentation, we do already see in the numbers of Q4, but also in Q2 and if you have a filter out the state note.
Speaker Change: In the numbers of Q T that one term deposits are coming to maturity in the current lower rate environment, where rates, which are now a cigna.
Speaker Change: Significantly lower than the peak of 4% a couple of quarters ago, then we do see the customers not necessarily prolonged their term deposits which are maturing.
Speaker Change: As a matter of fact.
Speaker Change: Vast majority shifts to current accounts and savings accounts.
Speaker Change: This is something which we see and we have taken a conservative approach in that perspective going forward.
Speaker Change: Sorry, just to make sure I understand so you still assume that term grows faster than current.
Speaker Change: But rather than a reversal of that mix shift that you have seen in 'twenty four.
Speaker Change: No no no we do not assume that as well that was the case in 2020 for time deposits were growing so the cost of term deposit was significantly higher than saving accounts and current accounts. That's supposed to 24 and we don't see this happening in 2025. So we do see that there is still evolution positive evolution.
Speaker Change: Turn to part of it is significantly lower than what we see on current accounts and savings accounts. One of the elements is precisely what is that when we do see today.
Speaker Change: Term deposits maturing debt customers off and it's also true for the Slovak sorry for the Czech market.
Speaker Change: Now it's also true for the European market, where in term deposits are maturing given the fact that interest rates have come down that customers are not prolonging dose term deposits to the same extent. So the answer is no. It is not going to grow in the same way as current account and savings accounts.
Speaker Change: Okay. Thank you.
Julian Mitchell: Okay. Good morning Julien.
Julian Mitchell: As far as your question is concerned on the credit cost ratio and the guidance that we gave them.
Julian Mitchell: Well below 25 30 basis points through the cycle.
Julian Mitchell: First of all.
Julian Mitchell: You should take into account that when you look at the additional provisions that would be created over the quarter of $100 million on the loan portfolio a substantial part of that actually 80 million was related to the reducing of the NPL backstop.
Julian Mitchell: In addition, we also have created additional provisions on mainly large legacy files when.
Julian Mitchell: When you look actually at the NPL ratio, then youll see there to just actually dropping also quarter on quarter.
And when we obviously clearly carefully monitor the loan portfolio, where we see the basically the E. P D shifts.
Julian Mitchell: You mean relatively limited, meaning that we see a slight increase in the beauty shifts towards of course please.
Julian Mitchell: Not significant certainly not food trends or structural trend in the.
Julian Mitchell: In the quality of our Oh.
Julian Mitchell: Our asset quality, so that explains why going forward, we do not expect or.
Julian Mitchell: Re guide well below 25 two.
Julian Mitchell: 30 basis points through the cycle.
Julian Mitchell: Thank you.
Julian Mitchell: Thank you we'll take the next question is from line.
Julian Mitchell: Rob.
Speaker Change: Your line is open. Please go ahead.
Julian Mitchell: Thank you good morning.
Speaker Change: First question I wanted to ask you is on the fee you don't guide on fees, but I'm trying to reconcile what you think you can do on that claim based on the guidance. You gave you on the other revenue line. So I think you have in mind, something like mid to high single digit growth.
Speaker Change: And every year through 2027, so just wanted to check if you would agree.
Speaker Change: With that magnitude and what you think we need to drive it so search for growth over the next three years.
Speaker Change: And then I wanted to ask you a question on the CET one I know, it's a Q1 update.
Speaker Change: On the target.
Speaker Change: But maybe ahead of that decision can you at least ran it through what it is that you are considering when theyre going to make that decision on the targets in Q1.
Speaker Change: What are the considerations around the factor that you will consider when you make your decision. Thank you.
Speaker Change: Okay.
Speaker Change: Well, thank you I mean.
Speaker Change: I will take first the question on net fee and commission income guidance.
Speaker Change: 5% to 10% first of all we do not guide net fee and commission income.
Speaker Change: So we will so.
Speaker Change: So we will not be van at Phoenix was on that but we think that basically what you're indicating is relatively on the high side.
Speaker Change: Yeah.
Speaker Change: And then Florida for your second quarter second question as you. Indeed pointed out we are going to give you an update on the.
Speaker Change: Q1 announcements so that is and May give you the full detail first of all what we expect it to be how are you going to deal with.
Speaker Change:
Speaker Change: Targets amongst others and what are we going to do it.
Speaker Change: With the ceiling the thresholds for surplus capital and Salon support now I understand your question for any considerations, which we will take into account with and I'm actually excited to give you a kind of insight in what we are going to do going forward, it's a bit too early.
Speaker Change: But KBC is and will be also one of the better capitalized financial institutions in Europe that is for sure.
Speaker Change: One of the drivers which were going to take into account.
Speaker Change: But I would ask you to have Furthermore, patients. Another what is it three months and then we will give you the full detail.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you we'll take the next question from line Roger from HSBC. Your line is open. Please go ahead.
Roger: Yes, good morning, everyone. A couple of questions from my side. So firstly on your room less than 91% combined ratio target for 2027, just wondering how much conservatism have you baked in there because you did 90 in 2004, but that was with them.
Roger: Claims inflation catch up and other special factors you've pulled out there I don't know if you look back over a longer period of time, you're very regularly below 90% combined ratio target. So just your thinking on how you arrived at night, you want as a kind of medium term.
Roger: Target that and then on the Czech Republic, a more high level question, you know everything seems to be going really well there volume growth margin expansion and that 40%.
Roger: You're showing the slides and my question is really what could derail that I know bank windfall taxes are off the table in the Czech Republic, but cannot level of profitability really be sustained and is there kind of a medium term risk, but it eventually gets competed away somehow so just your kind of longer longer term perspectives.
Speaker Change: On the Czech Republic structural profitability. Please thank you.
Hi, Gary. Thank you for your questions. Let me answer the first one on the the combined ratio well. Indeed your analysis is correct. So we have been able to keep that combined ratio.
Speaker Change: Ooh significantly below the 91%.
Speaker Change: At least if you accept significantly to be in the range of 2% to 3% points and the reason why we are pretty okay going forward with that number is that if you would exclude one offs like natural catastrophic is the performance of KBC group.
Speaker Change: You need to understand that the underwriting.
The underwriting rules of non life insurance companies in the entire group are the same so it is done on the basis of the same tool.
Speaker Change: That those underwriting rules have guarantees or the combined ratio, which is significantly below the 91%. If you would add then a natural catastrophic due to to tune of roughly this year. It was 130 million euro.
Speaker Change: Well, then you're still below the 91% and this year it boiled down to 90%. So we're pretty confident on the base of the underlying quality on the basis of the <unk>.
Speaker Change: <unk>.
Speaker Change: Underwriting tool, which is group wide the same.
Speaker Change: And we do take into account at least one.
Speaker Change: Bigger event and the number 91 to be absorbed so that should be also doable going forward.
Speaker Change: Now just checking a box takes the second one okay.
So then your second question as it related to the Czech Republic.
Speaker Change: And indeed, everything seems to be growing quite nicely and that is correct.
Speaker Change: So we did see quite some nice growth both on the lending side and also on the deposit side and also on the lending side, we see growth.
Speaker Change:
Speaker Change: That could still.
Speaker Change: Both in volumes and quite nice margins that are being maintained.
Speaker Change: What could go wrong, I mean, it's difficult to predict but when you look at the GDP forecast that we have.
Speaker Change: Published and basically you see that we expect the GDP growth.
Speaker Change: Go up from 1% this year to two 1% next year and two 3%.
Speaker Change: The year after on top of that inflation is likely to or we expect to slightly drop in.
Speaker Change: Czech Republic, and what you should also take into account of course is that we had in 'twenty four quite the weakening of the.
Speaker Change: Corona, which has a <unk>.
Speaker Change: The negative impact of course on your on your income side than there is a positive impact on your cost side.
Speaker Change: You know we are quite comfortable that notwithstanding the.
The.
Speaker Change: Global forming a German economy, the Czech economy is we'll continue to grow for three reasons on the one hand, Czech economy still benefits from European subsidies.
Speaker Change: Secondly of course, do not underestimate domestic consumption, which will increase thanks to.
Speaker Change: Huge inflation do you used to have.
Speaker Change: Including of course, the wage drift over the past couple of years and last but not least it also quite some foreign direct investments, including also investment into new new nuclear plants, which will support the economy going forward. So there's a reason why.
Speaker Change: We do know.
Speaker Change: I see no reason why we should be pessimistic on the further growth of the business in the Czech Republic.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you we'll take the next question from the line.
Speaker Change: From RBC. Your line is open now please go ahead.
Speaker Change: Yeah. Thank you for taking my question.
Speaker Change:
Speaker Change: W ankle with.
Speaker Change: Some guidance.
Speaker Change: What do you expect in terms of.
Speaker Change: Are there any like all of US and then that was one nine.
Speaker Change: On your slide on Basel, four impact and it's based on.
Speaker Change: First half 2024 hour considering the volume goes I'm sure. These numbers establish that these numbers up.
Speaker Change: Right.
Somewhat higher when they actually come to that point and thank you very much.
Speaker Change: Yes.
Speaker Change: Yes, indeed as far as your question is concerned on a risk weighted asset growth or.
Speaker Change: No as you and has it been highlighting the risk weighted asset growth in the fourth quarter was 3 billion Euro or 3.3 dollars 1 billion Euro, which was mainly driven indeed by increase in the volume, saying the credit volume so good business going forward.
Speaker Change: And also by the <unk>.
Speaker Change: One of review of the once every year of course in the in the fourth quarter of the <unk>.
Speaker Change: Operational.
Speaker Change: On the operational risk weighted assets.
Speaker Change: Going forward, what you should have noticed as well is that there was no growth or limited impact of growth due to the model changes.
Speaker Change: Or.
Speaker Change: Requirements from the regulator going forward of course is very difficult to estimate the further growth of the RWD apart from the fact that of course the loan growth that we guide as 4% you should also take into account that somehow the risk weighted asset density.
Speaker Change: Is increasing as a result of a number of measures that have been taken.
Speaker Change: But at the same time, we will of course also continued to manage properly the portfolio and the lending portfolio.
Speaker Change: Potentially also looking at the <unk>.
Speaker Change: <unk>, so that you should take into consideration.
Speaker Change: So I don't think one should.
Speaker Change: It will be well below the long haul.
Speaker Change: Conclusion.
Speaker Change: Ah well below is not what our what I would say, but indeed definitely below yes. Okay.
Speaker Change: So indeed dunkin as it should be below because it's not 100% of the loans that you're doing so therefore intrinsically it should be below.
Speaker Change: Coming back to your second question regarding the.
Speaker Change: Bezel for impact.
Speaker Change: The numbers, which you can see on page 20, and the first time application of impact of a $1 billion.
Speaker Change: Taking into account a static balance sheet. So in principle it should be it should be this of course adjusted for the growth of the balance sheet.
Speaker Change: But intrinsically it should be stable.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you we will take the next question from line of Matthew Clark from Mediobanca. Your line is open.
Speaker Change: Okay.
Matthew Clark: Good morning, everyone.
Matthew Clark: So my question is on your NII outlook for 2025, which is just.
Matthew Clark: The fourth quarter level annualized I mean, even if you strip out the accounting one off.
Matthew Clark: When you're guiding for solid loan growth.
Matthew Clark: And.
Matthew Clark: I'm also confident in the continued benefit from the.
Matthew Clark: The replicating portfolio and deposit mix shift so it seems like that greater than sign is doing a lot of heavy lifting or is there actually some other lumpy items in the fourth quarter all reasons for caution that means youre not.
Matthew Clark: Basing your yield.
<unk> costs higher than just the fourth quarter annualized thanks.
Matthew Clark: Yes.
Matt: Hi, Matt.
Matthew Clark: Taking your question well the the guidance of net interest income 25 is obviously based.
Matthew Clark: The evolution of our our volumes in both on the lending side and on deposit side on the lending side, we were very explicit about that so approximately 4%.
Matthew Clark: Which means that it is.
Matthew Clark: Similar to the level, which we have seen in 2024.
Matthew Clark: On the other on the other side of the balance sheet, the volume and growth of our deposit side, which is then obviously influencing positively our guidance.
Matthew Clark: Is is also we don't give you an explicit number for that.
Matthew Clark: But it's also foreseen that we do continue to see growth of current accounts savings accounts and to a lesser extent term deposits that was the question of Trulia now in that perspective, what is crucial as well and the guidance that is that we have taken a super conservative stance on this one that is that the state node is going to.
Matthew Clark: Mature partly in March and also the biggest chunk is going to mature in October of 2025.
Matthew Clark: The assumptions, which we have taken in is that it will be reinvested.
Matthew Clark: We invested at the yields zero and so in that perspective, there are a couple of things.
Matthew Clark: <unk> in the guidance, which are on the more conservative side.
Matthew Clark: What I can say to that is what we have seen recently if in December when time deposits are maturing.
Matthew Clark: It is reinvest it only partially in term deposits and mainly in current accounts and savings accounts and their margin definitely is not zero. So it is indeed, a little bit conservative on certain aspects.
Matthew Clark: Alright, just to be clear the fourth quarter already includes the burden from the negative spread to them.
Matthew Clark: The state notes reinvested in time deposits. So I don't see even if there is.
Matthew Clark: Even if those mature and are reinvested.
Matthew Clark: Zero I don't see why that would be a drag versus the fourth quarter level.
The fourth quarter.
Matthew Clark: There was a lot better than the.
Preceding quarters and I'm just wondering why in your guidance you don't seem to be annualizing that as your baseline.
Matthew Clark: Whereas it from the outside it looks like fourth quarter should be a fairly clean quarter and shouldn't be a baseline and therefore growing in the year ahead.
Matthew Clark: Well.
Matthew Clark: First of all.
Matthew Clark: First of all correct. What you said so we have a negative impact of the state note that as in the document 22 million Euro.
Matthew Clark: But there is also a one off positive effect and the dock and in the fourth quarter net interest income of 9 million Euro which is linked to the fees and the accounting approach where the fees in Bulgaria. So be careful if you extrapolate and you take the fourth quarter multiplied by four.
Matthew Clark: Or do you need to be careful by not taking all those one offs into account as well.
Matthew Clark: What is also different and therefore, you need to make a couple of adjustments as the lower MMR M are at cost, which is going not to be the case in 2025. So he adjust that then indeed, you are slightly above the $5 7 billion, which means that we have indeed used the term.
Matthew Clark: Monology at least $5 seven so it's a floor, which we consider to be.
Matthew Clark: Conservative so in that perspective. Your analysis is correct. If you exclude the one offs and you multiply you will end up roughly five points three depends on what you exclude what you don't exclude but.
Matthew Clark: The guidance is a floor and therefore, we assume it's to be at least five points out.
Matthew Clark: Thank you.
Speaker Change: Thank you we will take the next question from the line Amit <unk> from J P. N C. The line is open now please go ahead.
Speaker Change: Thank you for taking my questions I have two please can you. Please talk about the competitive dynamics in Belgium, you have talked about the shift away from term deposits, but on the new architecture.
Speaker Change: How are you seeing competition, there and also on the lending side.
Speaker Change: If you could talk talk us through that and then the second one was if you could remind us of the sensitivity to check rates and you're already on.
Speaker Change: If possible on the long and short end. Please thank you.
Speaker Change: Thank you very much for your questions Amit first of all on competition and you referred to competition on Belgium, well I would say.
Speaker Change: What we have seen in September 2023, and then in October September This last year, sorry, 24 that was a severe competition beyond.
Speaker Change: A common sense I would say well that is no longer the case, we do have still strong competition. There is no doubt about that but it is now more in line with what I would call common sense. So we're no longer having competition with negative margins on for instance, saving products short term deposits on the lending side same story.
Speaker Change: It is strong but it is reasonable in that perspective, we were able.
Speaker Change: Two words to generate more growth and decent margins and we that is also the ambition going forward for 2025.
Butler: The second part Butler is going to take.
Speaker Change: Good morning on it so.
So where your question is all about the NII sensitivity.
Speaker Change: So what we guide in terms of NII sensitivity is.
Speaker Change: $50 million.
Speaker Change: Impact of a 25 basis points shift on an annual basis.
Speaker Change: On an annual basis.
Speaker Change: What is important to highlight you cannot compare that with the previous guidance that you've given on the <unk>.
Speaker Change: Which was $70 million.
Speaker Change: A parallel shift basically because this is my only focusing on the short end.
Speaker Change: The curve for the very simple reason that when this will be a been lengthening the deterioration of the.
Speaker Change: Replication portfolio.
Speaker Change: And we are still today obviously.
Speaker Change: Reinvesting the maturing.
Speaker Change: The maturing.
Bonds on a longer at higher.
Speaker Change: Returns or higher yields on the short term you will have noticed of course that the curve is somewhat shifting.
Speaker Change: More towards normal curve and there'll be a somewhat shortening and that's the reason why we mainly guide just on the short end of the curve.
Speaker Change: Thank you and can I just follow up on their application portfolio could you disclose the size of their application portfolio possible.
Speaker Change: No we are not disclosing the size or the replication portfolio.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you Anthony will take the next question from Farquhar Murray from Autonomous Your line is open. Please go ahead.
Speaker Change: Morning, All just two questions from me Firstly, just on the deposit side I just wondered if you could run through perhaps pass through assumptions you're building into the 25 to 27 guidance I think previously you framed around 40% or pass through or beta on savings accounts by age long term I'm just wondering if you have anything.
Speaker Change: Around there.
Speaker Change: At this time.
Speaker Change: Secondly on the asset side.
Speaker Change: Mortgage margins in Belgium, ticked up for the first time in quite some time I'm. Just wondering if you could outline what's happening there and whether it has actually been sustained this year. Thanks.
Speaker Change: So thank you very much for your questions, giving your first question the pass through rates well we have.
Speaker Change: As you know the pass through rates, obviously are influenced by the evolution of the policy rates of the central.
Speaker Change: Central banks and therefore, the relative pass through rates is constantly shifting what we have assumed is the pass through on the go.
Speaker Change: Current accounts sorry on the saving accounts in all countries is going to be at the starting level, where we are today so in that perspective.
Speaker Change: The evolution of the policy rate is relatively speaking entities in the bathroom it not necessarily increasing the real the real Barstool, Let me let me let me explain that in more concrete terms the more of the interest policy rates are coming down the higher the likelihood there's real depth as well our.
Speaker Change: Our rates for our customers on our saving accounts, which by the way we did.
Speaker Change: Two weeks or three weeks ago in Belgium, when we brought down the margin, but when you brought down the external rates on our saving accounts.
Speaker Change: With between 10, and 30 basis points, so pass through starting from the conservative levels, which we know today and relatively speaking it is influenced by the interest rate policy rates of DCP.
So as far as your second question is concerned if I understand correctly, you're acquiring for the development of the mortgage business in Belgium in particular.
Speaker Change: And also looking at the the rates on the mortgage business in Belgium is picking up.
Speaker Change: Listen of course in the in the European countries, but it's still picking up we have seen a quarter on quarter growth of 0.7% in Belgium.
Speaker Change: And over the past quarter end.
Speaker Change: Two 3% on the.
Speaker Change: Over the year, but indeed margins remained subdued.
Speaker Change: Basically we are indeed running currently at modules, which are.
Speaker Change: Below the margin on the back book.
Speaker Change: And this is something that we will manage going forward.
Speaker Change: We will of course maintain our.
Speaker Change: Market share.
Speaker Change: As we indicated before.
Speaker Change: Okay.
Speaker Change: One quick follow up just on that deposit rate cut in Belgium did you see any volume consequences following on from that thanks.
Speaker Change: The answer is negative on the country. We continue to see volume increases we had a very strong performance in quarter, four which is obviously before the rate card, but given the fact that the rate cut is in line with what the market has been doing we do not see any negative impact on the volumes.
Speaker Change: However.
Speaker Change: Alright, Thanks, a lot.
Speaker Change: Thank you we'll take the next question from Kumar from Deutsche Bank. Your line is open. Please go ahead.
Kumar: Thank you for taking my questions I have two.
<unk> costs.
Kumar: Is the previous midterm guidance, there is a bit of step up to keep us below 1.8.
Kumar: Or should we read into this guidance is it more to do with.
Kumar: To support higher growth or do you think there is higher persistence and operating cost and what you thought.
Kumar: And within that how should we think about banking taxes don't look we need 25. Previously you had noted some mitigation Asia, saying I'm getting so any guidance on that would be included.
Kumar: And secondly, a clarification on your.
Kumar: Let's take the public can I get into what our guidance is embedded for 2025.
Kumar: At least you will like.
Kumar: In southern Florida.
Kumar: Yes.
Shari: Thanks, Shari shut off on your first question regarding Opex.
Shari: The guidance, which was indeed, driven upward is actually translated by.
Shari: Let's say a like for like comparison 'twenty three 'twenty four so if you look into if you look at the evolution of the cost sides and and 20 for full year then the costs have.
Shari: Up slightly but this is mainly influenced by.
Shari: The fact that in 2023, we will still having KBC Bank, Ireland in our portfolio that portfolio. That's the asset obviously has been divested portfolio has been redefined and in this perspective, if you exclude the island in both 'twenty three and 'twenty. Four then we do see a cost increase of two 7%.
Shari: For good understanding we have also put that in a footnote on page 18.
Shari: In the guidance, where we indicated that if you would exclude island cost could be indicate increasing with two 7%. So as a matter of fact.
Shari: If you look into the guidance for 'twenty five but also even in the longer term and the guidance of 'twenty.
Shari: So the long term guidance is 27% to 2.5% is actually an improvement compared to what the reality is of 2024 23, and then the longer term guidance is more or less in the same range as the cost evolution of 2024 versus 2023. The main drivers of that are.
Two 7% increase in 24, you know does are mainly driven by the higher inflation, we do expect the inflation to be roughly around two 5%.
Shari: Going forward for the next coming years, so and therefore also end up perspective, we keep our costs quite well under control.
Shari: As far as your question is concerned on the banking tax and I E.
Shari: I understood mainly refocusing on Belgium.
Shari: There the banking tax in Belgium came in at 285 million Euro.
Shari: Which is 10.2% of the Opex, but.
Shari: Is down.
Shari: Compared to the previous year and that is mainly because there was a significant I mean the single resolution.
Shari: European single Resolution fund contributions have stopped now so that had a positive impact of more than 100 million.
Shari: The question is going to be of course, what are we going to what is going to happen in Belgium with respect to the deposit guarantee fund contribution in principle that is set at one 8% of the covered.
Shari: <unk>.
Shari: Now we will have fully blend that in.
Shari: In Belgium by July of this year.
Shari: Question now is what the government will do going forward, whether we will have to apply that on the additional volumes that we will generate or not or whether they will remain that maintain that equal is unclear yet in the government agreements. It is indicated that banking, Texas, which remained more or less equal, but it is very difficult.
Shari: Interpret what exactly would mean, we would anyway guide more on that.
Shari: With the first quarter results when we have a better view on the real impact of the government agreement.
Speaker Change: Thank you we'll take the next question from landmark.
Speaker Change: Romeo from Citi. Your line is open. Please go ahead.
Romeo: Good morning, Thank you very much I've got two simple questions on capital.
Romeo: First one is that with your current outlook for earnings at the organic and battle for arguably like growth and the ordinary payout do you think that you can build up capital from here.
Romeo: Before continuing SRT.
Romeo: And my second question also on capital at what level of fully loaded core equity tier one would you feel your capital constraint to your growth. Thank you.
Thank you Martin for your questions.
Romeo: So coming back to your first question.
Romeo: Well, we will indeed be able to to build up capital.
Romeo: All depends of course on the dividend policy, which we are going to announce.
Romeo: May of this year.
Romeo: But given the evolution of our risk weighted assets given the evolution of the guidance, which we gave for total income and on the cost side. So you can figure it out as we are building up capital.
Speaker Change: Further I would like to repeat what also bartels said on an earlier as an answer on an earlier question.
Speaker Change: So we are also looking in srt's too in that perspective.
Speaker Change: Generate some more.
Speaker Change: Oxygen on the on the capital side, so yes on the basis of the guidance, yes on the basis of the risk weighted assets, we will be able to build up capital and how we are going to deal with that capital is going to be explained in.
Speaker Change: In may of this year with it when we gave the guidance of the capital deployment plan.
And then the second part of the question was about because I missed that.
Speaker Change: Sure.
Speaker Change: So in principle I mean, if I understood the question well what level of.
Speaker Change: Okay.
Speaker Change: B our gross.
Speaker Change: Jeopardize well in this perspective, let's also be aware that srt's arch a means to an end.
Speaker Change: So in principle, when we will be continuously using as Archie said will allow us to further grow our book.
Speaker Change: It was more like if you can I understand that you will not bet on capital in Q1, and it was more to think about the bottom level at which you want to be running.
Speaker Change: Or you wouldn't want to cross.
Speaker Change: Cross for running the business.
Speaker Change: I understand your question, but this is probably going to give you as an indication in may of this year.
Speaker Change: Thank you and it appears no further question at this time I will hand, it back or what do you hope for closing remarks.
Speaker Change: Thank you very much operator, and this subject for the school, so where I would like to thank you for your attendance and enjoy the rest of the day Bye bye.
Speaker Change: Joining today's call you may now disconnect.