Q1 2025 KBC Group NV Earnings Call
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Speaker Change: Hello, and welcome to the KBC group earnings release first quarter.
Jan: 2025 conference call on today's call, we have Mr. Jan <unk>, CEO volatile puddings, CFO and Kurt de <unk> head of Investor Relations.
Jan: Please note. This call is being recorded and saw the duration of the call your lines will be on listen only.
Jan: However, you would have to have Boston you ask questions at the end of the court. This can be done by pressing star one on your telephone keypad and if you require assistance at any point, Please press star zero.
Jan: And you would be connected to one of three two.
Kip: We know hand, you over to your host Mr. Kip <unk> head of Investor to begin today's conference. Thank you.
Mr. Kip: Thank you operator.
Speaker Change: Also a very good morning to all of you from the headquarters of KBC in Brussels, and so they'll come to the Capes you conference call.
Speaker Change: Today is Thursday may 15th 2025, and we are hosting the conference call on the first quarter results of KBC, the updated dividend and capital deployment policy as well as the acquisition of 365 Bank and Slovakia.
Speaker Change: As usual, we have you on task group CEO with us as well as our group CFO, but cause billings and they will both elaborate on the results and that's some additional insights.
As such it's my pleasure to give the floor to a C. O U S who will quickly run you through the presentation.
Speaker Change: Thank you very much a curse and also from my side a warm welcome to all of you on the announcement of the first quarter results of 2025, and we do that with the traditional stops with the key highlights. So we posted this quarter a 546 million euro results.
Speaker Change: Which is as you know heavily distorted by the upfront.
Speaker Change: Looking of actually all bank taxes for the year 2025, as a matter of fact tightened a 39 million Euro bank taxes were booked in this quarter gives you a completely different picture of the 546 million Europe now to summarize what that actually entails at 546 million Euro can clearly say that once again the commercial.
Speaker Change: Bank assurance Fran.
Speaker Change: Franchise I forgot if KBC has been firing on all its cylinders.
Speaker Change: As a matter of fact also the diversification has worked perfectly in this quarter. The income is in at 49 51 split up between not sorry between interest bearing income and non interest bearing income showing what indeed diversification. This group can deliver if I look in our in the detail then.
Speaker Change: Let's start with net interest income, which is indeed, a very strong number again and it's clearly ahead of our guidance and also in that perspective as it's ahead of the plan, which he had for this first quarter. It is driven by in a very good customer alone increased to 43% on the year.
Speaker Change: If you compare that with the guidance, which we gave 4% then it is indeed, a very strong performance on top of that we saw a customer money core customer money inflow of 2.4 billion Euro in this first quarter, but what is even more important I would say is that we do see what we indeed.
Speaker Change: Assume tend to announced at the back of the fourth quarter. We do see that there is a shift coming from term deposits to saving accounts further underpinning net interest income for the quarters to come and in all the P&L lines, we have a.
Speaker Change: Strong performance on the fee and commission basis, where we do have a record sale in investment products. It is the best quarter ever in that perspective with a net sale inflow of rub 2 billion Euro. We did have also very strong results on the insurance side.
Speaker Change: With a 9% growth on the non life side and a whopping 39%.
Speaker Change: Growth quarter compared to last year, which is indeed also a record high we do have a.
Speaker Change: Higher net result of the financials with fair value and also good performance on the net other income so all P&L lines actually have doing better than planned and haven't been delivering results, which are strongly underpinning our guidance and depth perspective. If you look at the other side of the P&L. The outflows moneys costs are under control they are slightly up.
Speaker Change: Compared to the same quarter last year.
Speaker Change: But they are lower than what we originally planned for this quarter has to do with the seasonality of the first quarter last year, which was extremely low but.
Speaker Change: We do have a cost income ratio of 41% expressing what I just said on that good performance, we have a lower a.
Speaker Change: Loan loss impediments and so we do have consequently also an excellent credit cost ratio.
Speaker Change: Consequently, we do have a very solid liquidity and solvency ratio.
Speaker Change: This in depth perspective that also no surprise, that's b. Despite the volatility at the turbulence on the financial market and indeed microeconomic domain, we do reconfirm and the short term and along guidance today going forward last but not least we also update the dividend and the capital deployment policy I will go into that in a second.
Speaker Change: So let me then immediately switch to that dividend policy, and so that capital deployment while straightforward.
Speaker Change: We are having.
Speaker Change: Stop at a dividend policy, we are having a clearer definition now we take into account also certain limitations, which were linked to the current dividend policy, namely the at least trigger amongst others. The ECB to say that we could not consolidate interim the province, which we made in our results and in our capital so not in our results and our capital raise.
Speaker Change: So I mean did.
Speaker Change: This this annoyance, we have overcome by redefining the dividend policy and the payout ratio will be including the 81 coupons going forward as of this year 2025 between 50 and 65% of consolidated profit just for all clarity if you look at the 65%.
Speaker Change: If you look at the payout of dividends, which we have done over the last 10 years, well, including share buybacks, including surplus capital distributions, including regular dividends Inc.
Speaker Change: Including all the one offs, which we did over the last years. The average just below that 65% threshold. So it means indeed, we are searching it to two.
Speaker Change: What was done in the past Haswell traditionally we pay one euro interim dividend per share in the month of November and that completes the dividend policy.
Speaker Change: Going forward.
Speaker Change: Once defined dividend policy going forward, we do also redesigned our capital deployment and also here we take into account.
Speaker Change: A couple of things, which were linked to the previous capital deployment, which had this met it quite clearly we worked at that time with a threshold for the definition of.
Speaker Change: The surplus capital that was as you know.
Speaker Change: 15% CET one ratio, while we abandoned that's our that's our philosophy and we actually come back.
Speaker Change: Dividend policy, which allows us now to better manage our capital better management of our capital taking into account, how we want to deploy better our capital going forward and that is both in growth and remuneration of our shareholders. So translated into the capital deployment policy as of 2025 that philosophy.
Speaker Change: Now means that we remain and we want to be amongst the better capitalized financial institutions in Europe and this is a crucial one this you know.
Speaker Change: This was part of our policy and the pause in the real main definitely our policy in the future. So on the back of that philosophy amongst about the capitalized institutions. Our board will have every year a decision to be taken at his discretion. What are we going to do with the capital deployment. The focus there is also clearly on organic growth and M&A. She was just.
Speaker Change: To emphasize what that means if I look over the last five years, what we did on organic growth than the asset growth lending growth is roughly 5% a year over the period 2020 until 2014 and that obviously consumes also under the basal four.
Speaker Change: Regulation.
Speaker Change: Consumes quite a lot of capital and last but not least we want to do M&A four years ago, we did.
Speaker Change: The acquisition of <unk> in Bulgaria, and now today, we announced another acquisition, namely the acquisition of 365 bank in Slovakia, So going forward. The board will take that decision at his discretion with the focus I. Just explained that is an absolute minimum threshold of 13% in Florida fully loaded CET, one ratio and rebuilds.
Speaker Change: <unk> to us as of now the 81 and tier two buckets to be filled up and as our Ts to manage our risk weighted assets and a more optimal way, which is as I said now possible, giving the new capital deployment policy as a matter of fact, using the SRT can be translated in that we will.
Speaker Change: I'd be asking.
Speaker Change: Our grant from the ECB from the European Central Bank.
Speaker Change: First as a T on KBC sites by the end of this year.
Speaker Change:
Speaker Change: Coming back to the M&A side, let me immediately go into the order news, which is important to be announced today that is the acquisition of 365 bank in Slovakia. So KBC has reached an agreement with the owner of owners of 360, <unk> Bank in Slovakia for the acquisition of $98.
Speaker Change: 45%.
Speaker Change: Off of that institution, well that it comes to a total consideration for $749 million to be paid the total value stands at 761 million Euro and it's going to be paid in cash.
Speaker Change: The bank itself.
Speaker Change: As a retail focused bank that bank, which transformed itself over the last year is clearly from a let's call. It more universal bank to a more digital and retail focused bank. What is important to understand is that the combination together with our subsidiary in Slovakia will give us a top three position in the banking environment with our market share.
Speaker Change: Roughly 16%. It is also giving us a leadership position on the retail banking side, that's quite clear and it will definitely give us the possibility to further strengthen the bank assurance model going forward in that country and perspective on the financial side.
Speaker Change: <unk>.
Speaker Change: We paid one four times book value of $9 four times price, earning and we are able to realize a significant amount of synergies, which is translated into 75 pre tax.
Speaker Change: <unk>.
Speaker Change: Which allows us to have a.
Speaker Change: Return on investment of roughly roughly 16% to 17% as of the year 2028, when we do assume that those synergies will start to kick in the return on equity on this deal is roughly 15%.
Speaker Change: And it also is calculated as of the moment that synergies kick in so this means that we do consider.
Speaker Change: The integration process going to take place over the period over the next 24 months the track record of KBC. As you know is that we deliver certainly within the premises, which we make has been proven recently, but also in the earlier possible and we did acquisitions in Bulgaria amongst all of US in terms of our greatest Miss well. This deal is EPS.
Speaker Change: As of as of year, sorry year, one onwards, so EPS accretion is 1% to 2% of the first two years when we do the full integration afterwards when.
Speaker Change: The condition is done and the synergies start to come up to speed.
Speaker Change: The EPS accretion is at least 3%.
Speaker Change: And Bose calculations, Amit on a very conservative basis capital impact for the group is at closing roughly 50 basis points and so perfectly in line with our capital deployment.
Speaker Change: Strategy and of course, you will understand that this transaction announced today is subject to approval by the regulatory authorities.
Speaker Change: Giving the experiences we have with previous deals be assumed just to be happening before end of year 2000 2025 on the next slide to see the overview of the diversification, which we Havent KBC group and once again, we can confirm that also this quarter. Despite the very strong growth on the lending side. Despite the.
Speaker Change: Very good performance on the transformation result side, we keep up with other income to make the diversification of our income almost equal to the 50 50 split actually 49% net interest income linked and 51% for the non interest bearing income. The same is true for the diversification on the geographical part, but all of it.
Speaker Change: Not go into that deal, but also there we have a strong growth in central Europe compared to the western European market in essence, Belgium on the next page you see the.
Speaker Change: The split between the banking and insurance activities, 74% on the banking side, 26% on the insurance side and that is a.
Speaker Change: More and better than the traditional split up 80, 515, but as you probably can already understand it is also linked to the fact that bank taxes are kicking in more heavily than insurance and taxes in the first quarter, Kate well Kate is doing super well it goes much faster than we anticipated and while it is far more important customers start to use it more and more.
Speaker Change: Our $5 5 million customers are using it on a daily basis, but also desktop like it much more of the NPS continuously increases and so the autonomy of Kate is not a strange that Kate autonomy the ability to answer questions of customers without any KBC employer employee interfering now is at 70%.
Speaker Change: Belgium, and even 74% at check the public we do assume this to grow further when we will launch <unk> 2.0, which is going to happen in the course of quarter four quarter. One next year. So in that perspective, just to give an idea.
Speaker Change: Okay to realize there's roughly 100000 sales autonomously.
Speaker Change: Every quarter.
Speaker Change: For the last 12 months, we have realized 383000 sales via kit, Kate or probably arcade Leeds and lost so the bushes to your revenue and last but not least Kate is doing today, if I can calculate it in a very conservative manner Cal Kate is doing today. The work of 300 Ftes on a daily basis, the equivalent of that.
Speaker Change: Next slide is about all the other things which are related to sustainability and some other.
Speaker Change: Positions, which we have but let me skip that immediately go to the exceptional items.
Speaker Change: We have one exceptional item qualify that is the extra windfall taxes, which was defined on a temporary basis by the Hungarian government kicks in for 53 million Euro.
Speaker Change: After tax that is 50 million euro less a bit less than 50 million Euro. Unfortunately, we do think that there is not certain that as temporary so it could be that as it becomes a <unk>.
Speaker Change: We will see going forward, let me start with.
Speaker Change: Roughly 49% of our <unk>.
Speaker Change: That is the net interest income side well.
Speaker Change: Today, we are.
Speaker Change: <unk>.
Speaker Change: If you look at the straightforward numbers today, we are posting a result of $1 421 million euro over the quarter, which is significantly more than it was in the same period of last year and a little bit lower than what it was previous quarter, but that is entirely due to two things first of all the one off booking of a net interest income which was <unk>.
Speaker Change: Two a change in the Bulgarian entity of 9 million and the number of days, which are lower in quarter. One. If you look if you would exclude those two numbers well then the net interest income also nominally would be higher this quarter than in previous quarter.
Speaker Change: As a matter of fact, if you look at the underlying building blocks and one of the Mone domain. The two main drivers here are lending income and transformation result, the analysis quite straightforward.
Speaker Change: We have seen again in.
Speaker Change: The first quarter of this year, a higher commercial transformation results than than previous quarter and the growth is 3% perfectly in line with the guidance, which we gave as a matter of fact, the 1.421 billion Euro net interest income this quarter is lower than the one assumption, which we made.
Speaker Change: For this quarter, and which was the basis of the total guidance, which we give.
Speaker Change: Earlier this year for the total net interest income same can be said about the lending income the lending income was higher than previous quarter and it was driven by a very strong loan growth.
Speaker Change: So a very strong volume increase to 43% correction of FX included if you would exclude the FX impact and it's even two 7% compared to the way the guidance on full year basis of 4% that is indeed, a strong result that growth is realized in all countries and the growth is also realize that perspective.
Speaker Change: And mortgages and corporate lending business, one country is doing a bit better than the other I can go into that detail later on with questions. If needed if I look at the dealing room also there a stronger performance than previous quarters. So also there a very strong contribution to net interest income what are the offsetting factors already mentioned $50 million.
Speaker Change: The negative impact of the lumber lower number of days and then inflation linked bonds suffered but we expect this to come back in the course of 2025 quarter, two three and four.
Speaker Change: All other things you can read on the slides but.
Speaker Change: In essence, the two main drivers net interest income are performing better and that's the strongest message I can get.
Speaker Change: Net interest margin stands at 200 to five basis points, which is slightly low than lower than the 208 basis points, but that can of previous quarter, but again entirely be explained by the one offs, which I was referring to if you're correct those one offs.
Speaker Change: Net interest margin would be even little bit higher than the 208 basis points of previous quarter on the deposit side I will switch to the next slide which gives you an insight on the detail well core money went up with $2 4 billion Euro.
Speaker Change: And that's a combination of two parts first of all 2 billion inflow on the investment product side, which is indeed as I already said a record high but also we do see a positive contribution of 0.4 billion on the deposit side and that's actually good news because traditionally the first quarter is one of the weakest.
Speaker Change: And that perspective, why quarter for us driven by.
Speaker Change: Extra payments, which are done by employers to their employees, which is called mostly of time third month 13 month and so on support so that comes in around the Christmas period, and then the second part of most of the time is driven by the payout of bonuses and variable compensation and that comes in the second quarter and in between you have a quarter, where all the year builds are need to be paid and sponsor.
Speaker Change: Nevertheless, we saw an increase of theater point 4 billion what is far more important that comes from positive inflow on the saving accounts, which is fueled by the maturities of term deposits.
Speaker Change: In the first quarter.
Speaker Change: Also in that perspective, very important to notice that in the majority of those term deposits. The first part of the monies which were recovered in the state note in Belgium came to maturity.
Speaker Change: The important thing there too to notice is that what we already assume then also explained in guidance, which we gave is happening a reality, but even stronger than what was guided for only 38% of term deposits, which are maturing monies coming back from the state node or reinvest it in.
Low yielding turn deposits the remainder be it 60% is most of that is invested in saving accounts, yielding higher than than what.
Speaker Change: What the term deposit is delivering as a matter of fact that also boost net interest income going forward because as you know we have the the bulk of that state on money maturing in quarter three of this year. So in terms of fee and commission that is then the immediate bridge to the next slide while we had a very strong quarter $690 million.
Speaker Change: Which is substantially more than what it was in the same period last year.
Speaker Change: As a matter of fact.
Speaker Change: It is.
Speaker Change: 12% higher compared with previous quarter, perhaps you say wait a second is a little bit lower but here again, we have booked two one offs in the fourth quarter last year, you remember from the call at that time that we had roughly 20 million euro yearend effects, which was amongst others exceptional performance fees, which were booked.
Speaker Change: In the Czech Republic, and amongst others also a one off in Hungary. If you would expose the 20 million Euro you clearly see that net fee and commission business is $10 million up on this quarter, how come while it's driven by by in essence, two things the investment products. So the asset management production.
Speaker Change: Both on the asset management and sort of Saudi on the management fee side and on the entry fee side. We saw an increase of that money combined roughly 8 million euro. So that explains the difference with the previous quarter as I already said, we have a very strong growth of the net sales 2 billion up which is indeed, a record high and it is also some.
Speaker Change: <unk> by a further strong inflow from the regular investment plans, so I called as the saving account amongst the investment products 439 million in this quarter.
Speaker Change: Indeed also auto services have been doing very well definitely on our trading platforms. We had record results on our trading platforms, both in Belgium, and Czech Republic with a very strong increase of the fees there as a matter of fact, we have 26% more volume than last.
Speaker Change: Last year.
Speaker Change: The fourth quarter, which was in itself already a record quarter again, so indeed, we do have.
Speaker Change: A strong increase in fees, consequently, which are linked to that as well.
Speaker Change: Seasonally high payments services in fourth quarter cannot be.
Speaker Change: And there'll be matched in the first quarter, so there'll be a little bit of offsetting factors, but nevertheless, the sum of our parts.
Speaker Change: Typically higher than what it was currently we stand at 273 assets under management, which are of course, a little bit down and that is fully driven by the turbulence in the financial market.
Speaker Change: You can imagine yourself, what is the course of that turbulence because all of us have been suffering the statements of the American President anyway, Let's go forward to be go to the insurance business, 9% growth on the quarter, 8%. If you exclude the FX effect on the non life science also coming with a very good call.
Speaker Change: The 86% combined ratio, which levels almost the 85%.
Speaker Change: Combined ratio of previous quarter as a matter of fact, if you would exclude the fallout of the.
Speaker Change: The storm borders.
Speaker Change: On the claims side in 2025 first quarter.
Speaker Change: Then the combined ratio would have been equal, but nevertheless, it is substantially lower better than our guidance of 91.
Speaker Change: Combined ratio in terms of the life sales.
Speaker Change: Whatever whatever quarter, you take order one quarter four it is substantially higher this quarter. This is due to a very strong performance on the unit linked sites due to commercial campaigns, and Belgium, 39% up on the quarter to 32% up on the year driven by both unit linked and interest guaranteed products. Indeed, there is a strong.
Speaker Change: Performance in the split off between unit linked and.
Speaker Change: Interest guaranteed products may now stand at roughly.
<unk> 67 to $66 31, and the remainder is hybrid products.
Speaker Change: Let's go into our financial estimate fair value. It can be short about that well, it's a it's a significantly better than what it was but this is mainly driven by the <unk>.
Speaker Change: <unk> room income, which was up thanks to interest rate fluctuations.
Speaker Change: All the other elements I mentioned that in detail. The MBA CVA is in Fda's were up 5 million Euro and then also on the derivative side, we had a better performance.
Speaker Change: Given the volatility of those numbers I think you are more interested in other elements of the P&L. So therefore, I'm also not going to dwell too much on the other income which is perfectly in line with the overall average of $45 50 million Euro if you take into account a one off gain which we booked on the real estate side roughly 90 million.
Speaker Change: Let me come down immediately to costs.
Speaker Change: Costs are significantly.
Speaker Change: Compared to previous quarter.
Speaker Change: Because of the bank taxes.
Speaker Change: Which in itself are at 539 million Euro.
Speaker Change: And there I, perhaps let me finalize this funded bank, Texas 539 million euro at higher than before why because the free fall of taxes, which are linked to the resolution fund that consumed by the Belgian government 42 million Euro higher contribution to the deposit guarantee scheme, which brings the coverage to one 8%, which as you know the requirements by.
Speaker Change: Europe is zero point dates with a significantly higher this will come to an end by the way in the course of 2025.
And what is also kicking in this perspective is the fact that we recover more.
Speaker Change: From the state northern corporate deposits or the trigger for these taxes is offset a little bit by but it's lower than the single resolution fund and other.
Speaker Change: Countries and the total sum is an increase of 19 million Euro we do estimate for year end just to be at 692 million, which is a whopping number let me come back to the essence of the cost without bank taxes, well, if you compare it with the previous quarter. It is lower but that is obviously also triggered by seasonality if you compare it with previous year.
Speaker Change: Then you do see an increase of 4% that is a small but to add.
Speaker Change: First of all.
Speaker Change: The cost at the level of.
Speaker Change: First quarter last year were extremely low in the pattern of the year.
Speaker Change: Therefore, the 4% is exaggerated as a matter of fact, if we do have our cost planning for this year.
Speaker Change: Let's do the guidance of two 5% than the current cost position of $1 billion 106 million Euro is lower than our internal planning for 2025 quarter. One so it's perfectly in line with what we do expect another thing to mentioned that is if you make the stronger performance on the income side.
Speaker Change: And the cost side linked two ways first of all the cost income ratio stands at 41%, which is indeed better than our guidance and the second thing.
Speaker Change: If you look at the jaws, which are realized in this quarter than we stand now at 4%, which is better than the guidance, which we gave of at least 3% are you could say it's in line because it was at least street itself. So in that perspective cost evolution.
Speaker Change: Is better than planned.
Speaker Change: But you need to have some explanation to see it normally back in Texas I elaborated on the first.
Speaker Change: On the previous slide so, let's skip this one and we come to the asset impairment side.
Speaker Change: Well asset impairments were very strong.
Speaker Change: Stan nominally at 38 million Euro, let me express that definitely to make an understanding easier. It's eight basis points of credit cost ratio, which is substantially lower than the guidance of somewhere in between 25 to 30 basis points. If you look into the detail. Then you will see that on the lending book is 83 million Euro.
Speaker Change: But in that $83 million, we did a further cleanup of the very old npl's.
Speaker Change: Backstop it is called and of the 83 million Europe 41 million of that backstop were taken into the number so the underlying loan loss impairments were actually substantially lower.
Speaker Change: In terms of the ECL buffer, which is as you know 100% model driven the pattern meters, which we use also the forward looking macroeconomic parameters like growth GDP GDP growth inflation and so on support.
Speaker Change: Even if we take those better meet this forward looking into account then that is a decrease of 45 million of that buffer, which brings down the total impairment at 38 million Europe. What is left over at the buffer of 72 million Euro.
Speaker Change: For emerging risks and so on and so forth in terms of impaired loans.
Speaker Change: A further decrease of the impaired loan ratio, we now stand at one 9% of which roughly 1% is 90 days past due if you compare that with European definition EBA definition, we stand at 1.4%, which is indeed lower than the previous quarter, and which is indeed lower than the European average.
Speaker Change: Let us go into the.
Speaker Change: The impact of basal four on the risk weighted assets, while we guided earlier several times on the basis of a static balance sheet. This time, we do have indeed again, the static balance sheet, but the latest observation, which means also that the impact which we guided for in reality is lower.
Speaker Change: First time application impact 0.9 billion euro of which the vast majority is linked to the growth of the balance sheet and this translated in risk weighted assets for the operational risk.
Speaker Change: And then the first time application is also coming down now stands at $1 6 billion.
Speaker Change: So a total $2 5 billion Europe, bringing the impact of basal four for those two elements at 37 bps now all the rest is output floor that is 2033, we do not consider this and all our numbers why first of all as a long time to go and a lot of measures can be taken to mitigate that impact.
Speaker Change: And the reality is when you take the original guidance, which we had which was indeed conservative as always and you look at the guidance, which we gave today, which is still conservative than is already substantially lower given the changes which have been happening over the last one and a half two years now what does it result in terms of capital.
Speaker Change: So as I said, the original position of last year, Basil III or 15%. If you take purely the impact of basal four then that ratio would drop mechanically to 14.6 today, we posted under basal four at 14.5% capital ratio, which is entirely driven by the <unk>.
Speaker Change: Growth of our loan book asset.
Speaker Change: As a matter of fact, the numbers a little bit artificial giving the much higher bank taxes, we had to pay the growth of the loan book is kicking in full on the risk weighted assets and the profit is reduced by $539 million because of the bank taxes.
Speaker Change: When you also look forward, let me give you some idea of what that might bring in the nearby future well. We will have first of all higher profit retention second thing is that we will also upstream from <unk>.
Speaker Change: From Belgian garb, the insurance profits, we do this and principal only quarter two in quarter four. So therefore, it's also a distortion of this.
Of this 14, five and then last but not least we are also going to have two elements first of all the ups the positive impact of the deferred tax assets, which are linked to the liquidation of KBC Bank. We expect this to come in the third quarter of 2025 for roughly 20 basis points, and then last but not least we are going to fill up.
Speaker Change: We do capital managed balance sheet management by using 81 and tier two instruments and then for sure going to use the tailwind of.
Speaker Change: As our teeth in the course of 2025 more focused towards year end. So the fourth quarter of this year. If you translate that in OCR and MDA positions, while the OCR now stands at 10, 83% and the MTA stands at 11, 47% because of the fact that we did not.
Speaker Change: Philip the 81 tier to buttress, yet, which brings us a very solid buffers of 3% at least depends on which you use it use the OCR buffer than the buffer OCR numbers than the buffer stands at three 6%, which roughly $4 5 billion leverage ratios.
Speaker Change: It remains very solid with five 4% liquidity ratios have a buffer of at least 50, 40% to 50% compared to the absolute minimum and also the solvency ratio of the insurance company increased slightly to 210 basis points, which brings me to.
Speaker Change: The forward looking part well.
Speaker Change: Economically it does a lot of turbulence out a financial market is extremely nervous.
Speaker Change: And there's obviously has to do with the policies of the American Trump administration.
Speaker Change: You'll have the tariff policies, which you know liberation day, we're very rough which in the Meanwhile have been halted and have been in certain instances EBIT significantly lower we will see what has happened what will happen going forward, but also we do see at the European sites reflections that indeed, Europe has to reunite and rethink.
Speaker Change: Previous policies, which have been resulted in statements about the.
Speaker Change: <unk> policy and statements on the German side of spending more than what they did beforehand ish Watson isn't that perspective, no longer a absolute minimum and therefore economic growth might be boosted by infrastructure investments amongst others.
Speaker Change: <unk> off where we are we look towards the future with a little bit better numbers than before we do expect that the European growth GDP will be still moderate we talk about an average of 0.9% this year.
Similar next year and slightly higher than the year above and beyond in terms of the split up it is important to notice that in the <unk> and the.
Speaker Change: Central European parts of our group grosses at least 100 basis points higher than the 0.9, I said, a second ago and it depends a little bit on the country's southern countries will be clearly above 2% growing in terms of the.
Speaker Change: The impact.
Speaker Change: The impact of the tariffs well KBC isn't that perspective.
Speaker Change: Okay positions, if we take a very conservative stance on our loan book and therefore, we take granted loans not outstanding loans.
And the potential impact is limited to roughly 7% of our book.
Speaker Change: Let me repeat it was done in a very conservative we have very limited exposure on the U S dollar.
Speaker Change: In bonds and in equity so in that perspective also the impact will be limited and therefore, given what I just said of the economic growth, giving them what I just said on the exposure, we do consider our short term and long term financial guidance as valid and therefore reconfirmed that today I think there's some set up for the for the for the park.
Speaker Change: On the group all the countries I leave open for potential questions and therefore, I give back the floor to cut.
Speaker Change: Thank you Juan.
Speaker Change: Now the floor is open for questions.
Speaker Change: Please restrict the number of questions with too low for a maximum number of people to raise questions. Thank you.
Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question or contribute on todays call. Please press star one now on telephone Keypad, then to redraw your question its tough to also.
Speaker Change: Ensure your lines remains on muted locally you would be advised went to US your question and ask the horse mentioned, please limit yourself to two questions per participant in order to keep everyone posted to ask that question.
The first question comes from the line of.
Speaker Change: <unk>, calling from Kepler. Please go ahead.
Speaker Change: Yes. Good morning, So two questions on my side. The first one is actually on the on the guidance the at least five 5% income growth for 'twenty five.
Speaker Change: When I look at the Q1 and two more months of them the loan growth a good impression that this is a very conservative figure.
Speaker Change: If I do the math quickly I I get to towards more of a kind of actually 4% operating jaws for the year. So I know it's early in the year, but cannot do you share this impression on that.
Now you are on the conservative side.
Speaker Change: On the on the income side.
Speaker Change: Question number one the number two is on the excess capital trying to get a grip on what kind of value of the excess capital is a bit more complicated than before so you have on one side a minimum of about 13%.
Speaker Change: On the yogurt side, you want to keep an eye actually on the I guess on the peer group because you want to remain one of the best capitalized bank. So how do you reconcile let's say the absolute level medium almost 13% and put on Chile doing interested to look at.
Speaker Change: We'll keep looking at.
Speaker Change: Peer group level to make sure that the CET one ratio is not going too low.
Speaker Change: And then.
Speaker Change: Actually on payout ratio just to clarify to 50% to 65% when you add 50 and whatnot.
Speaker Change: Or will you be at 65% is that a functional.
Speaker Change: CET one ratio. So for example, a 50% payout on 13% then and probably about 65%. When you are favorable with the 14% level. Thank you.
Speaker Change:
Speaker Change: Good morning, everyone also from my side as to your first question.
Speaker Change: The answer is clearly, yes, I mean, we always have been quite conservative when we put forward our guidance. So I can confirm that indeed this.
Speaker Change: Five 5% total income growth.
Speaker Change: <unk>.
Speaker Change: To be considered as conservative if you look at the indeed, the NII that came in at $1.421 billion and you multiply that by four you will already see that we more or less achieve the guidance of $5 seven.
Speaker Change: <unk>.
Speaker Change: And if you add to that of course also the lending income, which has been indicating where we already achieved a two 4% organic growth, having a positive impact on that side as well.
Speaker Change: Supported also by the strong performance on the insurance business and the N fee net fee and commission income as indicated by your own before.
So it is clearly positive.
Speaker Change: And regarding your second question more on the on the capital side.
Speaker Change: So yes indeed.
Speaker Change: The change in the policy and you highlight that actually all the particular parts of the change so well spotted.
Speaker Change: The reason why we change it is precisely the reason why you asked the question. It gives us indeed, much more possibilities going forward to manage the capital, including M&A organic growth and remuneration of shareholders in a more.
Speaker Change: Suitable wait let me translate what that means first of all in the past Ulta.
Speaker Change: Ultimately it started to become very mechanical.
Speaker Change: <unk> already highlighted the peer group, but also I would add to that the 15%.
Speaker Change: Which actually does not allow us to give us a bit.
Speaker Change: In terms of management of our balance sheets Srt's don't make sense in that perspective also the 81 tier two doesn't make too much of sand and therefore, we dropped that mechanical approach approach, including the mechanical approach of the peer group. So that also means that yes, we will be amongst the better capitalized financial institution Institute.
Speaker Change: And yes, we will observe what our peers are doing.
Speaker Change: Going into account also regulatory changes for instance, basal four impact we don't know yet in full detail because we have given quite some guidance, which is not necessarily a given for all the peers, but it is the peer group is now used as an indication of where we should be not as a mechanical exercise. So the story about median and so on support has gone it is a judgment.
Speaker Change: Made by our board.
Speaker Change: What about then.
Speaker Change: The dividend policy in that perspective.
Speaker Change: You asked when is it 51 is at 65, what you can learn from that is very simple previously would be call. It at least which I think still is a very good approach, but it. Unfortunately triggered the regulator to say listen when its at least then there is no. There is no possibility to bring in interim profits into your capital ratio.
Speaker Change: That's a painful and therefore, we change it at least is now translated as it is a range starting from 50, which is at least 50.
Speaker Change: On top of that.
Speaker Change: The 65 comes from when you look into what we did over the last years in terms of capital distribution you take the regular dividends you take all the surplus capital, which we distribute it you take into account the share buyback.
Speaker Change: You take into account all the one offs, which we did than we are at roughly 63%, 65% is an indication that the good from a duration I think we were amongst the voters in that perspective in our peer group.
Speaker Change: This concentrated also into our dividend policy going forward. So the 65 and that perspective is the translation of of the good renovation of the past when will it be 51 will be 65, well that is a decision which is going obviously to be taken by the <unk>.
Speaker Change: By the board added at its discretion sorry.
Speaker Change: And it is not mechanicals, so they will take into account.
Speaker Change: What are the growth opportunities what are the.
Speaker Change: The macroeconomic positions and some support.
Speaker Change: The the <unk>.
Speaker Change: Capital.
Speaker Change: Optimization policies kick in there as well and then last but not least obviously, it's a good balance between.
Speaker Change: Capital optimization and also shareholder remuneration. So it gives you much more freedom and it allows us to be amongst indeed.
Speaker Change: The well the revenue rating institutions better remunerating institutions in our context by the way in that perspective also the return, which we are generating.
Speaker Change: It will help us to go forward with the same policy regenerate between 200, and lets say 75 300 basis points of capital before distributions every year again, so yes I think.
Speaker Change: The minimum 13% sorry so.
Speaker Change: We also refer to the minimum 13% how would do we need to consider.
Speaker Change: Consider that well you need to consider it as others are defined as just the minimum so it means that if you are going to drop below that 13% then our board will take a decision.
Speaker Change: How to replenish that.
Speaker Change: The replenishment is done at the pace that the board will decide to take into account. The pattern suggests that so what are we in the economic environment. What is the geopolitical pressure and so forth and so on so forth and let me add one more thing to that 13%, but because it doesn't come from well you know if you feel about the 81 and the tier two buckets, our MTA MDA level will stand.
Speaker Change: The $10 eight so we have more than 2% safety buffer.
Speaker Change: Compared to that minimum MDA minimum for distribution of dividend.
Speaker Change: So that gives us a lot of comfort.
Speaker Change: Defining it as a as a minimum threshold.
Speaker Change: With flexibility I just defined so.
Speaker Change: It gives the board a perfect possibility to manage all of the things at the same time that is and growth and organic growth and acquisition and a good remuneration of shareholders and the non mechanical way.
Speaker Change: Alright, Thank you very much.
Kumar: The next question comes from the line of <unk> Kumar, calling from Deutsche Bank. Please go ahead.
Speaker Change: Good morning.
Speaker Change: Thank you for taking my question.
Speaker Change: Sticking on capital.
Speaker Change: Would it be a sad way.
Speaker Change: To interpret your 13% minimum.
Speaker Change: Possibility of holding.
Speaker Change: In my neighborhood.
Speaker Change: 50 basis points.
Speaker Change: Given these opportunities come across consistently.
And in terms of just sticking again the capital could you again quantify what are the kind of benefits that you're expecting from S&P.
Speaker Change: And the second one is on loan growth.
Speaker Change: More on the sustainability, particularly in some of your CE markets like Czech Republic.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thanks, all for any questions, let me take the first one on capital.
Speaker Change: The 13% as I just said on the previous question have been more than 30% is the minimum and the minimum in that perspective.
Speaker Change: Something which you have to understand as a minimum we.
Speaker Change: We don't explicitly have M&A buffers in that perspective, so we don't qualify and a mechanical way less than we are today at $14 five that means we have $1 five delta, but the minimum so that one 5% as a buffer for M&A, that's not how it works.
Speaker Change: You need to consider it is as I just said we do.
Speaker Change: Do have an absolute threshold of 30% and if youre going to breakthrough that but one of the other reason then the board will take a considered in their consideration of that their concession, how we are going to replenish that and by when.
Speaker Change: That's how you need to understand that if we do more or have an acquisition possibility, which will consumers two points percent of capital.
Speaker Change: The unbilled drop through that ratio and the board will take that decision then.
Speaker Change: And as I just said so it's not that the buffer is pre defined as the delta between where we are today and the.
Speaker Change: Threshold of 30% no. It is defined in a more flexible way and the flexibility I explained on the previous question has been triggered by a lot of elements that is amongst all this will be our <unk>.
Speaker Change: Ms of profit generation, So capital generation, where we are with the environment, We live in where our peers are installed sport and the possibilities, which we have on M&A.
Speaker Change: Right.
Speaker Change: And then okay. Srt's was the next question sorry, almost forgot well, it's a as I said, we are preparing to launch our inaugural as a T until now we never use it because it did not make too much of a sense, giving the fact that we were about 15%, but our capital position as of now because.
Speaker Change: We don't have that threshold of 15% anymore. It does make sense to optimize our balance sheet and to optimize the capital usage and the capital consumption. So yes, we will do a hazard going forward. The first one will be.
Speaker Change: It's currently being prepared and will be launched for approval to the ECB, we hope to launch it.
Speaker Change: And of course of the fourth quarter of this year. The approval process is pretty long, we'll see how long it.
Speaker Change: It takes in reality, how much we are going to do.
Speaker Change: In that perspective, we don't disclose that detail.
Speaker Change: But it is a optimization of our capital structure, we have no intention to massively used as artists going forward. The reason is very obvious we don't need it and we do generate giving our profitability of roughly let me around.
Speaker Change: 280 to 300 basis points of capital every year before distributions, so srt's optimization not tool to tool in itself too absolutely.
Speaker Change: Generate capital.
Speaker Change: Good morning, Sharon as far as your second question is concerned relative to loan growth.
Speaker Change: So indeed as you have seen we generated over the first quarter and organic growth of two 4%.
Speaker Change: This is to be compared with the 4% of course, we set the guidance for the full year. Please do not extrapolate that.
This is would be of course further.
Speaker Change: Exaggerated what we see is actually strong loan growth in all the countries.
Speaker Change: Basically in both in the corporate business is also in the retail business.
Speaker Change: The mortgage loan growth overall is one 5% of the out of that so the board is also on the corporate side.
Speaker Change: And we expect that to continue.
Speaker Change: However, not at the same pace.
Speaker Change: Secondly in terms of what you also should take into account that is in terms of the margins.
Speaker Change: For the loan growth we saw.
Speaker Change: See the margins somewhat come under pressure, particularly.
Speaker Change: Particularly in Belgium on the mortgage portfolio, where the margins are still below the back book.
Speaker Change: Do you also see some pressure on the corporate loan growth.
Speaker Change: Basically the margins on the corporate loans in the Czech Republic, it's a bit the opposite in the sense that we see good growth in the mud in the mortgage business.
Speaker Change: Margins are somewhat under pressure, but well above the back book and also on the corporate side good growth there.
Speaker Change: Decent margins.
Speaker Change: International markets most of the business is growing more than strong, particularly in Bulgaria.
Speaker Change: Modules are somewhat still subdued on the corporate side, we also see quite a nice growth and margins.
Speaker Change: That aren't really decent so that as far as the loan growth is concerned.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Julian Mitchell, calling from Morgan Stanley. Please go ahead.
Speaker Change: Yes, hi, good morning, and I have two questions as well so the first one on the synergies actually on the deal they seemed quite high to me also because the bank you arent buying has it lower costing.
Speaker Change: Cost income.
Speaker Change: Then your.
Speaker Change: Bank. So so you know what.
What gives you confidence on achieving those and then secondly, and you've been quite open about talking.
Speaker Change: About the potential to acquire the Belgian insurer S. Yes.
Speaker Change: And I was wondering if you have any.
Speaker Change: Date on that end.
Speaker Change: Since you are on the topic. If there is any other file on your radar in the short term and yes, if you could flag it. Thank you.
Speaker Change: Good morning, Julien as far as your first question is concerned about the synergies so basically.
Speaker Change: <unk>.
Speaker Change: Estimate of synergies to come in at $75 million.
Speaker Change: Pretax.
Speaker Change: As of 28, obviously after tax this is roughly $53 million.
Speaker Change: But basically the synergies are covered by the fact that we see strong cost synergies when you look at the.
Speaker Change: Geographically overlap, which is 100% this additional fees.
Speaker Change: Offers quite important cost synergies also quite important funding synergies, which are as such given and then of course the remainder is related.
Speaker Change: Conservative to revenue synergies, so we feel comfortable and as Jan has been highlighting this is not the first time that we are integrating of course and acquisition and we've always been able to deliver.
Speaker Change: Our plan in our business case, so also this.
Speaker Change: We feel relatively comfortable or we feel comfortable I would say of achieving those synergies.
Speaker Change: And then also good morning from my side Giuliani Your second question regarding <unk>.
Giuliani: Indeed, we are still very interested in that.
Speaker Change: That potential acquisition.
Speaker Change: The <unk> as you know might generate indeed for KBC.
Speaker Change: Quite simply some extra sub.
Speaker Change: Surpluses on the insurance side.
Speaker Change: We are more or less of the same size.
Speaker Change: Both on the life and non life side, so indeed at tremendous value the file as such.
Speaker Change: Which I think I highlighted already earlier.
Speaker Change: Is today not in an urgent let's call it a rush states to sell the Belgian government.
Speaker Change: <unk> was triggered by some press articles.
Speaker Change: Is no longer under pressure to find substantial amount of money to finance amongst others. The defense side. So that urgency is not on the table.
Speaker Change: I would say between break us anymore, and therefore I think the government has some time to prepare that launch because strategically over the longer run Belgium State is and then also in the hands of the Belgian stages.
Speaker Change: Several assets, which you can read it.
Speaker Change: You can question why it is still there and therefore I think that regarding those assets amongst all of those areas.
Speaker Change: A final outcome of that preparation will be there in the course of 2026 my guess positioning.
Speaker Change: Positioning of the Belgian state early 2026.
Speaker Change: So clearly my answer is yes, we will be interested in that file we have been prepared for it.
Speaker Change: Also now giving you. The fact that 365 is concluded we can now fully focus on other M&A acquisition and if its possible that it is one of them, we definitely will be involved.
Thanks, and there isn't any anything else on your table and the momentum for 2025.
Speaker Change: So for 2025 in the short term of the size of eight years or.
Similar sizes at this stage.
Speaker Change: Let me say it differently today I have nothing concretely, what as you know we also.
Speaker Change: Flagged our interest in assets in Central Europe in the recent past until now they are not for sale.
Speaker Change: It will happen, we clearly are interested in further expanding our activities in our core countries. We include Romania to Dow and <unk>, We just talked about so concretely today on my desk and my colleagues of the M&A Department I have no concrete files of this size on the table today.
Speaker Change: Thank you at least at least not in negotiation I mean in preparation we have plenty of them, but that's what you understood.
Yes. Thank you.
Speaker Change: The next question comes from the line of.
Speaker Change: <unk> via Charger Coning from HSBC. Please go ahead.
Speaker Change: Yes, good morning, everyone. A couple of questions on my side, both on Slovakia, if I could so firstly, just a follow up call.
Speaker Change: What specifically the breakdown of that $75 million between cost and revenue synergy assumptions assumptions I just need to get a feel for what you're assuming in terms of for instance, the bank assurance opportunity because it sounds like the bulk of it coming from cost and funding benefits rather than a big uplift.
Speaker Change: Cross sell and then secondly, it sounds like 365.
Speaker Change: Very much kind of a challenger bank, whereas your <unk>, it's more of a kind of traditional incumbent banks and how should we think about the customer positioning the cultural fit of putting those two very different banking models together.
Speaker Change: Okay.
Speaker Change: So good morning, Gary I will take the first question.
Speaker Change: We do not disclose of course, the exact numbers, but I think you are assumption is correct. So the bulk of the.
Speaker Change: Synergies will come on the one hand on the cost side and on the other end on the funding side.
And as usual, we've been relatively conservative on the revenue side.
Speaker Change: And then going back on the second part of your question Kerry.
Speaker Change: The type of bank and why it's so interesting for us while the salaries of Super interesting for US first of all.
Speaker Change: The bank gives.
Speaker Change: Given its market share and its positioning brings us to the number three position in terms of net bones amongst others.
Speaker Change: The bank itself he called the Challenger Bank, well I don't know what's different about your definition as a challenger Bank. Let me give you mine, that's the bond who chases definitely price driven or.
Speaker Change: <unk>.
Speaker Change: The stronger incumbents, well that is not really the profile of 365 banks that were not appraised breaker. So in this perspective, they are more or less in line with what we do in our Princess deposit gathering.
Speaker Change: What is definitely true for 265 bank, it's actually driven by two components. So you have an agreement with Slovak post where you do have 1400 postal offices, which have a particular type of client and clients as you can imagine and this is a very strong one in terms of deposit gathering.
Speaker Change: Without being a price break a second thing is that 360 <unk> bank that's call. It 365.
Speaker Change: Part of the bank well that is in a completely different bank and that is something which we like a lot. They have been doing a tremendous job on the digital side be aware of that.
Speaker Change: Roughly around a number now roughly 58% to 60% of that.
Speaker Change: Oh, the clients of the 365 bank.
Speaker Change: Now the 365 parts of the bank sorry.
Speaker Change: 60, roughly 60% of them are digital customers and digital onboarding customers. So it brings them very close to what we do in <unk>, what we do in Slovakia, with Kate and with KBC. So in that perspective is a perfect.
Speaker Change: Match, but what we do so taking all this into account.
Speaker Change: The institution 365 is perfectly integrated bull and S bottle just yet.
Speaker Change: In our synergies, we do not assume big numbers of the country.
Speaker Change: Principally never do on the revenue side, but there is a quite significant potential on the revenue side. Once the KBC model is in place both on the bank and on the insurance side and then we can build on bond the strengths of 265 also on the digital side.
Speaker Change: That's very helpful. Thank you guys.
Speaker Change: The next question comes from the line of Farquhar Hauck <unk>, calling from autonomous. Please go ahead.
Speaker Change: Morning, All just two questions. If I may firstly coming back to 365 I'm. Just wondering if you could give us a sense of the actual nature of the contractual agreement with the postal bank in terms of how long that exclusive distribution agreement lasts and whether there might be a renewal point on it and maybe more broadly.
Speaker Change: It fits into your strategy for the bank further out and then secondly, just going back to the capital return policy.
Speaker Change: Possibly a little bit worse months, a question, but if I look at the 50% to 65% payout ratio should I think about purely dividend or does it actually pick up buybacks I'm just wondering how I should think about the mix between dividends and buybacks going forward and where the buybacks on a truly exceptional.
<unk>.
Speaker Change: Okay. Thank you very much for your question as far as the.
Speaker Change: Contract is concerned with the Slavic post.
Speaker Change: This has been recently extended to at least 36 20.
Speaker Change: 36.
Speaker Change: So from that perspective.
This is quite a long and basically there.
Speaker Change: There is a opportunity to take out or to terminate the contract delivered with a three year.
Speaker Change: Notification on our site so from that perspective, I think it's pretty well covered.
Speaker Change: <unk> also seen that the.
Speaker Change: The boost.
Speaker Change: Also a <unk>.
Speaker Change: Small share in the capital and that is of course confirming of course also the strategic alliance.
Speaker Change: 365 has with the with the slower post.
Speaker Change: Yeah.
Speaker Change: And.
Speaker Change: Coming back to your second question firepower.
The 50 65 dividend.
Speaker Change: Arrange and then the form of that dividend range well.
Speaker Change: We do not exclude anything whatsoever in that perspective so.
Speaker Change: The dividend payout can be in and cash can be in in the form of a share buyback and so on and so forth and what and how that will be at each and every time considered by our board.
Speaker Change: They will take those additions and on the payout and on the form of debt pay out just to give you an idea of share buyback now what we did with the acquisition of $3 65 Bank that is more EPS accretive and for instance, the share buybacks. So are there opportunities out there for doing acquisitions with EPS accretion SBA have seen it of the law.
Speaker Change: All of our 365, then the share buyback will not fall.
Speaker Change: Thanks, a lot.
Speaker Change: The next question comes from the line of Tarik El <unk>, calling from the buffer. Please go ahead.
Speaker Change: Hi, Good morning, everyone. Just a couple of question on my side as well first on the capital.
Speaker Change: Uh huh.
Speaker Change: Thanks, God you dropped this medium.
Speaker Change: Mark that's a good news now I'm not sure the new dividend policies is is that because you have to be fair I mean minimum of 13%.
Speaker Change: That sounds to me very low and it doesn't square with your your.
Speaker Change: Maine as well criteria to remain among the highest capitalized banks I mean, 13% due to the new 10 of years ago, and 220 basis points buffer to MDA as Tom says, we're quite quite low. So how do we think should we think about your real minimum and Theres just a backstop I would say as you describe it to minimum.
Speaker Change: And then.
Speaker Change: Looking at your.
Speaker Change: The your cost consensus virtual distribution clearly markets was hoping for a top up buyback on top of 63% a payout in the next two years.
Speaker Change: Let's say, if you build capital faster than you've highlighted all the moving parts.
Speaker Change: Is this still a possibility to do more distribution with comverse too much from your minimum CET one of 13 or 14, and if you can remind us what are the the size of these moving parts are highlighted E dividend upstream.
Speaker Change: The DTA is usage on the exits of Ireland Saatchi.
Speaker Change: For this year and my second question is on <unk> I mean, yes. It puts you in a top three position in the country, but this is not the best quality back I guess a cost of risk is is quite high versus the quality of quality you have in your AR and your existing footprint. So.
Speaker Change: Is that the kind of profile of banks, who are looking for where you see a lot of upside to improve profitability and then extract the synergies.
Speaker Change: But when I look at the multiples.
Speaker Change: It looks pretty pricey, though happy to to to hear what you say on that thank you very much.
Speaker Change: Thanks for your questions.
Speaker Change: Derek.
Speaker Change: Uh huh.
Speaker Change: Let me come back to definitely first part of the question.
Speaker Change: <unk>.
Speaker Change: What is the 13% you called it is it a kind of a backstop I don't know what your definition is a backstop of course, but is there anything to send us a minimum and it means and I explained that earlier it means minimum as a minimum if you go through it then you will take a position how to replenish and that's how you should see it.
Speaker Change: Why are we quantified how we qualify to 13% well we qualify that as that is something which we feel comfortable but when you take into consideration our $10 80, OCR level MDA level. This threshold for four <unk>.
Speaker Change: Dividend payments, so we have.
Speaker Change: More than 2% buffer to depth, so that gives us comfort the 2% is derived on the basis of our risk profile of our stress test and so forth. So it gives us quite a lot of comfort with the 13% and also the flexibility, which we give around 13% in terms of how we're going to deal with that in terms, how we are going to deal with all the monies.
Speaker Change: Charter above well then it comes back to the definition of amongst the better capitalized financial institutions. As I said is no longer dogmatic median which gives you a zero flexibility. So it gives you a zero flexibility to manage your position to manage your balance sheet to manage your M&A ambitions and salon support so we left out and I understood.
Speaker Change: We're very grateful for that so I agree with you the flexibility now gives us much more possibility. So a reality when using generated roughly 200 to 300 basis points.
Speaker Change: Of capital before distributions.
Speaker Change: Every year.
Speaker Change: You will for sure have also made that calculation that if we do acquisitions. So we will go back and forward with our capital ratios between the level of 13% and whatever it maybe but also one that's the second part of your question what happens if we do generate a lot of capital we do not consume it.
Speaker Change: And acquisitions going forward.
Speaker Change: Then the board will take a decision what is the what are you going to do with that amount of capital, which we cannot make it work nor by organic gross nor via organic growth is there any way, but via M&A and then of course that will take a decision and then in the different possibilities. There have you know that is distribute the money via <unk>.
Speaker Change: Cash dividend distributed.
Speaker Change: Distribute the money via share buyback and so on so forth.
Speaker Change: Correct, what you said indeed in the short term.
Speaker Change: Clearly you have an outlook of improvements on the current capital position amongst others. The DTA, which comes in in the course of the third quarter of this year. So you know we divested island everything is done and now we are bound to an Irish process from the Irish one or the other department of the Irish government.
Speaker Change: That is just an administrative process. So we do we are pretty sure. They will get that roughly 20 basis points of the course of the third quarter and then the Srt's will start to kick in as of quarter. Four so you're right. We will improve our capital position come back to the question of Julia Bye then we have more insight on what's going to happen with the assets in the hands of the Belgian government.
Speaker Change: That will of course trigger some some capital impact we will have by then also the approval of the authorities of.
Speaker Change: And the ECB regarding the Slovakian file and therefore.
Speaker Change: It is what I call active capital management, and all possibilities are they're straightforward again, if it is surplus capital, which one day the government.
Speaker Change: The board decided to distribute because they know possibilities it cant have any shape or form.
Speaker Change: And for good understanding the definition of surplus capital at this perspective is something else than the 15%.
Speaker Change:
Who takes the second one Buffalo Nuomi, Okay Battle.
Speaker Change: Good morning, Eric as far as your second question is concerned concern quality of of $3 65.
Speaker Change: First of all.
Speaker Change: When you look at 365, you would need to we will have noticed that there have been significantly building down the corporate portfolio and they've been refocusing mailing on their mortgage portfolio. So it has become predominantly a retail bank with a mortgage portfolio of good quality. The corporate portfolio has been built around significantly.
Speaker Change: <unk>.
Speaker Change: 24% over the past three years.
Speaker Change: Secondly, they of course also have Ah.
Speaker Change: Consumer Finance book.
Speaker Change: Which is.
Speaker Change: Profitable, we obviously during the due diligence looked into the quality of the.
Speaker Change: Of the loan book.
Speaker Change: And but there has been some.
Speaker Change: Disposal of we have been taken out certainly on the corporate side some of the of the of the assets in order to bring them in line with our risk appetite. So going forward. This is a bank that was mainly grow in more in the mortgage business.
Speaker Change: Consumer finds the higher NPL ratios of course are due to the fact that you have proportionately higher consumer finance, which is indeed always at a higher NPL, but as such is manageable. So going forward. We believe that this is a strong assets in terms of.
Speaker Change: The.
Speaker Change: The pricing that you highlighted as indicated we obviously take into account in the.
Speaker Change: Pricing the.
Evaluation of the future cash flows that could be generated from this entity, but on top of that you also need to take into account the synergies we never pay out the synergies or the full amount of the synergies. So these are the synergies that we will continue to generate going forward and then when you look indeed at the return on investment that comes in at <unk>.
Speaker Change: 15%.
Speaker Change: The return on equity in 2008 of our boats.
Speaker Change: Entities combined will move towards the 15% and last but not least the entity will also be.
Speaker Change: Earnings per share of <unk> has been highlighting 1% to 2% over the first two years with more than 3% as of 2008. So these are numbers that I think demonstrate that the price is right and that the quality is not core.
Speaker Change: And Nick I can yes, I can add to that Patrick because you also added a forward looking question to the last part of February bottle. Just explained how are we looking for assets that are of quality.
Inferior to what we currently produces KBC well that makes the exercise or the return on investment most of the time.
Speaker Change: Definitely when the prices in line with what the quality of the asset that makes of course, the return on investment investment potentially higher KBC has a track record indeed, bringing in assets, which have a performance which is lower than our performance.
Speaker Change: The track record is there'll be are able to do the integration and then afterwards have the same performance of our higher performance than what we had before or in Denver, we have at KBC. So the answer is yes.
Speaker Change: Does it matter as long as surprises right, we will be able to do.
Speaker Change: To grow the company. According to the standards of KBC and approve I would like to refer to the previous acquisitions, which we have done in the past, where we delivered that promise.
Speaker Change: Thank you if I could just follow up on the on the capital a bit.
Speaker Change: You're thinking about your position of capital do you integrate as well the phase in the $1 6 billion left with 26 sensor tea tree and how old that you think come through your balance sheet.
Speaker Change: Early part of the rental or more towards statutory.
Speaker Change: Because that's left around 25 bps of capital so impact on Basel four right.
Speaker Change: Ex output floor.
Speaker Change: So the $1 6 billion as part of our of the capital ratio of course, yeah. So we took that fully into account that this 37 bps.
Speaker Change: That is spread over the periods between 26 and 32, so it's a pretty long range and there's a static so that means theres not taking into account any kind of management actions. So it's pretty on the conservative side.
Speaker Change: It is spread over the period is not necessarily all in 2026. So it's more I mean, it's super Conservative and management's actions are not included I can assure you there will be management actions.
Speaker Change: Thank you very much.
Speaker Change: Question comes from the line of Sean <unk> from UBS. Please go ahead.
Speaker Change: Thank you.
Speaker Change: I wanted to come back to the capital I'm afraid.
Speaker Change: Just looking at the capital ratios, you're discussing now if we look across Europe either.
Speaker Change: 14% pro forma for the transaction.
Speaker Change: That looks to me to be.
Speaker Change: Average.
Speaker Change: Beth and 13 would put you firmly in the bottom quartile.
Speaker Change: Comparable peers.
Speaker Change: So even though you don't have the direct link to the peer group you do talk you made it very clear that it's still a relative game.
Speaker Change: So how does that feel them should we think of there being.
Speaker Change: No access and I guess it goes back to the tariff question on where the therapy is just the Baxter, but I'm just trying to gauge.
Speaker Change: When the board sits down at the end of this year.
Speaker Change: How important is the thinking around the relative that we had of last year, which I think from memory. You said it was slightly north of 15 postpartum before they wanted it.
Speaker Change: Maybe mid fourteens or something like that Friday, if that's still how we should think about it and then.
Speaker Change: Do you just have more flexibility now to dip down towards the <unk>.
Opportunities for foster organic or inorganic growth comps and then maybe related on the capital have you quantified I haven't done the calculation for health care.
Speaker Change: Just how much additional tier one capital and tier two you expect to issue and if there's anything on.
Speaker Change: On timing related to that.
Speaker Change: And then my second question is just Super quick one on 365, you said that <unk> been running down the corporate loan book and you've kind of gone through that should we expect the corporate loan book to remain in run off.
Speaker Change: Or are you happy with the corporate loan book they have today.
Speaker Change: Thanks, everyone for your questions, Let me answer the first one on capital.
Speaker Change: First of all I understand your question, but for good understanding that's reset the mindset.
Speaker Change: There's a constant mix up between the 15 and the end of 14 of today. So pro forma is indeed 14, but be aware, the 14th which the pro forma as numbers after the approval of <unk>.
Speaker Change: The acquisition of 365 is under Basil for.
Speaker Change: What is the 15 is under Basil III, Let me, let me translate what I just said.
Speaker Change: 15 of yesterday is actually 14 six today.
And in that 14.6 is included the full deduction of Basil for not only first time application, but also what that he just asked are.
Speaker Change: The impact of basal going forward.
Speaker Change: A very conservative way, which is fair.
Speaker Change: He may peer comparison today, we only have the first time application.
Speaker Change: And if you compare this with the with your peer group.
Speaker Change: Listen you are on the bottom part or you're in the last quartile of whatever trial.
Speaker Change: Then it is on the basis of first time application, which is new.
Speaker Change: Less conservative what we positioned today so <unk>.
Speaker Change: Taking into account peer comparison it is no longer strict you know we have the median of our peer group full stop it is not at all it is given where we are what our position is how we compare to them.
Speaker Change: A series of other banks and under basal four full integration of basal four be it. The first time application plus the 26 2032 position that is what we take into account clarity on that one we will get in August when everybody's positioning Ns on the EBA stress test than those numbers, probably will get public and we have a better insight.
Speaker Change: Today, we feel super comfortable with our position on capital the 14 and a half even when we include the pro forma impact of 50 basis points or 365, we still feel comfortable with our capital position.
Speaker Change: Even taking into.
Speaker Change: Into accounts.
Speaker Change: The position of peers in terms of.
Speaker Change: 81, the tier twos, yes of course, we are going to fill those buckets up.
Speaker Change: And those buckets filled up is roughly 30 basis points. Each that is if you translate at an amount that is roughly 400 million euro per issue.
Speaker Change: 81, and tier two which we will conduct in the course of on the right momentum. So in the course of 2025.
Speaker Change: Then just on a very short answer on 65.
Speaker Change: Corporate loan book, which is still there we will continue to grow but has the ambition of the merged entity to be a full fledged bank in Slovakia that is not only a retail bottle, that's giving you full for the.
Speaker Change: The explanation on that so, it's us and retail and corporate banking and with the part which is still in the books roughly 430 million Euro we feel super fine and quality and our perspective has been assessed according to the standards of KBC. So we will grow the company.
Speaker Change: Bind entity.
Speaker Change: All cylinders in that perspective.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of NK again, calling from RBC. Please go ahead.
Speaker Change: Yes. Thank you for taking my question and apologies.
Speaker Change: Okay.
Speaker Change: Just imagine it got to year end.
Speaker Change: Yeah.
Speaker Change: And then just as a capex that position.
Speaker Change: So as I said.
Speaker Change: 50% to 65% payout ratio and then is there room to pay out of the pay out about that 65%.
Speaker Change: And the way I would assume.
Speaker Change: Yes to go to I guess, the 30% is relevant as you do an acquisition.
Speaker Change: But what's the additional excess.
Speaker Change: Excess distribution that would be a function of you wanting to stay about PFS I'm, sorry, I understand the whole mechanics change that you want to try to model it.
Speaker Change: And then just a small question I can find how much you're actually accrued in that last quarter about 50 or 69%.
Speaker Change: Thank you very much.
Speaker Change: Thanks for your questions and.
Speaker Change: The last one is very simple, 50% accrued in this quarter and then going back to the first part of your question.
Speaker Change: Well the 50 to 65 is the range in which are the dividends will be defined and it's a range. So once again the.
Speaker Change: The referenced which we made to all the dividend payments in the past.
Speaker Change: Was bringing us to 63% average so that perspective, all share buybacks all surplus capital distribution and so on support are captured within that 50% to 65%. Now. Your question was very explicit give me some guidance. So I can model the mindset of your board.
Speaker Change: This is a brief translation of what you asked.
Speaker Change: I can unfortunately, not give you that that model, but.
Speaker Change: Listen the flexibility, which is now defined as in such a way that the board has all possibilities the guidance, which you clearly give us dividend is between 50% to 65% and 65% is it is actually a umbrella which covers all the payments.
Speaker Change: <unk>, which we did in the past, including the surplus capital. So that should give you comfort second thing is is it excluding that the board will give you more than 65% the answer is no.
Speaker Change: The board's going to do that I'll can I cannot give you the answer about it because it will be decided at the discretion of the board taking into <unk>.
Speaker Change: Specific elements. The elements are very straightforward, where are we with our capital deployment and sorry with our capital position.
Speaker Change: As the ratio how do we forecast the economic growth economic circumstance, which will trigger our profit contribution and therefore capital generation what is on the table on M&A is there is nothing on the table is that in the foreseeable future and nothing on the table. Then you will generate extra capital, which you cannot make it work and then the board will take a decision will lead you to.
Speaker Change: More than 65% well that is possible. It is not excluded so you have much more flexibility and the flexibility is needed why because otherwise it does not make sense to have SRT is on your on euro on Yoplait and to have also the 81 or tier two.
Speaker Change: <unk> ability as Philadelphia so this.
Speaker Change: Model of this capital deployment policy gives the board much more flexibility to run in a flexible way taking into account the dynamics of the market, which we operate and the possibilities on the M&A side and the remnant ration of the.
Speaker Change: Of the shareholders and to give you a little bit of certainty. Therefore, we give you the 50 and 65% and the reference point of the 13% is the absolute minimum that's how you should see it and that's how you should model. So the answer is straightforward to your question answer is it possible to go beyond 65 per cent straightforward. The answer is yes.
Speaker Change: Is it straight towards the impossible to go below 13, no, but it's not the intention of course, but if there are circumstances. We do so then they will consider the replenishment and then dividend policy will be applied according to that.
Speaker Change: Okay. Thank you very much.
Flora: Our next question comes from the line of Flora <unk>, calling from Barclays. Please go ahead.
Flora: Yes. Thank you. The first question I wanted to ask you is the outlook for 2027, which you reiterated today despite.
Flora: The announced acquisition.
Flora: So just to check if that is because.
Flora: Basically the benefit of this acquisition into 'twenty seven is being offset by the fill up of the H, one and tier two buckets here and just a clarification on this actually could you just confirm if the EG one cost goes below the net income while the tier two would go into the NII.
Flora: And then another question on M&A.
Flora: Only two quick ones on this the first is could you tell us what is the main criterion youre going to consider in any M&A deal is it a return on investment and if it is what is the limit in terms of return on investment that you Wouldnt consider an M&A deal. If it's below and then I'm just trying to reconcile the notes here because.
Flora: It looks like you want to potentially prepare the bank for additional M&A, but then this deal is going to close near the end of this year. Then you have potentially Etfs. If it happens early next year would you still have room for additional M&A in the next 12 18 months, if those do happen.
Flora: <unk>.
Flora: Sure.
Flora: Good morning, Florida.
Flora: Well first of all to be absolutely clear, we will update of course are 27.
Flora: Guidance with the.
Flora: First quarter results of next year. This has not been included in the guidance. So that will be an update but I think your assumption is not correct. I mean, this is not going to compensate for potential.
Flora: For making up the guidance as we are.
Flora: As we.
Flora: I gave you so it is not.
Flora: You should not take that into account and second your second question was related to the H, one and tier two so as you want has been highlighting there. We have currently a 64 basis point shortfall. So 30 threep is going to be covered through 81, which indeed does not go through NII or the P&L.
Flora: Through dividend payments and basically the tier two is indeed going through NII and that is 31 basis points.
Flora: Yeah.
Flora: And then Florida for your second question.
Flora: So what are the drivers when we do acquisitions well.
Flora: Roy as such is not priority number one in terms of driver so the assessments, which should make us more or less always the same first of all we look from a strategic perspective that is it needs to be a bank or insurance company in essence in the countries, which we define as a core country.
Flora: And therefore.
Flora: You know the countries, where we are present, we added to that to Romania.
Flora: And the next step we will so within that framework. We will then look at the possibilities to generate.
Flora: Return on investment or return on equity you can translate the latter as return on risk adjusted capital and therefore, we do consider indeed, what you actually highlighted.
Flora: That in the medium term, we need to be able to generate the returns on a risk adjusted capital, which we are used to in the group.
Flora: Which is a proxy for that the return on equity for KBC has been north of 50% or more in the last what is it 10 years. So that is the driver which we import.
Flora: So it is also.
Flora: Part of the answer which I gave to an earlier question. What is the driver to be preferred to have poor quality or higher quality acquisitions, well all boils down to what we can make of it and then debt perspective to track record shows quite clearly that we do.
Flora: We are able to realize those returns once we put the KBC machine.
Flora: Into the migration and integration Motors, then regarding the capital position, which we have.
Flora: By year end, so it will be definitely and that's what we've already guided for in the presentation itself and the capital position of which we have today 14, and a half can be enhanced going forward by the integration of the profits, which would make on the bank insurance side. The first place second place.
Flora: Because of the optimization techniques, which we can apply.
Flora: And then you deduct a 50 basis point pro forma for the acquisition of.
Flora: 365, and then you come to the conclusion that we have substantial capital left over.
Flora: For instance for acquisitions of of amongst others potential candidates areas, even when you would deduct the impact of areas.
Flora: And then we still are superior to the the the thresholds, which had been done been defined amongst others, the 13% and let's not forget we're quite confident about this we are also able to apply the Danish compromise when we do acquisitions of insurance companies within the group.
Speaker Change: Thank you just to follow up on that last and certainly.
Flora: Not in terms of capital, but in terms of the management focus on M&A. If you already have to do you just going through and do you have room to focus on as said one even if you have capital available for that.
Flora: The answer is yes, it depends on which assets youre talking about but for instance, if if if and let's be careful I mean doesn't not made to sound that we already acquired areas. That's not the case at all but it's not even as I said on an earlier question.
Flora: At this time and this instance, the final the table priority will be.
Flora: The focus will probably cause of 'twenty six, but even when atheists would be in our books and then you deduct the impact of that and then we still have significant surplus compared even with a 13% minimum compared with the MDA level, we still have.
A significant buffer to that as well so the answer straightforward question is yes, we have buffer.
Flora: Okay excellent. Thank you.
Speaker Change: And the last question come from Amit <unk>, calling from Jpmorgan. Please go ahead.
Amit Bose: Yes, hi, good morning, and thank you for taking my questions on the first one is on ECS you have reduced outstanding ECL for geopolitical and macro and microeconomic uncertainties can you talk about the thinking here and if you built any impact in your models what tactics and the second one is.
Amit Bose: NII, if you could remind us of the NII sensitivity is to check and euro rates.
Amit Bose: You talked about the shift from interest.
Amit Bose: Savings deposits.
Amit Bose: Thats a trend that you expect to continue what assumptions have you built in your NII guidance for that thank you.
Amit Bose: Good morning.
Amit Bose: Well as far as the ECL microeconomic buffer is concerned yes, we indeed released $45 million, which might be country intuitive today, we still have 72 million in the.
Amit Bose: Macro economic buffer. The reason why we released is very simply we already had.
Amit Bose: You can.
As you might know we moved indeed too.
Amit Bose: Modal approach, which means we want to have a less subjective approach.
Amit Bose: Nevertheless back in November last year, we intervened with the elections of.
Amit Bose: Trump.
On the conservation buffer and the.
Amit Bose: What we now would like to do what we simply did is we released that our conservative approach to allow the model to fully operate.
Amit Bose: No that means most of the features of the model are driven by.
Amit Bose: Better meters that are delivered by <unk>.
Amit Bose: We stimulated those because it is always a two months delay in the in the figures and we came to the conclusion that indeed, the $45 million release was still appropriate as.
Amit Bose: As far as the NII sensitivity is concerned.
Amit Bose: We already guided last time, but also to maintain that guidance now what we guide is that basically a 25 basis points drop in the on the short term of the curve would lead to an impact of roughly 50 million euro.
Amit Bose: And indeed, we still expect a continuous shift of the term deposits towards the saving accounts for very simple reason that also the policy rates.
Amit Bose: I'd expect it to continue to drop and when policy rates dropped.
Amit Bose: People are less intended to maintain the auto broke them out of their funds for a longer time. So therefore, we indeed expect a continuation of that shift from saving accounts from time deposits to saving accounts as we already see today, where it goes where in term deposits come to maturity that we see that actually only 30.
Amit Bose: 8% of what matures is reinvested in terms of our deposits and actually 40% goes back to Gaza and the remainder mainly to the.
Amit Bose: Asset management business.
Amit Bose: Thank you.
Amit Bose: Can I please.
Speaker Change: Can I come back to your question because Curt pointed out to me, where the confusion perhaps comes from it was on the accrual of a dividend. So I confirm what I. Just said so we do have 50% accrual of KBC group level profits, but you need to be aware, if you look and therefore potentially your question.
Speaker Change: If you look at the detail in the back on page 18, and you make the calculation of what we accrued and how much profit we have in the numbers then of course, it is not 50%, but it is 61, 5%.
Speaker Change: The reason why this is is that the approval is done on a group level, 50% and the profit which is in there, giving the Danish compromise is only the bank upstream. So the insurance of streaming it is a technical for the insurance up streaming of profits only quarter two in quarter four and therefore it might look.
Speaker Change: You could almost 60%.
Speaker Change: 61, 5% to be precise Jos I want to get the clarification, but intrinsically what we are accruing at group level is 50%.
Speaker Change: Okay.
Speaker Change: Alright.
Mr. <unk>: There are no further questions. So I will hand, you back to Mr. <unk> to conclude today's conference. Thank you.
Mr. <unk>: Alright, then this sums it up for this call I would like to thank you for your attendance and enjoy the rest of the day Bye bye.
Mr. <unk>: Yes.
Mr. <unk>: Thank you for joining today's call you may now disconnect.
Mr. <unk>: Hmm.
Mr. <unk>: Hmm.
Mr. <unk>: Okay.
Mr. <unk>: Sure.
Mr. <unk>: Hum.
Mr. <unk>: Okay.
Mr. <unk>: Hmm.
Mr. <unk>: Okay.
Mr. <unk>: [music].