Q1 2026 KBC Group NV Earnings Call

May 12, 2026

Operator: Good morning, ladies and gentlemen, and welcome to the conference call of KBC Group Earnings Release Q1 2026. I would now like to turn the floor over to Kurt De Baenst, General Manager, Investor Relations. Please go ahead. Thank you.

Speaker #1: Good morning, ladies and gentlemen, and welcome to the conference call of KBC Group Earnings Release, first quarter 2026. At this time, all participants are in listening remote.

Speaker #1: If you would like to ask a question during today's call, please press star one on your telephone keypad. I would now like to turn the floor over to Kurt Baenst, General Manager Investor Relations.

Speaker #1: Please go ahead. Thank you.

Speaker #2: Thank you, Operator. Also, from my side, a very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the KBC conference call.

Kurt De Baenst: Thank you, operator. Also from my side, a very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the KBC conference call. Today is Tuesday, 12 May 2026, and we are hosting the conference call on the Q1 results of KBC. As usual, we have Johan Thijs, Group CEO, with us, as well as Group CFO Bartel Puelinckx, and they will both elaborate on the results. As such, it's my pleasure to give the floor to our CEO, Johan Thijs, who will quickly run you through the presentation.

Speaker #2: Today is Tuesday, May 12th, 2026, and we are hosting the conference call on the first quarter results of KBC. As usual, we have Johan Thijs, Group CEO, with us, as well as Group CFO Bartel Peelings, and they will both elaborate on the results.

Speaker #2: As such, it's my pleasure to give the floor to our CEO, Johan Thijs, who will quickly run you through the presentation.

Speaker #3: Thank you very much, Kurt, and also from my side, a warm welcome on the announcement of the first quarter results of 2026. And despite the fact that we have been working in a very rough environment, the geopolitical turmoil was not creating the best environment for financial institutions, despite all that turmoil, the results in the first quarter were excellent, with a return on tangible equity of 16%, totaling 575 million euro over the quarter.

Johan Thijs: Thank you very much, Kurt, and also from my side, a warm welcome on the announcement of the Q1 results of 2026. Despite the fact that we have been working in a very rough environment, the geopolitical turmoil, you know, was not creating the best environment for financial institutions. Despite all that turmoil, the results in Q1 were excellent, with a return on tangible equity of 16%, totaling EUR 575 million over Q1. This EUR 557 million is posted after paying EUR 549 million bank taxes. Now, it is quite reassuring to once again then see the machine has been firing on all cylinders, and that means that all countries have been contributed and that the bank insurance diversification has worked very well.

Speaker #3: This €557 million is posted after paying €549 million in bank taxes. Now, it is quite reassuring to once again see the machine has been firing on all cylinders, and that means that all countries have contributed and that the bank-insurance diversification has worked very well.

Speaker #3: Let me start with indicating customer loans and customer deposit, a strong growth on the lending side, with a very strong 1.6% increase over the quarter, but also customer money inflows totaling 5.4 billion in this quarter.

Johan Thijs: Let me start with indicating customer loans and customer deposits. A strong growth on the lending side, with a very strong 1.6% increase over the quarter, also customer money inflows totaling EUR 5.4 billion in this quarter. We have seen consequently as well a strong increase of the net interest income, which was also completely copied by the non-interest income totaling net fee and commission and insurance income.

Speaker #3: We have seen, consequently then as well, a strong increase of the net interest income. Which was then also completely copied by the non-net interest income, totaling net fee and commission and insurance income.

Speaker #3: Net fee and commission income, strong growth driven by strong performance on the sales side of direct client monies, but also on the insurance side, we have seen a strong performance on the non-life side and on the life side.

Johan Thijs: Net fee and commission income, strong growth driven by strong performance on the sales side of direct client monies, but also on the insurance side, we have seen a strong performance on the non-life side and on the life side. In terms of the volatility, you clearly see that reflected in our financial income, our instruments of financial income at fair value. That is totaling again a strong growth on the total income side. On the let's say outgoing monies, we do see, first of all, that the lending book in terms of its quality has performed very well with a very good cost credit cost ratio standing at a like-to-like basis, 15 basis points, which is well below the 25, 30 basis points.

Speaker #3: In terms of the volatility, I clearly see that reflected in our financial income, our instruments of financial income at fair value, and that is totaling again a strong growth under the total income side.

Speaker #3: On the, let's say, outgoing monies, we do see first of all that the lending book in terms of its quality has performed very well with a very good cost credit cost ratio standing at like-for-like basis, 15 basis points, which is well below the 25-30 basis points.

Speaker #3: We also saw a very good combined ratio with 84%, and we did in that perspective also see that costs are under control, be it that you need to be aware that this is the first quarter where we integrate 365 and Business Lease into our numbers. We'll come back to that in more detail.

Johan Thijs: We also saw a very good combined ratio with 84%. We did in that perspective, also see that costs are under control, be it that you need to be aware that this is the Q1 where we integrate 365.bank and Business Lease into our numbers. We'll come back to that in more detail. Solvency position, both on the bank side and the insurance side remain solid, with respectively a CET1 ratio of 14.4% and a Solvency II ratio of 231%. You also know that on the AGM last week, it was decided to pay out the EUR 4.1 dividend, which will be paid out on the 20 May. Let me go immediately into the detail.

Speaker #3: Solvency position both on the bank side and the insurance side remains solid with respectively a CT1 ratio of 14.4% and a solvency 2 ratio of 231%.

Speaker #3: And you also know that on the AGM last week it was decided to pay out the 4.1 dividend which will be paid out on the 20th of May.

Speaker #3: Let me go immediately into the detail. On the next slide you can see the actually the split up in essence between our net interest income bearing in sorry, our interest bearing income and our not interest non-interest bearing income.

Johan Thijs: On the next slide, you can see the actually the split up, in essence, between our interest bearing income and our non-interest bearing income. The split up over the period was hovering around 50%, which is also the case for this quarter. This quarter it is 51.49%, which is pretty much in line as what we have seen on the previous quarters and years. In terms of where we are with the technology and the evolution of the innovation side in KBC, well, it is performing again on a very strong level. We have seen further increase of the usage of Kate, that is now reaching 6.1 million of our customers, which are using Kate on a regular basis.

Speaker #3: The split up over the period was hovering around 50% which is also the case for this quarter. This quarter it is 51-49% which is pretty much in line as what we have seen on the previous quarters and years.

Speaker #3: In terms of where we are with the technology and the evolution of the innovation side in KBC, well, it is performing again on a very strong level.

Speaker #3: We have seen a further increase in the usage of Kate, which is now reaching 6.1 million of our customers who are using Kate on a regular basis.

Speaker #3: That also means that Kate is answering their questions. We have two versions of Kate out now in Belgium since the, let's say, end of last year.

Johan Thijs: That also means that Kate is answering their questions. We have two versions of Kate out now in Belgium since the end of last year. We have launched a full large language model driven Kate, we call it Kate 2.0, which has a autonomy rate of roughly 80%. This quarter, a little bit lower, has to do with customers asking more and more questions which are not yet, at this stage, fully straight-through processed. When they are not straight-through processed, we don't consider this to be a provided answer according to our standards. In the Central European countries, we still have the older version of Kate 1.0. The new version will be rolled out in the course of 2026.

Speaker #3: We have launched the full large language model-driven Kate—we call it Kate 2.0—which has an autonomy rate of roughly 80% this quarter. It's a little bit lower, which has to do with customers asking more and more questions—questions which are not yet at this stage fully straight-through process, and when they are not straight-through process, we don't consider this to be a provided answer.

Speaker #3: According to our standards, in the Central European countries we still have the older version of Kate 1.0. The new version will be rolled out in the course of 2026.

Speaker #3: We do see Czech Republic at 69%, but other countries like Hungary, Bulgaria stand at an autonomy of 75%. All of that has led to the further gains which we do on the productivity side.

Johan Thijs: We do see Czech Republic at 69%, but other countries like Hungary, Bulgaria stand at an autonomy of 75%. All of that has led to the further gains which we do on the productivity side. To say something, when we look only on the commercial side, then Kate is doing the job of roughly 400 people. If we look at how many leads are converted by Kate, then we'd speak about 420,000 sales over the last 12 months. For good understanding, we see now 3 consecutive quarters an increase of those converted leads driven by Kate. Last but not least, what also is happening when Kate is answering questions, processes are fully automated, which means that also back office processes are automated.

Speaker #3: To say something, when we look only on the commercial side then Kate is doing the job of roughly 400 people. If we look at how many leads are converted by Kate, then we'd speak about 420,000 sales over the last 12 months.

Speaker #3: For good understanding, we see now three consecutive quarters an increase of those converted leads in driven by Kate. Last but not least, what also is happening when Kate is answering questions processes are fully automated which means that also back office processes are automated.

Speaker #3: We don't take them into the number of 400, so in essence, Kate is doing the work of much more than the reference made to the 400 people I was earlier referring to.

Johan Thijs: We don't take them into the number of 400. In essence, Kate is doing the work of much more than the reference made, than the 400 people I was earlier referring about. On the next page, you see the other positions which we have on the sustainability side and how others are judging us in terms of innovation. I would not dwell too much upon that. Let me go to the one-offs. There are multiple one-offs this quarter. First of all, in this quarter, after the approval of the AGM on the matter, we have booked the one-off bonus for our staff. The one-off bonus is totaling EUR 23 million ultimately, which also means that will be part of our cost.

Speaker #3: On the next page, you see the other positions which we have on the sustainability side and how others are judging us in terms of innovation, but I would not dwell too much upon that.

Speaker #3: Let me go to the one-offs. There are multiple one-offs this quarter. First of all, in this quarter, after the approval of the AGM on the matter, we have booked the one-off bonus for our staff.

Speaker #3: The one-off bonus is totaling €23 million ultimately. Which also means that that will be part of our cost—for good understanding, this was not part of our cost guidance for the simple reason that the decision had to be taken by the AGM.

Johan Thijs: For good understanding, this was not part of our cost guidance for the simple reason that the decision had to be taken by the AGM. Also what we do see is in Hungary, quite a series of one-offs. The first one is linked to a correction on the subsidized loans where an interpretation was not followed by the authorities. The correction totaled EUR 10 million. But more significantly is that we won a legal case against those Hungarian authorities, which ultimately delivered EUR 33 million in positive. Last, definitely not least, is that the Hungarian authorities introduced a new windfall tax, so on top of the previous one, for a whopping EUR 134 million, which completely changes the picture in the Q1, where those majority of taxes are booked.

Speaker #3: Also, what we do see is in Hungary quite a series of one-offs. The first one is linked to a correction on the subsidized loans, for an interpretation was not followed by the authorities.

Speaker #3: The correction totaled 10 million euro. But more significantly is that we won a legal case against those Hungarian authorities which ultimately delivered 33 million euro in positive.

Speaker #3: Last, definitely not least, is that the Hungarian authorities introduced a new windfall tax. So, on top of the previous one, for a whopping €134 million, which completely changes the picture in the first quarter, where the majority of those taxes are booked.

Speaker #3: In terms of total amounts, we now stand after taxes as 121 million euro exceptionals. So one-offs which clearly more than what we have seen in the same quarter last year and definitely also much more than what we have seen.

Johan Thijs: In terms of total amounts, we now stand after taxes as EUR 121 million exceptional, so one-offs, which clearly more than what we have seen in the same quarter last year, and definitely also much more than what we have seen on previous quarter. Let me now go into the building blocks. First starting with Net Interest Income. Net Interest Income as such is up 4% on the quarter and 18% on the year. Of course, this is significantly influenced by the absorption of 365.bank and Business Lease. For good understanding, when I'm going to say further in this presentation 365.bank, I always mean the combination of the two. The integration of both entities have triggered that strong increase.

Speaker #3: On the previous quarter. Let me now go into the building blocks. So, first, starting with net interest income. Net interest income, as such, is up 4% on the quarter and 18% on the year.

Speaker #3: Of course, this is significantly influenced by the absorption of 365.bank and Business Lease. For good understanding, when I say further in this presentation '365.bank,' I always mean the combination of the two.

Speaker #3: So, the integration of both entities has triggered that strong increase. If you exclude them, then we would see an increase of 2% for the quarter and 15% for the year.

Johan Thijs: If you would exclude them, then we would see an increase of 2% on the quarter and 15% on the year. Which actually means that underlying our net interest income has been performing very well. In that perspective, to give you an idea, if we exclude 365.bank and Business Lease, we have a strong performance of our commercial transformation results, which is benefiting further from the reinvestment yields, also the fact that the volumes have been on the Current Account Savings Accounts, have been continuously flowing in and in that perspective, are prolonging our strategy. In terms of the lending income, also a slight increase. We do see in that perspective, of course, also the influence of the integration of 365.bank.

Speaker #3: Which actually means that, underlying, our net interest income has been performing very well. In that perspective, to give you an idea, if we exclude 365 and Business Lease, we have a strong performance of our commercial transformation result, which is benefiting further from the reinvestment yields and then also the fact that the volumes on the current account saving accounts have been continuously flowing in. And in that perspective, we are prolonging our strategy.

Speaker #3: In terms of the lending income also, a slight increase. So we do see in that perspective, of course, also the influence of the integration of 365.

Speaker #3: But even if you would exclude that M&A part, then we do see an increase of our lending income, which is driven by 1.6% quarter-on-quarter growth.

Johan Thijs: Even if you would exclude that M&A part, then we do see an increase of our lending income, which is driven by 1.6% quarter on quarter growth, which is very strong. Translated over the year, it means that we do see a growth of roughly 7%, to be precise, 6.6%, which is indeed, despite the political turmoil, a very good result. Part of that is offset by margin pressure. Well, we do see margin pressure on certain products. It is a bit of a mixed picture. Not all products we do see the margin going down, on the contrary. In essence, all in all, I would say commercial margins are still under pressure over the countries as a whole. Lending income slightly up, given the combination of the two.

Speaker #3: Which is very strong translated over the year. It means that we do see a growth of roughly 7%, to be precise, 6.6%. Which is indeed, despite the political turmoil, a very good result.

Speaker #3: Part of that is offset by margin pressure. Well, we do see margin pressure on certain products. It is a bit of a mixed picture.

Speaker #3: Not all products we do see the margin going down. On the contrary. But in essence, all in all, I would say commercial margins are still under pressure over the country as a whole.

Speaker #3: So, lending income is slightly up, given the combination of the two. We do also see that some other parts are indeed also increasing, and they are only offset by two negative things.

Johan Thijs: We do also see that some other parts are indeed also increasing, and they are only offset by 2 negative things. In essence, the number of days are lower than on the previous quarter, which has a negative impact of EUR 17 million. We do also see that the inflation-linked bonds have quarter on quarter delivered a difference of EUR 17 million. As you know, inflation is on the rise. The calculation of those inflation-linked bonds is always on the inflation of 2 months ago, which means the delay factor plays against us, but we will recuperate that in the course of the year. Therefore, going forward, the inflation-linked bonds result full year will be guided for EUR 30 to 40 million. Also a negative offset is EUR -10 million I was earlier referring to in Hungary.

Speaker #3: In essence, the number of days is lower than in the previous quarter, which has a negative impact of €17 million. And we do also see that the inflation-linked bonds have, quarter on quarter, delivered a difference of €17 million.

Speaker #3: As you know, inflation is on the rise. The calculation of those inflation-linked bonds is always based on the inflation of two months ago, which means the delay factor plays against us.

Speaker #3: But we will recuperate that in the course of the year. Therefore, going forward, the inflation-linked bonds result full year will be guided for €30 to €40 million.

Speaker #3: Also, a negative offside is the €10 million I was earlier referring to in Hungary. How is that translated in net interest margins? Well, margins are up significantly.

Johan Thijs: How is that translated in net interest margins? Well, margins are up significantly, now total 217 basis points. This is obviously influenced by the things I just mentioned. I have to add that also, for instance, the MRR in Bulgaria has a positive uptick in this quarter. If you would leave out 365.bank, even then margins would be growing to 214 basis points. On the remainder of the page, you can see the split of all the total loans. We have also seen this growth of 1% on the quarter for the mortgages, totaling 6% over the year. In terms of volumes on the deposit side, positive 2% up on the quarter, 5% up on the year.

Speaker #3: Now, total 217 basis points. This is obviously influenced by the things I just mentioned. I have to add that also, for instance, the MRR in Bulgaria has a positive uptick in this quarter.

Speaker #3: But if you would leave out 365.bank, even then margins would be growing to 214 basis points. On the remainder of the page, you can see the split over the total loans.

Speaker #3: So, we have also seen a growth of 1% on the quarter for the mortgages, totaling 6% over the year. And in terms of volumes on the deposit side, positive 2% up on the quarter, 5% up on the year.

Speaker #3: But I think it's better and easier—more easier—to explain it using the next slide on page eight, where you can clearly see, if you exclude the foreign branches and you exclude the FX effect, that we do have an increase of the deposits inflow for—or let me say it differently.

Johan Thijs: I think it's better and easier, more easier to explain it on using the next slide on page 8, where you can clearly see if you exclude the foreign branches and you exclude the FX effect, that we do have an increase of deposits inflow. Let me say it differently. We do have an increase of customer money inflows of EUR 5.4 billion. What is the split up of those of that EUR 5.4 billion? Well, EUR 1.6 billion is linked to, again, a very strong net sale on the asset management product side. Mutual funds totaling EUR 1.6 billion, which actually means that roughly EUR 3.8 billion is linked to, let's call it customer deposit.

Speaker #3: We do see have an increase of customer money inflows of 5.4 billion euro. Now what is the split up of those of that 5.4 billion euro?

Speaker #3: Well, €1.6 billion is linked to, again, a very strong net sale on the asset management product side. So, mutual funds totaling €1.6 billion.

Speaker #3: Which actually means that roughly €3.8 billion is linked to, let's call it, customer deposits. Current accounts and savings accounts total €1.3 billion positive, and term deposits do see an increase of €2.4 billion.

Johan Thijs: Current account saving accounts totaling EUR +1.3 billion and term deposits do see an increase of EUR 2.4 billion. Of course, this number is also influenced by the acquisition of 365.bank. If we would exclude 365.bank, well, the number EUR 5.4 billion will become EUR 1.9 billion net customer money inflow. If you translate that in a different way, the EUR 1.6 billion remains the same on the mutual fund business, which actually says that what we do see is saving accounts are unchanged, EUR 0.6 billion. Current accounts, we do see a clear shift from current accounts to term deposits, which is different than what we saw in the previous quarters. The reason behind that is actually linked to 2 countries, in essence, Belgium and Czech Republic.

Speaker #3: Now, of course, this number is also influenced by the acquisition of 365 Bank. And if we would exclude 365 Bank, well then the number 5.4 will become €1.9 billion net core customer money inflow.

Speaker #3: Now, if you translate that in a different way, the 1.6 remains the same on the mutual fund business. Which actually says that what we do see is saving accounts are unchanged.

Speaker #3: 0.6. But current accounts, we do see a clear shift from current accounts to term deposits. Which is different than what we saw in the previous quarters.

Speaker #3: The reason behind that is actually linked to two countries. In essence, Belgium and the Czech Republic. And this has to do with two completely different things.

Johan Thijs: This has to do with two completely different things. First of all, because of the war, because of the turmoil on the financial market, we did see a pickup of the interest rates. Therefore, in private banking Belgium, some of the customers have actually split up their investments on two sides. Part of the money was shifted into asset management products, other part of the money were locked in into term deposits. We're talking about EUR 0.7 billion, which was an anticipation on the fact that if the war is a short-lived one, then interest rates would come down again, therefore locking it in for a year does make sense.

Speaker #3: First of all, because of the war and the turmoil on the financial markets, we did see a pickup of the interest rates. And therefore, in Private Banking Belgium, some of the customers have actually split up their investments on two sides.

Speaker #3: Part of the money was shifted into asset management products. The other part of the money was locked into term deposits. We're talking about €0.7 billion.

Speaker #3: Which was an anticipation on the fact that if the war is a short-lived one, then interest rates would come down again. And therefore locking it in for the year does make sense.

Johan Thijs: The other country where we see the effect of outflow in corporate customer accounts, current accounts, sorry, is Slovakia, which is linked to a certain extent, the retail bond which was issued in Q1, a purely seasonal effect, which is linked to tax payments by micro SMEs in Slovakia. Last but not least, also in Belgium, we saw a seasonal effect that is corporate accounts, which is traditional going down every year in Q1, but normally picks up in the course of the year. All in all, customer monies have been continuously inflowing, in that perspective, is creating the still solid base going forward. In terms of fee and commission income, I already mentioned that we have seen a strong sale.

Speaker #3: The other country where we see the effect of outflowing customer accounts current accounts, sorry, is Slovakia. Which is linked to a certain extent the retail bond which was issued in the quarter.

Speaker #3: And then a purely seasonal effect, which is linked to tax payments by micro SMEs in Slovakia. Last but not least, also in Belgium we saw a seasonal effect—that is, corporate accounts, which traditionally go down every year in the first quarter.

Speaker #3: But normally picks up in the course of the year. So, all in all, customer monies have been continuously inflowing, and that, in that perspective, is creating the still solid base going forward.

Speaker #3: In terms of fee and commission income, I already mentioned that we have seen a strong sale, which has also translated overall in the net fee and commission in total, up 1% on the quarter.

Johan Thijs: Well, that's also translated overall in the net fee and commission in total, up 1% on the quarter and up 6% on the year. If you would exclude 365.bank, well, then of course, you have a little bit different numbers, -2 on the quarter, +3 on the year. Where does it come from? Well, we have seen strong sales, which is indeed EUR 1.6 billion, quite an achievement. If you compare that with the records of last year, it's only slightly down. That is, despite the war, is an excellent result. Also, we see the same more or less in the gross sales. Also in gross sales, we have the second highest Q1 ever realized in 2026.

Speaker #3: And up 6% on the year. If you would exclude 365 Bank, well then of course you have a little bit different numbers: minus 2 on the quarter, plus 3 on the year.

Speaker #3: Where does it come from? Well, we have seen strong sales, which is indeed €1.6 billion. Quite an achievement if you compare that with the records of last year.

Speaker #3: It's only slightly down, so that is, despite the war, an excellent result. And also, we see the same, more or less, in the gross sales.

Speaker #3: So, also in gross sales, we have the second-highest first quarter ever realized in 2026. Which means that the asset management services fees increased.

Johan Thijs: Which means that the asset management services fees increased by 1%. Other fees went up as well. Bank services went up with 1%, which is in essence due to fees linked on the credit side. Fees were also linked to our securities trading platform like Bolero and Patria. Bolero in Belgium, Patria in Czech Republic. To just give you an indication, the number of transactions in Bolero in Q1 were 26% up compared with the same quarter last year. For good understanding, Q1 2025 was a record high. We also see that. Sorry, I made a mistake. The 26 is about customers, it's not about transactions. About transactions, it's 13% up.

Speaker #3: By 1%. But also that the entry fees went up as well. Bank services went up by 1%, which is in essence due to fees linked on the credit side.

Speaker #3: But also fees which were linked to our securities trading platform, like Bolero and Patria—Bolero in Belgium, Patria in the Czech Republic. To just give you an indication, the number of transactions in Bolero in the first quarter were 26% up compared with the same quarter last year.

Speaker #3: For good understanding, Q1 2025 was a record high. We do also see that—sorry, I made a mistake. The 26 is about customers.

Speaker #3: It's not about transactions. It's about transactions being 13% up. So what you also have to bear in mind is that in this quarter, we also deducted for the first time the SRT cost.

Johan Thijs: What you also have to bear in mind that is in this quarter, we also deducted for the first time the SRT cost, contributing EUR -6 million to this fee and commission income. In terms of assets under management, well, obviously the negative sentiment on the financial market have put down the assets under management. It's roughly 2% on the total 4.5 billion, and it is only partly compensated by the net inflow of the EUR 1.6 billion, which I reflected upon earlier. Small add-on on the net sales. We also saw, again, a strong performance on the regular investment plans. Let's say the stable, solid base of the net sales.

Speaker #3: Contributing a minus 6 million euro to this fee and commission income. In terms of assets under management, well, obviously the negative sentiment on the financial markets has put down the assets under management—it's roughly 2% on the total, four and a half billion.

Speaker #3: And it is only partly compensated by the net inflow of €1.6 billion, which I reflected upon earlier. Small add-on on the net sales, we also saw again a strong performance on the regular investment plans.

Speaker #3: Let's say the stable, solid base of the net sales. It is totaling €450 million, which is also again translated in a further increase of the number of regular investment plans.

Johan Thijs: It is totaling EUR 450 million, which is also again translated in a further increase of the number of regular investment plans increase with 9% over the year. In terms of non-life insurance business, already mentioned that it was having a strong growth of 7%. This is triggered by all countries. Belgium as having a growth in more mature market at 6%, where we do see growth of double digit in Czech Republic, Bulgaria, and 9% in Hungary. In terms of the quality, 84% combined ratio, which is an excellent result. This is true for all countries. Small caveat, we do have extra windfall taxes or windfall taxes in Hungary.

Speaker #3: Increase with 9% over the year. In terms of non-life insurance business, already mentioned that it was having a strong growth of 7%. This is triggered by all countries.

Speaker #3: Belgium is having growth of a more mature market at 6%. Where we do see growth of double digits in Czech Republic, Bulgaria, and 9% in Hungary.

Speaker #3: In terms of the quality, 84% combined ratio—which is an excellent result. This is true for all countries. Small caveat, we do have actual inflow taxes or inflow taxes in Hungary.

Speaker #3: If you would exclude those inflow taxes in Hungary, the combined ratio there stands at 93%. But also, most countries are having combined ratios below even 80%.

Johan Thijs: If we would exclude those windfall taxes in Hungary, the combined ratio there stands at 93%. Also most countries are having combined ratios below even 80%. Life sales side, super strong. You can make the comparison on the previous quarter, which was indeed a record high. Even that quarter was beaten with the 9% growth. If you compare it with the same quarter last year, which is traditionally a very strong quarter, well, 15% up, that is quite a striking result. The split up between the products is 36% guaranteed interest product, whereas unit linked is 58, the remainder is in the hybrid products. In terms of the financial instruments at fair value, we do see a EUR -96 million evolution here compared with the previous quarter.

Speaker #3: Live sales side super strong. You can make the comparison to the previous quarter, which was indeed a record high. But even that quarter was beaten with a 9% growth.

Speaker #3: If you compare it with the same quarter last year, which is traditionally a very strong quarter, well, 15% up. And that is quite a striking result.

Speaker #3: The split-up between the products is 36% guaranteed interest products, whereas unit-linked is 58%, and the remainder is in the hybrid products. In terms of the financial instruments at fair value, we do see a negative evolution here.

Speaker #3: Of €96 million compared with the previous quarter. That has to do, of course, with the volatility in the markets. We do see the impact, the negative impact rather, of the increased interest rates.

Johan Thijs: That has to do, of course, with the volatility in the markets. We do see the impact of or a negative impact better of the increased interest rates, the rest is linked to the hedge accounting ineffectiveness. On the dealing room, we also saw, because of the turbulence, a negative evolution there, of roughly EUR 26 million, which the sum of the two combined actually explains more than the EUR 96 I was earlier referring to. Net other income was up significantly, as you can see, EUR 89 million, which is actually much better than the normal run rate of, let's say, roughly EUR 50 million. Well, that has to do with two things in essence.

Speaker #3: And the rest is linked to the hedge accounting ineffectiveness. On the dealing room, we also saw, because of the turbulence, a negative evolution there.

Speaker #3: Of roughly €26 million, which the sum of the two combined actually explains more than the €96 million I was earlier referring to. Net other income was up significantly, as you can see.

Speaker #3: €89 million, which is actually much better than the normal run rate of, let's say, roughly €50 million. While that has to do with two things, in essence.

Johan Thijs: Well, first of all, the contribution of Business Lease, which is in for the first time, it's EUR 7 million, but also the fact that we won a legal case, EUR 29 million is here in the result, and that it was already mentioned earlier with the exceptional result. If you would exclude both of them, then we are closer to the run rate, a little bit higher, 10% higher, but EUR 56 million. What about operating expenses? Well, this quarter, of course, is completely different than the previous quarter because of the bank taxes.

Speaker #3: Well, first of all, the contribution of Business Lease, which is in for the first time. It's €7 million. But also the fact that we won a legal case—€29 million is here in the result.

Speaker #3: And that it was already mentioned earlier with the exceptional result. If you would exclude both of them, then we are closer to the run rate—a little bit higher, 10% higher—but €56 million.

Speaker #3: What about operating expenses? Well, this quarter, of course, is completely different than the previous quarter because of the bank taxes. But let me start with the real costs.

Johan Thijs: Let me start with the real costs, that is the operating expenses, EUR 1,214 million, which is compared to previous quarter, down EUR 10 million, despite the fact that we included in this quarter EUR 23 million of one-offs, and despite the fact that in this quarter also EUR 30 million is included because of 365.bank. More sense does make to make the comparison with previous year, same quarter. Well, we do see an increase, but also here, be aware there are one-offs which you need to make the distinction between the consolidation of the different underlying assets. As I said, 365.bank is included this year, and then also the one-off bonus is included, and you have an FX effect of roughly EUR 13 million. What about cost income?

Speaker #3: That is the operating expenses. 1 billion 214 million euro which is compared to previous quarter down 10 million euro. Despite the fact that we included in this quarter 23 million euro of one-offs and despite the fact that in this quarter also 30 million euro is included because of 365.

Speaker #3: It makes more sense to make the comparison with the previous year's same quarter. Well, then we do see an increase. But also here, be aware there are one-offs, which you—or you need to—make the distinction between the consolidation of the different underlying assets.

Speaker #3: So, as I said, 365 is included—this year, and then also the one-off bonus is included. And you have an AVAX effect of roughly €13 million.

Speaker #3: So what about cost income? It's 41% which indicates already that we have been able to keep our cost well under control. As a matter of fact, if you do a comparison on a like-for-like basis between quarter one last year and quarter one this year, then we do see having then we do see an increase of 3.7% which is slightly higher than the guided 3.4%.

Johan Thijs: It's 41%, which indicates already that we have been able to keep our cost well under control. As a matter of fact, if you do a comparison on a like-for-like basis between Q1 last year and Q1 this year, then we do see an increase of 3.7%, which is slightly higher than the guided 3.4%. This is 100% due to timing differences. We take into account already some costs in Q1, where the benefits are only going to be seen in the course of 2026. As a matter of fact, we are perfectly online with our planned cost evolution in this quarter.

Speaker #3: But this is 100% due to timing differences. So, we take into account already some costs in the first quarter, where the benefits are only going to be seen in the course of 2026.

Speaker #3: So as a matter of fact, we are perfectly online with our planned cost evolution in this quarter. In terms of bank taxes, well bank taxes are at a level of 549 million euro which is significantly higher than last year.

Johan Thijs: In terms of bank taxes, well, bank taxes are at a level of EUR 549 million, which is significantly higher than last year. This is due to, in essence, two effects. First of all, we see an increase of the windfall taxes in Hungary. They added EUR 134 million. If you compare it with previous quarter, that is an increase of EUR 81 million. In total, if you take into account some SRF contributions and financial transactions levy, we end up at EUR 87 million. In terms of the Belgian situation, well, the deposit, the guarantee scheme in Belgium was fully filled up, so that contribution fell to 0.

Speaker #3: And this is due to, in essence, two effects. First of all, we see an increase of the windfall taxes in Hungary. They added €134 million if you compare it with the previous quarter.

Speaker #3: That is an increase of €81 million. In total, if you take into account some as-a-rev contributions and the financial transaction levy, we end up at €87 million.

Speaker #3: In terms of the Belgian situation, well, the deposit guarantee scheme in Belgium was fully filled up. So that contribution fell to zero. What the difference was, for more than 50%, filled up by the Belgian government by additional national taxes.

Johan Thijs: What the difference was, for more than 50% filled up by the Belgian government by additional national taxes, bringing the total to a positive evolution of EUR 67 million. In total, bank tax is up at 13. We do expect by year end to pay EUR 724 million of taxes, and the split up of the 549 over the different countries and what that means on OPEX, you can see on slide 13. Let me go immediately to asset impairments. We do have in total EUR 165 million of impairments, which are actually split up in 2 parts. First is the business as usual impairment. What is the quality of the underlying lending book?

Speaker #3: Bringing the total to a positive evolution of €67 million. So in total, bank taxes are up 13. We do expect by year-end to pay €724 million of taxes.

Speaker #3: And the split-up of the 549 over the different countries and what that means on OPEX, you can see on slide 13. Let me go immediately to asset impairments.

Speaker #3: We do have, in total, €165 million of impairments, which are actually split up into two parts. First is the business-as-usual impairments.

Speaker #3: So, what is the quality of the underlying lending book? Well, €89 million compares to €76 million, which means that you do see an increase of €13 million.

Johan Thijs: Well, EUR 89 million compares to EUR 76 million, which means that you do see an increase of EUR 13 million. There is a small but in EUR 89 is included 365.bank for EUR 11 million. On top of that, we also took a further provision on the non-performing loans exposure of EUR 16 million. The reason why I'm mentioning that is by taking that EUR 16 million, you will have a positive impact on your CET1, and it's of course, a voluntary choice. If you would exclude that EUR 27 million, actually the business as usual impairments are better than what we have seen in previous quarter, but also better what we have seen in the same quarter on previous year. Quality-wise, it is actually a good quarter.

Speaker #3: There is a small, but in 89 is included €3.65 million. And on top of that, a further provision on the non-performing loans exposure of €16 million.

Speaker #3: The reason why I'm mentioning that is, by taking that €16 million, you will have a positive impact on your CET1. And it's, of course, a voluntary choice.

Speaker #3: So if you would exclude that €27 million, actually the business-as-usual impairments are better than what we have seen in the previous quarter, but also better than what we have seen in the same quarter of the previous year.

Speaker #3: So, quality-wise, it is actually a good quarter. We also see that in the PD shifts in this country in this quarter, which are actually pretty stable.

Johan Thijs: We also see that in the PD shifts in this quarter, which are actually pretty stable, which is also translated in the impaired loans ratio of 1.8%. For those who are more familiar with the EBA definition, we now stand at 148 basis points, which is substantially better than the European average of 180 or the European median of 170 basis points. Another way to reflect the underlying quality of the lending book is, the credit cost ratio like for like basis. Well, that stands at 15 basis points, which is perfectly comparable with the 13 of last year and the 16 the year before, and is definitely much better than the longer term average or the guidance which we gave 25, 30 basis points. What else?

Speaker #3: This is also reflected in the impaired loans ratio of 1.8%. For those who are more familiar with the EBA definition, we now stand at 148 basis points, which is substantially better than the European average of 180 or the European median of 170 basis points.

Speaker #3: Another way to reflect the underlying quality of the lending book is the credit cost ratio on a like-for-like basis. Well, that stands at 15 basis points, which is perfectly compatible with the 13 of last year and the 16 the year before.

Speaker #3: And that's definitely much better than the longer-term average or the guidance, which we gave at 25 or 30 basis points. What else? We added, given the very difficult situation out there, a conservatism extra to what we already had as a buffer.

Johan Thijs: We added, giving the very difficult situation out there, a conservatism extra to what we already had as a buffer. The previous buffer was EUR 100 million. We now decided giving that turbulence in the Middle East, that management overlay is indeed added to the tune of EUR 72 million. EUR 3 million was extra added because of the previous buffer. In total, we do add EUR 75 million. What is particular about this buffer is that it is one-to-one linked to the IRB shortfall, and therefore, this buffer actually adds to the CET1 ratio 4 basis points extra positive. Total buffer at the end of this quarter, EUR 175 million.

Speaker #3: The previous buffer was €100 million. We have now decided, given the turbulence in the Middle East, that a management overlay is indeed added to the tune of €72 million.

Speaker #3: €3 million was extra added because of the previous buffer. So in total, we do add €75 million. What is particular about this buffer is that it is one-to-one linked to the IRB shortfall.

Speaker #3: And therefore, this buffer actually adds to the CET1 ratio for basis points extra positive. So, total buffer at the end of this quarter: €175 million, with the evolution of the conflict in the Middle East as we have seen it, and with the evolution also of the situation in Ukraine.

Johan Thijs: With the evolution of the conflict in the Middle East as we have seen it, with the evolution also of the situation in Ukraine, we do not expect to touch the EUR 72 million management overlay in the remaining part of this year. Which is then translated to page 15, where we do give you some more detail on our exposure to the Middle East, which is very limited to only 0.2% of our outstanding loan book. The same can be said about vulnerable sectors. Given the conflict in the Middle East, KBC already in the past, was anticipating potential issues and therefore was scrutinizing those portfolios. To give you an idea, actually, we do have limited exposures on those sectors which might be vulnerable.

Speaker #3: We do not expect to touch the €72 million management overlay in the remaining part of this year. Which is then translated to page 15, where we do give you some more detail on our exposure to the Middle East.

Speaker #3: Which is very limited to only 0.2% of our outstanding loan book. And the same can be said about vulnerable sectors. Given the conflict in the Middle East, KBC already in the past was anticipating potential issues.

Speaker #3: And therefore, we were scrutinizing those portfolios. But to give you an idea, actually, we do have limited exposures on those sectors which might be vulnerable.

Speaker #3: Amongst others, oil and gas. Amongst others, automotive. Amongst others, chemicals. Aviation and software. You can clearly see that the exposures which we have are very limited.

Johan Thijs: Amongst others, oil and gas, amongst others, automotive, amongst others, chemicals, aviation, and software. You can clearly see that the exposures which we have are very limited. We are talking about max 2.4% in the automotive, but most of those exposures are smaller than 1% of our outstanding loan book. In terms of, and that's just a confirmation of what we said on previous occasions, previous quarters. Private credit, hardly any exposure. Private equity, limited to less than 0.5% of our lending book. Let me go immediately into the capital ratio. Well, the buildup of capital is definitely triggered by the net result and the upstreaming of the dividend of the insurance company.

Speaker #3: We are talking about max 2.4% in the automotive. But most of those exposures are smaller than 1% of our outstanding loan book. In terms of—and that's just confirmation of what we said on previous occasions, previous quarters—private credit, hardly any exposure.

Speaker #3: Private equity is limited to less than 0.5% of our lending book. Let me go immediately into the capital ratio. Well, the buildup of capital is definitely triggered by the net result and the upstreaming of the dividend of the insurance company.

Speaker #3: We also added the goodwill and the intangibles of 365 Bank to the tune of €260 million, which actually brings capital to 19.3. In terms of the risk-rated assets, obviously the integration of 365 Bank and Business Lease have added risk-rated assets to this.

Johan Thijs: We also added the goodwill and the intangibles of 365.bank to the tune of EUR 260 million, which actually brings capital 19.3%. In terms of the risk-weighted assets, obviously, the integration of 365.bank and Business Lease have added risk-weighted assets to this. This is EUR 2.5 billion rounded. All the rest is in essence, the vast majority of that is explained by volume increases. The strong loan growth triggers the increase of EUR 1.5 billion. All the rest is explained by model changes and also higher risk-weighted asset counterparty risk. So totaling EUR 134.5 billion of risk-weighted assets, bringing the capital ratio to 14.4%.

Speaker #3: This is €2.5 billion, rounded. All the rest is, in essence, the vast majority of that is explained by volume increases. So, the strong loan growth triggers the increase of the €1.5 billion.

Speaker #3: All the rest is explained by model changes and also higher risk-rated asset counterparty risk. So, totaling €134.5 billion of risk-rated assets, bringing the capital ratio to 14.4%.

Speaker #3: Let me remind you that KBC always includes in its CET1 ratio, fully loaded, the phased-in of Basel IV. If you would exclude that, the ratio would stand at 14.54%.

Johan Thijs: Let me remind you that KBC always includes in its CET1 ratio fully loaded the phased-in of Basel IV. If you would exclude that, the ratio would stand at 14.54%. In terms of the MREL, sorry, not the MREL, the MDA position. We have a OCR 10.9%, which gives us a buffer of 3.5%. If we include the shortfall, which can be financed with CET1 on 81 and tier 2, the MDA level stands at 11.13%, giving us a buffer of more than roughly EUR 4.4 billion. The leverage ratio stands at 5.6%. The solvency ratio already mentioned 231.

Johan Thijs: Let me remind you that KBC always includes in its CET1 ratio fully loaded the phased-in of Basel IV. If you would exclude that, the ratio would stand at 14.54%. In terms of the MREL, sorry, not the MREL, the MDA position. We have a OCR 10.9%, which gives us a buffer of 3.5%. If we include the shortfall, which can be financed with CET1 on 81 and Tier 2, the MDA level stands at 11.13%, giving us a buffer of more than roughly EUR 4.4 billion. The leverage ratio stands at 5.6%. The solvency ratio already mentioned 231.

Speaker #3: In terms of the EMREL sorry, not the EMREL, the MDNA position. So we have a OCR 10.9% which gives us a buffer of 3.5%.

Speaker #3: If we include the shortfall, which can be financed with CET1, on AT1 and Tier 2, the MDA level stands at 11.13%, giving us a buffer of more than 4.4, of roughly €4.4 billion.

Speaker #3: The leverage ratio stands at 5.6%. The solvency ratio already mentioned 231. Let me repeat as well LCR and the NSFR respectively 139 and 159, 135.

Johan Thijs: Let me repeat as well, LCR and the NSFR respectively, 139 and 159, 135. In terms of guidance, in essence, we never give new guidances in the first quarter. Also giving the turbulence today is extremely difficult to give any sensible comments on, for instance, net interest income, what it will be. Multiple scenarios are still possible. The guidance which you see on page 8 Sorry, it's page 19, is unchanged. The only remark I would like to make is that be aware that we included EUR 23 million costs, which were previously not part of the guidance, given the fact that decision is only taken in 2026. In wrap up, it's a pretty good quarter.

Johan Thijs: Let me repeat as well, LCR and the NSFR respectively, 139 and 159, 135. In terms of guidance, in essence, we never give new guidances in the first quarter. Also giving the turbulence today is extremely difficult to give any sensible comments on, for instance, net interest income, what it will be. Multiple scenarios are still possible. The guidance which you see on page eight sorry, it's page 19, is unchanged. The only remark I would like to make is that be aware that we included EUR 23 million costs, which were previously not part of the guidance, given the fact that decision is only taken in 2026. In wrap up, it's a pretty good quarter.

Speaker #3: Then, in terms of guidance, in essence, we never give new guidances in the first quarter. Also, given the turbulence today, it is extremely difficult to give any sensible comments on, for instance, net interest income—what it will be.

Speaker #3: Multiple scenarios are still possible. So the guidance which you see on page 18 sorry, it's page 19 is unchanged. The only remark I would like to make is that be aware that we included 23 million euro costs which were previously not part of the guidance given the fact that decision is only taken in 2026.

Speaker #3: So in wrap up, it's a pretty good quarter. A lot of things are moving on. But business wise, the machine has been firing on all cylinders.

Johan Thijs: A lot of things are moving on, but business-wise, the machine has been firing on all cylinders. I'll give back the floor to Kurt De Baenst, who will guide us through your questions.

Speaker #3: And I'll give back the floor to Kurt, who will guide us through your questions.

Speaker #1: Thank you, everyone. The floor is now open for questions. Please restrict the number of questions to two, to allow for the maximum number of people to raise questions.

Kurt De Baenst: Thank you, Johan. The floor is now open for questions. Please restrict the number of questions to 2, to allow for a maximum number of people to raise questions. Thank you.

Kurt De Baenst: Thank you, Johan. The floor is now open for questions. Please restrict the number of questions to two, to allow for a maximum number of people to raise questions. Thank you.

Speaker #1: Thank you.

Speaker #3: Thank you. Ladies and gentlemen, if you have a question or a comment, please press star followed by one on your touch-tone telephone at this time.

Operator: We will now take our first question from Giulia Aurora Miotto of Morgan Stanley. Your line is open. Please go ahead.

Speaker #3: If at any point your question is answered, you may exit the cube by pressing the pound key star two, sorry. Questions will be taken in the order they are received.

Speaker #3: Thank you. We will now take our first question from Julia Arora Mioto of Morgan Stanley. Your line is open. Please go ahead.

Operator: We will now take our first question from Giulia Aurora Miotto of Morgan Stanley. Your line is open. Please go ahead.

Giulia Aurora Miotto: Good morning. Thank you for taking my questions. I have 2 on net interest income. I hear you that you don't want to upgrade the guidance already given the uncertainty. However, the NII result was solid. There is very good deposit, and loan growth. I would assume we get an upgrade in Q2. I don't know if you agree and if you can, you know, quantify the upside if the rate curve stays where it is. Secondly, slide 8 surprised me a little bit because it's different from what you had mentioned before. I think before you mentioned that KBC was assuming a deposit mix shift towards current, and savings, and this quarter we see the opposite. What are you seeing quarter to date in Q2?

Giulia Miotto: Good morning. Thank you for taking my questions. I have two on net interest income. I hear you that you don't want to upgrade the guidance already given the uncertainty. However, the NII result was solid. There is very good deposit, and loan growth. I would assume we get an upgrade in Q2. I don't know if you agree and if you can, you know, quantify the upside if the rate curve stays where it is. Secondly, slide eight surprised me a little bit because it's different from what you had mentioned before. I think before you mentioned that KBC was assuming a deposit mix shift towards current, and savings, and this quarter we see the opposite. What are you seeing quarter to date in Q2?

Speaker #4: Good morning. Thank you for taking my questions. I have two on net interest income. So I hear you that you don't want to upgrade the guidance already.

Speaker #4: Given the uncertainty, however, the NAI result was solid. There is very good deposit and loan growth. So I would assume we get an upgrade in Q2.

Speaker #4: And I don't know if you can if you agree and if you can quantify the upside if the rate curve stays where it is.

Speaker #4: And then secondly, slide eight surprised me a little bit because it's different from what you had mentioned before. I think before you mentioned that KBC was assuming a deposit mix shift towards current and savings.

Speaker #4: And this quarter we see the opposite. What are you seeing quarter to date in Q2? So is this trend towards term continuing or in fact it is reversing towards your assumption?

Giulia Aurora Miotto: Is this trend towards term continuing or in fact, you know, it is reversing towards your assumption? Does it make sense for banks to increase the cost in term deposit if the rate hikes are expected to be temporary? Thanks.

Giulia Miotto: Is this trend towards term continuing or in fact, you know, it is reversing towards your assumption? Does it make sense for banks to increase the cost in term deposit if the rate hikes are expected to be temporary? Thanks.

Speaker #4: And does it make sense for banks to increase the cost on term deposits if the rate hikes are expected to be temporary? Thanks.

Johan Thijs: Thanks, thanks Giulia for your questions. I will take the first one. Actually, your question is a disguised way to ask for guidance update. Let me highlight why we are not giving you an update. First of all, I mean, the war is creating I mean, I'm talking about the war in the Middle East. It's creating a lot of volatility, as we all know. Depending on the outcome of that conflict, is it short-lived or long-lived? I mean, it will fundamentally change the numbers and definitely also the situation for all financial institutions. Let me highlight in brief what we have in mind.

Speaker #1: Thanks Julia for your questions. I will take the first one. And actually your question is a disguise way to ask for guidance update. So let me highlight why we are not giving you an update.

Speaker #1: So first of all, I mean the war is creating I mean I'm talking about the war in the Middle East. It's creating a lot of volatility.

Speaker #1: As we all know, and depending on the outcome of that conflict—whether it is short-lived or long-lived—it will fundamentally change the numbers and definitely also the situation for all financial institutions.

Speaker #1: Let me highlight in brief what we have in mind. We still think that this war is a short-lived one which means let's say two months, three months max, four months and then a ceasefire will be there.

Johan Thijs: We still think that this war is a short-lived one, which means, let's say, you know, 2 months, 3 months, max 4 months, and then a ceasefire will be there, which intrinsically, according to the statements of the senior politicians on both sides of the conflict are today already stating. If it is a short-lived war, then we are in the situation which you see today. There is a slightly lower GDP growth. In Europe, the predictions are 0.4 percentage points, 0.5 percentage points lower GDP growth, but still it is good. In that environment, in Q1, we published a 1.6% lending growth. We are quite good in dealing with that kind of situation. What is also far more important is that, you know, inflation is going up.

Johan Thijs: We still think that this war is a short-lived one, which means, let's say, you know, two months, three months, max four months, and then a ceasefire will be there, which intrinsically, according to the statements of the senior politicians on both sides of the conflict are today already stating. If it is a short-lived war, then we are in the situation which you see today. There is a slightly lower GDP growth. In Europe, the predictions are 0.4 percentage points, 0.5 percentage points lower GDP growth, but still it is good. In that environment, in Q1, we published a 1.6% lending growth. We are quite good in dealing with that kind of situation. What is also far more important is that, you know, inflation is going up.

Speaker #1: Which, intrinsically, according to the statements of the senior politicians on both sides of the conflict, are today already stating. So, if it is a short-lived war, then we are in the situation which you see today.

Speaker #1: Okay, there is a slightly lower GDP growth in Europe. The predictions are 0.4, 0.5 points percent lower GDP growth. But still it is good.

Speaker #1: And in that environment, in the first quarter, we published a 1.6% lending growth. So we are quite good in dealing with that kind of situation.

Speaker #1: But what is also far more important is that inflation is going up. This is what we see in this quarter. But if it is short-lived, the assumption is that it will not last.

Johan Thijs: This is what we see in this quarter. If it is short-lived, the assumption is that it will not last. In 2027, we will definitely have a normalized be roughly around 2% inflation position. As a consequence, the central banks will look through the inflation and will not start to hike, which is different as what the forwards today are saying. Forwards still are assuming 3 rate hikes before the end of 2026. Therefore, you know, also in our net interest income, you will have a positive impact on certain things which you already saw in this quarter. We will have a positive upside on our inflation-linked bonds, which is not calculated in this quarter.

Johan Thijs: This is what we see in this quarter. If it is short-lived, the assumption is that it will not last. In 2027, we will definitely have a normalized be roughly around 2% inflation position. As a consequence, the central banks will look through the inflation and will not start to hike, which is different as what the forwards today are saying. Forwards still are assuming three rate hikes before the end of 2026. Therefore, you know, also in our net interest income, you will have a positive impact on certain things which you already saw in this quarter. We will have a positive upside on our inflation-linked bonds, which is not calculated in this quarter.

Speaker #1: So in 2027, we will definitely have a normalized normalized be roughly around 2% inflation position. As a consequence, the central banks will look to look through the inflation and will not start to hike.

Speaker #1: Which is different as what the forwards today are saying. Forwards still are assuming three rate hikes before the end of 2026. So therefore, also in our net interest income, you will have a positive impact on certain things which you already saw in this quarter.

Speaker #1: We will have a positive upside on our inflation-linked bonds, which is not calculated in this quarter. We will have the slowdown of the shifts of current and savings accounts to term deposits, which are part of this quarter.

Johan Thijs: We will have the slowdown of the shifts of current and savings account to term deposits, which are part of this quarter, because interest rates will not go down and customers have anticipated because of the war, the longer term interest rates, which were given in this quarter. That shift will go down. Indeed, as you indicated, this is something which we had not seen in Q3 and Q4, where there was no war for good understanding. What we see now, when there is a war, that this is happening. Also in other parts of the P&L, it will have an impact. If we would now, on the other hand, a long-lived contract, well, then it's completely different. You will see inflation going much higher.

Speaker #1: Because interest rates will not go down, and customers have anticipated—because of the war—the longer-term interest rates, which were a given in this quarter.

Speaker #1: So that shift will go down. And indeed, as you indicated, this is something which we had not seen in Q3 and Q4, where there was no war, for good understanding.

Speaker #1: What we see now when there is a war, that this is happening. So also in other parts of the P&L, it will have an impact.

Speaker #1: If we would now, on the other hand, have a long-lived contract, well, then it's completely different. Then you will see inflation going much higher. Probably, central banks will anticipate with rate hikes, and then we probably come closer to the forward rates when the forward rates are materializing.

Johan Thijs: Probably, central banks will anticipate with rate hikes, we probably come closer to the forward rates. When the forward rates are materializing, we see a completely different picture on net interest income side. You probably will see, also interest rates on other products increasing, given fact that interest rates are in the rise, you will have an clearly higher inflation, therefore higher inflation in bonds. It's completely different to say what it is. We will have a better view on that in the weeks to come, which means in Q2, we'll clearly give you some insight where we will be at Q2. To wrap it up, if you listen carefully to what I said, I agree with your position that the current guidance which we have given is very conservative.

Speaker #1: We see a completely different picture on net interest income side. You probably will see also interest rates on other products increasing given the fact that interest rates are in the rise and you will have a clearly higher inflation.

Speaker #1: Therefore, higher inflation-linked bonds. So it's completely different to say what it is. But we will have a better view on that in the weeks to come which means in the second quarter and we clearly give you some insight where we will be at quarter two.

Speaker #1: And to wrap it up, if you listen carefully to what I said, I agree with your position that the current guidance which we have given is very conservative.

Speaker #1: Okay. And then good morning also from my side to everyone. I'm Julia, your second question, the shift from Gaza to term deposits and now seems to be halted and turned around.

Bartel Puelinckx: Good morning also from my side to everyone. Julian, your second question, the shift from CASA to term deposits now seems to be halted and turned around, but let me give you some exact numbers. First of all, indeed, when you look at the slides related to the direct customer or core customer money, then you see EUR 2.4 billion increase in the term deposits. Out of those EUR 2.4 billion, EUR 1.4 billion comes from 365.bank in Slovakia, so you should deduct that. Secondly, we see some indeed shift, as Johan was explaining in Belgium, in private banking, from current accounts to the term deposits, for the reasons explained. This is only in Belgium.

Bartel Puelinckx: Good morning also from my side to everyone. Giulia, your second question, the shift from CASA to term deposits now seems to be halted and turned around, but let me give you some exact numbers. First of all, indeed, when you look at the slides related to the direct customer or core customer money, then you see EUR 2.4 billion increase in the term deposits. Out of those EUR 2.4 billion, EUR 1.4 billion comes from 365.bank in Slovakia, so you should deduct that. Secondly, we see some indeed shift, as Johan was explaining in Belgium, in private banking, from current accounts to the term deposits, for the reasons explained. This is only in Belgium.

Speaker #1: But let me give you some exact numbers. First of all, indeed, when you look at the slide related to the direct customer or core customer money, that you see 2.4 billion increase in the term deposits.

Speaker #1: But out of those 2.4 billion, 1.4 billion comes from 365 in Slovakia. So if you you should deduct that, secondly, we see some indeed shift as Johan was explaining in Belgium in private banking from current accounts to the term deposits for the reasons explained.

Speaker #1: But this is only in Belgium. We in the Czech Republic actually we continue to see a shift the other way around. And that is then a net impact of 0.8 billion and then basically the we also see some increase in term deposits but mainly driven in Slovakia by the corporates where we had a campaign on term deposits for the corporates to attract additional deposits.

Bartel Puelinckx: We, in the Czech Republic, actually, we continue to see a shift the other way around. That is then a net impact of EUR 0.8 billion. We also see some increase in term deposits, but mainly driven in Slovakia by the corporates, where we had a campaign on the term deposits for the corporates to attract additional deposits. That's in total EUR 2.4 billion. Is this going to continue? Actually, as Johan has been explaining, depends a bit, of course, on the duration of the war. If indeed, the situation in the Middle East lasts longer, as we have already been indicating openly that this is likely also going to indeed trigger back a shift from current accounts and savings accounts to term deposits.

Speaker #1: So that's in total 2.4 billion. So is this going to continue? Actually, as Johan has been explaining, depends a bit of course on the duration of the war.

Speaker #1: If indeed the situation in the Middle East lasts longer as we have already been indicating openly that this is likely also going to indeed trigger back a shift from current accounts and savings accounts to term deposits.

Bartel Puelinckx: When the war is short-lived, we do not believe that this is continue going forward.

Speaker #1: But when the war is short-lived, we do not believe that this is going to continue going forward.

Bartel Puelinckx: When the war is short-lived, we do not believe that this is continue going forward.

Speaker #2: Thanks.

Giulia Aurora Miotto: Thanks.

Giulia Miotto: Thanks.

Operator: Thank you. We'll now take our next question from Sharath Kumar of Deutsche Bank. Your line is open. Please go ahead.

Speaker #3: Thank you. And we'll now take our next question from Jared Kumar. Jared, your line is open. Please go ahead.

Sharath Kumar: Good morning. Thank you for taking my questions. My first one, sticking with NII, wanted to dwell a bit more on the moving parts of NII and how it progresses for the remaining quarters. I see in Q1, we had both positives and negatives, dealing room NII. If I have to look at positives, was elevated. Do you see risks of this reversing? On the other hand, if I account for negatives like inflation-linked bonds, lower day count, overall, I see underlying Q1's annualized run rate closer to EUR 6.9 billion, consensus around EUR 6.8 billion. If you could comment on how to think about the NII progression in the remaining quarters, it would be helpful. You had previously shared EUR +50 million NII sensitivity for a 25 basis points rise in interest rates.

Speaker #4: Good morning. Thank you for taking my questions. My first one, sticking with NII, wanted to dwell a bit more on the moving parts of NII and how it progresses for the remaining quarters.

Speaker #4: I see in first quarter we had both positives and negatives. Dealing room NII, if I have to look at positives, was elevated. So do you see risks of this reversing?

Speaker #4: On the other hand, if I account for negatives like inflation-linked bonds, lower day count, overall I see underlying first quarter annualized run rate closer to 6.9 billion.

Speaker #4: Consensus around 6.8. So if you could comment on how to think about the NII progression in the remaining quarters, it would be helpful. And you had previously shared a plus 50 million NII sensitivity for a 25 basis points rise in interest rates.

Sharath Kumar: Just wanted to check if this has changed. Second, on asset quality, you've already added EUR 75 million to your ECL buffers. Oil prices have remained elevated. I appreciate this is not 2022 where the risks were higher for Europe, but there we saw ECL buffers continuously added in all the quarters. Generally wanted to understand the risks of further additions to ECL buffers and more broadly on asset quality trends in the wake of current geopolitical risks. Thank you.

Speaker #4: Just wanted to check if this has changed. Second, on asset quality, you've already added 75 million to your ECL buffers. Oil prices have remained elevated.

Speaker #4: I appreciate this is not 2022 where the risks were higher for Europe, but there we saw ECL buffers continuously added in all the quarters.

Speaker #4: So generally wanted to understand the risks of further additions to ECL buffers. And more broadly on asset quality trends in the wake of current geopolitical risks.

Speaker #4: Thank you.

Johan Thijs: Thank you, Sharad, for your question. I will take the first one. It's a bit, a continuation of what I said earlier to Julia's question. If you go in the moving parts, I mean, on Net Interest Income, intrinsically, it's very simple. Roughly 90% of all Net Interest Income is built by two parameters, and that is the transformation result and the lending income. Now, on the transformation result, Bartl just highlighted what is crucial in that perspective, that is customer deposits inflow. As he highlighted, well, that is at least stable, but it is in reality growing. Therefore, the positions which we take and have been taken can be continued.

Speaker #1: Thank you, Sharad, for your question. I will take the first one. It's a bit a continuation of what I said earlier to Julia's question.

Johan Thijs: Thank you, Sharad, for your question. I will take the first one. It's a bit, a continuation of what I said earlier to Giulia's question. If you go in the moving parts, I mean, on Net Interest Income, intrinsically, it's very simple. Roughly 90% of all Net Interest Income is built by two parameters, and that is the transformation result and the lending income. Now, on the transformation result, Bartl just highlighted what is crucial in that perspective, that is customer deposits inflow. As he highlighted, well, that is at least stable, but it is in reality growing. Therefore, the positions which we take and have been taken can be continued.

Speaker #1: But if I go in the moving parts, I mean, on net interest income intrinsically, it's very simple. Roughly 90% of all net interest income is built by two parameters.

Speaker #1: And that is the transformation results and the landing income. Now, on the transformation results, Bartlett just highlighted what is crucial in that perspective—that is, customer deposits inflow.

Speaker #1: And as he highlighted, well, that is at least stable, but it is in reality growing. And therefore, the positions which we take and have been taken can be continued, which actually means that transformation and results are going to increase not only in this quarter, as they did on the previous X quarters, but also in the future quarters.

Johan Thijs: Which actually means that transformation end results are going to increase not only in this quarter, as they did on the previous X quarters, but also in the future quarters. We do anticipate that not only for 2026, but also for 2027, 2028, we will see further continuation of that transformation result to go to go up, huh. When I'm saying 2028, I'm saying at least 2028. Now, what is crucial to understand that is the 90 or the roughly 90% of Net Interest Income build up a transformation result and lending income. The moving part, the really moving part is the transformation result. What is to a lesser extent the case for the lending income. If you see this, the differences quarter on quarter, far more important transformation result than lending income. On lending income, it's very straightforward.

Speaker #1: We do anticipate that not only for 2026, but also for 2027, 2028, we will see further continuation of that transformation result to go up.

Speaker #1: And when I'm saying 2028, I'm saying at least 2028. Now, what is crucial to understand is that 90, or roughly 90%, of net interest income builds up a transformation result, and lending income—the moving part, the really moving part—is the transformation result.

Speaker #1: What is to a lesser extent the case for the lending income. So if you see the differences quarter on quarter, far more important transformation result than lending income.

Speaker #1: On lending income, it's very straightforward. Two things are crucial: volume on one side, margin on the other side. So let me start with volumes.

Johan Thijs: Two things are crucial, volume on one side, margin on the other side. Let me start with volumes. We had a very strong quarter in published Q1, 1.6% growth. The good news is that if we look at the pipeline, it is quite strong from the commercial SMEs side going forward. In Belgium and in Czech Republic, as a matter of fact, in all countries, except to a certain extent, Hungary, we do have a very strong commercial banking pipeline filled. The 1.6%, I do not see as an exception. We guided for 5% currently with the evolution, which we see we are above that.

Speaker #1: We had a very strong quarter in published quarter one—1.6% growth. But the good news is that if we look at the pipeline, it's quite strong from the commercial SME side, going forward.

Speaker #1: And in Belgium and in Czech Republic, as a matter of fact, in all countries except to a certain extent Hungary, we do have a very strong commercial banking pipeline filled.

Speaker #1: So the 1.6%, I do not see as an exception. We guide it for 5% currently with the evolution which we see we are above that.

Speaker #1: And also given the fact that we have been rolling this off in a period where uncertainty was key given the conflicts which are ongoing, we are quite confident that the 5% will be reached.

Johan Thijs: Also given the fact that we have been rolling this off in a period where uncertainty was key, given the conflicts which are ongoing, we are quite confident that the 5% will be reached by us going forward. What about margins then? Well, we continue to play the game of pushing up the margins in a sound and commercial way. Sound way means acceptable for customers. Commercial way means we take also into account our market share. Where we do see a drop in our market share, for instance, which happened in Q1 2026 in Belgium, where we were pushing up the margins on the mortgage side, the market was not following. We just adapt the situation, which means that by the end of the quarter, we restored our market shares again.

Speaker #1: By us going forward. What about margins then? Well, we start we continue to play the game of pushing up the margins and sound and commercial way, sound way means acceptable for customers, commercial way means we take also into account our market share.

Speaker #1: Where we do see a drop in our market share, for instance, which happened in the first quarter 2026 in Belgium where we were pushing up the margins on the mortgage side, the market was not following.

Speaker #1: We just adapt the situation, which means that by the end of the quarter, we restored our market shares again. This is how it works.

Johan Thijs: This is how it works. I would say it depends a little bit on the market. And in that perspective, I do not expect that we will see a major uplift in the commercial margin. The product of the two would actually means that we will see a further continuation of what we have seen in Q1 of this year. Let's then discuss the remaining parts. You mentioned dealing room income. Let's face it, dealing room income has a positive contribution, of course. But let's face it's only roughly 3% of our total net interest income. Even if you have their changes, which are what, EUR 3 million, EUR 5 million, it is not going to shift the needle on net interest income. The same can be said on, for instance, cash management.

Speaker #1: So I would say it depends a little bit on the market and in that perspective, I do not expect that we will see a major uplift in the commercial margin.

Speaker #1: So the product of the two, what actually means that we will see a further continuation of what we have seen in quarter one of this year.

Speaker #1: So let's then discuss the remaining parts. You mentioned dealing room income. Let's face it, dealing room income has positive contribution, of course, but let's face it, it's only roughly 3% of our total net interest income.

Speaker #1: So even if you have there changes which are what, 3 million, 5 million, it is not going to shift the needle on net interest income.

Speaker #1: The same can be said on, for instance, cash management. We don't necessarily always mention that, but cash management has a positive contribution. But it's more I mean, an adjustment rather than a fundamental influence.

Johan Thijs: We don't necessarily always mention that, but cash management is a positive contribution, but it's more, I mean, an adjustment rather than a fundamental influence. You also mentioned inflation-linked bonds. That's quite crucial. In this quarter, it is negative. We do expect the inflation-linked bonds total for the year to be at roughly EUR 30, 40 million. That is an adjustment compared to this quarter in total of, let's say, roughly between EUR 40 and 50 million. The same can be said also, if you want to extrapolate Q1, be careful, number of days are different, has a negative impact, and also be careful there is a negative one-off in this quarter on the Hungarian side.

Johan Thijs: We don't necessarily always mention that, but cash management is a positive contribution, but it's more, I mean, an adjustment rather than a fundamental influence. You also mentioned inflation-linked bonds. That's quite crucial. In this quarter, it is negative. We do expect the inflation-linked bonds total for the year to be at roughly EUR 30, EUR 40 million. That is an adjustment compared to this quarter in total of, let's say, roughly between EUR 40 and EUR 50 million. The same can be said also, if you want to extrapolate Q1, be careful, number of days are different, has a negative impact, and also be careful there is a negative one-off in this quarter on the Hungarian side.

Speaker #1: You also mentioned inflation-linked bonds. That's quite crucial in this quarter it is negative. But we do expect the inflation-linked bonds total for the year to be at roughly 30, 40 million euros.

Speaker #1: So that is an adjustment compared to this quarter in total of, let's say, roughly between 40 and 50 million euros. And the same can be said also if you want to extrapolate quarter one, be careful, number of days are different has a negative impact and also be careful there are negative one-offs in this quarter on the Hungarian side.

Speaker #1: So all in all, we do see that the pickup of the net interest income over the last quarters and last years is going to be continued going forward.

Johan Thijs: All in all, we do see that the pickup of the net interest income over the last quarters and last years is going to be continued going forward. Therefore, I said what I said to Giulia Aurora Miotto as well. The 6.725 billion guidance is on the conservative side, and we will give you an update in Q2. The last thing you mentioned was the parallel shift of 25% already on earlier occasions. Sorry. Of course, 25 basis points. 25%, that would be a nightmare. 25 basis points, we already said on earlier occasions that the impact would be roughly EUR 60 million. Be careful, parallel shift is a parallel shift.

Speaker #1: And therefore, I said what I said to Julia as well: the €6.725 billion guidance is on the conservative side, and we'll give you an update in Q2.

Speaker #1: The last thing you mentioned was the parallel shift of 25% already on earlier occasions. Sorry, sorry, of course, 25 basis points. 25%, that would be a nightmare.

Speaker #1: But 25 basis points, we already said on earlier occasions that the impact would be roughly 60 million euros. Be careful, parallel shift is a parallel shift.

Speaker #1: We don't see that in reality. And the short end and the long end move in different directions, and we have more flattening of the curve.

Bartel Puelinckx: We don't see that in reality, and the short end and the long end move in different directions, and we have more flattening of the curve. In that perspective, no change in our guidance. Good morning, Sharad. As far as your second question is concerned, related to the ECL buffer, which we indeed increased to EUR 175 million with what I would call a one-off fixed management overlay. This is bringing indeed the total buffer to EUR 175 million, which is roughly 60% of the provisions or impairments that we have as a business as usual on the year, and we feel comfortable with that.

Johan Thijs: We don't see that in reality, and the short end and the long end move in different directions, and we have more flattening of the curve. In that perspective, no change in our guidance.

Speaker #1: But in that perspective, no change in our guidance.

Speaker #4: Good morning, Shahrat. As far as your second question is concerned, related to the ECL buffer, which we indeed increased to 175 million with what I would call a one-off fixed management overlay.

Bartel Puelinckx: Good morning, Sharad. As far as your second question is concerned, related to the ECL buffer, which we indeed increased to EUR 175 million with what I would call a one-off fixed management overlay. This is bringing indeed the total buffer to EUR 175 million, which is roughly 60% of the provisions or impairments that we have as a business as usual on the year, and we feel comfortable with that.

Speaker #4: This is bringing, indeed, the total buffer to €175 million, which is roughly 60% of the provisional impairments that we have as a business as usual on the year.

Speaker #4: And we feel comfortable with that. Going forward, we do not anticipate that. As I said, it's a fixed one, so we do not anticipate further increasing that.

Johan Thijs: Going forward, we do not anticipate that, as I said, it is a fixed one. We do not anticipate to further increase that. What I can say as well, as Johan has been highlighting as well, this is also helping us to reduce the IRB shortfall. The impact of that is 4 basis points. Now, for the time being, also, as far as your question is concerned, what is the outlook? Of course, there, what we see is today we are particularly in Belgium, in what we call the review season. That means that we are incorporating in our PDs the 2025 corporate results.

Bartel Puelinckx: Going forward, we do not anticipate that, as I said, it is a fixed one. We do not anticipate to further increase that. What I can say as well, as Johan has been highlighting as well, this is also helping us to reduce the IRB shortfall. The impact of that is 4 basis points. Now, for the time being, also, as far as your question is concerned, what is the outlook? Of course, there, what we see is today we are particularly in Belgium, in what we call the review season. That means that we are incorporating in our PDs the 2025 corporate results.

Speaker #4: What I can say as well, as Johan has been highlighting as well, this is also helping us to reduce the IRB shortfall, the impact of that is 4 basis points.

Speaker #4: Now, for the time being, also, as far as your question is concerned, what is the outlook? Of course, there what we see today, we are particularly in Belgium in what we call the review season.

Speaker #4: That means that we are incorporating in our PDs the 2025 corporate results. What we see is, today, the PD shifts are stable, but we do expect potentially a slight increase in stage one and stage two as a result of this integration of the 2025.

Johan Thijs: What we see is today the PD shifts are stable, but we do expect potentially a slight increase in the stage 1 and stage 2 as a result of this integration of the 2025. This is more a normalization than a structural deterioration. We do not believe or think that there will be a structural deterioration, of course, unless the war continues for a very long period of time because, of course, companies are suffering. If the war is certainly short-listed, then lifted, then lift, I should say, then basically, we do not expect a structural deterioration. It's rather a normalization, and therefore, we maintain the guidance of well below the 25 to 30 basis points.

Bartel Puelinckx: What we see is today the PD shifts are stable, but we do expect potentially a slight increase in the stage 1 and stage 2 as a result of this integration of the 2025. This is more a normalization than a structural deterioration. We do not believe or think that there will be a structural deterioration, of course, unless the war continues for a very long period of time because, of course, companies are suffering. If the war is certainly short-listed, then lifted, then lift, I should say, then basically, we do not expect a structural deterioration. It's rather a normalization, and therefore, we maintain the guidance of well below the 25 to 30 basis points.

Speaker #4: But this is more a normalization than a structural deterioration. So we do not believe or think that there will be a structural deterioration of course, unless the war continues for a very long period of time because, of course, companies are suffering.

Speaker #4: But if the war is certainly shortlisted, then lifted, then lift, I should say, then basically we do not expect a structural deterioration. It's rather a normalization and therefore we maintain the guidance of well below the 25 to 30 basis points.

Speaker #1: Thank you.

Sharath Kumar: Thank you.

Speaker #5: Thank you. And we'll now take our next question from Shrey of Citi. Your line is open. Please go ahead.

Operator: Thank you. We'll now take our next question from Shrey of Citi. Your line is open. Please go ahead.

Shrey Srivastava: Morning, thank you very much for taking my question. I'm gonna give you a break from the net interest income and ask about Kate. Thank you for your comments on the autonomy decrease in Belgium at the beginning. I want to actually shift focus to the Czech Republic, where if you compare Q1 of last year to Q1 of this year, I believe your autonomy rates are down something like 5%. If I could just understand what's driving that. Is it people are asking more difficult questions, or is it something else? My second question is on the amount of leads generated by Kate.

Speaker #6: Good morning and thank you very much for taking my question. I'm going to give you a break from the net interest income. And ask about Kate.

Speaker #6: Thank you for your comments on the autonomy decrease in Belgium. At the beginning, I want to actually shift focus to the Czech Republic where if you compare the first quarter of last year to the first quarter of this year, I believe your autonomy rates are down something like 5%.

Speaker #6: So if I could just understand what's driving that, is it people are asking more difficult questions? Or is it something else? And my second question is on the amount of leads generated by Kate.

Speaker #6: It's increased to 420,000 this quarter from, I believe, 398,000 the quarter before and the last 12 months, which implies a quite substantial step up, sort of in the quarterly run rate.

Shrey Srivastava: It's increased to EUR 420 thousand this quarter from, I believe, EUR 398 thousand the quarter, the quarter before in the last 12 months, which implies a quite substantial step up, sort of in the quarterly run rate, relative to a year ago. If you can just talk about, what you see as the latest developments there. Thank you.

Shrey Srivastava: It's increased to EUR 420,000 this quarter from, I believe, EUR 398,000 the quarter, the quarter before in the last 12 months, which implies a quite substantial step up, sort of in the quarterly run rate, relative to a year ago. If you can just talk about, what you see as the latest developments there. Thank you.

Speaker #6: Relative to a year ago. So if you can just talk about what you see as the latest developments there. Thank you.

Johan Thijs: Thanks, Shrey. Sorry, we just were discussing because there was a little blip in the line. We could not understand a part of your second question. Anyway, in terms of the first question about Kate and then more particular Czech Republic, well, indeed, there is a fundamental difference in the autonomy. Let me define again, autonomy is quite crucial. Autonomy means that if you ask a question to Kate provides you not only the answer, but if the answer entails a product, she also delivers the product without any human being interfering. What we call straight-through processing is a particular parameter which is judged upon when we are calculating the autonomy. In Belgium, the autonomy is hovering around 80%.

Speaker #1: Thanks, Shrey. Sorry, we just were discussing because there was a little blip in the line. We could not understand a part of your second question.

Speaker #1: But anyway, so in terms of the first question about Kate, and then more particularly the Czech Republic, well, indeed, there is a fundamental difference in the autonomy.

Speaker #1: And let me define again autonomy is quite crucial. Autonomy means that if you ask a question to Kate, Kate provides you not only the answer, but if the answer entails a product, she also delivers the product without any human being interfering.

Speaker #1: So what we call straight-through processing is a particular parameter which is judged upon when we are calculating the autonomy. So in Belgium, the autonomy is hovering around 80%.

Johan Thijs: Czech Republic, which is Kate 1.0, so not the full LLM, Kate, that autonomy is now, what was it? 67%, which is indeed down compared on previous quarter. Now, how come? Actually, it's true for both countries, because also in Belgium, the autonomy was slightly down. It has to do with the type of questions customers are asking to Kate. First of all, more and more usage is made of Kate. We do see an increase of 11%, compared to previous year on the usage of Kate. That is first thing. Secondly, when they start using it, the NPS score is very high, which means there are much more customer using it, they're much more satisfied.

Speaker #1: Czech Republic, which is Kate 1.0, so not the full LLM Kate, that autonomy is now what was it? 67%, which is indeed down compared on previous quarter.

Speaker #1: Now, how come? And actually, it's true for both countries, because also in Belgium, the autonomy was slightly down. It has to do with the type of questions customers are asking to Kate.

Speaker #1: Because, first of all, more and more usage is made of Kate. We do see an increase of 11% compared to the previous year on the usage of Kate.

Speaker #1: That is the first thing. And secondly, when they start using it, the NPS score is very high, which means there are much more customers using it.

Speaker #1: There are much more satisfied. And as you already indicated in your question, they start to ask questions beyond the traditional stuff. And if it is not foreseen in the solutions which we have that they are straight-through process, we can provide an answer, but we do not provide the product.

Johan Thijs: As you already indicated in your question, they start to ask questions beyond the traditional stuff. If it is not foreseen in the solutions which we have that they are straight through process, we can provide an answer, but we do not provide the product. For example, when customers are asking for overdrafts or for particular products which are potentially linked to fraudulent actions, we do not, of course, provide the answers, and we do not provide the solutions. In that perspective, we do not count them in the autonomy. Czech Republic is now in the process of rolling out its Kate 2.0. It is already rolled out to internal staff, and the aim is to roll it out to customers by mid of this year.

Speaker #1: For example, we when customers are asking for overdrafts or for particular products which are potentially linked to fraudulent actions, we do not, of course, provide the answers.

Speaker #1: And we do not provide the solutions. And in that perspective, we do not count them in the autonomy. Czech Republic is now in the process of rolling out its K2.0.

Speaker #1: It is already rolled out to internal staff, and the aim is to roll it out to customers by mid-year. So, we do hope to see that indeed the autonomy is increasing there as well.

Johan Thijs: We do hope to see that, indeed, the autonomy is increasing there as well. In other Central European countries, Kate 2.0 will be rolled out in the course of end of 2026, early 2027. Their autonomy currently stands at 75% to 77%. As far as your second question is concerned, related to the strong increase of the leads from indeed, 398,000 to 420,000, this is mainly driven by Belgium and to some extent, also the Czech Republic. This is entirely driven also by the stronger conversion ratio, which has increased by from 13% to 14%. What does that mean? Basically that is that it's a whole process.

Speaker #1: In other Central European countries, K2.0 will be rolled out in the course of end of 2026, early 2027. Their autonomy currently stands at 75 to 77%.

Speaker #6: As far as your second question is concerned, related to the strong increase of the leads from indeed 398,000 to 420,000, this is mainly driven by Belgium and to some extent also the Czech Republic.

Bartel Puelinckx: As far as your second question is concerned, related to the strong increase of the leads from indeed, 398,000 to 420,000, this is mainly driven by Belgium and to some extent, also the Czech Republic. This is entirely driven also by the stronger conversion ratio, which has increased by from 13% to 14. What does that mean? Basically that is that it's a whole process.

Speaker #6: And this is entirely driven also by the stronger conversion ratio, which has increased by from 13 to 14%. What does that mean? That basically that is that it's a whole process.

Speaker #6: So you start up with a pickup ratio, then you have the contact to pickup ratio, which means the relationship manager contacts the client. Then you, of course, have the sales talk, which leads to the contact ratio.

Johan Thijs: You start up with a pickup ratio, then you have the contact to pickup ratio, which means the relationship manager contacts the client. You of course, have the sales talk, which leads to the contact ratio, and subsequently the final conclusion of that, which is indeed the total conversion ratio. One of the reasons why it has significantly impact picked up also compared to particularly the last quarter and Q3, is mainly also because in Belgium, we had the maturity of the term deposits, which of course also forced our sales force to pay attention to that.

Bartel Puelinckx: You start up with a pickup ratio, then you have the contact to pickup ratio, which means the relationship manager contacts the client. You of course, have the sales talk, which leads to the contact ratio, and subsequently the final conclusion of that, which is indeed the total conversion ratio. One of the reasons why it has significantly impact picked up also compared to particularly the last quarter and Q3, is mainly also because in Belgium, we had the maturity of the term deposits, which of course also forced our sales force to pay attention to that.

Speaker #6: And then subsequently the final conclusion of that, which is indeed the total conversion ratio. Now, one of the reasons why it has significantly picked up also compared to particularly the last quarter and the quarter three, is mainly also because in Belgium, we had the also the maturity of the term deposits, which of course also forced our sales force to pay attention to that.

Speaker #6: And that is having an impact on a slower conversion ratio in the last two quarters. The senior pickup now is 14%, leading indeed to a significant increase in the conversion ratio of in total 420,000.

Johan Thijs: That is having an impact on a slower conversion ratio in the last 2 quarters. The seniors pickup now is 14%, leading indeed to a significant increase on the conversion ratio of in total, 420,000. We expect that to increase further and further also, for the reasons that Johan explained before.

Bartel Puelinckx: That is having an impact on a slower conversion ratio in the last two quarters. The seniors pickup now is 14%, leading indeed to a significant increase on the conversion ratio of in total, 420,000. We expect that to increase further and further also, for the reasons that Johan explained before.

Speaker #6: And we expect that to increase further and further also for the reasons that Johan explained before.

Operator: Understood. Thank you very much. Thank you. We'll now move on to our next question from Namita Samtani of Barclays. Your line is open. Please go ahead.

Shrey Srivastava: Understood. Thank you very much.

Speaker #1: Understood. Thank you very much.

Speaker #7: Thank you. And we'll now move on to our next question from the phone lines: Tony from Barclays. Elaine is here. Please go ahead.

Operator: Thank you. We'll now move on to our next question from Namita Samtani of Barclays. Your line is open. Please go ahead.

Namita Samtani: Morning, thank you for taking my questions. My first one, just on Hungary NII in Q1. Even excluding all the one-offs, so the EUR -10 million and the EUR +4 million, excluding FX, NII looks flat quarter-on-quarter. I just wanted to understand why this was because the slides point to a higher commercial transformation result and a growing balance sheet quarter-on-quarter. Are you seeing increased competition in Hungary, and what does the competitive landscape look like there? Secondly on Czech, the loans are growing a lot faster than deposits, and that's been the case for some quarters now. Do you think this is a sustainable strategy, and why do you not become more aggressive on deposit growth going forward?

Speaker #8: Morning. And thank you for taking my questions. My first one, just on Hungary net interest income in the first quarter. Even excluding all the one-offs, so the 10 million negative and the 4 million positive and excluding FX, net interest income looks flat quarter on quarter.

Speaker #8: And I just wanted to understand why this was, because the slides point to a higher commercial transformation result and a growing balance sheet quarter on quarter.

Speaker #8: Are you seeing increased competition in Hungary? And what does the competitive landscape look like there? And secondly, on Czech, the loans are growing a lot faster than deposits.

Speaker #8: And that's been the case for some quarters now. Do you think this is a sustainable strategy? And why do you not become more aggressive on deposit growth going forward?

Speaker #8: And if you're just able to quantify the impact on net interest income from a Czech rate hike, if there were to be one. Thank you.

Namita Samtani: If you're just able to quantify the impact on net interest income from a Czech rate hike, if there were to be one. Thank you.

Johan Thijs: Thank you. Hi, Namita. Thank you for your questions. Let me take the first one. Indeed, in Hungary, we do see a couple of one-offs, which are resulting in a slight, I mean influence of roughly EUR 6 million on the net interest income side. As you pointed out indeed, the net interest income is evolving positively, but is not at the same pace growing as in the rest of the group. Now, in terms of the building blocks, well, here we do see the same pattern as in the group. Commercial transformation result is performing better, which also means that on the other elements there is a compensating effect.

Speaker #1: Thank you. Hi, Nomita. Thank you for your questions. Let me take the first one. So, indeed, in Hungary, we do see a couple of one-offs.

Speaker #1: Which are resulting in a slight, I mean, influence of roughly €6 million on the net interest income side. And as you pointed out, indeed, the net interest income is evolving positively, but it is not growing at the same pace as in the rest of the group.

Speaker #1: Now, in terms of the building blocks, well, here we do see the same pattern as in the group. So commercial transformation result is in that is performing better, which also means that on the other elements, there is a compensating effect.

Speaker #1: Well, the compensating effect has to do with the fact that, and I mentioned that earlier, that for instance, the growth on the corporate side in Hungary is below our expectation.

Johan Thijs: Well, the compensating effect has to do with the fact that, and I mentioned that earlier, that the, for instance, the growth on the corporate side in Hungary is below our expectation. This has to do with different elements which are part of the Hungarian domain, and that is, of course, the elections which were creating some nervousness and also in terms of the appetite for investments, sorry, of the business development, they were subdued. In that perspective, the explanation is actually pretty straightforward. What is the expectation going forward? Well, on the short term, I know that there are huge expectations regarding the Hungarian government.

Speaker #1: And this has to do with different elements which are part of the Hungarian domain. And that is, of course, the elections, which were creating some nervousness and also in terms of the appetite for investors of the for investments, sorry, of the business development.

Speaker #1: They were subdued. So in that perspective, the explanation is actually pretty straightforward. What is the expectation going forward? Well, on the short term, I know that there are huge expectations regarding the Hungarian government.

Speaker #1: But honestly, I think that the Hungarian government will need some time before they start to build up the transition, which everybody is expecting from Orbán policy, let's call it like that, to a more Europe-oriented policy, in the short term.

Johan Thijs: Honestly, I think that the Hungarian government will need some time before they start to build up the transition which everybody is expecting from Orban policy, let's call it like that, to a more Europe-oriented policy. In the short term, and we know that there are 2 deadlines on the freeing up of the European budget, the European subsidies. There is a very short term target, and there is one in August. Well, I think the August target to free up the European subsidies for Hungary is more realistic than the upcoming one in, I think it is in this month, in May. Well, that might trigger, of course, further economic development and consequently further loan growth.

Johan Thijs: Honestly, I think that the Hungarian government will need some time before they start to build up the transition which everybody is expecting from Orban policy, let's call it like that, to a more Europe-oriented policy. In the short term, and we know that there are two deadlines on the freeing up of the European budget, the European subsidies. There is a very short term target, and there is one in August. Well, I think the August target to free up the European subsidies for Hungary is more realistic than the upcoming one in, I think it is in this month, in May. Well, that might trigger, of course, further economic development and consequently further loan growth.

Speaker #1: And we know that there are two deadlines. On the freeing up of the European budget, the European subsidies, there is a very short-term target.

Speaker #1: And there is one in June—sorry, in August. Well, I think the August target to free up the European subsidies for Hungary is more realistic than the upcoming one in— I think it is this month, in May.

Speaker #1: Well, that might trigger, of course, further economic development and consequently further loan growth. So yes, it is slattish now. But the outlook is at least when you take into account the European subsidies, is more positive.

Johan Thijs: Yes, it is flattish now, the outlook is at least when you take into account the European subsidies, is more positive. Good morning, Namita. On your question on the Czech Republic. Basically, indeed, we have seen quite strong loan growth, a little stronger than the growth of the deposit base. Bear in mind that the loan to deposit ratio in the Czech Republic today still stands at 82%. This is something that obviously we monitor closely and further efforts will be taken within this respect. Bear in mind as well that we have been somewhat reducing the external rates on the saving accounts. Notwithstanding that, basically, our market share has remains quite stable.

Johan Thijs: Yes, it is flattish now, the outlook is at least when you take into account the European subsidies, is more positive.

Speaker #1: Good morning, Nomita. On your question on the Czech Republic, basically, indeed, we have seen quite strong loan growth—stronger than the growth of the deposit base.

Bartel Puelinckx: Good morning, Namita. On your question on the Czech Republic. Basically, indeed, we have seen quite strong loan growth, a little stronger than the growth of the deposit base. Bear in mind that the loan to deposit ratio in the Czech Republic today still stands at 82%. This is something that obviously we monitor closely and further efforts will be taken within this respect. Bear in mind as well that we have been somewhat reducing the external rates on the saving accounts. Notwithstanding that, basically, our market share has remains quite stable.

Speaker #1: But bear in mind that the loan-to-deposit ratio in the Czech Republic today still stands at 82%. This is something that obviously we monitor closely and further efforts will be taken into the within this respect.

Speaker #1: Bear in mind as well that we have been somewhat reducing the external rates on the saving accounts, notwithstanding that basically our market share has remained quite stable.

Johan Thijs: Also there, the net inflow is quite positive in deposits, which is indeed a growth of 0.5% quarter-on-quarter, but still 2.2% year-on-year. As far as your question is concerned on the sensitivity in the Czech Republic, well, a parallel shift of 25 basis points in the Czech Republic has only a very minor impact of more or less EUR 3 million.

Speaker #1: So also there, the net inflow is quite positive in deposits, which is indeed a growth of 0.5% quarter on quarter, but still 2.2% year on year.

Bartel Puelinckx: Also there, the net inflow is quite positive in deposits, which is indeed a growth of 0.5% quarter-on-quarter, but still 2.2% year-on-year. As far as your question is concerned on the sensitivity in the Czech Republic, well, a parallel shift of 25 basis points in the Czech Republic has only a very minor impact of more or less EUR 3 million.

Speaker #1: As far as your question is concerned, on the sensitivity in the Czech Republic, well, a parallel shift of 25 basis points in the Czech Republic has only a very minor impact of more or less 3 million euro.

Namita Samtani: That's helpful. Thank you.

Speaker #7: That's helpful. Thank you.

Speaker #8: Thank you. And we'll now take our next question from Amit Ranjan of JP Morgan. Elaine is open. Please go ahead.

Operator: Thank you. We'll now take our next question from Amit Ranjan of JP Morgan. Your line is open. Please go ahead.

Operator: Thank you. We'll now take our next question from Amit Ranjan of J.P. Morgan. Your line is open. Please go ahead.

Amit Ranjan: Yes, hi. Good morning, thank you for taking my questions. The 1st one is on the 2 acquisitions that you have done, 365.bank and Business Lease. How do the contributions in Q1 compare to your planning or expectations, please? The 2nd one is just a clarification on dividend accruals. What was the ratio that you accrued in Q1? Thank you.

Amit Ranjan: Yes, hi. Good morning, thank you for taking my questions. The 1st one is on the two acquisitions that you have done, 365.bank and Business Lease. How do the contributions in Q1 compare to your planning or expectations, please? The 2nd one is just a clarification on dividend accruals. What was the ratio that you accrued in Q1? Thank you.

Speaker #9: Yes, hi. Good morning. And thank you for taking my questions. The first one is on the two acquisitions that you have done, 365 and Business Lease.

Speaker #9: How do the contributions in the first quarter compare to your planning or expectations, please? And the second one is just a clarification on dividend accruals.

Speaker #9: What was the ratio that you accrued in the first quarter? Thank you.

Johan Thijs: Thank you, Amit, for your question. Let me take the first one. We guided for 365.bank and Business Lease. The detail is in the quarter announcement of Q4 2025. Actually, we guided for this year net interest income of EUR 157 million, EUR 104 million non-NII, and that totals EUR 261 million as total income. This is full year. For good understanding, OPEX EUR 156 million, and cost income ratio of 59.8%. When you translate that on a quarterly basis, well, you will have EUR 39 million expectation net interest income, EUR 26 million on non-NII, and EUR 65 million totaling income. On the OPEX side, EUR 39 million.

Speaker #1: Thank you, Amit, for your question. Let me take the first one. So we guided for 365 and Business Lease; the detail is in the quarter announcement of Q4 2025.

Speaker #1: So actually, we guided for this year net interest income of 157 million euro. 104 million euro non-net interest income. And then that totals 261 million euro as total income.

Speaker #1: This is full year for good understanding. OPEX 156, and cost-income ratio of 59.8%. When I look in—when you translate that on a quarterly basis, well, you will have €39 million expectation net interest income, €26 million on non-NII.

Speaker #1: And then 65 million totaling income on the OPEX side 39 million. Then you have the full split up. Well, where are we in reality?

Johan Thijs: You have the full split up. Well, where are we in reality? We are EUR 37 million on the Net Interest Income. If you combine that with businesses, is more or less EUR 38 million. It's, let's say, EUR 1 million lower than forecasted. The non-NII is also EUR 1 million lower, it's EUR 25 million, which brings the total income at roughly EUR 2 million lower than what it was. On the OPEX side, on the other hand, the reality was EUR 32 million, which is EUR 7 million better than what it was. Ultimately, P&L wise gives you it's bit better result. Cost income ratio stands at 51.6%. Hereby you have the full detail.

Speaker #1: We are 37 million euro on the net interest income. If you combine that with Business Lease, it's more or less 38. So it's, let's say, 1 million lower than forecasted.

Speaker #1: The non-NII is also 1 million lower, it's 25 million, which brings the total income at roughly 2 million lower than what it was. On the OPEX side, on the other hand, the reality was 32 million euro, which is 7 million better than what it was.

Speaker #1: So ultimately, P&L-wise, it gives you a better it's a bit better result. Cost income ratio stands at 51.6%. So hereby, you have the full detail.

Speaker #1: And then as far as your second question is concerned, Amit, related to the accrual dividend accruals. So actually, we always accrual 50% in the first, second, and third quarter.

Bartel Puelinckx: As far as your second question is concerned, Amit, related to the accrual, dividend accruals. Actually we always accrue 50% in Q1, Q2, and Q3, obviously in Q4, we accrue in line with the final dividend decision.

Speaker #1: And then obviously, in the fourth quarter, we accrue in line with the final dividend decision.

Speaker #9: Thank you.

Amit Ranjan: Thank you.

Speaker #8: Thank you. There are no further questions in here. I will now hand it back to Kurt for closing remarks. Thank you.

Operator: Thank you. There are no further questions in queue. I will now hand it back to Kurt for closing remarks. Thank you.

Speaker #1: Thank you, operator. Okay. This sums it up for this call then. Thank you for your attendance. And enjoy the rest of the day. Bye-bye.

Kurt De Baenst: Thank you, operator. Okay. This sums it up for this call then. Thank you for attendance, enjoy the rest of the day. Bye-bye.

Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.

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Q1 2026 KBC Group NV Earnings Call

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KBC Group

KBCSY

Earnings

Q1 2026 KBC Group NV Earnings Call

Tuesday, May 12th, 2026 at 7:30 AM

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