Q4 2025 KBC Group NV Earnings Call

February 12, 2026

Operator: Hello, and welcome to the KBC Group Earnings Release Q4 2025 Conference Call, hosted by Johan Thijs, CEO, Bartel Puelinckx, CFO, and Kurt De Baets, Head of Investor Relations. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions after the presentation. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand over to Kurt De Baets to begin today's conference. Thank you.

Speaker #1: Hello and welcome to the KBC Group Earnings Release Q4 2025 conference call hosted by Johan Thijs, CEO, Bartel Pullings, CFO, and Kurt Baenst, Head of Investor Relations.

Speaker #1: Please note this conference is being recorded. And for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions after the presentation; this can be done by pressing *1 on your telephone keypad to register your question.

Speaker #1: If you require assistance at any point, please press *0 and you'll be connected to an operator. I will now hand over to Kurt Baenst.

Speaker #1: To begin today's conference, thank you.

Speaker #2: Thank you, operator. 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. A very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the KBC Conference Call. Today is Thursday, 12 February 2026, and we are hosting the conference call on the Q4 and full year results of KBC, as well as the 2026 and 2028 financial guidance. As usual, we have Johan Thijs, our Group CEO, with us, as well as his Group CFO, Bartel Puelinckx, and they will both elaborate on the results and add some additional insight on the new short-term and long-term financial guidance. 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 Thursday, February the 12th of 2026, and we are hosting the conference call on the fourth quarter and full year results of KBC, as well as the 26th and 28th financial guidance.

Speaker #2: As usual, we have Johan Thijs, our Group CEO, with us, as well as the Group CFO, Bartel Pullings, and they will both elaborate on the results and add some additional insight on the new short-term and long-term financial guidance.

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.

Johan Thijs: ... Thank you very much, Kurt, and also from my side, a warm welcome to the announcement of the Q4 results of 2025, which was also obviously is then the announcement of the full year results of the very same year. Let me start with the highlights. As a matter of fact, I always use in this perspective the same thing, Glenn, you know what I'm going to say, the machine has been firing on all its cylinders. Yes, indeed, all the different aspects of our bank insurance franchise have been performing excellently.

Speaker #3: Thank you very much, Kurt, and also from my side, a warm welcome to the announcement of the fourth quarter results of 2025—which is also, obviously, then the announcement of the full-year results of the very same year.

Speaker #3: Let me start with the highlights. And as a matter of fact, and I always use in this perspective, the same thing Glenn, you know what I'm going to say.

Speaker #3: The machine has been firing on all its cylinders. Yes, indeed, all the different aspects of our bank-insurance franchise have been performing excellently. First of all, we have continued to operate at a diversified split of 50% net interest income.

Johan Thijs: You know, first of all, we have continued to operate at a diversified split of 50% net interest income and 50% non-net interest income, despite the fact that our net interest income grew significantly, which clearly means that we are able to perform also on the asset management side and the insurance side, life, non-life, at the same growth pace as the increasing net interest income. Coming back to that net interest income, it was significantly up compared to previous quarter, and obviously significantly up compared to previous years, which was triggered by, in essence, two things. First of all, a further continuation of the strong performance of what we call the transformation results, so our replicating portfolio, which was further boosted by the further continuation shift of term deposits into current accounts, saving accounts.

Speaker #3: And 50% non-net interest income despite the fact that our net interest income grew significantly. We clearly mean that we are able to perform also on the asset management side and the insurance side, life, non-life, at the same growth pace as the increasing net interest income.

Speaker #3: Coming back to that net interest income, it was significantly up compared to previous quarter and obviously significantly up compared to previous years, which was triggered by, in essence, two things.

Speaker #3: First of all, a further continuation of the strong performance of what we call the transformation results, so our replicating portfolio, which was further boosted by the further continuation shift of term deposits into current accounts, saving accounts.

Speaker #3: Next to that, we also saw a strong performance. Our loan and our customer deposits both are growing significantly in all the countries, and therefore contributed to the net interest income.

Johan Thijs: Next to that, we also saw a strong performance, our loan and our customer deposits, both are growing significantly in all the countries and therefore contributed to the net interest income. We saw as well a record net sales over the full year, which was supported with, again, a positive net sale on the fee and commission business, so asset management business in Q4. The insurance business performed excellently, also with growth numbers, double digit, both on non-life and on the life side, which was, by the way, improving even the record results of 2024. In that perspective, we also see that the underlying...

Speaker #3: We saw as well a record net sales over the full year, which was supported with, again, a positive net sale. On the fee and commission business, so asset management business in the fourth quarter, the insurance business performed excellently, also with growth numbers double-digit both on non-life and on the life side, which was, by the way, improving even the record results of 2020-24.

Speaker #3: In that perspective, we also see that the underlying sorry, first of all, the total income in total grew 9% on the year, while our costs maintained at the guided level of 2.5% in that perspective, excluding, obviously, the bank taxes and the FX effect, which is giving us a job of more than 6% as a matter of fact, 6.4%.

Johan Thijs: Sorry, first of all, the total income in total grew 9%, on the year, while our cost maintains at the guided level of 2.5%, in that perspective, excluding obviously the bank taxes and the effect, which is giving us a draw of more than 6%, as a matter of fact, 6.4%. Quality-wise, impairments under control, 13 basis points, significantly better than the guidance and the Combined Ratio, also 87%, also significantly better than the guidance. As a matter of fact, all the elements which we provided for as a guidance in last year were achieved, or let me say differently, overachieved. This has two consequences.

Speaker #3: Quality-wise, impairments under control, 13 basis points significantly better than the guidance, and the combined ratio also 87%, also significantly better than the guidance. As a matter of fact, all the elements which we provided for as a guidance in last year were achieved, or let me say differently, overachieved.

Speaker #3: This has two consequences. First of all, if you wrap it up in your capital ratio, then our common equity tier one ratio now stands at 14.9%, and our liquidity ratios stand at very solid positions both on the short-term and in the mid-term.

Johan Thijs: First of all, if you wrap it up in your capital ratio, then our Common Equity Tier 1 ratio now stands at 14.9%, and our liquidity ratios stand at very solid positions, both in the short term and in the midterm. Which allows us to say that the dividends which we are going to propose to the annual general meeting will be 5.1 EUR per share, and if you include there the 81 coupon, that means a payout ratio of 60%. Giving the exceptional character of 2025, not only in terms of the results, but also in terms of customer satisfaction, in terms of employee satisfaction, and also on the digital front, where we have once again been nominated having the best banking app in the world.

Speaker #3: Which allows us to say that the dividends which we are going to propose to the annual general meeting will be 5.1 euro per share, and if you include there the 81 coupon that means the payout ratio of 60%.

Speaker #3: Giving the exceptional character of 2025, not only in terms of the results, but also in terms of customer satisfaction, in terms of employee satisfaction, and also on the digital front where we have once again the nominated having the best banking app in the world, we also decided to contribute a profit allocation to the tune of 25 million euro into what we call team blue bonus for our staff.

Johan Thijs: We also decided to contribute a profit allocation to the tune of EUR 25 million into what we call Team Blue Bonus for our staff. We also provide guidance for the period to come, but I will go into that in more detail later on, and we will then immediately switch into the detail of Q4 first. On the next page, you can clearly see the performance of our digital initiatives. This is underpinned by what you already know, Kate. It's performing better and better.

Speaker #3: We also provide guidance for the period to come, but I will go into that in more detail later on, and we will then immediately switch into the detail of quarter four first.

Speaker #3: On the next page, you can clearly see the performance of our digital initiatives. This is underpinned by what you already know, Kate. It's performing better and better.

Speaker #3: It has been retrained, as I said on previous occasions, and it now is fully fledged large language model, included which means also that the autonomy of Kate under that new formula, so Kate 2.0, is now having an increase of its autonomy, which means the ability to solve questions of our customers without any human being interfering.

Johan Thijs: It has been retrained, as I said, on previous occasions, and it now is a fully fledged large language model included, which means also that the autonomy of Kate, under that new formula, so Kate 2.0, is now having an increase of its autonomy, which means the ability to solve questions of our customers without any human being interfering. And solving the question means providing the requested product or providing the requested answer to the customer, indeed. Well, that has increased with roughly 20% compared to the previous version, and now brings the autonomy to 82%.

Speaker #3: And solving the question means providing the requested product or providing the requested answer to the customer, indeed, while that has increased by roughly 20% compared to the previous version and now brings the autonomy to 82%.

Speaker #3: As a matter of fact, we will be launching this in the Central European countries in the quarters to come, and that will mean that efficiency gains in that perspective will be to the same tune because the autonomy in Central Europe is now hovering around 70%, which indeed is the previous number of Belgium.

Johan Thijs: As a matter of fact, we will be launching this in the Central European countries in the quarters to come, and that will mean that efficiency gains in that perspective will be to the same tune, because the autonomy in Central Europe is now hovering around 70%, which indeed is the previous number of Belgium. In terms of the job done by Kate of the equivalent FTEs, we talk now more than 400 FTEs. But what is also very much more important, that is, Kate is able to deliver 400,000 sales independently from the traditional network. Also, in that perspective, we will continue to invest in the near future on the same developments on the innovation front, and just to highlight, we launched in Q4, an Ecosphere around mobility.

Speaker #3: In terms of the job done by Kate or the equivalent FTEs, we talk now more than 400 FTEs, but what is also very much more important is that Kate is able to deliver 400,000 sales independently from the traditional network.

Speaker #3: Also, in that perspective, we will continue to invest in the near future on the same developments on the innovation front. And just to highlight, we launched in Q4 an Ecosphere around mobility. That Ecosphere was launched in Belgium and was triggered in the first month by 73,000 users, which were generating, indeed, already a lot of data, which is enabling us to sell more products to these customers.

Johan Thijs: That Ecosphere was triggered, was launched in Belgium, was triggered in the first month by 73,000 users, which were generating indeed already a lot of data, which was, is enabling us to sell more products to these customers. In terms of one-offs, it was a very normal quarter. You can see that on page five, roughly EUR 87 after tax, EUR 9 before tax of exceptional income. It's not worth to talk about it. There is, of course, a bigger impact in 2024, end of year, so be careful. The DTA of Ireland was, at that stage, included. Now, more importantly, is what about the evolution of the net interest income?

Speaker #3: In terms of one-offs, there was a very normal quarter. You can see that on page five. Roughly eight, seven after-tax, nine before-tax of exceptional income.

Speaker #3: It's not worth to talk about it. That is, of course, a bigger impact in 2024 end of year, so be careful. The DTA of Ireland was at that stage included.

Speaker #3: Now, more importantly, what about the evolution of the net interest income? Well, we do report today €1,608,000,000 of net interest income, which is a significant rise in net interest income compared to the previous quarter—5%—and even 12% compared to the previous year.

Johan Thijs: Well, we do report today EUR 1,608 million of net interest income, which is a significant rise of the net interest income compared to previous quarter, 5% and even 12% compared to previous year. What is the driver? As we said on previous occasions, it is the result of the commercial transformation result, which continues to increase significantly. What is underpinned by two things: first of all, the reinvestment yields, which continue to rise, and we confirm here today that through, sorry, the cycle of the guidance, 2026, 2027, 2028, this will be again the case.

Speaker #3: What is the driver? As we said on previous occasions, it is the result of the commercial transformation result, which continues to increase significantly. What is underpinned by two things.

Speaker #3: First of all, the reinvestment yields, which continue to rise. And we confirm here today that through the cycling through, sorry, the cycle of the guidance, 26, 27, 28, this will be again the case.

Speaker #3: The second element, which is crucial in this perspective, is the continued increase of our deposits. First of all, and secondly, also the shift from term deposits back into current account saving accounts, which allows stability on our transformation result.

Johan Thijs: Second element, which is crucial in this perspective, is the continued increase of our deposits, first of all, and secondly, also the shift from term deposits back into current account saving accounts, which allows stability on our transformation result. So in this perspective, indeed, commercial transformation result has boosted the net interest income and will continue to do so going forward. Second main contributor is the net interest income generated on the lending side. Well, here again, we had a good quarter in 2025 Q4, with a growth of 1.1%, which brings the total growth of 2024 on the lending, sorry, 2025, obviously, on the lending side to 7.4%, which is much better than we originally anticipated and we, which we guided for, and so therefore, it contributes to the lending growth.

Speaker #3: So in this perspective, indeed, commercial transformation result has boosted the net interest income and will continue to do so going forward. The second main contributor is the net interest income generated on the lending side.

Speaker #3: Well, here again, we had a good quarter in 2025, quarter four, with a growth of 1.1%, which brings the total growth of 2024 on the lending oh, sorry, 25, obviously, on the lending side to 7.4%, which is much better than we originally anticipated, and we wish we guided for.

Speaker #3: And therefore, it contributes to the lending growth. What remains under pressure, obviously, are the commercial margins. It is not true that in every type of product, in every country, the margin will go down.

Johan Thijs: What remains under pressure, obviously, are the commercial margins. It is not true that in every type of product, in every country, the margin will go down. This is not the case. For instance, the margin on mortgages in Belgium went up with 8 or 9 basis points. But in general, I would say there is commercial pressure, but this is offset by the volume increase, and therefore, also the increase of market share, which we see in the most, in most of our countries.

Speaker #3: This is not the case. For instance, the margin on mortgages in Belgium went up by 8 or 9 basis points, but in general, I would say that is commercial pressure. However, this is offset by the volume increase, and therefore also the increase of market share, which we see in most of our countries.

Speaker #3: In summary, the net interest margin went up to 211 basis points, which is significantly higher than the previous quarter, and this is indeed triggered by three things.

Johan Thijs: In summary, the net interest margin went up to 211 basis points, which is significantly higher than previous quarter, and this is indeed triggered by three things: the replication portfolio, which continues to perform excellently, as explained, the shifts between term deposits and current account, saving accounts, and then obviously, also the fact that in Belgium, we brought down the loyalty premium on the savings account to 10 basis points. Now, in terms of all the other elements of net interest income, well, they're more or less in line. So I would not dwell upon this too much. Let's say, in essence, they are in line with what we have seen in previous quarters.

Speaker #3: The replication portfolio, which continues to perform excellently as explained, the shifts between term deposits and current account saving accounts, and then obviously also the fact that in Belgium, we brought down the loyalty premium on the savings account to 10 basis points.

Speaker #3: Now, in terms of all the other elements of net interest income, while they're more or less in line so I would not dwell upon this too much, what let's say in essence, they are in line with what we have seen in the previous quarters.

Speaker #3: If you take talk about inflation linked bonds, if you talk about the short-term cash management, so on and so forth. So not worth to spend too much time, but we will be happy to answer all of your questions in that perspective.

Johan Thijs: If you talk about inflation-linked bonds, if you talk about the short-term cash management, so on, so forth, so not worth to spend too much time, but we will be happy to answer all of your questions in that perspective. Far more important is the next slide, where you see the evolution of our customer money, and the core customer money, and the message is very straightforward. In Q4, again, a positive evolution of EUR 4.5 billion, which is triggered by two things. First of all, the shift of term deposits into current accounts and saving accounts. As a matter of fact, there is a positive delta of roughly EUR 4 billion, and then on top of that, we do see monies flowing in, further continue to flow in into the mutual fund business.

Speaker #3: Far more important is the next slide where you see the evolution of our customer money. And the core customer money and the message is very straightforward.

Speaker #3: In the fourth quarter, again, a positive evolution of 4.5 billion euro, which is triggered by two things. First of all, the shift of term deposits into current account and saving accounts.

Speaker #3: As a matter of fact, there is a positive delta of roughly 4 billion euro. And then on top of that, we do see monies flowing in further, continue to flow in into the mutual fund business, again a positive growth of 0.7 billion euro.

Johan Thijs: Again, a positive growth of EUR 0.7 billion. So in total, for the full year, this brings us an inflow of a striking EUR 13.5 billion, which is, in essence, split up as a shift of, let me round the number, roughly, nine billion euro of term deposits and savings certificates into current accounts and saving accounts, totaling that amount as an inflow of roughly EUR 16 billion, further underpinning the replicating portfolio. And then last but not least, a record year in inflow into our investment products mutual fund business of EUR 6 billion, but that is worth in itself, a further explanation in a second. So to wrap it up, we do see a continuous shift from lower yielding term deposits into higher yielding, term, sorry, current account, saving accounts, but also mutual funds.

Speaker #3: So in total, for the full year, this brings us an inflow of a striking 13.5 billion euro, which is in essence split up as a shift of let me round the number, roughly 9 billion euro of term deposits and savings certificates into current account and saving accounts, totaling that amount as an inflow of roughly 16 billion euro, further underpinning the replicating portfolio.

Speaker #3: And then last but not least, a record year in inflow into our investment products, mutual fund business of 6 billion, but that is worth in itself a further explanation in a see a continuous shift from lower yielding term deposits into higher yielding term sorry, current account saving accounts, but also mutual funds.

Speaker #3: And this is a trend which we continue to see in 2026, and also expect to happen going forward, given the evolution of the policy rates of the central banks.

Johan Thijs: This is a trend which we continue to see in 2026, and also expect to happen going forward, given the evolution of the policy rates of the central banks. Let me go on. Let me then go immediately into fee and commission. Well, fee and commission, EUR 725 million, which is up roughly 2% on the quarter, and 4% on the year. And this is again driven by the performance, mainly on the asset management services side. So first of all, we did see a good performance on the management fees for obvious reasons. And secondly, we do see also a good performance on the sales side, which is further contributing to the growth of those asset management services fees.

Speaker #3: Let me go on. Let me then go immediately into fee and commission. Well, fee and commission, €725 million, which is up roughly 2% on the quarter, and 4% on the year.

Speaker #3: And this is again driven by the performance, mainly on the asset management services side. So, first of all, we did see a good performance on the management fees, for obvious reasons.

Speaker #3: And secondly, we do see also a good performance on the sales side, which is further contributing to the growth of those asset management services fees.

Speaker #3: In terms of the banking services, well, in essence, we do see there also a good performance. There is one caveat, and the caveat is when you do excellently on the sale of certain banking products, you have to pay commissions, and those commissions are deducted here from the fee and commission, and that is 11 million euro.

Johan Thijs: In terms of the banking services, well, in essence, we do see there also a good performance. There is one caveat, and the caveat is when you do excellently on the sale of certain banking products, you have to pay commissions, and those commissions are deducted here from the fee and commission, and that is EUR 11 million. Otherwise, banking services will be on the rise as well. So in that perspective, the Q4 is a continuation of what we have seen in the three previous quarters, and is then bringing the total of assets under management to a record high EUR 300 billion. Direct client money, you can see it on the graph, is also on the rise, and this is mainly triggered by end market performance, but also on net inflows, as I just explained.

Speaker #3: Otherwise, banking services would be on the rise as well. So in that perspective, the fourth quarter is a continuation of what we have seen in the three previous quarters, and is then bringing the total of assets under management to a record high, 300 billion euro.

Speaker #3: Direct client money—you can see it on the graph—is also on the rise, and this is mainly triggered by end-market performance, but also by net inflows, as I just explained.

Speaker #3: Just for information purposes, if you look at the gross sales of 2025, we have a striking 16.5 billion of gross sales, which is translated in net sales of 6 billion euro.

Johan Thijs: Just for information purposes, if you look at the gross sales of 2025, we have a striking EUR 60.5 billion of gross sales, which is translated in net sales of EUR 6 billion, and this is indeed a record high. Also small detail, we do see strong performance on our trading platforms, and in those trading platforms, we have two major contributor, the Belgian Bolero platform, which saw an increase of 25% of customers over the year, and a 45% increase of transaction. And more or less the same can be said about the Czech platform, which is used in Central Europe. So not only in Czech Republic, where we did see the same kind of performance or a likewise performance. Anyway, what about the other part of the diversification, insurance?

Speaker #3: And this is indeed a record high. Also, small detail, we do see strong performance on our trading platforms, and in those trading platforms, we have two major contributors: the Belgian Bolero platform, which saw an increase of 25% of customers over the year and a 45% increase of transactions.

Speaker #3: And more or less the same can be said about the Czech platform, which is used in Central Europe, so not only in Czech, but public, where we did see the same kind of performance, or a likewise performance.

Speaker #3: Anyway, what about the other part of the diversification? Insurance. Well, if you look on the year-on-year results, 11% up. If you look year to date, it's 9% up.

Johan Thijs: Well, if you look on the year-on-year results, 11% up, if you look year to date, it's 9% up, which is indeed a striking number. And this is translated not only in a strong growth, but also in good quality, because the Combined Ratio now stands at 86.7%, and that is better than guided, but also better than last year. So continuation of good growth, 9%, and good quality with the delta compared to the 100% Combined Ratio of 13 percentage points. Life insurance sales, well, we had until the Q3 already a record performance, and Q4 has topped that up with a whopping 26% increase, which is triggered by both unit-linked and interest-guaranteed products. Mainly interest-guaranteed products, due to commercial campaigns run both in Belgium and Central Europe.

Speaker #3: Which is indeed a striking number. And this is translated not only into strong growth, but also into good quality, because the combined ratio now stands at 86.7%.

Speaker #3: And that is better than guided, but also better than last year. So, continuation of good growth—9% and good quality, with the delta compared to the 100% combined ratio of 13 percentage points.

Speaker #3: Life insurance sales: well, we had until the third quarter already a record performance, and the fourth quarter has topped that up with a whopping 26% increase, which is triggered by both unit-linked as well as interest-guaranteed products—mainly interest-guaranteed products—due to commercial campaigns run both in Belgium and Central Europe.

Speaker #3: So this performance of growth in the live insurance side is also true for Central Europe. And let me emphasize something I forgot on the fee and commission.

Johan Thijs: So this performance of growth in the life insurance side is also true for Central Europe. Let me emphasize something I forgot on the fee and commission. This, the growth of the fee and commission business on the asset management side was also driven by Central Europe, in essence. So in this perspective, we do see, again, a very strong growth, which means that the guaranteed interest products and the unit link both roughly are 45% of the total production, which means that is very well balanced.

Speaker #3: The growth of the fee and commission business on the asset management side was also driven by Central Europe in essence. So in this perspective, we do see again a very strong growth, which means that the guaranteed interest products and the unit link both roughly are 45% of the total production, which means that is very well balanced.

Speaker #3: In terms of the more volatile results, financial instruments, fair value, we do see a fundamental increase of the contribution, which is mainly linked to the fact that the ALM derivatives have been performing better due to in essence, the difference between previous quarter and this quarter is mainly driven by positive contribution of the ineffectiveness of hedge accounting and on the performance due to better performance due to better interest rate swaps.

Johan Thijs: In terms of the more volatile results, financial instruments, fair value, we do see a fundamental increase of the contribution, which is mainly linked to the fact that the ALM derivatives have been performing better due to, in essence, the difference between the previous quarter and this quarter is mainly driven by, positive contribution of the ineffectiveness of hedge accounting, and on the performance due better performance due better interest rate swaps. Coming to the net other income, while the run rate is roughly EUR 45 million, so with 39, we're slightly below, but this is a detail, and in essence, I would say it's perfectly in line with what, this should be. Let me then go to, an important line that is the operating expenses line.

Speaker #3: Coming to the net order income, well, the run rate is roughly 45 million euro, so with 39, we are slightly below. But this is a detail and in essence, I would say it's perfectly in line with what this should be.

Speaker #3: Let me then go to an important line that is the operating expenses line. Well, we guided in the beginning of the year a growth of 2.5% year-on-year to date year to date.

Johan Thijs: Well, you know, we guided in the beginning of the year a growth of 2.5%, year-on-year to date, year to date, and we delivered on that precisely 2.5%, cost increase, full year 2025 compared to full year 2024, excluding obviously bank taxes and the FX impact. So in this perspective, it's perfectly in line in the guidance, and that's if that entails also the efficiency, because intrinsically, if you look at the contributors, we have the seasonal effects in the Q4 of IT contributors, marketing expenses, and so on support. But if you look at the underlying result, while in essence it's very simple, we build down the total number of FTEs, KBC Group-wide, so we have less people, but we have 9% more revenues generated in 2025.

Speaker #3: And we delivered on that—precisely a 2.5% cost increase full year ’25 compared to full year ’24, excluding, obviously, bank taxes and the AVAX impact.

Speaker #3: So, in this perspective, it is perfectly in line, and the guidance, and that if that entails also the efficiency—because intrinsically, if you look at the contributors, we have the seasonal effects in the fourth quarter of IT contributors, marketing expenses, and so on and so forth.

Speaker #3: But if you look at the underlying result, well, in essence, it's very simple. We brought down the total number of FTEs, KBC Group-wide. So, we have fewer people, but we have 9% more revenues generated in 2025.

Speaker #3: And it is that efficiency which we are going to continue in the years to come 26, 27, and 28. How is this translated? Well, this is translated in a further improvement of the cost income ratio.

Johan Thijs: It is that efficiency which we are going to continue in the years to come, 2026, 2027, and 2028. How is this translated? Well, this is translated in a further improvement of the cost income ratio. If you do more with less people, then your cost income ratio goes to 41% when you exclude the bank taxes. And bank taxes speaking, we now have EUR 666 million. It's a very interesting number, and is therefore also called bank taxes. No further comments on the next page, you see the detail. And let me go then immediately into impairments. Well, impairments are well under control.

Speaker #3: If you do more with fewer people, then your cost-income ratio goes to 41% when you exclude the bank taxes. And, bank taxes speaking, we now have €666 million.

Speaker #3: It's a very interesting number. And it's therefore also called bank taxes. No further comments on the next page. You see the detail. And let me go then immediately into impairments.

Speaker #3: Well, impairments are well under control. We had actually a good quarter in quarter four, 76 million euro were related to the loan book. Which was triggered by one or two bigger files.

Johan Thijs: We had actually a good quarter in Q4, EUR 76 million were related to the loan book, which was triggered by one or two bigger files, but this is perfectly in line with the guidance which we gave. And on the buffer, which we hold for geographical and emerging risks, we only had a release of EUR 3 million, which brings the buffer to EUR 100 million, which can be used for circumstances if they would derail in the future. We also had a EUR 48 million impairment on goodwill, which is mainly triggered by an impairment on software. This is software mainly in the Central Europe entities, where we have, as you know, installed new platforms and we impaired other parts of solutions which were built in that perspective.

Speaker #3: But this is perfectly in line with the guidance which we gave. And on the buffer which we hold for geographical and emerging risks, we only had a release of €3 million, which brings the buffer to €100 million, which can be used for circumstances.

Speaker #3: If they would derail in the future. We also had a 48 million euro impairment on goodwill. Which is mainly triggered by an impairment on software.

Speaker #3: This is software mainly in the Central Europe entities where we have, as you know, installed new platforms, and we impaired other parts of solutions which were built in that perspective.

Speaker #3: In terms of the remaining amounts, 9 million euro is linked to a government initiative in Slovakia 9 million euro of modification losses and 7 million euro on goodwill impairment, which sums it up to 48.

Johan Thijs: In terms of the remaining amounts, EUR 9 million is linked to a government initiative in Slovakia, EUR 9 million of nine modification losses, and EUR 7 million on goodwill impairment, which sums it up to EUR 48 million. What about credit cost ratio and impaired loans ratio? Well, we continue to see a very good credit cost ratio, 13 basis points, regardless of the buffer, and the 13 basis points compared to the guidance which we gave below 25 to 30 basis points, which is, that box is ticked. Also, when you compare it in the longer term, credit cost ratio of 25, 30 basis points, well, then, this is significantly better. The ratio is good. Why? Because also the underlying portfolio, on impaired loans is further improving. It now stands at 1.8%.

Speaker #3: What about the credit cost ratio for unimpaired loans? Well, we continue to see a very good credit cost ratio—13 basis points, regardless of the buffer.

Speaker #3: And the 13 basis points compared to the guidance which we gave below 25 to 30 basis points, which is that box is ticked. And also when you compare it in the longer term, credit cost ratio of 25-30 basis points.

Speaker #3: Well, then this is a significantly better. The ratio is good. Why? Because also the underlying portfolio on impaired loans is further improving. It now stands at 1.8%.

Speaker #3: If you would use the EBA definition because of the KBC definition a bit harsher, then the number stands at 137 basis points, which is significantly better than the European average.

Johan Thijs: If you would use the EBA definition because of the KBC definition, a bit harsher, then the number stands at 137 basis points, which is significantly better than the European average. Also, if you would look into the evolution of the PD classes, which you can find in the quarterly report as well, then you see there that in Q4, we had a further improvement of the PD evolutions, in our loan book, triggering indeed, this credit cost ratio and saying that the quality of the book is good. Going to, the capital ratios, which, you know, are built up by two sides.

Speaker #3: Also if you would look into the evolution of the PD classes where you can find in the quarterly report as well, then you see there that in quarter four we had a further improvement of the PD evolutions in our loan book triggering indeed this credit cost ratio and saying that the quality of the book is good.

Speaker #3: Going to the capital ratios, which you know are built up by two sides. In the numerator part, we add the contribution of quarter four.

Johan Thijs: In the numerator part, we add the contribution of Q4, and we obviously also add the dividend payments of KBC Insurance, which is, as you know, lagging one quarter behind in the insurance side. So the results you see here is a dividend of the previous quarter, which is booked, and totaling EUR 19.2 billion CET1 capital. What about the denominator? Well, that denominator is influenced by two things. First of all... Actually, three things. First of all, growth. Given the fact that we're strongly growing our asset side, so our loan book, that has an impact on the risk-weighted assets to the tune of EUR 1.7 billion.

Speaker #3: And we obviously also add the dividend payments of KBC Insurance, which is, as you know, lagging one quarter behind on the insurance side. So, the result you see here is the dividend of the previous quarter, which is booked.

Speaker #3: And totaling €19.2 billion CET1 capital. What about the denominator? Well, that denominator is influenced by two things—first of all, or actually three things.

Speaker #3: First of all, growth. Given the fact that we strongly growing our asset sites or our loan book, that has an impact on the risk rated assets to the tune of 1.7 billion.

Speaker #3: Next to that, we have the traditional booking of the operational risk-rated assets totaling €1.2 billion, and some changes on the market risk-rated assets, €0.8 billion.

Johan Thijs: Next to that, we have the traditional booking of the operational risk-weighted assets, totaling EUR 1.2 billion, and some changes on the market risk-weighted assets, 0.8. So in total, let's say round the number, roughly EUR 4 billion. But this was offset by the inclusion of the impact of the SRT, which we run in Q4, and that SRT brings down the risk-weighted asset increase to roughly EUR 1.7 billion. In that perspective, the capital ratio now stands at a solid 14.9%. What is not included in this capital ratio are, in essence, two things.

Speaker #3: So, in total, let's say around roughly €4 billion. But this was offset by the inclusion of the impact of the SRT, which we run in the fourth quarter.

Speaker #3: And that SRT brings down the risk rated to roughly 1.7 billion euro. In that perspective, the capital ratio now stands at a solid 14.9%.

Speaker #3: What is not included in this capital ratio are in essence two things. First of all, we have closed the acquisitions of 365 Bank. And two days ago, or yeah, two days ago, the acquisition of business lease check for public and Slovakia.

Johan Thijs: First of all, we have closed the acquisitions of 365.bank, and two days ago, yeah, two days ago, the acquisition of Business Lease, Czech Republic, and Slovakia, and the sum of the two will have an impact of 50 basis points. And then what is also to be known is that we will continue to further optimize our capital position, risk-weighted assets position in the course of 2026, with SRTs, and therefore, try to mitigate the impact of the volume increase, which we foresee as, as we speak in 2026, 2027, and 2028. Going to the ratios then. Well, we end up with an OCR ratio of 10.87%, which is 2 basis points higher than before.

Speaker #3: And the sum of the two will have an impact of 50 basis points. And then what is also to be known is that we will continue to further optimize our capital position, risk-rated assets position, in the course of 2026 with SRTs, and therefore try to mitigate the impact of the volume increase which we foresee as we speak in '26, '27, and '28.

Speaker #3: Going to the ratios then. Well, we end up with an OCR ratio of 10.87%. Which is two basis points higher than before. This has to do by legal changes on the systemic buffer and so on and so forth.

Johan Thijs: This has to do by legal changes on the systemic buffer, and so on, so forth. It's only 2 basis points, so let's not dwell to prolong upon this. And then the MDA stands at 1,091. This is triggered by a 4 percentage points... No, not 4 percentage points, 4 basis points, difference on the 8, the Tier 2. And that is almost fully, but not entirely compensated by the 81 surpluses. Leverage ratio stands at 5.6%, which is a further increase, which is also true for the liquidity ratios, already mentioned them. And also, the insurance stands at a very solid 227% Solvency II ratio, which was positively triggered by the evolution of the spreads on the bonds, and also, obviously, by the contribution of the results of the insurance company.

Speaker #3: It's only two basis points, so let's not dwell too long on this. And then the MDA stands at 10.91. This is triggered by a 4 basis points—no, not 4 percentage points, 4 basis points.

Speaker #3: Difference on the tier two and that is almost fully, but not entirely compensated by the 81 surpluses. Leverage ratio stands at 5.6%, which is a further increase which is also true for the liquidity ratios already mentioned them.

Speaker #3: And also the insurance stands at a very solid 227% solvency two ratio, which was positively triggered by the evolution of the spreads on the bonds.

Speaker #3: And also obviously by the contribution of the result of the insurance company. Which brings us to the future. What about the future? Well, the guidance this time is a bit more difficult because we are comparing 2025 as a base year with 26, 27, 28 where KBC Group changes from a composition.

Johan Thijs: Which brings us to the future. What about the future? Well, the guidance this time is a bit more difficult because we are comparing 2025 as a base year with 2026, 2027, and 2028, where KBC Group changes from a composition. 2025 does not contain 365 nor Business Lease acquisitions. So therefore, let's be careful, and therefore, we prefer to give also guidance on the underlying performance of KBC Group in 2026, 2027, and 2028. On the first slide, this is on page 19, you can see what actually we guided last year for 2026 and 2027. If you look at the performance, the underlying total income growth, which we forecasted a year ago, is 5.3%.

Speaker #3: 25 does not contain 365 nor business lease acquisitions. So therefore, let's be careful and therefore we prefer to give also guidance on the underlying performance of KBC Group in 26, 27, and 28.

Speaker #3: On the first slide, this is on page 19. You can see what actually we guided last year for 26 and 27. If you look at the performance, the underlying total income growth, which we forecasted a year ago was 5.3%.

Speaker #3: And if you look at the longer-term guidance from last year for '26 and '27 on the cost side, then we guided an increase of 3.3%.

Johan Thijs: If you look at the guidance, longer-term guidance last year for 2026 and 2027 on the cost side, then we guided an increase of 3.3%. Well, if I just take now a look at 2026, 2027, and 2028, purely organically, so forget about the acquisitions, then we guide that our income growth for 2026 will be stronger than the 5.3%, so 6.8%. And the efficiency, the cost evolution, will be roughly the same as what we guided a year ago, so 3.4%. Let me translate that differently. We use the same efficiency, but we add EUR hundreds of millions to our bottom line PNL. So in the operating profit, there will be a strong positive contribution remaining the efficiency of what we had.

Speaker #3: Well, if I just take now a look at '26, '27, and '28, purely organically—so forget about the acquisitions—then we guide that our income growth for '26 will be stronger than the 5.3%.

Speaker #3: So 6.8%. And the efficiency, the cost evolution will be roughly the same as what we guided a year ago. So 3.4%. Let me translate that differently.

Speaker #3: We used the same efficiency, but we added hundreds of millions to our bottom line P&L. So in the operating profit, there will be a strong positive contribution, maintaining the efficiency of what we had.

Speaker #3: Or let me use it differently, with the same people doing even more revenues. Intrinsically, what we then add for the long-term guidance is the acquisition of 365 and Business Lease.

Johan Thijs: Or let me use it differently, with the same people doing even more revenues. Intrinsically, what we do then, add for the long-term guidance, is the acquisition of 365 and Business Lease. 365, added in 2026, means that we are adding a company which still is not working according to the KBC standards... We do foresee max 24 months to make 365 Business Lease working according to the efficiency and productivity standards of KBC. That means that we will have the full benefit on the revenue side and on the cost side, fully into 2028, not 2026, 2027, because you just absorb them as of 1 January of this year. As a matter of fact, this also then gives, for 2028, the same underlying results.

Speaker #3: 365 added in 2026 means that we are adding a company which still is not working according to the KBC standards. We do foresee a maximum of 24 months to make 365 business lease work according to the efficiency and productivity standards of KBC.

Speaker #3: That means that we will have the full benefit on the revenue side and on the cost side fully into 28. Not 26, 27 because you just absorb them as of the 1st of January of this year.

Speaker #3: As a matter of fact, this also then gives for 2028 the same underlying results we will continue to see the underlying growth of our cost 3.4% with that difference that our top line will grow even faster than what was done in 26 and 27.

Johan Thijs: We will continue to see the underlying growth of our cost 3.4%, with that difference that our top line will grow even faster than what was done in 2026 and 2027, so 7.7%. So adding then, at the end of 2028, the efficiency, the benefits of 365 and Business Lease, will add another EUR 100 million on your bottom line. So in summary, in essence, underlying, you will have a draw of 3.4%, and this is true for the entire cycle. The difference is that we will continue grow, to grow our total income further and stronger than what we did last year, and therefore it adds to your operational profit, hundreds of millions of EUR. How you translate that then in efficiency?

Speaker #3: So 7.7%. So adding then at the end of 2028, the efficiency, the benefits of 2000 of 365 and business lease will add another 100 million euro on your bottom line.

Speaker #3: So, in summary, in essence, underlying, you will have a JAW of 3.4%, and this is true for the entire cycle. The difference is that we will continue to grow our total income further and stronger than what we did last year.

Speaker #3: And therefore, it adds to your operational profit hundreds of millions of euro. How you translate that then in efficiency? Well, we do see the cost income ratio of 26 guided at roughly 40%.

Johan Thijs: Well, we do see the cost-income ratio of 26, guided at roughly 40%, and given what I just said, we do more income with less people. We will guide the cost-income for the longer term below 38%. All the rest on the guidance is more or less in line. We increase the guidance on our insurance business from 7 to 7.5%. Combined ratio goes to below 91%, and then credit cost ratio is well below the 25, 30 basis points. And let me emphasize again, this is what we call the floor-ceiling approach. So everything which is related to income is a floor, so it's at least, and everything which related to costs or claims or impairments is considered to be a ceiling, so max.

Speaker #3: And given what I just said, we do more income with less people. We will guide the cost/income for the longer term below 38%.

Speaker #3: All the rest on the guidance is more or less in line. We increase the guidance on our insurance business from 7 to 7.5%. Combined ratio goes to 91% below.

Speaker #3: And then credit cost ratio is well below the 25–30 basis points. And let me emphasize again, this is what we call the floor-ceiling approach.

Speaker #3: So everything which is related to income is a floor. So it's at least. And everything which is related to costs or claims or impairments is considered to be a ceiling.

Speaker #3: So max. In that perspective, one more detail. We do expect our net interest income for this year to be at least 6 billion, 725 million euro, which is compared to previous year roughly 11%.

Johan Thijs: In that perspective, one more detail, we do expect our net interest income for this year to be at least EUR 6.725 billion, which is compared to previous year roughly 11% as a floor, so it is at least. Let me go then in the wrap-up. The wrap-up is in that perspective a repeat, so let me actually emphasize only one slide. That is a slide of full year 2025. If you look at 2025 as a summary of fourth quarters, then this is indeed EUR 358 million of profit, which is significantly better as last year. If you exclude the one-offs, one-off effect of the DTA in Ireland out of the year 2024, then the profit rose with 18%.

Speaker #3: As a floor, so it is at least. Let me go then to the wrap-up. The wrap-up is, in that perspective, a repeat. So let me actually emphasize only one slide.

Speaker #3: That is a slide of full year 2025. If you look at 25 as a summary of fourth quarters, then this is indeed 3.568 million euro of profit, which is significantly better as last year.

Speaker #3: If you exclude the one-offs at one-off effect of the DTA in Ireland out of the year 2024, then the profit rose with 18%. And given the fact that the guidance which we just gave of 26, 27, and and 28 is just a prolongation and a continuation of the effects of 25, the outlook on the operating profit is more or less in line with what I just said on 25, 24.

Johan Thijs: Given the fact that, you know, the guidance which we just gave of 26, 27 and 28, it's just a promulgation and a continuation of the effect of 25. The outlook on the operating profit is more or less in line with what I just said on 25, 24. Given the exceptional character of this year, where we not only had record results, but also record performance on the customer satisfaction, employee satisfaction, and the best banking app in the world, we also decided, or not decided, we proposed to our board yesterday evening, to grant an exceptional bonus of EUR 25 million for the entire group to our staff. This bonus is yesterday positively advised, and now will be proposed to the AGM in May.

Speaker #3: Given the exceptional character of this year, where we not only had record results, but also record performance on the customer satisfaction, employee satisfaction, and the best banking app in the world, we also decided or not decided, we proposed to our board yesterday evening to grant an exceptional bonus of 25 million euro for the entire group to our staff.

Speaker #3: This bonus is yesterday positively advised and now will be proposed to the AGM in May. The reason why it goes to the AGM, it is an allocation of profit.

Johan Thijs: The reason why it goes to the AGM, it is an allocation of profit, and therefore, under Belgian GAAP, it will be indeed... When it is approved by the AGM, it will be booked under the profit allocation. In the IFRS, the rules are a little bit different. That profit allocation is considered to be a cost, and that will be then, if positively decided by the AGM, will be contributed to the costs. That cost, given the fact that decision needs to be taken, is not in the guidance. So this sums it up. I am not going to dwell upon all the other slides. I give you time for your questions, so I give back the floor to Kurt.

Speaker #3: And therefore, under Belgian GAAP, it will be indeed when it is approved by the AGM, it will be booked under the profit allocation. In the IRS, the rules are a little bit different.

Speaker #3: That profit allocation is considered to be a cost. And that will be then if positively decided by the AGM, will be contributed to the costs.

Speaker #3: That cost, given the fact that the decision needs to be taken, is not in the guidance. So this sums it up. I am not going to dwell upon all the other slides.

Speaker #3: I give you time for your questions. So I give back the floor to Kurt.

Speaker #2: Thank you, Johan. The floor is now open for questions. Please restrict the number of questions to two. Too low for a maximum number of people to raise questions.

Kurt De Baenst: Thank you, everyone. 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 #2: Thank you.

Speaker #3: Thank you, sir. And as a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two and please ensure your lines are unmuted locally.

Operator: Thank you, sir. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two, and please ensure your lines are unmuted locally, as you'll be prompted when to ask your question. Again, we kindly ask you to limit yourself to two questions only. The first question today comes from a line of Tarik El Mejjad from Bank of America. Please go ahead.

Speaker #3: As you'll be prompted when to ask your question. So again, we kindly ask you to limit yourself to two questions only. The first question today comes from a line of Tariq Almejad from Bank of America.

Speaker #3: Please go ahead.

Speaker #4: Hi. Good morning, everyone. Two questions. I mean, first, I would just come back on your point about you're always arguments about NII is a floor and or revenue is a floor and costs guidance is a cap.

Tarik El Mejjad: Hi, good morning, everyone. Two questions. I mean, first, I would just come back on your point about, you know, you always argument about NII is the floor, and or revenue is the floor, and costs guidance is a cap. I understand where is the upside could come from, from both. First, on NII, I would like to understand what volume assumptions you use for loans and deposits. I mean, for loans, you gave the 5% year-on-year in 2026, which sounds to me quite lowball, given your delivery and the pickup in growth in CE and in Eurozone. But want your view on this, and what's the outlook for beyond 2026?

Speaker #4: And I understand where the upside could come from, both. First, on NII, I would like to understand what volume assumptions you use for loans and deposits.

Speaker #4: I mean, for loans, you gave the 5% year on year in 26, but which sounds to me quite low bold given your delivery and the pickup in growth in CE and in eurozone.

Speaker #4: But once you hear on this, and what's the outlook for beyond '26? Is it fair still to apply the usual 2, 1, 2 percent NII conservatism buffer you guys always had?

Tarik El Mejjad: Is it fair still to apply the usual 2.12% NII conservatism that you guys always had? Worked quite well in the past. So just wondering if you still have this cautiousness there. And then on costs, I understand the scope effect change, but on the AI and tech and basically, you know, growing CAGR further, how much actually are allocated on investments on this? I mean, for AI and tech, for banking, it turned from banks being winners to losers in the last few weeks. What do you think of that? And do you see it really as a pain first, then benefit, or you think you can reap the benefit first? Thank you.

Speaker #4: Worked quite well in the past. So just wondering if you still have this cautiousness there. And then on costs, I understand the scope effect change, but on the AI and tech and basically growing Kate further, how much actually you are located on investments on this?

Speaker #4: I mean, for AI and tech for banking, it turned from banks being winners to losers in the last few weeks. What do you think of that?

Speaker #4: And do you see it really as a pain first, then a benefit? Or do you think you can reap the benefit first? Thank you.

Speaker #3: Well, good morning to you all. I will respond to the first question of Tariq related to the development of the loan volumes and the deposit volumes going forward.

Johan Thijs: Well, good morning to you all. I will respond to the first question of Tarik, related to the development of the loan volumes and the deposit volumes going forward. So indeed, I mean, we recorded an exceptional 7.4% organic growth in the loan portfolio in 2025. But this is indeed exceptional. We now guide for 2026 approximately 5% growth. The reason why we had a very strong growth in the 2025, which is rather exceptional, was, of course, triggered by the first half of the year. Particularly in advance, also, of the uncertainty related to the tariffs, where we saw quite some increase also in anticipation of those tariffs of production in Central Europe.

Speaker #3: So indeed, I mean, we recorded an exceptional 7.4% organic growth in the loan portfolio in 25. But this is indeed exceptional. We now guide in 26 for approximately 5% growth.

Speaker #3: The reason why we had a very strong growth in the 25, which is rather exceptional, was, of course, triggered by the first half of the year, particularly in advance also of the uncertainty related to the tariffs, where we saw quite some increase also in anticipation of those tariffs of production in Europe, as one element of that.

Speaker #3: And secondly, we also indicated that basically the strong growth in the first half was driven by a number of large transactions, mainly M&A transactions of some of our core customers which drove the increase to indeed for the full year 7.4%.

Johan Thijs: As one element of that, and secondly, we also indicated that basically the strong growth in the first half was driven by a number of large transactions, mainly M&A transactions of some of our core customers, which drove the increase to indeed, for the full year, 7.4%. We do not expect that to be repeated in 2026. That is the reason why we guide 5%, but obviously 5% is based and driven by the fact that we typically look at the composition of the GDP growth on the one hand, and the inflation.

Speaker #3: We do not expect that to be repeated in the 26. That is the reason why we guide 5%. But obviously, 5% is based and driven by the fact that we typically look at the composition of the GDP growth on the one hand and the inflation.

Speaker #3: So if you that's the rule of thumb that we always use, particularly in Central Europe, GDP growth plus inflation which indeed is bringing you to roughly 5%.

Johan Thijs: So that's the rule of thumb that we always use, particularly in Central Europe, GDP growth plus inflation, which indeed is bringing you to roughly 5%. And by the way, when you look back over the past 5 years, we always have been able to grow our loan portfolio by 5% organic growth. So that is where the 5% comes from. Then, as far as the deposit side is concerned, so we never guide on the growth of deposits, but as you have seen, we have 2.8% organic growth for the full year and 4% growth for the full year non-organic. This gives you an indication of potential future growth.

Speaker #3: And by the way, when you look back over the past five years, we always have been able to grow our loan portfolio by 5% organic growth.

Speaker #3: So that is where the 5% comes from. Then, as far as the deposit side is concerned—so, we never guide on the growth of deposits, but as you have seen, we have 2.8% organic growth for the full year and 4% growth for the full year non-organic.

Speaker #3: This gives you an indication of potential future growth. Obviously, also here, the wealth conversion and the GDP growth in Central Europe is going to contribute to that.

Johan Thijs: Obviously, also here, the wealth conversion and the GDP growth in Central Europe is going to contribute to that, and so we have a positive view on the further growth from that perspective. So that explains where we come from. We do not guide on the loan and deposit growth for 2027 and 2028 for obvious reasons. And Tarik, good morning, also, from my side. I will answer your second question. Indeed, there is at this, let's say, last quarter, there is a big shift in terms of also media attention and statements made on artificial intelligence and impact on business development, but also on efficiency, and not only in the financial industry, but in general.

Speaker #3: And so we have a positive view on the further growth from that perspective. So that explains where we come from. We do not guide on the loan and deposit growth for the 27 and 28 for obvious reasons.

Speaker #1: And Tariq, good morning also from my side. I will answer your second question. Indeed, at this, let's say, last quarter, there is a big shift in terms of also media attention and statements made on artificial intelligence.

Bartel Puelinckx: And Tarik, good morning, also, from my side. I will answer your second question. Indeed, there is at this, let's say, last quarter, there is a big shift in terms of also media attention and statements made on artificial intelligence and impact on business development, but also on efficiency, and not only in the financial industry, but in general.

Speaker #1: And impact on business development, but also on efficiency. And not only in the financial industry, but in general. But specifically for the financial industry, I think our sector is, in that perspective, really, really prone to using and embracing artificial intelligence if productivity gains need to be achieved.

Johan Thijs: But specifically for the financial industry, I think our sector is, in that perspective, really, really prone to using and embracing artificial intelligence if productivity gains need to be achieved. So giving this general statement, you can imagine that we are continuously and emphasizing this. We have been doing this for the last 11 years already. KBC started with its artificial intelligence applications in our organizational structures and in operations in 2014, 2015. So we will continue to do so. We have an intention to further optimize the way how we are working, and that is done in two ways. First of all, we continue to develop our backbone because in KBC, the philosophy of using artificial intelligence, and that is, I think, a little bit different than what you sometimes read in the press.

Bartel Puelinckx: But specifically for the financial industry, I think our sector is, in that perspective, really, really prone to using and embracing artificial intelligence if productivity gains need to be achieved. So giving this general statement, you can imagine that we are continuously and emphasizing this. We have been doing this for the last 11 years already. KBC started with its artificial intelligence applications in our organizational structures and in operations in 2014, 2015. So we will continue to do so. We have an intention to further optimize the way how we are working, and that is done in two ways. First of all, we continue to develop our backbone because in KBC, the philosophy of using artificial intelligence, and that is, I think, a little bit different than what you sometimes read in the press.

Speaker #1: So getting this general statement, you can imagine that we are continuously emphasizing this. We have been doing this for the last 11 years, already.

Speaker #1: KBC started with its artificial intelligence applications in our organizational structures and in operations. In 2014, '15. So we will continue to do so. We have an intention to further optimize the way how we are working.

Speaker #1: And that is done in two ways. First of all, we continue to develop our backbone because in KBC, the philosophy of using artificial intelligence, and that is, I think, a little bit different than what you sometimes read in the press, I have the impression that in the press sometimes people are believing that when they mention the word artificial intelligence, that only the fact that it is mentioned already increases productivity gains.

Johan Thijs: I have the impression that in the press, sometimes people are believing that when they mention the word artificial intelligence, that only the fact that it is mentioned already increased productivity gains. I do not think that is a given. I think you have artificial intelligence productivity gains only when you tailor your AI solutions to the specific, needs of your company. That's the first thing. And second thing, we will continue to do so. You can read it in our presentation as part of our Q4 announcement, but it's already in that, in that pack for, let's say, 10 years. We continue to develop our front end and our back end connected via AI solutions. This is translated via Kate, among others, but we will continue to develop those going forward.

Bartel Puelinckx: I have the impression that in the press, sometimes people are believing that when they mention the word artificial intelligence, that only the fact that it is mentioned already increased productivity gains. I do not think that is a given. I think you have artificial intelligence productivity gains only when you tailor your AI solutions to the specific, needs of your company. That's the first thing. And second thing, we will continue to do so. You can read it in our presentation as part of our Q4 announcement, but it's already in that, in that pack for, let's say, 10 years. We continue to develop our front end and our back end connected via AI solutions. This is translated via Kate, among others, but we will continue to develop those going forward.

Speaker #1: I do not think that is a given. I think you have artificial intelligence, productivity gains only when you tailor your AI solutions to the specific needs of your company.

Speaker #1: That's the first thing. And the second thing, we will continue to do so. You can read it in our presentation as part of our Q4 announcement, but it's already in that pack for, let's say, ten years.

Speaker #1: We continue to develop our front end and our back end connected via AI solutions. This is translated via Kate, amongst others. But we will continue to develop those going forward.

Speaker #1: Straight-through processing, which means using AI tools to tailor solutions to customer needs without any human being interfering in KBC and the commercial processes, stands now at roughly 65%.

Johan Thijs: Straight-through processing, which means using AI tools to tailor solutions to customer needs without any human being interfering in KBC, and the commercial processes stands now at roughly 65%, and the ambition is to bring it higher. And that's something which we launched in 2025, beginning of the year, and this is now coming to maturity. We also are doing the exact same thing that is connecting your front end and your back end. The front, in this case, the internal people for the non-commercial processes. And that needs to be, that is also using AI for good understanding, and that needs to deliver its results in the course of 2026, 2027, and 2028.

Bartel Puelinckx: Straight-through processing, which means using AI tools to tailor solutions to customer needs without any human being interfering in KBC, and the commercial processes stands now at roughly 65%, and the ambition is to bring it higher. And that's something which we launched in 2025, beginning of the year, and this is now coming to maturity. We also are doing the exact same thing that is connecting your front end and your back end. The front, in this case, the internal people for the non-commercial processes. And that needs to be, that is also using AI for good understanding, and that needs to deliver its results in the course of 2026, 2027, and 2028.

Speaker #1: And the ambition is to bring it higher. But—and that’s something which we launched in 2025, at the beginning of the year—and this is now coming to maturity.

Speaker #1: We also are doing this exactly same thing that is connecting your front end and your back end. The front end, in this case, the internal people for the non-commercial processes.

Speaker #1: And that needs to, that is also using AI for good understanding. And that needs to deliver its results in the course of 26, 7, and 8.

Speaker #1: So in that perspective, yes, we will continue to invest in artificial intelligence. So using innovation, but we will continue and that is, I think, far more important to use artificial intelligence to automate the processes in what we call a dark factory mode.

Johan Thijs: So in that perspective, yes, we will continue to invest in artificial intelligence or using innovation, but we will continue, and that is, I think, far more important to use artificial intelligence to automate the processes in what we call a dark factory mode, so without any human beings interfering. The total summary of all investment is also part of the pack, including the transformation of the back offices, which is the trigger, including the front office applications, including artificial intelligence, is cash wise EUR 2 billion for the next three years and is roughly EUR 1.5 billion in terms of OpEx, also over three years. Thank you.

Bartel Puelinckx: So in that perspective, yes, we will continue to invest in artificial intelligence or using innovation, but we will continue, and that is, I think, far more important to use artificial intelligence to automate the processes in what we call a dark factory mode, so without any human beings interfering. The total summary of all investment is also part of the pack, including the transformation of the back offices, which is the trigger, including the front office applications, including artificial intelligence, is cash wise EUR 2 billion for the next three years and is roughly EUR 1.5 billion in terms of OpEx, also over three years. Thank you.

Speaker #1: So without any human beings interfering. The total summary of all investments is also part of the pack. Including the transformation of the back offices, which is the trigger.

Speaker #1: Including the front office applications and including artificial intelligence is cash-wise $2 billion for the next three years. And it's roughly $1.5 billion in terms of OPEX.

Speaker #1: Also over three years.

Speaker #3: Thank you.

Speaker #4: The next question comes from a line of Namita Santani from Barclays. Please go ahead.

Operator: The next question comes from the line of Namita Samtani from Barclays. Please go ahead.

Speaker #5: Morning and thank you for taking my questions. My first question, I see the footnote on the net interest income guidance says you include conservative pass-through assumptions.

Namita Samtani: Morning, and thank you for taking my questions. My first question, I see the footnote on the net interest income guidance says you include conservative pass-through assumptions. Can I clarify, do you mean pass-through of policy rates or pass-through of your replicating portfolio yield? Just wondering, because both your Benelux peers are guiding to around 100% pass-through of the uptick in their replicating portfolio to savers. So are you similarly conservative there? And my second question, could you please give us an outlook for banks and insurance taxes, please? Because when I look at a country level, Belgium's gonna be up around EUR 35 billion year-over-year, Hungary is gonna be up EUR 60 million, and you're guiding to 5% deposit growth or something similar.

Speaker #5: Can I clarify, do you mean pass-through of policy rates or pass-through of your replicating portfolio yield? Just wondering, because both your Benelux peers are guiding to around 100% pass-through of the uptick in their replicating portfolio to savers.

Speaker #5: So, are you similarly conservative there? And my second question: Could you please give us an outlook for banks and insurance taxes, please? Because when I look at a country level, Belgium is going to be up around €35 billion year-on-year.

Speaker #5: Hungary is going to be up €60 million, and you're guiding to 5% deposit growth or something similar. So I find consensus being up only €25 million year-on-year quite confusing.

Namita Samtani: So, I find consensus being up by a net EUR 25 million year-on-year, quite confusing. Is my math wrong, or can you give some color here, please? Thank you.

Speaker #5: So is my maths wrong, or can you give some color here, please? Thank you.

Speaker #3: Good morning, Namita. So actually, what the conservatism that we guide for is basically the external rate on the saving accounts. Which is, of course, going to be depending on the evolution of the policy rates going forward.

Bartel Puelinckx: Good morning, Namita. So, actually, the conservatism that we guide for is basically the external rate on the saving accounts, which is, of course, going to be depending on the evolution of the policy rates going forward.

Speaker #1: Okay. And then I will take your second question. So on the bank taxes, indeed, it is not a guidance provided yet. For the simple reason that it is uncertainty on one big element that is what Belgium government is going to do.

Johan Thijs: Okay, and then I will take your second question. So on the bank taxes, indeed, there is not a guidance provided yet, for the simple reason that there is uncertainty on one big element, that is what the Belgian government is going to do. So it is unclear, definitely in the details, how and what the Belgian decision in this matter is going to be, and therefore, we cannot give you now a right insight in what the evolution of the bank taxes is going to be. I am not. So I know you made a reference to certain articles in the newspapers, I'm not convinced this is the real situation yet in Belgium.

Speaker #1: So, it is unclear definitely in the detail how and what the Belgian decision in this matter is going to be. And therefore, we cannot give you now a right insight into what the evolution of the bank taxes is going to be.

Speaker #1: I am not, so I know you made a reference to certain articles in the newspapers. I'm not convinced this is the real situation yet in Belgium.

Speaker #1: So therefore, I recommend to wait until the end of quarter one when we are going to announce anyway the guidance or the expectations on bank taxes for the full year.

Johan Thijs: So therefore, I recommend to wait until the end of Q1, when we are going to announce anyway, the guidance or the expectations on bank taxes for the full year, because then we will have better insight how it's going to work. The other element on bank taxes is, of course, Hungary, where the Hungarian government has already positioned itself. As you know, a part of that positioning is actually passed through to customers. The other part is impacting our PNL, and that has already been disclosed earlier. So all the other countries, no bank tax changes are foreseen, and therefore, we will give you full guidance on the bank taxes when we have more insight, more clarity on the Belgian position, end of Q1.

Speaker #1: Because then we have better insight how it's going to work. The two the other element on bank taxes is, of course, Hungary, where the Hungarian government has already positioned itself, as you know, part of that positioning is actually passed through to customers.

Speaker #1: The other part is impacting our P&L. And that has already been disclosed earlier. So all the other countries, no bank tax changes are foreseen.

Speaker #1: And therefore, we will give you full guidance on the bank taxes when we have more insight, more clarity on the Belgian position—end of quarter one.

Speaker #5: Thanks. Sorry, can I just follow up on the savings account? Can you quantify the pass-through? Or are you assuming any increase in deposit costs if base rates are stable?

Namita Samtani: Thanks. Sorry, can I just follow up on this, on the savings account? Can you quantify the pass-through, or are you assuming an increase in deposit costs if base rates are stable? Thanks.

Speaker #5: Thanks.

Speaker #3: Well, no, we can basically what we're doing, I mean, you always need to take into account, of course, what the commercial impact is going to be.

Bartel Puelinckx: Well, no, we can, but basically what we're doing, I mean, you always need to take into account, of course, what the commercial impact is going to be, and also, of course, when the policy rates would be increasing, then obviously it's likely that we would be required to increase our external rates on the saving accounts as well. And that's the reason why we put some conservatism on the external rates on the saving accounts.

Speaker #3: And also for, of course, when the policy rates would be increasing, then obviously it's likely that we would be required to increase our external rates on the saving accounts as well.

Speaker #3: And that's the reason why we put some conservatism on the external rates of the saving accounts.

Speaker #5: Thanks very much.

Namita Samtani: Thanks very much.

Speaker #4: The next question comes from Benoît Petrarque from Kepler Cheuvreux. Please go ahead.

Operator: The next question comes from a line of Benoit Pétrarque from Crédit Agricole. Please go ahead.

Speaker #1: Yes, good morning. So my first question will be on the assumptions on NI for '26 and '28. So on the volume growth, I think you've clarified that.

Benoît Pétrarque: Yes, good morning. So my first question will be on the assumptions on NI for 2026 and 2028. So on the volume growth, I think you, you've clarified that. Could you maybe clarify what your assumptions are on asset margins going forward? Also in terms of shift from term deposits to yeah, other type of deposits, and also clarify on the pass-through rate assumption. Sorry to come back on that. You know, what type of marginal pass-through rate assumption do you expect in your guidance? So that's the first question. Number two is on OpEx. Thanks for the slide 19, and the kind of organic OpEx growth of 3%, 3.4%. It sounds still a bit high.

Speaker #1: Could you maybe clarify what your assumptions are on asset margins going forward? Also in terms of shift from term deposits to, yeah, other type of deposits.

Speaker #1: And also clarify on the pass-through rate assumption. Sorry to come back on that. What time of marginal pass-through rate assumption do you expect in your guidance?

Speaker #1: So that's the first question. Number two is on OPEX. Thanks for the slide 19 and the kind of organic OPEX growth of 3.4%. It sounds still a bit high.

Speaker #1: I'm looking at the indexation there. This is coming down quite sharply. So, yeah, I'm trying to understand why you expect 3.4%. And did you include any maybe one-off investments?

Benoît Pétrarque: I'm looking at the Belgian inflation, and we know we have indexation there. This is coming down quite sharply, so yeah, I'm trying to understand why you expect 3.4%, and did you include any maybe one-off investments? We talked about AI, and are there any specific investments in that number? Thank you.

Speaker #1: We talked about AI and are there any specific investments in that number? Thank you.

Speaker #3: Bonjour, Benoît. So, as far as your first question is concerned, first of all, the margins on the asset side. Basically, I mean, I already indicated—and I should have also highlighted—that on the mortgage side, let me start with that one.

Bartel Puelinckx: ... Bonjour, Benoît. So as far as your first question is concerned, first of all, the margins on the asset side. Basically, I mean, I already indicated, and I should have also highlighted that, on the mortgage side, let me start by that one. We still expect some quite some nice growth, also in Belgium actually, also this year, started well off quite nicely with continuous growth also on the mortgage side, but particularly in Central Europe, and this in all countries.

Speaker #3: We still expect some quite some nice growth. Also in Belgium, actually, also this year, started well off quite nicely with continuous growth also on the mortgage side.

Speaker #3: But particularly in Central Europe. And this in all countries. In terms of margins on the mortgages, in Belgium, as Yvonne has been highlighting, we saw a we further reduced the gap between the front the margin on the front book and the margin on the back book.

Bartel Puelinckx: In terms of margins on the mortgages in Belgium, as Johan has been highlighting, we saw we further reduced the gap between the margin on the front book and the margin on the back book in Q4 by roughly 8 basis points. However, what we see is in the beginning of this year, that competition has somewhat increased, and as a result of that, margins are somewhat more under pressure in Belgium. This is less the case in certain countries in Central Europe, where particularly in Hungary, due to the fact that we have the Home Start program and the fact that now 80% of the business is being subsidized.

Speaker #3: In the fourth quarter, by roughly eight basis points. However, what we see is, in the beginning of this year, that competition has somewhat increased.

Speaker #3: And as a result of that, margins are somewhat more under pressure in Belgium. This is less the case in certain countries in Central Europe, where particularly in Hungary, due to the fact that we have the Homestart program and the fact that now 80% of the business is being subsidized, this also leads to significantly higher margins.

Bartel Puelinckx: This also leads to significantly higher margins, and supporting, of course, further growth also of the mortgage business. In Bulgaria, also there we see a very strong and continuous growth. You know that, in anticipation of the Euro adoption, the mortgage business increased quite significantly. But we see that pattern continuing also after the post, the Euro adoption, at margins that are now at least compared to the Euro board, in a positive range. However, also, you know, that there is a very particular funding approach and replication approach in Bulgaria, where the margins are, or the external rates are directly linked also to the external rates on the deposit side.

Speaker #3: And supporting, of course, further growth also of the mortgage business. In Bulgaria, also there, we see a very strong and continuous growth. You know that in anticipation of the Euro adoption, the mortgage business increased quite significantly.

Speaker #3: But we see that pattern continuing also after the euro adoption, at margins that are now at least, compared to the Euribor, in the positive range.

Speaker #3: However, also, you know that there is a very particular funding approach and replication approach in Bulgaria, where the margins are or the external rates are directly linked also to the external rates on the deposit side.

Speaker #3: As far as the Czech Republic is concerned, also there, we continue to see quite nice growth of the mortgage portfolio. But also there, margins somewhat more under pressure, being still aligned with the margins on the back book.

Bartel Puelinckx: As far as the Czech Republic is concerned, also there we continue to see quite nice growth of the mortgage portfolio, but also there, margins somewhat more under pressure, being still in line with the margins on the back book. Slovakia, also there, continuous growth margins similar to the Czech Republic, approaching more also the margin on the back book. Then on the mortgage side, on the corporate and SME side, we also expect continuous growth, in both, segment, where, in most of the countries, the margins are, quite strong and continue to be, we expect them to continue to be quite strong, going forward. Also in Belgium, although there, of course, competition might increase in the course of the year. So that on the asset margins.

Speaker #3: Slovakia, also there, continuous growth—margins similar to the Czech Republic, approaching more also the margin on the back book. Then on the mortgage side, on the corporate and SME side, we also expect continuous growth in both segments.

Speaker #3: Where in most of the countries, the margins are quite strong and continue to be we expect them to continue to be quite strong going forward.

Speaker #3: Also in Belgium, although there, of course, competition might increase in the course of the year. So, that on the asset margins. As far as the shift is concerned towards term deposits, as you have seen.

Bartel Puelinckx: As far as the shift is concerned, towards term deposits, as you have seen, and indeed as Johan has been highlighting, there has been a huge shift of term deposits to, say, CASA, particularly in Belgium. Following, of course, the maturity of the term deposits that were issued one year ago as following the repayment of the state note, or state bond, I should say. Basically, 50% went actually back to CASA. So this is obviously a, you know, one experience, but we do expect, going forward, that that shift will continue as well, depending, of course, on the development of the policy rates.

Speaker #3: And indeed, as Yvonne has been highlighting, there has been a huge shift of term deposits to CASA, particularly in Belgium, following, of course, the maturity of the term deposits that were issued one year ago, as well as following the repayment of the state note.

Speaker #3: Or state bond, I should say. Basically, 50% went actually back to Casa. So this is obviously a one experience. But we do expect going forward that that shift will continue going will continue as well.

Speaker #3: Depending, of course, on the development of the policy rates. And that's because, of course, if the policy rates would increase, it might be that some would return from CASA to term deposits.

Bartel Puelinckx: That's because, of course, if the policy rates would increase, it might be that some would return from CASA to term deposits, as well as, of course, the continuous growth of our asset management business, where we will continue also to focus on increasing, particularly the net sales. So that as far as the shift is concerned, of term deposits towards CASA, and as far as the pass-through are concerned, basically the pass-through as such, we do not guide specifically.

Speaker #3: As well as, of course, the continuous growth of our asset management business, where we will continue also to focus on increasing particularly the net sales.

Speaker #3: So, that as far as the shift is concerned of term deposits towards CASA. And as far as the passthroughs are concerned, basically the passthroughs, such, we do not guide specifically.

Speaker #3: Good morning, Benoit. I will take your second question. Yes, indeed, as you pointed out already, the cost increase organically for 2026 is mainly driven by inflation.

Johan Thijs: Good morning, Benoit. I will take your second question. Yes, indeed, as you pointed already out, the cost increase organically for 2026 is mainly driven by inflation. But I would nuance the word inflation, because I would more specifically refer to wage inflation. In general, we do expect a wage inflation of roughly 3.7% for the group, which means not only Belgium, where it is indeed indexed, as you rightly pointed out, but obviously also have promotions and some support. And the sum of all parts means that the wage inflation is 3.7%.

Speaker #3: But I would nuance the word inflation because I would specific more specifically refer to wage inflation. In general, we do expect a wage inflation of roughly 3.7% for the group, which means not only Belgium, where it is indeed indexed, as you rightly pointed out, but obviously also have promotions and so on and so forth.

Speaker #3: And the sum of all parts means that the wage inflation is 3.7%. Which immediately indicates that if the guidance, which we gave—3.4% cost rise for 2026 organically—it means that efficiency gains are bringing down the number of wage inflation to the total cost increase.

Johan Thijs: Which immediately indicates that if the guidance which we gave 3.4% cost rise for 2026 organically, it means that efficiency gains are bringing down the number of wage inflation to the total cost increase. Let me translate it more boldly. We do more work, more output with less people, because the inflation of the salaries is otherwise eating up your cost performance. So in essence, this is not only true for 2026, but this is indeed the same for 2027, for 2028, where the CAGR of the cost side, of the wage inflation side, sorry, is also roughly the same amount, 3.7, 3.8%. So in that perspective, yes, indeed, we do the investment. That was the answer to Namita's question.

Speaker #3: Let me translate it more boldly. We do more work, more output, with fewer people because the inflation of the salaries is otherwise eating up your cost performance.

Speaker #3: So, in essence, this is not only true for 2026, but this is indeed the same for 2007, for 2028, where the CAGR of the cost side—of the wage inflation side, sorry—is also roughly the same amount, 3.7%, 3.8%.

Speaker #3: So in that perspective, yes, indeed, we do the investment that was the answer to Namita's question. Or sorry, on Atari's question, sorry. That is, indeed, the efficiency gains are triggered by the automation via artificial intelligence solutions.

Johan Thijs: Sorry, on Tarik's question, sorry. That is indeed the efficiency gains are triggered by the automation via artificial intelligence solutions, and therefore, we are able to bring down wage inflation to a lower cost level. Your question about investments and more specifically, one-off investments. Well, I would not call it a one-off investments, but in the numbers of 26, 27, and 28, we do have actually, for the first time, bigger parts coming in on the cost side, which are related to investments. Let me highlight one thing. The investments which we are doing in Czech Republic on both the banking and the insurance side, where we're building new platforms, are yet again front-loaded. So you see that more into the cost and the benefits will come later on, so in the course of the next coming years.

Speaker #3: And therefore, we are able to bring down the wage inflation to a lower cost level. Your question about investments, and more specifically one-off investments—well, I would not call it a one-off investment.

Speaker #3: But in the numbers of 2026, 2027, and 2028, we do have actually, for the first time, bigger parts coming in on the cost side, which are related to investments.

Speaker #3: Let me highlight one thing. The investments which we are doing in Czech Republic, on both the banking and the insurance side, where we're building new platforms, are here again front-loaded.

Speaker #3: So you see that more into the cost, and the benefits will come later on. So in the course of the next coming years, while that is increasing, for instance, on the Czechoslovakian banking side, the cost in 2026 versus 2025 is with another €12 million.

Johan Thijs: While that is increasing, for instance, on the Czechoslovakia banking side, the cost, 26 versus 20, 25 with another EUR 12 million. But as I said, you don't see it in the CAGRs. Why? Because we are making more gains on the efficiency side, on the, let's call it automation on AI side, and therefore, all those investments are returning into the PNL, which allows us, as I said, to make more revenues, substantially more revenues. I'm talking about hundreds of millions of EUR with less people and therefore with, a strong positive contribution.

Speaker #3: But as I said, you don't see it in the CAGRs. Why? Because we are making more gains on the efficiency side, on the—let's call it—automation, AI side.

Speaker #3: And therefore, all those investments are returning into the P&L, which allows us, as I said, to make more revenues substantially more revenues. I'm talking about hundreds of millions of euro with less people.

Speaker #3: And therefore, with a strong positive contribution.

Speaker #1: Thank you very much. And the next question comes from a line of Frey Srivastava from City. Please go ahead.

Shrey Srivastava: Thank you very much.

Benoît Pétrarque: Thank you very much.

Operator: The next question comes from the line of Shrey Srivastava from Citi. Please go ahead.

Speaker #5: Hi, and thank you for taking my questions. Two for me, please. The first is, you guide all the way till 2028 to be notably below your through-the-cycle cost of risk of 25 to 30 bps.

Shrey Srivastava: Hi, and thank you for taking my questions. Two for me, please. The first is: you guide all the way till 2028 to be notably below your through-the-cycle cost of risk of 25 to 30 basis points. At what point do you start to question the through-the-cycle range, rather than just commit to being below it year after year? And my second one is another one on artificial intelligence and Kate. You mentioned when you introduced your large language model, you drove an increase in autonomy of 15%. What are the latest figures on this? Because you, you've obviously had three months more now to test it. It was very new at the time.

Speaker #5: At what point do you start to question the through-the-cycle range rather than just commit to being below it year after year? And my second one is another one on artificial intelligence and Kate.

Speaker #5: You mentioned that when you introduced your large language model, you drove an increase in autonomy of 15%. What are the latest figures on this? Because you’ve obviously had three months more now.

Speaker #5: To test it, it was very new at the time. Could you give an idea of sort of latest developments here, if there's been a higher increase in autonomy or if you have a greater level of confidence?

Shrey Srivastava: Could you give an idea of sort of latest developments here, if there's been a higher increase in autonomy or if you have a greater level of confidence? Thanks.

Speaker #5: Thanks.

Speaker #6: Thank you for your question, Frey. Let me answer well, I'll probably take both. Anyway, so your question about the longer-term or the cycle on the credit cost ratio—well, as a matter of fact, we already reviewed it a year ago when we took out a couple of one-off effects, ts, amongst others, the longer-term cycle which is somewhere in the pack.

Johan Thijs: Thank you for your questions, Shrey. Let me answer, well, I'll probably take both. Anyway, so your question about the longer term or the cycle on the credit cost ratio. Well, as a matter of fact, we already reviewed it a year ago when we took out a couple of one-off effects, among others, the longer term cycle, which is somewhere in the pack. I don't know the number, the page number by heart, but it is indeed roughly 30 basis points. We reviewed it. Why? Because in those numbers, the longer term, 25-year number, was including, obviously, the financial crisis and was including Ireland, which is no longer part of a group. So we reviewed the numbers.

Speaker #6: I don't know the number, the page number by heart. But it is indeed roughly 30 basis points. We reviewed it. Why? Because in those numbers, the longer-term 25 years number was including, obviously, the financial crisis and was including Ireland, which is no longer part of a group.

Speaker #6: So, we reviewed the numbers. What you see here—the 25, 30 bits—is the group as it is over the last 20 years. Do we need to review it?

Johan Thijs: What you see here, the 25, 30 bps, is the group as it is over the last 20 years. Do we need to review it? Well, I mean, we could give you more detail by saying the last 10 years or the last 5 years or whatever, but this is what the group is in the longer term. So the through-the-cycle number is 25, 30 bps, reviewed in the composition as it is, composition of the group as it is today. Then going to the artificial intelligence and the increase of autonomy. As I said, during the announcement of the results, there is indeed an increase of, of the efficiency of the tool which we use and which is used, and in the front end and in the back end. To...

Speaker #6: Well, I mean, we could give you more detail by saying the last 10 years, or the last 5 years, or whatever. But this is what the Group is in the longer term.

Speaker #6: So, the through-the-cycle number is 25, 30 bits reviewed in the composition as it is—composition of the group as it is today. Then, going to the artificial intelligence and the increase of autonomy—as I said during the announcement of the results—there is indeed an increase of the efficiency of the tool which we use and which is used in the front end and in the back end.

Speaker #6: To you referred to earlier said 15% increase of autonomy. Well, it is actually today in reality. So in production, since what is it, four months, it's actually 20%.

Johan Thijs: You referred to earlier, said 15 percent increase of autonomy. Well, it is actually today, in reality, so in production since, what is it? 4 months, is actually 20 percent. So originally, Kate, when we changed it, had an autonomy of 70% in Belgium. Now we do have an autonomy of 82%, which is roughly 20% plus. The Central European entities are today, as you can see it on, on the, on the slides, 69% in Czech Republic, but in Hungary and, and Bulgaria, and some support is 71, 72. So in summary, is there roughly 70%. We will use the new tool, the Kate 2.0, also in the next coming quarters in, the Central European economies, countries, and therefore you can expect the rise of that, autonomy indeed, in line with what we have seen in Belgium.

Speaker #6: So originally, Kate when we changed it had an autonomy of 70% in Belgium. Now we do have an autonomy of 82%, which is roughly 20% plus.

Speaker #6: The Central European entities are today, as you can see on the slides, 69 in Czech Republic, but in Hungary and in Bulgaria and so on and so forth, it's 71, 72.

Speaker #6: So, in summary, it's there at roughly 70%. We will use the new tool, the K2.0, also in the next coming quarters in the Central European countries.

Speaker #6: And therefore, you can expect the rise of that autonomy, indeed in line with what we have seen in Belgium. Two other small remarks. First one, it's not only the autonomy which is up significantly, but we do see that customers are using more and more Kate because of the new tool.

Johan Thijs: Two other small remarks. First one, there's not only the autonomy which is up significantly, but we do see that customers are using more and more Kate because of the new tool. Why? It's far more intuitive, it, they can answer contextual questions and some support, and therefore, customer satisfaction was significantly up as well, translated in more usage. More users means more efficiency, means more work done by Kate. As you have already seen in this quarter, that is, number of FTEs is on the rise. That's the first thing. Second thing is we also use this Kate in the back offices. Let me give you a silly example. At the first glance, it's silly.

Speaker #6: Why? It's far more intuitive. It can answer contextual questions and so on and so forth. And therefore, customer satisfaction was significantly up as well translated in more usage, more usage means more efficiency, means more work done by Kate as you have already seen in this quarter that is number of FTEs is on the rise.

Speaker #6: That's the first thing. Second thing is, we also use this Kate in the back offices. Let me give you a silly example. At first glance, it's silly.

Speaker #6: Every bank has a database which contains all the information which our employees need to use—regulation, product features, da, da, da, da. What they did in the past is go into that database; when they have a question, they look for the information. They spend X minutes—for instance, 10 or 15 minutes—before they find the answer to that question.

Johan Thijs: You know, every bank has a database where which contains all the information which our employees needs to use regulation, product features. What they do in the past, they are going into the database, when they have a question, they look for the information, they spend X minutes, for instance, 10, 15 minutes before they find the answer to that question. Well, this has been translated into Kate 1.0 already, but is now translated in Kate 2.0, which has a huge boost on the efficiency. Whereas previously, an employee was not always able to find the answer, it took 10, 15 minutes to find the answer.

Speaker #6: Well, this has been translated into Kate 1.0 already, but it's now translated in Kate 2.0, which has a huge boost in efficiency. Whereas previously, an employee was not always able to find the answer—it took 10, 15 minutes to find the answer.

Speaker #6: Today, with Kate 2.0, all answers are found, and the throughput time is one second. Therefore, we just celebrated the 100,000th question in Belgium under the tool Kate for staff.

Johan Thijs: Today with Kate, Kate 2.0, all answers are found, and the throughput time is 1 second, and therefore we just celebrated the 100,000th question in Belgium under the tool, Kate for staff. That means that efficiency gain is translated into the numbers as well. It sounds silly, but the impact is quite significant. For good understanding, this tool is rolled out group wide.

Speaker #6: And that means that efficiency gain is translated into the numbers as well. So it sounds silly, but the impact is quite significant. For good understanding, this tool is rolled out group-wide.

Speaker #5: That makes sense. Thank you very much. Just, if I may quickly follow up on the first one—you mentioned 25 to 30 is good as the through-the-cycle for the entire group.

Shrey Srivastava: That makes sense. Thank you very much. Just if I may quickly follow up on the first one. You mentioned 25 to 30 is the through the cycle for the entire group, but obviously 2028's a way away, and you must have some degree of confidence to guide for something which is 2 or 3 years away. So just what gives you confidence in 2028 being well below the 25 to 30 through the cycle?

Speaker #5: But obviously, 2028's a way away, and you must have some degree of confidence to guide for something which is two or three years away.

Speaker #5: So just what gives you confidence in 2028 being well below the 25 to 30 through-the-cycle figure?

Speaker #6: No, so, indeed, yes, I mean, the floor-ceiling approach—you know, given the fact this is a ceiling—we are very confident that it will be low.

Johan Thijs: Now, indeed, yes, we—I mean, the floor ceiling approach, you know, the, given the fact this is a ceiling, we are very confident that it will be low. As a matter of fact, when I look into the portfolio, the guidance which we gave is based on underpinning elements, obviously. One of the most important underpinning elements, I, I highlighted briefly during the call, that is, what about PD migrations? And the PD migrations in Q2, Q3, and Q4 of 2025, and it sounds perhaps counterintuitive given the... I mean, the shape of the world we are in, the PD migrations have been improving. So we do see in our entire loan book, the PD migrations shifting to the better side. So a number of defaults, debt is improving.

Speaker #6: As a matter of fact, when I look into the portfolio, the guidance which we gave is based on underpinning elements, obviously. One of the most important underpinning elements I highlighted briefly during the call, that is: what about PD migrations?

Speaker #6: And the PD migrations, in Quarter 2, 3, and 4 of 2025—and it sounds perhaps counterintuitive given the, I mean, the world, the shape of the world we are in—the PD migrations have been improving.

Speaker #6: So we do see, in our entire loan book, the PD migrations shifting to the better side. So, the number of defaults is improving.

Speaker #6: What, of course, can happen is that there is a bigger file here and there. But if you take that into account, and you take into account the observations which we have for 2026, 2027, 2028—given, and that is an assumption, the same economic environments which we have—well, there is no reason to assume that the 13 basis points which we have seen for 2025 is going to be fundamentally different than in 2026, 2027, 2028, which means significantly below the 25, 30 bps.

Johan Thijs: What, of course, can happen is that there is a bigger file here and there. But if you take that into account, and you take into account the observations which we have for 2026, 2027, 2028, given, and that is an assumption, the same economic environment which we have, well, there is no reason to assume that the 13 basis points, which we have seen for 2025, is going to be fundamentally different than in 2026, 2027, 2028, which means significantly below the 25, 30 basis points. One caveat, and you probably know what I'm now going to say, no escalations of wars, no other things which are popping up, which are disrupting the environment, the economic or political environment significantly globally.

Speaker #6: One caveat, and you probably know what I'm now going to say, no escalations of wars, no other things which are popping up which are disrupting the environment, the economic or political environment significantly globally.

Speaker #5: Understood. Thank you very much. Very helpful.

Shrey Srivastava: Understood. Thank you very much. Very helpful.

Speaker #1: And the next question comes from a line of Giulia Aurora Miotto, from Morgan Stanley. Please go ahead.

Operator: The next question comes from the line of Giulia Aurora Miotto from Morgan Stanley. Please go ahead.

Speaker #7: Hi. Hi, good morning. Thank you for taking my questions. I have two. Sorry, just to go back on the NII. Did I understand it correctly that you are assuming continued faster growth of current account versus savings and term?

Giulia Aurora Miotto: Hi. Hi, good morning. Thank you for taking my questions. I have two. Sorry, just to go back on the NII. Did I understand it correctly, that you are assuming continued faster growth of current account versus savings and term, i.e., a mix shift towards current account, which is more profitable? Or are you assuming a stable mix shift from here? And I know we had a great mix shift in the quarter, I'm just looking forward. And then secondly, SRTs, you started doing some. How much shall we assume every year, in addition to what you have already done? And I don't know if you can share any economics on this in terms of, you know, the costs to do so. Thank you.

Speaker #7: I.e., a mixed shift towards current account, which is more profitable? Or are you assuming a stable mixed shift from here? And I know we had a great mixed shift in the quarter.

Speaker #7: I'm just looking forward. And then secondly, SRTs—you started doing some. How much shall we assume every year, in addition to what you have already done?

Speaker #7: And I don't know if you can share any economics on this in terms of the costs to do so. Thank you.

Speaker #3: Giulia, I apologize. Can you repeat your second question? Because, I mean, it's very difficult to understand. No, no, please. Sorry.

Johan Thijs: Giulia, I apologize. Can you repeat your second question? Because, I mean, it's very difficult to,

Speaker #7: okay. I was just asking about SRTs. How much are you planning to do every year on SRTs? Yes, SRT. Yes, significant risk transfer.

Giulia Aurora Miotto: Oh, sorry.

Johan Thijs: - to understand. No, no, please. Sorry.

Giulia Aurora Miotto: Ah! Okay. I was just asking about SRTs. How much are you planning to do every year?

Johan Thijs: Ah, SRT.

Giulia Aurora Miotto: On SRT.

Johan Thijs: Okay, sorry.

Giulia Aurora Miotto: Yes, SRT. Yes. Significant Risk Transfer.

Speaker #3: Yeah, because we missed the word SRT, and therefore, we will.

Johan Thijs: Yeah, because we missed the word SRT, and therefore we-

Speaker #7: right. That doesn't make sense. Okay.

Giulia Aurora Miotto: Ah, right. Then doesn't make sense. Okay.

Speaker #1: Okay, Giulia, I will respond to both of your questions. So, as far as the shift is concerned, we never indicated that it would be a shift only to current accounts. When we were referring to a shift, it is a shift that goes from term deposits to both current and savings accounts.

Johan Thijs: Okay. Giulia, I will respond to both of your questions. So as far as the shift is concerned, we never indicated that it would be a shift only to current accounts. When we were referring to a shift, it's a shift that goes from term deposits to both current and saving accounts. So we do not specifically mention that it was only to current accounts. Secondly, as far as your SRTs is concerned, indeed, I mean, as we have always been saying, we see the SRTs as a means to an end. We are, of course, actively engaging into portfolio management, which is a number of tools that we used, and one of them is indeed SRTs.

Bartel Puelinckx: Okay. Giulia, I will respond to both of your questions. So as far as the shift is concerned, we never indicated that it would be a shift only to current accounts. When we were referring to a shift, it's a shift that goes from term deposits to both current and saving accounts. So we do not specifically mention that it was only to current accounts. Secondly, as far as your SRTs is concerned, indeed, I mean, as we have always been saying, we see the SRTs as a means to an end. We are, of course, actively engaging into portfolio management, which is a number of tools that we used, and one of them is indeed SRTs.

Speaker #1: So, we do not specifically mention that it was only to current accounts. Secondly, as far as your SRTs are concerned—indeed, I mean, as we have always been saying—we see the SRTs as a means to an end.

Speaker #1: We are, of course, actively engaging into portfolio management, which is a number of tools that we used and one of them is indeed SRTs.

Speaker #1: The reason why we're doing that is that we do not want to become fully dependent on the SRT market going forward. Having said that, you know that we did our first inaugural SRT back in the fourth quarter, which was a very successful one: €4.3 billion, out of which we generated €2.3 billion of risk-real asset saving, which is an efficiency of more than 50%.

Johan Thijs: Well, the reason why we're doing that, is that we do not want to become fully dependent on the SRT market going forward. Having said that, you know that we did our first inaugural SRT back in Q4, which was a very successful one, EUR 4.3 billion, out of which we generated a EUR 2.3 billion of risk weight asset saving, which is an efficiency of more than 50%. And also, as we indicated, this is at a cost which is well below the cost of capital of KBC, so therefore, also contributing quite nicely. Going forward, we do intend to further invest or launch SRTs. We do not-- we are currently making an analysis of the portfolio.

Bartel Puelinckx: Well, the reason why we're doing that, is that we do not want to become fully dependent on the SRT market going forward. Having said that, you know that we did our first inaugural SRT back in Q4, which was a very successful one, EUR 4.3 billion, out of which we generated a EUR 2.3 billion of risk weight asset saving, which is an efficiency of more than 50%. And also, as we indicated, this is at a cost which is well below the cost of capital of KBC, so therefore, also contributing quite nicely. Going forward, we do intend to further invest or launch SRTs. We do not-- we are currently making an analysis of the portfolio.

Speaker #1: And also, as we indicated, this is at a cost which is well below the cost of capital of KBC, so therefore also contributing quite nicely.

Speaker #1: Going forward, we do intend to further invest or launch SRTs. We are currently making analyses of the portfolio. We have a relatively good view on which portfolios we will include.

Johan Thijs: We have a relatively good view on which portfolios we will include, and indeed, you can expect further SRTs, depending, of course, also on the approvals that we get from the ECB. Because you also know that they have launched a so-called fast lane track, but there are quite a number of conditions that need to be fulfilled in order to be able to benefit from that fast lane approach.

Bartel Puelinckx: We have a relatively good view on which portfolios we will include, and indeed, you can expect further SRTs, depending, of course, also on the approvals that we get from the ECB. Because you also know that they have launched a so-called fast lane track, but there are quite a number of conditions that need to be fulfilled in order to be able to benefit from that fast lane approach.

Speaker #1: And indeed, you can expect further SRTs depending, of course, also on the approvals that we get from the ECB. And because you also know that they have launched the so-called fast lane track, but there are quite a number of conditions that need to be fulfilled in order to be able to benefit from that fast lane approach.

Speaker #1: And so therefore, it's very uncertain whether we would be able to benefit. So therefore, take into account that we will probably launch a second SRT in the second quarter and a third SRT in the fourth quarter of 2026.

Bartel Puelinckx: ... and so therefore, it's very uncertain whether we would be able to benefit. So therefore, take into account that we will probably launch a second SRT in Q2 and a third SRT in Q4 of 2026. The amounts, that remains to be seen and depends on the portfolio and the efficiency that we can generate on those portfolio, but we will keep you posted on that going forward.

Speaker #1: The amounts that remain to be seen and depends on the portfolio and the efficiency that we can generate on those portfolios. But we will keep you posted on that going forward.

Speaker #7: Thank you very much. And if I can just follow up on the first question, so the mixed shift. So basically, you assume less term, more current and savings.

Giulia Aurora Miotto: Thank you very much. And if I can just follow up on the first question, so the mix shift. So basically, you assume less term, more current and savings, and you base, you know, these go-to levels on history. So what can you share, basically, the split that you are using?

Speaker #7: And you base this go-to levels on history. So what can you share basically the split that you are using?

Speaker #3: Well, it's very difficult to anticipate how much exactly is going to shift from the term deposits to Kaza. And as I stated before, to a large extent, this will also depend on the development, of course, of the policy rates.

Bartel Puelinckx: Well, it's very difficult to anticipate how much exactly is going to shift from the term deposits to CASA. And as I stated before, to a large extent, this will also depend on the development, of course, of the policy rates. Because if policy rates would go up again, you can expect, of course, that less will be shifting, and then we might even have to see a return from saving accounts to term deposits. So that's the reason why it's very difficult to give you a clear indication of what the shift is going to be, but we do, do expect that for the time being, if, of course, policy rates remain as they are, that we will continue to see a shift from term deposits to CASA, and particularly also to mutual funds.

Speaker #3: Because if policy rates would go up again, you can expect, of course, that less will be shifting and that we might even have to see a return from saving accounts to term deposits.

Speaker #3: So that's the reason why it's very difficult to give you a clear indication of what the shift is going to be. But we do expect that for the time being, if, of course, policy rates remain as they are, that we will continue to see a shift from term deposits to Kaza.

Speaker #3: And particularly also to mutual funds.

Speaker #7: Got it. Thanks.

Giulia Aurora Miotto: Mm. Got it. Thanks.

Speaker #1: The next question comes from a line of Chris Hallam from Goldman Sachs International. Please go ahead.

Operator: The next question comes from the line of Chris Hallam from Goldman Sachs International. Please go ahead.

Speaker #8: Yeah, good morning, everybody. Just two left. So I think both pretty simple ones. So what did 50% of the state notes go back to, Kaza?

Chris Hallam: Yeah. Good morning, everybody. Just two left. So I think both pretty simple ones. So why did 50% of the state notes go back to CASA? I know the rates on offer on term deposits aren't as generous as they were, but I guess they're still better than CASA rates. So why do you think clients are proactively rebalancing their liquidity from locked up savings, from locked up saving strategies into more operational accounts? So I know the difference between the flow, but just specifically when the state note matured and that flowback happened, maybe cases telling them to do that. And then perhaps I missed this earlier, but could you give us your best sense on the timeline on ETS, where that currently stands? I know we've had a mark-to-market on that in prior calls.

Speaker #8: I know the rates on offer on term deposits aren't as generous as they were, but I guess they're still better than Kaza rates. Why do you think clients are proactively rebalancing their liquidity from locked-up savings from locked-up saving strategies into more operational accounts?

Speaker #8: I know there's a difference between the flow, but just specifically when the state note matured and that flowback happened, maybe Katie's telling them to do that.

Speaker #8: And then, perhaps I missed this earlier, but could you give us your best sense on the timeline for ETS—where that currently stands? I know we've had a mark-to-market on that in prior calls.

Speaker #8: I know it's not directly relevant for you as well, but any color you have on the timeline for Belfius and whether or not there could be any connection between those two processes.

Chris Hallam: I know it's not directly relevant for you as well, but any color you have on the timeline for Belfius and whether or not there could be any connection between those two processes? Thank you.

Speaker #8: Thank you.

Speaker #3: First of all, as far as your first question is concerned, I mean, why indeed did 40-50% of the maturing term deposits go back to Kaza?

Bartel Puelinckx: First of all, as far as your first question is concerned, and why indeed 45 percent of the maturing term deposits went back to CASA. Obviously, when you look at the current external rates that we are able to generate, because, of course, the main difference with last year is that the market has returned to more rationality. And as a result of that, basically, we are able to offer term deposits now, not at negative rates, but of course negative margins, but at positive margins. So the rates on the term deposits have come down significantly, and therefore, people are very unlikely or willing to continue to lock in their money for a longer term at such rates.

Speaker #3: Obviously, when you look at the current external rates that we were able to generate—because, of course, the main difference with last year is that the market has returned to more rationality.

Speaker #3: And as a result of that, basically, we are able to offer term deposit now not at negative rates, but, of course, at negative margins—sorry, but at positive margins.

Speaker #3: So the rates on the term deposits have come down significantly, and therefore, people are very unlikely or willing to continue to lock in their money for a longer term at such rates.

Speaker #3: And that's the reason they probably shifted more to Kaza, awaiting also for opportunities. And that's also what we are doing: to further invest in mutual funds.

Bartel Puelinckx: And that's the reason they probably shifted more to CASA, awaiting also for opportunities, and that's also what we are doing, to further invest in mutual funds. So that is exactly what we are expecting, that we are moving, that we will -- we see also more moving into the mutual funds going forward.

Speaker #3: So that is exactly what we are expecting, that we are moving, that we will see also more moving into the mutual funds going forward.

Speaker #9: Thanks, Chris, for your questions—although, I'll take the second one. If I add one more flavor to what Bartlett just said, be aware that a lot of people who invest in term deposits are very wealthy people.

Johan Thijs: Thanks, Chris, for your questions. I will take the second one. If I, if I add one more flavor to what Bartel just said, be aware that a lot of people which invest in term deposits were very wealthy people, and therefore they are inclined to go more into investment products. Anyway, going back to your second question, well, the government has taken position, also on the record, on what they're going to do with their assets, and that is entailing, in essence, two things. The one, you know, is Belfius. They have the possibility to investigate a private placement of roughly 20% of the capital, which then also means that they could maintain their dividend, which goes into the budget, as you know, of the government.

Speaker #9: And therefore, they are inclined to go more into investment products. Anyway, coming back to your second question, well, the government has taken position also on the record.

Speaker #9: On what they're going to do with their assets. And that is entailing, in essence, two things. The one is Belfius—they have the possibility of investigating a private placement of roughly 20% of the capital, which then also means that they could maintain their dividend, which goes into the budget, as you know, of the government.

Speaker #9: The 20% sale goes into that GDP position of the government. And then they at the same announcement, they also indicated that the position on ETS is investigated, which means that in the course of 2026, they will position themselves and that position can be twofold.

Johan Thijs: The 20% sale goes into that GDP position of the government. And then they have the same talk, the same announcement. They also indicated that the position on Ethias is investigated, which means that in the course of 2026, they will position themselves, and that position can be twofold, and is either launch it in terms of a sale, partial sale, whatever sale of Ethias. And then secondly, the other option would be, no, we keep it for whatever reason. The position in this perspective of KBC is quite clear. We will struggle. Belfius is not possible for us, giving the concentration risk in terms of market share. And the second one, Ethias, we are clearly interested.

Speaker #9: That is, either launch it in terms of a sale, partial sale, whatever sale, of ETS. And then secondly, the other option would be we keep it, for whatever reason.

Speaker #9: The position in this perspective of KBC is quite clear. We will struggle. Belfius is not possible for us giving the concentration risk in terms of market share.

Speaker #9: And the second one, ETS, we are clearly interested. I said this on multiple occasions. And this is not changing. So we are definitely looking into that possibility for that reason we also prepared ourselves.

Johan Thijs: I said this on multiple occasions, and this is not changing, so we are definitely looking into that possibility. For that reason, we also prepared ourselves. And if the outcome of the government will be launched, we will be ready. If the outcome of the government, no launch, then, and clear statement that it will not be sold, then it is considered for us to be gone. And in that perspective, we will reconsider our position on the capital which we hold specifically for that acquisition.

Speaker #9: And if the outcome of the government will be launch, we will be ready. If the outcome of the government is no launch, and a clear statement that it will not be sold, then it is considered for us to be gone, and in that perspective, we will reconsider our position on the capital, which we hold specifically for that acquisition.

Speaker #1: Okay, thank you. The next question comes from a line of Anker Huygens from RBC. Please go ahead.

Chris Hallam: Okay, thank you.

Operator: The next question comes from a line of Anke Reingen from RBC. Please go ahead.

Speaker #10: Yeah. Thank you very much. Just one follow-up question on the capital distribution. I'm sorry if I missed this. I'm just wondering what was the thinking you moved to 60% payout ratio and you didn't go out all the way to the 65.

Anke Reingen: Yeah, thank you very much. Just one follow-up question on the capital distribution. I'm sorry if I missed this. I'm just wondering—What was the thinking you moved to, like, 60% payout ratio, and you didn't go out all the way to the 65%? And so I just want to follow up on the ETS. You said there's also partial sale discussed. Would you be interested? I mean, I guess it depends on all the moving parts, but would a partial sale be of interest as well as a full acquisition? Thank you.

Speaker #10: And so I just want to follow up on the ETS. You said there's also partial sale discussed. Would you be interested? I mean, I guess it depends on all the moving parts, but would a partial sale be of interest as well as a full acquisition?

Speaker #10: Thank you.

Speaker #9: Thank you, Anker, for your questions. So, on the dividend—well, our policy is straightforward. We want to further grow our book, and that growth of the book is in two ways: organic growth, which we established this year at 9%.

Johan Thijs: Thank you, Anke, for your questions. So on the dividend, well, you know, what our policy is straightforward. We want to grow further our book. And in that growth of book is in two ways: organic growth, which we established this year, 9%, 8.7% to be precise, and also acquisitions, which we did this year as well, with the acquisition 365 and the leasing companies in Czech Republic and in Slovakia. The outlook for 2026 is indeed, given the government statement, a potential acquisition. So 365 and businesses is going to be deducted from our capital this quarter. Sorry, this quarter, which is Q1.

Bartel Puelinckx: Thank you, Anke, for your questions. So on the dividend, well, you know, what our policy is straightforward. We want to grow further our book. And in that growth of book is in two ways: organic growth, which we established this year, 9%, 8.7% to be precise, and also acquisitions, which we did this year as well, with the acquisition 365 and the leasing companies in Czech Republic and in Slovakia. The outlook for 2026 is indeed, given the government statement, a potential acquisition. So 365 and businesses is going to be deducted from our capital this quarter. Sorry, this quarter, which is Q1.

Speaker #9: 8.7 to be precise. And also acquisitions, which we did this year as well, with the acquisition of 365 and the leasing companies in Czech Republic and in Slovakia.

Speaker #9: The outlook for 2026 is indeed, given the government statement, the potential acquisition. So 365 and Business Lease is going to be deducted from our capital this quarter.

Speaker #9: Sorry, this quarter, which is quarter one—so that is roughly 50, no, that is 50 basis points: 46 plus 4. And then our capital ratio stands at 14.4%.

Johan Thijs: That is roughly 50 basis points, 46 plus, plus 4, and then our capital ratio stands at 14.4%. The acquisition of ADS, if it comes to the table, will have an impact. I mean, according to the analyst reports, we don't comment on the precise impact, but according to analyst reports, most of them, under Danish compromise, consider this to be max 100 basis points. You can make the calculations yourselves. So in this perspective, the 60% payout is in a further execution continuation of our dividend policy, which may brings it now to 5.10 EUR per share, and is aligned with what I just explained on the potential acquisitions, and the potential M&A, which we can do in 2026, 2027.

Bartel Puelinckx: That is roughly 50 basis points, 46 plus, plus 4, and then our capital ratio stands at 14.4%. The acquisition of ADS, if it comes to the table, will have an impact. I mean, according to the analyst reports, we don't comment on the precise impact, but according to analyst reports, most of them, under Danish compromise, consider this to be max 100 basis points. You can make the calculations yourselves. So in this perspective, the 60% payout is in a further execution continuation of our dividend policy, which may brings it now to 5.10 EUR per share, and is aligned with what I just explained on the potential acquisitions, and the potential M&A, which we can do in 2026, 2027.

Speaker #9: The acquisition of ETS, if it comes to the table, will have an impact I mean, according to the analyst reports, we don't comment on the precise impact.

Speaker #9: But according to analyst reports, most of them under Danish compromise consider this to be max 100 basis points. You can make the calculation yourselves.

Speaker #9: So in this perspective, the 60% payout is in a further execution continuation of our dividend policy, which brings it now to 5.10 euro per share.

Speaker #9: And is aligned with what I just explained on the potential acquisitions and the potential M&A, which we can do in 2026, 2027. In that perspective, it is also clear that it was also the answer, which I just gave on Chris' question, if it is not coming to the table, then this capital is no longer allocated to this part and becomes part of the distribution.

Johan Thijs: In that perspective, it is also clear, that was also the answer which I just gave on Chris' question. If it is not coming to the table, then this capital is no longer allocated to this part and becomes part of the distribution, clearly. So in this perspective, we just keep, let's call it the powder dry, and we bring a very decent payout and the consideration on the future in that perspective is quite clear. Or we do an acquisition, or we release that part of our capital in terms of capital distribution. What about a partial sale?

Bartel Puelinckx: In that perspective, it is also clear, that was also the answer which I just gave on Chris' question. If it is not coming to the table, then this capital is no longer allocated to this part and becomes part of the distribution, clearly. So in this perspective, we just keep, let's call it the powder dry, and we bring a very decent payout and the consideration on the future in that perspective is quite clear. Or we do an acquisition, or we release that part of our capital in terms of capital distribution. What about a partial sale?

Speaker #9: Clear. So in this perspective, we just keep, let's call it, the powder dry. And the we bring a very decent payout and the consideration on the future in that perspective is quite clear.

Speaker #9: Or we do an acquisition or we release that part of our capital in terms of capital distribution. What about a partial sale? Well, I mean, at this stage, if there is a partial sale with a straightforward message that no longer it is possible to do a full sale, well, that would completely change our position because we are not interested to participate in an acquisition where we would hold, for instance, not the 100% or would hold a position where there is a firm stake of the government involved.

Johan Thijs: Well, I mean, at this stage, if there is a partial sale with a straightforward message that no longer it is possible to do a full sale, well, that would then completely change our position because we are not interested to participate in an acquisition where we would hold, for instance, not the 100%, or withhold a position where there is a firm stake of the government involved. So in that perspective, we still assume the position to be fully released by the authorities.

Bartel Puelinckx: Well, I mean, at this stage, if there is a partial sale with a straightforward message that no longer it is possible to do a full sale, well, that would then completely change our position because we are not interested to participate in an acquisition where we would hold, for instance, not the 100%, or withhold a position where there is a firm stake of the government involved. So in that perspective, we still assume the position to be fully released by the authorities.

Speaker #9: So in that perspective, we still assume the position to be fully released by the authorities.

Speaker #10: Thank you very much.

Anke Reingen: Thank you very much.

Speaker #1: The next question comes from Farquhar Murray from Autonomous. Please go ahead.

Operator: The next question comes from the line of Farquhar Murray, Autonomous. Please go ahead.

Speaker #11: Oh, yeah. Just one question from me, actually, actually in this case on the non-life side. I just wondered whether you factor in any cyclical softening to pricing in the non-life outlook when you look out towards fully a 2028.

Farquhar Murray: Oh, and just one detail, question from me, actually, actually, in this case, on the non-life side. I just wondered whether you factor in any cyclical softening to pricing in the non-life outlook when you look out to what's full year 2028, and maybe more in the here and now. Are there any actual signs of such softening emerging in the markets you operate? Thanks.

Speaker #11: And maybe more in the here and now, are there any actual signs of such softening emerging in the markets you operate? Thanks.

Speaker #9: Thanks, Farquhar, for your question. So be aware, in the position which we have, softening of pricing is obviously related to two things. And that is: what is the current growth of your economy, which is triggering two things on the non-life side, for sure.

Johan Thijs: Thanks, Farquhar, for your question. Be aware in the position which we have, and softening of pricing is obviously related to two things, and that is, the current growth of your economy, which is triggering two things on the non-life side, for sure, the potential growth of your book, and the second part is how profitable is your book. In terms of our profitability, we are a positive outlier compared to peers. Also in the Belgian market, portfolios have improved on the market in general, but not to the same extent as where we are with KBC. So therefore, we have a competitive edge and I to go immediately into the extreme version of soft pricing, that is a price war, I don't expect this to happen. Why?

Speaker #9: The growth of your potential growth of your book and the second part is how profitable is your book. In terms of our profitability, we are a positive outlier compared to peers.

Speaker #9: Also in the Belgian market, portfolios have improved on the market in general, but not to the same extent as where we are with KBC.

Speaker #9: So therefore, we have a competitive edge. And I to go immediately into the extreme version of soft pricing that is a price war, I don't expect this to happen.

Speaker #9: Why? Because the margins are good, but the margins are not super in the sector. And KBC, the 87% in that perspective, is not representative of what we see in the market.

Johan Thijs: Because the margins are good, but the margins are not super in the sector. And KBC, the 87% in that perspective, is not representative of what we see in the market. And this is true in the majority of the countries where we are present. So do we expect a softening of the prices? The outlook is at least not that we go into a strong version of softening and definitely not into a price war. So in that perspective, the reason why we continue to see the growth of insurance companies and even upgraded the guidance to 7.5%, is tailored to two things. First of all, what I just said, GDP growth is quite significant.

Speaker #9: And this is true in the majority of the countries where we are present. So, do we expect a softening of the price in the outlook? At least, not that we go into a strong version of softening, and definitely not into a price war.

Speaker #9: So in that perspective, the reason why we continue to see the growth of insurance companies and even upgraded the guidance to 7.5% is tailored to two things.

Speaker #9: First of all, what I just said, GDP growth is quite significant. Don't forget that GDP growth and center Europe is roughly 100 to 150 basis points at least higher than what we see in Europe and Europe Western Europe, sorry, Western Europe is considered to grow roughly 1%, 1.1%.

Johan Thijs: Don't forget that GDP growth in Central Europe is roughly 100 to 150 basis points, at least higher than what we see in Europe and Europe, Western Europe, sorry. Western Europe is considered to grow roughly 1%, 1, 1.1%. And then, secondly, be aware that the underwriting of our non-life insurance business is fully automated. Same standards apply in the same group. That's one of the reasons why the combined ratio is what it is, but also allows us to, in that perspective, target very specifically the bank customers and other customers via the model switch we use, and they are pushed, amongst others, by Kate.

Speaker #9: And then secondly, be aware that the underwriting of our non-life insurance business is fully automated. Same standards apply in the same group. This is one of the reasons why the combined ratio is what it is.

Speaker #9: But also allows us to, in that perspective, target very specifically the bank customers and other customers via the model switch we use. And they are pushed, amongst others, by Kate.

Speaker #1: Thanks. The next question comes from a line of Sharad Kumar from Deutsche Bank. Please go ahead.

Farquhar Murray: Thanks.

Operator: ... The next question comes from the line of Sharad Kumar from Deutsche Bank. Please go ahead.

Speaker #12: Good morning. Thank you for taking my questions. I have two. Firstly, on free growth, what are the embedded assumptions for your midterm guidance? I calculate around a 6% CAGR between now and 2028.

Sharath Kumar Ramanathan: Good morning, thank you for taking my questions. I have two. Firstly, on fee growth, what the embedded assumptions for your midterm guidance? I calculate around a 6% CAGR between now and 2028. Would you agree with it? And what sort of an assumptions predicate this. Specifically on asset management, do you think the 5% organic flow rate that we saw in 2025 is sustainable? Are there any positive, extraordinary performance fees that we need to be aware of in 2025? Secondly, on capital distribution, a follow-up on the ATS comment that you made. Assuming it does not happen, what is your excess capital stand? Would 14% be a realistic floor rather than the 13% minimum that you have in your policy? Thank you.

Sharath Kumar: Good morning, thank you for taking my questions. I have two. Firstly, on fee growth, what the embedded assumptions for your midterm guidance? I calculate around a 6% CAGR between now and 2028. Would you agree with it? And what sort of an assumptions predicate this. Specifically on asset management, do you think the 5% organic flow rate that we saw in 2025 is sustainable? Are there any positive, extraordinary performance fees that we need to be aware of in 2025? Secondly, on capital distribution, a follow-up on the ATS comment that you made. Assuming it does not happen, what is your excess capital stand? Would 14% be a realistic floor rather than the 13% minimum that you have in your policy? Thank you.

Speaker #12: Would you agree with it? And what sort of an assumptions predicate this? Specifically on asset management, do you think the 5% organic flow rate that you saw in 2025 is sustainable?

Speaker #12: Are there any positive extraordinary performance fees that we need to be aware of in 2025? Secondly, on capital distribution, a follow-up on the ETF's comment that you made.

Speaker #12: Assuming it does not happen, what is your excess capital stand? Would 14% be a realistic floor rather than the 13% minimum that you have in your policy?

Speaker #12: Thank you.

Speaker #9: Okay, thank you. I will take the first question on NIDFI and commission income. Basically, you know that we are not guiding NIDFI and commission income for the very simple reason that, basically, to a large extent, the development of NIDFI and commission income is defined by the asset management business and, therefore, also, of course, by the development of assets under management and market performance.

Johan Thijs: Okay, thank you. I will take the first question on net fee and commission income. Basically, you know that we are not guiding net fee and commission income for the very simple reason that basically, to a large extent, the development of net fee and commission income is defined by the asset management business, and therefore, also, of course, by the development of the assets under management and the market performance. So because basically 55% of our net fee and commission income, roughly 55%, comes from asset management, and of the 55%, or roughly 50% of our portfolio is in equity. So there we are subject, of course, to quite some market evolutions.

Speaker #9: So because basically 55% of our NIDFI and commission income, roughly 55%, comes from asset management. And of the 55%, roughly 50% of our portfolio is in equities.

Speaker #9: So there we are subject, of course, to quite some market evolutions. But the numbers that you have calculated in terms of the non-NII growth are more or less, I mean, are numbers that I would be able to subscribe.

Johan Thijs: But the numbers that you have calculated, in terms of the non-NII growth, are more or less, I mean, are some numbers that I would be able to subscribe. Do we see some extraordinary fees or whatever? You know that, in Q4, there was a EUR 50 million fee that was paid, performance fee that was paid by the pension company in the Czech Republic. This you cannot extrapolate, obviously, because it's performance related, but it is indeed, that's the only annual performance fee that that we have. And so from that perspective, the answer to your question is negative. And I will take your second question, Sharad.

Speaker #9: Do we see some extraordinary fees or whatever? You know that in the fourth quarter, there was a 15 million euro fee that was paid performance fee that was paid by the pension company in the Czech Republic.

Speaker #9: This you cannot extrapolate. Obviously, because it's performance related. But it is indeed that the only annual performance fee that we have and so from that perspective, the answer to your question is negative.

Speaker #9: And I will take your second question, Sharaf. So, on the capital side, what would happen in terms of excess capital if ETFs do not come to the table?

Bartel Puelinckx: And I will take your second question, Sharad.

Johan Thijs: So on the capital side, what would happen in terms of excess capital if Ethias does not come to the table? Well, first of all, in terms of the final destination, that is, if we don't have any M&A possibilities, concretely at the end of 2026, beginning of 2027, when we decide on the dividend, well, then this is considered to be surplus capital or capital, which we cannot make work in terms of organic growth and M&A. So, and as I said, that will be then prone for distribution. How much capital is excess? Well, that's, we don't speak in terms of excess capital, so as we did two years ago. This is no longer valid. We have a clear position there.

Bartel Puelinckx: So on the capital side, what would happen in terms of excess capital if Ethias does not come to the table? Well, first of all, in terms of the final destination, that is, if we don't have any M&A possibilities, concretely at the end of 2026, beginning of 2027, when we decide on the dividend, well, then this is considered to be surplus capital or capital, which we cannot make work in terms of organic growth and M&A. So, and as I said, that will be then prone for distribution. How much capital is excess? Well, that's, we don't speak in terms of excess capital, so as we did two years ago. This is no longer valid. We have a clear position there.

Speaker #9: Well, first of all, in terms of the final destination—that is, if we don't have any M&A possibilities—concretely at the end of '26, beginning of '27, when we decide on the dividend, well, then this is considered to be surplus capital or capital which we cannot make work in terms of organic growth.

Speaker #9: And M&A, and as I said, that will be then prone for distribution. How much capital is excess? Well, we don't speak in terms of excess capital.

Speaker #9: So as we did, what is it, two years ago? This is no longer valid. We have a clear position there. We have an absolute minimum of 13% on the CAT1 ratio.

Johan Thijs: We have an absolute minimum of 13%, on the CET1 ratio. We do have our current capital position, 14.4, if you take into account 365.bank and Business Lease, and then obviously, you add to that the performance in terms of capital in the course of 2026 to end up with a number, and that will be compared to our peers in a non-mechanical way. So we want to be among the better capitalized financial institutions. That is something which we don't forego on, and that will be then decided by our board in all discretion. Let me emphasize one more thing, which Bartel said earlier: we will continue to optimize our capital structure.

Bartel Puelinckx: We have an absolute minimum of 13%, on the CET1 ratio. We do have our current capital position, 14.4, if you take into account 365.bank and Business Lease, and then obviously, you add to that the performance in terms of capital in the course of 2026 to end up with a number, and that will be compared to our peers in a non-mechanical way. So we want to be among the better capitalized financial institutions. That is something which we don't forego on, and that will be then decided by our board in all discretion. Let me emphasize one more thing, which Bartel said earlier: we will continue to optimize our capital structure.

Speaker #9: We do have our current capital position, 14.4, if you take into account 365 and business lease. And then obviously, you add to that the performance in terms of capital in the course of 2026 to end up with the number.

Speaker #9: And that will be compared to our peers in a non-mechanical way. So we want to be amongst the better capitalized financial institutions. That is something which we don't forgo on.

Speaker #9: And that will be then decided by our Board in all discretion. Let me emphasize one more thing which Bartlett said earlier: we will continue to optimize our capital structure.

Speaker #9: It means, amongst others, that SRTs are tools which we have on the table, which we are preparing, and which are going to be, indeed, influencing positively the capital position.

Johan Thijs: It means, among others, that SRTs are tools which we have on the table, which we are preparing, and which are going to be indeed influencing positively the capital position.

Bartel Puelinckx: It means, among others, that SRTs are tools which we have on the table, which we are preparing, and which are going to be indeed influencing positively the capital position.

Speaker #12: Thank you.

Speaker #1: There are no further questions. So hand back over to your host for closing remarks.

Sharath Kumar Ramanathan: Thank you.

Sharath Kumar: Thank you.

Operator: There are no further questions, so hand back over to your host for closing remarks.

Speaker #13: Thank you. To sum to that for this call, I would like to thank you for your attendance and enjoy the rest of the day.

Kurt De Baenst: Thank you. This ends it for this call. I would like to thank you for your attendance, and enjoy the rest of the day. Bye-bye.

Speaker #13: Bye-bye.

Operator: Thank you for joining today's call. You may now disconnect your line.

Q4 2025 KBC Group NV Earnings Call

Request a DemoDemo

KBC

KBC Group

Earnings