Earnings call transcript: KBC Group Q2 2025 shows strong growth and innovation

KBC Group reported a net result of €1,018 million for Q2 2025, showcasing solid financial performance with significant growth in net interest income and improved loan and deposit growth. The company maintains an attractive P/E ratio of 1.4 and trades below book value at 0.89x, suggesting potential undervaluation according to InvestingPro analysis. Despite a slight decline in stock price, the company’s strategic focus on innovation and digital transformation, particularly through its AI assistant Kate, demonstrates a forward-looking approach.

Key Takeaways

• Net interest income rose to €1,509 million, up €88 million from the previous quarter.
• Loan growth guidance upgraded to at least 6.5% for the year.
• AI assistant Kate handled 73 million interactions, with a 14% sales conversion rate.
• Insurance combined ratio improved to 85%, well below guidance.
• Potential M&A interest in Central Europe, particularly Romania.

Company Performance

KBC Group’s Q2 2025 results reflect robust financial health, driven by increased net interest income and a strong return on equity of 15%. According to InvestingPro data, the company demonstrates impressive efficiency with a return on assets of 40.99% and maintains a conservative debt-to-equity ratio of 0.01. The company’s diversified income streams, with 49% from net interest and 51% from insurance and fee products, underscore its competitive positioning. The banking segment remains dominant at 81% of total operations.

Financial Highlights

• Net results: €1,018 million for Q2 2025
• Net interest income: €1,509 million (+€88 million vs previous quarter)
• Net interest margin: 208 basis points (+3 basis points quarter-on-quarter)
• Return on Equity: 15%
• Cost-to-Income Ratio: 41% (excluding bank insurance taxes)

Outlook & Guidance

KBC has upgraded its net interest income guidance to at least €5.85 billion and increased its loan growth forecast to a minimum of 6.5% for the year. The company maintains a steady cost evolution guidance of 2.5% and is exploring potential mergers and acquisitions in Central Europe.

Executive Commentary

Johan Thijs, Group CEO, emphasized the importance of digital transformation, stating, "Kate is delivering more and more to our customers." He also highlighted KBC’s strategic market positioning: "We want to be amongst the better capitalized financial institutions in Europe."

Risks and Challenges

• Economic growth projections remain modest, with potential impacts on loan demand.
• Limited exposure to US tariffs, though still a concern for some investors.
• Potential challenges in executing M&A strategies, particularly in volatile markets.

Overall, KBC Group’s Q2 2025 earnings call reflects a company focused on leveraging technology and strategic growth to enhance its market position, despite facing broader economic uncertainties. InvestingPro analysis indicates a FAIR Financial Health score of 2.0, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of KBC’s financial position, growth prospects, and market opportunities.

Full transcript - KBC Groep NV (KBC) Q2 2025:

Conference Operator: Good day, and welcome to today’s KBC Group Earnings Release Q2 twenty twenty five Conference Call. This meeting is being recorded. And now I’d like to hand the call over to Kurt DeBanst, Head of Investor Relations. Please go ahead, sir.

Kurt DeBanst, Head of Investor Relations, KBC Group: 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, 08/07/2025, and we are hosting the conference call on the second quarter results of KBC. As usual, we have Johan Thijs, Group CEO, with us as well as our Group CFO, Bartol Pudlings, and he will both elaborate on the results and add some additional insight. 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, Group CEO, KBC Group: Thank you very much, Kurt. And also from my side, a warm welcome to the announcement of the second quarter results of 2025. And as always, we start with the key takeaways, the highlights of this quarter. And let me start with the net results, which stands at a very strong EUR 1,018,000,000.000 for the quarter. And so again, we pulled the net results over the 1,000,000,000, which I would say, given the taxes being booked in the first quarter upfront, is the third quarter in a row.

As a matter of fact, the commercial franchise, bank insurance franchise, has been firing on all the cylinders in KBC Group. That has, amongst others, led to the fact that also KBC’s group diversification kicked in very well. As a matter of fact, 49% of the income was related to the net interest income side and which means that diversification to other products, in essence, insurance products and fee and commission products, delivered 51% of our total income. Coming back to the interest bearing part of our P and L. Well, we had a very strong quarter given our deposits and our lending side, both increased significantly on the quarter and delivered excellent results, which resulted, amongst others, in growth of net interest income on the lending side, but also record high money inflows.

We have a very strong quarter on the sales side of the asset management side despite the turbulence which was generated in the first part of this quarter, giving the announcement of the tariffs in The U. S. We had a very strong quarter on the insurance side, both on the sales side and on the outcome of the quality of the underwritten products with a combined ratio of 85%. And we kept our cost perfectly under control. There is an increase in our cost, but this is perfectly in line with the foreseen budget of KBC in the first half of the year.

As a matter of fact, it’s slightly below that budget. In terms of our loan impairments, with also there, perfectly under control. As a matter of fact, we have added a one off buffer extra of roughly €40,000,000 to be precise, 38,000,000, which still leads to an excellent credit cost ratio of 15 basis points. No big surprise that our solvency and our liquidity positions remained very strong, and this also allows us to announce today the interim dividend of €1 per share, which, as usual, is paid out in November. In other parameters defined, the return on equity of this quarter stands at 15% if you equally spread the taxes over the year.

Let me go now into more detail. I already mentioned on the next page the diversification. As a matter of fact, the split between the banking and the insurance activities was 81% on the banking side and 18% on the insurance side, which means that the insurance performed very well. As a matter of fact, it had a very strong performance with EUR 181,000,000, higher than normal, and that also plays its role in our CET1 ratio. I will come back to that later on.

But the 181,000,000 of profit is indeed €41,000,000 more than the normal run rate, which normally stands at roughly 15%. Our probably best known employee besides Kurt De Bans is probably Kate, and that means that, Kate is delivering more and more to our customers. First of all, it’s used more and more by our customers, 5,700,000 customers group wide are using Kate. They’re not only using it more, but they are also using it until the end of the process for which they started up Kate, which intrinsically means that Kate has been contacted 73,000,000 times by our customers in the quarter, that, she has delivered answers to seven of 10 questions which are raised, which means that Kate delivers without any kind of employee of KBC involved interfering whatsoever the solution to our customers, which allows us to indeed state that if we calculate in a super conservative way the number of staff, which is replaced by Kate, to be at least at the level of three hundred-three 20 people. This is a very conservative assumption, because I give you one example, we only consider eight minutes to be spent by a customer when he or she asks a question in the branch, eight minutes, that is absolute, absolute minimal.

Also there, that’s on the cost side, the positive side on the income side, be aware that the leads which are triggered by Kate and transferred to our network, that they are growing and that they are, in essence, roughly around 14% of them are converted into a sales transaction, which led over the last twelve months roughly to 414,000 extra sales conclusions made. As a matter of the fact, you should combine the two, the time which is saved by Kate for our bank branch managers bank branch people, sorry, are used to get in contact with customers on the sales side for processes which are a bit more sophisticated and therefore need human intervention. And that has paid off indeed in this quarter. On the one off side, well, this has been a very normal quarter, hardly any one offs. The total is EUR 1,000,000 of difference if you exclude them, so not worth to mention it.

So let me go immediately to the things which are more relevant, and that is, first of all, the net interest income. Well, we have a very strong quarter on the side of net interest income, EUR 1,500,000,000.0 and 9,000,000 is delivered in this quarter, which is EUR 88,000,000 net interest income more than previous quarter, and which is a whopping EUR $233,000,000 more than previous year same quarter. The reason why this increased so strongly is actually materializing in, let’s say, three elements in essence. What we already said for a longer period on several occasions during quarter result announcements is that our transformation result is going to deliver higher and higher net interest income results, and this is this quarter effect as well. EUR 27,000,000 more on the quarter, driven by higher yields, but also on the fact that we do have more volumes generated through the incoming core monies.

Also on the lending side, there was a fundamental uptick in the net interest income, where we speak about the combination of margin and volume. The main driver here is the volumes. We have a growth of 2.2% in the quarter. As a matter of fact, 7% on the year, which is extremely strong. If we look into the performance of the loans year to date, then we already have achieved our target, which we guided, the 4% at least, is already achieved in this quarter year to date, 4.7% is the case.

So we are going to review those targets and consequently also the targets on net interest income. What was also a strong uptick was the inflation linked bonds net interest income, where it was negative in the first quarter, it was positive in the second quarter, and that made a difference over the quarter of EUR 29,000,000. As a matter of fact, we guided the market that we would see on the net interest sorry, on the net interest income ILB side, inflation linked bond side, roughly EUR 20,000,000 to 30,000,000 for the full year, probably more tailored towards the lower end of the range. Well, today year to date, we are already at EUR 19,000,000 due to this uptick in the second quarter. A couple of other elements play here the role as well, the number of days, 7,000,000 up, and that is something which is, of course, particularly linked to this quarter.

But nevertheless, net interest income is significantly up given what I just said. On the year, something similar, but I’m not going to dwell upon that. What is far more important, that is to see that the margin now stands at two zero eight basis points, which is three basis points up on the quarter. That’s a rounded number because closer in that perspective to what is mentioned, two basis points in the tax. Now in the overall scheme of things, what is driving this?

That is translated on the net interest income side, what I just said about, amongst others, transformation results and sold as commercial margins are under pressure, be it that this quarter in Belgium, in Czech Republic and Bulgaria, we were able to write higher margins on almost all the products compared to previous quarter and even previous year. The countries where it is under pressure is Hungary and Slovakia still. So coming back to the building blocks, let me talk about the volumes. Well, volumes were up 2.2% on the quarter. Actually, as a matter of fact, if you exclude the volatility of the foreign branches, which is deposits of very low margins, it was up 7%, if you include them, 6%, which means indeed there’s a very strong performance.

This is also translated on Slide eight, where you can see the inflow of core customer money that is on the quarter €5,000,000,000 up. And if you would make abstraction of the fact that also in last year, when we recuperated the monies which were invested in the state note and which we recuperated in this quarter, then the €5,000,000,000 inflow is indeed an extremely well number. It is and that is a positive one, it is, first of all, flowing in into current accounts and saving accounts, whereas in the term deposits, we now see the gradual build down of those term deposits, and that is something which we have to bear in mind going forward because this will have a very positive impact on our net interest income for quarter three and quarter four. In terms of the year to date number, well, we do have 7,400,000 core customer money inflow, which is translated, as you can see in the slide, on a fundamental shift, more than 7,000,000,000 on the current accounts and saving accounts, that is in total EUR 7,800,000,000.0, and the decline of the term deposits, which is shifting, as I said, to our current account saving grounds or mutual funds, well, that is standing at the year at €3,900,000,000 Remind all of you that in the third quarter, in October, it’s actually the fourth quarter, to be straightforward, we do have the maturity of the recuperated money from the state note, which is invested mainly in term deposits, and we will see there an impact.

Now I also in this slide, can see a very strong performance on the mutual funds, 1,500,000,000.0 positive impact. I’ll come back to that in a second, but let me finish first on the net interest income. Well, you can clearly see that on all the building blocks of that net interest income, we have outperformed what we guided before. So it’s no big surprise that we are going to update the guidance which we have given earlier. We guided the net interest income for the full year 2025 at least €5,700,000,000 As always, we build in conservatism in this perspective, and it’s clearly also shown here in the results today.

Today, we’re going to review that conservatism in the same way and still update the guidance with €150,000,000 extra. So with the same form of conservatism, the new guidance on the net interest income is at least point €85,000,000,000 Now when I look at the assumptions which the analyst community made on the previous guidance, What about the conservatism KBC puts in? That was roughly €120,000,000 We are not surprised. And I repeat what I said, we keep the same conservatism in the new guidance. Let me go then to the guidance on the loan side.

Well, we are today already at four point seven percent in terms of the loan guidance, while we have already overshot that number, and therefore, we also are going to increase that guidance on the loan growth as well to at least 6.5% growth. Both numbers are, as I said, floors, so the upside is a given, given the conservatism which we always build in. Let me go to fee and commission business. Well, at first glance, it looks €23,000,000 lower than what it was previous year. And in reality, in the hard numbers, it’s indeed a given.

There is a small but, and the small but is that €23,000,000 which is the difference between previous quarter and current quarter, is driven in essence by asset management fees, which are triggered by the assets under management. Now in the beginning of this quarter too, there was an announcement made by the American President regarding the tariffs, and that disturbed the financial market significantly, for short also the stock market. And because the stock markets play an important role in our assets under management, the start of the quarter was very negative, and that had a negative impact management on fee under the asset management business. What was mitigating that impact was the sales which took place in that second quarter. We posted in quarter two €1,500,000,000 net sales, which is an absolute strong number.

Definitely, if you compare it with the same period of last year, where we had in the quarter two twenty twenty four, 600,000,000.0 net sales. So this quarter, we were able, despite the turbulence, to sell 2.5x more than the same period last year. It almost gets to the record level of the first quarter, which stood at €2,000,000,000 and therefore, indeed, it is a mitigant for the negative impact, which we have seen at the beginning of the quarter twenty twenty, twenty twenty five quarter two of the impact of the financial markets on the management fee. Now what has happened over the quarter is that, that financial market has recovered over the quarter towards quarter end. So that is a good starting base for quarter three, but of course, it does not translate itself in the quarter two in full.

And therefore, the €23,000,000 is actually a good result given the net sales I just highlighted. If you look at the banking services, well, that is slightly below the previous quarter, but it has to do with seasonality, and it has also to do with the record high numbers, which were posted, for instance, on our secured trading platforms in Belgium and Czech Republic, which were now also at a very high level, but not at the same record level as previous quarter. As a matter of fact, if you look at those trading platforms, we do see, if you compare the first half of this year with the first half of previous year, a 37% increase of the trading activities. As a matter of fact, we do see an increase of 50% of new customers over the same period. So it’s quite striking.

If you look at the assets under management, as I said, beginning of the quarter was recuperated the decline of the beginning of the quarter was recuperated over the following part. And therefore, at the end of the quarter, we stood at €280,000,000,000 assets under management, where you could clearly see also with the direct client money, an increase of €3,000,000,000 which was driven by two things, the strong sales and also the market performance at the end of the quarter. This is a picture on the end of the quarter. In terms of the gross sales, also there, we had a very strong quarter with EUR 3,900,000,000.0 sales, which is almost EUR 1,000,000,000 more than the record quarter of the quarter 01/2025. Insurance side, well, 8% growth on the Non Life side, which is clearly better than the guidance, and it’s also delivered with a very good quality because the combined ratio stands at 85%, which is substantially lower than the guidance which we have given in that perspective.

Life insurance sales side were good when you compare them with the previous quarter because life insurance, this is driven by commercial campaigns, by new issues and so on support. You need to be aware that in the second quarter, we launched no new specific commercial campaigns. We had no new emissions on structural products, life insurance products. And therefore, it’s good to make the comparison between quarter two twenty twenty, twenty twenty five with the same quarter in 2024. And you can clearly see there that there is an increase of the sales volumes of 6%, mainly due to the interest guaranteed products.

Also in that perspective, good to understand that the CSM, the margin on the life insurance products increased to 17 also there. The quality of the sales, which are generated are very good. What I forgot to say about the combined ratio, apology for that, is that all countries in the meanwhile delivered combined ratio below 100%, including Slovakia, where it was above 100% on previous occasions, so it has been restored back to profitability after interventions on the technical side. Let me go to the financial instruments fair value. I’m not going to dwell upon this very long.

It’s better, 11,000,000 in previous quarters, mainly to, amongst others, good performance in other dealing rooms despite the fact that the income declined a little bit. It has to do with, of course, the financial the movements on the financial markets. But the results are actually, in the total, very good. If you look at the net other income, it is substantially better than the run rate of EUR 50,000,000. But also here, I would say, let’s be careful, the EUR 77,000,000 is influenced by a sale of a real estate of which generated an extra value of EUR20 million.

If I would deduct that, then we’re more or less in the run rate of EUR50 million. As a matter of fact, we would be at EUR57 million. Far more interesting is the cost side. Well, if you look at the evolution of the cost, it comes down significantly compared to the previous quarter. But here again, be aware that in the previous quarter, the upfront booking of the majority of the bank and insurance taxes is done, so it distorts the picture completely.

Let’s compare the real costs, so the underlying operating expenses that now stands at €1.125 So if you compare it with previous quarter, it is up 2%. If you compare it to previous year, it’s up 5%. Now that 5% is clearly higher than the guidance, which we provided for full year, that is 2.5%. But let’s be aware that in quarter one and quarter two twenty twenty four, we had very low cost evolution. As a matter of fact, in 2024, the cost evolution, which is normally kind of equally distributed over the year, was more backloaded towards quarter three and quarter four.

So if you compare rather low, so let’s call it abnormally low costs in 2024 with 2025, then the uptake of 5% is quite easy to explain. As a matter of fact, if we compare them with our internal budgets for the quarters, then the €1,125,000,000 is still below our budget. We still have a margin there, and that means that we are very comfortable to give you also a confirmation of our early given guidance of 2.5% of the cost evolution full year 2025 compared to full year 2024. It also is reflected the strong performance on the income side and the cost control on the cost side is reflected in the cost income ratio, which, if you exclude bank insurance taxes, now stands at 41%, which is indeed a very low number. Certain things in life exist, definitely when you talk about taxes, the taxes go up and now stand at a whopping EUR 500,000,000, $660,000,000 for ABC Group.

Well, we do expect this number to be at the year end at roughly €669,000,000 which is indeed a fundamental increase of 7% compared to previous year. What about asset impairments? Well, the asset impairments stand this quarter at €124,000,000 which is significantly more than previous quarter and previous year. It needs to have some further flavor because the EUR124 million actually can break up into three buckets: EUR8 million on what we call other, which is in essence EUR4 million of net notification losses and then certain impairments on software. So if you exclude that as EUR8 million is more or less similar to previous quarters, then you end up with EUR116 million on, let’s call it, more or less impairments on the lending book.

Now in that €16,000,000 the real impairments are only €76,000,000 So the real impairments on our lending book are €76,000,000 which is lower than the €83,000,000 of previous quarter. What we did differently this quarter, that is the buffer for geographical and emerging risks, so geopolitical and macroeconomic uncertainties, we reviewed that buffer. That buffer generated a slight increase, 2,000,000, giving all the turmoil which is going on in the world. But we put in a management overlay extra for an extreme situation, and that extreme situation translated in the buffer of €30,000,000 one off on top of the geographical emerging risk buffer. So the 38,000,000 is an extra safety margin when we apply an extreme test, and therefore, the total stands at €116,000,000 Now if you conclude both into cost sorry, into the credit cost ratio.

The credit cost ratio, despite the buffer which we extra put in, only stands at 15 basis points, which is substantially lower than the longer term credit cost ratio and the guidance. And this is something we feel quite comfortable with also going forward. It’s also translated in the impairment loan loss ratios, which further comes down, stands at 1.8% according to the KBC calculation. If you would apply the EBITDA definition, it would stand at 135 basis points, which is significantly lower than the European average. Let’s go to the sum of all these parts into capital.

Well, if you bring it all together, we stand at 14.6% CET1 ratio. Let me add to that a little bit of flavor. The 14.6% is actually driven down by the evolution of our available capital. First of all, we had a very strong performance on the insurance side, and that very strong performance on the insurance side, which is, as I said earlier, EUR41 million higher than the normal run rate is because of the Danish Compromise deducted in full of our result. So that EUR41 million, which is only compensated by dividend, and you know that on the dividend side, we have a lagging factor.

The lagging factor in this perspective means that we only bring in the delta of the remaining dividend over full year 2024 is not offsetting that deduction. So long story short, EUR41 million compared to normal situations is because of the outperformance of the insurance result deducted extra, and that is roughly three, three point five basis points on our CET1. Also, we deducted now in full the remaining part of what is called by the ECB old nonperforming loans. As you know, the ECB wants all the banks to reduce the very old nonperforming loans in full from their either from their P and L or from their capital. We decided to write it down in full from our capital this quarter, and that is 50 roughly EUR 50,000,000, which we deduct from the available capital.

Now if you this is also a one off. If you translate that in CET1, well, that is four basis points. The insurance plus NPL combined is seven basis points, which actually brings to 14.6% to what it should have been, 14.7%. Both be aware, both numbers, so the insurance deduction and the capital deduction come back. The insurance comes back next quarters, and the capital deduction comes back in a reduction the MDA buffer sorry, a reduction of the Pillar two requirement, which has a positive effect on the MDA buffer in our numbers of eight basis points.

Obviously, the increase of the risk weighted assets are entirely linked to the evolution of the volumes. So the strong performance on the volume side translates the fundamental or translates the most important part of the increase of the risk weighted assets, as you can see in the numbers. On the next slide, you can see the MDA buffers. Given the fact that KBC filled up its full AT1 and therefore, compensates the 77 basis points, which is granted by the ECB as a potential replacement for capital, The MDA buffer now stands at the level of the OCR, which means 10.8%, and that is also giving us a clearer view on what are the buffers. And now you can see that those buffers for the three buckets, CET1, AT1 included, total capital, is more or less at the same level, roughly, let me round the number, 5,000,000,000, 4%.

Let me go quickly into liquidity and leverage ratio. Further improvement of the leverage ratio now stands at 5.6%. Liquidity stands super solid at very high levels compared with the minima. And also the solvency on the insurance side has improved with 200 basis points, yes, correct, 2%, mainly driven by the evolutions of the interest rate curves and the strong performance of the insurance company, as I said. So let me wrap up with forward looking.

First of all, economic outlook. Well, we all read there is a tariff agreement concluded on the July 27 between Europe and The U. S. The details are still in the process of being worked out. We will further see how this develops.

But this also has some influence on the economic growth going forward. I think the economic growth in this perspective is more or less hovering around 1%, this year 1.2%, next year 1.9 and the year thereafter, probably back again to 1.2%, 1.3%. So there is a negative impact of that tariff on the European, but it is under control. Of course, that is offset definitely in the medium term for the expected defense spending and infrastructure investments in the European domain. The fortunate thing about KBC is the diversification into Central Europe, which has stronger growth and a substantially higher number in that perspective compared to the Western Part Of Europe because of the catch up driven by, amongst others, continuous FDIs.

Also regarding the tariffs, there are of course more certain sectors which are more vulnerable than others. If you look back to those sectors, and there we include traditionally metals, we include, apology, pharma, we include chemicals. Well, KBC has analyzed what is then impacting our book. This is limited to only roughly 7% of our books, roughly €8,000,000,000 and in that book, only a small part might be under significant spreads. Anyway, KBC has very limited exposure on The U.

S. Through its bonds and through its dollar exposure. So it allows us to say also that going forward, the guidance can be updated that the guidance can be updated I already mentioned the net interest income. So we go from the at least €5,700,000,000 to an at least 5,900,000,000.0 sorry, at least EUR 5,850,000,000.00 number with the conservatism of the first guidance remaining intact. We do increase our lending to 6.5%, coming from at least 4%.

We are very comfortable with our 7% guidance on insurance. We confirm our guidance on the cost side, which intrinsically means that the jaws, which were allegedly at 3%, are now shifted upwards with 1.5% ending at least 4.5%, which I think is a very confident message also giving the results which we have posted today. On the combined ratio and on the credit cost ratio, given the numbers which we have concluded today, we are pretty confident also to confirm again this guidance. I skip all the rest regarding the countries. I think it’s much better to leave the floor to all of you for questions, and I give back the floor to Gernth.

Kurt DeBanst, Head of Investor Relations, KBC Group: Thank you. Floor is open for questions now. Please restrict the number of questions to two to allow for a maximum number of people to raise questions. Thank

Conference Operator: Our first question is from Namita Samtani from Barclays. Please go ahead.

Namita Samtani, Analyst, Barclays: Good morning, and thanks for taking my questions. The first question, on your net interest income guide for 2025, and I guess also looking out to 2026, I just wondered what you baked in for the maturity of last year’s deposit campaigns. Do you continue to expect to keep the majority of these deposits in house? And do you expect that some competitors may once again offer negative margin products like they did last year? And my second question, are you as confident on a potential FES acquisition as you were in the first quarter?

Just curious on your thoughts given some government parties have some very strong opinions on what should happen to that asset. Thanks.

Johan Thijs, Group CEO, KBC Group: Thank you very much, Namita, for your question. We didn’t hear the beginning of your first question. Could you repeat that? Because we’re now guessing what was the topic. Could you repeat the sec the the second question, first part?

Namita Samtani, Analyst, Barclays: Sure. Just on your net interest income guide for 2025,

Johan Thijs, Group CEO, KBC Group: I No. No. No. The the sec the the second quarter the second question. Sorry.

Namita Samtani, Analyst, Barclays: Just on the SES acquisition. You’re very confident in the first quarter, so I’m just I’m just wondered what what your thoughts are now because there have been some government parties that have had some very strong opinions.

Johan Thijs, Group CEO, KBC Group: Yep. Okay. Clear. So thank you for your questions. So Bartol or myself can take the first question.

I’ll give it to Bartol.

Bartol Pudlings, Group CFO, KBC Group: Okay. Thank you, Johan. Good morning, Narita, and thanks for your question. As far as the NII guide is concerned and your question related to the potential migration continuous migration following the maturity of the term deposits in the fourth quarter, basically and also the reaction of the competitors. First of all, of course, what we have been seeing continuous shift from term deposits to saving accounts and also to mutual funds.

We had quite some significant maturities already because we issued initially also part of it in on six months. And we have seen that in the first quarter, those maturities resulted into a shift of only 38% of to back to term deposits. The remainder went to 40% to the saving accounts and then, of course, also to the mutual funds. So that gives you already an indication. Certainly, you look at also take into account that the policy rates will further continue to drop, that have a that gives you an indication what you can expect also in the fourth quarter.

As far as competition is concerned, obviously, we never know. You never know what’s going to happen. But what we see is that competition seems to get back to more, and in particular, competitor in a more rational approach. And then you look at actually the drop of the external rates on the saving accounts in Belgium, where all banks actually have been following with a quite significant drop in saving accounts. I will inform you that basically, at the beginning of this year, the external rate on saving accounts in Belgium was 90 basis points, 45 basis points base rate and 45 basis points the loyalty premium.

Today, as of the July 1, we will be at 60 basis points, 40 basis base rate and 20 basis on the loyalty premium. And you would have seen also that most of the competitors are following that. So that seems to indicate that there will be a more rational behavior in the market, but obviously, you never know.

Conference Operator: We will now move to our next question from Benoit Petrar, Mr. Clark. Excuse

Johan Thijs, Group CEO, KBC Group: me, operator, but we are still have to answer the second part of Namita’s question, so apology. So Namita, coming back to your second question regarding the potential sale of Etihos and then also the government statements which were made around that during the summer period. Indeed, there was a statement made by a French politician about what was going to happen with ETIAS, which clearly indicates that the ETIAS will be on the table in the period to come. And that means not necessarily that it will happen this year, because the statement was made that it should happen before the July 21, which is National Day in Belgium. I mean, the National Day has passed, the statement has not been made, which makes also quite clear that the decision is not taken yet.

I’ll come back to my earlier statements. I’m still convinced that those are true. I expect that on the ETIAS file, there will be a clear indication, definitely by year end, and, I expect it to move in 2026, and that, will be triggered by the, in essence, three parties which are involved, that is the federal government, the Flemish government, and then the Walloon government, which holds, let’s say, more or less one third of EDIAS. And, if they come to the market, we will be one of the candidates, and we will be certainly looking into the file, as as I said and stated on earlier occasions. So right now, it is not on the table yet, but it’s quite clear that the politicians are debating the matter, and I expect things to move ultimately by 2026.

Namita Samtani, Analyst, Barclays: Thank you.

Conference Operator: Thank you. We’ll now move to our next question from Benoit Petrarque from Kepler Cheuvreux. So

Benoit Petrarque, Analyst, Kepler Cheuvreux: the first one is actually on the transformation results. The transformation income keeps delivering more income quarters after quarters. And I was wondering if you could help us to quantify how much average yield you are generating as we speak and how much you are this deviate from the current yield and how much transformation income will actually come in the coming quarters. I think many banks are actually providing some guidance on that. It will be very useful if KBC could also provide that as well.

And also linked to that, I was wondering if you could give us the your your your view on the clean NI for the second quarter. I think I’ve been a few one offs. I mean, the the inflation linked bonds, maybe some some dealing room income as well were a bit high. So would be useful to get a clean NII for the second quarter. And just maybe on ATS, I think your message is clear.

I think it’s the French MR, which, well, is in favor of a merger between ATS and Belfuse. What is your view on that? And what do you see? And I know you are close from Flemish politicians as well. And what do you think their reaction is when they listen to George Lee Boucher talking about a merger with Belfast?

What what have you seen in terms of kind of reaction from from the Flemish side? Thank you.

Johan Thijs, Group CEO, KBC Group: So thanks very much, Benoit, for your questions. Let me come back to the first part of your first question regarding the transformation result. So we don’t give the details of what is the average yield in our transformation results. What we do give, that is that, first of all, we given the fact that we have taken specific positions roughly two years ago, where we sacrificed short term income for the longer term income, so we shortened at a certain stage interest rates were increasing and coming at a 4% level, we hedged it for a longer period. Well, that is now paying off, clearly.

We you know that in our replicating portfolio, we have different durations, roughly four years on the current accounts, roughly two point five years on the saving accounts. These are indications which we give. And given the evolution of the interest rates, given what I just said, we are having a strong mitigating factor even in an environment where interest rates are cut by the central banks, so where interest rates are coming down. We said on earlier occasions that we are confident that the transformation results continues to increase for ’25 and ’26, and we repeat that today, we are confident that we are going to see our net interest income increasing going forward on the transformation result for 2026, 2027. The what I want to like to add to that, that is due to two reasons, because net interest income is the outcome of the product between of the multiplication between volume on one side, and you saw today that we are able to increase our volumes in a very stable fashion.

And what Bartoli just said to Gnameda’s question is that also in the next coming quarters, there is going to be a maturity or a significant amount of term deposits. Well, that is to our expectation. And if we only use in a very conservative manner the term deposits and renewal, then it’s for sure that from a negative margin in that product now, we are going to go to at least a positive margin on the term deposit renewal, but the vast majority will be transformed into current accounts and saving points at higher margin and therefore, higher income. We did not calculate that into our guidance, so there’s a super conservatism indeed included, but it also allows us to say that in terms of volumes, we can continue our strategy, which we have on the transformation side. And then on the yield, so on the margin, which we have on the transformation result, that margin increases as it did in this quarter and in previous quarter, and it will continue going forward.

How much it is, we don’t disclose.

Bartol Pudlings, Group CFO, KBC Group: Yes, Jean Robert, order to give you some numbers on the clean NII as you requested, I mean, generated EUR 1,509,000,000.000 of NII in the second quarter. That’s from the impact of the inflation the NII on the inflationary bonds of €24,000,000 and then you have more or less a clean one. Of course, take into account also for the second quarter that as Johan was highlighting that it probably will not repeat, so you cannot extrapolate that. Take into account also somewhat lower loan volumes and as far as the dealing room NII is concerned, we do not disclose that, but it’s relatively limited. So that should give you an idea of what the clean NII would be.

Johan Thijs, Group CEO, KBC Group: And then coming back to your question or your more detailed question on ETIAS. So indeed, the statement which was referred to was statement by Jean Louis Boucher, the President of the French speaking Liberals, who indeed emphasized that there would also be the possibility of a merger between EDS and Balfius. I mean, that is not a statement which is this is a statement on his behalf. It’s not necessarily the final outcome. I think this is just a matter of the debate amongst the government, because the government is doing this for specific reason.

One of those specific reasons, if not the specific reason, is to collect extra budgets, which they need to have to support their budget of the fiscal year 2025 and 2026 and forward. So in that perspective, we all know that the decisions have been taken, for instance, on the defense spending side, which come on top of Belgium’s not that comfortable budgetary situation. And in that perspective, the assets which the government holds can be instrumental. So if you do then the analysis, if you bring everything together, then it’s not that obvious that Etihaus and Belfast are put into a merger, that it would make sense to do it differently to go for a sale of that company is far more contributing to the budget of the Belgian state. So let me cut the story short.

It was indeed a remark made by Mr. Boucher. Flemish politicians have not reacted openly on this, and both come together in the federal government where both parties are involved, including the French speaking liberals and the flesh. So in that perspective, two out of the three voices have not reacted officially. We will see, and that is my answer on Namita’s question, we will see what that brings in the quarters to come.

And therefore, I expect an outcome in the course of end of year 2025, 2026.

Benoit Petrarque, Analyst, Kepler Cheuvreux: Very clear. Thank you.

Conference Operator: And our next question is from Giulia Aurora Nioto from Morgan Stanley. Please go ahead.

Giulia Aurora Nioto, Analyst, Morgan Stanley: Good morning. Thank you for taking my questions. I have two. One, maybe to to wrap up on the NII. When I put together the previous questions and answers, I think it’s fair to say that the real guidance is basically 6,000,000,000.

Because if you start from a clean one four eight five and you assume at least flat if but, I mean, it should be higher given the deposit migration, the loan growth of the replicating result, you get closer to six. Yeah. Let me is that correct? And then secondly, I hear that you’re very interested in is there any other file, or, is there anything interesting coming up in, CE, that you’re also looking at? Or on the M and A side, we should mostly have in mind SES?

Thanks,

Johan Thijs, Group CEO, KBC Group: Julia, for both your questions. So coming back on your question regarding the NII. So I said, I mean, traditionally, KBC puts in a conservative margin when we do give guidance because we want to deliver on what we promise. When we put forward the guidance on the 5.7% at least, so the floor, we build in that conservatism. The results which we have made over the first half of the year indicate clearly that we’re going to make those numbers, and we just put forward the guidance to 5.85 with the same conservatism.

Now you said, listen, if I look at the consensus and I see, the guidance, then there is a difference of roughly €120,000,000 The €120,000,000 added to the new guidance brings us close to 6,000,000 So I mean, your calculation is definitely correct. We guide at least 5,850,000.00 with the same conservatism. And that I keep it and the less I leave over to your interpretation. Coming back to ETIAS, I understood your question that we now come up with ETIAS. I think I’ve said it on previous occasions as well.

So we are interested in ETIAS. And, as I answered on the previous two questions, we still are, and we’re definitely looking into it. And with regards to Central Europe, that is the same thing. We constantly screen the market not only on what is officially available, as we have demonstrated by the acquisition of three sixty five. That means officially, three sixty five was not on the market, but we spoke to the owners of three sixty five, and we brought this deal home.

We expect this to be closed by year end, by the way. So we will look in anything what is available in the market on an unofficial matter. And in the unofficial matters, we make do conversations with parties where we think it makes sense for them to reallocate their capital allocation. That means that they might reconsider their assets in Central Europe, which would be of our interest. Now the names in that perspective, I cannot release because they are not officially on the market, but we constantly have conversations.

Sharath Kumar, Analyst, Deutsche Bank: Thanks.

Conference Operator: Thank you. We will now move to our next question from Tariq Elmeyat from Bank of America. Please go ahead.

Tariq Elmeyat, Analyst, Bank of America: Hi. Sorry. Good morning, everyone. A few questions from my side. First of all, I’ll be back from the moxmox to the sale on HES because I’m I’m not very familiar with this, political contingencies, and I think it would be very challenging to to make a view on this.

But the let’s say, you know, it goes to Belfuse or it stops sell or another competitor, your excess capital will keep building up. I mean, you have great profitability, good capital generation, even putting a 65% payout with the and assuming that this extraordinary growth you had in in first half continues, you’ll be diverging from your, new c t one targets. Would you adjust your dividend policy if there is no deal coming on on the table? And how quick would you react to that? And, I mean, you just last your last question on Julia’s on on m and a.

I mean, were you referring to Romania and kind of geographies or or Poland or, I mean, without David Banks, but just to to have a sense? And, and the other question, on Kate. She’s probably the most famous employee, but I’m not sure who’s the most popular internally. But, I mean, it’s been very successful projects. We can see it, see it, and see it in the cost control in all aspects and also your digitization on the clients onboarding and compliance has been very successful.

Are you working on projects to, make that broader into SMEs, maybe even mid corp in terms of automation and and digital. Maybe not be cocaine, but but that kind of same spirit if you’re on there. Thank you.

Johan Thijs, Group CEO, KBC Group: So thank you, Tariq. We were just discussing who was going to take what, so sorry for the delay. Let me come back, on your first question. And now I because there are two parts in the first question. I I I just lost it.

I’m sorry. And then Okay. So on the dividend policy, so I I start from your assumption that is ATEOS is not available, and that is or it is not coming to the market or it goes to competitor, whatever. Our our capital deployment plan in that perspective is quite straightforward. We pay out a regular dividend between fifty percent and sixty five percent, and we want to be amongst the better capitalized financial institutions in Europe.

Our capital generative power is the one you know, close to 300 basis points before distribution. So after distribution, let’s say, the CET1 increases, as you indicated. This is a very plausible scenario. We will, at that stage I mean, we, it’s the board, who will at that stage, observe the possibilities. I will use your assumptions.

That means Aetias is not there, and there is not, in the foreseeable future, anything available on the market, so I will use all the other assumption. And it’s quite clear that we do have surplus capital. And in that perspective, our board will see how they will bring that surplus capital back to the shareholders because we cannot invest it in because organic growth is already absorbed in the numbers I was just referring, we cannot, in the foreseeable future, see it translated into M and A. Then your second part of that question, are we looking in the Central European markets? So what Julia was asking and further detail into that.

The answer is yes, of course, we are interested, amongst others, in Romania. And in that perspective, yes, we are having had conversations with potential assets which might be of our interest. Until now, nothing is on the table concretely, as you know. And as I answer to Giulia’s question, all the other conversations which are happening bilaterally, I’m not going to disclose for obvious reasons. We speak, we were approached for Poland, but we have given the fact there was no possibility to establish in a significant country a bank assurance model, we were not interested.

So we have declined. And then I will do Kate as well, Waffle. Okay. Then I will continue with Kate. Yes, indeed, it is taking off very well.

This is, as I said also on earlier occasions, we are a bit overwhelmed by performance. We were making assumptions at the time, how it would interfere in our business and what would be potentially the positive uptick, and Cadence beating them to all standards, both on the cost side, both on the income side. As we speak, we are developing K two point zero, which is going to be launched by October, let’s say, by year end. And that K two point zero is a further enhanced case, which can do what she what the tool is doing today, but go beyond that as well. The, the expectation is that our autonomy rate will be go further beyond the 70% easily.

And that means that it becomes, you know, it’s, it’s something which is going to be the ultimate solution tool for all questions of all customers. That is one thing. Second thing is this is part of a bigger project, which we have been working out now for ten years, and which goes step by step. So the solutions which we provide by Kate the solutions which we provide by Katecoins are translated and translated in a fully automated ecosphere strategy. And the ecospheres which we are working out are related to I mean, the most obvious things for the bank insurer, and that is everything which is related to mobility, everything which is relate to, to housing and everything, but but is related to, amongst others, health.

And what we are going to do, I’m not I don’t have time enough to explain that in this call, but we are going to launch end of this year, early next year, the fully integrated EcoSphere solutions, which we are working out. And, that will be end to end fully automated by ultimately 2026. So there, you’re a little bit of an indication where we are going to. I’m happy to to explore more what I just answered, but there are needs at least an hour.

Tariq Elmeyat, Analyst, Bank of America: Thank you very much.

Conference Operator: Thank you. And our next question is from from Farquhar Murey from Autonomous. Just

Farquhar Murey, Analyst, Autonomous: two questions, if I may. Firstly, we’ve all seen the kind of recent Pillar three and Basel IV disclosures, which kind of in places are a bit of threadbare as compared to what KBC has disclosed and your reporting approach. So I just wondered how those practical limitations might flow into your benchmarking exercise and your approach to the, kind of CET1 threshold at year end. And then secondly, can I get your preliminary take on the summer accords from the new federal government, both for the bank and the insurance businesses? I I appreciate there’s a lot of details still to be filled in there, but I just wondered what the key focus points were for you, possible implications, and where clearly, obviously, some more details will be needed.

Thanks.

Bartol Pudlings, Group CFO, KBC Group: Thank you, Fakur, for your for your question. To understand correctly, are you referring to what was disclosed in the transparency templates under the stress test and also in the Pillar three disclosures compared to what we have disclosed in the presentation, the corporate presentation on the Basel IV impact. Is that your question?

Farquhar Murey, Analyst, Autonomous: It’s largely that. Yes. Indeed. So but mainly probably the pillar three of 1Q is probably what I’m talking about.

Bartol Pudlings, Group CFO, KBC Group: Yeah. I mean, what you should know, I mean, you should reflect to the and mainly look at what we’ve been disclosing in the, corporate, presentation, which is based, of course, on a different reporting period that is mainly on the fourth quarter static balance sheet of ’24, where indeed you see a first time implication impact of EUR 900,000,000.0 and then a transitional of an additional EUR 1,600,000,000.0 with a floor the output floor impact of EUR 2,600,000,000.0, bringing to a total of EUR 5,100,000,000.0. The reason why there is a deviation in some of the disclosure is because it’s a different reporting period. And secondly, also because, of course, in the meantime, a number of measures have been taken to mitigate further the impact of Basel IV, and we also have are using more granular calculation in the calculation tools. Now having said that, for benchmarking, course, there is certain limitation because some of the banks now decided to no longer disclose the fully loaded impact, including the output floor and to go to a transitional, only the transitional impact, this is correct.

This is something that we will have to deal with.

Benoit Petrarque, Analyst, Kepler Cheuvreux: How will you deal with it?

Bartol Pudlings, Group CFO, KBC Group: Well, is something that we are currently looking into. We are currently in the process of making the benchmark analysis based also on what has been disclosed in the stress test, And then that is what we will take into account going forward.

Johan Thijs, Group CEO, KBC Group: Perhaps, Farquhar, if I add to Bartle’s comment, if you just look how we calculate the CET1, the disclosed fully loaded on floor CET1, we include the phased part as well of Basel IV. And if you would, not do that, as some of our peers are doing, they only give the FDA, or they’d only take into account the FDA, well, then our CET1 ratio would stand at 14.8 rather than 14.6. So that is a difference of roughly, precisely 19 basis points or roughly 20 basis points. If you would take it all, so the also the floor in 02/1933, which is indeed, I think, a long shot, that has a negative impact of 30 basis points. But as I said, that is a long shot because there will be a lot of things happening between now and 02/1933.

Now let me come back to your second question. Well, indeed, the government has taken or the federal government in Belgium has taken a lot of, decisions which are part of a summer agreement, as they call it. Well, the thing is that in that summer agreement, a lot of elements are included, which have not necessarily direct impact on the banking industry. There are some which might have an impact, and there is one, for short, who has an impact on the operational side. That is on the bank taxes, the statement is that in the summary agreement that the bank taxes remain at the level of last year, which means you do not can expect that there is any kind of decline, which we also not expect going forward.

What it how does it translate in hard numbers? Well, that is not defined. So it is at the level of 2024, which means no no no reduction whatsoever. That’s one thing. The other thing is that there are a couple of things translated in the summary agreement regarding our saving accounts, because they are expecting one or the other judgment of, on one or the other question on the loyalty premium in Belgium.

That might change a couple of things in the way how we are setting up the saving accounts, how we deal with the remuneration of those saving accounts, specifically loyalty premiums. But even when it changes, if the market is in this in the behavior of today, that is working with products which include loyalty premium, it should not have an immediate negative impact on our numbers. Why? Because the vast majority of customers which do have a product with a loyalty premium, there we also pay out loyalty premium. I’m talking about, more than 90% is paid out.

So even if that would be changed in the agreement, that would not have a negative impact on the numbers. For good understanding, the judgment is only to be expected in the third quarter of this year. So before the changes are made, I expect this to be ultimately 2026, but probably quarter four of this year. We’ll see. And then the what is the precise translation?

The capital gains tax, well, the capital gains tax is debt and is given, so there is no way that is going to disappear. The capital gain tax is something which has no direct impact on the banks in the form of we have to pay more taxes that is due that is due for our customers. The thing is we do need to implement it because it starts at the 01/01/2026. And that will, first of all, that is on very short notice. It’s not six, what is it, five and a half months to go.

And the unfortunate thing is that what it is and how it should be implemented is not defined yet. So the expectation is that after summer, in October, this will become clear in the government. So then we have a couple of months to implement that, which is impossible. So we do expect indeed that comes to the table, that we’re going to implement it. It has no direct impact on our P and L because of the capital gains tax itself, but it has definitely some impact on our cost side, and that is something which we are going to see going forward because in October, we do expect the final detail about that.

The preparation on the cost side is included in our guidance.

Conference Operator: Our next question is from Chris Hallum from Goldman Sachs.

Kurt DeBanst, Head of Investor Relations, KBC Group0: I just have one question left, which is on deposit trends. So obviously, quite strong in the second quarter, 6% to 7% growth. I just wondered, are there any lingering state note impacts in there with regards to the win back campaigns and then the roll off of those campaigns? I’ve just lost track a bit about when that should have all washed out. So is that a 6% to 7% number indicative of core underlying trends?

Or is it still being impacted by the 23 state notes? Is that sort of the right base to look at going forward?

Bartol Pudlings, Group CFO, KBC Group: Chris, can you repeat the first part of your question, please? It didn’t come in clearly.

Kurt DeBanst, Head of Investor Relations, KBC Group0: Yes. No, it’s just whether or not the growth rate you saw in deposits in the second quarter, 6% to 7%, whether or not that’s still being impacted by the lingering effects from the state notes in 2023. So you had the win back campaigns and then those campaigns rolling off. And I’ve just lost track of the ebbs and flows of the impact from the state note.

Johan Thijs, Group CEO, KBC Group: So thanks, Chris. We have a very poor line, so we hardly understand you. But what we made out of what you asked is if there are any kind of campaigns going forward coming to the market now in September, October regarding the majority of the previously recuperated state note monies? Well, we’ll see. Bartol already answered in the previous question that today, we do see a very disciplined behavior in the market.

Also, if you look at the results of some of our peers, the net interest income on their side is toning down, so it’s always a bit negative. We do not expect that in the market now, we will have a war again as we have seen it two years ago and last year. So in that perspective, we are fully prepared for eventually an aggressive campaign of one or the other competitor. There is, on our side, normal behavior to be expected, but fully prepared in the event it would be different.

Conference Operator: We will now move to our next question from Anke Rangen from RBC.

Kurt DeBanst, Head of Investor Relations, KBC Group1: Just two small questions, please. First is on your operating leverage. I mean, I guess you have the top line upgrade, but stick to the cost cost guidance. Is that largely a function of, yeah, the mix of the upgrade to the top line, or is there, like, are you making more successes as well on on savings initiatives, and and that helps the keeping costs flat as well? And then in terms of the Belgium loan momentum, a really good volume growth plus spreads are holding up really well.

Do you think that’s sort of like a new environment? And do you think that’s sustainable? Or if loan growth slows down, then it becomes a bit more competitive on the spreads as well?

Johan Thijs, Group CEO, KBC Group: Thanks, Anke, for your questions. So regarding the first one. So if you look at the performance in, let’s say, the first half of this year, so combination quarter one, quarter two, indeed, we do see an uptick on specific domains. We just do better on specific elements. Part of that outperformance is driven by, let’s call it, interventions, which we did at headquarters and which I explained earlier, that is, amongst others, the way how we hedged and so on and so forth, not necessarily consuming extra effort in our bank branches or in our headquarters in on the banking side.

And for that reason, indeed, we are able to grow our income and secondly, keep that cost part under control. And then let’s not underestimate the impact of of Kate. We I mean, we can disclose numbers which are very conservative. The reality is that 70% of the questions of our customers are answered by Kate. Let me disclose another number.

We do have on a monthly basis, let me give you one country, for Belgium alone, €84,000,000, 84,000,000 interventions on our mobile, which means that customers are dealing with our mobile first to solve their their questions, and that Kate plays an important role. That time which is freed up is used to do the business, we are referring to. So the answer is yes to your question. Despite the fact that the income is is growing significantly, we are doing this either because of a certain actions which we took in the past and which are not necessarily related to operational activity in the branches. And the second thing is an important chunk of work, which is cumbersome, so time consuming, so let’s call it administrative work, is fully now tackled by Kate and the growth of the interaction of our customers in our mobile.

I didn’t give the references, so 83,000,000 interactions now, a bit more than a year ago. It was roughly 70,000,000 interactions with our customers, so it’s growing like hell. So that means that that operational part is taken by the machine and no longer by human beings, which allows them to do the more sophisticated conversations with our customers, the more time consuming efforts with our customers. So yes, it allows us to keep the cost evolution stable.

Bartol Pudlings, Group CFO, KBC Group: As far as your second question is concerned, I understood that this is mainly focused on the loan the deposit volume growth in Belgium. They’re basically, as I already stated in the first quarter, what we typically see is that in Belgium, have a seasonally low amount of deposit volume, mainly due to the fact that there are no bonus payments or holiday allowances or any other kind of allowances being paid in the first quarter. On the contrary, there are a lot of utility bills, etcetera, and insurance premiums to be paid for the year. So typically, Belgium, the deposit volumes in the first quarter are somewhat lower. The second quarter here, you’ve seen indeed an uptick, and that is definitely driven by the fact that you get indeed the bonus payments, but also this was also seasonally driven by a higher corporate volumes in this quarter.

The third quarter there, you will see that there is going to be an impact somewhat of the of course, the holiday season and people have been spending there. And the fourth quarter, will be quite strong as a result also of the in Belgium, very typical, what is called a thirteen month payment that typically has a positive impact also, together with, of course, also the corporate volumes, Just to give you an idea of how how the seasonality is.

Kurt DeBanst, Head of Investor Relations, KBC Group1: Thank you. But I was actually thank you for this detail. Was actually wondering about the loan side. On the spreads, they’re Belgium, they’re holding up really well. Do you think that’s sort of, like, sustainable, Or is there some seasonality potentially in that as well?

Okay.

Bartol Pudlings, Group CFO, KBC Group: Sorry, I misunderstood that. But on the loan side, I think for the second half, it would I would not recommend you to also, and not in Belgium, to extrapolate the extraordinary results of the first half of the year very simply because, of course, on the corporate side, we’ve seen quite significant increase on corporate loans, which should be most likely not be repeated in the second half.

Kurt DeBanst, Head of Investor Relations, KBC Group1: Okay. Thank you.

Conference Operator: Thank you. And we’ll take our final question today from Sharath Kumar from Deutsche Bank. Please go ahead.

Sharath Kumar, Analyst, Deutsche Bank: Good morning. Thank you for taking my questions. I have two left, please. Firstly, on deposits growth and mix shift. I know you didn’t previously provide, but for the second quarter, can you now provide us the split between the maturity of term deposits related to the Belgium state note and the organic shifts?

Also be interested in understanding the sensitivity around the mix shifts in deposits towards your NII guidance. Secondly, on additional tier one notes, the 1,000,000,000 issuance in May looks much higher than the shortfall that you needed to fill. So just checking if there are any callable bonds later this year. Is it possible to provide any guidance, on your 81 cost for the year? Thank you.

Johan Thijs, Group CEO, KBC Group: Thank you, Sherat, for your questions. We were just distributing the two questions between us. The on the deposit question, so for good understanding, the so indeed, in Belgium, we do have, as you could see in the previous presentation, roughly EUR 6,500,000,000.0 recuperated amongst the state note monies, and part of it came from us, part of was coming from the market. And that was invested in term deposits in KBC Group in two parts. That was a certain part was invested term deposits with a tenor of six months, and the vast majority was invested in a tenor of thirty months.

Because it was originated in September, you have the maturity of the first part, the six months part, in March, which was part of quarter one. So what you see in quarter two, the €5,000,000,000 core monies flowing in has nothing to do with the term deposit of the state note. So that is pure attraction of new monies of customers, and that is pure dividend on the strength of KBC without any kind of transformation. And that is what I said at the beginning of the call, and perhaps I did not emphasize it enough, the strong performance indeed because indeed, current accounts and saving accounts in that second quarters have performed positively 5,500,000,000.0. So the maturity of the internal term deposits in the second quarter are just term deposits as such not linked to the state note.

And also there, of course, we do see maturities, and we see them coming indeed into current accounts and saving accounts, but they have nothing to do with the recuperation of the state note money. That part is going to mature in October. And that part, Bartel said earlier, if you even take the original historical assumption of the first quarter, that is only 38%, going back to term deposits, deliver a lot of net interest income. Be aware, we didn’t put that into the guidance. And therefore, I said we maintained our conservatism levels.

Also on the lending side, we included conservative levels. So that still has to come.

Bartol Pudlings, Group CFO, KBC Group: Morning, Serna. As your question related to the AT1 is concerned, your calculation is correct, but please take into account that we will call €364,000,000 in October on an old 81. So that, I think, answers your question.

Sharath Kumar, Analyst, Deutsche Bank: Yes. Thank you.

Conference Operator: Thank you. There are currently no further questions at this time. With this, I’d like to hand the call back over to our host for closing remarks.

Kurt DeBanst, Head of Investor Relations, KBC Group: Thank you very much. This sums it up for this call. I would like to thank you for your attendance, your interesting questions, and enjoy the rest

Johan Thijs, Group CEO, KBC Group: of the day. Bye bye.

Conference Operator: Thank you. This concludes today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.

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