KBC Group NV ($KBC)

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

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

Thank you very much, Baenst also from my side, and welcome on the announcement of the first quarter results of 2026. And despite the fact that we have been working in a very rough environment, the geopolitical terminal was not creating the best environment for financial institutions. Despite all that turmoil, the results in the first quarter were excellent with a return on tangible equity of 16%, totaling EUR 557 million over the quarter. This EUR 557 million is posted after paying EUR 549 million bank taxes. Now it is quite reassuring to once again then see the machine has been firing on all cylinders, and that means that all countries have been contributed and that the bank insurance diversification has worked very well. Let me start with indicating customer loans and customer deposits, a strong growth on the lending side, with a very strong 1.6% increase over the quarter, but also customer money inflows totaling EUR 5.4 billion in this quarter. We have seen consequently then as well a strong increase of the net interest income, which was then also completely copied by the non-net interest income, totaling net fee and commission and insurance income. Net fee and commission income, strong growth, driven by strong performance on the sales side of direct client monies, but also on the insurance side, we have seen a strong performance on the non-life side and on the life side. In terms of the volatility, you clearly see that reflected in our financial income, our instruments and financial income at fair value. And that is totaling again, strong growth on the total income side. On the, let's say, outgoing monies, we do see, first of all, that the lending book in terms of its quality has performed very well with a very good cost credit cost ratio standing at a like-for-like basis, 15 basis points, which is well below the 25, 30 basis points. We also saw a very good combined ratio with 84% and we did, in that perspective, also see that costs are under control be it that you need to be aware that this is the first quarter where we integrate 365 and Business Lease into our numbers. We'll come back to that in more detail. Solvency position, both on the bank side and the insurance side remain solid with respectively, a CET1 ratio of 14.4% and a Solvency II ratio of 231% and you also know that on the AGM last week, it was decided to pay out the EUR 4.1 dividend, which will be paid out on the 20th of May. Let me go immediately into the detail. On the next slide, you can see the -- actually the split up in essence between our net interest income bearing -- sorry, our interest bearing income and our non-interest bearing income. The split up over the period was hovering around 50%, which is also the case for this quarter. This quarter, it is 51-49 percent, which is pretty much in line with what we have seen on the previous quarters and years. In terms of where we are with the technology and the evolution of the innovation side in KBC, will it has performed again on a very strong level. We have seen further increase of the usage of Kate that is now reaching 6.1 million of our customers, which are using Kate on a regular basis. That also means that Kate is answering their questions. We have 2 versions of Kate out now in Belgium since the, let's say, end of last year, we have launched a full large language model driven Kate, we call it 2.0, which has an autonomy rate of roughly 80% this quarter, a little bit lower has to do with customers asking more and more questions, which are not yet at this stage, fully straight to process. And when they are not straight to process, we don't consider this to be a provided answer according to our standards. In the Central European countries, we still have the older version of Kate 1.0, the new version will be rolled out in the course of '26. We do see Czech Republic at 69%, but other countries like Hungary, Bulgaria stand at an autonomy of 75%. All of that has led to the further gains, which we do on the productivity side to say something when we look only on the commercial side, then Kate is doing the job of roughly 400 people. If we look at how many leads are converted by Kate, then we speak about 420,000 sales over the last 12 months. For good understanding, we see now 3 consecutive quarters, an increase of those converted leads driven by Kate. Last but not least, what also is happening when Kate is answering questions, processes are fully automated, which means that also back office processes are automated. We don't take them into the number of 400. So in essence, Kate is doing the work much more than the reference made than the 400 people as earlier referring about. On the next page, you see the other positions which we have on the sustainability side and how others are judging us in terms of innovation, but I would not dwell too much upon that. Let me go to the one-offs. There are multiple one-offs this quarter. First of all, in this quarter after the approval of the AGM on the matter, we are going to -- we have booked the one-off bonus for our staff. The one-off bonus is totaling EUR 23 million ultimately, which also means that, that will be part of our cost for good understanding. This was not part of our cost guidance for the simple reason that the decision has to be taken by the AGM. Also, what we do see is in Hungary, quite a series of one-offs. The first one is linked to -- and the correction on the subsidized loans where an interpretation was not followed by the authorities, the correction total to EUR 10 million, but more significantly is that we want a legal case against those Hungarian authorities, which ultimately delivered EUR 33 million in positive. Last definitely not least is that Hungarian authorities introduced a new windfall tax. So on top of the previous one for the whopping EUR 134 million, which completely changes the picture in the first quarter, where those majority of taxes are booked. In terms of total amounts, we now stand after taxes at EUR 121 million exceptionals, so one-offs clearly more than what we have seen in the same quarter last year and definitely also much more than what we have seen on previous quarter. Let me now go to the building blocks. So first, starting with net interest income. Net interest income, as such, is up 4% on the quarter and 18% on the year. Of course, this is significantly influenced by the absorption of 365.bank and Business Lease. For good understanding, what I'm going to say further in this presentation, 365.bank, I always mean the combination of the 2. So the integration of both entities have triggered that strong increase, if you would exclude them, then we would see an increase of 2% on the quarter and 15% on the year, which actually means that underlying our net interest income has been performing very well. In that perspective, to give you an idea, the strong if we exclude 365 and Business Lease, we have a strong performance of our commercial transformation result, which is benefiting further from the reinvestment yields. And then also the fact that the volumes have been under current account -- saving accounts have been continuously flowing in. And in that perspective, are prolonging our strategy. In terms of the lending income, also a slight increase. So we do see in that perspective, of course, also the influence of the integration of 365. But even if you would exclude that M&A part, then we do see an increase of our lending income, which is driven by 1.6% quarter-on-quarter growth, which is very strong, translated over the year. It means that we do see a growth of roughly 7% to be precise, 6.6%, which is indeed despite the political turmoil, a very good result. Part of that is offset by margin pressure. Well, we do see margin pressure on certain products. It is a bit of a mixed picture, not all products. We do see the margin going down on the contrary. But in essence, all in all, I would say commercial margins are still under pressure over the countries as a whole. So lending income slightly up, given the combination of the 2. We do also see that some other parts are indeed also increasing, and they are only offset 2 negative things. In essence, the number of days are lower than on the previous quarter, which has a negative impact of EUR 17 million and we do also see that the inflation-linked bonds have quarter-on-quarter delivered a difference of EUR 17 million. As you know, inflation is on the rise. The calculation of those inflation-linked bonds is always on the inflation of 2 months ago, which means the delay factor plays against us, but we will recuperate that in the course of the year. Therefore, going forward, the inflation-linked bonds result full year will be guided for EUR 30 million to EUR 40 million. Also, a negative offsite is the EUR 10 million I was earlier referring to in Hungary. How is that translated in net interest margins? Well, margins are up significantly, now total 217 basis points. This is obviously influenced by the things I just mentioned, I have to add that also, for instance, the MRR in Bulgaria has a positive uptick in this quarter. But if you would leave out 365.bank, even then margins would be growing to 214 basis points. On the remainder of the page, you can see the split of the total loans. So we have also seen a growth of 1% on the quarter for the mortgages, totaling 6% over the year. And in terms of volumes on the deposit side, positive 2% up on the quarter, 5% up on the year, but I think it's better and easier -- more easier to explain it on using the next slide on Page 8. We can clearly see if you exclude the foreign branches and you exclude the FX effect that we do have an increase of deposits inflow or let me say it differently, we do see have an increase of customer money inflows of EUR 5.4 billion. Now what is the the split up of those -- of that EUR 5.4 billion, well, EUR 1.6 billion is linked to, again, a very strong net sale on the asset management product side. So mutual funds totaling EUR 1.6 billion, which actually means that roughly EUR 3.8 billion is linked to, let's call it, customer deposits. Current account saving accounts totaling EUR 1.3 billion positive and term deposits do see an increase of EUR 2.4 billion. Now of course, this number is also influenced by the acquisition of 365.bank. And if we would exclude 365.bank, well, then the number EUR 5.4 billion will become EUR 1.9 billion in net customer money inflow. Now if you translate that in a different way, the 1.6% remains the same on the mutual fund business, which actually says that what we do see is saving accounts are unchanged, 0.6%, but current accounts we do see a clear shift from current account term deposits, which is different than what we saw in the previous quarters. The reason behind that is actually linked to 2 countries, in essence, Belgium and Czech Republic. And this has to do with 2 completely different things. First of all, because of the war, because of the turmoil on the financial markets, we did see a pickup of the interest rates and therefore, in private banking, Belgium, some of the customers have actually split up their investments on 2 sides. Part of the money was shifted into asset management products. Other part of the money were locked in into term deposits. We're talking about EUR 0.7 billion, which was in anticipation on the fact that if the world is a short-lived one, interest rates would come down again and therefore, locking it in for the year does make sense. The other country where we see the effect of outflow in customer accounts -- current accounts, sorry, is Slovakia, which is linked to a certain extent, the retail bond, which was issued in the quarter and then a purely seasonal effect, which is linked to tax payments by micro SMEs in Slovakia. Last but not least, the -- also in Belgium, we saw a seasonal effect that is corporate accounts, which is traditional going down every year in the first quarter that normally picks up in the course of the year. So all in all, customer monies have been continuously inflowing and that in that perspective, is creating the still solid base going forward. In terms of fee and commission income, I already mentioned that we have seen a strong sale. Well, that's also translated overall in the net fee and commission in total, up 1% on the quarter and up 6% on the year. If you would exclude 365.bank, well, then, of course, you have a little bit different numbers, minus 2 quarter, plus 3% on the year. Where does it come from? Well, we have seen strong sales, which is indeed EUR 1.6 billion, quite an achievement. If you compare that with the record of last year, it's only slightly down. So that is despite the war is an excellent result. And also, we see the same more or less in the gross sales, so also in gross sales, we have the second highest first quarter ever realized in 2026, which means that the asset management services fees increased by 1%, but also that the entry fees went up as well. Bank services went up with 1%, which is in essence due to fees linked on the credit side, but also fees which were linked to our securities trading platform like Bolero and [indiscernible] Belgium, Pavlin Czech Republic. To just give you an indication in the number of transactions in the first quarter were 26% up compared with the same quarter last year. Good understanding, quarter 1 2025 was a record high. We do so also see that -- sorry, I made a mistake, the '26 is about customers. It's not by transactions, but transactions is 13% up. So what you also have to bear in mind that is in this quarter, we also deducted for the first time, the [indiscernible] cost contributing a minus EUR 6 million to this fee and commission income. In terms of assets under management, well, obviously, the negative sentiment on the financial market have put down the assets under management on the -- it's roughly 2% on the total EUR 4.5 billion. And it is only partly compensated by the net inflow of the EUR 1.6 billion, which I reflected upon earlier. Small add-on on the net sales. We also saw again, a strong performance on the regular investment plans. Let's say, the stable, solid base of the net sales. It is totaling EUR 450 million, which is also again translated in a further increase of the number of regular investment plans increased with 9% in over the year. In terms of non-life insurance business, I already mentioned that it was having a strong growth of 7%. This is triggered by all countries, Belgium as having a growth in more mature market at 6%, where we do growth of double digit in Czech Republic, Bulgaria and 9% in Hungary. In terms of the quality, 84% combined ratio, which is an excellent result, -- this is true for all countries, small caveat. We do have extra windfall taxes or windfall taxes in Hungary. If we would exclude those info taxes and hungry the combined ratio there stands at 93%, but also most countries are having combined ratios below even 80%. Life sales side, super strong. You can make the comparison on the previous quarter, which was indeed a record high. But even that quarter was beaten with a 9% growth if you compare it with the same quarter last year, which is traditionally a very strong quarter, well, 15% up, and that is quite a striking result. The split up between the products is 36% guaranteed interest product, whereas unit-linked is 58%, and the remainder is in the hybrid products. In terms of the financial instruments at fair value. We do see a negative evolution here of EUR 96 million compared with the previous quarter. That has to do, of course, with the volatility in the market, we do see the impact of negative impact, better of the increased interest rates and the rest is linked to the hedge accounting ineffectiveness. On the dealing room, we also saw because of the turbulence a negative evolution there of roughly EUR 26 million, which the sum of the 2 combined actually explains more than the 96% I was earlier referring to. Net other income was up significantly, as you can see are EUR 89 million, which is actually much better than the normal run rate of, let's say, roughly EUR 50 million while that has to do with 2 things, in essence, well, first of all, the contribution of business lease, which is in for the first time, it's EUR 7 million, but also the fact that we want a legal case EUR 29 million is here in the result and that was already mentioned earlier with the exceptional results. If you would exclude both of them, then we are closer to the run rate a little bit higher, 10% higher about EUR 56 million. What about operating expenses? Well, this quarter, of course, is completely different than the previous quarter because of the bank taxes. But let me start with the real cost that is the operating expenses EUR 1.214 billion, which is compared to previous quarter, down EUR 10 million despite the fact that we included in this quarter, EUR 23 million of one-offs and despite the fact that in this quarter, also EUR 30 million is included because of 365. More sense does make to make the comparison with previous year same quarter, well, then we do see an increase, but also here, be aware there are one-offs which you are you need to make the distinction between the consolidation of the different underlying assets. So as I said, 365 is included this year and then also the one-off bonus is included, and you have an FX effect of roughly EUR 13 million. So what about cost income, it's 41%, which indicates already that we have been able to keep our costs well under control. As a matter of fact, if you do a comparison on a like-for-like basis between quarter 1 last year and quarter 1 this year, then we do see -- we do see an increase of 3.7%, which is slightly higher than the guided 3.4%, but this is 100% due to timing differences. So we take into account already some costs in the first quarter where the benefits are only going to be seen in the course of 2026. So as a matter of fact, we are perfectly in line with our planned cost evolution in this quarter. In terms of bank taxes, well, bank taxes are at a level of EUR 549 million, which is significantly higher than last year, and this is due to, in essence, 2 effects. First of all, we see an increase of the windfall taxes in Hungary. They added EUR 134 million. If you compare it with previous quarter, that is an increase of EUR 81 million. In total, if you take into account some SRF contributions and financial transaction levy, we end up at EUR 87 million. In terms of the Belgium situation, well, the deposit guarantee scheme in Belgium was fully filled up. So that contribution fell to 0. What the difference was for more than 50% filled up by the Belgium government by additional national taxes, bringing the total to a positive evolution of EUR 67 million. So in total, bank taxes up of EUR 13 million, we do expect by year-end to pay EUR 724 million of taxes and the spill it up of the EUR 540 million over the different countries and what that means on OpEx, you can see on Slide 13. Let me go immediately to asset impairments. We do have, in total, EUR 165 million of impairments, which are actually split up in 2 parts. First is the business as usual impairment. So what is the quality of the underlying lending book, well, EUR 89 million compares to EUR 76 million, which means that you do see an increase of EUR 13 million. That is a small, but in EUR 89 million is included 365 for EUR 11 million. And on top of that, we also took a further provision on the nonperforming loans exposure of EUR 16 million. The reason why I'm mentioning that is by taking that EUR 16 million, you will have a positive impact on your CET1, and it's, of course, a voluntary choice. So if you would exclude that EUR 27 million, actually the business as usual impairment are better than what we have seen in the previous quarter, but also better what we have seen in the same quarter on previous year. So quality wise, it is actually a good quarter. We also see that in the PD shifts in this country -- in this quarter, which are actually pretty stable, which is also translated in the impaired loans ratio of 1.8%. For those who are more familiar with the EBA definition, we now stand at 148 basis points, which is substantially better than the European average of 180 basis points or the European median of 170 basis points. Another way to reflect the underlying quality of the lending book is the credit cost ratio like-for-like basis, well, that stands at 15 basis points, which is perfectly comparable with the 13 of last year and 16% the year before. and it's definitely much better than the longer-term average of the guidance, which we gave 25, 30 basis points. What else? We added, given the very difficult situation out there a conservatism extra to what we already had as a buffer. The previous buffer was EUR 100 million. We now decided giving that turbulence in the Middle East that management overlay is indeed added to the tune of EUR 72 million, EUR 3 million was extra added because of the previous buffer. So in total, we do add EUR 75 million. What is particular about this buffer is that it is one-to-one linked to the IRB shortfall and therefore, this buffer actually adds to the CET1 ratio 4 basis points extra positive. So total buffer at the end of this quarter, EUR 175 million with the evolution of the conflict in the Middle East as we have seen it with the evolution also of the situation in Ukraine. We do not expect to touch the EUR 72 million management overlay in the remaining part of this year, which is then translated to Page 15, where we do give you some more detail on our exposure to the Middle East, which is very limited to only 0.2% of our outstanding loan book. And the same can be said about vulnerable sectors, given the conflict in the Middle East, KBC already in the past was anticipating potential issues and therefore, was scrutinizing those portfolios. But to give you an idea, actually, we do have limited exposures on those sectors, which might be vulnerable. Amongst others, oil and gas, amongst others, automotive, amongst other chemicals, aviation and software, you can clearly see that the exposures, which we have are very limited -- we are talking about Max 2.4% in the Automotive, but most of those exposures are smaller than 1% on our outstanding loan book. In terms of and that's just a confirmation of what we said on previous occasions, previous quarters, private credit partly any exposure, private equity limited to less than 0.5% of our lending book. Let me go immediately into the capital ratio. Well, the buildup of capital is definitely triggered by the net result and the upstreaming of the dividend of the insurance company. We also added the goodwill and the intangibles of 365.bank to the tune of EUR 260 million, which actually brings capital to EUR 19.3 million. In terms of the risk-weighted assets, obviously, the integration of 365.bank and Business Lease have added equated access to this. This is EUR 2.5 billion rounded. All the rest is in essence, the vast majority of that is explained by volume. So the strong loan growth triggers the increase of EUR 1.5 billion. And all the rest is explained by model changes and also higher risk-weighted asset counter party risk. So totaling EUR 134.5 billion of risk-weighted assets, bringing the capital ratio to 14.4%. Let me remind you that KBC always includes in its CET1 ratio fully loaded the phase-in of Basel IV. If you would exclude that, the ratio would stand at 14.54%. In terms of the MREL -- sorry, not the MREL, the MD&A position. So we have a OCR 10.9%, which gives us a buffer of 3.5%. If we include the shortfall, which can be financed with CET1 on AT1 and Tier 2, the MDA level stands at 11.13%, giving us a buffer of more than -- of roughly EUR 4.4 billion. The leverage ratio stands at 5.6%. The solvency ratio already mentioned, 231. Let me repeat as well LCR and the NSFR, respectively, 139 -- 159 and 135. Then in terms of guidance, in essence, we never give new guidance in the first quarter. Also, given the turbulence today is extremely difficult to give any sensible comments on, for instance, net interest income, what it will be. Multiple scenarios are still possible. So the guidance which you see on Page 18 -- sorry, Page 19 is unchanged. The only remark I would like to make is that be aware that we included EUR 23 million costs, which were previously not part of the guidance, given the fact that decision is only taken in 2026. So in wrap up, it's a pretty good quarter. A lot of things are moving on. But business-wise, the machine has been firing on all cylinders. And I'll give back the floor to Kurt, who will guide us through your questions.

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

[Operator Instructions] We will now take our first question from Giulia Aurora Miotto of Morgan Stanley.

I have [indiscernible] net interest income. So I hear you that you don't want to upgrade the guidance already, given the uncertainty, however, the NII result was solid, there is very good deposit and loan growth. So I would assume we get an upgrade in Q2. And I don't know if you can -- if you agree. And if you can quantify the upside if the rate curve stays where it is? And then secondly, so Slide 8 surprised me a little bit because it's different from what you had mentioned before. And I think before you mentioned that KBC was assuming deposit mix shift towards current and savings. And this quarter, we see the opposite. What are you seeing quarter-to-date in Q2? So is this trend towards term continuing? Or in fact, it is reversing towards your assumption? And does it make sense for banks to increase the cost in term deposit if the rate hikes are expected to be temporary?

Thanks, Guilia, for your questions. I will take the first one. And actually, your question is that these guys way to ask for guidance update. So let me highlight why we are not giving you an update. So first of all, I mean the war is creating -- I mean I'm talking about the war in the Middle East. It's creating a lot of volatility, as we all know. And depending on the outcome of that conflict, is it short-lived or long-lived I mean, it will fundamentally change the numbers and definitely also the situation for all financial institutions. Let me highlight in brief what we have in mind. We still think that this war is a short list on, which means, let's say, 2 months, 3 months, next 4 months and then cease fire will be there, which intrinsically according to the statements of nor politicians on both sides of the conflict are today already stating. So if it is a short-lived war, then we are in the situation which you see today. Okay, there is a slightly lower GDP growth in Europe, the productions are 0.4, 0.5 points percent lower GDP growth, but still it is good. And in that environment, in the first quarter, we published a 1.6% lending growth. So we are quite good in dealing with that kind of situation. But what is also far more important is that inflation is going up. This is what we see in this quarter. But if it is short-lived, the assumption is that it will not last. So in '27, we will definitely have a normalized roughly around 2% inflation position. As a consequence, the central banks will look to -- look through the inflation and will not start to hike, which is -- that is what the forwards today are saying, forwards still are assuming 3 rate hikes before the end of 2026. So therefore, also in our net interest income, you will have a positive impact on certain things, which you already saw in this quarter, we will have a positive upside on our inflation-linked bonds, which is not calculated in this quarter. We will have the slowdown of the shifts of current and savings account term deposits, which are part of this quarter, because interest rates will not go down and customers have anticipated because of the war, the longer-term interest rates, which were given in this quarter. So that will -- that shift will go down. And indeed, as you indicated, this is something which we had not seen in quarter 3 and 4, where there was no war for good understanding. What we see now when there is a war that this is happening. So also in other parts of the P&L, it will have an impact. If we would now on the other hand, a long-lived contract, well, then it's completely different. Then you will see inflation going much higher, probably central banks will anticipate with rate hikes and then we probably come closer to the forward rates. When the forward rates are materializing, we see a completely different picture on net interest income side. You probably will see also interest rates on other products increasing, given fact that interest rates are in the rise and you will have a clearly higher inflation, therefore, higher inflationary bonds. So it's completely different to say what it is. But we will have a better view on that in the weeks to come, which means in the second quarter, and we clearly give you some insight where we will be at quarter 2. And to wrap it up, if you listen carefully to what I said, I agree with your position that the current guidance, which we have given is very conservative.

Okay. And then also from my side to everyone. And Giulia, your second question, the shift from CASA to term deposits and now seems to be holded and turned around. But let me give you some exact numbers. First of all, indeed, when you look at the slides related to the direct customer money, that you see EUR 2.4 billion increase in the term deposits. But out of those EUR 2.4 billion, EUR 1.4 billion comes from 365 in Slovakia. So if you should deduct that. Secondly, we see some indeed shift, as Johan was explaining in Belgium in private banking from current accounts to the term deposits for the reasons explained. But this is only in Belgium. We -- in the Czech Republic, actually, we continue to see a shift the other way around. And that is then a net impact of EUR 0.8 billion. And then basically, we also see some increase in term deposits, but mainly driven in Slovakia by the corporates where we had a campaign on term deposits for the corporates to attract additional deposits. So that's in total, EUR 2.4 billion. So is this going to continue. Actually, as Johan has been explaining, depends a bit, of course, on the duration of the war. If indeed, the situation in the Middle East last longer as we have already been indicating openly that this is likely also going to indeed trigger back a shift from current accounts, same accounts to term deposits. But when the war is shortlisted we do not believe that this is going to continue going forward.

And we will now take our next question from Sharat Kumar of Deutsche Bank.

My first one sticking with wanted to dwell a bit more on the moving parts of NII and how it progresses for the remaining quarters. I see in first quarter, we had both positives and negatives, dealing room NII. If I have to look at positives was elevated. So do you see risks of this reversing the other hand, if I account for negatives like inflation-linked bonds, lower day count. Overall, I see underlying first quarter annualized run rate closer to INR 6.9 billion, consensus around EUR 6.8 billion. So if you could comment on how to think about the NII progression in the remaining quarters, it would be helpful. And like had previously shared a plus EUR 50 million NII sensitivity for a 25 basis point rise in interest rates. Just wanted to check if this has changed. Second, on asset quality, you've already added EUR 75 million to your ECL buffers. Oil prices have remained elevated. I appreciate this is not 2022, where the risks were higher for Europe. But there, we saw ECL buffers continuously added in all the quarters. So generally, wanted to understand the risks of further additions to ECL buffer. And more broadly on asset quality trends in the wake of current geopolitical risks.

Thank you, Sharath, for your question. I will take the first one. It's a bit a continuation of what I said earlier to Guilia's question. But if we go in the moving parts, I mean, on net interest income, intrinsically, it's very simple. Roughly 90% of all net interest income is built by 2 parameters. And that is the transformation results and the lending income. Now on the transformation result, Bartel just highlighted what is crucial in that perspective that is customer deposits inflow. And as he highlighted, well, that is at least stable, but it is in reality growing. And therefore, the positions which we take and have been taken can be continued, which actually means that transformation and results are going to increase not only in this quarter, as they did on the previous ex quarters, but also in the future quarters. We do anticipate that not only for '26, but also '27, '28, we will see further continuation of that transformation result to go up? And when I'm saying '28, I'm saying at least' '28. Now what is crucial to understand that is the 90 -- or the roughly 90% of net interest income built up a transformation result and lending income, the moving part, the really moving part is the transformation result. What is, to a lesser extent, the case for the lending income. So if you see the differences quarter-on-quarter, far more important transformation result than lending income. On lending income is fairly straightforward. Two things crucial, volume on one side, margin on the other side. So let me start with volumes. We had a very strong quarter in -- published quarter 1, 1.6% growth, but the good news is that if we look at the pipeline, it's quite strong from the commercial SME side going forward. And in Belgium and in Czech Republic as a matter of fact, in all countries, except to a certain extent, Hungary, we do have a very strong commercial banking pipeline filled. So the 1.6%, I do not see as an exception. We guided for 5% currently with the evolution, which we see we are above that. And also given the fact that we have been rolling this off in a period where uncertainty was key, given the conflicts which are ongoing, we are quite confident that the 5% will be reached by us going forward. What about margins then? Well, start -- we continue to play the game of pushing up the margins and I guess, sounding commercial way -- sound way means acceptable for customers, commercial wave means we take also into account our market share, where we do see a drop in our market share, for instance, which happened in the first quarter '26 in Belgium where we are pushing up the margins on the mortgage side. The market was not following, we just adapted situation, which means that by the end of the quarter, we restored our market shares again. This is how it works. So I would say it depends a little bit on the market. And in that perspective, I do not expect that we will see a major uplift in the commercial margin. So the product of the 2 what actually means that we will see a further continuation of what we have seen in quarter 1 of this year. Let's then discuss the remaining parts. You mentioned dealing room income, let's face the dealing room income has a positive contribution, of course, but that's faced it, it's only roughly 3% of our total net interest income. So even if you have the changes, which are about EUR 3 million, EUR 5 million, it is not going to shift the needle on net interest income. The same can be set on, for instance, cash management. We don't necessarily always mention that, but cash management is a positive contribution, but it's more -- I mean, an adjustment rather than a fundamental influence. You also mentioned inflation-linked bonds. That's quite crucial in this quarter, it is negative. But we do expect the inflation-linked bonds total for the year to be at roughly EUR 30 million, EUR 40 million. So that is an adjustment compared to this quarter in total of, let's say, roughly between EUR 40 million and EUR 50 million. And the same can be said also if you want to extrapolate quarter 1, be careful number of days are different as a negative impact and also be careful that negative one-off in this quarter on the Hungarian side. So all in all, we do see that the pickup of the net interest income over the last quarters and last year is going to be continued going forward. And therefore, I said what I said to Giulia as well, the EUR 6.725 billion guidance is on the conservative side, and we will give you an update on quarter 2. The last thing you mentioned was the parallel shift of 25% already on earlier occasions -- sorry, sorry, of course, 25 basis points, 25%, that will be a nightmare. But 25 basis points, we already said on earlier occasions that the impact would be roughly EUR 60 million. Be careful, that little shift is a parallel shift. We don't see that in reality in the short end and the long end move in different directions, and we have more flattening of the curve. But in that perspective, no change in our guidance.

As far as your second question is concerned related to the ECL buffer, which we indeed increased to EUR 175 million with what I would call a one-off fixed management overlay. This is bringing indeed, the total buffer to EUR 175 million, which is roughly 60% of the [indiscernible] impairments that we have on as a business as usual on the year, and we feel comfortable with that. Going forward, we do not anticipate that, as I said, it's a fixed one. So we do not anticipate to further increase that. What I can say as well as Johan has been lighting as well. This is also helping us to reduce the IRB shortfall. The impact of that is 4 basis points. Now for the time being, also as far as your question is concerned, what is the outlook? Of course, there what we see is today, we are particularly in Belgium what we call the review season. That means that we are incorporating in our PDs, the 2025 corporate results. What we see is today, the PDS are stable, but we do expect potentially a slight increase in the Stage 1 and Stage 2 as a result of this integration of the 2025, but this is more a normalization than a structural deal generation. So we do not believe -- or I think that there will be a structural deterioration -- of course, unless the war continues for a very long period of time because, of course, companies are suffering. But if the world is certainly a shortlisted lift, I should say, then basically, we do not expect structural deterioration, it's rather a normalization, and therefore, we maintain the guidance of well below the 25 to 30 basis points.

And we'll now take our next question from Shrey of Citi. Please go ahead.

I'm going to give you a break from the net interest income and ask about Kate. Thank you for your comments on the autonomy decrease in Belgium at the beginning. I want to actually shift focus to the Czech Republic, where if you compare the first quarter of last year to the first quarter of this year, I believe your autonomy rates are down something like 5%. So if I could just understand what's driving that? Is it -- people are asking more difficult questions or is it something else? And my second question is on the amount of leads generated by Kate. It's increased to 420,000 this quarter from, I believe, 398,000 the quarter before in the last 12 months, which implies a quite substantial step up sort of in the quarterly run rate relative to a year ago. So if you can just talk about what you see as the latest developments there?

Thanks, Shrey. Sorry, we just were discussing because there was a little blip in the line, we could not understand a part of your second question. But anyway, so in terms of the first question about Kate and then more particular Czech Republic, Well, indeed, there is a fundamental difference in the autonomy and let me define again, autonomy is quite crucial. Autonomy means that if you ask a question to Kate, Kate provides only the answer. But if the answer entails the product, she also delivers the product without any human being interfering. So what we call straight-through processing is a particular parameter, which is judged upon when we are calculating the autonomy. So in Belgium, the autonomy is hovering around 80%. In Czech Republic, which is Kate 1.0, so not the full LLM Kate, that autonomy is now what was at 67%, which is indeed down compared to previous quarter. Now how come -- and actually, it's true for both countries because also in Belgium, the autonomy was slightly down. It has to do with the type of questions customers are asking to Kate because, first of all, more and more usage is made of Kate. We do see an increase of 11% compared to previous year on the usage of Kate. That is the first thing. And secondly, when they start using it, the NPS score is very high, which means there are much more customer using us, they are much more satisfied. And as you already indicated in your question, they start to ask questions beyond the traditional stuff. And if it is not foreseen in the solutions which we have that they are straight through process, we can provide an answer, but we do not provide the product. For example, we -- when customers are asking for overdrafts, or for particular products, which are potentially linked to fraudulent actions, we do not, of course, provide the answers and we do not provide the solutions. And in that perspective, we do not count them in the autonomy. Czech Republic is now in the process of rolling out it's Kate 2.0, is already rolled out to internal staff. And the aim is to roll it out to customers by mid of this year. So we do hope to see that indeed, the autonomy is increasing there as well. In other Central European countries, Kate 2.0 will be rolled out in the course of end of 2026, early 2027. Their autonomy currently stands at 75% to 77%.

As far as your second question is concerned related to the increase of the leads from 398,000 to 420,000, this is mainly driven by Belgium, and to some extent, also the Czech Republic. And this is entirely driven also by the stronger conversion ratio, which has increased by -- from 13% to 14%. What does that mean? Basically, that is that it's a whole process. So you start up with a pickup ratio, then you have the contact to pickup ratio, which means the relationship manager context the clients, then you, of course, have the sales talk, which leads to the contract ratio and then subsequently, the final conclusion of that, which is indeed total conversion ratio. Now one of the reasons why it has significantly picked up also compared to particularly the last quarter and quarter 3 is mainly also because in Belgium, we had the -- also the maturity of the term deposits, which, of course, also forced our sales force to pay attention to that. And that is what will have an impact on a slower conversion ratio in the last tiers. The senior pickup now is 4% leading indeed to a significant increase in the conversion ratio of in total 420,000, and we expect that to increase further and further also for the reasons that Johan explained before.

We'll now move on to our next question from Namita Samtani of Barclays. Please go ahead.

My first one, just on Hungary net interest income in the first quarter even excluding all the one-offs, the EUR 10 million negative and the EUR 4 million positive and excluding FX net interest income looks flat quarter-on-quarter. And I just wanted to understand why this was because the slides point to a higher commercial transformation result and a growing balance sheet quarter-on-quarter. Are you seeing increased competition in Hungary? And what does the competitive landscape look like there? And secondly, on Czech, the loans are growing a lot faster than deposits and that's been the case for some quarters now. Do you think this is a sustainable strategy? And why do you not become more aggressive on deposit growth going forward? And if you're just able to quantify the impact on net interest income from a check Czech freight hike, if there were to be one.

Namita, thank you for your questions. Let me take the first one. So indeed, in Hungary, we do see a couple of one-offs, which are resulting in a slight -- I mean, influence of roughly EUR 6 million on the net interest income side. And as you pointed out, indeed, the net interest income is evolving positively, but is not at the same pace growing as in the rest of the group. Now in terms of the building blocks, well, here, we do see the same pattern as in the group. So commercial transformation result is performing better, which also means that on the other elements that is a compensating effect. Well, the compensating effect has to do with the fact that -- and I mentioned that earlier that for instance, the growth on the corporate side in Hungary is below our expectation. And this has to do with different elements, which are part of the Hungarian domain. And that is, of course, the elections, which were creating some nervousness and also in terms of the appetite for investors of the -- for investment, sorry, of the business development, they were subdued. So In that perspective, the explanation is actually pretty straightforward. What is the expectation going forward? Well, on the short term, I know that there are huge expectations regarding the Hungarian government. But honestly, I think that the Hungarian government will need some time before they start to build up the transition, which everybody is expecting from [indiscernible] policy, let's call it like that, to a more Europe oriented policy. In the short term, and we know that there are 2 deadlines. On the the freeing up the European budget, the European subsidies. That is a very short-term target, and there is 1 in June -- sorry, in August. Well, I think the August target to free up European subsidies for Hungary is more realistic than the upcoming one in, I think it is in this month in May. Well, that might trigger, of course, further economic development and consequently further loan growth. So. Yes, it is flattish now, but the outlook is at least when you take into account the European subsidies is more positive.

On your question on the Czech Republic. Basically, indeed, we have seen quite strong loan growth, a little stronger than the growth of the deposit base. But bear in mind that the loan-to-deposit ratio in the Czech Republic today still stands at 82%. This is something that obviously we monitor closely and further efforts will be taken into the -- within this respect. Bear in mind as well that we have been somewhat reducing the external rates on the saving accounts, Notwithstanding that, basically, our market share has remained quite stable. So also there, the net inflow is quite positive in deposits, which is indeed a growth of 0.5% quarter-on-quarter, but still 2.2% year-on-year. As far as your question is concerned on the sensitivity in the Czech Republic, while a parallel shift of 25 basis points in the Czech Republic has only a very minor impact of [indiscernible] .

And we'll now take our next question from Amit Ranjan of JP Morgan.

The first one is on the 2 acquisitions that you have done, 365 and Business Lease. How do the contributions in the first quarter compared to your planning or expectations, please? And the second one is just a clarification on dividend accruals. What was the ratio that you accrued in the first quarter?

Thank you, Amit, for your question. Let me take the first one. So we guided for 365 and Business Lease, the detail is in the quarter announcement of quarter 4 2025. So actually, we guided for this year net interest income of EUR 157 million, EUR 104 million non-net interest income. And then that totals EUR 261 million as total income. This is full year for good understanding. OpEx, EUR 156 million and cost/income ratio of 59.8%. When I I look -- when you translate that on a quarterly basis, well, you will have EUR 39 million expectation, net interest income, EUR 26 million on non-NII and then EUR 65 million total income on the OPEC site, EUR 39 million, then you have the full split up. Well, where are we in reality? We are EUR 37 million on the net interest income. If you combine that with businesses is more or less EUR 38 million. So it's, let's say, EUR 1 million lower than forecasted. The non-NII is also EUR 1 million lower, EUR 25 million, which brings the total income at roughly EUR 2 million lower than what it was. On the OpEx side, on the other hand, the reality was EUR 32 million, which is EUR 7 million better than what it was. So ultimately, P&L-wise, you will see a result. Cost income ratio stands at 51.6%. So hereby, you have the full detail.

And then as far as your second question is concerned, Amit, related to the accrual -- dividend accruals. So actually, we always accrue 50% in the first, second and third quarter and then obviously, in the fourth quarter, we accrue in line with the final dividend decision.

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

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

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