KBC Group NV (KBC) Earnings Call Transcript & Summary

Welcome to the KBC Group Second Quarter 2026 Results Conference Call. [Operator Instructions] Now I will hand the conference over to Kurt De Baenst, Head of Investor Relations. Please go ahead, sir.

Thank you. 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, August 6, 2026, and we are hosting the conference call on the second quarter results of KBC. As usual, we have Johan Thijs, our 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, Kurt. And also from my side, a warm welcome on the announcement of the second quarter results. And as always, we start with the overview. And I'm very happy to announce a very excellent result over the second quarter, totaling EUR 1,152 million. This is a return on tangible equity of 18%. And once again, it highlights that KBC is not only a very well-integrated bancassurance group, but that KBC is once again able to make the machine turn on all its -- fire on all its cylinders. All countries performed excellently in delivering this result, and that is also translated in, amongst others, customer loans growth and customer deposit growth over the quarter again, and that also totals in a very strong inflow of core customer monies now totaling in one single quarter, EUR 6 billion. It also translates and transpires in an excellent net interest income result, which allows us to increase the guidance to approximately EUR 7.05 billion. Not only the interest income part was delivering, but as I said, the diversification into the fee and commission business and the insurance business both delivered excellent results. again, very strong inflow on the asset management business, but also on the Life and Non-life side, if you compare it with previous periods in the -- with same period, sorry, in previous year, then we see a strong growth, more than 10% each. In terms of guidance, also there, we will further increase the guidance. In terms of the sum of all parts, you will not be surprised that also total income guidance is now brought to approximately 11% as it is a comparison to 9.9%, so an increase of roughly 1.2%. Costs are well under control. They're perfectly in line with the guidance, which we gave at the end of -- on the back of the fourth quarter results and is now also perfectly in line with our internal trajectory on the cost evolution as a matter of fact, we have some advance in that perspective. That trajectory was used to put the guidance in place. Now in terms of loan loss impairments, excellent credit cost ratio, and we have taken some impairments on other matters, but I will come back to that in a second. Solvency and liquidity positions remain very strong with a solvency position of 14.4%, which allows us also to announce today, as usual, the execution of our dividend policy, indicating that we are going to pay out a EUR 1 per share interim dividend as usual in November of this year. Let me go then more into the detail. On the next slide, you can see what I just said about the diversification. In general, it's more or less 50-50 split this quarter. It was a little bit more on the net interest income side. It is 52%, 48%, and this is confirming what I said, highly diversified. In KBC, both growth and costs are under control because of the investments which we do in the digital environment, artificial intelligence, amongst others, and that is then transpiring into what you all know under the name Kate. Kate is continuously improving its deliveries in terms of both the revenue side and on the cost side, more than 6.2 million of our customers are in contact with Kate and using it and the autonomy in that perspective of Kate is hovering around 80%. So 77% in Belgium this quarter, 75% in Czech Republic, where we launched Kate 2.0. In the other Central European countries, Kate 2.0 is going to be launched in the quarters to come, which also means that there, you can expect indeed a further increase. And as you know, we start -- we want to have numbers of autonomy 80% or more. In terms of the translation into what is the effect on the cost side, well, Kate is doing the equivalent of work of at least 420 of our commercial employees, and it is calculated in a very conservative way. But let me also highlight something else. Kate is generating on the back of customer data leads, which are then sent out to our employees in a dedicated way. And on the back of that, Kate was able to trigger roughly 0.5 million sales in this quarter. To be precise, 488,000 sales were delivered on the back of that, giving -- just to give you an idea, this is a success rate of roughly 19%, for instance, in the business unit Belgium. lead to contract. On the next page, you can see an overview of where we are in terms of the different position, profitability, sustainability. But let me skip that to spend more time on the really technical numbers. This quarter was also characterized by a couple of one-offs. The most important one-off, which is in this pack is the adjustment for the modification losses in Hungary. Well, that is, in essence, it's very straightforward. As you remember, there is a cap on the interest rates for mortgages in Hungary. That cap was by the -- normally taking 6 months time line. So every 6 months, it was decided if the cap would be withhold or not, triggering an impairment, a modification loss. The previous government, Orbán government, just before they handed over the baton to the Petromedia government, they changed that and actually have decided to get rid of that temporary 6 months cap. And therefore, the impairment needs to be calculated over the full lifetime of the loans totaling EUR 42 million. As we speak, Hungarian government is indeed reconsidering that position and then bringing back the caps again. A couple of things needs to be discussed on that matter, but it is potentially possible that we are going to review that EUR 42 million in the quarters to come. And then obviously, we will write back that impairment. So in essence, over the full quarter after taxes, EUR 38 million total one-offs, which is, as you can see on the graph, a bit different than on previous quarter. Let me go into the different P&L lines. And as usual, we always start with net interest income. Well, we have an extremely good quarter, EUR 1,805 million is indeed a strong performance, and it's triggered by its 2 main drivers, plus an extra. The 2 main drivers are the transformation result. First of all, transformation result went up significantly over the quarter on the back of 2 things. First of all, higher yields and second thing, a continuous inflow of benchmark deposit volumes. I will come back to that in a second. But in this quarter, we had a very strong inflow again on current accounts and saving accounts. Next to that, we had a strong increase of our lending income, roughly EUR 28 million more than before, which is due to 2 things. First of all, the traditional lending income generated by volumes and margin. Volumes were up on the on all countries and in a very significant way compared to our guidance. In this quarter alone, volumes increased with 2.8%, which is indeed -- that is 7.2% on the year for good understanding, which is indeed significant. As a matter of fact, year-to-date, giving the second quarter result, we now have an increase of our lending volumes of 4.3%, which is already almost achieving the full year target guidance, which we gave at least 5%. And on the back of that, we are going to increase that guidance for the loan growth to at least 6% for 2026. Growth is -- volume is one thing. What about the margin? It's clear that in a lot of markets where we are present, -- and on the mortgage side and on the corporate side, margins are under pressure. It's not always downward. Sometimes we are able to increase margin. But in general, I would say there is commercial pressure on the margins on the lending side. In terms of the total margin for the entire book, that means and the margins on the deposit side, replicating portfolio and the margin on the lending side and all other products which are generating interest income, the margin went up from 217 basis points to 223 basis points, which is indeed a very strong increase. If you compare it over the year, then the increase is 15 basis points, and that is indeed very significant. So I said 2 drivers. I just explained them and an extra. The extra is inflation-linked bonds. As we have indicated on the announcement of the previous quarter, where inflation-linked bonds were contributing negatively this quarter was stellar. EUR 45 million net interest income was generated through those inflation-linked bonds, which makes the difference back to back the previous quarter, EUR 57 million. As a matter of fact, the total -- the interest income for the inflation-linked bonds over this year already totals EUR 34 million. We guided previously between EUR 30 million, and EUR 40 million. So we are coming -- getting close to that. You cannot extrapolate the EUR 45 million of this quarter going forward, probably will generate a couple of million euro every quarter in the coming quarters to come. What about the other adjustments there to a lesser extent, number of days, EUR 9 million extra where it was previously negative. So all in all, a very strong number, but let me come back to what I said on the volumes. There was a 2% growth overall on the quarter of our deposits. If you look at the inflow of core customer monies on the next slide, then it is indeed a very strong quarter, EUR 6 billion of inflow of core customer monies. And what is even more important is that this -- in comparison to previous quarter, this quarter was characterized by a strong inflow on current accounts and saving accounts rather than on term deposits. As a matter of fact, the inflow on current account saving account is double of that of the term deposits, which is a different trend as what was probably assumed in quarter 1. If you sum it up all parts, then we are almost at EUR 12 billion net inflow of core customer monies. You also see that in that perspective, we do see EUR 1.4 EUR 1.4 billion inflow on the mutual fund business, which already gives you an indication on the strong performance of last year. Let me say one more word on the term deposits. Term deposits here are also used as a defensive instrument. This defensive instrument is used, for instance, when competition is launching these kind of products, when states are launching state notes with higher interest rates, well, then term deposits are often used to actually facilitate our customers with short-term products, but there is one fundamental difference. Most of the time, we do see that clearly, for example, in the business unit Belgium, where private banking is using this instrument for the same reason that most customers lock in those monies in a very short term. 55% of all the monies which are on term deposits in that perspective in Belgium are having a tenor of less than 3 months. 75% have a tenor of less than 6 months, which means it's just an instrument to mitigate potential other investments in the future, amongst others, mutual funds, let me say it differently, amongst others products with higher yields. Let me then go into an immediate bridge to the fee and commission, already mentioned the very strong inflows, but EUR 758 million put net fee and commission income at a record high. And this is due to actually 2 things, in essence, 4% growth on the asset management services and 4% as well growth on the banking services. Asset management services, as you know, is also driven on the evolution of the market. So the market performance is generating here a very strong uptick. Our assets under management grew to EUR 328 billion, which is an increase of 10% on the quarter, and that 10% is actually generated to roughly 9% to 10% market performance and 1% net inflow. Now given that market performance, there is no big surprise that the asset management fees are increasing indeed strongly over the quarter and that net inflows follow up. But to a lesser extent, that is a translation of the strong inflow of the EUR 1.4 billion. In terms of the banking services, a very strong performance on the payment services. Payment service are the bulk of those banking services, but also very strong performance on the network income and the credit files linked to the loan growth, but also on the security-related fees, which we get on our trading platforms in Belgium, Czech Republic and Hungary. Just to give you an idea, we had, again, on the record of last quarter, we had another improvement, 12% more customers on the Bolero platform in Belgium over the year compared to 36% more transactions. So all in all, very strong performance on the fee and commission side. We stand now at EUR 3 billion gross -- sorry, EUR 3 billion net sales inflow in the first half of this year, and this is a perfect in line with our ambition in this perspective. As you know, we don't give detailed guidance, but we are quite positive about the evolution. Just to give you an idea, in the first month of this third quarter -- yes, third quarter, we have achieved a sale of EUR 1 billion net as well. What about the insurance side? Well, non-life business is doing excellently, 10% sales increase, which is quite significant. This is due to all countries. Belgium, 7%, more mature market, bigger portfolio. And then the Central European portfolios, they all grew above their targets, more than 10%, 12% in Bulgaria, Hungary, 16% and 14% in Czech Republic and Slovakia is a bit lower. Why? On purpose because of the reshuffling which we are doing on the portfolios, and this is mainly due to the MTPL portfolio. Combined ratios in all countries are performing excellently. -- despite the fact that we had thunderstorms with consequences in Belgium and in Hungary, but also a couple of big fires in, amongst others, Czech Republic. But if you all take that into account and you put it into a combined ratio, then you see that combined ratio stands at an excellent 85%, perfectly comparable with the same period previous year and clearly below the target of lower than 91%. So this is a clear token that the underlying quality of this portfolio is of such kind that allows us to absorb even a couple of calamities, which can happen in a quarter. What about the life business? Well, the quarter performance looks compared to previous quarter, subdued, but this is not a correct observation. As you know, a lot of sales in these portfolios are driven by campaigns and the first quarter characterized by very strong campaigning, not only in Belgium, but also Central European countries, amongst other Czech Republic. This was not the case in the second quarter. Only we had only one campaign in Belgium and in Bulgaria. And nevertheless, we were able to generate 24% more sales in this quarter than in the same period last year where you have the same seasonality. So combining the 2 quarters, the first half of year net sales was 18% higher than the same period last year, just to indicate that also in that perspective, the commercial machine has been doing its utmost to generate extra sales. Quality-wise, also the margin, which we deliver on those products, the CSM margin has further increased. It now is solidly above the 17%, which is a fundamental uptick in comparison with, for instance, the same period -- the same position a year ago. Then we go on to more volatile results. That is the financial instruments at fair value. As you can see, we have a clear improvement on the derivatives, which are used for our mark-to-market positions, EUR 42 million better, which is on the back of the lower ineffectiveness of our macro hedges. All the other stuff you can read in the detail. In essence, the total result improved with roughly EUR 26 million over the quarter, which is totaling minus EUR 92 million. Net other income, the income generated through the leasing and real estate and the assistance company is here perfectly in line with the run rate, EUR 50 million is precisely the result which we have booked in this quarter. Coming to the operating expenses. Well, operating expenses are significantly lower than previous quarter. But once again, here, be careful, bank taxes are, as you know, upfront paid in the first quarter. So let's ignore that. And then if you look purely at the underlying operating expenses, well, then the expenses this quarter are roughly EUR 5 million lower than previous quarter. If you take into account the FX effect, we had a very strong appreciation of the forint to a lesser extent, the Czech koruna. If you exclude to make a like-for-like comparison, well, then the cost growth is EUR 9 million, which is a translation that costs are under control. The comparison made by previous quarter, we need to be aware, we paid EUR 23 million bonus in that quarter. So despite the fundamental uptick of inflation, despite the fundamental uptick of the FX effect, we were able to keep costs more or less in line compared to previous quarter. And also, that transpires in the calculation of the underlying effectiveness of KBC Group. If you exclude -- so you make a like-for-like comparison, if you exclude the FX effect I just was referring to, the one-off profit bonus and then, of course, the acquisition of 365.bank let me remind you that the integration of 365.bank at this stage is an integration of a not efficient institution, so at high cost and that the benefits of that, so the synergies that they will be reaped in 2028, start to do that in '27, but ultimately, the big chunk comes in '28. So it is front-loading the cost and backloading the efficiencies or the synergies. Well, if you exclude that 365.bank to make a comparison on a like-for-like basis, then we do see this quarter an increase of our cost of 3.4% absorbing indeed, what I just said, wage inflation, which I think is a major achievement. This is perfectly in line with the guidance. And also -- but these are numbers you obviously don't know, perfectly in line with the trajectory which we had forecasted for ourselves to get to the guidance. So cost/income ratio now stands at 39.8% when you exclude the bank taxes, and that is better than the 41% of previous year. [ Certainties ] in Life, our bank taxes, well, we paid another EUR 64 million, mainly triggered by the windfall taxes in Hungary, EUR 54 million. We do expect that by year-end, the sum of all taxes paid is EUR 730 million, and that is indeed quite a lot. Going to asset impairments. Well, asset impairments are very benign in this quarter despite the very difficult circumstances, which were part of our lives, EUR 135 million. But if you look at the really underlying impairments on loans, it's only EUR 53 million. That EUR 53 million is translated into 11 basis points credit cost ratio, which is indeed a very good result. And if you compare that with previous quarter, it's an improvement. If you compare that with the results of last year, and it's another improvement. So indeed, the quality of our portfolio is and remains good. Sorry, the impairment loans ratio stands at 1.8%, which is stable over the years. And if you translate that at EBA level, then it's 146%, and that's clearly below the European average. Now -- we have added a couple of things to those impairments this quarter. And that is, first of all, given the turbulence in the world, the parameters changed and therefore, the modeled ECL buffer has increased with EUR 13 million. As I indicated on previous quarter, the EUR 75 million management overlay we would not touch. And if you add both numbers together, then the total buffer now stands for -- total buffer for geopolitical and macroeconomic uncertainties plus the management overlay stands at EUR 188 million, which is roughly 8 basis points of our lending book. The other impairment, which we took is the EUR 42 million modification losses, which I explained earlier and which we potentially are going to take back in the coming quarters. But we also took a EUR 28 million impairment on software. That impairment is a seasonal exercise, which we do for sure, half year and end of year. Probably we will do it every quarter now going forward because also this impairment has a positive impact on our capital position. And therefore, it will indeed have a positive contribution to our CET1 ratio. Let me go into the exposures which we have, particularly on our portfolio. You might have questions about that. We already indicated in the first quarter and has not changed that we do have no exposure to private credit. We have hardly any exposure to private equity, and we have hardly exposure to the Middle East. 0.2% in the latter on our outstanding book is indeed limited, but also sectors which can be qualified as vulnerable, our exposures are limited. You can see the numbers on this page. I'm not going to dwell upon this in the detail. Might you have questions about it, we're willing, happy to answer those questions. Let me go to the sum of all parts, which brings us to the CET1 ratio. Well, the CET1 ratio stands at 14.4%, which is the consequence of capital distribution through the profit generation. Mind you that it might occur that the dividend, which is coming from the dividend -- sorry, from the insurance company is pretty low. As you know, this has to do with the dividends which are generated through the Belgian GAAP result and paid out. So there's always a quarter delay. That EUR 25 million will be in the next quarter, for instance, EUR 208 million. So there is some seasonality in those numbers. And then the second thing is, of course, the evolution of the risk-weighted assets we have had a strong growth of the volume. I indicated already that on the back of that, we increased our guidance. But this, of course, translates itself in the volume increase of our risk-weighted assets. As you can see, EUR 2.3 billion out of the EUR 3.5 billion directly comes from that volume increase and also FX effect, the very strong uptick of the foreign and to a lesser extent, the Czech koruna have generated 0.6% extra risk-weighted assets. sum of 2 parts is explaining roughly 90% of that increase. So 14.4% on the capital side, which actually triggers also buffers roughly of EUR 4.8 billion if you compare them with the MDA of the OCR level. There is a small adjustment on the MDA that 5 basis points come on sorry, on the OCR, 4 basis points come on top of that because of an increase of the countercyclical buffer in Czech Republic as of the 1st of July of this year. MDA buffer now stands at 10.99%, which is due to a 5 basis point shortfall on the AT1. Leverage ratios are actually in line with what it was previous quarter. Also, the liquidity ratios are super stable, and the insurance company stands at a rock solid 231% solvency ratio. Now I already mentioned that in the introduction, given the strong results, we actually updated and I should say, upgraded our guidance. The guidance now stands for the total income 11%, which compares to the previous guidance, 9.9%. This is mainly triggered by an interest income guidance increased to approximately EUR 7.05 billion. and an increase of the insurance revenue to approximately 9%. You already noticed there is a difference in the wording where we used previously at least, we now use more precisely approximately. The difference is at the beginning of the year, the world is very uncertain. We make a prediction for the full year. Now 7 months down the road, it becomes quite clear where we are. And therefore, we're making a guidance now, which is far more precise than the previous one, which is giving you a bigger range. So this is the reason why we have changed that, and that is also translated in the operating expenses, which we guide at approximately 3.4% year-on-year. Consequently, the jaws are standing now 3.3% which means that we also upgraded the jaw. Previously, the jaw stood at 2.2%. So the full increase of income is indeed calculated on top of the jaw. So that benefit is fully taken into the jaw. The cost/income ratio will be approximately 40%, and the rest of the guidance remains unchanged. We didn't touch the guidance of 2028 because that guidance was -- sorry, that guidance is only done once a year. And that is, as you know, always at the back of a budget exercise, which is currently starting up. So update on '28, but also giving you insights on '29 will be delivered as always in the month of February on the back of the fourth quarter results. Well, I keep it here, and I'll give back the floor to Kurt, who will guide us through to your questions.

Thank you, Johan. Let's open the floor for questions. [Operator Instructions]

[Operator Instructions] Let's open the floor for questions. to -- the next question comes from Tarik El Mejjad from BofA.

Two from my side, please. First, on the M&A and Ethias deal, could you please update us on what's the latest on the discussion from the government side on the optionality around Ethias, this recent report, what you make of it? And also, I mean, you've been open about distributing the equivalent capital to shareholders in case that deal doesn't happen. I mean, I think from the ROI perspective, it's probably not the best be in cash or a buyback. Would you consider opening up to another M&A option across Europe, Central Europe and being -- I mean, you've been always transparent about what could be the target, which country or at least when asked, not pushing back too much on commenting. So would you be opening up to another option to use the capital? And second question is on costs, especially in Belgium. So your last comment about approximately versus at least seems that you're confident about your cost target. What do you make of the fact that if inflation picks up because of this uncertain macro environment, especially in the Middle East, take cost inflation up and then cost in Belgium up. So have you identified any levers to offset that inflation in case it persists?

Thank you very much, Tarik, for your questions. And let me take the first one. So indeed, what we said about potential M&A and then especially the Ethias file, we said at this stage -- I mean, on the previous quarter, I mean, I said on this stage, it's only certain that Belfius will come to the market. The government is trying to sell 20% stake, and that process has now started up. We expect by year-end that the government will make a clear statement about what they're going to do with Ethias. Well, where we are today, and that is also in the newspapers and also picked up by analyst reports, actually, that statement which we made last quarter, quarter before is confirmed by the official declarations of the government. So it's quite clear that the government has launched a process to sell 20% stake in Belfius. The government has also triggered an investment firm to give an analysis on what to do with Ethias and then also to comment on the possibilities of merging Belfius and Ethias at this stage. The intermediate conclusions, which have been also sounded by the Minister of Finance were that a merger between Belfius and Ethias is not possible when you do a launch of the stake -- the sale of 20% stake in Belfius as is happening today. As a matter of fact, also economically, it makes a lot of sense to merge Ethias with another financial institution, a bank, an insurance company. Which means actually that they are now indicating that the process of Belfius is one and potential process of Ethias is another. The minister is going to come back -- or sorry, the investment firm is going to come back to the Belgian government before the end of September. And then on the back of that, the government is going to take a decision on Ethias. And which means before the year-end, we know what they're going to do with Ethias. And let me remind you that whatever happens, so if the government is willing to sell Ethias, we will be a candidate. And for the right price, we will pursue that transaction. And if the government would decide not to sell it, it will not break KBC because we are growing our market share on the strong side. We are meanwhile #3 in Belgium and growing. And in that perspective, we are not desperate. What to do with the monies? I agree with you that you have 2 options. In essence, you would go for building business, which we are currently doing. Let's not forget that we grew our lending book roughly 5% this quarter. We grew our insurance book roughly 10% in this quarter. So if you take that into account, then I could say that we grow the size of an Ethias every year again, roughly over 2 years, I think it will be roughly there. Over 5 years, we grew the size of a company like CSOB organically. What we definitely will do continuously is screen the market for opportunities. In the first place in the countries where we are present, this is translated into, for instance, the acquisition of 365 and others in the previous years. And as I said before, we look in specific markets that if an opportunity arises, which fits our strategy and which clearly fits also our business model that we will at least consider. And countries which we have mentioned in the past were, amongst others, Romania. And if it is an opportunity, then we'll definitely pursue. In terms of business development, given the returns which we are making, I think also it makes a lot of sense for investors that we use our capital to expand our business organically for sure, but if possible, inorganically as well.

Very good morning to all of you from my side for your question on OpEx. So basically, indeed, as Johan has been highlighting, we maintain our guidance on the OpEx evolution. We made it more specific by changing below to approximate. So we maintained the 7.7% year-on-year on a nonorganic basis and the 3.4% organic basis, so excluding 365.bank and also the FX impact. As far as wage inflation in Belgium is concerned, there, we are very clear that we -- as Johan also has been highlighting, that we anticipate that we will be able to absorb in '26, the inflation increase by further efficiency improvements driven mainly by, of course, Kate and the impact on that on our FTE savings -- theoretical FTE savings. So from that perspective, you should take that into account that we will absorb that.

The next question comes from Giulia Miotto from Morgan Stanley.

First of all, on NII, I hear you that you have changed from at least to approximately. But I'm just trying to understand if this is a realistic or still sort of conservative guidance. If I take Q2 and I assume it's flat in Q3 and Q4, I'm already at or above the 7.05 guidance. And then, of course, you still have got loan growth and deposit growth coming. So is the difference because the contribution from the inflation-linked bonds is going to be lower? Or is it conservatism? So some comments on that. And then secondly, loan growth is ahead of deposit growth in each market. And for now, I think it's fine because loans are still below deposits. But is there a moment or do you think we are approaching a moment where there needs to be much more deposit competition because loan growth is accelerating and banks need to fund the loan growth?

Thank you, Giulia, for your questions. Let me answer the first one. So of course, I mean, like always, your calculation is correct. And then the question is how you -- how -- what is the driver behind that? Well, if you make the analysis on the evolution of net interest income, then first of all, the 2 drivers are -- 2 main drivers are transformation result. Transformation result is triggered by inflows. And I just highlighted that we have a very strong performance on the -- that we do have a very strong performance on the inflow of core deposit money and that the yields are higher. So on transformation result, Actually, the outlook is the same as what we have given already for many quarters. That will continue to increase. On the lending side, well, we gave guidance that it is at least 6% and that the current position after 6 months is 4.3%, which means the second quarter is not going to grow as fast or we do expect that it's not going to grow as fast as it did in the first half of the year. So in that perspective, some slowdown, assuming same margins, well, you will have anyway some slowdown in that perspective. And then the -- you already highlighted the impact in the second quarter that you need to be careful. Inflation-linked bonds have been totaling EUR 45 million in this quarter. You cannot keep that constant going forward. So we expect inflation-linked bonds to generate couple of million euros every quarter, but definitely not the EUR 45 million which you have seen in this quarter. So in all pieces, if you put them together, well, you will see some further increase on your net interest income, which brings us to the approximately EUR 7.05 billion. But that the margin of conservatism, which was in the first guidance, well, that margin of conservatism has certainly come down. I'm not saying it's 0, but it's certainly come down.

On your question on the loan growth, which is higher than the deposit growth, obviously correct. We have a 2.8% organic growth on the loan side and 2% on the deposit side. Now there's 2 elements I would like to highlight. First of all, you've also seen that basically, we have a strong inflow into our asset management business, net sales, EUR 1.4 billion, EUR 3 billion for the year. So that also you should take into account. We are indeed also driving our inflows in order to generate higher investment returns, which is also where the margins are also well north of 100 basis points and which ties in the clients even better. So it improved also the loan -- the client loyalty. But secondly, also within KBC, we've always done that, whereas we obviously guide and steer our entities on loan growth. We do the same also on the deposit growth. So they need to focus also on growing deposits, obviously, without generating a deposit war. And a good example of that, you can see in Slovakia, in Slovakia, where we had a loan-to-deposit ratio of well above 140%. This has now dropped to 127%, exactly because also in the Slovakians have been focusing on increasing their deposits. Moreover, thanks to Kate as well and thanks to the fact that we've been able to increase our NPS scores, we are also able to attract new clients and new clients means also nice deposit growth. So from that perspective, our loan-to-deposit ratio for the whole group still stands at a very favorable 88%. And so that it will grow somewhat, but we will definitely manage that to make -- to avoid that it would be increasing dramatically.

The next question comes from Namita Samtani from Barclays.

My first question is the net interest income in Belgium. It's up 18% year-on-year in the second quarter, but loans grew below that at 6% year-on-year and deposits only 2% year-on-year. And you've spoken about lending margin pressure. So can you just break down to me the components of how Belgium NII can grow 18% year-on-year? I just wondered if it's all the replicating portfolio with saving rates. not moving? And then my second question, which is again on the loan-to-deposit ratio, but in Czech. So the Czech loan-to-deposit ratio was 67% 3 years ago and now it's 80%. Are you happy for the loan-to-deposit ratio to continue to grind upwards there? Or is there a limit? And what assumption for the Czech retail bond have you made in your NII guidance?

Thank you, Namita, for your questions. I will take the first one. So indeed, we do have in Belgium a very strong beat in the net interest income, and that is driven by the 2 elements which I highlighted for the group in essence. So First of all, you have in Belgium, a very strong performance on the transformation side, given the fact that inflow of core money, so current accounts and saving accounts is indeed also happening in Belgium. And as you know, this is by far the biggest portfolio. We do see that the net interest income, we're now talking about nominal amounts, whereas inflow, we mostly speak about percentages. So net interest income is indeed generated through the transformation result at a higher yield on a higher volume in current accounts, saving accounts, which are the 2 products which have the highest margin in this perspective. And as a consequence, we do see in Belgium that the transformation result increases significantly. As you know, we don't give a precise number and definitely not per country, but believe me, it was significant. The other element is the lending income. Belgium had a very strong quarter on the growth. And in that perspective, the growth was on 2 sides, both on the mortgage side, where, as you know, we tried in the first quarter to push up the margins. Also in the last quarter of '25 to push up the margin. We lost some market share consequently because the competition did not follow. But we do see that in the second quarter, that has completely been restored to the detriment to a certain extent of our margin. You can see that in the detail which we have published. But volumes have gone up significantly in Belgium, we do see an increase of our volumes on the term loans with 4% and roughly 1% on the mortgages restoring our market share back to 21%. So both have been contributing significant increase of that net interest income. And let's not forget in Belgium, inflation-linked bonds is the main bulk of the inflation-linked bonds are booked in Belgium. On the insurance company, and so the EUR 45 million is almost entirely on the inflation -- on the interest income of the business unit.

Good morning, Namita. Your question on the loan-to-deposit ratio in the Czech Republic. Indeed, our loan-to-deposit ratio currently stands at 83%, which is indeed up compared to the previous quarters. But this is -- needs to be put somewhat into perspective. What I said earlier with respect to the focus on loan growth also and then also on the deposit growth is also valid, of course, for the Czech Republic. There, what you clearly see indeed is the impact, of course, of the retail state bond, which was more successful than anticipated. They expected to raise CZK 40 billion of now at CZK 74 billion, which is significantly up, roughly EUR 3 billion. Now that only led to an outflow within CSOB of roughly EUR 7 billion, which is well below the market share of 21% on the deposit side. Moreover, you should also take into account that notwithstanding the fact that we have -- that in the Czech Republic, we had, of course, also a policy rate increase. The market continues to react quite in a reasonable way in the sense that the top rate remains at 400 basis points. We, by the way, as I already highlighted on the first quarter, have been decreasing the top rate for the saving accounts from 400 basis points to 380 basis points. And nevertheless, our market share in saving accounts did not drop. So we continue to see also quite some strong growth. We will do not do crazy things. And on top of that, we are also focusing in the Czech Republic on shifting part of that towards our investment products in order, again, to also link better our clients, which we do with quite a success because also you can see that our private banking and wealth market shares continue to increase and our assets under management also continue to increase. So they take also those 2 aspects into account.

The next question comes from Amit Ranjan from JPMorgan.

The first one is on risk-weighted assets. Besides loan volumes, should we expect any other drivers going forward? And in that context, if you could also talk about SRTs, if you plan to undertake more in the second half, please? And the second one is just generally on asset quality. Is there any pockets or signs of stress anywhere that you are seeing? If you could talk about the different geographies, please?

Yes. So in terms of your question related to the risk-weighted assets, indeed, risk-weighted assets for this quarter increased by EUR 3.5 billion, 2.6%. That is, as you have seen in the company presentation, is mainly driven by volume increase. and also by FX, obviously. To some extent, we've also seen an increase as a result of the defaulted loan portfolio now there. To be very clear, this is not immediately linked to a potential deterioration of the loan portfolio. This is simply because we have been writing off quite a number of legacy files with higher provision coverage than the inflow of new files, which explains the increase of the risk-weighted assets on that side. We see a relatively modest, but something that you cannot avoid increase in our risk-weighted assets from the models and model changes. This is obviously related to updates of models, but also interventions of the regulator. As we indicated already before, we will mitigate that by, of course, using or further managing our -- through management -- portfolio management initiatives. These are, amongst others, SRTs, but it's also more than SRTs. We are also looking obviously at credit insurance, but we're also looking at further improving our data and also being much more aware of what the impact is of potential increases in loan volumes on the risk-weighted asset side. So in terms of SRTs, we have been issuing our second SRT in June, which was on a EUR 1.25 billion corporate portfolio in Belgium, generating an RWA saving of EUR 0.7 billion. We do have indeed another number of SRTs into our planning still also for this year. But it's too early to give you an indication on what the impact would be and what the portfolio would be because, as you know, the impact is depending on the concentration of the portfolio. But yes, if there are any further impacts of model changes, et cetera, we will, to the extent possible, manage that through portfolio management.

Amit, I will take your second question. So given what about asset quality and what about potential stress? Well, if you look at the numbers, which are also part of our disclosures today, both in the PowerPoint analyst presentation as in the detailed quarterly report, you can see that our loan asset impairment ratio and our credit cost ratio are actually either stable or improving. So the macro picture is -- the answer to your question on basis of this macro picture of our portfolio is actually very straightforward. Well, we don't see any kind of deterioration despite the stress which is there. So there is -- there are some shocks given the Strait of Hormuz closures and so on and so forth. But we don't see it transpiring directly in a fundamental uptick into our numbers. One of the reasons is we are not exposed to, first of all, directly the region. And secondly, the number of sectors which are very sensitive to this are not present in our portfolios in a large extent. That detail is provided in the analyst presentation. Now looking into specifically the ratios, as I said, in the quarterly report, you also find an overview of the PD classes, the different buckets, PD 1 to 4, 5 to 7, 8 and 9 and then you have 10, 11 -- 10 to 12. Well, if you make that average of -- and you look into the evolution over time, if you would do that exercise, you will see that the second quarter is better than the previous one. And as a matter of fact, those quarters are perfectly in line with what you have seen over the last 2 years. As a matter of fact, they're slightly higher than 2022, which was a period when the credit cost ratio was absolutely at its lowest level. So hardly 0 or hardly positive and close to 0. So our guidance remains -- if you look at what is happening, you look at our credit cost ratio, it is improving. It is 11 basis points. It will now go back to 0. We do expect that we will have a normalization of the underlying impairments on our portfolio. This would be a normal way of thinking. It is not crystallizing yet in our portfolios, but we remain extremely, extremely vigilant about that, extremely attentive about that. We do on every book for every country, particular exercises on sectors, which might be vulnerable to external factors, amongst others, the conflicts in the Middle East. And as I said, that attentiveness makes us sure that we will not have big jumps in our credit cost ratio. But the normalization is what we guided before and which we continue to say today.

The next question comes from Benoit Petrarque from Kepler Cheuvreux.