Good day and welcome to today's KBC Group earnings release Q2 2025 conference call. This meeting is being recorded, and now I'd like to hand the call over to Kurt De Baenst, Head of Investor Relations. Please go ahead, sir. Thank you, operator. A very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the KBC conference call. Today is Thursday, August 7, 2025, and we are hosting the conference call on the second quarter results of KBC. As usual, we have Johan Thijs, Group CEO, with us, as well as our Group CFO, Bartel Puelinckx, and they will both elaborate on the results and add some additional insights. 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 to the announcement of the second quarter results of 2025. As always, we start with the key takeaways, the highlights of this quarter, and let me start with the net result, which stands at a very strong EUR 1.18 billion for the quarter. Again, we pulled the net result over the billion, which I would say, given the taxes being booked in the first quarter upfront, is the third quarter in a row. As a matter of fact, the commercial franchise, bank insurance franchise, has been firing on all cylinders in KBC Group. That has, amongst others, led to the fact that also KBC's group diversification kicked in very well. As a matter of fact, 49% of the income was related to the net interest income side, which means that diversification to other products, in essence, insurance products and fee and commission products, delivered 51% of our total income. Coming back to the interest batting part of our P&L, we had a very strong quarter given our deposits and our lending side. Both increased significantly on the quarter and delivered excellent results, which resulted, amongst others, in growth on net interest income on the lending side, but also record high money inflows. We have a very strong quarter on the sales side of the asset management side, despite the turbulence which was generated in the first part of this quarter, given the announcement of the tariffs in the U.S. We had a very strong quarter on the insurance side, both on the sales side and on the outcome of the quality of the underwritten products, with a combined ratio of 85%. We kept our cost perfectly under control. That is, we increased our costs, but this is perfectly in line with the foreseen budget of KBC in the first half of the year. As a matter of fact, it's slightly below that budget. In terms of our loan impairments, also there perfectly under control. As a matter of fact, we have added a one-off buffer extra of roughly EUR 40 million, to be precise, EUR 38 million, which still leads to an excellent credit cost ratio of 15 basis points. No big surprise that our solvency and our liquidity positions remained very strong, and this also allows us to announce today the interim dividend of EUR 1 per share, which, as usual, is paid out in November of this year. In other parameters defined, the return on equity of this quarter stands at 15% if you equally spread the taxes over the year. Let me go now into more detail. I already mentioned on the next page the diversification. As a matter of fact, the split up between the banking and the insurance activities was 81% on the banking side and 18% on the insurance side, which means that the insurance performed very well. As a matter of fact, it had a very strong performance with EUR 181 million higher than normal. That also plays its role in our CET1 ratio. I will come back to that later on. The EUR 181 million of profit is indeed EUR 41 million more than the normal run rate, which normally stands at roughly 15%. Our probably best-known employee, besides Kurt De Baenst, is probably Kate, and that means that Kate is delivering more and more to our customers. First of all, it's used more and more by our customers. 5.7 million customers group-wide are using Kate. They're not only using it more, but they are also using it until the end of the process for which they started up Kate, which intrinsically means that Kate has been contacted 73x million by our customers in the quarter, that she has delivered answers to seven out of 10, sorry, seven out of 10 questions which are raised, which means that Kate delivers without any kind of employee of KBC involved interfering whatsoever. The solution to our customers, which allows us to indeed state that if we calculate in a super conservative way, the number of staff which is replaced by Kate to be at least at the level of 300, 320 people. This is a very conservative assumption because I'll give you one example. We only consider eight minutes to be spent by a customer when he or she asks a question in the branch. Eight minutes, that is absolute, absolute minimum. Also there, that's on the cost side, the positive side. On the income side, be aware that the leads which are triggered by Kate and transferred to our network, that they are growing and that they are, in essence, roughly around 14% of them are converted into a sales transaction, which led over the last 12 months roughly to 414,000 extra sales conclusions made. As a matter of the fact, you should combine the two. The time which is saved by Kate for our bank branch managers, bank branch people, sorry, are used to get in contact with customers on the sales side for processes which are a bit more sophisticated and therefore need human intervention. That is paid off indeed in this quarter. On the one-off side, this has been a very normal quarter. Hardly any one-offs. The total is EUR 1 million of difference if you exclude them. Not worth to mention it. Let me go immediately to the things which are more relevant, and that is, first of all, the net interest income. We have a very strong quarter on the side of net interest income. EUR 1.5 billion and EUR 9 million is delivered in this quarter, which is EUR 88 million net interest income more than previous quarter, and which is a whopping EUR 233 million more than previous year, same quarter. The reason why this increased so strongly is actually materializing in, let's say, three elements, in essence. What we already said for a longer period on several occasions during quarter result announcements is that our transformation result is going to deliver higher and higher net interest income results. This is this quarter's effect as well. EUR 27 million more on the quarter driven by higher yields, but also on the fact that we do have more volumes generated through the incoming core monies. Also on the lending side, there was a fundamental uptick in the net interest income where we speak about the combination of margin and volume. The main driver here is the volumes. We have a growth of 2.2% in the quarter. As a matter of fact, 7% on the year, which is extremely strong. If we look into the performance of the loans year-to-date, then we already have achieved our target, which we guided the 4% at least is already achieved in this quarter year-to-date. 4.7% is the case. We are going to review those targets and consequently also the targets on net interest income. What was also a strong uptick was the inflation-linked bonds net interest income. Where it was negative in the first quarter, it was positive in the second quarter, and that made a difference over the quarter of EUR 29 million. As a matter of fact, we guided the market that we would see on the net interest income ILB side, inflation-linked bonds side, roughly EUR 20- EUR 30 million for the full year, probably more tailored towards the lower end of the range. Today, year-to-date, we are already at EUR 19 million due to this uptick in the second quarter. A couple of other elements play here the role as well. The number of days, EUR 7 million up, and that is something which is, of course, particularly linked to this quarter. Nevertheless, net interest income is significantly up given what I just said. On the year, something similar, but I'm not going to dwell upon that. What is far more important is to see that the margin now stands at 208 basis points, which is 3 basis points up on the quarter. That's a rounded number because it's closer in that perspective to what is mentioned, 2 basis points in the text. Now, in the overall scheme of things, what is driving this is translated on the net interest income side, what I just said about amongst all this transformation result and shoulders. Commercial margins are under pressure, be it that this quarter in Belgium, in Czech Republic, and Bulgaria, we were able to write higher margins on almost all the products compared to the previous quarter and even the previous year. The countries where it is under pressure are Hungary and Slovakia still. Coming back to the building blocks, let me talk about the volumes. Volumes were up 2.2% on the quarter. Actually, as a matter of fact, if you exclude the volatility of the foreign branches, which is deposits of very low margins, it was up 7%. If you include them, 6%, which means indeed there's a very strong performance. This is also translated on slide eight, where you can see the inflow of core customer money that is on the quarter, EUR 5 billion up. If you would make abstraction of the fact that also in last year, when we recuperated the monies which were invested in the state note, which we recuperated in this quarter, then the EUR 5 billion inflow is indeed an extremely well number. It is, and that is a positive one. It is, first of all, flowing in into current accounts and saving accounts, whereas in the term deposits, we now see the gradual build-down of those term deposits. That is something which we have to bear in mind going forward because this will have a very positive impact on our net interest income for quarter three and quarter four. In terms of the year-to-date number, we do have EUR 7.4 billion core customer money inflow, which is translated, as you can see in the slide, on a fundamental shift, more than EUR 7 billion on the current accounts and saving accounts. That is in total EUR 7.8 billion. The decline of the term deposits, which is shifting, as I said, to current accounts, saving accounts, or mutual funds, is standing at the year at EUR 3.9 billion. Remind all of you that in the third quarter, in October, which is actually the fourth quarter, to be straightforward, we do have the maturity of the recuperated money from the state note, which is invested mainly in term deposits, and we will see there an impact. Now, I also, in this slide, you can see a very strong performance on the mutual funds, EUR 1.5 billion positive impact. I'll come back to that in a second. Let me finish first on the net interest income. You can clearly see that, on all the building blocks of that net interest income, we have outperformed what we guided before. It's no big surprise that we are going to update the guidance, which we have again earlier. We guided the net interest income for the full year 2025 at at least EUR 5.7 billion. As always, we build in conservatism in this perspective, and it's clearly also shown here in the results today. Today, we're going to review that conservatism in the same way and still update the guidance with EUR 150 million extra. With the same form of conservatism, the new guidance on the net interest income is at least EUR 5.85 billion. When I look at the assumptions which the analyst community made on the previous guidance, what about the conservatism KBC puts in? That was roughly EUR 120 million. We're not surprised, and I repeat what I said. We keep the same conservatism in the new guidance. Let me go then to the guidance on the loan side. We are today already at 4.7% in terms of the loan guidance. We have already overshot that number, and therefore, we also are going to increase that guidance on the loan growth as well to at least 6.5% growth. Both numbers are, as I said, floors. The upside is a given given the conservatism which we always build in. Let me go to fee and commission business. At first glance, it looks EUR 23 million lower than what it was previous year. In reality, in the hard numbers, it's indeed the given. There is a small but, and the small but is that EUR 23 million, which is the difference between previous quarter and current quarter, is driven in essence by asset management fees, which are triggered by the assets under management. In the beginning of this quarter too, there was an announcement made by the American president regarding the tariffs, and that disturbed the financial markets significantly, for sure, also the stock markets. Because the stock markets play an important role in our assets under management, the start of the quarter was very negative, and that had a negative impact on our assets, sorry, on our management fee under the asset management business. What was mitigating that impact was the sales which took place in that second quarter. We posted in quarter two EUR 1.5 billion net sales, which is an absolute strong number. Definitely, if you compare it with the same period of last year, where we had in quarter two 2023, EUR 0.6 billion net sales. This quarter, we were able, despite the turbulence, to sell 2.5x more than the same period last year. It almost gets to the record level of the first quarter, which stood at EUR 2 billion. Therefore, indeed, it is a mitigant for the negative impact, which we have seen at the beginning of 2025 quarter two, of the impact of the financial markets on the management fee. Now, what has happened over the quarter is that the financial market has recovered over the quarter towards quarter end. That is a good starting base for quarter three, but of course, it does not translate itself in quarter two in full. Therefore, the EUR 23 million is actually a good result given the net sales I just highlighted. If you look at the banking services, that is slightly below the previous quarter, but it has to do with seasonality, and it has also to do with the record high numbers which were posted, for instance, on our secured trading platforms in Belgium and Czech Republic, which were now also at a very high level, but not at the same record level as previous quarter. As a matter of fact, if you look at those trading platforms, we do see, if you compare the first half of this year with the first half of previous year, a 37% increase of the trading activities. As a matter of fact, we do see an increase of 50% of new customers over the same period. It's quite striking. If you look at the assets under management, as I said, the beginning of the quarter was recuperated. The decline of the beginning of the quarter was recuperated over the following part. Therefore, at the end of the quarter, we stood at EUR 280 billion assets under management, where you could clearly see also with the direct client money, an increase of EUR 3 billion, which was driven by two things, the strong sales and also the market performance at the end of the quarter. This is a picture on the end of the quarter. In terms of the gross sales, also there, we had a very strong quarter with EUR 3.9 billion sales, which is almost EUR 1 billion more than the record quarter of the quarter one, 2025. Insurance side, 8% growth on the non-life side, which is clearly better than the guidance. It's also delivered with a very good quality because the combined ratio stands at 85%, which is substantially lower than the guidance which we have given in that perspective. Life insurance sales sites were good when you compare them with the previous quarter because life insurance, this is driven by commercial campaigns, by new issues, and so on and so forth. You need to be aware that in the second quarter, we launched no new specific commercial campaigns. We had no new emissions on structured products, life insurance products. Therefore, it's good to make the comparison between quarter two 2025, with the same quarter in 2024. You can clearly see there that there is an increase of the sales volumes of 6%, mainly due to the interest guaranteed products. Also in that perspective, good to understand that the CSM, the margin on the life insurance products, increased to 17%. Also there, the quality of the sales which are generated are very good. What I forgot to say about the combined ratio, apology for that, is that all countries in the meanwhile delivered a combined ratio below 100%, including Slovakia, where it was above 100% on previous occasions. It has been restored back to profitability after interventions on the technical side. Let me go to the financial instrument fair value. I'm not going to dwell upon this very long. It's better EUR 11 million than previous quarters, mainly due to, amongst others, good performance in the dealing rooms, despite the fact that the income declined a little bit. It has to do with, of course, the financial movements on the financial market. The results are actually in the total very good. If you look at the net other income, it is substantially better than the run rate of EUR 50 million. I would say, let's be careful, the EUR 77 million is influenced by a sale of a real estate which generated an extra value of EUR 20 million. If I would deduct that, then we're more or less in the run rate of EUR 50 million. As a matter of fact, we would be at EUR 57 million. Far more interesting is the cost side. If you look at the evolution of the cost, it comes down significantly compared to the previous quarter. Here again, be aware that in the previous quarter, the upfront booking of the majority of the bank and insurance taxes is done. It distorts the picture completely. Let's compare the real cost. The underlying operating expenses now stand at EUR 1,125 million. If you compare it with the previous quarter, it is up 2%. If you compare it with the previous year, it's up 5%. That 5% is clearly higher than the guidance which we provided for the full year, which is 2.5%. Be aware that in quarter one and quarter two, 2024, we had very low cost evolution. As a matter of fact, in 2024, the cost evolution, which is normally kind of equally distributed over the year, was more backloaded towards quarter three and quarter four. If you compare rather low, let's call it abnormally low costs in 2024 with 2025, then the uptake of 5% is quite easy to explain. As a matter of fact, if we compare them with our internal budgets for the quarters, then the EUR 1,125 million is still below our budget. We still have a margin there, and that means that we are very comfortable to give you also a confirmation of our early given guidance of 2.5% of the cost evolution full year 2025 compared to full year 2024. It also is reflected in the strong performance on the income side, and the cost control on the cost side is reflected in the cost-income ratio, which if you exclude bank insurance taxes now stands at 41%, which is indeed a very low number. Certain things in life exist. Definitely when you talk about taxes, the taxes go up and now stand at a whopping EUR 660 million for the KBC Group. We do expect this number to be at the year end at roughly EUR 669 million, which is indeed a fundamental increase of 7% compared to the previous year. What about asset impairments? The asset impairments stand this quarter at EUR 124 million, which is significantly more than previous quarter and previous year. It needs to have some further flavor because the EUR 124 million actually can break up into three buckets. EUR 8 million on what we call other, which is in essence EUR 4 million of net notification losses, and then certain impairments on software. If you exclude that as EUR 8 million, it's more or less similar to previous quarters, then you end up with EUR 116 million on, let's call it more or less impairments on the lending book. In that EUR 116 million, the real impairments are only EUR 76 million. The real impairments on our lending book are EUR 76 million, which is lower than the EUR 83 million of previous quarter. What we did differently this quarter is the buffer for geographically emerging risks, so geographical and geopolitical and macroeconomic uncertainties, we reviewed that buffer. That buffer generated a slight increase, EUR 2 million, given all the turmoil which is going on in the world. We put in a management overlay extra for an extreme situation, and that extreme situation translated in the buffer of EUR 30 million one-off on top of the geographically emerging risk buffer. The EUR 38 million is an extra safety margin when we apply an extreme test, and therefore the total stands at EUR 116 million. If you conclude both into the credit cost ratio, the credit cost ratio, despite the buffer which we extra put in, only stands at 15 basis points, which is substantially lower than the longer-term credit cost ratio and the guidance. This is something we feel quite comfortable with also going forward. It's also translated in the impaired loan loss ratios, which further comes down, stands at 1.8% according to KBC calculations. If you would apply the EBITDA definition, it would stand at 135 basis points, which is significantly lower than the European average. Let's go to the sum of all these parts into capital. If you bring it all together, we stand at 14.6% CET1 ratio. Let me add to that a little bit of flavor. The 14.6% is actually driven down by the evolution of our available capital. First of all, we had a very strong performance on the insurance side, and that very strong performance on the insurance side, which is, as I said earlier, EUR 41 million higher than the normal run rate, is because of the Danish compromise deducted in full of our result. That's EUR 41 million, which is only compensated by dividend. You know that on the dividend side, we have a lagging factor. The lagging factor in this perspective means that we only bring in the delta of the remaining dividend over full year 2024. It's not offsetting that deduction. Long story short, EUR 41 million compared to normal situations is because of the outperformance of the insurance result deducted extra, and that is roughly 3, 3.5 basis points on our CET1. Also, we deducted now in full the remaining part of what is called by the ECB old non-performing loans. As you know, the ECB wants all the banks to reduce the very old non-performing loans in full from either their P&L or from their capital. We decided to write it down in full from our capital this quarter, and that is roughly EUR 50 million, which we deduct from the available capital. Now, this is also one-off. If you translate that in CET1, that is 4 basis points. The insurance plus the NPL combined is 7 basis points, which actually brings the 14.6% to what it should have been, 14.7%. Be aware, both numbers, so the insurance deduction and the capital deduction, come back. The insurance comes back next quarters, and the capital deduction comes back in a reduction of the MBA buffer, sorry, a reduction of the pillar two requirement, which has a positive effect on the MBA buffer in our numbers of 8 basis points. Obviously, the increase of the risk-weighted assets is entirely linked to the evolution of the volumes. The strong performance on the volume side translates the fundamental increase or translates the most important part of the increase of the risk-weighted assets, as you can see in the numbers. On the next slide, you can see the MBA buffers, given the fact that KBC filled up its full 81% and therefore compensates the 77 basis points, which is granted by the ECB as a potential replacement for capital. The MBA buffer now stands at the level of the OCR, which means 10.8%, and that is also giving us a clearer view on what are the buffers. Now you can see that those buffers for the three buckets, CET1, 81% included, total capital is more or less at the same level, roughly, let me round the number, EUR 5 billion, 4%. Let me go quickly into liquidity and leverage ratio. Further improvement of the leverage ratio now stands at 5.6%. Liquidity stands super solid at very high levels compared with the minima, and also the solvency on the insurance side has improved with 200 basis points. Yeah, correct, 2%, mainly driven by the evolutions of the interest rate curves and the strong performance of the insurance company, as I said. Let me wrap up with forward-looking. First of all, economic outlook. There is a tariff agreement concluded on the 27th of July between Europe and the U.S. The details are still in the process of being worked out. We will further see how this develops, but this also has some influence on the economic growth going forward. I think the economic growth in this perspective is more or less hovering around 1% this year, 1.2% next year, 0.9%, and the year thereafter probably back again to 1.2%, 1.3%. There is a negative impact of that tariff on the European, but it is, quote unquote, "under control." Of course, that is offset definitely in the medium term for the expected defense spending and infrastructure investments in the European domain. The fortunate thing about KBC Group is the diversification into Central Europe, which has stronger growth and a substantially higher number in that perspective compared to the western part of Europe because of the catch-up driven by, amongst others, continuous FDIs. Also regarding the tariffs, there are, of course, certain sectors which are more vulnerable than others. If you look back to those sectors, and we include traditionally metals, we include, apology, pharma, we include chemicals. KBC Group has analyzed what is then impacting our book. This is limited only to roughly 7% of our books, roughly EUR 8 billion. In that book, only a small part might be under significant stress. KBC Group has very limited exposure on the U.S. through its bonds and through its dollar exposure. It allows us to say also that going forward, the guidance can be updated and that the guidance can be updated. I already mentioned the net interest income. We go from at least EUR 5.7 billion to at least EUR 5.9 billion, sorry, at least EUR 5.85 billion number with the conservatism of the first guidance remaining intact. We do increase our lending to 6.5%, coming from at least 4%. We are very comfortable with our 7% guidance on insurance. We confirm our guidance on the cost side, which intrinsically means that the draws, which were originally at 3%, are now shifted upwards with 1.5%, ending at at least 4.5%, which I think is a very confident message, also given the results which we have posted today. On the combined ratio and on the credit cost ratio, given the numbers which we have concluded today, we are pretty confident also to confirm again this guidance. I skipped all the rest regarding the countries. I think it's much better to leave the floor to all of you for questions, and I give back the floor to Kurt. Thank you, Johan. The floor is open for questions now. Please restrict the number of questions to two to allow for a maximum number of people to raise questions. Thank you. If you wish to ask a question over the phone, please signal by pressing Star one, and please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press Star two. Again, it is star one to ask a question. Our first question is from Namita Samtani from Barclays. Please go ahead. Morning, and thanks for taking my questions. The first question, on your net interest income guide for 2025, and I guess also looking out to 2026, I just wondered what you'd baked in for the maturity of last year's deposit campaigns. Do you continue to expect to keep the majority of these deposits in-house, and do you expect that some competitors may once again offer negative margin products like they did last year? My second question, are you as confident on a potential Ethias acquisition as you were in the first quarter? Just curious on your thoughts, given some government parties have some very strong opinions on what should happen to that asset. Thanks. Thank you very much, Namita, for your question. We didn't hear the beginning of your first question. Could you repeat that? Because we're now guessing what was the topic. Could you repeat the second question, first part? Sure. Just on your net interest income guide for 2025. No, the second question, sorry. Just on the Ethias acquisition, you're very confident in the first quarter. I'm just wondering what your thoughts are now because there have been some government parties that have had some very strong opinions. Okay, clear. Thank you for your questions. Bartel or myself can take the first question. I'll give it to Bartel. Okay, thank you, Johan. Good morning, Namita. Thanks for your question. As far as the NAI guide is concerned and your question related to the potential continuous migration following the maturity of the term deposits in the fourth quarter, basically, and also the reaction of the competitors. First of all, of course, what we have been seeing is a continuous shift from term deposits to saving accounts and also to mutual funds. We had quite some significant maturities already because we issued initially also part of it on six months. We have seen that in the first quarter, those maturities resulted in a shift of only 38% back to term deposits. The remainder went to 40% to the saving accounts and then, of course, also to the mutual funds. That gives you already an indication. Certainly, when you look at also taking into account that the policy rates will further continue to drop, that gives you an indication of what you can expect also in the fourth quarter. As far as competition is concerned, obviously, we never know. You never know what is going to happen. What we see is that competition seems to get back to more, and in particular, one competitor on a more rational approach. You look at actually the drop of the external rates on the saving accounts in Belgium, where all banks actually have been following with a quite significant drop in saving accounts. I will inform you that basically at the beginning of this year, the external rate on saving accounts in Belgium was 90 basis points, 45 basis points base rate, and 45 basis points the loyalty premium. Today, as of the 1st of July, we will be at 60 basis points, 40 base rate, and 20 on the loyalty premium. You will have seen also that most of the competitors are following that. That seems to indicate that there will be a more rational behavior in the market, but obviously, you never know. Thank you. We'll now move to our next question from Benoit Petrar. Excuse me, excuse me, operator, but we still have to answer the second part of Namita's question, so apology. Namita, coming back to your second question regarding the potential sale of ETFs and also the government statements which were made around that during the summer period. Indeed, there was a statement made by a French politician about what was going to happen with ETFs, which clearly indicates that the ETFs will be on the table in the period to come. That means not necessarily that it will happen this year because the statement was made that it should happen before the 21st of July, which is the National Day in Belgium. The National Day has passed. The statement has not been made, which makes also quite clear that the decision is not taken yet. I'll come back to my earlier statements. I'm still convinced that those are true. I expect that on the ETFs file, there will be a clear indication definitely by year end, and I expect it to move in 2026. That will be triggered by, in essence, three parties which are involved. That is the federal government, the Flemish government, and the Walloon government, which holds, let's say, more or less one-third of ETFs. If they come to the market, we will be one of the candidates, and we will be certainly looking into the file, as I said and stated on earlier occasions. Right now, it is not on the table yet, but it's quite clear that the politicians are debating the matter, and I expect things to move ultimately by the beginning of 2026. Thank you. Thank you. We'll now move to our next question from Benoit Petrarque from Kepler Cheuvreux. Please go ahead. Yes, good morning. The first one is actually on the transformation results. The transformation income keeps delivering more income quarters after quarters. I was wondering if you could help us to quantify how much average yield you are generating as we speak and how much these deviate from the current yield and how much transformation income will actually come in the coming quarters. I think many banks are actually providing some guidance on that. It would be very useful if KBC could also provide that as well. Also linked to that, I was wondering if you could give us your view on the clean NAI for the second quarter. I think there have been a few warnings. I mean, the inflation-linked bonds, maybe some dealing room income as well were a bit high. It would be useful to get a clean NAI for the second quarter. Just maybe on Ethias, I think the message is clear. I think it's the French MR, which is in favor of a merger between Ethias and Belfius. What is your view on that and what do you see? I know you are close from Flemish politicians as well. What do you think their reaction is when they listen to Georges-Louis Boucher talking about a merger with Belfius? What have you seen in terms of kind of reaction from the Flemish side? Thank you. Thanks very much, Benoit, for your questions. Let me come back to the first part of your first question regarding the transformation result. We don't give the details of what is the average yield in our transformation result. What we do give is that, first of all, given the fact that we have taken specific positions roughly two years ago where we sacrificed short-term income for the longer-term income, we shortened at a certain stage the durations. When interest rates were increasing and coming at a 4% level, we hedged it for a longer period. That is now paying off clearly. You know that in our replicating portfolio, we have different durations, roughly four years on the current accounts and roughly two and a half years on the saving accounts. These are indications which we give. Given the evolution of the interest rates, given what I just said, we are having a strong mitigating factor even in an environment where interest rates are cut by the central banks, where interest rates are coming down. We said on earlier occasions that we are confident that the transformation result continues to increase for 2025 and 2026. We repeat that today. We are confident that we are going to see our net interest income increasing going forward on the transformation result for 2026, 2027. What I want to add to that is due to two reasons, because net interest income is the outcome of the product between the multiplication between volume on one side. You saw today that we are able to increase our volumes in a very stable fashion. What Bartel just said to Namita's question is that also in the next coming quarters, there is going to be a maturity of a significant amount of term deposits. That is to our expectation. If we only use in a very conservative manner the term deposits renewal, then it's for sure that from a negative margin in that product now, we are going to go to at least a positive margin on the term deposit renewal. The vast majority will be transformed into current accounts and saving accounts at higher margin and therefore higher income. We did not calculate that into our guidance. There is a super conservatism indeed included. It also allows us to say that in terms of volumes, we can continue our strategy, which we have on the transformation side. On the yield, so on the margin which we have on the transformation result, that margin increases as it did in this quarter and the previous quarter, and it will continue going forward. How much it is, we don't disclose. Yes, bonjour Benoit. In order to give you some numbers on the clean NAI, as you requested, we generated EUR 1,509 million of NAI in the second quarter. Deduct from that the impact of the NAI on the inflation-linked bonds of EUR 24 million, and then you have more or less a clean one. Of course, take into account also for the second quarter that, as Johan was highlighting, it probably will not repeat. You cannot extrapolate that. Take into account also somewhat lower loan volumes. As far as the dealing room NAI is concerned, we do not disclose that, but it is relatively limited. That should give you an idea of what the clean NAI would be. Coming back to your question or your more detailed question on Ethias. The statement which was referred to was a statement by Georges-Louis Boucher, the President of the French-speaking liberals, who emphasized that there would also be the possibility of a merger between Ethias and Belfius. That is not a statement which is the final outcome. This is a statement on his behalf. It's not necessarily the final outcome. I think this is just a matter of the debate amongst the government because the government is doing this for a specific reason. One of the specific reasons, if not the specific reason, is to collect extra budgets which they need to have to support their budget of the fiscal year 2025 and 2026 and forward. In that perspective, we all know that the decisions have been taken, for instance, on the defense spending side, which come on top of Belgium's not that comfortable budgetary situation. In that perspective, the assets which the government holds can be instrumental. If you do the analysis, if you bring everything together, then it's not that obvious that Ethias and Belfius are put into a merger. It would make sense to do it differently. To go for the sale of that company is far more contributing to the budget of the Belgian state. Let me cut the story short. It was indeed a remark made by Mr. Boucher. Flemish politicians have not reacted openly on this, and both come together in the federal government where both parties are involved, including the French-speaking liberals and the Flemish. In that perspective, two out of the three voices have not reacted officially. We will see, and that is my answer on Namita's question, we will see what that brings in the quarters to come. Therefore, I expect an outcome in the course of end of year 2025, beginning of 2026. Very clear. Thank you. Our next question is from Guilia Aurora Miiotto from Morgan Stanley. Please go ahead. Morning. Thank you for taking my questions. I have two. One, maybe to wrap up on the NAI. When I put together the previous questions and answers, I think it's fair to say that the real guidance is basically EUR 6 billion. Because if you start from a clean EUR 1.485 billion and you assume at least flat, but I mean, it should be higher given the deposit migration, the loan growth, the replicating result, you get closer to EUR 6 billion. Yeah, is that correct? Secondly, I hear that you're very interested in Ethias. Is there any other file or is there anything interesting coming up in Central and Eastern Europe that you're also looking at? On the M&A side, we should mostly have in mind Ethias. Thank you. Thanks, Julia, for both your questions. Coming back on your question regarding the NAI, I said, you know, I mean, traditionally, KBC puts in a conservative margin when we do give guidance because we want to deliver on what we promise. When we put forward the guidance on the 5.7% at least, the floor, we build in that conservatism. The results which we have made over the first half of the year indicate clearly that we're going to make those numbers, and we just put forward the guidance to 5.85% with the same conservatism. You said, listen, if I look at the consensus and I see the guidance, then there is a difference of roughly EUR 120 million. The EUR 120 million added to the new guidance brings us close to 6%. I mean, your calculation is definitely correct. We guide at least 5.85% with the same conservatism. There I keep it, and the rest I leave over to your interpretation. Coming back to Ethias, I understood your question that we now come up with Ethias. I think I've said it on previous occasions as well. We are interested in Ethias. As I answered on the previous two questions, we still are, and we're definitely looking into it. With regards to Central Europe, there is the same thing. We constantly screen the market, not only on what is officially available, as we have demonstrated by the acquisition of 365. That means officially 365 was not on the market, but we spoke to the owners of 365, and we brought this deal home. We expect this to be closed by year end, by the way. We will look at anything that is available in the market on the official matter. In the unofficial matters, we can make conversations with parties where we think it makes sense for them to reallocate their capital allocation. That means that they might reconsider their assets in Central Europe, which would be of our interest. The names in that perspective, I cannot release because they're not officially on the market, but we constantly have conversations. Thanks. Thank you. We'll now move to our next question from Tariq El Mejjad from Bank of America. Please go ahead. Good morning, everyone. A few questions from my side. First of all, I'll be back from the not so much to be fair on Ethias because I'm not very familiar with these political contingencies, and I think it would be very challenging to make a view on this. Let's say it goes to Belfius or it's Tocciel or another competitor, your excess capital will keep building up. You have great profitability, good capital generation, even putting a 65% payout, and assuming this extraordinary growth you had in the first half continues, you'll be diverging from your new CET1 targets. Would you adjust your dividend policy if there's no deal coming on the table? How quick would you react to that? Your last question on Julia's on M&A, were you referring to Romanian kind of geographies or Poland or without maybe the banks, but just to have a sense? The other question on Kate, probably the most famous employee, but I'm not sure the most popular internally. It's been a very successful project. We can see it and feel it in the cost control in all aspects. Also, your decision on the client onboarding and compliance has been very successful. Are you working on a project to make that broader into SMEs, maybe even mid-corp in terms of automation and digital? It would not be called Kate, but that kind of sense is very difficult. Thank you. Thank you, Tariq. We were just discussing who was going to take what. Sorry for the delay. Let me come back on your first question. There are two parts to the first question. On the dividend policy, I start from your assumption that Ethias are not available and that it's not coming to the market or it goes to competitors, whatever. Our capital deployment plan in that perspective is quite straightforward. We pay out a regular dividend between 50% and 65%, and we want to be amongst the better capitalized financial institutions in Europe. Our capital generative power is the one you know, close to 300 basis points before distribution. After distribution, let's say the CET1 increases, as you indicated. This is a very plausible scenario. At that stage, the board will observe the possibilities. I will use your assumptions. That means Ethias are not there and there is not in the foreseeable future anything available on the market. I will use your assumption. It's quite clear that we do have surplus capital. In that perspective, our board will see how they will bring that surplus capital back to the shareholders because we cannot invest it in, because organic growth is already absorbed in the numbers I was just referring. We cannot in the foreseeable future see it translated into M&A. Your second part of that question, are we looking in the Central European market? What Julia was asking and further detail into that, the answer is yes, of course. We are interested, amongst others, in Romania and in that perspective, yes, we are having had conversations with potential assets which might be of our interest. Until now, nothing is on the table concretely, as you know, and as I answered to Julia's question, all the other conversations which are happening bilaterally, I'm not going to disclose for obvious reasons. As we speak, we would approach for Poland, but given the fact there was no possibility to establish in a significant country a bank assurance model, we were not interested. We have declined. I will do Kate as well, Bartel. I will continue with Kate. Yes, indeed, it is taking off very well. As I said also on earlier occasions, we are a bit overwhelmed by the performance. We were making assumptions at the time how it would interfere in our business and what would be potentially the positive uptake. Kate is beating them to all standards, both on the cost side, both on the income side. As we speak, we are developing Kate 2.0, which is going to be launched by October, let's say, by year end. Kate 2.0 is a further enhanced Kate, which can do what the tool is doing today, but go beyond that as well. The expectation is that our autonomy rate will go further beyond 70% easily. That means that it becomes, you know, it's something which is going to be the ultimate solution tool for all questions of all customers. That is one thing. The second thing is this is part of a bigger project which we have been working out now for 10 years and which goes step by step. The solutions which we provide by Kate, the solutions which we provide by Kate Coins, are translated and translated in a fully automated ecosphere strategy. The ecospheres which we are working out are related to, I mean, the most obvious things for a bank insurer. That is everything which is related to mobility, everything which is related to housing, and everything what is related to, amongst others, health. What we are going to do, I don't have time enough to explain that in this call, but we are going to launch end of this year, early next year, the fully integrated ecosphere solutions which we are working out. That will be end-to-end, fully automated by ultimately 2026. There you have a little bit of an indication where we are going to. I'm happy to explore more what I just answered, but then I need at least an hour. Thank you very much. Our next question is from Farquhar Murray from Autonomous. Please go ahead. Morning, all. Just two questions about me. Firstly, we've all seen the kind of recent Pillar 3 and Basel IV disclosures, which kind of in places are a bit of a threadbare as compared to what KBC Group has disclosed and your reporting approach. I just wondered how those practical limitations might flow into your benchmarking exercise and your approach to the kind of CET1 threshold at year end. Secondly, could I get your preliminary take on the summer accords from the new federal government, both for the bank and the insurance businesses? I appreciate there's a lot of detail still to be filled in there, but I just wondered what the key focus points were for you, possible implications, and where clearly, obviously, some more details will be needed. Thanks. Thanks. Thank you, Farquhar, for your question. To understand correctly, are you referring to what was disclosed in the transparency templates under the stress test and also in the Pillar 3 disclosures compared to what we've disclosed in the presentation, in the corporate presentation on the Basel IV impact? Is that your question? It's largely that, yes, indeed. Mainly probably the Pillar 3 off 1Q is probably what I'm talking about. Yeah, I mean, what you should know, you should reflect to the and mainly look at what we've been disclosing in the corporate presentation, which is based, of course, on a different reporting period that is mainly on the fourth quarter static balance sheet of 2024, where indeed you see a first-time application impact of EUR 0.9 billion and then a transitional of an additional EUR 1.6 billion with the output floor impact of EUR 2.6 billion, bringing it to a total of EUR 5.1 billion. The reason why there is a deviation in some of the disclosure is because it's a different reporting period. Secondly, also because, of course, in the meantime, a number of measures have been taken to mitigate further the impact of Basel IV, and we also are using more granular calculation in the calculation tools. Now, having said that, for benchmarking, of course, there is a certain limitation because some of the banks now decided to no longer disclose the fully loaded impact, including the output floor, and to go to a transitional, only the transitional impact. This is correct. This is something that we will have to deal with. How will you deal with it? That is something that we are currently looking into. We are currently in the process of making the benchmark analysis based also on what has been disclosed in the stress test. That is what we will take into account going forward. Perhaps, Farquhar, if I add to Bartel's comment, if you just took how we calculate the CET1, the disclosed fully loaded and floor CET1, we include the phased part as well of Basel IV. If you would not do that, as some of our peers are doing, they only give the FDA or they only take into account the FDA, our CET1 ratio would stand at 14.8 rather than 14.6. There is a difference of roughly precisely 19 basis points, so roughly 20 basis points. If you would take it all, so also the floor in 2033, which is, I think, a long shot that has a negative impact of 30 basis points. That is a long shot because there will be a lot of things happening between now and 2033. Now, let me come back to your second question. Indeed, the government has taken, or the federal government in Belgium has taken a lot of decisions which are part of a summer agreement, as they call it. The thing is that in that summer agreement, a lot of elements are included which have not necessarily a direct impact on the banking industry. There are some which might have an impact, and there is one for sure who has an impact on the operational side. That is, on the bank taxes, the statement is that in the summer agreement that the bank taxes remain at the level of last year, which means you do not expect that there is any kind of decline, which we also do not expect going forward. How does it translate in hard numbers? That is not defined. It is at the level of 2024, which means no reduction whatsoever. That's one thing. The other thing is that there are a couple of things translated in the summer agreement regarding our saving accounts because they are expecting one or the other judgment on one or the other question on the loyalty premium in Belgium. That might change a couple of things in the way how we are setting up the saving accounts, how we deal with the remuneration of those saving accounts, specifically loyalty premiums. Even when it changes, if the market is in the behavior of today, that is working with products which include loyalty premium, it should not have an immediate negative impact on our numbers. Why? Because the vast majority of customers which do have a product with a loyalty premium, there we also pay out a loyalty premium. I'm talking about more than 90% is paid out. Even if that would be changed in the agreement, that would not have a negative impact on the numbers. For good understanding, the judgment is only to be expected in the third quarter of this year. Before the changes are made, I expect this to be ultimately 2026, but probably quarter four of this year. We'll see. What is the precise translation? The capital gains tax. The capital gains tax is debt and is given. There is no way that is going to disappear. The capital gains tax is something which has no direct impact on the banks in the form of we have to pay more taxes that is due for our customers. The thing is, we do need to implement it because it starts at January 1, 2026. That is, first of all, on very short notice. It's not a six, what is it, five and a half months to go. The unfortunate thing is that what it is and how it should be implemented is not defined yet. The expectation is that after summer, in October, this will become clear in the government. We have a couple of months to implement that, which is impossible. We do expect indeed that that comes to the table, that we're going to implement it. It has no direct impact on our P&L because of the capital gains tax itself, but it has definitely some impact on our cost side. That is something which we are going to see going forward because in October, we do expect the final detail about that. The preparation on the cost side is included in our guidance. Thanks. Thank you. Our next question is from Chris Hallam from Goldman Sachs. Please go ahead. Thank you. I just have one question left, which is on deposit trends. Obviously, quite strong in the second quarter, 6%-7% growth. I just wondered, are there any lingering state note impacts in there with regards to the win-back campaigns and then the roll-off of those campaigns? I've just lost track a bit about when that should have all washed out. Is that a 6%-7% number indicative of core underlying trends, or is it still being impacted by the 2023 state note? Is that sort of the right base to look at going forward? Thank you. Chris, can you repeat the first part of your question, please? It didn't come in clearly. Yeah, no, it's just whether or not the growth rate you saw in deposits in the second quarter, 6%-7%, whether or not that's still being impacted by the lingering effects from the state notes in 2023. You had the win-win-back campaigns and then those campaigns rolling off. I've just lost track of the ebbs and flows of the impact from the state note. Thanks, Chris. We have a very poor line, so we hardly understand you. What we made out of what you asked is if there are any kind of campaigns going forward coming to the market now in September, October regarding the maturity of the previously recuperated state note monies. Bartel already answered in a previous question that today we do see a very disciplined behavior in the market. Also, if you look at the results of some of our peers, the net interest income on their side is toning down, so it's always with a negative. We do not expect that in the market now, we will have a war again as we have seen it two years ago and last year. In that perspective, we are fully prepared for eventually an aggressive campaign of one or the other competitor. That is, on our side, a normal behavior to be expected, but fully prepared in the event it would be different. Thank you. We will now move to our next question from Anke Reingen from RBC. Please go ahead. Thank you very much. Just two small questions, please. First is on your operating leverage. I mean, I guess you have the top line upgrade, but stick to the cost guidance. Is that largely a function of the mix of the upgrade to the top line? Or are you making more successes as well on savings initiatives, and that helps keeping costs flat as well? In terms of the Belgium loan momentum, really good volume growth plus spreads are holding up really well. Do you think that's sort of like a new environment, and do you think that's sustainable? Or if loan growth slows down, then it becomes a bit more competitive on the spreads as well? Thank you very much. Thanks, Anke, for your questions. Regarding the first one, if you look at the performance in, let's say, the first half of this year, combination quarter one, quarter two, indeed, we do see an uptake on specific domains. We just do better on specific elements. Part of that outperformance is driven by, let's call it, interventions which we did at headquarters and which I explained earlier. That is, amongst others, the way how we hedge and so on and so forth, not necessarily consuming extra effort in our bank branches or in our headquarters on the banking side. For that reason, indeed, we are able to grow our income and, secondly, keep that cost part under control. Let's not underestimate the impact of Kate. We can disclose numbers which are very conservative. The reality is that 70% of the questions of our customers are answered by Kate. Let me disclose another number. We do have, on a monthly basis, let me give you one country, for Belgium alone, EUR 84 million, 84 million interventions on our mobile, which means that customers are dealing with our mobile first to solve their questions. There Kate plays an important role. That time, which is freed up, is used to do the business we are referring to. The answer is yes to your question, despite the fact that the income is growing significantly. We are doing this either because of certain accents which we took in the past and which are not necessarily related to operational activity in the branches. The second thing is, an important chunk of work, which is cumbersome, so time-consuming, so let's call it administrative work, is fully now tackled by Kate and the growth of the interaction of our customers in our mobile. I didn't give the references, so 83 million interactions now, a bit more than a year ago, it was roughly 70 million interactions with our customers. It's growing like hell. That means that operational part is taken by the machine and no longer by human beings, which allows them to do the more sophisticated conversations with our customers, the more time-consuming efforts with our customers. Yes, it allows us to keep the cost evolution stable. Okay. Good morning, Anke. As far as your second question is concerned, I understood that this is mainly focused on the loan, the deposit volume growth in Belgium. As I already stated in the first quarter, what we typically see is that in Belgium, you have a seasonally low amount of deposit volume, mainly due to the fact that there are no bonus payments or holiday allowances or any other kind of allowances being paid in the first quarter. On the contrary, there are a lot of utility bills, etc., and insurance premiums to be paid for the year. Typically in Belgium, the deposit volumes in the first quarter are somewhat lower. In the second quarter here, you've seen indeed an uptake, and that is definitely driven by the fact that you get indeed the bonus payments, but also this was also seasonally driven by higher corporate volumes in this quarter. In the third quarter, you will see that there is going to be an impact somewhat of the holiday season, and people have been spending there. The fourth quarter, again, will be quite strong as a result also of the, in Belgium, very typical of what is called a thirteenth month payment that typically has a positive impact also together with, of course, also the corporate volumes. Just to give you an idea of how the seasonality is. Thank you for this detail. I was actually wondering about the loan side. On the spreads, they're in Belgium, they're holding up really well. Do you think that's sort of like sustainable? Or is there some seasonality potentially in there as well? Thank you. Oh, okay. Sorry. I misunderstood that. On the loan side, I think for the second half, I would not recommend you to, also not in Belgium, to extrapolate the extraordinary results of the first half of the year. Very simply because, of course, on the corporate side, we've seen quite a significant increase on corporate loans, which will more likely not be repeated in the second half. Okay, thank you. Thank you. We'll take our final question today from Sharath Kumar from Deutsche Bank. Please go ahead. Good morning. Thank you for taking my questions. I have two left, please. Firstly, on deposits growth and mix shift. I know you didn't previously provide, but for the second quarter, can you now provide us the split between the maturity of term deposits, related to the Belgian state note and the organic shifts? Also, I'd be interested in understanding the sensitivity around the mix shifts, in deposits towards your NII guidance. Secondly, on additional tier one notes, the EUR 1 billion issuance in May looks much higher than the shortfall that you needed to fill. Just checking if there are any callable bonds later this year. Is it possible to provide any guidance on your AT1 costs for the year? Thank you. Thank you, Sharad, for your questions. We were just distributing the two questions between us. On the deposit question, for good understanding, indeed, in Belgium, we do have, as you could see in the previous presentation, roughly EUR 6.5 billion recuperated amongst the state note monies. Part of it came from us, part was coming from the market. That was invested in term deposits in KBC Group, in two parts. A certain part was invested in term deposits with a tenor of six months, and the vast majority was invested in a tenor of thirty months. Because it was originated in September, you have the maturity of the first part, the six months part, in March this year, which was part of quarter one. What you see in quarter two, the EUR 5 billion core monies flowing in, has nothing to do with the term deposit of the state note. That is pure attraction of new monies of customers, and that is purely driven on the strength of KBC Group without any kind of transformation. That is what I said at the beginning of the call. Perhaps I did not emphasize enough the strong performance, indeed, because current accounts and saving accounts in that second quarter have performed positively, EUR 5.5 billion. The maturity of the internal term deposits in the second quarter are just term deposits as such, not linked to the state note. Also there, of course, we do see maturities, and we see them coming indeed into current accounts and saving accounts, but they have nothing to do with the recuperation of the state note money. That part is going to mature in October of this year. That part, Bartel said earlier, if you even take the original historical assumption of the first quarter, that is only 38% going back to term deposits, will deliver a lot of net interest income. Be aware, we didn't put that into the guidance. Therefore, I said we maintained our conservatism levels. Also on the lending side, we included conservative levels. That still has to come. Okay. Good morning, Sharad. As your question related to the AT1 is concerned, your calculation is correct, but please take into account that we will call EUR 364 million in October on an old AT1. I think that answers your question. Yes, thank you. Thank you. There are currently no further questions at this time. With this, I'd like to hand it all back over to our host for closing remarks. Thank you very much. This ends it for this call. I would like to thank you for your attendance, your interesting questions, and enjoy the rest of the day. Bye-bye. Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.