KBC Group NV (KBC) Earnings Call Transcript

Hello, and welcome to the KBC Group Earnings Release First Quarter 2023 Call. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions] I will now hand you over to your host, Kurt De Baenst, Head of Investor Relations, to begin today's conference. Thank you.

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 Tuesday, the 16th of May 2023, and we are hosting the conference call on the first quarter results of KBC for the first time under IFRS 17. As usual, we have Johan Thijs, our Group CEO with us; as well as our group CFO, Luc Popelier, 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 first quarter results. And as usual, we're going to do this on the back of a couple of slides, which starts with the overall view and the highlights. Let me open with saying that, indeed, we posted an excellent net result of EUR 882 million on the first quarter of this year, which is significantly better than last year and is also significantly better than the average of the all quarters last year, including the fourth quarter of 2022. The reason -- the main reason is that we have done excellently on our commercial bank-insurance franchises in all our core markets. So we performed very well. But also the result is significantly positively impacted by the divestment of our activity in Ireland, which has contributed on a net basis, EUR 370 million to the first quarter of this year. There's also a negative impact. As usual, in the first quarter of the year, we have posted a EUR 571 million impact on bank taxes which is significantly more than what it was last year. But all in all, EUR 882 million is the result and that is indeed excellent. Let me come back to the highlights. That is we have seen a strong performance on the customer loans side. And also on the customer deposit side, we have seen a year-on-year increase and also a slight increase on a quarter basis. We have seen a higher fee and commission income. We do see a slightly lower net interest income, but that lower net interest income was fully in line with the expectations given the fact that there were a couple of one-offs influencing negatively this first quarter, and this will be offset in quarter 2, 3 and 4, making us come back to where we guided in the beginning of this year. It's also true that the other diversifying factor next to the fee and commission business, the insurance business was performing excellently on the level of the nonlife insurance company side with extreme strong sales and good combined ratio, it was less on the life insurance side, but this is entirely due to the commercial planning agenda, the agenda, which drives the commercial actions in the different business entity. Costs were well under control with a 38% cost-income ratio before bank tax, it is very well and that is one of the record low numbers which we have seen over the history of KBC. We had releases on the impairment side, and all of those numbers combined have improved further our solvency position, both on the bank and the insurance side as well as our liquidity side. To summarize it, return on equity stands at 15%. Cost-income ratio at 38% before bank taxes and the CET1 ratio stands at 16.1%, whereas the short-term liquidity ratio stands at 152%. Let me go back then -- let me go further with a couple of other things, and I will shift immediately the slides on the one-offs, which is Slide 6. This means that we have indeed a very fundamental one-off this quarter, and I already highlighted the fact that the divestments of the KBC Bank Ireland subsidiary has triggered a EUR 370 million net impact on the P&L. This is due to EUR 405 million net other income increase and then a couple of one-offs which are related to that transaction, which are driven by either OpEx, either taxes and that brings the total of EUR 370 million. Talking about taxes, we had also a temporary extra windfall tax and insurance tax in Hungary totaling EUR 79 million. That was only partially recuperated or recovered with the EUR 9 million, which we got back from the extraordinary deposit guarantee contribution, which we had to do last year. And then also the good news on the tax side was that the banking sector in Belgium won the court case against the Belgium state. And therefore, we were able to recuperate EUR 48 million of unwarranted paid bank taxes in Belgium in 2016. So that sums up to a total exceptional in this quarter of EUR 340 million and that is indeed quite significant. Let me also highlight one specific element, which is also very important. That is, as you know, we published a press release about this, we lost a historical legacy file in Czech Republic. We had -- as a consequence of that outcome, we had an extra impact -- negative impact, which we -- has occurred in February of this year of EUR 149 million. This is mentioned on this table as well. But given the fact that our external auditor consider this to be a subsequent event of the year 2022, we had to restate the numbers and that restatement makes the booking of that impact of EUR 149 million to be done in the fourth quarter of 2022. So that is also in this list. Mind you, it was happening in '23, but it is booked in the fourth quarter of '22, leading to a full restatement of our numbers -- quarter -- full restatement of our numbers in 2022. Let me go to the detail on those numbers. As I said, net interest income was down on the quarter 7% and was significantly up on the year 10%. Let me explain the 7% down. The 10% is easy to explain because it's mainly driven by growth in online side and then, of course, rising interest rates on the other side, but the decrease of the 7% was entirely due to one-off effects of FX which we were well aware of which we took into account where we were calculating our guidance given by the beginning of this year. So all these events are in essence. First, the TLTRO benefit, which is no longer there in the first quarter of '23, whereas it was in the past that it has an impact of EUR 41 million in this quarter. The second one is that Ireland only contributed for 1 month in this quarter, but as it contributed for full in 2022. So that means that we do have a difference of EUR 31 million -- EUR 33 million, sorry, on this quarter. We had a significant impact because of an accounting effect on the inflation-linked bonds of EUR 44 million this quarter. This is something which is temporary and which will be recovered in the quarters to come. It is indeed purely linked to the way how those inflation-linked bonds are calculated for accounting-wise, so it will be fully recovered in the next coming quarter. And also, we confirm that on the inflation-linked bonds, everything which we took into account in our guidance of 2023 full year net interest income is still there. Also, the negative impact, which was perfectly calculated and I expected was the fact that we had a higher pass-through on the saving accounts in Belgium. We shifted from 11 basis points to an essence 60 basis points at the beginning of this year. And this impact, of course, is on the total saving account book of EUR 61 billion, very significant, and that kicks in, in the full quarter, which was not happening as we know, in the fourth quarter of last year. So those elements are the perfect explanation why we had a decline of those net interest income. If you would exclude those, then you would see an increase of our net interest income is roughly 10%. In terms of the last element, which is specific for this quarter is -- sounds a bit ridiculous, but it is not that we had 2 working days less, and that has a negative impact of EUR 15 million in total. This sums it up for the quarter-on-quarter. I will not make the comparison year-on-year to save some time. On the net interest margin, obviously, you have the same effect. We do have a decline of 6 basis points, but that is also driven by Ireland. If we would exclude Ireland from these numbers, we have a slight deterioration of 4 basis points, respectively, on the quarter and 17 basis points on top on the year. In terms of volume growth, also on the lending side, we see a clear growth of 6% on the year which shows a strong performance over the last 12 months, but also it shows that we have a quarter-on-quarter growth of 0%. It clearly indicates the fact that the economy is growing -- is bottoming out and the economic growth is indeed slowing down, and that is translated in those numbers. You can see the shift between retail and term loans. Remind you that the term loans are negatively influenced by 1 single loan, which was granted by Belgium to the Czech Ministry of Finance and that loan of EUR 1 billion you would exclude that, then the growth would be indeed slightly positive also on a quarter-on-quarter basis. On the customer deposit side, the growth of 3% on the year. What is more important is the decline of 3% on the quarter-on-quarter growth. Now we have to mention here the reason why because this is entirely due to the fact that in our foreign branches, mainly the [ London ] branch, we have seen outflows in this quarter to a total amount of EUR 6.9 billion. And if you would -- and it is what this is, in essence, very volatile money, which is related to professional overnight deals. We have most of the time called it a short-term cash management. You remember that from previous calls, So that money was no longer there and EUR 6.9 billion, if you deduct that number from the deposit account, then you would see a slight increase. For good understanding, to show you the volatility in this quarter, we already had money to the tune of EUR 3.8 billion flowing back in. In terms of where we are -- so by the way, if you would exclude those -- that EUR 6.9 billion, then the minus [ EUR 3 billion ] becomes slightly positive. So if you would look then at what is really important, that is on the next slide, the inflow or outflow of core customer money. Well, we can clearly state that we have seen an inflow of core customer money. In order to explain that, we dealt and that you can see on the light blue side, we dealt with a different building block of core money. First of all, we saw a decline of current accounts, EUR 7.1 billion, which is, in essence, a shift from those current accounts to term deposits, which you can see rising EUR 6.1 billion. On the saving accounts, that remains slightly positive growing with EUR 0.6 billion. And if you would make that sum that you see a slight decline of the total deposits. Now the reason is fairly straightforward. The reason is that what we call anchoring that is we guide our customers with their monies on current accounts, saving accounts and so on towards mutual funds. And we have seen an extreme good of inflow of core money into mutual fund business, in essence, EUR 1.8 billion. So if you make the total evolution of all those monies you see at KBC Group level, an inflow of EUR 1.3 billion net. Let me highlight again the caveats we took into account, first of all, foreign branches are included, which is purely volatile money, as I explained. And secondly, we took into account that, of course, in Ireland, where we are divesting the outflow was EUR 0.2 billion. Also, we excluded any potential positive impact of foreign exchange rates. That is quite significant given the strong performance of the Czech koruna and to a lesser extent Hungarian forint. So we excluded that as well. And still after that, we see an increase of our volumes, core direct money of EUR 1.3 billion. Let me go to the next topic on the P&L side that is the fee and commission business. We had an extreme good performance in this quarter despite the fact that we had very volatile circumstances in the markets. We all remember the turbulence, which was linked to the collapse of a couple of U.S. banks and to the takeover of Credit Suisse. We have seen, despite of the turbulence, we have seen a net inflow of EUR 1.8 billion on the asset management side. This is really good because if I go back to my statements on the first quarter of 2022, I at that time mentioned that we had a record inflow -- net inflow of EUR 1.6 billion during that quarter, well we have beaten that inflow with another EUR 200 million in this quarter despite indeed the very difficult circumstances, which we were facing. If you translate that in the evolution of the Asset Management Services, then the fees were up to 5% on the quarter. They were compared to last year's, slightly down, and it has entirely to do with the starting position of the assets under management. You know how it works. But also the banking services performed extremely well with an increase of 5% on the quarter. And also, if you make the comparison with last year, then there is a positive uptick of roughly 9% as well. In terms of the total amount, as I said, it is EUR 27 million up, which is nicely divided over the 2 topics. You will no longer find the fee and commission business being [ nebulously ] distorted by the commissions of the insurance companies. This has to do with the definition of IFRS 17. Commissions are now posted on another line, no longer in this fee and commission block. And I think, honestly, this is now reflecting much better the commercial activities of the bank and also on the insurance company. In terms of assets under management, we went up with EUR 11 billion to EUR 217 billion now which is an increase of 5%, which is almost nicely split up between net inflows and the performance of the markets plus 3%. Talking about the insurance activities, let me start immediately with the nonlife insurance activities. We had a very strong quarter in terms of sales, 11% up and this is attributable to all countries. In all countries we had double-digit growth on the nonlife side. But it's also important that this growth of 11% is not only positive on the growth side, but also in terms of quality. We do see a record low combined ratio of 83% posted in this first quarter. Even with that low number, it is negatively distorted by the windfall tax, which is charged upon the Hungarian business. In Hungary, the gross combined ratio stands at 115% which is entirely due to the windfall taxes. If we would exclude those windfall taxes then in Hungary, the combined ratio drops to 83% and the group combined ratio drops to 81% which is indeed an excellent number. Talking about the life insurance company, well, we do see a different picture there, on [ Class ] 21, so intra-guaranteed products, which is mainly driven by the Belgium business unit, we do see a growth which is comparable with the growth of last year, which is slightly down compared with the growth of previous quarter. But what is far more important is we do see a decline of the unit-linked business quite significantly quarter-on-quarter and roughly 25% down year-on-year. Now the reason is very easy to explain. We did not have any commercial actions in quarter 1 on the unit-linked portfolio. We do have like normal in every year at quarter 4 always commercial actions, but also last year, we had some commercial actions ongoing in the first quarter. So this is entirely driven by the commercial calendar and this will be changed as you will see in quarter 2 where we do have commercial actions running. In terms of the financial instruments at fair value, actually, it's similar to what it was previous quarter and previous year. So it's roughly the same total amount, the components which are underpinning -- or which are underlying to the total amount of EUR 90 million here and there shift a little bit. But in essence, we had excellent results on the dealing room side, we had quite good results on our XVAs and also in terms of our unit-linked activities and our mark-to-market of our activities, there was almost similar results than last year and last quarter. So it is not big shifts there. In terms of the net other income line, it's a completely different story than we have absolute increase of the number. I already mentioned the fact that we have booked a one-off gain on the sale of our Irish activities of EUR 405 million. And next to that, we do have also a one-off recuperation of Belgian bank and insurance taxes of EUR 48 million, which was booked in this quarter. So the sum of both is EUR 455 million. If you would deduct that from the number EUR 498 million, then you would come back to 45 -- roughly EUR 45 million, which is actually the run rate net other income. I also want to highlight again fourth quarter '22. I already mentioned that we had a negative impact of an old legacy file in Czech Republic of EUR 149 million, which was concluded in quarter 1 of 2023 but because it was defined as a subsequent event, we had to restate the numbers of '22 and that has translated also in this quarter with a minus EUR 103 million because of the impact of that legacy file of EUR 149 million gross. So to summarize, if you would exclude the one-off effects, which have a significant impact, then we are kind of normal in terms of the net other income line. Far more important in that perspective is, what about costs? If you look at the cost side, then you will see that the costs are significantly influenced by inflation. And that is, for obvious reason then with an upward pressure year-on-year but we do have a downward evolution of our cost with EUR 66 million on the quarter-on-quarter comparison, which clearly indicates that KBC is, as always, managing its costs very, very tightly. The reason of this decrease of cost is driven by lower staff expenses, i.e., lower FTEs and also that we have spent less than in the fourth quarter on the IT side, but I would not really refer to that nor I would refer to marketing expenses because it's typical seasonal. Be aware also that the consolidation of this group is different because in 1 quarter you will have Ireland and in the other quarter, you'll and Bulgaria. And for instance, in the first quarter of this year, you have full consolidation of Bulgaria which was not the case, for instance, compared to last year. In terms of cost-income ratio, that tells you a bit more about what is now the situation. We are at 38% before bank taxes. And if you would include all other costs -- all other bank tax, but would exclude certain nonoperating items, which are in essence linked to the transactions in Ireland and in Bulgaria. If you would exclude those, then our cost-income ratio stands at a very excellent 50%. Far more important is the [ 38% ] because that excludes the bank taxes. And on bank taxes, I can, as always, give you almost a guarantee that the trend there is upward this time, 11% higher. And we do expect that by year-end, we have to pay EUR 690 million in total of bank taxes, of which indeed EUR 571 million was already paid in this quarter. It is roughly 14% of our OpEx group-wide. And on Slide 13, you can see the detail on every country -- or in every business unit in terms of the percentage of the operational expenses. Let us go to loan loss impairments. Well, we have once again an excellent quarter, which reflects the quality of our book. In essence, if you look purely at the loan impairments all loans combined in KBC Group, we had a release of EUR 3 million, which is giving also circumstances is indeed super well. In terms of impact on our buffer, you remember that we had set aside a buffer of roughly 1 year full year of loan losses of EUR 429 million. The fact that we did have releases on our regular book also meant that we had a couple of releases on this what we call geographical and emerging risk buffer. Well, that release was in total EUR 21 million, and that is bringing our total releases this quarter at EUR 24 million. Besides impairment releases on the topic order of EUR 2 million brings the total to EUR 26 million, which is indeed an excellent result. Translate that in credit cost ratio without the buffer we are at 0 basis points, including the buffer for the emerging risk, we are at minus 4 basis points. Also in terms of the impaired ratio, we are improving to 2%, which is, of course, driven also by the divestment in Ireland. If you would apply the EBA definition, KBC stands at 1.5%, which is clearly below the European average. In terms of the emerging risk buffer, you can see on Page 15, the detail. You can also clearly see that we have releases in every particular line, the direct exposure, which we -- as you know, we have no direct subsidiaries in nor in Russia, nor in Ukraine, nor in Belarus. But we have some trade finance activities, which we wrote down immediately when the war started. Now that money is coming back. And also this quarter, we had a release there of EUR 4 million. In terms of all the other lines, what we call bucket C, D and E, we did see money flowing back in because of things which we anticipated for are not happening or let me state it differently, the conservatism, which was part of this assessment is indeed conservative. In total, EUR 36 million how come that we only booked EUR 21 million in this P&L for this quarter. Well, it has to do with Ireland EUR 18 million of that was linked -- of that buffer was linked to Ireland. That buffer is now gone because of the divestment of Ireland. And that EUR 18 million is obviously reasons not reflected in the P&L today, but it is reflected in the transaction price with Bank of Ireland. On Page 16, you have an overview of the gas supply and how we are currently positioned. Now let me summarize this page. It clearly indicates that at the European level, also in our core countries, the current provision of gas and gas supply is much higher than it was a year ago. And as a matter of fact, we had a quite comfortable level given the time of the season. So we are at the end of the winter, beginning normally now to boost those supplies to prepare for the next winter. Let me summarize this differently. Given these numbers, it is very likely that we will not run into energy shortfall as we have experienced in October last year. And as you remember, that drove up energy prices and inflation in a very significant manner. So taking into account for this on this slide, you could translate that the likelihood that this will happen again in quarter 4 of this year is very remote. Going to Page 17, brings me on the capital position of KBC Group. Well, given the profitability when we assume a dividend payout of 50% at least, then our capital is now increasing to EUR 17 billion. And if you look into the risk-weighted asset evolution, which is positively influenced by the sale of KBC Bank Ireland and then set off partially, only partially by volume growth of FX trends, then it's quite obvious that our capital ratio grows significantly to a solid 16.1% CET1 ratio fully loaded under Danish compromise. That is clearly above our 15% reference position, defining surplus capital. So indeed, we do have more than EUR 1 billion extra surplus capital compared to where we were with the 15%. The 15% is not restated because KBC stands with its policy that we want to be amongst the better capitalized financial institutions in Europe. And when we do the calculation of the median of that European banking sector, we come to the conclusion that the median is roughly around 15%. And for that reason, we did not redefine the surplus definition of our capital, so it's fixed at 15%. Translate that in buffers, that is on Page 18. You can clearly see that we have on top of the MDA level, and that is the lowest number of the 3 potential definitions of MDA buffer. We have more than EUR 5 billion of buffer, which is clearly indicating that KBC is solid capitalized. Its also translated into our MREL position, which is somewhere further in the bank. We currently stand at 30% MREL position, which is clearly higher than the requested target of 27.86% request to be fulfilled by the first of January of 2024. So solid capital position, what about the liquidity position -- sorry, what about the leverage position, I forgot to mention that one. So it increased also very significantly. It is also related, obviously, to the sale of Ireland now stands at 5.5%. And also the insurance company with 207% is also in a very solid area. What about liquidity? We have a 152% liquidity LCR ratio and also on the midterm, 139%. These are very solid numbers if you compare them with a request of 100% [ lease ] of the ECB, we have solid buffers. To say differently on the short-term liquidity, we do have a buffer -- a liquid buffer of EUR 92 billion. Coming to the period to come. Well, we do see that economic growth is slowing down, and it is what we do see now today, it is potentially not going to go into a recession. What we do see is recently a restatement of -- in our core countries of GDP numbers slightly upward. So for instance, the Belgian GDP growth has been the restated from what it was 0.7%, 0.8% to 1% now. And we also see that also in Central European countries, we do see inflation stabilizing and there is a trend towards actually bottoming or topping off the inflation and then the downward trends will continue, but it is a persistent core inflation, which is still too high compared to the European Central Bank target, and that clearly indicates also that interest rate will remain higher for a longer period than was originally anticipated by the market. As a consequence, we have guided in the beginning of this year for the full year 2023 on the net interest income side, on the total income side and then also on the credit cost side and OpEx. That is -- we are perfectly on track for those numbers. And we, as usual, don't update every quarter, but give an update twice a year. And therefore, the numbers on the guidance are the same as was guided in the full 22 year results announcement. The only change which was there, as you might remember, is the fact that we restated those numbers taking into account IFRS 17. Now all the other slides are linked to Belgian, Czech and International business units. I'm not going to dwell up on that detail, but I would like to stick it to this presentation. And I'll give back the floor to Kurt who will guide you -- who will guide us through your questions. Please Kurt.

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

[Operator Instructions] We will take our first question from Flora Bocahut of Jefferies.

Yes. The questions I have mostly on the excess capital distribution. Firstly, if you could clarify the amount that we are talking about here because in the Q4 slide pack, I think you were mentioning the intention to distribute an additional EUR 1.4 billion. Obviously, we've had the post-balance sheet event since. So if you could clarify what amount we are talking about today and on which I think you are still awaiting ECB approval. Then around the timing of that distribution, let's assume you get the ECB approval over the next few weeks. Would you consider distributing that intra-quarter? Or are we going to have to wait until Q2 results are published in August for that distribution to be made. And lastly, still on that subject, if you could clarify how you're thinking around the mix on the distribution and if we can expect it to be entirely done via buyback? Thank you.

Thank you very much, Flora, for your question. I think it's indeed a very obvious question. So let me give answers to those different elements, which you highlighted. So first of all, indeed, originally, we announced a share buyback of EUR 0.4 billion surplus capital, which was 15.4% -- capital ratio [ 0.4 ] above the 15% threshold, 0.4% on roughly a bit more than EUR 100 billion of risk-weighted assets makes it EUR 0.4 billion indeed. Plus then the surplus capital, which was linked to the transaction in Ireland, that transaction brought us roughly EUR 1 billion of capital, and the 2 combined gave you the EUR 1.4 billion. That is what we announced on early February. I don't know the precise date anymore, but the announcement of the Q4 results. Unfortunately, we had that subsequent event, which happened in -- at the end of February in Czech Republic, and that was EUR 0.1 billion. As a matter of fact, EUR 149 million precise. So if you deduct that number from the EUR 1.4 billion, then it brings the share buyback level at EUR 1.3 billion. So in essence, it's just mathematics. Now what is far more crucial is the second part of your question, what about the timing and what about the distribution? Well, so we filed a request for the share buyback, as announced on the basis of the quarter 4 results. The second thing is that we had that a subsequent event. And the delay the regulator has to -- or the supervisor has to adhere to is roughly 3 months. When we did the resubmission of the file we had to restate the full quarter 2 numbers -- sorry, the full 22 numbers of that file as well. So we resubmitted a file to the ECB, we got a couple of questions for clarification after this resubmission. And so you could say that by the end of March, the file was complete because the 3 months only start counting as of the moment that the file is complete. So we do expect. Let me say it differently, the time line by which ECB is going to answer our request is foreseen end of June max, ultimately beginning of July. So we do expect that answer in that period. Now in terms of positioning. As of the moment, we have the answer in of the ECB, our Board will take a decision and that decision then will be communicated to the market. So ultimately, it depends a little bit on when we do get the answer of the ECB in. That answer will be ultimately given to the markets, of course, on the August announcement, and that is, I think 12th of August of the Q2 results. That is, for sure, the ultimate deadline. In terms of what it then will be? Will it be a full-set buyback, will it be a mix distribution with interim dividend? That is at the discretion of our board, but it's obvious that why we are waiting for the approval of the share buyback that the share buyback is clearly also part of that distribution for sure.

We'll now take our next question from Benoit Petrarque at Kepler Cheuvreux.

So the first one is on the shift into term deposits. I think you mentioned plus EUR 6.1 billion at group level. We were aware that this shift was happening in Czech Republic, but apparently, it is also happening in Belgium now. So could you maybe quantify the shift you've seen in Belgium specifically? And I think you provided the guidance of EUR 150 million to allow a pass-through going down from 40% to 30% on savings accounts. Is the shift you actually see now into term deposits in line with your basic assumptions around NII for the full year? Or does that go maybe a little bit faster than expected? So that's the first question. And then the second one is on the [indiscernible] for share buybacks and special distribution. I was wondering here because could you maybe change the cutoff date for kind of deciding about what the threshold will be in 2024. I mean we are still in Q1 -- well, Q2 2023, now you decide on keeping this threshold basically for 2024. We also know that many peers are going to buy back shares this year. So it sounds like KBC is going to run a bit behind the pack, let's say, on distribution. So the question is, I understand that your median is still around 15%, but given that your peers will buy back shares this year, I guess, the CET1 ratios will come down on average. So could you maybe give you -- give us your impression on whether it's adequate to have this scale of debt already now. And okay, I'll leave it here. I've got some questions on cost, but sorry, sorry.

So with regards to the shift to term deposits and the pass-through changes, I will answer that question. So when we looked at our guidance, we had, of course, a certain shift to term deposits in our minds, obviously, that is a speak for itself. And you also saw what assumption we took on the pass-through rates. Now in reality, the shift to term deposits is a bit more than we expected. On the other hand, you can see that the pass-through rates are well below what we assumed in our assumptions. And that is why those 2 we, at the moment, think they're more or less compensate each other. And therefore, we did not feel there's any material impact to change the guidance at this moment. You can ask the other question. Okay. And Johan will answer the second question.

Thanks, Benoit for your question. If I may add one more element to the answer, look, because you specifically referred to Belgium, if we look at the market share of term deposits beginning of the year, end of the quarter, then the market share is still -- the part of our term deposit is still below our national market share on deposits to good, which means that the move which we have seen in the first quarter is actually a catch-up because the market share at the beginning of the year was substantially lower than our natural market share. Going back to the share buyback thresholds or the capital distribution threshold that's a better description, I think. So the 15%, and there are 2 questions. First of all, what about the cutoff date or you call it the cutoff date, would it be earlier? And then secondly, is it with [ 15% ] not too high? Well, let me start with the answer for the second part to explain the first part. So as you know, and we will not change that position. We always want to be amongst the better capitalized financial institutions in Europe. We, therefore, have a peer group of similar financial institutions to us. And that is also something which we constantly monitor. And I mean, constantly, constantly is not only once a year. We do that on a regular basis. What we have seen is that, that median of that group is indeed around 15%. It's roughly 15%, which clearly indicates that what you indeed triggered in your question that if they are facing capital distributions, the debt capital distribution is not yet executed by those institutions. If it becomes clear that capital distribution is happening, then, of course, we will adjust the numbers of our peer group, and we will see further evolution. On the basis of that, we will take decisions. In principle, we take that decision once a year, as you know, in the first quarter. And that decision is influenced about by the peer group setting, but also by the circumstances. The circumstances which have been very rough in the first quarter, God knows what is going to happen in quarter 2, 3 and 4. Let's hope it is not going to be as rough as what have experienced after the fall of a couple of American banks. But taking into account the situation we will take a decision and that decision is not necessarily bound on the date but is clearly the logical or the common way to deal with it is indeed once a year, but it's not 100% bound to that. If we do see that our peers are indeed doing what they said that we're doing and bringing down their capital ratios. On the remark on the uncertainty, one of the drivers, I think, why we are waiting for the share buyback decision is also that the ECB also in their official communications towards the market and we all know that they're looking in the supervisory measures, which are going to be reviewed after the turbulence in the financial markets over the first quarter that they are not pushed by any urge to give to the markets very rapid answers on capital distribution. For them, it's better on the safe side than on the sorry side.

Sorry to come back on that because obviously, you have a large bond portfolio. So does that weigh on the decision of ECB, what interest rates will do? Is there any link to kind of postponing or analyzing a bit more the interest rate risk or anything -- any ideas on this?

So of course, we are not sitting around the table with the ECB to discuss matters that is at their discretion. But until now, we did not get any questions on that position of our bond book. As a matter of fact, because KBC has super high liquidity buffers. And as you can see, we continuously strengthening those buffers. By the way, this is also linked to the business model because we have a surplus -- a significant surplus of deposits. Because of that, that buffer, we do not have any issues, but that's amortized cost bond portfolio. And until further notice, we did not get any particular questions from the ECB side.

[Operator Instructions] We now move on to our next question from Amit Goel at Barclays. Please go ahead.

So 2 questions. One, just coming back to the 2023 NII sensitivity. Of that EUR 0.9 billion is benefits that you see. How much of that comes from Belgium? And what's the Czech component? If you could give us some color on that, please? And within that, for those 2 regions, what you're seeing in terms of quarterly development? And then the second question, just trying to understand in terms of the terming of deposits versus the liability on the savings accounts. How does that work in terms of -- is it not better just to pass on a bit more on the savings to see a little bit less terming or do you see these things as completely independent?

Okay. So on the NII sensitivity of EUR 0.9 billion, it's obvious that this will mainly be coming from euro transformation results. And that is both in Belgium, but also partly Slovakia and Bulgaria because Bulgaria's lev is linked to the euro. And the contribution of Czech Republic and Hungary will be relatively low. So that's the first question. The second question on your term deposits versus giving a bit more on savings accounts. This is, of course, the [ metier ], the work that our treasurers together with the business do all day long, day in day out and looking at refining the pricing on the various products and making sure that the mix is optimized. So this is the work we do every day, obviously. And this is the conclusion of that work. And of course, driven by competition and customer behavior. So there are some parameters not always control like it is in sailing.

And so for the Czech contribution, would that be a positive contribution?

Well, for the full year, and I think as it last time as well, we think that for the full year, the interest income from Czech Republic would not be materially different, so higher or lower. Materially, I'm stressing that. And so it depends on certain circumstances, but it will not be material, both in positive or negative sense.

We'll move on to our next question from Kiri of HSBC.