Thank you, operator. A very good morning to all of you from the headquarters of KBC.

Today is Thursday, February 13, 2020 and we are hosting the conference call on the Fourth Quarter '19 and Full Year '19 results of KBC. Today we have Johan Thijs, our Group CEO; and Rik Scheerlinck, our Group CFO with us and both will elaborate on the results and add some additional insights.

As such. It's my pleasure to give the floor to Johan.

Thank you very much. Kurt.

And also from my side a warm welcome to the announcement of the fourth quarter results 2019, and as a consequence, it will also include the announcement of the full-year results 2019. We used the common pattern that is starting with the key takeaways.

I'm on Page 3 of the investor presentation, which describes the result of the fourth quarter resulting in an excellent EUR702 million. This is again a proof of the capacity of the commercial bank insurance franchise of KBC, which has been firing all the cylinders in all our core countries.

Actually, what I could say is that on the income line all elements have been performing very well. We saw our loans increasing, the deposits increasing.

We saw our net interest income as a consequence of increasing mortgage margins going up. We saw our fee business growing.

We had net inflows in this quarter, resulting in a higher net fee income. We saw also that our insurance business was performing extremely well.

On the non-life side sales was combined with an excellent combined ratio. And we also saw our financial instruments such our value performing in an extremely good manner, profiting from the take-up on the long-term interest rates at the year-end.

We saw our full year results on the costs perfectly reflecting our guidance, which was strict cost management for the detail before, later on despite the fact that wage inflation was significantly up and that the regulatory and taxes regulatory costs and taxes were also substantially higher than what we had hoped for. We have an increase tick up in our impairments on the more negative side, but nevertheless it's still reflecting in a credit cost ratio, which is substantially lower than the long-term average.

In terms of our solvency and liquidity position, only good news. Liquidity has always been strong, KBC has confirmed again and the solvency position both on the insurance side and on the banking and as a consequence group side was improving further now it stands beyond 200% on the insurance side and stands at 16.1% on group level, which means also that the return on equity of KBC Group is at a solid 14.3%, reflecting a strong performance on a very high capital ratio and that high capital ratio is also reflected in the leverage ratio of 6.4%.

So we're very pleased with that. And it also allows us and that is described on page 4 to announce today that we are going to put the gross dividend of EUR3.5 per share, which actually means that we will have a final dividend of EUR2.5 after the interim dividend paid out in November of EUR1 per share.

But also, and that's something which we have to propose also for approval to the ECB. We are announcing today share buy-back of maximum of 5.5 million shares, which actually is a reflection of our dividend policy which we have announced already two or three years ago, which we constantly have repeated our payout ratio is at least 50% and capital, which is surplus capital which we cannot make work will be distributed to our shareholders today.

This is now concluded in EUR3.5 per share and a 5.5 million share buyback, which results after payout, after distribution in a capital CET1 position of 15.7, which is precisely on a reference capital position. Now the payout ratio after this dividends and share buy-back distribution will be 76%, which is indeed at least 50 up.

The building blocks which you can see on page five are I mean, pretty straightforward. I'm not going to lose time in explaining to them the quarter.

And that's page six is quite normal in terms of exceptional events and exceptional items, hardly any in this quarter, only EUR4 million, if you compared it to previous quarter previous year, you can see indeed that is not worth to mention. In terms of the distribution, bank versus insurance that is on page nine, you can clearly see that the insurance company had a very strong quarter.

This is mainly driven by the non-life insurance company where we had strong sales and also an excellent combined ratio. The split-up, which is traditionally 85-15 was in this quarter 80-20 and if you would look for instance at the more mature levels, which are seen in the basement Belgium Business unit you can clearly see that we had an extremely strong quarter on the insurance side.

Anyway, let me now go to the building blocks of the P&L. And as I said income was performing extremely well in this quarter like it did in the previous year as well.

The major lines have all been improving starting with the net interest income. For good understanding, the net interest income is up 1% on the quarter and on the year.

But the far more important thing is that if you look at the banking income, we have a bit more diversification. And on the insurance side, the net interest income is up 1% on the quarter and 4% on the year, which I think is really a good performance.

The reason why is that, is the case is two-folds. I mean first of all, we have seen that we are hampered by the low interest rate environment in our transformation result that really kicks in the euro denominated countries, whereas on the other hand, we do see a strong performance on the non-euro denominated countries and mainly Czech Republic where we have the impact of the increasing policy rates of the Czech National Bank, which is contributing significantly to our results.

We also, as you know swap euros into korunas placed at the Czech National Bank and that is delivering result as well. The other thing which is important is that the funding cost continued to decrease and what we do see is, and that is important.

And on the lending side we also have a strong performance again, which means that we are able to keep the margins stable. And in certain products, and I'm talking mainly about the mortgage business in Belgium, Czech Republic, and some other countries, we were able to increase margins significantly.

Margin's significantly up definitely for instance, in Belgium where we talk about the increase of more than 25 basis points. Now in terms of volumes, other good news follows, because on the mortgage business the quarter was up 2% and was up year-on-year 4%, which is really a strong growth.

In terms of the growth and that is - by the way this is mainly driven by Belgium and all other countries as well, but Belgium had a very strong quarter in - sorry, that is strong in last quarter in 2019. If you look at the total growth of the loans, we have a year-on-year evolution of 3% and the quarter-on-quarter growth of it seems to be low, 0%.

But mind you, this number is actually, if you look at the numbers before correction of the FX evolution, this would be 1% on the quarter. The reason why this is low is because of the fact that we do calculate these numbers on the euro basis which means that the appreciation of the Czech koruna and the Hungarian forint, two countries contributing significantly to the growth have been revised downwards because of that appreciation.

So it is better than it looks, it is definitely better than the 0% which is on this page. In terms of the deposit same evolution.

So, also there, you could see a further strengthening of our position, definitely in the countries where we do want to strengthen that. And last but not least, we have a positive impact on the tiering about EUR7 million for the quarter.

In terms of net interest margin, it remained stable. Also, the good news is, for instance, in Belgium, the production is now having interest margins which are higher than the back book.

In terms of another P&L contributor, fee and commission, we do see a further increase. Our fee commission in the fourth quarter is slightly higher than previous quarter which wasn't, as you remember, a very strong quarter, EUR1 million or more, but it's 9% more than what happened last year in the same quarter.

This is due to several elements. Let me first of all emphasize the fact that as you know this bucket is split up in different parts.

This is definitely, important part is the asset management business, the banking service business, and then obviously you have the distribution costs which are related to mainly the sales of insurance. As I said, insurance was having a strong performance and therefore those commissions are up.

I think we should, for the near future we should split it up because the better you do it on the insurance side, the more the commissions go down. It's a bit of a weird situation, but that's how it works in IFRS.

Anyway, the two main contributors, which are asset management business and the banking services. On the asset management business we have seen a strong quarter.

It is a bit different than what we have seen in the previous years, but the fourth quarter was a quarter where we had net inflows. And that's really good news because I mean that was clearly not the case in the previous years.

The translation of that is that we have seen our entry fees going up, but that is twofold because of the net inflows, but also clearly on the margins. On the other hand, the management fees were kind of stable definitely, significantly up on the year because of the low performance in the fourth quarter of 2018.

In terms of the management fee margin, it's kind of stable, went down 1 basis points, but this has to do with, amongst others, the shifts which we have in the sale of our products. The CPPI products are shifted, as you know, into discretionary products which have a lower but a stable margin.

Whereas the CPPI margin was more volatile, be it a bit higher, giving the current performance of the financial markets. In terms of the banking services, it increased 3% on the quarter and which is mainly due to the fact that we had a good performance on the fee business related to credit.

Credit files were up, as I already explained, and we had a strong performance on the network income which were mainly related to the sales of FX products. In terms of payment services, this is slightly down compared to previous quarter, which is mainly due to the impact of supply in the Central European countries and also some compensation which we paid in Czech Republic.

In terms of the year-on-year increase, I mean it's more or less the same philosophy. You have clearly strong performance on the asset management business, strong performance on the banking services business, which are 8% up on the year.

And there you'll also see that we have the negative impact of the strong sales on the insurance side but that strong - that positive impact will be reflected in the next topic. And assets under management are up again and this is, as I said, very positive news because the net inflows are a given.

We have seen some outflows on the investment advice, but as you know these are low fee business and we have some outflow on the group assets, which is close to zero fee business. So in that perspective the good news, the impact, obviously, on the pricing effect is taken into account.

This is having a positive impact as well on the EUR4 billion of difference on the assets under management. Last remark, when we had the plummeting of the assets under management in the fourth quarter 2018, that is no more than compensated over the full year 2019.

We are at a record high EUR216 billion assets under management. Insurance business, already referred several times to that.

So, strong performance again on the insurance side. Non-life business is up 8%, for the earned premiums, it's up - on the written premium, 7%.

It is in terms of countries more or less the same in the whole group. It's 4% in Belgium, which is significantly higher than the Belgium sector growth and it is up more than double-digit in the - all the Central European countries, which is an extremely strong performance.

The good news is also that, that underwriting is creating a good technical income, which means that the underwriting quality is high. Combined ratio stands at 90%.

And let me be a bit more precise, actually it's not 90%, it's 89.9% which is below 90%. And all countries have a combined ratio now below our long target of 94%.

So also Czech Republic dropped to that level and all the other countries, we are below 90% or just on 90%. In terms of the life-sales, which you can see on the next page, we had a strong increase for the interest guaranteed products which have seen a growth of 29%.

The unit-linked business remained stable, if you compare them over the year, then the numbers look a bit differently and then we have a decrease of 8%, which is mainly due to the fact that the low interest rate environment is kicking in and that therefore we stopped certain products in interest guaranteed products. Unit linked sales were not picking up as we have seen in previous years but was transferred [ph] and transformed as you know in the bank insurance model via the asset management products and discuss earlier.

So all in all good performance on the insurance side. In terms of the financial instruments at fair value was a strong uptick.

We have a fundamental improvement on the quarter EUR176 million of difference on the year and EUR128 million of difference. This is due to several aspects.

Obviously, the impact positive on the up increase of the long-term interest rates at the year-end kicking in on not only the ex-VAs [ph] as we call them at the market trend and the funding value adjustments, but also on the dealing room results. Also strong performance on the equity side on the insurance company.

And then obviously the long-term interest rates kick in on the derivatives, the ALM derivatives because we're tailored for an increase of interest rates. Net other income was actually normal, quarter run rate is EUR50 million.

As you can see EUR47. It's more or less that number so I would not waste too much of time there.

So normal quarter in this perspective which brings us to the cost management on Page 15. Well, let me summarize it as follows.

We guided over the several quarters that our costs evolution would be limited and that's what we strive to do to 1.6%. And if you look at the total costs, full year 2018, you compare it with the total cost of full year 2019, we have an increase of 1.6%, which is indeed precisely the guidance.

Now, the good news is, if you look a little bit deeper into those numbers, it's actually much better than it looks, because full year 2019 difference, but full year 2018 is EUR70 million. Now, including in that is the full consolidation of CMSS which is EUR30 million.

And on top, we had to pay, again, more taxes, more bank taxes, which is a difference of EUR29 million. So the EUR70 million is fully explained by EUR30 million and EUR29 million, EUR59 million because of those two elements.

And I would add to that the FX impact EUR5 million. And I would add to that another increase of the direct supervisory expenses EUR3 million.

Then the total difference because of elements which are beyond our control is EUR67 million, which means actually we have managed to keep our costs '18 and '19 constant. So zero increase.

Which I think giving wage inflation, which I think giving circumstances, which we all know, we are investing heavily in the transformation of our business. By the way that IT investment is perfectly on the guidance which we have given.

So EUR250 million, more or less EUR250 million. That has been fully compensated in the way how we run the company, which means cutting FTEs.

So in this perspective, costs are under control to use an understatement. Cost-income ratio as a consequence stands at 58%.

To just explain what it means rising bank taxes that's on Page 16. We have EUR491 million of bank taxes, which is another increase of 6% compared to the year.

And this is becoming a lot of money, almost EUR0.5 billion of bank taxes. If you add to that the direct supervisory cost, we are topping EUR525 million to be precise.

So that's a lot of money. In terms of keeping costs under control, bank taxes went up 6%.

So, direct supervisory costs, which are the invoices which we paid to supervisors were up 10% on the year. In terms of asset impairment, we have seen an increase of the impairments on loans in the fourth quarter.

They now stand at EUR75 million, which is about EUR50 million higher than previous quarter, about EUR45 million higher than previous year. This is mainly due or I would actually I have to say only due to the increase of provisions which we have put into the Belgium Business Unit.

We saw an uptick there of EUR107 million which is due to five corporate files because we don't see this happening in the other types of business; nor on the SME side, nor on the retail side. We don't see any particular, I mean reference to a particular sector, it's happening just in the series of corporate files.

I would actually say quite randomly in all sectors. The other countries, and I'm referring to Slovakia, Bulgaria, Ireland has seen reversals.

Czech Republic only had EUR1 million of provisions, which is close to zero indeed. The reversions of cost in Ireland are at level of EUR14 million, and also as reflecting the evolution which we described already in earlier quarters.

So this is coming now to a normal situation where we will not have huge write-backs on provisions as we have seen them in the first quarters of 2019 and last quarters of 2018. In terms of the credit cost ratio, now stands at 0.12%, 12 basis points, which is higher than previous years.

But we already stated that for a couple of years that the, what we have seen in '17 and '18 was abnormal and that the costs, credit cost ratio would evolve to more normal territory. If you would compare that to the long-term average, so over a cycle of 20 years than the credit cost ratio is 42 basis points.

The 0.12% today is still exceptionally low. In terms of where we do see it evolving, we think that it will evolve more and more towards the normal levels, but this is over time, not in next year.

For 2020, we think it will be kind of half of what we have seen on the historical average. So I would say 21 basis points will be more, would be a better reference point.

Also, quality wise we see the non-performing loan ratio standing at 3.5%, of which 1.9% is more than 90 days past due. This is according to the definition which we always use.

If you would use the strict EBA definition then this number would drop to 2.8% below the European average. And the reason why it is there is, as you know, the Irish and the Bulgarian institution because all the others are substantially below that number of 3.5%.

The good news is that in both Bulgaria and in Ireland we have decreased significantly our non-performing loans position. Anyway, on page 19, you see the overview of all the details of our business profile.

I will not explain the detail, nor will I explain the detail of every business unit just to save some time for questions. And I suggest to go to page 38, where you see the evolution of the profit over our group.

So, I mean in terms of return on equity, it's already mentioned 14.3%. You can see it in each and every country with the stellar performance of the Czech Republic and all the other business units are doing actually a great job as well.

In terms of the International markets business unit, be aware that this is lowered because of the impact of the Irish market. In terms of page 39, in terms of the balance sheet, I already mentioned the evolution of the loans and deposits.

You can see the evolution in the country you prefer on the right hand side of the slide. I'm not going to go into the detail because I suggest better to talk about the capital position which is at page 41.

The common equity ratio stands at, after profit contribution, stands at 16.1%, which means that we have generated quite a lot of capital in also the fourth quarter, taking into account a couple of provisions which we took for TRIM and also other regulatory uncertainties. The good news is also that this is reflected in the total capital ratio.

As you know, KBC already has fulfilled its buckets on the AT1 tier-2. And on page 42, you can see the impact of the same.

Contribution on our leverage ratio stands at 6.4% group level, 5.2% at bank level, which allows us to indeed say that we will go into a distribution of a capital going to our reference capital position, which stands at 15.7, which allows us to pay out 76% of our total profit coming from EUR3.5 dividend per share and a share buyback maximum of 5.5 million shares. Let me say one single word on the insurance companies.

Solvency ratio stands at a solid 202%. It's a bit better than the guidance which we had given on the last, when we were announcing the last quarter.

This is due to the uptick of the interest rates in the last weeks of 2019, but also because of the regulatory change on the guarantees given by regional authorities. In terms of liquidity, page 43.

We do see that everything is as you are used to. So strong positions on liquidity and is of our LCR.

And the customer driven funding is about 72%, which is also quite normal. So I would not waste any more time there and I will just go to page 45 where you see actually the full-year results reflected as almost EUR2.5 billion, which is more or less the same as what we have seen last year.

So in terms of the full-year results, I would say it's more of the same, what I just explained on the quarter. Great year, strong performance on the business, strong performance on the quality, very strict cost management, as I explained in detail.

And so this ultimately results in strong ratios, both on the solvency side, liquidity side and a strong dividend policy with a payout of 76%. In terms of all the detail of that year, I would skip that because I think you are far more interested to ask some questions.

For the guidance going forward, we expect that this 2020 will be an exciting year with a lot of things to do. Economy will be evolving the same way.

We are all looking into what is going to happen with the American elections, the Brexit transition period, and obviously what happens in China is of great concern to all of us. But we do expect solid returns for all the business units.

And the Basel IV impact, as we have been disclosing already in previous occasions has not changed. The only reason why the impact, the 1.3% went down to 1.2% is because of the increase of risk-weighted assets.

And for the rest, I leave the floor to Kurt who will guide us through your questions.

Thank you, Johan. Now the floor is open for questions.

Please restrict the number of questions to maximum two to allow for a maximum number of people to raise questions. Thank you.

Hi, good morning and thank you for the presentation. So two questions for me.

The first one is on your dividend policy, and you said that your dividend policy has not changed, but obviously the buyback is a new element. So can you give us just a sense, how did you calibrate the dividend or the dividend portions versus buyback and how do you see really buybacks going forward.

What role they can play? Is it just a small element that gives you flexibility or perhaps it can be something more meaningful going forward?

So that's the first question. And the second question just goes back to your comment on cost and guidance there.

You said that underlying costs were flat and obviously that's a very good result. To what extent it can be maintained going forward, because you also alluded to wage inflation, IT spend and supervisory cost that are playing increasingly more important role.

So can you maintain this cost discipline and similar results going forward? Thank you.

Thank you, Pawel, for your questions. Let me start with the dividend policy.

So I mean for us it's quite crucial that what we have said in the past is indeed executed today in the way we explained it in the past, which means that the dividend policy is starting from our position first of all, total capital. And then as you know the reference capital position which we have defined according to how it works.

The 15.7% is actually exceeded than, we also came to the conclusion that in this perspective we could indeed distribute more capital to our shareholders, as we have been doing over the past incidents, the capacity to use that surplus capital in for instance acquisitions, and so on so forth. So in that perspective the buffer which we have is sufficient for reusing - the buffer which we have on acquisition is sufficient for using the files which we have on the table.

Now the way we distribute the capital is a choice which we have made today and it's not a guarantee that we will do exactly same thing in the future, and that is decided by the Board that deals with the question. But we have decided in this case to keep the dividends, the payout of the cash dividends stable and to do the remaining distribution of capital via a share buyback.

So what is going to be in the future, as you know we have an investor day upcoming in June of this year, and during that investor day we will give further guidance on the future capital deployment plans as we will give further guidance on some other elements in our group. Coming back to your question on the cost side, well, I mean the evolution I described to you perfectly reflected that in your question.

We also would like to emphasize that the guidance which we have given on the cost of 1.6% to stand at something which we would continue to sales for the year 2020. In that perspective, we also repeat what we have said on previous occasions, that is that it is not wise when governments increase their taxes to safe people to cut jobs for that.

So what we have done, in the guidance which we have given, is taken into account flat taxes for 2020, and all the rest is a continuation of what we have done in the recent past that is managed very tightly our organization, our efficiency. We will continue to invest on the IT side and we will continue to bring our cost to the level of which we have seen in 2019.

So philosophy wise, it's actually for 2020, exactly the same as what we have done in 2019.

Thank you very much.

Hi guys. Good morning.

It's Stefan from Citi. The two questions on my side as well.

The first one is in terms of buyback versus dividend. So if I read this correctly, we have a 60% dividend payout plus 16% buyback payout so to say.

Are you building a curve from the dividend payout? So going from 50% to 60%, should we look at the 60% as sort of an ongoing dividend payout ratio?

And my second question is a bit more kind of like taking a step back and looking at the bank assurance model. You made some comments in the presentation that mutual fund sales were better than the investment advice.

So just thinking about that, how are you approaching the asset management/bank assurance space in terms of customized products versus plain vanilla products? And then taking another step basically looking into non-financial targets of the CAGR in the sales for bank assurance customers.

I believe you were targeting 2% CAGR for Belgium, you're running at around 1% now. Is there some sort of a saturation point that you're reaching in your domestic market from a bank assurance point of view?

How you're positioning your asset management offering, what are the challenges, are you seeing more of a move towards passive investing? So, just some color in terms of the strategy and how, I guess, how you're thinking about the overall space in your positioning within that.

Thank you.

Thank you, Stefan, for your question. On the dividend and on the payback your numbers are indeed correct.

But I mean you cannot deduct from that, that we would have a ceiling or if you want to a floor going forward on the cash dividend. I would not say that.

We just chosen now for doing the share buyback and therefore the EUR3.50 is what it is, as you calculated 60%. So I mean there is no tendency in this perspective.

The only thing I would like to add and probably you will not be surprised is that our dividend policy clearly states that we are going to payout at least 50% of our profit. And that's the only thing which you can conclude from the day that is the 60% is a confirmation that it was at least 50%.

But there is no guidance that the next day, over the next time it will be 61% or whatever. Now repeating what I said on the previous question.

We will update the capital deployment plan in June 2020 and we will definitely give more flavor on how that than will be enrolled. So the very straightforward answer to your question is today there is no indication whatsoever, but we will give you more flavor in 2020 June.

A warm welcome from my side as well. And to come back to your cluster of questions which constitutes your question number two on the bank insurance.

So a couple of things. So first of all, indeed it is, in this low interest rate environment it is clear that unit-linked funds sales are better for the client than the plain vanilla interest guaranteed funds because the low interest rate environment.

So indeed we, together with our colleagues in asset management we work towards tailored made products and we've seen good sales like on the unit-linked continuing in all of our countries in 2019 and we expect this to continue. If you look at the growth of bank insurance stable clients, indeed in Belgium the growth was a little bit lower than the 2% we had expected, but that is the growth in the number of clients.

It does not constitute or is basically the underlying sales that we then do per client because typically it takes a couple of quarters before a client becomes fully productive in the sense that the cross sale, the one-stop shop helps into that. As you know in our bank insurance model, we constitute product neutrality at the basis of the client.

We offer a number of products. They can be mutual funds, they can be unit-linked, they can be plain vanilla insurance products as we see in Belgium Branch 21.

And actually it has declined to a decide. So what is important for us, as Johan already hinted to that, is how are we doing in terms of net sales.

And we have seen that in the fourth quarter of 2019, the net sales of mutual funds was significantly with about EUR120 million that brought the year to a positive net sales of about EUR100 million, which is in line with the number we have seen last year.

Okay. Thank you for that.

Hi. Good morning everyone.

Two questions please. First on capital.

So I guess you didn't update your reference capital for 2020. And how do you think about it if this 75 goes through and we have the lower pillars or if you can fill it with other non-equity capital for you to be like around 80 basis points lift.

So would you, I mean if the competition actually decreased there, since you are on target and given your methodology, I guess you will be decreasing your reference capital as well. And second question on capital is the ERU2.5 billion RWA you booked in Q4 which is a number of regulatory headwinds you put there.

And can you detail the major parts of that? And also maybe on the Danish Compromise bits, can you explain what's rationale, because we've seen that with Intesa, some comments from BNP, and also understand how it is dealt within Belgium.

Thank you.

Thank you, Tarik, for your question, for your both questions. Now they're related more or less at the same thing.

So let me answer the first part which is reflecting potential changes in the regulatory environment. I mean given our current capital policy, if indeed the common equity tier-1 ratios of our peers are changing, then we take into account obviously those changes in the calculation of our reference capital position and the owned.

So the 14% would then be lower, to add to that the buffer, and then you come to indeed a lower reference capital position. That's how it works.

All the rest is of course speculative. I know the story is around 75 [ph].

I know a couple of stories around other stuff, but I know also the opposite. I see the impact of the trends, I see the impact of certain initiatives which are taken by the EBA, which is going to have to be implemented.

The stories, NPLs so on so forth. So it's all speculative.

But the straightforward answer to your question is, if it happens, and as a consequence CET1 goes down of our peers, then in principle it has the same impact on our capital position accordingly and then certain capitals will rise, with then the consequences for the dividend, positive consequence for our dividend policy. In this perspective, also once again refer to the Investor Day in June 2020.

If I may add to the stories and the questions you raised about the Danish Compromise, the Intesa story and about our buffer of EUR2.5 billion. And so, first of all, in Danish Compromise we have not received any letter from the ECB, nor a request, nor a discussion on this topic yet.

So - and then also where that the industry situation is not applicable to KBC because we have not issued hybrid capital at the insurance level. We have issued at group level.

Is it not going to happen going forward? I don't know.

We'll see. You never know with the ECB in this perspective.

Also the regulatory uncertainties which we have a buffer for EUR2.5 billion are indeed elements which we do prefer not to detail because if we would detail them, I mean you know how it works. If it is provisioned for, then the discussion which we have at the ECB on these matters will become a bit more difficult because when it's provisioned, it's easier to say you already have the money, just supply.

So we are still in discussion with them. But you know what I'm talking about.

You know that is about NPLs, it's about definition default and so on so forth. By the way, for good understanding we also provided fully already for the TRIM exercises which have been conducted on KBC.

Thank you. I mean but I kind of not understand your cautiousness about the negative stories we could hear because I think Basel IV captures a lot and you have already now provisioned for the tail of other regulatory, so what other things that would make you worry that it could go the other direction in terms of capital because your peers seems to be quite now comfortable about this, I mean guiding for return of capital while you've been guiding for it because of your higher profitability and higher capital levels, while other banks are just like surfing the wave and trying to sell the story.

So what concerns you actually more than what's already released?

I do agree with your position, but for good understanding, that's always been our style that we only take into account certainties and not speculative things. So everything which is related to, what you said on CET1 and so on so forth are still not certain.

So we'll see how it happens. But I confirm what I just said, if it has a negative, sorry, if it has a positive impact, so it reduces the CET1 position of our peers, it will ultimately give the same impact as now and ours will create more surplus capital.

What we have now taken into account are things which are today in discussion with the ECB. So these are not speculative things.

These are really things happening. Have we provided fully for them is a discussion boil out to be positive from our side so that we don't need the entire amount, then we will release and then it will create surplus capital again?

But as always, as KBC you know how it works. We take into account the things which we have in control.

We will do not put in speculative things to take stances, for instance, for distribution of capital.

That's very clear. Thank you very much.

Hi. On the NII guidance of EUR4.65 billion for 2020.

Could you reconcile it to the kind of run rate you've shown in Q4, NII was, I mean 4x is about, it's higher than EUR4.7 billion. Two, what do you expect into 2020?

It looks like you are a bit on the cautious side still on the NII development in the coming quarters, so trying to reconcile that to your guidance. Second one was on the CET1 ratio of KBC Bank, which is 14%.

I was wondering how much payout ratio you have assume here, how much upstream you expect from the bank to the holding, what is your assumption for 2019? And then maybe finally going into Q1 we have seen a quite large storm, windstorm this weekend, maybe a bit too early to comment, but what is your feeling and could you recall us how the reinsurance agreement works and what is your level of protection against large storms?

Thank you.

Thank you, Benoit, for your questions. On the first one, on the NII.

So our guidance of the EUR4.65 billion is a ballpark figure. There are, as you know, since the end of the year, there are a number of developments, so the Corona virus expansion has had an impact on long-term interest rates.

There is more uncertain environment there. And as you know, we want to be conservative when we guide.

You remember, we guided last year at EUR4.6 billion, we came in at EUR4.68 billion and we want to continue our styling guidance.

Thank you. Benoit for question number two and number three.

The answer for the banking side, as you have seen the capital ratio of the bank stands now at 14% and function of the upstreaming because that was particularly the question, what the question was related to. So actually nothing has changed.

So what we are doing, the policy remains the same. I think we have been explaining this on a regular basis amongst others to you in detail.

So nothing has changed. So the upstreaming on the insurance side is indeed as announced by this fall.

On the banking side we keep it more capital at banking level in order to boost the capital position. And you see it's steadily going up.

This is something which we're going to continue going forward. And in that perspective, nothing has changed.

Indeed, you're right on the windstorm. So in over started Saturday evening, full Sunday.

And then on Monday, we had quite a lot of wind in on the European continent and then clearly in Belgium. KBC is a company which has an independent network of agents which have the possibility to settle claims themselves.

So this gives us the opportunity to indeed, three days after the storm, already give you a good indication what it means. So we have about 18,000 claims in Belgium.

And the good news is that the big claims which have been in the newspapers and on television, none of them is insured by us, which also brings down the average claim amount to an estimate of EUR200,000. This is on the basis of already settlements done and all the modifications done by our agents and by the digital applications which we have in KBC.

So totaling EUR36 million estimate. You asked for the priorities.

So, in Central Europe, we think about max because also Czech Republic to a little extent, very little extent, Slovakia, Bulgaria and Slovakia and Hungary. Bulgaria was not hit.

We think that those countries, we will talk about maximum EUR2 million to EUR3 million. Now all those amongst some are just at level of our priority.

So priority in Belgium is EUR30 million. We have a reinsurance captive in Luxembourg, to sum off all parts, give and take, if you did the mathematics, its EUR38 million priority.

The next one which is announced because probably you have seen that as well. They predict windstorm.

I think it will be of a lesser impact as what we have seen over the last weekend. The windstorm called Dennis for this weekend.

If it would hit us then it would create damages. Then in terms of impact, we will see what it's going to bring.

But this one is, let's say, more or less between EUR36 and EUR38 million.

Thank you. Great.

Thank you.

Yes, good morning. Two questions.

The first one is related to the share buyback. How do you intend to execute, is it an amount per month, per quarter and how will it affect the reported core equity tier 1 because we could see a delta in the fourth quarter?

And one question which is in suspense is what kind of payout will you use for as a basis for dividend provisions going forward in the beginning of 2020, is it 76%, 50%, 60%, I should clarify that. The second question was on the drivers of the provisions on the five corporates, were there any common points in the deterioration and are there any risk for further corporate files, or was it a conservative view based on your good trading results you decided to be conservative given the very solid trading results?

Thank you.

Can you repeat the second part of your first question Jean-Pierre because I missed that completely because of quality of the line, can you do that again?

Sure. So that was related to the five corporates.

No, sorry. That part was clear.

Yes.

The second part of your first question.

Yes. Did you take advantage of the strong trading results to take a more conservative view and take provisions?

So basically take advantage of the strong results to be more conservative on the provisions?

Okay. Thank you, Jean-Pierre.

On the share buyback, so the way it goes is we need to have approval first of all from the ECB. Then we go to the General Assembly Meeting that is the 7th of May.

And then once we have approval from the AGM to do the share buyback, actually we will start executing it just as we did last time. It is spread over a number of months.

But in terms of capital treatment once we have approval from the AGM and once we have approval from the ECB, we will deduct it from our CET1.

And going back on the question on the five corporate banking files. So as I said during the disclosure of the result itself, it's not specifically related to one or the other sector.

Those five files, two are in the same sector and the other ones are in different sectors. And so there is not, I mean we cannot see immediate direct link to one or the other sector.

I think we should also bear in mind that we got used to a situation where we had zero impairments. And obviously if you then see five impairments coming up, but it makes a difference in P&L, makes a difference in the size of provisions.

But let's remember, even when you take into account the full year 2019, all the provisions made on corporate banking, they were still below the average run rate over the last 20 years. Did we put in any conservatism in those files?

As always, we try to be as accurate as possible and when I define accurate as possible than you know that we always put in the seven conservatism but as we track that’s the ambition at least that reflects reality. So having good trading results we did not make use of that to put in a big chunk of that not good management, I think.

Good. And the point I was asking about the payout which was assume going forward in the dividend provisions, what kind of level of payouts should we assume in the next quarter for example.

So, are you referring to the dividend accruals?

Yeah, that’s correct.

That’s the discussion, well as you know we have we are in discussion with the ECB still on the recognition insurance profit, but if you use their methodology than they look at the cash dividend and that is payout ratio of 60.6%, so its 60.6.

Great. Thank you very much.

[Indiscernible] from me, please. The first one is on your Solvency II ratio, which is now at 202%.

So there was a significant increase of 15% related to some regulatory treatment. Can you please elaborate on this?

And secondly, some of your peers are really counting on reduction of risk weighting of the insurance business? And what's your view on this?

Do you think this will happen? Do you think it's very remote?

Thank you.

Thank you, Ricardo [ph] for your question. So first of all, indeed, we had a strong improvement of our solvency position.

So the 15 basis points - sorry, the 15 points percent even was much better than what we guided on the previous announcement of quarter results - of quarter 3 results. This is a result of 2 things.

First of all, we had a positive impact because of the interest rates, which is actually reflecting about more or less 5 points percent of improvement. And then you had the second thing, that is change that is related to guarantees given by the regional authorities here mainly in Belgium, which has been reviewed and which has a positive impact of about 12 points percent.

So there's just a regulatory update, which has been taken into account. Going back to your second part or your second question.

The reduction of risk-weighted assets, I understood on the insurance side was the question about. So we all know that is a review or a review scheduled of Solvency II but it's super early days to take already that into account.

So with the implementation is only foreseen I think by 2024, which is a long way to go. And what I've seen for instance yesterday came out a report of one of the other European think tanks about the review of that, what is 900-page document of EIOPA and they considered that the review which is described in the document was overly conservative.

So I think a lot of discussions are still going on. We'll see what it brings.

But I think it's very early days to, you can comment about it, but definitely not take it into account.

Okay. Thank you.

Yes. Kirivijayarajah, HSBC.

Good morning. So, a couple of questions.

Firstly, on the volume growth. I appreciate the group number, the 3% is distorted by FX and whatnot, but just focusing on Belgium the 2% volume growth there.

If I look back to about a year ago, you were running at full 5% overall loan growth in Belgium and so I'm wondering is the 2% kind of the new normal to expect in Belgium in the current environment? And is it a case that actually you don't need to push so hard on the volumes there to keep absolute NII kind of flat?

And then on the sticking with revenues, on the banking fees, they were quite strong up high-single digits year-over-year. So, is not just the strong activity in the quarter, it is actually some repricing you're pushing through, in which case is a little bit of a tailwind on the banking fees to come through into 2020 as well.

Thank you.

On the volume growth, Kiri. Thank you for your question.

We had guided in the beginning of the year that we expected volume growth in business unit Belgium between 2% and 3%, so we came in at the lower range of that. So just two elements.

So, first of all, if you look at mortgages, there we have seen a good volume growth, you see 4%. So the back book actually increased by EUR1.4 billion.

On the corporate side, the volume growth was lower. But a lot of that has to do with the way that companies also are managing their balance sheets at year-end.

As you know, companies have different ratios. They have to fulfill the covenant towards the banks.

And what we had seen in the fourth quarter, we have seen that in previous years as well is that especially short term loans, straight loans have been reduced and that is the reason why we saw the growth in Belgium coming down overall then to 2%. So what do we expect for 2020?

Indeed let's say the new normal of growth that we thank you for business unit Belgium on the loan volume side is around 2%.

I will get back to the second question. So for good understanding the new normal for Belgium is not 2%, it's 3%.

That's the expectation. Let's not get a misunderstanding there.

It was a mix up between a quarter number and a year number. Going back on the revenues repricing there on the banking side.

So first of all take into account what Richard [ph] said, on the guidance of NII. Also, I mean in terms of the total revenues, which we have all products going forward.

Always what we try to do is fulfill customer demand. That's where you know that is translated in strong growth and not only on the lending side, but definitely also on the fee generating part of our business.

And then in terms of repricing probably you know there was a whole debate going on in amongst others Belgium but also in certain other countries. And KBC is looking into that situation from a perspective as always.

That is, if the opportunity arises, and it is indeed a fair repricing, then we'll definitely consider. So in this perspective, Kiri, nothing is new.

We'll maintain our competitive position. We will take into account any possibility which is there in order to do a fair correct pricing, fair and correct on both sides of the coin, being customer-client side and company's side.

Great. Okay, thanks guys.

Just going to ask one general question, so maybe you will kindly expand on the answer. I'm getting a negative picture for unit for your net income in 2020 based on NII plus fees is flat or some progress, but lower trading and other income, keeping with the trend.

Insurance combined ratios have been very good but seem to be trending up. And you are guiding for four percentage point higher cost of risk.

Costs up 1.6% or more on higher bank tax inflation. Cost of risk to double from almost double from 12 basis points to 21.

Just this would shave off circa 6% of net income. And so far, your scot-free from any meaningful litigation risk.

So risk there is still to the upside for further provisions. So is it fair to assume that net income is at risk of showing a significant fall in 2020?

Or am I missing some strong tailwinds that offset these negatives?? Thank you.

Thank you, Jose, for your question. Actually I think when I listened carefully to your question, then you're not talking about net income, but you're talking about bottom line.

So in that perspective, I mean, the analysis, which you just did, is on the revenue side. Rik has already guided for interest income.

On fee and commission business, that we don't give guidance. I can give you a little bit of flavor.

What we have done in 2018, it started - sorry, '19, it started difficulties because of the impact of - at year-end of 2018. We strongly build up our fee and commission business, we mitigated the impact of MiFID II.

And we have increased our volumes. And if you start from the position that circumstances are, let's call it, similar than 2019, then you can sort of yourself what the outcome will be on fee and commission business.

It will definitely start better than what we have seen in 2019 first quarter. In terms of the other things you just mentioned, on the insurance side, sales will continue to go good, because it's an explicit policy to come back on the bank insurance side on the Belgium Business Unit.

I triggered my CEO to do better than what he has had in 2019, which is a challenge and normally should drive up in that perspective, indeed. The bank insurance numbers.

The bank insurance numbers, as Rik has explained, ultimately, a bit further in time - go in further and can increase sales, allowing you to do the exercise. And then coming back on the other elements, which you analyzed, we guided indeed for credit cost ratio trending to a, let's say, half of the normal run rate, which if you compare it to 2019 is indeed a deterioration.

On the cost side, we guided 1.6%. You can do the math.

And then if you add up all numbers, you will have a final outcome, P&L outcome. But as you know, we never guide for profitability.

All right. Thank you very much.

No problem. Thank you very much for taking the question.

Just two things. I mean number one is, where do you think bank taxes will be in 2020 versus 2019?

I guess, the Slovakian change is the biggest one, but you also have a significantly larger balance sheet in the Czech Republic. If you can give us some indications, so we can kind of see what the 1.6% underlying plus bank tax.

If I understood your guidance before, that's not part of the 1.6% in terms of forward-looking guidance. That's the first question.

And then the second is just a reflection on your CET1 target. So if we look at - and we don't know exactly what your peer group looks like.

But if we just look across Europe, most banks have higher CET1 ratios at the end of '19 than they did at the end of '18. So if we apply the same methodology, is it fair to assume that we should see a 20, 30, 40 basis point increase in your CET1 target, or do you have any, at least initial indications of where that median might move, because the average might not be representative, of course?

Thank you, Johan, for your questions on the bank taxes. So the only thing we know for certain right now is already on Slovakia you have seen that the government has implemented higher bank taxes there.

The impact of that for us will be about EUR16 million. For the other countries, again we've seen last year that actually in Belgium bank taxes increased by EUR8 million.

It's a function of volume. We don't see big changes there.

And then we're going to see some slight upticks in the Czech Republic and in Hungary because there also bank taxes are a function of the total asset evolution. But you've seen the size of our balance sheet, so the growth has not been all that substantial.

And then going back to your second question, Johan. It's not an easy one to answer because as you rightfully pointed out at the end of your question; it's not about the average, but it's about the median of the common equity tier 1 which we take into account to make the definition of our own capital target.

So let me elaborate one minute about that. You're right that we do see the common equity tier 1 ratio of the peer group rising anyway, which means that the average rises, but not necessarily in the median.

So, be careful about that. You cannot straightforward put that into the conclusion that as a consequence, KBC's own capital position, so our 14% will rise as well.

The second thing is that obviously when the common equity tier 1 ratios of our peers are rising, they will be tempted to also exchange our dividend payout policy. And as a consequence that has also an impact, a downward impact on their CET1 position which could then reflect again in having a same average at the end of the day, or let's say it even the slightly lower average at the end of the day depending on how much the payout ratio is.

But as I said, it's not about the average, it's about the median. We will give you full detail on that anyway in our investor event; our Investor Day in June in Prague.

That will be for sure. And normally we also give an update anyway on our peer group going forward in 2020.

Thank you. Maybe a question for the Capital Markets Day that you can make public within your peer group by - I struggle to understand why that is secret.

Thank you very much for your answers.

Thank you for taking my questions. Two questions, please, one on margins, one on impairment.

On margins, so I can see the NIM was stable in Q4, largely driven by higher margins in Belgium, particularly stronger mortgages, which offset your declines as seen elsewhere and also lower investment yield as well. The volume is also very strong.

But just wondering how much of that margin and volume boost in Belgium was just a temporary effect of the change of the Belgium government's mortgage incentive scheme, which has now ended? And what's your margin outlook for 2020 by region, please?

Second question on impairment. So the Q4 uptick, it was largely attributable to the 5 corporate files that you mentioned at the beginning as quite random in terms of factors, et cetera.

But can we get more color on what KBC think is driving these isolated cases? And do you view this as a developing trend in the region?

And how this will interplay with IFRS 9 and further provisioning requirements, please? And if you can give some more color on the underlying trend in the country in other regions, that would be appreciated.

And if you can give some more color on the underlying trend in the country and other regions, that would be appreciated. Thank you.

Thank you, Daphne, for your questions. Let me answer the first one in terms of the margin and definitely the strong production, which we have realized in the mortgage business in Belgium.

You're right that this has definitely been positively influenced by the decision taken by the regional authority in Flemish to shift a tax advantage and bring it actually to 0. As of the January 1, 2020, that has created a run on the, let's call it, on the mortgage business.

And as a consequence, we've seen a strong uptick in the production in 2019, let's actually say even the last 2 months. So we had more than 4x quarter production in 1 single month, to say something.

The good news is, on the other hand, that the margin which we have realized is not related to that. So on the contrary, I mean, the margin increase in Belgium - and that you can see on - and I did not discuss about that during the presentation.

But actually, you can see it on page 2020 of the pack which was distributed this morning to all of you. On Page 2020, you see that the increase of the margin is already going on for, what is that, 4, 5 quarters.

And that margin is now at a very solid level. In the mortgage business, is the line, the dark blue line in the same graph, the bottom of the page, you can see it's more or less 120, 130, 125 basis points, let's round the number.

But that is not - definitely not related to the strong production and definitely not related to the decision taken by that authority. So in terms of - the stimulus is now gone, is the margin going to drop significantly back to the old levels?

The answer will be no.

And to come back on your second question, thank you for that, Daphne, so on the impairments. So for the entire year 2019, the impairments were EUR 203 million, if you just look at the loan impairments.

And EUR 240 million, so more than that was actually Business Unit Belgium. What we had seen starting in the second half of 2018 that there was some stress on a number of Belgian companies mostly related to retail.

So that is indeed a trend that we have seen starting in 2018 and going through 2019. So these are mostly retailers, high-end - high street retailers who were not prepared for the digital revolution in sales and were caught with too much real estate, too much people, too high inventories.

And that is actually being processed through to the cycle. When we look in total at the impaired loan loss ratio, and I'm on Slide 79 now, you see that in Belgium, the total ratio is 2.4%, the - more than 90 days remained at 1.1%.

So it's a pretty good number. Czech Republic overall 2.3%, of which 90 plus 1.3% that you've seen in the entire year, there are almost no credit costs in the Czech Republic.

And then in each of our international markets, as Johan already hinted that, very low numbers in Slovakia, 1.7% and only 1.4%, more than 90 days, so there also a very benign credit environment. Hungary, 2.8%, and over 90 days, 2.1%.

There's still some legacy on the real estate side, but we're doing very well with the execution of that portfolio. And only the 2 countries where we have higher NPLs is Bulgaria with 10.6% and Ireland at 16.4%.

And there again, we are working with our customers and making progress on solving the issues. And that's what we have been doing and we will continue doing.

If I just look at Ireland and we look at net cures in 2019, so on the retail side, we had total net cures of EUR 163 million. And so that is a good evolution that shows that you need to - working with the clients to come to a solution actually bears fruit.

Thank you.

Good morning, gentlemen. I have two questions, if I may, both exploring the philosophy around capital return, if I could.

Firstly, today's actions would seem to suggest the key element of your existing policy is the 15.7% reference capital position. Is that fair?

And when you talk about the June update, would there be any advantages in changing that policy? I'm just kind of wondering what your internal pros and cons are around that?

And then secondly, can I just ask what the factor that drove the decision for a share buyback over, say, a special dividend instead? Thanks.

Thanks, Farquhar, for your questions. Let me answer the first one.

So - I mean the philosophy, which we applied in our current dividend policy, is well known, I think. So we want to have a strong capital position so that whatever downturn happens, we will not - we will be impacted, but we will not run into difficulties.

I mean for good understanding, that is a philosophy which dates back to the dark days of 2008 and '09. We never ever want to experience that again.

So that will be, I can guarantee you, also part of our capital development plan going forward. So no changes in that perspective.

The other part, which was part of our philosophy when we apply the current dividend policy, was that if we have - if we do generate surplus capital, and we do have surplus capital which we cannot make work, then we should distribute it back to our shareholders. And that is - I mean if you look what we did announce today, that is perfectly reflected in that announcement.

In terms of philosophy, we have not had a discussion with our Board yet on the new capital deployment plan. So we just executed the current one.

The discussion took place yesterday. And the discussion on the new capital deployment will be happening in the next period to follow and will be announced on the Investor Day at, what was it again, the 17th, I think, of June in 2020.

So philosophy-wise, I can guarantee you, we'll apply the same things. We need to be solid.

We need to be one of the strong financial institutions in Europe, both on the banking side and on the insurance side. We need to be - we will be, as a consequence, a strong group.

And that allows us to build our business going forward in a very sustainable manner. That will not change.

Also in terms of surplus capital, I cannot imagine that we will keep surplus capital on our books. If we cannot make it work, why should we keep it on our book?

So philosophy-wise, it will not be - I don't think it will be fundamentally different. In terms of capital numbers and targets, it's early days we will discuss it with our Board and then announce it in June.

And then on the buyback versus special?

Yes. So on the buyback versus special, we are quite indifferent to that.

But as you can imagine, we, of course, talk to our investors or institutional investors. We gauge for their preferences.

And these are all elements that we take into account when we discuss the capital distribution plan with our Board of Directors. But for us, from our point of view, we're quite indifferent to that.

Okay, thanks.

All right. So thank you very much for all the questions.

This sums it up for this call. I would like to thank you for your attendance, and hope to see many of you tomorrow morning at the sell-side XPMS [ph] meeting in Old Broad Street.

In the meantime, enjoy the rest of the day. Cheers.