Home Banking Interview with Mr. Johan Thijs, Chief Executive Officer, KBC Group
Interview with Mr. Johan Thijs, Chief Executive Officer, KBC Group
Mr. Jon Briggs of International Banker interviews Mr. Johan Thijs, Chief Executive Officer of KBC Group to discuss the financial performance of the bank, their award-winning mobile app and also the culture at KBC.
So, today, International Banker is in Belgium to talk to Johan Thijs, who’s the CEO of KBC Group. And we’ll talk about the financial performance of the bank, their award-winning mobile app and also the culture at KBC. Johan, thank you very much indeed for joining us.
It’s my greatest pleasure.
So, let’s start with the earnings-release presentation for the fourth quarter of 2024, where it was disclosed that customer loans and deposits had increased quarter-on-quarter in all of the Group’s core markets. Are there any common underlying factors across the core markets that can explain this growth?
Well, KBC has a traditional track record of always beating the GDP growth of the countries, and that’s an important one. Because GDP growths in the different countries where we are present— Belgium, Central Europe—is fundamentally different. GDP growth in the Central European countries is mostly double of what we see in Western Europe. So, this is an important factor, which triggers amongst others the growth on the lending side. Now, having the track record, we proved again in 2024 that we are able to beat significantly the GDP growth in our lending growth in all the countries. And combining the two, the stronger performance in Central Europe, giving the strongest GDP growth, make us grow 5 percent more—actually more than 5 percent—over 2024, which is quite exceptional if you take into consideration that the average growth in Europe GDP growth was only 1 percent. The same can be said about deposits. But there the atmosphere or the sentiment is a little bit different. Deposits are mostly also linked to the sentiment of customers about safety-ness and security and so on and so forth. And KBC is considered by a lot of customers, or a lot of people outside KBC, as a safe haven. So, when we have some volatility in the markets, they choose KBC to deposit their monies. And that was translated again in 2024 in the strong growth.
So, which of those markets experienced the highest loan and deposit growth rates? And can you find any factors that account for such strong performances?
Well, the markets which are growing fastest are obviously the Central European markets—definitely from a relative perspective. If I look into countries like Hungary and Bulgaria, then we have growth which goes north of 10 percent. But, obviously, we’re talking about relative numbers. If you look at the growth in, let’s say, Europe, so nominal growth, then obviously Belgium remains the strongest market. On average, I would say over all the countries, growth is significantly above the GDP, and in total, we grow at least five billion euros on a yearly basis. New loans, which is quite O.K. given the markets we were in.
That Q4 presentation also stated that KBC has, and I quote, “made sustainability integral to our overall business strategy and integrated it into our day-to-day business operations”. In the products and services that you provide, how has sustainability been most significantly and effectively integrated into the Group’s daily business operations in recent months?
Well, sustainability is something which has changed, or the view of sustainability has changed, fundamentally over the last, let’s say, five to ten years. It has become more and more imminent for all customers of ours that they are facing a world which is completely different. Also on the front of let’s call it ESG. Now, given all those changes, given all those requirements—which are also driven by regulatory initiatives—our customers are facing a challenge which they not always can deal with. Now, what we have as a mission in KBC is to service our customer better. We are there to provide solutions for the financial needs and the questions on financial needs of our customers. So, sustainability became an integral part of answering those questions. So, as a matter of fact, we actually changed our position roughly, let’s say, 10 years ago to make sustainability being a part of our business solutions for our customers, which, given the change over time, which over, let’s say, the last five, six years, became more and more important. We accelerated the implementation of how customers should and could deal with the green transition. So, we provide our customers solutions which help them dealing with that green transition. In a matter of concrete examples, it is, for instance, providing them with carbon-footprint calculators; it’s providing them with solutions, for instance, for retail customers how to deal with renovation and so on and so forth. We take all the hassle out of their hands, and we provide them insights how they can deal with that.
Does KBC have any specific positive results from this integration?
Well, fundamentally, the answer is yes. Not only because rating agencies on the sustainability side rate KBC as one of the banks, even globally, which is in the top 10 in dealing with sustainability matters. But also for our customers. The motto of KBC is for our customers zero hassle, zero friction and zero delay in implementing solutions for their financial needs. Given the sustainability demands and sustainability requirements which are now very, very imminent, we can provide customers with tools which fulfill those three things. And it goes for retail people. We have, for instance, bought companies or at least taken a majority participation in companies which provide them with tools on, let’s say, renovation—not only what to do but also how much it will cost and how to deal with that. But also for corporates or SMEs, we provide them tools on how you have to set up a transition plan towards greener business, what it will cost you and how you have to report about it. Because let’s face it, there’s a lot of regulation, and that regulation demands a lot of reporting, of which most of our customers are totally unaware.
Still with that Q4 presentation, it mentioned that one of KBC’s strategies is to move beyond traditional bank insurance towards what you describe as bank insurance plus, providing not only traditional bank-insurance solutions but also less traditional non-financial solutions that impact the financial wellness of retail customers or the future of their business. What are and how would you describe some of those less traditional non-financial solutions?
Well, as a matter of fact, I have now to ask you a question. I have to go back in time, let’s say, 10 years. We took a decision at that time that we are there to service our customers, and we are not only there to service our customers with financial products. As a matter of fact, we need to provide them solutions. I would say that customers are not there to buy products. They’re there to get solutions for their issues—amongst others, in our case, for their financial needs. So, having that view, having that statement on how we have to deal with our customers’ needs, 10 years ago, we started to anticipate that in order to provide financial products like the traditional mortgages, like traditional credit cards or insurance products, we needed to anticipate those needs. And in order to understand that, you need data—data on how customers behave, what they are dealing with and so on and so forth. So, we could anticipate the fulfillment of those needs of our customers. Now, it’s a long explanation to say that we have actually started to develop tools and services for our customers which, in the first instance, have nothing to do with a traditional bank-insurance business. Let me give you a couple of examples. We developed our banking app, bank-insurance app actually, as a tool which is I call it a lifestyle app. Everything you are confronted in your daily life with on a frequent basis, well, we will provide the solution for that. And as long as it has to do with financial transactions, we need to be there. Let me give you a silly example. When you need to buy a bus ticket, we will provide that service into your mobile-banking app. When you need to buy a ticket for parking your car, we will provide that. If you want to book a hotel, a restaurant, we will provide that. It doesn’t make sense from a pure banking perspective. For a customer, it gives you a great sentiment that we are facilitating everything which has to do with financial services in your daily life. And as a conclusion, because customers like it, they will use it, and they will be part of our mobile-banking app. Let me say it differently: They will be part of our KBC ecosphere. In doing so, we better understand them. In better understanding them, we can anticipate their future needs. And we can have a better delivery of the solutions for those future needs.
How satisfied are you with the progress of such a strategy?
Well, to be very straightforward, when we launched this strategy, and you have to understand we update our strategy every three years. So, it’s not something which we made 10 years ago, and let’s now implement it for the next 15 years. No, it’s not how we work. We had a view, and the view was based on customer needs. Customer needs change over time, so we constantly adapt our strategy. Intrinsically, every three years, we do an update. Now, what we see is that how we have tried to fill the strategies which I just described that over time we can, thanks to technology, always add bits and pieces which allow our customers indeed to consume our solutions in a way which we call zero hassle, zero friction, zero delay. And when I was rolling out what we call Kate, our service bot, three years ago, we were not anticipating the speed in which it was embraced by our customers. Customers jumped on it. They like it, and they massively use it throughout the Group. And that process of launching something, taking it up by our customers and using it in their daily life was for us under-anticipated. Which is good news, actually, because they don’t not only use it, they like it a lot. And they are massively using it, which allows us to build further upon that experience going forward.
I want to come on and talk about Kate a little more a little later in our interview. But one of the most significant results was the Group achieving a 49/51 split between net interest income (NII) and non-net interest income (NNII), thereby maintaining what is an almost even distribution. Is reaching this approximate 50/50 split an official group strategy? And if so, how do you make sure you ensure that it happens?
Well, it’s an interesting question. And the answer is: Actually, it is not a hard target. So, the 50/50 split as such has never been imposed by me or by my supervisory board upon the Group. There is a but, and the but was, as of Day One, in our way of working, we installed, we need to have a diversification in our income. And that diversification brings us away from pure net interest income. So, from pure interest-bearing products. Now, over time, it evolved in the direction of 50/50, which seems to be quite a good balance, given the size of the bank and given the size of the insurance company. But the reason why we are there today is because underlying, we have a lot of parameters, which are KPIs, so key performance indicators, which are straightforward for our staff, which are triggering the ultimate result leading to the 50-50 split of our income, NII and NNII. Let me explain that further. In KBC, we are, as a bank-insurance group, we are for any kind of customers always reacting the same way—that is, we will fulfill your needs, financial needs, with bank or insurance products. You know, it’s not we will fill your needs with bank products only, or it needs to be a banking product. Now it can be both; as long as it is a KBC product, we are fine. So, in this perspective, we strive for that every customer of KBC has both banking and insurance products in its portfolio. And that in itself already triggers that the income which will generate will be split X/Y banking income—most of the time, interest income and others. Now, the reality is indeed 50/50 split. It’s even more intriguing if you look back in time. So, if you go pre-COVID, let’s say 2019, the split was 50/50 literally. Now, why I’m saying this is important is in 2019, interest rates, policy rates of the ECB were negative, so this was not really a benign environment for generating net interest income. Now, over time, we all know what happened. Policy rates were pulled up from minus-50 basis points. The ECB raised rates to 4 percent plus. And that 4 percent is already very benign for a banking environment, for sure on the net interest income side. So, what we saw, obviously, as a consequence is that our net interest income started to increase in a quite significant manner. Now, the absolutely, definitely for the outside world, astonishing performance which we had. That is, despite the strong growth of the net interest income, in 2024, 2023, 2022, the split between net interest income, which was boosted, and non-net interest income, was still 50/50. So, actually, let me translate that differently. We were able at KBC to not only strongly generate net interest income but also make sure that our customers bought other services as well. And those services were fee-business-related or insurance-business-related. So, as a matter of fact, the diversification of our income was remaining solid over a period where the fundamentals of our business were changing. And amongst others, that element was picked up by the markets and is also shown in our stock-price performance. A last thing to say about that, we have another diversification, and that one is the geographical diversification. Because let’s face it, Western Europe, in essence, we are present in all countries in Western Europe, but the bank-insurance activity we have in Belgium. The growth in those countries in Western Europe is, let’s say, roughly 1 percent. Whereas in Central Europe, the growth is at least double that. And in terms of diversification, when you know the GDP—so, economic growth—is linked to, for instance, the business you can do on the insurance side but also on the lending business. Having that diversification, if it is a little bit difficult in Western Europe, we still have Central Europe to boost our income and keep it at a decent level. So, yes, KBC has a double diversification, and we’re very happy with that.
How does KBC define straight-through processing, or STP? And briefly, if you wouldn’t mind, what methodology do you use for assigning STP scores?
Well, I think this is a very important question, because people fundamentally underestimate what it really means to have productivity gains. And STP, straight-through processing, in our definition is crucial for that element. In the definition of KBC, straight-through processing means that when a customer asks a question, and you provide a solution to the customer via a digital way, then zero human beings are interfering in the process. To say it differently, end-to-end customer process in this perspective is defined in such a way that he can deliver the solution without any kind of human intervention. As a matter of fact, the process becomes scalable, so you can sell more without having fundamental, without having any increase whatsoever on the cost side. Now, the reason why for us STP is so crucial is because we have, in the meanwhile, with our service bot Kate a lot of interactions with our customers. Customers are using Kate in the first place to see if they can be provided with a solution for their question. And if you don’t have a straight-through process behind the answer of Kate to the customer, the customer will get frustrated. I always compare it with the following: Having Kate, a service bot, answer your question without an STP is like putting lipstick on a bulldog. It looks nice, but ultimately, it will bite you. And for us, we have been able in the meanwhile, over a period of three years, to have 61 of our, 61 percent of our commercial processes in retail fully STPed. We will continue to do further STP also on the not-commercial processes. So, also, the internal factories of KBC will be straight-through processing, which leaves us, in that perspective, or gives us, in that perspective, also added value on the cost side and on the productivity side. So, it is a crucial element in the way how we deal with our customers but also with innovation.
From a Group digitalization perspective, though, why is the STP score considered to be such an important metric for you?
Well, we always need to have targets. We know also that not all processes can be STPed. So, we took, three years ago, we took a stance that said, “Listen, 60 percent of our processes need to be STP as a starting position.” Because what you need to fundamentally understand, it’s not an easy one. If we say that a process is STP—so, straight-through processing—you have to completely redesign your process. Let me make a bold statement. Intrinsically, you can automate all processes which you have. But it is not only about the automation and the redesign of the process, also, it needs to be, you need it to be affordable. Because, let’s face it, a process which is a straight-through process, which is completely redesigned, will cost you a lot of money. If it is not used too often, then the payback price or the payback period will be far too long, even potentially never be there. So, STPing processes is also a matter of economics. For customer processes which are having a high frequency, it makes a lot of sense. For customer process which are either too complex or not often used, well, you need to have, there will be a trade-off. And in our definition, we say, “Listen, at least 60 to 70 percent of our commercial processes can be STPed, definitely on the retail side. On the commercial-banking side, it’s something else.” And, therefore, we have, we are using there another approach, and the other approach is that part of the processes can be STPed but linked, to be 100 percent linked to human processes. So, there the definition is a bit different. But, on a yearly basis, we gain a productivity gain of between 1 and 1.5 percent on the entire group in having STP processes. That’s quite significant.
So, let’s talk about the digital assistant Kate’s rate of successful autonomous fulfillment of answers and solutions to questions raised by your customers. It now stands, as you said, at almost 70 percent. What is the formal target rate for Kate, if any, should we say for the end of this year?
Well, intriguing question as well. If you would have asked me the question just after the launch, the target was 3-0, 30 percent, which looks pretty mediocre. I mean, answering three out of ten questions by the machine, you as a customer still would have two questions unanswered if you would ask three. Now, what we underestimated was the power of artificial intelligence. Or let me say, we were a little bit conservative in putting the target forward. The reality was that we reached the target of 30 percent roughly after one year. And the target was set after to get to 30 percent after three years. So, we increased the target. And now by putting the targets, I said to my people, let’s go immediately to 60 percent, which, you know, they found extremely aggressive. But nevertheless, we are now three years after the—or three and a half years after—the launch of Kate, and we are today at roughly 70 percent autonomy, which means seven out of ten questions are answered by the machine, by Kate, in the way that the digital processes are as well, which is quite a bit. So, the target for the end of 2025 is 75 percent, and the target is 80 percent by next year. Now, it seems to be logical that if you are today at 60 or 70 percent that next year, you’re at 75 and the year after that, 80. But it is a bit more sophisticated than that. It is not a linear curve. There is a certain threshold above which the investment to make the machine learning and understanding what the customer needs has become too expensive. So, 100 percent of autonomy is not doable. Theoretically, it’s possible, but it will cost you so dearly that it is no longer worth it. And the second part of it is, customers, by using Kate and getting more answers to their questions, they start to play with Kate as well; they start asking questions which have nothing to do with KBC and which will definitely not be answered by Kate.
Did you or were you unduly conservative, or did you just underestimate the appetite that is there to deal with questions and get things done immediately and processed properly?
Well, I mean, it’s both. KBC always has a tendency to under-promise and over-deliver. In this case, we were conservative, but we misjudged the power of our AI department, and we misjudged the possibilities of the technology. So, Kate is a deep-learning tool. Now it is upgraded with everything which has to do with GenAI, so large language models, and that technology when we launched Kate was not, it was in a premature phase. It was there; it was not mature enough to launch it. And we underestimated the outcome of that technology or the possibilities of that technology. So, in all fairness, we underestimated what the technology, what the kind of enabler the technology was for, what we had in mind. So, therefore, 30 and now 80 percent.
No. Theoretically it is, but the cost price of making it 100 percent is of such a kind that it is no longer worth it. So, there’s a threshold. And then next to that, customers are playing around with Kate, start asking questions which have nothing to do with financial services: “What’s going to be the weather tomorrow?” Well, Kate will not be able to answer that one.
Now, as I understand it, part of what has earned the KBC mobile app several very lofty accolades is its seamless integration into Kate, and that’s now on hand in the app to guide customers, as we said, along their respective journeys. Can you give us a brief insight into how this integration was really successfully achieved from a design-and-development process standpoint?
Well, as a matter of fact, it all started with the development of the mobile-banking app, which was built, actually, in 2010. So, it’s not that long. It was 15 years ago. The app, which, by the way, won also the prize of most innovative application in the Benelux, was designed to do traditional bank and insurance transactions, full stop. Two years later, we completely changed the setup of the app because we said this cannot be the end goal. The end goal is something else, and the end goal is customer service. And customers, they’re not inclined to go for products; they want solutions for whatever they are experiencing in their life. So, what we are doing with the mobile-banking app was starting from the position of customer service and what you need for that. So, we started to include services like buying bus tickets, train tickets, airplane tickets, restaurants, paying your cleaning lady and so on and so forth. Afterwards, we started to add other solutions, and the other solution was there are so many questions, you cannot find all that information in the app anymore, because the app becomes too broad and has too much possibility. The customer gets lost. So, we need to have a full-time employee. What is full-time? 24/7 employee in your pocket. And that means that we are going to develop a service bot in your mobile-banking app which will guide you as an individual. So, it’s no longer a service which is provided for everybody the same. It is a service which is specifically tailored for you via the service bot. And now, adding all these bits and pieces together, now we are moving to the next stage. And the next stage is we will help you in your daily life with whatever you are experiencing and whatever needs you have as long as they are linked to one or the other financial services. We will service you, not only on the financial product but also all the steps preceding that. So, if you want to have your house renovated, well, there’s a lot of things you will get involved with which you’re totally unfamiliar with, which is for you like a jungle. It’s a lot of administration; you need permits, dah dah dah. And we will sort that out. Who’s we? Kate will help you in doing so. And, guess what, as of the moment that we have found all the solutions for you, we will facilitate you with suppliers for those services. And the financial products, well, you can buy them with us.
So, Johan, what do you anticipate will be the most significant development under the Group’s digital-first strategy this year in terms of elevating the customer experience?
Well, I can give you multiple examples of what we are currently having on the plate and what we’re going to launch any day soon. Nice things, but fundamentally, it’s not the answer to your question. Nice things, you know, carbon calculator, carbon-footprint calculator for companies or buying a ticket for a highway or whatever. This is fun, but it’s not really the answer to your question. The answer to your question is: We create an environment which facilitates you as a customer in the daily stuff you are experiencing in your life and stuff which is becoming more and more complicated. Administrative burden. Let’s face it, the financial industry in itself is super complex in its administrative processes. But also the outside world is getting more and more complex. Well, in that jungle of complexity, we will provide you services via our applications who will ease your life. And that’s what we need Kate for, that’s what we need our Kate Coin for, and that’s why the mobile-banking app is becoming a lifestyle app and no longer a bank-insurance app.
How excited should customers be about that?
Well, until now, they are super excited, if I see the users of it. They’re super excited if you look at the net promoter scores, which are kind of the satisfaction degrees of our customers. They’re really thrilled about what we’re offering. And if I look at rating agencies, the outside world rates the KBC mobile-banking app as the best banking app in the world. So, history is not a guarantee for the future, but at least we started well.
Let’s talk about the culture of Pearl+. How, if at all, has KBC’s increasing focus on sustainability in recent years impacted or influenced its approach to the renowned business culture of Pearl+, which, as we know, stands for Performance, Empowerment, Accountability, Responsiveness, Local Embeddedness, and the plus is for adding value by working together to innovate, initiate and inspire throughout and for the benefit of the entire group? For example, with respect, perhaps, to what constitutes responsible behavior?
Well, also, I mean in your question, the answer is intrinsically already embedded. If you look at our Pearl culture or Pearl+ culture, well, the culture triggers the answer to your question, and not the other way around. So, for instance, everything which has to do with sustainability is intrinsically triggered by the Pearl culture. The world changes. We have to be aware that we have a negative impact, or our economic developments have a negative impact, on our environment. How are we going to solve it? We’re going into a green transition. Well, if we take that mission on board, which we did, then the Pearl culture says, “Listen, the P stands for performance, so we are going to help our customers achieve that green transition.” The E stands for empowerment, which means that all my employees throughout the Group can come up with initiatives which facilitate what I just said. So, which will help us, for instance, creativity, innovation is dealt with by all employees. So, if one of my 43,000 employees has a brilliant idea how to deal with Kate, how to deal with sustainability and so on and so forth, well, they can come up with the idea. If the idea flies, we will implement it. If it doesn’t fly, you know, nice try. Accountability. We need our customers to help. We have accountability towards our customers, to our society, and, therefore, we need to have to do our utmost to deliver. The R stands for responsiveness in sustainability. It’s a fundamental need. And that fundamental need, we have to pick it up. We need first of all to understand it. We need to be aware that it’s not only about sustainability, about environment; it’s about creating welfare. And welfare can afterwards be used as a means to an end, and the end is to create a more sustainable society. And then the L, the local embeddedness together with the groupwide collaboration, allows us to exchange ideas across the entire Group, which helps us doing stuff in Hungary, which is more or less applicable in Bulgaria or in Slovakia or in Belgium or in Flanders or whatever. But we can use it Group-wide. Now, that philosophy is deeply rooted and deeply embedded in all my employees and is translated in the word responsible behavior. Which means we all have a mission—not only KBC but we as an individual have a mission. And that mission is subscribed in the Pearl+ culture and pushes us into a responsible behavior.
Now, as I understand it, KBC’s sustainability strategy consists of three cornerstones. Encouraging responsible behaviors on the part of all employees is one; increasing the Group’s positive impacts on society and limiting any potentially adverse social consequences. How do you accurately gauge those impacts on society? And, indeed, what specific measures can you actually take to limit adverse social effects?
Of course, we have a lot of regulation, and regulation has in this perspective also a lot of parameters, which we have to first of all adhere to and, secondly, to ensure we implement in our daily activities. Of course, if I look, let me make an external judgment, if I look at the results of the rating agency on the sustainability side, then KBC comes out quite well in terms of reporting on what we do, how we do it and how we help our customers dealing with that. So, we are top 10 in the world when it comes to those ratings. Now in terms of—that’s the outside world—in terms of the inside world, well, you know we have a lot of activities going on which are helping KBC Group, and, of course, our customers to deal with that green transition. Because let’s face it, there’s—this is a two-sided coin, you know. First of all, we as a company, we also have to fulfill our sustainability goal. We also have to fulfill our green transition. And next to that, we have a lot of customers which are facing on their side the same questions and the same issues. So, how, me being a customer of KBC, how am I going to deal with that green transition? Well, that connection we have to make, and that connection is supported by a lot of tools which we put in the market. And then last but not least, also, we do develop a lot of new products. Every product which we launch, whatever the product may be—banking product, insurance product, whatever product—is designed in such a way that we call it an NAPB process, it’s an internal process. And it is not only designed, but it’s also assessed on all the different parameters—risk parameters, sustainability parameters, profitability parameters and so on and so forth. An added value for the customer. If that assessment made comes to the conclusion that on one or the other parameters, the product or the process does not qualify, it is not launched towards the market. So, it’s actually dealing with, to answer straightforwardly your question, is actually dealing on three different levels with three different angles to fulfill what the sustainabilities are.
So, there is a good protection mechanism within the strategy as you build and put forward ideas on that.
Correct, 100 percent correct. And it’s also changing over time. When I would look, for instance, at the regulatory side, when we would have had this interview four months ago, my answer would be a little bit different than what I just said. Intrinsically, underlying it remains the same, but I would say the emphasis on the regulatory side was much stronger four months ago than it is now. The green transition is still a given, but the reporting about the green transition now has come down for, I agree, a too-excessive way of reporting to a more realistic way of reporting. So, it evolves over time. And that is true for all the different levels I just described. It is crucial that we constantly keep the pulse on the societal heart, on all the different aspects—in this case, the sustainable design.
Let’s talk a little bit about the political atmosphere in which this conversation is happening. In a previous conversation with International Banker, you cited Donald Trump’s return to the White House for a second presidential term as a crucial factor influencing KBC’s economic projections for 2025. Have any of those economic projections changed since then, with Trump having been in office for almost two months now?
Well, the answer is straightforward. Yes. When Mr. Trump was proposing for running for presidency, we made what we called a what-if scenario. So, what if Mr. Trump becomes president, and what if Mr. Trump puts in place what he has promised in his election campaign. That scenario we put on paper in what I call temporary unsuspicious times. It was not there yet. Now, since the 20th of January, Mr. Trump has become president, and what nobody anticipated was the speed in which he was implementing what he promised in his election campaign. Now, the outcome, which is preliminary, I agree, but still the outcome of those measures which have been taken, they’re not that fundamentally different from our what-if scenario. Now, to be very open, in our what-if scenario, we already assumed there would be a negative impact. And we treat it from a conservative perspective as being a significant negative impact. So, what we see now at the first preliminary outcomes, and what we had in our what-if scenario, they’re kind of aligned. Now, going forward, and as we speak today, Mr. Trump is going to announce a lot of new measures taken, definitely on the tariff side. We’ll see what those measures are. First thing to see is what is the amplitude of their impact, but the second thing is we will see going forward how they will be implemented and what will be implemented. But if it really comes to the implementation of what is anticipated now that the decision is going to be, then the impact will be fundamentally negative. What we already see is GDP growth in the US is coming down, inflation is creeping up, the interest rates are creeping up. So, the outcome for the US is not, on the short term for sure, not necessarily positive. There is an impact on Europe, depending on the outcome now of the to-be announced tariffs; the impact will be for sure negative on the GDP growth. On the other side, the big positive outcome of Mr. Trump’s administrative, administration and the reaction of that is that Europe has come to the conclusion we need to be more independent and for sure, not only dependent on what our friend in the US is saying to us and helping us. So, that part is a positive. And Europe now understands that we have to be more autonomous on different aspects. And, for instance, Germany has taken an unprecedented decision on the Schwarze Null, and this is definitely going to help Europe going forward—on the economic side, but also on other sides. Which means that we are becoming a more and more stronger continent like we were until today. So, if there is any positive, then it’s that.
You sound as if you’re kind of braced for action. How well positioned is KBC to weather, in inverted commas, the storm?
Well, of course, we are present, we are present globally. But our main presence, by far, our main presence is in Europe. So, the impact of decisions taken on a global level on Europe is for us crucial. Given the fact that we are having fundamentally a negative impact which is linked, for instance, to the tariffs and to the uncertainty which is there in the markets. That negative impact will impact KBC for sure, like it will impact the rest of the other players in the financial market. The positive side is, on the other hand, the initiatives which are taken to become more independent, to become more autonomous as Europe as a whole. And that is going to, for sure, boost the economic growth in Europe. And then you have the difference between Western Europe and Eastern and Central Europe. And given the fact that those markets will react differently and that they will react in a way that GDP growth will indeed be fundamentally different in both parts of Europe, given our diversification. I think the outcome will be O.K. When I would take a stress scenario, we have done so in the what-if scenario, which I described earlier. Well, then, still the impact, if negative, it will be still for KBC O.K.
So, what are some of the most effective ways that the KBC Group ensures that it attracts and retains the best and brightest banking talent in the market? We know that talent is where it is at. We know there is a shortage. What are you doing about it?
Well, I don’t know if we attract the best and the brightest, but we have attracted at least definitely good people, great people, to be less modest. So, KBC has quite a reputation in the market, definitely in the countries where we are present. And that reputation, brand reputation, but also the reputation which is linked to the great results, the successes which we have booked, and so on and so forth, amongst others from a profit side but also on the innovation side that have strengthened us in the labor market. When we have applications, for instance, on the innovation side, it is actually not an issue to find great people. And once they are into the company, then we have a very specific policy how to deal with those newcomers. I think one of the strengths which we have is, for instance, we are an international group, but we do consider KBC Group as one single market. So, people which are doing a job with KBC, they can actually move around in the entire group, you know, like it was one marketplace. And that is a crucial one. Because when I was young, and I came into a company, I started with the idea: I have a job now, I will do my utmost, and probably I will retire in this company. Well, that way of thinking, that’s gone with youngsters. So, you need to find for them challenges. And given KBC’s reputation, given the fact that KBC is a frontrunner on a lot of domains—amongst others, innovation—that triggers a lot of young people to come to KBC and explore the possibilities. Be it in Belgium, be it in Central Europe, be it in innovation, be it on the insurance side, be it in asset management, whatever. We have so much to offer that they stay with us. And when I say our churn rate, our attrition rate, it’s super low. So, for instance, in Belgium, we have a churn rate of 2.5 percent, which is substantially lower than the market average. Why? Well, because it’s KBC.
It’s still challenging, though. I mean, what challenges are you finding when you’re facing competition from the fintech firms and other financial firms as well, who are all offering good, difficult-to-find talent great opportunities?
Well, I fully agree with you. We constantly are confronted with third parties which are also having, in certain cases, very nice, attractive possibilities, for instance, for our own staff. And I spoke about success, that it can be an advantage, but the success also has a downside. And the downside is when you’re successful, people come hunting for your people. And this is what we experience every day as well. My guy who’s running my artificial intelligence department, he has a great view. He says, “Listen, I have great people dealing with AI.” And as I said, we are a frontrunner, so that we have good people. He said, “But, you know, I don’t mind when my people are head-hunted by another firm.” Of course, it doesn’t happen too massively, obviously. “Because I need to also have new blood coming in.” And until further notice, we are perfectly able to attract new people, even in the AI department. And those people coming in bring new ideas which allow us to bring up new solutions and become even more innovative. So, in this perspective, every downside has an upside, and this is the upside. So, being hunted because you’re successful allows other people to come in. As long as we are able to attract new people, we’re perfectly fine with that.
It’s very clear KBC benefits from new ideas and innovation from all sides and from all departments. It’s one of the reasons you’ve kept going and kept doing as well as you have. Johan, thank you very much indeed.
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