Home Banking Interview with Mr. Johan Thijs, Chief Executive Officer, KBC Group

Interview with Mr. Johan Thijs, Chief Executive Officer, KBC Group

by internationalbanker


International Banker is in Belgium and joined by Mr. Johan Thijs, Chief Executive Officer of KBC Group, to discuss the banks ongoing innovative use of technology, its commitment to ESG and the global economic outlook.


Today, International Banker is in Belgium and joined by Johan Thijs, CEO of KBC Group, to discuss the bank’s ongoing innovative use of technology, its commitment to ESG and the global economic outlook. Very good to be here today. Now, according to KBC’s third-quarter results, net interest income increased by 4 percent quarter-on-quarter and by 17 percent year-on-year. That’s 1 percent quarter-on-quarter and 14 percent year-on-year when the recently consolidated Raiffeisenbank (Bulgaria) is excluded. To what main factors do you attribute these positive results?

Well, it’s indeed a very positive result. You can indeed say that. And the main driver of that result is the performance of the interest rates. As we all know, interest rates have been rising. And that was established, let’s say, at the beginning of quarter three but definitely also in quarter four. And that has a significant impact on our result on the net interest income side at least. Because it has, of course, a big impact on the reinvestment yields on our entire asset book. And that has a major impact. Not only on that book, of course, it also plays a role in our lending activities and in our deposit-gathering activities. Both have been performing quite well during the year. You know, if I look over the total year, we had a more than 8-percent growth on the lending side, which is quite extraordinary given our size. And we had an even higher growth on the deposit side. Now, with higher interest rates, both can be contributing better—for sure, on the deposit side. On the lending side, it was going actually very great in the first part of the year. But because of the slowdown of the economy, the so-called mild recession, it was a bit slower in the fourth quarter. But let’s not complain. All in all, it was a massive, massive performance and an excellent result.

Now, KBC has announced that in 2023, it will start to pool all its expertise on the more complex needs of the self-employed SMEs and corporate-banking customers, bringing together more than 250 relationship managers in 24 KBC commercial-banking branches, which is three times the number of branches that it has today. Has this process begun already? And when do you hope to have it completed?

Yes, it was indeed quite an exciting move which we did and also quite a difficult one. Because let’s not underestimate. We were moving actually 48,000 customers, commercial customers in our group. Now, to come back, in essence, we dealt with this change, this redesign, because of the change of times. The banking model and the distribution model, amongst others in corporate banking, because we did something similar on the retail side as well, was actually the last, let’s say, 10 years not changing dramatically. Well, whilst in the meanwhile, we had a lot of movements on the innovation side. The world has become more digital, our customers have become more digital. KBC has developed a lot of tools which are playing an important role on that innovation side and which are bringing our services to our customers in a more digital way. But the brick-and-mortar network never actually was really adjusted to that. And this move is taking into account that evolution of the innovation side. Consequently, yes, indeed, we moved actually around 300 of our corporate account managers in a completely different new structure. And that is not only taking into account our 25 branches which we have on the commercial-banking side in Belgium and also nine branches which we have across Europe, the Pacific, Asia-Pacific and the U.S. And that move was dealt with, very long prepared, of course, but it was actually dealt with in only one month. And let’s not forget, it’s a massive IT move as well. And that move of IT was done at the end of December, so we could start in January dealing with our customers in the new way. And just to emphasize the latter, what does it mean? Whereas in the past, on average, we would have one contact with the commercial customer per relationship manager a day. That has now changed. Because of the new redesign, now we are able to have at least two and preferably three commercial contacts per account manager per day. And that is really a big change.

Now, we’ve often spoken about digital in terms of how KBC deploys that. And you’ve announced a raft of new features that have been integrated within KBC Mobile to help customers save on energy, time and money. What are some of the most exciting of these new features? And how specifically do they improve the customer experience?

Well, you know, I don’t know how long we can take for this interview, because when I start speaking about this, I can speak for hours about this. Let me try to summarize it in brief. So, our mobile application has gone substantially beyond traditional banking and traditional insurance. You know, when we were developing it, and it started roughly 10 years ago, the first thing which we do is do it in a better way on the banking and insurance side. But after a short period, we also came to the conclusion, you know, that if we want to make the difference, we also have to serve our customers in a different way. And in doing that, in let’s call it the KBC way—high quality, high standards, high security—we needed to do something else, and that something else became actually what is currently our mobile banking app. We go literally beyond banking and insurance. Let me give you a couple of examples. We started to integrate, for instance, services to our customers in our mobile-banking app. And the definition of a service. If you, for instance, on a daily basis want to buy train tickets, you can do it via the KBC app. It’s fully integrated. It’s safe. It’s secure. And it goes super smoothly. If you want to buy bus tickets, if you want to go to the cinema, if you want to park your car, if you want to pay a cleaning lady, you can do it with the app because we’re all integrated. Let me translate it differently. If you have high-frequency contacts which involve financial transactions, you can do it in our app. Next to that, we introduced also what we call deals. So, deals means if you pay with our app with retailers, with your local boutique where you buy your clothes, then you can get a discount, and that discount is triggered by the mere fact that you use our app or that you use the KBC systems. Now, let me combine the two together. The one is saving time. The other one is saving money. Now we go to the next level. And the next level is that we are introducing services which go beyond what I just said. That is, what is important for you in your life as a customer, let me say something, the energy bill, which is definitely a very acute topic in 2022 and 2023. How can we as a bank help you in monitoring your energy costs? And the next step is not only monitoring but bringing it down. By using your app in a smooth, zero-friction, zero-hassle way. Well, that is what we have developed and that was launched now recently to our customers to monitor not only their energy costs but the next step also, also for 2023, is that we help you to bring that down. So, you start to save time but also start to earn money. And, you know, if I would have more time, Simon, I could give you another 10 examples.

In March 2022, KBC launched Discai, a fully owned fintech subsidiary, which is commercializing the innovative artificial-intelligence applications it develops in-house to third parties, specifically B2B parties. The first application available focuses on combating money laundering. Can you briefly explain how this is done?

Well, indeed, actually KBC is dealing in a very specific way with artificial intelligence—very structured, with a separate unit. Roughly eight years ago, we started with that. The unit, by the way, is still reporting to me because my background was dealing with AI when I was at university. That is a long time ago, I can assure you. But that unit has been developing solutions tailored to the needs of KBC. And one of the solutions which we developed in that way was, of course, taking into account a very hot topic in the European banking scene—that is, anti-money laundering. Now, when we were developing, we were thinking, let’s do it differently, because there is a lot of software available which is in essence rule-based for AML concerns and AML topics. So, we developed an AI tool not on the traditional rule-based engines, which means if then else but in a completely different way. And the tool which we developed—and, therefore, AI is very, very, very useful—it’s getting away from the traditional routes and is going into more trend recognition, pattern recognition, network recognition, anomaly analysis and so on and so forth. And this was actually developed in-house, taking into account the data of KBC and developing it group-wide. So, we have implemented that already three years ago group-wide, and it is extremely powerful. It is in terms of efficiency at least two to three times up to ten to twelve times more efficient than traditional tools. And the technology is patented, so we have taken out a patent on this a while ago, and that technology is made available for the market. So, we are commercializing those investments. And that is done under the company Discai, which, by the way, owns roughly another 20 patents of KBC Group.

Now, Kate was launched to KBC customers in November 2020. In the roughly two years in operation, which particular aspects of this digital assistant’s performance have you been most satisfied with? And which aspect of Kate do you think still requires the most improvement?

Well, you know, when we launched Kate, our AI-driven service robot—let’s call it like that; it’s actually called a service assistant—when we launched it two years ago, the intention was to help our customers deal with what they have to do in daily banking and daily insurance activities. You know, when we launched it, I remember very well when I did a press conference, I said to the journalist, “Listen, don’t judge Kate in one year. Judge her in three years.” Because an AI tool based on machine learning, it takes it a little bit of time. And the first step was, customers asked questions, and Kate answered them. Now, we do it in a very specific way. When Kate provides answers, solutions to the questions of customers, we want those solutions to be provided back, sorry, straight-through process. Now, what is straight-through processing? In our definition, it means that if you go online, you go via your mobile phone, you ask Kate a question, you say something: “I want to have a credit card, a new credit card.” Then Kate will provide you the answer, gives you the credit card, goes back into our back offices and goes back to the customer without any human being interfering. That part is called straight-through processing. Well, where are we today? We thought originally: 2020 launch; by 2023, we will have 30 percent of the questions of our customers answered by Kate. And we will have by 2023 roughly 6 out of 10 of our solutions straight-through processed. Well, we misjudged. You know, currently, at the end of 2022, Kate answers 56 percent of the questions of customers. And for the straight-through processing, we still have to provide a little bit more, because we are roughly at 47. So, we are on a good track to achieve that target by 2023 as well. Now, the thing is, and that’s what we fundamentally underestimated, Kate is massively picked up by our customers. We have three million of our customers in the meanwhile using Kate, and that is not only in Belgium but also in all other countries combined because it’s launched out in the meanwhile everywhere. And then the second thing is, you know, they are using it much more than we thought. We have in the meanwhile roughly 15 million interactions between customers and Kate, and with a solution of let’s say one out of two questions answered, it is giving also great satisfaction to our customers. The NPS score of Kate is at 30 points, which is as good as our brick-and-mortar network, and that is great news. So, yes, we will further continue. We will further start to develop. We will start to, I mean, to try to answer all questions with straight-through-process solutions. But that’s not yet for tomorrow. That’s for the day after tomorrow.

Well, let’s look at the level of performance and accuracy. What are you expecting for Kate by the end of 2023?

So, we always push the bar a little bit higher. Because the progress we made, the fact that customers have been picking up Kate much more intensively than was anticipated originally, the target is now: Let’s not only try to answer 30 percent, which was the original target. We are now at 56 percent of all questions are answered by Kate. Let’s now go to 75, which means three out of four questions are answered by Kate. And because we, I mean, it seems to be very realistic that we will achieve that, we are also repositioning Kate even faster than we anticipated towards the rest of the organization. Because Kate was started with, and that was the original plan: We go to customers. So, all customer-facing solutions are provided by Kate. And then the thought was at that time already: And then we’ll see how it picks up. If we have time left, then we will start reorienting Kate not only from customer-facing but also inward-looking. So, dealing with back offices. Well, we have already started with that. And Kate is not only advising the customers but is also advising our staff. For instance, those which have client-facing tasks, they are indeed today already massively advised by Kate. If Simon approaches the brick-and-mortar network, the customer, I’m sorry, the employee, the account manager knows via Kate who you are, what is your concern, how were you contacted last time with KBC, what products do you need and so on and so forth. And the next step is that also internal, transitional, internal processes like, for instance, in a mortgage department are going to be indeed steered, enhanced and so on and so forth by Kate. And that’s what we currently are developing, and let’s not forget, this is done group-wide.

And this is a question of kind of efficiency and productivity. Just at a time when those two things are critical for businesses.

Precisely, and you’re spot on. Because if you combine, indeed, the two, not only, I mean, the customer-facing side and asking customers questions but also the straight-through processing, then it fundamentally enhances your productivity. And I fully agree with you. In current times, where inflation is high, where you have a lot of pressure on your cost because of inflation and the link between, for instance, wages and inflation, this productivity gain is of utmost importance.

Now, in June 2022, KBC became the first financial institution in Europe to launch its own blockchain-powered digital coin, Kate Coin. In which specific area of the Group’s activities do you envisage this coin being most frequently used? And what are some of the key ways that users of Kate Coin can be rewarded for using the coin over fiat money?

Yep, and, I mean, there’s also a fundamental change, which we have in our group. So, indeed, the Kate Coin was launched somewhere in the middle of 2022. As a matter of fact, we launched it, and we used our staff on a rock festival, Werchter Boutique, which is one of the bigger festivals in Europe. And our staff was using the Kate Coin quite massively. Eight, nine thousand people experimenting with the Kate Coin, to see how it worked. And they were excited, you know. So, it was a good start, and it was a real-life test of what it could be and what it should be. Now, let me explain to you what it is. The Kate Coin is what we call, it’s, according to European standards, an e-money token. You could call it a kind of cryptocurrency. But it is a cryptocurrency in a very specific way. It is programmable money. So, you can define what you can do with it. If it is described what you can do with it, everything else is now possible. Second thing is, what we call a closed-loop system. It means you can only use it in the loop. Let me give you an example. Everybody knows the London Tube. If you take a train, let me say, something that’s the Blue Line, which goes from Gloucester Road to Saint Pancras. And you step on the train in Gloucester Road, and you don’t step out in between, you end up at Saint Pancras. If you don’t exit the train there, it drives you back to Gloucester Road. And back and forth, back and forth, the whole day if you want to. That’s a closed loop. Well, the Kate Coin is according to the same principle. When we defined a blue line—for instance, all companies within KBC Group; for instance, the bank, the insurance company, the leasing company, asset managers, our assistance company, our travel company, what have you. All those companies together, that’s the blue line. If you buy a mortgage, we will compensate you also for the fact that you bought that with, let me say, something like 100 Kate Coins. You can use those Kate Coins within KBC Group. It’s programmed that it can only be used there. The value of 100 Kate Coins is in this case 100 euros. And then the nice thing is we can define it in terms of the value. We can also define it in terms of you can use it for a period of one year. Now, combine that with Kate. If you have 100 Kate Coins in your wallet, and you have not consumed them yet, Kate can warn you. “Say, listen, Simon, you still have 100 Kate Coins. By the way, they will expire at the end of, let me say something, May. You have still two to three months to go. So, what do you want me to do? I can also indicate to you that you are missing, for instance, in travel insurance for your upcoming travel, which you do on a yearly basis, to the sunny side of Europe. And in that perspective, there are office mates in the travel company. Or, you can buy from a travel-insurance company. And if you use that before May, you get an extra discount, because we’ll increase the value of the coin to 1.10 euros.” So, it is kind of a savings of 10 percent. That’s how it works. And the intrinsic value of the Kate Coin is that it steers your, steers your behavior, but it also allows us to reward the loyalty of our customers. Now, the more cunning side of the story. This one we already launched. The more cunning side of the story is that if you go out of what I call the blue line—it’s the ecosphere—if you go out of that ecosphere, you can start to attract also other parties in the ecosphere. For instance, retailers, other people which have offers to make to our customers. And if you have done the combination of Kate with Kate Coin, you have the real, I mean, I call it the next level of saving time and saving money.

Now, the bank’s recent economic outlook cites a key problem of the world economy as being excessively high inflation. How much longer do you see this as being a problem, particularly in the eurozone? And what measures has KBC taken to protect itself against further accelerating prices?

Well, indeed, inflation was going through the roof, let’s face it. We were confronted over a period of, a very long period, of very low inflation numbers, and now we are all of a sudden, in a period of six months, it rose to 8, 9 percent—11 percent in Belgium, 8, 9 percent in Europe. But even higher in Central Europe. For instance, in the Czech Republic, we were confronted with an inflation level of 17 percent, and that’s whopping. The main trigger for that is I think manifold. It’s not only the war in Ukraine, which is pushing up, because of the sanctions and the embargoes, the oil prices and so on and so forth, which is definitely part of the inflationary pressure for sure. But it’s also other things. I think also the consequences of the monetary policy, which has happened for good reasons, and the consequences of that are reflected currently in where we are with inflation levels. And then, of course, you have supply shocks and so on and so forth, which happened in the course, in the aftermath of the COVID crisis. But what we see is that inflation is high, and there KBC has a very particular view on what’s going to happen with that. Because we think that inflationary pressure will be still on also in 2023 but also later. So, we do not expect that inflation is coming down to, let me say, 1.5, 2 percent any day soon. So, there are multiple reasons for that. One of the reasons is, amongst others, China coming back into the world economy; the war is not over yet, so there will be still some pressure on, via the sanctions, embargoes, on the energy prices. And then last but not least, you have the consequences of the IRA, the Inflation Reduction Act, which will definitely have an upward pressure on commodities and also on energy. And the expected European reactions on the green transformation as well, which has the same effect. So, we do think that inflation will be remaining higher for longer. And as a consequence, we also believe that the European Central Bank next to all other central banks will keep pressure on higher rates, also for longer than what’s currently priced in the markets. Now, how we are mitigating the impact of that high inflation in KBC, well, you have several things to do. First of all, you can buy inflation-protection products. Like, for instance, inflation-linked bonds. We are doing a lot of stuff also, for instance, directly into our products. Because let’s face it, we…let me give you one example. On our insurance side, you have an upward inflationary pressure of claims cost. Well, we take provisionaries, we take provisions and, actually, provisionary actions to mitigate that impact. And then, obviously, inflation goes, in this case, hand in hand with interest rates, which are coming up, and that’s kind of a natural match, because that pushes up our income and, therefore, fortunately, income rises are stronger than the inflationary cost that has then ultimately a positive effect on our P&L. Last but not least, the entire amount of innovation now starts to pay off. Because all the innovation investments which we have done have created a higher productivity. And that productivity gain brings down, or let me say it differently, increases the output per FTE. So, as a matter of fact, the inflation, which has a negative impact on the cost of that FTE, is mitigated partially also by the increase of our productivity. So, we do a lot of stuff to have that inflationary pressure under control.

Similarly, what are your predictions for monetary policy this year, particularly from the European Central Bank? Are you predicting a recession this year? And how is further monetary tightening set to impact KBC’s bottom line?

Recession is one thing; monetary policy is another thing. Our expectation is that on the economic-output side, so recession, yes or no, it’s going to be pretty okay. Crucial in that perspective, of course, is the evolution of the war. And given the stance of the position at which we currently are in seems to be that we are having a frozen, kind of a frozen conflict. This war is not going to be over any day soon. But also, our deduction from what is happening today is that it is not going to escalate neither. And that’s a crucial one. Because if the war escalates, I don’t know what the outcome will be on the economic-output side, inflation. The only thing I know is it’s not going to be good. Given what I just said, we don’t believe that it will be a deep recession nor even a mild recession. I think it’s pretty okay. We will go to, let’s say, positive growth levels in 2023, which will strengthen in principle over ‘24 and following. But we are also convinced that inflation will remain high and higher for longer, higher than what was originally assumed. And as a consequence, I think the European Central Bank but all other central banks have no other choice that if they want to fight that inflation, they have to keep the interest rate high. And I would say in the case of the European Central Bank, they have to put those interest rates higher. And, therefore, we do expect in the period to come further rate hikes. We believe that for this year, we’ll definitely go up 350 basis points. And we don’t believe that that is going to be brought down in the course of 2024 or even at the end of 2023 in a significant manner. So, we think that, indeed, the European Central Bank will have a stricter monetary policy, not only interest rate but also on quantitative tightening, which has a positive upward pressure on the interest rate. Positive because it has a positive effect, of course, on our net interest income, so on our total income line.

Now, in Hungary, a 10-percent windfall tax on banks’ revenue was introduced in 2022, which will fall to 8 percent this year as part of a set of fiscal emergency measures to raise funds for the Treasury. How significantly has this tax impacted KBC’s earnings in Hungary, particularly through its subsidiary, K&H Bank?

Well, indeed, I mean, what we have experienced over the last, let’s say, two or three quarters has triggered us in different manners. So, first of all, energy prices were putting a lot of pressure on society but also on interest rates. Interest rates have made our books look better, and our P&L for sure. And that has inspired across Europe certain governments to look into potential, what I call, windfall taxes. Indeed, in Hungary, the Hungarian government has introduced that windfall tax. And it has a very significant impact on our P&L. It was introduced in quarter two. It immediately cost us 78 million euros, which is a significant amount of our profit. But let me summarize it as follows. We were able to manage our commercial activities in Hungary in a very successful way. It was the profit which we generated that was churned off was roughly, let me say, 80 million euros. But at the end of the day, we were still able to realize roughly 200 million euros in Hungary, which is, given the circumstances, acceptable. As a matter of fact, if I would summarize it differently, it’s not only about windfall taxes, because a lot of governments apply taxes anyway. And that is then translated as a bank tax. And the sum of all the parts of KBC Group of all those bank taxes, windfall taxes and so on and so forth is a whopping 646 million euros, and that’s a lot of money. So, we do contribute our fair share to society or to governments to pay up for, let’s call, the energy crisis or very particular circumstances.

Now, let’s move to another area. In December, final approval was confirmed for Bank of Ireland Group to acquire substantially all of KBC Bank Ireland’s performing loan assets and deposits as well as a small portfolio of non-performing mortgages, NPAs. When will this final transfer occur? And the overall deal transaction be completed? And, also, what responsibilities does KBC Group have for the outgoing KBC Bank Ireland staff and employees? Are there any opportunities for them to be retained elsewhere within the company?

Well, indeed, you’re right. We concluded, we closed our deal with Bank of Ireland Group on the 3rd of February of this year. It was a deal which has taken a bit of time for the approval process. And as a matter of fact, because of that, we were able to prepare very well and very significantly the transfer—which is the consequence of the closing of the deal—the transfer of all the assets which were involved. And to be very straightforward, after the closing, very soon after, we did the transfer over the weekend, and it went actually very smoothly. So, purely from an IT perspective, transferring of the books has happened, at least the part which was bought by Bank of Ireland Group. Of course, we still have a remaining part, which is very small, which we have to run off now in the period to come. The consequences are obvious, and the consequences are for two stakeholders in this process. First of all, let me start with customers. We have prepared this exit and also, therefore, the transfer of the books, which were sold to Bank of Ireland Group. We have prepared it very diligently and over a longer time period. So, customers were, first of all, those who are moving into Bank of Ireland Group, informed well in advance. But also, those which are not part of the deal are well informed in advance and have been given significant time delays to look for alternatives, be it with Bank of Ireland or be it with other banks active in the Irish Republic. So, in that perspective, customers had more than, let’s say, eight, nine months to take precautionary measures, which also, in reality, has been happening. Now, let me go to the last stakeholder group, which are, of course, our employees. And I have to, I mean, let me be very open; I’m very, very pleased with the way how they’ve dealt with our activities in Ireland before the announcement of the exit. But also, when we announced it, I can only be very pleased the way how they dealt with the process and with their activities after the announcement. So, as a consequence of that, obviously, we’re doing our utmost to serve our employees in a very particular manner, given the outcome of the decision. So, part of the staff is transferred to Bank of Ireland. That is not a vast majority, but part of the staff is going over to the Group. Another part is going to stay because we still have some activities in Ireland which we’re now rolling off which will take us another couple of years depending on the approval process. So, we will still deliver tasks and so on and so forth by staff of our subsidiary, KBC Bank Ireland. And then the part which is not belonging to one or the other group also there we agreed with our employee council and in full agreement with them redundancy packages. Because if the exit is a fact, and we can no longer provide them work, employment in our group or within Bank of Ireland Group then we also need to compensate for that loss. And that was dealt with in a very appropriate manner far beyond what is mandatory by law and also in full agreement with the employee council. And, therefore, I think the solution, be it painful, is still acceptable for our staff.

Now, KBC Group was one of just 19 companies globally to have been very recently awarded the 2022 Terra Carta Seal, which recognizes those firms which are driving innovation and supporting the creation of genuinely sustainable markets. What do you think this award says about the quality of KBC’s sustainability efforts over the last year? And which of those efforts are you specifically most proud of?

Well, KBC is dealing with sustainability already for a very long period. And perhaps it might surprise you now to say what it means very long. I think we started 35 years ago, even a bit more, 37 years ago, with the establishment of a company, a separate company, which was dealing with environmental issues. That was in a time when there was hardly anyone speaking about banks having to do sustainability, surveys or whatever. But we did that quite early in the process. Now, I remember very well the big shift came roughly 12 years ago when I decided that that activity should no longer be in a separate company but that that separate company became integrated, fully embedded, within KBC Group as an entity. Because, as of that moment, let’s call it sustainability—that was linked to environment, but let’s call it sustainability—sustainability was something of that separate company, you know. Because of the integration, because making it embedded in the organization, it was all of a sudden, a task for all of us. And the big difference between the moment of integration and now was that we started at that time with a PowerPoint presentation. And it was nicely described: What are we going to do now? Where we are now is completely different. We are now having sustainability deeply enrooted into the company, into the governance structure. Let me say it differently: deeply enrooted into the genes of our staff. And, therefore, KBC has now not only a financial budget; we don’t only have a capital plan; we don’t only have a liquidity plan; but we also have a full sustainability plan. What we have to do now to get on target by 2030 or, take it even longer, 2050. You know what I’m referring to: the minus-two degrees, or the minus-one-and-a-half-degree target. What we have to do now in order to get there. And that is translated in what we call a climate report, which we make public and which is also audited by our auditor. Now, all these tasks are part of daily operations. And what I just described was picked up not only by the rating agencies but also by the organization behind the Terra Carta Seal. And when we were notified last year, end of last year, that we were one of the candidates for the Terra Carta Seal, my first reaction was, “Wow! How come?” And, you know, when we ultimately were nominated, and we received the Terra Carta Seal, we were extremely proud. And, therefore, we are really appreciative not only of the organization who issued it but also for the mere fact that we received it. Because it’s actually a reward for all staff and for a little group of people which have been steering the sustainability process all these years within the Group and made it happen today.

Thinking of the kind of sustainability and innovation, in November, you announced the launch of a pilot project for 250 employees, who are going to be offered the opportunity to have solar panels and/or home batteries installed. What are the main reasons that this project was undertaken? And are you able to share any results from the project to date?

Well, you know, actually it’s a combination of a lot of things which we talked earlier in this interview. We talked about innovation. We talked about sustainability. This is the combination of the two. We are providing to our customers services beyond banking insurance. We spoke about energy costs, how to deal with that, and this project is actually the next level. What we are doing, and we are testing it out with 250 of our employees, which volunteered, by the way, we are testing out that concept. It means, we’re not only going to help you monitor your energy costs, where you can zoom in on electricity, gas and so on and so forth, but also, we’re going to help you to go to the next level, that you start not only to be an energy consumer but that you start to be an energy producer. And that you do it in such an efficient way—technology provides you that possibility—that you do it in such an efficient way that the energy production is not entirely consumed. So that you also become an energy distributor to others. And that is dealt with in a very particular way and is optimized using batteries, solar panels and so on and so forth, everything which is included in that packet and is monitored in full by the KBC app, which is a banking app. And that sounds a bit weird, but this is the level which we currently are reaching. And it will be no surprise. Kate is involved, of course. It is dealt with also by third parties, which are providing services to us, and the combination of the three is done in a way that is for the customer zero hassle, zero friction. Here we go again. So, we try to save you time. We try to save you money. And we try to save the planet.

That’s a great combination.

I think so as well.

In terms of your own experience as a banking leader, how would you assess 2022? And what do you consider to have been the greatest challenge with which you were faced as CEO last year?

Well, you know, 2022 was a very peculiar year. It started off as a rocket. And we came just out of COVID. We were actually, all of us, were looking forward to once again: “Oof, oh, finally COVID is out of the world, kind of. Now let’s have a normal life.” And it started off like a rocket. Production was going through the roof; our customers were super satisfied and so on. Innovation was on track and so on and so forth. And then on the 24th of February, the Russians invaded Ukraine, and everything changed. So, we got high inflation, the energy prices were soaring, we were having a lot of other concerns, embargoes, sanctions and so on and so forth. So, it started from a very positive atmosphere into a very bleak situation and became a little bit gloomy. Recession was looming and so on and so forth. So, nevertheless, the business dealt with the year fundamentally excellent, I have to admit. Much better than we anticipated. We were able to integrate, or we are integrating, but the process was concluded, the integration of Raiffeisenbank (Bulgaria). We were able to conclude the transaction on our assets in Ireland. And we have done a lot of other stuff from that perspective. So, actually, despite all the challenges and the difficulties which were surrounding us, very volatile financial markets, we had a pretty exciting year. We delivered on sustainability; we delivered on innovation. So, all in all, it was a bizarre year. It was a very unusual year. We had the war, which is absolutely regretful. And it is, I think, it’s scandalous for the European continent that we in the 21st century are having a war on our continent. But business-wise and the development of our business in all kinds of aspects, we’re doing quite well. So, it was a bit of a bizarre year.

And what do you think are the most significant challenges for KBC during 2023? And how do you intend to address those challenges?

Well, in essence, I could repeat what I said about the year 2022, because a lot of the factors remain. The war is still there; there is still the side which we have to observe, what about the energy and the energy potential, the energy deficit. You know, we have this year come through quite well. What is going to happen in the winter of 2023? What is happening in January, February, March ’24? How are we going to deal with that? And so on and so forth. So, it’s still there. Inflation is still there. The interest rates—we’re compensating, kind of compensating the effect of the inflation table probably there as well, according to our prediction, they will be for sure there. Business development, you know, the recession which was forecasted is not really going to happen, knock on wood. So, from that perspective, we are expecting the same circumstances, let’s call it, the same features of 2022 in 2023 again. And then, of course, we will work hard on the innovation side to go, indeed, to the next level. We are going to roll out the Kate Coin to our clients and then also start to explore all possibilities which are generated or which can be triggered by the Kate Coin. And then, last but not least, we continue to do what we have to do on the sustainability side and integrate that also not only with our customers but also with our business activity across the Group. So, 2023 is also a pretty exciting year. I keep my fingers crossed that we will have also any day soon the solution for the war. And if that’s going to happen, then I would welcome the future.

As ever, it’s always a great pleasure to spend time with you. Thank you very much for your time today.

The pleasure was all on my side. Thank you very much, Simon.


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