Hello, hello. Good afternoon. Good morning, ladies and gentlemen. Welcome from Komerční banka. Thank you for sharing your time with us today. It is the 30th of April 2025, and we are going to discuss the results of Komerční banka Group for the Q1 of 2025. Please note that this call is being recorded. I have just started the recording. Our speakers today will be Jan Juchelka, Chairman of the Board of Directors and CEO of Komerční banka, Jiří Šperl, Chief Financial Officer, and Didier Colin, Chief Risk Officer. Standing by, in case you have questions for them, are Jitka Haubová, Chief Operating Officer, Margus Simson, Chief Digital Officer, Miroslav Hiršl, Head of Retail Banking, and David Formánek, Head of Corporate and Investment Banking. As always, we will begin with the presentation of results, which will be followed by questions and answers session.
During this presentation part, all participants will be on listen-only mode. We would appreciate it if you could keep your microphones muted during that time. Now, let me ask the CEO, Jan Juchelka, to begin the presentation. Jan, please.
All right. Ladies and gentlemen, welcome to the presentation of Q1 results for Komerční banka Group. Together with my colleagues, we are keen to lead you through the presentation and answer your questions afterwards. The highlights of the Q1 are the following. Komerční has continued fulfilling its role in the Czech economy. We were growing not only the number of clients, which was by 60,000 to the current level of 1.7 million, together with ongoing migration of clients from old technological stack to the new technological stack. Also, we continued fulfilling the needs of our clients in the field of financing. The loans were growing by almost 3% on year-over-year comparison. Housing loans by almost 55% compared with the Q1 of 2024.
Then having also good news on the side of deposits, where despite the fact that they were stable or slightly below, the growth was realized on the side of current accounts, which is giving us back not only liquidity but also NII. The mutual funds were growing by double-digit growth, more or less traditionally, but we want to bring this dynamism back to the levels which we are used to in the previous quarters. No space for complacency here. Whereas the other assets under management, such as pension schemes and life insurance reserves, were at zero or in slightly negative territory. The total capital ratio, i.e., the balance sheet, was at the level of 18.7%, quarter one, 17.7%, loan-to-deposit ratio 81.9%, and both long-term and short-term liquidity ratios at more than satisfactory levels. On that side, the balance sheet remains very, very strong.
Speaking about P&L, the translation into P&L is we are bringing to our shareholders one of the strongest, if not the strongest, Q2 in the history of our bank, and bringing CZK 4.2 billion of group net income, which is almost 50% higher on year-over-year comparison. Earnings per share are landing at the level of CZK 22.17 per share. Cost of risk, which was one of the contributors into this result, is in negative territory, 22 basis points, thanks to the release of provisions. Cost to income are landing slightly above 50% of reported numbers. Would be 47.2% should IFRIC remain linearized. ROE 13.7% under the fulfillment of the same condition. Let me move to the next page, which is the macro echo. Czech Republic remains, let's say, a growing country, even though in rather mediocre intervals or mediocre scope.
In Q4, the GDP was up by 0.7% on a Q-on-Q basis and 1.8% year-over-year, mainly supported by the activities of households and government consumption. Wages were up by 7.2%, which means also that there was a growth of real wages by 4.2%. Hence, the households bringing to the market more economic activity. Unemployment compressed still below 3% at the level of 2.7% as of February 2025. The inflation at the same level, 2.7% on a year-over-year basis in March. Czech National Bank remained at the level of 3.75% with the short-term repo rate. Czech koruna, 25 per euro, stronger by 0.9% and 23.1 vis-à-vis US dollar. The market rates, three months prior, were 3.72%, down by 20 basis points year-to-date. 10-year IRS at 3.78%, down by 2 basis points, and 5-year IRS 3.56%, minus 10 basis points year-to-date.
The Czech government bonds, 10-years, 4.29%, slightly up by 7 basis points as of year-to-date. What is pretty nicely self-explanatory part of this page is the right-hand bottom side, where our colleagues have displayed the composition of Czech exports by sector and composition of Czech exports by country, where we see that the logic and deliveries and contributions of our industries is mainly in the field of motor vehicles and having Germany/European Union as the main trading partner for the direct connections or direct exchange. The United States being at the level of 2.9% of our exports. One should remain in the context of hectic discussions and decisions around tariffs that there are also indirect exports to the United States through Germany mainly. Yeah, we can move probably to the next page and see the business performance. Gross loans to clients were growing by 2.9%.
As I mentioned already, driven mainly by housing loans, both KB mortgages and loans from Modrá pyramida went up by 54.5% compared to the Q1 of 2024 and by 6% compared to Q4 2024, which is reminding us of the old good times where all the mortgage production is going at full speed. After the transformation of Modrá pyramida, who is now the only and sole provider of housing loans, we have our ambitions also in the commercial side of the origination of new mortgages. Group lending, in general, 2.9% up. The parts below the housing loans are showing pretty, let's say, nice contribution of small businesses and corporates, whereas the SGEF is bringing us somehow to lower levels as we used to be. We believe that the leasing financing will be growing up as the year will go. Yeah, this is the picture.
Sorry, I confused you maybe a little bit. 2.6% corporate clients, 0.7% small businesses. And SGEF, I stick to what I mentioned, 2.1%. We would rather see that above 5% growth. We believe that SGEF will go back to these levels. The next page is showing our contribution to remarkable transactions in the financing of our corporate clients. You can see at page number nine, please. I do not see the page moving. Yes, nine. One back. Yes, this one. We were active all over the place, all over the segments, all over the sectors, including municipalities. We have picked up one green financing to Accolade, which is one of the largest clients in the real estate development. The next page is showing us the developments on the deposit side.
The deposits are slightly down, even though, as I mentioned, the composition of current accounts chipping in almost 5% growth is, let's say, bringing back the hope that the trend of growing current accounts volumes will be continuing. The term and savings accounts are down by 6.3%. Our traditional strength, which is investments and investment products, up by 8.1%. The main contributor being Amundi and private banking. The other two main contributors, life insurance reserves and client assets under management in KB Pension Company, are slightly below, slightly in the negative territory. Here, probably, I should stop myself and hand over to Jiří Šperl, our CFO, for the financial performance. Thank you.
Yeah, thank you, Jan. Good afternoon, Jan. Indeed, financial-wise, the group generated a very solid quarter at the level of CZK 4.2 billion, as mentioned already by Jan, i.e., almost by 50% year-on-year. I can confirm that it is the best Q1 in the history of the group. At the same time, it is fair to add that the result was positively influenced by the first release of the provisions and also by the decrease of the regulatory charges. As said, in absolute terms, cost of risk and regulatory charges contributed the most year-on-year, as visualized on the waterfall chart on the left-hand side. Cost of risk by almost CZK 1 billion, on regulatory charges, almost CZK 400 million. Of course, no surprise that this transposed positively also to the profitability indicators, Jan was mentioning earlier.
I will add ROTE, return on tangible equity, which is growing even more to the level of 15.5% if RIC 21 adjusted. Quarter on quarter, we went a bit down, which is, however, given more by the base effect than anything else. We were mentioning three months ago that the Q4 last year was one of the best quarters in the history of the group. Let's move to the balance sheet, please. The balance sheet, total assets went a bit down year-on-year. It's by minus 1.8%. There is a slight recovery quarter over quarter, but less than expected, to be frank, and influenced by slowdown in the deposits mainly, as Jan was already commenting. On the asset side, quarter over quarter perspective, the loans basically stayed flattish, while the liquidity surplus was placed mainly into repo with the central bank. The Czech government investments are basically flattish.
This is bringing me to net interest income category. It was growing year-on-year by 2 percentage points, supported both by income from loans plus 4% and income from deposits plus 6%, while both other NII and NII from IB went a bit down. The correction in quarter over quarter perspective is almost solely influenced by doubling of the minimal obligatory reserves that started as of January 1st this year. That are, as you might know, non-interest-bearing. At that time, we were quantifying the impact, and the yearly impact was quantified at the level of roughly CZK 800 million. The quarterly impact is roughly at the level of CZK 200 million. To say without this impact, NII would grow slightly, but still less than 1 percentage point. It is, of course, also transposed into NIM, net interest margin.
That is very much comparable both quarter over quarter and year-on-year, and lending for Q1 at the level of 171. Let's move to the FISAN commissions. FISAN commissions remain still one of the drivers of the growth. Year-on-year growing still double-digit by a very strong 11.2 percentage points with two very clear drivers. First one, it is fees coming from the specialized financial services. I should say another super strong quarter, adding more than CZK 500,000,000, mainly due to continuing of bond issuance, loan sy ndication. There is a growth in income from the private banking, etc. The second driver is a very good quarter in the area of fees from cross-selling, following the sales of the non-bank assets under management, as mentioned by Jan. This category is growing year-on-year by 11%. From the quarterly perspective, there is a correction down.
Not a big surprise here. I can say that it's mainly influenced by the extraordinarily high Q4 2024, as we were commenting on that roughly three months ago. Still, however, above the, to say, run rate. So good quarter. Financial operations, please. Financial operations are growing, or income from financial operations are growing by roughly 12% on a year-on-year basis with both components, key components growing and contributing dynamically. It's the case of capital markets, plus 15%, and also effects from the structural book growing by 9%. As usual, I would like to add that the blue part is much more stable, so we very much appreciate it. On the quarter over quarter perspective, there is a slight drop. I mean, the overall financial operations income, which is rather of seasonal nature. In absolute terms, more than CZK 900 million is still above our run rate.
The results of Q3 and Q4 last year were rather extraordinary. OPEX, please. OPEX was going down by 4.4%, influenced mainly by first lower regulatory charges, but also other categories are pretty under control. Let's go briefly through all of them. Personal expenses are growing by +4% due to the increase of the base salaries roughly one year ago. At the same time, we are reporting that the number of the employees is lower year-on-year by more than 4%, exactly in line with our plan. In terms of GAE, going relatively significantly down, -4%. Here, the savings go basically across the board. I also already touched on regulatory funds. Here, it is like around CZK 370 million down.
According to our expectation, this is kind of a new normal in terms of resolution fund charges and deposit insurance fund charges because the fund is already filled. Finally, depreciation and amortization still growing double-digit, which should not be normally a surprise because still in the middle of the transformation. It is a kind of mirror of activation of the assets, mainly from NDB, New Digital Bank. Probably one comment to the bottom right chart on the bottom right chart. It's true that quarter over quarter costs are going a bit up, up around 5%. To say if we adjust by regulatory charges, which have to be booked in Q1, also quarter over quarter costs would go a bit down. Even the trend is visible here. That's all from me now and passing forward to Didier. Please, Didier, go ahead.
Thank you, Jiří. Good morning. Good afternoon, everyone. Turning to the overview of our asset quality for the Q1, we continue to experience a good level of resilience with notably two developments, one being the reduction or the contraction of our 12-month default rate for the SME portfolio following some peaks we had in the last two years. Levels are returning to or near through the cycle range for the SME portfolio, which is good. The second one is that we continue to witness some contraction in the same indicator, 12-month default rate for our unsecured retail portfolios, namely consumer finance and small business lending. Of course, at the same time, the mortgage loan and the large corporate portfolio continue to be at a very low level when it comes to default rate.
If you translate this into the IFRS 9 risk classification of our loan book, in the Q1 , we've seen some moderate improvement. In particular, when it comes to the S2 category, which contracted by a little bit over CZK 5 billion. In fact, this contraction is the simple reflection of a couple of material one-off situations on our mortgage, on our corporate segment with two client situations significantly improving in the Q1 . For the rest, maybe the point that I keep reminding you every quarter is that we continue to see a very low level of intensity when it comes to loan migration dynamics between the S1 and S2 portfolios, which is another sign of the resilience of our loan book. This level of migration being very stable between CZK 10 billion-CZK 15 billion going both ways.
Compared to the size of the loan book, a very low level. Taking a quick look at the NPL exposure, Q1Q, it remained very stable. In fact, we had a very low level of migration into the NPL part of our portfolio. All this gives you this content level of our key metrics, the S2 ratio that slightly contracted below the level of 14%, the NPL ratio, which was stable at 2%, and the provision coverage that we report for the NPL portfolio, also stable within the 40%-45% range, which is a comfortable level taking into account the fact that we do not reflect here the value of our collaterals. This is for the asset quality. If we go to the next slide, we see its translation in terms of the evolution of our cost of risk.
For the Q1, recorded at CZK 500,000,000 in net reversal, which is made of three main components. The first one is this reversal, which we had announced to you in the last two quarters for one of our corporate clients generating near CZK 1,100,000,000 in provision reversal. That is the first one. The second one, which is also in terms of positive development, is the level of net creation generated by our retail portfolio exposures, which was slightly above CZK 100,000,000, which is materially below the quarterly average of the last two or three years, which is more in the range of CZK 200,000,000.
The third point is that we booked CZK 500,000,000 temporary reserve, this in anticipation of the upcoming update of our macroeconomic scenario under the IFRS 9 standard, reflecting the recent tariffs announcement. This CZK 500,000,000 temporary reserve, in fact, was very simply estimated based on an expected 25 basis points increase of our probability of default for the corporate segment. This reserve will be "recycled" once we have the upcoming or the next version of our macroeconomic scenarios, which will be sometime next month. This is for the main component of our cost of risk figure for the Q1 . A brief comment on the overlay reserves, which we created in 2022. For the Q1 , we kept them stable at a level of CZK 2,200,000,000.
As we communicated to you in the previous quarter, we will start our release phase, which is expected, in fact, to kick in this quarter and continue through the second semester with the planned reversal of its retail component, which is for an amount in the range of CZK 700 million. To conclude on this cost of risk overview, we've decided to update or precise our year-end for 2025 cost of risk outlook, which is now guided in the range of 0-10 basis points, closer to 0, i.e., a range that is well below our through-the-cycle cost of risk level. This takes into account two or three drivers. One is obviously the one I just mentioned, which is the planned reversal of our retail overlay reserve.
The second one is an assumption in terms of stable default rate across all segments and product portfolios under our central scenario, macroeconomic scenario. We have also added a bit of add-on of reserves reflecting some possible increase in any credit or losses that we could incur coming from digital or the digitalization of the bank and through digital fraud risk, just to be on the safe side. That gives you the main drivers behind this guidance, again, which is within the range of 0-10 basis points for 2025 year-end and again, closer to the zero level. On this, I'm going to hand over back to you, Jiří.
Thank you, Didier, Police Capital. The capital adequacy is still very strong at the level of 18.7. Sorry. Quarter over quarter, it is almost the same, i.e., still around 210 basis points above the minimum requirement and even above our management buffer, which is 50-200. Probably here, it is worth to stop for a second. March is the first publishing date when we are reporting under the new method, under the new standard, i.e., CRR3, or otherwise called like Basel IV. From the waterfall chart, you can see that the first adoption impact is more or less neutral when the positive impact coming from the credit risk weighted assets that added like plus 44 basis points into capital adequacy. It was offset by negative impact on the operisk risk weighted assets side by almost the same figure, by 43 basis points. This was not a surprise.
We were expecting kind of a neutral impact. Still, what is ahead of us is the impacts into the market risk weighted assets, which are expected probably next year. They are going to be, as indicated before, still positive. Not surprisingly, although MRL adequacy is safely above the requirements. For you, also in 2025, we do not plan to go for another sub-debt/SNP senior non-preferred instruments as we simply do not need it. The final slide of the presentation is the outlook. Yes. There are some changes, but not too many in macro. Jan already was touching at the beginning of this presentation. Growth of the economy is expected at 1.5% in 2025, inflation around 2%, rates still expected to continue going down, lending at 3%. Here is a slight change because three months ago, we were seeing by the mid of the year.
Now we are, let's say, extending the time by the end of the year. We are expecting on quarterly basis that CNB is going to go down by 25 basis points. In terms of market growth, there are no changes. Both lending and deposits are expected to grow by mid-single digit. For KB, and that's given the slowdown in Q1 this year, we are a bit downgrading the growth, which basically goes across the board. The overall growth on the loans side is still at mid-single digit, but now we're rather at the kind of lower edge of mid-single digit. Deposits, due to the same reasons, we downgrade from high single. Same reasons, I mean, a bit slowdown in Q1 this year. We downgraded from high single digit to mid-single digit growth.
Having said that, we also adjusted KB financial outlook on the revenue side down from high single digit to mid-single digit. Mainly, it is on NII front due to the lower than expected growth of deposits in Q1 and the quarters to come. This is going to be followed by lower OpEx than expected and even guided three months ago. Three months ago, we were guiding low single digit down, now low to mid-single digit down. That is thanks to continuing simplification, optimization of branch network, decrease in staff number by approximately 500 by the end of the year. Also, I was touching that before, lower contribution to the resolution fund charge. Credit risk skipping, Didier already informed you. Finishing with potential risks, they remain completely the same, just we added one, which is disruption of international trade due to protectionism. That is all.
Now I'm returning to the studio. Thank you.
Thank you. Thanks to all the presenters. In the next part of our today's meeting, we'll be happy to answer your questions. Let me remind you that this meeting is being recorded. If you have a question, please click on the icon with raised hand at the upper part of your screen, and then please wait to be called. If you are connected through a phone and you would like to ask a question, please wait for an opportunity later on. Thank you. Our first question comes from the line of Johan Sykora from Oddo BHF. Johan, please go ahead.
Yeah. Hello, everyone. Thank you for the call. I just have one question on the outlook.
We missed you.
We missed you.
Okay. Sorry, sorry. I have just one question on outlook on fees. I think it previously said growth, but now it said stable. Is it correct or I missed something maybe in the last guidance?
Yes. I can take this one. You are correct, current guidance is stable. What you can see behind mainly is the fact that we are expecting a bit slower dynamism of the sale of, let's say, equity funds, equity mutual funds due to uncertainties on the markets recently, right? As these products are generating very effective fees, that has been transposed into our downgrade, slight downgrade of the fees and commissions.
Okay. You take also the reported one because there was some one-off in Q4 on the fee side, but you take the reporting as a base for the guidance, right?
Yes.
Okay. Okay. Maybe I have just one, I'm not sure whether I get it correctly, the components of the 0-10 basis points risk cost guidance, there were like two, three points. If maybe you can repeat, that would be my last question. Thank you.
In fact, I will give you the first ones, which are from a material point of view, the one to keep in mind, which is what I summarized regarding the adjustments of our covenants to manage overlay. In the rest of the year, so Q2 and the second semester, provided that we continue to see the improvement that we've seen for the retail portfolios, which is more than likely, we will reverse the 2022 reserves for its retail components. It is more or less in the range of CZK 700 million. That's number one. Number two is that we made the assumption that default rate would be at the same level as last year, so 2024, for all product and segment portfolios, which is a reasonable assumption to make within our central macroeconomic scenario.
Okay. Great. Thank you.
Thank you for the question and the answer. Let me remind you that if you'd like to ask a question, please use the raise the hand button. Our next question comes from Delphine Lee from JP Morgan. Delphine, please go ahead.
Yes. Good afternoon. Thank you for taking my questions. Actually, I just have two quick ones. Just on, first of all, on the lending volumes. Mid-single digit, and you're talking about the low end, you are assuming, I guess, an acceleration of the lending volumes in coming quarters. Just wanted to get a little bit your level of confidence and if you can elaborate a little bit about that. The second question is on cost. Clearly, it's very helpful to see sort of like a bigger decline this year. Just wondering sort of what should we expect for 2026 onwards? What kind of cost trend should we expect? Thank you.
I will start with the answer to the first question, and probably my business lines colleagues will complete me. How we are confident? We are confident. Let's probably touch the main products that are behind us. We are very confident in terms of mortgage loans. Simply, the demand is still super high. The sales are expected to increase further. The same consumer loans here, we downgraded a bit from high single digit to mid. Still, the demand is also relatively convincing. Here, we are also fully confident in terms of corporate. To say for the time being, there is a very rich pipeline that, according to our opinion, should offset potential impact of tariffs.
If you are asking for the level of confidence for corporate, for me, the lowest confidence is right at this point, i.e., corporate, because simply, there is a risk that companies are going to postpone or delay their investments, etc., etc. I don't know whether my colleagues would like to complete me.
Maybe just to say that on the retail side, mortgages are 60% of last year's production, but it does not immediately translate into the outstanding volumes because this is like standard structure of production. It is not just refinancing of the things that come immediately. It is full scope reconstructions, constructions, everything. It will come to the outstanding balance, but it will take time, and the growth will continue. I am pretty much confident on the retail side.
Just to complement for the corporate part, what we see is now a bit, let's say, bigger appetite of the corporates to discuss some investment financing opportunities, and also the working capital lines are being drawn more than it used to be some time ago. These are, let's say, two actual elements of what's happening in this landscape.
The other question was on the cost side, and more concretely in 2026. As I was mentioning, for this year, we are expecting a slow to mid-single digit decline. For 2026, usually, we are not guiding the years to come, but it is expected that the costs in 2026 will not or will stay basically flattish versus the decreased base we are targeting in 2025. Around flat.
Great. Thank you very much.
Thank you all. The next question comes from Martin Marek from UBS. Martin, please. Martin, we do not hear you. Can you unmute yourself?
Can you hear me now?
Yes.
Excellent. Thank you for taking our questions, and thank you for the presentation. A question on the NII outlook. Obviously, you slightly revised your guidance down on that front. Can I just ask, is that mainly the function of somewhat lower confidence in corporate lending growth? I long to the volume picture, or perhaps the net interest margin, maybe through deposit competition, maybe through lower loan spreads also play a role here. Just on that related topic, if you could talk a little bit about deposit competition and the pace of expected shifts from here onwards in the deposit mix. Thank you.
Okay. I will take the first one. NII outlook almost saw a reason for the slowdown. Now I'm skipping the, let's say, change is minimal obligatory reserves, but our volumes, almost nothing else. We believe that the volumes recover as part of our guidance. In terms of income from the deposits, Jan was touching at the very beginning, a positive piece of information that it improved. I mean, the ratio of unpaid versus total slightly improved. I am not benchmarking with Q4 2024 because that's kind of extraordinary.
Always Q4 is a bit different. If you have a look on the, let's say, evolution of this ratio, unpaid versus total, I remember that one year ago, it was around 52%. Then it went a bit up. For the time being, at the end of Q1 this year, it is already 56%. The point is that the change of the structure happened relatively late. You still do not see full impact of that in Q1 results, but this should recover in the quarters to come.
Thank you.
Thank you. Let me again remind you to use the raise the hand button if you have a question.
I think, Jakub, there was still a question about the competitive landscape in deposits.
That's right. Yes. Sorry, sorry. Okay. Yeah, please go ahead.
You mean competition is still the answer is in the air. I may start on the retail side by saying two things. First one, we stick to our, I would say, general principle approach, saying we pay a fair price. We do not aggressively compete on the pricing side of deposits. This is not the way we would like to attract clients. We definitely see some of our competitors paying more. On the other hand, we believe we are quite reasonably balanced at this moment. This is the first thing. Second one, usually volatile times play in favor of banking deposits. We can see it already a bit. Third one, volatile times and decreasing interest rates play in favor of current accounts, outstanding balances. This is where my optimism would be probably stemming from if this brief, not sure answer is enough for you.
That absolutely makes sense. Thank you.
Thank you. If you would like to ask your question through a telephone, please press star and six to unmute yourself, and you can ask your question. Of course, still, you can use the raise the hand button as well. Our next question comes from the line of Mathews Shane from WhiteOak Capital. Mathews, please.
Thank you. Thank you for the opportunity. Just to better understand the corporate loan growth guidance as well, when we talk to clients, are they, let's say, initially hesitant at this point in time to invest? What is the, let's say, actual, let's say, demand? Because you talked about some demand you're seeing from clients, but are they, let's say, willing to forgo it till they get more certainty on the environment and how it's changing? I just want to better understand the real ground interactions you're seeing and whether we are being more conservative just in line of how, let's say, the environment has changed.
Maybe I start to give you a kind of short comment or reflection from the clients. Generally speaking, last year, the companies were more hesitating about pursuing their investment plans. This year, they are rather more active despite all the geopolitical uncertainties. Maybe a favorable factor or element is also decreasing interest rates and basically interest rates more or less according to the expectations, hitting the, I would say, medium-term levels. The companies are just ready to pursue some investments. Some of them are necessary from a technological or life cycle point of view as well. This is the current situation. We do not record a kind of increased level of uncertainty because the level of uncertainty is anyway high already for some time.
Got it. Thanks.
Not sure if Miroslav Hirsl would like to also add for retail, or is that a complete answer?
No, yes, that's it. I just wanted to ask about the corporate. Yeah.
Okay. Okay. I see. Okay. Thank you. Let me propose waiting a few seconds if you have another question.
Probably on, if I may just fill the moment of silence, coming back to the corporate lending, both Martin and Mathew's ask for the same. What is probably not fully, let's say, reflected on our assumptions for 2025 is the level of public investments which might create additional space for private investment too and give some anchor to corporate clients, including large corporations, including mid-size companies. I'm speaking mainly about potential new investments into infrastructure, be it energy, be it transportation type of infra. On that side, we are, as Czech Banking Association, in pretty lively discussion with the government, and there might be some inputs or impulses coming from this side. That might a little bit elevate the bar for opportunities on corporate finance.
Thank you.
Thank you. Our next question comes from the line of HQ and Kalori Magesh. Please go ahead.
Hi. Thank you for the opportunity. I just wanted to understand how do you think about the related levers of, let's say, CET1, AT1 issuances, and dividend payouts. Philosophically, how do you think about when to issue AT1s, if at all you do, or generally as a concept, would you not like to do so? The reason I'm asking is, let's say, over the last few years, you've been paying 100% payouts, and that has, of course, been reducing the CET1 ratio. At some point, you might reach a point where you would say, "I don't want to reduce the capital ratios anymore." At which point would you like to optimize the way you hold capital between common equity Tier 1 and AT1s? Just what is the long-term thinking around it? Thank you.
Should I take it then? Okay. Okay. So question number one was, are we going to consider to issue AT1? Actually, not really, because after some considerations, it's very clear that this would not work efficiently, and this would lead to the kind of double taxation both on KB side and the investor side. That's first. Second, you're right, 2025 is the third year in a row when we paid or we announced to the markets to pay, which is the case for 2025, 100% of the capital. At the same time, we would like to grow sufficiently, which will consume the relevant part of the newly generated capital. The last point is, for the time being, or as a matter of policy of the bank, we do not guide dividends beyond the year we are operating.
At the same time, I can repeat here that once there is a surplus of the capital, we are not going to sit on it, and we will return to the shareholders. Yes. Thank you.
Thank you for the answer.
Thank you. Our next question comes from the line of Jan Juchelka. Please ask your question.
Hi. Let me apologize. I was not here, so maybe this question was, I'm not sure. I wanted to ask about the dividend policy of the KB. Due to 2024 or 2023 was policy, I think, 40% holding, 60% divide to shareholders. Then it was risen to 100%. I wanted to ask, have you seen the future policy of the dividends until maybe 2026, 2027? Thank you so much.
Okay. I do not know when you joined the meeting, but it was exactly the point of the previous question. Let me very briefly summarize the answer. We do not guide the dividend policy beyond the year we are operating. First, we will be more concrete during Q1, during Q4 presentation results in February 2026. This is one thing. Once there is a surplus, we tend to return it to the shareholders. That is second. The third point is maybe just to explain why we paid three consecutive years 100%. Of course, 2025 subject to all of validation, but it was very much about the focus on the capital management discipline. What you can see behind is a very high level of our models, almost complete KB Group is running under IRBA.
We are preparing IRBA for other components of the group, which could be KB Slovakia, which could be SGEF, etc., etc. That's one point. Another point, we redirected kind of allocation of the capital into the retail loans that are kind of from that are capital less intensive. We are considering to go direction more originate to distribute, etc., etc. Right? That's why we were able to pay 100%. Still, the kind of standard normalized dividend policy is whatever between 60-70%, I would add plus. Thank you.
Thank you for the questions and for the answers. It seems we do not have any further questions in the queue. Let me hand back to the CEO, Jan Juchelka, for the concluding remark.
All right. Thank you very much for being with us. We are thrilled to continue our hard work to deliver the next quarter and the main aspects of 2025 according to what we are debating here with you. I wanted to thank you for your trust and work you are dedicating to covering KB shares. Also thanking to my colleagues who presented or answered your questions, including the investor relations team for preparing all of this. Thank you very much, and see you at the latest at the occasion of the Q2 results presentation. Thank you. Enjoy today.
Thank you very much. This has concluded the presentation. You can now disconnect.
Thank you. Bye-bye.
Bye.
Bye.