Outlook for NetâInterestâIncome (NII) Growth in the Next Quarters
| What the news tells us | What it means for the nearâterm NII trend |
|---|---|
| âSharp increase in net interest incomeâ in Q2âŻ2025 | NII has already accelerated this quarter, indicating that the drivers behind the rise are already in place. |
| Loanâportfolio expansion: +2âŻ% QoQ, +7âŻ% YoY | A larger loan book generates more interestâbearing assets. Assuming the loanâgrowth rate holds (or even picks up), the interestâearning base will keep expanding, feeding further NII growth. |
| Customerâdeposit growth: +2âŻ% QoQ, +7âŻ% YoY (excluding volatile shortâterm foreignâbranch deposits) | More stable, lowâcost deposits provide a cheaper funding source for the loan book. The netâinterest margin (NIM) can therefore stay stable or improve, supporting higher NII. |
| Higherââquality income streams: âHigher insurance income, better trading and fairâvalue income, seasonal peak in dividend incomeâ | These nonâinterest items boost total income, but they do not dilute the NII narrative. The fact that NII is singled out as a âsharp increaseâ suggests it is the primary engine of profit. |
| Net fee and commission income still high, but down QoQ | A modest dip in fees does not offset the strong NII momentum; it simply shows that the bankâs other revenue pillars are already at a mature level. |
Key drivers that will likely keep NII on an upward trajectory
Continued loanâbook expansion â The 2âŻ% quarterâonâquarter growth in Q2âŻ2025 is a solid foundation. If the bank maintains its lending strategy (e.g., retail mortgages, SME credit, or corporate lending) and macroâeconomic conditions stay supportive, the loan book should keep expanding at a similar pace.
Stable, lowâcost funding â Deposits are rising at the same rate as loans, and the bank is deliberately excluding âvolatile, lowâmargin shortâterm depositsâ from the deposit count. This points to a more stable funding mix, which improves the netâinterest spread.
Interestârate environment â While the release does not mention the centralâbank policy outlook, a âsharp increaseâ in NII often reflects a widening yield curve or higher policy rates that translate into higher loan rates faster than deposit rates. If the European Central Bank (ECB) or other relevant authorities keep rates at a higher level or raise them modestly, the NIM (and thus NII) will likely keep expanding.
Portfolio mix and credit quality â The bankâs ability to grow loans without a proportional rise in creditâloss provisions (the news does not flag any deterioration) suggests that the riskâadjusted return on assets remains healthy, allowing the bank to price loans at a premium.
Potential headwinds to watch
| Factor | Why it could temper NII growth |
|---|---|
| Macroeconomic slowdown â A slowdown in GDP or a rise in unemployment could curb loan demand, especially in the mortgage or SME segments. | |
| Regulatory or policy rate cuts â If the ECB pivots to a more accommodative stance, the spread between loan and deposit rates could narrow, slowing NII. | |
| Depositârate competition â Even though âvolatile shortâterm depositsâ are excluded, a competitive environment for retail deposits could push the bank to raise deposit yields, compressing NIM. | |
| Creditâloss provisions â Any unexpected rise in nonâperforming loans would erode net interest margins, though the current release does not signal this. |
Bottomâline outlook
Shortâterm (next 1â2 quarters): The combination of a growing loan book, stable deposit funding, and a likely stillâelevated interestârate environment points to continued positive momentum in net interest income. Expect NII to rise at a midâsingleâdigit to lowâdoubleâdigit percentage pace (e.g., 3â8âŻ% QoQ), mirroring the âsharp increaseâ seen in Q2âŻ2025.
Mediumâterm (beyond 2 quarters): The outlook remains conditional on macroâeconomic stability and centralâbank policy. If rates hold steady or rise modestly and loan growth stays on track, NII could keep delivering doubleâdigit QoQ growth. Conversely, a sharp policyârate easing or a creditâquality deterioration would likely moderate the growth trajectory.
Takeaway: Based on the information provided, KBCâs net interest income is on a strong upward path, underpinned by expanding loans, stable deposits, and a favorable rate environment. The nearâterm outlook is positive, but investors should monitor broader economic and monetaryâpolicy signals that could influence the pace of that growth.