Banco Bpm Societa Ord

Good afternoon. This is the course call conference operator. Welcome and thank you for joining the Banco BPM full year 2020 group results presentation. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Roberto Pernaglio, Investor Relations Manager of Banco BPM. Please go ahead, sir.

Thank you very much to be present with us tonight for the presentation of the full year result. Before leaving the floor, Mr. Giuseppe Castagna. Let me remind that you can find the presentation on our website in Investor Relations page and the Q&A section is reserved for financial analysts. Thank you very much. I leave the floor to Mr. Castagna.

Thank you Roberto. Good evening everybody. Thank you for being with us for this full year 2020 presentation. Let's start immediately on page 5 where we have summed up some significant performance which our bank was able to reach in this very challenging environment of 2020 the first part is related to the asset quality which we manage through credit management initiative linked to the moratoria to the state guarantee loans and to an effective monitoring of Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord in H2 with a very effective commercial activity from our branch network, but also leveraging on digital banking. This produced a very solid rebound in H2 with pre-provision income up 43% vis-à-vis H1. all these results allowed us in a complicated year in which of course we expected some rules to respect also in terms of dividend distribution encourage us to be very cautious and prudent both on conservative provisioning policy we have in the last quarter we have done 1.3 disposal between portfolio and single name. We have increased of 500 basis points the coverage of MPE. We have upfronting with IFRS 9 further amount in order to foster new disposal starting since 2021. At the same time we were able to front loading restructuring cost able to foster 1,500 early retirement person scheme for 1,500 person and a closure by June this year of another 300 branch which sum up to the 750 we already have closed since the starting of the merger. this allowed us all in all to be back to distribute a dividend of 6 euro per share and overall to be very positive on the outlook of 2021 on page 7 we wanted just to give an outlook on the four year of our merger in which we think we were very much able to to build up a track record in the risking and capital generation. As you know, we have reduced for 30 billion to 8.6 billion the amount of MP, but at the same time, we were able to increase common equity tier one from 11.4 to 13.3%, which is the result of 2020. Needless to say that in between, we have financed something like 1000 basis points coming from revenue generation and asset management transaction which allowed us to reduce of 21 billion the amount of MP during these years. Starting from the credit profile let's have some look about the main action of this year of course the action where very much linked to the pandemic and to the measures taken by the government. We wanted to reach a target in sustaining the economy and we were able to reach a new record lending, new lending in 2020. After 21 billion in 2019, we were able to lend 27.6 billion. including 10.2 billion assisted by state guarantees. We still had at the beginning of the year almost 4 billion of loan loans assisted by state guarantees in pipeline of which in January we were able to deploy 1 billion. The second target was to uphold the portfolio quality through the reduction of MPEs 15% down to 8.6 billion and 7.5 MPI ratio thanks to a very favorable migration rate we had only 1% of default rate to a very low market share in the moratoria 5% versus 7.3% which is our natural market share on loans on checking very carefully the quality of the moratoria both for the one who already aspired in December which were an amount of 3 billion with a very much on the fourth rate of 0.5 percent and the same rate we are experiencing in the early engagement campaigns for the moratorium which are coming at a spiring in the next few months we have as we will check later on reviewed a big amount of this kind of moratoria and we already have some good expectation about the potential repayment. The other step was, as I mentioned before, to reinforce, to massively reinforce the coverage. We have reached for the first time a total of 50% of MPE coverage. Particularly, we have upgraded UTP coverage to 43.7%, 46 base on year. but if we include the Django disposal, the amount of coverage was even more than that. All these considering a tough scenario for 2021, of course related to the COVID and also provisioning further amount to start the risk, further the risking since 2021. The last objective was to contain the capital absorption, and we think that we had reached also these results, having 86% of loans assisted by state guarantee at zero risk weighting. On page 8, a focus on the moratorium. As I mentioned, we started with $16 billion of total requests. In December, we had $3 billion of moratorium expiring. with again a default rate of 0.5 for another billion more or less we had some different measures often linked to state guarantee the remaining portfolio as of end of the year is 12.2 billion of which 10 billion coming from the government and 2.3 from the Abbey moratorium this 12.2 billion are 80% of these are client of low median risk as rating, 12% mid-high risk and only 8% high risk. If we go into the sector with more impact from the COVID, we have a total of 2.7, 2.8 billion of risks under moderatoria, of which 2.4 billion under the best rating category. In order to check into these couple of billion we have run and we're still running early engagement campaigns activated on a total portfolio of selected mid-high and high risk clients amounting for 2.2 billion out of which only 2.8 billion are nowadays in watch list and only 0.6% are with signals of default. The outstanding moratoria related to our performing loans amounts to only 12%. On page 9 we start with some figures starting from asset quality again coming back from 9.1 to 7.5 in gross MP from 5.2 to 3.9 on net MP 39% to 43.7% for UTP coverage and 56% to 59% to bad loan coverage. If we include write-offs, we reach 65%. At the same, I would say, at a very good level, we of course have also our liquidity and funding situation. LCR is an higher of 191% and the SFI ratio is much higher than 100%. We have 20 billion of unencumbered eligible securities and we have reserves both on amortized cost and HTCS respectively for 875 million and 198 million with a very, very strong capital gain. Coming to capital again we reach 13.3% coming from 13% of December 19 with an increased MDA buffer thanks to the many issues we had in 2020 and beginning of 2021 of 81 and tier 2. The total amount passed from 250 basis points to 450 basis points in January this year after the last issue. Again, we propose a dividend distribution of 6 cents per stage, which amounts to 2.8% of dividend yield on the last quotation, which is above 3% if we consider an average of the first month of the year.