Banco Bpm Societa Ord

Good morning. This is the Coruscall Conference Operator. Welcome and thank you for joining the Banco Bpm presentation of 9 months 2021 group results and of the 2021-2024 strategic plan. 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 Peronaglio, IR Manager of Banco BPM. Please go ahead, sir.

Thank you very much. Good morning, ladies and gentlemen, and thanks a lot also for your attention to these conference calls. Today, we are going to present the BPM's group Q3 result and the new 2021-2024 strategy plan. We will start a short presentation of the result, and then we'll immediately pass to the strategic plan. As usual, you can find the two presentations on our website in the investor relations section. At the end of the two presentations, there will be a Q&A section, which is reserved to the financial analysts, as usual, with the aim to give to everyone the opportunity to ask questions, to make a maximum of two answers, and in any case, there will be, at the end, the opportunity to have a follow-up. Before leaving the floor to Mr. Castagna, let me introduce our colleague on the stage. Then starting to your left, we have Mr. Salvatore Poloni, our co-general manager and chief operation officer. Mr. Edoardo Ginevra, our CFO. Mr. Giuseppe Castagna, our CEO that you already know. Then we have Mr. Carlo Bianchi, chief landing officer. And last but not least, Mr. Domenico De Angelis, co-general manager and chief commercial officer. Someone of you told me that there is some problem with the streaming, the video streaming. We try to resolve this shortly, but you can listen to the conference on the conference call number. Now I leave the floor to Mr. Scarsagna. Thank you very much.

Hello, good morning everybody. Happy to be here with my top line in order to give first the presentation of our nine-month results and then a deep presentation of our new strategic plan 21-24. Of course, it's going to be quite a long journey through our past, but especially toward our future. We are very confident that the results we have been able to reach during these very complex five years of merger and restructuring and renovation of our bank will give everybody confidence to reach and the possibility to be very compliant also with the plan we are going to present today. Let's start with page five of the nine mind results. Just a moment because... Okay, we are so... Not as usually we are going to giving a presentation of nine months which would be condensate in very few slides due to the length of our morning. So there are many numbers in this first slide, but I think that these all together give you the impression of what extraordinary work has been done by my colleagues. Core revenues are growing up to 3.1 billion, plus 10% year on year, with the quarterly level consistently above 1 billion. A very robust NII plus 4.2%. strong growth in fees plus 15%, and a solid contribution from our product factory at 145 million plus 35% year-on-year. Also, total revenues are up to 3.4 billion, 10% more than last year, and pre-provision income are up to 1.5 billion plus 20%. Cost control is still ongoing. As you know, we have normalizing the cost of last year. We have a small reduction. We will see then afterwards how the cost reacted to the pandemic. Cost income is down to 55% from 59 in the nine months 2020. We have a very good situation also in our Asset quality, we are down to 5.9%, which means we have a definition being below the 5%, the famous threshold of 5%. We are down to 4.8%. MPE ratio net are 3.2, Texas ratio 29%, default rate below 1%. The cost of risk, I know, and I have been looking to the presentation of my colleagues, we are still very prudent provisioning, up-fronting what is needed to continue the risk in the bank, even though we have reached 5%. So we are with a core cost of risk of 48 basis points, but the cost of risk, which totally is 83 basis points, like our guidance three months ago. Capital position is very solid, 13.3%. Let me just remember that we were at 13.3% at the end of 2020, facing a very strong headwind for 95 basis points. In nine months, we have recovered all the 95 basis points and positioning our bank in this solid capital position with MDA buffer more than 450 basis points. The sound, as I mentioned before, we have been able to include in this position the headwinds for 2021. All in all, net income, 472 million in nine months, which again, give us a lot of confidence and boost to sustain not only the ambitious profitability for this year, but all the business plan for 2021. a quick look at the main figure of our bank I won't go again on what I already said but it's worth to notice net fees and commission very strong in Q3 basically at the same level of Q2 leading to 15% on 9 months core revenues consistently above 1 billion quarter by quarter and reaching 3.1 billion in nine months. Again, total revenues consistently above 1.1 billion, reaching 3.4 billion in nine months. Operating costs under control, a small reduction in Q&Q of 16 million, with an increase on the stated number of 2020 which, as you remember, had a lot of one-off thanks to the pandemic situation and stated we have an increase of 60 million. Pre-provision income is 485 million, vis-à-vis 560 million in last quarter, and the same result, 484 in the first quarter this year. All in all, 1.5 billion of pre-provision income, which is 20%, more than last year provision at the sound level that we already mentioned before 673 million let's just consider that the core provision for this year without up fronting and without the massive increase of stage two methodology amount to below 400 million for of course the risk for 2021. profit before tax are consistently at level 260 million quarter by quarter, leading to almost 800 million of profit before tax for this year, which is 75% more than last year. After taxes, we have 180 million of Q3 results and 571 million of nine months. After semi-charges and mainly other costs related to fair value option we are down to 111 million in Q3 which is a very solid result above the first quarter results and a total 472 million which adjust is 565 million going ahead we have some detail about net interest income as you see plus 4% on last year minus 1% this quarter still with a very solid performance from commercial banking plus 5 million a reduction due to the reduction of NPE so the contribution was down 2.6 million a temporary decrease of the TLTRO interest income which is due to a different phasing on the TLTRO and we will recover during the lifetime of TLTRO this figure and non-commercial banking which includes of course the negative effect of the reinvestment of the liquidity coming from TLTRO is down 4 million. So all in all 560 million versus 522 million. Good to say that Notwithstanding the strong increase of state-guaranteed lending, our asset spread is still consistent at 177 basis points, so quite the same for the entire 2021, and also the commercial spread is still at 116 basis points. fees and commission. We already commented the very strong result of this Q3, taking into account the seasonality, which normally has a downside for August. This time we were able to compensate, basically, increasing commercial fees versus advisory fees. As you see, $475 million was the result, basically the same of the second quarter. plus 13%, 13.8% versus last year. In nine months, it's 15% growth. The composition is changing a bit. We have an increase of 17 million in commercial banking fees, mainly due to the lending activity and to the payment services and the trade finance activity. Meanwhile, of course, we have a small reduction in advisory, especially driven by upfront. Meanwhile, the running fees were still very sound. On Q3, we have the three months, and you see that August was almost 12 million below July and September, which were at the level of 162, 163 million. As far as the investment product capability, placement to our clients, we are still maintaining a pace of 1.5 billion per month, apart from August in which we had 1.1 billion, which in any case was a record for our bank. But we are still confident that we can keep this 1.5 pace up to the end of the year. Operating cost, like for like plus 3% on a normalized figures, we are below 0.2. If we compare 2021 with 2019 before COVID, we are down almost 3% in overall cost. The Q3 is below Q2 for 15, 16 million. And the dead count is down to 20,565 people having left the bank almost 1,000 people out of the 1,600 due for the early retirement scheme. Also, the branch net was right-sized. We overcome the target of 200 branches given in our previous plan, and we have reached 300 more closures to the work already done during the first year. we have now 1430 branch almost 1000 branch below the starting point of the merger on page 10 we have some consideration about the volume growth as you see on the left side the core performing loans are stable quarter-on-quarter with a growth of 3% year-on-year, which is the normal growth we have always experienced, apart from 2020, in which we were able to grow more because of the state guarantee assistance. But this is the pace that we envisage also for our bank for the next years. on the center you see the growth of loans guaranteed by the state is plus 9% in the last quarter of course is an enormous increase in terms of year on year because in September 20 we were at the beginning of the state guarantee aid so basically from zero we have been growing to 16 billion now the total level of this 16 billion is and the average level, considering that some of this guarantee are 100%, some 70, 80, 90% is 86% of the total consideration. The moratoria is going still down. We have reduced it from 16.2 billion to 4.2 billion. Very good news is that the default rate of the moratoria is below 1% versus 1.25% in June, three months ago. And still we have more than 70% of the remaining outstanding moratoria in our best rating classes. And we are monitoring very attentive all the evolution. As you see on the slide 16, you have all the details about moratoria as well as on page 15 you will have the details about the evolution of the state guarantee loans. Customer deposit, another good signal due to the effort of our people in the branch network. We were able to reduce 1.6% the growth we were experiencing in deposit from client. As you remember, we have been growing almost 15 billion during the pandemic. Now the effort to transform most of this deposit into asset under management is giving a good result. As you see from the next box, the asset under management are growing quarter on quarter 1.2% and on a yearly base almost 10%. a very good figure also to look to the net inflows we have reached 2.5 billion net inflows from customer deposit to asset under management and this is a figure which will be very important also as a reference for our business plan liquidity and funding very solid of course thanks also to TLTRO which is at the maximum 37 billion Italian Go is still down, 2.3 billion in Q3, leveraging also on NFR, which of course has a good boost from this situation. And bond outstanding is only 18 billion. We will see on the plan how small relative is the reduction year by year. On page 11, a quick look to a very important step that we have reached. You will remember that we started with 24% of MP ratio. With this quarter, we have reached 5.9%, which will be 4.8% considering the EBA definition. If we consider that we have front-loaded the amount needed to complete further disposal for an amount which goes from 650 million up to 1 billion. Even if we consider only 650 million, the pro forma MPE ratio will go down to 5.3% and 4.3% if we consider the EBA definition. So I think it's very important statement for our bank, which has been considered for many years as a big MP ratio bank, and now we are finally eventually into the low MP ratio bank. Cost of risk, again, some evidence. I understand, again, that some of my competitors are Bpm Societa Ord last page of number capital position another very strong and satisfactory results 13.3 end of 2020 we had to face the reduction due to the headwind 95 basis point but as you see in 9 months we have completely recovered the capital position of end of 2020 which fully loaded is 13.3% again thanks to the Q3 performance of course already considering the dividend and the AT coupon and to the FWA and other asset change on our balance sheet. The phase-in figure is 14.5% These lead to a capital buffer, MDA buffer, which is above 450 million fully phased and almost 600 basis points, sorry, not million basis points, if you consider the phase-in. All in all, we confirm our target for 2021. Basically, we're a bit above the figure that we gave you last quarter, but again, which doesn't change the global look of our results which will still be very consistent with being above 4.4 billion as total revenues almost 2.5 billion of operating costs and pre-provision 1.9 billion. Cost of risk we confirm to be in line with the guidance we gave you possibly exploiting this prudence in the coming year with an APS and a payout that we confirmed 35 cents and 40% with a solid capital buffer which is already above our target of 13 and 350 basis points. Okay, I think this is of course in the following page I'm sure you have all the details the normal page that we slides that we present every quarter but again maybe it's better to go straight to the strategic plan and to examine how these track record very consistent can bring to even better results in the coming year so starting on page three you see the the agenda for the business plan we have a small examination of the current macro situation in which we consider that at least from an economic point of view we can consider not only our country but the eurozone i would say out of the crisis mean meanwhile we know that the pandemic is still to be overcome and Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Then we will examine in deep the track record of the bank and then we will go to the number of our strategic plan. In this presentation today I will have the help of my CFO which will go through after the number that I will present the different business line in order to give you more detail about the means that we will use, the tools that we will use to reach our target so out of the crisis this is a scenario that almost all everybody convey with different level of course of optimism we knew that in the last week and day that for instance the GDP for Italy is going up in any case we have utilized the the GDP of some weeks ago that had a provision of 6% for 2021, 4.2% of 2022, 2.5% in 2023, and 1.5% in 2024. This is a scenario that happen also if there is a zero growth during the fourth quarter. So it is, of course, a prudent scenario. And we think that most probably the the outlook will be better. For Euribor, we have used a scenario which will still be more or less at the level we have today for 2022, then a small reduction in 2023 and a more consistent reduction, always below zero with negative interest rate in 2024. If you look at the forward rates, they show today that they are already positive starting from 2023. The global situation, we know that there is a fiscal recovery boosted both by the decision made by the US and the Euro politician. we have bottlenecks in the transportation and in the commodity cost. This brings to an acceleration, we have seen during last weekend, the focus on climate change and the new rules. And also at the Eurozone economy, Eurozone level, we have an expansion of EU macro thanks to next gen plan which has been developed developed by each country and also again by the climate change action that are going on in Italy again the recoveries is very good up to now and we still have to see the effect of the PNRR implementation coupled with the almost the same level importance of the structural reform agenda that the government has started to implement. On page six, some words about the Italian PNRR, the once-in-a-lifetime occasion not only for Italy but also, of course, for the banking system to support this growth inside the next-gen EU plan. on the left you see some figure that you already know I think about the mission and the investment that will be devoted by the public to this initiative basically on digitalization innovation almost 50 billion the green transition is almost 70 billion infrastructure for mobility is more than 30 billion healthcare 20 billion inclusion cohesion is 30 billion education research 33 billion the total funding is more than 235 billion on the time horizon 21 26 and we expect a boost in bank lending to support and to enhance this investment which will be in the region between 150 to 100 billion. As I was mentioning before, this will be in conflict with the comprehensive reform program, which will be focused on public administration, justice, competitive environment, labor law, labor cost, and fiscal. The cumulative GDP impact starting from 21, 0.5% from this plan will reach 3.6% of increasing growth of our GDP. Let's have a look at what we have done before talking about the future during these years. First of all, our position. You know that we have a very strong franchise in Italy. Basically, our loans are concentrated 40%, more than 40% in Lombardy and 70% in the four regions which together represent more than 50% of the Italian GDP and are, as you know, amongst the wealthiest and more manufactured regions of the entire EU zone. We have been investing on increasing productivity and complementarity over our specialized bank into our business. We have bought in our wealth management bank, Bank Aletti, and in our investment bank, Bank Agros, now two of the primary name in the relevant field, which are starting to give good results and have in this new plan the opportunity and the occasion to be even more fully integrated in our strategy, as well as we are pushing on the digital capability of WeBank, which, as you know, is not anymore an independent bank, but is a brand that still represents the digital innovation of our bank and started not a few years ago but more than 20 years ago. Together with this very comfortable situation, we have now a very solid track record in terms not only of the risking and restructuring and network reorganization, but eventually also in terms of revenues, cost-cutting, MP, so asset quality, and capital strengthen. So the best possible situation to start for a new ambitious plan. Not forgetting the opportunity that we also will consider for our improvement, leveraging on our three important product factory, Agos, which as you know, is a leading national player in which we have a stake of 39% together with Credit Agricole Anima which is the top independent Italian asset management player in which we are the major stakeholder with a stake of 20% and the two bank assurance joint venture which you know nowadays represent 19% for BPM in BPM Vita and BPM Medandi and 35% in Vera, together with Covea and Cattolica. But as we will explain, and you already know, during the planned horizon, we'll be completely incorporated by ourselves and we'll become 100% part of our bank. And this is a strong opportunity to leverage on this product factory. On page 9, we have some small reminder of what we have done already in terms of business plan compliance. In our first, the merger plan, notwithstanding, of course, we didn't know the bank well as we know now. We started from a very consistent 31 billion of MPE stock. The target was to reach 23 billion deluxe number that Bpm Societa Ord Bpm Societa Ord beating the budget, the target number, the planned target number. The branches were due to be reduced to 2,100 and we were down to 1,700 branches. The staff was considered a reduction of 2,500 people and we went over 3,000 people. The operating costs, which were 3.1 billion, were considered to go down to 2.9 billion, we managed to reduce in 2019 the cost to 2.6 billion, almost 500 billion, which overcome 600 billion in 2020, thanks to the peculiar situation of the pandemic. The same was with the capital position. We were able to be at 13% above the target plan in 2019, as well as we overcome doubling the results we expected for the Texas ratio. The sole missing target were related to the total revenues. This was a big missing. The target, due to the different forecasts that we had on the plan, we imagined an Euribor going up to 10 basis points positive. Meanwhile, the Euribor went down to minus 40. Also, the GDP, we imagine a GDP basically stable at 1%. The GDP went down from 1.7 to 0.3. Notwithstanding that, the net income were very solid. we had a target of 1.1 billion we reached almost 800 million so we already had also for the first plan the possibility to beat mostly of the target as well as we were able last year after a very difficult situation created by the pandemic crisis but we react very promptly once we were ready as you remember to launch the new plan we reacted very promptly to the new situation we were able to change basically to start to change our interaction with client from physical to digital we had the possibility to stress the cost efficiency with a reduction of further 170 million in one year compared to the almost 500 million made in the previous three years with a stronger focus also on the agile work ensuring of course safety and anyway not avoiding a commercial relationship between our client and our network last but not least we reacted very promptly to the moratorium and the state guarantee maneuver allowed by our government. And we were one of the best banks to react with a share on gross customer loans, which passed from 3% state guarantee to 15%. So not only we had the opportunity to sustain the strength and the liquidity of our client, But we have also bettered a lot our portfolio, increasing the share of state guarantee loans to 15% of our global portfolio. Also, the market share in this share of guarantee loans is above our normal market share, 9% versus 7%. But also in terms of numbers, not only in 2020, but as I mentioned, as I showed to you with the Q3 presentation, we have a strong increase, both in terms of balance sheet and the profitability. We already mentioned the increase in loans, basically from 91 before the crisis to 100 billion as of September. the strong increase of the positive from $88 billion to $102 billion. The asset under manager will grow $5 billion since 2019, but again, a very consistent growth in profitability, both at total revenues level, consistently above $1.1 billion, with still a very prudent approach on cost and risk notwithstanding the fast reduction of our MP ratio. Also, the net profit from operation is now very, very consistent in the region of 180 million. If we consider this number adjusted, so without the different situation that quarter by quarter can impact one-off on our results, we have, as you can see, in the last three quarters, results which is always above 220, 240, 250 million. The asset quality already we explained that we are below 5% with the EBA definition, 5.9% with the normal definition, and again a very strong capital situation. Why we are confident for the future?

Because if we also compare the results that we have reached during the

2021 and we compare them to the forecast we have done last year in term of revenues generation and I'm sure you remember that the plan last year was considered very ambitious in some in most of the figure we have reached already in 21 the results we had the objective the target we had for 2023 we have a couple of examples in these slides 12 you see that investment product placement we were 3.5 billion before the quarterly average before the COVID 3.2 during 2020 we grew to 4.7 billion this year compared with a target of 4.5 billion for 2023 so basically we are already there more or less the same for net customer loan, which were envisaged to grow 3% year by year from 20 to 23, and we grew instead 4.6% starting from pre-COVID to nowadays. So this situation allows us to say that we have built up a solid track record in terms of commercial efficiency, which lead us to the number of the plan. And on page 14, we go immediately to a comparison between the old plan of March last year with the new plan, of course, extended one year because the new plan goes to 2024. As you can see, there is a growth in total revenues growing to 4.6 billion. Operating costs are going down to 2.4 billion, gross MPE below 5%, cost of risk 48 basis points, which is exactly the cost of risk of this year, already reached the core cost of risk of this year, which will bring us to a net income above 1 billion, compared with the 770 million 2023 last plan, and return on tangible equity above 9% compared with 7% of the last plan. Also, in terms of capital strength, we see that we are above 200 basis points, the previous target of the last plan, almost 14.5 basis points compared to 12.5 basis points. Also, the figure of 2023, which we will give you of the new plan we will present 23 and 24 target compared with the old 23 are almost at the same level not to extending the pandemic we have experienced during these last 18 months some details return on tangible equity why we feel confident to grow from five to nine percent basically we have already Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Cost income going, of course, down thanks to the increase of revenues and the reduction of costs. So we are already at 57% on a yearly basis. As we have seen before on Q3 2021, we are already 55%. We think we can go down to 53% 2024. The gross MP ratio, there is not... Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord and we will work out numbers which we are very well used to do year by year since 2017. Of course, I cannot exclude that there will be further disposal, massive disposal, but we have not considered massive disposal for our plan apart from the 650 million that I mentioned during the Q3 presentation. Common equity ratio, as you see, is a robust growth up to 14.4%, thanks to the growth of profitability, but also to the lack of further headwinds that, as you see, during these nine months amounted to 95 basis points. Some number on total revenues. We have given you the number starting from 19 because basically it was the last year before COVID, so no impact from COVID. We already grew to 4.3 billion. The target is 4.6 billion. As you see, 4.3 will be reached by 2023. now we are 4.4 but I remember that there is the TLTRO termination with an impact on reduction of NII of this aspect the increase of 300 million almost 300 million that you see from 23 and 24 is equally split amongst NII net commission and net income from associate which means basically the incorporation of the bank assurance deal so is also in this respect is something that is already very well considered and in our opinion as a prudent approach all in all we will have a growth of 2.4% in 2024 but the total revenues growth that we forecast starting from now is exactly the same pace that we had considering the starting point of 2019 operating cost also for this the reduction 1.3 considered from 2019 is exactly the same reduction we are foreseeing starting from now as you know this year we will be in the region of 2.5 billion we imagine to reduce to 2.4, thanks especially to the early retirement scheme, which has been already in place, but has not yet performed the full effect, which will be in 2022 and 2023. Cost of risk, we already told about our prudent approach. Net income, again, the results of all this, of course, generate an increase starting from 19 of 10% CAGR year by year and of course starting from 21, 25%. Let's have a look to the pre-provision income roadmap starting from 19. we start again from 19 in order to check what we have already done, the pace of growth we have already experienced going forward to 2024. As you see, we have already had, starting from 19, an increase of more than 150 million. We think that to reach 2.1 billion, we'll go through a reduction of NII of 20 million. Basically, there will be a sort of compensation between the lower contribution TLTRO and on the other side the advantage of having a robust increase in volumes thanks also to the PNRR and the Oribor improvement that I showed before. Net commission will be 200 million more as I mentioned we have been growing since 2020 almost of the same at the same pace these fees comes from the majority from management and advisory fees 150 million out of the 60 million of improvement out of the commercial banking but out of the 150 million the 85% will be related to the running component of the fee. So it's the build-up of increasing asset under management coming from the inflow of the corporate deposit, sorry, client deposit, which will bring us to generate more fees and not an implementation of product investment, which will grow very, very slowly at a pace which is very much below the pace we have done during this year. Then the discipline on cost we already mentioned. We will bring more profitability for 80 million if we look at the personnel, 30 million for other general costs, And of course, we have also a very prudent approach on NFR. NFR in this last year gave us a big satisfaction in terms of results. We, due to also to the new situation of the potential growth, economic growth, we don't think that there will be the same possibility to make such results. And with a prudent approach, we reduce the contribution of 135 million. So this brings to 2.1 billion, which is the result of 2024, which is an increase of below 4% on a CAGR 21-24. Customer volumes grew 3%. As I mentioned, it's the same pace we have experienced up to now. The same on the other side is going for deposits. we believe is possible reduction in deposit at the pace we are having starting from last year so we have had as I mentioned in the quarter 2 billion of reduction we think we can have another 4 billion of reduction of our total customer deposit of course switching into asset under management in which we see the bigger growth of our volume balance sheet which grew from 64 to 78%, let's consider that the global growth of 14 billion, cumulative growth of 14 billion, 21, 24, is already at 2.5 billion at the September of this year. So we have another 12 billion to grow to complete our asset under management target. The new lending is growing again at the same level we have experienced that norm in a normal year apart from the spike of 2020 in which the state guarantee loans of course gave the opportunity to increase to more than 27 billion I try to accelerate a bit I won't comment the asset quality we've already talked about that common equity is the same LCR and SFR of course will have a more normal figure vis-a-vis the 200, more than 200 of LCR today due to, of course, to the end of TLTRO. Finally, I would say there is the common equity TR1 capital work. We start from 13.3%. We have 200 basis point of retaining earnings after dividend 81 coupon. 20 basis points detailed in the next page of Balance Sheet Capital Management Action, 100 basis points of loss of capital due to the volume growth and increase of value of our product factory or our participation, and 20 basis points from other components. So all in all, we will have 14.4%. We gave you also an immediate outlook on 2025 as you know, Basel III has been postponed starting from 2025, even though if we take in consideration the 80 basis point of impact that will be phased in eight years, we will go down to 13.6% if we consider the fully phased impact of Basel III. Of course, these will be then recovered thanks to the deduction of DTA, which thanks to the results we are getting, are progressively not anymore a burden for our capital. Just two words about the 20 basis points of capital management action, because you know some of them, so I want to be precise. Consumer finance, we have a put option aspiring in 2023 for Agos, for 10% of Agos. In this plan, we have considered not to exercise the put option because we don't want to renounce to the revenue generation of Agos. As you have seen, we don't have any problem in capital strengthen. So we consider to reduce 26 basis point, not renewing, not exercising the put option and the Bank Assurance, of course, will have, thanks to the Danish compromise, an impact of only 16 basis points, even though these 16 basis points will then afterwards recover thanks to some tailwinds coming from Basel III. The positive impact will come from the pro-family runoff. You know that we have another 500 million of RWA in runoff. Real estate optimization, we have considered 700 more million of RWA reduction in our properties held. And finally, balance sheet action like synthetic securitization or cancellation of credit lines unutilized, which amount for more than 30 basis points. Let's consider that most of these will come immediately in the next quarter, thanks to some synthetic securitization we are launching during this quarter. A very quick, because I am really late, sorry for that, very quick look to our pillars to realize this strategy. Basically, what I will be talking is the new digital driven service model, enhanced, of course, from the experience we had during the moratoria period, which enable sustainable core business growth, fostered by the track record we have already experienced during these last nine months, and leveraging on the product factories. the three of them they are growing one of them as you know will become part of our group 100% so there will be a big effect from this production product factory on our balance sheet very quickly the digital transformation we have already talked about the reduction of branch from almost 2400 the beginning of the merger to 1.400 1,400 right now we will still be reducing the branch we will see afterwards but more than the branch we have reduced the transaction to the cash desk this means that we have reduced the cash desk from almost 5,000 in 2017 to 2,500 right now but now we have cash open only in the morning This means the FT equivalent is below 1,500 people. So one-third compared more than one-third, two-thirds reduction compared with the starting point. This, of course, has been allowed by the growth of the remote-based transaction, which grew from 70% to 83%. And also, especially recently, the big increase that we are experiencing on a monthly basis of our app-based transactions, which are experiencing a growth every quarter. Despite this number, we still feel that we have a lot of further potential value generation that can be created by the a more diffused digital approach in the relation with our client. Just some figures to give you the consistency of this strategy. In 2020, we were serving on a yearly basis only 25% of our retail client. This means that one quarter of our clients bought Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord the best performer in residential mortgages. We have a penetration of 11% vis-a-vis 14% of our best competitor. Health insurance, we have 2.2% only vis-a-vis 3% of the best banks. Also in SME activity, we have 26% of our clients having our point of sale and the other bank reached 32%. So there is room to improve this activity, of course fostered by the reduction of branch-based transactions. In this respect, starting for 2019, we have already registered a very encouraging reduction from 18 million per month of transactions to 10 million nowadays. and we envisage to reduce another 40% the branch-based transaction. We will leverage the possibility to increase this number through a stronger and a more sophisticated digital approach with three main levers. The first one I would say in page 26 is the full digital and mobile-centric daily Customer Interaction. We have already reached, compared to 2019, an increase from 68 to 73% of our clients enrolled in digital transactions, 43% of which in mobile transactions. We envisage to reach more than 80% in 2024, but especially more than 70% in mobile transactions. Mobile is a strong ammunition for our bank. We have the best in class banking app application. This comes from the customer reviews, including the challenging banks. So we have all the opportunity to attract more clients to utilize mobile. As I mentioned before, we reached 83% of remote based transaction we aim to go above 90% and to reduce the branch-based operation to 6 million, down to 6 million. All this also through the change of attitude of our customer center assistance, which will be much more dedicated to outbound production rather than to inbound. more than 15 that model almost 60 percent allow our inbound transactional belt with an automatic system which we will bring to 75 percent leaving of course time and people to improve and to increase the outbound proposal to our clients the second layer is a to empower to have more people dedicated both in the branch and in our digital branch which will be the new customer center dedicated to client as I mentioned before we reduced from almost 5,017 to 2,500 the number of cash desk they are going down in 24 to 1,600 with an equivalent FT to below 1,000 people but you remember the number in 17 was 5,000 people. Most of the people, of course, part of them will be a lower population of our employee. Part of them will be going through reskilling, upskilling education in order to have more people dedicated to the more commercial activity. and also the customer center, as I mentioned before, that will be much more dedicated to the outbound and will be increased up to 200 FT dedicated to commercial activities. The third levers is, I would say, the artificial intelligence and the data mining, which will allow us to develop even more you see that we have already activated 23 customer journey which means a dedicated approach which substitute the normal campaigns for each product already 23 starting from 6 in 19 we aim to reach 50 customer journey so in doing so covering all our main products the interaction with client we grew already the active interaction to do the real sales that we have done through digital grew 6% to 36%. Our aim is to reach 60% by 2024. This of course will be possible thanks to the full remotization of our product and service catalog by 2023. You see on the bottom of this slide, the different product availability, both for private and SME customer. Finally, this will allow us to dedicate more than 75% of our employees to commercial activity, to reduce the branch network furthermore to 1,300 branches, to experience Retail sales driven by advanced analytics and started remote to be completed either remotely or on an omnichannel journey, more than 50% of our total sales. As you see, in 2019, this was only 8%. Now it's already 23%. This will finally allow us to close the commercial gap I mentioned before from 109 to 131 as index in the retail sales. So sorry for being a bit long about this explanation. Now I will leave the floor to Eduardo Ginevra, our CFO, which will bring you more in detail in the client cluster.

Thanks, Giuseppe, and good morning, everyone. Let me now lead you through the second pillar of our business plan, which is the commercial growth. In this section, we describe the initiatives we are going to adopt in the new macro context and exploiting the opportunities from the digitalization, which was described under the first pillar, throughout our main business segments, which are Family Banking, Wealth Management, SMEs, Corporate and Investment Banking. For each segment, I'm going to illustrate the main expected figures together with the main actions that we are planning to implement along a very simple philosophy. We are a commercial bank, and we think that a commercial bank must do what a commercial bank must do, i.e. focus on, stay close to our clients, focus on commercial effectiveness and generate possibly a positive trend in driving use on a risk-adjusted basis. So first point, family banking. In each slide, in each section here, you see first slide with the main figures and then the actions. On family banking, the key balance sheet elements are represented by mortgages, which we see growing 3.2% per year in 21 to 24. And in terms of total revenues, we expect a growth of 19.2%. Why this 19.2%? Because this is measured as managerial data taking into account internal transfer rates. And as you see in the right part of this page 31, on loans, the expectation is an increase of 1.3%. Here we use index numbers. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord component growing, such as non-life bank assurance, consumer finance, digital payments, and this dynamic component represents 44% of the total, more or less, whilst other components are more static and not expected to grow over the planned horizon. The actions that will support these revenue targets are structured around three main areas. I don't go into the details. I only mention the titles. omnichannel approach to be fully deployed and exploited in this segment. The opportunities offered from synergies with our product factories. And finally, focus on specific opportunities also with an ESG angle. Main KPIs we look at are mortgages, where the yearly pace is expected to go up to 4.6 billion in 2024. We used to be 3.8 in 19, 4.3 in 21, and consumer finance, for which the growth is up to 1.1 billion, as opposed to almost 1 billion that we had in 19 and 100 million this year. Second, and probably one of the most important areas, one of the most strategic for the success of this plan, is wealth management. Wealth management is, in wealth management, we expect growth in assets under management from 64, current level, as of September, to 79 billion and over 24. This is equivalent to assets under management representing 70%, as opposed to current 64%, of total assets under management and assets under custody. revenues driven by this increase will grow at 6.3% additional commissions for 153 million, which is basically mostly driven by the contribution of the increase in running fees. So the logic is increasing assets under management, increasing running fees, and then increasing revenues. In terms of the increase in asset management, it's worth noting that up to now this year, we have generated 4 billion of additional AUM from 60 to 64. This is due to the contribution of 2.4 net inflows and 1.6 market effect. For the future years, net inflows are expected to continue in the positive growth trends to arrive to 4.4 billion in 2024. with the market effect that prudently were maintained below 1 billion year by year. 34, again, as in case of family banking, the key initiatives are grouped around the area of commercial tools, so CRM analytics, customer journeys, new service model based on web cooperation and advisory under the coordination of the investment center of Banca Letti. And on the other hand, a strong focus on value-added solutions provided by Bank Assurance Product Factory, which will be internalized, as we will see later on in 2024, and asset management with the collaboration with our partner, Anima, which we are shareholders. KPIs, AUMs, as mentioned in the previous slide, up to 4.4 billion. Currently, we have generated in nine months 2.4 billion. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord which performs private banking directly as a dedicated bank for high net worth individuals with 170 private bankers and volumes directly managed of 17.4 billion and also the function of investment center for the whole of the group with 70 financial specialists dedicated and additional assets under management for almost 15 billion. The levers for the development of Banca Letti are three, again, new service model, better and empowered value proposition, and exploitation of synergies with the rest of the group, both with the corporate segment, with WeBank, with investment banking. KPIs, we expect to grow the total of indirect funding to 18.3 billion as compared to the 14.6 of 19 and 15.4 in 21. Assets under management within indirect funding to grow to 14.3, current at 11.3 and where 10.5 in 19, fee income driven by the previous aggregates to grow from 87 million in 19 to 100 million expected in end of this year, to 123 million expected end of 2014. Now we turn the page to the B2B area, to SME and corporate. And here it's worth pausing a little bit and observing that we are in a completely different context versus what we were used to before the COVID-driven crisis. The context is a context of very heavy public interventions that are creating a vast amount of new and very interesting business opportunities, we feel to be in a very favorable position to exploit these opportunities. First point, first example we mentioned in this page, 36, is a super and eco bonus. This is a mechanism that creates an interesting forward-looking and high capacity. Why is that? Up to the end of September, we have already originated volumes for $650 million, with total NII over the lifetime of these assets of $58 million. progressively booked in our PNL over time according to the maturity of underlying assets. On top of this NII, one of commissions that in this part of the year had amounted to $5 million. The total that we expect to originate until 2023 is 3.5 billion. So proportionally, this means that the pocket of additional NII to be generated is 350 million. So this is the contribution that in part will flow into the plan, in part will be present in general in the future P&L of the group. Turning to the National Resilience and Recovery Plan, PNRR, this is an important game changer. We expect to play the role of a reference lending partner for clients, customers interested to support with additional financing the activities that will be generated in the areas of emissions of the plant. At the same time, to be advised or to have an advisory role, especially for the lowest end of the range, for small-sized or medium-sized SMEs, which will definitely need advisory services from banks to receive help in understanding the opportunities and investing on them. The impact of PNRR on volumes is around additional 4 billion. This 4 billion is a conservative potential estimated out of a maximum amount of 8 billion of additional loans and is consistent with the estimate of additional 150 to 200 billion at national market level that are to be originated under the domain of PNRR. The growth rate of loans in PNRR with the additional amount originated using the PNRR mechanisms is expected to go from 1.8% before PNRR to 3.1% after the impact of PNRR. So with this context in mind, let's have a look to SMEs. SMEs will be at the center of our investments, especially in the distribution model, as we will see in a second. In terms of volumes, we have 2.6% growth per year of volumes, similar trend as in the previous ones in the previous years, 5% growth in revenues. This 5% growth compounded annually. is the result of 1.8% growth in the margin of loans. Reduction in the negative margin on deposits of 31.4%, net fees and commission growth of 3.2%. Within SMEs as well, we have an important contribution of the most strategic component. Here we mentioned upfront and edging fees, acquiring fees and trade finance fees. Bpm Societa Ord go after and push additional attractive opportunities in dedicated value chains in PNRR related financing and services, agri-food and so on and so forth. New loans to be originated turning to KPIs are above 10.5 billion compared to 7.5 in 19 and 8.6 in 21. Net fees and commissions, the strategic components of those that are expected to grow more significantly are to be Bpm Bpm Bpm Bpm Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord work in the undifferentiated full traditional branches 1.6 relationship manager per branch in the future will work will be located and concentrated in a dedicated business center in a number of on average five relationship managers per business center and as I said before almost half of these business centers will be located in areas which for us are under-penetrated but have a strong potential to grow faster. Corporate investment banking is an area where we want to capitalize on an already prominent positive position that we have reached over the last few years since the merger. Growth in volumes is expected in volumes 4.1%. Growth in revenues is 5.6% driven by Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord The initiatives in corporate areas are around four main drivers. First is to identify pockets of business that embed higher values, such as structured finance, such as structured export financing, to seize the PNRR opportunity, of course, we discussed early on, to be on top of group synergies generated with Banca Agros and Banca Letti, Banca Agros for investment banking, we'll see in a second, facilitating also access to international markets and capital markets leveraging on Auckland's network that we acquired during this year. And finally, to adopt a more sophisticated analytical approach to the core business in order to optimize the revenue generation taking into account expected risk, taking into account absorbed capital. KPIs. New loans to be originated around 11 billion. We had reached 10.1 billion in 19. 21 was a little bit lower, 9 billion. But we have to bear in mind that in 2020, corporate segment originated 13 billion, 1.3, owing to the opportunity, explaining the opportunity of publicly guaranteed loans. Fees generated in high value-added businesses, 213 million, was 157 in 1972, expected this year. Share of wallet, driven by the increase in volumes, will go up to 12%. It was 10.6 in 19, 11.2 current level. across within corporate investment banking will be an important contributor across is currently articulated for business areas generating core income for in 19 before the crisis of 147 million revenues and net profit for 38 after the crisis which reduced revenues and net profit we expect them these amounts to recover significantly and to arrive Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord in corporate investment banking, promoting innovation in product and services in global market, enhancing trading and market-making activities, financial engineering, and hedging services. So this concludes the section, the second pillar, the section on the development of the commercial areas. I think that it's worth now looking at the third one, which for us is a clear source of value. I'm referring to our high-value product factories, clear source of value, sometimes not captured in full by our valuations by some of the market operators. Bank Assurance is the first one, which for us is a key game changer in the new plan, with the opportunity to internalize the whole value chain. Asset Management, ANIMA, is a precious asset, which will further be appreciated, will benefit from the actions that we explained in our plan in the wealth management area. And finally, Consumer Credit, AGOS, a profit machine, we own 39%, allowing to diversify our business portfolio. Let's start with Bank Assurance. In Bank Assurance, page 44 explains the current situation. We own minority stakes in two partnerships, one with Cattolica Assicurazione and the second with Covea. We have the option to internalize the full 100% of both partnerships for Cattolica during 2023 for Covea from now to 2023. And actually, we have already started an internal project that has the objective to create all the conditions to really implement this internalization. The opportunities that can be exploited in this area are related to higher productivity, to increase productivity. We feel we can sell much more premium, both in life and non-life, than the current volumes. We've seen a second drivers. In terms of profitability, because higher scale and higher synergies will definitely improve all the P&L components. In terms of capital, because of the opportunity created by the Danish compromise, which allows to reduce very significantly, as explained in the previous section, the impact on CET1 ratio acquisitions in terms of operational model, while preserving all potential optionality. Historically, bank assurance has not been an area where we had performed according to our potential. So this explains why on page 45 you see that we rank below our peers, both in life and in non-life. After we fixed all the historical issues, going back to Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord European levels, both in terms of total amount of premium that are sold to the various customers and in terms of the penetration of bank assurance channel within this market. This potential explains why online we expect to go up to 4 billion in terms of the total premium, Bpm Societa Ord In non-life exploiting both the under-penetration that we have in the specific products, health insurance, less than 3% of our companies uses non-life health insurance products, we expect to grow up to 240 million premium as opposed to the current expected level for this year, 180. So this for bank assurance, Anima is a well-known success story, 200 billion now of assets under management, the largest Italian company uh asset management independent asset management player they recently published net results for nine months 2021 176 million which even with maybe some components that are specific for this year still generate significant potential for the future. Also, bring in mind what I mentioned before, the benefits that indirectly will arrive to this company by our own expected development in assets under management. And, of course, it's very well known we are the most prominent shareholder of this company with almost 19%. Agos is the third largest player in an Italian market, which is very interesting and recovering fast after the COVID crisis, as you see from market data, a reference date of the first half of this year. Solid economics generating a profit the first half of this year of 149 million, of which, of course, we own 39% ideally. and in an area where we feel we can increase significantly our productivity by simply leveling the differentiation in sales effectiveness. Here you see that the highest performing branches sell to 135 million, sorry, 1,000 per year per relationship manager in consumer finance. The lowest performers are at 82,000. So to sum up in the story of this part, revenues, additional revenues, both in terms of fee income and in terms of contribution to income from associates are shown on page 49. So the plan expects, I repeat, to internalize bank assurance from 2024, from January 2024, which doesn't mean This is the actual date we will, at the end of the day, push. We can even do it before, as I said earlier, because in 2023 we will have the opportunity to arrive to 100% both with Covea partnership and with Cattolica partnership. This internalization allows to increase income from associates from the expected level of almost 150 million for this year to a final level of 270, out of which 125 is bank assurance. These 125 is for 90 million expected level of contribution of the increase in the share from the current 35 or 19% to the final 100%. On top, we thought helpful here to summarize also the commissions that were included in the previous parts on family banking, and on web management, but also are important to bear in mind because this contribution is definitely a pillar of the development of our plan. In this case, the increase is 8% per year from 590 expected end of this year to 740. That's all for the third pillar, and now I leave the stage again to Giuseppe.

Thank you. I will be even more quick. Sorry for being so long, but it's full of information to give to you. But we don't have any more time because I want to have your question. So just I would go over basically the asset quality. I think you have a clear idea on page 51 of the situation we have reached now. We are below our old plan target. We have a pace of disposal and workout, which is already at the level we envisage for our new plan. The default estimated national level, of course, will have a lower impact on our bank. We have 96% of our loans in market where the default rate is below 1.5%. so the geography will help a lot to keep this default rate lower respect to this level. Not talking about the many levers that can be used in terms of already utilized advanced data warehouse, strengthening of credit policies, early warning monitoring and system evolution, and the new approach to the MPE management which is not only focused on the massive disposal but also on single names which are still going ahead. On the right side you will see our default rate that we have calculated for our plan. Also in this case very prudent approach. We think the most of the effect of the default rate 22 is already incorporated in the cost of risk 21. but nonetheless we think with a prudent approach to keep the possibility for a spike in 2022 and then to be reduced to the current situation of 1% liquidity and funding very sound by the plan horizon we will reimburse the 37.5 billion of TLTRO of course most of them will be already in 2022 with the hand of the super bonus of 50 basis point and we will end up with a funding from ECB using ordinary funding from ECB expected in the region of 9 billion. Of course this will lead to reduction of ECB asset from held in ECB from 28 to 3 billion. Bond issuance no need for getting more issuing we have a forecast of 2.4 billion of unsecured bonds as a difference, a net bond issuance of 2.4 billion, considering, of course, what we already have right now. All in all, it will be 8 billion of unsecured bonds to issue in the next three and a half years. Securities portfolio, very comfortable. We are going down to 53%. of the Italian Govis share, and we envisage to go down to 50% by the end of the plan. Just a few words about the people strategy. We already know what we have already decided about the increase of the retirement scheme of 500 more people vis-à-vis the old plan. This brings, of course, a reduction in cost, which we will see better in the next page, but has been something like a bit less than 300 million starting from the merger starting point. The branch going down to 1,300 Of course, a lot of attention to our people. I would say a comprehensive and articulated people strategy, increasing smart working days. We have envisaged by 2024 to have almost, I would say, 40% of our head office people working from home, which is the situation already in place now. lots of well-being initiative increasing our dedicated to well-being and volunteer initiative and of course the well-do attention to the new generation of management that we have to build up also thanks to the digital transformation we are going on last but not least diversity and inclusion we have a focused plan about the increasing women presence in our management together with the filling the gap in the gender compensation. On page 58, just some words about the evolution of cost. We were 1,700 million normalized cost in 2020. The initial growth to vis-a-vis the plan would have brought the cost of personnel to 1,800. sorry 1 billion 800 million the impact of the managerial action of course most of them coming from the early retirement scheme will bring down to below 1 billion 600 million our cost of personnel technology of course a lot of investment linked to the digital transformation to advance the analytics to the transformation of the bank, the operation of the bank to be slim and improved and, of course, absorb less time. This needs a global investment for the plan horizon of $650 million. of which 250 are dedicated to the digital. Basically, the evolution of investment is growing from 100 million in 2020 to 170 million average from 2022 to 2024. Also in the cyber, we have a full set of investment already envisaged Of course, the main aspect will be related to data protection, business continuity, and what we call react to attack. It became always almost impossible to avoid somebody to try to attack the bank. We are developing skill and technology in order to react very promptly to any intrusion into our system and we are doing many experiments about the capability of the bank to react very promptly. The global investment in security related aspect is cumulative 45 million. Few words also in a chapter which is very, very important for us, which is the ESG integration. I think it's more readable also from you, so I will be through very quickly. Basically, the aim is to go through the introduction and integration of ESG into all our pillars. So business, risk and credits, people strategy, environment, and community. We have already done a lot of works in terms of governance. We have each of our governance board and bodies in charge for different aspects of ESG and this has already brought us to have for instance ESG targets integrated in our short term and long term intensive plan for the CEO and the top management green social bond framework already published improved ESG rating already obtained and both from Standard Ethics, ISS, Sustainal Ethics and we have been included also by the into the Futsimi BSG index by the stock exchange. This of course is a detailed action and targets both for business. On page 63 you see our main targets linked to the share of new lending dedicated to green low transition risk sector above 65% of the cumulative loans during the Horizon Plan. A dedicated already started new product for green residential mortgages. The purchase of real estate tax credit which Eduardo was mentioning before which apart from giving us boost from profitability is of course also a support for environmental. Akros playing his role as a manager, a book runner of ESG Bonds and our increase investment shares of ESG Bonds starting last year at 8% and growing up to 30%. risk and credit. Of course, the integration of ESG policy into our credit policy. We have the exclusion of our credit availability for sector with high environmental risks, which in any case represent only 2% of our loan, but we will be in runoff in the next four years. As well as we will be dedicating New Lending to Fossil Fuels Related Sectors, linked only to transition projects for more than 80% of our new lending. Of course, we are in the process of signing the Net Zero Banking Alliance, the TSFD, the Science Based Target Initiative. people strategy basically already told explained before when we were talking about the dedicated work smart working days and well-being days and welfare days dedicated to our people for project in environment and sustainability last but not least our engagement vis-a-vis the reduction co2 emission we already are forecasting to reduce 20% by the plan horizon the total direct and indirect energy consumption we have already reached certified 100% of electric energy coming from renewable sources but we in any case are forecasting to reach the carbon neutrality over the plan horizon and to reduce 20% the indirect emission from commuters coming related to scope 3. Community needless to say this is our DNA as a cooperative bank we have already had strong attention to all the initiative of our community linked to art, culture, charity, research, health, education, sport, young people. We will continue to do that with the main target that you see on the right side, which are basically already in place and we will continue to foster over the planned horizon. Let me conclude very briefly with numbers. Of course, the plan is numbers. So a quick recap about our target objectives. There will be an increase, basically an increase from 4.4 billion to 4.6 billion in 24. You will see also the target for 23 close to 24. The CAGR is only 2.4% coming, 3% from NII Commission and 20% from Associates, which means the value embedded into the integration of our bank assurance and the growth of our product factory. Operating costs down 1.1% to 2.4 billion, almost reached by 2023. Pre-provision income up to 2.1 billion. I already explained before the differences where they come from, starting from 1.9 billion of 2021 guidance. with a long-lost provision of 48 basis points, we go to a net income of 1 billion 50 million in 2024 and 740 million in 2023. Cost income down to 53%, return on tangible equity higher than 9%. Basically, that's all. You will find some other figures. Let me just conclude. saying and thanking also all my colleagues for being part of I would say unique successful restructuring story ready to start a new journey with a strengthening digital business model which will allow us to increase effectiveness we have yes ambitious target but in our view they are based on prudent estimates on key performance driver and we feel that taking in account the improvement done starting from 19 to now, we are very credible with our track record into a grow of revenues and profitability. Thanks a lot for your attention and we are ready for your questions.

Thank you very much everybody. Just let me remind you that to give room to everybody we ask to have only two questions and then if necessary you can have a follow up at the end. Thank you very much.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. The first question is from Antonio Reale with Morgan Stanley. Please go ahead, sir.

Good morning, everyone. It's Antonio from Morgan Stanley. A couple of questions from my side then. The first one on capital slash M&A and secondly on core revenues. If I look at your slide 20, as part of your plan, you forecast to have a capital buffer over your MDA of 590 basis points by the end of the plan horizon, which is quite a bit higher than the buffer you have currently. And that is the case even if I adjust for the 80 basis points from Basel IV, which expect later anyway. This is while paying a dividend payout of 40% through the plan. so on your estimates at least you're building quite a large buffer which is contrary to the message we're hearing from other banks that aim to lower equity to improve the ROTE so my question is what do you intend to do with this capital buffer are you thinking about capital allocation going forward is it M&A aspirations are you keeping some for special distribution you talk about 40% payouts which is in line with what you pay now How are you thinking about that? It's my first questions related to that. If you're planning to pursue M&A and you've been open about that possibility in the recent past, could you maybe share with us a bit more color with respect to conditions under which you'd be happy to consider M&A opportunities? Just I'm thinking perhaps to introduce some discipline and defend that large capital stack. you forecast and given the lessons perhaps from the Banco Popolare integration. That's my first question. Secondly, you've talked about growth in core revenues, NII and fees in both 2023 and 2024. And I see on page 69, the 3.9 billion and 4.1 respectively. Could you share with us the split between these two, NII and fees? And more specifically, how much of the NII benefits you assume from higher interest rates for both 2023 and 2024. We see that you have estimates for each year, but it would be great if you could share the contribution in Euro million that you incorporate in each year. So we have all the elements to assess the outlook in both scenarios. Thank you.

Thank you, Mr. Reale. Very quickly, because there is a lot of other questions to answer. But yes, we are confident. We know that there is a very important capital buffer. Basically, most of them comes from the Basel III or IV postponement. So we didn't change our view of the dividend payment. But of course, because we have been used to reach the target, we of course will be very attentive to be in line with what the other competitor will do not forget that of course we are coming out from a pandemic still these days we are talking about further effect we are confident we want to give you a plan which is reliable we think that with this buffer and ending up also even after Basel 3 to 13.5% higher than 13.5%, there is a lot of room to be more generous. But let's say that for us it's a very important and good starting point. M&A, I cannot give you very much color because I don't see banks right now willing to do anything. That was the reason why we were pushed to present M&A Our plan stand alone. We are very happy of being stand alone right now because you have seen that we have an ambitious target to reach. All the managerial team is confident. All our people is on board. We are fully confident to reach our target stand alone, but we are very attentive to any potential possibility to extract more value from a merger. I think that our track record is in a very complicated merger stands for our capability to deliver value out of merger.

Core revenues and fee...

So if there is no increase in... in the spread in the river. Basically, I think this is your question. We have a lower interest rate, lower margin for 130 million at the given situation as it is right now.

It sounds a bit low, but thank you.

Thank you.

The next question is from Andrea Vercellone with Exxon. Please go ahead.

Good morning. My two questions are on cost of risk and on costs. First, on costs because it's the easier one. It wasn't clear to me whether the new business plan embeds a further early retirement program on top of the one for 1,600 people or not. I think it doesn't, but I just would like you to confirm it. If it doesn't, can you give us some explanation as to how you plan to still have HR costs falling relative to today and to prior assumptions on cost of risk? I'm asking because I strongly disagree with your assumption for 2023. My view is the cost of risk normalizes far sooner than then. So you have 48 basis points in nine months 2021 underlying. You normalize to this level in 2024. At the same time, you're telling us that the default rates you are currently experiencing on the moratoria are very low. You do not embed in the plan additional MPL sales on top of the 650 million for Q4, which you have already covered. The share of loans guaranteed by the state is 16%. So you will have no loss basically on that. And if you take out the retail mortgages is actually 22. You give us the assumptions on default rates for 2022. 1.8% so not very high and then you normalize down to 1.2% already in 2023 yet you give us 58 basis points for 2023 why is that since everything points to a much lower number at least to me and specifically for 2022 if the default rate indeed is in line with your assumption of 1.8%, and if indeed you do not sell additional MPLs, what do you expect the cost of risk to be in 2022? Thank you.

Thank you, Mr. Vercellone. Of course, I hope you are right and I am wrong, but the prudent approach I have to have in order to give a credible number pushed us to be Maybe a bit too much prudent. I understand your point. Maybe a few months ago we were not talking about this cost of risk. Nowadays looks like everything is going down. Let's wait some months. We have done all our number out of the model that we have in our bank. Of course, I agree with you that it's impossible to have a cost of risk which won't be aligned to our competitors. because, of course, being now almost everybody at below 5% level of MPL ratio, it's very difficult to see the stock to influence so much the cost of risk. The difference is in the inflow. We are prepared to deal and work out year by year all the new inflow. It's very much possible that this will cost us less but in any case I think it's only prudent having such evidence of good results and taking some possibility also to compensate some of them to be for a bank which was used up to 2020 to have more than 100 basis points of cost of risk and also this year keeping the cost of risk to 80-90 basis points to reduce year by year, the cost of risk. If you will be right, we will be only happy. And of course, there is a possibility that you are right. I won't go on further explaining about 22, because as you have for sure noticed, we have only given figures related to 23 and 24. And on costs? No. sorry sorry cost coming so is a mix of the two we as you remember we announced in our plan 1100 people in our scheme later on but before today we announced that we would have increased to 1600 the exit scheme the early retirement scheme and So nowadays the numbers are aligned with these new figures, 1,600. I don't know if you were already aligned to that or not. Basically, we have had an advantage of 50 million in 2021 out of this exit scheme. We will have 86 million in 2022, 36 million in 2023, and finally 20 million in 2024. This is the year by year reduction which is envisaged by this retirement scheme and of course the further exit, the natural exit of our personnel.

Thank you.

The next question is from Jean Noé with Goldman Sachs. Please go ahead.

Hi, good morning. Actually, my question relates to the previous questions. And just essentially, I just wanted to understand in a sense why you chose to have a 40% payout ratio through the horizon of your plan, knowing that Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord is going to be rather at the bottom end so I would understand when you had in a sense more NPLs and maybe some regulatory headwinds but here in a sense I just wanted to know whether it's because you say payout like this and maybe you intend to do buybacks on top or anything different so this is something I'd like to to understand what the rationale behind the the payout ratio would be and the second thing I wanted to ask on on the HR cost again is you know when for example on slide 58 you showing that the inertial growth of the HR cost is a hundred Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord and arguably you no longer have those natural exits that keep the inflation of salaries down also. Thanks.

Thank you. Again, we come from a past which in our view is very successful but still is a restructuring deal. So basically, if you see at our... payout up to now has never been 40%, unfortunately, because when we were prepared finally, eventually, to pay 40%, there was the 20,020 ban. And also this year, as you know, we had to deal in order to give recognition to our shareholders. So, of course, our aim is to give more. Of course, we want to be at the same level of our competitor time by time. Let's say that we haven't yet gained the possibility to pay this kind of ratio. We will be more than happy to pay more. As far as I see right now, we are still, even though with a very much good ratio, capital ratio, we still are below many of our competitors. I see figures in the region of 14.5-15% already now. So let's really wait and see year by year. We hope also to be better than what we have showed. And again, the minimum payout that we foresee is 40%. You think minimum? Minimum. No, we calculate, of course, I cannot calculate a minimum and a maximum in a business plan. So, of course, this is what we have calculated. As for all business plan, this can be, of course, increased. We will give time by time all our situation in order to give you the possibility to understand what would be the real payout year by year. But in the calculation for this plan, we have been using the 40%. As far as the global cost of personnel, basically, we have an increasing cost due to the contract renewed and to the, let's say, step of increasing cost meanwhile the age of people is growing and then it's been reducing for the managerial action for the service model which of course is less costly we have defined new rules about upgrade of position transferred sending people all around the network and so on. So the common situation between inertial growth and managerial action together with the reduction embedded both in the early retirement and in the natural exit will bring below 1.6 billion in 2024. Okay, thanks.

The next question is from Cristian Carrese with Intermonte. Please go ahead.

Thank you for the presentation. I have one question on revenues, in particular on net interest income. Could you give us an idea of the lower contribution from TLTRO and financial portfolio in 2024 compared to 2020 or 2021? And I was wondering, I see an important growth in terms of loans and in terms of assets under management in terms of loans. I was wondering if there is any contingency plan if something goes wrong as we saw with the COVID-19 in terms of cost efficiency. So there are still some room to improve profitability, cost efficiency. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Why don't you introduce a buyback scheme given the low valuation of Banco Bpm in terms of price to tangible today? I think that it could be the best way to create value also for shareholders. So there is a chance that you will introduce within the plan later on also a buyback. We saw other banks doing so. Thank you.

Thank you, Mr. Carrese. Let me start from that, which is very much linked to the previous question about, in any case, use our capital in the interest of our shareholder. We are more than happy to consider all this possibility. We were willing to give you the potentiality of our capital strengthened for our bank. And as you know, the decision will be made not with the three-year of anticipation, but I think that is important for you to know that we will reach that amount considering this kind of payback. Of course, we will be more than willing if the situation goes better. You have done a question in saying what if something goes wrong in terms of macro, but on the other side you say why don't you consider buyback. So, of course, we have to consider everything. not everything is needed to be considered with three years in advance so we basically hope that you have now all the figure to consider everything if it goes wrong or right of course if it goes wrong we have token up to now that of course we are considering a strong increase in volumes also for loans of course if this if this come not because of the macro situation, I expect that there will be lower cost of credit. I expect that there could be some action from the government in a situation like the one that we have already experienced. So we have, of course, in NFR, you have seen that you have reduced dramatically the contribution, which has never been the case during these years in Bank of BPM. We've already performed better results. So there is room in many parts, of course, to compensate. Likewise, there was room, and this is important for you to consider, when last year we presented a strong plan in revenues, which eventually happened, but of course with the pandemic we reduced 170 million the cost the global cost so we are already in a situation in which the tactical and the strategic action have to be complementary sorry to answer this way but I think the past of our bank shows you that we adapt every time the possibility to reduce or to increase would the market ask for? Not to speak about the reduction in MPE. About the numeric question you made about contribution of GOVIS and TLTRO 21-24, the contribution of TLTRO should go down 80 million in 22, 120 million in 23 and 60 million in 24. Of course, they will be compensated by the volume and the effect of rates we mentioned before. The Govis, I would say that the reduction in the interest would be in the region of 140 million versus 221.

Thank you, very clear.

The next question is from Giovanni Razzoli with Deutsche Bank. Please go ahead.

Good morning to everybody. Two questions. The first one, you've mentioned that you expect to reduce by 700 million euros the risk-weighted assets out of the real estate. I was wondering when you can elaborate a bit more on that. It seems to me that you can do even more in light of the digitalization and the reduction in the physical activity at the branch level that you've made. So if you can elaborate a bit more on that, And the second question, I've appreciated a lot your ESG discussion, but I haven't seen any mention about the management incentives on achieving those targets, which in my view are the crucial element other than the payout ratio, buyback, whatever, to align investor interest with management interest. So can you elaborate a bit more on your incentive on those targets? For example, are any bonds deferred to 2024 targets, 2023? Do the incentive scheme envisage an equity component, stock component, or is just 100% based on cash? Thank you.

Thank you, Mr. Razzoli. Real estate, sorry, it was my fault not to mention that likewise in the previous plan, We are not talking about instrumental real estate assets. We are talking mostly about assets that come from the many banks we have merged during the years, ad offices, repossession, and so on. So, of course, for the branch, we are almost, if I told you that we are already at 1,430 branches, of course there will be some room in reducing another 100 branch but nothing to compare with the work already done on this aspect for the other again is 700 million out of I think 1.5 1.6 billion of other non-instrumental asset that we are forcing to dispose ESG yes I'm sorry again page 62 I think we have shown that the target for management long term and short term the incentives are already aligned to the ESG target you see on the up box on the right side ESG targets integrate in short term and long term incentive plans then for CEO and management then on page 65 we also say that one of our target is to have a waterfall of these target integrated also in the middle management and in the our employee incentive sorry if I may follow up on this I was referring not exactly to ESG targets but to the business plan targets so to the quick and dirty bottom line or ROT yes of course as you know we have a disalignment of one year because last year we had I would say to retire the plan we have presented, which of course was aligned to the incentive scheme of the management. Luckily enough, as you have seen, the 2023 target of this plan are in line basically with the old plan. So this will align our incentive to the realization of the plan in 2023. Of course, we will rotate to 2024 the new long-term incentive in order to comply with the new figure or target of the business plan. Thank you.

The next question is from Fabrizio Bernardi with Bestinver. Please go ahead.

Hi everybody. I have a couple of questions. The first one is thanks to Roberto, Arne and Carmine for 110 pages of presentation and slides and press releases. and among these pages I would choose page number 43 which I like very much it's about product companies I like the pillar 3 of the strategic plan you mentioned that you are focused on the product companies so namely Anima, Agos and the joint ventures in Banca Assurance it seems to me these are important assets that you would be willing to value precisely, especially in an M&A environment. In my opinion If I look at your price to tangible equity of 0.35 and I deduct the potential value of these three companies, the commercial value of the franchise is very low. My question, Mark, is about evaluation conundrum between the value of the product companies and the value of the franchise. And secondly, I have a question on the last four years. I want to try to make a recap about your history. In the last four years, you sold some billions of NPLs, twice the amount you originally planned, and you did not do any capital increase. You did not sell any stake in Agos, which is very dilutive in terms of capital. You postponed any deal in Agos. Actually, you increased your stake in Anima, which are important capital deductions and now you are thinking about internalizing the majorities of the joint ventures in Banca Sorance which is it seems to me you believe you are fairly comfortable in terms of capital so I put my question together with the question before and I ask you the 40% payout is low if I look at the Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord actually important stakes in very valuable companies.

First of all, thank you Mr. Bernardi for the appreciation of our consistent story of rebuilding up whatever we were obliged to renounce over the years because of the risking needs. You remember quite fairly that I think there is no other bank with this kind of risk without asking money to shareholders or to stakeholders, let's say. We have been consistent in renouncing to some part of making some agreement already leveraging also during the difficult years on the strength of our product factory. If you consider we have done an agreement with Anima to buy Bpm Societa Ord Bpm Societa Ord and now we are telling you we are not utilizing anymore the disposal. And the same was for bank assurance. We were able to cash more than 800 million with the deal of Cattolica. Nowadays, and I'm sure you have done your figure to understand how much we will save buying back the stake, but even more important, how much multiple we can consider if you have in mind the growth in the bank assurance that we are experiencing. Eduardo was saying, I am showing page 49 again, it's true that we envisage a growth from 590 to 740, but let's go back, we were at 450 last year, at 517 and 19. So there is an incredible growth that should bring value to our bank also in terms of stock price. So this is our strategy right now. We are trying to internalize all the value that was temporary put aside our perimeter. We think that this will bring to very good results. Up to now, we are year by year doing something very good. And unfortunately, as you were mentioning, maybe we have not yet reached the rewards, even though our stock in the last year was one of the best. But of course, we are not happy at all about the value of our stock. This is the reason why we have decided to present the standalone. We think there is enormous value in the Good merger, but there is also enormous value in being concentrating on exploiting the best part of our bank and the regeneration we have had in the network of our bank. So again, sorry for the payout that looks not satisfactory. I again stress that is the only thing basically we have not done yet to pay a proper payout up to now. We hope that we can immediately start doing that and then possibly to be more consistent also in terms of reward for our stakeholders.

May I just interrupt to provide further information on a previous question from Christian Carrese. On our securities portfolio, the reduction between 21 and 24 is in the order of 80 million. What we provided earlier was the reduction between 20 and 2024, just to avoid misunderstandings. Thanks.

The next question is from Azurra Guelfi with Citi. Please go ahead, madam.

Hi, good morning. When I look at this plan, you have a credible starting point on cost and provision given all the risk done. and probably the market has more question on the revenue. But the plan seems to focus on improving the revenue quality and the sustainability of revenue over time. When I look at the NII, in the slide where you talk about the SMEs and corporate, you show an increase of the marginal lending between the starting point and the end of the plan. And can you explain a little bit? What are the driver of that? Is it risking up a bit? It's a different mix. It's how much of it is the link to rate and how much instead it's action on your own customer base and products. The second one is on fees. The second question is on fees. Bpm Societa Ord When I look at the mix of director and indirect funding that doesn't change too much through the plan. Bpm Societa Ord You have an improvement in the asset under management so i'm just trying to understand your fee growth in the wealth management is more between every mix between assets under management and assets under custody and less on deposit transformation, if you can elaborate a little bit on that, thank you.

Thanks.

I'll try to elaborate on the question on loan growth. Definitely, there is no risk in our strategy. We expect to be conservative in new lending policies, as we have been in the recent past. And actually, growth in volumes that you are expecting to achieve in the next few years are not so different from the recent experience both in SMEs and in corporates. So the increase that you expect to have is in SME especially to penetrate further pockets of clients in areas which we have not served sufficiently up to now in corporates to focus and concentrate more in the transactions that incorporate higher value added either in terms of spreads or in terms of upfront commissions. On fees, so what the key underlying driver is definitely the increase in assets under management. So assets under management drive an increase mostly of running fees. And so whilst upfront fees on assets under management or in general management or new sales, are more or less proportional to the increase in volumes of placements, so from 17 plus this year to 19 plus end of the plan. Assets under custody remain more or less stable over the plan horizon. What drives the increase in assets under management is, of course, at least in part, the reduction in the excess deposits that we are currently having in our current accounts.

The next question is from Delphine Lee with JP Morgan. Please go ahead, madam.

Yes, good morning. So I just have really three quick questions. First of all, on NII, thanks for providing the impact of rates and the securities portfolio. Can we also get the contribution of TLTRO? So how much is declining over the plant? My second question is on provisions. You used to have in your old plan up to 60 basis points of impact from calendar provisioning. And I mean, I know this was, you know, pillar two related item, but is that something which is embedded in your guidance from cost of risk? And is it why this is, you know, a little bit higher than the level you're running at at the moment? and the last question is on 81. I haven't seen anything in your business plan around this. Do you plan any issuances of 81 or tier two in your plan? Thank you very much.

Yeah, so I think we provided the data, but just to recap, the usage is currently around 38 billion and No major changes expected until the end of the subsidized period, June next year. These $38 billion are invested at negative rates, on the margin at least. So, roughly speaking, the reimbursement or the When the subsidy will no longer be present, we will lose the 50 basis points of subsidy on the 38 billion that we are currently having contributed, 37.5 to be precise, that are currently contributing to our P&L. meaning that net-net, the reduction from TLTRO is below 200 million as a difference between 21 expected and 24. Concerning 81, we will need to maintain our trend of growth in 81 to keep the buffer so that over the plan we will continue to have issues even if most of the gap has been filled by the issuances that we have implemented in the last three years. T2 is again maintenance following the growth in WA and generally speaking optimizing the cost of our liabilities.

Let me add some things about the cost of risk and calendar provisioning. As you know, we have upfronted something about the disposal of other MP. Of course, this will include also asset into calendar provisioning. And of course, over the time horizon, we have to consider the possibility to accelerate disposal first of the calendar provisioning more influenced asset. On top of that, of course, we have room into the capital buffer that you have seen if we have to consider some of the potential effect of the future calendar provisioning impact. As you know, this is split amongst the next four years. consistently and comfortably into our common equity, but it's a few business points.

Great, thank you very much.

The next question is from Marco Nicolai with Jefferies. Please go ahead.

Hi, thanks for taking my questions. I've got two, both on the insurance. Firstly, Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Given the full consolidation of the insurance business, I guess that you will have an insurance revenue line and the OPEX attached to the business in your P&L as opposed to a net 125 million figure that you mentioned. Is this understanding correct? And if so, could you please provide some color on the gross revenue impact and what effect we will see on cost? I'm just trying to appreciate the business diversification that this transaction will provide. Yeah, and then I had another one on the 40% payout ratio too, but given where was the focus on the call, I think I'll spare you that. Thank you.

So, thanks for the questions. Definitely, what we have adopted in the plan is a simplified scenario. So, given that we have the option to internalize in 23, the two Vera JVs, and until end of 23, the Bpm Vita JV, we conventionally assume that this internalization is finalized at the last date of 23, so no additional contribution in 23, and is then fully operational since January 2024. So this is a conservative assumption in the sense that we have the option to either proceed more gradually for BPM Vita, theoretically we can tomorrow send the notice for the exercise of the call to Covea and then start the authorization process. or proceed with the VERA at the earliest possible date, which is 1st of July 2023. You are right, we have simplified the representation in terms of the contribution to the bottom line, by using only the contribution to the bottom line of insurance revenues, sorry, of insurance net profit. On this, I think that Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord On the other hand, we definitely have assumed growth in revenues and synergies in the costs, even if at an earlier stage, those latest, given that we will complete integration in the assumption on the plan early in 2024, adopting a conservative stance in general.

Thank you.

The next question is from Manuela Meroni with Intesa San Paolo. Please go ahead, madam.

Good morning. A couple of questions of my side. The first one on capital. What is the level of optimal capital for Banco BPM in your view and how do you calculate it so it is on the basis of a certain MDA buffer or is it a specific level of common equity tier one? The second question is on provision. Could you please remind us the amount of overlay provisions for the macro scenario that you have accounted for in 2020? Do you plan to release at least part of these provisions anytime soon or in your business plan projections?

Thank you, Miss Maroni. You know, it's difficult to say the optimized capital level because during these years, if you would have been me asking in 2018, 19, 20, 21, would have been always a different answer because, as you know, on one side, the supervisory activity, on the other side, the attitude of our competitor, not only Italian, but international, give us some guidance about the level. What we feel, of course, is that MDA buffer above 350 is more than comfortable. Of course, we have to also to deal with the potential impact of the growth in this capital in order to understand better what can be immediately released to our shareholders or kept in order to reinforce the capital of our bank. We are in a situation in which up to a few months ago we were in the middle of some potential merger situation. We want to eventually stay with a capital sound situation in order to be ready for whatever opportunity we could have but again of course now we feel in a very comfortable situation which by no means should be the one for all the plan horizon let's also have a look to our competitor because normally we are seeing that they are a common acquisitor one which is higher than ours for for the potential right back. Yes, it's possible. Of course, changing scenario macro are very, very important in terms of considering future right back of the provision we have done, especially in stage two. As you know, we have strengthened our rules in order to be more prudent a possible macroevolution with a good scenario could give us could give us some consistent right back I think Eduardo has also done some figure okay okay The next question is from Domenico Santoro with HSBC. Please go ahead.

Hi, good morning. Thanks for taking my questions and well done for taking the courage and being the first to present the business plan. So our curiosity on the numbers. First of all, just to recap on the NII, the 280 million euro that you will lose on the TRTRO and on the solar and bond portfolio. Can you give us an idea You gave already some numbers, but can you give us an idea how you intend to recover those at end 2024? Let's say if this number is 100, 20% by volume growth, 20% with interest rate hike, lower cost of funding, I assume, and there might be also a little bit from the MPE as well. Just to have an NII waterfall from here to 2024, that will be very useful. The second question is on the contribution of the bank levies in 24. I wonder whether you are excluding the resolution fund from your numbers. And just a suggestion, it would be very useful to get the answer to the question before on the loan loss provision for next year, 2022, given that you double your default rate on your portfolio. even if not precise guidance at least to understand what's the direction compared to 2021 pre or post disposal as you might like. Thank you very much.

Yes, hi, good morning. Yes, the number is directionally correct. The effect on NII of TLTL-TRO and securities portfolio. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord So these components, at the end of the day, neutralize the negative impact that is attributed to TLTRO and bonds and bond portfolio so that the net outcome is very close to zero. It's negative, but very close to zero. Systemic charges. Yes, that's correct. We have excluded in 2024 the resolution fund.

Again, it's really early nowadays to give you some guidance for 2022. But of course, we have already, you can leverage what we have already said that we are up fronting some cost of risk in order to dispose for next year. We are preparing, of course, very closely all the provisioning for the potential default of next year. So we are very much prepared to face the situation, having in mind that we are still considering a default rate which is increasing vis-à-vis the current one.

Okay, thank you.

The next question is from Noemi Teruk with Mediobanca. Please go ahead.

Good morning. Thank you for taking my question. I have some follow-ups. The first one is on NII. So is the 130 million I think you mentioned related to a RIBOR related to 2023 or 2024? And then on the addendum, is not very clear to me your strategy. Does your cost of risk target include some of the coverage increases and on the basis of that, did I understand correctly that the addendum would increase MDA only by a few basis points if applied throughout the plan? And then on JVs, You mentioned the 90 million additional net profit in 2024 and what part of it is driven by synergies? And finally, just one question on equity stakes. If you're planning to sell some of them ahead of Basel IV. Thank you very much.

Thank you. So the first question, yes, I confirm that The 130 million is 2024. Of course, with the forecast we have shown in the first page of the presentation, you see that the major increase of Euribor is coming 2024. Cost of risk, of course, include part of the addendum because we mentioned that we have up-fronted 100 million to dispose. I said that we will of course dispose with a very close attention to also to calendar provisioning and so it is very much possible that the majority of the disposal will include part of the addendum.

So net profit of joint venture is mostly driven by the increase in our volumes in bank assurance. whilst the synergies in the first year after the internalization are very limited and will probably represent an additional potential to increase profitability after the final year of the time horizon. I didn't get the final question on equity stakes. If you can repeat, Noemi.

Sure. If you are planning to sell some of them ahead of Battlefork,

Well, of course, we have the strategic stakes that we have extensively commented in the presentation that for us remain strategic. So that's one issue. We have some minor other investments which for us might originate divestment opportunities. In general, we have already investigated the impact of Basel IV rules on our equity stake portfolio and this impact is zero because all of the stakes that we have in mind are already deducted from the portfolio, so no additional increase. There is just one minor participation for which we expect a few tens of millions of RWA in 2024, but really not something worth considering.

Thank you. The next question is from Adele Palama with UBS. Please go ahead, madam.

Yes, hi. Thank you for the presentation. I have a very quick question. I mean, I know that you don't want to disclose a lot about 2022, but just looking at your bridge on the capital, I mean, you have 210 basis points of capital retained earnings after dividend 81 in the business plan horizon. Do they include the full dividend of 2022 as well? Because I'm asking this because if I do reverse engineering and I try to understand what's the implied net income for 2022 from this bridge, Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord so I mean I want to understand if basically there is a more upside the risk than like seven eight eight percent of consensus a versus consensus in 2022 and how do you see the evolution of the key matrix INII fees and cost of risk I mean I understand that you don't want to give a the guidance. But I mean, if you don't include the full payout in 2021, I mean, I want to understand if we should expect more upside than the versus the current consensus. Thank you.

Yeah, my advice is to not post too much trust in reverse engineering or numbers from the capital world. Having said this, I think that definitely the answer to your question is that in September we have accounted for the accruing dividend that has matured up to end of September. So the remaining part of the work starts with both the net profit and the dividend which will accrue in the final quarter of this year. We prefer not to give guidance on 2022 at this stage, so probably not worth commenting on 22 consensus. I don't know, Giuseppe, if you want to add something.

No, I think that, again, this is a business plan. We have done the guidance which are full for 23 and 24. Of course, as we have done this year for 21, we will give you guidance at the beginning of next year.

Okay, thank you. The next question is from Hugo Cruz with KBW. Please go ahead, sir.

Hi, thank you for the time. So I wanted to go a bit more on the bank insurance option, a few questions. So you can already exercise the Covia option. So are you already planning to do it? Are you already with discussions with them? Because it seems to me if it's profitable to internalize these businesses, you would want to do it as soon as possible. Second on the Danish compromise, you know, the difference between you and the other banks is that you have not owned these businesses for a long time. So do you have comfort from your discussions with the regulators that they will let you use the Danish compromise? and third, I just wanted to understand a little bit more, you know, the contribution from the internalization and split that from the other businesses. So you'll be great if you could tell me how much is the expected contribution from Agos and Anima in 2024 and also specifically on the bank assurance. Is there any assumption of renegotiating the distribution fee that you book in fee income. So is there any contribution on a fee income side? And, you know, I expect extra costs from internalizing the business. Are those extra costs reflecting reflected in your associates estimate? Or is it reflected in your OPEX estimate? And if you could tell me how much of those extra costs are you expecting?

Thank you.

Okay, bank insurance, yes, we can already exercise. This means that we have a full set of agreement with our partner, Covea, which knows that the company basically will end up being 100% Banco Bpm. That means that we have already in place lots of projects that basically we are leading together with the people which are already working for BPM Vita and BPM Edanni which knows very well that we are the potential shareholders of the company. So we are hands-on if this is the question you wanted to know. Danish, we are comfortable because We have no other example of a situation like ours, both in terms of volumes of bank assurance and in terms of percentage of ownership for which Danish has not been approved. So we have, let's say, a reference which is very clear in the other example, which are very much like ours. extra cost already the value of the company that we have done into the associates is of course the final value so excluding the cost we cannot give you the split between Agos and Anima you know that Anima is a listed company so this is something maybe to understand better from them we have done of course the bank assurance because is that object of the growth of our business plan.

On the distribution fee, I don't know if you... Distribution fee is the question related to bank assurance. Again, excuse me, Hugo.

Yeah, I was just wondering, you know, there is a part of the profits get booked in the associates or the insurance business and part will get booked in the branch and you'll go through fee income. So I was just wondering if you assume any... different economics for the branch network from internalizing the business?

For bank assurance, it's basically a pass-through. So you see the commission on the left part of this slide and the net profit is after paying the commission. One is on a gross basis before tax, the other is on a net basis after tax. But at the end of the day, we are simply to answer your question we are simply assuming to continue in the current regime which is perfectly market depends on the product of course life very different from no life and within life and no life according to the specific products for example traditional as opposed to unit linked we have kept for sake of simplicity the assumption to preserve the current level of insurance commissions but for insurance specifically, I tend to see it as a pass-through after the internalization, given that it's simply putting the pocket of money either in the subsidiary or in the bank network. Extra costs of internalization are reflected in the business plan. We don't expect to have huge extra costs of internalization. Bearing in mind this was not mentioned, probably, in the presentation, but we have a platform. We don't start from zero. We have Bpm Vita, which is 130 people working in the insurance sector, fully independent, not relying on services heavily provided by our partner Covea. So this is a company which is totally self-standing and scalable also. so with limited investments we can host the additional volumes within the platform of Bpm Vita.

Okay, thank you very much.

The next question is from Luigi Pedone with Equita. Please go ahead, sir.

Hi, good morning. Two questions from my side regarding the JV. The first one is regarding the risk. So which are in our view In your view, sorry, the main risk coming from the internalization of the JV, the insurance JV, which are the main action to close the gap with Pearson Bank Assurance. And the second one is regarding the impact. So we have assumed the renewal of the Danish compromise, but which will be the impact of the internalization of the JV starting from 2024 if we assume the final expiration of the Danish compromise and the impact of the IFRS 17. Thank you.

Yes, thanks. So, we have started the process exactly to address the risks you were correctly mentioning in your question. We believe that the most important one to bear in mind is regular execution risk. We are not an insurance, we are a bank. We are planning to create a bank insurance conglomerate and this is something which requires to be very carefully planned and before being executed. We have, I mean, it's now end of 2021. We have until end of 2023 to complete in full the process and to arrive to internalization. So even if we aspire to complete it much sooner than end of 2023, and that's something that can be easily understandable, it's a fair amount of time to address properly all the risks and cover the bases. Other risks, of course, are related directly to the technical idea of insurance, actuarial risk, both in life and in life. The companies are well equipped to deal with them. After the capital increases in VeraVita, the position of VeraVita has always been very comfortable from a financial perspective, so we don't expect this to generate or originate any backfire on the impact of the internalization of the position. On Danish, we, as Giuseppe said, have a clear aspiration to obtain the regime of the Danish compromise because this has been recognized to all Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord should be, all the conditions for a Danish compromise should be addressed during this transitional period that I mentioned before. Without Danish, the impact on capital would be in the region, if I remember correctly, around 100 basis points, whilst the Danish that we have considered, the 15 basis points, is, as reported in the presentation, before the tailwinds of Basel IV. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Majority Stakes in Insurance Companies and this does not expire the other concerns stakes minority stakes that are owned historically owned by banking institutions in insurance companies and is not our case of course ok thank you the next question is from Carlo Tomaselli with Societe Generale please go ahead sir

Good morning. Thanks for a very detailed presentation and taking my questions. The first one is on slide 33. It would be helpful to have some sense on your assumptions in terms of a UN breakdown, say funds, bank assurance, managed accounts in 2024, please, as well as the net new money 4.4 billion, which is the landing point for 2024. Thank you for the detailed ESG quantitative targets. As far as the AUM is concerned, can you give us a bit of a sense of the ESG compliant AUM today and if there is any target for 2024 for slide 49 clearly when I was about to ask about the granularity in terms of contribution to fee income from the JVs just for the for Agos and for the combined bank assurance but after clearly it is not possible at this stage I would just ask if you could give us a bit of a sense of the 2023 contribution final question if you could give us some color on the tax rate assumption over the plan horizon thank you

Thank you, Mr. Tomaselli. I will start with your request from some breakdown of Ascent Under Management. I don't understand if you want to know about sales of investment products or stock. But in the case, I will try to give you both. Fantastic. So let's say that 2021, we have a split of almost 14 billion dollars of funds and 2.6 billion of bank assurance, which grow basically to 2024, 14 billion of funds and 4 billion of bank assurance in terms of sales. In terms of stock, we have a growth from 45 as far as funds are concerned from 45 billion to 55 billion in funds so the vast majority of net inflow is conveyed into funds meanwhile we'll have a bank assurance stock growing from 15 billion to 19 billion As far as the second question, I think we mentioned that we are expecting to improve our share of ESG asset under management from 11% to above 20% in 2024. And the last one was that the contribution of maybe Eduardo can answer.

Yeah. On the contribution, are you referring to 23 for the commissions?

Yes.

Yeah. So I have it here. It's something a little bit below seven, 700 million, seven, 619, something like that. Contribution of the fees from the three product factories activities.

And the tax rate assumption?

Tax rate assumption is 27%, bearing in mind that some components are free tax, especially the net profit from associates.

Thank you.

The next question is a follow-up from Andrea Vercellone with Exxon. Please go ahead, sir.

Thank you for taking the follow-up. Two questions, one on capital. In the 14.4% in 2024, have you factored in any additional headwinds of a regulatory nature in 22, 23, 24, or there's none? In the old business plan, there were still 30 bits if I remember correctly maybe they've gone or they've already been absorbed if you can clarify that and on the buzzer for impact of 80 basis points is that pre or post the drop in risk-weighted assets related to the insurance operations if it is pre can you tell us the number post And one question which has nothing to do with the plan, but it's a big number. So can you tell us for 2022? What is the capital gain that you will book in the forward sales of 2 billion of L2 maturity bonds, which you have already closed? It was mentioned in the H1 interim results. Thank you.

Okay. Thank you, Mr. Vercellone. Yes, we have basically there is no other material change in Edwin's relay there. We also wrote down in page 20 negligible impact from regulatory Edwins over the plan horizon. So the vast majority has been done. Some of them was anticipated that we don't have a not even 30 basis point, but much lower. I think it's something between 5 and 10 basis point. Capital gain on forward sales, I would say something in the region of 95 million. And then maybe Edoardo can answer.

So Andrea, the 80 basis points is after the Tailwind on Danish Compromise which accounts for I say this five minutes ago 1.2 billion roughly speaking lower WA because it's this is the impact of a transition between 370% and 250% Thank you Gentlemen there are no more questions registered at this time

So thank you everybody for being patient today with us. I hope that it's been useful to know our most recent evolution, both for Q3 and for the plan. And hopefully we will be in touch very soon for the one-off question. Thank you very much. Have a good day.