Banco Bpm Societa Ord

Good afternoon. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the full year 2022 of Banco Bpm Group Results. 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 Pernalho, Head of Investor Relations. Please go ahead, sir.

Thank you very much. Good evening, everybody, to be here with the presentation of full year results of 2022. As usual, before leaving the floor to Mr. Castagna for the presentation, let me remind that you can find the presentation on our website on Investor Relations page, and the Q&A section is reserved only for financial analysts. Thank you very much. I leave the floor to Mr. Castagna.

Thank you, Roberto. Good evening, everybody. Thank you for being with us for the 2022 full year presentation of Banco Bpm. We are very happy and proud to present this full set of very good results, which are basically our record in our six year history since the merger between the two banks. We have reached a net income over 700 million and adjusted net income of 886 million. a roti of growing from 5.5% to 7.4%, with a cost income down from 56% to 54%, and a FAD reduction in gross MPs down from 6.4 billion to 4.8 billion, reducing the gross MP ratio to 4.2%. also vis-a-vis the guidance we just gave you three months ago in November for the Q3 presentation we are able to present a set of better results starting of course from the better NII growing to put 2.3 billion versus 2.2 which of course leave the total revenues to 4.7 always $100 million better than we expected with the same operating cost and pre-provision income $160 million better than at expectation. With low loss provision slightly below what we expected, we are able to present an APS of $0.46 vis-à-vis the $0.45 that were our guidance in November last year. also very good and strong common equity tier 1 well above our 13% guidance at 13.3% including the effect of the Danish compromise as we announced that the distribution of 50% of our net profit will lead to a DPS of 23 cents which is 21% better than last year. On page 7, I would like to give you a very quick reminder of the last six years since the merger of the banks. We had basically three years of full restructuring of the bank, reducing MPEs from 24% to 9% starting 2017 up to 2019. and also with a very effective cost reduction down 400 million in the first three years. Then starting basically apart from the 2020 which was affected by the pandemic starting from 2021 up to Q3 2022 we presented a very steady improvement of our results both in terms of core revenues and the pre-provision income always bettering but with a very constant pace of results, improving also our efficiency thanks to the bank assurance deal that we performed this year and the effort we have done during this year in digital transformation and with a full ESG-focused approach. In Q4, thanks to NAI, we have a new acceleration in our trajectory. Basically, thanks to these Q4 results, we are able to present core income at a level which is already better than our expected result in 2023 and 2024. of our current business plan at 4.2 billion versus 3.9 expecting in 2023 and 4.1 expecting in 2024. The same is for pre-provision income at 2.2 versus 1.9 and 2.1 with the loan loss provision already reaching the target of 2023 with a further room of battery 10 basis points to reach the target 2024. With this set of results of Q4, we are even more comfortable in repeating our guidance of more than $0.60 for 2023, increasing the $0.49 which were originally targeted in our strategic plan. Just to remember some of the move that we have done in terms of bank assurance, you know that we have already acquired BPM Vita, consolidating line for line since Q3 in our budget. We are in the way to be recognized at the financial conglomerate, which is a precondition to obtain the Danish compromise. We have concluded an agreement with the Crédit Agricole in order to have a new joint venture for the P&C bank assurance business as soon as we will have also exercised the option to buy 65% of Vera Vita and Vera Assicurazioni expected by year end 2023. In terms of digital, we have reached very good results starting from pre-pandemic. We were at only 11% of remote and omnichannel sales. We have already reached 35% with a target of 50% of our strategic plan for 2024. And the same applies also for the transaction concluded by app, growing three times in the last three years. also in term of ESG focused approach we are very proud to announce that this year we have granted green new lending for 11 billion we have done very significant issuance of social and green bond from 2021 to Q1 23 3.3 billion which is the first issuer among Italian banks already above the full target for the strategy plan 21-24. Also in terms of people in community, we have reached a lot of the accomplishments that we had in our business plan. Let me just stress the new hiring of almost 750 people, 90% of which below 30 years. and also very important for us the increasing women in managerial position 15% year on year. As far as the numbers on page 9 let's concentrate on Q4 and the full year results. In Q4 there was an enormous increase in NAI driven by the capability to keep the deposit cost very low in front to the new pace of Euribor. Commissions were slightly below, which is quite normal in our Q4, and we believe that we can recover the previous pace starting from Q1 2023. All in all, net fee and commission and NII stands at 14.3% above last year, meanwhile only NII was 31% above last year. Total revenues are still 10% above last quarter with the pre-provision income after operating cost strictly above, slightly above the Q3 at 650 million with pre-provision income, 18% better than last quarter. After long-lost provision and fair value on tangible asset, we had a profit from continuing operation pre-tax at 333 million, 14.3% better than Q3, and a net profit from continuing operation, 15.8% better than last quarter, with a net income... due to the lower contribution to the systemic charge in Q4 amounting to 93% better than Q3 at 210 million vis-à-vis the 109 million of Q3. As far as the full year, we have 13% increase in NII, 6% increase in NII net fees and commission with a further increase of total revenue, so almost $200 million to $4.7 billion vis-à-vis $4.5 billion in 2021. Operating costs were almost in line, $2,539,000,000, and we have a pre-provision income of 8.6% better of last year. Loan loss provision much better, $200 million lower than last year, which leave our profit before tax to 1.3 billion versus 920 million in 2021, which is 42% better results. After taxes, 900 million is 35% better than last year, and the full result, net income, is 703 million, 23.5% better than 21 results. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord a strong rate sensitivity to support the growth that we have realized, but even more, the faster growth we think we can be able to realize in the next quarters. As you know, the ECB level facility grew 300 basis points up to 2.5%. We have currently an ORIBOR which is in line with the facility. and our sensitivity went down to 220 million to 160 million mainly because of the increase of deposit beta even though as you can see on the right side of the bottom part of the slide our cost of deposit is still very much below the beta that we consider in our sensitivity we have a beta at 46% our deposit base is still at 37% Bips. All in all, the new guidance for 2023 for NII will be 2.7 billion, higher than 2.7 billion, 200 million better than the previous one. We have still continued on page 11 to support our client. We have increased 3.3% our core customer loans. The pace of the business plan is 3.1%, so we are very well in line with our expectation even though since age 22 we are very cautious in granting our loans to our client preferring of course to be concentrated on the better quality of client and in loan guaranteed or by collateral or by guarantee of the state. Also, the geographic distribution of our loans give you an idea of the quality of our asset book, 75% in concentrated in the north of Italy, 18% in the center, 5% in the south and island, and 1% in the rest of the world. New landing was very high, increasing in 17% from 22.7 billion to 26.5 billion, mainly due to the growth in corporate enterprises, small business segment, which grew 4 billion from 18.5 to 22.8. A small reduction in the households from 4.2 billion to 3.8 billion, mainly due to the lower performance in Q4 for mortgages impacted by the increase of the interest rate. The safe profile of new lending is bettering also our asset quality book increasing the lending reserved for low medium risk to 96% with only 3.4% in mid-high risk and 0.6% to high risk, mainly, of course, collateralized or guaranteed by state guarantee. Gross NP ratio down to 4.2% from 5.6%. In terms of net NP ratio, we are at 2.2%. With the EBA definition, we would be below 2% at 1.9%. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord a significant amount of single names disposal with no impact on cost of credit because of previous provisioning. As you know we have also upfronted additional disposal for almost 500 million in the plan Horizon which we are confident to be able to do in 2023 mainly bad loans and small tickets overlays grew to 163 million from 125 of September 22 on page 15 and other clear evidence of the impressive the risking and the solidity of our capital position comparing the figure before at the time of the merger and the current one. As you can see, we start at 11.4 of Common Equity Tier 1 and now we are 13.3 as well as the Common Equity Tier 1 buffer versus minimum requirement or MDA. It was 160 points and now it's 464 with an increase of more than 300 basis points. Texas ratio down from 160% to 20% and an impressive dynamics in reduction of NP which started from 30 billion including the inflow in these six years, the risking was 33 billion leading to 4.8 billion which is the current NP situation. Let's go to some main figures of P&L. NII again strong growth supported mainly by the commercial spread. So split the increase to $724 million is due mainly to commercial activity with client and the bond portfolio income which experienced an increase in the yield. Of course, there is a reduction due to the TLTRO net results, which is negative for 66 million, mainly due to the cost of deposit facilities. All in all, we think that 724 million has also been impacted, if you want, from the old regime of TLTRO in place until 22 of November. If we eliminate the advantage of this contribution for the first 50 days, the Q4 pro forma would be 650 million. The commercial spread grew more than 100 basis points, mainly due to the liability spread, which of course increased almost in the same proportion of the increase of Euribor, from 33 to 141 basis point. Net fees and commission on page 16, good results in terms of commercial banking activity driven by fees on lending plus 15% year-on-year, payment service plus 9% year-on-year, credit cards plus 18% year on year and these results were able to more than offsetting also the higher cost of the Carto synthetic securitization which impacted the negative for 21 million. In terms of management and mediation and advisory fee we have a reduction of slightly below 5% impacted also by the Q4 as I mentioned before the product placement activity for the full year 22 was much lower than the record activity in 2021 in which we placed more than 18 billion of product this year we stood at 14.8 billion with a reduction from Q1 to Q4 from 4.5 billion to 3.1 billion as I mentioned before already in January we grew again to 1.3 billion February is started even better so we are confident that we can go again at a very good pace toward the record of 2021 operating cost on page 17 like for likes I mean excluding The cost associated to the insurance, we have almost matched the cost of 2021, notwithstanding the inflation dynamics, thanks to the staff cost. In staff cost, thanks to the early retirement scheme, we were able to reduce of almost 70 million the cost of the staff. meanwhile we grew 40 million in other administrative expenses especially as cost of energy and maintenance inflated cost and we have a one-off cost in DNA especially in Q4 which is not replicable in future quarters and should lead again towards 70 million per quarter the pace of the DNA content If we add to the banking business cost the insurance cost, we grow from 2 billion 524 million of 15 million to 2 billion 539 million. Coming back to cost of risk, the core cost of risk is very similar to last year. It's 52 basis points versus 55 last year, but in absolute terms there is a reduction of 23%, mainly due to the contribution of the disposal that we have done during these last two years. Let's say that out of this cost of risk, only half of this is related to cost of inflows of new MPE. Meanwhile, the rest is the maintenance of the portfolio and the cost of the reduction in the quantity of MPE, in the volume of MPE. The default rate, as you know, for 2022 was very comfortable at 0.94, basically the same of 2021. Danger rate almost the same at 10%, with a very remarkable workout rate, which was almost 30%. But if you exclude some single name transaction operating in December, it's 22.7%. still a very, very good pace of work out considering the reduction in volume that we have EMP. Coverage ratio increased in terms of bed loans in one year of 620 basis points. There is instead a reduction due to the disposal of single names in UTP from 44% to 43%. But this comes together with the reduction of the vintage of OTP of 25% from 4.4 year to 3.3 year. All in all, total MPEs registered an increase of 170 basis points year on year. some indication about some structure and quality of our portfolio after these intensive activity that we had in the quality of our loans we have that now the total of our household and non-financial companies which is 91 billion for 67.7% is either collateralized or state-guaranteed. Precisely, 19.4% is state-guaranteed. If we exclude the households, so only relation with non-financial companies, this rate increases to 28%. 28% of our non-financial companies' loans are guaranteed by the state. also if we even better if we go to let's say that potentially more risky loans to small SMEs in this case we grew from 10% of state guaranteed to 43% with a total collateralization at 72.6% we have also concluded our early engagement campaigns on the company affected by the increase of energy and raw material it was a very good output because out of around 10 billion related to 7400 clients 90% of these are in the better classes of our portfolio not experienced any problem from the increase of these costs. We have classified prudentially 1.8 billion in stage 2, but there were 2.5 billion in September, so we are already experiencing some exit from stage 2 to stage 1, and we have classified only 150 million at NPE. which is a default rate in this category of 1.5% which is of course above the total default rate but is completely under control. Let me give the floor to Edoardo Ginevra for some consideration on funding, bonds for Stafoglio and capital.