Banco Bpm Societa Ord

Good afternoon. This is the Coral School Conference operator. Welcome and thank you for joining the Banco Bpm Group third quarter 2023 results conference call. 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 and Zero on the 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 and welcome everybody. Before starting, as usual, let me remind that you find the presentation and also the press release on our website, the Investor Relations page. The second part will be a Q&A section reserved to the Financial Analyst and please limit to only two questions for analysts to leave room to each other for some other questions. Thank you. I leave the floor to Mr. Castagna.

Thank you, Roberto. Good evening, everybody. We will try to be very quick this evening, a very solid, strong set of results. I would say both in terms of profitability and the balance sheet. nine months in which we have reached 94% of net profit higher year on year. Q3 is 134% higher than Q3 22, leading to go over the guidance we gave of 80 cents per share and 1.2 billion of net profit. Of course, we'll be more precise about that in the upcoming presentation of the industrial plan early in December. Going down on page seven to the different results, let me stress the excellent results in core revenues, which is higher 26% year on year. Pre-provision income is up 31% with the cost income which is below 50 at 48%, with a Q3 cost income at 46.5%. A good reduction also in terms of loan loss provision, down 23%, leading to a profit before tax of plus 63%. Very good also the reduction, the continuous reduction in MPs. We are now below 4 billion, in volumes and at 3.5% of MPE ratio, which is 1.8% of net MPE ratio. With the EBAC, it's 3.2, the gross ratio. Good occasion also to stress two good news for us. One is the upgrade of standard reports to investment grade for our bank. joining Fitch and the BRS. We have been granted BBB- with the positive outlook, which for sure will help us also in the bond issuing in the next few months. Also in terms of capital, good news, we have eventually authorized by ECB to apply the Danish compromise to our bank assurance company, which of course will be will be already inserted in the day in this common equity at one ratio at 14.9 pro forma but of course will be officially included starting from the presentation of the date of December 23. This business model I would say is now very well integrated also with our digital and ESG strategy Speaking at digital on page eight, you can see how much the branch-based transaction have been reducing during the years and at which even accelerated pace are growing the app mobile-based transaction, basically three times the volume of 2019 before the COVID. Nowadays, as we already know, the transaction on the app are almost 10 million more and one-third more than the branch-based transaction. All in all, we have more than 85% of the transaction of the bank through remote and mobile. Also, the sales of our product are now 39% done through remote and omnichannel, Bpm Societa Ord Bpm Societa Ord Forecast is to overcome 40% by year-end. The same is also for the contact center, our commercial activity, remote commercial activity, starting from only 6% in 19 of commercial contacts. The other were inbound answer to question made by client. Now we have completely inverted. Now 55% of the commercial contacts are driven by commercial activity. Page 9, some highlights about our ESG integrated business model. We have, in terms of business, joined Net Zero Bank Alliance and identified the five priority sector. We have reached almost 60% of green new loans to corporate enterprises out of the target of reaching 65% by the end of 2024, 100 million new loans to non-profit sector, 1.5 billion of issuing of green bonds by the bank, which we have had more than 2 billion in 2022, which were the first bank in terms of new issuing of green bonds. In terms of people and community, we are on the right pace to reach 30% of women in managerial position. We started 21% in 2021 and now are above 27% with an increase of 31%. We have devoted more than 131,000 hours of ESG training to our employees as well as 4,000 hours to our clients. in terms of organization. We have now a sustainability committee at board level established in April of this year, 23, and we have today published the Green Social Sustainability Bonds Framework aligned with taxonomy. In terms of strategy, of course, also for DSG strategy, the DSG New Action Plan, Bpm Societa Ord ESG rating, as well as Sustainalytics separated from medium risk to low risk, our bank, and Standard Ethics confirmed AAE with positive outlook. Let's have a look on page 11 to the main figure. All in all, as I said, net income almost doubled year on year. with a considerable increase both in core revenues at the yearly level and also quarter-on-quarter. 26% year-on-year and 4% increase quarter-on-quarter, driven, of course, by net interest income, which grew 52% year-on-year and 7% on quarter-on-quarter. A very solid result also in... operating costs. We have an increase year on year only of 0.8% while below the guidance of 2-3% that we gave at the beginning of the year. Pre-provision income is up 30% and 6% on a quarterly basis and profit from continuing operation pre-tax profit are high to 63% year-on-year and almost 7% on the quarterly basis, leading again to a net income at 94% higher than last year. On the right side of the slide, you can see the net interest income, the core revenues, the pre-provision income, and the net income compared with the previous two Q3 in 21 and 22. As you can see, the net income is more than doubled in the Q3 23 and 22 and more than 3 times the Q3 21. On page 12 let's have a look to NII trend not only 52% increase year on year but also a very good increase also Q3 and Q2 is 7.3% which allow us to confirm a guidance which will be in the region 3.25 billion most probably we will be a bit over that lead led by the commercial spread which grew 30 basis point on Q3 driven especially by liability spread which grew 29 basis point only one basis point for us spread which is still having a good return As far as the sensitivity is concerned, we confirm and observe the possibility of around 33%, considering both commercial and derivatives, a sensitivity for 100 basis points, 12 months of 300 million and ready to comply with potential new scenario, let's say more probably in the second part of 2024, in case of inversion of the rate trend, we have a wide room to limit the NII sensitivity by expanding the size of the replicating portfolio, which is now edged only for 15 billion. Let's have a look to our franchise in terms of loans. What we want to stress is the quality of our loan portfolio, which is in turn, of course, shown by the cost of risk and the reduction of MP. We have almost 100 billion of customer loans is a bit less than 3% since the beginning of the year. Most of them comes from non-financial corporates. Meanwhile, households are only down 300 million year to date. financials public administration and others instead are growing 0.5 in Q3 leading to positive results but what is important to stress is the very low risk profile out of these 100 billion 69% are secured 41% collateralized 21% with state guaranteed which if we go to the household, of course, is much higher to 95% collateralized. If we go to small businesses, 74% secured, 45% of which with the state guarantee. Also in terms of total non-financial corporates, 57% is secured, 31% with the state guarantee. Also in terms of real estate collateral, we have three quarters of our real estate collateral located in north of Italy with a loan to value at 60%. In terms of deposit, total customer funding is 205 million.4, slightly below 206 million of last quarter, but almost 6 billion, or more than 6 billion higher than year to date. Especially we had some 9 billion of increase in asset under management and asset under custody. Meanwhile, the deposit base decreased over 3 billion, only 3 billion fostered the growth of asset under management and custody. On the quarter, I would say that in Q3 we have this reduction of 600 million, but let me say that the volume effect is up 1.1 billion. Meanwhile, the market effect is down 1.7 billion. The retail base is huge. We have a deposit guarantee for more than 57 billion. 81% of the household deposits are guaranteed by the Guarantee Scheme and out of 100 billion of side deposits, more than 80% are retail and SME deposits. On page 15, let's have a look to the net fees, very good results. when we were down to 1.148 million, down from 1.44, growing at 0.5% in terms of commercial banking fees, with a reduction of 5% in terms of management, intermediation, and advisory fees. The results in terms of commercial banking fees have taken account the reduction of 25 million more costs for 25 million in terms of new synthetic securitization costs. The cancellation of fees on excess liquidity on current account, which happened since the second quarter and will account for 30 million year on year. And these two negative figures were more than offset by strong contribution for basically all the remaining components of the commercial banking activity, in particular from cash management and payment service, which grew year on year 30%. In terms of court results, you see that in terms of commercial banking fees, we have results which is higher than Q2, notwithstanding 8 million of higher costs on synthetic securitization, Meanwhile, we still have a reduction in terms of management advisory fees, led especially by lower production in terms of funders almost offset by higher fees on certificates and asset under custody products, basically BTP. In terms of total investment product sales, We are up 500 million to 9 month 23 to 9 month 22. Let me stress that we had bought Q3 23 with a solid performance of 4.1 billion of investment product sales. But especially in October, we had 1.4 billion of placement to which we have to add 1.2 billion of BTP Valore placement. I would consider very good also the performance of the cost control of course the cost income which went down to 48% from almost 55% year on year we went up only 0.8% and quarter on quarter we are reducing Q3 and Q2 both staff cost and also let's say we had a result which is equal in terms of other administrative expenses and depreciation and amortization. This shows us the strict cost control is embedded, I would say, in the bank. We are, of course, preparing all the potential of setting of increasing cost of personnel and administrative costs also for the new business plan for which, of course, we will be more precise in December to the presentation of the plan. Let's pass on page 17 to the asset quality. We already say that we can say that the turnaround is now complete. We have been reducing during these six and a half years more than 34 billion of MPE passing from 30 billion plus 8 billion matured of new inflow to MP from 17 to now. Now we are below 4 billion. 3.9 is the level in September 23. We have so reached 3.2% as per EBA definition and 3.5% of MP ratio go down to 1.8% of net MP ratio with bed loan ratio down to 0.6%. Also, the cost of risk, of course, has been reducing over 2023 with a constant cost, which is now around 47, 48 basis point. Let's say in terms of comparison with our target of the current business plan, that the 3.9 billion of volume of MPE has to be compared with the phoregas of 6 billion that we had for 2024 and the gross MPE ratio, which was 4.8. Meanwhile, now, as I said, it's 3.5. We have also increased the charging already, the gross risk, to 900 million, the target of disposal of MPE which from 700 million 500 which have been already executed by the third quarter 23 the remaining 400 million will be done for a part in the fourth queue and a more significant part in 2024 on page 18 the prudent policy that we are applying for our provision. The quarterly LPEs, as you can see, are on a basis of around 45 basis points. The migration rates are still very well under control. We're below 0.9% annualized in the nine months of 2023. Q rate around 5%. Net default rate 0.75%. the disposal of small ticket unsecured brought the bed loan coverage a bit below the previous numbers. We are now 59%, which is 68%, including the write-offs. Meanwhile, the UTP coverage grew from 42% to 43.1%. Of course, the disposal of unsecured smooth tickets led us to have now a share of secured MPE, which grew from 66% to 69%. In terms of stage 2, we have an increase to 12.8 billion, coming by a different methodology following the application of the threefold effect, and new automatic trigger in the watch list of our trade portfolio. More severe, of course, trigger. Edoardo, would you want to continue?

Sure, thanks a lot, Giuseppe. Good evening, everyone. So let's go to page 19, which as usual shows the evolution of our debt securities portfolio. In the last quarter, we had a small increase in total volumes, 600 million, mostly concentrated in the amortized cost component. The share of amortized cost component remains stable at around 72%. On the right side of the same slide, you see the composition by counterparty where the most important information relates to the share of Italian Govis being below 39%. as opposed to a strategic plan target or threshold of 50%. Important to underline that the share of Italian government bonds in fair value of the comprehensive income is as low as 20.8%, while the remaining part is concentrated in the amortized cost part. Another point which we always like to emphasize is that at the merger date, the share with Lengovic was slightly above 99%. Page 20 shows the contribution to capital via comprehensive income, via P&L, of the trading activities and of the bond portfolio. So our reserves on debt securities are now 565 million negative on an eight basis compared with very low sensitivity that is confirmed. We keep hedging the whole of the portfolio using swap strategies so that we remain only exposed to the spread between the market rates, the government bond rates and the risk-free rates, the swap rates. On the right part of this slide, you see that the total net financial results went down from 8.4 to 22.8 million, but this is the result mostly of the certificate costs. We explained in the August presentation, in the second quarter presentation, that certificates contribute for accounting, due to accounting constraints, to the net financial results, but their contribution to the P&L is quite similar to a negative component of NII. So, The reduction from 63 to 76 is simply the pure effect of the increase in market rates in average labor arrival during the quarter. Turning to page 21, this is a snapshot of our liquidity and funding position. So, first of all, on liquidity, we keep maintaining liquidity. Bpm Societa Ord Bpm Societa Ord with positive outlook as far as long-term is concerned. On the right of this slide, the right part of this slide, we show LCR and NSFR. LCR 160 as opposed to a plan target that was to keep it above 140%. NSFR 127 as opposed to a plan target which was to keep the NSFR indicator above 100%. I think that page 22 is... a very strong picture of the evolution of our capital. So we increase capital base since the beginning of the year of 150 basis points, mostly because of organic capital generation. And this is before the application of Danish compromise, which adds on top of these 150 Bps additional 60 Bps. Coming to this last quarter, no big movements, apart again from the Danish compromise with Q3 performance contributing for 60 basis points, 34 negative basis points from dividends and 81 coupons. The nine BPs due to the February comprehensive income and debt reserves correspond to what we have already commented in the dedicated slide, and there is a mixture of additional effects that is negative for nine basis points. The authorization for the Danish compromise has been received a few days ago from ECB for application of the Danish compromise on November 7th. Worth also highlighting the level of MDA buffer which is on a stated basis at 559 basis points and once the Danish compromise is considered on a pro forma basis is 620 Bpm. Capital ratios are consistent with the evolution of common equity tier 1. We have tier 1 at 16.7 and total capital ratios at 19.7%. Finally, a short mention to the windfall tax, where the board, as we have observed also the rest of the market has done, resolved to submit to the approval of the General Assembly the proposal to set up a dedicated undistributable reserve which is quantified in 378 million. This reserve is of course fully accountable, fully included in City One Capital. The final part, let me turn again to Giuseppe.

Just a quick word to consolidate the number and the figure that we have discussed. Bpm Societa Ord Bpm Societa Ord in December, in 12 of December with a new strategic plan. Let me just only stress that we are well above the results that we announced and 143 million is very much in line, a bit above the guidance trajectory, which in turn is almost 75% above 2022 results, as well as the guidance that we gave for 2024 and of course that will be Bpm Societa Ord Bpm Societa Ord the performance we are engaged to do. First of all, the resilient NII, the higher for longer rates scenario together with the improvement of the investment grade will enhance our capability to produce NII also for the next quarter. The improved diversification for which we have built up the base during 23 with the bank assurance and payment service business but also I would say with the strong room for improving our asset under management strategy with the increase of 6 billion of indirect deposit this year. The street cost discipline, we have been able not to grow in terms of cost. We are determined to be able to continue to have a very good cost structure also in view of the next increase of the new contract. Together, of course, with a very solid low risk profile, which is benefiting not only from the material de-risking we have done, but also from our capability to enhance through guarantee and collateral our loan portfolio. together with proactive credit management activity which allow us to detect and intervene immediately for any potential new inflow of MPE. All in all, profitability, capital generation, good portfolio, and I would say a very solid track record from this management team would, I hope, and we are confident that will be able to convince that is worth to wait for the next months in order to understand what we will announce as potential results for the next three years. So that's all for the time being. I will leave the floor to you for your question. And together with Eduardo, we are ready to answer to your question. Thank you very much.

This is the conference operator. We will now begin the question. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Noemi Peruc. of Mediobanca. Please go ahead.

Good evening and thank you for taking my questions. The first one is on NII. If you could give us some color on the evolution of NII in 2024. And in this context, if you could just share with us your expectation for beta and also your strategy. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord and then I have a question on insurance the clearly the contribution has been a bit volatile probably due to IFRS 17 and if you could give us a bit of color on the expected contribution from this business going forward it would be very helpful And lastly, what do you see as risk or opportunities from the digital EU implementation? And if you would consider investment in this regard, probably in your next business plan. Thank you very much.

Thank you, Noemi. Let me say as far as NII is concerned, We think the forecast for 2024 is to have an average EUR which will be higher than 23 because of course the starting point is higher. Most probably will be higher until the second part, the final quarter of 2024. Why we say that most probably? Again, I don't want to go into detail for 2024 because we will present the number in one month's time. But, of course, we feel that NII will be a strong part of our presentation. We think that we can use the better forecast of NII to devote some of the Euribor average increase to lose a bit of beta. We are still at 30%. We think we don't have, we haven't used at all any time deposit. We have all side deposit. Our strategy for this year was basically to stay strict to the zero point something of time deposit, not increasing our cost. Not withstanding that, we were able to keep in line, I would say, or even better of some competitor, our deposit base. If you consider the increase in indirect deposit, we are on a positive, very much positive side. So basically, if we consider that we can have 24 in line with 23, there is room to foster some new deposit in time deposit, spending a bit of beta in this regard. For the rest, we think the beta is really stable, will be even more stable due to the fact that we don't expect further increase in EORIB or by ECB, and this should bring some advantage in terms of volume for us. Insurance contribution expected, again, I cannot say anything for 2024. You will have all the details later. In one month time for this year, we had, of course, as you know, we don't have yet half, two-thirds of the company, and we have a contribution of around 40 million. So we expect that the figure that we gave when we presented the first business plan to be deployed in 2024 will be almost the same during the new business plan. risk opportunity for digital euro frankly speaking something we are not yet concentrated in terms of waiting for exactly what is to come we know that the limit of 3000 should in some way protect the deposit base of the bank but let's wait and see how this will be applied when will be decided and of course our digital attitude will, in my opinion, help us to be reactive also in this respect. But it's a bit too early to have some figures about that.

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

Good afternoon. Two questions. One clarification on your commercial performance. If you can please repeat what was the subscription of the BPP Valore and if you can give us an idea of what were the amount of placement of certificates. I haven't found them in the presentation but they were around 5 billion euros in the Q2 so you are pretty much strong into this and so I would like to know what was the contribution in the first quarter in terms of volumes. and another question from the capital. What regulatory wins do we expect for the Q4? Because if I look at your capital position and I include also the already disclosed benefits from the JV in the payments, you are running basically with a CT1 ratio of 15.5% and you just mentioned that in 2023 you booked something like 150 basis points of cash flow generation. So seems to me that the trajectory of the CT1 is approaching 16% which is clearly well above consensus of 15%. So I'm wondering whether the regulatory wins in the Q4 will be higher than expected or my understanding is more or less correct.

Thank you. Good evening and thank you for your question. BTP Valore we had on top again of the placement that we shown on our page 15 slide two different amount 1.2 billion I would say in October for the recent BTP Valore and the one in April was 1.1 billion this 2.3 billion have to be added to the 12.2 billion which you find in the nine months, 23 indication on page 15. Meanwhile, certificates are included in the investment product placement, and in the nine months were 1.4 billion. Capital. It's a bit too early to say that we are above 15. First of all, because we are 14.9. But secondly, because as you well know, we were expecting two things. One was positive and is the Danish, which we are very happy to consider now a matter of fact. The other is the headwind. We don't know why you are perceiving could be higher. I don't know. We don't have a clear idea, but we expect, as we already said, that we'll be in the region of the positive coming from the Danish So I would say that a more precise figure is around 14.3, 14.4 currently, including the Edwin. So this is our indication. Of course, also these 14, above 14, give us room to have different strategy in the remuneration of our shareholders. Thank you. Thank you.

The next question is from Adele Palama of UBS. Please go ahead.

Yes, hi. Good afternoon. A couple of questions from me. So the first one is on NII. I'm trying to understand if you think that the third quarter to the result is the peak NII that you have given that you had a pass-through on loan of 95% since first quarter 2022 until today. So, I mean, I understand you don't want to guide on a precise number on 2024, but do can we expect that the NII will go down versus 2023 excluding the contribution from the replicating portfolio and then regarding the replicating portfolio could you give us some details on the size the maturity the exit yield or like the contribution that you expect from that portfolio in 2024 and that's it thanks

Good evening, Adele. NII, many parts, I would say, in this question. So let's talk about the positive one. As I said before, we think NII will be, generally speaking, higher because of the entering point of Euribor in 2024, which will be, as an average, will be 40-50 basis point higher than 2023. Another positive, I would say, comes from the possibility to utilize the replicating portfolio, but this will come only when the interest rates will start to go down. Otherwise, it doesn't make much more sense to lose money applying to a stable interest rate some different policy. Third positive is the issuance of our bonds in general or Our paper, because thanks to the investment grade from the third rating agency, we think that we can reduce the cost of issuing. What is negative? I would say generally only the level of volume that you want to reach. So if we decide to push on the accelerator to increase our deposit, we will utilize more of this room generated by depositives in order to increase the volume of our deposit and to pay some time deposit, for instance, which up to now we basically didn't apply yet. All in all, I don't see how we could see lower than 2023, frankly speaking. But again, this is something that we can expand a bit more in the presentation of the plan. I hope I have been clear.

Okay, but the guidance for the full year 2023 is implying a lower NII in portfolio.

No, why you think it would be lower? I don't think so. I think it's more or less stable if you add the same result of Q4 to Q3 to the first nine months, you will reach a bit higher of the guidance we have given. So I don't think there is, which is about, so I think that 10, 20, 30 million on 3.2 billion does make such a difference.

Okay. And sorry, can I add another question on cost? Is the guidance for the full year 2023 2.6 or around 2.6, including in the fourth quarter, some top up for the national contracts? So, someone else?

We haven't, of course. The contract is not concluded, so we didn't give any provision already done. We think that if, as we all hope, the contract will be concluded by the end, there will be room in our cost base to accommodate one month or two months of potential cost of the contract for the first year.

Okay, thanks.

Thank you.

The next question is from Andrea Lisi of Equita. Please go ahead.

Hi. Thank you for taking my question. The first one is again on the increase in Stage 2. You have explained that you have also changed the methodology. If you can provide a bit more color on that. and if it is also to be assumed some increase in overlays or if they should be considered stable versus the previous quarter and the second question is again on the insurance business we have seen that in the draft of the budget law there is the possibility of the introduction of a guarantee fund for the life insurance business if you have already quantified a potential impact for you. Thank you.

Here we are. Thank you for your question. So stage two is exactly what I said. So we think that we have changed the methodology. We have... Sorry, I'm looking for the right page. Easy. This one. Okay, this one. The one billion more in Q3, which is again below the one year ago, comes from a very volatile effect. The increase of stage two comes from the threefold effect, which is the rule for which if a rating deteriorated of three grade even though it comes from one, so the better, to four, which is still a very good rate, you have to consider it into stage two. The second is some new penalizing automatic trigger in the watch list, which of course help our credit manager to detect any position at the first moment to anticipate, of course, any intervention. On the other side, of course, we have reduced of about 2 billion the increase that was present in the second quarter. So as you can see, there is a very volatile situation. Maybe going forward, we can better understand the volume, but we think it would be not so much different from this one. In terms of overlays, we are stable. We are exactly at the same level, around 200 million. As far as the insurance, it's a very small impact. It should be in the region of 3 million for BPM Vita.

Thank you.

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

Hi, thanks for the presentation. I wanted to ask a question on default rates. So if I'm not wrong, it decreased again from the previous quarter. I wanted to know if you could explain somewhat the different picture that comes from some macro indications. For example, the Eurostat bankruptcy indicator, which is showing a worsening trend in terms of bankruptcy since already a couple of quarters and the message that you and the other banks actually are given in terms of default rates. So what could explain the difference? Why default rates are still improving compared to the macro picture which is worsening somewhat?

Maybe we are learning from the past mistakes. It's just a guess. But I think that as I tried to explain many times, we have now a completely different set of control in place for all the life long of our credit portfolio. So we have monitoring, detection, anticipation of potential default trigger and so on. So what I feel is normally the banking system catch Bpm Societa Ord Bpm Societa Ord and possibly to intervene early rather than wait for the duration.

The next question is from Hugo Cruz of KBW. Please go ahead.

Mr. Cruz, your line is open. Please go ahead.

Hi, sorry. Sorry, I was on mute. A couple of questions. One on replicating portfolio. If you could give us a bit more clarity what you can do there. Would it be increasing hedges or is there room, for example, to increase the size of your Govis portfolio given that it's quite a decent shape of the yield curve there? And second, if you could clarify on the regulatory headwinds, if you could give us a bit more timing or the size of the potential impacts over the next couple of years, it would be great.

Thank you.

Yes, this is Eduardo Ginevra, replicating portfolio. So the starting point is our deposit base of around 100 billion. The stable component of the deposit base is some 55% of these numbers, so in the area of 55 billion. The current size of the replicating portfolio is around 15 billion. So theoretically, we can fill the full gap. between 15 and 55. More realistically, we have room to increase quite significantly, almost double the 15 billion, bearing in mind all the various constraints, regulatory, especially in terms of supervisory outlier tests. This is... tool we didn't want to use to invest too much in the current rate environment because of the negative curve the negative slope of the curve because of the expectation of stable interest rates we are in a sort of vigilant position to be able to exploit the inversion in the curve a more regular curve or expectations of Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord a decision from them which is expected to come around the end. But we are confident that this impact is absorbed in the numbers that we've shown or put it more precisely, more or less comparable to what we have in the pro forma impact of the positive impact of the Danish.

Thank you very much.

For any further questions, please press star and one on your telephone. Mr. Castagna, there's a follow-up from Andrea Lisi of Equita. Please go ahead.

just about the potential impact of regulatory headwinds on capital just to understand if you have room to optimize your risk weighted asset in order to offset this just this, thank you we have room in managing our capital structure of course which we have done up to now we have built up

quite consistent the common equity tier one which will be abundant to accommodate any potential Edwin from ECB we are still as I mentioned before we are increasing also our securitization program which of course is costly in terms of commission but is very effective in terms of building up capital so we are of course we have also of course some because as you know when there is an inspection on model this lasts for months sometimes years and of course in the meantime we are able to adjust to the indication of ECB also the request so that's why we cannot say that we expect such a consistent figure coming out from the model many thanks

The next question is from Pamela Zuluaga of Morgan Stanley. Please go ahead.

Hello, good afternoon. Thank you very much. Just to follow up on the deposit details, overall your NII guidance, you were mentioning that you might increase your appetite for deposit volumes, which could result in higher deposit yield offerings. So could you give us an idea on how much could we see deposit details growing under this type of scenario? And then another follow-up. How do you see that second issuance of BTP Valore impacting the main revenue lines in Q4 if we take into account that the October issuance raised almost $17 billion? Thank you.

Sorry, I cannot really be more precise on beta. We are only saying that we think we have room to... foster some increase in volumes because we see that the beta is quite consistently in the region of 20 basis points as far as the commercial activity is concerned, 30 if you consider derivatives. So, I don't know, there is room to go up to 40 if we would like to give a push to our deposit volume. which again is still something that is good because in turn when the interest rate will go down, likewise the BTP would be ammunition to convert into asset under management. So for us the growth in volume of deposit direct or indirect is very important. That's why we are happy we've grown 6 billion this year. We think that in 2023 we have been very good at maintaining a solid base of deposit without utilizing interest rate, or basically time deposit. You take also into account that we have WeBank, which was one of the first digital banks, which is very good at using interest rate in order to increase the deposit size. So we will opportunistically exploit also this opportunity basically sacrificing some few points in terms of price to get possibly more volume. But this is just, I would say, a tactical strategy. It's not something that is going to change the balance sheet, the P&L of the bank. BTP Valore, I don't think will have any impact in Q4 because I don't think there is a is 1.2 billion but they are not going to impact on the capability of the bank to place investment product in the region of possibly even more than 4 billion starting from 1.4 billion of October but

I mean, if the question is on the P&L of Q4, you have on one side the positive commission, which is a one-off of 50 BPs, and on the other hand, you have the opportunity cost for deposit transformed into assets under custody, which, given that this happens only for two and a half months, is more or less difficult to match the 50 BPs of the one-off.

Thank you very much.

Mr. Castagna, there are no more questions at this time.

Thank you. So let me thank you all the people linked to our presentation and this time the new meeting will be in only one month time so I hope to have all of you again in December for the business plan presentation. Thank you very much.