Banco Bpm Societa Ord

Good evening, this is the Chorus Call Conference Operator. Welcome and thank you for joining the Banco BPM Group First Quarter 2024 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 star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco Bpm. Please go ahead, sir.

Good evening and thank you for attending the conference call. Let me remind you that the Q&A session is for institutional investors and financial analysts only.

We ask possibly to limit the number of questions to a maximum of three. And I will now turn the floor to our CEO, Mr. Giuseppe Castagna.

Thank you.

Thank you very much, everybody. Thanks for being with us. I know it's been a long day for most of you. This is, I think, the third or fourth presentation in the day, so I will try to be quick, and I will be helped by the very strong and solid set of results, maybe not so many comments on the figure we will give you. We are very happy. We have been experiencing a very powerful start over the year. High profitability, strong capital generation, net fees growing 12% quarter on quarter, cost income at a lower 47%. The lowest cost of risk ever at the 31 basis point thanks to a further reduction of more than 1 billion of gross MPs A very strong funding capacity. Our clients are increasing by 3 billion in the first quarter their deposit with us. And we have been able not only to have a very good net income, but also a strong capital generation leading the common equity tier one from 14.2 to 14.7%. The net income amount to 370 million. is 40% higher year-to-year, 15% Q&Q, ahead of full year 24 guidance on a quarterly average, and as you can see on page 6, is ahead also, almost in line with the results that we forecast for the 26th. On page seven, some key figure, core revenues are high, 11% year-on-year, 2% on quarter, cost of risk 82 million, vis-a-vis 137 million last year in Q1, and 175 million in Q4. Then we'll examine the reason for why we feel this figure could be consistent with the current default rate. Profit from before tax are at the highest level of 662 million, 48% more of Q4 2023, 40% higher than Q1 2023 year on year. And all these, considering that we are still in the middle, I would say, of our new key product factories that, as you know, will generate revenues and profitability by 2026, but 2024 still is an implementing year. We have, as you know, acquired the Life Bank Assurance starting 1st January this year, but still we have IT and operations separately managed through the existing platform and particularly VeraVita is still managed by the Generali platform as well as we have just started our joint venture in PNC January this year with the Credieric Hall and so we are still at the beginning of this activity we will we think that we will have the most out of these two activities coming in second part of 24 with the full integration also of the IT and platform in 25 and full steam of this activity in 26 the same I would say is for Payment System New Joint Venture that has been called, as most of you maybe know, NUMIA, the joint venture with BCC and FSI. We have, as you know, signed the deal. We will have the closing by the second part of this year and the completion of the migration during 2025. So for both these activities, we think still we have to experience the capability and the profitability that will come during the next quarters. On page 9, asset quality very good, as I mentioned before. The trajectory now is 31 basis point, well below 45 basis point of our target to 26. Let's say that during 23 we still were continuing to anticipate provision in order to make more disposal. In one year we were able to dispose more than 1 billion of MP. Still we have to dispose another 600 million during 24 for which we have already provisioned the amount needed there. even say that we don't have other provision to do for disposal so this is the reason why being now almost in line with our target of 3.5 billion which most probably will come down during this quarter in which we think we will have another disposal of 150 million and another 350 million will come in H2 going below 3.5 billion, we don't see any need for provision more. As you will see when we will talk more in detail about MPs, also the coverage is at very high level. Going to the capital, we were able to generate almost 120 basis points in one year going from 13.6 to 14.7 of common equity tier one and almost 60 basis point Q and Q. As I mentioned below, also direct funding is increasing. It's 4.2 billion year on year, 3 billion Q and Q, considering also, of course, not only current account and deposits, but also our bond activity. As far as the issuing is concerned, as you know, we are exploiting very positive rating momentum due to the recent upgrade, end of the year 23, from old rating agency and we are already experiencing very good reduction in wholesale cost of funding. Loan to deposit rate is 81%. Also, this is very safe. They give us all the possibility to increase loan activity as soon as the possibility of interest rate going down will boost again the recovery of the new activity in loan granting. Let's go to page 12 on the PNL. As you can see, we have a very good result also in NAI. It's 16% higher year-on-year, and basically including the one-day effect of Q1-24 is also higher of Q4-23. if we consider core revenues again is almost 11% higher than last year with very good financial results driven by activity that we had in option and swap on our portfolio and also in managing our activity on the replicating portfolio and anticipating some also in this respect. Total revenues were high 15% year-on-year and 2.6% on last quarter 23. Operating costs under control were 1.1% Q&Q and 4% year-on-year, including the new labor costs we will see in details also this trend. Pre-provision income is 25% higher year-on-year at $765 million, with lower loan loss provision, as we mentioned before, lower 40% year-on-year and 53% quarter-on-quarter. This ends up to a result pre-tax 40% higher than last year. And after tax, also considering that we have doubled the contribution in tax, vis-à-vis last quarter 2023, we end up with the net profit from continuing operation, which is almost 37% higher than last year, and the net income after systemic charge that are 40% higher than Q1 2023. As you can see on the right side of the slide, there is the trend of the last couple of year evolution. As you can see the evolution of all the main driver is very good and lead us to a net income which has been growing more than 100% over the last two years. Going into the details, MAI, as I mentioned before, is 16% higher than Q1-23, is more or less in line with Q4-23. We are very happy that we can consider our forecast that we gave presenting our strategy plan with the three reduction forecast for 24 which should be the right forecast for this year in doing so we feel that we can have an NII also for 24 higher than the results of 23 interest rate sensitivity considered including both NII and NFR so including certificates is still at 23 250 million over 100 basis points. The commercial spread is keeping a good level. It's 12 basis points lower than last quarter, three basis points of which due to the reduction of Euribor and the difference I will try to explain commenting the right side of page 13 in which we will again give you some support to the target of 2026. As you know, we have a target of 3 billion, 50 million, and we are pretty confident of reaching this target, notwithstanding the sensitivity, because we are already implementing some measures which give us a good buffer to recover the potential reduction of the sensitivity. The first action, as I mentioned, is the increase in the size of replicating portfolio from 15 to 25 billion over the planned horizon, 1 billion which has been already done during Q1, and other 3 billion have been already optioned with structure in which we increased the fixed receiver amount by 3 billion in H2-24. This maneuver gave already a buffer of almost 40 million by 26. On top of that, we are leveraging, as I mentioned before, on the very good reception by the market of our new investment-grade status we confirm that we have a very strong spread reduction in new bonds and certificates which give us by 26 another 80 million of buffer compensating further possible Euribor reduction. Then we have some maneuver that we have already started with which is giving a bit of a loss in terms of commercial spread but will soon give us a good advantage as soon as the lower interest rate scenario will happen possibly in H224. The first is the increasing share of indexed current account. We started from a 24% by year 2023 we are already now over 28%, which means 4 billion more of indexed current account, which of course now constitute an increase in cost of deposit, but will immediately automatically be reducing as soon as again the interest rate scenario will go down in H224 and going forward. On top of that, we have already started to improve a collection of new, more fragmented deposits, and I mentioned again the 3 billion that we increased in Q124, which are due to substitute some most expensive accounts mostly institutional that will go out end of June this year. We are going to lose a couple of billion of deposit with an interest rate above Euribor which was contractualized some years ago and now will expire by June this year. On top of that, again, we have reduced the conversion of current account into time deposit. This also was a maneuver announced in the business plan in order to keep an high level of deposit, feeding the possibility of having BTP as a potential competitor vis-à-vis our current account. But as a matter of fact, in Q1, we only switched 500 million from current account to time deposit out of the 9 billion which are embedded into the business plan out of which 4 billion are due in 2024. So still a lot of room if needed in order to keep high deposit, high share of deposit. On page 14, again, the franchise value in terms both of total customer financial asset, which grew more than 5 billion in Q1. Again, almost 1 billion in current account and deposit, 2.5 billion in asset under custody, 1.5 billion in asset under management. And this growth is continuing also in April. and is basically fostering almost all the roadmap we had for 2024 and a big part of the increase that we forecast by 2026. The vast majority of the deposit base comes from retail and SMEs. More than 80% comes from this kind, this cluster of clients. On the loans volume side, a steady situation. We are still around $97 billion of loans, a small reduction, $300 million in mortgages, compensated by an increase of $300 million of non-financial corporates. For this year, we don't envisage a big increase in stock of loans. a 98 billion target by year end, so we are pretty sure that with the potential increase of volumes of the second part on 24, we will be able to hit the target for 24. The composition of portfolio is mostly for non-financial corporates secured, 30% with state guarantee and a further 27% collateralized with real estate. If we go down to small business, the share guaranteed by state increase to 44% with almost 30% of collateralized loan. The three-quarters of the portfolio are based in the north of Italy. Let's go on page 15 to the fees, maybe the best results we have ever reached, 50 million more than Q4 23, 30 million more than Q1 23, considering that in Q1 23 we still had the contribution on 15 million that we reduced from the account of our client starting from Q2 23 due to the elimination of this fee being terminating the negative interest rate period. So the real compensation would be something like 45 million of increase also year on year. On the high side of page 15, the strong increase that we registered thanks to an excellent performance in investment product placement. We reached a record 5.8 billion in product plus 1.2 billion in BTP, which is something like 2 billion more than both Q4-23 and Q1-23. So, of course, the upfront fees contribution grew 90% Q&Q and 40% year-on-year with a very steady running fees contribution, 4% higher than last year. On the commercial fees, let me mention, apart from the commercial activity, which is growing, considering the like-for-like on Q1-23, The vast majority of the difference is coming from corporate investment banking, structural finance, and trade finance fee with a double digit year on year. Consistently with what I said relating to the incoming activity in bank assurance, and the other product factory, the rest of the product factory contribution is not increasing, is not giving any increase quarter on quarter. Cost income down to 47%, notwithstanding the growth also in revenues that we have commented a few minutes ago. We are now at 47% compared with the 48% for the all year 23. We started 65% in 2017, driven by the staff cost, which of course taking account the increase of the new labor contract. But if you look at the pro forma impact on new labor contract, you see that the increase is very moderate, is 1.8%. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord If we still have a default rate at the current level, we can have this new target, I would say, as a cost of risk. As you can see, again, the level of stock is very low. It's $3.6 billion. Out of this, we have $500 million to dispose by year-end 2024. Of these 3.6 billion, almost 800 million are loans with a state guarantee. And all in all, meanwhile, the bed loan coverage is more than 60%. If you exclude the loans with state guarantee, the coverage on bed loans is higher than 70%. being the state guarantee covered 28% with the uncovered exposure in the region of 15%. So all the opportunity to not having further covered both on the state guarantee loans and also I would say on the non-guarantee loans considering that part of them are also collateralized. Let me say also that we, of course, continue to have and to increase partially the overlays going from 190 million to 200 million. Meanwhile, we had a reduction of almost 2 billion in stage two. Let me give the floor to Edoardo Ginevra for some further financial figures.

Thanks a lot Giuseppe Page 18 now gives the picture of the evolution of our securities portfolio that has been increased by 4 billion mostly concentrated in the amortized cost component during the first quarter of this year so from 36.5 billion now we are at 40.5 billion share of amortized cost is at 72% with the aim to preserve the Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord to be compared with the threshold that we put in our strategy plan of remaining below 50%. The share of Italian Govis in February comprehensive income is as limited as 19.1%, meaning that remaining 80%, 80.9% of Italian government bonds is concentrated in the amortized cost part of the portfolio. Page 19 explores the contribution of this portfolio and, in general, the financial activity, financial-related activity, in terms of comprehensive income. As far as capital is concerned, the level of reserves on debt securities at fair value of comprehensive income now has been reduced to 470 million end of March, with a sensitivity that remains low. limited below 1 million close to zero for the component of Italian government bonds. For the trading results, the financial results, this has been positive at 8.8 million owing to a number of trading and hedging strategies that were able to more than compensate Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord on liquidity and funding page 20 presents the overall bank's position with the total in total our cash position liquidity position is now almost 48 billion made for 9 billion of deposit facilities 33 billion of ECB eligible assets of which 20.8 is securities and 12.6 is credit claims 5 billion of other marketable securities, an increase of 6 billion in total versus the previous position at the reference date of December. LCR went to 155% because following the reimbursement of 10 billion Teltro 3 that the bank executed in March. Now the position with ECB is 5.7 billion with a net position that is positive for 3.3 billion. NSFR remained almost constant at 126%. Issuan's activity has been successful in the first quarter with 500 million of subordinated Tier 2 issued in March on top of the 750 million issued both in green senior non-prepared and in cover bond during January. This issuance activity in wholesale market has been also coupled with interesting flows from the retail market with 700 million of structured issues during Q1 through our network finally the combination of this asset and IBD structure led to an MRL buffer of 9.2 percentage point above the requirement expressed in terms of total RWA Capital, on page 21, we reported an increase of 58 basis points in this quarter, represented by 65 bps of additional quarter one performance, so the P&L performance that has been, that led to forecast a payment of 46 bps in terms of payments on top of 81 coupons then on the other components we have three basis points of contribution on what I illustrated before from February comprehensive income debt reserves 12 basis points dividends from participations this is typical of first quarter of the year 24 basis points of improvement in grey risk which has increased benefited from the adoption in our systems of the new model parameters I remind you that in December we used preliminary estimates adopting a conservative stance the rest is only one basis point MDA buffer is at 567 basis points tier 1 17% total 20.5% total capital ratio 20.5%, finally RWA are now at 62.7 billion.

Okay, thank you, Eduardo. Let's conclude with some wrap-up of the results. On page 23, we confirmed that we are highly confident in delivering our target 24 based on the main drivers we showed to you and I will recall the interest rate scenario that we confirmed would have three ECB rate cuts in H2-24. The stronger boost coming from investment product placement experiencing Q1 and still continuing in April. The strict control of operating costs. The lowering of our default rate embedded in the plan, which was for 24, 1.3%, and now we are experiencing 0.83%. and a very strong capital position with FWA Dynamics reducing and under control. This will lead to an increase vis-à-vis 23 of net interest income, net fees and commission, a reducing cost of risk, even cost income ratio, and an increasing in common equity tier 1. Considering that we are up to now the only bank where already improved by 8% the guidance 24 vis-a-vis 23 we leave for this court at 90 cents the APS guidance without one-offs as you know with one-off this will increase to 1 euro point 10 but stressing that we have a positive outlook on the figure and we will be able to give update after H1 results about a potential change in guidance. Vis-a-vis on page 24, the business plan, let's say that we are also confident due to the figure we are experiencing to pursue the strategic plan targets and we are basically ahead on every main feature both vis-a-vis 23 and 26 strategic plan figure. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord And of course, we are very well on track to a net income of 6 billion over the plan horizon with the distribution of 4 billion to our shareholders. Thank you very much and leave the floor to your question.

This is the Coruscall conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use the handset when asking questions. Anyone who has a question may press star and one at this time. The first question is from Azura Wealthy with Citi. Please go ahead.

Hi, good afternoon. Three questions for me. One on NII, one on cost of risk, and one on capital. When I look at your NII, what I notice the biggest difference versus the last cortex is the change in the funding cost. So your liability spread has decreased. If I understand well, that is mostly because of some specific increase of the funding and the institutional funding that will mature in the first half. So is it fair to assume a reversal of this trend? So liability spread improving in the second part, of course, based on your rate assumption. and how much are you looking for deposit is it linked because we are getting better offer out to the customer the second one is on the cost of risk I'm a bit puzzle on the overlay because stage two are coming down the MPLs are coming down the default rate is better than what you are expecting but still the overlays are marginally up. And so I wanted to check if there is anything that you want to comment about stage two development. And the other one is, how do we think about these overlays? When can you think about releasing them? What could be that you think the trigger for that and the timing? And the last one is on capital. So pro forma, the closing of the transaction, the pending and the integration charges, given the progress of this cortex, you would be comfortably above 15%. I hear you about your plan for the distribution and you made it clear when you presented the plan. But I'm thinking about organic growth versus external growth. And we have seen in Spain consolidation starting in the banking sector. What do you think would be a trigger for starting consolidation in Italy as well? Thank you.

Thank you, Azzurra. So starting from NII, yes, liability spread. As I mentioned before, we have started some manoeuvre in order to have some advantage as soon as the interest rate will start to go down. And knowing that there is some flow of deposit, very expensive, that we had since a couple of years ago, for a contractualized with some institution, we are already fostering the deposit at a lower interest rate, a low cost of deposit in order to replace what will go down. So no reversal in second half, only a lower cost of funding because of the reduction of these expensive deposit. a reduction due to the increasing percentage of indexed deposits, which will go down automatically. And if you consider these are basically the only ones who make the total cost of deposit 100 basis points, As far as the non-indexed deposit, the cost is still 20-24 basis points. So the part that accounts a lot is the indexed deposit, which will go down with the EU report reduction. Overlays, basically we always say that we don't consider overlays, let's say, a buffer to increase or decrease depending on how the situation is going. We think that this is a sort of risk management activity with deterioration of the scenario. This will go up. With a better scenario, this goes down automatically. And in terms of a prudent activity, we prefer also in this situation in which notwithstanding experiencing a very good default rate, we still have a default rate for the full year 2014 which is higher we don't think is an opportunity for us to reduce overlay having already a very low cost of risk of 31 basis point which again is very consistent with this new default rate scenario because we basically don't have any other add-on on our stock due to the composition that I explained before about the stocks so out of 2 billion of MPE bad loans, 800 million comes from the guarantee scheme, only 1.2 billion are not guaranteed by the state and are covered at more than 70%, almost 77% if you consider the write-off. Capital, basically we mentioned, I won't say that is a target 15%, We mentioned many times that capital in our business plan was the consequence of the profitability that we were experiencing and the 14% in 26 end of the plan would not be our target as well as not is our target to be 15% in 2024. Of course, as you know, 2024 will be higher because the day after we will have to incorporate Basel IV. So, of course, this will go down for sure beginning on 2025. And then with this organic growth, we can think about distributing the excess of capital towards end of 2025-2026 in terms of shareholder remuneration.

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

Good afternoon to everybody. I have a couple of clarifications. The first one is on the reclassification of the fee income. You recorded some changes in the classification from other income to fees in the Q1. Can you clarify with us what was the impact of this change? so that we can have an idea of the underlying level of the fee on a quarter-on-quarter basis. Second question relates to the NII and the contribution of the replicating portfolio. Eduardo, you mentioned that during the slide that there was a positive impact on net financial results in the Q1 following this increase. If you can share with us what is the contribution to NII. And the last question is on the CT1. strong improvement in the Q1 there were some less unfavorable or more favorable adoption of input parameters that you've mentioned if you can please clarify what portfolio do they cover and I wonder if you can also apply these same you know favorable reading on the 100 basis points of negative impact if I'm not mistaken that you have incorporated in your business plan in terms of negative effect from business dynamics on your capital ratios. Do you have any updates on those effects? Thank you.

Okay, Giovanni, so for the fee income reclassification, overall the amount of revenues that have been reclassified to fee income, model money should be around 60 million per year, stable throughout the various quarters, and this is due to the fact that these revenues are attributable to the Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord strategies of increasing replicating portfolio will imply an increase in the weighted average return. The other question is, sorry, not sure I understood the point.

I was asking, sorry, I cannot rephrase my question. The first one is on the positive impact that you had from the less unfavorable calculation of the parameters for credit risk. So if you can elaborate this. And secondly, in the business plan, if I'm not mistaken, you incorporated some negative impacts on the CT1 from the business solution. I was wondering whether you have been quite concerned.

Okay. So the first one, so we have updated the models following number of interactions with ECB basically this was in the area of EPA guidelines how we proceeded in that in December reference date of December we proceeded with estimates based on simulations without having the parameters already in already embedded in the legacy systems and to preserve some headroom and avoid negative evolutions over time, we preferred, as we also communicated to the market in that period, to maintain, to adopt a conservative stance. So we included a buffer by increasing the level of RWA using Article 3 of CRR, which was, so to speak... estimated preserving some margin of conservatism against the more analytical estimates. So once these estimates have been translated from parallel environment to the real legacy systems, we discovered a number that was lower a number in terms of increase of RWA that was lower than the initial conservative estimate and this generated this improvement in credit risk that we illustrated in the capital work for the final question on business dynamic in business plan of course we are only two quarters along the line from the start of the business plan we have had a moderate drift in credit risk since for example in this court I think it's units of basis points probably five basis points something like that but really nothing that is creating any concern in this respect

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

Hi, good evening. Just one quick question is about the income from insurance business which was quite weak, a bit weak in the quarter. So what do you expect going on and What does it need to accelerate from current level and if you can explain the reason why it was a bit weak in this quarter.

Thank you. Just, of course, it's quite new also for us. We are experiencing the accountancy of bank insurance into the banking account. Basically, because of Veravita, Bpm Societa Ord in terms of placement of bank assurance product all in all. But because they are still three different entities, Bpm Vita, Vera Vita and Vera Financial, which is our Irish life company, we have to segregate the different accounts and I think you may know that the accountability of bank insurance is quite different. So when there is a negative component, you have to account for all accounts the amount and this brought to some 10 million of negative into the line of revenues from Bank Assurance which was what brought us to have only a 5 million contribution being a 15 million contribution the one coming from Bpm Vita with a negative of 10 million from Veravita. So going further, as soon as we will be able, and we think this will start in Q3, to have the possibility to have new product from Generali for our Veravita production, we will be able to compensate the loss and end up with a consistent result in life bank assurance in the region of what we were expecting basically for whole year 24, which is around 65 to 70 million of revenues.

Thank you.

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

Hi, thank you for the time. I just want to clarify some of the comments you made on the excess capital. and a bit related to that also try to understand your guidance on Basel IV so that you know you know in Q4 your guidance on regulatory headwinds we know now it was conservative right and so I was wondering if the guidance you gave on Basel IV has also been conservative and if you have any new guidance there and then so related to these I think you said on the call earlier that you would start either giving guidance or clarifying the usage of excess capital in 2025-26. So if you could kind of repeat those comments. Is it that we'll know in 2025-26 what you will do with excess capital or will you start to distribute that excess capital? This would be very helpful if you could clarify it. Thank you.

So, on Basel IV guidance, we prefer not to go for new guidance. Of course, we think we have been conservative in assessing potential regulatory headwinds when we published the plan. I remind you that on that occasion we said that we were expecting regulatory headwinds between end of 23 and 26, so 24 and 26, of a total of 130 basis points, mostly represented by Basel IV. I have also to remind that this number includes significant headwind on bank assurance because the risk weight in the regime of the Danish compromise from the current level 100% after Basel IV will go to a new level of 250%. We are convinced that we may explore some levers to mitigate the impact of Basel IV, but before going with new guidance and estimates, we prefer to keep the current one.

On

The usage of excess capital, well, as Giuseppe already clarified, we prefer not to label the levels expected in end of this year or end of the plan, respectively 15% and 14% as targets. We are convinced that these levels create excess capital, so you are correct, and we will assess the at the end of the plan what could be the most effective in the interest of shareholders use of such a capital including distribution and including buybacks to be considered later on after confirming the distribution plan for the current calendar year.

Okay, thank you.

as a reminder if you wish to register for a question please press star and one on your telephone the next question is from Adele Palama with UBS please go ahead yes hi good afternoon I have one question maybe you mentioned already on fees so there has been quite of increasing upfront fees is it like something that is that we should expect as recurring or there is any one-off component there. And in general, on the guidance for full year 24, I mean, I understand that you are confirming the guidance, but sort of changing the outlook, flagging the upside risk on your guidance. But which are the areas that you want to have sort of a confirmation that are going better than expected before changing the guidance, upgrading the guidance, given the fact that you reported the strong trends on fees and cost of risk this quarter. Thanks.

Thank you. For the fees, of course, we were experiencing an unexpected amount of performance in investment product placement. As I mentioned before, we grew from an average of 4 billion per quarter to almost 6 billion. So, frankly speaking, I would wait another quarter to say that this is the new normal. I wouldn't expect that. But for sure, this will come higher than the 4 billion we were using too. So let's say that we feel that between 5 and 5.5 could be a result for Q2, but that's the reason why we want to expect at least H1 to change the guidance for the year. It's a potential because, frankly speaking, we're not using, we're not expecting this level. The interest rates are still high, so the trigger for which we expected the investment product to be sold is yet to come so possibly we could do a very good job also at this level considering also that for bank assurance as I was explaining before we still don't have for all the companies the right level in order to be placed to our client so some surprises possible I would say that that the we showed an up in the guidance vis-a-vis the results of last year and we still feel that we can have a good performance but I can't confirm the current level yet as far as the guidance again the current number shows us that it's possible to change the guidance, but because we only three months ago gave this guidance, and again, we are the only bank at the moment who gave already a guidance for 24, 8% higher than 23, we don't expect after three months to be needed to change the guidance. The outlook is very positive. Let's wait. If these numbers can be confirmed in the second queue, and the end of second Q for us is much more serious to approach a potential change of guidance by that date.

Okay, thanks.

For any further questions, please press star and one on your telephone. The next question is from Noemi Peruc with Mediobanca. Please go ahead.

Good evening. Thank you for taking my questions. I have just a few on NII. So if you could please walk us through the quarterly NII contributions since it is up, excluding the day effect. while the commercial spread is down Q on Q. And then I would like more color on the contribution to NII from the tax credits in Q1 and whether it has changed vis-a-vis Q4. And if you could give us the total tax credit outstanding in your balance sheet as of Q1. Thank you very much.

Okay, contribution from tax credit is around 10 million per month to NII. Tax credit in the balance sheet is around 3 billion on top of additional commitments below the line that lead to a total of 4.5, maybe more, 5 billion. The first question was, can you repeat please, was it on the quarterly development of NII?

Exactly, on the moving part, Q&Q, since we are seeing a commercial spread down. Thank you.

So, we showed already the commercial spreads and we answered to one of the first questions on the liability spread. for the remaining part of this year we expect a total NII which is above the level of last year thanks to the fact that on average we expect EUR in the area of 360-365 basis points in terms of the various moving parts the commercial part is expected to be stable throughout the various quarters with a limited reduction towards the end of the year and in line with the reduction of interest rates to have an increased contribution from hedging

strategies especially those related to replicating portfolio thank you gentlemen there are no more questions registered at this time thank you very much everybody thanks for the heavy day today and we look forward to meet you in person during the next week thank you