Banco Bpm Societa Ord

Good afternoon. This is the Coral School conference operator. Welcome and thank you for joining the Banco BPM first half 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 Viscassi, IR manager of Banco Bpm. Please, go ahead, sir.

Good evening, everyone, and thank you for attending the conference call. As usual, let me remind that the Q&A session is just for financial analysts and possibly with a limit of three questions each. I will now leave the floor over to our CEO, Mr. Giuseppe Castagna. Thank you.

Hello, everybody. Good evening. Thanks for being with us still at this time of the day after many presentations that you had to listen to today. I hope this will be a time spent in a good manner. Let's say very happy to present our H1 24 results, a very solid set of results leading to a double guidance upgrade both in terms of APS and interim dividend update. This is thanks to both an adjusted net income growing to $776 million, 19% growth year-on-year, above the strategy plan trajectory, and as well a very promising common equity year-on-year growth at 15.2%. the highest level since the merger, a well ahead of the strategic plan landing point. The guidance has been updated from 90 cents to 95 of APS, which means considering the 83 cents of 2023, a total increase of 14%, 24 and 23. As far as the interim dividend, 24 interim dividend is concerned, we feel that today we can update the dividend, the interim dividend we will decide in the board of November to be upgraded to 600 million versus 550 million, which is 9% plus more of the original plan forecast. And this is together with a lot of other effective managerial action which support a positive outlook in terms of profitability with let's mention a reduction in interest rate sensitivity down from 250 million to 200 million and let me also remind that we still have to experience the income coming from the new product factories set up, which will be progressive deployed with the full steam in 2026. On page seven, let's have a look at some of these promising figure in many aspects, I would say profit and loss, total deposit and asset quality. As far as profit and loss, we have core revenues growing 8.3% year on year, to 2,830,000,000 in H1. A high level of franchise value with the growth of total deposit indirect of 7.7 billion in six months with a big contribution of coming from the investment product placement, 31% higher than the first half of 2023. supported also by even better asset quality which is now down to 1.6% in terms of net NPE ratio with an annualized cost of risk of 38 basis points with a reduction in the first six months of the year of another 10% vis-a-vis last year. We already mentioned Common Equity R1. Let's say that, of course, we have also a very good increase in MDA Buffer, which now is above 600 basis points, 100 basis points better than six months ago. On page 8, some other main figures. Total revenues grew 8.4%. You can see the progression starting from 21 to 24 and comparing the 24 first half results with the average of the first half of our business plan of 2026. As you can see, the figure of 24 are already higher than the results of 26 expected in the 26th. The same is for pre-provision income. We are up 11.8% year-on-year to 1.456 million, vis-à-vis 1.375 million of 26. Cost income is down to 48% from 49 last year, with a target in 26 below 50%. The same, I would say, also for cost of risk. we are down 25% in one year and we have 38 basis points of annualized cost of risk vis-a-vis 45 basis points of the financial targets for 26. Asset quality, we already said non-performance, the net MP ratio. Let's have a look to the main figure. We reduce the year-on-year 20% the stock of MPs, 400 million in first half 24, planning on below 3.4 billion, which means 3.2% of MP gross ratio. Let's say that, as you know, we have started the plan for disposing 700 million which we already realized in first half of 24 for a global amount of 250 million. We now we can confirm that we will realize the all 450 million by the end of the year and this should lead to a total MP ratio below 3%. lets me remember that the target of the plan is below 3.5, 3% with 3.5 billion. Well on track also in terms of funding capacity, the positive rating momentum which started in November last year is still continuing with improving rating from the rating agency. This allowed us in the first half of the year basically to complete two-thirds of the entire year emission, which we realized also at a much better spread vis-à-vis the last issuance before the rating upgrade. Just to make some figure, we have issued green senior non-preferred to 235 Bpm of spread compared to 280 Bpm T2 245 Bpm vis-a-vis 340 of the last emission and 81 at 455 Bpm compared with 670 Bpm and this of course will lead to a much better emission results also in terms of NII going forward. Let's go on page 12 to the main figure of the net income. As I mentioned before, year on year, 20% of the stated net income and 19% in net income adjusted with the positive figure basically in all the main drivers, net interest income plus 11%, net fees and commission plus 4.5%, core revenues I already say 8.3% as well as total revenues, pre-provision income up to 12% with reduction of 25% in terms of loan loss provision which lead to a profit pre-tax of 1.240 million which is 22% higher than the 23 results. On the right side of the page, you can see the progression of the last two years in which is evident the higher contribution coming from the managerial action of these couple of last year. Core revenues up into year 37%, profit before tax up 90%, net income up 114%. NII is very resilient, thanks also to the sensitivity reduced to 200 million. This is still to make the most effective benefit going forward. Meanwhile, the interest rates will go down. We have already started to work on that in order to take the most of the advantage when the interest rate will became to go down. As I mentioned before, we are 11% higher than last year. Basically, the Q2 was almost the same of Q1, 0.7% less than Q1, with the evolution of commercial spreads, which give a stable asset spread to 1.54 basis point and a reduction of the liability spread five basis points less than the reduction of the Euribor. Why that? Because we again started many manoeuvres which will help us in a lower environment rates. Just to mention some of them, as you know, we have started to increase the size of our replicating portfolio We started from 50 billion. The target was 25. We have reached 20 billion with an average yield of 2%. So very interesting fixed income yield and a duration of only 2.4 years. On top of that, we increased the share of index current account from 24% to 32%. which of course doesn't give us immediately an advantage in terms of NAI but thanks to a beta higher than 70% will give us an immediate relief when the interest rate will go down. As I mentioned before also the improved credit ratings is giving us benefit vis-a-vis the business plan figure. We have a reduction which now will grow to almost 100 million in terms of a lower cost of funding for only new bonds emission in 2026. And these together with the other manoeuvre allowed us not to increase the recourse to time deposit at a higher interest rate, which we forecasted in our business plan to reach 4.5 billion in 2024 and 9 billion by 2026. As a matter of fact, we have only issued more or less 400 million per quarter this year and the total of time deposit is 1.1 billion. Let me remember that every billion of lower issuing of time deposit means a savings of 15 million per year. Customer Financial Assets, the bank was able to attract Customer Financial Assets in all the categories, both direct and indirect deposit. Core deposit grew to above 100 billion to 101 billion. Let me remember that the target for 2026 is 100 billion, so we're already above. and also we grew in terms of asset under management 2.1 billion and in asset under custody almost 3 billion. Let me also say that this capability to attract direct deposit at very good rates enabled us to terminate all the customer deposit, institutional customer deposit agreement which we had in place starting from the negative rates times and with July we have reimbursed the last 2 billion of Euribor Plus deposit from institution. Now we are coming to get advantage also from this switch from higher to lower spread deposit. In terms of loans, we have had a reduction of 1 billion end of June 24. Let me remember that in June, together with December, we experienced the vast majority of reduction in in medium long term maturities in June we had 2.4 billion of MLT aspiring loans and I have to say that starting from May but especially in July we are recovering a lot in new lending activity, which already grew more than 10% Q2 and Q1, and in July had a record of 2.6 billion of new loan granting. Net fees and commission on page 15, we have a 4.5 increase year on year, which if we have to give you an effective pace of the commercial activity is almost 7.6% if you exclude the fees on current account which we reduced starting from Q2 23 which in Q1 23 were 15 million of higher fees that we cashed in and together also with the cost of synthetic securitization, which instead are still, of course, part of our negative commission, but again, is not a measure of our commercial capability. In terms of investment products, the most of the increase came from the upfront fees, thanks to the 30% increase in investment product sales, and so we had an increase in upfront fees of 23% which lower pace of increase in running fees of below 1% but thanks to the attraction of asset under management and asset under custody which we experience should give higher results in the forthcoming quarters. Other fees, 2.4% again, which is equal to 7.4% with the naturalization I was speaking before. Let's say that the best results are coming from specialized activities, likewise, corporate investment banking, structured finance, and trade finance. Meanwhile, as I mentioned at the beginning of the presentation, The main sources of revenues from the new product factories are yet to materialize. Cost income down, page 16, is down to 48%, notwithstanding, of course, the impact of the new labor contract, which accounts for almost 53 million higher than last year. but thanks to the increase of revenues, of course, the cost-income ratio is down from 49% to 48%. If we compare quarter on quarter, you can see that both staff costs and other administrative expenses remain basically at the same level. Page 17, some further detail on cost of risk and asset quality. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord gross MP again down to 3.4 billion and I mentioned before below 1.6 billion as net MPs very good also the migration rates which are still under control both in terms of default rate which is still below 1% and if we consider also the Q rate the net default rate is below 90 0.9%. Good news also from the increase of coverage. We increased the bad loan coverage 20 basis points year to date, 80 basis points the UTP coverage, as well as 80 basis points also the total MPE coverage. Let me remind that in terms of bad loan coverage, if we exclude loans with state guarantees, which are very well collateralized and as you know are guaranteed for more than 80% by the state, the coverage of the loans without excluding the one with state guarantees is increased up to 72%. Let me say that also the vintage of MP has been reduced from 3.6 to 3.4 years. Let me give the word to Mr. Ginevra for the financial and capital.

Thank you. So on page 18, you see that the trend of our portfolio, that securities portfolio is increasing to billion in the quarter, mainly related to the fact that we increase the size to anticipate future maturities during the second half and exploit the opportunities provided by the favorable interest rate scenario in the second quarter, anticipating some of the advantages of the plan. Maturities that we are anticipating for the second half of the year are around 2 billion. Half of them is Italian bonds. This explains also the slight increase in the share of Italian government bonds, which is now up to 39.8%, well below the threshold of 50%, which is our strategic plan maximum level and will further decrease in the second part of the year. Share of Italian bonds on the total is mostly concentrated in amortized cost. Only 20.8% of Italian bonds are in fair value or comprehensive income. Page 19. talking about the fair value of the comprehensive income you see that the evolution of reserves and the contribution to capital is stable during the first half of the year started from 488 and is now at 492 and by the way has been improving in the recent weeks following the reduction in the overall level of rates worth mentioning is that We have increased the part of the portfolio invested in a fixed rate so that the BPV is now at 1.6 million, was 1 million three months ago, but most of this BPV is related to non-Italian government bonds. The contribution of Italian government bonds to the BPV is only 0.2 million at the date of 30th of June. trading income contribution is stable year on year so 42 million the same level we had one year ago with negative contribution from certificate stable quarter on quarter at 75 million positive contribution from the remaining trading components other NFR Bpm Societa Ord worth mentioning that these strategies are maturing, expiring in the second half of the year and especially in the current rate environment we expect them to contribute positively to trading income in the second part of the year. Liquidity, page 20, cash position of the group is still very high, 45.1 billion, so well above, for example, the level we had at the beginning of the year. We have during the Last quarter optimized the composition of our liquidity with eligible assets going down from 33 to 29 billion. Still, LCR remains at a very comparable level of 140% and SFR at 127%. Worth mentioning on the funding side, the direct funding continues to increase also in the second quarter, so We started here at 126. We are now almost at 130, thanks to the issuance that we did in 24, almost 3 billion with a well-diversified seniority profile, including also 700 million of structured bonds. TELTO3 is constant at 5.7 billion. The expiration dates are September 4 billion and December the remaining 1.7 billion. net ECB position is still comfortable positive at 4.5 billion and MRL is at 9.4 percentage point above the requirement that we've been given by SRB ESG strategy turning to page 21 we have formalized the targets of net zero banking alliance for our five priority sectors that are automotive, cement, coal Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord for these specific indicator we have a total target for 2024 at 5 billion at the same time we have introduced a new rating climate rating that we are using for risk assessment organizationally we have reinforced our organization supporting the activities in transition and sustainability creating a dedicated unit with one department one function active for Bpm Societa Ord the level in June last year. On the financial side, on the finance side, funding, as far as funding is concerned, we have issued 750 million of green senior non-preferred bond in this half of the year, in the first half of the year, and we have released in July the impact report of the green social and sustainability report, bonds framework for 2024. On the asset side, we have increased the share of ESG non-government bonds to 32%. This share was 24% at the end of 2022. The total amount, the absolute amount has doubled in the last 18 months. Capital, we have continued in our trajectory of improving, increasing, reinforcing the capital position with a total increase in CET1 ratio of more than 100 basis points, 101 basis points in the first half of the year, of which 43 basis points achieved in the second quarter. 67 BPs are related to the performance 48 BPs is the capital dedicated to dividends and 81 coupons limited amount of impact from the comprehensive income reserves and the ordinary organic growth in RWA positive impact from new regulatory models that are specifically related to the introduction of these models in structured finance, especially for the use of slotting criteria. MDA Buffer, which was 508 basis points like for like at the beginning of the year, is now 609 basis points. Finally, Tier 1 and Tier Total respectively are at 17.4% and 20.92%, where WA is slightly above, so $62 billion. Now again, let me turn to Giuseppe for the final part of the presentation.

Thank you, Eduardo. So I think that the results were presented both in terms of profit and loss and capital give us the confidence to increase our guidance for 2024. As I mentioned before, we think all the main drivers bettered after Q2. Of course, they were already very good in Q1, but we wanted to wait A confirmation in the second quarter. Now we can see that vis-a-vis last year, we will have better results in terms of net interest income, fee and commission, a cost income lower than last year, a cost of risk, which is up to now 10 basis points better than last year. And as you have seen, a very strong common equity tier one, with the capital generation in six months. If you consider also what we have put aside for the dividends of almost 200 basis points. These allow us to increase to 95 cents from 90 cents our guidance. Let me remind that we were one of the few banks or maybe the only banks who increased it in 24 at the beginning the guidance vis-à-vis 2023. So if you consider all of both the increase, we are now up 14% versus earning per share of 2023, which still is very frustrating because I see that with the current price earning, we are below six times, but hopefully better time will come with a better consideration of our stock. Let me also mention some figures in terms of ROT. We were at 13% with 90 cents of APS. We are now almost 14% with the new guidance. And if we consider a common equity R1 at a normalized 13%, the return on tangible equity will be almost 16%. All of these, again, basically overcoming the results of 26. We know very well that there would be some switch from interest rate to commission, and this is yet to prove. We are very confident. We think that having almost closed the gap between 23 and 26 give us a lot of confidence in confirming to make a net profit in the 26 over 1.5 billion. and confident that this will be a sustainable long-term profitability outlook starting since, I would say, the current year. Let me also say something in terms of total shareholder remuneration. In this, we have also the support of this increase in Common Equity Tier 1, so we think that we can increase the interim guidance from 550 million to 600 million. Of course, this will be approved in November by the Board of Directors. And this guidance update is calculated as 50% of the total remuneration expected for full year 24. With this dividend, the annualized expected dividend deals stands at 14%. If you include the dividend paid in April of 850 million vis-à-vis the forecast of 750 million, we are now 150 million above the planned trajectory. So what we can say is that the total shareholder remuneration that we promised of 4 billion for the period 23 of 26 is ahead of the plan for 150 million leaving the possibility to exceed our 4 billion strategic plan target. Now I give you back the floor in order to start the Q&A session. Thank you very much.

Thank you. 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 their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Giovanni Razzoli, Deutsche Bank. Please go ahead.

Good afternoon to everybody. Three questions very quick. The first one if you can please elaborate again on the 30 basis points of positive regulatory impacts that you have recorded in this quarter. I think I've missed your comments which were referring to some new models applied on some areas and connected with that if you can also provide an indication on the impact from Basel IV in 2025 my perception is that you have been extremely prudent so far with the regulatory wins so if you can also share with us the data and the last question is what is the contribution in terms of yield of the replicating portfolio which has been increased in terms of size in the in this quarter thank you

Okay, so first question on a 30 basis points of regulatory impact disease in the effect of the fact that we adopted New Models for the Structured Finance part of our portfolio, which has impacted both on RWA and on shortfall, leading to an improvement in our capital position for a total of 30 basis points. Basel IV in 2024, what I would confirm is that we expect a phased-in impact in the order of magnitude of around 70 basis points 80 basis points whilst in terms of the total impact we prefer to be very prudent to I mean given also that we have a significant capital buffer we are working now on some optimizations but for the time being what we can say is that we confirm the overall Bpm Societa Ord Bpm Societa Ord of capital that can be either during the plan horizon or later on that can be deployed coming from either DTAs or from fair value other comprehensive income reserves that through pull to par will progressively transform themselves into capital.

sorry if I may out of the 130 how much is the operational risk component if it's significant yes it is significant it is in the area of 20 to 30 thanks the next question is from Domenico Santoro HSBC please go ahead hi good afternoon also a couple of questions from my side

when I go back to your page six about the change in the NII sensitivity the way this is written is that affects not only the NII but also the cost of certificate so given that you're reducing here the sensitivity I wonder how we play out on trading profits going forward if we should still expect that line to be in red by more than 100 million euro which was if I remember correctly the guidance in the in the plan you mentioned also some positive from the one at the edge on the certificates in the second part of the year so if you could also quantify if we have already an idea because I guess also this might be one of the reason to upgrade the guidance then a curiosity from the about the upgrade of the guidance where does it come from more from an AI fees or you basically are probably more positive on the on the on the credit quality And about the one off that you're going to charge in the second part of the year related to the personal layout layoff. I was just wondering whether you can give us an update on the on the number in absolute terms. Thank you.

Okay, so on an AI sensitivity, yes, it's correct. We have included in our sensitivity, as we have done in the last quarters also, the positive contribution, the mitigating contribution from certificates that are representing sort of cost of funding included in the trading income. We confirm the guidance for the trading income on a full year basis of around 100 million, which is the result of the current 75 per quarter from certificates. We expect these to decline progressively in line with the trend in market interest rates. the remaining component from trading may provide additional positive contribution according to the evolution of rates. Four, if I understood correctly, the third question on personnel. No, maybe Giuseppe, you want to...

Yes, layoff, I mean, you are meaning personnel reductions. we have still our program to reduce of a total 800 people in and out, so reducing 1,600 people either with early retirement or with pre-pension scheme, which we already started. We had more than 500 people accepting to retire before the maturity. we are still in negotiation with the unions in order to define properly how many of the remaining 1,100 will go out in which of the two schemes I mentioned before and of course how many people will come in. All in all will be again 800 people and the number that we mentioned in the Q1 are always valid The only thing is that having increased the number of people accepting to retire before time, this of course reduces the cost of the early retirement scheme. So all in all, we will have better stated results vis-à-vis our initial guidance. I am not sure that I understood the question about credit quality when you say maybe positive in terms of... No, the question was more the change in the guidance.

Where did it come from? Better optimism, more optimism about the NII fees or maybe credit quality. And if you could just quantify, I know the probability is too soon, how much it could be the one off if I understood correctly on trading from hedging strategy expiring on the certificates in the second part of the year.

I can give you some more detail but of course we don't have the precise figure for the guidance in every aspect all in all we think that we can better of five cents the total revenues the total profitability coming from the many things I mentioned before we will have better revenues better cost income ratio a reduction in cost of risk and all in all this is not basically so much different from what we experienced in Q1 but of course after 7 months we are much confident that we can reach better results in terms of EPS split amongst all the main drivers that I mentioned before on the replicating portfolio.

On the replicating portfolio, we didn't answer, sorry Mr. Azzoli, to your second question. So the contribution on the replicating portfolio for the deposit part of the replicating portfolio is around 90 million negative to NII in the quarter.

The next question is from Ignacio Ulargi, BNP Paribas Exxon. Please go ahead.

Thank you very much for the presentation and for taking my questions. I have two, if I may. I mean, the first one is a bit on getting your thoughts on how do you see lending growth evolving. You have made a comment about new lending accelerating, so I just wanted to get a bit of a sense of how do you see lending growth evolving from here. And also, I just wanted to understand a bit better How should we think about organic capital generation going forward in the light of a very solid capital print? How do you see your capital evolving from here? Thank you.

Thank you, Ignacio. Lending growth, as we expected, basically, at the beginning of the year, a very cautious first four months of the year. with more or less below 6 billion in four months of new lending growth. And then in the last three months, May, June and July, we exceeded 6.5 billion of new lending. So an increase of 15-20%. This, of course, will bring to some update of our new lending for the end of the year. I cannot already say that this pace that we had experienced in July will go forward the same pace, but for sure the potential reduction also of interest rate which we are talking a lot during these days. If this will be confirmed in September, we expect some increase in new lending growth. Organic generation, I think you are talking about capital. As I mentioned before, we are experiencing a very good pace of growth in Common Equity Tier 1, 100 basis points or 200 basis points if you consider the dividend and the 81... Bpm Societa Ord a very good capital generation, very much above the 2026 target. We think we can be in the region between 80 and 90 basis points above the target. Thank you very much.

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

Hi, thank you for the time.

I have really just one question.

the the new interim and what that means for the full year so can you clarify what is the total payout that you assume for the full year yes the payout is always 67% as we mentioned during our business presentation which we changed our Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord 1.2 billion for 2024.

And those 67 is on reported earnings, right? Yes.

Yes, on reported earnings, but I believe that the key guidance we wanted to convey is 600 million, which is 50% of the total expected distribution for the full year.

Yeah, very helpful.

Thank you.

The next question is from Andrea Lizi, Equita. Please go ahead.

Hi, good evening. Thank you for taking my questions. The first one is on the product factories, in particular on the insurance business. We have seen an income from insurance business of 5 million in the first quarter, 10 million in the second quarter, but my feeling is that you are... Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord the second is if you can repeat your guidance for trading for the year that was not so clear to me and the other is just an indication on if you can provide us more color on the stage 2 that if I'm not wrong increased by kind of 1 billion quarter on quarter just to understand the reason why and what we expect here thank you

Okay, thank you very much. As I mentioned also in Q1 result, we have not yet the possibility to integrate because as I mentioned before, we have the VeraVita activity which is still run by Generali. This will require still another possibly 12 months from their side in order to complete the IT migration. So we are in a situation in which we cannot substitute with new products our commercial activity in life insurance. We have of course BPM Vita products which we are deploying but yet in terms of Vera Vita we cannot do that much. Luckily enough in September we will have a new product from Generali which is of course what we requested this will help us to offset the potential reduction in terms of early retirement from the product requested by our client and this will adjust immediately what is the loss component affecting negatively with IFRS 17 the value of our participation in the insurance company. So basically it's not a question of integrating or not, it's a question how quick we will be to produce new results with new products offsetting products that are redeemed by our clients. We have no problem in that. We are doing very well with the other assurance, but we need products and we are confident that starting from September we will be able to compensate the very slow pace of this first quarter. On a sense, of course, we are also happy that this is not yet on board because this gives us the possibility to compensate with the new commission and new Stakeholding Value, the potential reduction in AI in the forthcoming quarter.

On RNF, sorry, maybe it was not very clear. We said around 100 million as a conservative guidance for 2024 negative, of course. So with the negative contribution, based on negative contribution from certificates, not in full offset by the other components.

And on stage 2, please.

Yeah, sorry, on stage 2, yes, we have experienced an increase which is based on the run of statistical models that capture a number of of components that we conservatively include among stage two. But really, we don't believe this has to be interpreted as a signal of weakening of the credit portfolio, more as the outcome of statistical simulations that at the end of the day leave the overall coverage need on the performing portfolio fully unchanged. So it's a remix between stage 1 and stage 2, but only at the margin with no material impact. Thank you.

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

Hello, good afternoon. Thank you very much. I have a follow-up question on your comments around the contribution improvements that you're expecting from the new product factories. I know you already talked about insurance. but I was wondering if you could also please give us some color around the contributions you're expecting from the payments business. How soon can we see those increased contributions flowing through the P&L? And the second one is in capital. You said that you're willing to explore the optionality of excess capital after you've booked Basel IV impacts. This quarter you even presented a target for RTE that is adjusted for the excess capital above a 13% target. So could we see that Potential excess capital distribution as soon as next year. Is this what you're considering when you are saying that you will exceed the 4 billion cumulative target? Thank you.

Thank you, Pamela. Let me try to answer to your first question. Basically, as I mentioned before, we are having better contribution for the existing product factory, specifically a much better contribution from Anima, good contribution from Bpm Vita and Agus Ducato. Unfortunately, not yet contribution from the PECO because you know that we will close the contract so basically we didn't start yet and as I mentioned before of course we don't have yet such a pace of growth in the income from the evaluation of our bank insurance product for the reason I explained before we count to reach a comfortable 80 to 90 million from bank insurance by the end of the year Eduardo, maybe you want to expand on excess capital?

Yes, so I think we've been consistent after we published the plan that we had a final trajectory arriving at 14%, but this doesn't have to be interpreted as a capital target for the group. We believe that this leads to excess capital definitely that we will later on during the progress of the plan decide how to use in the interest of our shareholders. So I would say here from the perspective of shareholder remuneration is only that we are confirming the strength of the group, the ability to even probably exceed this trajectory. We are ahead of the trajectory as a matter of fact in the first part of this year. In terms of distributing excess capital, the turning point will be the first initial impact of Basel IV implementation after a number of optimization actions have been deployed so that we'll be able to be more precise in measuring the potential outlook for capital and then decide how to move on.

Perfect, thank you very much.

The next question is from Fabrizio Bernardi in Termonte. Please go ahead.

Hi, good evening. You answered my question about shareholders remuneration and potential dividends versus buyback. so my question would be would be changing and would be if you may use the buffer of capital that is evident in the presentation today in order to make some let's say P&L kitchen dressing like posting some one-off charges by year-end in order to manage another part of your NPs which are already low or one-off costs. The question would have been why don't you do a buyback because this is the question that will be made tomorrow because you made a top up in terms of cash dividend for the Thank you Mr. Bernardi.

No, we never say that we don't want to make a share buyback. In order to make a buyback or to distribute dividends, we have, first of all, to make a very good profit and loss. Secondly, to have a good capital generation. I think we have proven also in this last quarter that this space is growing at an expected pace vis-à-vis the business plan we presented. Now we have maybe the last step, which is... and our capability to reduce the impact of Basel III. This will be one of the major headwinds that we'll have to face, and after we will decide what we can do in terms of distribution. Up to now, we have been happy to increase quarter by quarter, basically, the guidance for earning and guidance for increasing dividend. I don't see others that have done the same as we did. And then I think in the first part of 2025, we will give also a better understanding of our strategy in terms of shareholder remunerations. But what I think is undoubtedly that we have a very good capital generation, very good result. So there is, of course, more money in order to make happy our shareholders. Thank you.

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

Yes, hi. I have a couple of questions, please. One is on 2025. So if you can give us guidance on the evolution of the NII, that you're expecting the fees and the cost of risk. And if you can give us also the assumption on rates that you are assuming. And then I have another question on the fee print on the running fees. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord the sensitivity on capital on the base point BTP changes spread. Thanks.

Okay, let me try to answer to the first question. Of course, we didn't give you any guidance for 25. We just deployed our 24 guidance. Maybe you are a bit too early to give you some assumption for 25 other than what we said in the business plan. that we think we can reach, and this is even more confirmed and we are committed to do that, to reach as soon as possible the target of 1.5 billion. I think we are not that far away also for this year. And then, of course, considering that depending on the interest rate evolution, we will have a reduction of interest rate, but possibly an increase in commission, and the stabilization of cost of risk, we expect to be very close to our final target of 26, also for 25. But we don't have any assumption and any guidance to give you on the single driver. Yes, running fees, we expect that thanks to the increase of asset under management and asset under custody, the global volume will bring us some positive also in terms of running fees and not only in upfront. But upfront was a very good opportunity to get thanks from the request of investment sales product in the first quarter of this year. You remember very well the run to start to have fixed rate income because of potential reduction of Euribor that eventually did not materialize in the first six months, but was the name of the game in the first quarter. So that's why we also had that performance in that period. Now we'll see after summer if this situation will be again possible, but for sure now we have a pace of investment sales product that allow us to choose better, you know, the perfect investment for our client, for our customer client.

So on, if I understood correctly, the final question, this is on the sensitivity of our capital, of our position to in increasing spread on Italian government bonds. This sensitivity is in the area of one basis point of CET1 for each five basis points of increase in the spread, if this was the question. If I may add a comment, we may also on previous questions, on the scenario, for example, we have we are confident we can confirm our targets for the plan with the scenario of EURIBOR in 2026 in the area of 2.6 and these with a trajectory that for 2025 we're encouraging trajectory for results in 2025 EURIBOR at the level of 2.7 if this 2.7 2.75 if this was a part of your question okay thank you

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

Good evening. Thanks for taking my questions. Just two quick ones. Just to clarify on capital and your message on Basel IV. So your day one impact on 1st of January 25 is 80 basis points or is it 130 basis points and then you have mitigation action so the the DTA, the OCI, etc., which, you know, basically will reduce that impact from 130 basis points towards 80 basis points, you know, for the down the line.

80 basis points is the phase D impact that we expect to have day one after Basel IV.

Okay, understood. And then on my second question, which is going back to NII sensitivity, Do you mind just explaining the improvement to 200 million? What are the underlying assumptions that you're using on deposit pass-through? And if I remember your four-year presentation, for your 23 presentation, I think the expectation is to reduce the sensitivity to rates and mitigate to reduce that to only 50 to 70 million. Just wondering, you know, what kind of pace... No, sorry, never say that 50 to 70 million, I don't know.

We say always that we want to reduce sensitivity, but in the contribution of sensitivity to your first part of the question on deposits, basically this is based on the split between indexed and non-indexed. so that index deposits, as Giuseppe said during the presentation, have a beta of around 70%. Non-index deposits have a single-digit beta of around 5%. Given the shares of the two, the weighted average is around 25%, which is our pass-through assumption for the sensitivity, so I would say quite conservative.

Great, thank you very much. And on the impact of your mitigation actions, How much should we expect in terms of how much it would improve NII in the next year or so?

Probably the most important point to mention is the expected increase in replicating portfolio for which we confirmed the planned target of 25 billion even if this target we could be flexible in implementing the strategies throughout the plan horizon. This, compared to the current level of 20 billion, is a contribution per se in reducing the sensitivity of around 50 million.

Great, thank you so much.

The next question is from Noemi Peruc, Mediobanca. Please go ahead.

Good evening. I have two questions. The first one is on provisions.

Speak closer to the mic. We don't hear you.

Is it better now?

Yes.

All right. So if you could give us some color on the usage of 70 million of overlays in the quarter. And the second one is... how much of a support could synthetic securitization be to common equity post Basel and how big could the benefit from the absorption tax loss carry forward be by 2026 thank you very much okay on overlays so overlays is

also consistent with recent communications from ECB are basically to be defined as all the adjustments that you apply to your statistical models that are plugged into the credit procedure on top of them to arrive to a level of expected loss on the performing portfolio consistent with all the risks that insist on that portfolio. So the more the statistical models are accurate in terms of measuring these risks, the less you need to apply overlays. Overall, the coverage duration of our performing portfolio is unchanged, if not slightly increased in the quarter. The way we arrive to these results Bpm Societa Ord the second question is I mean for a synthetic securitization we have we continue to produce overall Bpm Societa Ord well above 10 basis points and this is similar to what we expect to do also in the following years.

Thank you. Sorry.

and on tax loss carried forward absorption by... On DTAs, first of all, all our DTAs are currently in the balance sheet, so we don't have P&L occurrences from writebacks of DTAs. The DTAs are... may be impactful only from a capital perspective. So DTAs that we currently deduct from capital over time will start to be recovered. What I can comment is that Based on our current position, the amount of capital which would be created if we avoid to deduct DTAs is around 250 basis points. This is an amount which will progressively be deployed starting mostly from 2026 and then progressively over the following years.

Thank you.

The next question is from Fabrizio Bernardi in Termonte. Please go ahead.

Sorry, very two quick questions. The first is, you presented the business plan in December, half of December, and it seems that now it's August, and you are already ahead of the targets at the end of the business plan. So apart from adjusting today's the target for 2024 about EPS and DPS. I was wondering whether we may expect sooner or later to have a full update of the business plan. Then another small thing about the capital gain regarding the digital payments, which I think should be booked in the third quarter, if I'm not mistaken. should we expect this to go down to the bottom line in the full year or maybe that maybe the usable part would be used in order to say make the next year easier so in order to offset cost or loan loss provision or make securitization whatever it is

Let's say that, of course, we are not ready to make an update of the business plan. As you know, there are still a lot of issues to overcome, both in terms of our operation, because we have to confirm with our work and with the next quarter the capability to increase massively the weight of commission and stakeholders revenues coming from our new joint venture and our new bank assurance business. Of course, going forward, we will be happy to update you. But of course, we don't have not even an update, then you ask also for a full update, then that means that the business plan would not work at all. We still are confident and we still are confident that the increase to 1.5 billion can be appreciated and can be recognized by the market and for the next quarter we will be happy to have this as a target. For digital payment, yes, this should come in Q3. The only things that we will deduct, as we mentioned already, with our business plan is the potential maneuver for the layoff, so the early retirement scheme. And if the two of them will materialize in the same quarter, you will see a figure contributing to the net stated profit, which will be the results of 500 billion million less the cost of the retirement scheme.

Excuse me, before the next question, I just want to come back to the question asked by Mr. Finn from JP Morgan on NII sensitivity because I didn't stress the point that we calculate our sensitivity based on a shock of 100 basis points. Maybe that by means of comparison with the Bpm Societa Ord

Okay, if there are no other questions, I want to thank all of you for being with us in the 6th of August. Time to make a bit of holiday for everybody. So, of course, we will be tomorrow at your disposal for any clarification. Then our IR team will be always available and hope to see all of you in September. Thank you very much.