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.