Banco Bpm Societa Ord

Good morning, this is the Chorus Call Conference Operator. Welcome, and thank you for joining the full year 2024 Banco BPM Group Results and Business Plan 2024-2027 Update Presentation. 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, Investor Relations Manager of Banco Bpm. Please go ahead, sir.

Good morning, everybody. Thanks for joining the call. Let me just remind you that on the website you can find all the material presentation for this conference call that, as you know, will present the full year results and the update of the strategic plan. And now I leave the floor to Mr. Castagna. Thank you.

Good morning everybody. Thank you for being with us. Very important day for us to be here to present the 24 results and the update of our business plan. We call the continuation a solid and continuing success story because we want to show with this plan how the last eight years was characterized by commitment from our side and delivery. Not a single year below expectation. Now we are at the final step of transformation of a solid commercial bank into a well-diversified integrated conglomerate with strong support from commission and product factory up to 50% of our net profit. So Banco Bpm for us is the place to be and we want to write the new roadmap towards 24% of ROT. Let's start from 24 results. All time high for our bank, net income stated at 1.9 billion with 1.5 billion of dividends distributed. Let me remember the former target of net profit for the plan was the same amount which will remunerate our shareholder. 1.5 billion was the target of net profit for 2026. Net income adjusted to 1.7 billion and ROTE adjusted at 16%, well above market consensus and 2026 targets. costing come down in two years 7.5 point full point gross MP ratio ratio already below the target of 26 down to 2.8 percent and net bed loans close to zero how we were able to manage the bank in this way we are leveraging on a strong business model in the Italian banking landscape focusing on the most dynamic regions at European level, not only Italian, and parallel distribution franchise with best-in-class product factory models built up in the last few years, lowest NII sensitivity across peers based on historical observation with the new transaction of Anima to further improve non-interest income contributing from 40% to 50% of our total revenues. The new target, the target for the updated plan will be outstanding. We will deliver in 2027 net income for 2 billion, 150 million, which are realistic, highly feasible, and we will show you in the next page how we'll reach this target. Anima adds 200 million of this net income. Let's consider also that we were, of course, more conservative vis-à-vis the previous plan with the Euribor scenario down to 2% vis-à-vis 3.1% of the last plan. All other P&L growth drivers are strictly in line with 2023-2026 plan. and mostly conservative if compared to the trajectory we were able to realize during 2024. So we are not pushing the results we reached in 24 up to 27. We want to be at most of our credibility to show you the same trajectory of the plan presented in 23. The ROTI in 27, we have a concrete perspective to reach to overcome 24% of ROTI with improved business mix, high value business at 45-50% of new net income, vis-à-vis 30-35%, which is the current contribution. And of course, the management is happy to commit to top notch shareholder remuneration with the minimum of 6 billion cumulative distribution over the plan, plus 1 billion of additional distribution upon obtainment of positive feedback of Danish compromise application. All that with still a rock-solid capital with a CHET-1 above 14%, also considering the 7 billion of distribution. Let's pass to the results of 2024. We accelerated profitability and increased remuneration at an unprecedented level. We reached the 1.7 billion adjusted. The top up is done from the combination of income coming from the Numia transaction and the funding of the early retirement scheme, which we signed in December 24 net income adjusted 1.7 billion means 16% of erotic versus 12.9% of guidance and the same net income is 330 million above 24 guidance which means 24% above the guidance and is already 190 million above 2026 target 13% higher. If you look at the figure on the left, you will see that we started from 2023 with an APS of 83 cents. We committed at a guidance of 90 cents for 2024, increased during the year at 95 cents. We conclude the year with 1.12, 1 euro 12 cents of APS adjusted one euro 27 cents or APS stated already above the one euro which was the target of APS in 2026 and now is the DPS for this year and going forward about distribution this year we increase our distribution of dividends to 1.5 billion with increasing also the payout to almost 80% coming from 67% again with the DPS at one euro and the dividend yield also at the current price above 11%. In the first two years of the plan, we realized that the cumulative dividends of 2.2 billion 350 million which is 500 million above our guidance of one year ago. The total cumulative dividend is up from 1,850,000,000 to 2,350,000,000 which means 27% increase. And all of these with the common equity tier one increased to 15% starting from 14.2 of last year, 23, well above the landing point of the 26 plan at 14%. And all of these with still further profitability coming from the product factory that has yet to emerge because of the recent start of many of these activities. So why update? Because as is very clear from page 8, we are above 26 basically for all most important figures comparing 24 results and 26 admissions. As you can see, we are up 5.4% in core revenues, 4.4% vis-à-vis the target 26, pre-provision income up more than 10%, both vis-a-vis 23 and the target of 26, cost income down 47% with a target of below 50% in 26, and cost of risk already below the 26 target of 3% at 2.8%. And this is why we are updating our business plan. Let's go to some figure of 24. Net income adjusted again to 1.7, 18% year-on-year. Net income stayed at 52% higher than 23. As you can see, basically all the core revenues went up as well as we had a reduction in loan loss provision and other expenses. and we reached the profit from continuing operation at 22% higher than last year. And after an increase of 30% of the tax paid, we landed up in net profit from continuing operation up 19% vis-à-vis last year. On page 10, let's go to some of the main figures of these results. Let's start from NII. and AI the only figure which is underperforming but much better than the majority of the competitor is the reduction of 2% in gross performing customer loans even though we were able to manage new lending for 21.5 billion which is 10% higher year-on-year compared with 23. The vast majority of our competitors did a much lower figure in this respect. Deposits went up 1.4% as well as certificates and other debt securities at fair value, up 12%. Let's have a look at Euribor compared with the commercial spread we were able to reach. basically we performed better than the decrease of the Euribor because the commercial spread both quarter on quarter and year on year was ended up with better figure vis-a-vis the reduction of Euribor in one year the Euribor went down 94 basis point our commercial spread was down to 81 so bettering the reduction of Euribor The same was a quarter-on-quarter. The Uribor was down 55 basis points. We went down 40 basis points. How we did that? The trend of net interest income was supported by managerial action that added on positive NII contribution, both in an increasing and in a declining interest rate scenario. Let's start with the increasing scenario, which is the comparison year on year. You will see that we went up 150 million compared to 23, even though the sensitivity would have given us only 48 million. We were able to add up more than 100 million through managerial action in which we will explain immediately after. The same was with the scenario in the last quarter of Euribor Down. As you can see, in the last quarter, comparing last quarter 23 and last quarter 24, the Euribor went down 94 basis points. Per quarter, this means a predicted sensitivity of minus 70 million. we were able to mitigate this impact to 12 million all in all with a contribution from the managerial action of almost 60 million in positive. On top of that, these figures were done with the sensitivity of the end of 23. Let me say that end of 24 we have a full funding cost sensitivity which is 200 million reducing 50 million year-on-year. Net interest income again, and that is some further explanation about both sensitivity and managerial action. If you compare the trend of Euribor in the last three years, starting from first Q22 to last Q24, you see the curve of Euribor but comparing the increasing rate scenario coming from the beginning 22 to last quarter 23 because then the Eurabor starting to decline we have been the bank which the lower growth in NII and also compared to the peer to the average of the peer we are at 70 percent contribution coming from the NAI's growth scenario, vis-à-vis a contribution of 97% of our competitors. This is explained by the cautious managerial action we improved during that phase of increasing Euribor, which now is paying off and allowing us to reduce sensitivity effect and give support to our NII. The same is the impact that you can see of the more limited contribution of NII vis-à-vis total revenues that our bank has been performing over these two years vis-à-vis the other banks. So the fact that very often we are considered as a bank very much subject to sensitivity. I think that we have completely overcome this understanding through the action we were able to take in place during these last two years. And these are mainly on the right side of the slide. You see that we have increased from 15 to 22 billion the replicating portfolio. But if you add on the increase to 34% of our indexed current account, Basically, we are covered for half of the deposit base, more than 50% of our deposit base. And, of course, thanks to the index, the current account, we have experienced an immediate reduction of impact on NII, vis-à-vis the Euribor. The Euribor went down 98 basis points during 24, and we had 94 basis points, and we had a positive impact, a less penalizing impact on 98 basis points, thanks to this maneuver. On top of that, I remember that we have also some direct effect on cost of funding First one is the share of time deposit vis-à-vis the original plan, which is one third of the original plan for the first year. We have 1.4% of time deposit, which of course are much costly, vis-à-vis 4.5%, which was the first expected for 2024, and 9%, which was expected for 2026, and of course is now not anymore needed. because of the reduction of Euribor. On top of that, we have the decreasing cost of new wholesale bonds. As you can see, the issuing made in 2024 and 2025 after the attainment of the investment grade and the positive outlook from all the investment rating companies allow us to have a reduction in the wholesale Cost of funds which come goes from 60 basis point of the senior preferred to the 200 basis point more than 200 basis point of 81 Let's have a look on page 12 on the total net fees and commission We have an all-time high also in this figure six point five per six point four percent normalized and with a strong impact both from the commission from investment product fees and the commercial activity. Let's have a look at the investment products. We went up 10% in terms of contribution of commission. The vast majority coming from running fees as a consequence of the improvement of 22% of the investment product placement performed in 2024 vis-à-vis 2023. Let's say that we have started 2025 even better with the same pace in January, which is almost 20% higher than January last year, which was a record month for 2024. And also in terms of commission generation, we are applying a policy in our investment product placement which allow us to increase the average commission for our products. This improvement in investment product placement helped us to increase the stock indirect funding from 62 to 66 billion in asset under management and from 44 to 50 billion in asset under custody. First month of the year, we are 2 billion up this figure. very strong performance also in the commercial activity with the particular improvement of 18 percent coming from the specialized activities across structure finance trade finance and so on on the right side of the slide there is also some comparison between the results of 24 coming from the new structure of our product Factory built up very recently in which in the first year of the plan we are already above the growth the pace of growth forecasted in the plan 23 26 the plan forecasted 11 percent growth aggregate and we are in the first year already at 12 percent even though many of these product factories started only in September 2014. A look on page 13 to our cost-income ratio, reduced to 47%, without the positive contribution of the Solidarity Fund, which is only starting in 2025. So we will have the concentration of 150 million of positive contribution not anymore distributed on three years of the plan but in the next two years 25 and 26 allowing us to recover more than 75 million out of the field that you have shown today let's also mention that also in other administrative expenses we have a reduction of five percent meanwhile we have an increase in DNA because of the massive investment we are performing in IT, AI and all the digital banking activity. Let's go to the cost of risk. This is really a solid success story. You know where we started from. We are now another 17.4% reduction of cost of risk at 46 basis points. still at the eye of our competitor, also with what I called before becoming a net zero bad loans bank. We were able to manage our gross MPE down 24%, net MPEs down 15%. Let's say that out of 1.6 billion, below 1.6 billion of net MPE, if you exclude the state guarantee loans we are below 1 billion and in terms of bad loans we have only 200 million of exposure we experience a solid I would say default rate until November the same rate of last year below 1% then we already switched into I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm I'm Just have a look to the capital liquidity and funding position. We have been proving to be able to build up further capital year by year, even considering the massive distribution and the higher distribution to shareholders increased with this presentation. Of course, this is our proposal to our General Assembly. So we started from slightly above 14%. and we ended up with the dividend at 67% to 15.4% of Common Equity Tier 1. If we consider 39% of dividend payout increased to 80%, we remain above 15% even after the increased distribution. with a very solid MDA buffer, almost 600 basis points. LCR and SFR, you see the figures are really confident. And I think that with this very solid set of results, again, more than 300 million ahead of our plan, we can update the plan and continue to improve the forecast that we have for our bank. Where we stand today versus competitors, I would say that we have a highly attractive competitive position, both because of the strong franchise rooted in the best region of our country, I would say also Europe, with 75% of our asset loans in the north of Italy, but also because of our capability to build up in the recent years a new model of bank starting passing from a pure commercial bank and introducing a complete full range of product factories if you compare with our peers we are now the best in class we have for all the five principal product factories our direct presence as shareholders, sometimes as only shareholders, sometimes through joint venture with best-in-class partners. And you can see that starting from asset management with Anima, life insurance with the two insurance companies that we own 100%, and as well Anima we will own 100%, non-life insurance and consumer finance with our partnership with Crédit Agricole and the recent partnership with FSC and ICREA in the payment system with Numia started in September 24 we now have the best position amongst all the main banks reaching let's say the bank which is normally considered best in class as far as our direct presence in product factory and increasing the gap vis-à-vis the less structured bank in terms of product factory or I would say the more NII dependent bank vis-à-vis our situation. What have we done during these years to be rightly considered as a management team with an undisputable track record of growth and accomplishment? Let's have a look to the results of the last four years. We have always overperformed our trajectory. As you can see, you see both, and I think I've just stated for the last four years, as well as with a massive increase from 500 million to almost 2 billion in terms of stated, and from 700 million to 1.7 billion in terms of adjusted, as well as the reduction from 5.8% on gross MPE to 2.8%, and the increase, notwithstanding the massive distribution to shareholders, from 13% to 15%. but we have also exceeded our own commitments always as you can see in the last two years we had a target in our plan 21-24 of 740 million for 23 and we ended up with basically the double of these results as well as last year we gave a guidance of 1.3 billion of 24 results net profit and we ended up with almost 130 million up our guidance the same is for MPs the same is for common equity even considering the increase of distribution of dividends and of course all these results show you not only the need but also our ambition to present an updated plan which take into account the big results the consistent results and the new confirmation of our bank let's also say on page 19 that we not only exceeded our expectation but I would say we always exceeded the expectation of the brokers you can see year by year of course starting with the big gap in 21 was our first year after the COVID, of course, lack of confidence toward the banking system in general. And we had the gap of 190% between consensus and the actual end of the year net income. But this gap has always been present with an average of almost 40%. Also in the last year with 18% gap between consensus and the actual results of the bank. This has been, of course, paying off through a very important total threshold return above 1,000% if we start after the COVID period in May 2020. And our stock went up not only after the recent OPS on us, but was already 800% on the 25th of November, so before the OPS. And let's say that after the OPS, we grew 27% vis-à-vis 23% of the ingress. So I would say that this 1,000% is undisturbed. Also in terms of dividend yield, at the European level, we had the second bank in terms of dividend yield we are above 11% and you see all the other peers below I believe that with this full set of results we deserve credibility for our commitment so let's go more in details to show you the key message and the key figure for our updating plan the key messages are basically we have a more conservative Uribe scenario we were 310 basis points we are now 200 basis points and 26 the new starting point is of course the 24 performance adjusted which as we mentioned many times is a plan for more than 300 million and allow us to increase the new targets but the key pillars the action the driver The growth that we presented in 2023-2026 plan are all confirmed, adding on only the integration of animals starting from the second part of 2025. So the growth are not pushed because of the situation, but are the same growth that we forecast one year ago, starting from a better starting point. And of course, we improved to 27 because it does make sense to have a plan which is not at least three years of horizon. Let's go to the performance. We are able to confirm you again with a prudent plan assumption that net income will go up from 1.5 billion to 1.95 billion in 2026. and 2 billion 150 million in 27 with a contribution of animal 200 million the four-year cumulative should all the remuneration pass from 4 billion to up to 7 billion but 6 billion assured in any case obtaining be without or weed the attainment of the Danish compromise if we obtain the Danish compromise of course we will have more capital we will be able to give a father 1 billion of distribution the roti is going from 13 percent to more than 24 percent in 27 and higher than 20 percent in 26 and and the landing point of Common Equity Tier 1, again, is not a target, but is a landing point, will be above 14%. And even in a situation which is not foreseen of no Danish compromise, we will be above 13% with the same distribution we explained before. Let me give the floor to Edoardo Ginevra for the detail of the plan.

Thank you Giuseppe and good morning everyone. So let's start with the scenario. We have been adopting assumptions that on the macro perspective are very similar to the previous plan. GDP in Italy going 0.7% in 26 and 0.4% in 27. Inflation rate at around 2% both in 27 and 26. We were much more prudent in the area of interest rates where we have been below the assumptions of the previous plan for more than 100 basis points. Now we are at 2% both in 26 and in 27. These assumptions lead to the bridge between the current level of profitability and the future level of profitability, which is shown on page 22. So allow me to go step by step. We started last year from an adjusted basis on P&L, an adjusted basis of 1 billion 430 million. today we are at 1.69 and the guidance we gave one year ago when you announced the plan was 90 cents which is 1.36 so we are ahead of the previous plan the previous announcements 330 million on an adjusted basis the increase between like for like between last year and this year is 18 percent the overall average growth rate embedded in the plan from now to 27 is 7.5% which if we exclude Anima is much more prudent 4.9% from 1.69 to 1.95 How do we achieve this level? First of all, reduction in NII, 300 million, and we'll come to describe all of these pieces more in detail in the following part of the presentation, of course. We have non-interest income increasing of 150 million, 280 is commission, 80 is net financial result, 90 is income from associates, life insurance, and other net operating income. Then we have a contribution of 60 million from the reduction of both operating costs and other provisions, a contribution of 70 million from the removal of systemic charges. and a tax effect which drags something like 40 million. This leads to 1.95 and we believe this can be very easily explained on a piece-by-piece basis. Then the addition of Anima is 200 million on top. And again, this also Anima, this 200 million is simply consensus plus some very conservative additional assumptions. Let's go piece-by-piece. First of all, nothing new compared to the previous plan. Page 23 says that simply we have exactly the same assumptions in terms of growth of loans, growth of net fees and commission, growth of volumes in indirect funding, stability of operating costs and cost of risk that were used in the previous plan with some natural evolution in some areas. and nothing new also from the viewpoint of the pillars that are needed, the initiatives that are needed to complete the plan. The same seven pillars that we used to have, leadership in SME and corporate, reinforced wealth management and life insurance distribution, capture value from our product factories, partnerships in P&C and payments. develop further our omnichannel approach to our clients, improve the level of innovation continuing in the investment space with more than 200 million per year during the plan, consolidate our balance sheet, improving further the asset quality, and empower people and the community. we add in addition to the seven initiative Anima a new pillar of which we will provide some detail in a moment and we preserve the approach to sustainability that is completely integrated in the various pillars throughout the plan Anima the page 24 is coming from 230 million the current level of profitability 50 million of which is part of our PNL given our 22% stake to 260 million 60 million is like for like the current stake 200 million is the addition how we arrived there first of all we took consensus for 2026 then we extended consensus to the following year so 20 years sorry 2027 with an inertial and conservative approach then we added the conservative assumptions conservative assumptions on synergies anima is yearly year by year is amortizing its intangibles at consolidated levels which is something that after our PPA will be removed from our PNL then we have a limited amount of synergies on the cost side a new LTIP will be aligned to BPM policies some central function synergies and really very conservative on the revenue side just to give you an idea we are talking about 5 million of revenue synergies in terms of contribution to net profit and given by additional increase of penetration of a new product in our claim basis or fully under our control. To give you an idea of the prudent approach. This gives me also the opportunity to briefly illustrate what we are doing on Anima. As you probably have read in the press release, we are calling for a General Assembly and we received commitments from shareholders of Anima. So now we have already secured 43.3% of Anima capital. and the General Assembly is planned for 28th of February in a little bit more than two weeks to approve the new offer price of 7 euros and to grant the board the authority to decide on waivers for the condition precedent that we included in the offer we launched on November 6th and because of the passivity rule introduced after we had been subject to the tender offer from Unicrate are now need now an approval from the General Assembly. These conditions, President, include minimum acceptance of amendments, may include Danish compromise. Important to bear in mind, we are not giving up to such conditions with the approval, General Assembly approval. We are simply delegating the Board decisions about future management of the offer process perfectly in accordance with Testo Unico e la Finanza. On commitments that we received, we received a letter, and we are grateful for that, from both Poste and FSI. Poste owns about 12%, FSI owns about 10%, then there is the dilution for LTIP, leading to 21.3% of animal share capital. on top of our 22% fully diluted stake becomes, as I said, 42.3%. These are subject to the General Assembly approval concerning the authorization to amend the terms and conditions, as I said earlier, price and the other conditions. On top, one point worth noting is the role of ANIMA management. they are entitled to receive some 4.7% of share capital following the acceleration of the IP. These shares are either to be tendered or subject to 12 months lock up, excluding the self to cover portion for tax reasons. So we are confident that we can have a positive contribution to the offer also from such shares. The metrics that we used for the ANIMA deal are fully confirmed. Financially, EPS accretion is 10%, RWA impact is an addition of 39 basis points. From a strategic perspective, as also Giuseppe was mentioning before, contribution of non-interest income will go as high as 50% of total revenue. So half of this bank will generate revenues on the non-interest part at the end of the plan and 35% of our net profit base will be generated by wealth and asset management and protection leading to a very strong diversification of the business model. Page 27, now let's go to the detail section. In this page, we show the comparison between 23, 24, the previous plan, landing point or target, sorry, at 26, and then the updated plan, including animals. Total revenues. 5.70 billion, the current starting point, 6.07 in 26 instead of 5.4, and 6.36 in 2027. This is due to the, as I said earlier, reduction in NII, conservative interest rate scenario, as I want to confirm again, and increase in net fees and commission thanks to ANIMA contribution and thanks to the improvement of our fee generation through the various business both for the factories and traditional banking. um we will have a total level of uh core revenues which goes from 5.69 to 6.24 contribution of factory this is very important target was to go from 860 to a little bit less than 1.2 billion this was the existing plan now we are already at almost 1 billion so we are full speed compared to the plan and we target 1.72 thanks to the contribution of ANIMA. We will see details on this in a second. operating cost basically stable or slightly reducing thanks to the agreement with the trade unions and to cost discipline, then we will add only ANIMA cost base on top for a cost income which will go down as 44% at the end of the plan. And let me remind you that the previous target was below 50%. cost of risk and naturally going in the low 40s until arriving to 40 basis points in 27 and finally sorry if I reiterate net income net income goes from 1.5 billion which is the previous target and more or less is the current consensus, as you all know, to 2 billion 150 million, an increase of 650 million. And again, I have in mind that other banks announced an increase of the same order of magnitude, but starting from an order of magnitude of around 9 billion or things like that. Return on tangible equity, this year we generated an already excellent 16%, in 26 we target 20%, above 20%, and in 27 we target above 24%. We'll come back on this 24% in a second. volumes long growth is moderate is expected to be moderate at 1.7% per year also facilitated by the new interest rate scenario the assumptions on growth are very conservative and similar to what we did in the previous plan customer deposit deposits are flat but with an important remix compared to the previous assumption in the plan because we will not need to push that much on 10 deposits in a reduced rate environment so we conservatively estimate to go from the current level 1.5 to a final level of 2.4 billion but we probably won't need such a high size In direct funding, we grew in two years of almost 13%. We will grow in the next three years of only half of that, less than half of that, 5.7%, with a remix between assets under custody and assets under management in favor of the second ones. So, NII. For NII, page 29, the last part of this slide simply summarizes the analysis that Giuseppe showed in the first part, commenting the results. Simply, we are not that rate sensitive. The simple truth is that our net interest in the period of rate increase grew of only 70% compared to 97% of our peers. and now the portion of total revenues which is represented in the last quarter by the increased NII is 24% for our peer the same ratio gives 28% so on less than one quarter of our total revenues is the impact of this increase in rates Um, how to explain then the dynamics of net interesting and going forward this year we went from 3.29 to 44, and Giuseppe explained very well that this is the result of not only sensitivity, but also additional managerial actions, and surprise, surprise, this is the same that we will do from 24 to 27. 390 of reduction, which is led by sensitivity, this is simply arithmetics from the initial to final level of your eyeball, but we are able to mitigate this impact under 400 million and let me reiterate that this is this hundred million is in three years is the same amount that we generated in only one year in 2024 so looks like it's achievable and incredible On top, same rate dynamics will drive the improvement in cost of certificates that you see in the bottom of this page on the right, from 280 to 170. for net fees and commissions page 30 gives the dynamics of the various components so we grew this year of 4.4 percent which is a normalized 6.4 percent after neutralizing for increased in cost of synthetic civilizations which were not expecting for the future and for current account excess liquidity commissions. So the real growth was 6.4%. The future growth is 4.4% per year, and of these, 110 million are attributable to investment product fees, 40 million to commercial banking, 70 million to strategic partnerships. Again, we reiterate, this is an area where the full potential has still to be attained, given that NUMIA started only in September and CREAGRICOL partnership in PNC started one year ago, in January. finally the speed the fees from specialized activity will contribute for additional 60 million anima with the consolidation of its fee base provides an additional contribution of 500 million on product factories we wanted to provide on page 31 the same detail that we comment quarter by quarter and we which we start giving to the market one year ago with the plan so basically as I said earlier we grew 110 million this year from 860 to 970 We will grow 100 million per year with a growth rate which is below because last year it was 12%, now it will be 10%. Anima will lead to 440 just a quick note technical note to say it's different from the 500 the previous slide because here we remove the duplication in created by the fact that currently we account for the net profit share within the associates pnl line but it's the same amount that you see in the previous page the total is 1.72 easily operating costs. This is an area where we have already secured a reduction in a share by 60 million. Basically, we have the effect of the trade union agreement is overall 100 million and the effect of the final tranche of the new contract will be in the three years 40 million. The part related to administration, expense and amortization is increasing 30 million, but simply because we start amortizing the new investments which we are producing because this is a bank that invests every year in technology, in digital, in cybersecurity, and in people, by the way. So we arrived to 2.62, which is lower than the standalone base of 2.66. Anima adds 170 million for a total of 279. asset quality so we used to be a 24% MP bank we are now expected to be a 24% return on tangible equity bank 24% is the starting point of our journey end of 2016 and if there is a success this management achieved is to be credible every year in curbing the cost of risk now at 46 basis points and expected to be at 40 basis points in 27 we adopted a very prudent stance in projecting the level of stocks, so from 2.8% to 3%, so that the stock of MP is around 3 billion constant. We already said that net bell loans are close to zero, after you consider the part that is guaranteed by the state. Default rate and workout activity are consistent with our track record and with these market dynamics. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord the difference between our numbers and the numbers in the consensus. The numbers in the consensus which reflect the stand-alone position of the bank lead to a total net profit in 27 of 1.5 billion whilst we project 1.95 and on top we are the 200 million for anime so let's break piece by pieces this difference stand alone versus stand alone so first of all these are net numbers let me allow me to switch to gross numbers pre-tax so 450 becomes some 650 then let's go line by line and break down the difference piece by piece NII, we are at 3.44. Target is 3.15. Consensus is 100 million below. The difference is simply the managerial actions that you expect to deploy in the three years. We did 100 million of managerial elections in one year in 2024. This is three years. Net fees and commissions, we are at 2 billion. We want to go, we expect to go, the target is 2.28%. Consensus is again 100 million below with a growth rate on average of 3%. This is the consensus. We grew last year on a normalized basis of 6%. And we still have, as I said, to achieve this number, we will need to grow 4.4. And we still have to deploy the full potential of the product factories, which will contribute further to the development of the community. Other revenues is another contributor of the PNL that needs to be clearly identified. This includes not only trading, but also contribution for certificates, insurance, the associates, significant part of core revenues for us come from there. We start from 260 million this year. We aspire to achieve 450. Consensus is halfway between the two, 320. Why do we believe that we can achieve our target of 150? First, benefit from certificates, more than 100 million because of the reduction in rates which reduce the cost of funding coming from these instruments. Second, NPS dividend. Of course, in 24, we didn't have this, while this starts to contribute starting from 2025. We have 5% of Montepaschi. Montepaschi pays an order of magnitude of 1 billion, so 5% is an order of magnitude of 50 million. Then there are product factories. The product factories here, as I mentioned, include not only associates, but also the insurance line. And here we expect 100 million split in two between these two. And for associates, of course, we expect an increasing contribution from our joint venture, like Agos, like Numia, like the PNC Verassicurazione. Let's go to operating costs for operating costs. We arrived to 2.62 again stand alone not anime is not included in this scheme. This breakdown. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord For the other costs, we have a history that speaks for us in terms of cost discipline actions implementation. We have a tradition of being very rigorous and disciplined in acting on each and every single cost lever. We expect to do the same, if not better, in the next few years. The final part is LLP and other provisions where we have a total starting point of 440 and market consensus leads to 610 whilst we expect to land at 420. The difference is probably to be better explained by dividing between LLP's 120 and other provisions. For LLP, our target is highly consistent with the improvement trajectory that we have historically experienced and with the trend reported by peers. For the other provisions, basically here, real estate covered the lion's share in our history. The investment portfolio of real estate is now drastically reduced to below 480 million. used to be 1.1 billion at beginning of 2023. So, reduction in the portfolio, initiatives such as Square Project and also the future environment of reducing interest rate will explain the improvement of this line of the PNL. Let me go to capital. capital is from 14.2 to 15% and will go to 14.4%. How we get there? Retain the earnings 146 basis points and here you have the details of the components from net profit and from the distributions at 80% payout. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Regulatory headwinds here, this is Basel III Plus accounting for 94 basis points, so here we have updated our previous guidance after some optimizations, initiatives that we started to implement in our portfolio, and Anima leading to a contribution, WA, of 79 basis points. Then we have a positive expected contribution both from DTAs which will be recovered thanks to the profit capacity generated during the three years and from fair payable comprehensive income reserves with usual assumptions of pull-to-par. participations after the reduction after the reduction in the portfolio will lead in to an improvement of 30 basis 31 basis points then this leads to 16 percent in case after we obtain the approval for the niche compromise we'll be able to distribute one additional billion to our shareholders and this will lead to 114.4 percent important to bear in mind that, first of all, this final level doesn't take into account the future potential capital, which might be created by further recoveries in DTAs and in negative reserves on federal comprehensive income beyond 2027. second point is that even in the scenario which we don't think is likely of the of a northernish compromise treatment of animal acquisition still we expect to have a ct1 ratio above 17 percent at the end of the each year during the plan horizon and now I think that Giuseppe may conclude the presentation yes sorry for keeping you so long but I think we had

many piece of news very important and for us is really important that you can understand in deep each number of this presentation let's let's terminate with the our commitment of course we call meet were committed as a management team to perform let's say as usual on the positive solid the track record of delivering which we never miss any year and will bring us to a cumulative net income of almost 8 billion, 7.7 billion, vis-à-vis 6 billion of the plan, a cumulative shareholder remuneration from 4 billion to up to 7 billion, with a minimum of 6 billion, to a return on tangible equity end of plan, which was 13%, is now 24%. and as Eduardo said, this number for us has some meaning because it was our MP ratio when nobody believed that without any share issue we would be able to reduce basically to zero this amount of MP. Shareholder remuneration. Basically, we tend to more than 50% of our current market cap. This didn't change from the previous blend. but what changed is the price of our stock we went up from 5 euro to 9 euro this means that we are delivering the double of what we were committed one year ago the formal remuneration will be reassessed periodically the interim dividend is confirmed a quick note about guidance 25 net income higher than adjusted 24, total revenues positive, and AI at full funding cost in middle single digit reduction, net vision commission double digit type with animal contribution for six months, cost income at the same level of this year and provision a bit lower than this year. Let's terminate with the final slide that a we want to really do a to to make clear a is not only a matter of numbers we I think we present a number which are really mmm unexpected the which are very surprising a meanwhile we think are very credible a very feasible that the number of the plan that now we don't want to conclude on number we want to conclude on the business model we have created during this year. We have done an impressive work over the last three years to develop a new transformation in the bank in order to come from a pure commercial bank activity through a specialty banking solution to a wealth and asset management plus protection bank. These will constitute 35% of the revenues and the profit of the bank together with the specialty banking solution will go up to 50% of non-interested income. These change completely the profile of risk of the bank. We will have a bank which is much less risky, more resilient and replicable in terms of profitability, less capital intensive and so allowing us to be even more generous with our shareholders on the right side you see the what we have done during this year we have taken advantage of higher interest rate not only to perform the TSR that we mentioned before which is outstanding but also to devote part of the profit to build up the new bank a new bank which not only as a tribal of a net profit but this net profit will come for half of them from the activity we develop day by day in the last year somebody say that can change banks in six months this is a dream or maybe can be transformed in the nightmare you have to be consistent when we do you do this kind of a job we now have a bank that through the joint venture with agricole The rain sourcing of life bank assurance the joint venture from the payment system and Newly announced the acquisition of Anima will transform completely the risk profile of the bank Enhancing also our multiple in terms of value value creation So let me make a small joke. Somebody says that he has an unlocked plan. I would say this is a plan locked in in terms of results. Thank you very much. We are ready for your questions.

Thank you, sir. This is the chorus call 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 you to limit your questions to two per participant and use the handset when asking questions. The first question is from Pamela Zuluaga of Morgan Stanley.

Hello, good morning. Thank you very much. The first question that I have is specifically on your Q4 results for insurance income. There was a sharp quarter-on-quarter decline. Can you give us some color around what were the moving pieces for insurance income in the quarter? And what are the main drivers that you expect for this line to grow moving forward? And the other one is a follow up on your distribution targets. I understand that you will assess the distribution mix for the 80% accrual. But what about the potential additional 1 billion distribution? Are you open to it being distributed via buybacks? Thank you.

So Pamela, insurance income in Q4 has been clearly satisfactory, even if not at full steam. So in Q3, we have been benefiting from the reversal of some of the lost components booked in the previous quarter. In this Q4, it was sort of a more normal type of evolution but still below the potential in terms of driver for growth we continued to be very effective in pushing for products for two areas of products the most important being Vera Vita traditional products and also with the mixed the hybrid product that we sell through the Irish based factory uh going forward in this rate environment we believe this will be very conducive to further improvement in the insurance results and this will make us confident that this line of profit will create additional contribution during the plan as I said in commenting the projections uh let me leave the world to Giuseppe for the distribution

Sorry, very easy. This is a subject, as we mentioned, to getting the final word about the Danish compromise. We, of course, feel that this is something that has to come by this year, and this will be distributed most probably as a share buyback.

Very clear. Thank you. The next question is from Ignacio Urlarqui of BNP Paribas.

Thanks very much for the presentation and all the details. I just wanted to get a bit of your thoughts on when I just look to the NII of 2026 that you provide in the present list of the plan, it looks like there is an incremental decline in 26 versus 25. So I just wanted to get a bit of your thoughts on what are the moving parts on that decline in NII. And the second question that I just wanted is how relevant volumes can be in improving the performance of the top line in 25 and 26. Have you seen any kind of acceleration of lending growth? Some signs that provide some comfort on a recovery of volumes? Thank you.

Yes, thanks a lot for the question, Ignacio. So what happens in 26 is that we have the full impact of the reduction in rates, which already go down to 200 basis points on average in this year. Basically, the cycle of rate reduction is fully completed during 2025, and then we have a sort of constant level of Euribor for 26 and 27. So this leads to the need to allow for some time for the deployment of part of the managerial actions that will create most of the impact in 2027. So at the end of the day, what happens in 2026 is simply if Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord On volumes, very good question. Basically, if I think to the balance sheet of the bank, the point is mostly about constant level of deposits, stable level of deposits. Of course, the more we can do on loans, the more we are happy in financing the economy, creating side business with our clients, improving our franchise. We are very happy to deploy Capitan instead of leaving it idle. But still, if volumes are not growing, if you put the same amount into bonds and security, at the end of the day, you get a very similar type of contribution to the P&L in terms of NII. So NII-wise, volumes are really not that important, not that critical for the achievement of the target result.

If I may add, it was very clear on loans and of course we can be sure that if there is a recovery, we will be the first bank to see this recovery because of our geographical position. If you compare the small loss of volumes that we had during this last two years and you compare with banks which are not present as we are in the north of Italy, you will see figures massively below 7% of decrease. But talking about the other Aspect so basically deposits and indirect funding We are already growing in 2025 at the same pace of 2024 as I mentioned before we were really 2 billion of increase in indirect funding Volumes that are 20% higher in terms of investment products. So we are very confident that we Comparing this growth with the really small and prudent approach of the plan that I remember only figure six percent of growth in the three year CAGR we are very much above Thank you The next question is from Noemi Peruk of Mediobanca

Good morning, thank you for taking my questions. I have a few on the Danish compromise and I would like to know the day one impact of the acquisition of Anima without the Danish compromise and if this would not impact the 80% payout on earnings in 2025. and I was wondering if you could give us a little bit of color on this decision, whether it is a matter of timing, considering the tender offer ongoing, or if it is a matter of skepticism maybe you sensed from the supervisor. And then on NII guidance, I think you mentioned single digit down for 2025. I was just wondering if this is at full funding cost or is it NII as it is and if you could give us the difference between the two in terms of year-on-year evolution. Thank you very much.

Okay, I believe that what counts is the sum because at the end of the day, the gross profit is in the gross profit, they go both. But I mean, we are in a mid single digit, including full funding costs, high single digit, not including funding costs in the trend of NII in 2025. On Danish compromise, what I can say is, first of all, payout is confirmed every year, 80%, whatever is required treatment of ANIMA acquisition. Without any compromise, like, I would say, before any optimization actions, the acquisition of ANIMA costs us around 240-250 basis points. would cost. We believe that at the end of the day what we are doing with the animal offer if General Assembly approves is simply going back to the position at the beginning of the offer because when we introduced the offer we wanted maximum clarity and certainty so we introduced the condition precedent on ECB. Now we understand that this condition precedent is difficult to be fulfilled with the pronunciation from ECB before the end of the offer period. We are very committed to proceed with the offer with ANIMA, so the removal of the condition precedent is all in order to make sure that the offer can be implemented in the right timing. then for concerning the regulatory outlook we are fully convinced that what is written in the EBA question in the EBA Q&A that says that the Danish compromise is applicable to the goodwill that you obtain after acquisitions through the insurance arm of a financial conglomerate is a clear outlook for our acquisition of animals

Thank you.

The next question is from Adele Palama of UBS.

Yes, hi. I have a few questions on the fee and the IOM growth in the plan. So can you tell us a little bit about how you see the fee margin evolution? and which type of market performance you are embedding in your fee forecast and in the forecast of the IOM. And then, sorry, can you repeat the impact of the Danish, if you don't apply Danish compromise to Anima, it's around 200 basis points, you said. Then I would like to know if you have, any DTA of balance sheet if you can tell us the amount and then one general question more around M&A how do you think about inorganic growth opportunity for BAMI at this point thanks

Well, let me repeat, Danish compromise. No Danish compromise on ANIMA is around 250 basis points if no optimizations are involved. So thanks for giving me the opportunity to restate that we don't believe this would be the end of the story. We believe there could be room for optimization. then interesting question on DTAs I've been in this bank for 10 years we never had DTAs off balance sheet so just correct that we have the opportunity to provide clarity in case it is needed we've always kept our DTAs in the balance sheet so the only point of DTAs is capital discussion and not PNL discussion on AUM and fees. You asked probably for market effect, correct? which is above it on market performance expected into the forecast and on the margin on the management fee margin evolution okay no management fee margin evolution is stable over the plan and for the market effect is two and a half percent on average to the plan let me add something about M&A let me remember that we were both in 2017 and in 2024

the first bank to move into M&A. First with the deal between Bpm and Banco and recently the 6th of November with the only cash offer present in the market on Anima. After us a lot happened. Of course we have now to be consistent with what we did because we didn't want only to be bigger, we want to be better. and in order to be better we have to perform the business model that I tried to explain in detail during the presentation. Then we have another offer which basically now is not an offer because it's at a discount but can materialize in the future. We will deal with that possibly, of course, with all the restrictions of the passivity rule. Third, if we go out also from that, of course, I think we are the best position bank for further M&A. Again, no need to explain our performance, no need to explain our geography, no need to explain our business model, the most complete. So whoever don't want to have an M&A with Banco, I don't know. We will see in the future which opportunity we will have in the interest of our shareholders. of our people, of our clients, of our territory. We want to ensure our shareholders that they don't run useless risk and stay on the best place.

Okay, thanks. The next question is from Andrea Lisi of Equita.

Hi, thank you for taking my question. The first one is if you can provide us an indication of upfront fees in the fourth quarter 2024 and in general over the full year, and what is the level of upfront fees that you are assuming in the plan, obviously for the a bank of BPM standalone and combined with Anima and in slide 31 you have pointed out depicted an 80 million increase in revenues from Associates can you provide some detail on that and really just a clarification on the evolution of the NII have I understood correctly that the increase of 5% of NII 2027 versus 2026 is not driven by volumes or by marginal part by volumes and mostly by managerial actions that you are planning to to put in place and which are these if you can provide some further details on this managerial action thank you

Okay, thanks Andrea. Upfront fees in 2024, which I believe has been given in the presentation, but we are a little bit above 250 million and this is a level which will be consistently maintained during the course of the plan. So as an order of magnitude, we are stable on upfront fees thanks to level same level of intensity over selling activities by our branches on associates. Let me go back to the slide. it's the product factory contribution to income from associates once I have removed Anima and the detail of these is so first of all Anima is a strange impact because here it's accounted for in associates and then removed in the effect from animal consolidation. So that's why you are funding this there. We have also an increase in Agos Ducato, which will contribute for a little bit less than half of these 80 million. and Numia Group, which will contribute for more than one quarter of these 80 million. The rest is Zetaima and Verasicurazione as well.

Let me just add, just to the clarity of what I also said before, that meanwhile we adopt this conservative measure in terms of fees that Eduardo was mentioning which are the same that we forecast in the previous plan 23-26 the current experience of upfront fees both in end of the year but especially beginning of the year is massively increasingly so I think you would see some figure which is consistently higher than the forecast we adopted for the plan let me say that The average quarter of last year could be reached between the first 45-50 days of the year this year.

On NII in 27, in general, we say that the 100 million are the impact of both volumes that are developed throughout the plan, including the last year, so part of it will be obtained in 27 and managerial actions. Managerial actions are represented by reduction in spreads on funding that we pay on issued bonds and on certificates remix of the funding sources in a way to optimize the contribution to the net interest income and replacement of replicating portfolio the part that is going to mature during the next one and two years which are typically at low rates with higher rates comparable with the current shape and with the expected shape of the yield curve which will contribute more towards the end of the plan than in the beginning Thank you Thank you

The next question is from Delphine Lee of JP Morgan.

Hi, good morning. Thank you for taking my questions. Just a very few quick clarification. Just on NII follow up on what you've just said. Is your assumption on the replicating portfolio to still increase that eventually towards 25 or 30 billion? and would it be possible to have the sort of rate of you know the of what is maturing on your replicating portfolio you think lower rates just to kind of assess you know how much of an uplift we can get during your plan and then on buybacks would you start just about the timing of that would you start that I would assume after the ANIMA offer. Would you ask the authorization for that as soon as you get the Danish compromise? And also maybe just when do you think you get clarity on the Danish compromise? Is that March or could that be later? Thank you.

let me comment on the replicating portfolio you gave me the opportunity to provide a few pieces of data which we started giving to the market in last quarters we have a duration of the replicating portfolio of two years and a quarter, and we have an average yield on this replicating portfolio of 2.1%. So given the current shape of the yield curve and having the opportunity to play a little bit with maturities, we are able over time to increase the overall yield of the portfolio, the receiving part, I mean, whilst we will pay less because of declining new LIBOR. on the other hand we don't foresee an increase in volumes we are happy with the current level of 22 billion we didn't account for the forward start in this level which we will use to continuously replace maturities that we have so I don't know it will be 22 to 23 but we don't expect definitely to arrive in the current setting to 30.

Let me say about share buyback. Of course, we have to wait for ECB authorization. Otherwise, we cannot decide the timing. Once we will have the time, we will propose to our assembly a further distribution of 1 billion that the management is committed to perform. And in that case, I repeat, it is yet to come. We don't know the date, but most probably will be a share buyback. and and the Danish compromises March show you would say or could be later how can answer to a question that depends on ECB not on us so I don't know how can give you some guidance about that we were we make a decision to anticipate anima offer without waiting for the Danish compromise approval, just because strategically it's much more important to take on board in our conglomerate the ANIMA contribution and then wait very quietly for what we think should arrive. When this will arrive, we will have further capital in order to have a further shareholder distribution.

Great, thank you very much. The next question is from Manuela Meroni of Intesa San Paolo. Good morning.

Thank you for taking my questions.

The first one is on the loan evolution. I'm wondering if you can comment on the trend of loans in the fourth quarter and what do you expect in 2025? The second question is on the regulatory rate wins at page 35, 94 basis points. This is just related to the Basel IV. or some other element you should take into consideration and what is the phasing that you have assumed in your business plan. The question on the sensitivity to rates, I'm wondering if you have further room to reduce this sensitivity. I imagine that you have. And finally on the DTA, what are the DTA that are remaining in your balance sheet after 2027? Thank you.

Loan evolution has been flat during the fourth quarter, even though we experienced a big increase in loan granting. As I mentioned during the presentation, it was 10% higher than last year, and the vast majority of this increase was in the last quarter. in the last two quarters, basically, from September on. This year, again, as Eduardo mentioned, we are keeping the 1.7% growth over the plan horizon. This year, a bit slightly above the growth of the plan. Up to now, we are having good loan granting, but, of course, we are not already experiencing growth because we think this will come with interest rate reduction.

On headwinds, Manuela, it's Basel IV. It's deployment of the Basel IV rules that have a phasing of seven basis points per year, which in our simulations, of course, which will continue for additional three years after the end of the plan. On DTAs, sorry, we mentioned 130 basis points of additional potential capital. 50% of that is DTAs. So after 27, we have 130 basis points of potential additional capital represented half of it by DTAs and half of it by negative results on fair value of the comprehensive income.

The next question is from Hugo Cruz of KBW.

Hi, thank you for the time. It's related to that DTA effect and OCI effect in your capital waterfall. It's quite big numbers. I was wondering if you could clarify a bit the timing of those positive impacts. Thank you. Like in each year.

Yes, I can, but allow me a few seconds to go through the material. Okay.

In 25, I have 44 basis points of DTAs, Tax Loss Carry Forward, and some 50 in total, considering also the fair value of other comprehensive income. similar pace in 26 again some 50 basis points and then much less in 27 because we start exhausting the potential in we are about in the 27 we are in the area between 20 25 basis points something like that thank you very helpful

The next question is from Marco Nicolai of Jefferies.

Hi, thanks for taking my question. So my understanding is that the amendment of the ANIMA offer consideration allows also Unicredit to terminate their offer on Banco BPM. I don't know if you have any color on this or any reason to believe that Unicredit instead would not exercise this condition. Thank you.

Thank you, Marco. very interesting question of course the behavior has been a bit randomic in the next few weeks with many intervention in credit in financial activity so really we don't know what they want to do also visa via our decision to go ahead in Anima it's very difficult to say in my opinion is not only the Anima thoughts that they have to have but also some much better understanding of our plan our potentiality how much they should spend in order to get Successful their their potential offer that again now is not an offer Thank you The next question is from Luis Pratas of autonomous and

Thank you very much for taking my questions. I have the first one on the Danish compromise again, sorry. Could you please give any color regarding your interactions with regulators on this subject? You seem to be a bit more cautious regarding the timing. So I'm basically trying to assess what is the risk of not receiving the Danish compromise altogether. And secondly, could you also provide a bit more color on the cost development throughout the business plan? Bpm Societa Ord How much you expect for cost, for instance, next year and do the 100 million benefits from exit that is come equally throughout the years or is going to be, you know, more, more front holders next year or like more closer to the end of the business plan. Thank you.

okay interactions with regulators simply reflected in our statement on the fact that we want to make sure to close the deal anima as soon as possible and we prefer not to wait for the pronunciation of the regulator so simply that we don't want we don't have a clear certainty on timing when they will provide confirmation or potentially give a indications that diverge from both currently the EBA gave to the whole European system on operational costs we are going for decline already next year in 25 compared to 24 and then marginally improve going forward. So I'm talking about standalone without considering the contribution of Anima, which is on top. But what we will do is that we will achieve an improvement in costs next year. Then going forward, it will be balancing between further reduction in the cost of personnel for additional deployment of the agreement with the unions and some marginal increase in depreciation, amortization and depreciation.

Thank you.

You're welcome. Gentlemen, Mr. Viscassi, there are no more questions registered at this time. Would you like to hand it back to you for any closing remarks?

Okay, thank you very much. Sorry again for this very long conference call, but it was worth to attend to discuss. Of course, we will be on the show since this afternoon. We will be very happy and keen to give you all the further information you need in order to better understand the many figures that we presented today. Thank you for your attention. See you soon. Bye.