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.