Banco Bpm Societa Ord

Good evening. This is the Corusco Conference Operator. Welcome and thank you for joining the Banco BPM Group first quarter 2025 results 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 cell phones. At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.

Thank you, everybody, for joining the call.

The CEO, Mr. Giuseppe Castagna, together with the Joint General Manager, CFO, Mr. Edoardo Gineva, will present the Q1 results for 2025.

And now let me leave the floor to Mr. Giuseppe Castagna. Thank you.

Thank you, Arne. Thank you, everybody, for being with us for the Q1 presentation results. Very solid set of results, I would say. We are not only closer to the target of the plan, but I think we started with a real fast pace, which enabled us to confirm that the targets are at reach. First of all, Q1 results, the best results in our history, 511 million on net profits, ANIMA acquisition is not yet factored into P&L. The initial contribution on ANIMA will be included starting from Q2, having concluded the acquisition in April. The ROTI and the ROI stand at 16.7% and 22.1% with the full consolidation of ANIMA. Let's say that we are ahead of the planned trajectory. Non-interest revenues, pro forma including ANIMA, already represent 49% of total revenues versus our target of 50% by 2027. So almost there. The same I would say that if we include a pro forma of ANIMA Q1, the net income of the group would stand 2% above the average quarter of 2027. So with a big anticipation over the plan. Profit from continuing operation pre-tax are higher than again the average quarter 27, which is 788. This quarter, including Anima, we are at 827 million. These results have been driven by very strong commercial results across the board despite Euribor's decline. Let me remind that year on year the Euribor declined 1.36 points but notwithstanding that total revenues went up to 1 billion euros 476 million vis-a-vis 1 billion 434 million in Q1 2024. Customer loans went up 2.5% quarter on quarter. Investment products year on year are up 15%. We also managed to reduce general cost and provision with the cost income which went down from 47% to 44% and the cost of risk down from 32 basis points to 30 basis points. All these results allow us to anticipate that we are already changing our guidance for 2025, which will be increased by 1.7 billion to 1.9 billion, which, by the way, is the results we expected for 2026. On page seven, the fast execution of the plan has been the drivers for such over performance and the possibility to reach targets in 2027. Net income again up 38% year on year, including ANIMA, we are 2% higher than the quarterly target of 2027. Strong volume growth, 2.4 billion in Q1, vis-à-vis the forecast of 1.7%, which we had for the entire 2025. So the increase is 2.5% vis-à-vis 1.7%, but 2.5% is related only to the first quarter. The same is for investment products, 15% year-on-year, up to 6.7 billion, vis-à-vis 5.8 billion of 2024, which was already a record number. Let's consider that the average target for 2027 would be 5.3 billion per quarter. Good improvement in asset quality down from 3.6 billion to 2.8 billion. And again, cost of risk reduced to 30 basis points with a target of 40 basis points. Also happy to confirm that animal acquisition has been anticipated of one quarter having been affected by April 25th. The contribution from non-interest revenues, which was one of the main input of our business plan, is already starting to give very good results, together with a good control on cost. Total revenues, again, were up 2.9%, notwithstanding a lower NII for around 50 million year-on-year. and the total contribution of Q1 in terms of total revenues is already higher than the average of 2027 for August. The same is for the contribution of non-interest income on total revenues. The target with Anima was 50%. We are including Anima Performa 49% and the same 1% is without considering Anima in this quarter neither in average quarter in 2027 so almost there also for that operating costs very good down 3.5% with let's say cost of staff yet to take full advantage for the early retirement scheme which will impact mostly in the second part of the year and cost income record 44% vis-a-vis 45% of the target plan Total provision went down 30% with cost of risk two basis points lower than last year, or the Q1 of last year, and with an advantage of 10 basis points vis-à-vis the target of 2027. The volume growth is confirming our capability to generate shareholder value through continuing support to the Italian economy Basically, all the increase in customer loans is related to non-financial corporates, almost 2 billion in this regard, preserving also the high quality of the stock, which still is secured for more than 50%, half and half basically state-guaranteed and collateralized. And this figure became 64% of... secured if we consider SME companies moreover we were was very good the trend in new lending we passed from 5 billion of the first quarter 24 to 6 billion 0.2 in the last quarter 24 to 8.2 billion in the first quarter 25 I can anticipate that we overcome 10 billion by April this year. The difference quarter on quarter is more than 30% and with good results also in terms of ESG related medium term financing, which stood at 2.4 billion in Q1 versus a target of the year of 6 billion. So very well ahead. Total customer financial asset year on year up 3.4% basically the same figure that we registered in December 24 despite 1 billion on negative market effect which we experienced during Q1 25. This growth was supported by a good net flow both of assets under custody and Asset Under Management for a total consideration of 2 billion. Some words about Anima. I already said we will consolidate Anima by Q2 2025. Basically, we reached total customer financial asset together with the bank and Anima to the level of 377 billion. and the key figure of Anima standalone will be asset under management of 200 billion, net income of 72 million in Q125, 30 million which will be compensated in the integration, the consolidation with our figures. Let me remember that Anima has, apart from the relationship with us, which is the most important, something like 100 other distributors, 1 million on client and more than 300 investment professionals. The contribution to the group coming from Anima is an APS accretion of more than 10%, a return on investment of 13%, the possibility to reach 50%, as I mentioned before, in terms of non-interest income or total revenues and the contribution coming to net income from wealth management, asset management and protection in the region of 35% of the total net profit. One of the most ambitious targets of the plan with the wider gap to fill when we presented the plan was the revenues coming from key product factory in Q1-24 we had 222 million coming from this activity but with the completion of ANIMA we reached already in Q1 390 million versus a target of the plan of 430 million which is a 5% growth in terms of CAGR and let's consider that without ANIMA because it is not consolidated in Q1, we already had a growth in the other product factories Q1-25 to Q1-24 of more than 20% year on year. Let me remind also that the insurance and payment business will go at full speed only from 2026. further improvement also in asset quality apart from the reduction I already mentioned of 800 million in terms of gross MPs which comes from a very good and solid default rate below 1% a reduced cost of risk to 30 basis point the capability of the bank to process already out of 1 billion of disposal which were in the forecast of the business plan We already reached 800 million of disposal. The remaining 200 million will be completed by this year. But let me say on the right part of slide 12 that if we exclude the state guarantee loans, MPs, of course, we are net MP below 1%, 0.8%. Just some quick word about capital. We confirm that we can stay above 13% in terms of target after Anima also without the Nord-Danish compromise. Then Mr. Ginevra will go through the details of this figure. With MDA buff, including already, of course, the Basel III impact, which allowed us to close the Q1 at 15.3% and with an anticipation of the non-Danish Anima impact of 53 basis points coming from the capital increase we provided to BPM Vita in order to complete the acquisition of Anima. The MDA buffer stood at 459 basis points and also in this respect we can confirm that throughout the plan will be above 350 basis points very comfortable also LCR and SPR and MREL let's go to some of the numbers in details Q1 net income again 511 million coming from a good tenure in terms of net interest income minus 5.5%, but if we consider full funding costs, including certificates, the gap is reduced to 2.9% year-on-year. Fees and commission up 6%. Very good results also from insurance, which grew from 5 million on Q124 to 26 million in this quarter, together with very good net financial results, which was boosted not only from the lower cost of certificates, but good performance in the trading. Total revenues, again, 3% higher than last year, notwithstanding 50 million less in NII. Operating costs down 3.5%. provision down 30% which lead to a pre-tax profit of 15% higher than last year and a net profit again of 38% higher than last year. I have been told by my colleague that we should be around 70 million above the consensus for this quarter. in terms of consistency of our growth pace on the right side you will see in the last two years some of the most important figures characterizing the results net fees and commission went up 12% revenues up 18% cost income down 7 full point a reduction of 45% in LLP's and again net profit from continuing operation up 58%. Let's go through some of these figures. NII already mentioned that 5.5% lower in a year will be 2.9% full funding cost. This also considering that we were able during Q1 to reduce further the NII sensitivity which started in 2024 at 300 million per 400 basis points, then went down to 250 million in Q4, now is down to 200 million and 150 million if we consider also the contribution of certificates. On the right side, you see the asset spread and liability spread. which the asset spread basically was quite consistent if we consider the good growth that we registered in long growth liability spread was much better than the reduction was much better than the reduction of Euribor as you can see here Euribor was down 136 basis points we went down in Leibniz spread only 100 basis point and the same proportion is more or less for Q4 24 versus Q1 25. How we were able to maintain a good net interest income? Because to the figure of Q1 2024, if we would have applied the full predicted sensitivity, we would have gone down 93 million, but through managerial action and some other volume effect and other, we were able to register basically half of the predicted reduction. The managerial action itself will count for mostly half of this figure, around 20 million. Let me remind that it is the same experience that we had basically in each quarter of last year and that throughout the business plan we have forecast a total reduction of 100 million of positive effect in managerial action throughout the completion of the business plan. So in the next 11 quarter, we have another 80 million to optimize. So we are on the good road also in this situation. What are the managerial action? You know very well. The replicating portfolio is up from 22 billion to 25 with an average yield of 2.1%, so very solid and a duration of 2.8 years. We further slightly increased the share of indexed current account from 34% to 36% and we are also experiencing a continuous reduction of spread in the newly issued wholesale bonds, which allow us to take advantage up to now of each new issue vis-à-vis the previous issuance. Net fees and commission up 12% on last quarter 24, 6% year on year, but is almost 10% if we consider that we don't have basically any more contribution from fiscal credits and instant payments which amount for the first quarter 24 at around 15 million. And of course, not to extend in that the commercial banking fees, the other fees apart from investment product fees are still slightly higher than Q124. So they would have been much higher if we would have considered the fiscal credit commission. Let's spend some word about investment product fees. As I mentioned before, we had a big increase in placement of investment product plus 15% year on year. But we were able to manage the best products in terms of commission with an upfront which grew 29% year on year to 106 million versus 82 million in 24 and a slightly increase of 5% also on running fees. Let me also stress that another quality of fees that we emphasized during the business plan presentation which are the fees coming from specialised activities, corporate investment banking, structural finance, trade export finance and so on, went up from 61 million of Q124 to almost 80 million of Q125. Cost income, very good results, with the cost income down to 44%, a reduction in cost of more than 3%, Again, we have not yet experienced the reduction of the staff, which we mostly made during Q1. Let's only consider that we had almost 750 people out in Q1. through the early retirement scheme and the early retirement with the new hiring for a bit low up 300 people. So this, of course, will make a very strong effect in the region of some 30 to 40 million in the next in the remaining part of the year. So we will experience further reduction also in cost of personnel. DNA and other administrative expenses also in this field we were able to manage very carefully all our expenses for sure I don't think we can stay at this level for the next quarter but vis-a-vis the business plan figure we are much below the target Asset quality, I already mentioned the reduction of cost of risk and MPs. Let me just mention default rate below the figure of last year, 10 basis point. The Q rate, 1.5% better than the figure of 2024. And also a very strong support in terms of coverage where at 57%, Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord

let me give the floor to Eduardo for the finance part of the presentation thank you very much Giuseppe very quickly on page 20 to highlight that we have increased the level of the size of the banking book while preserving to 46.7 billion while preserving the split between the two components, amortized cost and fair value of the comprehensive income with the amortized cost remaining at a stable 69% of the total of the banking book. Similarly, also the share of Italian bonds on the total of the banking book or the total GOVIs and supranational bonds is in the area between 35% and 40% historically maintained, to be precise, at 38.2%. The non-government bonds are stable at slightly above $8 billion. Page 21 shows the impact of the financial part on capital and on P&L. So capital reserves have been slightly improved in the first quarter from 509 to 498 million. And as a matter of fact, they have more significant improvement in the first month of the second quarter. Now the position is 455 million. The increase in the basic point value of the comprehensive income portfolio is consistent with increase in size. and it's also related to the from 1 million to 2 million and it's also related to the intention to preserve a net interest margin in a scenario of declining rates. Turning to the trading contribution, these went up from 9 million one year ago to 46 million, but the increase is clearly to be split into two components. So the component related to cost of certificates is continuing to benefit from the trend reduction in interest rate, mitigating the overall sensitivity of RPNL that had been shown in the slide on NII. From 75 to 50 million, this is again around one-third. The rest of the trading component, the trading result, is based on other NFR component especially in terms of the global market activities so structuring of derivatives products or certificate products that is then sold through our network and on top positive results in general from trading. This part of the P&L is not currently taking the advantage of dividends to be paid by Montepaschi. The participation in Montepaschi will father provide food for this component of the PNL in the second quarter for a total that is quite close to 100 million. Next page on liquidium funding very quickly the highlights have been already presented by Giuseppe the liquidity position is 49 billion direct funding stable at around 132 billion positive news from rating agencies with DBRS position in the bank in a triple B high and Standard & Poor's improving the outlook to positive market conducive to sustained insurance activity also in this quarter and as already mentioned an activity that allowed the bank to reduce the overall spread on the bonds. On LCR and SFR, nothing relevant to comment. Maybe interesting to mention that the buffer has observed very easily the impact of Basel IV, Basel III Plus, remaining at an amount well above 9%. And talking about Basel 4, or 3+, the next page, page 23, provides the details on the evolution of capital during the quarter. So let's go step by step. We started the quarter at 15.05. We have received a contribution from performance, so the net profit from P&L, which is 92 BPs, and a distribution, including 81 coupons, of 77 BPs. meaning that PNL created despite a strong level of payout of 80% created still 15 basis points of capital organic capital generation in one quarter on top organic capital generation coming from sources different from PNL is given by the DTA 16 basis points and for value of the comprehensive income reserves here we have Future potential capital that amounts to more than 300, 325 basis points, of which worth noting that 175 basis points is to be transformed into real capital by the end of 27. So during our plan horizon, providing further comfort to our capital position overall. As anticipated to the market in the previous quarter, we have produced an important effort to optimize capital position in the participation area and in other managerial actions. So, participations leading to 17 basis points of additional capital and the managerial actions including synthetic equalization for 46 basis points. capital reduction coming from regulatory headwinds including Basel III Plus and RWA increase so volume increase has been contained in 76 basis points so leading to a total pre-ANIMA transaction of 15.30 then the value of the fully phased position in March is 14.76 with 53 basis points that is the impact of the capital increase in Banco BPM Vita to fund the Anima transaction and which is an anticipation of the overall impact of the acquisition of Anima in the scenario of where the Danish compromise is not granted. What I mean by that is that of the overall impact of 268 basis points of Anima, 53 basis points that we anticipate to the market three months ago. 53 basis points has been already anticipated with this capital increase. On top, before coming to the final potential impact, we need to consider also that the participation in Anima is 90% instead of the 100% which was used to calculate the 268 basis points leading to a saving of the order of magnitude of around 30 basis points as anticipated in previous presentations to the market. So with this in mind, I think it's clear that we are very close to maintain the 13% which will be transformed into a delivery of the target taking into account the contribution from current capital generation in the next quarter. MDA Buffer is 559 basis points, RWA at 65 billion after Basel III Plus impact. Now, again, if I can leave the word to Giuseppe for the final conclusion, please.

Yes, I think on page 25 would be, I think, very useful for you because I was mixing during the presentation with ANIMA, without ANIMA. So let me make a quick remind of the figure of the actual figure of Q125 without ANIMA. The proforma full consolidation of ANIMA of the same figure of Q1 compared on the right side of the slide with the average quarter of 27, the final year of the plan, of course, including ANIMA contribution. So you can see that the total revenues in terms of Proforma, including Anima, are already higher than the average of 2027. The core revenues are at the same level, 1,561,000,000 is the same level of the Foregas for 2027. Still the 40 million missing, you remember, from the factory, but we are going at a speed and a pace that will allow us in the next 11 quarter to easily reach and overcome the target to 27 and in doing so in completing the 50% of non-interest income coming from product factory and non-interest income on total revenues. Operating costs are already at the level of the 27 quarter. 703 million vis-à-vis 697 million as is shown by the cost income ratio which is 44% at the same level of 27 and the cost of risk which is still lower than the target 30 basis point vis-à-vis 40 basis point. Net income all in all as I mentioned before is 2% higher than the average quarter of the target in 2027. Also in terms of business mix, I think we have done a lot of road during this first quarter and especially if we consider the pro forma consolidation of Anima, you can see that in terms of breakdown of net income by business mix, we have been reduced to 60% the commercial banking activity. We are at 10% in terms of specialty banking solution but we grew already to 30% coming from wealth and asset management plus protection. So we have still this 5% of increase vis-a-vis the plan target which will come by the development of the many product factors we started in 24 and the contribution coming from integration of Anima. This is very important for us because it's not only Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord This means that the results will be much more replicable, the bank will be more capital light with a lower risk profile. All in all, we feel that also the multiple at which our stock will be considered should increase thanks to this better positioning. On page 26, why we are so confident to reach the results of the target. First of all, because we are confident in increasing our guidance, but the fast execution and the proven track record of delivery give us full confidence and full commitment from our management to reach the targets. We made the first two, the last two plan that we an example with the last two plan we presented on the left side of the slide in 21 and 23 in both cases we delivered in advance one year in advance and two year in advance for the last plan as you can see we had the target of 740 million 23 and 1 billion 50 million in 24 basically after one year we were already higher then the target in 23 with the actual 22 and in 23 we overcome the 24 target and this came with this start fast start but not as faster as the one we have done this year the second example is for the plan that we have recently reviewed in February this year this was the plan presented in December 23 as you may remember in one year we were already 300 million ahead of the forecast the guidance was 1 billion 360 million the target 26 was 1.5 billion after one year in 24 we were already adjusted at 1.7 billion in this case we had a fast start 370 million in Q1 24 which was higher than the Guidance for 2024 and slightly below the guidance of the last year of the plan. So let's go to the current plan on the right side. The current start confirm the capability to execute very fastly our projection. As you may remember, the target for 2026 of the current plan is 1,950,000,000 and for 27 is 2,150,000,000. We have had the first quarter including Anima Consolidation which stands at 550,000,000 which is 13% higher than the forecast in 26 and 2% higher than the forecast of the average quarter of 27. If you exclude Anima on the bottom line, you see that the advantage that we kept is almost at the same level, even a bit higher vis-a-vis the results done in Q1 and average of 27. So again, fast start, proven track regularly. track record commitment to delivery allow us to present this very good set of results confirming not only the capability to reach the plan but also the strength of our capital tenure and this has encouraged us to present the new guidance on net income from 1.7 billion to 1,950,000,000. This will come notwithstanding, we are considering Euribor 30-40 basis points lower than we considered in February at the presentation of the guidance. So NAI at full funding cost will be mid-single legit lower than 24%. Net fees and commission, of course, will experience a strong growth, thanks also to the ANIMA contribution, double-digit growth and a good single-digit reduction also in cost income and in provision, which leads, of course, to this 1 billion and 150 million. Q1 results, so we feel, are already in line with the expectation that we have for the plan target in 2027, and we feel really that the reference point, this would be the reference point for any stand-alone valuation of the bank. So, again, I give you the floor for any Q&A, which I would be happy to answer with Edoardo.

Thank you. This is the Coruscant 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 touch tone telephone to remove yourself from the question queue please press star and two we kindly ask to use handsets when asking questions anyone who has a question may press star and one at this time the first question is from Antonio Reale of Bank of America please go ahead hi good afternoon it's Antonio from Bank of America I have two questions please

My first one is on loan growth. You're clearly in the wealthiest part of the country and that might explain part of the strong activity levels when it comes to volumes, but you've been gaining market share, growing, performing loans this quarter. Can you talk a little bit more about what you're seeing both from your clients on the network and from your competitors and to what extent the market share gains can come without compromising price discipline? That's my first question. My second question is on organic capital generation, please. But if I may, before I jump onto that, a quick clarification on your capital ratio pro forma after including Anima at 90%. Because if I'm not mistaken, you would be at around 12.9% C1 this quarter. I wonder if that's correct. And then with organic capital generation, you'll be above 13% from the next quarter. Now, that's a quick clarification, hopefully. and then I come to my second question which is I'd like to dig a little bit deeper into the drivers of organic capital generation you just posted a very strong net profit I think it's your record high quarter with strong core revenues and very low default rates but then if I look at your slide 23 after dividends paid your organic generation deriving purely from earnings stands at around 15 basis points while the majority of the capital growth also going forward I think is expected to come from DTAs and fair value reserves and I see there's also strong manageable effort which I'm sure requires a lot of work so can you just give us a little bit more color on the quality of this organic capital generation going forward and how much more of this can be sustained thank you Antonio

Long growth, yes, a very good experience this quarter because also we come from, as all the market, from a couple of years of reduction of growth because of the interest rate, waiting the interest rate to going down, because of the uncertainty that we experience in the geopolitical situation, because of the tariffs situation. Notwithstanding that, the reduction of interest rate that we experience in Q1 is was a boost, I feel, for our client to start to make more demand for credit. Part of this, of course, is also switch from old loan to new loan. As I mentioned, we reached 8 billion of new loan in Q1. So this is part of the growth of 2.5 billion, which is not something that we think we can experience all over the year. This is already more than we expected for 2025. So now we can stay very attentive to not concede any potential advantage in terms of interest rate. The discipline has been very solid. If we are slightly reducing one or two basis points, that's a spread because we take care of the quality of the client and of the guarantee scheme that we have made now an habit to have for SMEs so very happy of these results not yet full request for new loans from all the market but of course I think our geography helped a lot in terms of growing together let me say also with the willingness of our people and our client to support and to show some interest in the offer of the bank. Yes, for the second question, organic capital generation, of course, if you anticipate to Q1 the ANIMA effect, of course, would be 12.9, but because ANIMA will come in the second quarter, we will be able to generate more capital. Let me give the floor to Eduardo for giving some color on this.

No, but what I would say on Anima is, first of all, your math is correct, Antonio, but if I simply kind of stop the clock at April 30, then I have also 14 additional basis points of reserve from fair value other comprehensive income, which is not accounted for at the date of March 13th so it's of course a dynamic that is generated I would say day by day taking into account organic capital generation that you mentioned yes the impact of ANIMA without Danish compromise is to be taken into account but also the other parts of the capital generation are part of the equation so we continue to be fully confident in maintaining these 13% that was mentioned since the presentation of the plan.

On the organic capital generation, yes, 15 basis points is what we achieved this year.

And of course, it's not 92 basis points because we think it's worth paying a significant part of the capital we generate or the net profit we generate to our shareholders. And that's the explanation of the 80% Payout Ratio. So 15 basis points is, of course, despite the 80% payout ratio, which we continue to be committed to pay to our shareholders. On the rest of capital generation, you're right, it's based on DTAs and fair value of the comprehensive income. I already said that this is out of a total, remaining total, the date of end March of 325 basis points, 175 basis points by year end 27. If you ask for more color, I would say that 50 basis points or 50 something, 50 plus basis points of these 175 are to be transformed into capital by end of 2025 with the remaining part split of 140 basis points split more or less similarly between 26 with 70 basis points and 27 with 50 basis points. Sorry, the remaining part of 120 basis points, I said 140. so we are really comfortable because now that the bank is producing strong organic capital generation and PNL in this period is not only in this scenario this not only drives direct increase in capital but also generates DTA recoveries which has been for long remained trapped into the previous

asset the situation it's great thank you the next question is from Noemi Peru of Mediobanca please go ahead good evening I have one clarification and two questions if I may the clarification is on net profit guidance did the 1.7 billion included the 160 million capital gain from animal or or is it only now included in the 1.95 billion? And then my first question on common equity. Could you please update us on the additional benefit from reallocating some of the ANIMA intangibles between banking and insurance business post consolidation? and did you consider the transitional Basel IV risk rate for the insurance business as of now? And if so, could you please comment on the impact on common equity with 250%? My second question is on M&A. On the press, I think you mentioned that BAMI would remain part of the consolidation So I start with your first question, which are three questions if I understood correctly.

Guidance includes the capital gain of ANIMA currently. Of course, when we issued the previous guidance, we had a high-level estimate of the same parameter, which was included as well. Let me say that overall, this guidance has some margin of conservatism that we now are no longer adopting, given the positive start of the year. and, of course, given also the opportunity provided by the fact that ANIMA itself will contribute to our P&L for three quarters instead of two, which was the original assumption. ANIMA intangibles, good point. I forgot to mention it in replying to the previous question. So, currently, we didn't use any smoothening assumption on the non-English scenario from reallocation of ANIMA intangibles from ANIMA to Banco Bpm Vita It's an option that we are studying. It's a possibility that we have and that, of course, may contribute to further improve the capital position of the bank. On insurance, we are applying 100% risk weight and we are expected to continue to apply this risk weight based on article, if I'm not mistaken, 499.2 of CRR, which allows us these treatment based on the existing position at the date of, I think, mid-24, if I'm not mistaken. But at the end of the day, we are confident to continue in this fashion, so not 150% for us. On M&A, I believe this is a question for Giuseppe.

Yes, even though I would avoid the first part of your question because, of course, we are under a public offer, so I wouldn't talk about retiring anybody. We will see what happens. Until then, of course, we are on this standalone pattern, which is very satisfactory for us. In the future, we will see. I already mentioned in the past that, of course, we consider ourselves an important part of the potential consolidation in Italy. I think the completion of the product factory make us as a unique kind of bank with 50% coming from commission and manufacturing for sure there will be room for make other potential to explore other potential opportunity but let us be very much concentrated on our standalone situation right now, on looking at what will happen on the offer. You know what we think about the offer. It's not yet an offer. Basically, it's still a discount. We are expecting something from Unicredit, and then we will make our decision, which, of course, will be as a leader of the Italian banking system.

Thank you. And just one follow-up on the 250%. Am I understanding correctly that you, given your structure, you would never apply 250% on a fully, fully loaded basis of Basel? Thank you.

Yes, sorry, I had a problem with the mic. Yes, this is our stance given the CRR rule contained in Article 4.9, 4.9.2.

Thank you.

495.2, sorry, 495.2.

Thank you.

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

Good afternoon, everybody. Follow-up questions on the CT1. You said that you expect after the consolidation of ANIMA to be about about 13% about the comment that you made bring me to think that you will be well above 13% you do have the cash flow generation for the next quarter including Anima you mentioned the improvement in the other comprehensive income reserve that is the DTA Then, if I'm not mistaken, you mentioned in the past also some significant risk transfer actions, the possibility to move the goodwill to BPM Theta, and you are already at 13%, let's say 12.9. So my understanding is that this is an extremely conservative guidance where I can be wrong. There could be acceleration of risk-weighted assets or what could be the other, let's say, offsetting elements to this, in my view. strong achievement, potential strong achievement. And the second question is on the commercial performance in terms of placement on investment products, which has been very, very strong. You reach 7 billion euros. I would say that there's probably this this this this this this performance was also impacted by some noise around Unicredit offer, which could have an impact on them on your network. So I was wondering whether you can give us some call also from the month of April if this positive trend is also confirmed given the turbulence we had in April.

Thank you. Thank you, Giovanni. Let me take the occasion to answer to your question on common equity. I think you have made some very good observations and comments. Unfortunately, we are stuck to this 13% because the market was influenced by some rumors going below 12%. We want just to show that since Q1, we are almost there. We are higher than there. And even with the contribution of anime, impact of anime will be there. So, of course, we have generated, again, track record. If you look at our eight years of story, I think we have generated 2,000 basis points of common equity tier one, all in all, in order to the risk 30 billion of assets, in order to make all the capital management action we have done to build up our network, our product factory, and so on. So now, unfortunately, I don't know why the market is stuck on this 13%, and maybe we were so Bpm Societa Ord somebody would have expected some reduction in capital. We are still there and we will be stronger even after. Placement, a good question. Also, this is one of the only credit impact. What can I say? Of course, we would prefer to work without distraction and without distraction for our network is not that easy. especially at the beginning when something happened like that. But as you were mentioning, then you can be able to transform problem in opportunities. Maybe this was the case also for our network. We have experienced a lot of commitment from everybody, from the 1,300 branch, from the 15,000 people in the network, from all the people working from the bank. We are so committed and so certain of our strength standalone and maybe the results of this quarter testify the capability of the bank. Sometimes you need a kick to perform better and this was a good occasion. April, let me say, that was still very good considering the many, unfortunately, breaches that we had during the month, Eastern 25 of April 1st of May and so on and you know that in terms of commission this costs a lot because you cannot perform the day by day transaction but I think we were around 1.7 billion in terms of investment much higher than April last year the same this I think I mentioned was in terms of loan production we are above 10 billion by the end of April so we will continue very steadily to perform well. Thank you.

The next question is from Manuela Meroni of Intesa San Paolo. Please go ahead.

Yes, thank you for taking my questions. The first one is on your net income guidance for 2025. It has improved so you already mentioned some changes in the capital gain on Anima. I'm wondering if you can share with us what do you expect to be better compared with what you were expecting in February when you released the first guidance. and we are talking about better volumes, revenues, lower cost or provision or anything that you can share with us. And the second question is again on the Common Equity Tier 1. You already generated 46 basis points from managerial action. I'm wondering if you still have further room for other managerial action that you want to put in place in the next quarters and if these managerial actions are going to have any impact on your revenues. Thank you.

Thank you, Manuela. I think on page 27 we gave you some, let's say, indication about the bettering the many bettering, I would say, of the forecast of the guidance for 2025. Basically, we are confirming that NII is kept at a very solid level of one mid-single digit reduction vis-à-vis 2024. And on the opposite, we have a strong increase in commission, very good performance in cost income and in cost generally. and a lot of room in terms of guidance in provision. So all of these together with the HANIM anticipation of one quarter should give us the results that we presented today. For managerial action, I don't know if Edoardo want to.

Yes, can you repeat the question? Do you understand if you talk about capital or NAI, sorry?

I was talking about capital. Capital.

Yes. Yeah, so what we have done is we originated this capital mostly from synthetic secularizations. We performed two transactions in March and from, how to say it, from the credit portfolio by reducing the capital absorption with maneuvers that you can imagine on our lending, on our credit risk and capital absorbed on credit risk. So we can continue. We don't currently expect to perform synthetic securitization in the second quarter. We are considering currently additional transaction potentially if needed either in the third or in the fourth quarter. And of course, we will continue to optimize the credit portfolio.

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

Yes, good evening. Thank you for taking my questions. I just wanted to ask you on NII and the interest rate sensitivity, which is reduced to 200 million. If you don't mind elaborating a little bit on this. And it seems to me that part of the difference in terms of consensus and revenues that you target is also not just, you know, core revenues, but trading and associates and insurance. So just wanted to see on trading, like, if you could give us a little bit of, you know, indication, I mean, q1 was clearly very strong, but in terms of the run rate that you would expect and the trends on that. Thank you very much.

Okay, so on NI sensitivity, basically this is the result, the reduction of NI sensitivity, this is the result of the progressive implementation of all the actions that we are producing to decrease the sensitivity of our balance sheet in a scenario of declining rates. If I may summarize the concept, the real name of the game is the usual deposit beta. So one year ago, the contribution to sensitivity of total deposit of improvement in Bpm Cost of Deposits, taking into account the replicating portfolio one year ago for 100 basis points was 360 million. Now it's 480 million. So this means that especially taking into account the increase in the replicating portfolio, I don't have on top of my mind the amount one year ago, but it was probably below 20 billion. And now we are... at above 25 billion, plus the restructuring of the deposit portfolio itself, which is now indexed at a share of 36%, leads to this improvement because we have a natural share of deposit repricing in a scenario of declining interest rates or repricing through the swaps in a scenario of declining interest rates that contributes to this reduction in sensitivity. then of course there are some moving parts in the rest of the balance sheet but overall they tend to compensate each other throughout the period that we are considering. On NFR what we have and that contributed to the improvement in the guidance is of course consolidation of the results of this month and on top the fact that given that we have two quarters of ANIMA part of the contribution of Anima is in Nefar for the contribution of the dividend from MPS, which is in the order of magnitude of additional 40 million. So this explains the fact that we are confident to close with Nefar, which will be in the area of, let's say, slightly below 100 million. Part of this contribution it comes as well from again the reduction in rates because with the current level of rates we clearly have an advantage in certificates that is shown on page 21. Last quarter, last year, we paid 64 million on certificates. Now, in a quarter, we paid 50 million. One year ago, we paid 75 million. So this is a contribution to the overall target, as I mentioned.

Thank you very much. The next question is from Marco Nicolai of Jefferies. Please go ahead.

Hello. Thanks for the presentation. So on commercial performance and on commission, so fees were very strong this quarter if I compare how much the commission income grew compared to the stock let's say AUM were up 3% year on year but running fees are up 5% and also placements are up 15% but upfront fees are up 30% so there has been also let's say margin effect on top of the volume effect can you give us some examples you know indications what is driving it and if you think it can be sustainable for the future and then and also on asset quality so still pretty solid and overlays increased compared to the previous quarter but let's say so if you are in a scenario where GDP growth is lower than expected can you provide us with some with some sensitivities on your cost of risk

and just a clarification is the cost of risk guidance embedding them 2025 net income guidance 30 basis points thank you okay thank you for the question very interesting let me talk about this is very important the fee increase in terms of yield of each investment product sold this is the difference between of having a product factory on yourself and just distributing product from other product factory when you have the full range of product factory you can choose time by time in the best interest of the client the most convenient product in your range of the many factors let me make an example last year first quarter was very good we didn't have any life insurance product because Generali and Veravita were not providing us any new product. We were obliged to sell other products that mostly had maybe a lower yield for us. Now, including also Anima, of course, we have a wide range of products which come from the most simple current account to the most sophisticated provided by SICA for funds from Anima and we can depending on the capability of the client to be risk adverse or risk premium to give them the best product we always have a solution for them and this allow us to have a much higher yield in terms of each product that we can sell So I think that, frankly speaking, maybe the volume is not so I'm not so sure that we can continue to grow to six and a half, seven billion per quarter. But for sure, the yield of these sales will be even higher than the one we presented, because now we have all the ammunition to give the most important, the best product for the client and for the bank. So I think it's sustainable. and the first quarter results shown very clearly this assumption asset quality sensitivity we of course have done sensitivity also for 2025 considering a default rate much higher depending also on potential decrease in GDP and I think we have 10 to 15 basis point of increase from the current situation

for a zero GDP growth in GDP tendencies?

Yeah, 10% for a zero GDP. Sensitivity on cost of risk is the one that you asked. It's the same question, I think, asset quality. 30 basis point is not the guidance for 25. The guidance is higher. As I mentioned before, we have a default rate which is higher, prudentially, of course.

The next question is from Ignacio Ulargui of BNP Paribas Exxon. Please go ahead.

Thank you for taking my questions. I just have two, one on costs and the other one on commercial spread. So starting with costs, I mean, the performance has been very strong, much stronger than what we expected at least, and that has been largely driven by admin expenses, which are down 60% in a quarter. although they are flat year-on-year, sorry, quarter-on-quarter. How should we think about admin expenses going forward? What kind of investments are you planning to have into 2025? And the second one is on the commercial spread. I mean, how should we think about the performance of the commercial spread? It's kind of largely done, provided that your average day is a current level, so we should expect some further decline in the coming quarter. Thank you.

Thank you. Thanks for congratulating on the evolution of the bank. Finally, on staff costs, or in general, on operational costs, I would say we are very optimistic on the evolution of Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord While we talk about costs, let me also clarify that the cost of personnel is still in progress of improving during the rest of this year, because starting from the second quarter, we will have the positive impact of the redundancy schemes that have been agreed in December and started only to a limited extent to produce the benefits during the first quarter. So this is another area where we believe we can continue to deliver an improvement in the performance for the rest of the year.

Coming to the commercial spread, let me talk, I didn't understand if you want to talk about deposit or asset spread, so let me talk about commercial spread in general. If you see our page 16, you will see that our commercial spread has increased much higher than the reduction of the Euribor over the quarter. For instance, Q1-24, we had an advantage in the commercial spread vis-à-vis the Euribor average of the quarter of 37 basis points. Thanks to the maneuver that we are doing on the liability spread and the capability to keep a very good asset spread also in a growing environment, we have increased the commercial spread in the last quarter of 24 to 58 basis points from 37. And in Q1, 25 to 69 basis points. So that means that our capability and view to reduce the possibility to increase NII in an environment in which Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord spread reduces reducing much at a lower speed vis-a-vis the reduction Euribor and having the capability to keep the asset spread at the same level we have a potential increase in commercial spread meanwhile the Euribor goes down thank you thank you

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

Hi, thank you for the time. Just two quick questions. One is I've noticed you didn't show any loan growth in household loans. I wonder if there's any, you know, if there's anything to do with the pricing conditions in that part of the market. If you could please discuss those. And the second question on the replicating portfolio. Do you still see any room to grow the size of the portfolio further? And the duration, 2.8 years, seems a bit low. Why are you not pursuing a longer duration? That's it, thank you.

No, on replicating portfolio, we are fine with the level that we reached, which was announced back in the previous strategy plan and confirmed in this one. we believe that taking into account the share of index deposits which do not need a replicating portfolio to improve price sensitivity overall we are at around now 60% of total deposits that are hedged either through replicating portfolio or through the contract itself of indexation and strategically we are fine with that bearing in mind that still the yield curve remains negatively sloped or only slightly positively sloped for the relevant levels on the 2.1% rate I believe we are satisfied with that of course we can improve once the yield curve will normalize by simply replacing the back book with a new transactions more or less leaving unchanged the current volumes we observe in the market that other institutions have a lower level of yield and a higher duration meaning that it might be slower for other players the improvement of the overall profile of the same replicating portfolio On the long growth pricing condition maybe I didn't get very clearly the question

is how we have managed the loan growth, keeping good prices.

Sorry, you were just on household loans. You didn't show any growth in household loans. I was wondering if that's because of pricing in that market.

Basically, the vast majority of the growth was with corporates and SMEs. We are of course growing in terms of residential mortgages, but with a very slow start in January, improving in February, very good in March. So let's keep an eye on the next quarter to understand if March will be the average for the next quarter. For sure, there is an improvement. Meanwhile, the interest rate goes down, but still not at that speed yet. that we could have expected with such interest rate. Let's see this quarter what happens. Thank you.

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

Thank you for taking my question. Good evening. The first one is just a follow-up on the G&E expenses. You said that, yeah, it is a can be seen that are closer to the one of the previous quarter but if I understood well during the call you have said that it is unlikely that on a standalone perimeter they will remain at this level so what could be imagined has a reasonable average quarterly level for these expenses Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord if there is still a positive substitution effect on this side. And the very last one, obviously, it is quite difficult to quantify, but clearly in a lower interest rate environment, there is room for higher capital gains. And so if it is reasonable or in some way reasonable Yeah, it can be a reasonable hypothesis to assume an average trading level that is close to the one that we observed this quarter. Thank you.

Okay, thanks a lot for allowing me to clarify, especially taking into consideration the position of equity in this current overall environment. It's interesting. It's helpful to be able to clarify. On the general expenses, I wanted to mean that we are very satisfied of the current level of the general expenses, which is consistent with the last quarter. In our guidance, P&L, we prefer to stay a little bit more on the safe side so that if needed, we will have room. But again, this is an area where we can compress the overall budget level of expenses so generating additional buffer and additional delivery to improve our overall performance so overall we are kind of guiding for a slight increase but we have room to compress this item if On NII effect from substitution, well, of course, it depends on the various products and on the various segments. So at a constant mix, I believe that we can say that the back book is replaced by an equivalent level of spreads from the front book. Then if the mix changes, it depends on... products, for example, mortgages, of course, would have a lower spread compared to SME and small business lending. On the rates, I believe that the current level of rates gives probably more opportunities to further push and improve in commissions. because in investments in investment portfolios of our clients capital gains tend to materialize helping for additional commercial activity from the network trading we don't have expectations to translate capital gains in the portfolio into trading because of course these capital gains are in the parts of the portfolio that generate higher levels of NII and we are fine with the long-term contribution of such parts of the portfolio.

Very clear, thank you.

Mr. Riscassi, gentlemen, there are no more questions registered at this time.

Okay, so thank you very much to all of you and I hope to see you in the next days for some other clarification. Thank you very much.