Banco Bpm Societa Ord

Good evening, this is the Coruscall Conference Operator. Welcome and thank you for joining the Banco BPM Group H1 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 telephone. At this time, I would like to turn the conference over to Mr. Arneris Cassi, IR Manager of Banco BPM. Please go ahead, sir.

Good afternoon, everybody, and thanks for joining the Banco BPM Alfea Results conference call. Giuseppe Castagna, our CEO, and Eduardo Gineva, Joint General Manager and CFO, will take you through the presentation, which will follow by Q&A session. Please, just let me remind you to limit to maximum two questions each. I will hand over to Mr. Castagna.

Good evening, everybody. Welcome to our H1 presentation. Very happy to give you this presentation, which is full of good results and state of art of our business plan target already reached in our H1. First of all, very good net income at an all-time high at $1.2 billion. 110 million. Well on track on our target of this year, 1 billion and 150 million. Very good news also from Capital. Remember that we had a guidance of 13%. We are already at 13.3% of chat one. Also, of course, this will be the first presentation which we have also consolidated from the second quarter ANIMA results. So I will try to give you both figure one like for like without anima contribution and of course the stated one which includes also anima contribution which mean Q2 contribution plus the one off on capital gain. Let's start from net income. 31% like for like increase. from 750 million H1 last year to almost 1 billion, 984 million this first half of the year, to which we have to add 230 million of global contribution of Anima. Let's say that these accounts for 54 million being the contribution of Q2, 200 million being the capital gain, and minus 25 million, which are the cost of both the successful OPA and the abandoned OPS. For a total, again, net income of more than 1.2 billion in six months, which represents 62% of our guidance of almost 2 billion, 1,150,000,000. for 2025. Again, the guidance has already been overcome by our common equity tier one. And all these results, I would say, are thanks to our confirmation, our model to be very close to our client, to our territory. and is well represented by the growth that we had bought in a new lending for 15.3 billion in the first six months of the year, which represents 50% more than the same period last year, and also the sales of investment products, which is 12% plus year on year. very good performance also on the management of our credit portfolio which declined 23% year on year and if we exclude considering net MPE the loans with state guarantee which we don't want to sell because they are very much well covered then we can cash all the difference we are below 1% 0.84% Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Page 7, let's consider what happened to our bank with Anima Consolidation. To confirm the successful strategy that we had in launching the public offer on Anima, we have our group now handling 155 billion of asset under management on top of the more than 200 billion of the bank. with a total consideration of 383 billion managed by the group. Also, the contribution to the fees and the net fees and net income is very considerable. We increase with Anima on a pro forma basis 23% net fees and 11% net income of the group. Another very important target that we have already reached, which was one of the main targets for 2027 of our business plan, was to even the contribution from non-NII to the one given by NII. I'm sure you remember that our target was to reach 50% of non-NII Let's say that after the first half of the second year of the plan, but the first year with Anima inside, we are already at 49% of non-NII on total revenues contribution. And also the contribution to net income from well management, asset management and protection is already at the target level of 35%. Very consistent is also the increase of both return on equity and return on tangible equity, respectively to 17% and 22.6%. And also the pre-tax and pre-one-off profit contribution is already at level of the final year of the business plan. So we are already at 1.6 billion vis-a-vis 1.577 million being an average year. of the results of 2027. The contribution comes from very solid growth in revenues. As you can see on the left, we grew, notwithstanding 124 reduction in NII year on year, we grew non-NII 213 million for a total consideration 2,883,000,000, which is 3.2% like-for-like growth, to which we have to add the contribution second quarter of ANIMA, which is 141 million, ending up to more than 3 billion in the first half of the year. Again, the non-NIA revenues grew from 38% in the first half of 2024 to 45% like-for-like, and if we have a pro forma consolidation of ANIMA for all the year, we are already, as I mentioned before, at 49% of contribution. This was coupled by very strong cost control. We reduced our cost from 2.6% like for like, and we are basically at the same level of cost of 24, even if we include the cost related to Anima for the second quarter. The same we can say for the declining of provision which went down 24% from 215 million to 163 million which comes from a reduction of LLPs from 194 to 164 million and basically to reduce it to zero the other provision mainly on real estate. On page 9, this was coupled again by a very strong capital position. We started, as you know, with 15% at the end of last year. We had to face two very strong reductions coming from the ANIM acquisition, of course, after the denial of the application of the Danish Compromise, which accounted for 242 basis points. and regular headwinds for 62 basis points, mainly related to Basel III. This ended up our capital to 12%, to which we were able to add both with organic capital generation and managerial action, mainly, I would say, regarding fair value on comprehensive income, DTA, and so on, the level of the capital above the 3%. to 13.3%. The same comes from MDA Buffer which grew from an average level that we mentioned Q1 of 350 basis points to almost 380 basis points. Let's see, generally speaking, you know that our business plan has been done with the strong thought of transforming our bank from a pure commercial bank into a more consolidated bank with all the product factory contributing to the final results. And of course, in order to do that, it takes time, but we were very quick to reach some of the target already already in the first half of the year. Notwithstanding that, there is still a long way to complete, and we want just to say that for the different product factories that we consolidated, let's say, in the last three years, 23, 24, and 25, we are still halfway, I would say, to the final full steam that we think can happen starting from 2026. for the different product factory. Let's say that the life insurance that we integrated in 2023, but we had the opportunity only to switch in terms of IT system during the second quarter of 25. We have completed the migration very successfully. Meanwhile, our joint venture PNC is still under migration, which is to be completed in second part of 2025. This is just to say that these are very long consuming time transaction which are already giving very good result to our bank but still have to perform in the terms that we forecast in the business plan because still has to bring more value to our bank. The same we can say for the payment system found on Numia joint venture with ICREA and FSI. The transaction was completed in 24. We worked a lot last quarter 24, the first quarter 25 to complete the POS migration, which is completely successfully completed. But we are now starting with the issuing migration. So the issuing of credit cards to our clients. And this will take for the whole 25. So again, the full steam will be in 26. Last but not least, Anima, which was announced, the cash offer was announced on the 6th of November 24th, as you know, has been completed April 25th. This is the first quarter in which we consolidate Anima, and the numbers are already very loudly speaking, but still we think that with all the synergy, we can have full steam again in 2016. So I would say very good result up to now, but it's a long work and we have to wait maybe another year to see better and stronger results that we expect. Let's have a look to the roadmap to the plan target. As you know, we plan to terminate 2027 with 2 billion, 150 million of net profit. we have on the right side of the slide 11, split in two, of course, the F1 and F2, compared with H125 pro forma, which means consolidating ANIMA for both quarters, not only for the one that is stated, not considering, of course, the one-off, and comparing this figure with our final plan target. As you can see, total revenues are almost there. We have a performance 3 billion, 150 million as total revenues compared to 3 billion, 180 million of the target of the plan, which is we are slightly above in terms of NII, 30 million above, slightly below 70 million below in terms of fees and commission. This is why I explain to you that the roadmap for the increasing of volumes of the product factory are still to come with core revenues which are 3 billion 100 million vis-a-vis 3 billion 160 million with non-interesting income contribution of 49% compared with 50% of the plan and operating costs which are already at the level of the 2027 plan target. Cost income is already there, 44%, we are below in terms of cost of risk, with the net income excluding one-off and by far minorities, which is almost 1 billion 60 million, compared to 1 billion 75 million of the business plan. So still some room, but very close to the final target. Let's have a look on page 13 to the main figure of our H1. Of course, we are comparing like for like in the first two columns, and we just put also the stated number on the fourth column of the slide. I will comment, of course, only the like for like. We are 7% below in terms of net interest income. If you consider the NII at full funding costs, which means including the cost of the reduction that we experienced, the cost of certificates, the total NII cost has been 4.2% below last year results. And this 4.2% has been completely replaced by increase of 4.4% in terms of net fees and commission, which grew 4.4%. Let's say that we had also a very strong increase in terms of income from insurance from 25 to 80 million. We had a good net financial result from minus 76 to plus 46. And this brought total revenues 3.2% vis-a-vis H1 24. We already spoke about the reduction of 2.6% in terms of operating costs. which brings the pre-provision income to a plus 8.5%. We experienced some reduction in total provision, so we grow the contribution on profit from continuing operation pre-tax to 14% and post-tax to almost 18% more than the first six months of 2014. Of course, 24% was impacted from the last tranche of systemic charge. So we end up with a 31% of increase like for like accounting the net income to 984 million. Meanwhile, including Anima, we reach a net profit stated of 1.2 billion. On the right side, you're going to see the main trends, 23, 24, 25, both, of course, compared with the first H1 of each year. And you see that the growth and improvement was good in all the main line of the profit and loss. Revenues grew almost 12% because the income went down four percentage points. LLP were down 36% and net profit from continuing operation was up 42%. Let's go through some items. NII, 1.6 billion, the results of the year, minus 7% year on year. Meanwhile, we have the Q2 compared to Q1 at only 3.9% below. If we exclude a one-off over Q1 related to interest on a previous litigation, we have, like for like, an increase of 1% also Q2 on Q1 on net interest income. Let's consider how these six months results come from a reduction of an Euribor, which in first half of 24 was 3.87% and was down to 2.33% in H125, the sensitivity would have brought down more than 200 million our results, but we were able to recover 91 million through managerial action. Through managerial action, excluding one-off, we have already recovered 65 million out of the 100 million we said in our presentation of the strategic plan we would end up the 2027 so almost two-thirds of the recovery has already been done in the first six months let's pass to the trend of commercial spreads spreads are doing much better than the reduction of Euribor as you can see both year on year compared with Q2 24 we have had an Euribor down 170 basis point with the commercial spread down only 118 basis point meanwhile Q2 and Q1 25 the reduction of sorry of Q2 25 to Q4 24 so in the last six months the reduction of the Euribor was 91 basis point meanwhile we managed to reduce commercial spread only 66 basis points. On the bottom side of the right part of the slide you will find the update on the managerial action that you will know we have increased our replicating portfolio to 26.5 billion up from 22 billion end of the year with an average receiving yield of 2.1% and a duration of 2.7 years. the share of index current account stayed at 36% compared with 34% full year and you can see also some indication about the low cost of wholesale funding that we are experiencing thanks to the better perception of our risk profile confirmed by the rating agency also after the abandon of our OPS very recently. We will tell afterwards some detail. But the reduction of the spread, as you can see, is really massive, contributing to the bettering of our results vis-à-vis the final target of the industrial plan. We have been reaching these results, continuing to do the work that we do better, supporting our client, our territory, putting all our effort in serving our corporates and retail clients, which led us to increase 50% the new lending granted. Specifically, we increased the lending to households, so the mortgage side to private individuals, 68% year on year, and almost 40% the new lending to small businesses. And the new lending to small business has been 59% guaranteed by state guarantee, vis-a-vis 52%, which was the average in 2024. The stock of performing loans basically is the same level of end of the year, but this is just because we reduced 1.6 billion our exposure to some institutional big ticket. Meanwhile, both in the household we grew 1% in the stock and in non-financial corporates we grew 1.8% toward the end of the year. All in all, 52% of non-financial corporates portfolio is secured, 27% with state guarantee and 25% with collateral. In terms of direct customer funding, this is driven by deposit which grew from 100 million to 101.9 billion. Meanwhile, the certificates reduction was 400 million, bringing the total direct customer funding to 107.3 billion. On page 16, let's have a look to the growth of the commission. Like for like, we grew 4.4%. But normalizing for the reduction in the eco bonus and the instant payments, we have a growth more than 7% year on year. And of course, the stated results is much higher because we consider also the integration of Anima to 1.2 billion. If we would consider a pro forma with the full consolidation of Anima for the first six months, the contribution on net fees would go up to 1.340 million. Our growth was mainly in the investment product fees, which grew 12%, which is exactly the growth that we experienced in the investment product placement, going from 10.6 billion in six months, 24, to almost 12 billion in six months, 25. Let me reassure that also in July, we had investment product sales for 2 billion, which is exactly the average of the first six months. Going to the details, upfront fees grew 27%, running fees 3%, to which we have to add the 114 million coming from the second queue of Anima Consolidation. Very strong results also on other fees, even though it appears to be flat, but just consider that we have almost 30 million less in the first half 25 coming from the reduction of the fiscal credit fees, the famous ECO bonus, and the impact of the instant payment. This reduction was completely offset by the other fees, mainly fees from specialised activities, meaning corporate investment banks, structured trade finance, which grew from $140 million to $176 million. Let's have a look to the number with the consolidation of Anima of the indirect customer funding, which grew 3 billion like for like without Anima from 160 billion to 119 billion. And of course, as I mentioned before, end up to 275 billion consolidating Anima, which 222 of asset under management and 54 billion of asset under custody. It is worth to notice that there is 1 billion growth higher than last year of net flows of asset under management, growing from 300 million of last year to 1.3 billion of this year. The cost income, again, a good reduction, 2.6%. bringing the cost income down from 48% to 45.2 like for like 44.6, including Anima, basically with the flat contribution from the staff cost. Let's have in mind that the main impact of the early retirement scheme will appear in the second half of this year, which will amount in a saving of 40 million. of course, more than offsetting both the new labor contract and also the new hiring that we continue to make. Very good results also in other administrative expense and DNA with a total reduction of 7.8%. Cost of risk down to 33 basis point, driven by old credit management over the life cycle, meaning very strong credit policy in granting new loans mostly granted by the state very effective management throughout the life of the loan with all the attention to the deterioration possible deterioration of credit and early intervention in order to minimize the potential effect of cost of credit This brought us to a reduction of 23% total MPE year-on-year and excluding the MPEs with state guarantee, we have a reduction of almost 30% year-on-year. Let's consider on the bottom side, on the left of the page, 19, that the net bed loan excluding state guarantees represent only 0.2% of total new loans. is basically to make evident that we basically don't have any other net bed loads other than the one who are guaranteed by the state. On the right side, some figure about ratio, cost of risk again down to 33 basis point, default rate battery to below 1% to 0.9, good increase in cure rate to 7.5, and also the coverage which appear to grow also on the total MPs. Again, on the right side, if you exclude the state guarantee, the MP guaranteed by the state, we increase the coverage of the other bad loans from 73% to 75% of UTP from 41.4% to 41.9% and globally to grow to 53% the full coverage of the other loan not guaranteed by the state. Let's give the floor to Edoardo Ginevra which will drive you through the financial and capital issue.