Banco Bpm Societa Ord

Good evening, this is the Coral School Conference Operator. Welcome and thank you for joining the Banco Bpm Group 9-month 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 and welcome to Banco BPM 9-month results conference call. We have here Giuseppe Castagna, our CEO, and Edoardo Ginevra, Joint General Manager and CFO, which will take you through the presentation. This will be, as you know, followed by Q&A session, and I kindly ask you to limit yourself to two questions.

Now I hand over to Giuseppe.

Thank you, Arne. Thank you, everybody, for being with us for this Q3 presentation. Let's start immediately on page six of our presentation. We wanted to show you just a full picture of what we are doing, and now we are delivering our vision that we announced with our business plan February this year. We think we have completely almost the product factory activity that we started two and a half years ago with the bank insurance, payment system, life insurance, and recently asset under management. This brought us already quite a relevant set of results. Let's say almost $400 billion of total customer financial assets 49% of fee-based generated models, so non-NII revenues on total revenues, a strong reduction on NPE ratio, 2.48 gross and 1.4 net, and maintaining and building up, again, a strong capital position up to 13.52%. profitability is growing as we expected. We have now reached a ROTE of 22% vis-à-vis 16% of 2024 and 14% of 2023 with an ROE which stands at 6.5%. In terms of shareholder remuneration, we can confirm that the board has approved the distribution of 46 cents per action per shares to be paid later in November, on 26th of November this month, representing 80% interim dividend for 2025. If you can make a comparison with the previous dividends starting from 2022, you can see the growth that we are having considering Life for Life results, 350,022,850,23, 1,100, excluding the standard distribution for the NUMIA one-off in 2024, and already 700 million in 2025. Total shareholder remuneration during this year is 565%. The dividend yield that we will pay will be 7.3%. on a yearly basis. Net income stands at 1.660 billion, well on track towards our guidance, coming in with a ratio of 13.52. Again, as you can see, excluding one-off, we are 17% higher than last year's results, and we already reached 85%. of the total guidance we gave for this year. Then we will come back to that. Net income was a very strong 450 million considering the seasonality of August and one of the best quarter, third quarter in our story. This pace we deem is fully consistent with our long-term targets. In terms of the commercial performance, new lending was 39% higher year-on-year. Asset under management net flows was 1.7 billion in nine months compared to 700 million of 2024. And the cost income stood at 45% down from 47% nine months, 24%. Again, cost of risk reduction to 34 basis points compared with 40 basis points last year. The interim dividend has a six-month yield of 3.6%, and again, has been approved today, will be paid 26th of November. We have already accrued 1.170 million in the first nine months of the year to be distributed between the interim and the final distribution. Economics are very solid, both in terms of growth in revenues, 5% stated vis-à-vis last year. If we consider Proforma, the contribution of Anima, we increase these results to 120 million. We already said that non-NIIM stood to perform at 49%, very close to 50% of the target in 2027, as well as net funding commission rose 18%, including the contribution of ANIMA, but performing also the first quarter of ANIMA, this will grow of another $140 million. Also, the contribution from income from Associates Insurance, NFR, increased from 140 million to 290 million in line with our expectation for 2027. In terms of cost control, we were able to reduce again the cost income to 45%, with a reduction of 2% like-for-like vis-à-vis 24% and just a slight increase if we consider the ANIMA inclusion of cost. Significant decline in provision from 30% year-on-year from 350 million to 244 million with a cost of risk going down from 40 to 34 basis points. Capital, if we consider the acquisition of Anima and the regular headwinds, we were able to build up 152 basis points in terms of organic generation through managerial action. After paying 240 basis points out of the ANIMA transaction and 60 basis points for regulatory add-ins and including, of course, also 200 basis points that we will pay as dividend, 80% dividend payout. On page 10, let's have a look to the trajectory towards our target in 2027. As we already said, net income Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord and reduction of commercial banking activity, which went down from 65% to 57%, with a target of 50% to 55%. The quality, these results were driven by non-NII revenues, again, growing from 40% to 49%, cost income ratio reducing from 47% to 45%, cost of risk down to 34 basis points. Bpm Societa Ord we still have a delay of 30 million per quarter in terms of NAI which will easily reach through the refresh or replicating portfolio in the next couple of years the decreasing cost of wholesale funding which is already contributing more than 40 million per year and the growing commercial volumes which we expect in terms to up to 3 billion by the end of the business plan. Net fees and commission, still we have some growth to expect from the full speed of the different product factory, including, of course, animal contribution and improvement in the running fees. but also we expect some improvement from insurance business. You may remember that this year we had two IT migrations for both life and non-life business which impacted on our results and also on the payment system activity with Numia. Meanwhile, we are still experiencing a very strong growth in terms of Bpm Societa Ord Bpm Societa Ord are well on track, cost of risk is below the target we expected, so we have an advantage that would help the final target that we have in terms of net profit. So very confident to reach our target. Let's have a look to Q3. We wanted to dedicate a slide to the Q3 contribution. We are very satisfied Bpm Societa Ord deflated by seasonality but the difference of 70 million coming from the Q2 results is due essentially only to the Montabaschi dividend that we included in Q2 meanwhile the seasonality has been partially recovered through organic improvement expected in fees and lower cost So a very solid result for Q3. Let's have a look to the nine months. Net interest income down 8%, but if you consider net interest income at full funding cost, which means including the cost of certificates, which are, of course, a source of funding for our bank, we will go down to 5.7%. and core revenues, although experiencing a reduction of $225 million in NAI vis-à-vis the nine months to 24, have an increase of 1.6 as total core revenues year on year. If you include the net financial result and other operating income, these advantages vis-à-vis last year grew to 5%. and operating costs meanwhile registered 2.2% increase due to the ANIMA impact if we consider year on year without ANIMA on a like for like is a reduction of 2% in general cost. Provision down 30% leading to a net profit from continuing operation and net income one-off down 17% vis-a-vis last year. On the right side, you can see the trend of this last year with continuous improvement, which are very encouraging for the remaining growth that we have experienced by 2027. As you can see, revenues grew 13%, almost 550 million in two years. NII at full funding cost registered this year is at the same level of 2023, notwithstanding a new high board, which is 106 points below the average of 2023. Cost income down, cost of risk down, let's pay some attention to net profit from continuing operation which is 1.5 billion compared to 1.1 billion of 23 is 440 million more also after considering almost 200 million reduction of NAI so that means that we had a profit of generated by a strong increase in fees and a very strong reduction in general cost and cost of risk. We already mentioned MAI. Let me just say that the reduction we had has been offset for 84 million by managerial action. out of 100 million that we expected by 2027, so we are also in this case at a good point. Now we have almost the same spread asset liability in the region of 145 basis points, and we are consistently taking advantage from the bonds issue spread which has been reducing 40 basis points generating a lower cost in terms of NII for 41 million per year. You have some example of the different kind of bond issued by the bank of the strong reduction we are experiencing since the previous issuance that were strongly higher in terms of spread vis-a-vis the current situation. We also gave you some figures about the replicating portfolio, which now stood at almost 28 billion. We have to refresh by the end of the year, the next year, for a total consideration of something like 9 to 10 billion that will improve also the general yield and the contribution to NII. Notwithstanding, we were able to have an increase in new lending of 39% exactly 57% in mortgages and 44% to non-financial corporates the full level of our stock remaining basically the same. As you know, we are not registering an increase in loan demand, although we are confident that by 2026, having kept the level of loan at the same level at the beginning of the year, we can register a strong increase that is testified by the good activity we are having in granting new loans. We are taking, of course, a lot of attention to the quality of our portfolio. Stage 2 loans reduced 1.6 billion to below 9 billion. And now our non-financial corporate portfolio is 53% secured, 64% if you consider only small business loans. 92% of our stock is concentrated in the best risk classes and the same level is up to 98% if we consider the new lending over the first nine months of this year. Let's go to page 16, total net fees and commission up 3%. which would be pro forma 5% if we exclude the contribution of eco bonus and instant payments last year of course the stated figure is much higher because it includes the contribution given by ANIMA which is up to 1.8 billion and if we include the full consolidation of ANIMA starting from January This figure is almost 2 billion. The investment product fees grew 10%, mostly in upfront fees, but with a good contribution of also running fees in line with the growth of investment product placement. which after 9 months stood at 17 billion vis-a-vis 15 billion of last year and 17 billion was realized notwithstanding 2.3 billion of issuing of BTP by our bank. Let's say that also in October we are continuing this strong production and also in October we have increased of another 2 billion the investment product sales. For other fees, we have a reduction which is driven by the commercial banking activity. The two business lines I mentioned before, especially ECO bonus and instant payment, which went down 35 million euro an year. Meanwhile, we are growing almost 40 million in terms of fees generated by Corporate Investment Bank, Structure Finance and Trade Finance. So very strong results. Let's have a look to the contribution of Anima. On the left we have the growth in terms of total asset generated by the bank standalone. Also in this case we wanted to give you the progression of the last two years. We grew basically 20 billion in less than two years. from 210 billion to 230 billion. We grew year-to-date of 3.4 billion in terms of assets under custody, 2.4 billion in assets under management, 2.3 billion in terms of deposits. These, of course, are excluding consolidation of annual. In terms of net inflows, we grew 1.7 billion versus 700 million last year. On the right side, you have the consolidation of Anima. We increased 230 billion to almost 390 billion, vis-à-vis 377 billion at the end of 2024. So a strong increase also in terms of Anima assets contributed to the bank. On page 18, on the left side, you see the main feature of Anima, which we consider a first-class network, which is still performing consistently well. And we have on the right the outstanding commercial and financial results, a growing asset under management rate, of 2.4%, namely 2.5 billion in nine months of asset under management net flows, excluding the insurance mandates. In terms of revenues and net income in the nine months, compared to nine months 24, we have an increase of 11% in terms of revenues and 50% in terms of net income generated by ANIMA. Cost-income ratio down to 45%. As you can see, like for like, we have a reduction of 2%. Meanwhile, we have a stated or with a small increase of 1% driven by the ANIMA inclusion. The staff cost was down again, like for like, 1%. Still, we have some further advantage that will... be generated in Q4 even though mostly offset the compensated by the new labour contract and the hirings that we are still having in order to offset the exit of the early retirement scheme. We will have another 40 million of reduction next year generated by the early retirement scheme ended December 25, but part of that, of course, will be offset by the new hirings. Also, other administrative expenses and DNA are down 4%, like for like, and other administrative expenses stand alone are down 7%. cost of risk at a very good level of 34 basis points driven by an effective credit management over the life cycle the gross total MPEs went down from 3.2 billion to 2.5 billion the net from 1.7 to 1.35 the net bed loan ratio is low as 0.4% of total loans as much as if we included also the state guarantee this figure go down to 0.1% and the share of the cake between OTP and bad loans is 80% OTP and 20% bad loans we already mentioned the reduction in stage 2 Let's see some figures that generated these 34 basis points. Of course, the risk, first of all, default rate down to 0.8%, Q rate up from 4% to 6.5%, with the net default rate, which was as much low as 0.7%, from 1%. The coverage is increasing both in terms of total coverage to 45.7% as total MPs with integer in terms of years which has been reduced from 2.5 to basically 2.1 year. If we include the state guarantee, if we exclude the state guarantee MPs, we have an increase in bad loans to 77%, in OTP to 43%, and in total MPs, 55.3%. Let me give the floor to Edoardo for some figures in terms of net financial results.

Thank you, Giuseppe. Very quickly on the financial contribution to capital and the financial part of the balance sheet contribution to capital and to P&L. Capital-wise, we are at a contribution from reserves at comprehensive income that remains at 330 million similar to last quarter. a significant improvement versus the value at the beginning of the year, which was negative for 500 million, allowed this improvement by the active management of the bond portfolio. In terms of stocks, the situation is that we have 47 billion, similar to what we had three months ago, 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 Bpm Societa Ord with a positive impact from the reduction in rates as also shown in the first part of the PNL of this presentation concerning the overall contribution of NII at full funding cost. Rest of NFR of trading is 226 million positive through the year benefiting not only from MPS dividends but in general from the active management of the bond portfolio page 22 liquidity is at 54.7 so almost 55 billion increasing again this quarter and from the beginning of the year which was 48.4 billion total direct funding increased especially for the contribution of retail deposits which of course leads gives interesting benefits Bpm Societa Ord um issues activity has been also encouraged by the positive uh evolution of our rating uh position with positive outlook assigned by poor smoothies and pitch and an upgrade by the brs to bbb triple b high brs also is has assigned a first a level rating to the bank recently in october um very positive reassuring also the position for the liquidity indicators CR at 157 NSFR stable at 126 MRL buffer at 7.8 percentage point of the total so very significant level of the buffer 23 for capital 23 for capital as mentioned in the first part of this presentation capital creation from the beginning of the year has been 152 basis points after taking into account more than 200 basis points of dividends in the last quarter the progress has been 20 basis points which is some 12 basis points from the difference between positive performance and accounting for additional dividends 20 basis points from our source of capital that constantly gives a contribution which is DTAs and reserves for very other comprehensive income in total 13 basis points negative from the expansion of the books in terms of RWA increase. On the contribution from DTA in February comprehensive income, we confirm that this will be important also for the rest of our plan horizon with 145 basis points as shown in the bottom of this page materializing between now and end of 2027. MDA buffer quite comfortable now above 400 basis points and 50 basis points above the minimum threshold of our plan let me conclude let's recap these very strong first nine months of the year

I don't have to remember that during the year our bank was also some pressure, I would say, but not to extend in that. We were able to almost complete the target for this year, the guidance for this year. Let's say that we are increasing profitability through the non-NII related business, benefiting from our unique product factories model. We are continuing strong and efficient cost discipline. We have built up an excellent asset quality which reflects the footprint and the geography of our branches. All in all, we were able in one year to increase the ROE adjusted and the ROTE adjusted. Adjustment means without one-off ANIMA contribution for 25, a one-off NUMIA contribution for 24, up to almost 200 basis points in terms of ROE and almost 550 basis points in terms of ROTE. And this notwithstanding the NII impact due to the reduction of Euribor from 3.6% to 2.2%. So we consider these very strong results and and already on top of our target in 2027. Having already said of the capital position, the capability to build up further capital over the next quarter, we were able to approve the 700 million distribution for our shareholders to be paid on 26th of November with an increase of 15% year-on-year on the interim dividend distributed in November 24, 46 cents versus 40 cents last year, with an annualized expected dividend yield at 7.3%. In terms of cumulative remuneration after 18 months, we have already deliberated and will distribute 2.2 billion in 18 months fully in line with over $6 billion we expect for the full duration of our business plan. Some hint on the guidance. We already say that we prefer to leave the guidance at the level we announced, $1.95 billion. Whatever will be the accounting treatment of the fiscal impact that we'll have, we don't know yet which kind of impact, but we are pretty sure that having already reached 85% of the target we wanted to achieve in 2025 we will be able to leave this guidance whatever will happen in terms of fiscal impact this year. That's all and now we will leave the floor to M&A session. Q&A session, sorry.

Thank you. This is the Coral School Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 under touchtone telephone. To remove your staff from the question queue, please press star and 2. We kindly ask to use handsets when asking questions. The first question is from Giovanni Razzoli, Deutsche Bank. Please go ahead.

Good afternoon, everybody. I have two Clarification the first one is on the slide at 23 you mentioned at the 145 basis points of organic capital generation that I interpret as deriving only from the release of DTA and fair value reserve in the next two years is that is my understanding correct and is my understanding correct that out of these 145 basis points around the 60 basis points are from the securities on fair value on other comprehensive income. That's my first question. And the second one, again on capital, I was wondering whether you plan to complete some SRT transaction or risk weighted asset optimization with Q4 or if there are any regulatory that you can expect. Thank you.

So, thanks Giovanni. As far as the question on capital, the two questions on capital, let me first confirm that we are finalizing an SRT transaction which we plan to complete in the next few weeks, so before the end of the year. for the capital creation from DTAs and February Comprehensive Income. So this 145 is what is expected to come as additional capital between the next quarter 26 and 27 in total. You asked what is the split between DTAs and February Comprehensive Income. DTA is around 120. The rest is fair value of the comprehensive income pull-to-par effect. Thank you. The next question is from... Maybe, sorry, before continuing, let me add also that we prefer here to stick to the plan horizon, needless to say, there is additional capital to come also after end of 2017. Please.

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

Yes, good afternoon. Thank you for taking my questions. The first one is on the guidance of 2025. You confirmed your 1.95 billion guidance, but considering what you have already achieved in the nine months, Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord And the second question is on the dividend. You have already 13.5% common equity R1, so well above your 13% minimum threshold. You have these tailwinds from DTA and fair value through the OCI. So I'm wondering if you might consider to increase the payout above the current level. Thank you.

Thank you, Manuela. Let me be more precise on that. Of course, we think that we will reach the guidance, as I said before, whatever will be the final accounting principle to regulate the fiscal impact that we are still waiting from the government to deliberate. So let me be a bit prudent, but also, let's say, on the other way, a bit aggressive. in saying that even though we should be obliged to put the potential amount into profit and loss, we feel that we can be able to still respect a figure in the region of 1.95 billion, which I think was not expected. And no, I needn't hear from anybody else such possibility. On dividends, of course, as you may remember, we were very much questioned about the possibility to be above 13%. In the first three quarters, we have generated a lot of capital. We are respecting 80% of payout is still increasing to 13.5%. our common equity tier one let's say that still we are below our peers so let's wait for end of the year to understand which will be the capital generated by the bank in the next couple of quarter and then we can discuss increasing the remuneration or the payout

Okay.

The next question is from Sophie Peterson's Goldman Sachs. Please go ahead.

Yeah, thank you. Here is Sophie from Goldman Sachs. My first question would be on net interest income. In terms of the trough, we saw weak volumes, but new production is very encouraging. and also lending margins are stabilizing. So do you think we have reached the net interest income trough or do you think that's still ahead of us? And then my second question would be on M&A. If you could just talk about your thoughts around M&A. The press has been talking about Credag, Italy. Any comments you can make here? Thank you.

So let me talk about NII and then Giuseppe on the M&A session, which you wanted to start earlier. On NII, consider that in our plan we have a guidance of we have a target of slightly above 3 billion for 2026 which we believe that at this point is confirmed with a scenario of Euribor at 2%. We announced already that we would be able to absorb small shocks on the scenario but basically we don't see reasons why we should change this target Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord that will provide a contribution from the financial part of the portfolio, and this is replicating portfolio and decreasing cost of wholesale funding. To give you an idea, we have 27 billion replicating portfolio. The target is 25, which is where we expect to stay on average next year. These 25 billion are paying currently... a label that is some 20 basis points above Euribor for a pure mechanical effect of time lag on the reprice and the readjustment. If Euribor stabilizes, this mechanical effect will disappear and 20 basis points on 25 billion is around 50 million. Similarly, benefit from issuance of also funding, we have a billion of new missions per year. And so in the next in a total of 10 billion, which is the average over two years, including issuance of second part of this year and issues and half auditions over 2027. A benefit of 50 basis points leads to an improvement down the line of around 50 million. Commercial volumes, just look at the spreads, which has quite... Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Loans is the next challenge, but we believe we are very well equipped to restart in growing the loan book once our clients will restart, will revamp the investment process.

Thank you, Sophie. Let me just give some color to your question. I think we have shown this year to be able to respect our guidance also considering unexpected headwind as we are having on top of that we manage this year to cope with the honey acquisition on one side and let's say to be obliged to stay under a hostile OPS for nine months with our network. We had to cope with two IT migration and two bank assurance deal and the integration of the product factory we have built up in the last year. So a lot of work to do, reaching always strong results. The same we have for 2026. of course we are not scared of taking one eye on reaching our target for 26 and also considering any opportunity coming from the market in terms of M&A we are not in this moment of course we have nothing in mind we are not dealing with any transaction but we know very well that there are some Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord we showed that we were able to do together with reaching our results. So attentive to have anything happen on the market. We are not many left in the market, but still with a lot of opportunity.

Thank you.

The next question is from Luis Radas, Autonomous. Please go ahead.

Good afternoon, thank you for taking my questions. My first one is on NII. We saw a much lower quarterly reduction this quarter in the customer spread compared to Q1 and Q2. So do you think we are close to the bottom in the customer spread and how do you see this spread going forward split by the asset and liability spreads? And then my second question is on the ANIMA minority. I wanted to hear your latest thoughts on how you plan to deal with the minorities. Do you have the goal to own 100% of ANIMA and delist it? Thank you.

Thank you, Luis, for the question. Let's say yes, we think we have reached the bottom, both in terms of asset spread. Of course, the same, I think, is also in terms of liability. We don't think we can, with Enoribor, which is now quite stable, again, I want to stress especially the work we have done on the asset spread, because on liability, I think we dealt very well with the spread. On asset, as I mentioned before, we managed to maintain the same level of stock with a strong increase in almost 40% of increase in new loans generation, which of course had a good boost for our commission in a situation in which loan growth was zero or minus zero because we are not having loan growth in our country. So thanks to our geographic footprint, we were able to stand at a very good level of new loans maintaining the situation but of course and sorry bettering the quality of this credit book with a lot of guarantee taken also with the opportunity of the guarantee state scheme this of course in a situation in which loan are not growing and we are going we are willing to better our quality of course you can lose some few basis points, which is what happened to our portfolio. We feel, as I also understood that my colleagues think that in 2026 there will be a recovery in terms of investment. If this happens, as historically happened, our bank will be in the best situation to take advantage from that. And with the growing, even though not blooming, but growing market in terms of loss, I think also the asset spread will increase. Second question about minorities. I always say that we are going to buy Anima in order to make Anima greater. We want to... have our distributor of Anima. We think there is an opportunity to have some other banks joining the group of distributors and we want to leave room for also giving a stake in Anima to this new distributor. So until this situation will be open and we will have the opportunity to manage some contact with other banks I think we will leave for the time being the stock listed but I hope that quite soon we will understand what will be what will be the opportunity for the next quarter so give us some time to experience the opportunity of having somebody else on board and then we will decide what to do with the stake.

Thank you.

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

Hello, I thank you for the time. My main question is around dividend, the final dividend for 2025. You know, if I understand your dividend policy is you net out the gain on the revaluation of ANIMA. You already raised the interim larger than last year. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord some of your peers at least in the past quarter have shown loan growth so you know is that too much pricing competition and you don't want to compete there or you know because you know a system level there is that you're starting to have loan growth for the whole of Italy so why shouldn't you be doing better than the system when you are in the better part of the country thank you

Thank you, Hugo. For the first part, yes, of course, the one-off of Anima will not be considered. We announced that with our business plan. But, of course, if we will meet the guidance, the dividend will increase, and our effort will be to give a dividend which would be as much as possible in line with last year. in which we included the NUMIA one-off contribution. So let's say that like for like will be much better this year. We will decide, depending also on this fiscal impact, how to increase further this contribution. Let's say that when we announced the six plus billion in four years, we already say that of course there would have been an increasing dividend distribution in the last part of the four years, increasing of course also the profitability. So we are perfectly in line and hopefully, depending on the unexpected situation, we can try to also increase the contribution. on the loans we think we are doing better because we are basically maintaining our loans the level they are meanwhile I think there is some reduction in loans for other banks notwithstanding is the best part unfortunately investments are still lacking so the geopolitical situation the uncertainty on tariffs have been very persistent Thank you.

The next question is from Ignacio Ilargui, BMP Paribas Exchange. Please go ahead.

Thanks very much for the presentation and for taking my questions. I have two questions. One is on fees. I mean, do you think that whatever is not fees from specialized activities within the other fees bucket have probably bottomed at this level and we could see some recovery into the fourth quarter thanks to seasonality? And the second question is linked to multi basket stake. So if you could just share with us a bit of your thoughts on the state going forward.

Thank you.

Okay, just a minute and get into the page. Yes. So we have meant we were mentioning about the product factories, because we have three categories, commercial banking and other product factories, which means consumer credit paying system PNC insurance. And the last one is from Corporate Investment Banking and Trade Finance. Which one you are precisely...

I was just referring to the commercial banking and other fees and product factories, which, I mean, if I just look into the year, they have been relatively flattish. Whether that could be, you see, that could recover into the year end.

Yeah, we think that there will be basically everything which is not included in product factories and in corporate investment banking and trade finance activity is on the other, which means current account, commission on loans, other commission on payment activity, money transfer and so on is included in that. Last year, we had also a strong contribution from the discount of fiscal credit. You know that in Italy we had such a possibility to discount the fiscal credits, the famous super bonus or eco bonus. And together with the commission that we were able to get from the instant payment, which now are not anymore possible to apply, There is a reduction of almost 40 million, 35 to 40 million. The other are doing well, especially, of course, on loans, because as I said before, we were increasing 40% the new loans activity. So all in all, we think that like for like, we are increasing the commission also on the commercial banking, and this will stand also for the next quarter. For the other, as I mentioned before, the one from specialised activities are doing very well. Meanwhile, we have registered some reduction in the bank insurance because of the immigration I was mentioning before, both in the life activity and the non-life activity, which we will not have anymore, of course, going forward in the next quarter. This is for the first question. The second question... Go back to the problem of we were talking about delisting anima until we don't understand exactly what will be. Montepaschi, as you know, is a strong contributor in terms of distribution of anima. We had in the past some talks about the possibility for them to continue this activity also getting possibly some interest in being shareholders So we will see after that what the final word about our stake in Monte Baschi.

Thank you.

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

Thank you for taking my questions. My first one is on the Italian bank taxes. I know it's still being discussed, but just... wanted to kind of have your thoughts, your initial thoughts on, you know, how much that impact could be. And then my second question is on M&A. So Credac has already commented that they wouldn't, you know, they're not considering selling their subsidiary in Italy. So just kind of wondering what other forms, you know, this M&A potential could take like I mean would you consider more partnerships with credit in asset management or in other areas which I think is something that they you know would be keen on if you could just share your thoughts here that would be great thank you yes so thanks for the question on bank taxes there are values of course items that are interested by

the law or the project of law which has not been as you know approved yet in the current scenario we expect to have a one off this year of payments of sorry of levy that is in the order of magnitude of around 100 million and this is a one off for the next years the scenario is not Bpm Societa Ord to counterbalance these impacts, but we don't believe them to be a real changer versus our targets.

Okay, let's go back to M&A. You were mentioning Casa doesn't want to sell, but we never talk about buying the network of Casa, and we're never talking about having anything else with Casa other than being... I hope an MP shareholder of our banks we are not aware of anything happening in terms of possible merger and so we will see what happened they also requested to increase their stake to ECB they have not yet received the authorization once they will receive the authorization they will decide the stake to take and Of course, we will understand better what would be the possibility to have some more collaboration with them. Up to now, there is nothing at all. I read the speculation about buying the activity in Italy, but there is nothing in course.

Great. Thank you very much.

The next question is from Adele Palama, UBS. Please go ahead.

Yes, hi, good evening. Two questions. One is a clarification on the capital and the capital impact. So 145 basis points does include also like the impact that you were expecting in the business plan from the security station. So if I remember correctly, you were guiding for like 48 basis points. from synthetic securitization, how much of that 48 basis points has been already taken, how much is left, and if it is included in that 145 basis points. And then if you can give us a guidance on the other provision and provision for risk and charges. Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Because again, I mean, you have reported like around 35 basis point. But then if I try to bridge with your target, it looks like that you are expecting some additional extra provision in the fourth quarter. Is that right? Which is the guidance there. Thank you.

So, on capital, thanks for giving me the opportunity to clarify. The 145 basis points that we showed, that we mentioned in page 23 of today's presentation, is only the impact during the plan horizon from DTAs and fair barrier comprehensive E. Segwitization transactions are on top and will continue to provide the contribution that we have announced in the plan. By the way, we are already delivering on that, taking into account the fact that in the plan we said 48 basis points are including the effect of amortization of existing ones. But in general, in this quarter, we didn't have securitizations in SRT transactions. as I said earlier answering to the previous question we will have impact in the fourth quarter and in general we will continue to generate capital through this lever also in the next few years normally the high level guidance I would say is that we do two to three transactions per year and we have an impact of each transaction of around 10 to 15 basis points on average, but part of this impact is eroded by the amortization of existing ones.

For cost and risk guidance, we always say that this year would have been below 40 basis points. We can confirm we don't expect extra cost long-term provision in Q4. As I mentioned before, we have a 0.1 net bad loans ratio. We have a very good default rate. We are almost at half of November, so halfway to the year end. So I expect, apart from some managerial action that we could take by the year end, I expect something in line with the previous cost of risk.

The next question is from Matteo Pancetti, Mediobanca. Please go ahead.

Hi, thank you for taking my question. I have one clarification on RWAs and capital for the quarter. Can you please clarify, because when I see on your booking loans, they are down 2% Q on Q, but your RWA were up quarter on quarter, so Can you please clarify there was any headwinds during this quarter or if the density has been increasing? And the second one is on the overlays. You still have 150 million overlays. At which point you will consider to release or eventually using that? Thank you.

No, you know, we have grouped the 13 basis points in page 23, RWA and other. Actually, this includes a number of second order effects that give a contribution that the specific part of RWA is only six basis points and it's related in general to normal refresh of the portfolio, but nothing that creates any real drift towards a higher level of density or headwinds in this quarter. the rest is due to a number of minor impacts for example increase in the value of our participations that we deduct from capital and that if they mature if we use equity method for our valuation if they mature net profit over the quarter then this net profit is accounted for in the value of the participation and this value is an increase in the capital deduction so not material effect on credit in general yeah overlays overlays well usual debate overlays technically speaking are not something like a treasure we have and at some point will be left for release overlays are a way to account for unexpected novel risks that are not modeled and that you capture in your framework of risk management framework in IFRS 9 accounting framework through adjustments on top of what the risk model suggests to have in terms of generic provisions on performing loans. The only thing that counts is the level of coverage on performing, stage 1 and stage 2, and this coverage is driven by considerations on the status of the portfolio. we are sticking to a coverage which is in the area of above 40 basis points we have increased from 45 to 46 basis points in this quarter we believe that this is our sweet spot in general in the long run and so we believe that any comparison should take into account between banks on this KPI should take into account of course Geographic Footprint, Average Rating of Portfolios and so on and so forth.

Thank you.

Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

So if there are no other questions, thank you very much for being with us for Q3, and we will see in the next days or talk to you for further details. Thank you, and have a good evening.