Bper Banca Spa Unsp/Adr

Good evening. This is the Coral School Conference Operator. Welcome and thank you for joining the BPAR full year 2020 consolidated results conference call. 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. Alessandro Vandelli, CEO of Beepr. Please go ahead, sir.

Okay, good evening, ladies and gentlemen. Thank you for joining this conference call today. This is Alessandro Vandelli, CEO, and I'm here with Roberto Ferrari, CFO, Alessandro Simonazzi, Head of Planning and Control. I really hope that despite of this prolonged pandemic emergency, you and your family have been keeping safe and healthy, confident that we'll be able to overtake this emergency soon and turn back to our ordinary life. 2020 results returned very positive messages, in line with our strategy focused on enhancing profitability, improving furthermore our asset quality, maintaining a very solid capital position while seeking, when possible, new growth opportunities. A few numbers are self-explanatory of what I have just said. 2020 net profit of over 245 million euros, gross and net NP ratio respectively down to 7.8% and 4%, Common equity to annual ratio at 13.52% excluded the impact of the capital increase. These are overall a concrete evidence of our strategy, and at the same time, a good starting point for future. Now if you turn on slide five of the presentation, which is already available on our website, we can start with the overview about the main messages and the overview of 2020 final year results. I think that the 2020 final year results give us back three main messages, fully in line with our strategy. First, resilient profitability. Second, a remarkable step up in our already sound capital and liquidity position. and further significant improvement of the asset quality. So first, profitability. Net profit is at 245.7 million euro, thanks to confirmed ability to generate revenues and to contain operating costs, despite the difficult economic and financial environment. Good news come in particular from revenues mainly related to the strong increase of net commissions and the resiliency of the net interest income as shown by the core income that is at the highest level over the past six quarters comparable on a like-for-like basis. To complete the overview, it must be mentioned the improving trend of the staff costs compared with the first two quarters of the year. The third quarter, as you know, shows the usual seasonality, mainly thanks to the effectiveness of the redundancy plan foreseen in our business plan. A final point on the cost of credit, which comes at 101 basis points, but it includes also a precautionary estimate of the foreseeable impact on credit of the deterioration in macroeconomic scenario as a result of the pandemic. Moving on to capital and liquidity, the group's capitalization is growing further, even excluding the increase in capital for the acquisition of growing concern from the Intesa-San Paolo Group, with a pro forma fully loaded CHET-1 ratio at 13.52%. showing a remarkable increase of 150 basis points since December 2019 and 50 basis points since September. If we take into account the effect of the rights issue, it stands at 15.90 basis points. The positive picture comes along with our very strong liquidity position with the LCR index at over 200% and the liquidity buffers close to 20 billion euro. These two important elements, profitability and capital position, allow us to propose a cash dividend of 4 cents per share for 2020 in line with the ACB's recommendation, but at the same time confirming our commitment to shareholder remuneration. The third point is on asset quality. Again, we delivered another impressive improvement on it, achieving the lowest MPE ratio over the last 12 years as a consequence of our clear strategy and strong commitment to get closer to the best-in-class peers. In fact, the gross and net MPE ratio sharply reduced respectively to 7.8% and 4% compared with 11.1% and 5.8% at the end of 2019. This is the result of a good mix of combined actions as, for example, the positive job made to improve the quality of the performing loan book, the default rate is down in Q4 at 1%, the disposal of bad loans and UTP, and lastly, the strong contribution of our bad loans management company, Bipper Credit Management. In addition to these three main focuses and talking about business, we experienced the growth in performing loans up by 0.9% versus September 20, and 3.8% versus December 19. Also supported by government measures related to the health emergency, mainly attributable to retail and small business segments. On the other side, total funding, including the bank insurance segment, reached 185 billion euros, up by 5.5% versus December 19, showing an increase both of direct and indirect funding, as well as in bank insurance business. Now, moving on to slide six, We cannot forget that in 2020, we worked also to tackle the pandemic. Our first goal was to put in place safeguards to protect the health of customers and employees and to ensure the operational continuity of business processes, which were further strengthened. In fact, over 50% of employees were able to work on a remote basis. Then our priority was also to strengthen and promote initiatives in supporting families and businesses in this moment of economic and social difficulty caused by the protracted health emergency, also thanks to the support of our branches and central services, which were fully operational in compliance with current regulations. To date, we have accepted over 100,000 applications for a moratorium and disbursed funds for state-guaranteed loans for over €3.5 billion, while promoting numerous charitable initiatives and fundraising at the service of the territories and communities served. Furthermore, and we are very proud of this, we achieved important objectives and results on sustainability, thanks to our strong commitment in integrating it within our business model in order to continue to create value for our shareholders and stakeholders, the environment, and society. For example, CDP Carbon Disclosure Project included our bank in the A-list, which acknowledges the commitment to fight climate change, and the standard ethics agency raised the bank's rating for EE- to EE, furthermore confirming the strong value of its commitment to the environment. At the end of 2020, we inaugurated in our bank one of the largest photovoltaic parks in Emilia-Romagna, which immediately had a positive impact on the reduction of emissions. Last but not least, growth. This is another strong message from 2020. As you all know, we are finalizing in a few weeks the acquisition of a growing concern from Intesa San Paolo Group. A very important strategic deal which will allow the Bipper Group to achieve a significant dimensional growth, both in terms of market shares and number of customers. We are almost at the end of the activities and I'd like to thank all the staff of the group for the excellent job they are doing to ensure the best execution process. At the same time, I'd like to welcome our new colleagues within the group and send a message to our new customers that we are making all possible efforts to provide, since the beginning, the best services they deserve. Now we can go quickly through our 2020 results. Please move on to the next slide, number eight. We start with an overview of the funding. Total funding in December 20 reached $185.2 billion, including a contribution of asset management from ARCA holding of $17.4 billion. Direct funding in December is at 63.1 billion, up by 8.8% compared to December 19, and up by 5.6% versus September 20, confirming a strong preference for liquidity of our customers. Indira Deportes recorded a very strong performance in December versus September, with an increase of 4.1%. Asset under management performed well in the quarter, up by 4% versus September, higher than pre-crisis levels. Bank of Sudan continues to show a very positive trend, reaching a stock of $7.3 billion, which means plus 0.8% versus September and plus 7% since the end of 2019. The low amount in Q1 caused by the pandemic outbreak in 2020, the net inflows in asset management, a life insurance product, raised 1.1 billion euro. And for the fourth time, total asset management, including bank insurance, exceeded the threshold of 50 billion euro. We are really pleased with our progress in this sector, also in light of the strong increase of our customer base expected from the acquisition of the going concern from Intesa San Paolo Group. Let's turn to slide 9. Net performing loans up by 3.8% since December, plus 1.9 billion euro. This trend is also supported by the government measures to sustain the economy during the pandemic crisis. During the year, more than 100,000 moratoria were granted on loans to customers for a total of $11 billion, equal to approximately 20% of total gross loans. At the end of 2020, the moratoria outstanding amounted to $7.2 billion. The faults on loans for which the moratorium was not renewed are marginal to date. also disbursed funds for the state-guaranteed loans for over €3.5 billion. The quality of the performing loans book is still confirmed with a particularly low bracket of high risk exposure, only 2.9% of the performing book. Let's turn to slide 10. On non-performing disposals, once again, we record an important improvement in our asset quality. Let me underline that this improvement is due not only to the activity of the staff dedicated to the disposal projects, but also to BIPO Credit Management, our company specializing in bad loans recovery, and to the credit department, with all the actions performed to reduce the UTP stock. Gross NP at the end of December amounts to 4.3 billion euro with a ratio of 7.8% down from 8.8% in September and 11.1% in December 2019. Also thanks to 1.6 billion euro disposal over the year. Net NP stock is at 2.1 billion euro with an improvement of the ratio at 4% from 4.7% in September and 5.8% in December 19. Another good news is that the decrease of DMP stock come along with an increase of DMP coverage to 15% from 49.3% in September. We continue our job quarter after quarter to improve answer quality, delivering positive results. The expected macro scenario is uncertain, but we think we are well-equipped to face it, and we confirm our strong commitment to accelerate further our, as I quote, improvement. The acquisition of the going concern from Intesa Sampaio will be another important step in this process. On slide 11, we can see, first of all, the default rate. at 1% from 1.7% in December 19, clearly due to the measure taken by the government related to the health emergency. But in my opinion, it is also linked to our improvement in the origination process. Moreover, the average recovery rate on band loans reached a peak at 6.9% from 6.3% in 2019. It was 3.7% in 2016, showing a very positive long-term trend, demonstrating that our servicing platform deep credit management proved very efficient. On slide 12, the securities portfolio reported an increase close to $1.4 billion versus September, and by $5.7 billion since December 19. mainly led by our large buffer of liquidity to be invested and positive market expectations, in particular in the first income bond market. Italian government bonds stock at $7.8 billion, weighing 31.5% of the financial assets portfolio, and Italian bond exposure is 10.9% of the total assets. Now we can move on to profit and loss figures on slide 14. Note that the comparison between full year 20 and full year 19 is not possible because of the change in the perimeter of the group. You remember the acquisition of Unipol Bank and ARCA in July 2019. The fourth quarter of 2020 instead is comparable to the fourth quarter of 2019. Having said this, we are very proud of the net profit reporting in 2020 of €245.7 million, thanks in particular to a positive ability to generate revenues and control of costs despite the difficult macroeconomic environment, one-off costs for the acquisition of the going consortium, €29 million, and other non-recurring items of 59.3 million. The result benefits from the positive impact from tax of 67 million euro. We can move on very quickly to page 15. On this page you can find details on the fourth quarter and then profit for the fourth quarter is at 45 million euro impacted by the growth in core income to 593 million euro. Operating costs at 437 million euros, including costs related to the strategic deal with Intesa-San Paolo, a cost of credit of 25 BIPs, contribution to funds for 24 million euros. So overall, so here I have to say that this represents a positive set of results. We can move on to page 16 for some details of the profit and loss, starting with the NII. To be more consistent, today Group's accounting policies in the fourth quarter and amount of 23.1 million previously accounted for in net interest income was reclassified to commission income. This amount refers to Finitalia, a company that entered in the scope of consolidation following the acquisition of Unipol Bank. Due to this item, net of which The decrease is equal to 2.2% quarter-on-quarter. On NA, we have the positive impact related to the TLC Road 3. We took up in June 14 billion, and at the end of September, we took up another 2.7 billion. The TLC Road net contribution in the quarter was 36 million euros. On the other hand, we recorded a reduction of the yield in the bond portfolio along with the reduction of the yield on mortgages and credit facilities due to the new easements at lower yield related to loans granted by the government. On slide 17, net commission amounted to 297.7 million in Q4, 274.6 million net of the already mentioned accounting effect, up by 4.8% quarter on quarter on a performer basis, reflecting a significant recovery after the decline in the second Q 2020 due to the effect of the and the prolonged period of the look down. In details, commission of asset management showed a very positive performance up by 8% quarter-on-quarter. Commission of bank assurance rebounded significantly. Commission of credit cards collection and payment is up 4.6% quarter-on-quarter, while the component referring to loans and guarantees also increased by 3.3% quarter-on-quarter net of the accounting effect. The weight of the commissions on the core income is above 46%, in line with our target to reach a good balance between NII and commissions. On slide 18, dividend trading income. In the fourth quarter, trading income was very positive, even if a bit lower than in the previous ones, equal to 42%. mainly supported by fixed income bond trading and favorable equity market performance. Moving forward on slide 19, operating costs in Q4 amounted to $437.4 million and are not comparable with the previous quarter, mainly due to non-recurring expenses related to the strategic deal with Intesa San Paolo and seasonality effects, staff costs, are up quarter on quarter due to the use of seasonality, but declined by 6.5% year on year, benefiting from the positive effect of the redundancy plan. Other administrative expenses amounted to $147.4 million, showing an increase Quotient on Quotient managed to higher costs related to the store name project we have been working on, amounting to 21.1 million in Q4. We recorded also an increase in DNA to 50.5 million from 43. Let's turn to page 20. provision and other items. We account in loan loss provision for 134.2 million euro in fourth quarter. Cost of rate is at 101 basis points. Take into account the worsening of the economic scenario caused by the health emergency and the objective to increase the coverage in all categories of MPE. In Q4, we accounted a contribution to a single resolution fund relating to previous year of 10.9 million euros acting from the settlement of irrevocable commitments granted by cash collateral. Turning our attention now to liquidity, we can move on to slide 22. About liquidity, we consider our liquidity position very sound. Our total eligible asset increased at 28.1 billion, along with a bucket of an encumber eligible asset of 10 billion, and that's a liquidity of 9.9 billion made by redeposit to the ECB. ECB exposure of 16.7 billion euro in December 20, entirely composed of TLC3. LCR index is at 200.1%, so well above the 100% threshold, as well as the NSFR ratio stands well above the regulatory floor. I would like to draw your attention to our capital position on slide 23. We confirm our very positive capital generation and sound capital position, excluding the impact of the right issue Chetwan ratio fully loaded pro forma at 13.52%, with a significant increase year-to-date of 151 basis points. Chetwan ratio fully loaded pro forma at 15.9%, embedding the capital increase. We have also some extra buffer to exploit in Q1, like the ID model extension, Now, in conclusion, let me highlight briefly key messages on slide 25. We continue to record a very resilient profitability despite the complexity of the current situation caused by the health emergency and the process of acquisition of the growing concern from the San Paolo Group. I would like to underline the further important improvement in our asset quality with a tangible decrease in MPE stocks and an increase in coverage. Also, our capital position highlighted a very positive trend with a capital generation of about 150 basis points together with other 238 basis points of capital related to the completion of the right issue. We confirm once more the high strategic and industrial value of the deal with Intesa San Paolo Group, which will lead to significant growth in size and improvement in the competitive position in Italy and a significant increase in the customer base. This acquisition will provide important support to revenues in terms of both interest income and commission, especially in asset management and bank assurance. It will also accelerate the improvement in asset quality, despite the situation of high uncertainty, while at the same time reducing the group's cost-income ratio. All these factors should provide support for the group's profitability and should enable a tangible increase in shareholders' remuneration in the future, of course maintaining solid capital ratios. Thank you all for your time and attention. Now we are ready to start the Q&A session and to take your questions. Thank you again.

Excuse me, this is the Coral School Conference operator who will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Noemi Peruc with Mediobanca. Please go ahead.

Good evening, and thank you for taking my questions. I have three from my side. The first one is on M&A. I appreciate the fact that you still have to merge the ongoing concern and the operational effort that that entails. But now the DTA benefit for M&A is low, and it looks too big to ignore. So can you please update us on your M&A strategy, also in light of this incentive and the regulator push towards consolidation in Europe? My second question is on moratoria. You indicated that you granted 11 billion moratoria in the year, but now the active moratoria stands at 7.2 billion. So I infer that 4 billion moratoria expire in the quarter. Is that a correct way of interpreting the number? And if it is, can you give us more color on this? What is the default rate on those that expired and are they mailing retail loans? My last question is on the going concern. Soon the transfer of the clients will be effective. So my question is, how are you monitoring the behavior of those clients? And have you seen a part of them exercising the withdrawal right? And have you implementing a particular strategy to retain this client? Thank you very much.

OK.

Thank you. Thank you for your question about the first one and about the M&A strategy. I think that is very clear, our strategy, because we are finalizing a very significant acquisition. Let me say that after one year, we are ready to complete the first acquisition of the going concern from Intesa San Paolo. I think that this is probably the most important deal for Biper. and I think that will have an important effect in our position in the banking system in our country. What I can say is that we are open to further potential M&A, but now, as I said many times, the focus is only on the integration of these growing concerns. Obviously, you can imagine for deeper group to increase the size more or less 50% is crucial to have this kind of focus on this deal. After that, we are ready if there will be the condition to analyze potential other M&A deals. Let me remember that thanks to this acquisition, our total assets will reach 120 billion euros, so a very significant increase compared to the present size of our room. On moratorium, what I can say is that this reduction from 11 I think the right figure was higher than 11, probably was at the beginning 11.8 billion euro. Now is 7.2 at the end of 2020. So this was, let's say, this parliament of moratorium and the decision not to renew this moratorium, mainly on the private sector. So families and mortgages and let me say that till now what we can say is that the default is not material and so we have another reduction in January but we are analyzing if is possible to renew a part of of this moratorium but let's say this trend is in from my point of view a very positive signal in the quality of the portfolio. Yes, the last point, if I remember correctly, is about the return rate and what we are doing to monitor this point, but in particular the action for the coming weeks, because I think it's important to remember that the last weekend of February, the 2021 of February, there will be the completion of the acquisition of the going concern of the UBI branches. So there are many actions. We believe that BPER has the quality to maintain the customer base coming from this perimeter. Let's say the surprise is that probably the size, particularly of indirect funding, is higher than expected. So we think that it's possible to have a positive effect on our balance sheet and the profit and loss. I repeat, there are so many actions performed by our strategy that I think is extremely important to maintain a strong light in low level. Let me give the floor to Alessandro Simonazzi to give you other flavor about this point. Alessandro Simonazzi Good evening.

For what concerns the retention of the new client coming from the UBI perimeter, we have a specific project named Anti-Churn Project with three main drivers. One is pricing, specific pricing and dedicated pricing for the new client. The second is an important advertising campaign to make our brand well known on the new territories. And the third is listening to the clients to prevent potential churns during the next month. So we are quite engaged in maintaining and improving our client base also in these territories. We know that this kind of client could be potentially war territory for other banks. but we are quite engaged in maintaining and conserving this kind of approach also with the new client.

Thank you. The next question is from Jean-Louis with Goldman Sachs.

Please go ahead.

Hi, good evening, and thanks for the presentation. I had a question which... you may have put somewhere in the disclosure, but I haven't had time to find it yet. I just wanted to ask you about what the stage two loans evolution looked like, because you're showing nicely all the NPEs, gross net, the trends, default rates, et cetera, et cetera, which is great on the performing book. But I wanted to, obviously there's been the moratorium, so it's understandable that the default rate hasn't been too impacted so far. I just wanted to understand what your classifications are from stage one to stage two had done and whether there was any signs that you could share for the ultimate peak of NPLs that you were expecting as and when we get out of this situation. And the second thing I just wanted to ask is whether that now that you're two weeks away from, two, three weeks away from completing the perimeter purchase, whether you could give us a bit more refined guidance as what you expect the contributions to be throughout your P&L for this year and for your outlook. Thank you very much.

Thank you. Thank you, Louis, for your questions. First of all, about the staging. In September, the stage two, the weight of the stage two on the performing portfolio was 10.5% and in December is 12.2%. But let me underline a crucial point. The increase in stage two is mainly due to the extraordinary and prudential reclassification activity carried out by our credit department according to specific triggers. More specifically, the counterparties with a medium-high risk rating and belonging to industrial sectors more heavily hit by the COVID-19 crisis have been massively reclassified to state two, even if they have not yet shown a creditworthiness deterioration. So it is, in my view, extremely important to underline this point. There is not yet signal of deterioration, but to have a very prudent approach, we decided to reclassify this bucket of client to stage two. And this is the first element. About, if I understand correctly, your second question, so the benefit coming from the going concern. Let me say, looking at the P&L, I confirm, I do confirm that they estimate roughly on a full year basis, you know, that this year we have only 10 months for the perimeter coming from UBI. But let's say in a full year basis, we expect to have a profit before tax around 200 million euros. This is our best estimate at the moment. I think there are many other effects coming from this acquisition. Let me say and underline probably another important point is on asset quality. You know that this is... In every quarter during this call, I'm underlying the positiveness of our action on asset quality, and also this quarter is the same. But another important step will be thanks to the acquisition of this growing concern, because the mix of our asset quality and the asset quality coming from This perimeter will allow BPIR to reduce further the NP gross ratio. Our expectation is to be not far from 6%. And you can imagine that we were at 23.5% in June 2016. I think it is a very positive result. And we would like to transform what was a weakness some years ago in a point-of-trend OB per group. So I think there are some important messages coming from profit and loss, but also from asset quality. And at the end, confirming the capital position, because our expectation is to have a significant badwill coming from this acquisition, partially to use for extra provisioning. And we said also in the previous call, 200 million for extra coverage. But we think that the potential, we can have more room to use this bedware. And we think also here, one of the opportunities will be on the deteriorated portfolio to have a better quality. This is, I think, let's say, a collateral effect of this acquisition. But in my view, thinking about the next year, extremely important for the trend of Vipre Group.

OK. Just as a follow-up, very briefly, $200 million on what kind of cost of risk?

Well, in this case, we estimate the cost of risk between 80 and 90 basis points.

So 200 million on 1890 basis points, right?

Okay, 200 million before tax.

Yeah, but on 1890 basis points of cost of risk.

Yes, I confirm.

Okay, good, great.

Okay.

The next question is from Cristian Carriza with Intermonte. Please go ahead.

Yes, good evening. Thank you for the presentation. The first question is on net interest income. I saw some pressure on asset spread in the quarter and I would like to understand what you expect in the coming quarters looking at new origination and also some details on the reclassification you decided to do this quarter between net interest income and fees. And still on that interesting, can you repeat what was the contribution from TLTRO in the fourth quarter? And what do you expect the contribution to be in the coming quarters due to the change in the condition of TLTRO? The second question is on trading. It was quite a good quarter, quite good because I would expect some losses coming from the securitization in the fourth quarter booked in the trading income so if you can elaborate a little bit what was the driver of trading and what are the unrealized capital gain currently held mainly on the your italian government's portfolio classified as at amortized cost the third question is on capital uh i'm not sure but i think that there wasn't in this quarter the soft impact and unipol bank migration risk disaster migration internal model immigration so if you can elaborate a little bit on this when we expect to to have a debt impact and finally on the dividend payment you are proposing four cents is it correct to assume that if it will be approved you are going to pay in May as the previous year. Thank you.

Okay, Cristiano, thank you very much for your question. I will take, first of all, your question about capital. And I do confirm that there is an impact coming from the prudential treatment of software apps. asset, the impact is limited in 13 basis points. On the other side, I confirm that we expect to have the authorization to use the internal model for Unipol bank portfolio, we hope in Q1 2021. The impact of this activity will be roughly around 40 basis points of capital. So this is another important point. I asked you, Roberto Ferrari, to answer your question about the NII and the trading.

Roberto Ferrari Okay. Hi.

Hi, Christian. On the TLT03 contribution, in the fourth quarter, the net contribution was $36 million because we had $42 million from the liability side, minus 1%, and minus $6 million for liquidity redeposited to the ECB at minus 50 basis points. We are considering the opportunity of taking also the last part of the TLTRO tree for 1.7 billion. So the additional impact and contribution should be around 2 million per quarter. But I would say that also liquidity will grow up. So we are probably we will stabilize the contribution at around 36, 37 million per quarter. In terms of trading, we had very positive reserve in the last part of the year, so actually we took the opportunity to realize positive reserve, and this is actually the main reason of the good result of the trading portfolio. At the same time, we still have a positive reserve of around close to 500 million in amortized costs nowadays. So this is a very updated figure.

About dividend of 4 cents, I confirm that this, first of all, is... The amount is in line with the indication by the ECB, and so we are absolutely in line with the guideline by the ECB, and the payment in cash will be by the end of May.

Okay, just on the reclassification between 80% and fees. that was due to consumer credit upfront, if you can give some.

Yes, it was exactly a component of an AI, but that was correctly reclassified as a commission. So this is a one-off effect, more or less, 2 million euros per month. This is now in 2020, so starting from 2021, there will be an homogeneous trend in all the 2021. So this is a decision taken with our auditor about this point. So only an exchange between NII and Commission.

Thank you.

The next question is from Andrea Vercellone with Exane.

Please go ahead.

Good evening. Three questions on my side with some sub-questions. The first area is on asset quality. I'd like to know if you can tell us how many MPEs you are getting from UBI. and the associated provisions that will be transferred. Also, if you have already made up your mind, these are the further massive disposals. If so, if you can give us an idea of the possible size of such a transaction. And also I wanted to know what was the rationale for not taking any particular generic provision on stage two or stage one loans in Q4. So that's the first area. Then the second, it's a numerical question. Can you give us the elements that you have used to calculate the 13.5% pro forma core tier one ratio together with the coin concern? By that, I mean what RWAs you have used, what badwill you have used, what PPA you have used, what restructuring charge you have used. And the final one is if you can give us an idea of the average rate you are able to get on the government-guaranteed loans. Thank you.

Okay. Thank you. And therefore, for your question about the answer quality. Let's say that the starting point for the answer quality came from the perimeter. The starting point is the MP ratio of UBI in September 2020. And so the level was 7.48. So this is the level of MP gross ratio expected in the perimeter. But after that, Intesa completed some disposal. And we share with Intesa San Paolo the effect of the disposal also on the perimeter for deeper. So at the end of this process, our expectation is that after the disposal, the level of the MP gross ratio will be around 5.1, 5.2 percent. So for this reason, the combination is a positive effect on BIP that now is at 7.84% in the asset quality MP gross ratio. On the coverage, I think that the coverage will be in line with the coverage in the balance sheet of UBI, so the confirmation of this. And the expectation is to gather other action that we are planning on our portfolio to have an effect on our NP growth ratio and another reduction, as I said before, our expectation is to be not far from 6% of NP growth ratio. are working right now on a potential disposal of utp we are positive on this project and this is a disposal around the 400 and 450 million euro of the utp and probably the closing of this disposal will be by the end of the q1 of this year so together with this disposal the quality of the portfolio and the improvement of BIPER at the end, all together, we think that, as I said before, an AMP gross ratio not far from 6% could be achievable by BIPER. On the strategy, on coverage, on stage one and two, as I said before, We were prudent on the migration from stage two to stage one to stage two. And we apply very prudent metrics to have the level of coverage. But at the same time, let me say that we are planning a review in the Q1 when we have a significant battle And as I said before, what would be in excess in respect of our target in terms of capital position could be used to increase the coverage and also in stage two of our portfolio. About the common equity one, the 13.52 I don't want to give a not clear message. This was analyzing the capital position of BPIR, try to have to be homogeneous before comparing the December with September and the beginning of the year without computing the right issue. So not the estimate of the input coming from the acquisition of the going consort, but only to say this year, starting from 12%, without the right issue, at the end of 2020, we have 150 basis points of more capital position at 1,352. Then the effect of the rate issue leads to our common equity one at 15.9%, and there will be a reduction, obviously, in the Q1 due to the acquisition of the going concern. I don't remember the third question.

The third question is just if you can give us an idea of what rate you are currently getting. on the government-guaranteed loans you are granting?

About this, we have 3.5 billion loans with state guarantee. One-third is on retail and two-thirds is on corporate, more or less. On corporate, we have an average rate of roughly 1.3%, 1.4%. On retail, it's a little bit higher. So let me say an average is around 1.4%.

Thank you very much.

The next question is from Domenico Santoro with HSBC. Please go ahead.

Hi, it's Domenico, HSBC. Very quickly, just a couple of follow-ups to understand better what you said. On the reclassification that you've just done on the NII and fees, Are these the clean base in terms of NII and fees for the first quarter, or the reclassification pertains to the entire year, basically? The other question is whether there is any regulatory headwinds you might have to consider in 2021 in your capital. The other question is on loan loss provision. Did I understand correctly that it's 80, 90 basis points, the guidance that you're giving for this year, and the clarification on Q4, I think that the colleague already asked. Is the loan loss provision including also the loss on summer? And I don't know whether you want to mention or quantify that. Thank you.

Okay. Hi, Domenico. Well, about the first question, the reclassification, there's a 2020 three million covered the entire 2020. So, as I said before, more or less the impact was around two million per month. And so, the reclassification is to give also a clear representation of the NAI and Commission. So, the last part of the year probably is the level the starting point to analyze what will be the level of next year in commission and the NAI. About the 2021, we have no expectation of headwinds. And what we expect is to have, let's say, a little bit, some marginal and not significant impact coming from three weeks, let's say 15 basis points. But there is, as I said before, 45 basis points coming from the IRB model on the Unipol Bank perimeter. So at the end, our expectation is to have a benefit in 2021 around 25, 30 basis points coming from these elements. Please, Roberto.

The loss of summer is in the last quarter 16.6 million, and it is in voice 100. So it is under disposal of bonds and non-performing exposure, not in the provisioning.

And is your guidance for loan loss provision 80-90 for this year, right?

Well, I would like to express clearly, before when we said about the 80-90 basis point was for the perimeter of UBI, so the 200 million euro of pre-tax profit was estimated after 80-90 basis point of cost of risk on the perimeter of UBI. Speaking about the cost of risk of BIFR, let me say our expectation is to be around the level of this year. But, as I said before, we would like to take advantage of badwill. So, for example, as I said before, €200 million was already expressed in the project of the acquisition of the going consort. But if we have more room to use the badwill, we are ready to use for extra provisioning. So let's say this is, in my view, an opportunity to complete definitely the action on our asset quality And, you know, we want to be in the peer of the Italian bank with the best answer quality. And this is, in our view, a good opportunity in the right time in Q1 2021.

All right. Now it's very clear. Just a question for Alessandro, maybe. Can you give us a bit of sense of how the cost base is going to, you know, evolve this year for the BPES?

Stand alone, please.

The cost base for the next year, for 2021?

Exactly.

Okay. What we expect is on an ordinary basis, so without the impact of the one-off costs for Germany or for COVID or for other one-off items, what we expect is a decline around minus 1%, more or less. thanks to the last effect of the redundancy plan, the inertial effect of the redundancy plan, partially counterbalanced by the improvement of the IT platform. So we want to use a portion of this kind of benefit to improve the IT platform in order to be well prepared for gemini imports. So the guidance is a slight downside, more or less 1%.

I understand. Thank you very much. Thanks.

The next question is a follow-up from Christian Carriza with Intermonte. Please go ahead.

Thanks for taking my question. A quick follow-up on MPE ratio, the target that you gave, 6%. Which kind of timeframe have you got in mind to reach that level? The second question on cost base, you just said minus 1% year-on-year in 2021. This includes the renewal of the contract, labor contract, and I would say that's it.

Okay, Christian, thank you. I will take your first question, and I ask Alessandro to give you the answer to the second. About NPA, our expectation is to have probably in the Q1 or between the Q1 and the second Q, you know that we have a first important going concern related to the UBI branches in the next weeks, so by the end of this month. Then there will be another small going concern represented by some branches of Intesa San Paolo by the end of June. So there are two different, but the first is 95 percent of of the entire going concern. So the main effect would be focused on this first completion of the acquisition. So we expect at the end of March to have another sneak if we can drop in NP ratio. As I said before, our expectation is to be not far from 6%. Together, as I said before, to the completion of a disposal of UTP on which we are working right now and we expect to complete in the coming weeks. Now Alessandro for the cost base.

The cost base, the impact of the contract was already included in 2020 figures and the impact was on the last profit and loss, it was around $16 million. So for the next year, the figure of minus 1% is all in, including the inertial effect of the contract that was already impacting on 2020.

Very clear. Thank you.

Gentlemen, there are no more questions registered at this time.

Okay, thank you. Thank you very much for your attention and see you soon. Bye-bye.