Bper Banca Spa Unsp/Adr

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the conference call on the BIPER Group's full year 23 consolidated results. 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 the telephone. At this time, I would like to turn the conference over to Mr. Nicola Sponghi, Head of Investor Relations. Mr. Sponghi, you have the floor.

everybody and thank you for joining before i give the floor to mr montani our ceo and the cfo mr santi for the presentation of people bankers for your 2023 financial results please note that you will find our presentation and press release on our corporate website let me remind you that The Q&A session is reserved for financial analysts, so I would request to limit themselves to two questions each in order to give everybody the opportunity to ask questions. Please, Mr. Montagna, you have the floor. Thank you. Good evening. Thank you for joining. I think that in the presentation last time we said that this webinar the situation should have been framed as a positive as positive results and in fact I think I can confirm it because the macroeconomic environment last year was characterized by geopolitical tensions that introduced elements of concern and uncertainty nevertheless thanks to the efforts of the entire structure that I want to thank and that worked very well to make the operating engine efficient and optimize the all of the lines of business, the bank succeeded in achieving excellent results that go well beyond the favorable banking system cycle, confirming its revenue generation capacity. I would say that when I say that it went well beyond the cycle of the Italian banking system, what I mean is that unlike the other banks, We were confronted over these last two and a half years of work, we were confronted with the challenge of uh... achieving the results now while something else was uh... uh... brought forward uh... and i would like to remind everybody of the effort that was made because i really think that that uh... was a precious effort that uh... all of the structure should be thanked for we integrated nine hundred eighty eight branches with the two banks we took over and uh... we've onboarded uh... uh... millions of new customers, 2.5 million, and 1,500 billion of assets and 50 to 60 billion of balance sheet assets. And this is the effort that I was thinking of. But having said this, I would also say that the results for the period went even better than the trend for the entire banking system. 2023 was also a particularly significant year because we were able to complete all, and I would underline the adjective all, the actions that we had set out in the business plan for 2022-2025 that we presented to the market on the 10th of June 2022, which means that we closed the plan in one year and a half that was supposed to be closed by 2025. We did all of the transactions. We completed the 81 transaction in January that was not in the plan, but we did it. So this means that we could complete our business plan in less than two years. and we are absolutely proud of that and that's why i have thanked and i thank again all of the structure both the head office and the branch network that supported us with our customers the year closed with a net profit of 1 519.5 million inter alia net of non-recurring costs that we had already talked about in the nine-month report for $294.5 million in relation to the workforce optimization maneuver. If we did not consider this, then the real net profit, the actual net profit, would be over $1,700 million. And we're very proud of the agreements that we reached with the trade unions, which is a source of great satisfaction for us, because this will enable the onboarding of new resources, favoring youth employment in a logic of generational turnover, The transaction, the maneuver that we worked upon was done because we were convinced of this maneuver and we looked at and to the future development of this bank. Operating profit exceeded 5,260 million, up 39.7% year-on-year, thanks to the steep acceleration in net interest income that all of the Italian banking system benefited from and the positive result in net commission income that was quite good. All of the data that we presented in November during the nine-month report were exceeded The operating cost in the third quarter marked a positive trend. I would say it's an absolutely positive trend, and the operating efficiency is improving. Our cost-income ratio, the recurring cost-income ratio is 50.7% versus 64.1% at the end of 2022, and the number of employees and branches has gone down according to the numbers we had already. presented. Overall funding settled at $289 billion plus 3.9% year-on-year and net loans settled at $88.2 billion up 1.8% quarter-on-quarter. I think last time we talked, we said that we expected by the end of the year the trend would be in line with previous quarters and in fact it was even better The credit quality improvement is confirmed, fully confirmed. The growth and net NPE ratio are respectively 2.4 and 1.2 percent down compared to the end of 2022 when they were respectively 3.2 percent and 1.4 percent. The annualized cost of credit Proved to be steadily down to 48 basis points at the end of 2023. It was 64 basis points at the end of 2022. High capital strength is confirmed with a C to 1 ratio at year end of 14.5%, well in excess of the SREP requirement. Liquidity continues to be on levels of excellence with ratios well above the minimum thresholds. Respectively, LCR is at 161% and NSFR at 128%. The sound capital position but also all of the positive results that I have mentioned were achieved as a collective effort because all of the departments of the bank contributed to this positive performance. So the sound capital position and these results enable us to propose a dividend of 30 cents per share, which is equal to a payout of 30% approximately. I would give the floor to Gianluca Santi, the CFO, who will give the details of the results for this year. Thank you. Good evening, everybody. We'll go into the details of the evolution of the numbers starting from total funding. So direct and indirect deposits, as you can see, we are presenting a growth both year on year and quarter on quarter. We are basically commenting the last quarter now. And you can see that there has been an increased gain in terms of assets under custody. In particular, we had an important inflow in the last period, and we're starting to benefit from a market effect that was supportive. that was supportive, particularly in the last few months. As far as direct deposits are concerned, we can look at the lower part of the slide. You can see that as against the first half of the year when you may remember that we had lost about $7 billion worth of short-term funding, in the second part of the year, in the second six months of the year, we could... a prevent these type of outflows and convert it into partly deposits and certificates and so term deposits and on the other side we also strengthen the duration of our institutional funding by issuing bonds and structuring in this case some repos. This was specifically done to lengthen the duration given the significant weight that current accounts are having on our income statement, basically. And so I would also like to underline net funding in terms of assets under management, 1.2 billion or even more than that, which means that our network could in fact convert the current accounts and deposits into assets under management when they were looking for higher yields. And this is a very important result based on the and also in view of the activities that we will carry out in 2024. As far as net loans are concerned, in the last quarter we had a growth because of some important transactions in the factoring department and area. So you know that corporates develop their own activities towards the end of the year. But also we had some good results in retail with dedicated – campaigns for mortgage loans because mortgages of course are flagship products in our mix of products and then we try to develop that on an ongoing basis then from a point of view of year-on-year changes I would say there's been a drop by 3 billion euros and this drop is reflective on the one hand of a decrease in retail mortgage loans in particular because of the increasing interest rates that did not favor the development and growth in mortgage loans to retail customers. Then there was also a drop in the corporate sector because businesses preferred to use their own liquidity to try and avoid this increase in exposures and to prevent incurring the cost of borrowing. And then the weight of mortgage loans is 50% fixed rate loans and I would say that 67% in residential loans are fixed rates and 20% is floating rates. We can confirm the loan-to-deposit ratio that is very strong at 74%, which bears witness to our attention and conservativeness in lending. In terms of asset quality, once again, we can confirm the indicators that we already mentioned elsewhere with 2.4% and 1.2% in terms of growth and net NPEs. I would underline that there's been a variation in the stock because this year we completed disposals for about €1 billion, of which €820 billion worth. is VAT loans and the rest is UTPs. This, of course, has shifted the composition of these ratios a little bit. And then there's another important thing that is the coverage. Coverage is once again strong, even though a little bit decreasing compared to prior periods because we disposed of high vintage high coverage loans, and so the coverage of the loans remaining is, of course, a little bit lower. There's another important change that I would underline. You can see there's a reduction by $800 million in Stage 2 loans. This variation is due to a So bulk reclassification to performing loans of the stage two loans that had been classified as such during the COVID period. I'm referring to the hotels and tourism sectors and the reclassification of these stage two loans, of course, brings about a positive change in terms of stage two stock. As far as the portfolio is concerned, as we had already declared in other presentations, our intention was that of reducing the stock. The objective was $2 billion that we could achieve by the end of the year. We worked particularly on the government bonds, Italian government bonds, by reducing their amount. And so, of course, the coverage also has changed significantly. with an increase in duration that you can see reflected in the central part of the slide where there has been a change because the hedging, of course, has had an impact. As you can see, the yield, quarterly average yield, The portfolio is once again on an uptrend in the fourth quarter of 2023 and settles at 3%. Moving on to the P&L, we wanted to present the two versions, so the accounting part and the recurring part. P&L where we have reversed the impact of the redundancy fund. or the early retirement fund that we, of course, had the impact of in the last quarter of 2023. We have given you the impact in the guidance by $300 million, and in fact it was $294.5 million with a tax effect of $82.6 million. And this is the only difference between the accounting and the recurring P&L. I would move on to net interest income now, where you can see the evolution in slide 15. You can see that net interest income is once again increasing in the last quarter. We may comment that on a quarterly basis, because you may know that the P&L of Karije, and actually the consolidation of Karije's P&L, has been there, so to say, since June, so since the third quarter of 2022, so the scope is not like for like, so to say. But this plus 4% is reflected in the chart on the right-hand side of the slide, with the commercial part contributing 18.4%. If you remember, There was a subsidy, so to say, that were given to the population hit by the floods in the third quarter, and then there's You can see the details there and there's going to be a penalization of 40 million in terms of net interest income. We are lengthening the duration of funding and there's a positive contribution from the securities portfolio. We have separated the TLTRO effect Because next year, actually in March this year, we are going to repay the last tranche of $1.7 billion of the TLTRO. And so there's not going to be any contribution from the TLTRO anymore. The spread is increasing, continues to increase. And in the last quarter, there's 18 basis points. We're giving this view of the spread net of the echo bonus effect, because otherwise it would be 3.55, net of the echo bonus effect, 3.55%. as for net commission income once again we confirm the guidance that we had given we thought of a generation of 500 million worth of net commission income on a quarterly basis and we confirm that we have over 2 billion for the year and the good performance in that year is due to the performance in insurance with the commission bonus Because of the levels of production that we achieved, $25 million is accounted for by that, and then assets under management and assets under custody. Obviously, on the one hand, there's the effect of... net funding, $1.2 billion, and then there's the placement of government bonds in the last quarter that accounts for $4.7 million and then also good placement of certificates. As for the net commission income from traditional banking, I would say that the good activity and performance of businesses generated part of the net commission income for about $5 million that also contributes to this trend. As for operating costs, we have already mentioned the 294.4 million worth of the HR maneuver with 49 million being accounted for by the renewal of the labor agreement. If you remember, we were speaking about $100 million, and $100 million is the effect that we're going to have in 2024 because it will cover for the entire year. So $49 million this year and $100 million next year in 2024. Then as for the other items, the increase in depreciation and amortization reflects some write-offs in association with Carige, and this is real estate write-offs and hardware and IT write-downs. And then as far as other administrative expenses are concerned, we continue to invest in development projects, digitalization projects, and these costs are associated to the over 100 projects we are developing in relation to technology. Just a few words on cost income, which is now 51%. There were very important actions taken in terms of headcount. About 1,891 people exited as against 700 hired, so the turnover has changed. The branches were down by 278 with the details being accounted for by the takeover of Banco Dejo and other close downs during the year effect out in the business plan. As far as the cost of risk is concerned, we've already mentioned the indicators. We're at around 50% NPE coverage, 53, and we can confirm the cost of risk for 2023 of 48 basis points. There has been no deterioration of credit coverage. and that had been expected and because of the deterioration in interest rate and that increase in interest rates but potentially we wanted to put fifty basis points almost because as we said in the past we want to be ready for any type of changes in the scenarios. We once again confirm the total cumulative overlays of up to 277 million euro. In the first month of 2024, we have already talked about that, but there's going to be a different management of non-performing loans from the very beginning of this year, basically, because we have developed with Guardant an initiative that is going to be 70% owned by Garden Bridge and 30% by Beeper, whereby we're going to manage a stock of credit for an amount of $2.2 billion with a servicing platform. And on top of that, we have signed a 10-year servicing agreement that envisages the management of this platform, the management in this platform of new UTP inflows and new BAT loan inflows. 50% of UTPs and 90% of the new BAT loan inflows will be managed with a capital gain of 150 million. Just a quick comment on liquidity. We confirmed the total eligible assets of around 30 billion and I would like to underline that there are deposits with the UCB for an amount of 9.2 billion. The LCR is of around 160%. It's a little bit higher than the guidance we provided because we would like to go to 140 150 percent because we are of course getting ready to repay the uh last chance of the lta tltro in march so the indicators the liquidity indicators are very robust and moving on to the capital walk here near you can see here that there's an organic generation of capital that is very substantial The only item that I think is quite interesting to comment on is calendar provisioning. We have gathered some of the guidance and indications that came from the supervisors and we've closed a shortfall we had in calendar provisioning for 2023 and 2024 as well. So now our position is and this achieves no impact from calendar provisioning. At this point, I think I have completed the presentation. I will give the floor again to the CEO. Well, before I give you some guidelines on the outlook for 2025, Which I will go into soon. I would like to add just a few things on the transactions we completed. When I said that we closed the business plan, then I now listened to Gianluca who was speaking about Carice. But it's true. I mean, Carice's transaction also was completed. There are some questions coming up. every now and then. To what extent has it been completed? It has been completed 100%. Of course, we're fine-tuning some little things as always happens, but the project to us is closed. Having said this, coming to 2024, We're just at the beginning, so I'm not being prudent. I'm just calculating based on what I have on the table. So the bank worked very well, also to lay the foundations for a solid future. We expect in terms of net interest income to have a trend that is going to be a little bit going down for a number of factors, the compulsory reserve, the effects of the TLTRO. there may be a little bit of a contraction in terms of the trend also in the interest rates and the curve. So even though there may be this slight contraction, we are absolutely convinced that whatever is lost on this front if any, will be made up for in terms of net fees and commissions, particularly in the area of assets under management. I told you that there's also a program and project we have launched for Banca Cesare Ponti that is going to be initiated and kicked off in just 10 days. It's an area that will work together uh intensively on last year and even the year before and we have gained market shares and i think we will be able to um you know to to to to be at full speed soon uh as far as the operating costs are concerned we are confident they will be in line with the costs we had this year or last year and as far as net profit is concerned Net of the $380 million of DTAs that of course inflated the net profit compared to the recurring net profit. Everything is recurring, but the real truth is that the DTAs will not be there next year. So net of the $380 million worth. of TTAs, I think we would be in line with that profit we had this year. So this is going to be more or less the range we're going to fit ourselves in. 50 basis points should be the cost of risk or or at least stable with what we had this year, and net profit is going to be stable, and the CET1 ratio is going to be over 14.5% that we had this year. And so this is the data I can give you now. I will try to update you as far as we, you know, in progress. But I have completed the presentation, and we are willing to answer your questions. This is the course call operator. We're going to start the question and answer session now. Anyone who has a question may press star and 1 at this time. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. First question is from the Italian conference by Mr. Giovanni Razzoli of Deutsche Bank. Please go ahead, sir. Good evening. I would like to have two questions. clarifications when you said 23 basis points that you recorded in the fourth quarter of 2023 in slide 21 in terms of the calendar provisioning can you clarify a little bit what assets you are referring to and can you give us some further guidance and then When you talked about the $380 million worth of DTIs, now you do not have any DTIs of balance, and that could be a buffer for the future.

So can you give us more color about the DTIs, please? Mr. Santi answering.