Bper Banca Spa Unsp/Adr

Good morning, this is the Coruscall conference operator. Welcome and thank you for joining the second quarter 2025 BIPER 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. Nicola Sponghi, Head of Investor Relations of BIPER. Please go ahead, sir.

Thank you, and good morning, everyone. I'm pleased to welcome you to our second quarter and first half 2025 earnings conference call. Before I give the floor to our CEO, Gianni Franco Papa, please remind that our slide set and press release can be found on our corporate website. I would also advise you to take note of the disclaimer on slide two of the presentation document. That said, after the presentation, our CEO, our CFO, Simone Marcucci, and our CEO, Emanuele Christine, will take care of the Q&A session. I will reiterate that this is reserved for financial analysts, whom I will kindly request to ask a maximum of two questions each, so that everyone will have the opportunity to contribute to today's call. Thank you very much. I will now leave the stage to Mr. Papa, CEO of Bitter.

Thank you, Nicola, and good morning to everyone, and welcome to our Q2 and first half results presentation. Before I start giving you details of our financial performance, I'm keen to spend a couple of slides on the progress of the business combination with Bipso. We were among the last leading banks to launch an offer, and we are the first bank among Tier 1 banks which has been able to complete the first phase of the transaction with an extremely high level of acceptance, above 80%. Such a high acceptance rate will allow us to move rapidly with the full integration of Bipso into Bipper. This is a particular area where we can boast a significant track record. Concrete examples are the integration of Banca Carrage, Ubi Branches, Unipol Banca, and Banco di Sardegna. Needless to say that the financial community has recognized the very strong strategic and business rationale of the transaction. In the same way, investors have deemed the tender offer price to properly reflect the value of the business combination. I would like to highlight that the total consideration paid to BIPs of shareholders breaks into three. a consideration of approximately 528 million of newly issued B-per-shares, ordinary shares equivalent to 27.1% of B-per-share capital, and a consideration of approximately 364 million euros in cash. We have already launched a number of internal war streams, and we expect the full integration to be achieved before first half 2026. As you can see on the slide, thanks to the transaction, BIPER will strengthen its position as a leading player in the Italian banking sector with a very strong presence in rich northern Italy, particularly in Lombardy. We have summarized the positioning of BIPER in terms of TFA's, loans, deposits, and branches on the left side of the slide. These have been calculated on the basis of aggregated financials as of June 2025. The most important message I would like to pass on to the financial community is that the merger with BIPSO acts as an accelerator to our plan, B-Dynamic Full Value 2027. On the right side of the slide, you can appreciate our most important targets. From an accounting perspective, the first consolidated financials, including BIPSO, will be disclosed to the financial community with our Q3 results in November, while we expect to update the financial community with the progress of our business plan not later than first half 2026. On this slide, you can see the indicated timeline of the transaction. Up to now, the transaction has been carried out flawlessly. However, a number of other very important steps have to be completed, and among these, the appointment of the new Board of Directors of BIPSO, the approval of the merger plan for the incorporation of BIPSO into BIPER, and the submission of the relevant application request to ECB, and finally, the completion of the integration of the two banks, which we expect by first half As I mentioned earlier, two key dates for the financial community will be Q3 2025 results, when the consolidated financials will include BIPSO, and first up, 2026, when our B-Dynamic full-value 2027 plan will be updated. Ladies and gentlemen, This second quarter has been the best-ever quarter of BIPER. Along with the results achieved in Q1, I can proudly say that these have been the best-ever six-month results of our group. Before I start giving you details of our financial performance, I'm keen to highlight a number of key features of these remarkable Q2 2025 results, underlining that progress on our B-Dynamic Full Value 2027 is well on track. First and foremost, FirstUp 2025 was our best-ever six-monthly result, with the bottom line standing at €903 million. The outstanding results in Q1 2025 was further strengthened in Q2, despite declining interest rates and geopolitical turmoil. Although six monthly NIAs lead by 3.4% compared to the previous year, NIA in Q2 was resilient as the bank commercial effort more than compensated the impact of the reduction of interest rates. In this context, thanks to the relentless dedication of our teams, loan volumes were positively affected by significant new loan origination of 6 billion euros, a plus 22.3% on a year-on-year basis. In line with our plan, commissions continue to have a very positive run throughout the year given the focus on AUM, life insurance, and bank assurance products. We have further strengthened our performance in wealth management, where commissions increased by above 9% compared to the previous half in 2024. Our profitability remains high, with an adjusted return on tangible equity at a robust 20.4%. We maintain a very solid capital position with a CET1 ratio at 16.2%, resulting from an organic capital generation amounting to approximately 200 basis points, equal to 1.1 billion euro in the last six months. As already mentioned in the past, we will be able to carry out the merger process without capital-related constraints. And finally, the quality of our loan book continues to stand at the best levels in the Italian banking industry with a cost of risk of 31 basis points. These exceptional results have been achieved thanks to the hard work of all of us. we have maintained a strong focus on the transformation of BIPER into a go-to bank for individuals, families, SMEs, and corporates, an important step from being a pure relationship bank. Let's move on to the net profit drivers on slide number nine. As I mentioned earlier, the combination of the remarkable results in Q1 and Q2 2025 allowed to report the best-ever half-yearly results. The quality of our revenues remained outstanding, and IAI has proven to be very resilient in spite of lowering interest rates. I'm extremely satisfied about the progress of commission income, although these were impacted by an exceptional number of holidays in Q2. That said, progress is solid. Commissions increased by almost 5% versus the first six months of 2024 and increased by 1.2% compared to Q2 2024. Given the current geopolitical turmoil, let me underline that BIPER is a bank deeply rooted in Italy with a low business exposure to global markets. In addition, we are proud to state that we are a commercial bank with a complete banking offering and a focus on asset gathering. The pages to come will provide you with an in-depth review of each and every item. Let's move on to slide number 10. These remarkable results make us very confident to meet our 2025 guidance and allow us to improve it on a number of drivers. We upgrade our guidance on total revenues from €5.4 billion to €5.5 billion despite our internal scenario of lower rates which was reduced from 2% to 1.75%. The continued commercial push makes us more confident on the loans outlook. In the same way, the solid progress of commissions will continue throughout 2025. We improved guidance on cost-income ratios from 51% to 50% given our focus on operational efficiency. And finally, we revised upwards our guidance on CET1 ratio to above 15.5% given the bank progress on internal capital generation. This is particularly important in the context of the merger process with Bipso. Let me add that we expect The CT1 ratio of the combined entity to stand at approximately 15% at the end of December 2025. A quick glance at the progress of our business plan, which I remind you remains to date stand-alone. Firstly, I would like to highlight the remarkable achievements of BIPER ranking in first position as best small and mid-cap bank in Europe by Excel. In this context, I would like to thank all my colleagues for this exceptional result. A couple of additional highlights. New lending in the first half rose better than expected thanks to our strong commercial actions. Reported new lending in first half 2025 reached 10.4 billion euros, a 20.7% increase compared to the first six months in 2024. The positive results were achieved across several lines. Residential mortgages grew by 6.1%, consumer credit by 18.6%, and corporate loans increased by almost 30%. Commissions continued to register a remarkable performance. We noted an important contribution of AUM commissions and bank assurance, both running a double-digit growth rate. We continue to work rigorously on the progress of our digital and remote channels, now enabling approximately 20% of our new personal loans being fully processed digitally. In addition, we are now in a position to dedicate approximately 50% of the frontline time to value-added commercial activities as a result of the positive impact of operating efficiency initiatives. Our capital ratio remains strong and our guidance has been revised upwards for 2025. The bank modernization is progressing rapidly. Deployed capital effects according to plan reached 200 million euros in first half 2025 compared to 160 million euros in Q1. The commitment to ESG is high, reporting further increases in the amount of ESG new lending at 1.5 billion euros from 700 million euros in Q1. And finally, over 2,500 employees have already been involved in our dedicated academies. Let's now turn to our financial performance. The resilience and quality of our revenues was demonstrated by core revenues standing at $2.7 billion in first half 2025 in line with the previous half in 2024. Given the overall scenario, characterized by an acceleration of the reduction of interest rates, this is a positive result. Among the main drivers of total revenues, I would highlight the following. Resilient NII, higher loan volumes compensating lower rates, and a positive performance in commission income thanks to the positive contribution in AUM fees, life insurance, and bank assurance fees. I would like to stress that the NII is almost purely of commercial nature. As such, I would like the improving quality of our revenues where the ratio of net commission income to total revenues rose from 36.8% in first half 24 to 37.3% in first half 25. And finally, I would like to underline the continuous solid trend in productivity with the net revenues of risk-weighted assets ratio which increased from 8.6 to 9.8% between Q1-23 and Q2-25. Let's move on to the next slide which focuses on net interest income. Given the interest rates environment, the performance of the net interest income line was exceptional in Q2. As you can see, NII in Q2 was slightly higher than in Q1 at €814 million. And as you can appreciate in the waterfall chart, the negative effect of rates was more than compensated by increased loan volumes. In this particular business context, commercial actions to increase quality loan volumes have been extremely effective. As I mentioned in the slide on progress of our business plan, new loans in the first half increased by 20.7%, mainly due to increases in residential mortgages, of which an important component with ESG characteristics, increases on consumer credit limited to our existing clients in order to maintain outstanding quality of our loan book, and important new loan origination on corporate loans, demonstrating that BPIR is moving from the status of a relationship bank to go-to bank for our customers. As such, new loan origination has been aimed at high-quality rating classes, the effect of which you will see in a positive trend in risk-weighted assets. Finally, I would like to highlight that our NII sensitivity to 100 basis points movement equal to approximately 150 million euros in the quarter versus 165 million in the previous quarter. Now, let's move on to the development of net commission income. The performance of commission income progresses according to our plan. The bank relentlessly focuses on capital-light, high-quality, non-interest income products. Commission grew by 4.8% in the first semester of 2025 compared to the first six months of 2024. This is an important achievement given that Q2 was negatively affected by an extraordinarily high number of holidays. The most important contributor, which represents more than 50% of commissions, were fees from banking services, which reached 540 million euros. This demonstrates the growing commercial reach of BIPER. Wealth management fees, which increased by over 9% six months on six months, are rapidly playing a more important part as percentage of total commissions. These were mainly driven by high-quality AUM and life insurance fees. Fees from bike assurance continue to register strong growth rates by almost 16% compared to the first half of 2024. Noteworthy to mention that AUC and AUM running fees increased by 5.4% in the first six months, 25% compared to first half, 24%. Let's move to the next slide, which focuses on the progression of total financial assets. Total financial assets, the most important driver of commission income, grew by 4.5% in the last 12 months. In the quarter, total financial assets increased by almost 10 billion euros due to customer asset dynamics in deposits, AUC, and AUM. This is an important trend as it demonstrates BIPER capability in terms of attracting customer liquidity, both on the retail and corporate side, and transforming it into AUMs and AUCs. It also proves that BIPER is gradually being perceived as a go-to bank by its customer from a purely relationship bank. As such, we are now increasing penetration of liquidity management for both corporate SMEs and private clients. I came to underline that such positive progress allows us to have higher firepower to grant new loans. In fact, in Q2 2025, the loan-to-deposit ratio stood at 76.7%, stable quarter-on-quarter, one of the lowest among Italian peers, which will enable us to continue to grow the loan book and to transform client liquidity into AUCs and AUMs. Let's move on to our performance on the cost side. Total costs were down by 4.9% in the first half compared to the first six months of 2024, underlining our relentless focus on operational efficiency. Our actions have reduced the cost-income ratio to 46.6%, and our positive progress enables us to improve our guidance for 2025. The waterfall chart reports the key drivers on HR costs in the quarter. The reduction was mainly driven by organic turnover despite lower voluntary exits, which more than compensated the increases related to the national collective labor agreement. As you can see on this slide, at the end of March, headcounts stood at 19,224, a reduction of some 1,200 compared to June 2024 related to actions which are already in place. Non-HR costs were basically flat at about 250 million euros in line with the previous quarter. Although we improved our guidance to a lower cost-to-income ratio for 2025, We expect a pickup in the cost line, especially in Q4-25 due to seasonality. Let's move to cost of risk. As you can see, asset quality remains very strong. In the 12 months, cost of risk has fallen by 10 basis points to 31 basis points. Our NPE coverage ratio improved to 55.6% and is one of the highest among Italian peers. This will act as a further buffer against any potential deterioration in asset quality. Our conservative approach is further confirmed as we report a Q1 coverage ratio on performing loans at 0.63% among the highest in Italy. Total cumulative overlays stood at approximately 214 million euros, down by almost 14 million euros versus Q1 2025. Let's move on to asset quality on the left side. As in the previous quarters, the quality of our loan book continues to show a very healthy state. From a stock perspective, gross MPEs were flat in the quarter, approximately $130 million lower year-on-year. Noteworthy, Beeper is pursuing an approach where new lending is focused on the best rating classes with a lower risk profile. As a result of this conservative policy, Beeper is characterized by a high-quality loan book, which is further highlighted by the net MPE ratio, which, as you can appreciate, continues to improve and is one of the lowest in the Italian banking sector at 1.1%. Having finished with asset quality, let's move on to the development of the bank's risk-weighted assets. As you can see, In Q2 2025, our total risk-weighted assets decreased from $55.9 to $55.6 billion thanks to higher quality lending and methodological fine-tunings related to model reviews. Without the impact of Basel IV in Q1 2025, mainly related to operational risk, risk-weighted assets would stand at $53.9 billion. I will now turn to organic capital generation on the next slide. PIPER continues to generate a very high level of organic capital totaling 1.1 billion euro and approximately 200 basis points in the last six months. As a result, CET1 ratios reached 16.2%, a very comfortable level in preparation of BIPSO integration. With regards to BIPER capital profile, let me highlight the outstanding results achieved by the bank in the recent regulatory stress test exercise carried out by the European Banking Authority. The outcomes of the supervisory stress test exercise confirmed the bank's capital strength, showing a very limited capital depletion of 94 basis points even under a highly adverse scenario. This result reaffirms BIPER position as a highly resilient institution. Moving on to liquidity, let me point out that the bank's liquidity ratio remained high at the end of June. The LCR is equal to 163%, in line with 166 reported at the end of March 25th. the NSFR is equal to 135% stable compared to the end of March. In Q2, the loan-to-deposit ratio stood at 76.7%, stable quarter-on-quarter, one of the lowest amongst Italian peers, which will enable us to continue to grow the loan book through increased loan origination and transformation of client liquidity into AUC and AUMs thanks to our ability to attract customer liquidity. Turning now to the bond portfolio, Italian government bonds amounted to 14.8 billion euros and accounted for around 49.5% of total bonds. Noteworthy that already in Q3-24, a tactical and selective increase in exposure to Italian government bonds had been started. As a result of the active portfolio management strategy, in Q2 2025, the bond portfolio duration decreased to 2.1 years from 2.3 years in Q1 2025. The decision to focus purchases on Italian government bonds was driven by the attractive spread level and the opportunity to capitalize on market weaknesses. A brief look at our latest bond issuance is important. As already mentioned in Q1, BIPER successfully placed a €500 million senior non-preferred bond in January. That said, we do not anticipate any major bond issue until the integration of BIPSO into BIPER. It is also worth noting that Fitch and Moody's have upgraded BIPER to positive outlook, further supporting the bank's strong credit profile. All credit agencies have positively viewed the BIPSO business combination, and as a result, have also increased the credit rating of BIPSO itself. On slide 27, we report the divisional financials. I'd like to draw your attention to the important results achieved on total wealth commission income created across our divisions, which amount to €466 million in first half versus €840 million achieved during the 12 months of 2024. In addition, total indirect deposit in private and wealth management amounted to 191 billion euros, more than 60% of our total group TFAs, which stood at 312 billion euros, underlining our strong asset gathering generation capacity. Ladies and gentlemen, a brief summary of the most important achievements in Q2-25. First and foremost, we have completed the tender offer of BIPSO with an extremely high acceptance rate, which will allow us to carry out a swift integration of the two banks. In this context, we confirm that we have already launched a number of internal work streams. Our Plan B Dynamic 2027 full value is well on track and the business combination with BIPSO will act as an accelerator. In this context, we are planning an update to our plan after the integration of the two banks in first half 26. The transformation of BIPER from a relationship bank into a go-to bank is remarkable. Given the successful commercial action we have taken, which translated into achieving the best quarter and best half ever reported by BIPER. NII was resilient in the quarter, and fees have continued to positively run, with wealth management fees playing an increasingly important role in terms of total commissions. This underlines the increasing commercial strength of BIPA. Asset quality remains robust, with all reported ratios being at the best levels in the Italian banking landscape. We continue to register a significant internal capital generation with a CET1 ratio standing at 16.2%, which allows us to face BIPSO integration in a very comfortable situation. Thank you all, and we will now take your questions.