Bper Banca Spa Unsp/Adr

Good morning, this is the Coruscall conference operator. Welcome and thank you for joining the third 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 am pleased to welcome you to our third quarter and first time month 2025 earnings conference call. Before I give the floor to our CEO, Gianni Franco-Patta, please be reminded 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 CRO, Emanuele Cristini, will take care of the Q&A session. I will reiterate that this is reserved for financial analysts whom we 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 BIPER.

Thank you, Nicola. Good morning to everyone and welcome to our Q3 earnings presentation. Before giving you details on the financial performance of BIPER, I would highlight a number of key features of the third quarter 2025. First and foremost, the 23 work streams identified for the integration of BIPSO into BIPER are all up and running and will be completed by the end of the first half of 2026. Secondly, in the context of our new organizational model, we have decided to regroup 90 overlapping branches in the central and northern part of Italy. And given our market share by branches in Lombardy, where we can almost boast a share of the market of 18%, we decided to create a new regional headquarter called Lombardia Nord. As far as our human capital is concerned, we are aiming to further invest in young talents. In order to accomplish a generational change in the bank, we have initiated discussions with trade unions to implement additional voluntary exits, which should amount to about 800 employees. As you have seen in our press release dated October 21st, Deeper signed a derivative contract which can be summarized as a synthetic exposure to its own shares of up to 9.99% of the share capital. We decided to take this action as we strongly believe in the enormous potential to shareholder value generation of the new banking group combining BIPER and BIPSO. On the rating side, we have received important recognitions from the credit rating agencies with improved ratings post the successful outcome of the business combination with Bipso. And finally, as you can appreciate on the slide, in the last 24 months, Bipper shareholders have benefited from a total shareholder remuneration which is shy of 280%. This would increase to 315% at the end of October when the market cap reaches 20.2 billion euros. The trajectory is similar if we look at the main tangible banking asset drivers, which have increased by almost 50% in the same period. And let me add that compared to our peers, I'm convinced that we continue to trade at a discount. Let's now move to our Q3 financials on the next slide. I'm very pleased about Q3, because along with the ongoing business integration, both banks performed extremely well. These outstanding results have been possible because of the remarkable commercial performance, which led to continued and robust commission growth, resilient NII, and an increase in the number of net new customers. This particular slide highlights the financials of the new group. based on the consolidation of BIPSO Q3 results. As such, the impact of BIPSO on the consolidated financials counts for only three months, and in a similar way, Q4 will include only six months of BIPSO results. Please note that balance sheet items, on the other hand, include the full nine-month consolidation of BIPSO. In order to ease the reading, on the right side of the slide, we have included on the bottom part of each box BIPER like-for-like results. As you can see, total revenues now amount to €4.6 billion and net profit amount to €1.5 billion. On a like-for-like basis, these are the best-ever nine-month results by BIPER with a net profit of 1.3 billion euros, an increase of almost 20% nine months on nine months. The cost-income ratio stands at 46%. BIPER, on a like-for-like basis, decreased cost-income ratio by over 270 basis points to 46.8%, underlining the continued focus on cost efficiencies. The cost of risk stands at 24 basis points, while, like for like, the cost of risk landed at 35 basis points, lower by 5 basis points, 9 months on 9 months. The return on tangible equity stood at 19.8%. If we would operate with a CET1 ratio of 13%, our return on tangible equity would surge to 21.6%. The CET ratio continues to be very solid at 15.1% or 15.7% following the deconsolidation of Alba Leasing in Q4. Organic capital generation by BIPER, like for like, amounted to 1.7 billion euros, or 272 basis points, in the last nine months. In a similar way, the liquidity profile of the new group is sound, with short and long-term ratios well above regulatory thresholds. Before we start, please note that the figures reported on the left side of the table concern BIPER on a like-for-like basis. For ease of reading, we have included two columns with the consolidated financials, which embed only one quarter of BIPSO contribution. As already mentioned, BIPER is reporting a set of outstanding results nine months on nine months. As you can appreciate, total revenues were up by over 2% nine months on nine months, driven by resilient net interest income and a very robust result in net commissions. Please bear in mind that Q3 is normally a lackluster quarter in terms of commissions, given the summer holiday period. Moreover, the resilient performance of NII, as I will later explain, was supported particularly by commercial efforts of our network, which translated into an increase in new loan origination. Our continued focus on operational efficiency ensured costs to come down by 3.5%, nine months on nine months, and 2.4%, quarter on quarter. Loan loss provision stood at 230 million euros, nine months on nine months, In the quarter, reported LLPs stood at 88 million euros, increasing by almost 22% quarter-on-quarter on the back of our continued conservative approach. As a result, BIPER stated net profit exceeded 1.3 billion euros, up by almost 20% nine months on nine months. As you can see, given these outstanding results, we maintain our guidance unchanged. Please take note that the left part of the slide is related to BIPER on a like-for-like basis, while the table on the right side is related to the consolidated financials, which includes the six-month contribution to the 2025 group accounts. This is the first time we provide 2025 guidance on consolidated figures including BIPSO. There is an exogenous factor which needs to be taken into account that is related to the new banking levels in Italy. The topic is being discussed at banking system level with the auditors to understand whether the impact will start from 2026 or 2025. On a conservative basis, we have taken into account the impact of the so-called extraordinary tax on the increase in interest margin, which relates to the redemption of the non-distributable reserve created in 2023, and which amounts to approximately 116 million euros or 14 basis points on the CET1 ratio. It is yet unknown if the impact will pass through the P&L. One last note is related to the combined cost-income ratio for the end of the year. which will land at below 48%. Guidance is adjusted for approximately 300 million euros of integration costs related to the merger. Let's move to the core part of the presentation. After some 12 months since the launch of B-Dynamic Full Value 2027, a quick glance at the progress of our plan is a must. The plan which I remind you remains to date stand-alone, must be read in the context of the additional 23 work streams launched for the integration. As I mentioned several times, the merger with BIPSO is an accelerator of B-Dynamic Full Value 2027. Some highlights. On Pillar 1. The strong commercial push enabled new lending to increase by 20% nine months on nine months to almost 15 billion euros, close to 20 billion euros, including DIPSO. Commission income growth continues to be very robust, particularly in wealth management, and our customer base continues to grow significantly. On pillar two, Currently, 26% of new customers become Beeper's clients via digital channels. And similarly, Beeper has been awarded a leading position among the digital leaders in Italian banking. As far as Pillar 3 is concerned, our conservative risk approach enables Beeper to boast the most conservative asset quality ratios in Italy. And finally, on Pillar 4, On technology, security, and AI, the group data center rationalization process is fully completed with the adoption of AWS cloud services, ensuring data protection and business continuity while improving the digital customer experience. In this context, CapEx is running according to plan. Our commitment to ESG-related lending continues to be strong with some 2.7 billion euros of new ESG lending in the nine months and, finally, over 3,700 colleagues have already been involved in BIPR's academy and training paths. Let's now turn to our financial performance. Despite the overall scenario, characterized by an acceleration of the reduction of interest rates and the summer months, BIPER produced very positive results on a like-for-like basis. As such, total revenues increased by 2% 9 months on 9 months, and these are extremely satisfying results. Core revenues 9 months on 9 months were stable at 4 billion euros, driven by continued strength in commission growth thanks to AUM, life insurance, and bank assurance products. In this context, the ratio of net commission income to total revenues rose from 36.4% in the nine months 2024 to 37.8% in the nine months 2025, proving the high quality of our revenues. As we will see later, I wish to align the commercial drive on NII, where the negative impact of decreasing interest rates was compensated to some extent by the commercial push of the bank in terms of loan origination. In the quarter, lower NII was compensated by a strong performance in commissions, whereas dividends and other income were particularly affected by dividend seasonality and lower trading activities, which is customary in Q3. As you can appreciate, our productivity index measure as net revenues on risk-weighted assets has improved year-on-year to 9.8%. Let's move on to the next slide, which focuses on net interest income. Although net interest income came down by some 3.6% nine months on nine months, the reduction in NII, principally driven by lowering interest rates, was better than expected. As you can appreciate on the slide, commercial spreads came down from 3.7% to 3.4% in the last 12 months, negatively impacting the NII line item. In the quarter, NII was basically stable, down by less than 1%, and was driven by the interest rates environment, which clearly had a negative impact on NII. Lower interest rates had an important effect on commercial spreads. And in an opposite direction, but to a lesser extent, the important commercial effort of the bank had a positive effect on new loan origination. In this particular context, commercial actions aimed at increasing the quality of loan volumes have been extremely effective. This had a positive effect on credit risk-weighted assets, which we will illustrate later. As I mentioned in the slide on progress of our business plan, new lending in nine months increased by 20% to almost 15 billion euros. Finally, I would like to highlight that our NII sensitivity to 100 basis points movements equal to €184 million in the quarter versus €150 million in the previous quarter. The increase in sensitivity is related to seasonal repricing of floating rate assets. The increase of approximately €30 million in the quarter is in line with the increase between Q2 and Q3 Now, let's move on to the development of net commission income. Commission income continued its strong progress up by 6% nine months on nine months and 8.4% year on year. It is noteworthy to underline that net commission income contribution on total revenues increased to 36% 37.8% in the nine months 2025 versus 37.3% in first half 2025 and 36.4% in the nine months 2024. This is a clear indication of the increasing high quality of our revenues. The bank relentlessly focuses on capital light, high quality wealth management products. This counts for over 43% of total commissions from 41.5% 12 months ago. All this was achieved despite the summer season, which is a remarkable result. In fact, contrary to 2024, net commission in Q3 were higher than in Q2. That said, the most important contributor, which represents more than 50% of commissions, remain banking services fees, which reached 820 million euros. This increased by 6% nine months on nine months. The fact that Deeper is gradually being perceived as a go-to bank by its customer from a purely relationship bank allows the bank to capture a higher share of wallet and increasing net. As already mentioned, normally Q3 is a weaker quarter in terms of commission generation, so we do expect a pickup of fees in Q4 versus Q3. Let's move to the next slide. Total financial assets, the most important driver of commission income, grew by 5.3% since the launch of our plan, reaching 320 billion euros. On top of the market-driven effect, TFA's are growing significantly because BIPER is being increasingly perceived as a relevant player in Italian asset gathering. In this context, The contribution of BIPs increased TFA's by almost 100 billion euros to almost 415 billion euros. This will allow us to further strengthen our focus on asset gathering activities and will ensure the exploitation of further commission-related potential. Key drivers in the quarter have been AUCs and AUMs. Although deposits have been flat, there has been an important asset rotation from deposits to AUCs, mainly due to the issuance of certificates. This is important, as we are now increasing penetration of liquidity management for both corporate, SMEs, and private clients. In fact, in Q3 2025, the loan-to-deposit ratio stood at 76%, stable quarter-on-quarter, one of the lowest amongst 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 3.5% nine months on nine months, underlying our relentless focus on operational efficiency. Our plan actions continue to reduce the cost-income ratio, which decreased to 46.8% from 49.5% one year ago. Non-HR costs were slightly lower, below €250 million, in line with the previous quarter. As you can appreciate, the waterfall chart reports the key drivers of HR costs in the quarter. The reduction was mainly driven by organic turnover, which more than compensated the increase related to the National Collective Labor Agreement. At the end of September, headcount stood at 19,144, a reduction of some 1,100 compared to September 2024 related to actions which are already in place. In terms of the combined group, the integration of BIPSO will increase the account to approximately 22,900. This will decrease by some 260 in Q4 once Alba Leasing will have been deconsolidated. Before we move to cost of risk, let me anticipate that costs in Q4 will incorporate approximately 300 million euros of integration costs, as we previously indicated when we illustrated the BIPER-BIPSO business combination. Let's move to the next slide. In a similar way to costs, the trajectory on the cost of risk nine months on nine months is decreasing from 39 basis points to 34 basis points, including BIPSO. The cost of risk would stand at 24 basis points. The increase in Q3 to 38 basis points is related to our continued conservative approach, totally devoted to increasing coverage and translated into an improved NPE coverage ratio, which increased to 56.3%. This remains one of the highest among Italian peers and will act as a further buffer against any potential deterioration in asset quality. Our conservative approach is further confirmed as we report a Q3 2025 coverage ratio on performing loans stable at 0.63% among the highest in Italy. In this particular context, total cumulative overlays in the nine months amounted to 146.6 million after a reallocation of $67.2 million between provisioning categories, keeping stable the performing coverage ratio at 0.63%. When including BPSO, coverage ratios are somewhat lower due to a technical factor. BPSO non-performing loans are reported only on a net basis. As a result, The total NPE coverage ratio, which decreases from 56.3% to 50% in Q3, is driven partly by this reporting difference. On a comparable basis, the consolidated NPE coverage ratio would stand at 58% instead of 50%. Moving forward, once full integration, will have been accomplished, coverage ratio and NP ratios will be calculated in a homogeneous way. Let's move on to asset quality on the next slide. On asset quality, let me state that Q3 was characterized by lower loan disposals. This is important as there was literally no positive effect on stocks from such divestiture activities. As in previous years, we expect MPE disposals will pick up in Q4. As a result, the gross MPE stock was minimally higher than in Q2, but flat year on year, and the gross MPE ratio was slightly higher at 2.7%, although improved year on year. In any case, as in previous quarters, The quality of our loan book continues to show a very healthy state with net MPE ratios almost flat at 1.2%, one of the lowest in the Italian banking system. As far as the combined banks are concerned, attention should focus on the net MPE ratio which stands at 1.2% in Q3 and not on the gross MPE ratio. The reason? is exactly the same as previously explained, which is that DIPSO only reports on a net basis. Having finished with asset quality, let's move on to the development of the bank's risk-weighted assets. As you can see, In Q3 2025, total risk-weighted assets decreased from 55.6 to 54.6 billion euros, partly because of almost flat loan volumes and thanks to higher quality lending. As such, credit risk-weighted assets came down by 0.9 billion euros. While in Q1 2025 operational risk-weighted assets were impacting by 1.5 billion euros due to Basel IV, we do not expect any material impact related to operational risk due to the annual update in Q4. On a final note, the combination with DIPSO would lead to a total risk-weighted asset of just over 82 billion euros. I will now turn to organic capital generation on the next slide. In the last quarter, we mentioned that we approached the merger with BIPSO in a very robust position as our CET1 ratio stood at over 16%. The combined CET1 ratio at the end of September stands at a very comfortable 15.1%, or 15.7% following Alba Leasing deconsolidation. BIPER, on a life-for-life basis, continues to generate a very high level of organic capital with approximately 272 basis points or 1.7 billion euros in the last nine months. This result reaffirms BIPER position as a highly resilient institution. Moving on to liquidity, let me point out that at the end of September 2025, the bank's liquidity ratios remain high. The LCR is equal to 165% at the end of September 2025, in line with the 163% reported at the end of June. With the deconsolidation of Arbalese, the group LCR would stand at 173%. The NSFR is equal to 132% stable compared to the end of June 25, or 135% including the deconsolidation of Albalisi. As in Q2, in Q3-25, the loan-to-deposit ratio stood at 76%, 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 to transform client liquidity into AUCs and AUMs, thanks to our ability to attract customer liquidity. Turning now to the bond portfolio, Italian government bonds were flat at 14.8 billion euros and accounted for around 49.8% of total bond. In Q3 2025, the duration decreased, majority due to the position of CCTs equal to 4.4 billion euros that were repriced in mid-October. Now a brief look at our latest bond issuance. In the first nine months of 2025, as far as main wholesale issuance is concerned, BIPR successfully placed 500 million senior non-preferred bonds with VIPSO while BIPSO placed €500 million of cover bonds. On top of all the previous upgrades, in October, DBRS upgraded BIPER long-term deposits from BBB high to A low. Moreover, all credit rating agencies have positively viewed the BIPSO business combination and, as a result, have also increased the credit rating of BIPSO itself. Following the successful completion of the volunteer exchange offer for BIPSO in July, we have launched a joint project between BIPSO and BIPSO aimed at IT and organizational integration, as well as the corporate merger, to be completed by approximately mid-April 2026. Specifically, the project involves 23 cross-bank work streams, which are all up and running. To ensure the IT and organizational migration in line with the timeline, we launched discovery sessions in August to identify relevant functional and IT gaps between the two banks, which will be addressed and implemented through the integration. Additionally, we have defined an IT migration plan, which foresees technical migration tests and simulations in Q1 2026. In parallel, we have initiated the step leading to the merger between BIPER and BIPSO. On November 5th, the merger plan was presented to the board of directors of both banks, including target organizational model, share exchange ratio, and IT integration plan. Thereafter, the request to DCB for the merger authorization will be submitted. Finally, We believe that the merger between BIPER and BIPSO will be carried out effectively, enhancing the strength and resources of BIPSO and resulting in a bank that will be even better positioned to achieve the strategic and business objectives of both entities. As previously stated, we confirm that we will fully achieve €290 million in synergies in 2027. We also confirm that integration costs amount to €400 million. Of these, 75% will be booked in Q4 2025, the remaining in 2026. Now, let's turn the timing and next steps. As of today, the next key regulatory step will be the extraordinary shareholders' meeting of BIPER and BIPSO in order to approve the merger plan in March 2026. From an operational and business point of view, we expect the IT migration and the launch of the revised organizational and distribution model to be finalized by approximately mid-April 2026. On slide 28, we report the divisional financials for BIPER on a like-for-like basis. I would like to draw your attention to the important results achieved on total wealth commission income across our divisions, which amounted to €689 million in the first nine months, compared to €840 million achieved during the entire 12 months of 2024. These results underline the important focus of the group on asset gathering activities. Let's move to the final remarks. In conclusion, in this important quarter, the group has been focusing on business growth, execution of B-Dynamic Full Value 2027, and the regulatory, IT, and business integration of BIPSO. As we previously stated, the acquisition of Bipso must be seen as an acceleration of our plan. The commercial strength of the bank has been remarkable despite the summer holidays. Net commissions continue to grow at an important pace, with wealth management playing an ever-increasing role. Reported NII was better than expected despite declining interest rates. In this context of geopolitical headwinds, asset quality remains one of the best in the Italian banking sector. Let me underline that the bank has been able to generate an important profitability coupled with an outstanding organic capital generation amounting to 272 basis points in the last nine months. As such, we are confident in the potential for further superior value creation. The recent derivative transaction of 9.99% of share capital needs to be viewed as a proof of management's confidence in the enormous potential for shareholder value generation of the new banking group, combining BIPER and BIPSO. And finally, we are fully on track to ensure a smooth, efficient, and effective integration of the two banks by approximately mid-April 2026. We are now ready to take your questions.