Intesa Sanpaolo Spa Ord

Good afternoon ladies and gentlemen and welcome to the conference call of Intesa Sao Paulo for the presentation of the full year 2024 results hosted today by Mr Carlo Messina, Chief Executive Officer. My name is Razia and I will be your coordinator for today's conference. At the end of the presentation there will be a question and answer session. To enter the queue for questions please press star 1 and 1 at any time. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. You are kindly invited to ask no more than two questions, so as to leave room for the other participants. In case of additional questions, the IR team will be at your disposal after your conference call. I'll remind you that today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Carlo Messina, CEO, so you may begin.

welcome to our full year results conference call this is carlo messina chief executive officer and amir with luca boca our cfo and marco del frate and andrea tamagnini investor relations officers we are over delivering on our commitments as we enter the final year of our business plan we just delivered our best ever net income at 8.7 billion This comes to 9 billion when excluding non-recurring items in the 900 million of gross income managerial actions that we took to strengthen our future profitability. These excellent performance enable us to reward shareholders with cash dividends of 6.1 billion euros for 2024. Our strong profitability and rock-solid capital position also mean that, subject to shareholders' approval in June, we will launch a new share-by-back of €2 billion. These 2024 results are marked by our best year ever for insurance income and strong growth in commissions accelerating in Q4. Costs were essentially stable and asset quality remained top notch. Customer financial assets increased by 77 billion euro. We leveraged Q4 profitability to strengthen buffers and sustain our future results while increasing our net income guidance for 2025 to well above 9 billion euros. We continue to invest in technology with 4.2 billion already deployed, more than 2,300 IT specialists hired, and over 60% of applications already cloud-based. Easy Bank now has over 500,000 new clients with a strong acceleration in Q4. This brings in total Easy Bank customer base to nearly 900,000, giving us significant scale. Our tech investments are also enabling the generational change of our workforce. In three years, we will have 9,000 exits. We are generating significant synergies, leveraging internal potential with no need for acquisitions. no need for acquisitions, and avoiding related execution risks, managerial time absorption, and technology delays due to system integration of merger entities, especially large ones. At the same time, we can attract talents. People and technology are essential to delivering strong results in the short term. and to continue to be a leader in the future. We are ready to win against fintech challengers, and this is not the case for most of our competitors. I'm proud of our results, and I want to thank our people for their hard work. And let me add that our significant profitability allows us to have a world-class position in social impact. to fight poverty and reduce inequalities. Now let's turn to slide one for the key achievements of our full year. Slide one. In 2024, we delivered record net income, best-in-class cost-income ratio, NPR ratios at historical lows, strong growth in common equity ratio, high and sustainable value creation, and a massive program to address social needs, deploying 340 million euros. Slide number two. In this slide, you can see that 2024 results are above 2025 targets. Let me highlight that we have already distributed 24.6 billion to shareholders versus the 22 billion target for the entire business plan. Slide number three. In this slide, you can see the continuous strong net income growth. Slide number four. We allocated 900 million of gross income to succeed in the coming years, consolidating our position as a leading bank in Europe. Slide number five. we delivered excellent growth in commissions, also thanks to a significant acceleration of asset under management net inflows at more than $5 billion in Q4. Slide number six. Operating costs are down more than 1% when excluding the impact of the national labor contract renewal and depreciation for tech investments. We have a best-in-class cost-income ratio in Europe below 43%. Slide number seven. We are moving ahead quickly in the development of our cloud-based digital banking platform, EasyTech, and our digital channels, EasyBank and Fideron Direct, all delivering tangible results at an impressive speed. Our tech transformation is enabling significant efficiency gains. In three years, we will have 9,000 exits, of which almost 4,000 this year at no social cost and with savings of 500 million euros. Just to remember, 900 exits are equal to the ones we saw with the UBI merger. Slide number eight. We are delivering a significant increase in annual per share, dividend per share, and tangible book value per share. For 2024, we will pay a cash dividend of 34.1 cents per share, up 15% compared to last year, and we will launch a 2 billion euro share buyback. Now please turn to slide nine for the 2025 outlook. While improving our rock-solid capital position, we are increasing our net income guidance for this year to well above $9 billion, a level that is more than sustainable in the coming years. Slide number 10. I'm very proud that our excellent and sustainable performance allow us to benefit all our stakeholders and strongly support the fight against poverty and inequalities. Let's now move to slide 12 and take a closer look at our results. Slide 12. In a nutshell, for 2024, we had the best year ever for net income, operating income, operating margin, and gross income. And the common equity tier one ratio was up almost 80 basis points since the beginning of the year. Slide 13. In this slide, you have the P&L for the 12 months. Core revenues were up 8%, and net income grew 12%, and would have been $9.3 billion when excluding non-recurring items, managerial action to strengthen future profitability, and the final contribution to the Italian deposit guarantee scheme. Slide 14. In Q4, Core revenues were up 2% year-on-year, despite a significant drop in Euribor, thanks to 14% growth in commissions and a strong increase in insurance income. Commissions grew 5% on a quarterly basis. Personal costs were impacted by a non-recurring component as variable compensation due to the strong extra performance versus the budget. Slide 15, net interest income was resilient in Q4, despite the 50 basis point decline in Euribor. Our edging strategy will continue to sustain net interest income in the coming years, coupled with long growth. Slide 16, customer financial assets were up 77 billion to 1.4 trillion. with strong growth in direct deposits, assets under management, and assets under administration. Let's move to slide 17. The wealth management and protection businesses are strong contributors to the group profitability, and commissions from management, dealing, and consultancy activity were up 12%. Slide 18. Non-motor property and casualty contribution is increasing, up 17% year on year. We have significant upside potential, and our 100% fully owned product companies are a clear competitive advantage. Slide 19. The contribution from commissions and insurance income to revenues is the highest in Europe after UBS. Slide 20. Our top-notch services are delivering with related additional up over 30% year on year. We have also reached an agreement with BlackRock to create a new digital wealth management platform. The initiative is targeting private and affluent clients in Europe, beginning with Belgium and Luxembourg, with further expansion planned in other EU countries. In Bangladesh, slide 21, in Bangladesh territory, we will hire 1,500 global advisors for environmental protection activities. This will increase the total number of global advisors to 2,700. This means that Bangladesh territory alone is creating the fourth largest Italian financial advisory network with Fideura remaining number one. By 2027, we will have a total of 20,000 people in Italy dedicated to fueling wealth management and protection growth. Our delivery machine is at work and assets under management are already growing. Slide 22, on cost. Administrative cost decreased by 2% on an yearly basis, and we have high flexibility to reduce costs in the coming years also thanks to the 9,000 exits. Gross MPL stock was down 200 million compared to last year, and we now have less than $5 billion in net non-performing loans. Inflows remained at historical lows. Also, Stage 2 loans decreased 8% year on year. Slide 24. NPL stock and ratios are among the best in Europe. Slide 25. We are also very well positioned in terms of stage two that represent just 8% of loans. Slide 26. Our cost of risk was 26 basis points when adjusting for additional provisions to favor the risking with no overlays released. And we see no signs of asset quality deterioration. Slide 27. Quarter after quarter, we keep reducing our Russia exposure. In 2024, we booked over $260 million to offset net income generated locally. Let's move to slide 28 for an update on capital. The common equity ratio is above 13.9% and 13.3% taking into account the $2 billion to be launched in June. This means that we were able to increase the common equity TR1 ratio while distributing $8.1 billion. Slide 29. As you can see in this slide, capital ratios will remain well above the 12% business plan target, even considering the impact of Basel IV. We clearly have significant excess capital, allowing high flexibility for additional distribution. Slide 30, liquidity. We have best-in-class MREL ratios, and liquidity ratios are well above our targets. In the next two slides, you have the usual update on our ESG actions. In the appendix, you can find additional slides on our leading ESG position. But now let's move to slide 34 for the macro scenario. The Italian economy is resilient thanks to strong fundamentals. Inflation is cooling down and unemployment reached a record low. Italian GDP outperformed the Eurozone average over the past five years and will keep growing also this year. Slide 35. As you can see in this slide, InterSanPaolo is far better equipped than its European peers, also thanks to our best-in-class risk profile. Slide 36. In this slide, you can appreciate our unique positioning thanks to our commission-driven and efficient business model supported by strong tech investments. Slide 37. This slide recaps how ISP is equipped to further succeed in the future. In fact, we are ready to outperform in any interest rate environment. Slide 38. To finish, let me turn to the outlook. For this year, we expect net income to be well above $9 billion, a level that is more than sustainable in the coming years. And in this slide, you have a brief description of the drivers. For 2025, we will return more than $6 billion in cash dividends. And on top of that, we will determine additional distribution at year end. We have very strong internal potential for sustainable revenues and cost reductions thanks to the investments we made in these years. Our well-diversified business model for DOCUS wealth management and protection will deliver in any interest rate scenario. Our strong and sustainable performance allow us to strongly reward our shareholders. always a priority for ISP and me personally while maintaining rock solid capital and a strong contribution to fight poverty and reduce inequalities. Thank you for your attention and now we are happy to answer your questions.

Thank you sir. As a reminder to ask a question please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. You are kindly invited to ask no more than two questions so as to leave room for the other participants to ask their questions. Thank you.

We are now going to proceed with our first question.

The questions come from the line of Antonio Reale from Bank of America. Please ask your question.

Hi, good afternoon. It's Antonio from Bank of America. I have two questions, please. One on NII and one on use of capital. On the first one, you had something like 14 billion increase in current accounts in one single quarter in Q4, which is a big deal and probably speaks to your deposit franchise in the country. Now, this inevitably comes with a nice interest carry to your NII, which you're probably carrying over to 2025. Now, I would assume that the majority of this increase in current accounts probably took place late in the quarter. and will sustain your NII resilience guidance in 2025. Is that correct? And can you help us understand if 15 billion euros NII this year is within reach? That's my first question. My second question is about use of capital. And I realize I've asked you this before. And my question is, what do you need, what do you intend to do with this excess capital? Because you keep accumulating it, your organic asset generation this year grew more than what you've ended up distributing. And this is despite, at least we see no real signs of long growth in sight. You'll have DTAs more than compensating for Basel. So if you're not paying 100% of your organic capital generation, my question is why are you deciding to build capital on an already high capital buffer? What do you plan to do with the success? You've talked about no need for M&A, but just purely from a financial standpoint, given where your stock is trading, Would M&A be a better way to deploy this capital? Question mark. Thank you.

So thank you, Antonio. On net interest income, the deposits increase that we had in the last quarter can be in other areas in which we can work in order to have a good performance in net interest income also during 2025. The dynamics of net interest income in 2025 we'll have some positive and one major negative. One major negative will be, obviously, the reduction of Euribor, and so the reduction of contribution coming from Markdown. But on the positive side, we will have the edging facility, we will have the increase in terms of Markup, the increase in volume, both in loan and interest. in deposits and we will have also the increase in financial portfolios. So we will increase and we are increasing the government bond portfolios. And at the same time, we will have a reduction in terms of contribution from Markdown as soon as there will be further reduction in Euribor. Our expectation is to be in a position to have net interest income exceeding the level of 2023 the level of of the net interest income will depend also from the trading income so from the attitude of our people in in bankaimi and in treasury departments to realize capital gains but i'm pretty confident that we will have a very good performance also in net interest income during 2025, because at the end, the markdown contribution until the significant reduction that we think we will have on Euribor in the second part of the year will have a contribution that could be really positive for our figures. Looking at use of capital, it is true we have a significant excess capital. We are generating excess capital year by year and considering that we will reinforce during 2025 all the fee and commission-based business units of our group. So the majority of the increase will come from commissions and from insurance business we will continue to have a business model with a very low capital absorption. I think that for the time being this kind of attitude, so having a significant payout ratio and year by year giving a positive contribution to our shareholders in terms of share by back is the right way of working. Also because The fact that you can enter into M&A, it is not only linked with excess capital, it's also linked with your ability to maintain and to be able to create value through, first of all, your internal uh business unit and we have a significant potential that we can still exploit during 2025 and 2026 so i'm really convinced that if i'm focused on working on what we have already in our group do not forget that we have 900 billion euros in deposit and asset under administration that theoretically can be worked for asset under management proposition, we have a potential of increase in terms of asset under administration that is comparable with really the strongest player in terms of wealth management. And that's the reason why I think that Intel Sao Paulo now is more comparable in terms of commissions and fee income and potential with UBS than all the other players in Europe. So we will work in this way. We will see what will be the real excess capital at the end of 2025, and then we will define what amount can be redeployed to our shareholders.

Very clear. Thank you very much.

Thank you.

We are now going to proceed with our next question. The next questions come from the line of Ignacio Ular-Guilópez from BNP Paribas Exxon. Please ask a question.

Thanks very much for the presentation and for taking my questions. This is Nacho from BNP Paribas. I just have two questions. One on fee income. How should we think about the growth in commissions and insurance into 2025 after the excellent performance of 2024? And the second one, if you could help us a bit to understand on the course progression that we will have in 2025, how should we think about the course line after the performance of 2024 and the strong variable comp? Should we expect something similar in 2025 or that should be more contained in the year? Thank you.

So thank you for your question. I will elaborate on fee and commission income and on insurance fee and commission because these are the most important part of our job during 2025. Just to give you the figures on this point, we have an estimate and the budget 2025 in which the growth rate in fee and commissions income related to wealth management and protection is above double-digit growth, so it is double-digit growth minimum. So this is the expectation that we have on this area. This will be the result of a starting point that is much higher on average than all the 2024. So we will enter in 2025 with an amount of areas that can generate fee and commission on asset management that is 25 billion euros, much higher than 2024. So we will start with a portion of commission that is already in the volumes that will allow us to have a good start during 2025. Then we will have an acceleration that is already in the budget of my people because we have the list of clients with the aspiring time deposits, with the asset under administration, with capital gains embedded, with all the aspiring asset and administration volumes that will bring us to increase further the asset under management and insurance business of our group. This will bring us further increase in terms of commission. On a run rate, we usually have gross inflows between 25 billion and 35 billion, we are planning for 2025 a gross inflows of 35 billion euros per quarter. So an acceleration, and we are already delivering on this acceleration. Then there could be possibility to have a further increase in performance fees. We have considered a limited increase in performance fees. we have already in 2024 84 million euros of performance fees and our expectation is more or less that this level can be increased between 60 and 80 million euros but no more than this and i want to remember you that in the best year for interest paulo we had 360 million euros of performance fees Then we are increasing the number of private bankers because we are hiring private bankers and from other players. And especially with this confusion in the market, with all these potential M&A deals, we are a good place, a safe harbor for a number of talents in our country. And so this trend will continue. Then we will hire... 800 global advisors in Banca del Territory. This is our plan for 2025. And we will have an acceleration also looking at this point. And just to give you some figures, just today, we have out of 80 billion euros of ability in the end of our clients, a significant portion that is already capital gain positive and with the reduction of Euribor of one percentage point during 2025 a significant majority of these will become capital gain positive and also a significant portion of third deposit and certificates will expire during 2025. So just to give you the idea that this sector we are already planning and delivering a significant growth in fee and commission that is strategic for us. And it is a unique business model that no other players can have in Europe for the positioning that we have in terms of total asset under management, administration and deposits. On the other side, on the cost base, we will continue to work in terms of efficiency The reduction in cost base will be linked with 4,000 people that will leave the organization during 2025, so we will have a significant contribution from a reduction of personal cost. At the same time, we will continue to invest in technology and acceleration in this area, but we will have efficiency in In a number of other areas, we will continue to reduce branches, and we will accelerate also the possibility to move on cloud the majority of our technology today. So we think to be in a unique position looking at sustainable net income. So we don't need to make... marketing announcement or or something like different in order to show that we have a very good results because we need to have M&A value in terms of currency both on acquisition side or an offending side but we will continue to deliver a strong result on a sustainable basis because as I told in different occasion in Texas and Paulo want to be here So our attitude is that we want to create value for shareholders in a sustainable way.

Thank you very much.

We are now going to proceed with our next question. The questions come from the land of Ignacio Cherezo from UBS. Please ask your question.

Yeah, hi, good afternoon. Thank you for taking my questions. I've got one on lending growth. We have seen in the last couple of quarters, including Q4, some tentative signs, actually, of improvement. I think the number, basically, in Q4 is slightly higher than Q3 for first time in several quarters, actually. So if you can elaborate a little bit on how hopeful you are, actually, of a more significant volume acceleration in 2025, and where is that potential growth actually coming from? And then the second question, I'm sorry to ask this. Actually, I just wanted to check if your view around not participating on Italian M&A has changed following recent developments.

Thank you. So I will start from Italian M&A. No intention to participate to Italian M&A. We will be very, very far from all this confusion that we have in the market. So no attitude. We want only to deliver on our promises and to manage the organization with no M&A transaction. And also because on the antitrust side, we are in such a position that it will be difficult to create any kind of value. But from a managerial point of view, We want to remain concentrated in delivering on our promises and I want to deliver these well above 9 billion euros with the best compositions in terms of fee, commissions, insurance business, net interest income, reduction of cost, managing of cost of risk, so we have to be concentrated. And let me add that when you are the CEO of 100,000 people, it's fundamental the kind of messages that you have to give to your people, because 100,000 people are an army, so you need absolutely to give clarity in direction, you have not to manage an organization like an hedge fund, but you have to manage an organization like a very strong M&A in terms of delivering results. So no will to do any kind of M&A in Italy. On the other side, the lending activity is something that will obviously depend on the demand in terms of loan activity. And this is really related with investments in a country. So during the investments and also the corporate deposits. So you know that in Italy we have a significant amount of corporate deposits. and the attitude of the corporates in Italy has been to postpone their investments for the time being, the reason why there has been a reduction in terms of demand for loan, but today we are seeing a signal of recovery and our expectation is that during 2025 we will have an increase in terms of loan demand. Our expectation is to have an increase between 0% and 5% on the loan book, so we will depend on the kind of acceleration of the next generation EU funds in Italy, the usage of these, the export related, but our expectation is that we will have an increase in the loan book.

Thank you.

We are now going to proceed with our next question.

And the questions come from the line of Pamela Zuluaga from Morgan Stanley. Please ask your question.

Hello. Good afternoon. Thank you very much. I was wondering if you could give us some color specifically around the AUM margins. Are they still showing some pressure from the product mix? Have they begun recovering? How do you think they will continue evolving? Also, another question on NII. You said you're expecting volumes to help. You just said 0% to 5% of loans. Which segment are you expected to grow more? And is there any downside risk to loan demand from the phasing out of the super bonus effect? If I may, one follow-up. I know you said no acquisitions, no M&A, absolutely, but thinking more banking M&A. Would you be interested in doing any small bolt-on acquisitions within the asset management or insurance businesses that does not entail a lot of execution risk and help the narrative around fee generation?

Thank you very much.

So I will start again from acquisition. So on the point of acquisition. So we are not interested in making any kind of acquisition. we maintain a significant room for capital distribution for the future. But let me add also that in terms of pricing, asset under management targets are really expensive. Also, if you consider the Danish compromise, all the potential benefits. So for InterSan Paolo, I do not see any kind of acquisition for the future. Looking at the margin on asset under management, we see that in Italy we have good performance in terms of commissions. We are considering a potential slight reduction in terms of pricing during 2025, and this we have considered in our budget assumption, the kind of performance will derive mainly from volume in our asset under management area. Sorry, I was asking the second question. In terms of loan growth, our expectation is that we can have a growth in the area that are mainly linked with the next generation EU funds investments from the state. It is the area in which companies in Italy will have the majority of investments. And so we think that the attitude of Inter-San Paolo will be to sustain companies that are really correlated with this kind of investments. Also, all the export-related companies will have the support of Intel Sao Paulo if they will ask to have increase in terms of their loan demand.

Thank you very much. We are now going to proceed with our next question.

And the questions come from the line of Andrea Filtri from Mediobanca. Please ask a question.

Thank you. The first question is more semantics. How to interpret the well above 9 billion euros guidance? The question is, if you meant above 9.5, would you have said above 9.5 or it's included in the well above 9 billion? And the second is on DTAs. I wasn't able to find the amount of off-balance sheet DTAs remaining? And why have you reduced the CT1 benefits from DTA absorption from 120 to 100 basis points? Thank you.

Yes, so semantic well above means until 10 billion euros. So that's the semantic. So well above 9 billion. means until 10 billion euros then you can make your calculation obviously will not be 10 billion euros but if you want to enter into a semantic well above is until infinity then the off balance sheet remaining is really limited on dts so we are now with a very limited amount but we have a significant volumes in terms of assets and in terms of combination of companies. And so it is possible also that we can create some other unity for the future. That's all. Okay. Thank you, Andrea. Thank you.

We are now going to proceed with our next question. And the questions come from the line of Andrea Lisi from Equita. Please ask a question.

Hi, thank you for taking my questions. The first one is regarding your guidance, and in particular regarding the level of rates that is assuming the guidance and to which level you are confident you can still remain with, well, a bona in billion for 2025 and the following years. Then I want to ask if you have further room also to optimize risk-weighted assets. And the third one is a more regulatory question. It's regarding the application of Basel IV. We have read about some doubts, especially in other countries, regarding the possibility of applying the Basel IV framework. So someone is speaking about suspension. So what's your view on that and what do you think will be the final outcome in this regard? Thank you.

So looking at Basel IV, my expectation is that there will not be any kind of suspension. So my expectation is that this will remain as it is. So I don't think that in Europe we will have any kind of change. In terms of risk-weighted asset optimization, we have further room in order to increase our attitude to work on risk-weighted asset reduction. And our guidance is guidance with a number also on contingency plan on the cost sides and on some areas in the revenue side, so I think that we can be really relaxed on the guidance. No extraordinary, net extraordinary included in the contribution of guidance, and no usage of overlays included in our guidance.

Thank you.

We are now going to proceed with our next question.

And the questions come from the line of Britta Schmidt from Autonomous Research. Please ask your question.

Yeah, thanks for taking my questions. The first one is to pick up on the tax issue. What sort of tax rate do you expect for 2025? And has there been any change in the guidance? Secondly, on the NI versus trading debate, can you give us any insight on how you assume the sum of the two to move year on year, allowing for some changes between the mix. Yeah, those are my two follow-ups. Thank you.

Sorry, I didn't understand the second question. Sorry, just if you can repeat what you are asking on net interest income.

On net interest income, I think you explained... that the absolute level will, to some extent, depend on how your trading income develops. And I think there are two elements here. You flagged the CIB business in terms of realizing gains, but I guess there's also an element of how the customer behavior with regards to maturing certificates develops. So if these move back to deposits or not, for example. So I'm just trying to get an idea as to whether we can look at the sum of net interest income and trading together to see how that will develop in 2025 versus 2024.

our expectation is that our clients will remain on on the deposit side the stability of of our deposit based is is there and on if you look at our term deposit and certificates the volume is obviously limited in comparison for the total amount of deposits but the the expiring portion that we had during 2024 in this final part of the quarter has been converted into asset under management product. So our expectation is that for 10 billion, 50 billion euros, you can have a conversion in terms of asset under management during 2025. This is the expectation. We are really conservative also on the area of asset under administration that can be converted into asset under management or placed on the deposit side. On tech investments, we will continue to invest in a significant way. We have already delivered €4.2 billion and we want to exceed the €5 billion that we have considered as the total amount of investments that we need to have EasyTech as the right platform for the IT system of Interior São Paulo.

We are now going to proceed with our next question.

And the questions come from the line of Giovanni Razzoli from Deutsche Bank. Please ask your question.

Good afternoon. Two questions on my side. The first one is on the trading performance. What shall we expect for next year in terms of contribution from these line items? Because if I see the last couple of years, clearly the contribution was relatively low when compared to the previous years. Clearly, you've guided that most of these would also depend on the risk appetite, the contribution of NII. and the risk appetite of your trading deaths, but what could be a reasonable indication for 2025? And the last question is on M&A. You've been extremely clear on the non-intention on outright M&A. I was wondering whether this, you know, very clear answer can also apply to acquisition of minority stakes, which may complement your business mix. Thank you.

No, minority stake, absolutely no. We had in the past an attitude to enter into all the systemic deal 20 years ago, 15 years ago, and believe me, to buy minority stake is a crazy way of working with value creation. Then apart from if you want to make... capital gain on your minority stake. But this is not the case for InterSanPaolo. On the trading income, our expectation is that we can double, minimum double the amount of trading income that we had in 2024. And we will see, depending on the dynamic of interest rate.

Thank you very much, Moven.

Very clear.

We are now going to proceed with our next question. And the next questions come from the line of Marco Nicolai from Jefferies. Please ask your question.

Hi, thanks for taking my question. So one is on asset quality. This quarter there was some pickup in the flows of NPLs. So if you look at them, 4Q this year against 4Q last year was like 10% or slightly more. more flows. So I wanted to ask you what you expect in terms of NPL flows next year, and if you can give us a little bit of color around these inflows. And then a second question on NII 2026. So I'm not asking you any hard guidance, but let's say directionally in 2026 compared to 25, would you expect NII at this point to go up?

or given potentially some pickup in loan growth or not thank you so on 2026 because we are already working in terms of figures on on our further business plan that we will close by the end of 2025 our expectation is that net interest income can increase in 2026 Looking at asset quality, MPL, now we are at such a minimal level of non-performing loans that also 100 million, 200 million on a loan book of above 400 billion euros is something that is negligible in our figures. So on the last quarter of 2024, there is a dynamic that is also, in a sense, something that we decided to do very conservatively in order to start with 2025 with the right approach to have the best quality for 2025. We cannot exclude that 2025 we can have a marginal increase in terms of inflows, so we can move from 3.5 to 4 billion euros. We will see what can happen, but in any case, we will remain by far one of the best companies in Europe in terms of asset quality.

Thank you, very clear. Thank you.

We are now going to proceed with our next question. And the questions come from the line of Hugo Cruz from KBW. Please answer your question.

Hi, thank you for the time. My question is around interest rate sensitivity. Usually most banks are talking about a parallel shift in rates. It's more likely that you will see the short end going down and the middle and long end of the curve staying where they are. I was wondering what do you think that means for your NAI sensitivity and if you could give any Guidance about the impact of of that difference.

Thank you So looking at sensitivity we have today sensitivity that for a reduction of 50 basis points can have a reduction of 70 million euros But believe me this mathematical sensitivity is something that it is difficult to apply then in real life so in the managing of of an organization with such a significant number of clients, and especially in an organization like Intel Sao Paulo, in which the clear fundamental focus is to try to convert the majority of assets under administration and deposits of our clients into wealth management products. So this is the theoretical sensitivity, what I can tell you is that all the combination of what can happen during 2025 with an average Euribor of 2% and until an average Euribor of 1.75 can allow us to have a net income well above 9 billion euros because a potential further reduction in net interest income, if Euribor will go down well below 2%, can be compensated by fee and commissions. But mathematically, the sensitivity is the one that I told you.

Many thanks.

We are now going to proceed with our next question. And the questions come from that I know.

Fabrizio Bernardi from Intermonte, please ask a question. Fabrizio Bernardi, your line is opened. Fabrizio Bernardi, your line is open. You may go ahead with your question.

Okay, we're now going to proceed with our next question. The questions come from Chris Hallam from Goldman Sachs. Please ask your question.

Yeah, just two simple questions left from me. First, could you tell us what you embed in your NII guidance for deposit growth? in 2025. And maybe I misheard earlier, but I think you said you expect NII up in 2026. So just what's assumed in there maybe as well for deposit growth. And then secondly, on slide nine, when you say additional distribution for 2025 will be quantified with the full year results approval, I guess that's an earlier than usual confirmation

regarding future distribution is there any reason why your approach to quantifying that buyback in 26 may be different from what we've seen over the past two years so looking at net interest income we think that we can have a deposit growth in 2020 uh five compared to 2024 and the same in 2026 then we will have obviously to look at what kind of attitude our clients that can evaluate to buy insurance product or asset under management product will have what i can tell you for sure is that we will have in any case a growth in terms of customer financial assets. So that's for us the key drivers because for us to manage the wealth of a client is to manage a mix between a deposit asset under management and insurance product. Our expectation is in any case to have a growth in terms of deposits, but for 2025 and 2026, I will be more than happy to have growth in terms of asset under management and insurance product Looking at the the the second question that was on the on the share buyback the the our expectation for 2025 results will be that the amount of will be defined as we made in 2024 in the board of directors that will approve the figures for 2025. So we will not change our attitude. It is obvious that we are in a clear attitude to make other share buyback. That's for sure.

Okay. Thank you very much.

Thank you. This concludes the question and answer session. I will now hand back to Mr. Carlo Messina for closing remarks.

So thank you very much. I think that we demonstrate with these figures that InterSanPaolo has a clear and unique business model in Europe based mainly on fee and commissions income. and insurance income, and we will continue to have significant growth during 2025. Believe me, our budget has a growth in terms of the wealth management protection and advisory fees that will surprise investors. So thank you very much, and see you in London next days.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.