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.

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