Intesa Sanpaolo Spa Ord

Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sao Paulo for the presentation of the first quarter 2025 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 one and one 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 to leave room for the other participants. In case of additional questions, CIL team will be at your disposal after the conference call. I remind you all that today's conference is being recorded. At this time, I would like to hand the conference over to Mr. Carlo Messina, CEO, so you may begin.

Welcome to our first quarter.

First quarter in 25 years of this call. This is Carlo Messina, Executive Officer. Me, I will talk about our CFO and Marco Del Frate and Andrea Tamagnini, Investor Relations Officers. We just delivered our best ever net income at more than 2.6 billion euros, that means an annualized return on equity of 20%. This is an outstanding start to the year and we confirm our net income guidance for 2025 of well above 9 billion euros. We are navigating the current market volatility from a position of strength thanks to our resilient, efficient, and well-balanced business model. I want to stress that the Italian economy continues to show strong resilience. Italian SMEs are much stronger than in the past, and public and EU-driven investments are supporting growth. InterSan Paolo offers one of the highest dividend yields in European banking, and this year we will return at least 8.2 billion, taking into account the May dividend, the June buyback, and the interim dividend in November. Additional capital distribution will be quantified at the end of the year. In Q1, we increased our common equity TR1 ratio by 45 basis points, confirming strong capital generation capabilities. On the tech side, our digital bank now has one million clients with a strong acceleration in Q1. Our tech investments are also enabling the generational change of our workforce and significant efficiency gains. We are delivering strong internal synergies without the need for acquisitions, avoiding related risks. I'm proud of our results and thank our people for their excellent contribution. Let me underline that our strong profitability allows us to continue holding a world-class position in social impact. Now let's turn to slide one for the key achievements of the quarter. Slide one. In Q1, we delivered record high net income with strong growth in commissions, lowest ever cost-income ratio, NPR ratios and historical lows, significant increase in common equity ratio, and high . Slide number two. In this slide, you can see the strong and consistent growth in net income. Slide number three. We delivered a 20% annualized return on equity and a significant increase in annual per share, dividend per share, and tangible book value per share. Slide number four. As already said, we confirm our full year net income guidance of well above 9 billion euros. Slide number five. 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 seven for a closer look at Q1 results. Slide seven. In a nutshell, in Q1, net income was up 14% year on year. We accrued . We delivered the best Q1 ever for revenues, costs were down and asset quality remained excellent. Slide number eight. In this slide, you have the detailed P&L for the quarter showing good results across nearly all items. Slide number nine. In Q1, revenues were up both quarterly and yearly, driven by commissions. Slide number 10. The quarter-on-quarter decline in net interest income was more than offset by higher profits from financial assets that act as a natural edge against the impact of lower rates. As usual, we managed revenues in an integrated manner. Slide 11. This slide provides more detail on the net interest income evolution. In Q1, decline was due to the reduction in Euribor, fewer days in the quarter, and seasonality in MPL. We confirm our 2025 guidance at a level higher than 2023. Slide number 12. Customer financial assets were up $45 billion on a yearly basis. In Q1, we had 3 billion in gross asset under management inflow, and we can count on our unmatched client and advisory network with 17,000 people dedicated to fueling asset under management growth, reaching 20,000 people in three years. $900 billion in direct deposits and assets under administration will fuel our wealth management protection and advisory businesses. Let's now move to slide 13. In Q1, commissions were up 7% yearly, with an 11% growth in wealth management and protection. Our top-notch advisory services are a stabilizer for the impact of market volatility on fees with 38% growth year-on-year in related additional commissions. And our fully owned product factories are a clear competitive advantage. April was another good month for growth, for gross asset under management inflow. Slide 14. Non-motor PNC contribution was the main driver for insurance income growth. and we still have significant upside potential. Slide number 15. The contribution from commissions and insurance income to revenues is by far the highest in Europe after UBS. Please turn to slide 16. The cost income ratio was the best ever, at 38%, thanks to both revenue growth and decreasing costs. Please turn to slide 17 for a closer look at costs. Slide 17. Operating costs were down 2.7% when excluding the impact of the national labor contract renewal and depreciation linked to tech investments. Administrative costs decreased by 1.1%. Last but not least, we achieved almost 3,000 headcount reduction in Q1. Slide number 18. We have high flexibility to reduce cost further thanks to our tech transformation. In three years, we will have 9,000 exits at no social cost and with savings of 500 million euros. Let me highlight that 9,000 exits are equal to the ones we saw with the UBI merger. Slide number 19. We already have a best-in-class cost income ratio in Europe. Let's move to slide 20 for a look at our asset quality. Slide 20, gross MPL stock decreased 200 million on a yearly basis, and the net MPL inflows remained at historical lows. Also, stage two lows decreased 8%. Slide 21, our NPL stock and ratios are among the best in Europe. Slide 22, as you can see, we are also very well positioned in terms of stage two. Slide 23, our analyzed cost of risk was only 21 basis points with increased coverage and no overlays released. We see no signs of asset quality deterioration. slide 24 quarter after quarter we keep reducing our russia exposure down to less than 0.1 percent of the group's total loan with local loans close to zero let's move to slide 25 for an update on capital slide 25 in q1 the common equity ratio increased by 45 basis points to 13.3 percent and with further increase in the coming quarters we clearly have significant excess capital giving us great flexibility for additional distribution in the next three slides you have the usual update on our sound liquidity position and esg actions with additional slides on our leading ESG position in the appendix. Let's move to slide 30 to see how ISP is fully equipped to succeed in any scenario. Slide 30. Our profitability and capital position remains strong even under adverse conditions. We have a very resilient business model with a low cost income ratio and we have already deployed 4.4 billion in tech investments, a key enabler for further efficiency gains. Our net NPL stock is just 5 billion and we can count on 900 million in overlays. Last but not least, the management team has a strong track record in delivering results. Slide 31. InterSanPaolo stands out across key metrics and is better positioned than peers to face any future challenge. Slide 32. In this slide, you can appreciate our unique positioning thanks to our commission-driven and efficient business model supported by strong tech investments. Let's move to slide 33 for a few words on the strength of the Italian economy. The Italian economy remains resilient, supported by export-oriented, resilient and highly diversified companies, a strong banking system, high household wealth and low private debt, unemployment at the lowest level in the over 40 years, and continued EU public investments, and also stability in the government. We expect Italian GDP to grow this year and next. In this slide, you can see that Italian companies are in a stronger position and more resilient to external shocks today compared to the past. Their debt equity ratio has decreased over time, and their liquidity buffers are at all-time highs. Please turn to slide 36. This slide offers a recap of our best ever quarter and the reason why we are fully equipped to succeed in the future to finish please please turn to slide 37 for the outlook for 2025 we confirm our net income guidance of well above 9 billion euros a level we consider fully sustainable in the years ahead as always we will continue to manage revenues in an integrated manner maintaining a strong focus on cost efficiency and asset quality. We are delivering one of the highest dividend yields in European banking while maintaining rock solid capital and continue to lead on social impact. Additional capital distribution will be determined at the year end. Thank you for your attention and we are now happy to take your questions.