Intesa Sanpaolo Spa Ord

Good afternoon ladies and gentlemen and welcome to the conference call of Intesa San Paolo for the presentation of the first half 25 results hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Sarah and I will be your coordinator for today's conference. At the end of the presentation there will be a Q&A session. To enter the queue for questions please press star 1 1 at any time. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. You are kindly invited to ask no more than two questions so as to leave room for other participants. In case of additional questions, the IR team will be at disposal after the conference call. I remind you that today's conference is being recorded. At this time, I would like to hand the call over to Mr. Carlo Messina, CEO.

Welcome to our first half 2025 results conference call. This is Carlo Messina, Chief Executive Officer, and I'm here with Luca Bocca, our CFO, and Marco De Frade and Andrea Tamagnini, Investor Relations Officers. We are navigating the current geopolitical uncertainty from a position of strength, thanks to our resilient and well-balanced business model. In fact, we just delivered our best-ever six-month net income at 5.2 billion euros. That means a return on equity of 20%, so a return on equity of 20%, 24% on tangible. Earnings per share grew 12% on a yearly basis. Net income in the second quarter was also the best-ever at 2.6 billion euros. These top-notch results are marked by record high commissions and insurance income. And net interest income grew strongly in the second quarter, even as rates declined. And we continue to manage revenues in an integrated manner. I want to stress that the Italian economy continues to show strong resilience. Italian SMEs are much stronger. and public and EU-driven investments are supporting growth that we are ready to finance. Looking ahead, we are upgrading our 2025 net income guidance to well above 9 billion euros, including Q4 managerial actions to strengthen future profitability. InterSan Paolo offers one of the highest shareholder returns in Europe. This year we will distribute no less than 8.2 billion, considering the over 3 billion final dividend pay in May, the 2 billion buyback launched in June, and the 3.2 billion euro interim dividend to be paid in November. An additional capital distribution will be quantified at the end of the year in line with our practice. Costs are down, asset quality remains top-notch. We confirmed our best-in-class capital generation capabilities, and customer financial assets grew $37 billion on an yearly basis, of which $12 billion in Q2. We are delivering strong internal synergies, adding risks related to acquisitions. I'm proud of these results and thank our people for their excellent contribution. Let me underline that our strong profitability allow us to continue holding 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 the first six months. Slide one. In the first half, we delivered. record high net income and revenues, lowest ever cost income ratio, MPL ratios and historical lows, strong growth in common equity ratio, and high increasing and sustainable value creation. Slide two. In this slide, you can see the strong and continuous increase in net income that has more than doubled in five years. Slide number three. In the south, we delivered a significant and sustainable increase in return on equity, earnings per share, dividends per share, and tangible book value per share. Slide four. Thanks to our excellent six-month performance, we are in an affordable position to upgrade the 2025 net income to well above $9 billion, including Q4 managerial action to strengthen future profitability. Moreover, we clearly have significant excess capital, giving us a lot of flexibility for future additional distributions. Slide number five. Our performance allow us to benefit all our stakeholders and strongly support the fight against poverty and inequalities. In the first half, families and businesses received 42 billion euro in new medium long-term lending. up 44% in Italy on a yearly basis. Let's now move to slide seven for more details on our first half results. Slide seven, in a nutshell, net income was up 9% in the first six months and we accrued 3.7 billion in cash dividends. Slide eight, this slide shows the building box blocks of the first half P&L with improved results across nearly all items. Please turn to the next slide for a look at our second quarter results. Slide 9. Very briefly, in the second quarter, net interest income grew 5% quarterly. Revenues reached the record high with non-motor P&C revenues up 15% on a yearly basis. Net income was the best Q2 result ever, up 6% versus the same quarter last year. Slide number 10. In the first half, revenues were up despite the strong decline in market interest rates, thanks to our well-diversified and resilient business model. Slide 11. Net interest income was very resilient in the first half. And we raised our guidance for this year to a level well above 2023, with further growth expected next year, also thanks to the contribution from core deposits hedging. Slide number 12. In this slide, you can also see the quarter-on-quarter increase in net interest income, despite the further reduction in your IBOC. The growth drivers are the spread component that includes the contribution from core deposit hedging, the financial component mainly driven by the higher contribution from the securities portfolio, and the volume component that also benefited from the growth in loan volume in the quarter. Slide number 13, customer financial assets were up strongly on a yearly and quarterly basis. In the quarter, we had more than $6 billion growth in assets under management, despite the market volatility due to tariffs. And we can count on our unmatched client advisory network to drive future growth. Over $900 billion in private deposits and assets under administration are already fueling our wealth management, protection, and advisory businesses. Let's now move to slide 14. In the first six months, commissions were up 5% yearly with a 9% growth in wealth management. Our fully owned product factories are a clear competitive advantage and our top notch advisory services are stabilizers for the end of market volatility on fees. with over 30% in related additional commissions. Please turn to the next slide for a closer look at insurance income. Slide 15. Non-motor P&C contribution was the main driver for insurance income growth, and we still have significant upside potential with both individuals and corporate clients. Slide 16, the contribution from commissions and insurance income to revenues is by far the highest in Europe after UBS. Please turn to slide 17. The cost income ratio was the best ever at 38%. So please turn to slide 18 for a closer look at the breakdown of costs. Operating costs were down despite the impact of the national labor contract renewal and depreciation linked to tech investments. Personal costs decreased 1% and administrative costs 0.7%. We achieved an almost 3,400 in the first half of the year. Slide 19, we have high flexibility to further reduce costs thanks to our tech transformation. By 2027, we will have 9,000 exits with savings of 500 million euros. 9,000 exits are equal to the ones deriving from the UBI merger. Slide 20, the best in class cost income ratio in Europe. And now let's move to slide 21 for a look at our asset quality. Slide 21. Asset quality remained excellent. Inflows are at historical lows and MPL stocks further declined in the quarter. Slide 22. Our MPL stock and ratios are clearly among the best in Europe. Slide 23. As you can see, we are also very well positioned in terms of stage two. Slide 24. Our analyzed cost of risk is just 24 basis points with no overlays released and MPL coverage ratio at 50%. We see no signs of asset quality deterioration. Slide 25. After quarter by quarter, we keep reducing our Russia exposure down to less than 0.1% of the group's total loans with local loans close to zero. Slide 26 for an update on capital, 26. In the first half, the common equity ratio increased by 65 basis points to 13.5% and will increase further in the coming quarters. 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. But let's move to slide 31 to see how ISP is fully equipped to succeed in any scenario. Slide 31. Our profitability and capital position remains strong, even in adverse conditions. We have a very resilient and efficient business model, and we have already deployed 4.6 billion in tech investments including artificial intelligence, key enables for future and further efficiency gains. Our net MPL stock is just 4.9 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 32, Intel Sao Paolo stands out in Europe across key metrics and is better positioned than peers to face any future challenge. Slide 33. In this slide that we share every quarter, you can appreciate our unique positioning thanks to our commissions-driven and efficient business model supported by strong tech investments. Let's move to slide 34 for a few words on the strength of the Italian economy. The Italian economy remains resilient, supported by export-oriented and highly diversified companies, a strong banking system, high household wealth and low private debt. Employment and activity rates at their highest levels and continued EU public investments. So we expect Italian GDP to grow this year and next year. Slide 35, Italian companies are in a stronger position and more resilient to external shocks today compared to the past, even considering tariffs. Their debt equity ratio has decreased over time and their liquidity buffers are at all time highs. Please turn to slide 37. This slide offers a recap of our best ever six months and the reasons why we are fully equipped to succeed in the future. To finish, please turn to slide 38 for the outlook. Slide 38. Thanks to our excellent six-month performance, we are in a comfortable position to upgrade the full year net income guidance to well above 9 billion euros, including Q4 managerial actions to strengthen future profitability. This is 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, asset quality, and the sustainability of results. We are delivering one of the highest capital returns and dividend yields in European banking while maintaining rock-solid capital and continuing to lead on social impact. We clearly have strong internal capital generation and excess capital. An additional distribution will be determined at year end. So thank you for your attention. And now we are happy to take your question. So thank you.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A roster. Thank you. We will now start with our first question. This is from Delphine Lee from J.P. Morgan. Please go ahead.