Intesa Sanpaolo Spa Ord

Good afternoon, ladies and gentlemen, and welcome to the conference call of Intensa San Paolo for the presentation of the third quarter 2025 results, hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Nadia, and I will be your coordinator for today's conference. At the end of the presentation, there will be the question and answer 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 a question, please press star 1 1 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 your disposal after the conference call. I remind you that today's conference call is being recorded. At this time, I would like to hand the call over to Mr. Carlo Messina, CEO. Sir, you may begin.

Thank you. Welcome to our nine-month 2025 results conference call. This is Carlo Messina, Chief Executive Officer, and I'm here with Luca Bocca, our CFO, and Marco Del Frato and Andrea Tamagnini, Investor Relations Officers. We just delivered our best-ever nine-month net income at 7.6 billion euros, of which 20.4 in Q3. Common equity TR1 ratio increased more than 100 basis points. Analyzed return on equity is 20%, and earnings per share grew 9%. These are excellent results, confirming we are well on track to deliver our full-year net income target of well above 9 billion euros. including Q4 managerial actions to strengthen future profitability. The nine months and the third quarter both recorded all-time highs for commissions and insurance income. Costs are down, asset quality remains top-notch, and customer financial assets grew to more than $1.4 trillion. We keep investing strongly in technology, enabling the acceleration of our workforce generational changes. This year, we are returning 8.3 billion euros to our shareholders, including the 3.2 billion interim dividend to be paid in November. On top of this, an additional capital distribution will be quantified at the end. Our results once again confirm the resilience of our well-diversified business model, further validated by the EBA stress test where InterSanPaolo was a clear winner. This outstanding outcome reinforces our leaning position in Europe. This is also reflected in the two-notch upgrade by Fitch moving ISP above Italy and the one-notch upgrade by DBRS. Our strong profitability allows us to confirm a world-class position in social impact. to fight poverty and reduce inequalities. I'm proud of these results and thank our people for their excellent contribution. Now let's turn to slide one for the key achievement of the first nine months. In the first nine months, we delivered record high profitability and efficiency, MPL stock and ratios and historical lows strong capital growth, and high increasing and sustainable value creation. Slide number two. In this slide, you can see the impressive continuous growth in net income. Slide number three. In the first nine months, we delivered a significant increase in return on equity, earning per share, dividend per share, and tangible book value per share. In a few weeks, we will pay an interim dividend almost 10% higher than last year. Slide number four. In Q3, we confirmed our excellent organic capital generation capability with a 40 basis point increase in common equity tier one ratio. Slide number six. Net interest income has increased over 400 million compared with two years ago. despite a 90 basis points drop in Euribor. Euribor is now stabilizing at the level consistent with the normalized interest rate scenario, and our hedging strategy will continue to sustain net interest income in the coming quarters. Slide number six. Six. In the first nine months, commissions and insurance income grew 5%. Q3 performance was excellent, with 7% yearly growth and stable Q on Q despite the usual summer business slowdown. Slide number seven. We also managed to reduce costs despite tech investments reaching $5 billion. Slide number eight. As said, we are in a comfortable position to confirm our 2025 net income guidance of well above $9 billion. Moreover, we clearly have significant excess capital, giving us a lot of flexibility for growth and additional distributions. Slide number 9. Our performance allows us to benefit all our stakeholders. The new medium long-term lending to families and businesses grew 40% on an yearly basis. And let me just focus on the contribution to the public sector, because in taxes in the first nine months, we gave contribution for 4.6 billion euros. That is equivalent to the amount of the new taxation that the government is looking from the banking sector. In nine months, we paid the same amount. So contributing, hopefully, to social inequalities in the public sector. Slide number nine. Slide number 11, sorry. In a nutshell, in the first nine months, net income was up 6%. We accrued $5.3 billion in cash dividends. and we delivered a best-in-class common equity TR1 ratio growth. Please turn to the next slide for a closer look at our P&L. Slide 12. This slide shows the building block of our nine-month P&L with improved results across nearly all items. Please turn to the next slide for the third quarter results. Very briefly, in the third quarter, revenues were supported by the highest ever Q3 commissions and insurance income. We decided not to push on trading, keeping flexibility for the coming quarters. Costs were down on a yearly basis, and we increased MPL coverage. Please turn to slide 14 for a look at net interest income. We are firmly on track to deliver net interest income well above the 2023 level. Further growth is expected in 2026. Slide number 15. This slide provides more details on the net interest income evolution. The Q3 decline was mainly due to the further reduction in URIPOR and the impact from the six-month and one-year replacing of loans. Slide number 16, customer financial assets were up strongly on a yearly and quarterly basis. In Q3, we had 3 billion growth in retail current accounts and 10 billion growth in assets under management. Let's now move to slide 17. Slide 17, commission growth was driven by wealth management fees. We can count on our unmatched advisory net growth and our fully-owned product factories are a clear competitive advantage. Slide 18, the contribution from wealth management and protection activities is 43% of gross income and asset under management inflows are growing. Please turn to the next slide for a closer look at insurance income. Non-motor P&C contribution was the main driver for insurance income growth, and we still have significant upside potential. Slide 20. The contribution from commissions and insurance income to revenues is by far the highest in Europe after UBS. Please turn to slide 21 for a look at costs. Operating costs are down with personal costs decreasing 1% and administrative costs 1.5%. Slide 22. 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. Slide 23. We have a best-in-class cost-income ratio in Europe. Let's move to slide 24 for a look at our asset quality. Asset quality remained excellent, and we reduced the lowest ever MPL inflows. Slide 25, our MPL stock are clearly among the best in Europe. Slide 26, as you can see, we remain very well positioned in terms of stage two. Slide 27, our analyzed cost of risk is stable at 25 basis points with MPL coverage up to more than 51% and stable overlays. We see no signs of asset quality deterioration. Slide 28, our MPL coverage is clearly among the best in Europe. Slide 29, our Russia exposure is now less than 0.1% of the group's total loan with local loans close to zero. Slide 30, we have a rock-solid and increasing capital position with the TR1 ratio increased to 30.9%. Let's move to slide 31. ISP of the EBA stress test with a very low adverse scenario impact on our common equity tier one ratio. The next best performing peer showed an impact three times higher. In the next three slides, you have the usual update on our sound liquidity position and ESG actions. But let's move to slide 36 to see how ISP is fully equipped to succeed in any scenario. Slide 36, our profitability and capital position remains strong even in adverse conditions. We have a very resilient business model. Our asset quality is top notch and we have already deployed 5 billion in tech investments, including artificial intelligence. We are key enables for future efficient gains. Slide 37, Intel Sao Paolo stands out in Europe across key metrics and is better positioned than peers to face any future challenge. Slide 38, in this slide you can appreciate our unique positioning thanks to our commission driven and efficient business model. Let's move to slide 39 for a few words on the strength of the Italian economy. The Italian economy remains resilient and the recent upgrade of Italy's rating confirms the country's strength. We expect Italian GDP to grow this year and next. Slide 40. The Italian companies are in a stronger position today compared to the past. Their debt equity ratio has decreased over time, and their liquidity buffers are at all-time highs. Slide 32. 42, sorry. This slide offers a recap of our best-ever nine months and the reason why we are fully equipped to succeed in the future. To finish, please turn to slide 43. Slide 43. We are in a comfortable position to confirm our fully earned net income guidance. The nine-month performance once again demonstrates the quality of our business model. We are a sustainable 20% return on equity bank, one of the few in Europe able to combine high profitability with long-term strength. In Q3, we started putting away and continued in the fourth quarter to reinforce future profitability. We are delivering one of the highest capital returns and dividend yields in European banking, while maintaining a rock-solid capital position and continue to lead on social impact. At the same time, we are accelerating the generational change of our workforce, investing in new tech skills and new talent to ensure the group continues to grow and innovate in the coming years. Thank you for your attention, and we are now happy to take your questions.

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, you need to press star 1 1 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 1 and 1 again. You are kindly invited to ask no more than two questions, so to leave room for other participants. Please stand by, we'll compile the Q&A roster. This will take a few moments. And now we're going to take our first question. And it comes from the line of Antonio Reale from Bank of America. Your line is open. Please ask your question.