Intesa Sanpaolo Spa Ord

Good morning, ladies and gentlemen, and welcome to the conference call of Intesa San Paolo for the presentation of the 2025 Results and Business Plan, hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Sandra, 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 answer 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 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. Sir, you may begin.

Good morning, ladies and gentlemen, and welcome to today's conference call on our full year results and our new business plan. This is Carlo Messina, Chief Executive Officer, and I'm here with Luca Bocca, CFO, Marco De Frate, and Andrea Tamagnini, Investor Relations Officers. Before starting our presentation, let me recap the main elements of our strategy. Over the last two business plans, we have delivered on our commitments exceeding our targets. We have created a unique business model strongly focused on commissions with high efficiency and a low risk profile. This strategy was enabled by strong investments in technology and in our people. Our investments in technology are a key enabler of growth, risk management, and of the scalability and resilience of our operating models. They continue to translate into benefits over time, both in cost control and in the way we run the group. The new business plan will build on what already was, scaling our strengths. It is an ambitious plan, but with zero execution risks. I will now briefly review our full year results, which are a key enabling factor for the new plan, before presenting our four-year strategy and targets. Please turn to slide two. In 2025, we delivered record net income at $9.3 billion, best-in-class cost-income ratio, lowest-ever NPL inflows, stock and ratios, with bad loans reset to near zero, strong growth in capital, and high increasing and sustainable value creation. Slide three. We delivered on our commitment while paving the way for the new business plan. Revenue grew despite a significant drop in Uribe. Costs were down, cost of risk was low, and net income was the highest ever despite significant Q4 managerial actions to favor the risking and strengthen the balance sheet. Slide four. We over-delivered on all our targets set in the previous business plan while investing more than planned. Shareholder distribution was 50% more than the business plan target. Slide five. We leveraged Q4 profitability to allocate $1 billion of gross income to strengthen future profitability. We are the most resilient bank in Europe, fully equipped to succeed in any scenario. Slide number six. In this slide, you have a brief summary of our excellent performance. In a nutshell, we had the best year ever for revenues and operating margin with record high commissions and insurance income. We reduced costs and net income was up 8%. Slide 7. We delivered a strong growth in return on equity, earning per share, dividend per share, and tangible book value per share. For 2025, We will pay a cash dividend up 10% on a yearly basis, and we will launch a 2.3 billion euro buyback in July. Slide 8 for a look at capital. The common equity TR1 ratio grew to 13.9%, 13.2% after the buyback to be launched in July. We were able to increase the common equity TR1 ratio while distributing 8.8 billion to shareholders. Please turn to the next slide to see the further strengthening of our zero MPL bank status. We strongly reduced the MPL stock in Q4. We now have just 0.8 billion in bed loans. This is a key element for maintaining a low cost of risk in the coming years. Slide 10. Our MPL stock ratios are among the best in Europe, like a Nordic bank. Slide number 11. Revenues were up year on year, despite a strong decline in market interest rates, thanks to our well-diversified business model. Slide 12. Net interest income was resilient despite a strong drop in durable. In Q4, we decided not to push strongly on loan growth, and we are accelerating in the first quarter to compensate the 570 million impact on common equity TR1 ratio from the Italian budget low. Still, loans in any case were up 4 billion in the quarters. Slide 13, we had a record year for commissions and insurance income, and Q4 was the best quarter ever for commissions. Slide 14, costs are down year on year. In Q4, in light of our strong profitability, we accelerated investments, training in preparation for the new business plan, and advertising campaigns for the Winter Olympics. Our digital transformation is enabling significant efficiency gains, and we have high flexibility to further reduce costs in the coming years. Slide 15. Our cost of risk was 26 basis points when adjusting for additional provisions to favor the risking and strengthen the balance sheet. The Italian economy is very resilient, and we see no signs of asset quality deterioration. Slide 16. Our excellent and sustainable performance allow us to benefit all our stakeholders and strongly support the fight against poverty and inequalities. Slide 17. Our resilient profitability, well-diversified business model, low-cost income ratio, cutting-edge technology, and best-in-class risk profile place us in a unique position to keep succeeding in the coming years in any scenario. Slide 18. InterSan Paolo is also far better equipped than its European peers, and we are the most resilient European bank. Slide 19. In this slide, you can appreciate the unique business model of InterSan Paolo. Now we can turn to slide 26 to see the 2026 outlook. So slide 20. For 2026, we expect a net income of about $10 billion, driven by increased revenues, mainly thanks to commissions and insurance income growth, stable costs, low cost of risk driven by our zero MPL bank status, and a tax rate increase due to the Italian budget law, coupled with an increase in costs concerning the banking and insurance industry. We are also raising our cash payout ratio to 75% with an additional 20% buyback for a total payout of 95%. Now, let me briefly summarize our key messages for the full year results. The level of profitability we have delivered is driven by structural factors, not by temporary effects. In Q4, we took significant managerial actions to further strengthen the The sustainability of our results fully consistent with our approach that balances short-term and long-term. The combination of profitability, capital strength, and low risk we have is not common in the banking sector. From this position of strength, we are entering the next phase of our strategy with strong confidence. In the following slides, you have the full details of our full year and Q4 results, But now let me turn to our new business plan. Over the years, we have significantly strengthened the group. So this plan is about taking the strength further with zero execution risk. The plan is based on businesses we already run, investments we have already made, and and an execution model that is already proven. We are unique in Europe, resilient and ready to succeed in any scenario. Our wealth management, protection, and advisory model is fully integrated and operates efficiently with product factories and distribution networks working together under full strategic control. It has delivered results over many years, and we will take this model to the next level. The plan includes a very detailed roadmap to grow our advisory network in Italy and abroad. We will scale up the global advisors network in the Banca dei Territori division, and this network will become the third largest in Italy, with FIDEURA remaining number one. On top of that, we will set up a FIDEURAM-style network in the international banks divisions. The plan unlocks synergies across divisions, not only in Italy, but also abroad. We will export all the elements of our successful business model to our international banks. We will leverage EasyTech, our product experience and fully owned product factories to fully unlock the bank's growth potential. The international banks will contribute a lot more to net income growth than in the past. The synergies included in the plan have been developed together with the other group divisions through a dedicated steering committee zeroing execution risk. Another perfect example of our ability to extract synergy outside of Italy is the launch of EasyWealth Europe. We see the opportunity to be a challenger in France, Germany, and Spain, where we are already present with international branches. We will extend our successful business model, leveraging our strong tech investments, the extension of EasyTech, our wealth management leadership, and our existing international branches presence. We will combine our digital capabilities with the development of a sizable network of wealth management advisors. This is an opportunity for the group in the midterm, and this is why we assumed zero revenues in the business plan, despite including investments. We will be able to structurally reduce cost, and technology remains a major enabler, supporting efficiency, risk management, and scalability. We are the first leading bank fully adopting a cloud-based core banking system. As you will see, our business plan includes substantial growth in terms of new clients, new customer financial assets, and new lending. On this point, let me highlight that our total new lending in Italy will be by far bigger than Italy's recovery plan, and as usual, will follow high quality origination standards. We are the most resilient bank in Europe as confirmed by the EBA stress test and the zero MPL bank status that we will maintain. Against this backdrop, the new business plan is built around three clear pillars. Cost reduction, conservative revenue growth, and low cost of risk. Let's now turn to slide three. This is very important for me, so let me start with our people, our most important assets. And I want to thank them for their hard work and full commitment to the success of InterSanPaolo. Our people will always be our main asset and the key enabler of future success, and we will continue to invest in their talents. On top of that, we have a strong, long-standing, and cohesive management team. Slide number four. Intel Sao Paulo is a proven delivery machine, and this slide shows the excellent results of the past business plan. Net income and return on equity more than doubled. Cost income improved strongly. Customer financial assets grew significantly. NPL stock and ratios reached historical lows, and we returned almost $50 billion to shareholders, mainly cash. Slide number five. As you can see in this slide, net income has grown 20 years, 12 years in a row. Slide number six. The three pillars of our strategy are, one, cost reduction, benefiting from tech investments already deployed. Two, conservative revenues grow thanks to group synergies and additional people to strengthen our wealth management protection and advisory leadership. Three, low cost of risk driven by our zero NPL bank status with bad loans already reset to near zero. Our people are now fully committed to delivering the new business plan, a plan they were essential in developing. Slide number seven. Let's now go through the business plan numbers. By the end of the plan, we will deliver a net income above $11.5 billion, a sustainable return on equity above 20%, and a cost-income ratio at 37%. We will maintain our rock-solid capital position and our leading role in social impact with a new 1 billion euro contribution. Slide number eight. Our priority remains high in sustainable value creation and distribution, with strong growth in earning per share and dividend per share, and a total capital return of 50 billion, close to 50% of our market cap. We will distribute in each year of the business plan a cash dividend equal to 75% of our net income, and we will add a 20% buyback. Any additional distribution will be evaluated year by year starting from 2027. Slide number nine. As usual, our business plan is built on a solid set of industrial initiatives that I will outline later. Slide number 10. This plan leverages our strengths with no execution risk. We can leverage a proven track record in cost reduction, and our cloud-based digital platform is now being extended to the whole group, while generational change is already underway. We can boost our revenues through the unique combination of fully-owned product factories growing advisory networks, and the cohesive management team to extract the group growth potential. We can count on a very low MPL stock, high-quality loan origination, and a strong track record in managing emerging risks. Slide 11. To sum up, we are committed to a strong increase in profitability and efficiency with a return on equity above 20%, a result that very few banks in Europe can deliver. Slide 12. We have significant client and long-growth potential. We will expand our customer base by 2.5 million clients, mainly leveraging EasyBank and the international banks. We will provide more than $370 billion in medium-long-term lending to households and businesses. In Italy, the amount of new lending is higher than the European Union financial support to fund the national recovery and resilience plan for the country. Slide 13. We will also increase customer financial assets by 200 billion, of which 100 in assets under management, also thanks to 3,700 additional people to further strengthen our wealth management advisory network. Slide 14. Our common equity TR1 ratio will remain comfortably above the target level of 12.5%, even after 50 billion of capital return, thanks to strong internal capital generation. Slide 15. We will also maintain an excellent liquidity profile, despite a light funding plan confirming once again the zero execution risk of the business plan. Slide 16. I want to highlight that the business plan targets are based on conservative rate assumption. Italian GDP growth will be supported by Italy's strong fundamentals, and our international markets will show an even higher increase. Slide 17. The Italian economy remains resilient, and recent upgrades of Italy's rating confirm the country's strength. Slide 18. In this slide, you can see the main PLL figures we are targeting for 2029. And in the next two slides, you will find the main balance sheet figures with a positive contribution from all business units. Now we can go to slide 21. Thanks to the new plan, we will further strengthen our unique business model. Slide 22. Our new business plan will generate benefits for all stakeholders, and we will contribute $500 billion to the real economy over the next four years. We can now move to the next section for the industrial initiatives of the business plan. Slide 25. Let's now go through the first pillar of the business plan, cost reduction, which includes five main initiatives. such as the extension of EasyTech and the acceleration of generational change. Slide 26. As a result of these initiatives, cost will decrease by $200 million in absolute terms thanks to $1.6 billion in cost savings while keeping investing in technology and growth. To my knowledge, we are the only large bank in Europe with a business plan delivering cost reduction, and we have further space to have further cost reduction. Then we can go to slide 27 to see more in detail the first initiative, the extension of EasyTech. EasyTech is our cloud-native digital platform, and it has already been deployed with success to the Italian retail segment, and is a key enabler for expansion into new international markets. Slide 28. This is very important. EasyTech will be rolled out across the entire group over the course of the business plan, and by 2029, 100% of applications will be in the cloud, but what I want to point out is the 26-27 in which we will extend to all the wealth management activity of the group, so affluent, exclusive, private, and this will be very important also for the international expansion of wealth management of the group that we will see in Easy Wealth Europe. Slide 29. We will deliver a significant increase in productivity through artificial intelligence. This evolution will transform our serving model, enhance operational efficiency, and strengthen oversight of risk and control. Slide 30. We will expand also our digital branch capabilities to increase productivity and commercial activation leveraging artificial intelligence. Slide 31. Our bank is undergoing a generational transition, and a significant portion of our workforce is approaching retirement. And by 2029, we will have more than 12,000 exits at no social cost, while hiring more than 6,000 young people in Italy, largely global advisors with skills aligned to evolving business needs. This will enable 570 million in cost savings at run rate. Slide 32. We will also leverage our insourcing machine, enabling 200 million savings in external costs. Slide 33. In this slide, you can see our continuous focus on proactive cost management, driving a structural administrative cost reduction. Slide 34, we enter into revenues. We have a strong internal growth potential also leveraging group synergies. The business plan envisages a wide set of revenue growth initiatives across all business line in Italy and abroad. Slide 35, our ambition for the top line mainly comes from growth in wealth management, protection and advisory without relying on interest rate increases. Commissions will be the main source of revenue growth, thanks to initiatives that strengthen both our product factories and distribution networks. But do not forget the growth in net interest income, because in 2026, we will have the first round, the final round of Euribo reduction, And then in 2027, 8 and 9, we will have a significant acceleration also in the growth of net interest income coming from growth in loan book, in deposits, and in edging facilities. So also net interest income will be a key driver of increase of our revenue base with an acceleration starting from 2027, significant acceleration. We can go to slide 36, starting from the first initiative. This will strengthen our distinctive advisory network, focusing on the exclusive client segment. We started serving these clients with a dedicated service model in the last business plan. In this business plan, we will unlock their full potential by serving them with over 2,300 new global advisors, bringing more than $300 million in additional revenues. And you can see also that this acceleration in growth will leave us with further significant space of growth just looking at the quartile in which we have not generated significant revenues. So the potential is really enormous in the exclusive client segment. Slide number 37. The Bank of the Territory Global Advisors Network will become the market's third financial advisory network. with our FIDEURAM network remaining in the first place. In addition, we will set up a new FIDEURAM-style advisory network in our international bank divisions. Slide 38. Private banking. We will continue to strengthen our private banking leadership by enhancing our commercial proposition reinforcing our life cycle and longevity offering, and scaling up our international presence, increasing by 500 units the number of financial advisors. And remember, just in 2025, we increased by 500 persons the network of FIDEORAM. So it is really something conservative in my view. We can move to slide number 42 to look at the leadership that we have in product factories. We will continue to strengthen our fully owned product factories in asset management through the enhancement of our service model and product offering coupled with international expansion. In life insurance, by developing dedicated solutions to address specific customer needs. and in property and casualty insurance by extending our proposition to our private banking, SMEs, and corporate clients. Now let's turn to slide 45. Very important for our property and casualty insurance business. As you can see in this slide, we have huge potential to grow property and casualty revenues Increasing penetration of our products across our client base, including private banking, which today we have zero penetration. So we think to have further significant potential of growth in this business unit. Slide 46, moving into corporate and institutional clients. In the new plan, we target a 5.4% increase per year in any corporate investment banking net income. We will grow across various dimensions, scaling up our international business while strengthening our propositions in high-growth value chains, global markets, transaction banking, and private markets. We can go to slide 47, and we will look that we will also scale up IMI corporate investment banking international business, launching a new dedicated service model to support Italian corporates and SMEs in core and emerging markets, while strengthening institutional client coverage in core geographies. We can go to slide 51, moving into transaction banking, which is very important. And in 51, you can see the SMEs portfolio. In this slide, you can see that we will introduce two different service models to best serve SMEs thanks to our distinctive product offering and top-notch digital platform. This is another example of synergies across divisions. Slide 53, consumer finance. We are also planning to grow in the consumer finance space where we can improve our market share with a particular focus on personal loans and salary-based loan solutions. Slide 54, EasyBank. With more than 1 million clients already on board, a complete product offering, EasyBank is beating the FedEx market. And in slide 55, you can see that in the new business plan, ISBank will further consolidate its leading position among Italian digital banks, acquiring 1 million additional new clients. Slide 56, international banks. Looking outside of Italy, we will grow across our international banks, leveraging our successful business model in Italy. and unlocking full synergies with other group divisions, a lot more than in the past, also thanks to the extension of EasyTech. We created a dedicated steering committee with the division sets, the CFO and chief transformation and organization officer, and the chief technology officer to accelerate synergies. This will lead to a 50% significant increase in profitability. Slide 57. Our international banks are expected to deliver strong net income growth driven by the evolution of the business model with enhanced advisory capabilities. The setup of a Fideuram-style network to accelerate growth in wealth management and protection. A strong focus on digital, including the easy tech adoption and the launch of a new digital payment and lending solution. Slide 59. By 2029, we will have a Fideuram-style advisory network in the International Banks Division with 1,200 people to fuel growth. Slide 61. This is a very important project for the future of Inter-San Paolo. So last but not least, we see the opportunity to extend our successful business model to the main European countries where we are already present, such as France, Germany, and Spain, in which we have branches. We can leverage our leadership in wealth management, the 10 billion tech investments already deployed, the extension of easy tech in 2027 to wealth management areas, and the existing presence in these countries. We can combine our digital capabilities with the development of a sizable network of wealth management advisors. And we will build on our product factories to develop solutions tailored to the new markets, while at the same time leveraging partnership with global champions as we are already doing with the BlackRock in Belgium and Luxembourg. This is an opportunity for the group in the mid-term, and this is why we assumed zero revenues in this business plan. Despite this, we included 200 million euro of investments. Slide 62. We have a two-phase roadmap for easy wealth Europe. In the first phase that I will directly oversee, We will launch the project, extending our international branch license to serve retail and private clients, and setting up the new business model. So we will transform our branches that today are only corporate devoted into branches that can operate on retail and private. In the second phase, following the extension of EasyTech to affluent and private client segments, So at the end, we will have EasyBank in our branches, just to make it easy. We will have a state-of-the-art IT system, cloud-based, that will allow us to make wealth management also in this country. We will scale up the business by extending the footprint into other major cities, launching a new digital and holistic product offering, and expanding the networks of financial advisors and private bankers through hiring or acquisition. At the same time, our product factory in the insurance company is creating products in health and health that will be available starting from 2027 also abroad of Italy, and especially in Germany, France, and Spain. Slide number 63. We can enter into the pillar of cost of risk. Slide 64. We are at zero MPL bank and during the plan we will keep MPL inflows low thanks to high quality origination and optimized credit portfolio management. This will drive a structurally low cost of risk without using overlays. Slide 65. As mentioned earlier, in Q4, we reset the bed loss to near zero. In the next two slides, you can see more details about our active credit portfolio optimization and forward-looking credit decisions. Slide number 68. In addition to our credit risk strategy, we will continue to maintain a strong focus on all other risks. strengthening the internal control framework, risk management, and anti-financial crime. We will also improve the management of emerging risks in the new economic and geopolitical environment. Slide 69. We are the most resilient bank in Europe, also demonstrated by the EBA stress test. Slide 71. We will invest heavily in the development of our people, We will scale up capability building and we will push connectivity within the group. As you can see in slide 72, we will also further promote our group culture and enhance welfare at group level. Slide 73, we will continue to be the number one bank in the world for social impact. with an additional 1 billion euro contribution to support people in need, fight poverty and reduce inequalities. We will also support clients in the sustainable transition by allocating 30% of total medium-term new lending to sustainable financing. We confirm our commitments to decarbonization and will continue our commitment to preserving and promoting our cultural heritage while fostering innovation. In the next slides, you can see more details about our initiatives. We can go to slide 79 for final remarks before we take your questions. 79. To sum up, our strategy for the next four years is based on three key pillars. all enabled by our people. Structural cost reduction, conservative revenue growth, and low cost of risk. Slide 18. This plan, free from execution risks, translates into a net income above 11.5 billion euros, giving us a sustainable return on equity above 20% and a strong growth in EMI per share and dividend per share. All of these while leveraging our strong growth potential, distributing 50 billion euros of capital to shareholders and maintaining a rock-solid capital base and a very low risk profile. Slide 81. As mentioned earlier, our new business plan will generate benefits with an almost 500 billion contribution to our stakeholders. So today we covered a lot of ground this morning, and it was important to go into detail so that you can see exactly why we are unique and how we will execute this strategy. So this is a plan based on a bottom-up approach, and I think that we will over-deliver the plan. At the core of this strategy is value creation and distribution, guided by a strong sense of purpose. Year after year, we have demonstrated our ability to deliver our targets, even in a challenging environment. So thank you for your patience, and now let's move to your questions.

Thank you.