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 quarter 2026 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 1-1 at any time. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. You are kindly invited to ask no more than two questions to leave room for other participants. In case of additional questions, the IELTS 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'd like to hand the conference over to Mr. Carlo Messina, CEO, so you may begin.

Welcome to our first quarter 2026 results conference call. This is Carlo Messina, Chief Executive Officer, and Amir with Luca Bocca, our CFO, and Marco Del Frate and Andrea Tamagnini, Investor Relations Officers. Before we begin, I would like to state that sadly, yesterday night, my mother passed away. And so today, I will open this call with a very brief introduction. And then Luca will go through the presentation of our results. So he will help me in making the presentation. While we will manage the question and answer together, and I will be at your disposal for all the strategic questions. Let me underline, in any case, that we just delivered our best ever quarterly net income. 2.8 billion euros with an annualized return on equity of 21% and earning per share up 8% on a yearly basis. These are excellent results confirming that we are well on track to deliver 10 billion euros net income this year. And in any case, we are not used to change our guidance in the first quarter of any kind of year. In my opinion, to change guidance starting from the first quarter is not the right way to manage an organization. Execution, then I will elaborate on what we have as a driver that can allow us to have a very good performance also in the next quarters. Execution of our new business plan is already proceeding at full speed, and we are navigating the current market volatility from a position of strength. thanks to our top-notch asset quality and our resilient and well-diversified business model. In the first three months, we delivered high quality and increased revenues, supported by record Q1 commissions and best ever insurance income. Net interest income can be the real surprise for 2026. We reduced costs, and we will continue to reduce costs, and we confirm our strong capital generation capabilities. Intesa San Paolo offers one of the highest dividend yields in European banking, and this year we will return around $9.4 billion, taking into account the May dividend, the November interim dividend, and the $2.3 billion buyback to be launched in July. I'm proud of our results and thank our people for their excellent contribution. So let me underline that our strong profitability allow us to maintain a world-class position in social impact. I will now hand over to Luca, and thank you for your understanding.

Thank you, Carlo. We are all very sorry for your loss. And now let's start with slide one for the key achievements of the quarter. In the first three months, we deliver record high profitability with the lowest ever cost-income ratio, excellent asset quality, rock-solid capital position, and high sustainable and increasing value creation and distribution. Please turn to slide two. In this slide, you can see the impressive and consistent growth in net income that has almost doubled in five years. Slide number three. In the first three months, we deliver a strong increase in EPS, DPS, and tangible book value per share. In two weeks, we will pay the final dividend for 2025, which is 11% higher than last year. Please turn to slide four. As said before, thanks to this excellent start to the year, we are in a comfortable position to deliver 10 billion net income in 2026 despite market volatility. Slide number five. Our excellent profitability allows us to benefit all our stakeholders and strongly support the fight against poverty and inequalities. Please turn to slide six. In February, we presented our new business plan based on three pillars. One, cost reduction, benefiting from tech investments already deployed. Two, conservative revenue growth thanks to group synergies and additional people to strengthen our wealth management, protection, and advisory leadership. And three, low cost of risk, driven by our zero NPL bank status with bad loans already reset to near zero. The plan is proceeding at full speed and in the appendix you have an update of the most significant initiatives underway. Now let's move to slide 8 for a closer look at our first quarter results. In a nutshell, in Q1 net income was up 6% year-on-year. We delivered the best quarter ever for revenues, operating margin and gross income. Costs were down and asset quality remain top-notch with increased coverage and stable overlays. Please turn to slide 9. In this slide, you have the detailed P&L for the quarter, showing improved results in almost all the lines on both quarterly and yearly basis. Let me underline that the tax rate is almost 3 percentage points higher than last year, mainly due to Italy's budget law. Slide number 10. In Q1, revenues were up both quarterly and yearly. As usual, we manage our revenues in an integrated manner, with higher profits from financial assets that act as a natural edge against the impact of market volatility. Please turn to slide 11. This slide provides more detail on net interest income that was up year on year, despite the strong reduction in euro high boards. Net interest income also increased on a quarterly basis when considering the fewer days in Q1. Let me highlight that loans to customers grew 3% yearly and 1% quarterly. Please now turn to slide 12. Our well management and protection machine continued to deliver stronger results. In fact, this was the best Q1 ever for commissions and the best quarter ever for insurance income. Asset under management gross inflows were up, despite market volatility. Please turn to slide 13. In Q1, commissions were up 3% yearly, with 4% growth in wealth management and protection. The quarterly decline was due to performance fees and seasonality in commissions from commercial banking activities. Our top-notch advisory services are a stabilizer for the impact of market volatility on fees, with 13% growth year-on-year in related additional commissions. Our fully-owned product factories are a clear competitive advantage. Let me add that April was another good month for asset under management inflows. Slide 14. Non-motor P&C was a driver of insurance income growth, and we still have significant upside potential. Please turn to slide 15 now. Customer financial assets were up 64 billion on a yearly basis, to more than 1.4 trillion euros. The quarterly decline was due to negative market performance. Please turn to slide 16. We can count on our unmatched client advisory network with 19,000 people dedicated to fueling asset under management growth, reaching 22,500 people in three years. In Q1, we already added about 350 people, and in the past 12 months, we have increased our global advisory network by almost 900 people. Slide 17. The contribution from commissions and insurance income to revenue is by far the highest in Europe after UBS. Slide 18. The cost-income ratio was lower than 36% in Q1, also thanks to our tech investments that are clearly paying off. Please turn to slide 19. Operating costs were down 1% compared to last year, and in 12 months, we have a headcount reduction of over 1,900 people. Now turn to slide 20. We have high flexibility to reduce costs further, thanks to our tech transformation. A significant portion of our workforce is approaching retirement, and in Q1, we had 1,400 exits, and we hired 500 young people. By 2029, we will have more than 12,000 exits at no social cost, while hiring more than 6,000 young people in Italy, mostly global advisors, with skill aligned to evolving business needs. This will enable 570 million in cost savings at run rate with no impact on revenues. Slide 21. As you can see from this slide, we have a best-in-class cost income ratio in Europe. Let's move to slide 22 for a look at our top-notch asset quality. Our annualized cost of risk was 16 basis points, with a strong increase in coverage and no relays released, and we see no signs of asset quality deterioration. Turn to slide 23. We have a very low MPL stock, with only 3.9 billion net MPL, and bad loans reset to near zero. MPL inflows were at historical lows, and we have a well-diversified loan portfolio with no material exposure to private credit. Let's move to slide 24 for an update on capital. After having accrued $2.6 billion for distribution in Q1, the common equity ratio was above 13%. In Q1, we had an impact of about 15 basis points from devaluation reserves due to market volatility. 10 basis points were already recovered in April. The common equity ratio was 13.9%, including the benefit from DPA absorption. Please turn to slide 25. We have best-in-class MRL ratio, and the liquidity ratios are well above our business plan targets. Let's now move to slide 27 to see how well-equipped ISP is to succeed in any scenario. Our profitability and capital position remains strong, even under adverse conditions, as shown in the EBA stress test. We have a very resilient and efficient business model with 5.7 billion investments in tech already deployed. These are a key enabler for further efficiency gains and to win against fintechs. Our net MPS stock is very low. We can count on high-quality loan origination, and we have 900 million in overlays. Last but not least, the management team has a strong track record in delivering results. Please turn to slide 28. InterSanPaolo stands out across key metrics and is better positioned than our peers to face any future challenge. Please turn to slide 29. In this slide, you can appreciate our unique positioning thanks to our efficient, commission-driven business model supported by strong tech investment. Slide 30. As previously said, our NPL stock and ratios are among the best in Europe. Slide 31. As you can see, we are also very well positioned in terms of stage 2 that further declined in Q1. Please turn to slide 32. Our NPL coverage is also among the best in Europe. Slide 33. Our rush exposure is also close to zero. Please turn now to the next slide for a few words on the macro picture. The Italian economy remains resilient, and we expect Italian GDP to grow this year and next. Please turn now to slide 35. In this slide, that you already know but is very important, you can see that Italian companies are now in a stronger position and more resilient to external shocks than in the past. Their debt-to-equity ratio has increased over time, and their liquidity buffers are at all-time highs. Turn now to slide 37. 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 turn to slide 38 for the outlook. For 2026, we are in a comfortable position to deliver a net income of 10 billion euros. This performance reflects the strength of our business model with strong potential for growth. As always, we will continue to manage revenues in an integrated manner, maintaining a strong focus on cost, asset quality, and the sustainability of results. We combine high-quality revenues, cost control, strong investment for growth, high capital generation, and a very low risk profile, making us one of the most resilient banks in Europe. We remain focused on delivering strong short-term results while continuing to invest for sustainable long-term value creation. That is why we are delivering one of the highest dividend yields in European banking. while maintaining rock-solid capital and continue to lead on value creation and distribution and social impact. Thank you for your attention. We can now open the Q&A session.