Intesa Sanpaolo Spa Ord

Good afternoon, ladies and gentlemen, and welcome to the conference call of Entesa Sanpaolo for the presentation of the first half 2026 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. Turn to 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 and 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 IAR team will be at your disposal after the conference call. I remind you that today's conference is being recorded. At this time, I would like To hand the conference over to Mr. Carlo Messina, CEO. Sir, you may begin.

Thank you. Welcome to our first half 2026 results conference call. This is Carlo Messina, Chief Executive Officer, and I'm here with Luca Bocca, our CFO, and Marco Del Frate and Andrea Tamagnini, Investor Relations Officers. We have just delivered our best six months ever. with net income of 5.6 billion euros, including 2.8 billion in the second quarter, making it the best quarter ever. Our analyzed return on equity reached 20%, with return on tangible equity of 25%, while earnings per share increased by 9% year on year. These excellent results allow us to upgrade with confidence our 2026 net income guidance to more than 10 billion euros, reflecting the quality and sustainability of our earnings. The execution of our business plan continues at full speed, with key initiatives well underway. We are operating from a position of strength, thanks to our best-in-class asset quality and our resilient and well-balanced business model. The Montepaschi di Sierra transaction will further accelerate the execution of our business plan and create additional value. Italy's resilient economy and strong SMEs continue to provide a supportive environment for our business. In the first half, our high quality revenues were supported by all-time high commissions and insurance income, while customer financial assets grew to more than 1.5 trillion euros, showing continued commercial momentum. Net interest income accelerated in the second quarter, also thanks to loan and deposit growth. We further reduced costs while investing in technology, accelerating the generational change of our workforce and delivering significant efficiency gains. We maintain a rock-solid capital position with a common equity-to-war ratio of 13.1%. Our offer for Monte Paschi di Siena is well on track. The transaction is fully consistent with our business plan and with our disciplined approach to growth and value creation. It will further strengthen our leadership in Italy while reinforcing our position among Europe's leading bank groups, with zero integration risk. Inter Sanpaolo continues to offer one of the highest dividend yields in European banking. In 2026, we expect to return 9.4 billion euros to shareholders through dividends and buybacks. I'm proud of our results and thank our people for their excellent contribution. Now let's turn to slide one for key achievements of the first half. In the first half, we delivered record high six-month and quarterly profitability with the lowest ever cost-income ratio. Excellent asset quality and high sustainable increasing value creation distribution. Slide two. In this slide, you can see the impressive growth in net income that has more than doubled in six years. Slide number three. In the first six months, we delivered a significant increase in earnings per share, dividend per share, and tangible book value per share. In November, we will pay a $3.8 billion interim dividend. Slide number four. As you can see in this slide, we are on a solid growth path with loans and deposits accelerating in Q2. Loans to customers have grown for five consecutive quarters, and are up 5% yearly. Customer financial assets are growing strongly with deposits increasing by 7% and assets under management up 49 billion euros. Slide number five. As said before, thanks to our excellent six-month performance, we are in a comfortable position to upgrade the 2026 net income guidance to about 10 billion euros. Leaning Room for further improvements. Slide number six. Our excellent profitability allows us to benefit all our stakeholders, sustain the real economy, and strongly support the fight against poverty and inequalities, something that I personally care about deeply. Slide number seven. In this slide, we have a recap of the three pillars of our business plan presented in February. The plan is proceeding at full speed and we have already launched all the initiatives. In the appendix you have an update on the most significant ones. The Montepaschi di Siena transaction will trigger additional growth with no integration risk. The industrial rationale is strong as we have captured a unique strategic opportunity that can accelerate our business plan growth initiatives and create value for all stakeholders. In short, we will immediately exceed our business plan targets for web management, corporate investment banking and consumer finance. In addition, we will enlarge our customer base and we will create and distribute significant value at no social cost with a strong accretion in every dividend per share and capital distribution per share. while further strengthening our rock-solid capital base. Now let's move to slide 9 for a closer look at our first half results. In a nutshell, in the first six months, net income was up 6% year-on-year. We delivered the best six months ever for revenues, operating margin, and gross income. Costs were down, and asset quality remained top-notch. with high increased coverage and stable overlays. Slide number 10. In this slide, you have the detailed P&L for the first half showing improved results across almost all the lines. The tax rate is two percentage points higher than last year, mainly due to Italy's budget low. Slide 11. Looking at the second quarter, net interest income strongly accelerated, up 6% quarterly. Revenues reached their record high, and net income was up 7% on an yearly basis. Slide 12. In the first half, revenue grew across all components, thanks to our well-diversified business model that drives growth. As usual, we manage revenues in an integrated manner. Slide 13. Net interest income in the first six months was up compared to last year despite lower rates, and we can raise our guidance for this year to well above $15 billion. Slide 14. This slide provides more details on net interest income, and you can see that the strong quarter-on-quarter increase is mainly driven by by the commercial component. Slide 15. Our wealth management and protection machine continued to deliver strong results. This was the best six months and Q2 ever for commissions and the best results ever for insurance income. Assets under management gross inflows were up 7%. Slide 16. In the first half, commissions were up 5%, driven by work management and protection despite market volatility. Our top-notch advisory services are a stabilizer for the impact of market volatility on fees, and our fully-owned product factories are a clear competitive advantage. Slide 17 Non-motor P&C was a driver of record high insurance income and we still have significant upside potential. Slide 18. Customer financial assets exceeded 1.5 trillion with significant growth in assets under management and deposits. Slide number 19. We can count on our unmatched client advisory network with over 19,000 people dedicated to fueling assets under management growth. In the first six months, we added 600 people. Slide 20 The contribution from commissions and insurance income to revenues is by far the highest in Europe after UBS. Slide 21 The cost income ratio was 35.9% also thanks to our tech investments that are clearly in payoff. Please turn to slide 22 for a look at costs. Operating costs were down 1% compared to last year. Slide 23. We have high flexibility to reduce costs further thanks to our tech transformation that will enable a significant generational change at no social cost and with no impact on revenues. Let me highlight that taking into account the 6,800 new hires envisaged in the Monte dei Paschi transaction, We will hire more than 13,000 people with one of the most ambitious hiring programs ever seen in our country, focused on young people. Slide 24. We have a best-in-class cost-income ratio in Europe. Let's now move to slide 25 for a look at our top-notch asset quality. Analyzed cost of risk was 20 basis points with a strong increase in coverage and no overlays or resins. We see no signs of asset quality deterioration. Slide 26. We have a very low NPL stock with bad loans received to near zero. NPL inflows were at historical lows and we have a well-diversified loan portfolio. Let's move to slide 27 for an update on capital. The common equity ratio is more than 13.8%, including the benefit from VTA absorption. Slide 28. We have best-in-class REL ratios, and the liquidity ratios are well above our business plan targets. Let's now move to slide 30 to see how well-equipped is to succeed in any scenario. Our profitability and capital position remains strong, even under adverse conditions. We have a very resilient and efficient business model, with 6 billion already invested in tech. Our asset quality is top-notch in Europe, and last but not least, the management team is cohesive and gains a strong track record in delivering the results. Slide 31 It tells Sanpaolo stands out across key metrics and is better positioned than our peers to face any future challenges. Slide 32. In this slide, you can appreciate our unique positioning thanks to our efficient commissions-driven business model supported by strong tech investments. Slide number 33. As previously said, our NPS stocks and ratio are among the best in Europe and we are proud Absolutely a Nordic banker looking at this profile. Slide 34. As you can see, we are also very well positioned in terms of stage 2, the faster decline in Q2. Slide 35. Our NPL coverage is also among the best in Europe. Slide 36. Our Russia exposure is initially zero. Please turn to the next slide for a few words on the macro picture. Italian economy remains resilient and we expect Italian GDP to grow this year and next. Slide 38. Italian companies continue to be strong and are more resilient to external shocks than in the past. Let's now move to next slide for a brief update on the Monte dei Paschi transaction. When we announced the offer for Monte dei Paschi, we explained the solid rational underlying this combination. with clear benefits for all stakeholders who will enjoy the rewards of growth and increased value creation in distribution. We have strong potential on a stand-alone basis, but the transaction is also a big accelerator of the business plan, enabling us to achieve the target $3 billion in advance, reaching $2 trillion in customer financial assets by 2029. We will enlarge our client base by 6 million clients while strengthening our franchise in consumer finance and corporate investment banking, also leveraging Mediobanca's international footprint. We will deliver 2.9 billion in synergies by deploying ISP best-in-class delivery machine and IAT platform. We can do all of this confident there is no integration risk. Thanks to our proven expertise in managing integration. As a result, we will generate more than 16 billion net income in 2029 with strong earning per share, dividend per share, capital distribution per share acquisition. In the next slides, you have the details on the offer, but for the sake of the time, let's now move to slide 43. In this slide you can see that we have filed the offer document as planned and we have already published the documents for the September EGM. We are fully on track to complete the offer by year end. Let me conclude this section by saying that Monte dei Paschi shareholders can choose to join forces With the strongest player in Italy and one of the leading players in Europe, a group that always works to benefit its shareholders, clients, people and the broader community and with significant transparency in all what we do. We are determined to move forward and we remain absolutely convinced that this is the best option for Monte dei Basti, Mediobanca and for Inter Sanpaolo. Let's now move to slide 45 for the final remarks. This slide offers a recap of our best-ever six months and the reasons why we are fully equipped to succeed in the future. Slide 46. For 2026, we have upgraded our net income guidance to more than 10 billion euros, leaving room for further improvements. We will continue to operate from a position of strength, combining high quality revenues, efficiency, strong internal capital generation and a low risk profile, making us one of the most resilient and profitable banks in Europe. We are on a solid growth path and remain focused on delivering strong short-term results while continuing to invest for sustainable long-term value creation. That is why we continue to offer one of the highest dividend yields in European banking, while maintaining a rock-solid capital position and continuing to lead on social impact. Let me finish by saying that the Montepaschi transaction is fully aligned with our strategy and will trigger additional growth while creating value for all in Teo Sanpaolo and Montepaschi stakeholders and for the real economy with no integration risks. So thank you for your attention and now we are happy to take your questions.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1 and 1 again. Your country invites you to ask no more than two questions so as to leave room for other participants. And now we're going to take our first question. And the question comes in the line of Sophie Peterson from Goldman Sachs. Your line is open. Please ask your question.