Mediobanca Spa

Good morning, and thank you for joining the call on the full year results. On many metrics, this year is the best of our history, and this is backed by a stronger commercial achievement, fostered by a stronger franchise, which is basically the trajectory we have in our plan to have a stronger industrial footprint at the end of the three-year plan. In fact, this year, we have had 11 billion net new money, which is plus 30% year-on-year. We have had an increase of 8% in average loan in CIB, up to 1 billion. And we have further increased our extending capacity in printing new loans in consumer finance. You remember that our average trajectory was of 2 billion per quarter. We have reached 9 billion in a year, plus 9%. This reverted in a stronger double-digit growing fees trajectory, which exceeded 1 billion and is up 14%, and a very resilient NII backed by a stronger corporate consumer finance trend of up 9%. We have had also a lower core compared to our expectation. We had the forecasted or budgeted 50-55 basis points of cost of risk we ended up at 44. this reverted into a net profit up four percent and eps up seven percent on the back of buyback which has been concluded and basically very strong capital generation 270 basis points which allowed us to increase our dividend, and so the last tranche of the interim dividend is 0.59 per share. It's going to be payable next November, and brings the total dividend at 1.15 euro per share, up 7% year-on-year. We have also approved the last tranche of buyback, which will be up to the shareholder meeting of October, and is of 400 million euro. The solid progression continued also in the last quarters where we have had basically a record net new money of 3.8 billion, which then, of course, allowed us to reach 11 billion. And we have had a resilient NII. This quarter saw a further decrease in core. So we had a core of 35 basis points and we could end up with the higher net profit compared to the previous quarter. We have been growing steadily. If you see on slide five, we have brought our TFA to 112. This is an increase, an average increase of 13% in the last two years. And if we stick to the AUM, AUR, this increase has been 17%. On the asset side, we have been growing loans by 2% in the last two years, but we have managed to decrease RWA by 5%. So it's a very profitable growth where we put much more attention on use of RWA, and hence we have increased substantial return on RWA. Okay. So basically revenue went up to $3.7 billion with an average growth of 6% in the last two years. The GOP gross operating profit as well grew 8%. And as I said, the return on risk-weighted assets was brought to 2.9%, which is steadily above the starting point of the plan where we were at 2.4%. Cost income remained broadly in line at 43%. So this is not happening by chance. It's happening basically following a precise trajectory. If you see on slide 7, our EPS has kept on growing steadily by 16% average in the last four years, as well as the DPS, which is up 15%. Rote is in the region of 14% with an ample buffer of capital, as you see here in slide 7. So this trajectory pays the way to the next phase of our industrial plan. We are going to lead our bank to 4.4 billion of revenue in three years, up 6%. Our recurrent EPS will go up to 2.1, so basically 8% recurrent, and we will have a steeper increase in DPS because, as you know, we've been changing our distribution policy, moving from 70% cash and 30% buyback to full cash dividend next year, starting from next year. we will have a very important increase in dividend per share starting from next year, on top of the important increase of 16% that we have recorded in the last two. So this means that we will distribute €5 billion in the next three years, and our roti, ordinary roti, will stand at 17%, while enjoining... still a very important Tier 1 capital of 15%, 15.5. And here we are going to have a lower core Tier 1, but issuing more additional Tier 1 capital, we will reach 15.5. So an optimization of our capital structure. So revenue went up in the last quarter. Here's 6% capital light and 3% overall. If we look at the different business, we grew all the business, the banking business, in particular revenue in wealth management went up 5%, 16% in CIB, and 7% in consumer. Insurance was broadly in line to the previous one, net of some non-recurrent items. Stability of NII is an important differentiation element in our equity story. This is fostered by basically consumer and more recently by recovery in loan production in CIB. You see that in the last quarters, our NII was broadly flat on the back of the strengths of new loan production and marginality in consumer and the new loan production in CIB. This is something that we will see even in the next few quarters. As we will see, a nice trajectory in fees. This year, we have had, I would say, two major components, as in the past, of growth. One is wealth management. We have reached more than 500 million euros of fees in wealth management, so definitely higher than all the other components. This is on the back of a 13% increase with management fee steadily increasing driven by AUM growth and upfront fees supported by structural product sales and activity in ID. As you know, performance fees are very limited in our group. CID had a remarkable performance, up 20%. on the back of basically ARMA consolidation, which recorded very good results, and also on the back of the strengths of the Italian advisory activity. Consumer finance broadly flat compared to last year. We have had also an intense funding activity with important increase both in bonds and in deposits. We have been also managing down the bond stock spread. We were at 128. We are now at 122, as well as we are guiding down the cost of deposits from 1.84 to 1.64. Cost inflation or cost increase is driven by basically ongoing investment in business enhancing factor. So business-related growth, it's made up by 46 million additional costs, which include platform growth. Ad count was up by 90 people, increasing volume and product diversification and rebranding cost. Then we have had a further increase additional 12 million in technology and project and then we have had 10 million in inflation and other effects cost income remains at 43 percent core core here we have had better results than expected and also very limited use of overlay so what happened was that on the back of the new pd model And what is related to also scenario, I would say forecast in terms of expected credit loss, we have had two very good quarters, 139 basis points of cost of risk and the last 135. So this led to an overall 44. And which is more important is basically that this happened with a very limited use of overlay. So we started overlay with an overlay basket of 222 and basically we have used only 30 million or less than 30 million in one year. We have also incorporated a stricter definition of default, including some for Borne UTP with less than 90 days past due. So we reclassified them into MPL. Of course, these are of excellent quality. And so basically, we are, notwithstanding this, we remain broadly flat at 2% gross MPI ratio and broadly flat at 0.9% in net MPI ratio. So solid capital generation. So we have... generated 280 basis points of capital. Then there was a minor inflation of RWA and then, sorry, optimization of RWA. Then we have had 50 basis points of additional charge from insurance. And then, of course, distribution and dividend 190 and share buyback by 90 basis points, the last one of 400. which we have already upfront in the ratio of at the end of this year. We have further upgrade our ESG profile. Now, if you look at ratings we have achieved this year are among the highest from some of the most important agency. We have continued to reduce emissions through finance, the finance emission intensity by 18%. We have done a significant activity in DCM and also we have done also important steps in the social, I would say, camp with basically renewing our partnership with the UNCR to support child protection program in terms of gender equality and certification and in terms of supporting macro enterprises and women-led business. If we look at divisional results, we see that both in terms of revenue and in terms of GOP and in terms of profit, we have seen a steady progression. So, remarkable progression. wealth management, corporate investment banking, and consumer finance, increasing all of them return on risk with assets. So if we go and see the first division, the wealth management, I mean, of course, the outstanding numbers are the net new money, 11 billion. This is well above our expectation and target. We target between 9 and 10. And we have had also 1.5 billion of outflows in private, which is linked to the uncertainty stemming from the MPS offer. Notwithstanding this, the strength of the franchise and the activity of my colleagues made it possible even to exceed the target of net new money. This led to material growth in TFA. And as you see, we have had a very strong recruitment. So this year we have had basically 157 new hires, mainly in, of course, in selling activity salespeople, divided between bankers, but more in financial advisors. And we have had, out of this, 40 were added in the last quarter. Deposit materially up by 2.5%, on the back also some campaign to convert them into managed assets. So revenue were up 5%, with fees up 13%. Here we have had an impact in NII because there is You may remember that one of our subsidiaries, in particular the Bona Gas One, has distributed an extra dividend. So net-net, basically the revenue were up more than 5%, but there is part of the excess capital that has been distributed and less NII was produced because of lower capital basis. So if we look at our trajectory, which is more important than the single year of results, is that you see on page 25, wealth management is our main growth option. We need to scale it up and become a leader, and we want to do it our way. So basically using our brand approach, one brand, one culture, which is growth. really producing excellent results. So if we see in two years, private banking has had the net new money of $8 billion, $2 billion of liquidity events, a number of flagship initiatives with top-tier partners, and CMA introduced last year, or this year, CMA is a new generation of discretionary mandates which have more flexibility, a better fiscal impact. We think that with these features, private banking will continue to grow in the next few years steadily. As well, we'll do private premier banking, which is having very, very important results. In particular, they had 8.3 billion of net new money, but this year they were clearly the champion in the group in terms of net new money and in terms of commercial results. This is on the back of our repositioning. You remember this was Chebanca, is now Mediobanca Premier. We have then really put this entity into the ecosystem of Mediobanca, and this is now, you know, giving the expected results, and I would say even above expectation. So we will continue with this. But also we need to underline also asset management performance, in particular Polus, which is a product company having great quality in terms of offer product and in terms of attracting partnership and developing net new money. So basically in the last two years we have added plus a billion in new credit alternative funds, and we have placed a number of CLOs both in Europe and in the U.S. So net human in this quarter was very, very high, 3.8 billion, so never achieved such big amounts. This is spread between AUM, 1.5 billion, AUR 8.8 and important deposits because intake because also promo campaign we launched this quarter. Clearly going up in terms of AUM in particular means that we are growing wealth management fee at double digit. You see this on page 27 in particular the management franchise fee is going up 14%. All fees are going up 13%. And basically, you see that we are growing in terms of capacity. We are growing steadily as a wealth management operator in terms of ability to grow and generate net-to-money year by year. The numbers here are showing, as I said, plus 11% net profit, notwithstanding, as I said, a net interest income decrease of 5%, which was affected by a non-recurrent item, which was the distribution of part of the excess capital from company Monegasque to the parent company. CID was as well very strong. We have reached highest ever 12 months revenue, roughly 900 million Euro, up 16% year on year. Here we have had a very strong push by fees, up 20%, and also an increase in NII up 7%. We have resumed corporate lending new printing. So you see that we have reached 19.2 billion in Q4. and we were up more than a billion in the year. This is supporting NII, which is up 6% Q on Q. And if you see the fee, we have had an important advisory contribution. Advisory fee reached an all-time high this year, 300 million euros. Only a few years ago, I have to remind, the group was producing 100 million euro fee in advisory, mainly in Italy. Now we are at 300, mainly non-Italian. This growth, in particular in CLB, has to be and is coupled with more efficiency in terms of capital use. In fact, RWA are down this year. 1.6 billion, and so in less than three years, we have materially reduced the capital injection in CIB, increasing the bottom line. In fact, net profit and return on risk with assets are close to the highest level. What's the trajectory of CIB in the plan? So we want to have, as I said, a fee-driven, capitalized, more international diversified investment bank. We have to have a growth match with the strong RWA reduction. And we need also to leverage the new initiative to expand and to diversify the revenue source. So the delivery across the business has been in advisory. As I said, now we have 50% of the transaction are international and private capital is 84% of the total. We have had an increased net of ARMA, so peer-to-peer comparison of 15% in terms of announced transaction. In lending, revenue stability was obtained through an higher volume and also fostered by the new PD model. Markets, we continue to enjoy growth and better profitability on the back of newish initiatives like BTP, CO2 trading, and we are entering a new asset class in terms of trading, which will give us more revenue. Clearly, we have had a great success in partnering with ARMA. ARMA delivered a very, very important revenue line, well above our expectation, and this is an evidence of the quality of the franchise, of the quality of the partnership. The fact that tech digital, of course, is a trend which is going to stay. Of course, we can have a better quarter or less better quarter, but I mean the trend is there to stay. Energy transition as well was very strong as well. It was private capital. Cooperation between Private banking and CID was more robust, and we start to see the first sign of revenue production in Germany and Spain, where we have started our mid-corporate activity. So if we go and look at the numbers of CIB, as I said, total income up 16%, cost up 8% on the back of sole consolidation, loan loss provision minus 18%, and hence we have had a GOP risk adjusted of plus 24, then some non-recurrent items like adjustment in earn out of some of our boutique based on their excellent performance led to a net profit of up 11%. When we look at Compass, we see that Compass was able to improve its outstanding trend even this year. We have had quite a robust new business loan, new loan business. We have produced 9 billion In the last quarter, we have added 2.4, another very strong quarter, which normally is not as strong in terms of seasonality. This also is fueled by a very solid new personal loan progression. New personal loan 4.3, they were at 3.9, up 10%. This led to an important loan book growth Loan book now is at 16.1. So we are entering in the new fiscal year. We have entered the new fiscal with the bigger loan book, and this is important also for the trajectory in the coming quarters. Core was stable over late trend, as I said, with minor use. So we have had 170 basis points and growing risk adjusted profitability. So in one year, we have managed to increase by basically some 18 basis points the profitability, NII minus core on average loan. So this reverses into clearly record results, plus 7% in terms of revenue, plus 7% in terms of net profitability. The trajectory of Compass is to become even a stronger multi-channel consumer finance company, This is going to be obtained as it has been obtained in the last few years, both investing in some proprietary distribution network enhancement at variable cost, but also investing a lot in the digital platform. Our digital investments, I shouldn't say are nearly done because they are never done, but we are quite advanced in terms of we have released the new digital platform I would say, ecosystem. We are going to increase our investment to support buy now, pay later, which requires, you know, a continuous service 24-7. And this is basically giving us a lot of support and, I would say, expectation in terms of NII driver. backed with very strict control on cost and asset quality. Of course, the buy now, pay later has become and will become even more a very powerful instrument for new customer acquisition. So trends are, again, if you look at slide 38, you see how stronger is Compass compared to the previous year. We were producing basically 1.92 billion. We are now in $2.4 billion every quarter, and this is backed by a strong pricing capability, as you can see on slide 38. As I said, we have reclassified some portion like $110 million of higher quality loans into NPS in the fourth quarter, so you see that the mix at June 25 in terms of uh net mps it's of better quality because the the the the vast majority 87 is with an overview of less than 90 days so this means uh credit that have a good probability to be recovered while in the meantime we continue to write off uh uh mps and to sell them to maintain our net NPL stock in consumer in the region of 2.2%, 2.2%. Insurance has been giving very good support, net of some extraordinary item of last year, while, of course, holding function bear the cost of interest rates decrease, so have had, of course, as expected, lower contribution compared to last year. What do we expect for next year? We expect another year of important growth in a tougher scenario. The scenario is the scenario of lower growth in terms of expected GDP growth in Europe. We have still this turbulence of tariff impact. Notwithstanding this, I think we need to and we will continue to put a lot of emphasis on growth in terms of wealth management. With the important recruitment target, we plan to add more than 100 salespeople, mainly at variable cost, mainly financial advisors, and we want also to continue our offering enhancement. In CIB, as you know, the market has had a slowdown in the last A couple of quarters, we think that this slowdown may be, you know, somehow eased and we see some sign of recovery. In the meantime, we are also basically addressing this with new initiative, as I said, international mid-market and new market products. In consumer finance, we will continue the, by now, payless expansion, also thanks to our Swiss footprint. and strict control on core, we expect also high single-digit growth in insurance. So the guidance is to arrive 223, 125 billion of net new money of TFA with 10 billion of net new money. We plan to have a low mid-single-digit increase in revenue even this year. We plan to have high single-digit growth in fees, in particular boosted by wealth management We see basically similar trend in CIB, a touch less if we are prudent taking to consider the record results of ARMA. Resilient and AI, which is gonna be boosted by, as we said, consumer finance. And basically for the time being, we are reiterating core at 55, we are uh i i'm hoping like last year that this uh this number can be beaten as we did this year so we are forecasting a 1.4 billion of net profit with a quarter one in excess of 14 the region of 14.5 and all distributed in cash no this is on the back of uh or preparing uh or executing our plan to 2028 where we will see, as I said, the revenue at 4.4 billion with a current EPS 9% growth and EPS stated at 14%. And as we can see on page 46, this is something like 30% total yield ahead divided into 9% in 26, 10% in 27, 11% in 28. If we look at what we have done, at least in the last 10 years, we see that across the different business plan, we were able to not only deliver, over deliver, and this has been somehow incorporated in the performance of our stock. In particular, Mediobanca in the last 10 years has had something like 177 return, and a total shareholder return in the region 3.50. And this is well above any other competitors in Europe or the average of competitors in our area, and notably, of course, Montepaschi, which has had a totally different trend in the last 10 years. This is why we think that sticking to our standalone trajectory, which can be particularly fueled and improved by Banca Generali transaction. And on this, we have done some step ahead, sending a proposal to stabilize and to renew the agreement, existing agreement between Generali and Banca Generali to Generali recently. And also our board, based on this, has, I would say, thought about the 21st of August as possible date for our AGM on Banca Generali. So we are very much focused on delivering on our strategy, having important increase ahead in terms of dividend distribution, so 10% without any risk of execution like a big M&A strategy. like Montepaschi, and on top we have this option of transforming Mediobank into a bigger, stronger wealth management with Banca Generali, and we are doing a step ahead to make this possible and something that all our shareholders can decide what to do in the next few weeks. Thank you very much for your attention. Now it's your time for questions.

Thank you. As a reminder to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We are now going to proceed with our first question. And the questions come from the line of Manuela Meroni from Intesa San Paolo. Please ask your question.

Yes, good morning. Thank you for taking my questions. The first one is on Banca Generali. You mentioned the possibility to go forward the shareholders meeting to the 21st of August. I'm wondering if you actually think that this timeline is feasible, if it is possible to launch the offer on Banca Generali before the conclusion of the bid of Montepaschi. And if you could provide us some update on the status of the negotiation with Generali regarding the distribution agreement involving Banca Generali. The second question is on the cost of risk. You guided for a cost of risk at 55 basis points next year, including the release of half of your overlay provisions. This implies a material increase of the cost of risk compared with this year. Do you see some sign of deterioration of the asset quality, or this is just a prudent assumption and there is some upside potential on your guidance? And the third question is on your Common Equity Tier 1. I'm wondering if you can, let's say, disclose some, let's say, trends in your Common Equity Tier 1. What are the moving parts to go at above 14%? if you are expecting some regulatory or model changes that might impact your capital. And finally, you mentioned that you're going to issue some TT1, so if you can provide some details on that. Thank you.

Thank you, Manuela. On the first question, the date of the 21st of August... is based on a number of, I would say, concurrent factors. I would say the first one is that timeline of authorization from the competent authority is now envisaged on the 18th of August. This means that it's likely the last authorization to publish our offer document by console will be within five days from the 18th and so hence we need to have our shareholder meeting before a concept decision looking at the calendar the 21 is the possible date the second element is that we have made some progress in understanding the possible agreement between us and a general group This is based on the review of the existing agreement, which we received from Generali, and basically we arrived to the conclusion that a feasible starting point of negotiation is the consolidation of existing agreements, all existing agreements, and giving to all of them a maturity, a term of a longer term compared to the actual money. So we think that something like 10 years of maturity can be, you know, something which is market standard. So what we do expect is to have a feedback from the insurance group within the sixth of months August so that we can call the AGM of the 21 because as you know we need 15 days we need to call the AGM 15 days before the due date this is based on the rule of the passivity rule so if all this happens to come to your point our offer can be in the market before the end of the offer of Montepaschi. This depends on the calendar we will set and also we will discuss with Consul, but this can happen depending on a number of factors that I mentioned to you. Core. Basically, as you know, we have already in the plan which we released some weeks ago, we have guided for a normalization of the industrial core of consumer finance. So the core of consumer finance was in the region of 115 in 23. It went up to 180 in 24 and today net of overlays is 194. This is X overlay because of course what we have to see is the industrial trend. What we have guided is for an increase of basically 10 basis points in consumer from this year to next year. Now, is this going to happen? It's a matter of prudence. We haven't seen deterioration. On the contrary, we have seen a better than expected quality in core. But for matter of prudence and for matter of mix, which is more axon to personal loan, we are forecasting basically 10 basis points of core. We have to say that, as you know, Manuela, this kind of loan, personal loan, net of increased core, they will more. So basically, as we said, Compass will continue to improve its bottom line, notwithstanding an higher core. Overall core of this year, net of the release of, as I said, PD impact, is 50 basis points. So if we go from 50 to 55, it's something that is, I would say, reasonable. In capital ratio, we don't have basically any regulatory headwind coming. What we are saying is that, okay, we started from a capital base which is very ample, and in terms of structure of this structure, capital, it has to be, can be improved because we have only, I would say, core tier one today. We don't have tier one. So what we can do is maintaining a tier one, which is in the level of 15, but, you know, press on with the more distribution in cash. And this is going to bring our capital ratio in the region of 14.5. With an ample buffer, to do, you know, even some M&A, you know, because with the 14.5, we are well above our possible target of 13.5. But as I said, this change in ratio is not stemming, is not coming from Edwin's. It's coming from more distribution and more growth of the group.

As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We are now going to proceed with our next question. And the next question comes from the line of Rich Manuel Grillo-Pratas from Utenuas. Please ask your question.

Hey, good morning. Thank you for taking my questions. I have two, please. The first one is a bit more a clarification on the 2026 net income guidance. If I remember well, on the Q2 presentation, you guide the net profit to be above 1.4 billion. Now you seem to guide around 1.4 billion. So I just wanted to confirm what led to this small tweak downwards in the guidance and whether the new guidance is relatively conservative with further upside. And then my second question is on the Banker Generali deal. If we assume that Generali accepts the combination and Medial Banca shareholders approve the offer in August, can you comment whether this makes the Banca Generali offer legally binding, meaning that Montepaschi cannot back out even if they achieve control of any Medial Banca shareholder meeting later in September? Thank you.

Yeah. And I... There is a small difference, I think it's something like 30, 40 million, which I think was a matter of prudence for two reasons. One, of course, rates that are lower than expected, but I would say two other reasons of prudence which can over time be reversed. One is COF, cost of funding, in particular in private banking, Somehow, not that much, but also in Premier Banking, it's higher than expected. This is in part coming also from uncertainty from Montepaschi. And I think as soon as we have a different trajectory, standalone or Banker GNI, I think we can lower this cough. The second is, honestly, I think Compass would do better in terms of NII. So, We are confident to basically improve this guidance during the year. When I look to Banca Generali, the situation is interesting. We have been doing a number of transactions in our professional life, and it's nice that we have always something to learn and something new situation. So, in fact, we will be on one end under a takeover and as a bidder in the same time. So it has to be basically legally reviewed, but once the offer is published and most of the condition, the condition of the offer are met, this is legally binding. So this is something that cannot be withdrawn at the will of the bidder. So, in other words, if the offer is in the market in September, and we have the conclusion of the Montepaschi offer, and we have then the conclusion of Banca Generali offer, we need to check legally all the implications, but as we know, once the offer is irrevocable, the offer is irrevocable, and if the conditions are met, we will need, of course, to exchange our Generali shares, and we will need to basically to get the Banca Generali tender share, of course, if they are above the condition of 51 plus, which is one of the condition of our offer. And this is regardless that Mediobanca is basically standalone or is part of Montepaschi Group.

As a final reminder to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 and 1 again. We have no further questions at this time. I want to hand back to you, Mr. Nagel, for closing remarks.

Thank you very much for you attending the call, and we hope to have you all in the next one in October. And thank you very much, and see you soon. Bye.