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Good morning, ladies and gentlemen. Before I hand over to Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded. Ma'am, you may begin.

Good morning and welcome to Unicredit's second quarter and half year 2025 results conference call. Andrea Orchel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. As always, please limit yourself to two questions. With that, I'll hand over to Andrea.

Good morning and thank you for joining us today for Unicredit's remarkable second quarter results. Obviously, yesterday's announcement regarding BPM is in the background. Given the continued uncertainty for Unicredit and its shareholders generated by the Golden Power, we have decided to draw a line under this transaction and move on. As today's results and upgraded guidance demonstrate, we are accelerating beyond expectations, particularly neatly, gaining market share profitably and raising the value that we expect to create for our shareholders. As CEO of Unicredit, I believe that my job is to create the most value possible for our shareholders whilst strengthening our bank. M&A is just a tool, which depending on the condition of a transaction may or may not help in achieving that. While our decision has been difficult, It is absolutely the correct one for all our stakeholders. Going back to results, we are operating in a rapidly evolving banking landscape, one that continues to challenge the industry. Last year, the overall macro propelled us. This year, it is very different. And yet, we are on track to beat last year's record, becoming the benchmark for the sector across all KPIs. We are proving that Unicredit Unlocked is a winning strategy, that our strong and differentiated model delivers exceptional performance, that we can adapt, execute, and lead with confidence while we continue to invest, strengthen, and accelerate. The measures that enable our Unicredit Unlocked acceleration phase are already well underway and exceeding expectations. None of this would be possible without our people. I thank my colleagues once again for their stellar professionalism and dedication. Their execution continues to be nothing short of exceptional and the demonstration of the success of our culture. The second quarter marks a structural step forward in our journey. It is another quarter of setting records, growing returns and accelerating. We posted record net profit and return on tangible equity driven by core revenue growth both in the half and in the quarter, coupled with cost of risk discipline and continued operating and capital excellence, while keeping P&L buffers intact. These results come not from extraordinary items, but from the strengths of our core business. our franchise once again outperforming across all regions and more than offsetting stronger headwinds. Such results clearly demonstrate the strengths of our strategy and the progress in the execution of our transformation as we are shifting focus to revenue acceleration. We are well underway with the execution of our accelerator that shall positively contribute to our results from 2026 onward. These are the internalization of life insurance in Italy, which was executed in Q2, the integration of Alfa Bank in Romania, which shall be executed in Q3, and the Poland reentry, which supported by Aion Vodeno, which shall be launched in Q4. We are enhancing our acceleration from 26 onwards, even further by equity consolidating our stakes in Alfa. crowning a very successful partnership and in Commerzbank. We upgrade 2025 guidance once again, purely from the greater progress on execution of Unicredit Unlocked Phase 2 as the accelerator and the equity consolidation we only kick in from 2026 onward. We're also upgrading our ambition for 2027 from both our core acceleration and the impact from accelerators and equity consolidations. Our record first and second quarters have made the first half the best in Unicredit's history. What makes this performance so remarkable is its quality across the board and its ability to more than offset greater than anticipated headwinds while continuing to invest. In 2-2 alone, we achieved a net profit of 3.3 billion, 6.1 billion in the first half. In order to better compare our year-over-year underlying performance, we're excluding the significant net positive one-off. Sorry, the significant... I am sorry, one second. The significant net positive one-off... I'm sorry for a second, but... I'm missing a page. Here it is. Here we go. In order to better compare our year-on-year underlying performance, we are excluding the significant net positive one-off impact primarily related to Commerce Bank equity consolidation, life insurance internalization in Italy, and our front-loading of extraordinary provision for risk and charges to better protect our future. This is something that can only be done from a position of strength. Adjusted for one-offs, we achieved record net profit of $2.9 billion in the quarter and $5.7 billion in the half. These numbers reflect strong performance across the board. Core revenues defined as NII fees and dividends grew 1.3% year-over-year in Q2 and 1.5% in the half, a resilient top line more than offsetting stronger headwinds. Net interest income held up better than expected as volumes grew in our targeted segments without compromising margins. Fees grew 3.6% in the half and were slightly up in the quarter on a like-for-like basis, even in the face of market volatility, Liberation Day, and more general geopolitical uncertainty that contained fee growth and boosted trading. Trading excluding one-offs from strategic investments, primarily related to the equity consolidation of Commerce Bank, drew 22% in the half and 16% in the quarter, benefiting from greater client activity. At the same time, we further improved our operational efficiency. We reduced cost by 1.5% in Q2 and 1.4% in the first half on a constant perimeter, leading to further improvement of our cost-income ratio reaching less than 36% without impacting our net profit as we front-loaded the related integration cost in Q4 of last year and do not need to do it this year. As such, gross operating profit went up almost 3% in the quarter and 4% in the first half. Capital efficiency continues to improve, with net revenue to RWA reaching 8.8% in the quarter and 9% in the half. As a result, we deliver best-in-class return on tangible equity, excluding one-off, of 20.6% in the quarter and 21.3% in the half. On a per share basis, we grew EPS 26%, DPS 31, and tangible book value per share 19%, including dividends. And we've done all this while investing and keeping our more than $3 billion in P&L buffers intact, reinforcing the strengths and sustainability of our future trajectory. The table highlights the broad-based performance of our franchise. It strips out the noise created by one-off items. Our top line was impacted by $335 million trading one-off, driven by hedging costs related to the equity consolidation of Commerce Bank, only partially offset by the gains from our strategic portfolio. This top-line impact was offset below the line, the net operating profit line, by an overall net positive one-off of $675 million. $653 million from the revaluation of our life insurance stakes. $230 million in badwill linked to the Commerce Bank equity consolidation. 207 in front-loading of provision for risk and charges, further reinforcing our prudent and forward-looking approach to risk. So, while the quarter includes significant overall positive one-offs, the underlying message is clear. Our core performance, X, these one-offs, is well ahead of our plan and supports enhanced distribution. Our gross revenue grew 2% in the quarter and 2.7% in the first half, excluding one-off impact. Net revenue was impacted by cost-of-risk normalization, but still grew 0.5% in the quarter and 2.2% in the first half, excluding one-off impact. The resilience and quality of our revenue base is proven by our core revenue growth of 1.3% in the quarter and 1.5% in the first half as a result of strong fee and dividend income and resilient NII performance. This broad-based delivery gives us the confidence to upgrade our net revenue guidance for the year. Our net interest income has proven more resilient than expected, even in an environment of accelerated decline in interest rates. In Q2, NII declined by just 0.3% quarter-on-quarter, supported by increasing volume in the targeted segments, combined with our continued focus on protecting margins over volume. We continue to have excellent pass-through management, with the average in the quarter down 1.7 percentage points to circa 31%, well ahead of plan. This approach delivered results, maintaining our NII ROAC around 20% firmly best-in-class. As a result, we are upgrading our full year 2025 NII guidance. We now expect a mid-single-digit decline versus full year 2024. Asset quality remains strong and stable, with our gross NPE ratio at 2.6% and our net ratio at 1.5%, both steady. Cost of risk remains structurally low at nine basis points for the half, broadly flat quarter on quarter, while up versus previous year due to the larger non-recurring releases in Q2 last year in Central and Eastern Europe. Our default rate remains broadly flat at 1%, excluding two single names, at 1.2%, including these. Our NPE coverage remains stable and we maintain our 1.7 billion overlays intact. They will act as a further buffer against any potential deterioration in asset quality or to further propel profitability going forward. On the back of this solid trend, we are confirming our full year 2025 cost of risk guidance of approximately 15 basis points. Fees. Fees grew 4.1% in the first half and 1.1% in the quarter, excluding the payments one-off we flagged one year ago. Our fee-to-revenue remains top tier at 35%, underscoring the strengths and diversification of our revenue stream. We saw solid contribution from investment products, insurance, and client hedging. which compensate for lower performance in financing which suffered from mentioned macro uncertainty. Year-on-year comparison in payment are misleading due to one-off impact in Q2 2024 that benefited from renegotiation of contracts and changes in the timing of incentive scheme this year. Excluding these factors, payment would have been broadly flat. We are confirming our 2025 fee guidance of mid-single-digit growth and remain confident in delivering our 1.4 billion fee growth ambition by 2027 versus 2024. We continue to improve our operational efficiency. Cost declined 1.4% in the first half on a constant perimeter, even as we continue to invest in our people, in our technology, and in business growth. This disciplined approach allows us to balance efficiency with long-term value creation. Our cost-to-income ratio remains best in class, standing at 35.5%, excluding one-offs. A remarkable result, especially considering that strategic investments such as Alfa Romania and our Poland reentry are still ramping up and have yet to fully contribute to the revenue line. On the back of this strong delivery, we are improving our full year 2025 cost guidance to below $9.6 billion, lower than full year 2024 when adjusted for perimeters effect. This quarter, Unicredit generated 2.4 billion or 82 basis points of capital organically and 3.4 billion or 119 basis points overall. This more than absorbed the impact from model changes of 20 basis points, the distribution accrual of 86 basis points, while also increasing our CT1 ratio to 16.2% pro forma for the Danish compromise. We maintain our position among the most capital-generative and strongly capitalized banks in Europe. Our capital generation and level are strengths that support investments and best-in-class distribution. In the half, we accrued 5.2 billion, of which 2.6 in cash dividends. We continue to hold 8.5 to 10 billion in excess capital above our target CT1 range of 12.5 to 13%, providing further flexibility. As previously discussed, some of that excess is more volatile, and we shall consider it accordingly until it is secured. Looking ahead, we expect the CT1 impact from equity consolidation of the full stakes in Commerzbank and Alfa Bank to consume circa 130 basis points. We confirm our full year 2025 organic capital generation guidance are broadly in line with net profit, which has grown. Let's now turn to the engine behind these results, our region and product factories. In a persistently complex and volatile environment, the breadth and depth of our geographic footprint, client and product mix have proven to be a key differentiator. Each contributing uniquely, yet consistently, to our growth trajectory, reinforcing the resilience, balance and scalability of our franchise. Italy remains the cornerstone of Unicredit's performance and our strongest source of high-quality earnings. It is delivering quality, profitable growth, setting new records across all KPIs. Growth revenue reached 5.7 billion, broadly flat, excluding prior one-offs. NII declined 5.2% in the half and 3.2% sequentially in the quarter, primarily reflecting the rate decline. However, this was partially mitigated through disciplined pass-through management and targeted loan origination, up 12% year over year. Our focus on margin over volume translated into a strong NII ROAC of 24%. Our planned focus on SME resulted in an acceleration of our penetration in the segment with 7.5 billion additional or 41% increased financing delivered to the segment. Our progress was recognized by Euromoney that awarded us as Europe and Italy's best bank and best bank for SMEs. Fee income rose 2.3% in the half, driven by solid momentum in investment products, advisory, and financing, and flat in the quarter, adjusted for one-off. Our fee-to-revenue ratio stood at a top-tier 41%. Asset quality remains robust. Cost of risk stood at 26 basis points, down 3 basis points year over year, while our gross and net NPE ratios held steady at 2.6 and 1.4%. Adjusting for state guarantees, the net NPE ratio dropped to just 0.8%, almost entirely covered by our Italian overlays. Effectively, we're a zero net NPE bank in Italy. Operational efficiency improved as our cost-income ratio reached 33.4%. Cost decreased 2.2% in the half and 2.3% in the quarter, despite sustained investment in talent, in technology, and in business growth. Capital efficiency remained strong, with net revenue over RWAs at 10.8%, flat year-over-year. Profit before tax rose 4% to 3.5 billion, and ROAC reached 34%, reinforcing our market leadership. Organic capital generation was solid at 2.4 billion. We continued investing in our people and client, Andig, 430 new hires, and delivering over 410,000 hours of training to our people, a 20% increase year over year. We're enhancing clients' experience through Buddy, our digital branch, and BancoSmart 2.0 with a rollout of last-generation ITMs to the whole network by year-end. We'll continue to refurbish and redesign and digitalize our physical branches. We continue to invest in technology, with the UCX initiative significantly improving the speed and quality of our client's journey. We have also enhanced our product offering with secure digital asset solution, including crypto ETPs and capital-protected certificates. Italy exemplified our disciplined, high-performing, and client-focused model. Germany remains a strategically vital anchor for the group and a consistent contributor to our earnings quality. It is delivering another quota of quality, profitable growth, setting new records across all KPI, leading to the strongest first half in over a decade. Gross revenues reached $2.9 billion, up 3.2% in the half and 2.5% in the quarter, supported by strong demand for hedging products amid market volatility. NII declined 3.7% in the half, but increased 1% when adjusting for refinancing volume growth. Sequentially, it rose 3.3% without compromising our strong NII ROAC of 22%. Fee income was stable in both the half and the quarter. Investment and hedging fees grew strongly, offsetting lower fees from weaker financing activity. Fees to revenue stood at 31%. Credit quality remained solid with a gross and net NPI ratio respectively of 2.4% and 1.5%. Cost of risk remained stable at 12 basis points while maintaining overlays intact. Operational efficiency improved, with cost-income ratio down to 36.8%, and cost declined 2% in the half and 1.2% in the quarter, despite continuing investment in technology and in our people. Simplification continues to drive efficiency without compromising our network or frontline, a clear differentiator vis-à-vis some peers. Capital efficiency improved further, with net revenue to RWA at 8.3%, profit before tax rose 12% to 1.7 billion, ROAC exceeded 24% at nearly 3 percentage points year over year. Organic capital generation reached 1.3 billion. Our S&P rating upgrade to A-, validates our progress, and we are proud to have retained top employer certification for the 15th consecutive year. We remain the leading FX rates and commodity hedging provider for the corporate sector in Germany. We continue to invest in innovation through partnership like Rise Europe, investment like Banksware, and enhancements such as new security platform creating almost 150 jobs. This year marks the 20th anniversary of Unicredit's combination with HVB. We are proud to celebrate it with a top-performing bank that is leading across all KPIs and supporting the real economy, especially the Mittelstand. Our group implicit exposure to Germany shall increase from 2020 onwards, reflecting the planned progressive equity consolidation of our full stake in Commerzbank. Austria remains our second group anchor, continuing its successful evolution from value unlocking to sustainable growth. It is delivering another quota of quality profitable growth, setting yet another record. Gross revenues were slightly down to $1.3 billion due to NII decline, not fully compensated by very strong fees. Net revenue grew 2% thanks to the superior quality of our loan portfolio. NII declined 8.5% in the half, while growing 0.7% sequentially, supported by strong pathway management and the highest corporate lending growth in years. Fee income was a standout at 6.9% in the half and 5.2% in the quarter, driven by investments plus 12%, advisory and financing plus 15%, leading to a strong 32% fee-to-revenue ratio. Cost of risk is an overall net reversal of 15 basis points in the half due to continued repayments. Overlays are kept intact. Operational efficiency remained central, with our cost-income ratio below 39%, cost rose only 1.3%, well below inflation, and fell 0.7% in the quarter, thanks to efficiency measures coupled with continued investment in people and in technology. Our capital efficiency remained healthy, with net revenue to RWA at 6.9%, despite a 4.8% rise in RWAs mitigated by proactive actions. Profit before tax rose 1.2% to $0.8 billion, 4.4% excluding the new bank levy. ROC stands at 24.1%, greater than 25%, excluding bank levy. Organic capital regeneration reached 900 million. Austria started the re-internalization of issuing and acquiring, launching our in-house credit card and already onboarding 100,000 retail customers. We were proud to be named best bank for large corporates and continue to lead in innovation with simplified digital onboarding and consumer finance solution. We also strengthen our inclusive culture, earning edge recertification, launching girls' co-finance and supporting future talent through the Unicredit Foundation. Our CEE region continues to be a key growth driver, combining discipline execution with strong client momentum. Our commercial effort is driving profitable growth. Gross revenue grew 4.6% in the quarter and 5% in the half, reaching 2.3 billion, powered by both NII and fees. NII increased 2.4% in the half and remained stable in the quarter, supported by 10% volume growth in the half, including the contribution from Alfa Romania. NII ROAC stood at 26%. Fee income was a standout, rising 9% in the half, 2% in the quarter, with contribution across all categories. Fee-to-revenue improved by 1 percentage point to 28%. Cost of risk remained positive, thanks to continued repayment. Gross provisions are normalizing, but our conservative underwriting remains unchanged. Operational efficiency remains best in class, with cost to income at 34%, 32.6% excluding Alfa Romania. Cost rose 3.1% excluding Alfa Romania, but declined sequentially in the quarter, thanks to our focus on efficiency, while we continue to invest in people and technology. Capital efficiency remains strong, with net revenue to RWA at 8.6%, broadly stable, despite an 8% RWA increase due to Alfa Romania and Basel effects. Profit before tax declined 2.7% due to long-loss provision normalization, but would have increased by 2.9%, excluding VAT. ROC remained high at 29%. Organic capital generation reached 1.2 billion. We continue to invest in Central and Eastern Europe with long-term view, earnings awards across Bosnia, Croatia, Romania, ESG, and transaction banking. Innovation is a key focus with initiatives like AI-powered voice spots, seamless payments, and automated KYC enhancing client experience. Our group implicit exposure to CEE shall increase from 2026 onwards through the planned equity consolidation of our stake in Commerce Bank that owns circa 70% of mBank in Poland. From the onset of the crisis, we have committed to an accelerated, responsible, compliant and economically sound compression of Russia, and we have consistently delivered on that commitment. This quota marks another step forward in that journey, as we further reduce our exposure across all key dimensions. Local deposit declined 31% in the quarter, reaching $1 billion, or around 0.5% of group deposit, a total compression of 88% versus the first quarter of 2022. Net local loan declined 19% in the quarter, reaching $800 million, less than 0.5% of group loan, 89% less of the first quarter of 2022. Cross-border lending remained flat at minimal levels. It has declined by 94% since Q1 2022 and will reach zero by year-end. Cross-border payment decreased 17% in this quarter, reaching 6.4 billion, down 75% since Q1 2022. These are now almost exclusively conducted in Euro and US dollars. We have materially reduced the capital impact of full Russia write-down from approximately 130 basis points on a 14% CT1 to 78 on a 16.2 CT1. We remain fully compliant with applicable ECB targets and we continue our disciplined business compression, also targeting a full orderly exit from retail by the first half of 2026. Our product factories continue to deliver differentiated capital light growth and remain central to our strategy. In the first half, client solution generated $6.1 billion in gross revenues, up 4%, with over 67% coming from fees. Individual solution grew 7%, fueled by a 10% rise in investment products and 5% growth in non-life insurance. One market, AUM, reached $22 billion, with managed fund sales up more than 55%. We are well on track to retaining over 80% of the investment product value chain by accelerating proprietary product distribution, unlocking alpha growth well beyond market trends. Corporate solution grew 6% with fees up 13%, driven by strong advisory and client risk management. This was partially offset by weaker financing fees amid macro uncertainty. Payment solution delivered resilient performance when adjusting for contracts one-off and incentive scheme timing. These factories are scalable, as demonstrated by their use in our partnership with Alpha, client-centric and a key driver of our unlocking acceleration strategy through 2027. We're setting records and we're doing it against the backdrop of strong, I would say stronger headwinds. We have already absorbed over 500 million headwinds in the first half, mainly from rate normalization and inflationary drag on cost and some normalization of cost of risk. This was not unexpected. Our performance beat consensus across all key metrics, net revenue, NII, fees, cost, cost of risk, net operating profit, net profit, and CET1. This highlights the strength and consistency of our underlying business and position us to deliver our best year ever, even before considering anyone off. What's driving this result is the execution of our strategy at pace. We're now in the second phase of Unicredit Unlocked, moving from unlocking trap potential to unlocking acceleration. This is where we're truly scaling our story, delivering today what we continue to build for the future. Over the past three years, we have executed the first phase of Unicredit Unlocked with discipline and determination. We simplified and streamlined the organization, empowered our banks and our people, unified the group around a clear strategy and culture, and leveraged our scale. We benefited from tailwinds, but unlike many peers, we used them to prepare for the future, front-loading investment, building over 3 billion of P&L buffers, and generating excess capital that we are now deploying or returning. Today, we lead across all key performance indicators, cost income, return on tangible equity, net revenue over RWA, EPS growth and distribution. We have unlocked the majority of our trap potential and built the momentum and resilience to enter our next phase from a position of strength. In Phase 2 of Unicredit Unlock, we are making a decisive shift from transforming the operating machine to accelerating the commercial one. We are executing a clear and focused set of initiatives across 40 dimensions, geographies, clients, products and channels, with our people at the core. This is underpinned by continued investment in our organization, processes, way of working, technology, and data, ensuring that our operating machine remains resilient, efficient, and fully compliant. As our first half results demonstrate, we are progressing across all key dimensions supported by targeted sets of initiatives. Starting with geography, we are allocating capital to higher gross region. The 6% increase in allocated capital to Central and Eastern Europe in the first half, along with a planned re-entry in Poland, are clear examples of this targeted approach. On clients, our focus remains on SME and private and affluent segments, while maintaining discipline in mass market and large corporates. The 7.5 billion increase in SME lending in Italy and the significant growth in private clients in Germany are tangible results of this focus. Our UCX initiatives significantly improve the speed and quality of our clients' journey. For products, we continue to strengthen our offering and enhance its distribution, driving higher quality fee income while maintaining a selective approach to lending. Our new partnership with Wise in international payment and the rollout of digital asset solution are recent illustration of our product strengthening. In terms of channel, we continue to modernize our physical network while expanding our direct and digital reach, enabling a true omnichannel presence. BuddyBank added over 200,000 new clients in the first half, four times more than last year. And we are continuing to redesign and refurbish our branches to support premium advisory service at scale. Our first half also confirms our further progress on the operational side. We took concrete steps to continue to streamline our organization and invest in our people and technology. With respect to people, we hired 1,700 colleagues, mostly in the network and with early career profiles, and delivered 850,000 hours of training Engagement remains strong, with over 1,300 ideas collected through the CEO roadshows, 50% of which are or will be implemented. For organization, we continue to simplify, reducing layer, redesigning processes, and implementing over 1,000 simplification proposals received from our colleagues. On technology, data and AI, we're progressing with targeted investment. The Google Cloud Partnership, GenAI tools, digital platform like UCX, and are already improving speed, efficiency, and client experience. Moving to the organic accelerator. Our organic accelerators, which are part of a plan, are gaining momentum. although their contribution to our performance will only become meaningful from 2026 and beyond. Starting from next year, the internalization of life insurance in Italy, the Alpha Bank integration in Romania, and the scaling up of Poland and embedded finance are expected to increasingly contribute to over 400 million additional net profit by 2027 and growing further from there. In particular, the second quota 25 marks the internalization of the fourth largest Italian life insurance company within the group, together with 46 billion of directly managed assets. This will significantly further improve our revenue mix. These are unjust projections, but the result of tangible growth levers that will enhance revenue quality and strengthen our earnings, profitability, and distribution trajectory. We are now also equity consolidating our stakes in Alpha and Commerce Bank, further enhancing our profitable growth trajectory from 2026 onward. No impact this year. We expect to consolidate around 20% of Alpha in the third quarter and the remaining stake in Commerce Bank to reach circa 29% by year end. Alpha is the result of our welcome investment in Q2. Commerce Bank is the result of obtaining all the required approval, bringing us exactly where we said we would be from the start. Combined, they will contribute approximately $800 million in additional revenues, in additional net profit, and in additional distribution net of hedging costs by 2027, subject to their respective financial performance. Both investments offer a strong return of circa 20% and fully distributable. They also enhance our implicit exposure to attractive markets like Greece, Poland and Germany. Our partnership with Alpha will continue to develop, with our 20% allowing us to capture more of the value we shall create together. This will boost the original numbers of our organic plant by increasing our exposure to an attractive and fast-growing economy. such as Greece, and targeted clients within. It further reinforces our already strong partnership. Based on consensus, Alpha will contribute circa 200 million to our distributable net profit with a capital consumption of circa 40 basis points at circa 20% return on investment. Commerce Bank. The equity consolidation of our stake in Commerce Bank will further increase our implicit exposure to Germany, our resilient anchor, and Poland, among the fastest-growing European countries, while also accelerating our shift towards SME, private and affluent. As Commerce Bank's largest shareholder, we welcome change to strengthen the bank and set it on a sustainable, profitable growth trajectory. their success has become our success. Based on consensus, Commerce Bank will contribute over 600 million to 2027 distributable net profit, net of expected hedging cost, with a 90 basis point CT1 impact, a circa 20% return on investment. We will now turn to how the accelerated implementation of our strategy enables us to raise our guidance. Net profit guidance is raised to circa 10.5 billion for 2025. Net revenue guidance is improved to above 23.5 billion with NII now down by mid single digit and fees confirmed up mid single digit. Cost of risk is confirmed at 15 basis points. Costs improved to below 9.6 billion down at constant perimeter. Consequently, we expect stronger growth in earning per share and dividend per share, with return on tangible equity guidance improved to circa 20%. Distribution guidance is upgraded to at least $9.5 billion as it also takes into account non-distributable items. Dividend is expected to reach at least $4.75 billion, up 28% year-over-year on a declining share count. In 2027, we now aspire to reach at least 11 billion net profit at an over 20% return on tangible equity, with EPS and EPS growth further boosted by earnings growth related to share count reduction through share buybacks. This will allow us to deliver 25-27 cumulative distribution of at least $30 billion, of which at least $15 billion in dividend. Our best-in-class standalone profitable growth story is now upgraded thanks to a stronger-than-expected underlying performance, the confirmed execution of our organic accelerators, and the added contribution from equity consolidation in Commerce Bank and in Alpha. This leads to a consensus EPS and DPS double-digit growth significantly above the sector and return on tangible equity almost two times higher than the sector and above our top peers. We continue to accelerate on our standalone strategy, delivering excellent current results while laying the foundation for an ever-stronger future. Thank you, and I will now open for questions.

Thank you. This is the Coral School conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Britta Schmidt, Autonomous Research. Please go ahead.

Yeah, good morning. Thank you for taking my questions. I've got two. The first one will be on the Commerzbank stake. What timelines do you have in mind for this, considering that the 29% stake income is embedded in the 2027 guidance, suggesting long-term ownership is a possibility? And secondly, with regard to the excess capital, which will be more volatile if the stake remains hedged, can you provide some sort of sensitivity around share price movements and the impact on the CETI one? at 29%. Thank you.

Thank you, Britta. So let's start with excess capital. It's easier. Obviously, at the end of this quarter, we're still at 8.5 to 10 billion overall, depending if you look at 12.5% CT1 or 13% CT1 as the target. The last quarter, we said that of that, about 7, 7.5 was, let's say, more stable, less volatile, if you want to use that word, and the rest needed to be crystallized. Part of what has happened in Q2 is we crystallized part of the rest. So if I had to take a directional view, the non-volatile part is probably around eight billion. So it has grown. Obviously, the excess capital is then declining as we deploy on the equity consolidation of Alpha and Commerce Bank between now and the end of the year by 130 basis points. And we will update you on where it goes. But the way I would look at it is that we are, if you look at it from a distribution standpoint, we are transforming the ordinary plus excess distribution to more ordinary and less excess. And we are transforming the growth in all the share numbers from growths of earnings, growths of dividend, growths of tangible book value over reduced shares. So we are deploying part of that excess at a return on investment that is substantially higher than our share buyback, hence the accretion. As our share buyback today leads to about a 12% return on investment and both the consolidation are at over 20%. So we are converting into ordinary, we're improving the quality, and we're doing that at eight points over what we would have had as a return on investment from the share buyback. Incidentally, I'll take this opportunity to confirm one thing I haven't said in my presentation before, the $3.6 billion of 2024 share buyback. will now be free to move forward and will start as early as possible as we end our results going forward. So this will start and will precede the interims we will pay in the fourth quarter, the dividend interim. With respect to Commerce Bank, the reception of all the authorization that we needed, the last of which we got during the course of Q3, have allowed us to do what we said we would do, which is to transform the total return swaps into underlying shares. The transformation is gradual, and it's gradual because we continue to unwind the positions that we had. Most of the position that we needed to unwind, most of the hedges we had to restructure, occurred in Q3. Some of it remains, but it's the minority. And as we unwind and we transform, we increase the level of consolidation. There is, as you know, a timeline or a deadline in the authorization we have gotten. And if we do not transform by that deadline, we then lose consolidation, which is why mechanically we are going to transform the entire position into underlying shares. We'll remain hedged on the downside position. mildly exposed to the upside of the calls and just exposed to the upside of the stock. That is why we have converted the position in something that can be held for a long time. returning more than Shababaks and benefiting from the delivery of the plan that Commerce Bank has proposed. In terms of timing, we said at this point in time, we're just an investor, and indeed we are, and we remain that. There is nothing else on the table. We don't exclude that there might be, but for the time being, there is nothing on the table. Never has been. And the timing to do that is intellectually until the end of 27, but it very much depends on the posture of our shareholders. If they feel that this situation should protract in case there is nothing else happening by 27, then we will protract it. If they feel they prefer us to unwind and return, then we will unwind and return. As ever, we listen very carefully to our shareholders and we'll do what they feel is better for the time being. The way I look at it is we have 30% of a net income of Commerce Bank accruing to us, fully distributable at a return above 20% that creates, let's say, ordinary distribution going forward at that level. In my opinion, it's much better than a share by back.

Thank you.

The next question is from Antonio Reale, Bank of America. Please go ahead.

Morning, everyone. It's Antonio from Bank of America. I have two questions, please, if I may. My first one is a clarification, really, if I may, and apologies if it comes across as a bit direct, but it's to do with the board's decision to withdraw the offer on Bank of BPM. You've gone through a lot, and I think your resilience was tested on more than one occasion. I think I can remember at least a few chances where you could have worked. So my question is why now? Why after CONSO this extension, and I think most importantly at least to my reading, after the European Commission took a strong stance on your side and pretty much against almost every single condition proposed by the Golden Power Committee. That would be my first question. My second question is on use of capital. Now, unless we see growth really pick up at this rate, correct me if I'm wrong, but the only way to return this capital in a timely manner is still via M&A, and obviously that's easier said than done, as we've seen, and not just in Italy. So with all the challenges that you know better than we do, what is, in your opinion, the best way to deploy this capital for a bank like Uniqlo? Is it more bolt-on deals? Is it more investments a la Commerce Bank? Do you want to focus more on product factories like you've done on the insurance internalization? Any color you can share. He will be much appreciated. Thank you.

Thank you, Antonio. And we do like direct questions. So direct answer. Why now? Because the situation is not clarifying. And we're very clear. So, yes, the EC stance was very welcome and is very clear. And I will not comment further. But if you look at it, even with concept extension, the situation is such that we will not get clarification of golden power within that timeline. We will not. If you saw yesterday, even the most recent noise was that the government was working on a new golden power and extending the situation further. So we have been, from the beginning of April, completely stuck in a situation where we cannot engage with shareholders, we cannot review the situation, we cannot explain our position, we cannot run an ordinary orderly OPS project, and this situation does not have a clear deadline on it. It continued to slide. That for us had become drag. And that is the main reason why we withdrew, because the golden power situation is now resolved. Will it be resolved? We sincerely hope so in the future. When is that future? Beyond the offer deadline, even considering the concept extension. Hence, we pulled. In addition to all of that, I would add that if you look at the value that the transaction was going to provide us, and our shareholders, that value had gradually significantly tilted away from us. You know our views on the value destructed by ANIMA. You know our views on realizing that we needed to do substantial unexpected investments and further provision on BPM to bring them to our standards. you know that until now we were frozen on our share by tax of 3.6 billion. And we would have done it after the transaction providing another 800 million of value to BPM shareholders. This is value we are detracting from Unicredit shareholders. And if you continue like that, we risk affecting the entire distribution plan going into fourth quarter as well. So this was a difficult decision, but the right decision for Unicredit and for our value creation. On the side, we hope that the debate between the European Union and all of the national governments leads to a resolution on banking union because Europe needs it. But at this point, we're stepping back on this. We've drawn a line and we move on. With respect to the use of capital, I wouldn't say the only way to return by 2070 is M&A. Let's take it one by one. So today, you're correct, at the end of Q2, we have between 8.5 and 10 billion of excess capital. It is true, but already, let's call it by the end of the year for a second, the equivalent pro forma number will probably be between 3.5 and 5 billion. To be honest, if you look 3.5 to 5 billion within an over 30 billion distribution, we can very easily top up. And some investors would say, what, only another 10% on top? So there is absolutely no issue with returning it. Obviously, the key topic is what Brita, for example, raised before. Are you going to disinvest? from Commerce Bank and therefore have a lot of excess capital coming back in. At this point in time I answer the question and in my opinion what Unicredit is doing is incorporating into ordinary net profit, incorporating into ordinary distribution what was return on excess capital before. So look at it that way, we will consume 130 basis points of capital by equity consolidating alpha and commerce bank, but net of hedges, we will have run rate 800 million of further revenue, net profit, same number, distribution, same number, growing at the rate that Alpha and Commerce Bank net profit will grow. So effectively, this is ordinary distribution that is coming back, but over a perpetuity as opposed to one of three years. And within that, we have increased the distribution outlook for the next three years. With respect to M&A in general, we keep the same position as always. We are here to create value for all of you. That's what we're here for and do that while we strengthen Unicredit and provide exciting careers to our people and improve our connection with our clients. That's what we're here for. If there is M&A that we feel adds value and accelerate on any of that, we will move. If there isn't, we will not move. I repeat, we're not here and we are not expected and our duty is not to do M&A. Our duty is to create value and strengthen Unicredit. M&A may do that, then we will do it, or may not do that, then we will not. We are present and we continue to be present in 13 countries. There are M&A opportunities in every one of those countries. We monitor them. If they fulfill our guidelines, we will move in. If they don't, we will not. If they fulfill our guidelines and we move in, and during their execution they turn out to be a bad deal for Unicredit, we will pull back. And I think you have seen that in 21. You are now seeing that in 25. And hopefully, next time around, we will do something that will be closed because it will add value to our shareholders. But rest assured that if it doesn't, we will not hesitate one moment to pull back. And I think the entire board and I are completely united on this front. Life insurance and other initiatives. So in terms of additional deploying of enough capital, obviously. Life insurance was a big one for us. We took back control of our life insurance in Italy, 100%. This is the fourth largest life insurer. and 46 billion of investments, strengthening dramatically our assets under management, under administration, et cetera. So it's very strategic and we will look for other things like that. The return on this internalization is very high given the Danish compromise. The deployment of capital within Poland, that we expect to contribute between 150 and 200 million on net profit by 27, is another accelerated organic alternative, and we will continue to do that. We have bolt-on acquisition. You've seen one in Romania. But there are other initiatives. Now that we have drawn a line on BPM, we're fundamentally free. We don't have any offer in line. Our hands are free. Our Italian business can now fully invest, deploy, and aggressively go after for market share because we're not sitting there waiting for what might be and what the business has demonstrated that they have done in these six months, notwithstanding the uncertainty, and with the discipline of maintaining profitability-driven lending and business growth, will just accelerate going forward, notwithstanding the environment. So, I think this is where we are, and that's where we're going forward. But as I said, if tomorrow there is an opportunity of M&A that is in the best interest of our shareholders and of Unicredit, we will consider it. At this point in time, we do not see any.

Thank you.

The next question is from Andrea Filtri, Mediobanca. Please go ahead.

Hi, good morning. How are the probabilities of a commerce bank and alpha deals correlated with the withdrawal of the bunny bid, if at all? And in the commerce bank letter, you're ruling out a bid. Could you explain us why and what would be the other options? A final one, I'm just going to try that. Any clues on the invisible options? Thank you.

So I think effectively what we do with Commerce Bank and what we do with Alpha is completely uncorrelated with BPM. Zero. The only thing that I could venture is if there was and there wasn't and there isn't an intention to do a deal in the short time by withdrawing BPM, we're not free. Before, we had another deal in flight and another integration in flight. Now we don't. But there isn't anything on the table, and therefore there is no impact. So that is on BPM. So with respect to the letter ruling out a deal, et cetera, so we, notwithstanding all the noise, we continue to be exactly... where we said we would be the day after we reached 9.9% of Commerzbank buying a 4.5% stake from the German government. What was that? We said we're going to move to circa 30%. We're going to ask authorizations from all parties, regulators, antitrust, etc., to be able to hold the voting shares and equity consolidate. And because of the position, we will remain as an investor. This is where we are. We are at the end of that process. And there is no intention at this point in time to do anything else. Now, separately, if you ask me, and I know you ask me very many times, whether there is value to be created. I strongly believe there is a ton of value to be created, significantly more than what could have been created in Italy. This is a deal that over the last decade has been reviewed and proposed and considered several times. I'll go back and look at the research report or other media. Because it makes a lot of sense. These are two smaller banks that coming together would have a 10% market share or less than 10% in the German market. They would have a 13, 14% market share combined in Mittelstand. They are very present in segments of Mittelstand and in geographies that are completely complementary one to the other. So there is no overlap. There is no bloodbath in the network. There is no bloodbath commercially. There is just bringing them together and having a stronger competitor. I also believe it is a good thing for both HVB and Commerce Bank. It is a good thing for Germany. I think Europe requires stronger bank to finance investment and to support growth. I think it is good for banking union, but that is my opinion. As of today, we have no dialogue on this topic. We have nothing on the table. I know everybody comments on the merger or the acquisition, but there is nothing to comment on because we have nothing on the table, nor have we ever discussed it. because the other side is not ready to discuss it. And therefore, we respect that. We remain an investor. We're very happy to benefit from a return on investment of 20% in our revenue line, getting more stability on the revenue line, getting more ordinary distribution, and watch and stand and be patient and be supportive of anything we can do to accelerate their growth. At this point, our interests are completely aligned. Invisible options, I don't think they're invisible option, but I would just say that as in anything in life, if two parties sit down around the table and want to find solution to situation, most of the cases they do find that solution, and the solution is usually something that leads to a compromise. If the two parties or the three parties or the several parties refuse to sit around the table, then there are no options. There is us as the larger shareholder sitting constructively benefiting from their performance and waiting until our shareholders will tell us that this is not the best option for the use of our capital. But given the numbers, I sincerely doubt that they will tell me that.

The next question is from Ignacio Largui, BMP Paribas, Exane. Please go ahead.

Hi. Thanks for the presentation and for taking my questions. I have two questions. One in terms of lending growth. I think, Andrea, you have been much more vocal on acceleration of lending growth and improving outlook, especially in Italy. I wanted just to see a bit Where do you see the biggest opportunity in the SME segment in terms of financing if you see more willingness to have growth in long-term investments in Italy and Germany? Second question is on fee income outlook. I mean, one cue was very strong. Two cue has been a bit softer. How should we think about the interaction between the insurance business and the fee income to the second half? Thank you.

Okay, so lending growth. This is a good point because as you know, in our plan, so the phase two of Unicredit Unlocked, we were skeptical on the significance of loan growth in Europe. And therefore, our plan was predicated of making the numbers work, assuming a faster decline in NII than you're seeing now. We were wrong. I think there is a slightly better loan growth environment overall in our 13 economies than we anticipated. And if you think about us, and for a second we put aside all the noise, We have 16.2% CD1. Nobody has that. We are extremely liquid. Nobody else is as liquid as we are. We have done all of our cleaning, all of our homework in getting our operating machine as efficient as possible. I think very few are in this position. We're very clear we want to gain market share in SME, particularly small and micro, and in affluent and private. And we have put, rolled out, all the levers. And when you want, I can take you through it. Country by country, region by region, product by product, channel by channel. All the commercial levers that we need to do to get there. If anything, the BPM deal was... constraining us in Italy because there were a number of investments that we wanted to do that we were holding because you're not going to do those investments if you're acquiring a portfolio on the other side three months later, two months later, one month later. Now we're not constrained and you should expect us to increase the commercial pressure in Italy meaningfully. The same thing applies to Germany. Germany at the moment, the situation is stable. We are going to press and we are going to press because we are there. If you took some other peers in those markets, especially Italy, you will see peers which have completely destroyed their capital base going below minimum, who are overstretched on their liquidity with loans to deposit ratio completely out of whack with the rest of the system. that do not have the products, have not invested, and that have driven to a wall the commercial effort. So we hope, or we think, we're going to gain now, in the next four, five, six quarters, the market share that we deserve to gain, deploying our advantages in these elements. And that applies to the group. Where are we seeing the growth? Well, actually, we're only, let's call it benefiting because we're focused where we want to grow. So SMEs, private and affluent, and in terms of products, we're much more focused, especially in Italy on consumer lending, et cetera. Fees. As you know, or these are, linked to the general environment. So when we had rates going up every single quarter in the last few years, our fees were going well, but they were obfuscated by people being able to get a certain return and by the NII dynamic. Now, NII is coming off. And therefore, fees are rebalancing and are increasing their weight. But it's not a straight line, Ignacio, as you know very well. they move. Why are fees a little bit soft in second quarter? My personal opinion, following reason. Number one, we had an outsize event in Q1. It's not that outsize plus outsize plus outsize. If some people accelerate some investment or accelerate some insurance or do some things, then the following quarter, it's softer. We were clearly guiding for that. But that does not mean they're softer for the year. It means there is an anticipation in timeline that occurred in Q1, but it's slightly compensated in Q2. Let's see how the end of the year will occur, but we think we are bang on line. The second reason is inevitably all this volatility, all this noise. We have Liberation Day. We have wars. We have volatility. We have all of these things. This is not the conducive environment for people to take decision on investment, to take decision on life or non-life insurance, to do a number of things. To take decision on financing. Financing are postponed. Fees on financing are postponed with it. So that's a second reason. The third reason, which is less important, is especially in payments, Last year in Q2, we had significant benefits from our signing a new contract with several providers that gave us incentive. They were booked in Q2. This year, we are not. And secondly, incentive schemes on our payments, especially for retail, used to take place in April and in July. This year, they take place in December. So you have a timing difference. So if you look at all of these things together, as you say correctly, fees were softer in second quarter. We're not concerned. But if the situation, depending on where the geopolitics go and where things go, we may move in our core revenues between NII and fees and back, etc. I think that the equity consolidation gives us a stronger bedrock to make sure that the combined core revenues continues to grow and is more insulated than it was before. So that's the way I would look at it. But for the time being, we see the second half being on track, and obviously, From the second half, and you will see it in Q3, we are restating, if you want to call it this way, the way we report insurance, because at the moment we report insurance purely, in Italy, as fees from distribution. From this quarter we are in, we are going to have an insurance result, like some other peoples have, so in a way less fees, greater insurance results, On a full year basis, I have a number for 27, so this year is a little bit lower. You're talking 400 million more net revenues by 27. That after cost, take a 100 million contribution. So the composition of our revenues will shift from the end of this year onward as we will have a consistent contribution from equity consolidation of about, let's call it 800 million. and an insurance results, which will be about 400 million plus minus depending on the year, and lesser fees on the other scene, but the insurance result is going to be much greater than what we lose on fees. And that will all go to the bottom line. So I think that that is where it changes, but we don't have any other concern with respect to that, but maybe Stefano wants to add something.

Yeah, I will give you some data points. Ignacio, in relation to the loan growth, so as you have seen, in the quarter we were up $4 billion on the loan side, around 1 billion each in Italy and Austria and around 3 billion for the Central Eastern Europe. So for the rest of the year, we're expecting to be broadly stable on the loan side in Italy, Germany and Austria, while we're expecting to keep growing in the Central Eastern Europe. With regards to Italy and your question in relation to small and medium enterprises, I mean, so far we've been doing well. in relation especially to the new productions that is increasing and we're expecting that this growth will keep on going during course of 25 and also 26. On a longer time horizon, meaning if you look 27, right, so the period of 26, 27 versus 25, we're expecting on average to have a growth very similar to the nominal rate of the GDP with Italy, Germany, and Austria below the average, right, of nominal rate of the GDP, while Central and Eastern Europe more than 5%. So you take the GDP of the country where we are, the inflation more or less in Central and Eastern Europe will be there. In relation to the fees, You need to look at the number with a grain of salt. So we have confirmed for 2025 mid-single-digit growth. Andrea was already commenting on the fact that in the second part of the year, we will add the net insurance result. That will be around 140 million euros to the fees. When you look to the insurance part, bear in mind that, I mean, We have life and non-life, right? So we are more down on the life side rather than the non-life. But then if you put together the investment fee trend and the life together, fundamentally we will be in line with our average of growing at mid-single digit if you put the two together, okay? While on the non-life, we are confirming that we will grow in line of better than the average.

Yeah. Thanks so much.

The next question is from , JP Morgan. Please go ahead.

Good morning. Thanks for taking my question. So, first of all, on Commerce Bank, just wanted to understand, like, on your hedging strategy, on the color that you have, is the intention to reduce the hedging over time, Is that not the case because you want to keep your ROI relatively high and you think that it's optimal where it is right now? And the second question is just a clarification on Bingo BPM. Now that you've dropped the bid, I guess, I mean, I just want to see kind of what's the process here from the government's perspective. I guess there's no need for a decrease. Or does the government still need to respond to the EU, and is there a process there that continues beyond the timeframe of your bid, which has not finished? Or is it just everything is over? Thank you very much.

So with respect to Commerce Bank, you're asking the intention today. The intention today is we are fully covered on the downside. In fact, the significant strengths of the stock over the last three, four months has allowed us to significantly increase the strike on our put option and lock in a greater portion of the capital gain in case we were to get out. and which is not the plan at the moment and maintain the capital consumption to what we said we would be so that comes at a cost but we think it's the prudent thing to do and the good thing to do there is absolutely no intention to change that the future will tell but for the time being we're very happy to be and it gives us a position of extreme strengths with respect to the call obviously seeing the numbers that you have seen, we have restructured that and we have the lion's share of the calls have been eliminated. So now we are much more, let's say, asymmetric on the upside. The stock goes up, we benefit, the stock goes down, we're capped on the downside. So it's exactly the situation where we want it to be and we're happy with that. Obviously we hope that Commerce Bank does well because that will drive results in our direction. We're not anticipating any change to that strategy in the short term. If it were to change, we'll let you know, but nothing else. We've done most of what we needed to do. With respect to BPM, the process, well, one of the reasons why we pulled is because the process is not clear. If you ask the lawyers, they will tell you we are in complete uncharted territory. We have on one side the Administrative Court of Italy that has done a ruling. Potentially that ruling requires a redrawing, redrafting of a golden power. That ruling is also appealable to the Concilio di Stato. So that is one process. Then there is another process. The EU has sent a letter that has become public. to the Italian government, and that letter requires a response by the 12th of August. And then following that response, the EU will take a decision on what to do or not to do. Will this continue as it is now? Honestly, we don't know. We're no longer in the offer. Will the fact that we have had to pull because of that continue the process? Will it not? We have no idea. But I do think that in general, for all of us Europeans, having greater clarity of where we stand on these transactions, and therefore having a conclusion to the engagement between the European Union with several countries, among which Italy and Spain, is a good thing because it will be giving clarity on what one can do and one cannot do in this environment. But we don't know about the process in detail because this is all new and the intertwining of all of these things is all new. And that's one of the key reasons why we decided not to sit there and wait, you know, and draw a line on the BPM.

Thank you very much.

The next question is from Chris Hallam, Goldman Sachs. Please go ahead.

Yeah, good morning, everybody. I wanted to come back on the move to actually consolidation of the strategic stakes. If we think about this from a distribution perspective, one way, I guess, to conceptualize the move is that you're swapping excess capital, which could be distributed via irregular distributions into recurring net profit that can be distributed within the regular distribution envelope, and you're making that swap, obviously, a pretty attractive term. But one question to come out of that is that the distribution of excess capital would have been in part dependent on supervisory approvals. So do you sense any change from the supervisor vis-a-vis their willingness to approve large excess capital payouts? And might that uncertainty be part of the reason one would look to equity consolidate and effectively fully shift that distribution stream into part of the regular recurring payouts? And then as a follow-up, if we start to tie that together with the attractive ROI of the consolidation moves and considering all the political pushback we've seen to bank consolidation across several European markets, are we getting to a point where banks are becoming more and more incentivized to build up equity stakes and evolve into more complicated cross-holding structures instead of actually executing on transformative M&A?

So, first of all, let's put it up there. Notwithstanding the fact that some of you were concerned with the attention of approval from the regulators in distribution of excess capital above and beyond net profit, we always told you we were not concerned because given our capital level, given our capital generation, and given our dialogue with them, we didn't sense any restriction to that, and therefore we were confident. Now, having said that, we have and may continue to convert excess capital distribution into ordinary capital distribution. That means that if some of you had doubts, now the doubts are abating because instead of one-off distribution of, I don't know, let's call it 8.5 billion, I now have ordinary distribution of additional 1.5 to billion a year by the deployment and by the conversion of that excess capital into an equity consolidation or into other bolt-on M&A acquisition like we did on life insurance and other things like that. So the way I look at it is there was no risk. I think the regulator has always been clear. You can afford it. We're going to look at it. You can do it. Secondly, having said that, we are effectively, by transforming excess capital distribution into ordinary income from equity consolidation, we are increasing the ordinary and decreasing the excess. And therefore, we are gaining... let's call it that we are gaining independence in the way we distribute. And obviously the dividend part, so the cash part of our distribution is implicitly increasing because our dividend is linked to a 50% payout of our net income, of our net profit. If our net profit increases, it increases, while the excess was only in share buyback. So the composition is also moving. So that's the point. The second point that I would make, that you made, is if I can deploy my capital. This has always been said, but I do think that the situation has evolved. If I can deploy my capital substantially better than doing my share by back, at a substantially better return than doing my share by back, then I think my shareholders and you should encourage me to do that. And this is exactly what we're doing. In addition to that, it provides some sort of additional strategic optionality because while we're not counting on it, it is there. With a share buyback, it is not. So I think that is the bottom line. strengthening our revenues by increasing the component of, let's say, regular, recurrent, expected core revenue component through the dividend line. Number one, strengthening our ordering net profit through VAT that goes 100% down, strengthening our payout, both in terms of cash dividend and total, ordinary payout as expressed as a percentage of total net profit, maintaining, in any case, a buffer from excess capital, but that buffer call it this way, will be halved after we're done with our equity consolidation at the end of the year. So it's there, but it's halved. And within the magnitude of what now becomes primarily ordinary distribution in the next three years, that excess capital is rounding. So that is the way we look at it. In addition to that, I would make maybe a more technical comment. It is clear that with ordinary M&A processes being affected in a very significant way by political action, because if you look at all the processes, you can look at it in Spain, you can look at it in Italy, what does have that happen? They're lengthened, they're uncertain as to outcome, and they create situation like the one we are today. I'm not saying it's right or wrong, I'm just saying it's a fact. It is true that to a certain extent, banks, assuming that they want to do M&A, are now pushed and motivated to move into building of stakes because that is something that is still more free. From a market standpoint, that is not a good outcome, and I totally agree with you. Or you don't build stake and you don't do M&A because you don't have control on an orderly offer process. It also changes the dynamic because some targets, instead of debating with their shareholders and the shareholders of the bidder, transaction on merit, on value creation, on strategy, etc., completely hijack this process by having a political intervention, taking that decision away from shareholders and moving it to those management team and leadership away from the shareholders. Again, as a person who has lived in the UK, in the US, and has a certain point of view, I don't think that this is a good development either. But we are Europeans, this is where we live in, we need to respect it, and we need to do the best within the framework that we have. This is the best that we can do.

Okay, thank you.

The next question is from Hugo Cruz, KPW. Please go ahead.

Hi, thank you for the time. I wanted to ask first about the hedging of the Commerce Bank stake. So if I look at 29% of Commerce Bank consensus earnings would be $1.5 billion of earnings, but you're guiding for only above $600 million, so the rest is the cost of the hedging, arguably. So that sounds very expensive. So why keep a hedging in place if the stake will be equity accounted and therefore doesn't need to be marked to market anymore? Any room for that hedging to cost to disappear over time? And also, what exactly are you hedging? Is it just the market value of the stake or also your budget for the P&L contribution? And then the second question on Russia, you know, almost 500 million of profits in the first half. Can you tell us what your guidance assumes for the full year and for your 2027 ambition? Thank you.

Okay. So, Hugo, I sincerely hope that the 29% CBK, sorry, but the 29% of the net profit of Commerce Bank is $1.5 billion. Sincerely hope. I really hope you're right. We budget one. So if it was one and a half, add to our 600, 500 million, and it becomes 1.1, okay? Because the hedging cost is the same, but we are budgeting in about three billion plus, and not anything more. But if it ends up being better, we're very happy about that. And in calculating the return on investment, we are calculating it based on 600 million. If it was 1.5 billion and we end up at 1.1 billion, then our return on investment takes off. This is a demonstration that we are absolutely cheering for Commerce Bank to do as best as they can because it will propel us through. With respect to the hedges, so for the time being, we feel that it is the right thing to do, because we are not conclusive also in our chat with our shareholders, to maintain downside protection in full. That downside protection in full allows two things. One, it allows to reduce significantly the capital consumption at a cost that is single digits. Single-digit cost, so 7%, 8%, 9%. Our share-by-back is at 12%. Our return on investment in Commerce Bank is over 20%. So it's a very capital-returning way to enhance results and be efficient with our capital use. Those are long-dated puts that we have set up. at a strike that, as I said, has been dramatically increased over Q2, thanks to the performance of the stock, and we anticipate to keep it there. With respect to the calls that we had struck at the time of purchasing the stock, we have unwind the lion's share of them, more than the lion's share of them, and those may decline or vest or end by themselves. but the cost you have seen, in part you haven't seen it but it exists in Q1, and the one you have clearly seen in Q2, was the unwinding of those as we converted a fully hedged position, where we were not benefiting on the upside as much as we wanted, to a downside protected position where we have full upside. So again, I repeat, if consensus is right and we got it wrong on the $1.5 billion net income of Commerce Bank, that for us is a great outcome. And we will not reduce or change this hedge. We are where we are. With respect to Russia, I always warn people to be careful because Russia is lumpy. Where are we making our net profit in Russia from? The more we compress the business, the more we increase the liquidity of our P&L and we have outsized cash to deposit overnight at the central bank. Because of where rates are in Russia and what is being given by the central bank overnight and the fact that we are discouraging deposits, we have a very sizable margin on the way we're paid by the central bank overnight for our liquidity and where we pay for deposit, but very sizable. That situation is going to end at some point when rates will normalize, and they will. or when we will continue to compress our deposit out. And therefore, if you ask me where I think to be by the end of the year, assuming we do not do any protective provision that we often do, we may end up around $600 or $700 million. or we might not. So it's premature to do because every year we consider and we create further provisions on our position in Russia. I think you should anticipate that whatever is 500, 600, 700, the profit from Russia this year, you should anticipate that by 2027, we will have out of those 100, maybe 150, maybe less. So as you look at the numbers between 2025 and 2027, in our number, we are absorbing five to 600 million, maybe even more, of compression of contribution with Russia, which we are offsetting with the accelerators, so Romania, in Poland and life insurance. But that, the two things tend to offset. And then now we're enhancing with the equity consolidation. Okay? That's more or less how you should look at it. So by 27, it may look like we're not progressing a lot, but actually we're transforming the one-off contribution from Russia to quality earnings from Poland from Romania, from life insurance, and then the equity consolidation of the rest. But my personal opinion is that Russia may well be a lot less than you think for the full year because we always look at it prudently and take provision and protection when we have a particularly strong year.

Thank you very much.

The next question is from Ignacio Cerezo, UBS. Please go ahead.

Yeah, hi, good morning, and thank you for taking my questions. The first one is on NII, and if you can exclude Russia, basically, from the commentary. I mean, given your, I mean, seemingly kind of optimism actually on volumes, given the fact actually a rate seems to be stabilizing around 2%, given the fact that you seem to be controlling the spreads quite well, I mean, is it logical to expect some degree of acceleration of NII ex-Russia in the second half of the year? or it's a little premature, basically, and that will happen in the 26 and 27. And then the second question is on alpha. I mean, your position around Commerce Bank, where you are, how patient you want to be, I think is quite clear already. But direct question again, what is stopping you actually from taking a bigger position in alpha and by the entire bank, especially considering the devaluation of group banks if you pay attention basically to what the market is expecting you're more likely to go up and down basically in coming years. Thank you.

So let me start with alpha. Alpha is one of these things that happen without having planned and that turn out to be the best thing that could have happened to you. So we have an outstanding relationship with all levels of alpha. And when I say management, I think if you took the about 50 to 100 people at Unicredit that are regularly involved with alpha, given that we're doing so many things together, not only with our factories, but also in a number of other areas where we're helping them to move forward. They're all excited to do it. They're not doing it because they're asked. They're doing it because they're enjoying asking it. The same, and I go to Greece relatively regularly, not as much as I would like, the same happens on the Alpha side. So this is not only a CEO to CEO or board to board initiative. It is quite granular, and the people on both sides are enjoying working together, as if Alpha was part of our network. That's the first point. The second point is obviously we've gotten here initially because in order to do Romania we were encouraged to take a stake. We did it. We didn't expect much from the partnership in Greece. We were wrong. The partnership is outstanding and is progressing on all things. One market, trade finance, payments, corporate lending where we joined forces to to offer a solution to clients on the full requirements, etc. So we're happy. And we have been welcomed by an open, very market-friendly, and very focused on promoting the right kind of investment in the country, government, central bank, and institution in Greece. So if you have something like that, Ignacio, The last thing you want to do is put it at risk. So whatever we will do with Alpha will be something that Alpha wants to do with us. We're very respectful of them. Even the second increase was done because they asked. And we're very happy that they asked. And we did it. But we're not going to move unless we have... alpha feeling that this is a good thing for them. So, yeah, there will be financial, but this goes well beyond. We really respect the spirit, the partnership, and what they've done, and we're standing by this. Does that exclude that over time, and we have asked for authorization, our stake instead of being circa 20 could be circa 30? Sure. Is there a plan to get there? No. Is there an acceleration to get there? No. But as we need to ask, we're asking for 30, we're not asking for 20. It gives us flexibility in case the need occurs. But there is nothing at the moment beyond the 20, circa 20% percentage where we are, and we're going to keep it that way. And by the way, I do agree with you on the fact that if you look at the underlying economic growth in Greece, the rating of the country is The attitude towards both internal and foreign investments and how they operate, I think we're very optimistic about the prospects of Greece and the banking sector within it. So we're happy to have a stake. And the rallying of Greek banks have demonstrated that people have realized that that is the case. I think Alpha is now... trading above book value and deservedly so. So I do think that that's where we are on that. On net interest income, I will pass it to Stefano, but I would say that it is what it is, meaning no acceleration. There are a number of things. Remember, we often forget that if we go back two years, we would all have said that with rates reversing 2, 2.5% back from their peaks, it would have been an Armageddon for banks. Now, we're expecting that with rates doing exactly that, faster, in a volatile environment with trade wars, wars, etc., etc., we're expecting banks to actually accelerate into it. I think, if I may, we've gone from one extreme to the other. So, rates are still coming down. The average rate at which we land So it's not that the rates goes down, as you know very well, by the way. It goes down X, and the next day you have the impact. It lags. So I would say something different. I would say when we started 2025, we all felt that 2025 was a transition year, and then 26 would be more stable. Given all of the dynamics, I think 25 will be better than expected, but some of that tail we're going to get in 26. It's premature to tell you how much because it depends what happens in 25. But I do think that as the average rate normalizes, as the cost of risk, which as you see is very benign, comes up, as inflation continues and people who have not done the work will need to either suffer that or take restructuring charges to address them. I think 26 is the year where it's going to become more challenging. But for us, we see it as an opportunity to differentiate. Very clearly, so I'm not misunderstood, the 2025 new guidance reflect all of that. So all of the things that we're saying, we took into consideration in giving you the new guidance for NII. the confirmation of a guidance on fees, et cetera, et cetera, et cetera. So it doesn't change. The ambition for 2027, the same. As many other banks, we still do not have guidance for 26. The guidance for 26 will be affected by, in my opinion, what happens in the second half of this year. I hope I'm clear on that. But, Stefan, if you want to add.

Yeah, so as anticipated by Andrea, there is the rate effect, right? So in Q1, your average was around 2.6. If Q2 was 2.1, what we are expecting is your average to go below 2, so our current expectation to go around 1.8. So if you look at the average, your average for 2025, let's say, would be below 2.1. But then what we are expecting for 2026, or what we are assuming, is around 1.8. So consider that our net interest income sensitivity is around 300 million confirmed every plus minus 50. So we will still having the effect deriving from the rates reduction. Compensated, you are right, from two elements. So one is client rates or client rate, meaning the client spread on the assets that we did well, right? especially in Italy, but the volume side, as we have commented more than once, is not going to be sufficient to change the trend, right? So every billion of increased loans for us is around 14 million euros, right? So it's definitely a different magnitude in comparison with the rest of normalization. So as highlighted by Andrea, confirm the guidance for this year, mid-single-digit reduction. As you've also said, Russia will contribute negatively, right? So we were commenting before in relation to the bottom line, but also in relation to the top line, Russia will go down during the course of the second half, net interest income included. So in the mid-single-digit reduction, we are also including the lower reduction to the net interest income of Russia perimeter.

Thank you very much.

So we have come to time on the call. I turn the conference back to the management for any closing remarks.

So as a closing remark, I would say the following. This quarter is full of noise. A withdrawal from BPM, the restructuring of our hedges on Commerce Bank, the internalization of life insurance, the one-off risk and charges anticipating the future. Rates coming down, I would say, faster than we anticipated they would come down at the beginning of the year. Volatility from Liberation Day and everything else. But very clearly, the improvement, the underlying results for Q1 and Q2 are that, underlying, and they are stronger than last year as a whole and in most of the KPI lines. If you look at our guidance, it's stronger than last year and meaningfully so. And we're very confident. We don't raise things if we are not confident we're going to be there or better. That is the underlying business. The contribution from accelerators, which are Romania, Poland, and France, and life insurance internalization will not have a meaningful impact this year, so it's still the, in inverted commas, old Unicredit. They're going to start contributing positively in 26. The equity consolidation of Alpha and Commerce Bank and all the noise that is around it is not having an impact on 26, probably more negative than positive if you take out the one-off. but it will contribute from 26 onward. Sorry, it will not have an impact this year, 26 onward. So what we feel very strongly is a stronger than expected underlying performance, an accelerating underlying performance, an execution of a second phase of Unicredit Unlocked that is better than we thought, and now a strengthen the top line, core revenue line, and prospects for our KPIs that have led to the improving performance and in that guidance, not only for 25, but for 27. The rest, honestly, is noise, and we will continue to look for opportunities for our shareholders, either by accelerating internally or by finding other opportunities, but we're confident of what we have put on the table and will execute in that direction. With that, I close the call. I thank you all for your time and meet some of you during the roadshow. Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.