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Good morning, ladies and gentlemen. Before I hand you over to Mr. Jacopo Dallo, Investor Relations, a reminder that today is being recorded. The conference is being recorded. I apologize. Sir, you may begin.

Good morning and welcome to Unicredit's second quarter 2026 results. Our CEO, Andrea Orcel, will take you through the presentation. This will be followed by an analyst Q&A session with Andrea and with our CFO, Stefano Porro. As ever, please limit yourself to two questions. With that, I'll hand over to Andrea.

Thank you. Good morning and thank you all for joining us. Following an outstanding first quarter, I am pleased to present another record performance propelled by our core contributing to the strongest first half in Unicredit history. These results demonstrate the strengths of our business, the magnitude of our profitable organic growth, and the impact of our continued transformation. Unlocked builds the foundation, Unlimited is leveraging them, accelerating our trajectory and ensuring we are future ready. This quarter we achieved significant quality market share gains across all our regions while accelerating our transformation agenda, further improving efficiency and structural profitability. It is proof our model is winning. It is enabling profitable organic growth while improving our operating leverage unlike any other bank. None of this would be possible without our people. Their commitment, their care and ownership are what makes Unicredit so special, leading in every market where we are present. To each of them, my thank you. Today's results mark the 22nd record quarter, the best second quarter and the best first half in Unicredit history. They confirm the unlimited step change across both acceleration and transformation, delivering exceptional core revenue profitable growth, further improving operating leverage and reaching new highs across GOP, NOP, net profit and return on tangible equity. all in spite of the negative one-offs related to Commerce Bank offer and the acceleration of our Russia compression. Because of this performance, the continued strengthening of our business and well-established lines of defense, we are upgrading our ambition again. We now expect 2026 net profit to reach circa 11.5 billion excluding integration cost and to be well above 11 billion including them. This is in spite of negative circa 140 million extraordinary impact from Banca Progetto and Robber in Romania, our net profit expectation would benefit should this not occur. Our year-end CT1 ratio is also expected to improve to circa 15%, putting our capital on a stronger trajectory to absorb the impact of Commerce Bank full consolidation. Our 2028-2030 ambition will benefit from the 2026 base effect and momentum. It will be further improved by the full consolidation of Commerce Bank and the value that applying our blueprint will deliver. Slide 3. Over 20 quarters, Unlock built a record of profitability, efficiency and distribution excellence that set a new benchmark for banking. We unified as one, simplifying and streamlining. We trusted and empowered our people while harnessing scale. And we built lines of defense to protect our future, all while continuing to invest. Now, with Unlimited, we are elevating our sustainable trajectory, going beyond the limits of legacy banking, gaining quality market share by growing revenue without sacrificing margin or asset quality, and resetting the efficiency frontier, leveraging new tools. Unlimited is a new blueprint for the future, combining the strengths of a traditional bank, the agility of a fintech, and the dynamism of a technology company. Slide four. A step change in acceleration. This marks the second consecutive quarter of significant organic market share gains across all regions. These gains were targeted by client segment and product, accelerating growth, improving business mix, and strengthening the structural profitability of our franchise. This acceleration starts with investment in our people, factories, technologies, and channels. Training hours per employee increased by 22% while 2,600 new colleagues joined the group in the first six months of the year. 84% hired directly into the business. We continue to invest and innovate across our product factories, expanding our offering while capturing a greater share of the value chain. At the same time, we advanced our fully integrated omnichannel model, combining the strengths of our people with digital and AI-enabled capabilities. Initiatives such as Buddy in Italy and Prime in CEE demonstrate this evolution. Investment in technology and AI are enhancing productivity and client experience, translating directly into stronger commercial momentum. Customer loans, deposits, and total financial assets all increased by 8%, driving higher revenue per client, Co-revenue growth of 5% and overall underlying revenue growth of 10%. This is a virtuous circle of unlimited. We invest to become more productive and gain profitable market share, which together with improving efficiency turns into sustainable net profit growth at high return on tangible equity. Slide five. Unlimited transformation. This is also the second consecutive quarter of a significant step up in our AI-assisted transformation, enabling us to accelerate operational redesign and related efficiency gains. These gains have allowed us to hire talent, invest in technology and AI, and reduce cost simultaneously. Our transformation starts with our people's commitment to improving in search of excellence, embracing change and simplification, and leveraging technology and AI. We continue to redesign and simplify our organization since 2020. We have reduced organizational layers by 45%. We now operate a single AI platform that enables scalable solution across the group while continuing to deploy AI against clear bottom-up business cases that deliver sustainable results. These translate into both capital and Operational Excellence, with non-business costs down 5%, enabling us to fund investment and enhance productivity and client experience. This is what resetting the efficiency frontier looks like. Not a one-off, undifferentiated cost cut, but a structural, targeted and self-reinforcing transformation. Slide six. Unlocked comprised a series of major transformation projects to modernize our core technology and operations. For example, evolving our IT infrastructure and cybersecurity, accelerating our move to the cloud, centralizing our trading and trade finance engines, and revamping our security service platform. all while using an advanced near-shoring model to bring our 13 banks operation and technology closer together, optimizing processes and cost. Unlimited goes further, rethinking again our operating model with AI and new technology as key enablers. We're deploying targeted AI to completely redesign our key processes, including KYC, onboarding, corporate lending, Investment and Transaction Monetary. In payments, we are exploring new rails, actively contributing to the digital euro pilot and to the launch of a euro stablecoin through Kivalis. And in tokenization, we are building future-ready investment solutions for our clients, enabling greater automation, scalability and efficiency across the investment cycle. Throughout, we measured our investments by outcomes, not by inputs. Every euro we spend must enhance growth or efficiency and stand the test of time that may well increase the pricing of the necessary technology and AI. By transforming and accelerating at the same time, we are building a bank that is truly future ready. Slide seven. Our Q2 record performance is a clear beat of both expectations and last year across all operating lines. Its true strength is even more fully apparent once you adjust for 1. The negative trading one-off and temporary RWA impact linked to our increased position and related protection in Commerce Bank. 2. Russia more accelerated compression. 3. The more even quarterly distribution of our provisions. And four, last year large positive one-off linked to life insurance internalization in Italy. Adjusted revenues grew 13% in the quarter, with strong core revenue contribution up 7% as we gain profitable market share across all countries. Costs continued their gradual decline, further improving our best-in-class operating leverage. Adjusted GOP and NOP were up by more than 20% in the quarter and more than 15% in the half, accelerating. Adjusted net profit grew more than 20% to 3.1 billion in the quarter and 6.3 billion in the half. maintaining best-in-class return on tangible equity of respectively 23% and 24%. Finally, adjusted EPS, DPS, and tangible book value per share were up respectively 28%, 16%, and again 16%. This confirms the strengths of our underlying business, the momentum of our transformation, and the discipline of our execution. Slide eight. Overall, revenues were up 7% in the quarter and 5% in the half. Adjusted revenues were up 13% in the quarter and 10% in the half, accelerating, driven by our targeted market share gains without compromising margins nor asset quality. Net interest income was up 2% sequentially, down 1% in the half, slightly up excluding the impact of Russia compression. Fees and net insurance grew 14% in the quarter and 11% in the half, with their weight in net revenues increasing to 39%. This was the result of a strong commercial dynamic, with both loans and deposits up 8%, maintaining an NII ROAC of circa 20%. We expect NII to accelerate in the second half. Equity investment, net of hedging cost, further strengthening our performance, increasing by 900 million in the half, more than offsetting Russia compression. Overall, our revenue base is growing faster and becoming higher quality and more diversified. Slide nine. Overall, net revenues were up 5% in the quarter and 4% in the half adjusted net revenues were up 14% in the quarter and 10% in the half cost of risk remains structurally low at 17 basis points and within our 2026 ambition of 15 to 20 basis points We used circa 70 million of our overlays, mainly to absorb an update to the IFRS 9 microeconomic scenario, given the changing conditions. Our overlay stock is now at 1.6 billion. Adjusted net revenues on RWA stand at a top tier 8.7%, up 0.4% in the quarter. Asset quality improved further, quarter on quarter. Net NPE ratio was down to 1.4%, coverage improved to 45.9%, default rate reached a low of 0.8%. Efficiency continued to be a defining strength. Costs were down again, despite inflation and continued investment. 2% excluding new perimeter, 1% including it all. Non-business cost fell 5% with most savings reinvested into technology and AI and the frontline to boost revenues. Our cost income ratio remained best in class, improving both in the quarter and in the half. The result is a record gap of 8.8 billion with contribution from both sides of the jaws increasingly driven by our AI rollout. Slide 11. Our quarterly organic capital generation of 85 basis points more than covered the quarterly distribution accrual. Our CT1 ratio increased to 14.3%, 14.5% excluding the 19 basis points impact from the increased Commerce Bank position, which we expect to reverse by year-end, and 15% pro forma for the Danish compromise. These beats our expectation and puts our capital on a stronger trajectory to absorb the impact of Commerce Bank full consolidation. Italy delivered exceptional strong organic growth without sacrificing margin nor risk and is well positioned to leverage market disruption from consolidation. We are growing market share in our targeted client segments and products well above expectation. and we'll provide you an update of our three years target in this regard later this year. The acceleration step change is visible. The number of our SME client is up 4% and wealth clients 9% while our client penetration continues to improve. As a result, revenue grew 3% propelled by core revenues up 5%. Net interest income was up 2% sequentially, driven by quality loan growth of 8% and continued commercial discipline with NII ROAC at 23%. Our corporate lending market share increased by one percentage point in the half, with improving margin as we rebalance our mix. We continue to increase market share in our targeted retail products with discipline. Cost of risk decreased 2 basis points to 24 basis points, reflecting the continued quality of the loan book and discipline underwriting standards. Fees and net insurance were up 14% and reached 47% of net revenues, up 5 percentage points in the half, with strong delivery across the board. Investment fees grew 8%, reflecting the increasing relevance of our offering with total financial assets up 9%. This strong commercial performance was supported by investment in the franchise, including the hiring of 800 new colleagues, 90% of which client-facing and business role, that will support continued acceleration in the future. The step change for transformation is also increasingly visible, supporting this growth while continuing to reduce costs. Costs were down 1%, driven by non-business costs down 5% while continuing to invest. Cost income improves to 32.5%, remaining best in class. Net revenue to RWAs at 10.4% confirms strong capital discipline alongside growth. AI Impact is becoming increasingly tangible both in terms of commercial productivity and in terms of operational efficiency. GenAI is supporting Buddy Advisor to provide faster, more consistent and higher quality client interaction. Credit processes are now being automated through AI, reducing time to yes and improving efficiency and client experience. The combination of acceleration and continued transformation translated into GOP growth of 5% and ROAC of 31%, maintaining Italy's position as the most profitable banking franchise in the country. Slide 13. Germany is delivering strong organic growth while demonstrating that sustained investment, disciplined execution, and transformation translate into best-in-class efficiency and profitability. The acceleration step is visible. We continue to strengthen our position in targeted segment, adding more than 3,500 new private and affluent clients and reinforcing our position as the best bank for the Mittelstand and trade finance. This commercial momentum translated into revenue growth of 3%, propelled by core revenue growth of 8%. Net interest income increased 5% driven by quality loan growth of 3%, with NIA Roark at 19%. Cost of risk increased 9 basis points to 22 basis points, reflecting a more normalized provisioning profile while asset quality remained strong. Fees and net insurance were up 13%, and now accounts 36% of net revenue, up 4 percentage points in the half. with strong delivery across the board. Investment fees grew 16% reflecting the increasing relevance of our offering with TFA's up 3%. The strong commercial performance is supported by continued investment in the franchise. Germany remains a top employer. Hiring was up 24% as we continue to invest in client facing capability and future growths. The step change for transformation is also increasingly visible, supporting this growth while continuing to reduce costs. Costs were down 5% in Germany, driven by non-business costs down 9% while continuing to invest. Cost income improved by 3 percentage points to 35.3%, further strengthening our position as the most efficient bank in the country. Net revenue to RWAs to that 8.1%, confirming strong capital discipline alongside growth. AI impact is becoming increasingly tangible. The rollout of advanced fraud prevention solution and other AI-enabled initiatives is helping us enhance client experience, improve effectiveness, and further simplify our operating model. The combination of acceleration and continued transformation translated into GOP growth of 8% and ROAC of 23%, confirming HVB as the most profitable and efficient bank in the country. Slide 14. Ostra continued to strengthen its market position. The step change from acceleration is visible. We continue to acquire target clients across key segments with more than 1,000 new SMEs. This commercial momentum translated into core revenue growth of 4%, with overall revenue flat. Net interest income increased 2%, supported by quality loan growth of 6%, with NII ROAC improving to 16%. In corporate, we gained 43 basis points on market share over the last 12 months, further strengthening an already leading franchise. Cost of risk remained negative, 12 basis points, still benefitting from releases. Fees and net insurance were up 8%, reaching 31% of net revenues, with particularly strong performance in investment fees up 14%, with total financial upsets up 9%, reflecting deeper client engagement and growing penetration. The strong commercial performance was supported by continued investment in the franchise. We hired around 200 colleagues in the frontline and continue to strengthen capability across both business and transformation. The step change from transformation is also increasingly visible, supporting growth and investment while reducing cost. Costs were down 3%, driven by 4% decrease in non-business cost while continuing to invest. Net revenue to RWAs, AI Impact is also becoming increasingly visible. More than 360 AI agents are now supporting multiple activities across the franchise, helping improve response time, productivity, and client experience. The combination of acceleration and continued transformation translated into a GOP growth of 2% and ROAC of 27%. Slide 15. CEE continues to benefit from its leading position across the region. A strong primary client base and high digital engagement while remaining well positioned to capture further growth opportunities. The step change in acceleration is visible. We continue to strengthen client relationship across the region, growing affluent clients by 19% and standing as the best bank for SMEs in the region. This strong commercial momentum translated into 6% core revenue growth, 5% for overall revenue. Net interest income increased 5%, supported by strong quality loan growth up 11%, with NII ROAC at 23%. Cost of risk increased 24 basis points to 13 basis points, normalizing from past exceptionally low levels due to significant write-backs. Overall, asset quality and underlying cost of risk remain stable. Fees and net insurance were up 9%, reaching 31% of net revenues, up 2% in the half, with strong contribution from investment fees up 22%. Together with 19% total financial asset increase, this reflects the continued development of our affluent and wealth franchises in the region. The strong commercial performance was supported by continuing investment in the franchise, hiring around 1,000 colleagues, mostly in the frontline. The step change in transformation is also increasingly visible, supporting growth while reducing costs. Costs were down 1% a first for the CE, supported by non-business FT decreases of 6% as we continue to reinvest and invest in technology. Cost income improves to 33%, confirming operational excellence. Net revenue to RWAs at 8.1% demonstrated strong capital discipline while supporting double-digit balance sheet growth. AI and new technologies continue to be key enablers of transformation. We've now over 75% of clients digitally active. We're leveraging AI solution to improve commercial effectiveness, simplify processes, and further enhance client experience. The combination of acceleration and continued transformation translated into gap growth of 8% and ROAC over 27%, confirming CE's position as a profitable growth engine. Slide 16. Client solution remains a core pillar of our capital-light growth, powering the quality and resilience of our top line. Client solution generated 6.5 billion revenues, up 7%, and 4.7 billion of fees and net insurance, up 14%. Growth is broad-based across all product factories with visible benefits from internalization, including double-digit fee growth in Italy, in Germany and in the CEE. Corporate solution revenues reached 3.1 billion with a 28% ROAC, leveraging strong client activity in advisory and financing with fees up 26%. We maintain our role of trade finance powerhouse with top tier position in every country we operate in and best trade finance provider in Western Europe and Germany. Client risk management fees were up 15% with receptive market condition for hedging products. Individual solution delivers strong growth with revenues up 18%. Insurance revenues were up 32% Thank you very much. Slide 17. The messages are clear. First, 22 consecutive record quarters mark an undeniable track record and delivered sector leadership across all critical KPIs. Second, we have significant lines of defense to protect our future. Third, unlimited step change is underway, leading to upgraded ambitions. We now expect full year 26 net profit at circa 11.5 billion excluding integration costs and well above 11 billion including them. 2028 and 2030 net profit ambition are upgraded to well above 13 billion and well above 15 billion without diluting expected return on tangible equity. Year-end CT1 ratio should land at circa 15% pre-full consolidation of Commerce Bank and the connected 2025 share-by-back cancellation. In the 13% area, pro forma for both, much better than initially expected. As such, Unicrate 2026 distribution are also confirmed. Slide 18. We have significant inorganic optionality with opportunity across all our 13 countries, some of which we have captured initially through high return financial equity investments and now through the potential commerce bank value creating acquisition. including the tender shares, we have reached 47.6% of shares and 49.65% of voting rights given that the treasury shares have no voting rights. Potentially moving Commerce Bank from an attractive financial investment to a strategic transaction that we expect to generate substantial value and further accelerate our limited EPS and DPS trajectories. It would improve Unicredit's strengths, diversification and client franchise in Germany and CEE as recognized by rating agencies. We believe Commerce Bank has underinvested in recent years to deliver in the short term. It is now time to reverse this trend and prioritize overall transformation, substantially investing in talent, in technology and in AI initiatives to transform the bank. We are upgrading our pre-merger value creation potential from 800 million to 1.2 billion by 2030 by anticipating part of the post-merger synergies, which we are, for now at least, reducing to 800 million. Considering only pre-merger value creation, our capital has been deployed at an overall ROAC of 15%, well above the return of our share-by-back. Our 2026 dividend and share by back are confirmed while the trajectory for net profit, EPS, DPS and distribution beyond 2026 shall improve. We now expect regulatory approval potentially as early as fourth quarter 2026 and shortly thereafter intend to take the necessary step to exercise control and begin executing Commerce Bank Unlocked. We are seeking constructing engagement with the German government, the workforce representative, and banks' converting bodies and stakeholders. A cascade offer in Poland is not currently foreseen. Beyond this strategic fit, the attractiveness of Commerzbank lies in the value creation achieved by applying the unlocked blueprint, which we intend to roll out as quickly and decisively as possible. This starts with putting Germany and its middle stand truly back at the center, leveraging a stronger product offering, greater scale and increased investment capacity. At the same time, the connection between Germany, Poland and the rest of Europe should be further strengthened and digital data and AI capabilities across the franchise accelerated. The value creation opportunity is substantial. We see 350 million of revenue initiative potential upgraded versus our initial assumption, notwithstanding international lending and treasury asset optimization that shall both reduce risk and release capital. 1.4 billion of potential targeted efficiency are confirmed. Importantly, this is not about cost-cutting for its own sake. It is about reallocating resources, improving capital efficiency, and reinvesting to build a stronger franchise for clients, employees, and shareholders. While technology and AI will be key enablers, it is Commerce Bank employees that will accelerate transformation, simplify the operating model, and enhance the client journey as we have experienced across our group. There is a clear opportunity to create a stronger commerce bank, a stronger unicredit and a stronger pan-European banking group for Europe. Beyond the financial impact, a strategic transaction would create a stronger, more diversified and better positioned European franchise, with a broader client base, enhanced geographic diversification and greater exposure to the client segment and product in which we always intended to grow. Germany would become the leading contributor of the group earnings alongside Italy with a great balance between Italy, Germany and Austrian CEE. The client portfolio would also strengthen with increased exposure to SMEs, affluent and private client and further reinforce our position in Germany through a highly complementary franchise. We are entering this phase from a position of strength. Unicredit has invested more than $5 billion in the last five years and built $1.6 billion of overlays. We see an investment of $2.2 billion in Commerce Bank to accelerate value creation and make the franchise future ready and would expect $500 million of additional upfront coverage on the Commerce Bank loan book to protect it. Greater group diversification and an increased balance across geography, client segment and revenue streams may support further rating upgrades and related funding benefit. Slide 21. Unicredit year-end CT1 ratio pro forma for the impact of a transaction is expected to remain in the 13% area from day one. Indeed, the initial capital impact of a transaction is now expected to be around 200 business points, net of a cancellation of a 2025 share by back, assuming consolidation by year-end. Said capital impact would reduce significantly if consolidation occurs later as initially expected. Considering only pre-merger value creation, our capital has been deployed at a ROC of 15% overall, well above the return from our share by back. Unicredit 2026 distribution remain unaffected. Unicredit distribution for 27, 28, 29, and 30 are expected to improve through commerce bank contribution beyond the now expected more positive trajectory of unlimited standalone. We are deploying capital at attractive returns, maintaining a strong capital position and improving our earnings growth and distribution trajectory. Slide 22. We always envisaged HVB and Commerce Bank operating in parallel for two to three years, aligning the two banks industrially and culturally before considering any merger. We believe this is the most effective path to unlocking value for all stakeholders while laying the foundation for long-term success. Importantly, most of the value is created pre-merger as we are upgrading our pre-merger value creation from 0.8 billion to 1.2 billion by 2030 while reducing, for now at least, the additional merger synergies to 800 million. At the same time, we would see investment being brought forward Increasing from 1.7 billion to 2.2 billion upfront, accelerating the transformation of the franchise and 500 million of additional upfront coverage of the Commerce Bank Loan Book. This reflects our intention to prioritize investment and long-term value creation over short-term results and distributions. There would be more upfront investing, creating more value over time and accelerating delivery of a future-ready bank. Commerce Bank further enhances what is an already compelling standalone equity story. Even before considering Commerce Bank, our standalone trajectory is exceptionally strong, combining double-digit per share growth at high rotor and industry-leading distribution. Importantly, the reported 26-28 growth rates understate the strengths of the underlying trajectory as they still absorb the impact of an accelerated Russia compression. The figures shown today are directional and reflect only what is visible today before a potential merger. As we continue to execute Commerce Bank Unlocked, we expect the trajectory to strengthen further beyond 2028 and towards 2030. The transaction is expected to increase our 2628 net profit CAGR by six percentage points, and EPS and DPS CAGR by around four percentage points, reaching 17 and 18% respectively. In short, Commerce Bank is reinforcing an already compelling standalone story, further improving profitable per share growth and distribution for our shareholder. Slide 24. Before question, let me leave you with five key messages. First, Unlimited confirms a step change, marking our 22nd record quarter and the best second quarter and first half in our history. We continue to deliver at pace, accelerating and securing targeted profitable market share gain in every country as promised. This is coupled with unmatched transformation-led efficiency, resulting in lower cost and unique operating leverage, all while investing. Again, as promised. Third, we are delivering exceptional operating leverage, record GOP, NOP, net profit and return on tangible equity, along with an improved capital trajectory. Fourth, we are upgrading our 2026 net profit at high return on tangible equity. and Capital Trajectory, translating this into better prospects for 2730. And finally, we now have an even more compelling standalone profitable growth and distribution story, which may be boosted by the disciplined deployment of capital in commerce bank. Let me now open the line for your question. Thank you.

Thank you, sir. We will now begin the question and answer session. To register for a question, please press star and 1 on your touch-tone telephone. To remove your question, press star and 2. In the interest of time, we ask that you please limit yourself to one question and one follow-up per caller. The first question comes from Andrea Filtri of Mediobanca.

Thank you. First question on the Danish compromise. Santander said they expected the approval of the Danish compromise in August. You have been waiting for a year for this approval now. When do you expect it by, and does not having it yet limit your strategic options? Second question, do you see your C to R ratio as a hurdle to participate in the ongoing Italian consolidation wave, and how should we read today's call for an EGM? Thank you.

Okay, so Danish compromise first. We always said that the Danish compromise would be, we expected it in the third quarter. Some other thought it could be earlier. We always say third quarter, we remain third quarter. If I had to take a guess, it's probably September, but our expectation has not changed and we are rather confident that we're going to get it. Does that limit our options? No. I think it just reinforces our capital and it recognizes that we are a conglomerate and that we have internalized insurance. Obviously, in the future it gives us more flexibility around insurance assets, but that is not a limitation at the moment. Is CT1 a hurdle to participate in Italian M&A? No, I think that the hurdle is that at the moment we're observers. At the moment, we are gaining a disproportionate amount of market share organically, targeted specifically in the client segment that we want to grow into. And that trajectory, we think, will be significantly accelerated by the fact that all other banks may be involved in M&A. and not easy M&A. So anything that we would ever do, as you know, would need to beat that hurdle. And the hurdle for Italy at the moment, given how the team is performing, is very high. So if there is a hurdle, it's not capital, it's how the performance, who can beat the performance of the team in Italy. Not an easy one. How should we read today's call for EGM? So I think that today's call for EGM is linked to two things. One, to have the possibility, not the obligation, to have the possibility if we choose to to convert the physically settled TRS on Commerce Bank to settle it in shares at a similar exchange ratio as the one of the rest of the offer. And so it would align that percentage to the other tender shares, which we think is good and which we think also strengthen our capital. But it is an option because A, we haven't decided whether we will We will convert the TRS yet, and we haven't decided if we confirm it, whether we will convert it for shares or for cash. It is flexibility, giving us more capital flexibility going forward. The second thing, it would allow us to tap the U.S. market with 81, as 81 in the U.S. have a different structure and require underlying shares potential to settle. And therefore, we are aligned to some other European banks with an ability to tap the U.S. market and get benefit from that. I think these were the two. Yes. Thank you, Andrea.

The next question is from Noemi Peruc of Morgan Stanley.

Good morning, and thank you for taking my questions. I have two, one on Commerzbank and one on 27 Capital Returns. So, on Commerzbank, you reach 46 days before TRS, which will allow you to pursue control quickly. I would like to understand whether the German government showed interest in TOX this far, and I know it is premature, but I'm going to ask it anyway. Is there a scenario in which you could fast-forward the integration of Commerzbank? Second question, on 2027, I just wanted to understand how you would approach capital return in light of the 2.2 billion investment and 0.5 billion additional coverage. So will the entirety of this 2.7 go through P&L and will you pay 80% on the stated net profit or will you exclude one-offs? Thank you very much.

Okay, so I think that the German government has signaled quite clearly in the media their interest to talk. It is the right time, I guess. As indicated by them, the market has spoken. And now we have a period, which I could call of limbo, between having closed the offer and potentially receiving authorization, which is anywhere between, I don't know, four or five months or more than that. So in this period, it makes a total sense to align with the other stakeholders, German government and workers' council alike. I think for now, we haven't said that as lip service. We do believe that combination needs to be done in the right way. And the difference between having a successful merger and an unsuccessful merger is how you actually execute it. We think that having two banks that are aligned, principle, value, culture, model, technology, etc., makes merger a lot softer, a lot more effective, and therefore we are convinced that we will need two or three years keeping the banks separate before doing anything. And to be clear, even if we had a higher stake, we wouldn't be merging earlier. Obviously this is all predicated on expectations. We do not have control of Commerzbank yet. And we can comment only on what we see from the outside. We will update those views if and when we are on the inside. So this is the first one. 2027 distribution. I think for us we need to distinguish distribution for Unicredit and distribution for Commerce Bank and obviously this is under the assumption that we indeed take control of Commerce Bank. Distribution for Unicredit, we do not see any change. So meaning, to take your words. 26, we already said we have confirmed distributions for 26. I'm talking about Unicredit. And we may actually improve our interim dividends, given the strength of the business. We will give you more detail on that. but the totals and the 80% payout remains confirmed. For 27, 28, 29, 30, we expect better distribution, gradually better distribution if Commerce Bank is part of the perimeter given that we have deployed capital at better return than if we had done the share by back and therefore we think On a per share basis, we are going to have a positive impact. And the concept of 80% payout, 50% dividend, 30% share buyback is confirmed. With respect of Commerce Bank, I would take a slightly different point of view to be transparent as part of the CBK Unlocked. It may well be that well we envisage a need to bring forward investment accelerating the transformation of a franchise and the delivery of the future ready bank. Outside in that means investment for about 2.2 billion. At this would be at the level of Commerce Bank this would be shared among all shareholders and may impact short-term profit and distribution, including in 26. This would be reflecting our view that investment and long-term value creation should be prioritized over short-term returns and distribution. But this, at this point, is hypothetical. We don't have control yet. We don't know when we are going to consolidate, but it is obvious that if we start making the investments that are needed, That affects net profit, that mechanically affects distributions. We will see when we're there what the real impact is. I think these were your two questions. Yeah, let's move to the next.

The next question is from Antonio Reale of Bank of America.

Good morning, it's Antonio from Bank of America. Just two questions for me, please. The first one is on NII. If I look at the growth in NII this quarter, it looked like it was driven almost exclusively by volumes and seems to imply some margin pressure. Now, I wonder why that was the case, also conscious that Russia was flat this quarter. So can you maybe talk through your moving parts in NII and can we expect a sequential pickup in NII from here, given also the move in Euribor? I think you've added another 7 billion or so to your structural hedge this quarter so I'm interested to hear your thoughts there on NII. My second question is I think straight and simple and it's to do with your 2025 fiscal year buyback, the 4.75 billion you've accrued. Shall we definitely rule this out and assume that this is no longer happening and if that's the case why haven't you added it back to your CT1 ratio? Thank you.

So, Antonio, on the full year 2025, when you say should we definitely move it out, definitely is if we get control of Commerce Bank and we consolidate. In that case, definitely move it out. We don't have authorization yet. We're still thinking that can happen. And that's why, for the time being, not having confirmation, we're not moving it out. And in your words, and I would add another thing, Moving it out up front and then spending it later would create really a lot of swing on our capital trajectory that I don't think would be helpful. Primarily, we don't have closure. Therefore, the share buyback for the moment remains suspended until such time that we have closure. If the closure is positive, then it gets cancelled. If it's not, it gets reinstated, to be very, very clear. And so this is where we are on that. On NIA, I think Stefano is going to take you through, but I would say in Italy, margins are up. In other country, there has been a declining margin market-wise because of the growth rates that I think are market-related, and we have followed not to lose track, and the rest is delta compression. As we have said in the presentation, We think NII will become a much greater contributor to the group in the second half of the year because of the underlying rates dynamic and because certain other dynamics on margins are stabilizing, especially in places like the CE and Germany. But let me pass it to Stefano.

So let's start from Q2 and also first start because you mentioned Russia. We have grown the net interest income 2% quarter on quarter, 0.4% when we're looking year on year. The effect on the first half they're having for Russia is 70 million down. So otherwise the increase first half on first half would have been higher. In relation to the client spread, so asset side of the equation, if you look at the first half, The client spreads are flat, so around 138 business points. As highlighted by Andrea, we are up year on year in Italy and in Germany. Thank you very much. Let's say the client spread for the group, you can assume a flat-ish trend. Deposit pass-through, flat-ish for 2026, can be one point up in 2027, 2028. Nothing more than that. We are expecting to keep on growing on the lending. Probably a normalized rate when you're looking to second half 26, but in relation to 27 and 28, we are confirming growth higher than a nominal GDP trend in the countries. You mentioned sequential pickup. Yes, do expect a sequential pickup in the trend of our net interest income. Structural edge contribution, yes. and Rate Assumption. So the Rate Assumption is 2.3% your arrival for this year as an average, around 2.6% for 27 and 28. Taking this into consideration, the contribution from the structural edge is expected around 400 million this year, the positive. The cumulated contribution until 2028 is 1.3 billion. The next question is from Delphine Lee of JP Morgan.

Yes, good morning. Thanks for taking my question. I just wanted to have, first of all, a follow-up to what you said earlier. So in terms of next steps to increase your stake further from just under 50%, then you are now considering the TRS, you know, converting potentially in shares. Just to check, I mean, so we're talking about potentially like up to 13% additional stake that you would get from that. and I mean would you consider also in the discussion with the German government to potentially acquire part of their stake their 13% stake or is there no discussion or do you think this is completely premature and won't happen for another 2-3 years and at what level would you consider that merger and full combination because In theory, you could get that at 75% of the AGM, which is 60% stake, roughly. And then just on the synergies, what gives you the confidence that you can generate already 800 million by the end of 28?

I mean, the timeline is quite short.

So if you don't mind just elaborating a little bit on what are these kind of easy wins that you think you can achieve. And then just one comment on the capital. So it's clear you're at 13% on the performer basis. Just how quickly can you get the other reductions that you've talked about? I mean, in CBK Unlocked, I think it was, you know, 33 billion, 30 billion, 33 billion. So how quickly could we get that and to... Thank you, Delphine.

Let's start with one.

First of all, let's be very clear, maybe I wasn't. The answer to Andrea's question on VGM and on the TRS is only related to the physically settled TRS, 3.2% thereabout. When we state that we have reached, or when people state that we have reached either Circa 47 or Circa 50. That includes that 3.2% because it is physically settled. We can take ownership of it whenever we want. So it's only that 3.2% and it is already included in the stakes that we have in the presentation. We are only saying one thing, that because it's physically settled, the timing of settling, so of executing on the TRS is to our choice, so we have optionality on timing. and we have optionality on whether to do it for cash or assuming that the EGM approves it for shares. So timing and cash or shares allow us to maximize our capital flexibility, if you want to call it this way. and not affect in any way, shape or form any distribution, nor have any concern of any reason. At the moment, that is what it is. Secondly, you ask about the government stake. I think you said it, in my opinion, it is too premature. What we're seeking is a face-to-face engagement where a lot of the misunderstanding and in our view misleading information can be cleared up. and we will, in my view, demonstrate that we agree a lot, lot, lot, lot more than we disagree. And to find a cohesive way of going forward, and we would be delighted to give them as a shareholder, or if they stayed as shareholders, it would be obviously who would not. So for the time being, way too premature. What level of shareholding would you consider for the merger? Look, I think the reason, I mean if you look at, sorry to go back to my experience in the future, but when you do a lot of M&A, M&A fails for two reasons. One, you're dragged into paying too much and then you're pushed. of doing the wrong thing to try and demonstrate that what you have paid was worth it. We don't want to do that. We haven't done that. The second thing is not be thoughtful in the way you're going to integrate to companies that have different culture, different business model, et cetera. If you're trying to integrate to companies before you have aligned them, you will have an enormity of disruption, which is why we say two to three years. That's what we see from the outside. It's not that they're right or they're wrong, or we're right or we're wrong, we're just misaligned and it will take time. That does not mean that two or three years we will not generate value. In fact, we're telling you we will generate 1.2 billion of value while we're doing that, while we're realigning. Then value creation moving parts, okay? The value creation moving parts and why 800 million so quickly. If you look at the composition of our value creation on Commerce Bank, a lot of it is executable very quickly. Point number one, we have a substantially lower price point on all of our procurement, and people don't look at that a lot, but we have a lower, lower price point, and that affects technology. It affects a number of significant purchases that the bank does with all of our providers. Extending that group price point to Commerce Bank will have substantially cost effect. That's why we say that a significant amount of our value creation, if I recall correctly, 40-50% is non-FTA related. That's one of the levels. The second thing The only thing that we can generate very, very quickly is The moment we were to be able to plug our factories into Commerce Bank, that's why this transaction is a lot more about revenue synergies than other things. We can crystallize those very, very quickly. And we know how quickly, because just by partnering constructively with Alpha, you can ask them how quickly they have crystallized those revenues on their side. and some of the growth you're seeing in our factories on our side is linked to that. Now consider Commerce Bank as part of a group, we would crystallize it both sides. So that's another big chunk that is easy, is not disruptive and can be done really, really quickly. Then there is another point which has to do with the setup of the international network. And let me be clear on that. We keep on winning powerhouse trade finance of the year across Europe. We won it in Germany more than one year. So we know what we're talking about and we have absolutely no intention to create any disruption to the German corporates that we're trying to serve. Quite the opposite. Some of them will realize that our trade finance engine is a lot more advanced and can provide a lot of supports. But Centralizing the trade finance engine, centralizing the trading platforms in one place and renouncing to lending in geographies and with clients that we don't know as well as the European ones that we focus on can be done very quickly and is outside of Germany and outside of Poland. and in fact will determine some potential either hiring or redeployment of people in Germany as we centralize those engines into Germany rather than having them spread externally. Another point is Commerce Bank like us has relied or is relying increasingly heavily on nearshoring. In Poland,

in Czech Republic.

We believe we have one of the most advanced nearshoring models, fully technology and AI enables. We got praise several times on that. Synergies on those are very quick to execute. They are not in Germany and they are very quick to execute. So as you can see, there is a lot of things that we can do quite quickly, and I probably didn't list them all, that are completely unrelated to merging. They are related to aligning, to getting organized, and that's why I think we will speak a much clearer language between the two sides once we talk to each other. And then the last point that you had, the 33 billion RWA reduction in CBK. I think overall, two years. It depends on a number of things, but the great thing about PPA and repricing is that you get everything repriced to market up front and you don't lose when you sell them. And we believe that there are significant assets in Treasury around asset-backed security, international government exposure, including the Italian one, and lending in the US, in Latin America, to real estate projects and other, I don't know, data centers, et cetera, that can be disposed relatively quickly. But we will not have a real, a complete understanding on that until... If and when we get in there. But given our experience in other places and what we think is in there, two years and we will try to front load as fast as we can.

The next question is from Ignacio Urlagui of BNP Paribas.

Thanks very much for the presentation and good morning everyone. I just have two questions. I mean, the first one is on the organic capital generation and how should we think about organic capital generation over the coming quarters. I just look to the target of to be above, sorry, around 15% by full year 26. And I look to the benefits from Dennis Compromise and the RWF reduction. I don't get a big capital generation. I just wanted to get a bit of your thoughts, if that is because you are planning to accelerate lending growth. If so, how that would impact your revenue growth. And if not, if there is any other headwinds that are missing. The second one is on your 2028 guidance target of being well above 13 billion. I just wanted to get a bit of whether there is any impact on that from the Thank you. Oh, sorry. Sorry, Ignacio. So the restructuring charges and hedging costs, 2026, first of all,

With respect to our integration cost, that is what you're mentioning for 2026. As you know, we modulate. We can go as low as zero or we can go to a level that allows us to deliver for you in the short term, but accelerate in a number of places. We keep that flexibility. Usually we take a decision at the back end of the year when we see what opportunities are there and where they're going. This approach to integration cost will continue, but will always be done thoughtfully to maintain the targets that we're giving you. So when we tell you well over 13 billion in 28, we will deliver or we will strive to deliver well over 13 billion, and that is including integration cost. but we can modulate them with respect to hedging cost related to Commerce Bank. So you have two scenarios. Scenario one, you exclude everything that is happening on Commerce Bank. Then the numbers that we're giving you for 26, for 28, for 30, include the hedging cost of Commerce Bank and include the integration cost that we want to do. So that's one scenario. That's why we're saying that before you look at Commerce Bank, unlimited or the core of Unicredit, the core engine room, is performing better than we even expected and is improving to... The 11 to 11.5 billion area this year and then well over 13, well over 15. So this is like for like, just acceleration of the core is driving that. And we will review where we are in the third quarter. If instead we get to a position where we need to consolidate line by line commerce bank, then It changes because obviously in the numbers that we are giving you, we are also eliminating the hedging cost because we no longer need hedging cost if we consolidate Commerce Bank as any other bank in the group. So in that case, yes. And let Stefano comment on the organic capital generation.

Yes, so do we expect organic capital generation higher than distributions? Fundamentally in every quarter, but when we are looking to the second half, you can assume that. In relation to risk-weighted asset trends, some data points for you, not different in comparison with what we discussed in the past. So, we mentioned Danish compromise. When there is a Danish compromise, there is a capital benefit of something more than 50 BIS point, but there is a nominal increase of risk-weighted asset of around 6 billion. Then, operational risk. At the end of each year, considering the trend of the revenues, we do expect that around a couple of billion more of risk-credited assets deriving from operational risk are going to be there, not only for 2026, but considering the trend of our revenues also for 2027 and 2028. We add a very strong lending dynamics, and as a consequence, absorption of the capital connected to business dynamics. On average we are expecting to be able to have capital efficiency action in place in second part of 26 but also during 27 that are able to mitigate the capital absorption in terms of risk with us that have been from the business dynamics. The difference can be one billion. 2 billion, but not more than that. So this is reassuring in relation to the capacity of the group to keep on generating capital what and this on an ordinary basis then as highlighted by Andrea commenting let's say the full consolation of commerce bank and the related capital efficiency then when this capital efficiency will kick in that is an extraordinary boost to the capital generation of the group during the course of 27 and 28.

The next question is from Britta Schmidt of Autonomous Research. Yeah, morning. Thank you for taking my questions.

On Commerzbank, just with regards to the communication of the timeline, the 2 billion is still on the slide, but obviously now you expect a pre-merger scenario until 2030. Are you saying that you would rule out that a merger could happen and the 2 billion could also be accelerated, or are you just a little bit more conservative to de-emphasize this? And then on the capital impact, you mentioned the potential RWA releases. Do you have any idea of the maximum PPA impact in capital that we should potentially add on to the 200 basis points? And then just two quick comments, if I may. Has there been any update on the potential sale of Russia? And maybe you can also comment on what your position is regarding Qumqum situations in Germany. Thank you.

Okay, so let's start with the merger. So all that we're saying is outside-in. So in our experience, Given what we know, two to three years is appropriate. Can it be done faster if and when we're there we realize that the conditions are there to do it faster in the best interest of everybody? Yes. It's not that we are religious about two or three years. We're just saying that in our opinion, doing things right is better than rushing them and creating a lot of the attrition. I mean, there are a lot of mergers that go sideways because of that reason. We will prepare it well, we will organize it, and then at that point, I think everybody will be supportive of going forward. Two, three years, can it be done earlier? Can it also be done slightly later? Yes. I think we're not committing because we don't know. But it's not that we are religious, it's our expectation at this point, Rita. So then the PPA impact. So this is what we told you about capital impact. The capital impact is greater if we execute before the end of the year, vis-a-vis if we execute at the end of Q1 or in May. Part of that greater is PPA. Part of that greater is book value differential and other things that now Stefano will take you through in general in terms of impact. So when we were discussing about the impact from full consolidation, we were always considering second quarter of 27. Given that now there is a possibility that we end up much earlier The capital impact actually in our eyes is better, but we have a disadvantage that we're doing it earlier and therefore it is greater. With respect to the PPA, it moves and nobody's going to give you an exact number because it depends from rates and other things. But let's say that at the moment, broadly speaking, and Stefano will correct me, that impact is inside the 200 basis points. at the moment. But again, it may fluctuate depending on outside rates, et cetera. But an estimate of PPA is in there for the moment. And that is one of the drivers that would become lower if we waited longer. I will just very quickly touch on Russia. I think we are progressing as expected. There is nothing indicating a negative or a positive. Things are going as planned. and we are cautiously optimistic so for the time being the sale seems to be going ahead within the timeline that we indicated that it would go ahead.

So, as I said to Andrea, there are fundamentally two elements that are impacting. One is the PPA, so where we are calculating for value-added liability and we do the PPA. Currently, the assumption on PPA is having a negative PPA, but such a negative PPA can be lower if we are consolidating after and if there is a change in the rates. The second element is that fundamentally, if we are consolidating a quarter after, There is the accrual or more profit, so the equity is higher, the goodwill is lower. So these are the two elements. One is PPA, the other one is the goodwill. To give you the sense, the difference, a quarter can count something like between 20 and 30 business points. Okay? But as I said, Andrea, it's depending on the overall level of rates. That's why, based on the current rate condition, the impact, if we are consolidated at the end of 2026, all included, and taking into consideration the cancellation of the share of F25, is around 200 at this point.

The next question is from Andrew Combs of Citi.

Good morning. A couple of follow-ups, please. Firstly, just coming back to the last question, when you previously gave the guidance at 50% ownership, I think it was the 280 basis points, if you take the cancellation of the 4.75 billion buyback deduction take that on the consolidated RWA base that's about 100 bits of relief so that gets you to 180 bits so just to confirm the difference between that 180 bits pro forma prior guidance versus the 200 bits today is this PPA and timing difference related to the organic capital generation goodwill so first I just want to clarify that and then the second question just on the pull forward of the synergies An extra 400 million to be recognised by 2028 as opposed to 2030. What do you need to achieve that pull forward? Can you do it before going to an AGM and replacing the supervisory board and looking for a new management team for Commerce Bank? What drives that extra pull forward? I'm thinking about your alignment versus integration point. Thank you.

Okay, so the short answer on your first question, the 180 basis point is correct. Indeed, we have told you that the timing difference is 20 to 30 basis points, so we are slightly under what we thought it would be. And actually, if it went all the way into the second quarter, we would be even more under what we thought it would be because the time passes, we get more benefit. That is capital. Obviously, as time passes, we take control and we consolidate later. And therefore, it takes me to your second question. We realize the value creation later. So I think what we are assuming at the moment in giving you the numbers that we are giving you is that we will be able that We obtained the authorization and we would be able to indicate the action and for UNLOCK to be executed with determination from January 1, 2027. What do we need for that to occur? Well, we either need alignment with all parties and execute or We are in a position to call an EGM and exercise the control through the calling of an EGM ahead of the AGM in May. And we would do that if that's necessary. But our expectations are not to having to do that at the moment. And if we have everybody on board and on the same direction, We think that from January 1st, the bank should be directing towards executing the pillars of Unlocked, hopefully adjusted for a constructive, detailed conversation on all the things that we'll probably have missed from an outside in and that we can benefit from by talking to the people involved. I hope it's clear.

At this time, I will take the last question from Giovanni Rozzoli of Deutsche Bank.

Good morning to everybody. I have a question on the capital. So, is it fair to assume that one of the points of impact on the C21 is a kind of worst-case scenario today? I mean, if we move, you know, two, three years down the road and we do assume the consolidation of Commerce Bank, What would be the performance CT1 ratio or the impact on your capital in case of merging with Commerce Bank, regardless of the capital generation that you will make in between? Because at the end of the day, what you are saying today is that by 2013, your ambition is to merge Commerce Bank with Unicredit. And another clarification on the CT1 ratio, I was wondering whether the above 13% CT1 ratio in just after the consolidation of Commerce Bank, whether it's going to be Q4 26 or 2027, already incorporates the impact of the mandatory convertible that you have announced today. So that's my first question. And the second question is just a clarification on the synergies. You have basically increased by 50% of the synergies from Thank you very much.

So these 200 business points are, I don't know if you want to call it the worst case scenario, probably is. It is what will occur if we do consolidate line by line by the end of the year. If you want to call it worst case scenario, as we said, if it slides, it becomes less. And Stefano has given you an idea, 20, 30 business points less. Okay, so this is point number one. Point number two, over time, over time, if you assume, we're not assuming, but if you assume that we increase our participation above 50, you know that we have a 80 basis points friction on capital, linked to the fact that under European regulation the excess capital to minimum for minority shareholder is not counted in the total capital of the acquiring bank but obviously if we were to increase our position that 80 basis points would proportionally go down so that's if we were to increase the position you would have a benefit through that that's the second point The third point that is not linked to any of those two things is that as we land around 13%, as we deleverage Commerce Bank and post having done the integration cost and the investment necessary, The acquisition will generate substantially more capital than Unicredit standalone would have generated. Why? Because we're deleveraging a very significant franchise under our umbrella. Therefore, regardless of the 200, regardless of the 80 basis points, regardless of that, the call it organic capital generation of the group, and I think not many people have picked up that, Going beyond 27 is going to come up very significantly, which is one of the reasons why we're indicating to you that the distribution for unicredit consolidated in 27, 28, 29, 30 will improve materially is linked to that also. So this is for capital, and let me know if you got all of that, and otherwise we can get you more information. The 13% city one area, we're saying, because it's not that precise, given that PPA is flip-flopping because of rates and the shape of the curve, post-CBK consolidation does not include anything but what there is today. So it includes where we land at the end of the year, Number one, it includes the consolidation line by line of Commerce Bank. Number two, it does not include the conversion of a physically settled DRS. Obviously, if we were to execute it, we won't. In cash, it would be dilutive to that number. If we are executing in shares, It would be neutral, plus minus to that number, okay? And it does not include anything else with respect to tapping the U.S. market, et cetera, et cetera. This is an ability that we are, in inverted commas, acquiring to optimize our funding and our hybrid capital abilities into 27 and beyond, not before, but Stefano will correct that probably.

especially because we're referring in this case to additional tier one. So as I explained before by Andrea, the GM is called in order to approve the issuance of shares for a contingent convertible additional tier one. Probability-wise, these shares are never to be issued. And when we're going to issue 81, it's the same like issuing a Euro-based 81, So there is no impact to the common equity ratio, but only to the tier one ratio. So it would be part of the normal execution of our funding plan.

And then finally, your third question on synergies. Yes, but not only. So non-HR costs are linked primarily to procurement. and they're linked to other optimisation that we can do and procurement is a broad term because there are other optimisation we can do in technology, in AI and in a number of things but we have also said that what we can do in inverted commas quickly is optimising headcount outside of Germany, internationally and also optimizing nearshoring centers. So the reason it has moved and most of the move if you see is revenue based is number one, a more aggressive view on how fast we could deploy our factories within Commerce Bank and make them benefit from those. We have a pilot with Alpha. We see it on our banks. We're assuming an alignment and we can do that quickly. That's on the revenue side, mostly. On the cost side, it is procurement and it is some HR outside and some HR in near shoring centers if we're able to extract synergies. This is what has changed. And we have just front-loaded Thank you very much, very clear.

At this time, I will hand it back over to Mr. Orcel for any closing remarks. Please, sir.

Before I close, I would ask you to join me in congratulating Jacopo, who is now formal head of IR of Unicredit. He has survived a quarter and that's a lot to be said. And thank you very much to everybody for listening on the call and we'll see you in the roadshow. Thank you. Bye-bye.

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