Unicredito Spa Ord New

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.