Banco BPM Stock

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Group First Half 2026 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Arne Riscassi, Head of Investor Relations of Banco BPM. Please go ahead, sir.

Good afternoon. Thanks for attending the conference call of our H1 2026 results, which will be presented by our CEO, Mr. Giuseppe Castagna; and our Joint General Manager and CFO, Edoardo Ginevra. All the materials presentation and the press release are available on our website under the Investor Relations section.

[Operator Instructions] And now let me hand over to Mr. Castagna. Thank you.

Good evening, everybody. Happy to be here to present a very strong set of results of our first half of 2026, which allow us, first of all, to boost shareholder returns and to announce a new commitment of remuneration going up from EUR 6 billion to EUR 7 billion over the plan horizon up to '27. We will go further into detail immediately.

Let's say that the performance of this first year, and in particular, Q2 was really fantastic. We have regular profitability in terms of net income with the highest level of net profit at EUR 1.06 billion, improving revenue mix, cost income and cost of risk, record asset quality going below 2% for the first time ever in terms of gross NPE ratio and record capital generation, which allow us to have a common equity Tier 1 ratio at 14.40%, 140 basis points versus planned minimum threshold and 240 bps in the last 18 months since year-end 2024.

These results allow us to confirm and to increase the net income guidance from 26 million above EUR 1.95 billion for a total expected of EPS equal or higher to EUR 1.

Let me remind that with these results, which is, of course, in line with the planned target. But this year, we will overcome practically of EUR 100 million the results of the original plan because of the external headwinds that you may remember come from the fiscal low and the Banca Projecto deal, which amounted for EUR 100 million. And we're not taken, of course, in consideration when we did the original plan.

Let me say that we will also raise the interim dividend guidance to EUR 750 million, which means EUR 0.50 of dividend per share, up from $0.46 last year, meaning EUR 700 million of distribution. And this give also us room to enhance remuneration of our shareholders through a mix of buyback and initial dividends, which will be announced officially after we will have the ECB approval. Let me say that through this combination, we will have a cumulative remuneration target, which, I would say, go back to EUR 7 billion in the plan horizon EUR 6 billion, which is back to the plan maximum level before the annuam transaction.

You may remember that we announced the first time in February '25, the possibility to distribute EUR 7 billion if aim would be -- they would be low honey, I wouldn't be a deduct from our capital, you know very well that then we did obtain the Danish Compromise, and we were obliged to reduce dividend distribution to EUR 6 billion Nowadays, we can be able again to raise this target to EUR 7 billion, which from now on will be the target that we have for the conti 4 years, which means EUR 4 billion in the next 2 years '26 and '27.

This is thanks on Page 7 to a very sustainable and constant long-term value creation we have, again, on first half net income record, and we wanted to show you the progression of these results through the difficult years of the restructuring after the merger of the bank, the consolidation after the pandemia and the starting of the new transformational strategy started in 2023 with the taking on board the new product factories in '23 related to bancassurance, in '24 the Numedia for payment system, and in '25 intentive the acquisition environment. Since then, we have been increasing our net profit from EUR 650 million in '23, EUR 770 million in '24. Let me remember in '24, we had EUR 1.4 million Euribor higher than the current one. Notwithstanding that, now we have reached EUR 1.077 million, EUR 1.060 million stated, which means a strong increase through the non-NII interest. We will come back soon also with some more detail, which means a net income adjusted CAGR of 18% since 2023. And again, the capability [indiscernible] more than 100 basis points of reduction of Euribor with always stronger net profit results.

Let on Page 8 to talk and to show you how our total revenues changed during the last 2 years. In the '24, we had non-NII revenues for EUR 1.07 billion, which represented 38% of the total revenues in 261st half, we are having almost EUR 600 million of non-NII revenues on our total revenues, which represent 52% of the total revenues with an increase of 55% on a 2 years' time. An important increase year-on-year comes from the product factory that '26 on '24 first half grew EUR 77 million, which is 10% higher than the last year's result.

Of course, this revenue increase was coupled with a very strong cost control, both in terms of cost income, we went down from 48% to 43% in first half '26 and a cost of risk, which went down from 38 basis points in '24 to 31 basis points this year.

Talking of NPE, let me remind that we were able, since the merger, to reduce the gross NPE ratio from 24% to below 2%. We are now 1.6%, which net is 1.3%. Let me remember without any share issue during this 10-year period.

Excluding the NPE with state guarantee, we have now a net NPE ratio of 0.53% and the net bad loan ratio at 0.1%. Very good performance also in the fault rate, which is down to 0.73%, down from $0.84 last year. And we were also able to reduce the share of Stage 2, which now represents 7.4% of the total performing loans versus 8.1% last year.

But the strongest impact comes from the capability of the bank through profitability and management action to build up a strong capital position. We now reached 14.4%, which means 240 basis points higher than in the last 18 months. We position also the reduction we had to absorb in 2025 through the acquisition of Numia without Danish Compromise. This accounted for 240 basis points, which, coupled with regulatory headwinds, added to 300 basis points of deduction that we had to rebuild during these 18 months.

As a matter of fact, being at that level, we now think there is room to enhance shareholder remuneration through allocation of buyback or dividends to be determined exactly following ECB approval and of course, shareholder meeting approval.

We will be able to maintain our target level of common equity Tier 1 above 13% threshold, thanks to the, again, the internal capital generation. The DTA reduction still to come in the next 2 years and the managerial action, which were always able to manage in order to build up more capital.

On Page 12, let's have a look to the Q2 results. We have an increase in net interest income Q-on-Q of 4.6%, an increase -- slight increase in net fee and commission and an increase of 3% of core revenues. If we go after net financial results and other net operating items, the total revenues grew 9% Q-on-Q and 7.7% year-over-year.

Operating costs were down year-on-year 1.2%, up on the last quarter 2.9%, bringing in pre-provision income at 13.8% and 15% higher Q-on-Q, respectively and year-on-year. We had also very good results in terms of loan loss provision, which amounted to EUR 76 million, with a decrease year-on-year of 14%, which contribute to have a pretax profit 18% higher year-on-year and 15% higher on last quarter.

And going down, of course, we will see also net income adjusted 13% higher year-on-year and 23% higher Q-on-Q. The evolution of the Q2 results are shown in the right side of the page, where you can see the last 2 -- second Q quarter in '24 and '25, you can see how strategy implemented all the main figure in order to get the final results. Total revenues grew 22% in 2 years, cost to income down from 49% of [ 224 ] to 42% in Q2 '26, which is our best-ever results. We already talking about loan loss provision and the pretax profit grew 52% from EUR 600 million to EUR 900 million.

Let's go through some detail of the profit and loss, net interest income back to increasing Q-on-Q, 4.6%, with, of course, Euribor, which is growing Q-on-Q of 15 basis points and the contribution is coming both mainly from commercial banking activity, but also from the [indiscernible] portfolio. We were able to manage the increase of Euribor very well, especially in liability spread, which grew more than Euribor average, which brought our liability spread from 1.44 to 1.60, reducing only 2 basis points the asset spread.

The total commercial spread grew from 2.89 to 3.03.

No main news about the sensitivity, more or less, it's the same last quarter. We are still with a small increase of replicating portfolio vis-a-vis the target of EUR 25 billion that will be reduced in the second part of the year. Meanwhile, we started to reduce from 37% to 35% the index current account in view of the increasing [indiscernible] environment.

Another very good news comes from lending volumes. We are continuing commitment to support our clients even though preserving our loan book quality. As I mentioned before, the new lending in the first part of the year is EUR 13.8 billion, of which EUR 7.6 billion in Q2, which is 22% higher than Q1. The loan book is growing 1.8%, which is exactly in line, even higher than the total growth for '26, and this growth is coming, especially year-to-date from the nonfinancial corporates, which grew almost 3%.

The quality of the portfolio is secured by the location of our clients, 72% are located in north of Italy, and by the collateral and guarantee which support our stock, 47% is secured basically up and after through state guarantees and collateral and the collateralized loans, this 47% grow to 61% if we talk about SMEs.

On the right side of the page, you can see the record level of EUR 7.6 billion, which is the best loan -- new loan growth that we are experiencing. But I have to say that July was even better. In only 1 month, we were able to grant EUR 3.3 billion.

Good news comes also from the profitability coming from the new loans, which grew from 1.42% of the new loans granted in Q2 '25 to 1.57% linked to the new loans granted this first part of the year.

Net fees and income from insurance also in this case, we are at a lag level of EUR 1.5 million, the 3.2% higher than last year, which 51% are represented by product fees from investment sales.

On the right side of the slide, you can see that the investment product fees grew 70.5% versus first half '25 and almost 15% vis-a-vis Q2 '25. This growth comes from the very strong and solid results from Anima, which grew 15%. And also, I would say, this is quite new for us, a very good performance in terms of running fee, which grew 5% vis-a-vis first half of '25.

Also in terms of investment product placement, we were able to overcome the very strong results of H1 '25, reaching EUR 12.2 billion of sales, notwithstanding there was an increase also in the placement of BTP, which is, of course, considered apart from the EUR 12.2 billion of products -- of asset management products.

Also for the other fees, meanwhile, we have a reduction of 1.8% year-on-year due to the reduction of the Ecobonus, which, of course, here is much lower than last year. But if we compare Q2 '26 to Q2 '25, we have a growth of 3.8%, coming particularly from the increase that we have from the product factories, 5%, and the strong recovery of the specialized activity, which mainly are represented by structural finance fees and trade finance fees [indiscernible] respectively 34% versus Q1 '26 and 20% versus Q2 '25. So all results are growing and leave us room for better results in the second part of the year.

Let's talk about the other side of the balance sheet, the total customer and financial asset, we grew EUR 7.6 billion in Q2 versus Q1, EUR 4 billion year-to-date, which EUR 1.1 billion in current account and the rest in indirect funding for which we registered a positive net flows of almost EUR 2 billion. Meanwhile, the rest, of course, is a market effect.

These results are better also by the [indiscernible] performance, as we mentioned before. [indiscernible] contribution to total revenues of the group is 18% higher than the pro forma of '25. You remember that we brought on more than only in Q2, but we have a pro forma as it was here in the Q1 '25, and 27% of net income at EUR 145 million higher than the first part of '25.

Total group customer and financial assets, adding on power, own and [indiscernible], excluding, of course, billion in Anima, which are coming from BPM is much -- is very close to EUR 400 billion of total financial assets.

But let me pay some attention to Slide 17. This is the real change that we did during the last couple of years. As you may remember, we build up the strong reactivity in product factory starting from '23, starting having results basically from the first half of '24. In the first half '24, we reached EUR 456 million of the contribution from product factories. This amount is now after 2 years EUR 822 million, completely targeting and overcoming the target '26, which the average of year was EUR 800 million and very close to the target that we have for '27, which is EUR 860 million.

The share of total revenues of the product factory grew from 16% of '24 to 26% of this first part of the year. But on the right side of the slide, you can see how we are sort of Unicom in the -- amongst our competitors. We have only 1 competitor, which has a share of net fees and insurance very close to our 47%. The other peers are very much with a figure which are very much smaller than ours from 42% to 32% of contribution net fees. And you know how much is important to have a solid contribution from fees independent from the volatility of interest rate.

Coming to the cost side. Again, cost/income 43% in 6 months and 42% in Q2 is 1.6% lower of first half '25, thanks to the staff cost reduction of 4% year-on-year, which take benefit from the solidarity fund saving of last year, which reduced the cost of personnel of EUR 49 million, only partially offset by EUR 10 million of new labor contract cost.

We can envisage that the second part of the year will not that different from the first part of the year.

In terms of [indiscernible], we have an increase of 2.9% because we have accounted some extraordinary cost in the first part of the year. We envisage a better second part of the year in order to reduce the increase year-on-year.

We already spent some awards, but it's worth to mention the very strong results in terms of credit management. Cost of risk down to 31 basis points. NPE ratio below 2%. NPE coverage up to 48%. And if we exclude the NPEs with a state guarantee, we have a coverage, which is almost 60% as a total coverage more than 81% in terms of bad loans coverage.

Let me hand the word to Mr. Ginevra, which will continue on the financials.

So also the contribution of our financial business to the results has been very excellent -- has been really excellent in this half year. So on the side of this slide, you see that the reserves, the contribution to capital of reserves has improved, and we have negative reserves of EUR [ 256 ] million million, down from negative reserves of almost EUR 300 million at the beginning of the year. These with risk reduction in the risk of the government bond portfolio, whose basis point value went down from EUR 2.4 million to EUR 2.5 million in the first half of the year.

The derisking is interested also Italian government bonds down from 0.83 to [indiscernible]. Debt securities are at EUR 47.6 billion, 29% is [indiscernible] income, 71% is amortized cost, so with very limited exposures in terms of capital to market fluctuations. Italian government's share on the total of the banking book is [indiscernible] supernational [indiscernible] is 38.4%.

Improvement has been reported also in the yield of this portfolio, which is now above the level 255 basis points in the first half of the year.

On the right side, net financial result as shown in the previous slide, improved 62.3% in first half of the year, both thanks the contribution of cost of certificates, which went down from EUR 92 million to EUR 58 million million, thanks mostly to the declining rate scenario, Euribor. But on top of it, to improve, we had an improvement or on spread. The other NFR components improved their contribution from EUR 182 million to EUR 202 million half of this contribution is -- after all this element is represented by dividend on NPS is flat versus last year, the improvement in general is driven by the contribution of global market activities and by the dynamic management of market positions.

Liquidity and funding has improved both in terms of cash and encumbered assets, which is now at EUR 53.5 billion back to the level of December basically. And in terms of tariff funding, which went up from EUR EUR 133 million to EUR 144 million -- EUR 133.7 million to EUR 144.1 million in the quarter, mostly driven by increase in the items of repo financing. SCR is at 143% and SFR is 123% with high-quality liquid assets at a very comparable level of EUR 31.3 billion.

Capital, the data, the position in June has been already stated in the first part of the presentation. The work that leads us at this level is illustrated on Page 22, where we started from -- where you see how we started around EUR 13.59 million. Contribution from performance is [indiscernible] outperform is 98 basis points. Dividends reduced level of capital by 83 -- of CET1 ratio by 83 basis points bearing in mind that here, we have a level of dividend implied in this calculation of EUR 840 million, so higher than the one that we have said this level of interim dividend, which creates additional comfort on our capital position. [indiscernible] comprehensive income and ETAs improved the capital position, improved CET1 ratio, respectively, over 60 and 30 basis points. The growth in our business, business dynamics has implied a reduction of 24.2 basis points. [indiscernible] at EUR 68.8 billion. MDA buffer is a very comparable level of 187 basis points, MRL, including the Tier 2 issued in July is at the bakeries at 468 percentage points.

As usual, we have also highlighted the future contribution to capital coming from a progressive reduction in deduction from [indiscernible], in per comprehensive income debt reserves. This contribution is as high in the future as 150 basis points, of which 70 basis points are expected to mature in the plan Horizon in the next 18 months.

And now I hand over again to Giuseppe for the conclusion for the final remarks.

Thank you, Edoardo. Please go to Slide 24. The brief sum up of the results we announced. So we have a very strong set of profits from continuing operation, growing 32% in the last 2 years. And the results of this half of the year is already above the half yearly average of 2027, which is our planned target of the 4 year target we presented.

Also in terms of net income, we are growing massively and constantly because if you adjust '24, '25, '26, we will see that there is a growth of almost 10%, again, also in '26 because we have to remember that the guidance of 1.95 is considering EUR 100 million less of more cost, which represent without them would have represented a growth of almost 10% vis-a-vis 2025, giving us a good pace to reach also our target in 2027.

The very good news is on the left down side of the page, which we have basically reached the composition of the net income that we envisage in the presentation of the strategic plan. You may remember, we started with wealth management protection 24% of net income, specialty Banking 11% and 65% coming from commercial banking. Nowadays, we have 35% of wealth asset management protection, which is already in line with the target of '27. 9% versus 10% of Specialty Banking and 56% -- 50% to 55% of commercial banking. And [indiscernible] is going up from 16% on '24 to 20.3% of this first half of the year and more than 21% next year.

All these set of results enable us to upgrade the guidance, but more important to boost the remuneration higher the combination of main drivers like higher revenues, improved efficiency and lower cost of risk give us the confidence to overcome the EUR 1.95 billion of results, which is ahead of the strategic plan, notwithstanding the EUR 100 million, give us the opportunity to upgrade the dividend guidance to equal or higher EUR 1 per share, starting from the interim EPS, which grew from $0.46 to $0.50, meaning a total interim dividend coming up from EUR 700 million to EUR 750 million.

But more important, we have been authorized from our board to start all the regulatory procedure to increase the distribution target through further remuneration of share buyback, which will bring from EUR 6 million to EUR 7 billion the total remuneration of the plan. Again, this would mean to distribute EUR 4 billion in '26 and '27, after '27 results.

Frankly speaking, we are very happy to show this figure because, again, once we had the disappointment about [indiscernible] deduction from capital, we were obliged to reduce from EUR 7 billion to EUR 6 million. But we always say that if we would have had the opportunity to build up more capital, we would have returned to the EUR 7 billion target, and this is the case that we are very happy to announce to you. Thank you very much. I leave the floor for your Q&A session.

[Operator Instructions] The first question is from Giovanni Razzoli from Deutsche Bank.

I have 2 questions, actually 2 clarifications. The first one is on the evolution of the lending portfolio. The new business origination was extremely strong in the quarter, reaching the highest level since many quarters now. Still, I do see the stock of loans at the end of the period up only 1%, if I look at the end of the period data. So I was wondering whether there are other components like maturities, like financial components, which penalize the end of the period data? Or for example, if there are, I don't know, some state guaranteed loans, which came due in this quarter and in 2026, which penalized the trend of the stock?

The second question is on the fee income and especially in the trend of the first half. We've seen a strong acceleration, a very good performance. If I not mistaken, there was also a relatively strong contribution from the performance fees of [indiscernible] in the first half. If you can please elaborate about the trend that you would expect in the second half -- for the second half of the year in terms of evolution of the fee income?

Sure, Giovanni. Let me say that as far as lending, of course, as you know, June and December, we have the vast majority of maturity of loans with the different installments, which are concentrated in these 2 maturities. So for instance, in June, we had already accounted, of course, in the number I gave to you EUR 2.2 billion of maturity. Meanwhile, in March were EUR 1.5 billion. So there is always something more, which, of course, depresses a bit the second quarter and the fourth quarter results in terms of loans. But again, with 1.8% year-to-date, we are very happy because we have this target for the whole year. The pace of the loans is growing. I mentioned EUR 3.3 billion in July. So most possibly, we can envisage better results also for '27. Don't forget that there is a balanced combination in which we have to grow, but we have to maintain a very good credit quality. And at the same time, we have to try to increase the spread. And as I mentioned, year-on-year, we increased the spread of the new issuing 15 basis point. So all in all, it's a part of our results, which we, frankly speaking, like very much after some year of very slow growth in loans, if not a reduction.

In commission, we have, of course, a strong ambition in our plan. Let's say that we think we will be much better than last year this year. And we have a further growth of more or less EUR 100 million for next year. So I don't think there is room for upgrading because we already have very strong results, basically EUR 78 million better this year for last year and another EUR 100 million for next year, which will come again from the setup and full power of the product factory and a good pace we are having in the financial product sales.

Next question is from Elan Aerie in Elena Perini, Intesa Sanpaolo .

I got 2 questions. The first 1 is on your credit quality because it was 1 of the best surprises in my view in this set of results. So I was wondering about your guidance for the cost of risk for this year, and if possible, for next year too? There are some changes considering the positive evolution that you are experiencing.

The second question is, again, a follow-up on commissions because I see also from the results of your peers that there is a contribution of placement fees in this first half. So what is the outlook for this component, which cannot be considered as much as recurrent for the second half of the year?

Okay. I'll start with the first question then, please, can you repeat exactly what you need to understand better on the commission side. But for cost of risk, of course, we are doing better than the business plan. Of course, the business spend was done with a sort of, let's say, a prudent approach in terms of default rate, which now is being constantly below 1% for the last 4, 5 years. And every time, I think all of us think that there could be a deterioration. But maybe you have too much prudent also in that because the capability, which we now spend in managing, granting the loan, monitoring the watch list, detecting early warning allow us to be very efficient in timing and capability to sell and dispose and starting to reduce exposure where we feel to be at risk.

So all in all, I can say that for sure, we will do better than the business plan guidance, which were, if I remember well, 43 basis points for '26 and 40 basis points for 27.

Also because, as you remember, having now a stock which is so low and almost very much guaranteed from the state guarantee is very [indiscernible] to envisage cost of maintenance and the only cost will come from the full rate increase. Can you repeat on commission, sorry?

Yes. Sure. My question was referring to the Slide #15, in the sense that you have investment product placements. So they were basically stable in the first half of '25 and different half of '26 too. So I was wondering about the outlook for the second half of the year for this small component. And also, if I may add, if you consider a significant amount of upfront fees also for the second half of the year?

No, not really. I mentioned before that you are very happy to show that we are basically having a first half of the year with upfront fees, which are in line with last year and coming exactly from the same investment product placement amount, which is around EUR 12 billion. Meanwhile, we have an increase of 5% year-on-year of running fee, which, for us, is very important.

In terms of second half, again, we expect a bettering year-on-year '26 and '25. Investment fees account now for more than 50%, so for sure, we will have a good result. But let's remember that it's impossible to double for 2 because, of course, in the second half, there is August and December, which are always slower than the rest part -- the other part of the year. So this, of course, is for investment products.

Meanwhile, we think we can be very good, as I mentioned before, in recovering from the other commission, as we did Q1 in many of these items that I mentioned before.

Next question is from Ignacio Ulargui, BNP Paribas.

I have 2 questions. I mean the first one is in terms of capital distribution. I mean, could you help us to understand a bit if there could be other measures besides capital distribution in order to improve the operating profitability such as additional [indiscernible] programs or any other efficiency vessels? And linked to that, you have improved the cost-to-income by around 3.5, 4 percentage points in the last 12 months, which is a remarkable performance. How much do you think you can continue improving the cost to income in the coming quarters?

Ignacio, thanks for the questions. Capital distribution. So if I understood correctly, the question is about whether -- if we can continue to implement actions, managerial actions to improve capital position and generate additional efficiency in capital absorption. Basically, we are very active, as you know from also previous presentations in the area of synthetic securitizations. On top, we are deploying a number of levers to help generating additional capital, not only from P&L, but also from other sources, i.e., underlying again the 70 basis points that we have out of a total of $150 million of additional capital to be generated, and over the planned horizon from DTAs and fair value other comprehensive income reserves, we are in a position to be very confident we can tackle further opportunities to generate additional excess capital, which already is, I would say, quite significant when you compare the 14.4% we have to the 13%, which is, I would say, very conservative threshold and with almost EUR 69 billion of RWA. Just these numbers is very close to EUR 1 billion, if you make the maths.

On cost to income, if it's right for you, the...

Yes. I was also thinking whether you could, I mean, use the excess capital and the very strong capital position for other things that could improve further managerial and the cost-to-income by other retirements if there is -- if you see a space on the cost side, I can give the second question?

No, I think that we are very focused on distributing excess capital and using efficiently for managing expectation all of our shareholders. At the same time, we are extremely confident that the process of [indiscernible] excess capital is still ongoing and may continue to give us additional flexibilities going forward until at least the completion of the plan. So if we have in front of us opportunities to deploy capital differently or to use it for restructuring, we are confident we can have it. But for the time being, we're not planning additional usage for this excess category.

Okay. Coming back to cost income. Of course, it's very much better than our forest mainly due to staff cost reduction, as I mentioned before, but we have some further possibility to reduce the other administrative costs. So we are confident that we can beat the anticipation we have.

And again, 43% is a record for us. It's better than the plan. But notwithstanding that, we did 42% in Q2. So I don't know, if we are able, as we did to maintain costs at the level they are as it looks like to be possible for this year, increasing revenues will give us a better cost to income.

The next question is from Luis Pratas, Autonomous Research.

My first one is on NII. There was this impressive increase in the liability spreads from 144 basis points to 160. And this actually means that liability costs essentially remained flat despite the higher deriver. So I wanted to ask you, how did you manage to keep these deposit costs flat, whether they were like any strategic actions? And going forward, how do you expect the liability spread to [indiscernible]? And maybe more generally, if you could also provide to update the NII guidance for 2026, please?

And then my second question is related with M&A... There has been plenty of speculation about the potential combination between Credit Agricole Italy and Banco BPM I wanted to ask you whether you think this combination could result in value generation to Banco BPM shareholders? And how do you assess the government attitude towards the potential move by Credit Agricole take control of Banco BPM. Do you think it's a transaction that can be political acceptable?

Luis, thanks for your questions. On NII, a few observations. Yes, correct. We were effective in preserving liability spread. These -- and also on areas, as I suppose that spread is important to note at this point. There are also some second other effect in terms of delay in cost of index instruments to adjust to the behavior of rates. On top of that, needless to say, we have been very effective in how to say, steering the deposit base to take the maximum opportunities in of opportunities in an environment of declining rates. You can observe, for example, as reported in the presentation that we have now in the current account at this number was EUR 37 million, if I'm not mistaken, 6 months ago. And of course, the share of index on total is the most expensive in our deposit base.

Guidance for the rest of the year is we prefer to be prudent. So even without factoring as far as increase in base rates from ECB, still, of course, we can have improvements versus the second quarter, both in the third and in the fourth. This improvement can be even more evident in case of rates -- in case of ECB raising rates in the next meetings -- for coming meetings.

Okay. Just answering for the second part related to M&A. Let me say, first of all, that all this regulation starts maybe from the fact that was emphasized a sort of declaration from clear recall that they we didn't see value on the transaction we should have done with Monte. Let's be clear that the decision of not going ahead in the potential opportunity represented by a merger between us and Monte Paschi was decided only by the Board of the bank. And the Board of the bank, of course, as you know, include 4 Board member appointed in list supported by Credit Agricole. And this was unanimous. So everybody decided for this decision. I explained in our press release that after months of waiting, we were not able to understand which kind of transaction, which kind of number, which kind of value for our shareholders, this transaction, which we consider a very important and profitable opportunity, unfortunately did not materialize.

At that point, we decide, also because after our letter, as you know, materialize also the official offer from Intesa, we decided that for time frame limits. We were not anymore in the position to pursue in August or September, maybe a transaction, which would arrive before the Intesa Sanpaolo public offer. So I don't think any of the interpretation of [indiscernible] about our transaction with Monte true. But of course, you can ask them.

As far as our declaration related to us that they would prefer to have a merger with us. This always been a possibility that since, I don't know, 2, 3, 4 years, since they became our shareholders was a potential opportunity on the table. We would examine this potential opportunity if becomes true and possible in the interest of all the shareholders of the bank.

I have to say that from an industrial point of view, I think that is a very solid merger. But of course, we have to find a solution that makes happy all the other shareholders of BAMI if this transaction would, at a certain time, materialize.

I don't know, frankly speaking, about the position of the government. There are rules and opportunity to respect I don't want to enter into such things that are not related to what I can try to decide.

Next question is from Andrea Lisi, Equita.

The first one is on the increase of shareholder remuneration where you have -- you come back with the additional EUR 1 million. You indicated that you have the choice between increasing the dividend payout and the share buyback. Can you provide some color about which will be the rationale for you in selecting between an increase in the dividend payout and the share buyback? And so under which situation you think could be preferable one case or the other?

And the second question is on Anima. In particular, I want to ask you if you can provide any update on this front, in particular, considering that the stake listed is still at 10%? [indiscernible] 90$. Clearly, we have seen what happened with Monte. And if this could, in some way, change a bit your position regarding what to do with the minorities of Anima?

Okay. So basically, we announced the increase the borrowing popular [indiscernible] 6,7 in the distribution of the total plan Horizon. But at the same time, we need to abide to the rules from ECB that say that announcements of buybacks have to be precise, only can be precise, can be done in an amount only after an authorization is granted in case is the one we are talking about of buyback on top of ordinary payout distributed by the bank. So basically, where we stand now. We need to start the authorization process. Once we obtain the authorization, we will be able to disclose the amount. And in due course, we will communicate to the market.

Okay. For Anima, of course, let's start from the second part, which, of course, is a -- is very important also for the first part of your question. So what happened to MPS Anima? We have a contract lasting up to 2030. We are confident that Monte Baski stand-alone or Monte Baski in whatever situation will end up with respect the contract that they have with us. Let's remember that this is not a wholesale deal, but it's a B2B2C business, in which, of course, there are, I don't know, hundreds of thousands of clients in Monte who buys our product, Anima product. And I am sure that whoever will be deciding what to do, will have attention and care and not disappointing their client obliging or forcing them to change the investment product they are used since, I don't know, 15 years, 20 years to use. So we are very confident about that until 2030, and then we will discuss with whoever will be in charge at that time.

For the 10%, of course, let us understand better were Monte Paschi will be at the end of this consolidation, the offer process. And of course, we will decide it consequently.

The next question is from Hugo Cruz, KBW.

First a question on capital. You had the 60 basis points of benefit from fair value OCI reserves. With this all from Monte Paschi and mark-to-market? And was there any impact from hedges that I think you have related to this stake? So that's my first question.

And then on the -- going back to the buyback topic. So can you confirm that if you do a buyback, would you cancel the shares? And with that -- and if you do cancel the shares, mechanically that would increase Credit Agricole's stake. So what do you think about that implication?

And finally, also the timing. There is almost EUR 1 extra billion of distributions even versus consensus, I think it's an extra EUR 800 million. So would you do it in 1 go? Or would you split it between '26 and '27.

Okay. This increased improvement in favorable comprehensive income, you probably have seen that in the slide where we presented the financial -- the contribution of the financial components to the results Slide 20, reserves -- net reserves have reduced -- negative [indiscernible] results been reducing. So this is the contribution of [indiscernible] comprehensive income on which you have a top of which you have to add the DTA component. The remaining part that 60 basis points is mark-to-market of NPS, as you correctly -- or MPS equity holdings that we have in fair very comprehensive income, including but not limited to NPS.

A couple of additional points to note. You asked about the hedging contribution. The hedging contribution has been surprisingly negative in this quarter. We have some protections from the downside, which is already included in the P&L. So the total net financial results result would have been higher if in case of absent hedging, but of course, this has been much lower than the capital contribution of NPS. The only point is as inventory between NPS capital contribution, which is directly in other comprehensive income, not going through P&L and the negative contribution of hedges, which goes through P&L in the financial result.

On timing of potential share buyback. So if we get the authorization, then as I say, we will be able to communicate an amount and timing. We expect this given is our in overall transaction in this case will take a few months. So difficult for us to say, end of this year or early next year, but this is the best expectation we can give and provide at this stage.

In any case, it's EUR 4 billion in 2 years, whenever it will be. Let me say about the share buyback cancellation. Of course, we'll do cancellation. Of course, our shareholders, all the shareholders will be, I would say, more or less 3% higher in the terms of their stake. I think this -- whatever will be the kind of shareholder remuneration, we will make happy all the shareholders, including [indiscernible], which has well been declared to be a happy shareholder of of Banco BPM.

So we don't think to put in any embarrassment anybody if we do this kind of transaction. We don't know if they stay at the current level, 29.2% or they would grow to 29.9%. They already had the authorization, so we don't know exactly what is the figure for which. We could avoid if we have a share buyback [indiscernible] to increase. But practically speaking, they are -- will be in the same position of today. So they will find themselves maybe above 30%. If they don't want to launch, they have a certain period of months in order to reduce the participation, if they want to launch [indiscernible] they will do as well as they will do if they stay at 29.9%.

So I don't think anybody will remember, but I hope all the shareholders, including Agricole, will be happy of this further remuneration, which shows the strength of the bank in rebuilding capital and make profit.

If I may add very, I mean, technical point, the final the impact of any share buyback on the ownership of the bank depends on the amount, which is currently undefined given that we will need to wait for the authorization of ECB for that.

The next question is from Adele Palama, UBS.

I have 2 questions, please. One is on the fees. So running fees are basically stable quarter-on-quarter. And I've seen -- I mean the AUM is up 5% probably because of market performance. So I was wondering, basically, the margin is down a little bit. What is driving that decrease? I mean is there a mix just to understand that decline?

And then on capital, can you remind us the sensitivity of the OCI reserves to the BTP?

Reserve sensitivity to BTP, I have to dig a little bit. I don't have it on top of my mind. As far as running fees are concerned, this is in part a matter of composition. But basically, we are increasing component of running fees from mutual funds. There is a small reduction in assets under administration that explains the stability. I'll come back soon with a number of the sensitivity.

The next question is from Noemi Peruch, Morgan Stanley.

I have a follow-up on the additional remuneration because you say it could be a mix between dividends and buyback. When it comes to the dividend, would you consider increasing the ordinary payout? Or are you just thinking about an extra dividend?

And then for -- on capital for the second part of the year. And sorry, if you mentioned this before. I was wondering about the moving parts, whether -- so how much the benefit of the DTA would be? And also, if you can remind us on capital headwinds maybe and a potential SRT benefits?

Said what we said we are going to increase up to EUR 7 billion, the total dividend -- total shareholder remuneration. I think we have been quite open to make you understand which kind of authorization we are going to ask, so we don't have so much time to take what will be in case there would be a different form of remuneration. Let's stand to what we have said already.

On H2 guidance per capita, let's say that we expect to stay stable apart from any impact from authorizations in buyback. So -- but the ordinary part will be stable, meaning that capital creation from DTAs, which will be similar linearly to what happened in this quarter and from retained earnings compensated by expansions in expansion business. As of [indiscernible], we are planning to proceed with 1 additional transaction.

Next question is from Marco Nicolai at Jefferies.

First question is on the B&PS stake. Can you just remember us how the capital is impacted by this stake? I guess, by now, it's in deduction. So if the shares go further up, you don't have any impact on capital. But at the same time, you have the hedging impact in your P&L. Can you also remind us what type of hedging you have? How much of it is hedged? So this is the first question.

And second question is on the traditional banking fees. So these were down year-on-year in the first quarter, but they recovered quite a bit in the second quarter. So what is the -- what's driving this? And what's the outlook for this line in the coming quarters?

Didn't understand, sorry, Marco the second part of your question.

The second part was about the traditional banking fees. So the banking fees. So I was just wondering they recovered quite a bit in the second quarter, if I look at the year-on-year number. So what's driving and what do you expect in the coming quarters?

Okay. So no, I would say Monte Paschi, it's a nonfinancial -- sorry, it's a financial stake below 10%. And I mean, I can go back to CRR rules and explain that these stakes are risk-weighted up until the moment where the total of such stakes is below 10% of total capital. Any additional amount is deducted from capital. The is calculated net of share positions. Hedging that we have helped reducing the total level of the stake to be accounted -- to be included in the calculation. The overall -- these hedges, I mean, the only point I can add is structures that are quite out of the money away from the current market price and design [indiscernible] to be like that.

Of course, the dynamics of the price of this asset is such that, when it increases, we have a capital benefit. At the same time, we could have either an increase in risk weight or an increase in the deductions depending on the total level of participation -- financial participations below 10%.

Okay. Marco, for commercial banking fees. As we mentioned before, we are recovering very much vis-a-vis Q1 and also vis-a-vis Q2 '25. There has been a strong recovery in what we call specialized activities, which mainly are structured finance, trade finance and investment banking, which basically recovered all the gap vis-a-vis the first half of '25 with a strong increase in Q2 and Q1.

Let's say that the situation now is doing very well. The product factories contribution is good and will continue to be good. The only, let's say, back fire is that, as you know, in the second part of the year, normally, including August and December, there is normally a small reduction in total fees, but more on investment fees rather than in commercial fees. So we expect the tenure of all these different items.

The next question is from Sofie Peterzens at Goldman.

Sofie from Goldman Sachs. So it's very helpful that you gave the net income guidance for 2026, but I was wondering why did you put only EUR 1.95 billion? It looks quite unambitious if you look at the EUR 580 million that you already printed this quarter and close to EUR 500 million in Q1. So the full year run rate is already got above $2 billion. So maybe if you could just talk why you didn't put a more ambitious net income guidance for 2026?

And similarly, like how should we think about the 2027 target that also looks quite low considering the numbers that you printed.

And then my second question would be on -- going just back to net interest income. You gave very helpful guidance that your rate sensitivity is EUR 150 million for 100 basis points [indiscernible] shift. How quickly do you see this rate sensitivity come through? Is it within 12 months or 24 months? If you can just kind of talk about the dynamics on how quickly you kind of can reprice the asset side?

Yes. As far as the NII, basically, this is a quarter where we will see more clearly the impact of increasing Euribor on the asset side because most of our index portfolio, index loan portfolio, which is more or less 2/3 of the total, reprices in June. So the level of rates, 3 months, 6 months driver in June will drive the repricing index part of the portfolio in the second half.

Part of the repricing is reiterated in the third quarter, but most, as I said, of the portfolio is priced twice a year. So now in June and in December.

Sofie, for the first part of the question, you don't have to be so negative. It's normal. And if you compare also the results done by the other banks in the first half, they are not replicated the double the second part of the year. Of course, in Italy, especially in Italy, I would say there is August and December, which accounts a lot in terms of fee production. But for us, on top, there is also the situation that in April, we have the dividend coming from Monte Paschi, which, of course, is not replicated in the second part of the year.

Let give me this advice, try to compare the last year second half and make something on, and you will find that you will be happy of the total results.

I think that -- sorry, coming back to previous question on sensitivity to BTP of our reserves, I think that the key number is already provided in the presentation, actually, which is this EUR 700,000, EUR 690,000 basis point value for Italian government bonds in fair value comprehensive income component.

[Operator Instructions]

So thank you very much for -- sorry, there is somebody else?

No more questions registered at this time.

Okay. So thank you very much. Have a great holiday period, and we'll see each other in September. Thank you.

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

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Group First Quarter 2026 results presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.

Good afternoon. Thanks for joining the conference call. Q1 results will be presented by our CEO, Giuseppe Castagna; and our Joint General Manager and CFO, Edoardo Ginevra. Let me remind as usual to limit, please your yourself to questions maximum. Now let me hand over to Mr. Castagna. Thank you.

Thank you, Arne. Thank you, everybody, all people who join our conference call. We are happy to present a very strong set of numbers for Q1 '26 solid start, I would say, a compelling business model in action because we are following exactly the path that we presented last year with our updated business plan in February '25. Profitability grew to EUR 480 million of net income with royalty and ROE in line at 20% and 15%, in line with our planned target for 2026.

Also common equity Tier 1 is very solid, 13.6%, with an MDA buffer of over EUR 400 million. We will see going forward that common equity Tier 1 presents some very good surprise going forward and reaching almost 14%. The key driver, as envisaged in our business strategic plan is the benefit coming from the development of the product factories.

As you can see in '25, we had a contribution, average contribution over the quarter of EUR 377 million. Now in the first quarter is EUR 406 million, and the target, the quarterly target for this year was EUR 400 million. So we have already above the target.

Let's only have in mind that when we started the plan, the contribution from product factories was slightly above EUR 200 million in 2023. Of course, always as a quarterly average and EUR 242 million in 2024. So a significant announcement already in line with the trajectory of 2027 in which we envisage to reach EUR 430 million per quarter.

But also since Anima injection, of course, the was a significant improvement of the organic performance. If we go to the pretax results of Q1, we have a bettering of almost EUR 90 million coming half of this from higher non-NII revenues, particularly commission and contribution from product factory and the remaining 50% coming from lower operating costs, almost EUR 23 million and lower provision for over EUR 30 million. So a significant progress vis-a-vis our targets.

On Page 6, a slide, a quick reminder of the most important voices in terms of revenues, costs and cost of risk. Revenues grew more than EUR 100 million always on average -- quarterly average of 2024, bettering also the average of 25%, considering, of course, that NII Euribor is reduced vis-a-vis both years, '24, the Euribor average was 3.5%, '25 was 2.2%.

We also confirm the enhanced efficiency in cost management. in which we were able to reduce cost income from 47% to 44%. In 2 years and from 46% comparing to last year. We also reduced a sharp decline in total provision going down from EUR 137 million on quarterly average in '24 to EUR 78 million for Q1 '26 and last year was EUR 100 million, the quarterly average for '25.

The cost of risk has been reduced from 46 basis points to 32 basis points. And talking about effective credit management, we see here the evolution that we had, of course, in particular, starting in the first year of our merger. But following this part, we have been able to further reduce gross NPE ratio to 2.1%, which is in line with the average of Italian banks and also European banks, which is 1.8%.

The gross NPE ratio was down almost EUR 600 billion this year, less 21% from last year. And if we go to net NPE ratio, we are down from 1.5% to 1.1% in the last 12 months. If we see the net NPE ratio without excluding the NPA guaranteed from the state, we are down to 0.6%.

And if we consider only the net bad loan, excluding the state guarantee, we have down to 0.1%. This is the demonstration that we have been changing the quality of our portfolio since the pandemia we have here showed that since 2021 the average default rate year-by-year was below 1% with a record 0.68% in the first quarter 2020. We really believe that this demonstration that our portfolio is a very solid quality. Also, the Stage 2 loans were down in 1 year from almost 9% to 7.5%.

On Page 8, I will just say that we have been able -- were able to maintain to 13.6% the common equity Tier 1 but again, we will go more into detail at the end of the presentation on capital and the vis-a-vis the SREP requirement, we have an MDA buffer above 400 million -- 400 basis points.

Let me remind that, as I was mentioning before, we will see that if we can see the figure at 30th of April '26, considering the recovering of the frai value or other competitive income, we are almost at 14% of common equity Tier 1.

Some key highlights about the profit and loss. We have a comparison with year-on-year and Q-on-Q. Good results in terms of net interest income, even, of course, with a slight reduction Q-on-Q, the effect is completely offset by the 2 days effect -- 2 days less effect of Q1 '26 vis-a-vis Q4 '25 which account for a lower EUR 17 million.

Meanwhile, of course, the comparison with Q1 '25 is impacted by Euribor, which was 50 basis points higher vis-a-vis Q1 '26. Good increase instead, plus 3% Q-on-Q in net fees and commission and the solid contribution coming also from income from associates as well as income from insurance. Core revenues were in line with last Q '25 and slightly below year-on-year.

Net financial result was better than last Q '25 million, EUR 25 million positive versus EUR 49 million negative in Q4 '25, thanks both to the effect of better results from NFR and a reduced impact of cost of certificates. Thanks to that, we have total revenues, which increased almost 4% Q-on-Q with a reduction of 2% year-on-year. Operating costs down 3% on a quarterly basis and 2% on a yearly basis, mainly due to reduction of cost of personnel, but there were good tenors also of administrative costs. Pre-provision income is 10% above Q-on-Q and 2% negative year-on-year

After total provision, which were down 50% on last Q '25 and almost 3% on Q1 '25, we have, again, a profit from pretax profit, which is 25% better Q-on-Q. Then we have the increase of the impact coming from the new taxation, which made the contribution paid for taxes as much higher as EUR 278 million compared with EUR 185 million of Q4 and EUR 262 million in Q1 '25, leading to a net profit above EUR 500 million, 15% higher than December '25 and 6% lower than Q1 '25.

Let me remind, of course, that Q1 '25 is a pro forma, which includes the contribution of Anima, which instead was not present in Q1 '25 because, as you know, started to be consolidated in Q2 '25. So it's adjusted pro forma to compare the same perimeter. Final result, net result, as I mentioned, is EUR 480 million, which is 15% above last quarter.

We have also on the right side of the page show the positive progression that we register since the acquisition of Anima comparing the last 4 quarters. And as you can see, both in total revenues, cost income, loan loss provision and pretax profit, we have always registering a bettering of the result with some very positive outcome.

Going very quickly on some of the items. NII, again, was down 2.1% vis-a-vis Q4 '25, but the EUR 70 million effect would have offset completely this reduction. Meanwhile, we have a reduction of EUR 30 million, but with a Euribor, which was 50 basis points above the current Euribor. NII, full funding costs were basically at the same level in all the 3 quarters, we are examining.

On the right side, you see the evolution of the drivers of net interest income, leading to EUR 751 million, mainly due to the day effect. Meanwhile, you can see that we had a good results from the commercial spread, almost in line with Q3 and Q4 2025 at almost 2.9% of asset spread, basically, half of them coming from asset spread and half from liability spread.

Let me just anticipate that in April, the 2 spreads are going to widening. Meanwhile, we are more or less keeping the asset spread, we are increasing the liability spread, thanks to the increase of the Euribor. Let me remember that we have also sensitivity, which stood at EUR 150 million with a replicating portfolio which is slightly above our guidance of EUR 25 billion, but is due only to the anticipation of some maneuver, which is going to expire during the second part of the year. Meanwhile index or current account remains stable at 37%.

A good news is coming from lending activity. Although, as you know, the macroeconomic does not bring to support the decision of investing for our entrepreneurs, we were able to reduce EUR 1 billion of increase in stock of lending almost completely coming from nonfinancial corporates and lending, which grew 2%. So it's the first signal of recovery.

Of course, we cannot say that with the current geopolitical situation is a clear signal of going up, but good news to see after some quarter of reduction, the first time a positive number has increased in loan. On the right side, you see how the bettering of our portfolio, how much is allocated in the richest region of Italy, both split in total loans, nonfinancial corporates and the part of nonfinancial corporates related to small business. As you see, the more smaller the counterpart, the more increase securing packaging that we take for our -- for granting loans. If you go to the state guarantee secured loans, we see that we go from a total of 19% growing to 26% for nonfinancial corporates, which for the small business increased up to 41%. If we couple this 41% with the collateralized loans, we go up to 63% of secured loans for small companies.

Let's have a look on Page 13 on the total net fees and income from insurance. Let me say that we managed to reclassify for all the quarter we showed in this page and all the numbers that you will see in our enclosed slides that the cost related to synthetic securitization are now reclassified to other operating items and are not anymore into the net fees and commission. But this is, of course, pro forma for all the quarter we examination. And talking of that, you can see how the strong contribution from net fees and insurance make the quarter contribution passing from EUR 630 million to EUR 750 million, with also an increase from EUR 687 million to EUR 710 million, talking only of contribution from fees.

The vast majority of this contribution is coming from investment product fees, which grew 8% Q-on-Q, split above contribution coming from Anima, from upfront fees and from running fees. As usual, Q1 brings a strong contribution also from upfront fees, but is a sort of seasonality effect.

The investment product placement was as much stronger as Q1 '25. Let me remember the Q1 '25 was the strongest quarter in terms of contribution from investment product fees due to the special effort that our network was doing during the first months of the starting of the hostile offer from UniCredit.

So we managed to confirm that the capability of the network also without any kind of menace, is very trained to perform very good results. Apart from the EUR 6.7 billion of investment product placement, we managed also to sell to our clients EUR 1 billion in March of BTP issue. In terms of other fees contribution, we have a reduction of 2% Q-on-Q. Mainly driven by 2 items. The first one is the termination of the Ecobonus scheme, the fiscal credit discount that banks managed to perform both in '24 and '25 and now is not anymore there, even though the effect of the fiscal effect is still giving advantage to the bank, but not in terms of more commission.

The real reduction was coming, although from the lending activity and particularly from the specialized lending activity, the structured finance activity, which in the first quarter '25 was at a record level and now is at a more consistent level of EUR 75 million. I would say that this is contributing to the specialized activities for EUR 75 million.

I would say that this would be more or less the contribution we expect also in the rest of the year although we have experienced this growth in volume that we showed in the page before, demonstrating that there could be depending on the geopolitical situation, also strong recovery if the situation is going to normalize.

In terms of total customer financial assets on Page 14, we had -- we registered a reduction both in terms of volume of Banco BPM itself and in terms of Anima contribution due especially to the market effect, of course, coming from the reduction of the value in the first Q of 2026.

As far as for Anima is concerned, there is also a reduction coming from the termination of an agreement with Etica, which was known since January '25, and is producing some effect in reduction of financial assets managed by Anima. Notwithstanding that, the contribution from Anima is bettering. As you can see on the bottom right side of the slide, Anima contributed to the BPM Group's P&L for EUR 143 million of total revenues level, plus 4.7% vis-a-vis Q1 '25 pro forma, of course, and EUR 56 million in terms of net income level, 23% higher than Q1 pro forma '25.

On Page 15, we have the good results coming from the tenure of and the rigorous cost discipline applied by the bank. We have a reduction of 3.7% in total operating cost, which is 4.7% from staff cost due especially to the savings coming from the solidarity fund exit which were quite massive in Q4 '25 and also reduction of 1.8% Q-on-Q related to ASA and D&A.

Finally, on Page 16, cost of risk is down to 32 basis points. As I mentioned, we managed to reduce the stock gross from EUR 2.75 billion to EUR 2.180 billion, 21% year-on-year with the ratio, which has been reduced to 2.13 as gross ratio, 1.13 as a net ratio. Remember that net bad loan ratio is down to 0.34%. I don't repeat the effect if we exclude the loans guaranteed by the state. But as you remember, we are down as far as net bad loans to 0.1%.

On the right side, some good number about cost of risk down from 40 basis points to 32. Default rate down to 0.68%, a very positive cure rate in Q1 up to 9.78%. And especially the coverage of total NPEs increasing to 160 basis points as total coverage and 240 basis points if we exclude NPE with state guarantee, let me remind that bad loans, excluding NPEs with state guarantee are covered up to 80%. So really without any further potential risk coming from these assets. I leave the word to Edoardo Ginevra for Page 17.

Thank you, Guiseppe. So a quick look at the financial components of this quarter. So the first part that is illustrated in this slide is related to the evolution of our negative reserves on debt securities, which on a net basis has been worsened by EUR 30 million until from December to March due to the volatility that happen during the third month of the quarter.

Now this amount is again almost aligned with the level as of year-end of. End of April, it was EUR 300 million, EUR 306 million. So very similar to EUR 299 million that we experienced 3 months ago. BPV went down. So the level of our absolute exposure to interest rate risk went down in the comprehensive income portfolio from EUR 2.4 million, EUR 2.06 million.

This is only to a very limited extent, represented by Italian government bonds less than EUR 700,000. Why is that? Because with an overall level of the portfolio almost unchanged, EUR 47 billion. Now we have reduced the percentage represented by fair value-added comprehensive income to 29% with amortized cost accounting for 71%. Italian govies within the overall banking book represent only 38% of the total, so with a constant share in the last quarters.

On the right part of this slide, the net financial result improved significantly versus Q1 '25 from EUR 15 million to EUR 25 million. This is due to the structural improvement of cost of certificates from EUR 50 million in the first quarter last year to EUR 27 million, mostly driven by the decline in Euribor scenario.

Other NFR components went down from 66% to 52%, but 66% of last year was influenced by some one-off elements, whilst this year it's very important to note the contribution of global market activities and the dynamic management of our market positions. Then all of these elements translated into capital with the dynamic that is shown on Page 18.

So after accounting for the headwinds related to Basel III the starting point is 13.49% after accounting for these 9 basis points of headwinds. 88% positive basis points came from the performance in the P&L of this quarter, 75 basis points is the absorption of cargo from dividends and 81 coupons. Only 19 basis points despite the strong volatility in the market have been absorbed by the reduction in reserves fair value of the comprehensive income, which, as we said have been then reversed in April.

DTAs contributed positively for 18 bps and the rest, the various other elements are negative for at most 3 bps. 13.59, which is the level of common equity to 1 ratio, is at the end of March would become almost 14%, 13.98%, if you want to note the number, the exact number. If you consider fair value comprehensive income reserves on debt and equity holdings at the record date of April 2026.

So as a pro forma, at a pro forma level MDA buffer is above 100 basis points and MREL buffers are at 469 basis points to 4.69 percentage point if use as reference the total requirement. 437 is with reference to the subordination requirement.

Final point to mention in this slide is that we still continue to have an amount of capital that is -- of a potential capital that is to be created during the plan horizon, thanks to the contribution of reserves on fair value comprehensive income and DTAs. According to our forecast, this translation of potential into actual capital would account during the plan horizon for 120 basis points, whilst overall, taking into account also the rest of the capital to be created even out of the plan horizon beyond 2027, this amount is higher than 200 basis points.

Now for the final remarks. So let me leave the floor to Guiseppe.

Okay. So on Page 20, some check about the guidance and the outlook for 2026. As you know, we have out the previous plan that we confirmed in '26 last year, just 1 year ago in February '25, which was above EUR 1.9 billion for '26 million. Let me say that Q1 results are already in line thanks to revenues already in line by line and overperformance in net fees and commission.

As far as costs are concerned, we are instead well ahead our plan trajectory, both in operating costs and in cost of risk. So although there is a higher impact from the tax headwind, we can say that we have almost recovered all the gap generated by the taxation.

As you may remember, we confirmed the guidance for '26 before tax. Now we -- I think we are in line to say that we are very confident to be able to reach the target for '26 already this year. Let me say that, for sure, we confirm that the delivery of EUR 1 of dividend per share is confirmed for 26, which at today level, corresponds to 8% of dividend yield.

Looking ahead to 2027, as you know, we have a plan which terminates in '27 we have a target of EUR 2.15 billion. Also in this case, we feel that we have not already reached the lag in 2016, but in a positive trajectory which give us a lot of confidence in terms of reaching the target for '27.

We just mentioned some of the key numbers here. The increase of non-NII revenues above 50%, which was the target now is 53%. Still, we are not in full power with all our product factory the net NPE ratio, which is down 0.5% vis-a-vis the target 27%, and the availability of a buffer of common equity Tier 1 which is going to improve, thanks to managerial action and RWA, coupled with 120 basis point, what Edoardo was mentioning coming from DTA reduction.

So we are confident to overcome the EUR 7.7 billion of cumulative net profit for the 4 years of the plan, reaching the promising trajectory leading EUR 150 million for '27 and leaving us the room to going above the EUR 6 billion of cumulative distribution target, which we presented last year in February '25.

All the indicators are very good, both in terms of P&L and our capital strength which, of course, can also enable us to overcome the distribution through new issue. New measure to decide at the end of this year.

Thank you very much for your attention. I leave the floor for your Q&A session.

[Operator Instructions] The first question is from Giovanni Razzoli, Deutsche Bank.

Two questions on my side. The first one is on your CT1 ratio of 13.6%, which actually reached 14% in April, you mentioned. So it's a very good level about my expectations. I was wondering whether with this level of capital if this is confirmed going forward, you can consider resuming to your share buyback plan that you have put on hold last year.

And connected to this, I've seen that the lending growth was a little bit low 1% year-on-year on household and corporate. Can you give us a guidance for the full year so that we can have also a better understanding on how the CET1 ratio can evolve in terms of also risk-weighted assets expansion?

And the second question related to the Slide #13, especially in terms of fees. In my view, the fees were pretty good better in terms of investment fees -- there was a restatement as far as I understand. So you have changed the representation of the fees, removing the cost of the securitization from the fee income line, if you can share with us what was the impact in this quarter?

It seems to me that this is a trend representation that is in line with other peers. So if you can also confirm this. And regarding the investment fees, I was wondering if you can provide us also an indication on how is April evolving because the trend of the Q1 was very good in mind.

Thank you, Giovanni. So of course, we are very happy to have in April, 14%. Of course, this comes from the volatility of the market, but it's going back to the number we had at the end of the year. So we are quite confident that this could be the road map towards the end of the year.

We are very happy because this was one of the questions that many brokers were asking about our common equity Tier 1 strength, I think that coming back to 14%, as you may remember, after overcome the denying of the Danish compromise bring us to the same level also having had the burden of the non-Danish compromise apport.

So very happy about that. let, of course, terminate the years, as we were saying also last year in order to consider what we can do about the excess of capital. On fees, of course, as you were mentioning, there is this restatement is in line with our main competitor.

Frankly speaking, it's not something related to the capability of selling products to our clients. So we decided it's better represented into the other cost rather than into fees and commission. And I confirm that average on the last 5, 6 quarters has been consistent in line with the EUR 20 million.

Next question is from Manuela Meroni, Intesa Sanpaolo.

First question on the NII, you said to expect an NII in line with the 2025 exit level. That means to a bit lower than EUR 3.1 billion. I'm wondering if you can share with us the main moving parts in terms of volume, margins and the contribution of the replicating portfolio.

The second question is on consolidation. One of your competitors this morning said that Italy is a fact banking market and its consolidation. I'm wondering if you could want to share with us what are your thoughts on the consolidation in Italy and the role that Banco BPM can play in it.

So on replicating portfolio NII, yes, we guided towards an overall level of NII, which is similar to what we had in last quarter of the year, being in mind potential evolution of the underlying drivers.

And in particular, concerning volume, we expect to continue to have moderate growth in loans and to come back to an average level of deposits, which is, again, with increase versus the level we had in December.

So moderate positive contribution of volumes and potential tailwinds coming from level of rates and in particular, from the expectation of Euribor -- sorry, of Central Bank hiking rates during the next -- during the current quarter during the current part of this year replicating portfolio, we have -- I was about we have a level of replicating portfolio, which is at EUR 28 billion, EUR 3 billion above our target level.

This is because we took the opportunities of the shape of the yield curve during the first quarter to anticipate some maturities of the replicating portfolio, keeping anyway the target level the same EUR 25 billion that we used to have since we approved the previous plan.

So this means that over the rest of the year, we have maturities in this portfolio that we will not renew. So coming back to the level of EUR 25 billion, other things equal. We may, of course, reconsider this policy, the strategy depending on the evolution, not only of the absolute level of rates, but also the yield curve.

Okay. About consolidation, of course, yes, we feel we are in the best place to catch the potential opportunity coming from an eventual consolidation -- further consolidation of the market. We had a lot of consolidation last year, some of them also related to bank with the acquisition of Anima and the other acquisition of Monte Paschi, Mediobanca and BPER Banca. Of course, there could be room for something more is not only from one bank to decide exactly what to do. we think we are in a good position to understand where the market would generate opportunity for us for sure, we are in a strong position in terms of capability, having already realized a very good transaction years ago.

We have now at the plenty of our capability in terms of reaching the profitability we promised last year. We, of course, have also a lot of small consolidation potentially to do related to capability distribution, which would emphasize our product factory.

So there is a lot to go. We are looking to everything, big small opportunities in terms of banks, in terms of other factory to join to our factor in terms of distributors of our product factories. So it's difficult to say which one will materialize, which one will give the best opportunity for our shareholders.

For sure, we are considering and starting all the situation in order to take advantage from potential availability from other counterparties.

Next question is from Delphine Lee, JPMorgan.

My first one is just to go back on fees and commissions. So it looks like -- I mean, the trends in Q4 in Q1 were definitely better Q-on-Q, but the year-on-year comparison seems to be somewhat a little bit weaker than what we have seen with peers. .

If you could give us a bit of color what you expect in the next few quarters in terms of trends on a pro forma basis, clearly, after the reclassification. And then my second question is just to go back on M&A.

Previously, you were talking about the M&A options with Cariparma with the Park, is this still kind of priority for you? Is it something that you're actively looking? And if so, sort of what shape and form would you like to see? And what would be your sort of kind of ideal scenario in terms of value creation?

Thank you, Delphine. As far as the first question about fees. Let me remember that last year, Q1 was a record level and was driven, of course, also the peculiar situation we were experiencing.

So the fact that we were able almost to replicate last year, only difference is coming from fees on lending, as I was explaining before, which, as a matter of fact, it's now recovering. So let's be positive about the possibility to make better results as we expect in terms of fees and commission.

Let me also say that Q3 and Q4 last year were not that strong like Q1. I have only April of this year's comparison to last year. And I can anticipate that April, in terms of investment product in '26 has been better almost 20% vis-a-vis last year with a contribution, if I'm not wrong, of EUR 5 million, EUR 6 million better than April '25.

So a very strong contribution from the network. I think these are now numbers once we have common strategy also with Anima with our bank insurance activity that was not the case last year. So very important for us, the contribution coming from that and the possibility to exploit at the most, the full power of this product factory.

M&A, we, frankly speaking, we don't have a priority. Priority comes from the market opportunity we are examining all the possibility. Basically, I think we speak more about Agricole and Monte Paschi just because Agricole is the first our shareholder with 23% of shares.

So for sure, everybody could imagine some opportunity with them as well as we are a small shareholder, but nevertheless, quite relevant shareholder for Monte Paschi with 3.7%. So I think this is the reason why everybody expect possibly these two transactions. To be a shareholder does not mean that the opportunity for doing an M&A are ideal. So let's wait and see.

Let's understand what the other counterparty are willing to do but I think that we are in a good position to take advantage from every opportunity as well, as I mentioned before, opportunity arising from smaller M&A, which can enhance the capability of our product factory.

The next question is from Ignacio Ulargui, BNP Paribas.

I have just one question on costs. I mean, how should we expect cost going forward in the context of a very solid performance in 1Q and could you consider at a given point in time using that excess capital and that potential better capital progression to take any managerial action to improve cost further?

So thank you, Ignacio. So the trajectory of costs is, as you correctly observed, positively oriented. We managed in this quarter to deliver savings versus end of last year in general versus the overall last year trend because this has been the impact the result of the cost management actions we undertook since the announcement of the plan with the redundancy program the replacement of existing of older cohorts with new ones for a lower rate or rate of replacement that is lower than one.In general, the trend for cost that we expect to experience can benefit from additional marginal efficiencies.

Let me only observe that you are not only that you are not only below trajectory of the plan, but we expect to continue to stay below this trajectory . The only additional qualitative point, I may add on that is that within this overall trend, we expect to replace part of the running costs with change costs, so investments and expenses that we are implemented in order to modernize the infrastructure of the bank.

The next question is from Luis Manuel Pratas, Autonomous.

My first one is on the 2026 guidance. For multiple results, we have seen the disclosure that there is some room for overperformance, especially in fees, costs and cost of risk I would like to ask you what is holding you to provide a more positive guidance, whether it is just a more conservative view whether it is the weaker macro, given the geopolitical uncertainty?

Or maybe could you also think about recycling any of this better performance into investments for the future? Then my second question is also on the CET1 guidance of the 14% that you mentioned. Could you please break down the main OCI movements that you observed in April.

In particular, it will be very helpful if you could provide some sensitivity to changes in sovereign spreads as well any movements to the Monte Paschi share price.

Thank you, This is Giuseppe speaking. For the guidance, I think we have been quite clear on Page 20, you have all different items compared to the business plan on '26. Of course, before tax, we are much ahead, I would say, of what -- not the guidance, but what we expected before knowing the impact of the new fiscal impact.

Of course, we have still some prudent approach related to the recovery of almost EUR 100 million, we have to perform in order to match the 26 business plan. After 1 quarter, even though we have recovered almost all the gap maybe is more prudent for us to wait another quarter also due to the macro economics, which, as you know, are not that stable in terms of geopolitical, in terms of inflation, interest rate and so on.

So of course, it would be easy for me to say that I better my guidance and say that it would be equal or better, but does not change much. So I would, therefore, ask you to consider that is already a battering because in February, we were not saying that we would have matched the plan after tax, not only before tax.

Now we are much more confident to be able to reach also the results, absorbing almost EUR 100 million of tax effect. for common equity. I'll leave the answer to Edoardo.

Yes. If you -- I mean go back to the track record of Monte Paschi share price. I believe it was around 7.4%. If I'm not mistaken, end of March. Now it's -- and April was around 9% . This leads to 1.6x EUR 110 million which is more or less our number of shares.

But long story short, slightly more than 30 basis points is the improvement in April that we have in the pro forma from Monte Paschi slightly less than 10 basis points is the improvement we had in February, comprehensive income, debt, government bonds reserves.

And maybe can I just do a quick follow-up on the tax rate as well it's a very important guidance point -- so this quarter came in at 36% and it was a bit worse than the 33% guidance last quarter. So could you please clarify what's the tax rate guidance for the rest of the year?

Yes. I think this is slightly higher than what we expect to have overall during the year. So of course, the tax rate in Italy has been impacted Giuseppe was saying the budget law approved end of 2025. We expect to stay in the region over 35%, 34% to 35%. Overall for the whole of the year. So it's slightly higher because there are items that are less impactful in terms of taxes, such as, for example, Monte Paschi dividend maturing in second quarter, which is part of revenues, but is taxed before the distribution, so it doesn't impact on taxation.

The next question is from Elena Perini, Intesa Sanpaolo.

Yes. good evening, everyone. My question is about your stake in Anima because you are at 89.95%. So have several times mentioned the opportunity to reopen Anima's capital to other partners to also strengthen the distribution relationship. Is still your view at the moment and how this can potentially help other bigger M&A options for you.

No. Of course, as you were mentioning, is a possibility to open and to wider the possibility of accommodate both other banks or distributors, interest in Anima or also potential M&A.

So to have the company listed, that would help, of course, the value determination of the company, the possibility to have some step in a way which would be a bit easier than if we delist the company.

But of course, we will not keep it forever listed for sure. So let's wait this situation in which everybody is talking about opportunity and I think in a couple of quarters, we will make a decision about it. As you know, we can also decide to make a merger to consolidate Anima. So without any other action on the market.

The next question is from Noemi Peruch of Morgan, Stanley.

I have just a few. So in Q1, what drove the deposit decline, especially on the side deposits. And in terms of common equity, I appreciate the guidance on the mark-to-market as of April. But I was wondering if you could give us visibility also in perhaps other moving parts that could impact common equity.

Double impact by year-end? And then a follow-up on the cost side. If I'm not mistaken, you have plenty of room to implement a further early retirement scheme on top of what you have agreed with the unions with I was wondering where this initiative sits in your priority list and also in the context of meeting the net profit targets.

I wouldn't say that there is a decline in deposits. Frankly speaking, we are EUR 400 million in March below December, which, of course, has also seasonality. But let's have in mind that in March, we placed EUR 1 billion of BTP coming, of course, from current accounts. If I may say, in April, we are already above the figure of December '25.

As you know, this has been the growth in deposit that's been signal in our bank, growing year-by-year. But of course, we cannot expect to have a EUR 5 billion of increase in deposit every year like last year.

We have in our plan slightly growth of EUR 1.5 billion, EUR 2 billion per year having in mind that, of course, with the growth of last year, we are already where we thought to be able to be in 2027. So we are not spending interest rate in order to keep more volumes of deposits.

But because of our footprint, we increased deposits in any case. Then maybe cost and common equity. I think have already answered, but I leave the room.

So common equity, if I understood correctly, the question was about additional guidance for the rest of the year. And I think that the level that we have in April may represent the pro forma level that we have in April may represent a good hint towards the direction we expect to have until the end of the year.

So in the region, of 14%, bear in mind that with the current market volatility, this is a level that is subject a number of, what to call them statistical factors.

So with some room for defining an interval, a confidence interval. cost, talking on costs, as I said earlier, we have implemented already all the actions that were planned into our strategic plan last year.

So last year, we said basically the benefits on cost were locked in once we signed the contract with the unions, then we are delivering some additional improvements working on a number of levers.

For example, we signed recently an additional agreement for EUR 100 million in headcount reduction that are expected to be implemented during the remaining part of this year, mostly between the first and second quarter.

The rest, as I said, is to confirm the current trajectory and to remix in favor of more investments, more change, more modernization of the banks -- of the bank.

The next question is from Hugo Cruz, KBW.

I have three questions. First, on loan growth, it seems a bit weaker than some of what -- than the peers that have reported already. I was wondering if you could talk about your market share of new originations for the main segments, ready mortgages, corporates, et cetera.

Then a second question on NII. I understand you want to be cautious with the guidance overall, given the macro uncertainties. But what I heard from you about the NII, it sounded like all the trends would imply an increase to the guidance because I think guidance implies kind of flattish rest of the year, but you're talking about volumes going up, margin expansion, et cetera.

So why are you not raising your guidance for NII for this year? And then the third question is around if you could tell us the pace of the impact of DTA assertion on the CET1 ratio during the rest of the year.

You've done 18 basis points in Q1. I was hearing what should we assume in other quarters?

Thank you, Hugo. Loan growth we were much more prudent. I remember when we presented our plan vis-a-vis our competitor, we are happy about EUR 1 billion of loan growth. We have a target of EUR 2 billion for this year. So again, we don't want to sacrifice margin for loan growth.

As you have seen in our presentation, we are growing in all the segments, taking advantage also from the state guarantee and the collateral, keeping safe our stock of portfolio, so we are quite happy about our growth. Again, I don't think you can push loan growth in this situation in which there is some resistance from our entrepreneur to increase the investment.

So I think it's good that we are so close to take advantage from any potential movement but we are still waiting for some good market environment, bettering of the market environment in order to push on the loan growth -- having said that, again, for instance, for mortgage, we are applying some new products in order to offset the reduction we have experienced in last quarter, but we are still growing year-on-year. On NII Edo,respond.

Yes. NII. We definitely are seeing positive signals and expect to have results, delivering a positive trend versus the first quarter of this year. Bear in mind that we have mitigated on purpose, so our NII sensitivity to avoid excessive dependence on NII, so to avoid running too much the waves when they go up but also going too much -- be too much exposure to the downside risk. .

So net-net, if some of these conditions proved to be even more favorable than we could revise our guidance. But for the time being, we prefer to stick the indication to stay consistent with the exit level of December.

The other question was on DTA. Yes. More or less, we have an expectation for the rest of the year of capital creation coming from EPA that is similar to the pace we experienced during this quarter.

And consistent also with what I said, of the 120 basis points of capital creation expected from EBITDA and revert comprehensive income during the remaining part of the plan rise.

Gentlemen,Mr. Riscassi that was the last question. There are no more questions registered at this time. I'd like to turn the conference back to you for any closing remarks.

Thank you for being with us, and I'm sure we'll see around during our road show during the next days. Thank you again.

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

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Full Year 2025 Group Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.

Good afternoon, and welcome to Banco BPM Full Year Results Conference Call. Our CEO, Giuseppe Castagna; and our Joint General Manager, Edoardo Ginevra, will take through the presentation. And let me remind you, please to limit yourself to 2 questions. And now I hand over the -- to Mr. Castagna. Thank you.

Thank you, Arne. Good evening to everybody for ones we are the only one in the evening. So we'll take our time, but I will try to be as quick as possible in order to give you the possibility to make an interesting Q&A session.

So first slide, on Page 6, I will start is just a recap of the completion, we are more and more having on our new business model, which, as you know, started a couple of years ago with the intention to build a business model driven by the product factory and able to hedge the contribution of commission and fees vis-a-vis NII revenues. I would say that this model is becoming more and more attractive. We are completing basically the different product factoring steps. We will go through the each one later on.

But let me say that with this business model, we were able to support a very strong profitability, which with this split 50-50 income -- interest income and commission is, of course, more sustainable for the next quarter and the years. The results of 2025 was EUR 2.8 billion, EUR 130 million higher than the guidance I gave you in the last quarter. Also with the strong increase in terms of common equity Tier 1 pro forma, 13.76% versus, as you may remember, a planned minimum threshold of 13%.

These results allow us to match the dividend per share of EUR 1, which we gave last year so the balance dividend would be EUR 0.54, 17% higher than the first interim dividend, EUR 0.46. The payout ratio is still 80% considering for this year that net income, excluding the valuation of preexisting Anima stake of EUR 200 million. Let me remember that last year, we accounted for the 80% payout ratio, also the extraordinary contribution coming from the Numia transaction. Shareholder remuneration, '24-'25 reached EUR 3 billion, which is exactly of the strategic plan cumulative target, which is already achieved after a couple of years. Some further number, which give you the sense of where we stand in terms of where we wanted to reach with our presentation of business plan in February last year. As I mentioned before, we are already a non-NII revenues on total revenues 51%, cost-income ratio of 46%, gross NP ratio 2.2% and cost of risk 40 basis points.

On Page 7, the pro forma net profit is higher because, of course, we are not considering in the stated accounting, the first quarter in which we did not consolidate Anima. So if we have a pro forma with consolidation of Anima, the net profit -- the net profit would have been EUR 2.120 million.

If we compare, as I mentioned before, the '24 to '25 net profit, we have an increase of 20% excluding in '24 Numia transaction and solidarity one-off -- solidarity funds one-off and the EUR 1.880 billion, which we reached this year, excluding Anima one-off is a 20% increase in net income, which, of course, accounts for almost 20.5% of ROTE and 15.5% of ROE.

The organic improvement was so high to offset completely in the Euribor reduction of this year. We started from a profit from continuing operations, pretax of EUR 2.5 billion in '24. We have a total reduction NII at full funding cost of EUR 200 million, a further reduction in NFR of EUR 56 million, which were completely compensated by organic improvement coming from non-NII core specifically commission and insurance and a reduction of operating costs and provision like-for-like.

So we have a plus EUR 2.550 billion to which we add EUR 263 million related to the integration of Anima starting from Q2. If we include also the first quarter of Anima, our profit from continuing operation would stand at EUR 2.9 billion.

So let's have a look to the composition of the profit and loss. We have growing revenues in terms of total revenues from EUR 5.7 billion to almost EUR 6 billion. As I mentioned before, non-NII revenues on total revenues is 49% for pro forma, but 51% considering NII at full funding cost.

Net fees and commission raised 21% to EUR 2.5 billion, starting from EUR 2.055 million of last year. And the same strong increase of almost 60% comes from income from associates would grow from EUR 200 million to EUR 330 million.

The Q4 was the first positive quarter of the last year in terms of core revenues, which grew almost 5% thanks, of course, mainly to fees, but also to a fair contribution Q4 and Q3 of NII. The same favorable trend we are experiencing cost control. Like-for-like, we have a reduction in cost of 1.7%, which, of course, pro forma takes in account also the impact of Anima. Significant decline also in provision, where we reduced the total provision 26% with LLPs going down from 46 basis points to cost of risk to 40 basis points.

Just a quick deep dive on risk profile. As you may remember, this was the main difference that we had when we started the merger. We had an NPE ratio of 22.5% vis-a-vis an average of the Italian bank at 15% and average of EU bank at 5%. As you can see in the last 3 years, we have reduced massively this amount and now we are at 2.2%, which is exactly in line with Italian banks and slightly above the 1.8% of the European average. Let me also remember that we were basically one of the few banks who didn't make recourse to the market to offset the NPE. In the same period -- in the same 9-year period, we assume that there were at least more than EUR 25 billion of share issue in order to offset the NPE from other banks.

Also, the stock has a low record. We have now a EUR 2.250 billion of GBV, decreased by EUR 600 million now, which is a 21% reduction and net NPE went down 0.37 points to 1.2%. And basically, we have a 0 bad loan if you exclude bad loans covered with the state guarantees. We, at the same time, have also the higher NPE coverage because we're increasing for 52.5% to almost 56% of the total coverage excluding, again, state guarantee and also the vintage of our NPE portfolio has been reduced to less than 2 years. The default rate was 0.84%, and we have managed also to reduce EUR 1.1 billion Stage 2 loans, which now stands at 8% of total performing loans.

Capital generation, we were able to generate 194 basis points after absorbing more than 260 basis points related to EUR 1.5 billion of dividend distributed. We have a sort of road of the common equity Tier 1 during '25, which you may remember, has been a massively eaten by the Anima acquisition, not getting Danish compromise. This accounted for 240 basis points on our capital to which we had 60 basis points of regular headwinds totaling 300 -- more than 300 basis points.

So with the starting point rebased in 2024 at 12%. To this, we had the capability to generate 176 basis points which brought the total to 13.76% to which we had to deduct the one-off levy on extra profit reserve, which accounted for 18 basis point, bringing the stated common equity Tier 1 to 13.58%. We managed in January to have some hedging on some minority stake holdings, which gave us 18 basis points of contribution to common equity. So we can say that nowadays, we have 13.76% of common equity Tier 1.

After again, absorbing Anima acquisition, regular headwinds, the dividend payout and the levy on extra profit reserve. This is very important in our opinion because if in such a year, we were able to offset all these headwinds and generate such a consistent amount of capital as we did basically from 9 years, every year offsetting the losses that we had in reduction of NPE, you can understand that the capital generation for the future will not be a problem. We are very confident to return very soon at a 14% level.

Let's go into some detailed figure on Page 12. We have the spreadsheet of Q4 and Q3 and full year '25 and full year '24. As I mentioned before, Q-on-Q, we have the first time of positive results of net interest income 1.3% higher than Q3, net fees and commissions 7.5% higher than Q3. Of course, it's a bit more difficult to make a comparison year-on-year because we have the contribution of Anima, 9 months this year. But anyway, we have 21% of net fees -- higher net fees and commission to EUR 2.5 billion. Another quite remarkable contribution is coming from income from insurance, where year-on-year, we passed from EUR 116 million to EUR 163 million.

Core revenues went up 5% Q-on-Q and 2.5% to year-on-year considering more than EUR 300 million reduction in NII year-on-year. Net financial result was EUR 48 million positive due -- specifically, thanks to the cost of certificates, which went down to EUR 167 million compared with EUR 284 million last year.

Total revenues went up to almost EUR 6 billion compared to EUR 5.7 billion last year and Q-on-Q went up 1.1%. As I mentioned before, we have a slightly increase in operating costs, but this is driven by the Anima impact, which was not present in '24. If we compare like-for-like, we have down in cost, 1.7%.

Total provision down from EUR 547 million to EUR 403 million quarter-on-quarter, we have instead an increase, which is a seasonal increase of total provision to EUR 160 million from EUR 81 million.

Profit from continuing operation. Pretax profit were EUR 2.8 billion year on '25 compared to EUR 2.5 billion, '24, so a 12.5% growth. Net profit from continuing operations is 17.4% growth with again a considerable growth. Also net income more than the figure that is shown on the Page 12 of EUR 2.8 billion compared to EUR 1.9 billion, maybe is more affected to compare the 2 years without the one-off I mentioned before, again, is EUR 1.880 million against EUR 1.570 million, a growth of 20% year-on-year.

On the right side of this slide, you can see how we managed -- we were able to manage and we will go through afterwards the NII, of course, there was a massive reduction in NII. But if we consider the NII at full funding costs, so the contribution of the lower cost of certificates we managed to keep the reduction '25 on '23 at only 2.2% with EUR 200 million reduction from '24 to '25. And you can see how the impact of commission basically is now higher than the impact on NII in '25, growing to almost EUR 3 billion from EUR 2.3 billion of '23. So you can see the non-NII revenues growing from 43% to more than 50%.

Cost/income down to 46% from 48%. Again, I mentioned already both the LLPs and net profit from continuing operation, which grew 38% which is quite massive, if you consider the reduction of NII. Again, net interest income, specifically a reduction of 9% year-on-year, which is 1.3% positive on quarter. At full funding cost, the reduction was only 6.2%. And the results of the last quarter was justified by the increase of 3 basis points in Euribor, which we were able to take in our commercial spread up to 2 basis points, so almost all the entire Euribor increase. Specifically, we grew 2 basis points in the liability spread, maintaining at [ 1.47% ], the asset spread. The managerial action sensitivity basically reached the top as it was already in Q3, we are not hedging anymore both in terms of replicating portfolio due to the consistency of Euribor during the last months as well as also the index current accounts were stable at 37% vis-a-vis 34% over last year. Also sensitivity was -- there was a reduction on sensitivity rate at EUR 150 million.

Finally, on the last bottom right part of the slide, you can see how a strong help in NII came also from the reduction of the wholesale issue in last year. Basically, we reduced from the beginning of '24 to the last emission, we were able to reduce the average of the wholesale bonds spreads of 60 basis points which accounts for almost EUR 35 million per year. So that means that we have a lower cost of risk for our -- lower cost for our issuing going on towards the end of the plan. You can see how for each kind of issue, there was a reduction based from the last issuance from -- related to the previous one.

A good signal finally in Q4 also from loan volumes Of course, there was all the year strong generation of new lending up to EUR 28 billion, EUR 7 million higher than last year, showing our constant presence close to the client make us take advantage also from -- also in a period in which there is not loan growth. We were able, of course, to foster a lot of new loans taking an important share of commission coming from new lending. Specifically, new lending to household grew 40% year-on-year to non-financial corporates grew 30% year-on-year. Also in terms of low-carbon new money long-term financing, we were up to EUR 7.6 billion compared to EUR 5.7 billion of last year. As well -- as far as the stock is related, the Q4 was EUR 1.2 billion up in Q3, growing basically in all the different asset class, non-financial corporates, household and financial. Meanwhile, when you compare with December '24, we were able to have a positive increase, both in household and non-financial corporates. Meanwhile, as you may remember, we have only 1 institutional big ticket transaction amounting from EUR 1.5 billion which impacted the reduction of EUR 1.3 billion related to the institutional lending.

On the right side, some quality discretion 73% of our core customer loans are located in North of Italy. We still continue to take a lot of advantage from the collateral of our loans, 52% have secured, 27% with state guarantee. And if you go to SMEs, 63% are with collateral and more than 90% of the risk are concentrating in the best plus from mid- to low-risk. Net fees and commission is the game changer of this year, thanks not only to the Anima contribution but also to grow 5% and normalized for the Ecobonus reduction commission '25 or '24.

As you can see, we have -- we passed from EUR 2.055 million of '24 to EUR 2.5 billion of '25. And this, again, make clear the share of investment product fees passing from 56% to 49% of the total commission. You can have some detail on the right side of the slide. In the upper part, there is the investment product fee growth to 11% year-on-year like-for-like. So without Anima contribution, which, of course, became EUR 1.2 billion, if you consider also the contribution of Anima, which brings to more than 50% of the contribution of the asset manager -- wealth management fees.

Also in terms of loan of investment product placement, we grew 12%, in line with the growth of the commission. On the other commission, we were able to contain the reduction at 1.9% which if we exclude the deck of bonus impact on '24 became a growth of 1.2%, specifically from having good results and increasing results, especially from P&C insurance, consumer credit, corporate investment banking commission, structured finance commission.

Meanwhile, some reduction in -- as I mentioned before, in ecobonus and instant payments and in the payment system and activity. Let's make a quick focus on the insurance business, as you know, has been one of the core field of our strategic plan. In the last 2 years, we have done a lot of work integrating 100% the Life business and creating the new joint venture with Agricole and P&C. This year, we had bought the IT migration of Life and Non-Life. One run directly by us and the other one run by our partner of Agricole. So, of course, as always, in this case, you always experience some reduction in sales. Basically, it was not so much the case because if you see the contribution of the insurance business, this grew year-on-year, 26% from EUR 255 million to EUR 320 million with a pace which is much quicker than the pace that we need to reach the target in '27.

Basically, in the last year, we had the same increase that we expect for the next 2 years. If we go through the different kind of insurance, Life Insurance grew 27%. Commission were up to EUR 70 million from EUR 67 million, but what was really affecting these results was the income from the insurance business, keeping, of course, now all the income coming from this kind of business, which grew from EUR 160 million over last year to EUR 163 million of '25, which is almost in line with EUR 175 million, which we have as a target in 2027.

Let me remember that in '23, this business contributed only for EUR 46 million to our profit and loss -- as well -- as far as P&C is related, we have the same growth up to 23% coming from EUR 71 million to EUR 88 million. And again, definitely, we are not yet at the final speed we assume we can take in '26 and '27.

A quick focus also on Anima and all the total customer financial assets, which in terms of captive volumes grew more than EUR 13 billion, EUR 13.7 billion in '25 and more than EUR 25 billion in the last 2 years. So a really remarkable growth. As you can see, last year, we had a big impact also from net inflows. Asset under management grew EUR 2.3 billion, asset under custody EUR 3.5 billion and current account and deposits grew almost EUR 5 billion.

We can see the same -- almost the same pace if we consider the total customer financial assets held by our group, which now amounts to almost EUR 400 billion is EUR 396 billion, starting from [ EUR 377 billion ] last year. on a pro forma basis, of course, because we did not consolidate Anima last year with a growth of almost EUR 20 billion year-on-year.

A final page on Anima. Of course, the most important piece of news is that we appointed in end of January, the new CEO, Mr. Perissinotto. And of course, also the growth of Anima is quite considerable, considering also the difficulties of last year managing from one side, our acquisition, the CEO -- the former CEO leaving in the last quarter and managing the integration of the new business into the group. But Anima managed to grow 4%, EUR 8 billion year-on-year and growing 5% in terms of revenues and 16% in terms of net income. So we are very happy of the contribution Anima is doing for us. And we, of course, expect this figure bettering with the new management of the company.

Let's go to the cost income, down 46%, thanks to a rigorous cost discipline that is now, I would say, quite a mark for our bank. Like-for-like, we have the reduction of 1.7% to EUR 46 million, which, of course, including Anima is higher up to EUR 2.7 billion. If we consider staff cost, we have a reduction of 1.5% like-for-like. With Anima, we have stated EUR 1.8 billion if we integrate also in the first quarter Anima, the figure would have been EUR 1.825 billion, but we assume that we are completely in target with the business plan, which may remember is EUR 1.780 billion because thanks to the retirement scheme we fostered last year, we have already generated more than 1,000 exit and another 600 will be during the last 2 years.

This will be -- will generate EUR 60 million of reduction of cost of personnel only offset by EUR 20 million of increase of national contract and new hiring that we are doing. Also in other administrative expenses, we have a quite strong reduction, 4.7% in terms of [indiscernible] we just said we register a slight increase in depreciation and amortization due to the increasing amount of investment we are doing in IT and AI.

Let me remember that the headcount that with Anima were pro forma more than 20,000 people being in '25, now are down to below 19,000 people. We have 18,970 people and further reduction of 300 people is forecasted by the end of the plan. We already mentioned cost of risk, very good news in all aspects total down EUR 600 million to EUR 2.250 billion, net bad loan down to 0.36%, which became 0.1%, excluding state-guaranteed loans.

The cost of risk is down to 40 basis points, but this 40 basis points includes 5 basis points related to front-loading future derisking for other EUR 300 million, which we forecast to materialized during this year default rate at a low rate of 0.84%, increasing cure rate and of course, decreasing net default rate also the coverage is a record level for us without the state guarantee, we had almost 56% in NPEs and 77% of bad loans.

I'll give the floor to Edoardo Ginevra for the financial and capital side.

Thank you very much, Giuseppe. I try to be very quick in the interest of time. Good evening, every one, of course. So in this Page 21, we see the evolution of the contribution of the financial component to our P&L and our capital reserves performed very well during the year. They had a negative contribution on a net basis above EUR 500 million now or below EUR 300 million, with a further improvement during the month of January. Bond portfolio is slightly below EUR 47 billion, decrease in the quarter was due to some maturities. But you may remember that we described the evolution of this portfolio is pre-investing during the rest of the year also for some maturities that we had in the final part of the year.

Composition is similar to third quarter with 68% at amortized cost. Out of this, EUR 46.6 billion, EUR 38 billion are Govies, of which Italy accounts for 38%. Most of Italian bonds as usual, as in the previous quarters are in the area of -- in the category of amortized cost. Net financial result was negative last year for EUR 82 million, now is positive for EUR 48 million. Most important drivers of these results is -- this evolution are the reduction in cost of certificates from negative contribution to EUR 184 million to negative EUR 167 million.

The other components accounted for EUR 215 million, out of which almost EUR 100 million are represented by Monte Paschi dividends, which, by the way, left us some room for prudent valuations of loans booked at fair value during Q4. '22, cash is almost at EUR 54 billion with a positive evolution on total direct funding that now is at above EUR 137 billion, thanks to EUR 5 billion almost of increase in direct funding in current accounting deposits, sorry. Indicators of liquidity and funding are on a very solid level with LCR in particular, that is at 147%, which is quite the level that on a 12-month basis, the average we have continuously registered. NSFR is constant at 126%. MREL buffer is at almost 7.7 percentage points.

The evolution of our funding has been very successful as far as our access to the markets is concerned. Thanks also to positive influence of improvement in credit ratings from Fitch, from Moody's and DBRS, we have been upgraded whilst S&P during the year assigned to the bank a positive outlook. Moody's and DBRS for the first time, showed for the deposit category, also the A class of our rating. We were successful in issuing EUR 2.65 billion of wholesale bonds, of which [ EUR 175 billion ] using GS&S bond framework or EU GB fact sheet.

We were the first Italian bank issuing a green bond using the EU labor for EUR 500 million during the year. Secondary market spreads that were described on an average basis in the first part of this presentation in NII slide, here are analyzed in terms of the evolution between -- or the difference between the average spread of the strategic plan, which is the blue bar and the issuance spread that for that category, we have reported -- we have achieved in '25. So for example, senior preferred, we have in the plan, 140 basis points of spread, we issued this year at 95 basis points of spread and secondary market, which may, of course, be is a different type of indicator, but it's interesting as a benchmark, as at the end of last year was at 63 basis points.

Similarly, also for the other categories, you see that we are well ahead of where we expect it to be when we drafted the plan in February last year. Page on capital. Here, we focus on the evolution of this fourth quarter where we started at 13.52%. We have to book -- to account for the levy on extra profit reserves, which dragged the capital for 18 basis points. So the real rebate starting point is 13.34%. We are at a pro forma level of 13.76%. This is thanks to the contribution of our P&L, which after dividend contributes for 9 basis points, 72 minus 63 to the contribution of DTAs and fair value comprehensive income reserves. RWA operational risks is a one-off of 19 basis points due to the need to take account of Anima in our yearly -- full year P&L replacing the previous full year P&L, which was less rich in terms of revenues and final other components account for 4 bps. Organic capital creation in this quarter has been 24 basis points on a pro forma basis, taking into account the hedging transactions that we have executed in January.

We are on top 18 basis points coming to the level I mentioned 13.76%. MDA buffer allows us room for additional business expansions, investment opportunities, capital deployment, which is as high as 408 basis points or on proforma basis 425. Let me remind that the minimum threshold in the plan 350. Finally, we continue to have material level of capital that will be created from additional sources on top of P&L, in particular, DTA and fair value comprehensive income reserves will contribute to capital creation during the remaining part of the plan horizon in the next 2 years for an expected level of 150 basis points of about 150 basis points. And I'll leave the floor again to Giuseppe.

Okay. Just for the conclusion, thank you. So Page 26, we are very satisfied and proud also of the new bank with a very strong and diversified business model we were able to build in the last years, starting from a very normal commercial bank driven by NII. Now as you can see, we are able to deliver almost 50% through commission. Meanwhile, growing also in terms of net profit. So it's just not a substitution of income and profitability, but it's a growing profitability coming from a sustainable remuneration of commission.

Basically, we have the growth we experienced in the last year, which is already the double of the growth we will need to have in the next 2 years to reach the target '27, but more important, again, we are already at the 50% that we expect in terms of non-NII contribution. Let me say that 35% of our net profit comes from wealth management, asset management and protection, which was only 24% last year and below 20% in the previous year. So all these allow us to be very confident in the trajectory towards the EUR 2.150 billion of the net income target with a very consistent ROTE and ROE we almost already reached and the capability to continue to distribute a dividend of EUR 1 also this year, which, as you can see, the progression from EUR 0.23 to EUR 0.56 last 2 years ago, EUR 1 last year. But as you may remember, this EUR 1 was coming from out of EUR 400 million coming from the Numia transaction.

This year, the EUR 1.5 billion comes all from a repeatable and sustainable profitability, capability to generate profitability. All in all, we have -- with this distribution, we will reach the EUR 3 billion, which is half of what we promised to the market, which is EUR 6 billion, but we are already ahead of expectation because the first 2 years were considered lower in terms of profitability vis-a-vis the next 2 years. If we consider the average price of the stock in 2025, the dividend yield is 9%.

Let's have a look, recap on '25, profitability at record level with over delivery of EUR 130 million, more diversified and sustainable business model, producing 50% of non-NII revenues, record of asset quality, reduction of NPE to 1.2% and a good increase in the common equity Tier 1 ratio, notwithstanding a very difficult year in terms of headwind to just not remember that the year was, in a way, more difficult for many reasons. But notwithstanding that, we are already ahead of the figure we gave with our business plan in February vis-a-vis the target '26, both in terms of total revenues, in terms of operating cost, in terms of cost of risk.

And this, of course, this allow us to say that the pretax targets are confirmed with some room for overperformance. Of course, we know that for next 2 years, there will be better next 3 years, there will be some external challenge. We have a budget law, which increased the tax rate in the plan horizon. We have also some incremental due to specific systemic charge. Notwithstanding that, we think that through managerial action, the advantage accrued in '25, the capital generation that we are able to produce, we will, in any case, be able to deliver EUR 1 dividend per share also in 2026 and doing so, remaining ahead of the EUR 6 billion target distribution that we have for 2027. This is my final page. So please, I would go for Q&A section.

[Operator Instructions] First question is from Giovanni Razzoli, Deutsche Bank.

I have 2 questions. The first one is on the NII. We have seen an acceleration of the household segment in terms of loan growth in the Q4, but most of the growth was driven quarter-on-quarter by the financial institutions. So I expect that the trend of the NII in the coming quarters could be supported more by the household -- the growth in the household volumes going forward, whether this -- so I was wondering whether this -- my understanding is correct. Because on the other side, I've seen that you have reduced by around EUR 2 billion your replicating portfolio in the Q4 when compared with the Q3.

And if I remember it correctly, you tend to replicate much less than the other peers. So I was wondering what shall we expect going forward in terms of NII when compared with the Q4? And the second question related to the governance and specifically to the evolution of the governance and legal framework in the coming weeks. We've seen some coverage on the press. You are planning to introduce the changes in the Articles of Association. So what are the steps that we shall expect from here in terms of governance, legal framework? So if you have the opportunity to clarify this to us.

Okay. Thank you. Let's start from NII. We think that the pace of new loans we were able to produce last year is -- and also the increase in Q-on-Q is a good signal for forecasting a slow increase also in terms of portfolio of stock of loans. Beginning of the year is not that bad. Of course, every year, you have to stand and replace what is expiring end of the year, but we are already at a quite good pace. We are confident that this year could be the first year of recovery also in terms of loans.

But don't forget that last year, we grew EUR 5 billion in terms of deposit. This, I think, a very strong assumption. I don't know if we can repeat the same pace. But in any case, the margin coming from deposit is exactly the same, the margin coming from loans. So this is another very good way to increase NII without taking further risks. Of course, we will stand close to our clients, taking all the advantage also for increasing loans, but it's not the only way to better NII. I leave to Edoardo the replicating portfolio, but maybe I can go through your question about governance.

As you have seen from the published documents, we plan to amend our bylaws to comply with Legge Capitali and provide for an increased minority representation to our shareholders in line with the spirit of the law. As you know, we have a new EGM on February 23, which will be followed by the submission of slates for the renewal of the Board. If we will go for the list of the Board, we have to submit 40 days before the Ordinary Shareholders' Meeting of 16 April. So this will be within 7 of March.

And if the list will be presented by the shareholders, the presentation will be allowed up to 25 days before such extraordinary meeting, so within 22 of March. In terms, of course, of requirement, I think that there are the usual requirement, which are requested by ECB. So of course, fit and proper requirements, independence requirements, rules, equilibrium on gender. And specifically, of course, we have some bylaws, which imply that, of course, in terms of competitors, we cannot have in our Board members of competitors.

Thank you. On the replicating portfolio, you are right. We have reduced the level versus what we had in September. But this was, I think, completely planned in September, we basically entered into new transactions to anticipate of some swaps that was due to happen by end of the year. So we came back to the level that we plan to have in our strategic plan, which is exactly EUR 25 billion. Next year, we will start the year with this EUR 25 billion and the contribution to NII of the replicating portfolio is expected to be supportive to represent a tailwind for the overall NII given the evolution of especially the floating rate, the lag that is paying for us.

So also the replicating portfolio on top of the commercial evolution of the commercial part will allow us to reap some benefits. Another point worth mentioning is that despite the observation you made on replicating portfolio, still our sensitivity, overall NII sensitivity is reduced especially compared to June, given that on the period, it was EUR 50 million higher like-for-like, of course, so considering the contribution to NII or the contribution including certificates.

Next question is coming from Sofie Caroline Peterzens, Goldman Sachs.

Here is Sofie from Goldman Sachs. So my first question would be on the investment products on Slide 15. We can see that the upfront fees were very strong at EUR 343 million. Should we expect this to remain the run rate going forward? Or do you see kind of scope for increasing both upfront fees and also the running fees on the investment products? And then my second question is on the systemic charges that you mentioned on Slide 26 -- sorry, 27 that you expect kind of incremental systemic charges. Can you just walk us through what these charges are and how we should think about these new challenges?

Thank you, Sofie. On investment products, yes, it's been a very strong pace, but we come from years of increasing this kind of product. And of course, having now Anima into our group, it will be even easy to have the opportunity to give -- to offer our clients the best product having the possibility to offer without any advantage for us, but only in the interest of the client, both insurance product, asset under management, funds, certificates and whatever. So we think this is something that we can continue. Asset under management, notwithstanding the growth of the last years, we are still with a share which is a bit below the average of our competitors. So we feel that we can have the opportunity to have a common policy together with Anima and grow in this respect.

I have to add that next year, we will be -- this year, of course, '26 will be more attentive to the product, which will generate a run rate rather than upfront. This year, we were a bit in the middle of our bancassurance business proposition. And we had also the need to serve our clients with product which we were not -- we were more in the interest of our clients in terms of yield, reducing our commission in the run rate. Starting from this year, we are not anymore in this situation. We will have only one company, which will do together with Anima, the new product, and this will make much easier to have product, which will have more run rate embedded.

I leave Edoardo for the systemic charge.

So on systemic charge, of course, there is this specific case, which is very well known in the Italian market of Banca Progetto, which will require Italian banks to contribute through the interbank fund. Our share is around EUR 20 million per year in the next 5 years. On top, there is a small amount that will contribute to the insurance fund, which is additional EUR 5 million, EUR 6 million. I'm talking about gross before tax.

Next question is from Antonio Reale, Bank of America.

It's Antonio from Bank of America. Two questions from me, please. The first one is on your outlook for revenues in 2026. Your Slide 27 shows your business plan target, which, I mean, increasingly look very conservative now in the context of the strong numbers you've managed to deliver in 2025 and also in the context of your remarks in the presentation. So as things stand, your 2026 revenue number, it basically imply no growth year-on-year. And I'd like to understand or get a more up-to-date target on what you think this number could look like and possibly understand the moving parts on the sort of key revenue line items.

The second question is really a follow-up on the previous question on governance because I'm trying to square up. I think yesterday, Crédit Agricole said that they would like to have a fair representation on the Board. And I mean, it's no surprise given the shareholder register. Based on what you said earlier though, of not having members of a competitor on the Board, do you think this is going to require an additional approval from ECB or other authorities in Italy? I'm just trying to understand how this comment squares up, if I understand correctly.

Okay. Yes, every time we announce some plan, it looks like not to be conservative, then when we reach, of course, the final step looks conservative. Let's say that we are very happy where we stand right now. Of course, you know which were the figure for 2026. On top of that, we have some headwinds that I mentioned before. We are committed to make good results also for '26, trying to offset this EUR 100 million of lower net profit coming from the new taxation and the contribution that Edoardo was specifying. So I don't think it's something -- if you start from EUR 1.880 billion, which is the net profit of this year, not considering the contribution of Anima, I think is a quite impressive increase towards, of course, the final target, which is more related to '27.

And again, we are also committing in paying the same amount of dividend for this year. In terms of governance, no, we do not need any approval is Crédit Agricole. I think that need approval from ECB. We just have -- as I mentioned before, we have done a new -- some change in our bylaws in order to accommodate not only for Crédit Agricole, but for the minorities, all the minorities, a more consistent pace, also considering the level of shareholding held by Crédit Agricole. So we are going ahead. Of course, in order to change the bylaw, we need an approval from ECB, but it's not related to the Crédit Agricole possible Board member.

Next question is from Manuela Meroni, Intesa Sanpaolo.

The first one on the capital base. I'm wondering if you expected to make some optimization actions of your risk-weighted assets right now in 2026. I'm referring to potential SRT or maybe some action in order to reduce the capital impact of Anima. The second question is a follow-up on the question that you just answered. I would like to understand what should happen in order to allow you to revise upward revise your targets for 2026, '27. is this something that at some stage in 2026, we may expect? And the third question is on the hedging transaction that you executed in January. I'm wondering if you can elaborate a little bit more, providing some, let's say, indication also if there is any impact on the P&L.

Thank you, Manuela. Edoardo here, Ginevra. In 2026, the indication that we gave of 14% is based on, I would say, more of the same of what we have done during this year. So strong attention to capital absorption in origination, management actions to reoptimize RWA, including, as you mentioned, correctly, synthetic securitizations and capital production through [indiscernible] 20% retained earnings and DTAs and put to par of fair value comprehensive income.

We have on top kind of confidence that at least with this market scenario, we may be even more effective, for example, in managing the bond portfolio and creating additional capital out of that if needed. We don't have extraordinary transactions expected in this evolution to contribute to this evolution. In this fashion, what we have done in the hedging transaction is a simple capital hedging structure that we have to avoid to deduct from capital participations that would have been -- that have exceeded the threshold of 10% for the total participations below 10% -- so it's a transaction that creates a synthetic short position, counterbalancing the long positions and net-net generating capital efficiency via avoiding the deduction.

As far as your second question, let me remember, Manuela, that we gave this number only in February this year were numbers that we gave under an OPS. So I think you can understand that we were not shy where we gave this number to the market. We are very happy that in the first year, we are above we are as well confident that we will be good in '26 and '27. But for '26, let at least go through the 1 or 2 quarters in order to understand better the situation for '27, just some figure. We have a target of EUR 2.15 billion.

Without Anima, we are at EUR 1.880 billion is EUR 270 million. Let me say that we can add another EUR 100 million of tax that we didn't expect is EUR 370 million is 20% more than the net profit this year. So let me wait a bit in order to increase the 20% increase on net profit to which we are still very much committed, but it's difficult to say that we can right now, 2 years in advance, raise this target.

Next question is from Delphine Lee, JPMorgan.

Just first of all, just wanted to come back on the governance. Just trying to think about like if you could give us some color about what you think once Crédit Agricole will have some representation in the Board, like what implication that would have long term strategically? My second question is just like a very quick one on guidance on sort of net financial results, if you don't mind, given it can be sometimes a bit volatile. I mean, if you don't mind giving us a little bit of sort of a reminder of what you said in your business plan -- and then also maybe for this year, what do you expect including or excluding the dividend of Monte Paschi?

Okay. Delphine for the first question, frankly speaking, I think that there will be an important shareholders, which will be represented in the Board doesn't change that the bank remains a public company with a very important shareholder. I think we have been able to run the bank quite independently up to now. All the move we have done in insurance asset management are completely showing the independence of mind of our management.

So I don't expect any implication in this regard. Of course, we will strengthen all the rules related to the conflict of interest. This is something that also ECB will require for anybody being in our Board it running a business, which is in some way in competition with us. But for the rest, I think also Crédit Agricole is very happy. They have invested very recently in our bank. They are getting some good reward from the investment. We have 2 joint ventures in common. So I don't expect anything different from what we do right now.

Okay. On net financial result, I think that it is not surprise that this is an item that shows some volatility. We gave -- we insert in our strategic plan a conservative outlook for this item on the P&L, which after some reclassifications that we have done and we explained to the analyst community in June or in the second quarter of this year can be quantified in slightly below EUR 50 million. This is the indication for 2027. Current expectation is to be able -- to be confident to do better than that. leveraging on both the reduction in cost of certificates and on the ability to produce revenues from our structuring activity that is included within the certificates and so on and so forth, which is included within trading. Last but not least, of course, this component this item will include dividends from MPS, which is factored into our plan for an amount consistent with the dividend payout, which was announced 1 year ago by the bank.

Next question is from Luis Pratas, Autonomous Research.

The first one is on the cost of risk guidance. So essentially, you printed 40 basis points this year. You also reduced the NPE ratio significantly. I was just wondering why do you reiterate your 43 basis points 2026 target? Are you seeing like any signs of deterioration picking up? And then my second question is on the tax rate. Can you provide the guidance for the tax rate in 2026? I think you had 29% in 2025. So not sure if there were like any one-offs here? Or can we just assume maybe like 2 percentage points higher, so 31%.

No, you're right. Of course, cost of risk, if we have -- now our cost of risk is basically driven by default rate. As you were mentioning, we have a very low stock, very well provisioned. So we don't have any possible increase of cost of risk coming from managing the stock. Of course, inflow, default rate, it is always a question mark. We have had a very good '25 as well as good '24. With this, assuming there will be -- could be another year at that level, of course, we will have some better in terms of cost of risk.

But if you -- of course, it's very difficult, especially if we forecast a potential increase in the demand, which we don't see yet so strong, but could become strong, it's difficult to not consider at least 1% of default rate. If the default rate will be lower, considering that we don't have any stock to manage increasing provision, of course, the run rate related only to the cost -- to the default will be lower than our guidance, and we will update it during the year.

Tax rate, we are in the area -- in our outlook in the area of 33%, including, of course, the increase in taxes coming from the recent budget law. This year, correct, your observation has been lower. It's a technical out of the same budget originating one-off effects on DTAs that were readjusted to the new tax rates introduced by the budget law. So we basically have increased the current fair value of DTAs and this generated a one-off benefit on taxes.

Next question is from Lorenzo Giacometti, Intermonte.

I have actually 2. So the first one is whether there is any chance that you will be able to obtain a review on the ECBs decision on the Danish Compromise? And then the second one also on Anima is what are, in your opinion, like the most reasonable options you have in the medium term for the stake you hold in Anima, I mean, keep it listed, delisted or doing in industrial partners.

No. On the Danish Compromise, I think that the recent publication by EBA seems to close the various doors. So we are not taking in our plans, we're not assuming to have benefits from reviews. Also bearing in mind this recent position from EBA. On Anima, 10%.

On Anima, as I mentioned also before other presentation, we are really happy to be free to decide what to do with the remaining 10%. As you know, we have the possibility to take on board other partner, commercial -- new commercial partner, old commercial partner, all the definition of the banking system in Italy is ongoing. So let us wait at the right moment to decide what to do. Of course, having the Anima listed, I think, is much more flexible to operate in this respect.

Also considering that basically for 1 year, we had to offer to retire the 10% stake, the same price of the OPA we did. And basically right during these hours, the price of Animas is coming back towards EUR 7. So of course, it's something that we will decide, but we are not pressed. We have many projects and many potential opportunities that we want to exploit.

Next question is from Noemi Peruch, Morgan Stanley.

So I would like to ask which P&L line you see -- in which P&L line you see room for overperformance in 2026? And which actions are you planning to implement to reach targets? You mentioned wholesale spread, but if you could elaborate more, it would be very useful. And then on the capital and 18 bps common equity impact from the hedging transaction. Am I understanding correctly that you hedged the stake in Monte? And if so, what's the net stake at the minute?

Again, we gave on page -- I think the last page of my presentation was very clear in saying that we are above the plan, both in total revenues and operating costs and cost of risk. And for sure, this will be the aspect that are more encouraging. Specifically, I would say, commission, thanks to the consolidation of Anima for the full year, of course, the insurance that we made the focus in order to make you understand the pace of growth we are experiencing. Some -- all the commission, I think we will grow and will be better than this year.

Of course, NII -- depends from the interest rate where they will stand, of course, [indiscernible], which is like the current one, and we consider it to be stable. Of course, we think that we will be in line with the 2026 forecast, but lower than this year. Cost of risk, as I mentioned before to your colleague for Q&A, we think that depends on default rate. We are assuming the 1% default rate. We think that with a better default rate, we can do better.

On the hedging transaction, I prefer to repeat what I said, we had inefficiencies due to the fact that in total, our participations below 10%, exceeded the 10% of own funds threshold, and we implemented the transaction allowing us to come back within that maximum level, avoiding these deductions.

Next question is from Hugo Cruz, KBW.

Yes, just one more question. So you talked about a lot of the revenue lines. I don't think you've given an indication for trading, which has been very difficult to forecast. And also related to trading, should we expect any material impact from this hedging transaction in January? So if you could just give a bit of an indication what could be the trading income in 2026?

Well, it's always, I mean, difficult to commit with indications on single lines of the P&L. Trading, of course, is the most difficult. So again, allow me to say that in the current market scenario, we believe we'll be able to do better than to improve the final level of contribution of trading, both in '26 and in '27, allowing us some room of maneuver in general to exploit tailwinds on the revenue side.

Next question is from Adele Palama, UBS.

Sorry to repeat the question, but I have a question on the NII evolution. So in the target for 2026, so the quarterly run rate basically implied a little bit of decrease versus this quarter print. So now I understand that the guidance has like a degree of conservativeness. But I want you to understand like in terms of lending growth, are you still expecting -- I think the plan had a 1.7% growth assumption. And then how is the lending growth expected also for 2027? I mean is there any change or potential upside on that loan growth?

And then which are the possible headwinds that might bring the quarterly run rate for 2026 NII down versus the fourth quarter? And then the second question is actually on the capital. I just want to double check the DTA recovery that you had in 2025, the impact on the capital, the total one. And then the DTA recovery that you expect for 2026 and 2027. I have like an amount of around 80 basis points between '26 and '27. I just want to check if that amount is correct.

Okay. I'll try to answer to your first question related to NII, I think it's very consistent with the Euribor forecast that all the banks are doing, basically flat on 2%. We are still linked to our forecast of growth in terms of loans. But as I mentioned before, we -- for instance, this year, we were very much better in terms of deposit growth. So we depend also on that. Having said that, we are reducing in our forecast, the reduction vis-a-vis '25, if you consider the new Euribor average for '26. And we feel that it's not conservative. It's quite consistent with the current situation. Maybe Edoardo, do you want to say on the DTA?

Yes, we gave indication that we expect from DTA in February comprehensive income in total, 150 basis points of capital creation between '26 and '27. Most of this capital creation will definitely come from DTAs.

Okay. Sorry, if I can make a follow-up on the NII. I mean, so is the lending growth for 1.7% has an upside risk? -- in your estimates?

What do you mean, sorry, an upside risk...

Definitely you can do better.

Okay. Of course, normally, if there is a growth, our bank historically due to the geographic footprint and strength in structured finance, SMEs, corporates, normally, we grow more than the banking system. But we don't see yet such a strong growth in order to say that we can change the forecast of 1.5%, 1.6% growth.

Ladies and gentlemen, there are no more questions registered at this time. Sorry, we have one more question from Giuseppe Grimaldi, BNP Paribas.

I have a brief one related to the replicating, just a clarification. You said before that you expect some tailwind from the replicating this year. Can you help us in understanding the magnitude of that?

I mean 25 billion of average volumes magnitude may help if you compare a scenario of past year, 2.17% -- 2.2%, let's say, average Euribor. This year expected level of 2% and some delay in the translation of Euribor into cost of the swap. So the order of magnitude is slightly less than the 20 basis points multiplied by the EUR 25 billion. Also will depend, sorry, on renewal of existing swaps with new ones. So there are risks in that because we have part of this replicating that is maturing during the year, some EUR 6 billion -- and over time, we will need to see what will be the market rates from the swap curve.

And maybe just a quick follow-up. If you can -- if we can expect some growth in NII considering you have given a pretty solid outlook in terms of volume and replicating as well could be -- is expected to be a tailwind. So what kind of NII growth we can expect for '26?

We stick to the guidance that we gave in the plan, conservatively stay slightly above EUR 3 billion.

Gentlemen, we have no more questions registered at this time.

Thank you very much to everybody. I expect to see you in person in the next few days, and thanks for your attendances. Bye.

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

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Group 9 Months 2025 Results Presentation. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.

Good afternoon, and welcome to Banco BPM 9-month Results Conference Call. We have here Giuseppe Castagna, our CEO; and Edoardo Ginevra, Joint General Manager and CFO, which will take you through the presentation. This will be, as you know, followed by a Q&A session, and I kindly ask you to limit yourself to 2 questions.

Now I hand over to Giuseppe.

Thank you, Arne. Thank you, everybody, for being with us for this Q3 presentation. Let's start immediately on Page 6 of our presentation. We wanted to show you just a full picture of what we are doing and how we are delivering our vision that we announced with our business plan in February this year.

We think we have completed almost the product factory activity that we started 2.5 years ago with the bancassurance, payment system, life insurance and recently asset under management. This brought us already quite a relevant set of results, let's say, almost EUR 400 billion of total customer financial assets, 49% of fee-based generated models or non-NII revenues on total revenues, a strong reduction on NPE ratio, 2.48% gross and 1.4% net and maintaining and building up, again, a strong capital position up to 135%.

Profitability is growing as we expected. We have now reached ROTE of 22% vis-a-vis 16% of 2024 and 14% in 2023 with an ROE which stands at 6.5%. In terms of shareholder remuneration, we can confirm that the Board has approved a distribution of EUR 0.46 per action per shares to be paid in -- later in November on 26th of November this month, representing interim dividend for 2025.

If you can make a comparison with the previous dividends starting from '22, you can see the growth that we are having, considering like-for-like results, EUR 350 million '22, EUR 850 million '23, EUR 1,100 million, excluding extraordinary distribution for the Numia one-off in 2024 and already EUR 700 million in 2025. Total shareholder remuneration during this year is 565%. We will -- the dividend yield that we will pay will be 7.3% on a yearly basis.

Net income stands at EUR 1.660 billion, well on track towards our guidance. Common equity ratio at 13.52% Again, as you can see, excluding one-off, we are 17% higher than last year results, and we have already reached 85% of the total guidance we gave for this year. Then we will come back to that. Net income was very strong, EUR 450 million, considering the seasonality of August and one of the best quarter -- third quarter in our story.

This pace we deem is fully consistent with our long-term targets. In terms of the commercial performance, new lending was 39% higher year-on-year. Asset under management net flows was EUR 1.7 billion in 9 months compared to EUR 700 million of 2024 and the cost income stood at 45%, down from 47% 9 months '24. Again, cost of risk reduction to 34 basis points compared with 40 basis points last year.

The interim dividend has a yield on 6-month yield of 3.6% and again, has been approved today will be paid on 26th of November. We have already accrued EUR 170 million in the first 9 months of the year to be distributed between the interim and the final distribution.

Economics are very solid, both in terms of growth in revenues, 5% stated vis-a-vis last year. If we consider pro forma the contribution of Anima, we increased these results EUR 120 million. We already say that non-NII revenues stood pro forma at 49%, very close to 50% of the target in '27 as well as net fee and commission rose 18%, including the contribution of Anima, but pro forma also the first quarter of Anima, this will grow of another EUR 140 million.

Also the contribution from income from associates, insurance NFR increased from EUR 140 million to EUR 290 million in line with our expectation for '27. In terms of cost control, we were able to reduce again the cost-income to 45% with a reduction of 2% like-for-like vis-a-vis '24 and just a slight increase if we consider the Anima inclusion of cost. Significant decline in provision from 30% year-on-year from EUR 350 million to EUR 24 million with a cost of risk going down from 40 to 34 basis points.

Capital, if we consider the acquisition of Anima and the regulatory headwinds, we were able to build up 152 basis points in terms of organic generation through managerial action after paying 240 basis points out of the Anima transaction and 60 basis points for regulatory headwinds and including, of course, also 200 basis points that we will pay as dividend, 80% dividend payout.

On Page 10, let's have a look to the trajectory towards our target in 2027. As we already said, net income grew in terms of quality of the contribution. You remember that we switched our bank from a pure commercial banking activity to a more equilibrated and more capital-light activity, diversified activity. We had the target to grow from 24% to 35% is a contribution in terms of wealth asset management and protection.

We are already at 33% after 9 months from the target decision. The same is for specialty banking contribution that is almost in line with the minimum target of 27% and reduction of commercial banking activity, which went down from 65% to 57% with a target of 50% to 55%. The quality -- these results were driven by non-NII revenues, again, growing from 40% to 49%, cost income ratio reducing from 47% to 45% cost of risk down to 34 basis points.

In terms of figure numbers and the different contribution of the main area vis-a-vis the current results and the target -- we have still -- we are fully in line with our expectations. We still have a delay of EUR 30 million per quarter in terms of NII, which will easily reach through the refresh of replicating portfolio in the next couple of years. The decrease in cost of wholesale funding, which is already contributing more than EUR 40 million per year and the growing commercial volumes, which we expect in terms to up to EUR 3 billion by the end of the business plan.

Net fees and commission, still we have some growth to expect from the full speed of the different product factory, including, of course, Anima contribution and improvement in the running fees, but also we expect some improvement from insurance business. You may remember that this year, we had 2 IT migration for both life and non-life business, which impacted on our results and also on the payment system activity with Numia.

Meanwhile, we are still -- we are experiencing a very strong growth in terms of fees coming from corporate investment banking, Banco agro's trade finance, and we expect this to continue to grow for the coming 2 years. In terms of cost, both operating cost and cost of risk as we anticipated are well on track.

Cost of risk is below the target we expected. So we have an advantage that would help the final target that we have in terms of net profit. So very confident to reach our target. Let's have a look to Q3. We wanted to dedicate a slide to the Q3 contribution. We are very satisfied of our EUR 450 million of results.

On the right side of the slide, you can see the profit before tax, which stood at EUR 685 million in Q3, which has normally deflated by seasonality, but the difference of EUR 70 million coming from the Q2 results is due essentially only to the Monte Paschi dividend that we included in Q2. Meanwhile, the seasonality has been partially recovered through organic improvement expected in fees and lower cost. So a very solid result for Q3.

Let's have a look to the 9 months, net interest income down 8%. But if you consider net interest income at full funding cost, which means including the cost of certificates, which are, of course, a source of funding for our bank, we go down to 5.7%. And core revenues, although experiencing a reduction of EUR 225 million in NII vis-a-vis the 9 months '24 have an increase of 1.6% as total core revenues year-on-year.

If you include the net financial result and other operating income, this advantage vis-a-vis last year grew to 5% and operating cost meanwhile registered a 2.2% increase due to the Anima impact if we consider year-on-year without Anima on a like-for-like is a reduction of 2% in general cost.

Provision down 30%, leading to a net profit from continuing operation and net income one-off down better with 17% vis-a-vis last year. On the right side, you can see the trend of the last 2 years with the continuous improvement, which are very encouraging for the remaining growth that we have to experience by 2027. As you can see, revenues grew 13%, almost EUR 550 million in 2 years. NII at full funding cost registered this year is at the same level of 2023, notwithstanding a Euribor, which is 106 points below the average of 2023.

Cost income down, cost of risk down. Let's pay some attention to net profit from continuing operation, which is EUR 1.5 billion compared to EUR 1.1 billion of '23 is EUR 440 million more also after considering almost EUR 200 million reduction of NII. So that means that we had a profit generated by a strong increase in fees and a very strong reduction in general cost and cost of risk.

We already mentioned NII. Let me just say that the reduction we had has been offset for EUR 84 million by managerial action out of EUR 100 million that we expected by 2027. So we are also, in this case, at a good point. Now we have almost the same spread asset liability in the region of EUR basis points. And we are consistently taking advantage from the bonds issue spread, which has been reducing 40 basis points, generating a lower cost in terms of NII for EUR 41 million per year.

You have some example of in the different kind of bond issued by the bank of the strong reduction we are experiencing since the previous issuance, that were strongly higher in terms of spread vis-a-vis the current situation. We also gave you some figure about the replicating portfolio, which now stood at almost EUR 28 billion. We have to refresh by the end of the year and next year for a total consideration of something like EUR 9 billion to EUR 10 billion that will improve also the general yield and the contribution to NII.

Notwithstanding, we have -- we were able to have an increase in new lending of 39%, exactly 57% in mortgages and 44% to nonfinancial corporates the level of our stock remaining basically the same. As you know, we are not registering an increase in loan demand, although we are confident that by 2026, having kept the level of loan at the same level of beginning of the year, we can register a strong increase that is testified by the good activity we are having in granting new loan.

We are taking, of course, a lot of attention to the quality of our portfolio. Stage 2 loans reduced EUR 1.6 billion to below EUR 9 billion. And now our corporate nonfinancial corporate portfolio is 53% secured, 64% if you consider only small businesses. 92% of our stock is concentrated in the best risk classes and the same level is up to 98% if we consider the new lending of the first 9 months of this year.

Let's go to Page 16. Total net fees and commission, up 3%, which would be pro forma 5% if you exclude the contribution of ecobonus and instant payments last year. Of course, the stated figure is much higher because it includes the contribution given by Anima, which is up to EUR 1.8 billion. And if we include the full consolidation of Anima starting from January, this figure is almost EUR 2 billion.

The investment product fees grew 10%, mostly in upfront fees, but with a good contribution also running fees in line with the growth of investment product placement, which after 9 months stood at EUR 17 billion vis-a-vis EUR 15 billion of last year and EUR 7 billion was realized notwithstanding EUR 2.3 billion of issuing of BTP by our bank.

Let's say that also in October, we are continuing this strong production. And also in October, we have increase of another EUR 2 billion the investment product sales. For other fees, we have a reduction, which is driven by the commercial banking activity, the 2 business line I mentioned before, especially ecobonus and instant payment, which went down EUR 35 million year-on-year. Meanwhile, we are growing almost EUR 40 million in terms of fees generated by corporate investment banking, structured finance and trade finance. So very strong results.

Let's have a look to the contribution of Anima. On the left, we have the growth in terms of total asset generated by the bank stand-alone. Also in this case, we wanted to give you the progression of the last 2 years, we grew basically EUR 20 billion in less than 2 years from EUR 210 billion to EUR 230 billion with the growth year-to-date of EUR 3.4 billion in terms of assets under custody, EUR 2.4 billion in assets under management, EUR 2.3 billion in terms of deposit.

These, of course, are excluding consolidation of Anima. In terms of net inflows, we grew EUR 1.7 billion versus EUR 700 million last year. On the right side, you have the consolidation of Anima. We increased EUR 230 billion to almost EUR 390 billion vis-a-vis EUR 377 billion of end of '24. So a strong increase also in terms of Anima asset contributed to the bank.

On Page 18, on the left side, you see the main feature of Anima, which we consider a first-class network, which is still performing consistently well. And we have on the right, the outstanding commercial and financial results, a growth in assets under management of 2.4%, namely EUR 2.5 billion in 9 months of asset under management net flows, excluding the insurance mandates.

In terms of revenues and net income in the 9 months compared to 9 months '24, we have an increase of 11% in terms of revenues [ up 50% ] in terms of net income generated by Anima. Cost-income ratio down to 45% as you can see, like-for-like, we have a reduction of 2%. Meanwhile, we have a stated with a small increase of 1%, driven by the Anima inclusion. The staff cost was down, again, like-for-like 1%. Still, we have some further advantages that will be generated in Q4, even though mostly offset compensated by the new labor contract and hirings that we are still having in order to offset the exit of the early retirement scheme.

We will have another EUR 40 million of reduction next year generated by the early retirement scheme ended December '25, but part of that, of course, will be offset by the. Also other administrative expenses and D&A are down 4% like-for-like and other admin expenses stand-alone are down 7%. Cost of risk at a very good level of 34 basis points, driven in effective credit management over the life cycle.

The gross total NPEs went down from EUR 3.2 billion to EUR 2.5 billion, the net from EUR 1.7 billion to EUR 1.35 billion. The net bad loan ratio is low as 0.4% of total loans as much as we -- if we include also the state guarantee, this figure go down to 0.1%. And the share of the cake between UTP and bad loans is 80% UTP and 20% bad loans. We already mentioned the reduction in Stage 2. Let's see some figure that generated this 34 basis points of cost of risk.

First of all, default rate down to 0.8%, rate up from 4% to 6.5% with the net default rate which was as much low as 0.7% from 1% -- the coverage is increasing both in terms of total coverage to 45.7% as total NPEs with vintage in terms of years, which has been reduced from 2.5 to basically 2.1 years. If we include the state guarantee -- if we exclude the state guarantee NPEs, we have an increase in bad loans to 77% in UTP to 43% and in total NPEs, 55.3%.

Let me pass the -- give the floor to Edoardo for some figure in terms of net financial results.

Thank you, Giuseppe. So very quickly on the financial contribution to capital and the financial part of the balance sheet contribution to capital and to P&L. Capital-wise, we are at a contribution which from reserves at comprehensive income that remains at EUR 330 million, similar to last quarter, a significant improvement versus the value at the beginning of the year, which was negative for EUR 500 million, allowed this improvement by the active management of the bond portfolio.

In terms of stocks, situation is that we have EUR 47 billion, similar to what we had -- slightly above EUR 47 billion, similar to what we had 3 months ago and also the split between fair value comprehensive income and amortized cost didn't change, EUR 32 million as opposed to EUR 68 million with a slight increase of the fair value comprehensive income versus the beginning of the year.

Share of Italian govies on total govies is below 40%, which is our risk appetite threshold, also very well under control. Contribution to P&L, as I was saying, it's positive for EUR 97 million. Bearing in mind that in this P&L line, we have to offset the negative contribution from certificates, which is as high as EUR 129 million this year, down from EUR 29 million -- EUR 20 million in the 9 months of 2024.

So with a positive impact from the reduction in rates, as also shown in the first part of the P&L of this presentation, concerning the overall contribution of NII at full funding cost. Rest of NFR of trading is EUR 226 million positive through the year, benefiting not only from MPS dividends, but in general, from the active management of the bond portfolio.

Page 22. Liquidity is at EUR 54.7 billion, so almost EUR 55 billion, increasing again this quarter and from the beginning of the year, which was EUR 48.4 billion. Total direct funding increased, especially for the contribution of retail deposits, which, of course, leads gives interesting perspective in terms of -- interesting outlook in terms of positive potential P&L contribution, NII contribution.

We have continued actively our activity in the market for issuance being the first Italian bank and the second in Europe issuing in October a green bond under the EU green bond fact sheet. Issuance activity has been also encouraged by the positive evolution of our rating position with a positive outlook assigned by Standard & Poor's, Moody's and Fitch and an upgrade by DBRS to BBB (high). DBRS also is -- has assigned a first A level rating to the bank recently in October.

Very positive, reassuring also the position for the liquidity indicators, LCR at 157%, NSFR stable at 126%, MREL buffer at 7.8 percentage points of the total. So a very significant level of the buffer.

23 for capital -- Page 23 for capital. As mentioned in the first part of this presentation, capital creation in -- from the beginning of the year has been 152 basis points after taking into account more than 200 basis points of dividends. In the last quarter, the progress has been 20 basis points, which is some 12 basis points from the difference between positive performance and accounting for additional dividends, 20 basis points from our source of capital that constantly gives a contribution which is DTAs and reserves fair value other comprehensive income in total, 13 basis points negative from the expansion of the books in terms of RWA increase.

On the contribution from DTA and fair value comprehensive income, we confirm that this will be important also for the rest of our plan horizon with 145 basis points as shown in the bottom of this page, materializing in between now and end of 2027. MDA buffer quite comfortable now above 400 basis points in 50 basis points above the minimum threshold of our plan.

Let me conclude. Let's recap this very strong first 9 months of the year. I don't have to remember that during the year, our bank was also some pressure, I would say. But notwithstanding that, we were able to almost complete the target for this year, the guidance for this year. Let's say that we are increasing profitability through the non-NII-related business, benefiting from our unique product factories model. We are continuing strong and efficient cost discipline. We have built up an excellent asset quality, which reflects the footprint and the geography of our branches.

All in all, we were able in 1 year to increase the ROE adjusted and ROTE adjusted adjustment means without Anima contribution -- one-off Anima contribution for '25, one-off Numia contribution for '24 up to almost 200 basis points in terms of ROE and almost 550 basis points in terms of ROTE. And this notwithstanding the NII impact due to the reduction of Euribor from 3.6% to 2.2%.

So we consider this a very strong results and already on top of our target in 27. Having already said of the capital position, the capability to build up further capital over the next quarter, we were able to approve the EUR 700 million distribution for our shareholders to be paid on 26th of November with an increase of 15% year-on-year on the interim dividend distributed in November '24, EUR 0.46 versus EUR 0.40 last year with an annualized expected dividend yield at 7.3%.

In terms of cumulative remuneration after 18 months, we are already -- we have already delivered and will distribute EUR 2.2 billion in 18 months, fully in line with the over EUR 6 billion we expect for the full duration of our business plan.

Some hint on the guidance. We already say that we prefer to leave the guidance at the level we announced EUR 1.95 billion. Whatever will be the accounting treatment of the fiscal impact that they will have, and we don't know yet which kind of impact, but we are pretty sure that having already reached 85% of the target we wanted to achieve in '25, we will be able to leave this guidance, whatever will happen in terms of fiscal impact this year. That's all.

And now we will leave the floor to M&A session -- Q&A session, sorry.

[Operator Instructions] The first question is from Giovanni Razzoli, Deutsche Bank.

I have 2 clarifications. The first one is on Slide 23. You mentioned the 145 basis points of organic capital generation that I interpret as deriving only from the release of DTA and the fair value reserve in the next 2 years. Is that -- is my understanding correct? And is my understanding correct that out of these 145 basis points, around 60 basis points are from the securities on fair value on other comprehensive income. That's my first question.

And the second one, again, on capital, I was wondering whether you plan to complete some SRT transaction on risk-weighted asset optimization in Q4 or if there are any regulatory headwinds that you can expect?

So thanks, Giovanni. As far as the question on capital -- the 2 questions on capital, let me first confirm that we are finalizing an SRT transaction, which we plan to complete in the next few weeks, so before the end of the year.

For the capital creation from DTAs and fair value comprehensive income, so this is EUR 145 million is what is expected to come as additional capital in the quarters in the next -- between the next quarter, '26 and '27 in total. You asked what is the split between DTAs and fair value comprehensive income. DTA is around EUR 120 million. The rest is fair value comprehensive income pull to par effect.

Before continuing -- let me add also that we prefer here to stick to the plan horizon. Needless to say, there is additional capital to come also after end of '27.

The next question is from Manuela Meroni, Intesa Sanpaolo.

The first one is on the guidance of 2025. You confirm your EUR 1.95 billion guidance, but considering what you have already achieved in the 9 months, this embeds a fourth quarter significantly weaker compared with the third quarter. On the other hand, you are guiding for a stabilization of NII and fees up on a quarterly basis. So I'm wondering what -- if there are some reason to be so prudent on the fourth quarter, so what you are expecting there?

And the second question is on the dividend. You have already at 13.5% common equity Tier 1 so well above your 13% minimum threshold. You have these tailwinds from DTA and fair value through the OCI. So I'm wondering if you might consider to increase the payout above the current level.

Thank you, Manuela. Let me be more precise on that. Of course, we think that we will reach the guidance. As I said before, whatever will be the final accounting principle to regulate the fiscal impact that we are still waiting from the government to deliberate.

So let me be a bit prudent, but also, let's say, on the other way, a bit aggressive in saying that even though we should be obliged to put the potential amount into profit and loss, we feel that we can be able to still respect a figure in the region of EUR 1.95 billion, which I think was not expected. And I didn't hear from anybody else such a possibility.

On dividends, of course, as you may remember, we were very much questioned about the possibility to be above 13%. In the first 3 quarters, we have generated a lot of capital. We are respecting 80% of payout still increasing to 13.5% our common equity Tier 1, let's say that still we are below our peers. So let's wait for end of the year to understand which will be the capital generated by the bank in the next couple of quarters, and then we can discuss the increase in the remuneration of the payout.

The next question is from Sofie Peterzens, Goldman Sachs.

Here is Sofie from Goldman Sachs. My first question would be on net interest income. In terms of the trough, we saw weak volumes, but new production is very encouraging and also lending margins are stabilizing. So do you think we have reached the net interest income trough? Or do you think that's still ahead of us? And then my second question would be on M&A. If you could just talk about your kind of thoughts around M&A. The press has been talking about CRA, Italy. Any comments you can make here?

So let me talk about NII and then Giuseppe on the M&A session, which you wanted to start earlier. On NII, considered that in our plan, we have a guidance of -- we have a target of slightly above EUR 3 billion for 2026, which we believe that at this point is confirmed with a scenario of Euribor at 2%. We announced already that we would be able to absorb more shocks on the scenario.

But basically, we don't see reasons why we should change this target and this assumption on given the evolution -- the market evolution that we are facing at this point. Then we expect, as described in Slide 10 that this is the basis to achieve higher level of NII and to hit our target in 2027 with a mixture of actions that will provide contribution from the financial part of the portfolio, and this is replicating portfolio and decreasing cost of wholesale funding.

To give you an idea, we have EUR 25 billion EUR 27 billion replicating portfolio target is EUR which is where we expect to stay on average next year. This EUR 25 billion are paying currently a level that is some 20 basis points above Euribor for a pure mechanical effect of time lag on the repricing and the readjustment.

If Euribor stabilizes, this mechanical effect will disappear and 20 basis points on EUR 25 billion is around EUR 50 million. Similarly, benefited from issuance of wholesale funding. We have EUR 5 billion of new issuance per year. And so in the next -- in a total of EUR 10 billion, which is the average over 2 years, including issuance of second part of this year and issuance and half of issuance of 2027, a benefit of 50 basis points leads to an improvement down the line of around EUR 50 million.

Commercial volumes, just look at the spreads, which are quite similar on the asset and on the liability side means that every EUR 1 billion either of growth in loans or growth in deposits will provide us with an improvement of some EUR 15 million, 1.5% in terms of P&L. Deposits are growing at a very -- an excellent pace, have been growing at an excellent pace throughout the last few years. Loans is the next challenge, but we believe we are very well equipped to restart in growing the loan book once investor -- once our clients will restart -- will revamp this investment process, maybe on...

Thank you, Sofie. Let me just give some color to your question. I think we have shown this year to be able to respect our guidance also considering unexpected headwind as we are having. On top of that, we managed this year to cope with the Anima acquisition on one side and let's say, to be obliged to stay unde [indiscernible] for 9 months with our network.

We had to cope with 2 IT migration in the 2 bancassurance deal and the integration of the product factory we have built up in the last year. So a lot of work to do, reaching always strong results. The same we have for 2026. Of course, we are not scared of taking one eye on reaching our target for '26 and also considering any opportunity coming from the market in terms of M&A.

We are not -- in this moment, of course, we have nothing in mind. We are not dealing with any traction. But we know very well that there are some stakeholdings either in our bank or our stakeholding in other banks that could generate during 2026, some potential M&A.

So I think we have to consider our stand-alone plan and the capability in any situation, in any market situation to respect our plan on one side, and the possibility to deal with opportunities that we show that we were able to do together with reaching our results. So attentive to have anything happen on the market. We have not many left in the market, but still with a lot of opportunities.

The next question is from Luis Pratas, Autonomous.

My first one is on NII. We saw a much lower quarterly reduction this quarter in the customer spreads compared to, let's say, Q1 and Q2. So do you think we are close to the bottom in the customer spread? And how do you see the spread going forward, split by the asset and liability spread? And then my second question is on the Anima minorities. I wanted to hear your latest thoughts on how you plan to deal with the minorities. Do you have the goal to own 100% of Anima and delist?

Thank you, Luis, for the 2 questions. Let's say, yes, we think we have reached the bottom, both in terms of asset spread. Of course, the same, I think, is also in terms of liabilities. We don't think we can -- with Euribor, which is now quite stable.

Again, I want to stress especially the work we have done on the asset spread because on the liability, I think we dealt very well with the spread. On asset, as I mentioned before, we managed to maintain the same level of stock with a strong increase, almost 40% of increase in new loans generation, which, of course, are a good boost for our commission. In a situation in which loan growth was 0% or minus 0% because we don't have -- we are not having loan growth in our country.

So thanks to our geographic footprint, we were able to stand at a very good level of new loans, maintaining the situation, but of course -- and sorry, bettering the quality of this credit book with a lot of guarantee taken also with the opportunity of the guarantee state scheme. This, of course, in a situation in which loans are not growing, and we are willing to better our quality, of course, you can lose some few basis points, which is what happened to our portfolio.

We feel, as I also understood that my colleagues think that in 2026, there will be a recovery in terms of investment. If this happen, as historically happened, our bank is -- will be in the best situation to take advantage from that. And with a growing, even though not booming, but growing market in terms of loans, I think also the asset spread will increase.

Second question about minorities. We are -- I always say that we're going to buy Anima in order to make Anima greater. We want to have our distributor of Anima. We think there is an opportunity to have some other banks joining the group of distributors. And we want to leave room for also giving a stake in Anima to this new distributor.

So until this situation will be open, and we will have the opportunity to manage some contact with other banks, I think we will leave for the time being, the stock listed, but I hope that quite soon, we will understand what will be the opportunity for the next quarter. So give us some time to experience the opportunity of having somebody else on board, and then we will decide what to do with the stake.

The next question is from Hugo Cruz, KBW.

My main question is around dividend, the final dividend for 2025. If I understand your dividend policy is you net out the gain on the revaluation of Anima. You already raised the interim larger than last year. So even if you beat the guidance on earnings, it sounds like the final dividend will be lower year-on-year. Is that something you're comfortable with or not?

And then a second question, why are you not seeing loan growth? You're in the most dynamic part of Italy. Some of your peers, at least in the past quarter have shown loan growth. So is that too much pricing competition and you don't want to compete there? Or because a system level, there is -- that you're starting to have loan growth for the whole of Italy. So why shouldn't you be doing better than the system when you are in the better part of the country?

Thank you, Hugo. For the first part, yes, of course, the one-off of Anima will not be considered. We announced that with our business plan. But of course, if we will beat the guidance, the dividend will increase and our effort will be to give a dividend, which would be as much as possible in line with last year, in which we include the Numia one-off contribution.

So let's say that like-for-like will be much better this year. We will decide, depending also on this fiscal impact, how to increase further this contribution. Let's say that when we announced the EUR 6-plus billion in 4 years, we already say that, of course, there would have been an increasing dividend distribution in the last part of the 4 years, increasing, of course, also the profitability. We are perfectly in line and hopefully, depending on the unexpected situation, we can try to also increase the contribution.

On the loans, we think we are doing better because we are basically maintaining our loans at the level they are. Meanwhile, I think there is some reduction in loan for other banks, notwithstanding is the best part. Unfortunately, investments are still lacking. So the geopolitical situation, the uncertainty on tariffs have been very persistent during the year, and we still now in the beginning of November are not having a signal -- strong signal of recovery.

But being the third year in a row, we really are confident that some recovery there could be. And in this occasion, I'm sure we will be better than others in recovering and increasing our loans.

The next question is from Ignacio Ulargui, BNP Paribas Exane.

I have 2 questions. One is on fees. I mean, do you think that whatever is not fees from specialized activities within the other fees bucket have probably bottomed at this level, and we should -- we could see some recovery into the fourth quarter, thanks to seasonality? And the second question is linked to Monte dei Paschi stake. So if you could just share with us a bit of your thoughts on the stake going forward?

Okay. Just a minute and get into the page -- yes. So you were mentioning about the product factories because we have 3 categories, commercial banking and other product factories, which means consumer credit payment system and P&C insurance. And the last one is from Corporate Investment Banking and Trade Finance, which one you are precisely?

I was just referring to the commercial banking and other fees and product factories, which -- I mean, if I just look into the year, they have been relatively flattish, whether that could be -- you see that could recover into the year-end?

Yes. We think that there will be basically everything which is not included in product factories and in corporate investment banking and trade finance activity is on the other, which mean current account, commission on loans, other commission on payment activity, money transfer and so on is included in that.

Last year, we had also a strong contribution from the discount on fiscal credit. You know that in Italy, we had such a possibility to discount the fiscal credits, the famous super bonus or ecobonus. And together with the commission that we were able to get from the instant payment, which now are not anymore possible to apply, there is a reduction of almost EUR 40 million, EUR 35 million to EUR 40 million.

The other are doing well, especially, of course, on loans because as you -- as I said before, we were increasing 40% the new loans activity. So all in all, we think that like-for-like, we are increasing the commission also on the commercial banking, and this will stand also for the next quarter.

For the other, as I mentioned before, the one from specialized activities are doing very well. Meanwhile, we have registered some reduction in the bank insurance because of the migration I was mentioning before, both in the Life activity and the non-life activity, which will not have any more, of course, going forward in the next quarter. This is for the first question.

The second question go back to the problem of we were talking about delisting Anima until we don't understand exactly what will be Monte Paschi, as you know, is a strong contributor in terms of distribution of Anima. We had in the past some talks about the possibility for them to continue this activity, also getting possibly some interest in being shareholders. So we will see after that what the final word about our stake in Monte Paschi.

The next question is from Delphine Lee, JPMorgan.

My first one is on the Italian bank taxes. I know it's still being discussed, but just wanted to kind of have your thoughts, your initial thoughts on how much that impact could be? And then my second question is on M&A. So CredAg has already commented that they wouldn't -- they're not considering selling their subsidiary in Italy. So just kind of wondering what other forms this M&A potential could take. Like, I mean, would you consider more partnerships with CredAg in Asset Management or in other areas? -- which I think is something that they would be keen on. If you could just share your thoughts here, that would be great.

Yes. So thanks for the question. On bank taxes, there are various, of course, items that are of interest by the law or the project of law, which has not been, as you know, approved yet. In the current scenario, we expect to have a one-off this year of payments of levy that is in the order of magnitude of around EUR 100 million, and this is a one-off.

For the next years, the scenario is not clear, but we expect this to be affordable in the margins of flexibility and buffers that we will have in our plan once the real amounts and the technicalities of taxes will be clarified, then of course, we will have to take care of planning the impacts and potentially adopting measures to counterbalance these impacts. But we don't believe them to be a real changer versus our targets.

Okay. Let's go back to M&A. You were mentioning CASA doesn't want to sell, but we never talk about buying the network of CASA. We're never talking about having anything else with CASA other than being, I hope, an happy shareholder of our banks. We are not aware of anything happening in terms of a possible merger.

And so we will see what happen. They also requested to increase their stake to ECB. They have not yet received the authorization. Once they will receive the authorization, they will decide the stake to take. Of course, we will understand better what could be the possibility to have some more collaboration with them. Up to now, there is nothing at all. I read the speculation about buying the activity in Italy, but there is nothing in course.

The next question is from Adele Palama, UBS.

Two questions. One is a clarification on the capital impact. So 145 basis points does include also like the impact that you were expecting in the business plan from the securitization. So if I remember correctly, you were guiding for like 48 basis points from synthetic securitization. How much of that 48 basis points has been already taken? How much is left? And if it is included in that 145 basis points.

And then if you can give us a guidance on the other provision and provision for risk and charges. Because this quarter, you reported like positive number there. I'm just trying to understand a little bit the gap versus the target, which seems a little bit conservative for full year '25. And then on cost of risk, so which is the guidance for this year?

Because again, I mean, you have reported like around 35 basis points. But then if I try to bridge with your target, it looks like that you are expecting some additional extra provision in the fourth quarter. Is that right? Which is the guidance there?

So on capital, thanks for giving the opportunity to clarify. 145 basis points that we showed -- that we mentioned in Page 23 of today's presentation is only the impact during the plan horizon from DTAs and fair value comprehensive income. Securitization transactions are on top and will continue to provide the contribution that we have announced in the plan.

By the way, we are overdelivering on that, taking into account the fact that in the plan, we said 48 basis points, including the effect of amortization of existing ones. But in general, in this quarter, we didn't have securitization since SRT transactions, we -- as I said earlier answering to the previous question, we will have impact in the fourth quarter.

And in general, we will continue to generate capital through this lever also in the next few years. Normally, the high-level guidance, I would say, is that we do 2 to 3 transactions per year, and we have an impact of each transaction of around 10 to 15 basis points on average, but part of this impact is eroded by the amortization of existing ones.

For cost of risk guidance, we always said that this year, we would have been below 40 basis points. We can confirm we don't expect extra loan loss provision in Q4. As I mentioned before, we have a 0.1 net bad loans ratio.

We have a very good default rate. We are almost at half of November, so halfway to the year-end. So I expect apart from some managerial action that we could take by the year-end, I expect something in line with the previous cost of risk.

The next question is from Matteo Panchetti, Mediobanca.

I have one clarification on RWAs and capital for the quarter. Can you please clarify because when I see on your booking loans, they are down 2% Q-on-Q, but your RWA were up quarter-on-quarter. So can you please clarify if there was any headwinds during this quarter or if the density has been increasing? And the second one is on the overlays. You still have EUR 150 million overlays, which point you will consider to release or eventually using that?

No. We have grouped the 13 basis points in Page 23. RWA and other, actually, this includes a number of of second effects that give a contribution, the specific part of RWA is only 6 basis points, and it's related in general to normal refresh of the portfolio, but nothing that creates any real drift towards a higher level of density or headwinds in this quarter.

The rest is due to a number of minor impacts, for example, increase in the value of our participations that we deduct from capital and that if they mature, if we use equity method for our valuation, if they mature net profit over the quarter, then this net profit is accounted for in the value of the participation and this value is an increase in the capital deduction. So not material effect on credit in general.

Yes, overlays, overlays, well, usual debate. Overlays, technically speaking, are not something like a treasure we have and at some point will be left for release. Overlays are a way to account for unexpected risk that are not modeled and that you capture in your framework of risk management framework and IFRS 9 accounting framework through adjustments on top of what the risk model suggests to have in terms of generic provisions on performing loans.

The only thing that counts is the level of coverage on performing Stage 1 and Stage 2. And this coverage is driven by considerations on the status of the portfolio. We are sticking to a coverage, which is in the area of above 40 basis points. We have increased from 45 to 46 basis points in this quarter.

We believe that this is our sweet spot in general in the long run. And so we believe that any comparison should take into account between banks on this KPI should take into account, of course, geographic footprint, average rating of portfolios and so on and so forth.

Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

So if there are no other questions, thank you very much for being with us for Q3, and we will see in the next days or talk to you for further details. Thank you and have a good evening.

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