Banco BPM S.p.A. (BAMI) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM First Half 2021 Group Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Roberto Peronaglio, IR Manager of Banco BPM. Please go ahead, sir.

Thank you very much. And thank you, everybody, to be with us today for the presentation of the first half results of the Banco BPM Group. As usual, let me remind that you can find the presentation on our website, in Investor Relations page. And after the presentation of Mr. Castagna, there will be a session of Q&A reserved to financial analysts. Now I leave the field to Mr. Castagna.

Good evening, everybody. Thank you for being with us. I will be as quick as possible. I know that it's 5 of August, everybody is ready to leave. Very good results for our first 6 months, especially in this quarter. Operating performance, which allows us to reach a very strong but also consistent EUR 361 million of net profit stated, which would be EUR 382 million adjusted. Let me remark that this is higher than the market consensus for full year 2021. Asset quality is still improving. You already knew that we were concluding in Q2 the Rockets transaction, which allows us to sell another EUR 1.5 billion of NPE, bad loans specifically, which led our gross NPE to 6.2%; and 5.2%, with the EBA definition. Let me remind that when we started the merger, we were as high as 24.1% of NPE ratio. Very sound also the capital position, with a good 12.9% Common Equity Tier 1 fully phased and MDA buffer over 400 basis points. Also in this case, I want to stress that we were 13.3% in December and now we are 12.9%, but after having absorbed 95 basis points as regulatory headwinds. These results give us good confidence in the future, also linked to the fact that, as you know, we have resolved in Q2 the 2 agreements in Bancassurance, which will come back in the next couple of years fully in our hands with 100% of the joint venture being part of our group. This will allow us to exploit with more flexibility and, with full potential, the strength of the Bancassurance for the next business plan. On Page 6, a set of different targets, which show how consistent is our growth in revenues, in core revenues, in total revenues, in preprovision income and, especially, in a very consistent net profit from continuing operation, which I remember is only before systemic charts. And basically, in the last 4 quarters adjusted is almost at a level more than EUR 200 million, apart from Q4 2020. On Page 7, also the growth in volumes, both in customer loans, which are plus 0.6% in the quarter and 9.6% if we consider basically the beginning of 2020, which we included in order to give you the road map since, I would say, the starting of the COVID situation. Of course, there is an enormous growth also in deposit, 18.7% since beginning of 2020, which is still growing also in the last quarter, 2.4%. As we will see in details, this is a growth driven especially by corporates because, luckily enough, for private individuals we have been able to transform almost all the increase in deposits into assets under management. As you see, assets under management grew 8% and 2.6%, still growing in last Q. More important, the net inflow year-to-date, which is EUR 1.7 billion, compared with minus EUR 400 million in Q4 2019. Gross NPE ratio, down to 6.2%; already we said that. Common Equity Tier 1, 12.9%, after 95 basis points of headwinds. And the same MDA buffer, to 402 basis points. On Page 8, this was possible during a period with the COVID impact very strong, thanks to the intensive bettering of our Digital Banking experience, which has been expanded almost to all our products and allows us now to have more than 85% of the transactions remote, more than doubling, 145% more, of app-based transactions, which were 4 million in the first half '19 and are now more than 10 million in the first half 2020. Also, the app, which the newly successful rollout of the new group mobile app grew to 24%, the total app-based transactions, versus 9% in 2019. There is also a big increase in customers using both digital and app. The digital customers grew from 42% to 53. Active mobile users on digital active users grew to 67%, from 42%, and we have reached 1.5 million of customers utilizing our app. This, of course, is thanks to the digital transformation program that we started at the beginning of our merger that now will allow us to have a new operated at the best level in the market a digital SME platform, which allows us to increase our positive customer score; an omnichannel advisory which allows us to increase of 15% the total new sales revenues; the digital branch absorbing more than 50% of the total assistance requests; and of course deploying an advanced customer analytics which allows to address more than 30% of total sales, thanks to advanced analytics program. Also the digital identity, which will allow the bank to be completely paperless, started with a rollout during this quarter and will reach half of the app customers by this year and then in 2022 hopefully completing the paperless model. Also in ESG, on Page 9, we have developed our engagement. As you know, we have issued our first EUR 500 million social bond, senior preferred, under the EUR 25 billion EMTN program. The social bond will be utilized to finance, or refinance, Italian SME loans guaranteed by the state in response to COVID-19. The bond has been bought by banks, for 43%; funds, 40%; and other institutions, for the remaining 17%. We have also improved during this quarter our ratings, [ both Standard ratings ], which were upgraded as from EE- to EE. We have a top rank in ISS ESG Governance Quality Score, where we are considered the best, with Level 1. And also the sustainability ratings of Sustainalytics ranks us amongst the top 3 banks in Italy. On Page 10, we want to show how our results we are going to present today are fully aligned with the business plan we presented last year before the outspread of COVID and allows us to be very confident in potentially present the new business plan by the presentation of Q3 results. We have shown some macro targets which was presented in our 2020-23 business plan, which of course will be updated. But as you see, the current status of first half results show how, also in terms of revenues, which were maybe not fully credible when we presented the plan, are instead fully aligned with the results we had for 2023. As you can see, total revenues in the first half is EUR 2.3 billion. And in the full year '23, there was a [ forecast ], EUR 4.4 billion. Costs are already down, operating costs envisaged in 2023. Cost/income is 55%, versus 59%. Cost of risk. Core cost of risk is in line, even though we were very prudent in again foster financing, new derisking and be very prudent in the Stage 2 increase, which brought our full cost of risk to 86 basis points. Also in terms of return on equity and the net income, the annualized first 6 months results bring us mostly to the level of 2023 business plan. This is without considering further revenue boosters, like, as I mentioned before, the Bancassurance growth engine, an opportunity which we will deploy completely in the new business plan; likewise, the additional opportunities from next-generation EU plan and funds. Also in terms of cost, we still haven't yet utilized the savings coming from the retirement scheme which we financed in 2020 and will start in the third and fourth quarter 2021, because the first 990 exits happened at end of June '21. Essentially, the impact will be partial in 2021, then almost full in 2022 and the remaining EUR 20 million or EUR 30 million in 2023. And it's not yet incorporated in the first half results. First, NPE ratio is already at the level of our '23 target, which was 5.9% under the EBA definition, and is now 5.2%. Let's go to some figures on page -- I would say on Page 20 (sic) [ 12 ], there is the stated results. Let me only stress that this amounts to EUR 361 million net profit for the first half, EUR 261 million for the second quarter, after EUR 79 million of extraordinary revenues coming from fiscal realignment on real estate, which we almost completely fully utilized to increase depreciation on other real estate, and increased loan loss provision. On Page 13, there is adjusted highlights. Let me underline, quarter-on-quarter, 5.1% higher on net interest income. 1.5% on net fees and commission. You can remember that there was a Q1 record result for us in commissions. We have been able to beat Q1 and, of course, being 16% higher than first half 2020. Also NFR was able to repeat a very good result: EUR 100 million in Q1, EUR 117 million in Q2. In this case, thanks to trading activity, but also to the revaluation of [ Nexi ] stakeholders in our balance sheet. Also the result of other revenues is very good, coming from the strong results and strong profitability of our [ product factories ]. All in all, total revenues is almost EUR 1.2 billion in Q2 and EUR 2.3 billion half year. Operating costs are almost at the same level of Q1/Q2 and also vis-a-vis 2020, which lead to preprovision income of EUR 450 million (sic) [ EUR 540 million ] for Q2, confronted with EUR 486 million for Q1. Loan loss provisions still very consistent, EUR 235 million adjusted. And in the half year EUR 379 million, which again state the amount increased to EUR 473 million. Net profit from continuing operations is EUR 246 million; as I mentioned at the beginning of the presentation, almost 8% more of EUR 227 million on Q1. And H1 is at EUR 473 million, confronted with EUR 176 million of the first half 2020. After the systemic charge, we have EUR 230 million of net profit, versus EUR 150 million in Q1, and EUR 382 million for the semester, vis-a-vis EUR 128 million of last year. Let's go to some details about the different items, starting from NII, on Page 14. The trend is consistent, 6.9 driven by the TLTRO increase drawing by EUR 10 million at the end of March 2021. We have EUR 24 million coming from the last EUR 10 billion, but also the commercial banking activity and noncommercial banking activity, which include the negative impact from reinvestment of TLTRO ex liquidity is still positive. The commercial assets. Commercial spreads are doing well. The asset spread is still at the same level basically of Q2 2020, was 178 basis points, then 180, now again 178. But the customer spread is at 116, due to the reduction of liability spread, which of course is driven by the Euribor that was 25 basis points lower than Q2 2020. The new lending is still very consistent. We were at EUR 6.3 billion in Q2: EUR 5.2 million from enterprises and corporates and EUR 1.1 billion in terms of households. If we compare H1 '21 to H1 '20, the results is even: EUR 12.1 billion. But we are an increased percentage of share of COVID-19 measures, which is as high as 39% of the total loans granted, versus 15% in 2020. Of course, in the second half of the year we think that this percentage will be opposite to the one we are presenting. Also in July, the lending was very sound. We have closed July with 2.4 additional new lending of which EUR 600 million from state-guaranteed transactions. The total of state-guaranteed transactions as of 30 of June was EUR 15 billion: EUR 1.6 billion, 100% guaranteed; EUR 13.3 billion, from 70% to 90%; driving the average level of guarantees to 86% on the EUR 15 billion drawn. We still have EUR 2 billion in pipeline as of June. Of course, EUR 600 million were utilized in July. So we have still EUR 1.4 billion to be utilized during this quarter. In terms of spread, the outflows is still lower than the inflows. So possibly, we will not lose further asset spread because this should continue also in the Q3, apart from early repayment, which we of course are not able to envisage right now. Let me stress the robust performance of new lending to households, which was plus 62% year-on-year. Also in terms of targets of TLTRO, after reaching with an excess of EUR 7 billion the first observation period, which ended in Q1, for the period ending end of 2021 we have almost EUR 3 billion in excess. On Page 16, we can see some interesting view of the moratoria COVID measures. We are remaining with EUR 4.8 billion of outstanding moratoria right now. As you remember, we started with more than EUR 16 billion. So we are down 70%. The moratoria expired pre-June 2021 was EUR 6 billion, and the default rate was 1.25%. Of the remaining moratoria, EUR 10.2 billion, EUR 5.4 billion were not postponed by clients. So as you know, by June, we had the answer or the request from our clients to postpone or not the current moratoria; the majority decided not to postpone. And so we have been left with EUR 4.8 billion of requested moratoria, ending by the end of this year. Out of the EUR 5.4 billion, we already have been checking the first EUR 3 billion of installment, of course, expiring in July, and EUR 3 billion basically added to the EUR 6 billion already expired, reduces the default rate of the expired moratoria from 1.25% to 1.10%. Of this EUR 4.8 billion of remaining moratoria, standing moratoria, 74% is in the low-medium risk asset class, rating class, only 16% in mid-high risk; 10% in high risk. Let me underline that this is a number which has been reducing from time to time, from EUR 3.9 billion, which were the mid-high risk and high risk when we started with EUR 60 million of moratoria. Then they were reduced in December to EUR 2.4 billion in these 2 categories of middle risk and high risk. And now they are reduced to EUR 1.3 billion. This means that also clients that are classified from ourselves in these 2 categories are repaying normally the installments when they renounce to the moratoria. We have also conducted -- we're still conducting a continuous strict control on all this EUR 4.8 billion. We have now reached 79% of clients who are postponing the moratoria. And out of this 79%, less than 1% declared to possibly have some problem to restart payment in January 2022. I think a very important outlook with respect to the dramatic view that we had at the beginning of the pandemic. Page 17, we have the results of net fees and commissions due to outperforming the already strong Q1 and, of course, being EUR 140 million more than last year. We basically had the same result of Q1 in terms of commercial banking fees, EUR 231 million. And we beat for EUR 8 million the management and advisory fees, coming mostly from the investment products placement but also from advisory fees and corporate finance and M&A and advisory. The trend is still increasing. As you see, June was much higher, both of April and May. And in terms of sales, the results was also good, notwithstanding the investment products placement was in Q2 a bit lower than the EUR 5.4 billion record results of Q121. We reached EUR 4.9 billion, including EUR 300 billion (sic) [ EUR 300 million ] of BTP Futura. The average of EUR 1.5 billion per month has been maintained also in July. Very good also operating costs. We are keeping operating costs under strict control. We decided to give you also the number of first half '19 because, as you know, not really the first half '20, but when we will go ahead for the full year '20, this is uncomparable with full year '21. So we prefer to make also comparison with 2019. In 2020, as you know, we had some savings thanks to the cost attention and the opportunity to exploit the COVID measures, which made savings for more than EUR 140 million. Right now, we are 2.1% higher in respect to first half 2020. And the Q2 '21 is even lower than the Q1, thanks to EUR 14 million of COVID-related savings, which we think hopefully will be the last one which we will incorporate for 2021. As I mentioned at the beginning, we still are not considering the savings which will come from our retirement scheme [ or better ]. Only EUR 3 million are already considered in the first semester. The remaining EUR 41 million for 2021 will be in the second half, another EUR 120 million in 2022, and we will go to EUR 140 million in 2023. In terms of headcount, we are now down to 20,550 people, considering 990 voluntary exits by June. We still have some further 620 people included in this scheme which will leave the bank by 2022. Also the network was rightsized. As you know, a further 300 branches were reduced between May and June of this year, leading for a total of 1,000 branches if we consider the starting point of 2,400 branches in 2017. Just a few words on the strong liquidity and funding position. Of course, this is something that [ does give ] a problem to the banking system. Right now, we have LCR over 200%. A very, very sound NSFR. TLTRO, fully exploited. Very few global amount of bonds outstanding. Notwithstanding this year, in the last 18 months we have been issuing both AT1, Tier 2, senior preferred and senior nonpreferred. Very good results coming from our securities portfolio. We had a total consideration of almost below EUR 40 billion, between [ each -- into maturity and sales ], amortized cost and trading, which had in June EUR 90 million of reserves on [ HDTS ], which now grew to more than EUR 200 million. So notwithstanding what we have realized in the first 2 Qs, which led to the very sound NSFR results, we still have more than EUR 200 million of potential reserves under these govies, and also some EUR 70 million under securities at amortized cost. I won't go through Page 20. Just give you the glance of the Italian Govies vis-a-vis the non-Italian Govies and the relative duration, which basically didn't change a lot since last quarter. Just a few words about Page 21, where you will find the NPE evolution. We are down to EUR 7.1 billion. Frankly speaking, nowadays, we are below EUR 7 billion. And net NPEs, at EUR 3.7 billion. We just wanted to remember that we started from more than EUR 30 billion of gross NPE and more than EUR 16 billion of net NPE. The share of bad loans is again after the Rockets transaction down to 30% of the total NPEs. So bad loans are accounting for 30%; UTP, for 70%. This, of course, has an impact on the coverage, where we go down from 62% to 55.4% in bad loans and 50.7% to 47.4% in total NPE. Of course, if we consider the Rockets including in the first quarter, the amount of the second quarter sees an increase both in terms of bad loans, from 54.9% to 55.4%, and also in terms of total NPE, from 45.9% to 47.4%. Almost at the same level, we have also the UTP, which are 44.6%, up from 43.1%. Also in terms of bad loans, thanks to Rockets we increased, which of course had a lot of unsecured bad loans sold, we have now increased our secured bad loans from 62% to 69%. As you can see, default rate is very comfortable, to 1.1%. It would be a bit lower than 1%, excluding DoD. 8% of danger rate. Cure rate, of course, has been reduced during this COVID period due to the strict timing and the increasing time that we now have to respect to bring back to performing our UTP. In any case, the workout rate that you will find out on Page 43 is still very sound. It was around 14% last year and this year and allows us to compensate the inflow of new nonperforming loans. On Page 22, we have on the top part of the slide the quarter reduction of gross NPE and net NPE. In the lower part, you will see our very, very prudent approach that we are still having to our cost of risk evolution. We have an increase on Q2 vis-a-vis Q1, which brings the amount of the first half in line with the first half 2020. If we talk about ordinary cost of risk, we will be down to 52 basis points after having included some round provisions on single names. And the noncore impact, which was still driven by the Project Rockets impact and the tightening of Stage 2 criteria, to which we added also our leveraged [ fines ] portfolio in this quarter, has been accounting for 34 basis points. A last page of numbers. We have a very sound capital position. We ended March in 12.7% fully loaded, 13.7% phased in. We are now up to 12.9% fully loaded and 14.1% phased in. The increase is due to 37% (sic) [ 37 bps ] of Q2 performance, 17% (sic) [ 17 bps ] already accounted for the payment of AT1 coupon and dividend stake, 10% (sic) [ 10 bps ] out of regulatory headwinds coming this time from a look-through approach on alternative funds and an opposite 10 basis points plus coming from reduction of RWAs. The total amount is 12.9%, which brings also our MDA buffer to a very solid 402 basis points. Just the last part of the slide is dedicated to the EBA Stress Test, but I think you already know exactly what was going on, and it's very good also for us. So final remarks, on Page 24. A very good year, very good quarter and very consistent with our forecast and with the business model we have in mind to develop. Solid growth in core revenues, which led to a very sound net stated and adjusted net profit. Still reduction of NPE ratio and further disposal of bad loans. And a robust capital position. Leveraging on Digital Banking and on the changing profitability coming from the outlook of our business model. On Page 25, we give you some outlook about full year 2021. Of course, the total revenues will be slightly impacted by the very strong results of Q1 in NFR. So we think we can bring -- we will reach EUR 4.4 billion. Total costs, EUR 2.5 billion. Leading to preprovision profit of EUR 1.9 billion. Cost of risk, in order to have the opportunity to give you a forecast on EPS, we consider the same cost of risk of H1. But again, it's a very prudent approach. And this will bring to an EPS of EUR 0.35 and a dividend payout, partly already accounted in Common Equity Tier 1, of 40%. This is already having 13% as a target for Common Equity, and MDA buffer again in the region of 400, but in any case, higher than 350 basis points. I have completed my presentation. I leave to you the floor for your Q&A session.

[Operator Instructions] The first question is from Christian Carrese with Intermonte.

First of all, congratulations for the results. Very solid. The first question is on the revenues; in particular, on net interest income. I would like to understand the moving parts, going forward. Looking at TLTRO contribution, commercial banking. Basically, these 2. So TLTRO, if I look at the slide, it seems to have a positive contribution in the quarter equal to EUR 24 million additional contribution compared to the first quarter. So this would mean around a 1% yield on that TLTRO. Is it correct? If you can elaborate a little bit. And in terms of loans and customer spread, what do you expect for the second part of the year? And finally, on the financial portfolio, I saw that you reduced part of the Italian Govies in the quarter. The annualized capital gains went down a little bit. Maybe they were also booked in the [ trade ] income. So what do you expect from the financial portfolio contribution, going forward? So basically, this quarter level of net interest income, do you think that is sustainable in the coming quarters? The second question is on the fees. I see that now the network is going at full speed, a very good set of results. Do you expect still some conversion in terms of deposits into assets under management? If you can give us a guide. I would expect some slowdown in the third quarter compared to the second quarter? But if you can give us an idea? The [ third ] question is on a strategic option, let's say. We see that you had the option to buy back the Bancassurance joint ventures. This could add some earnings in the future, let's say, 2023, 2024. I did some homework, and I see that taking into account the possibility to get the Danish compromise, maybe the impact on the capital would be not so big; negligible, I would say. So if you can give us an idea of what could be the contribution from the Bancassurance if you decided to keep in-house that kind of activity. Then I missed one question, but maybe I will ask later.

Thank you. I will try to give you the detail you have requested. All in all, of course, we think the second part of the year will be slightly better thanks to the TLTRO, even though you know that we cannot contribute 100% basis points because, unfortunately, there is so much liquidity that a part of it will be unfortunately invested at negative rates. So I would say that only half of the contribution is incorporated in our forecast for '21. Commercial would be mostly in line with what we've seen in the first part of the year. The goal of the portfolio, securities portfolio, we think that considering, from one side, the maturity that we are having during the year at a higher yield. And on the other side, the savings on the interest that we are paying on the wholesaling issuing, we think that we have more or less EUR 15 million less of contribution vis-a-vis 2020. So the [ global ] number basically is quite clear, and I think you can calculate also by yourself it will be in the region EUR 2 billion, EUR 2.5 billion. Second question, fees. The conversion is very high, as I was mentioning before. Basically, we never had positive net assets under management from deposits. In June, we had EUR 1.7 billion, which for us is very, very consistent. We are still growing, and we will continue to grow. The problem is to reduce a bit the deposits from corporates and enterprises, which we are doing, charging corporates and enterprises of fees as much as we see an increase in deposits. This, unfortunately, will take place from -- has been taking place from July, but I think we will see more in the Q4, rather than in Q3. Total fees, as you were mentioning, normally in the second part of the year are a bit lower than the first part of the year. But I am confident because even in Q2 we had, as I mentioned before, a reduction of upfront fees, but a very sound compensation from [ running ] fees and from fees coming from ordinary activity, M&A and so on. So let's say that EUR 450 million for a quarter for the next 2 quarters would be at the bottom that we consider. Bancassurance, as I mentioned, will be basically at the base of our new business plan. We are doing all the forecasts about the potential charge that will be impairment to capital. We don't have definitely a precise idea, but we are considering that if the Danish compromise will be applied, it will be very negligible the cost of capital on Common Equity Tier 1. On the opposite, we will have a very consistent increase in terms of revenues and net profit, more than compensating of course whatever charge we can have in terms of capital.

Just on capital, if I may, a follow-up. In the business plan you presented last year, you were referring to a threshold of 12.5% Common Equity Tier 1, fully loaded, if I'm not mistaken. So you are now targeting 13%. So do you see that the 12.5% still is a reasonable threshold? Or after the COVID-19 pandemic you would prefer to have a higher capital buffer? And still on dividend payout, you increased the -- you've said 40% payout after the Stress Test outcome. So should we assume you don't expect any additional [ pillars ] to guidance after the results of the Stress Test [ negligible add-on ]?

Basically, as far as Common Equity is concerned, 12.5% I think was the 2023 baseline; the 13% is the outlook for 2021. So we have not yet given outlook for years to come. The real situation is that we were expecting more impact from the headwinds, which we have instead absorbing very well. So we are still keeping a very sound Common Equity Tier 1. As you know, the principal headwind were forecasted in these first 2 years of the plan, because in the next year we'll be very, very low. So I think we can envisage a higher Common Equity Tier 1, but I don't think that we will need to stay at 13%. If you asked right now, unfortunately, I see that the majority of the banks have higher Common Equity Tier 1. So we are already in the lower part of Common Equity Tier 1. We feel very comfortable being around 13%. Let's see the evolution of the pandemic, and possibly we can also go down at a more normal approach of around 12%, 12.5%.

And some comments on the Stress Test? Can you hear me?

Sorry, sorry. I didn't get...

I was wondering the Stress Test that you passed comfortably the Stress Test. So you don't expect any...

We feel very comfortable because, as you know, we have a very good performance, better than the average of the other banks, in the base case scenario, which I think is the most probable. I don't think there will be a severe consideration of the stressed case because, as you know, it was already applied to a very stressed situation. So I don't expect, frankly speaking, any material change in terms of a [ threat ].

The next question is from Giovanni Razzoli with Deutsche Bank.

Two questions. A clarification on the fee income. Can you share with us what was the contribution of the upfront fees in the second quarter? And the second question is Slide #10. So it's very explicit showing us that despite a cost of risk that is 86 basis points in the first half, that is quite above, so more prudent than the average of your peers, you are delivering EUR 360 million of bottom line. So I was wondering what could deviate your targets from something like an [ earnings power ] in the region of EUR 700 million for the next business plan? Because it seems to me that you are fairly prudent in terms of cost of risk in relative terms, while your profitability seems more resilient than expected. So shall we take this as an [ earnings power ] as a base for the next business plan? What are your thoughts there? Or you think that there are some elements in the revenues which can move up or down at this level of profits?

Thank you, Mr. Razzoli. Starting from fee income. We have upfront in Q2 for EUR 79 million, vis-a-vis EUR 87 million in Q1. Running fees, on the opposite, going up to EUR 123 million in Q2, vis-a-vis EUR 114.5 million in Q1. And then we have an increase of EUR 6 million in management and advisory fees. In terms of cost of risk. Basically, we wanted to give you -- first of all, it's not of course an anticipation of what we will give you for the new business plan. It's just an outlook for this year, which is not even an outlook for this year. The outlook was driven by the net results and the dividend policy. And in order to give you something consistent, we had of course to start from an hypothetical cost of risk, that we prefer to imagine the same of the first half. Then of course, all this can be better, but we wanted to give you some solid number about earnings per share and dividend policy. Now on Page 10, we instead were just representing some comparison between these first half results and the old business plan. Again, we are not saying that we are going to do the same business plan, because there will be many things different, but we were only stressing that we feel confident in approaching a new business plan target thanks to the results we have already reached in the first half of 2021. So I wouldn't consider neither 86 or 51 a guidance for the new business plan.

The next question is from Jean Neuez with Goldman Sachs.

I just wanted to ask because the cost program is fairly large, and then you're showing this very strong reduction in this particular quarter. So you have an outlook for the full year. I just wanted to understand the moving parts into 2022 or whether you have already a rough idea of what your cost would be then. I'm just trying to size up the difference in staff costs and branch costs, but also maybe versus some other inflation or some other initiatives that you might have. In particular, you referred a lot to digital in your presentation. Second question I have is, it is true that your cost of risk looks more prudent than some of the other peers. At the same time, you've got about EUR 2 billion more inflow per quarter year-to-date of Stage 2 loans. And I wonder whether you think you're there or whether you think there is some more reclass to take place? I think I already asked this question on the last quarterly conference call, but maybe there are changes in parameters. And lastly, with regards to what's happening around yourself in northern Italy in the banking landscape, there was a lot of focus today on your standalone profitability; I feel more than usual. Any change in the way that you think about Banco BPM's place in the Italian landscape now organically or inorganically?

Thank you, Mr. Neuez. First, we start from the last question. No, it is, basically, we want to just -- we were requested to give some forecast update on our business plan. We think that now would be a good moment to start talking about that. And of course, we cannot do other than giving you our standalone projection. Why now? Well, we're thinking basically by this autumn we can be able to do that, first of all, because we are experiencing eventually the results we were expecting when we announced the first business plan, especially in terms of revenue. So we are much more consistent and much more credible. And secondly, because, hopefully, we can imagine that the pandemic will have a lower and lower effect on the business. Of course, if this happens, we think we can go ahead with some new figures, very sound, very interesting in order to give the possibility to make some forecasts also in terms of our stock. Of course, we still believe that consolidation could be useful. But as I mentioned also in Q1, it's not the case right now. Because right now, we don't see any potential consolidation at our door. So of course we will still continue to look. We'll still continue to understand if there is the possibility to make some more interest of our stakeholders, [ social holders ], in doing a sound transaction. But of course we feel it is very interesting to understand that we have a good story, a very good story also on a standalone basis. Second question, I can assure that the cost of risk comes out for a very prudent approach. Stage 2 new increase is only, let's say, we take advantage from the moratoria and the pandemic to level the difference, the gap that we had vis-a-vis our competitor. In our opinion, this is much more due to our geographic presence rather than a nonprudent approach before of this division. But having the possibility to increase, to be more prudent, thanks to the moratoria, we decided to change the model and to make more tight a model for the inflow into Stage 2. And this happened in the first quarter, with the moratoria clients which were either in the mid-high risk and high risk and, in the industrial sector, more eaten by the pandemic. In the second Q, this was referred instead to our leveraged finance portfolio, and we decided to have a more strict model also for this asset class. And this, of course, had an inflow, [ probably an ] inflow in Stage 2 quite consistent, which led to the 34 basis points of increase of cost of risk. But because of the running of the moratoria, which are very, very good up to now, as I mentioned in my presentation, we are confident that this Stage 2 can go back to Stage 1 and reduce also the impact on cost of risk. The first question?

Was on the cost for 2022, whether you expect that you're going to get the benefit of the staff reduction, still 600 and the 1,000, plus the branches, or whether there is other inflation?