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 Full Year 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 here with us for our '21 full year presentation results. Before starting with the presentation, let me remind you, you can find all the slides and the press release on our website in the IR section. [Operator Instructions] So now I give the floor to Mr. Castagna for the presentation. Thank you.

Thank you, Roberto. Thank you, everybody, for being with here -- here with us. I will start the middle on Page 5, let's say, that we are very glad to announce maybe the best ever result since the merger for 2021 with an adjusted net profit of over EUR 700 million and a ROTE of 6.9%, which allow us to propose a dividend to our shareholder meetings of 50% as payout. This is, as you know, well above the strategic planned targets and paved the way to potential further increase of the remuneration under the strategic plan horizon. Of course, this is possible, thanks to the very sound results in every aspect, both in profitability, as I mentioned before, as well as in the further reduction of gross NPE, which are now down to 5.6% to EUR 6.4 billion, 4.3% under EBA definition with further derisking in place for the first quarter of 2022. Also, the capital position, even considering the distribution is very comfortable at 13.4% of common equity fully phased and with an MDA buffer of 470 basis points. That's the reason why having overcome the guidance of net profit we have decided to also distribute more than EUR 70 million more than the guidance. with a dividend per share, which is up to EUR 0.19 and represent 50% of the payout. On Page 6, basically, we have over-delivered in all the aspects we mentioned in our guidance starting from the third quarter last year, let's say that the 2021 total revenues were more than EUR 4.5 billion with a guidance of EUR 4.4 billion. PPI up to almost EUR 2 billion with a guidance of EUR 1.9 billion. We already talked about sound capital ratio at 13.4% with a guidance of 13% as well as the cost, both operating cost EUR 2.5 billion as the guidance as well as the cost of risk stated, which was 81 basis points with the guidance between 80 and 90 basis points. Let me remind that the core cost of risk without considering extraordinary provisioning for derisking was down to 55 basis points. We already spoke about net income. The guidance was EUR 530 million, and the stated net income was close to EUR 570 million, which adjusted is more than EUR 700 million. On Page 7, just a quick reminder of many figures, but just to show we are well on track towards our target in 2024 as well as we are already better than 2019 results, which were the best results before 2021 previous to the pandemic. As you can see on the left side, the investment product sales went up from EUR 14 billion in 2019 to EUR 18 billion in 2021, with a target in 2024 of EUR 19.6 billion. So the vast majority of the road map is already done as well as for asset under management net inflow, which were negative in 2019 and are now up to EUR 3.4 billion with a target of EUR 4.4 billion in 2022 -- in 3 years' time. Asset under management stock was up from EUR 58 billion to EUR 65 billion. With a target of EUR 78 billion in the next 3 years. New lending after the spike of 2020, thanks also to the loans guaranteed by the state which amounted to EUR 27 billion. We are now again on top of 2019 results, up to EUR 22.7 billion with a target of EUR 26 billion in 2024. Gross NPE, as I mentioned before, 5.6% vis-a-vis 9% in '19 and 4.8% in '24 as well as, again, cost of risk common equity, which I already mentioned before. Also in terms of the main operating figures it's good to mention that in the road map from '19 to '24, we are more on the side of the target rather than the starting point both considering total revenues, where we are at EUR 4.469 million with a target of EUR 4.3 billion in '23 and EUR 4.6 billion in '24. The same is for core revenues and the operating cost, which are very close to the target we wanted to reach with the business plan. Net income again EUR 569 million with adjusted EUR 700 million and the target in '23 of EUR 740 million and more above EUR 1 billion in 2024. Also, in terms of asset quality, as we mentioned before, we have now reached EUR 6.4 billion. Let's just remember that 5 years ago, when we had the merger, we were more than EUR 30 billion of NPE and 2019, EUR 10 billion, 2020, 1 year ago EUR 8.6 billion. So EUR 2.2 billion further derisking in -- during 2021. The target is EUR 6 billion, but as we will soon see, there is already a further EUR 1 billion of derisking, which will be executed by the first half of 2022, which should bring the bank below the target of 2024. Also in terms of coverage, both bad loan, UTP and NPE coverage are above the figure of 2019. NPE ratios 5.6%, down from 7.5% with a target of 4.8%. In terms of capital, starting from 11.4% in 2016, we are now with a stable above 13%. We had the target of 13% for the year. We are now 13.4% with the expected 14.4% in 2024 at the end of our strategic plan. Let's remember that in our outlook, we didn't consider the Basel IV impact of around 80 basis points. But at the same time, we consider this headwind to be progressively offset by the decrease in the TA impacting common equity Tier 1. The SREP require requirement is unchanged for 2022 so that we have a comfortable common equity Tier 1 both in terms of versus minimum requirement 490 basis points and in terms of MDA buffer 470 basis points. Our liquidity position is really comfortable above 200% in terms of NSFR and above 100%, well above 100% as in the NSFR. Let's also mention some of the key point of our business plan and where we stand in respect to this important issue, starting from the Bancassurance that you know is one of our key point of the strategic plan. We have already activated 8 work streams supported by industrial adviser in order to potentially anticipate the integration of the insurance business, especially with respect to the BPM Vita in which, as you know, we have the possibility to anticipate from 2023 also in 2022 the integration of this company. We have also already in place a plan in order to align the product range, the commercial offer of BPM Vita with Vera Vita in order to be ready to integrate both the insurance company by 2023. In terms of SME center, you will remember that we announced that we should -- would have activated many points closer to our client especially where the presence of the branch of the bank is not that strong. And we can announce that starting from the 1st of February, we opened 135 business points with 67 new responsible for SME center and more than 450 relationship manager dedicated to the development of 75,000 clients, 45,000 of which in the range of customers with the turnover from EUR 5 million to EUR 75 million and 30,000 clients below EUR 5 million, but with a strong opportunity and possibility to grow faster. In digital banking, we have launched since we announced in November of the business plan. The new app dedicated to the SME and business client. We have more than 400,000 clients enrolled in digital identity. This means that we can switch in a completely paperless offer with this client once, of course, they are enrolled with this feature. 20% of total sales are already driven by advanced analytics, digital transaction activity is well above average of the market. And I think most important, our app-based transaction are due to overcome in 2022, the branch-driven transaction. When I say app, I mean, only a transaction, of course, as we know, the total remote transaction is already 83% of the total transaction of the bank, but is very much important, in my view, to underline that app has been developing at a very strong pace as much as the branch-driven transaction are -- have been reducing 4x in the last 2 years. Also in terms of ESG, we have joined the United Nations Global Compact. We became a support of the TCFD. We have been included in the ESG index and the Bloomberg Gender Equality Index. We have now the lending policy completely integrated with ESG factor for all our sector, as well as we have integrated the risk identification process and the climate risk materiality assessment. On top of that, we have set up 2 new units in HR, one devoted to inclusion, diversity and social, the other one to the development of key people and talents. Let's have a look now to some of the main figures of the -- our 2021 results. I would start on the left, the adjusted figure just to compare with some figures in 2020. We have grown net interest income by 3%, net fees and commission by 15%, core revenues almost 10% and together with NFR, 7.6% of total revenues. Operating costs have been increasing in respect to 2020. But like-for-like, if we exclude from 2020 exceptional items due to the COVID pandemic, we are minus 0.9%. Pre-provision income are up 14.7% and of course, after a much lower impact on the loan loss provision, we end up with a profit from continuing operation before tax to EUR 1.2 billion vis-a-vis half this period in 2020. Net profit is EUR 870 million, which lead us after systemic charge to EUR 700 million of adjusted. The stated, of course, is EUR 570 million. The main differences are below the pre-provision income. And I would say part of this are related to the derisking anticipation upfront in the provision for derisking upfront in the valuation on real estate asset. And on the other side, taking advantage from the fiscal impact on some accounting principles in real estate. On Page 13, there is the quarter comparison, let me just stress how consistent are in the last 4 quarters, the core revenues and the total revenues of the bank, which now are not any more volatile as maybe we used to have during the first year of the merger. Nowadays, I think there is a strong consistencies, which give us a lot of confidence in the increase in this figure quarter-by-quarter. In terms of balance sheet, we are still continuing to grow in volume starting from core customer loans, which are up in 1 year, 1.1%. If we consider the growth since 2019, the CAGR is 4.5%, which is higher of 3.1% of our business plan, '21-'24. Loans guaranteed by state, also in this respect, we grew, of course, since 2019 from EUR 2.7 billion to more than EUR 18 billion, of which EUR 17.7 billion -- EUR 16.7 billion are related to COVID measure with an average guarantee of 85% from the state. Customer deposits continuing to go up until the last quarter of 2021. These first months, we are having some reduction, especially in relation to corporate and enterprise current account in which we are experiencing a reduction of around EUR 2 billion during this first 40 days of 2022. As you know, our expectation is to further reduce these figures, both for the reduction of the current account linked to corporates, but also with the conversion in further assets under management, which, as you can see on the bottom right, grew about EUR 5.6 billion during the last year, with a net inflow of EUR 3.4 billion, leading to the growth, which should bring us to the target of EUR 78 billion in 2024. Net interest income on Page 15. Year-on-year is up 3%. If we consider the quarter, there is a reduction of the 2%. If we exclude the reclassification of a one-off of EUR 5.8 million, the reduction Q-on-Q is only 0.9%. Let's also consider Q-on-Q, we had EUR 10 million of lower contribution from Italian govies. This was due to important sales that we performed between Q3 and Q4 of EUR 6.2 billion, to which we have to add further disposal for more than EUR 2 billion forward disposal, which will be taking place during 2022. Let me also stress that also in this respect, we think we have done a very good maneuver because basically, we have sold at very high level when the yield were lower. And nowadays, we have the opportunity, which is growing yield to rebuy and restock. And we consider our stock of govies with a good increase, which is forecasted in 2022. The commercial spread has been at a good level with respect to previous quarter, 1.76% As far as the asset spread is related, 1.13% in terms of commercial spread driven especially by the further reduction to minus 57 basis points of the Euribor. Let me anticipate that the sensitivity to a rate increase in Q4 '21 of 100 basis points was about EUR 430 million of increase in NII. Page 16, net fees income -- fees and commission, very strong not only in respect to 2020, but also with a combined growth of 3.2% starting from 2019. Year-on-year is almost 15% of growth, 19% related to assets under management and 11% to commercial banking fees. Also, the quarter was very sound with a total amount of EUR 485 million, 2.2% higher than Q3 especially driven by Commercial Banking Commission, notably related to new lending, traditional banking activities such as payments, trade finance and other related services. The investment product placement started at EUR 1.5 billion in January 2022. We are confident that we can reach our target for 2022, which are slightly higher of the total sales of 2021. Let me also remind that in the full year of 2021, a very important part of the management of advisory fee growth was due to the running component, which are also the key item for growing to the pace of the strategic plan. And in 2021, we grew EUR 52 million year-on-year in running fees, which is higher of the pace embedded in our plan. At operating cost level on Page 17. As you can see, we have a combined growth since 2019 -- sorry, combined reduction of 1.7%. Of course, there is a growth vis-a-vis 2020, in which we had a lot of extraordinary components. Normalizing this component, we still have a reduction of almost 1% year-over-year. In terms of quarterly -- quarter expenses, we have no major change. I would say, just a slight increase, especially in general cost also for the increase of oil and electricity bills. The headcount, we are down to 20,400 people. The vast majority of the people involved in the early retirement scheme left to the bank by end of the year. Of course, the positive effect of the savings related to this reduction will be due during 2022 in which we will have only due to these people leaving the bank a further reduction of EUR 80 million, partially compensated by increase in salary, some one-off that also in '21 we got for the pandemic. Also, the network is leading toward 1,300 branch. We are now to 1,427. And we expect with the growing digital, as I showed before, that we will be ready also for this target. On Page 18, we have some focus about loan loss provision. Some numbers, I would say, on a stated basis, we passed from 122 basis points to 81 basis point of cost of risk, 33% of reduction. On an adjusted we will be down to 63 basis points starting from 99 basis point. On adjusted basis, it is only related excluding the provision upfront for the derisking. We also would like to communicate the core cost of risk, which is further down to 55 basis points if we do not consider also some noncore elements due to the tightening of Stage 2 criteria and model change related to the increase of Stage 2, which passed from EUR 6.8 billion to EUR 11.7 billion. The migration rates are good, 1% -- slightly below 1% default rate, 9% danger rate and a record 20% workout rate, which include cure, cancellation write-off and recoveries. Some words also on moratoria on the bottom right side of the slide, as you know, since the 1st of January, moratoria completely expired. As a matter of fact, we had EUR 2.2 billion still expiring end of January. In the sense that the installments were due by end of January, and we have very positive results, basically almost completely paid also for this as expected. We still have further EUR 1.3 billion due by March and June, but with a very low default rate up to now, which is 1.5%. Let me also say that the total position still outstanding, which had the advantage to exploit the moratoria are concentrated in the best rating classes for 83% of the total. On Page 19, some figure related to the amounts, the further derisking. We think we can complete by the presentation of the first quarter this transaction, of course, we don't know if the closing will be done by the end, but for sure, we will have some final figure. Let's anticipate that the total amount would be around EUR 1 billion, leading the NPE from EUR 6.4 billion to EUR 5.4 billion. And with an NPE ratio from 5.6% to 4.8%, which occasionally is also the target that we have for 2024. Under EBA definition, with this transaction, we should go down to 3.7%. This is also the further disposal, of course, and also considering the possibility to reduce further the impact of calendar provisioning in 2022. On Page 20, some consideration about liquidity, govies and funding. As you see, of course, the bank is in a very comfortable liquidity position. As I mentioned before, we have sold more than EUR 6.6 billion in the fourth -- before the Q4 2021 and 2.5 forward sales for 2022. Of course, this allowed us to capitalize some NFR in 2021 and some consistent NFR also in 2022. But most of them was very -- was a very good timing due to the high spike in yield that we are experiencing during this week, which will allow us to reinvest a large amount of about EUR 12 billion of govies during 2022. Of course, part of it has already been completed during these days. Nowadays, we have 81% of the Italian govies portfolio concentrated under HTC and we are below 50% of Italian govies in respect to the total govies portfolio. Let's also stress that also the sensitivity of the basis point value of HTCS, Italian govies is EUR 600,000 per basis point. In terms of funding, of course, due to the situation of currently going on about the rates, we have not yet to decide what we'll do with our TLTRO. Of course, initially, we had the intention to reimburse a good part of it by June this year. We will carefully consider what to do taking, of course, trying to exploit all the opportunities to have also without the premium of 50 basis points, which will expire in June this year, the opportunity to potentially good funding spread in relation to the investment opportunities that we will see in the market. In any case, we don't think that we have a major issue in terms of bonds issuing. We have already done, as you know, a Tier 2 emission of EUR 400 million. We are left with more or less EUR 1.2 billion of senior unsecured. And if we have the opportunity and if we see a good market opportunity, also for an AT1 emission of EUR 300 million. On Page 21, again, what we have done in terms of key achievement of ESG during the Q4 and this first months of 2022. I think I already mentioned all these items before. I leave these slides for you. And finally, on Page 22, there is the capital generation, the capital work starting from 2020. As you can see, also in 2021, we had to consider 95 basis points of regulatory headwinds, which brought basically our starting point to 12.3. And thanks to the organic capital generation, both in terms of net profit and RWA reduction and also considering the dividend distribution and 81 coupons payment lead after some management -- balance sheet management to a comfortable 13.4 fully phased, which is 14.7% phased in. As you remember, the target is 14.4% for 2024. And again, we don't think there will be any impact -- material impact from Basel IV, thanks to the transformation of the DTA. On Page 23, some consideration about shareholder remuneration. We know that is always an important issue for the market. We were -- we have presented our business plan in November -- beginning of November. We were the first bank to present our strategic plan. And of course, we had ahead of us the fourth or the fifth wave of the COVID with the new Omicron with some uncertainty about the pandemic. Now we can say that the confirmation of the positive macro that we are seeing during the last weeks and coupled with the industry trend. And on our side on the achievement of the strategic -- of the results, which are leading to the target that we have for our plan. We think that all of that together with the consideration that we saw also from our competitors can give us further significant increase in shareholder remuneration. We made just as a scenario the possibility to reduce for 2024 the common equity Tier 1 ratio from 12.5% to 15%, with still a very comfortable buffer from 400 to 450 basis points. This will give us the opportunity to add a cumulative shareholder remuneration for EUR 2 billion with a payout of 70% for our shareholders. Again, this is, for the time being, just a scenario consideration, but we think that what we have already decided for this year can leave us the opportunity to reconsider in the future if we can still perform as well as we have done this year and continuing exploiting the opportunity leading to the 2024 results. On Page 24, just a quick recap. So very good news, the possibility to have a better remuneration for our shareholders higher than the guidance. Thanks to the strengthening of the core operating profitability. Thanks to the further improvement in NPE and the possibility to further the risk in the bank in 2022. The good and sound capital position but strengthened by the capital generation, we were able to build up year-by-year during these last 5 years and over delivering, of course, the guidance also in terms of net profit and EPS at EUR 0.38 versus EUR 0.35 that we announced last year. Again, all the management team and our network has full confidence in achieving the results of our plan, and we feel these results can give us the opportunity to further increase shareholder remuneration over the plan horizon. Thank you, and I leave to your questions.

[Operator Instructions] The first question is from Antonio Reale with Morgan Stanley.

It's Antonio from Morgan Stanley. A couple of questions from me, please. So if I look at your journey, you've delivered large derisking and NPEs over the years. You've also lowered your sensitivity to the sovereign book, and your capital is at 13.4%. And I don't think it's ever been higher. So today, you're increasing your dividend payout from 40% to 50% all in cash. And my question is how are you thinking about fair buybacks from here going forward? I see you've talked about increasing to a 70% payout in a sensitivity scenario. Can you maybe talk about more on the assumptions behind that scenario? How much would rates need to increase for that scenario to materialize? And just a general update on what we can expect going forward over the plan horizon without rates going up otherwise? That's my first question. My second question is about net interest income. Rates may go up in 2023. And then, hopefully, we won't need to worry about NII anymore. But until then, how should we think about your outlook for net interest income in 2022? You have lower TLTRO accrual. You've talked about it. It's a relatively large part of your balance sheet, lower interest income from NPL sales. Can you give us a sense of what this could look like? What this could do to your NII this year? And lastly, just if I may, if I see Slide 19, you're showing you're 2 years ahead of your targets with respect to derisking. You're going to be at an NPE ratio pro forma for the EUR 1 billion sale of 4.8%, which was your target for 2024. In 2024, you were also assuming a normalized cost of risk of 48 basis points. So I'm wondering how should we think about cost of risk for this year?

Thank you, Mr. Reale. Basically, again, we think is a good evidence of the potentiality and possibility of the bank and on the capital strength to give the message of increasing after a few months, the payout from 40% to 50%. Of course, we live in the real world. So we have seen what the market is actually to expect from other competitors. We want just to make -- made an example in which considering the landing point, which in our opinion, is acceptable, which is again 12.5%, 13% of common equity and above 400 basis points of MDA. And of course, during and performing our business plan, this could be -- could lead to an increase of shareholder remuneration. We didn't say -- just to make an example, we reduced debt in a payout. But of course, I think somewhere, maybe the note is very well described that, in that case, we have not yet decided how to perform this capital distribution if in terms of the highest payout rather than buyback. These are not yet consideration that we have done. We wanted just to give, I don't know, a comparison of the potentiality of the sensitivity lending to a very consistent and sound capital position. NII, difficult this year to give a guidance, not because I don't want to give, but you are looking at what's happening in the yield market. So for sure, we will have a reduction of 50 basis points starting from July of TLTRO. For sure, the starting point for govies is much lower than we had last year because, as I mentioned before, we have sold an important amount. But this is -- this gives us also the opportunity to buy at higher yield. So let's say that I would take for sure, the reduction of the 50 basis point of TLTRO. All the rest, frankly speaking, is under consideration. Again, also the potential reimbursement of almost half of the TLTRO that we had in program for the first maturity date in June this year is under consideration because we have to understand if there will be a difference between a good opportunity -- funding opportunity and on the other side, some investment opportunity. So nowadays, it's difficult to say how much this will lead in terms of NII. For sure, the commercial banking activity will expect an increase in NII, both for growth in volume but in my opinion, also for a slight increase in margin. So all in all, for sure, some reduction visibility. It's difficult to say how much, depending, of course, on the -- from the investment opportunity that we will have. We have hands-free. We are very happy of starting from a very low positioning, obviously, so we can build up again our portfolio. Last, derisking. Yes, we think we will basically be, since 2022, at the level expected in 2024. This, of course, will bring to a normalized cost of risk. That's the reason why we were very transparent in announcing also the cost of risk this year in 2021, which was 55 basis points. Let's say that without further derisking, we think this is the starting point, of course, for cost of risk.

The next question is from Christian Carrese with Intermonte.

The first one on the interest rates. You get a sensitivity on net interest income. I was wondering, what could happen if interest rates goes up in terms of fees? So replacement of investment products, do you see any risk of lower risk appetite by clients? And should we look at net interest income together with the trading income? Because we saw that you reduced the credit portfolio at the end of the year, but maybe you are going to rebuild the portfolio. And I was wondering, what is, let's say, the size, the weight of Italian govies you could look at? Because you reduced year-after-year below 50% on total govies. So are you -- you could go up again to 60%. I don't know if you can give us an idea. On cost of risk, you highlighted that you already reached, on a pro forma basis, 4.8% gross NPE ratio, which was the target for 2024. The EUR 1 billion disposal had been already provisioned or there could be some, let's say, headwinds in 2022. And on capital distribution, you said a 50% payout this year higher than the guidance you gave just in November. So we were -- we agree because with the common equity Tier 1 at the end of 2024, the guidance was at least to be too high. I was wondering if you are to get to the 50% guide payout of this year and the new minimum level for future payout. And in terms of buyback, this could be a 2023 story or maybe it could be -- could start already in 2022.

Thank you, Mr. Carrese. So a very good answer question about the combined effect of NII sensitivity vis-à-vis investment broad sales. Of course, in the banking industry, everything is very much linked in the different aspect of revenues. Of course, as we say, is a problem of a longer bench because, of course, if the NII increase, as you know, 40 basis points, we have more than EUR 150 million, and 100 basis points, EUR 430 million. So I think we could replace a lower impact in potential investment product. But again, for us, the important thing is not that much the revenues from investment product sales rather than increasing the stock of assets under management, so the net inflow. And this is our main guidance to increase of another EUR 3.5 billion, EUR 4 billion, taking advantage from the deposit. Of course, it will be a bit more difficult to reach the target if interest rate goes up in a sensible way. But again, on the other side, we will have so an advantage in terms of NII, which is not a problem, in my view. Italian govies, yes, we have now 49%, but we -- of course, we have always had the guidance between 50% and 60%. So there is room to not only reconstitute the disposal we have done, but also to buy something more, even though in our program, there is always the idea to stay 50-50 on Italian and international goals -- European goals, basically. Yes, the EUR 1 billion of fiber derisking is basically, I would say, materially already provisioned. Of course, the transaction have not yet concluded. Otherwise, I would have announced. But under IFRS 9, we have already provisioning what we think is necessary to a massive disposal that we have in mind. For which we have in mind something in the region of EUR 700 million. The rest would be single NIM disposal that we think can be done by a few months. And normally, when we do single NIMs, of course, there is no further needs for provisioning. Capital distribution, I would say, is not a change of our business plan, which was only done 2 months ago. That is, I would say, a sort of guidance in which we want to stress that the opportunity to maintain a sound capital level are now quite clear for us. And if we are able to remain at that level and to increase further the capital through capital generation, both from stability, from capital management, we will be able to perform better in terms of shareholder remuneration. Last one, the buyback. Frankly speaking, we didn't think yet to buy back. We are happy to say that there is more room to include -- to increase the shareholder remuneration. We will consider from time to time the situation of capital and decide what we can do in the next months or maybe during the plan horizon, for sure. Thank you.

Thank you. Roberto Peronaglio speaking. [Operator Instructions]

The next question is from Fabrizio Bernardi with Bestinver.

I just have one very fast question, I think. If I look at the P&L of the full year, but also the one of the fourth quarter, you have, at the end, the 81 basis points of cost of risk stated, of which 26 are, let's say, noncore, so probably one-off. And there is also a massive fair value adjustment on fixed assets of EUR 140 million. This is maybe the last one that we see this. But in any case, my point is that the 2022 P&L could be extremely rich if we have a focus on core provisions and maybe the lack of this kind of fair value adjustment. So the question is, if you can maybe give us an update about the EPS target that you may consider as correct for 2022. If you have any -- if you are confident about that, obviously.

We are confident, of course. But as you know, we gave some guidance very precise on '23 and '24. We normally don't give immediately beginning of the year some guidance about the year under review. But -- of course, this year is not that difficult. Of course, there will be something in between the road map that we have toward the 2023 results. As you rightly were mentioning, the vast majority of the gap will be filled through lower provisioning, which we feel is in our possibility because, again, this year was very good in these terms. We started very good also January, beginning of February. So let's say that the increase in net profit can come from the very regular figure -- growing figure that you see in core revenues and total revenues coupled with some potential benefit coming from the reduction on cost of risk. The major would be this reduction, the better would be the net profit. It's quite straightforward. It's a bit difficult nowadays to give you a more precise guidance, but we are optimistic that we are leading toward the results of the plan.

Sorry, if I can ask my second question, very quickly. Do you have any updates to give us in terms of M&A call about what can happen in the next few months? So we have seen Carige probably gone to Modena. There is another former cooperative bank that now is a joint stock, so maybe they can be ready for a deal. Are things accelerating? Or do you think the situation in [indiscernible] by mood?

As you know, we were very active in this field 1 year ago. Nowadays, we are very much more concentrated on our figures, and we are trying to perform a very satisfying, I would say, business plan. And this is our real target now. We don't see right now opportunity for other merger for -- as far as we are concerned. But we are very much concentrating on trying to perform good results and sustain our stock price, which we feel is still underpriced vis-à-vis the results that we are performing.

The next question is from Azzurra Guelfi with Citi.

Two questions from me. One is on your preference for allocating capital. In the past, has been very scale. You just said that you are now more focused on your plan than on M&A. So they switch towards more favorable capital return is a result of the macro, but also the M&A and growth option? And could this revert if stock -- if you want to rewrite in the future, and there is opportunity coming on the M&A? And the second one is on cost guidance. Can you give us some sensitivity on the inflation on the cost base?

Thank you, Azzurra. I'm not sure I understood the first question, but I think you were mentioning if we have a better price to book, we could consider M&A is the question?

It's basically like you have changed, if you want, your approach to M&A, and now you are talking about more opening about capital return. Are the 2 things linked? Could they revert if there are opportunity coming up?

Yes. Of course, I think it's very clear that the bank is more rewarding for everybody. If things go well, the restock would mean that we will be appreciated. Our results and our core forecast will be in line with market expectation. And this -- of course, this got also more confident to be in line with a potential better remuneration. We have, in any case, this opportunity because what counts again is the common equity Tier 1 of the market cap, but of course, a sounder market cap would give us, and I think the market and the stakeholders, more confidence about remuneration policy higher than what we have done up to now. Vis-à-vis the inflation, we have a sensitivity which is very low, should be in the region of EUR 6 million for each 1 point -- full point raise, so it's not really material. In terms of guidance, again, I mentioned the reduction in personnel cost, which will come from the early retirement scheme. Of course, we have reviewed a bit the general cost because you know that this problem of the energetic cost and general expenses growing will -- also in IT investment will impact a bit the cost of the bank, but nothing material, frankly speaking. All in all, of course, there will be a reduction in costs.

The next question is from Domenico Santoro with HSBC.

A couple of one, very quick. If my understanding is correct, that at the moment, you have a positive variance on the NII given the yields, sovereign yields, the way they move. And I mean to me, it looks quite significant. I'm not sure whether you will confirm this given that you're willing to rebuild a little bit of sovereign. And on the other side, a negative instead on the cost. Also understanding the answer that you gave to the colleague before. If you can also give a guidance on 2022 costs will be great. And second is on the NII sensitivity. I don't remember being so huge, actually. 20% of the NII is quite a surprise positively, of course. Is it because -- what has changed compared to the guidance that you gave in the past? Is that because you assume now that also the reserve ECB will be taxed at a lower rate or because you don't have any more macro hedging on deposits? So what's the main [ strength ] point?

Mr. Santoro, yes, as far as the first question about NII, yes, of course, as you know, the sensitivity, which is part of the third question, is a very good news for us. There is a considerable increase if interest rates go up. Of course, we are referring to the short terms, the Euribor short-term rates. In terms of yield on govies, of course, also could be a good news because, again, we have to invest quite a few because we have sold EUR 8 billion during the last month. So we have the opportunity to rebuild our govies portfolio. So the increase in interest rate give us the opportunity to choose the best strategy. I don't think the NII consideration changed a lot. If I am having a look to the figure that -- over the last year, and we are at the same level basically since January 2021. So in the last year, basically, there are EUR 10 million more or less of the figure that we gave today. Finally, on cost, I already said that there will be some reduction, I would say, 40, 50 -- EUR 40 million in terms of personnel and some top-up of EUR 10 million, EUR 15 million in terms of general cost.

The next question is from Giovanni Razzoli with Deutsche Bank.

Two questions. And if you can clarify or replicate, sorry, what you mentioned about the potential for the theoretical exercise on the capital. I missed your comment there at the end of the plan. So my first question is actually on the Superbonus. Can you share with us what are the volumes that you have acquired as of the end of 2021? And do you think that there could be impact on the EUR 3.5 billion volumes target in 2023 from the stop and go that the government is introducing on this measure? If I remember correctly, you have an estimate in the plan of EUR 315 million of accumulated revenues after these credits clearly spread over a 10-year horizon. So I was wondering whether this can impact also the 2022 stop and go by the government. And the second question, can you share with us what is the amount of upfront fees that you booked in the Q4?

Mr. Razzoli, so starting from the first one, capital return. If you are referring to the slides related to the potential increase of the capital remuneration, which is 23, I was saying that we just exercised some sensitivity leading to a bottom of capital, both in terms of common equity Tier 1 between 12 and 13 and in terms of MDA buffer between 400 and 450 basis points. Having said that, if we are able to perform as we are quite convinced to do the figure of our business plan, we should be able to generate capital cumulative shareholder remuneration, which is consistently higher than the 40% that we have mentioned in our business plan, which, of course, was leading to a 14.4% of common equity. And this would be equal to something like 70% of payout. But we say that it's not, given that this will be the payout right now, neither that will be only payout and not the mix of buyback and payout. In terms of upfront fees. Q4 was, of course, as I mentioned before, better in running fees rather than upfront. Q4 is always a bit lower than the others, was slightly above EUR 50 million vis-à-vis EUR 64 million in Q3. The Superbonus impact -- no, I mean you wanted to know mostly how much we have. I think we have engaged -- first of all, let me say that we are in a quite -- we feel very confident and very comfortable with the engagement we have done, both the one we have already performed and the one we are due to perform. We have only given a temporary stop to the retail acquisition of Superbonus because we had the double process. So we had our partners to buy in the first time. And then we were buying monthly -- month-by-month the full amount conserved. Nowadays, it's impossible, as you know, to perform this way. So we are arranging our operation in order to buy directly by the retailer this amount. And we think by -- as of February, we can restart to buy normally as we did up to now. The engagement that we have are in the region of EUR 3 billion, of which already contractualized -- already -- sorry, already bought EUR 900 million, a bit lower than EUR 1 billion.

The next question is from Andrea Vercellone with BNP Exane.

I have the same question that was already asked by Santoro, which is -- I agree with what he said that the sensitivity was very different in the annual report of 2020. If I'm not mistaken, 100 bps was around EUR 280 million, not EUR 430 million. It had already changed in H1 -- interim results in H1. So you told that has been the same for a number of months. But what we want to understand is, what changed versus last year in terms of the assumptions you're making? Because the assets and liabilities, they can't change that much in the meantime. So I would have the same question. And the second question is on your bond portfolio. Can you share with us what is the average yield that your bond portfolio currently carries?

I'm sorry that you have a different figure. Frankly speaking, I have all the figure month-by-month, starting from December '20 right now. Then, of course, we have also previous figure, but not immediately available here. Maybe the difference is that we are -- normally, we talk about 40 basis points sensitivity and not 100 basis points, but I'm sure this could be what is the major difference that you have. Frankly speaking, I don't have -- I have a consistency month-by-month on the 40 basis point basis, frankly speaking. The only thing I can imagine can have some impact is that the vast majority of lending is now at fixed rate. Meanwhile, of course, we have floating rates on deposit. But I don't know if this is the -- can bring to the different new experiences. We will be more precise, if you want, with our IR, but we are available to give you month-by-month all the historic figures. Just a minute, we are -- they are giving me -- my colleagues are giving me the yield leverage and is 110 basis points on the carrying portfolio.

The next question is from Adele Palama with UBS.

Two questions from me. So one is if you can tell us which are the various moving part that are affecting the CET1 capital in the RWA in quarter-on-quarter. And then on fees, I mean in the last fourth quarter, both figures beat your guidance of quarterly EUR 450 million fees. I was wondering which is like the guidance -- the part of the guidance proceeds that you're expecting in 2022.

Let me start from the second one, if I understood, the guidance on the fees. We should experience an increase of around 3%, which should be something like EUR 60 million of increase in commission. On the RWA quarter-on-quarter, we are just recovering the data. Just a few second.

This is Edoardo Ginevra. Just the key components are synthetic securitization that we performed in the final part of this year led to a reduction in RWA on one hand. On the other hand, we have factored only, in the last quarter, the increase in the payout in the dividend, which, of course, matured over the total 12 months. Whilst until the third quarter, we have adopted a more conservative assumption. So these are the most important content balancing forces.

The next question is from Luigi Pedone with Equita.

Just a quick question regarding the reduction in Italian BTP govies. I was wondering which is the amount of the unrealized gain on Italian BTP after the latest reduction.

Of course, the reserves are now in a negative territory. I think it's something like 20 basis points in terms of common equity, making the difference between the positive that we had in December in the current situation. Meanwhile, of course, we have realized -- we are going to realize something like EUR 100 million.

In the first quarter, in the first month?

Yes, in the first 40 days, of course.

The next question is from Marco Nicolai with Jefferies.

The first one is on the insurance. You mentioned before the possibility to anticipate in 2022 the integration of BPM Vita. What's your updated thinking on the early exercise of this option versus your initial target that we're envisaging the buyback of insurance only from the [indiscernible] 2024? And then a question on the equity method line. Can you give us an idea about the underlying trends? I understand that you had a nonrecurring item there this quarter. But can you give us some color on the consumer unit -- consumer credit unit and maybe also about the insurance? And any outlook here for 2022?

Thank you for the question, Mr. Nicolai. Unfortunately, I think that the insurance aspect of our plan is a bit under consider. We are focused very much on realizing as soon as possible this opportunity because, as you will remember, for the plan, we'll produce a very consistent return for the bank, especially considering that is not consuming that in capital. So we run since last quarter 2021 in trying to understand the different aspect starting from regulatory to operation, to commercial. And we have seen that after 3 or 4 months of work, that there is the opportunity where there is the possibility, of course, and this is only for BPM Vita for the Covéa business insurance joint venture to maybe anticipate timing that we, in the first time, postponed to first part of 2023 to 2022, even maybe the first half of 2022 in terms, of course, of authorization. This is because, of course, we want to be, as soon as possible, full in place on the [indiscernible] seat. And we are growing in experiencing this Bancassurance business very soon. We are, of course, taking onboard the new people for this business and the opportunity to anticipate revenues and experience in order to be very ready 2023. To make the bigger integration with Vera Vita is, in our opinion, a very good opportunity, which doesn't basically need capital but give us some potential return before what we expected. So this is something that if we will be able to perform all the duties due by the regulation and getting all the authorization will be something that we would like to anticipate. Associates. This was a very good year for many aspects, both maybe only the Bancassurance was not that good and will be, for sure, better starting from 2022. But both Agos and Anima have performed very well. As you know, in our balance sheet, in the Q4, there is no -- the contribution of Anima Q4, they closed the balance sheet beginning of March. So we will have only in the Q1, the results of the Q4 of Anima, which, of course, as you can expect, is a very good quarter, we feel, because of the performance as much as all the other asset management company. In terms of Agos, from one side, maybe you have seen that we are reducing and having a run out of our previous consumer company. Marco, on the other side, the 2022 started very aggressively in terms of consumer finance. Agos is performing very well. Our network is increasing a lot the sales of consumer finance. So we are very positive, of course, all scenarios. Of course, Agos also had an extraordinary contribution in Q4 '21 for around EUR 40 million due to the realignment of the fiscal value to the account and value of the goodwill. So all in all, we feel that apart from this EUR 40 million, there could be a very good year also for 2022.

Mr. Castagna, there are no more questions registered at this time.

Okay. So thank you, everybody. I think it was a very interesting meeting, and I hope to see you in the next few days for further information about Q4 results and the current situation. Thank you, and good night.

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