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

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.