BPER Banca SpA ($BPE)

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the BPER First Quarter 2026 Consolidated Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Nicolas Sponghi, Head of Investor Relations of BPER.

Please go ahead, sir. Thank you, and good morning, everyone. I'm pleased to welcome you to our Q1 2026 earnings conference call. Before I give the floor to our CEO, Gianni Giacomo Papa, please be reminded that our slide set and press release can be found on our corporate website. That said, after the presentation, our CEO and our CFO, Simone Marcucci, will take care of the Q&A session. I will reiterate that this is for financial analysts who may request to ask a maximum of 2 questions each so that everyone will have the opportunity to contribute to today's call. Thank you very much. I will now leave the stage to Mr. Papa, CEO of BPER.

Thank you, Nicolas. Good morning to everyone, and welcome to our Q1 results presentation for 2026. Before giving you details on the financial performance of BPER, I would highlight a number of key features of this last quarter. I'm glad to speak as the CEO of BPE post-merger with BPSO. As you know, as of April 20, the merger of BPER and BPSO is fully completed with all necessary regulatory and statutory approvals. We are now a leading player in Italy with approximately EUR 540 billion in customer loans and PFAs. We have an 11% share of the market in terms of branches and can boast a 57% share of banking branches in reach Northern Italy. Allow me to add that the thorough work of our team has translated into an incredible stock market performance. Since April 2024, total shareholders' return is close to 250%, among the highest for Italian listed banks. The bank is heavy at work with the integration. As we speak, approximately 1,000 BPER employees are working within BPSO premises to ensure the effective extraction of costs and revenue synergies. Our target of EUR 290 million of pre-tax synergies by end of 2027 is an important number given the limited time interval we have aimed for. As you can see on Slide 5, our teams are focusing on the 3 divisions to ensure a swift and flawless integration. We are working hard to ensure the full utilization of our complete client offer through our product factories and strategic partners. Some examples are important. Firstly, the exploitation of our digital platform in our corporate division to increase our customer share of wallet. Secondly, BPSO customers will now be able to make use of Banca Cesare Ponti private banking platform and benefit from an additional tailor-made customer offer. In the second half, we will be merging our product subsidiaries, specifically factoring and consumer finance to reduce complexity, optimize costs and increase revenue potential. In this context, I would like to highlight the importance of our internal CIB product factory, which will play a key role going forward, especially in terms of fee and commission income. All in all, the 2 banks are now aligned to make a homogeneous product and service offer on all client segments. Let's move on to Slide 6 for the summary of our Q1 results. Slide 6 summarizes the key financials for this quarter. In this context, from Q2 2026, we will only disclose consolidated financials. It is important to highlight that our financial performance has been partially affected by the negative impact of the total return swap and other market effects, which, as of yesterday, have more than fully recovered and lie in positive territory. As such, total revenues, which stand at EUR 1.8 billion and which decreased some 5% year-on-year would be only 1% lower if the total return swap and other market effects were not included. Similarly, adjusted net profit, which stands some 7% lower year-on-year, would actually have been increased by over 1%, including the above-mentioned adjustments. As you can appreciate, our focus on costs translated into a further improvement of the net cost-income ratio, which landed at just over 45%. In addition, BPER continues to boast a strong level of asset quality with the cost of risk standing at 27 basis points. Our balance sheet is very solid with a CET1 ratio of almost 15% and profitability is high with an RoTE of 17%. Should RoTE be adjusted for the above effects, it would stand at 18.4%. Let's turn to the slide to deeper key P&L items on Slide 7. Q1 results have proved to be very satisfactory given the fact that in these 3 months, a large number of employees have been focusing on merging operations on top of their daily duties. As I mentioned earlier, some P&L items have been affected by the total return swap and other market effects. As such, quarter-on-quarter, total revenues would have been only 3.1% lower without taking into account the impact of the TRS and other market effects. Some further comments are noteworthy as far as this first quarter of 2026 is concerned. Firstly, the resilient performance of NII, as I will later explain, was supported particularly by improving commercial spreads. Secondly, commissions would have been 5% higher quarter-on-quarter should the positive effect of the bancassurance wrapper be excluded from the Q4 2025 commission line. In addition, operating costs decreased, thanks to our continued focus on operational efficiency. And finally, loan loss provisions have also shown a positive trend, decreasing by over 9% year-on-year. In conclusion, as you can see on the chart on the right, adjusted net profit would be flat versus Q4 2025 should the TRS and other market effects be excluded. Let's move on to Slide #8. As far as 2026 guidance is concerned, the following points are key. At the end of the year, NII should be flat or slightly higher low single digit. In this respect, our working assumption is Euribor at 2%. Let me repeat, Euribor at 2%. Commissions, on the other hand, should be higher mid-single digit, continuing the same -- on the same trajectory. The cost-to-income ratio will lie at approximately 45%, in line with current results. The cost of risk is expected to be slightly higher due to our conservative approach. The current geopolitical environment is under close attention despite the fact that to date, we have not experienced any deterioration in the quality of our loans. And finally, we expect our CET1 ratio at approximately 14.5%, including the impact of the share buyback when approved by ECB. Further information on guidance, including BPSO will be given at the business plan update scheduled for August, subject to market conditions given the current geopolitical turmoil. Let's move to the core part of the presentation. After some 18 months since the launch of B:Dynamic Full Value 2027, a quick glance at the progress of our plan, which is fully on track is a must. The plan remains to date stand-alone and the merger with BPSO is an accelerator of B:Dynamic. Here are some highlights. On Pillar 1, new lending increased by 36% year-on-year. Net commission income growth continues to be very robust, particularly in wealth management and bancassurance. On Pillar 2, the digital channels now process 96% of bank transactions with over 25% of new customer acquisition acquired digitally. As far as Pillar 3 is concerned, our conservative risk approach enables BPER to boast the most conservative asset quality ratios in Italy, while at the same time, we are increasing automated credit approvals for selected retail, small business and SMEs. On Pillar 4, on technology, security and AI, the onboarding for AI/Gen AI use cases on the AI/Gen AI dedicated infrastructure is completed. Our commitment to ESG-related lending continues to be strong with some EUR 5 billion of new ESG lending since the launch of this B:Dynamic. And finally, over 6,000 colleagues have already been involved in BPER's academy and training path. Let's now turn to our AI/GenAI@Scale program, which is a core enabler of our sustainable growth strategy. As we explained at our last Capital Market Day, artificial intelligence is one of the enabling factors of our B:Dynamic strategic plan in terms of growth and modernization of the entire bank. Approximately 80 models have been developed since 2022, aiming at 120 models by end 2027 through a balanced approach of make and buy solutions to achieve both quick delivery and strategic control. AI directly supports the pillars of our business plan. Firstly, our customer empowerment through customized proposition and a strengthened sales and distribution network, supported by chatbots and advanced support tools. Secondly, it captures economy of scale, thanks to end-to-end process automation and solutions for document management and information extraction from unstructured text. Furthermore, we achieved the bank's modernization by using generative AI to accelerate application development and increase internal productivity also through the adoption of the Copilot suite. Our goal is not to simply develop models, but to integrate AI into the bank's end-to-end processes to generate a measurable, sustainable and compliant economic impact, also supporting risk monitoring by control functions, including AML, compliance and audit. Some examples are noteworthy. Firstly, our GPS Personnel, an evolution of our personal service model, providing an integrated advisory service in order to provide tailor-made advisory. The results have been remarkable with an increase in the productivity ratio of our network in the range of 8% to 10%. Secondly, our SDLC platform enables the acceleration of software development and IT maintenance with further cost optimization. We expect an improvement of the productivity of our IT development centers in the range of 15% to 20%. And finally, our help desk AI assistant aimed at resolving any anomalies with which we expect to optimize costs by some 25% to 30% of these operational processes. Let's now turn to our financial performance on Slide 13. Given the context of the merger of operations and increased geopolitical turmoil, BPER produced a set of important results. On a BPER like-for-like basis, total revenues in Q1 stood at EUR 1.4 billion compared to EUR 1.5 billion in Q4 2025. Among the main drivers, the total return swap and other market effects, which as of yesterday has fully recovered and lie in positive territory. Diving into the details, revenues were up by 1.8% quarter-on-quarter, excluding nonrecurring effects in both Q4 '25 and Q1 '26. Excluding nonrecurring effects in Q4 '25 on NII and fees as well as the impact of a reduced number of days in Q1, core revenues were up at EUR 1.4 billion, driven by resilient NII and increased net commissions both year-on-year and quarter-on-quarter. In this context, the ratio of net commission income to total revenues further increased to 39.8%, excluding the TRS and other market effects, proving the high quality of our revenues. Similarly, on a consolidated basis, Q1 core revenues stood at EUR 1.8 billion, up by 3.1% quarter-on-quarter, excluding nonrecurring effects in both Q4 2025 and Q1 2026. Finally, it is important to underline how BPER's productivity index measured as net revenues on risk-weighted assets has continued to improve relentlessly every quarter from 9.7% at the beginning of 2025 to 10.3%, excluding the impact of the TRS and other market effects. This is a remarkable result as it is among the highest productivity ratios in the industry. Let's move on to the next slide, which focuses on net interest income. In the first quarter, as you can appreciate from the slide, net interest income was supported by increasing spreads, which was the main driver of the positive commercial dynamics. In fact, on a like-for-like basis, NII stood at EUR 820 million, up by 1.9% quarter-on-quarter, excluding a one-off component of EUR 13.4 million in Q4 2025 and a negative days effect of EUR 18.2 million in Q1. Similarly, on a consolidated basis, NII stood at EUR 1.1 billion, up by 1% quarter-on-quarter, excluding the above-mentioned one-off item in Q4 2025 and the negative days effect in Q1 2026. Please note that loan volumes in the quarter were resilient and stable, an important achievement given the significant loan growth in Q4 2025, driven primarily by retail and factoring. That said, loan growth for BPER stand-alone increased 3.6% year-on-year. At group level, loan remains substantially flat. Finally, I would like to highlight that our NII sensitivity to 100 basis points movement equal to EUR 225 million in the quarter versus EUR 235 million in the previous quarter. Now let's move on to the development of net commission income. Despite the focus on the merger of operations and the seasonality of the first quarter, which is normally weaker, the trajectory of net commission income continues to be robust with a 5% increase year-on-year for BPER on a like-for-like basis. To date, this performance is well above the targets of our plan. The mere fact that net commission income contributing on total revenues stands at 39.8%, including the beforementioned adjustment is a clear indication of the increasing high quality of our revenues. Our focus on capital-light, high-quality wealth management products is proven by an increasing proportion of this versus total commissions at almost 46% of total from approximately 44% 12 months ago. The remarkable performance of wealth management fees is underlined by an increase of almost 8% in the last 12 months. Please note that bancassurance fees in the last quarter are always positively influenced by performance fees. Taking into account this effect, net commissions would be up by 5% quarter-on-quarter. That said, the most important contributor remains banking service fee, which landed at over EUR 275 million. Although the contribution of these fees is coming down as a percentage of total commissions, we expect this to pick up going forward, thanks to the integration of the 2 banks. Let's move to the next slide. As you can appreciate, since the launch of B:Dynamic Full Value 2027, TFAs, one of the most important driver of commission income, have been growing from approximately EUR 300 billion to almost EUR 330 billion on a like-for-like basis and to over EUR 410 billion with the new group perimeter. This is primarily as a result of BPER being increasingly perceived as a relevant player in Italian asset gathering. As already mentioned, the integration of BPSO allows us to further strengthen our focus on asset gathering activities and will ensure the exploitation of further commission-related potential. Changing our focus on the quarter. As you can see on the slide, TFAs were impacted by the migration of one customer with no P&L impact and by market effects. Neutralizing these effects would leave us with TFA substantially unchanged in the quarter. Noteworthy to emphasize the fact that AUM's net inflows amounted to approximately EUR 800 million in Q1, while market effects had an adverse impact of some EUR 1.4 billion. Finally, it is important to note that at year-end, the loan-to-deposit ratio stood at 77.3%, stable quarter-on-quarter. This will enable us to continue to grow the loan book and to transform client liquidity into AUCs and AUMs. Let's move on to our performance on the cost side. Cost performance has been extremely satisfactory. Total costs were down by 1.6% year-on-year for BPER stand-alone. The actions deriving from B:Dynamic continue to reduce the cost-income ratio, which stands at 46%, excluding the TRS and other market effects compared to 46.7% in Q1 '25. HR costs were up by 1.7% year-on-year, mainly driven by the increase of national collective labor agreement, while non-HR costs were down by 7.1%, thanks to decisive actions on cost rationalization. On a consolidated basis, the cost-to-income ratio improved to 43.3% with above-mentioned adjustments from 45.2% in Q4 2025. In terms of the combined group, total headcount stood at 23,000 with an increase of approximately 400, driven by temporary workforce hire to support BPSO integration. As already mentioned, as a result of previous agreements, we are expecting over 220 exits in 2026. And furthermore, we expect mainly in the same year, 800 additional exits as agreed in December 2025 with the unions aimed at the implementation of a generational change program in the bank. As a final note, the strong improvement on non-HR cost is the result of our relentless focus on cost efficiencies. As per our plan, we have significantly reduced outsourcing and consultancy costs. Slide 18. As you can see, the trajectory of the cost of risk is very positive. LLPs came down by 22% in the last 12 months, while the cost of risk stands at 24 basis points, slightly lower versus 2025. This is also a result of our very high coverage level. In the quarter, our continued conservative approach translated into an NPE coverage ratio of 56.8%, slightly lower due to the sale of highly covered UTP single names. Including BPSO, the cost of risk stands at 27 basis points with an NPE coverage ratio stable at 52.8%. That said, our coverage ratio remains one of the highest among Italian peers and will act as a further buffer against any potential deterioration in asset quality. Our conservative approach is further confirmed as we report a Q1 coverage ratio on performing loans at 0.6%, once again, the ratio is among the highest in Italy. Let me add that in Q1, total overlays stands at circa EUR 180 million with an increase of approximately EUR 40 million. Let's move on to asset quality on the next slide. As I mentioned in the previous slide, Q1 2026 was affected by the sale of a UTP portfolio of single names. For BPER stand-alone, gross NPE stocks were flat versus the previous quarter at EUR 2.3 billion, and the gross NPE ratio remained unchanged at 2.4%. In any case, as in the previous quarter, the quality of our loan book continues to show a very healthy state with net NPE ratio standing at 1.1%, one of the lowest in the Italian banking system. This is further confirmed by stable Stage 2 and stable past due loans. As far as the combined banks are concerned, similarly, the net NPE ratio stands at 1.1%, in line with BPER stand-alone. Having finished with asset quality, let's move on to the development of the bank's risk-weighted assets. As you can see, in Q1 2026, total risk-weighted assets of BPER, including BPSO, were basically flat at EUR 80.2 billion. I will now turn to organic capital generation on the next slide. Despite the acquisition of BPSO and the total return swap and other market effects, the combined CET1 ratio stands at a very comfortable 14.9%. BPER continues to generate a very high level of organic capital. In the quarter, BPER generated EUR 537 million of CET1 capital or approximately 67 basis points. This result reaffirms BPER position as a highly resilient institution. Let's move on to the balance sheet items on the next slide. As you can see, in Q1 2026, as a result of liquidity optimization, the LCR stands at 157% and the NSFR stands at 131%, underlining that the bank's liquidity ratio remained high. And finally, the loan-to-deposit ratio stood at 77.3%, one of the lowest among its peers, which will enable us to continue to grow the loan book through increased loan origination and to transform client liquidity into AUCs and AUMs, thanks to our ability to attract customer liquidity. Let's move on to the bond portfolio on the next slide. Turning now to the bond portfolio. Italian government bonds increased to EUR 22.2 billion and accounted for around 51% of total bonds. As a result of portfolio rebalancing, the total bond portfolio modified duration was 1.9 years, while the Italian govies portfolio modified duration was 2 years compared to 2.3 years at the end of 2025. Please note that the annualized average yield of the financial portfolio was 2.4% in Q1, and we expect the average yield to increase during 2026. Let's move on to the next slide. On Slide 25, we report the divisional financials for BPER on a like-for-like basis. I would like to draw your attention to the important results achieved on total wealth commission income across our divisions, which amounted to EUR 259 million, an increase of 8% compared to Q1 2025. These results underline the important focus of the group on asset gathering activities. Let's move to the final remarks. In conclusion, as of April 20, we are now one bank with a very strong position in rich Northern Italy, and we are well placed to play a leading role in asset gathering and fee generation in the future. We are working very hard to ensure the successful and flawless achievement of cost and revenue synergies, which I underline is an important target given the limited time frame. That said, and despite an important focus on merger operations, business growth has been positive, thanks to the strength of our commercial networks. Asset quality is one of the highest in the Italian market, coupled with very sound coverage ratio. Although we monitor the current geopolitical turmoil very closely, we are not experiencing any deterioration in the quality of our loan book. In addition, our capital strength with a CET1 ratio of 14.9% and our continued internal capital generation capacity place us in a comfortable position going forward. Finally, before taking your questions, please be reminded that we are planning an update of B:Dynamic Full Value 2027 on August 6, should the geopolitical and hence market conditions not deteriorate. We're now ready to take your questions. Thanks.

The first question is from Marco Nicolai, Jefferies.

A few questions. First one is on NII guidance. You guide for flat to low single-digit growth for 2026. Can you just remember us the rate assumption you use because by now, the market sees at least a couple of hikes this year. So Euribor are you taking into consideration in your guidance? And also in terms of loan growth, if I'm not wrong, you were targeting 3% year-on-year, which is pretty much what you delivered in the first quarter of this year. So taking all this into consideration, higher rates, perhaps margins pretty solid and loan growth, perhaps we should expect you to be at least in the upper part of your guidance for this year? So this is the first question. Second question on costs. If I look at the year-on-year performance you delivered this quarter in costs, you're down like 5% compared to the first quarter '25, if I look at the BPER plus BPSO cost base. And you closed the merger just in April. So this doesn't even include anything from the benefits of the merger. So my question is what you're doing, especially in the section of the admin costs where the performance has been very, very solid. And anything you're doing on the BPER level, can you replicate that on the BPSO level? And is that included in your synergies targets as well as taking into consideration the slide on AI, is that included into your current cost guidance and expectations? Or perhaps this is something we can look forward to in August when you will update us on the longer-term targets? And last question, just a follow-up on the TRS. If I understood correctly, you said that you recovered the loss of the TRS and other market effects you had this quarter. So how much was that loss? And shall we just consider that the deadline in the next quarter is just going to be, say, above EUR 100 million, recovering entirely the loss you had this quarter?

Thank you, Marco, for your questions. So in as much as guidance for NII is concerned, as we mentioned, we indicated that we are considering a Euribor ECB rate of 2%. So considering this change, we expect net interest income flat or up low single digit, and is a prudent assessment, absolutely. But then I will pass to Simone to give you more color on these assumptions and guidance.

Thank you very much. Mr. Papa, as you mentioned during the presentation, our forecast for NII has been based on the conservative approach 2% also because the market situation is quite stable at the moment. You know because we have declared in the presentation our sensitivity. So today, the Euribor is 2.2%, depending Euribor 3 months because this is the one that we use for our simulation, depending how the evolution of the market will drive us in the next month, we will adapt clearly the forecast for net interest income.

Yes. Then we have performed in the first quarter growth in loans and BPER stand-alone, as you mentioned, 3.6%. In our business plan, the one we presented in October '24, we indicated a growth of 3% CAGR throughout the plan. So we are on the right trajectory. Nevertheless, if you look at the combined entity, we are flat quarter-on-quarter for the reason that, obviously, BPSO being a target of an offer was inflating in a way their activity. And since we took over, we have been looking at this transaction. Nevertheless, we do expect to continue on the trajectory and close the year confirming our target of the growth CAGR. In terms of costs, well, yes, we had a good performance on cost. This is something that continues quarter after quarter. We have been reducing the non-HR cost, thanks to the reduced outsourcing and consultancy cost. This is something that we had indicated also in our strategic plan back in October '24. So you see that whatever we presented at time, we are keeping what we said, and we keep on going in that direction. We have, let's say, taken over officially the bank as BPSO with the merger that happened the technical merger on the 20th. So we will now start looking also at the cost on a combined entity. And we do expect to deliver the synergies on cost that we have indicated in our offer, so the EUR 190 million, which given by 2027, which given the limited period of time we have, so it's slightly more than 18 months, I think is quite a strong and important amount that we are going to deliver. Having said so, in any case, we are relentlessly looking at the reduction of costs. We have indicated that we have in the course of the year, we will have further exit of HR or colleagues. 220 coming from previous agreements and most of the 800 colleagues that were agreed in December last year. So we will have a further decrease on the HR cost, but also on the non-HR cost, we will keep on looking at different ways of optimizing the cost side of the business. In this, obviously, we are helped also by the deployment of AI. I indicated in my script that we have -- we are considering further reduction, especially on the back office activities operational side Nevertheless, we have to consider that the deployment of AI has a cost of implementation. So the results of this application of AI to these activities will be seen close more on the 2027 than in 2026. Last question was about the TRS, and I will ask Simone to answer this question, please.

Thank you very much, Mr. Papa. As you mentioned during the presentation, at the 31st of March, we had a negative effect from TRS and other market effects around EUR 75 million. At the date of 5th of May evening, we have totally recovered and we are positive around above EUR 30 million.

Consider that you know that at the end of last year, we had -- we indicated with transparency that the TRS, which was a one-off item was positive for around EUR 30 million. So this is the level of indication we can give.

The next question is from Lorenzo Giacometti, Intermonte.

Okay. So the first one is if you can guide us through basically the moving parts of your CET1 ratio leading to the 14.5% you target at year-end '26. The second one is if you can give us some color on the penetration of bancassurance products and the wealth management trends within the BPSO perimeter. And the third one is more of a strategic one. So given that we may see further consolidation in the Italian banking sector in the next year, how should we look at BPER in this context? And I mean, will it play an active role or more of a by standard one?

Thank you, Lorenzo, for your question. In as much as CET1 ratio is concerned, we gave a guidance of 14.5% year-end with considering also the SBB of up to EUR 750 million or 3% of capital, whichever is the number. And this has an impact of 94 basis points. And we still on a conservative basis, consider the full settlement of the TRS, which has an impact of 82 basis points. So as you know that we have always a conservative approach. Why do we have a conservative approach? Because we have filed application with the ECB yesterday or 2 days ago for the SVB. We need to wait for their approval. The ECB will take their time to give us their approval. Depending on when the approval comes, I mentioned already, I think, in the previous quarter when we presented the numbers that if the approval comes and they take the full period of time that they have at their disposal, this will be close to the end of July. Therefore, the SVB will start only in September. You don't run an SVB in August. And therefore, we need to really understand what is going to be our position towards year-end. So having a conservative approach, we decided to have 94 basis points, so the full deployment of the SVB, EUR 750 million and to keep the 82 basis points, the EUR 650 million that is related to the TRS. The other question was about the penetration of bancassurance in bps. This is one of the avenues of further development of business in the combined entity. Today, BPSO has a penetration of bancassurance in terms of revenues of 2% in terms of commission of 2%, whereas for us, so BPER on a stand-alone basis, we're talking about 6%. So you see here what is the growth that we can project. But obviously, this cannot happen by the end of '27 because, let's say, we had on the 20th of April, the integration, the technical integration of the 2 banks. The real work will start now because we need to integrate the 500 branches of BPSO and to bring BPSO on to our level of cross-selling activity. So it will take some time, but the aim is to improve our numbers, so to improve the 6% because we want to further grow and we do have opportunities of growing in bancassurance activity and to bring BPSO on to the same level of today. As much as consolidation is concerned, today, we are very busy in integrating BPSO. The acquisition, the merger of BPSO into BPER was an important step for the new bank, the new entity, the combined entity. It's placing us among the top player in the Italian banking sector. We see a lot of opportunities, very good opportunities to further grow. I mentioned that we have an 11% market share of branches in Italy. We have 57% of our branches in Northern Italy. In Lombardi, we have almost 18% market share of branches, 25% in Liguria, 14%, 15% in Emilia Romania. So we are very well placed in the richest and most active part of Italy. Now we have to bring this 11% or 57% of branches up to an increasing the market share, the commercial market share. So the market share in activity has also to grow. So we have a lot of opportunities there to grow. So I would say that we are concentrated very much on internal activity, organic growth. But obviously, as I mentioned also in the past, we work in this market. We are monitoring the market. We are seeing and reading what is happening almost every day. So bearing in mind that for us, the main activity today is to integrate completely Sondrio, never say never. Let's see what happens and then we decide what to do. But today, there's nothing on the table, just full integration of BPSO.

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

I just have 2 questions. One is on the cost progression in the year. I mean, looking to what you were flagging before, Gianni Franco, on the integration of the factories, especially in factoring and consumer credit, the departure of employees agreed with trade unions. How should we think about the cost progression in the year? Should we expect the synergies to start being visible in the coming quarter? Or that should be more a second half improvement in terms of starting to extract the EUR 190 million of synergies? The second one is on the commercial activity. I've seen that corporate lending in BPER stand-alone has been growing quarter-on-quarter. Just wanted to get a bit of your thoughts on how should we think about corporate lending in the current context, if you have start to see any slowdown in demand from corporates? And linked to that, on the deposit front, in the quarter, there was a decline probably explained by seasonal factors, but I wanted to see, I mean, how do you see deposit evolution going forward?

Thank you, Ignacio. So cost progression in the year, I mentioned that we have around 220 colleagues coming from previous agreement and 800 that will be leaving and coming from the latest agreement that was signed in December last year. Consider that this 800 will exit in batches. They will start the first batch, I think, the end of the third quarter, so by the end of September. And then we have progressively during the months going towards the end of the year. So let's say, the cost saving on this -- under this point of view will be really reflected in 2027 because we have the cost for sure until the end of September for the EUR 800 million. So this is where we see the impact -- the positive impact going forward. The integration of the product factories, so the one related to factoring activity and the one of consumer financing will happen probably in the fourth quarter, beginning of the fourth quarter because it takes also some legal framework that we have to go through in order to make sure that we do this. Also, this will bring for sure, a reduction in cost -- although in as much as the consumer financing business is concerned, the entity that is BNP is a very small one. And therefore, there, we will not have very large savings. Nevertheless, quarter-on-quarter, we do expect to keep on reducing also non-HR cost. Therefore, we landed -- we indicated as a guidance a cost-to-income ratio of 45% to close or around 45% close to year-end. We hope that we'll be able to beat this ratio. Considering also that we will put a lot of effort in growing the revenue side because obviously, cost income is made up of 2 elements, the cost on one side and revenue on the other, and we want to grow there. In terms of commercial activity, so far, we have not experienced a deterioration of the activity or a slowdown. Obviously, the impact of the geopolitical situation, if it's not sold, will happen in the months to come. But so far, we didn't witness any particular situation. It's a matter of fact that if we look at BPER on a stand-alone basis, in the first quarter, we were able to grow 3.6%, which is, I believe, a very good number considering the fact that we are really making our way in the corporate business. We are growing on the retail business, and we keep on having a very strong position in terms of mortgages for families and individuals. And we are growing also our activity on the transformation of liquidity into AUM and AUCs. And as much as liquidity is concerned, first quarter, as you mentioned, is always -- you have always seasonality. Nevertheless, for us, to gather liquidity is one of the most important component of our activity. This is something that we have been pushing in the last 2 years very much because having liquidity allows us to grow on the loan side, without having problem in terms of liquidity, but also to rotate liquidity and to transform liquidity into AUCs and AUMs. And here, I think we are making our way, especially thanks to Banca Cesare Ponti on the private banking side, but also on the activity that is done by our retail colleagues.

The next question is from Mateo Panchetti.

I have 2 questions, please. The first one is still on capital. You have said that the 14.5% target included the share buyback and the TRS transactions. But should we consider the buyout of the minority of Sondrio and other potential impact separately, meaning that the 14.5% should be considered more as a floor rather than an actual target? And my second question is on cost. You clearly said that you have a lot of cost-saving initiatives during this year with the phasing in between 2026 and 2027. But will you be able to provide an absolute cost guidance for this year?

So thank you for your question, Matteo. So as much as CET1 is concerned, yes, 14.5% is a floor. You know that we have always a conservative approach. So minorities are already considered. So it's really the floor. But as I mentioned before, we have also a conservative approach because we don't know when we are going to get the approval from the ECB. And therefore, we don't know what the full impact would be. So we decided to indicate full impact by the end of this year for both TRS and SVB. We have a lot of cost-saving initiatives in the sense that we have been having this in the last 2 years. We have -- we keep relentlessly to work on reducing costs. I would like to remind that 2, 2.5 years ago, this bank had a cost-to-income ratio of around 62%. Today, we landed at 45%. Therefore, I think that we did already a hell of a job here. We'll keep on pushing in that direction. In August, when hopefully, we are able to present our revised plan, we will give guidance, better guidance for '26, but we will give guidance also not only for '27, but also '28 and '29. So the guidance will go beyond the expiry of, let's say, this current business plan that, as you know, ends in 2027.

The next question is from Andrea Lisi, Equita.

The first one is an update on the share buybacks on the 3% of the capital. You have indicated that on the CET1 guidance that you assume include the cost of the share buyback plus the cost of keeping the full TRS. So should we deduct in some way that the share buyback will be executed not by using the TRS, the proportion TRS, but by buying shares directly on the market. And yes, this is the first question. The second is I have seen in the slide regarding capital movements in the quarter that you have accrued 53 bps for distribution, 67 bps of organic capital generation driven by net income. So this implies a ratio of distribution over capital generation of kind of 80%. So should we interpret it as an increase in the payout ratio from 75% to 80%? Really last one is if you can provide an update on the hedging portfolio, if you have some data on these elements on the contribution to NII, what you expect would be helpful.

So thank you, Andrea, for your question. So we have not decided yet what to do in as much as the SVB, whether utilize the TRS partially totally or not. We don't know exactly when we can start with the SBB. So as I mentioned, taking a conservative approach, we have decided to indicate and to deduct from the CET1 ratio both costs. In as much as the distribution is 75%, which is what we have decided and indicated in our strategic plan back in 2024. Obviously, I mentioned already several times because maybe I'm already anticipating a question coming from some of you. We always said that if also after the merger of BPSO and bearing any geopolitical and macroeconomic situation because you never know what is happening in the world, we have this constant generation of organic capital. And therefore, we can land with a very positive spin in terms of net profit, we might consider also a higher distribution on that. But in as much as the first quarter is concerned, we put aside 75%. Your third question because I didn't get, if you can repeat it, please.

Yes. And that was about the replicating portfolio, if there is any indication you can provide.

I'll put through Simone.

Thank you very much. As we already stated in previous presentation, we don't have a real replicating portfolio, but given the huge amount of mortgages and loans that we have in our balance sheet, we are one of the banks with more percentage of loans over assets among the Italian system. This is our natural hedging. So we have clearly derivative but not a clear structure of replicating portfolio. If you mention the amount of interest that comes from bonds and swap, this is increasing clearly quarter-over-quarter.

The next question is from Giovanni Razzoli, Deutsche Bank.

The first one is again on CET1 because it seems to me that there is a bit of confusion about the way you treat the TRS and the share buyback and the CET1 ratio guidance at year-end. So to make it simple, let's assume that tomorrow, the ECB approves the share buyback, which has an impact you mentioned of 94 basis points on capital. Is it fair to assume that you will reverse then 82 basis points of cost of the TRS so that at that point, your CET1 ratio will go up by 82 basis points to well above 15%. And then if I also assume the other moving parts on the CET1 ratio, including the merger with Popolare di Sondrio, which on my numbers should contribute around 40 basis points of more capital because of the issuance of the new shares and the impact on the minorities, your CET1 ratio will be well above 15%. So what are the moving parts which I'm missing here to stick to your 14.5% guidance, which you interpret as something between 14.5% and 15%. And the second question is on the disposal on the UTP portfolio. If you can please share with us what is the gross amount that you have sold?

Thank you, Giovanni, for your question. So first question, yes, you can assume in assumptions is 3 thing and then you can assume that if we receive the authorization from the ECB for the SVB and we start tomorrow, we might decide to utilize partially or totally the TRS. In that case, the assumption is that we will have a charge of 94 basis points for the SVB and a release of 82 points for the TRS total or in part in case it's in part, but we haven't decided yet what to do. And therefore, conservatively, we have decided to charge both to the capital. For the part related to the 40 basis points minorities and so on and the way in which we build the 14.5%, which, by the way, I mentioned before, there was another question is the floor, conservative approach, the floor, which means we could maybe be in a better position. I pass to Simone.

Yes. So thank you very much, Mr. Papa. Yes, I don't comment what already Mr. Papa has mentioned about the utilization of the TRS. But as you correctly mentioned, the 14.5% floor is already including also the benefit effect of the minorities. You have also to take in account that we have included business dynamic that will generate risk-weighted assets as well as a little bit of operating risk-weighted assets like all the years. But we confirm what you mentioned.

Sorry, I forgot to ask a follow-up on the share buyback. Can you confirm that so far, the share buyback is not intended to the cancellation of the shares or have I missed something?

For the time being, yes, this is the way in which has been approved by our Board. And I put through Mr. Rodilossi for your second question related to the UTP portfolio.

Thank you for the question. The gross amount was about EUR 70 million, EUR 67 million for the -- to be precise.

The next question is from Noemi Peruch, Morgan Stanley.

I just have a few follow-ups. So on the share buyback, is there any event that would trigger the cancellation of the shares? Or is it something that we should take for granted? And then on the moving parts on capital, I wanted to make sure that I have all the moving parts correctly. Are there any other moving parts related to the TRS in the next 9 months? Or did you get the full deduction related to this instrument with Q1? And if you can update us on your SFTs program, please?

Thank you, Noemi, for the question. So in as much as your first question is concerned, the SVB cancellation. For the time being, we announced that the shares will not be canceled, but I already mentioned also in other meetings that we have a constant discussion and approach with the Board if and when the Board decided to proceed to the cancellation of the shares, we will cancel the shares in total or partially depending on the utilization we'll make that we have share program, for instance, for our managers and so on and so forth. So for the time being, we stay with the noncancellation of the shares. And I'll ask Simone to take the second and third question.

Sorry, related for the moving part of the CET1 ratio, the TRS in the next quarter, we forecast an impact for around 10 bps, so therefore, negligible. And related to the SRT, as we have already mentioned, we are ready -- we have the engine ready to, let me say, launch the SRT whenever we think we need at the moment, we don't plan this quarter to launch any SRT. But as mentioned before in the previous presentation, we are ready in any moment when the Board will decide. Given the current capital structure, giving a CET1 ratio of 14.9% I don't think that we feel compelled to do a CR for the time being. But as Simone mentioned, we have the structure already. And if we decided to move for different reasons, not related to capital, by the way, but because maybe interest rates are in the right -- following the right direction and so on, we are ready to move in that direction.

Next question is from Sofie Peterzens, Goldman Sachs.

Here is Sofie from Goldman Sachs. So my first question would be, how should we think about the capital impact from the final merger in Q2? And then my second question would be on risk-weighted assets. They were broadly flat this quarter. But how should we think about the future risk-weighted asset reductions from kind of moving BPSO models to more IRB models? And then my final question would be like how do you think about kind of upside risk to the EUR 100 million revenue synergy target that you guided for? Are you seeing better prospects to grow your revenues than initially expected? Or do you think the EUR 100 million is still very valid?

Thank you, Sofie. I take the third question about synergies target and then Simone, our CFO, will answer the first 2 questions. In as much as synergies are concerned, we indicated EUR 290 million when we launched the offer for BPSO. And for the time being, we stand at EUR 290 million, given the fact that by 2027, given the fact that we have basically 18 months to proceed. Consider that until the acquisition of the minority shareholders, we could not do anything because the bank was a listed one. So we had to respect minorities rights and so on and so forth. So now with the cancellation of the shares and the full integration of BPSO into our bank, we have this EUR 290 million, which we consider a very ambitious target given the fact that we have 18, 19 months to deliver it. Nevertheless, and this will be treated when we present the update of the plan on the 6th of August, we will give also an indication and guidance on what will happen after 2027. So we give an indication for '28 to '29 because we do expect to have and to be able to produce further synergies, both on the cost side and on the revenue side, but that cannot be delivered by 2027. So I'm positive on the fact that we can have better synergies. And historically, BPER when has merged other banks into the latest acquisitions we made has been always able to deliver better synergies than what was indicated. But this will happen after 2027. So we stick to the EUR 290 million for the period until the end of 2027. And Simone will take your first 2 questions.

Yes. Thank you very much, Mr. Papa. As mentioned by also one of your colleagues before, you can assume and it's already included in the 14.5% floor that we have forecasted for year-end, you can assume from M&A operation around 40, 50 bps positive effect in relation to the risk-weighted asset effect we are taking account overall between business dynamic risk-weighted asset and other effects around 40, 50 bps.

The next question is from Luis Manuel Grilopratas, Autonomous.

My first one is on the stand-alone cost savings. From memory, you target EUR 280 million cost savings across your stand-alone business plan. I wanted to ask you how many of the EUR 280 million cost efficiencies were already executed? And also, could you please disclose whether there is any overlap between these cost savings with the EUR 190 million cost synergies from the Sondrio combination? Then my second question is on cost of risk. So your full year cost of risk guidance appears quite conservative, considering the performance that you already achieved and asset quality metrics seem to be improving. I wanted to ask you if you are seeing like any early signs of deterioration given the macro uncertainty? And have you updated already your IFRS 9 models to reflect weaker GDP expectations and whether we should expect any top-ups in cost of risk in the coming quarters?

Thank you, Luis. So if we look at your first question, so the stand-alone cost savings, I don't have the exact number with me, but we are beyond the plan. So we are performing better than what we had indicated in our business plan. We will provide you with the exact number, by the way. So it's not on the top of my mind now, so -- but we are better than expected and what we have planned. And this is not including the EUR 190 million cost synergies coming from BPSO because, in fact, when we presented our business plan on the 10th of October 2024, we didn't have under our radar screen BPSO as a possible acquisition target. So the EUR 290 million was on BPER stand-alone. And so as I said, better than plan. And on top of that, we are going to add EUR 190 million synergies coming from the acquisition. Cost of risk, conservative, and then I will ask my colleague to give you a more specific and technical answer. But the geopolitical and macroeconomic situation deriving from the geopolitical situation gives us the want to say not the opportunity, but for sure, push us to be conservative in indicating the cost of risk, although I am with you with the fact that this is a very conservative approach. But we don't know what to expect. And more than that, we don't know when this geopolitical crisis will end. I will ask Mr. Rodilossi to give an answer.

Our CEO has already highlighted the key points. Nevertheless, we can remark that overall, the asset quality remains very solid. But given the current geopolitical situation, we have overweighted our downside scenario to take into consideration the uncertainty and the volatility of the scenario itself. So at the moment, we do not observe any deterioration. Anyway, we are considering also the possibility of even a recession in our scenarios. But thanks to our prudent approach, we can say that we can face the crisis with the eventual crisis with relative confidence without the need of drastic measures. And about BPSO and their models, we are working and we think that for BPSO exposure the level of the coverage will converge to the BPER 1.

And does that mean that the top-up -- since you said that you overweight the downside scenario, does that mean that there was a top-up in cost of risk this quarter? Or shall it happen only in Q2?

Well, in Q2, we will apply the BPER framework. So we will -- we should have the effect in the Q2 itself.

The next question is from Juan Pablo Lopez Cobo, Santander.

I got one regarding the cost-to-income guidance, the 45%. I'm struggling a bit to get to that number, to be honest. If I look to the main P&L items, we should expect NII to evolve positively during next quarters, fee income probably as well. The financial income impact in this quarter will be reversed. And then we will -- we should expect cost savings and synergies to come during the next quarters. So am I missing anything here? Why do you expect cost to income to remain at the same level at this quarter? And maybe a related second question, a bit more detail regarding the cost savings. You just mentioned that because the merger happened just in April, you were not able to get any synergies. Could you give us any indication of the synergies? You mentioned 25% for 2026. That should apply both for cost and revenues. Another question is the 400 temporary employees. Could you give us any indication of the impact and timing when that will disappear?

Thank you, Pablo, for your question. So cost income guidance '26. As I mentioned, income ratio is made up of 2 items, cost and income. We do expect -- I mean, as much as income are concerned, we have indicated that in terms of net interest income, we do expect the NII being flat or up low single digit. Whereas for net commission income, we do expect those to grow in the upper mid-single digits. So we do expect to see a positive indication there. And as I mentioned, we will have also a partial reduction of cost. One, the most evident and earlier one will be from the exit of the first batch of people. So the 220 colleagues that will be exiting the bank from the old agreements that were reached in the past by the bank. And then, progressively, we will have a smaller saving coming from the 800 colleagues that will start exiting the bank by the end of September. So the first batch will bring 3 months saving and then going forward, but the total, let's say, benefit will be very evident in 2027. We had the famous this 400 temporary workers that have been helping us in the merger. So we'll see what happens now with the merger because as I mentioned, we had the technical merger taking place on the 20th of April. Now we are progressively having this temporary workers leaving the bank as long as we go for the integration and the activity related to the integration. As mentioned, the synergies, both on cost and on revenue side will be deployed by 25% in this year and 75% in 2027. Obviously, this is an assumption, but we'll be driving to deliver more in 2026. Let's see whether we can do better than the 25%, but this is the indication that we can give today.

The next question is from Hugo Cruz, KBW.

Just a couple of clarifications. So first on the impact of the rate rises, you give the sensitivity. But I was wondering how quickly does that get reflected in your NII? Should -- if we believe rates -- rate hikes go up this year, should we see a benefit already in the first quarter after the rate hikes or before? Or does it take a bit longer to reflect in your numbers? So that's the first question. And second, the TRS, I'm still a bit unclear about how it all works. In Q4, you disclosed a CET1 impact of 62 basis points. Now you're talking about 2 I'm not sure if that's in the Q1 number or if it's already mark-to-market for the latest prices. And then I think you mentioned another 10 bps negative impact in the next quarter. So is this all going to the P&L? Or there's some part that goes against capital? If you could clarify that would be helpful.

Thank you, Hugo, for your question. I'll ask our CFO to take the 2 questions.

Thank you very much, Mr. Papa. Regarding the impact on the rate increase, we clearly -- we don't have the impact immediately, but we can assume that after 1 quarter, we have half and then the full after -- in the following quarter. This is our assumption. Regarding the TRS, we have 10 bps this quarter, and we will have 10 bps we assume next quarter on the capital clearly.

Excuse me, last year, we said 62% was the impact on 2025, and we had additional impact in 2027. So maybe this was the missing part that you couldn't maybe remember. So the overall impact is 82 of which 1 impact was already calculated in 2025 when we indicated the CET1 ratio and the differential, which is the 20 basis points is 10 bps the first quarter and 10 bps in the second quarter, but was already indicated last year.

Next question is from Adele Palama, UBS.

Sorry, only a few clarification. So on the NII guidance, I understood that 2% 3-month Euribor is embedded as an assumption, but which is the assumption on the lending growth for 2026 for the combined entity? And then on the replicating portfolio hedging contribution for first quarter, so for this quarter, how much is the contribution into the NII? Then on fees, so into the first quarter, how much is the contribution from upfront fees? And then which is the market performance that is -- the market performance assumption that is included in the guidance? And then which is the tax rate that we should assume for 2026, 2027 as well? And then a clarification on the RWA. So you mentioned that the alignment of the credit RWA for Sondrio should bring around 40 to 50 basis point impact, I guess, is positive. Is that included in the 14.5% target or is on top?

Thank you, Adele. So the guidance for -- in as much as loan growth is concerned, as I mentioned, we believe that we'll be able to have a growth of around 3% in order to be able to deliver the 3% CAGR that we mentioned in our business plan, the strategic plan presented in 2024. Last year, we were at 3.2%, go by half 3.3%. So we see, in any case, a pickup going forward. So we'll stay broadly in line with that growth. In as much as the other questions are concerned, I think that in as much as the replicating contribution is concerned, Simone, our CFO, already answered that we don't have a replicating portfolio basically. So there's no contribution here coming from a pure replicating portfolio because we have a natural one. And therefore, this is already embedded in our numbers. In as much as the upfront fees, historically, we have around EUR 110 million, EUR 120 million per year -- and I think we are around EUR 30 million, EUR 35 million on quarter, something like that. So I think also in this -- in the first quarter, we had this. As a matter of fact, maybe this quarter, we had slightly more because we had -- we participate for our customers in the issuance from the government, the Italian government of BTPs. And we had -- we bought for our customers EUR 1.4 billion, and we had also issuance of certificates, which bring upfront fees. But the overall amount usually, we are talking about, on average, EUR 30 million per quarter. We try not to have upfront, but to stay on the recurring fees coming from all the different products. Tax rate, I'll ask Simone to answer.

The tax rate that you assume for year-end is 35% following the new law of last year that has increased the taxation of 2%. Regarding the last question that you mentioned, I said before that we have 40, 50 bps, not for the risk-weighted asset of BPSO, but because of the minorities M&A operation. This is what the positive effect that we have. If not clear, maybe we can clarify bilaterally.

Okay. But like then the RWA -- I mean, the RWA of Sondrio with BPER, which will be the effect? Are you considering any effect?

Thank you for the question. The answer is a little bit technical because we are not authorized to use our internal models on BPER exposure. For this reason, we submitted in September 2025 a letter comply a plan to ECB that authorize this plan and the plan foresees to apply a simplified approach on RWA calculation on the stock of BPSO exposure based on BPSO models and this is the transition approach that we use also for the former UB transaction. So the letter to compliance plan forces also to redevelop our models, including BPSO exposure. Anyway, the application package is planned to be submitted by the end of 2027. So the bottom line is that we expect a stability of RWAs on BPSO exposures.

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

Okay. So thank you very much for participating to our session. And obviously, we are always at your disposal for a one-to-one interaction. Thank you. Bye.

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