BPER Banca SpA (BPE) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the BPER Group consolidated results as at the 30th of June 2026 and Acceleration Beyond B:Dynamic Full Value 2027 presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Nicola Sponghi, Head of Investor Relations at BPER. Please go ahead, sir.

Thank you, and good morning, everyone. I'm pleased to welcome all of you to BPER's conference call, where our top management is going to present BPER's Q2 and H1 2026 consolidated results and an update on B:Dynamic's projection for 2028. Before I leave the stage to BPER CEO, Gianni Franco Papa, a couple of important points. Please note that today's slide set and the press release can be found on BPER's corporate website. I would also advise you to take note of the disclaimer on Slide 1 of the presentation document. After the presentation, the CEO will be joined by CFO, COO and CRO to address any questions that might arise. I will reiterate that this is reserved for financial analysts whom I will kindly request to ask a maximum of two 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.

Good morning, ladies and gentlemen. It's a pleasure to welcome you all to our event in which we present our first half results and an update on B:Dynamic projection for 2028 on the basis of the current perimeter. As you recall, back in 2024, we set ambitious targets for ourselves. We are overdelivering on such targets while in parallel, we have completed the integration of BPSO. That said, today, we stand on a broader and even more solid platform, ready to capture our full potential through a selected number of additional initiatives. I look forward to meeting with you personally to illustrate the details of this strategic update. Let's move to the next slide. I'm proud to say that today, at approximately halfway into our plan, we are beating our ambitious targets set in 2024. I must thank all our colleagues, customers and partners because altogether, we have been able to overdeliver on B:Dynamic, and this has been recognized also by the achievement of Italy Best Bank Award by Euromoney. First half 2026 is the best half ever in the history of the bank with over EUR 1.3 billion of adjusted net profit, representing an almost 15% year-on-year growth. The operating and financial performance continues to remain strong, as you will appreciate later in the presentation. Thanks to the business combination with BPSO, we have created a platform which is ready for enhanced top and bottom line growth. Our investment in technology, talent and capabilities, along with our strong capital position, position us to leverage our operating platform and capture organic and inorganic growth opportunities. On top of the ongoing business acceleration, we are raising our ambitions through a number of selected strategic levers, which I will walk you through later in the presentation. As a consequence, this will lead to accelerated performance and sustained value creation, which will enable an increasing and very attractive shareholder remuneration in terms of both cash dividends and share buybacks. Let's take a couple of minutes to review our historical performance since the launch of B:Dynamic. The net income line trajectory has been remarkable. Despite the significant growth, the cost of risk remained at extremely low levels and operational efficiency continued to improve. As you have seen throughout the plan, we have demonstrated a remarkable internal capital generation, totaling EUR 3.6 billion since B:Dynamic was launched. The outstanding operating and financial performance has attracted strong capital inflows from active and passive funds, which allows BPER market capitalization to increase from EUR 4.4 billion to over EUR 29 billion at the end of July. Furthermore, if we add dividend payments to the calculation, shareholders have benefited from an important upswing in total shareholder remuneration, reaching more than 460% since the beginning of 2024, significantly better than any other Italian and European peer above EUR 20 billion in market cap. Let's turn over to our tangible results of B:Dynamic to date. As you can see on the left side part of the slide, a remarkable profit-driven internal capital generation allowed for an outstanding shareholder remuneration since the launch of B:Dynamic. Cumulative distributions between 2025 and first half 2026 amount to over EUR 3.1 billion. This is an outstanding achievement given that during 2025 and 2026, we've been very busy in successfully completing the integration of BPSO. As you are aware, we have been working together with our colleagues of BPSO in order to set up and integrate the new operating platform aimed at capturing in a very short time period, EUR 290 million of annual cost and revenue synergies. By end 2026, we will have achieved over 25% of total synergies, and we expect to fully reach our target by 2027. That said, we expect further synergy potential in 2028 and beyond. As you can see, we have migrated almost 1 million clients to BPER's platform in approximately 7 months. And in a similar way, we have focused on upskilling actions to onboard 3,500 colleagues on our service model. And finally, our new operational procedures will render the bank leaner, swifter and more efficient. Let's move to the next page, which focuses on our operating achievements. This slide represents our progression since the launch of B:Dynamic and our achievements in 2025 as BPER stand-alone. Notably, in the first 12 months of the 3-year plan, we are well ahead of our ambitious target. And let me add that these remarkable results have further accelerated in the first half of 2026. On our first pillar, unleash our clients' full value, which focuses on capital-light commission income, we registered an outstanding performance. In the first year, commissions already grew by 5%, well on track to achieve the 12% target by the end of 2027. In the context of our second pillar, capture our latent economies of scale, which focuses on achieving a best-in-class operational efficiency, the bank decreased operating costs by 5.2%, already very close to the 7% reduction target by the end of 2027. On our third pillar, leverage our strong balance sheet. Today, our CET1 ratio remains well above our target of 14.5% despite the acquisition of BPSO and is among the highest in the Italian banking system. Finally, the last pillar, which focuses on completing the modernization of the bank has allowed us to make significant progress in terms of technology, ESG and sustainability as well as organization and people. To modernize our technology since the start of B:Dynamic, we have already invested EUR 230 million of the EUR 650 million plan, totaling almost EUR 1 billion since 2022. ESG and sustainability remain a must for us. We are determined to remain leading pioneers in this area, and we have materially improved our position on ESG ratings. Finally, we have made clear progress in upskilling our colleagues. In this context, we have empowered 21% of our colleagues with our academies. As I mentioned earlier, ladies and gentlemen, despite current geopolitical risk, macroeconomic headwinds and accomplishing a swift integration of BPSO, this first half and second quarter have been the best ever. Before I start giving you details of our financial performance, I'm keen to highlight a number of key features of this remarkable first half 2026 results. First and foremost, first half '26 was our best ever 6 months result with an adjusted net profit standing at over EUR 1.3 billion. The strong performance in NII and commissions resulted in reported Total Revenues of EUR 3.9 billion, up 4.5% half-on-half. Excluding the positive impact of the TRS, Total Revenues are up by 1.5%. In line with our plan, commissions continue to have a very positive run throughout the year given the focus on AuM, Life Insurance and Bancassurance products. We have further strengthened our performance in Wealth Management, where commissions increased by more than 10% compared to the previous half in 2025. Our profitability remained high with an adjusted return on tangible equity at a robust 20.6% or 19.6%, excluding the positive impact of the TRS. We maintain a very solid capital position with a CET1 ratio at 15%, resulting from an organic capital generation amounting to 163 basis points, equal to EUR 1.3 billion in the last 6 months. Similarly, the liquidity profile of the new group is very sound with short- and long-term ratios increasing and well above regulatory thresholds. And finally, the quality of our loan book continues to stand at the best levels in the Italian banking industry with a cost of risk of 28 basis points. Let's move on to the net profit drivers on Slide #7. The quality of our revenues remains outstanding, thanks to our very strong commercial performance. NII has proven to be very resilient, both half-on-half and quarter-on-quarter. I remind you that in Q1 and Q2, almost 1,000 employees were busy at work in supporting the integration. Despite the integration efforts, commissions between Q1 and Q2 were basically flat. As such, I'm extremely satisfied about the progress, which can be seen on a growth rate of almost 5% half-on-half. Costs have continued to come down, thanks to our focus on operational excellence, which we have identified as one of the key targets of B:Dynamic Full Value. LLPs increased by 3.3% half-on-half. In the quarter, LLPs were slightly higher due to a realignment of our credit framework post integration. We will touch on this later in the presentation. As you can appreciate, our record first half and Q2 bottom line result was achieved gross and net of the positive effect of the TRS and other market effects. In the pages to come, we'll provide you with an in-depth review of each and every item. Let's move on to Slide #8, which touches on 2026 guidance. A quick glance at our guidance for the current year is important as we have improved 2 KPIs. Given the current development, we have better the outlook for 2026 on NII and cost/income ratio. Let's move to the next slide on first half 2026 results. Among the main drivers of Total Revenues in the quarter, I would highlight record NII and higher loan volumes, a good performance in commission income despite the integration process, as customary in Q2, a strong contribution of dividend income and the strong contribution from the TRS and other market effects. As you can see, first half Core Revenues reached EUR 3.6 billion. And finally, I would like to underline the continued solid trend in productivity with a net revenues to risk-weighted assets ratio, which increased from 8.7% to 9.5% between Q1 2025 and Q2 2026. Let's move on to the next slide, which focuses on net interest income. The performance of the net interest income line was exceptional in Q2, posting a record figure at over EUR 1.1 billion, driven by positive commercial dynamics. As you can appreciate in the slide, the main driver in the quarter was volumes. Despite the integration, commercial actions to increase quality loan volumes have been extremely effective. Spreads slightly improved in the quarter. Finally, I would like to highlight that our NII sensitivity to 100 basis points movement amounted to approximately EUR 200 million in the quarter versus EUR 225 million in the previous quarter. Now let's move to the development of Net Commission Income on Slide 11. The performance of commission income half-on-half progressed according to our plan at plus 4.8% and plus 5.9% year-on-year, reaching more than EUR 1.350 billion despite the integration effort, which was carried out in second quarter 2026. The most important contributor, which represents more than 50% of commissions are banking services fees, which almost reached EUR 700 million. Wealth Management fees, which increased by over 10% 6 months on 6 months, are rapidly playing a more important part as a percentage of total commissions. These were mainly driven by high-quality AuM fees. Fees from Bancassurance continued to register strong growth rates, up by over 13% compared to first half 2025. This impressive pace in commission income growth results from one of our key pillars of B:Dynamic Full Value. As such, our commission income to Total Revenues ratio continues to improve. Excluding the effect of the TRS, the ratio has improved from 34.8% to 35.9% half-on-half. This is due to our persistent focus on capital-light, high-quality noninterest income products. Let's move to the next slide, which focuses on the progression of total financial assets. In the quarter, total financial assets increased by over EUR 13 billion to almost EUR 425 billion, whilst year-on-year TFAs increased by EUR 18 billion. It is important to note that the loan-to-deposit ratio stood at 77.6%, 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 to the evolution of costs on Slide 13. We continue to be extremely determined on operational efficiency. Total Costs were down by 3.9% half-on-half, further reducing the cost-income ratio from 45% to 41.4% -- please note that the cost/income ratio will stand at 42.6%, excluding the TRS. HR costs increased by just over 1% half-on-half, while non-HR costs decreased by approximately EUR 77 million. In terms of the combined group, total headcount stood at 22,500 with a decrease of approximately 500 people, mainly related to the exit of temporary workforce hired to support BPSO integration in Q1 '26. As a final note, the strong improvement on non-HR costs in the last 12 months is the result of our relentless focus on cost efficiencies. Let's move to Slide 14. As you can see, the cost of risk was almost flat on -- at 28 basis points half-on-half, thanks to positive dynamics in asset quality. LLPs increased by almost EUR 10 million in the quarter. This allowed us to increase the Total NPE Coverage Ratio from 52.8% to 54.1% in order to maintain a thorough control on the high quality of the loan portfolio, including an alignment of coverage framework post integration. In this particular context, I would like to underline that in the last 18 months, we have increased the Total NPE Coverage Ratio by almost 7 percentage points from 47.3% to 54.1% -- needless to say that 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. Last but not least, do note that following our alignment of coverage framework, our overlays in Q2 '26 amount to EUR 230 million, increasing by over EUR 50 million quarter-on-quarter. Our conservative approach is further confirmed as we report on Q2 coverage ratio on performing loans at 0.6%. Once again, this ratio is among the highest in Italy. Let's move on to asset quality on the next slide. Asset quality continues to be outstanding, one of the best in the Italian banking system. Gross NPE stock was almost flat, both quarter-on-quarter and year-on-year. Between Q1 and Q2 '26, the increase of EUR 100 million in bad loans was due to the complete realignment of our credit framework post integration. Similarly, the net NPE ratio remained flat at 1.1%, underlining the very healthy state of our loan book. This further confirmed by an important -- an improvement of Stage 2 classifications, mostly due to the credit framework realignment post integration. Let's move to Page 16 to elaborate on our capital position. Post integration, we stand at a very comfortable CET1 ratio of 15%. We maintain our path of generating quarter-by-quarter a substantial amount of internal capital, which allows us to be ready for potential headwinds, competitively strong and financially prepared for any inorganic growth opportunities should they arise. It also allows us to be very forthcoming in terms of shareholder distributions. In this context, yesterday, the Board agreed on a proposal to discuss at the next Board meeting scheduled for Q3 results, the distribution of an interim dividend of approximately EUR 700 million. This is an increase of approximately EUR 500 million compared to EUR 196 million paid in November 2026. Let's move to the next section. In the next section, we will illustrate our strengthened platform, the acceleration levers and the improved projections for '28 and 2029. As you can see on Slide 18, our position today has further improved. As already mentioned, this is also recognized by the achievement of Italy Best Bank Award in 2026 by Euromoney. We are now one of the leading domestic players in Italy with approximately 6 million clients, of which 5 million individuals and almost 1 million corporates. As one of the largest asset gatherers in Italy, we can now host around EUR 475 billion of total financial assets between life insurance, assets under management, assets under custody and customer deposits. Thanks to the acquisition of BPSO, we have strengthened significantly our presence in rich Northern Italy. We are now the leading bank in Lombardy, Liguria and Sardinia, and we rank second in Emilia-Romagna by number of branches. By clients, customers, financial assets and banking branches, we are clearly positioned as the third bank in Italy. Let's move to the next slide, where we illustrate our fully functioning operating platform. As you can appreciate, the business combination has transformed the bank into a larger platform, which is fully functioning and ready to scale, thanks to four key features. First, we have a wider and pervasive network. If you recall back in February '25, I stated that the new bank would reinforce and broaden the proximity client coverage model, becoming a go-to bank for families, SMEs and corporates. Now also thanks to the integration of BPSO, we have transformed BPER into a nationwide capillary platform that is mostly concentrated in the wealthiest Italian regions. We have distinctive product capabilities. On top of consumer and corporate loan services, we focus on Wealth Management, Bancassurance products, global transaction, banking services and advisory services through our CIB unit. We have specialized service models to serve all our clients. Over time, our business model has increasingly become omnichannel, ensuring high-quality service and improved access to all clients. We also have leading edge digital and technology foundations. Our IT ecosystem is fully integrated and modernized. We are pioneering in AI-enabled software development. The substantial CapEx deployed in technology and AI provides us with a strong foundation for the future, supporting the acceleration of business growth and enabling the bank to be more efficient and more effective. This platform created through a series of integrations is now ready for further scale up, thanks to a proven playbook, a management team with strong execution capabilities and a flexible and future-proof technical stack. Let's turn to Slide 20. B:Dynamic execution is continuing at a very strong pace throughout our retail, Corporate and Wealth Management divisions with continued attention to all strategic pillars of the plan. Yet the potential goes beyond the targets we have set. For example, in Lombardy, we boast a market share by branches of 17%, while we hold approximately a 10% market share by loans. Today, we are in a better position to capture a wider portion of this potential. In particular, we see five areas where our new platform offers opportunities for further acceleration. Let me walk you through them one by one. B:Champion. The integration of BPSO has made our corporate platform complete and competitive, and we are now ready to capture our fair share, focusing on Italy's midsized champions. In this context, we expect total lending to corporate clients between 2025 and 2028 to increase by 13%. B:Wealth. Our focus on capital-light commission growth will be further accelerated by leveraging the hidden value of our wealth management clients. We anticipate AuMs to increase by 18%, reaching approximately EUR 125 billion in 2028. B:Insured. Along with our Bancassurance partner, Unipol, we will be offering a wider product range, and we will be serving our clients in an efficient and effective manner. We anticipate that net insurance commissions will increase by 55%, reaching EUR 230 million in 2028. B:Digital. We will unleash our digital GenAI and AI powered platform in order to increase productivity. As part of this strategic lever, we will also achieve significant cost reductions. We anticipate the cost-to-income ratio to reach approximately 40% in 2028. B:Excellence. We are simplifying our approach to clients. The bank is optimizing front and back office function to increase client-facing time, enable higher proximity to our clients and enhance productivity. Frontline time dedicated to commercial activities will increase by 30% by the end of 2028. Let's turn to lever #1, B:Champion. Let me remind you that we created our CIB division just over 2 years ago. Thereafter, we acquired BPSO that has strong corporate capabilities. Today, we have a corporate platform, which is complete and competitive, enabling us to scale our share of wallet. As you can see on this slide, we will be leveraging our strengthened network through a substantial amount of business centers, trade finance centers and approximately 3,000 business specialists, mostly situated in the most productive export-oriented Italian regions. The goal is to capture a higher share of wallet from this important client segment characterized by Italian champions within corporates and SMEs. On top of lending objectives, we are increasing the penetration and so the share of wallet of several products and services. In this context, we will be aligning with Italian best practice and strengthening the offer of GTB services, cash management offerings and factoring. In addition, through our CIB unit, we will be increasing client penetration in terms of structured finance, corporate finance and other advisory added value services. We will benefit from the combined effect of increasing the penetration of underserved and untapped clients of the former BPSO network, along with leveraging BPSO consolidated expertise in selected areas such as factoring and nondomestic banking services to widen the client offer as a go-to bank for our customers. Let's move on to the second lever. B:Wealth focuses on increasing products and client penetration of our Wealth Management division. This division has delivered results above our expectations over time, and it continues to grow. As mentioned in first half 2026, Wealth Management fees grew by 10.3% half-on-half. Today, we have consolidated a platform that enables us to capture the hidden potential of our clients, including entrepreneurs. Our service model is centered around BPER Banca Private Cesare Ponti, which acts as a group wealth management hub. In this context, ARCA SGR, which already holds over EUR 50 billion in assets under management and about 1 million clients will play a key role. The group is making significant investments in strengthening the private banking network and has set ambitious goals in terms of productivity. We are strengthening the private banking network by increasing the number of private banking centers and dedicated bankers. In this way, we will increase proximity and so frequency of contact with our existing and potential clients. We are focused on fully serving our hidden private clients with the potential of doubling the size of our current private customer base. We will do this by attracting new clients and increasing the share of wallet of existing ones, deepening our relationship with SMEs and entrepreneurs. Finally, we will leverage our strategic presence in Luxembourg, Switzerland and Monaco, where we expect important and tangible results. As you can appreciate on this slide, we are anticipating asset under management growth of 18%, reaching EUR 125 billion in 2028. In a similar way, we expect wealth management commissions to grow by 14%, landing at EUR 1.2 billion in 2028. Let's move to the next slide. B:Insured is based on our strong partnership with our insurance partner, Unipol, the largest Italian non-life insurer. Historically, Bancassurance has been one of our distinctive strengths. The results we have delivered are exceptional with net insurance commissions more than doubling since 2021. We believe we can do even more by delivering a few focused initiatives. The product offer will be broadened with new modular product solutions aimed at increasing client insurance penetration. We will grow our insurance commissions from EUR 148 million to EUR 230 million, increasing by 55% by the end of 2028. Beyond the retail clients, the insurance offer will increasingly target private clients, SMEs and corporates, where we expect a significant potential to deliver tailor-made insurance solutions. In this way, we will be able to increase Net Commission Income and in parallel, improve the credit rating of our clients. We will succeed, thanks to a wider omnichannel access, combining 230 specialists, a new dedicated remote support unit and the fully fledged digital offer for basic products. Let's move to the next page to B:Digital, one of the key levers underpinning our acceleration. Our digital foundations are solid, thanks to the investments carried out in recent years. As such, a new dedicated digital business unit has been recently created and is now in place to act as a transformation catalyst for the bank, ensuring an efficient cross-functional collaboration across businesses and technology. Building on these foundations, we have defined a selected number of new high-impact initiatives to capture the next frontier of digital and AI-powered productivity. Firstly, we are leveraging AI to support our relationship managers in client origination, improving the effectiveness of our commercial campaigns and enhancing an omnichannel yet personalized approach on the basis of our customer needs. Secondly, we will deliver automated first level controls, accelerate end-to-end digitalization of key processes and automate central functions. This will enable a more efficient and more effective end-to-end product delivery. Lastly, we'll scale up the adoption of AI and Agentic AI in our IT factory, covering the full software development life cycle from requirements definition to coding and maintenance. In this way, we will be able to increase the overall productivity, enabling lower IT CapEx for the same level of output. In this context, cybersecurity threats are a high priority for us, and we plan to further strengthen our cybersecurity to protect our customers and operations. The size and frequency of cyber attacks is ever growing in the banking industry, and we need to be more than prepared. All in all, B:Digital will contribute to increase the productivity of our relationship managers by 15% to secure EUR 300 million of savings and to enable a 20% increase in CapEx productivity. Overall, this will allow us to reach a 40% cost-income ratio by the end of 2028. Let's move to the fifth and last strategic levers. B:Excellence, our fifth lever, will enable us to create additional value, enhancing our client approach, increasing customer-facing time and strengthening advisory value-added products and services. Our focus on customer excellence already delivered clear results with B:Dynamic. During 2025, on a BPER stand-alone perimeter, we have increased productivity by 10%. We have upskilled over 4,000 employees, and we kicked off a new talent program. Yet we can do more. Thanks to new technologies, today, like never before, we have an unprecedented opportunity to bring the client even more at the center of what we do. We are reviewing roles and positions to make the network more efficient, streamlining support functions around our client service model. Our specialized workforce will be empowered with more available time, enhancing proactive client interactions and accountability. Upskilling our talent base will be key. Our colleagues will be supported by new digital tools. As such, it is important for us to enable our colleagues to maximize utilization of AI tools to increase efficiency and productivity and to support them in the process. As a result, our clients will benefit from a higher proximity of our advisers. Let's move on to the next slide in which we will lay out our macroeconomic assumptions. Given the ongoing geopolitical turmoil and given the macroeconomic context is somewhat uncertain, we have based our 2028 projections on assumptions which we deem conservative, albeit realistic. Italian GDP growth is expected to remain basically flat in 2026 and 2027 with a pickup in 2028 at 0.7%. On the other hand, EU inflation is expected to decrease from 3.3% to 1.9% in 2028. Finally, we have taken a conservative approach with interest rates, assuming Euribor 3 months flat at 2.25% for the full 3-year period. That said, we look to the next couple of years with some caution given the potential headwinds deriving from the current global situation. As you can see on this slide, we expect Total Revenues to reach approximately EUR 8 billion by the end of 2028. On top of the positive effects of volumes and rates on NII, we expect continued progress on Net Commissions. As such, revenues will increase by approximately EUR 600 million, the main contributor being Net Commission Income, underlining our strong focus on high-quality capital-light revenues. In this context, it is important to note that the ratio of Net Commissions to Total Revenues will grow from 35% to 38% by 2028. NII is expected to increase by EUR 300 million, thanks to the combination of higher volumes and higher rates. We expect customer loans to increase by some 9% by 2028, thanks to pervasive commercial actions focused on consumer finance and mortgages in retail and loans in corporate, where we plan to materially increase the share of wallet on the best counterparts. Please note that the phasing out effect of Ecobonus between 2025 and 2028 is expected to have a negative impact on NII of some EUR 300 million. Let me repeat, is expected to have a negative impact on NII of some EUR 300 million, so that you can appreciate better the increase in the revenues that we are projecting. Finally, Net Commissions are expected to increase by approximately EUR 400 million, driven by a 55% growth in Bancassurance and a 14% growth in Wealth Management by 2028. On the next page, we will focus on the key drivers of costs. Our obsession for a best-in-class operational efficiency will continue Beyond B:Dynamic. Despite EUR 200 million of inflation-related and D&A increase, we will reduce absolute cost by some EUR 100 million while supporting the strong top line growth. As a result, our cost-income ratio is expected to improve from 45% in 2025 to approximately 40% by end of 2028. We anticipate EUR 300 million in cost savings, which are related to the full achievement of synergies from the BPSO integration as well as to other initiatives such as end-to-end digitalization of key product journey, the automation of mid-back office activities and the containment of other non-HR costs. FTE will decrease as a result of previous agreements and natural turnover. In this context, we are expecting over 220 exits in 2026. Furthermore, we expect mainly in the same year, 800 additional exits as agreed in December 2025 with the unions. Let's move to the next page, where we will outline our technology modernization effort. The size of our CapEx investments aimed at modernizing the bank's technology ecosystem between 2022 and 2025 amounted to approximately EUR 1 billion. We invested in key areas. Among others, we modernized the bank technology ecosystem. We created distinctive digital channels. We digitalized transactions evolving towards cashless branches, and we deployed a full range of AI use cases with particular impact achieved in the IT factory. Going forward, we will focus our investments on the remaining areas that require to be modernized further. For example, automation of key processes to make entire end-to-end process swifter, more efficient and hence more effective, strengthening our corporate platform with the aim of improving customer targeting, anticipating customer needs and delivering time-to-market solutions; and finally, elevating cybersecurity and IT resilience to the next level as a protection to the increasing number of cyberattacks in the banking industry. Overall, thanks to the investments made and the scale reached, we are now in the position to continue to invest significantly, EUR 600 million over the next 3 years, while at the same time, increasing our CapEx productivity by over 20% compared to 2025. We will now turn over to the main projections for 2028 and some for 2029. I would like to draw your attention to our 2028 projections. Total Revenues will reach EUR 8 billion. This will be positively impacted by the effect of higher NII by about EUR 300 million and higher commissions for a total of EUR 400 million. As a result, commissions on Total Revenues already today aligned to the best practices will further increase from 35% to 38%. Operating costs, excluding depreciation and amortization, our operating cost will materially decrease by almost 4%, bringing the cost-income ratio down to approximately 40% to 45% -- we expect to improve our projection on cost of risk. We have, however, kept a conservative approach with an expected cost of risk below 35 basis points in light of the current geopolitical turmoil and the potential impact on the Italian economy. All in all, net income will increase from approximately EUR 2.4 billion to about EUR 2.7 billion. CET1 ratio will stand at above 14.5% despite a higher shareholder remuneration. This will enable us to have a strong capital buffer should macroeconomic conditions deteriorate, be prepared for potential business combination should they arise or evaluate higher shareholder remuneration if the conditions allow it. On the far right of the slide, a number of projections for 2029 have been included. These are limited to Total Revenues, where we expect an increase to over EUR 8.3 billion. Our ratio of Net Commissions to Total Revenues is expected to improve to approximately 40%. We expect our cost/income ratio to fall below 40% and our CET1 ratio will stand at a robust level of above 14.5%. Let's move on to the next page where we show how our volumes will grow. On this slide, you have a snapshot of our key volume drivers, both on and off balance sheet, together with our asset quality projections for 2028. Net customer loans will increase to over EUR 140 billion with CAGR of 3% between '25 and 2028. Our total financial assets will be growing at around 2.9% per annum. Out of this, assets under management will increase from EUR 106 billion to approximately EUR 125 billion, equivalent to a growth rate of 5.7% per annum. Risk-weighted assets will increase in line with our loan book at 3.4% per annum. Thanks to our conservative risk approach, asset quality measured as net NPE ratio will remain among the lowest in the Italian banking sector with an NPE ratio of 1.2%, while the coverage ratio is planned at above 53%, among the best levels in Italy. And finally, let's move to the next slide, where we focus on our shareholder remuneration, which will be higher and sustainable. Thanks to the further acceleration we are foreseeing, not only confirm, but we also improve our expectations on the overall shareholders' remuneration for the 3-year period. Thanks to the solidity of our balance sheet, we expect to deliver sustainable yearly distributions, including buybacks of 85% between 2025 and 2028, distributing approximately EUR 7.5 billion. Of this amount, dividend totaling EUR 1.4 billion have been distributed for financial year 2025, translating into a payout ratio of 75%. Including the authorized buyback and accrued dividend for first half 2026, distribution to shareholders amounts to EUR 3.1 billion. Further shareholder remuneration may arise should the bank generate excess capital. Let me reiterate that yesterday, the Board agreed on the proposal to discuss at the next Board meeting scheduled for Q3 results, the distribution of an interim dividend of approximately EUR 700 million. Let's move to my closing remarks. In conclusion, let me remark the five key messages I would like you to bring home today. B:Dynamic is overdelivering on promises with commission growth and efficiency gains well ahead of schedule already at the end of the first year, while preserving our capital strength and progressing steadily on our modernization. We have achieved a record semester with over EUR 1.3 billion adjusted net profit, equivalent to a 15% year-on-year growth. Thanks to the integration of BPSO, we have now built a stronger platform ready to scale further, deliver enhanced growth and capture organic and inorganic opportunities. We see potential for an Acceleration Beyond B:Dynamic with five strategic areas driving stronger results in 2028. This will allow us to accelerate performance, sustain our value creation and deliver attractive shareholder remuneration with EUR 7.5 billion throughout 2025, 2028 through a combination of cash dividends and share buyback. Our strong capital position will enable us to evaluate higher shareholders' remuneration if the conditions allow it. We believe that these projections are a substantial acceleration that we consider in our style, ambitious but realistic. I wish to thank you for your attention, and we are now ready to take your questions.

[Operator Instructions] The first question comes from Ignacio Ulargui of BNP Paribas.

I have two, if I may. The first one is on the revenue targets for the business plan, particularly focused on fee income and other noninterest income revenues. I mean the targets that you have provided look to me a bit like a floor given the track record that you have delivered so far. Do you see them in general as such? Or do you think that there is an aggressive stance in terms of the outlook? The second one is on capital. You have announced today that you are unwinding the TRS for 7.5% of your own shares. Could you help us to understand how this will interplay with the buyback announced and whether we should expect some new announcement in terms of buybacks in '27 and whether these sales will be canceled potentially?

Thank you, Ignacio, for the question. So revenues, our style is to be conservative. I think that the projections we are showing are important. We have both on the NII and on the commission income, a clear path ahead of us. The projection on NII, for instance, the projection assumes ECB deposit rate at 2.25%. And obviously, we have also the possibility in case interest rates go up to have a better situation. And in as much as commissions are concerned, I would not consider this as a floor. But again, we prefer to be conservative. But the growth we have projected in the first 18 months of the plan show you already the path that we are following. We are already very advanced compared to what we have promised with B:Dynamic, which means that we will be pushing even more on that. In as much as the TRS, we have not announced any unwinding on the TRS. We have announced that we are stopping -- and therefore, whatever information related to the TRS, whatever actions we will be taking on the TRS will be obviously informed at a later stage when -- if and when we will take a further step in terms of that. In as much as the share buyback is concerned, we have announced also that we have been authorized by the Board to start the share buyback. The share buyback will start immediately after the summer. This is because usually in summer, the market is less receptive to transactions of this kind. In any event, the launch of the share buyback will be preceded by an official announcement in accordance with the applicable legal requirements, obviously, including all necessary information and disclosures.

The next question comes from Noemi Peruch of Morgan Stanley.

I would like to ask if you could share your thoughts on the recently announced evolution in the M&A in Italy and the potential opportunity for -- and I would like to ask whether you could consider using the shares underlying the share buyback and the TRS to fund M&A potentially. And you mentioned that you stopped the share -- the TRS, but you have not without unwinding it. What's the difference between the two?

Thank you, Noemi, for the question. So if I understand correctly, your first question relates to the MPS possible deal. So the development of the M&A in Italy. Did I got correctly because I was not hearing fine your question. Am I right?

In general, the evolution of M&A and if this could present an opportunity for you?

Yes. Well, it's a matter of fact that the evolution is -- we have a lot of moving parts still now on the M&A activity in Italy. There are a lot of ongoing developments. Some are, I would say, clearer as we go ahead. Some others are not really clear in what will be the final realization of this transaction. So it's a matter of fact that, yes, we are looking at a further consolidation of the Italian market. But if you recall, it's a couple of years that I'm saying that in Italy, banks need scale to support the Italian economy being Italy, the second manufacturer of Europe and the scale and the size of the banks so far, we were not really helping the Italian economy in developing. So let's see what the development of these actions will give us in the near future, I believe. In as much as your second question is concerned, no, I mean, we have started the buyback because we got the approval and so on and so forth. We are not considering to use these shares for any kind of transaction. So far, we don't have -- we are -- we might be part of the consolidation we were discussing before. Everybody read about the possible -- the agreement between Intesa and Unipol, but we will analyze the situation if and when, I would say, this will be presented to us. And in as much as the TRS is concerned, we have stopped the TRS, which doesn't necessarily mean the unwinding of the TRS. Stopping means that we are blocking basically our exposure to the TRS at the current level, which at the end of July last was at 7.95%. So we could keep this position going forward. You know that our TRS has a maturity of 3 years. So it would be expiring in 2028, basically or if the decision and the Board will decide, we will do something and we start unwinding. But for the time being, no decision taken.

And the underlying shares of the TRS could that grant you some optionality?

The buyback, you mean, right?

The TRS, the TRS.

No, TRS, no optionality for the simple reason that it is a cash transaction. And being a cash transaction, the only situation that will develop is that when we'll unwind the TRS, depending on the valuation of the stock, we will be receiving cash or we'll be paying cash, but no optionality attached to that, no share delivery.

The next question comes from Sofie Peterzens of Goldman Sachs.

Here is Sofie from Goldman Sachs. So you very helpfully guide for around 3% CAGR loan growth going forward. Could you maybe just discuss what dynamics you're seeing both on the lending and deposit side? How much competition is there? Is there any pricing pressure either on the lending side or the deposit side? And yes, how you kind of see growth opportunities here? And then my second question would be on Unipol and BPER. You have helpfully the slide on Unipol, but could you maybe just discuss how the potential transaction is going to work if Unipol acquires the branches from MPS and kind of how potentially you could further strengthen your relationship with Unipol. And yes, if you could discuss that.

Yes. Thank you for your question. So in as much as the development of lending and deposit is concerned, you have seen in the numbers that we have presented today that our growth in lending keeps on track and on the promise that we made and what we have indicated back in October 2024, a 3% growth CAGR, and we are projecting this growth also up to 2028. We have 6 million customers. We are one of the largest, if not the largest player in terms of mortgages, for instance, on the retail side. We are expanding our business on the consumer finance and on the salary-backed or pension-backed financing. For this particular -- so for the consumer financing, as you know, we are operating exclusively with our existing customers in order to be also very safe in terms of risk associated to this kind of business. In terms of corporate, it's a matter of fact that since the inception of our B:Dynamic 2027, we have strengthened our positioning on the market in terms of corporate on all the different areas of corporate, including also CIB, where we are now very active in arranging deals, transactions, structuring financing for our customers. And this is also witnessed by the strong increase in commission driven by this sort of activity. So we will be growing and we will keep on capturing and increasing our market share in this particular -- both on, as I mentioned, retail and corporate on the corporate side. Obviously, there is a lot of competition. So as such, every -- basically every day, there is a bank that is trying to get deals and offer better prices, both on the deposit side and on the loan side. Nevertheless, if you see also in as much as the TFA is concerned, total financial assets, you see that we are constantly growing. You see flat deposits, but the deposits are flat because we are converting deposits into AuC, AuM and increasing also the loans to our customers. So we keep on growing, and we will keep on growing in that direction. In terms of the possible deal which is becoming more probable than possible. So looking at what the newspaper are today indicating these days are indicating, I would say that the plan that we presented and the levers of acceleration that we have presented remain focused on our current perimeter. We have created a very strong platform ready to capture growth opportunities, both organic, as I mentioned before, and inorganic through opportunities that might arise in the market. In as much as Unipol is concerned, Unipol for us is a very good long-term strategic shareholder. is a key partner in Bancassurance that for us is a core growth business. We have existing agreements on commercial partnership. And this independently from any hypothetical consolidation scenario. Obviously, we will be assessing future opportunities with a usual disciplined approach. And as usual, in the best interest of all stakeholders. So we will analyze this once we have a clear indication of the perimeter that will be offered to BPER. And only at that time, we will have a clearer picture of numbers and so on and so forth. That to say that so far, we are not discussing with Unipol because, obviously, the main transaction is Intesa on Monte dei Paschi and from there, everything will derive.

The next question is from Marco Nicolai of Jefferies.

I've got a couple of questions. The first one is if you could help me reconcile the EUR 7.5 billion distributions with the more than 85% payout ratio because I'm struggling a bit to get there. So based on my numbers, I don't even reach your previous 75% dividend payout ratio for the next few years, given what you have already announced for '25, the dividend and also including the EUR 750 million buyback. So can you give us please some color on this? How is the 85% payout divided in the various years? Shall we assume that the dividend payout remains at 75% plus the EUR 750 million you are going to deliver in terms of buyback? Perhaps the answer could be in the profit, so in the net profit evolution. So if you can give us some color also on the net profit evolution between '25 and '28. So this is the first question. And the second question is on this potential transaction offered by Unipol. So I understand that after all, that's not certain yet. However, you already have an idea of what could be the perimeter and what would be the expense broadly related to that perimeter. So my question is, how do you intend to pay and would be a good idea to ramp up buybacks in order to pay for that, given that the time frame, it's pretty clear now and in order to approve -- to get the buybacks approved by the ECB and your shareholders, it takes some time. Why you are not being beforehand more aggressive on the buyback plan, preparing for that transaction? Or do you plan to pay for that perimeter issuing new shares because there is a big difference in terms of EPS accretion?

Thank you for the question. I take the second one and the first one will be answered by Simone Marcucci, our CFO. So let's put it in this way. The information we have so far and the information that everybody read on the newspaper, we do know, yes, that 635 branches will be transferred to us in case the deal goes through and in case the Board of Directors and the extraordinary shareholders' meeting of BPER will approve it. And attached to the 635 branches, that will be part of the head office of Monte dei Paschi. But we don't know, and that's why I cannot give any indication in this particular case where these branches are rightly located. So we have a rough idea, and this is what has been announced by the CEO of Intesa that was giving some indications, but we don't have a specific indication of where do they stand. We don't know exactly how many people will be transferred to us. We don't know where these people are working, whether in the branches who are commercial, very busy in commercial activities or are part of the office. And therefore, it is very difficult to assess the numbers beyond the numbers that have been given to the press. So it is -- if it goes through and when it will go through, is a good transaction for us because this will enable us to further strengthen our position in Italy. we could be even bigger -- we will be even bigger than what will be. We understand that there will be a kind of a couple of million more customers coming to us, which is a further acceleration of our activity. But it will be -- it's very difficult today to dwell into numbers and specific indications of the transaction. And we will be able to do that only when we will have a clear understanding of the situation. In as much as how the transaction will be performed, reading the news basically is these branches will be sold to Unipol. Unipol will then approach BPER offering this branch to us and to basically pay in the branches as a capital increase -- a contribution for capital increase of BPER. So there's nothing we are going to pay with the shares that are coming from the buyback. So this is something that Unipol will be offering and if approved by the extraordinary shareholders meeting is basically a contribution in kind for a capital increase of Unipol. In this way, Unipol will avoid if everything is approved, the whitewashing and the need for an offering for the total shares of -- these are information I have. And for the time being, I'm not in a position to give any other details.

So you exclude basically using the shares that you've already bought and you will keep -- and won't cancel, you won't use basically the shares to pay for the perimeter at all?

No. This is an option that has never been discussed. And so I -- frankly speaking, I cannot give you an answer whether I'm excluded or not. bearing in mind that if everything progress the way it is, this is something that will happen in 1.5 to 2 years from now because everybody has to go through different authorization. So we'll have first Intesa that has to go through the authorization from the regulators, all the regulators involved, somewhere over 40 regulators. Then it will be Unipol that has to go through regulators. And then it's BPER that has to go through regulators to get the approval. Therefore, we are not talking about a transaction that will happen in the next 3 to 6 months, but something that will take time and I believe quite a long time to get through. Ask through Simone for the other question.

Thank you very much for the question. So the assumption that we have in our plan is the dividend, I go for accrual for competence, not for cash. We have a dividend 2025, you have seen 75% in '26, 77% in '27, 79% in '28, 81% plus the EUR 750 million already approved buyback, we have more than 85%. Clearly, everything is calculated on the stated net profit. The only difference, therefore, that there are between these figures and your hypothesis calculation could be in the, let me say, not aggressive plan, as mentioned before by the CEO, and this could be only the delta that could be between us and...