Credito Emiliano S.p.A. (CE) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call operator. Welcome to the Credem's conference call presenting H1 2022 results. [Operator Instructions] Let me now turn the conference over to the General Manager of Credem, Mr. Nazzareno Gregori. Mr. Gregori, you have the floor.

Good morning to all of you. Thanks for logging in and for being with us, even though we are very close to the holidays. We have Campani Angelo with us, the current co-manager of the group. And as we disclosed yesterday, he will replace me on the January 31, 2023, when I will retire. Angelo, please take the floor.

Thank you, Nazzareno. Good morning to all of you on my behalf too. I'm very pleased to take part in this call. Nazzareno, you have the floor again.

The recent macroeconomic backdrop was affected not just by the pandemic, but unfortunately also by the effects of the Ukrainian war and the energy crisis with a subsequent contagion effect on the market and thus making the economic, political and social backdrop more complex. Let's now hope things will not even get worse because of what is happening in Taiwan. I'm sure that the banking industry is playing a more and more essential role to support families and households, especially against this very backdrop that is characterized by a high level of uncertainty. I can tell you that the results I am about to disclose underline how the group was able to adapt to the fast changes in the economic cycle and also to strengthen its foundations going forward and to be able to grasp opportunities deriving from the financial backdrop and to help our customers in rolling out their projects. And that was made possible by the excellent work made by our people who are still showing very strong innovation towards -- sorry, attitude towards innovation and teamwork. Teamwork is paramount, especially now in this scenario. That's why I would like to really give them my warmest thanks. Let's now move to Page 2. Also at the end of the first half, the main indicators show that the way we do banking and our business model are very effective and ensure to get results that are top of the industry. Despite the current scenario, we still have our loans growing at pays that is higher than that of the banking system. Over last year, we've seen an increase in excess of 12 percentage points, so 6x the industry data. And then we've also declined or reduced the impact of NPLs, now it's 2.2%, and we've increased our asset quality, which is now aligned with European average. Profitability indices are very positive, and we confirm the ability of the group to generate value in the different phases of the economic cycle. We have a return on tangible equity in excess of 11% and a level of excellence at the very top of the system, banking system. Even though we are going through a high level of volatility, we still grant and ensure strong capital soundness with 590 basis points versus the SREP 2022 requirements. Let me say that these results as a whole reflect the quality of our people and the effectiveness of our business model. And quarter after quarter, we have managed to follow our pathway in -- towards generating value over time. Page 3. Let me now stop on business diversification. And let me tell you how recurring revenues is well balanced. Operating income is well balanced. And in excess of -- well, our core NIM is in excess of total revenues. When it comes to rates, if you look at our aggregate features despite the market volatility, could ensure our revenues to further grow stemming from the development of our NII. Page 4. Before I deep dive into our financial highlights, I'm very happy and satisfied to show you some figures that show how committed the group is to growing its platform and making available to our clients an omnichannel approach that can be a distinctive feature also going forward. So we have internet banking retail growing 2%, 2.5% and with an impact on bank accounts, which is 70%. In June, 94% of our overall transactions happened through digital channels. And if we just look at corporate transactions only, we get almost to 95% of the total, reconfirming our excellent trend towards digital migration. The overall results are the outcome of a digital evolution pathway we have been following because we want to be reactive and adapt to the customer needs. And at the same time, we want to provide an offering that will offer both the benefits stemming from technology, but also stemming from the relationship between asset managers and clients, be it investment protection or disbursement of loans. We are on Page 5 now. And even in 2022, we are still focusing very much on sustainability and to each and every part of the sustainability project and ESG values. We -- last year, we released our nonfinancial reporting that listed the objectives that we had achieved during 2021. Let me give you a list of what we've done in the first 6 months of 2022 as well. We keep investing to improve climate risk analysis. We have a partnership to come up with an ESG data collection during the first half of 2023 and the first sample of 800 corporate clients to have a first look of physical transaction, sorry, transition risk to then move on to analyzing all of our corporate clients. The project we have started will enable the group to better understand how companies are embarking on an ESG pathway so that we have reliable data to tap from. And we also want to improve our ESG score in addition to improving our environmental, social and governance-related performance for us and for our clients, also offering -- by offering targeted loans and services. We know that the next 4 years, also thanks to the commitment at country level, thanks to the PNRR. The next 4 years will be fundamentally important for the environmental and digital transition of all companies. That's why we launched a dedicated plan called Credem per l'Italia del Futuro, Credem for Italy of the future. And it's EUR 16.5 billion over time span going from 2022 to 2025 to finance corporate projects and offer a complete suite of products to provide our consultancy, our advisory to our clients. And then in cooperation with FEduF, the foundation set up by ABI to offer clear and accessible information on economic sustainability and family sustainability to, of course, comply with the UN 2030 agenda. And then in 2021, within our group ESG framework, we had the first issue of a subordinated Tier 2 social bond, EUR 200 million. It was the first Tier 2 social bond issued by a European bank to finance and refinance assets that have a positive social impact to show that we are strongly committed to helping economy as a group. And this is Page 6. We have our income statement. As you can see, we have an excellent revenue trend, up almost 8% and almost 10% in recurring items, not just because of the consolidation of CR Cento, but also to the relevant performance of our NII and our fee components despite, of course, the market context and scenario. The trend in operating cost is flat on a like-for-like basis. And if we take into account the consolidation of Cassa di Cento and also taking into account business growth volume-wise as recorded in the last year. These growth dynamics enable to provide a better net operating results, increased by more than 15% versus H1 2021. And that reconfirms how our different revenue components are growing sustainably. And then NLPs remained at an extremely low level after updating models. Also thanks to the positive nonrecurring effect of having about -- an effect of about EUR 11 million in the first half of 2022. We have write-backs in addition to the first quarter to the -- thanks to the updating of credit positions we've received from Cassa di Cento for an impact of about EUR 103 million. And then disposals made over the last quarter gave a contribution of about EUR 4.5 million. The rest is driven by other write-backs on the performing part of our portfolios of Credem, Credem Leasing and Credem Factor. Net of all these effects, let me tell you that we are not yet identifying meaningful NPL flows. And that, of course, has a further contribution to the very limited LLPs we have recorded. We are closing the half year, reaching almost EUR 156 million of net profit, up more than 14% versus H1 2021. We're now on Page 7. We have our net interest income here depicted. You see quarter-on-quarter growth stems from the higher portfolio volumes quarter-on-quarter of our securities, portfolio revenue, increase in loans and we have the first effect of the rise in interest rate curves. The positive performance of this quarter and the 6 months laid the right foundation for further growth in the second half of the year, even though there'll be a low TLTRO contribution because benefits will be stopped as of July 1. Let's now have a look at the customer spread. We are starting to see the first impact of the rate increase, up 5 basis points, in line with the banking industry. So loans are about 4 -- the rate on loans is about 4 points higher. And whilst the average deposit rate is very close to 0. That is contributing to our NII, of course. We are on Page 9 now, on our securities portfolio. The securities portfolio breakdown is flat with BTPs held to collect is 95%, and that enabled us to free the recent -- the effect of the recent BTP bond spread increase. The average deposit at 7 years, while domestic securities is 3.8 average maturity on the HTC and 3.4 on the HTCS component. Of course, we've had purchases for Italian sovereign debt always held to collect. And in the next 6 months, we are going to further and further purchases in other asset classes to rebalance the effect of Italian treasury to get to levels as we have in the previous year same quarter. We want to seize opportunities for repositioning, but we want to have a well-diversified securities portfolio to somehow offset volatility affecting capital as we have shown you in our NII trend. We're now on Page 10. Let's look at the non-interest margin, NIM, about banking fees and management fees for the last quarters were pro forma adjusted according to the new instruction for balance sheets and financial reporting. There are no, however, changes in the totals of our overall noninterest margin. Commission recurring performance fees have a good growth. The NIM core grows about 5.1% versus H1 2021. And assets under management are higher versus H1 2021, also thanks to the excellent work we did last year, our network did last year, and our product factory did last year. Performance fees are EUR 105 million versus the last quarter. Of course they are affected by the current market performance and include -- and factor in the positive impact of some placements. Banking fees are up EUR 58 million, almost EUR 59 million, growing about 15%, also thanks to the consolidation of Cassa di Cento and the excellent performance of our insurance activities, growing both quarter-on-quarter and year-on-year and confirming the importance and the central role of bank insurance, we have to meet our customer needs, especially in the current social and economic scenario. We're now on Page 11. Let's have a look at operating costs and D&A and personnel costs are in line with what we had in Q2 2021, net of consolidation of Cassa di Cento. Admin costs on a like-for-like basis is consistent with the volume increase as our business increased and in compliance with the group projects. A lower impact in the first -- than in the first Qs of 2021 because, of course, we had the consolidation of Cassa di Cento. We are still focusing on investments that are increasingly and you see amortizations are also increasing. We will keep supporting businesses and people with a strategy more and more focused on digital and innovation. And we know that the markets are evolving at a higher and higher pace. Page 12, again, loans to customers [ SFM ] loans. As we -- as I said at the beginning, loans to customers are growing, year-on-year they're growing 12.3%. Let me say that net of the masses that were legacies from Cassa di Cento, we still have a positive cash of 7 percentage point. Also generally short-term loans are up almost 18% versus H1 '21, thanks to the excellent Avvera contribution, EUR 1.2 billion of loans, personal loans, target loans and salary-backed loans. And then also, we have supported our net working capital to support the economic recovery and then strong trend on residential mortgages and leasing up, respectively, 8.7% and 3.3% year-on-year. And then we have an excellent growth of other loans, up 13% versus H1 '21, which until last year was very much affected by our committed -- commitment to support companies through state guaranteed loans to somehow face up to the COVID emergency. So EUR 3.4 million are state guaranteed loans included in that item. Let me reiterate our commitment because we want to increase loans to support our geography, to support families and especially in this very complex scenario and that is characterized by a high level of uncertainty as to the growth we expect at year-end. And here maybe I'm answering some of your questions already. We have to bear in mind that the last couple of years were affected by state guaranteed loans and moratorium as we expect lower growth rates in 2020 to about 5% year-on-year. And I expect this to be still enabling us to be at the top of the industry. We're now on Page 13. We have a comparison with the rest of the banking industry. So our over-performance is still very marked even over the last 6 months. In June we managed our aggregate figure to be growing 6x higher than the system. And that's enabling us to further gain more market shares. And our sales network has been working wonderfully and it's an excellent result. The results, they have been proven and providing over the years. Page 14. We have net inflows despite the scenario. We still have positive net inflows. Market performance is affecting assets under management, and it's also affecting the way customers are picked. There was a lower contribution versus last year when the market conditions were totally different. And that's why positive direct deposit inflows reconfirm the fact that customers pick us also for assets under management. So congratulations to our product factories and distribution networks. And the current scenario forced or pushed our clients towards assets under managed products with positive inflows for about EUR 700 million. And then we have retail net inflows that's very positive. And our customers are somehow waiting to see what will happen. And then there are some effects on companies. Sales policies aimed at improving the liquidity level of our group. Page 15. Let's say deposits, assets under management and insurance. Of course this is affected by how markets are performing. But I was saying average volumes are higher than last year over the same time span, thanks to the good levels of direct deposits in 2021. The stability of these figures represent an excellent opportunity for us to keep on supporting growth, fostering growth and having a shift towards assets under management as soon as the economic cycle gets better. Now we are on Page 16, we have bond issuances and maturities. Over the last 6 months, you've seen us in the market, in institutional market. In January, we issued our first senior green bond preferred, a EUR 600 million worth of issuance, important for MREL purposes, but also because it was our first ESG issuance consistently with our will to favor the transition for both corporates and families. In May, we had a EUR 500 million covered bond issuance with a 2029 as maturity wall. And then in June, but with the issuance actual -- actually starting in July, we have a social Tier 2 issuance by CredemHolding that will enable the group to be very efficient capital-wise and to further increase our capital soundness. Let me remind you that the setup of this issuance is similar to the one we have in September 2020, and it's a mirror transaction by Credem, fully underwritten by CredemHolding and therefore eligible also for MREL purposes. Let me move on to Page 17. Credit Quality. As you can see, we keep on reducing our NPL stock, end of June was EUR 745 million, down 9% versus the end of 2021. Also thanks to a number of disposals worth about EUR 86 million with a positive impact on our P&L. As a consequence, we are reducing our NPL ratio to 2.2%, very close to the European average and also definitely lower than the system average, banking system average. This level of excellence enables us to be ready to phase up to a negative economic cycle. But as I was telling you at the beginning, right now we are not seeing any meaningful deterioration in our asset quality. Page 18. NPL Coverage. We are 52.16% on the total NPL and 73.6% if we look at just bad loans. And if we look at the shortfall and the additional coverage level in consistency with the addendum and calendar provisional requirements, we have a coverage of 59.12% and 84.8% on bad loans. Again, these figures are at the very top of the banking system. Page 19. Cost of Risk. The excellent level of our asset is one of the key points in our strategy and the way we do banking. On the one hand, we can ensure maximum efficiency is grounded when it comes to our credit portfolio. And at the same time, loan portfolio to reduce the impact on our P&L when there's high volatility in the economic cycle. And thanks to the lack of further NPL flows and some nonrecurring write-backs. So we have a cost of risk which is negative and it's minus 1 basis point. Net of nonrecurring items, EUR 12 million for the quarter, EUR 4.5 billion positive contribution and coming from disposals and then the updating of rating of Cassa di Cento and some write-backs. The cost of -- normalized cost of risk is much lower than the system average, and it's about 8 basis points. Let me tell you that the update of models did not have a meaningful negative impact. We went from the previous COVID framework to the new scenario because we made very prudential provisions in 2020 and then we had partial write-backs in 2021. Now we have introduced about -- with a weighing of 50% and 40%, a baseline scenario and an adverse scenario to be able to keep on monitoring the potential worsening and deterioration, but always with utmost caution. Cost of risk is not the level we expect for year-end. We expect a slight increase in default rate, more likely to take place for 2023 and 2024. And to answer some of your questions, cost of risk for us in 2022 is probably lower than 20 basis points and to then reach 30 basis points in the following 2 years, 2023 and 2024. Page 20. Assets and Liabilities. These are the main movements in our P&L. As you can see, loans are going up in our securities portfolio, mainly in the held-to-collect portion and then deposits from customers are flat. June loans-to-banks is -- it's mainly deposits with the ECB that was reduced due to a seasonality effect. And then we have another institutional depot probably, thanks to an increase of the available securities. First half, we had an increase in wholesale bonds because we -- because of the issuance of the end of May covered bond. We did not include the EUR 200 million because the actual starting date or accounting date is July and not end of June. If you look at the indices or liquidity ratios, we are well above the regulatory level. So that enables us to be very flexible in defining our funding strategies. Page 22. Before we move on to your questions, let me wrap up by giving you some capital detail. Despite the volatility we are encountering in the market, we reconfirm our very high capital soundness, CET1 almost at 13.5% buffer on requirements of 590 basis points versus these SREP '22 requirements. So net profit for the period and effects on reserves both on the bank and Credemvita portfolios because of the negative trends we have on the market. RWAs reduction is stemming from an update of ARB models that are most tied in with trend also in the first half of the year. I would like to thank you very much for your attention. And now we leave room for your questions. Thank you very much.

[Operator Instructions] First question comes from the line of Christian Carrese with Intermonte.

And I really wish you will have the best during your retirement. And I would like to give you a big hand to congratulate you on the work you did over the last few years. Well, a couple of slides, Slide 11, where we can see a constant growth of also your headcount over the last 12 years, which is unusual for the banking industry, which today's cutting headcount rather than hiring people. And also it can be summarized in the evolution of cost of risk, Slide 19, where you've always had a cost of risk that was very low. So doing banking in the right way, in a fair way with a conservative lending as you've always done will lead to excellent results. And that really sums up the work you did over the years. Going back to your presentation, I have a couple of questions. On the NII on the one hand, can you give us some -- well, elaborate on your sensitivity to rates, especially for the second part of the year? What are the moving parts when it comes to rates on the one hand, expected loans on the other and the benefits stemming from TLTRO. So maybe looking further than 2022, looking at 2023 and 2024 as well going forward. What kind of growth or situation you expect versus interest rates? And then something you announced in July, Credem-Euromobiliare Private Banking. Could you elaborate what you expect this entity to provide to the group? This new entity that gathers the private banker from the 2 entities. What are the synergies that will be unfolded? What is the potential development that you expect from this vehicle?

First of all, thank you very much for the very kind words and that comforting, and that will help us go along the same pathway. First question. In the first half, of course, the rates, the securities portfolio and volume increase supported our NII. For the next 6 months, we will have the TLTRO benefit coming to an end. So we have assumed 0 as contribution in the following half year. But the way rates are going and how the NII is also fair and it should enable us to grow about 7% year-on-year. Also taking into account the factoring in 6 extra months of Cassa di Cento consolidated in our consolidation scope. And then the way we generated a new entity, a new hub for private banking. It's consistent what we've been saying over time. Our business model is multifaceted, is well articulated and it's aimed at supporting savings and assets under management. Starting from the '80s, we've always focused on private banking as well. And we thought that coming up with a highly specialized network could, and I'm confident, it will -- could extract better value from our policies or more values from our policies because somehow we are stimulating our product factories to do better. And at the same time we should be able to manage our retail business unit at best because our business -- retail business unit will have to focus on other objectives. So this further specialization that is embedded into our business model, I think, will prove very satisfactory going forward because we'll have better market visibility. We will be able to recruit people and we will become a center of excellence. We are confident in that, we strongly believe in it. And the next few months, of course, will require a lot of work because we will have to set up the new vehicle. We are waiting for the clearance to come. However, we have very clear objectives and goals ahead of us. We've already checked the geography. So it's a well advanced process already, and it will happen in due time, and it will be completed in Q4 2023. That's the rationale, the underpinning. Let me hand it over to Mr. Cucchi, who can add on to the first question you asked. Alessandro, please go ahead.

Alessandro Cucchi speaking. Good morning to all of you. Mr. Carrese, you asked for sensitivity to interest rates increase. For us, its 100 basis points on the curve, EUR 52 million would be the effect over 12 months.

Next question comes from Giovanni Razzoli with Deutsche Bank.

I would like to again thank Nazzareno Gregori for leading the bank in an excellent way, leading an excellent bank in an excellent way. So it's not an easy time. So best of luck to Angelo as well, who will do just as well in the coming years, I'm sure. So on the one hand, we have a question on NII. What is the quarter trajectory? Does that already include some one-off stemming from the contribution of inflation like bond or inflation-linked PTPs, so to say? Is it a meaningful material amount or not in Q2? You gave us a sensitivity of about EUR 52 million at 100 basis points with rates featuring 100 basis points. What are your forecast focusing on the cost of deposits? So even with another 50 basis points of increase of interest rates do not affect the cost of deposits being affected very much. So you don't see a threat of the cost of deposits going up. And then cost of risk, could you tell us about the stock of provision overlays that is tied in with COVID you can rely on as of today?

First of all, thank you very much for your words, for your kind words. For all the details, at least for the first couple of questions, I hand it over to Mr. Cucchi.

Thank you very much. Mr. Razzoli was asking, well, there was something special to be highlighted on the NII. It's a growing contribution by the operating -- well, the NII coming from the securities portfolio, EUR 17 million. It's growing. It was EUR 10 million in the previous quarter. So it's growing. It's a value that we expect also going forward, as Mr. -- we expect it to be flat going forward because the securities portfolio, especially right now at this moment in time is a strengthening factor to the NII. The impact on the cost of funding, it's similar to what was said about -- what you said about the bank. As to the overlay, you mentioned in your third question, there are EUR 5 million, EUR 6 million, if I'm not mistaken, of value that is still tied in with COVID.

Next question comes from Manuela Meroni with Intesa Sanpaolo.

Again, I don't endorse what the colleague said, so best of luck for the future and also my appreciation for the work you did until now, Mr. Gregori. And I have 3 questions. The first one is on commissions and fees. Could you elaborate on what you expect commissions and fees to give us a contribution in the coming 6 months. They are still strong on the banking fees side. Management fees are affected by markets. So what are your expectations going forward? And the second question is on capital. I've seen benefits, sizable benefits stemming from the adjustment of ARB models. Are there more contribution we can expect during this year or maybe next year as to the change and amendment of models and regulatory tailwinds or headwinds? As to synergies with CR Cento, we have been working on that for quite a few quarters. Can you reconfirm the synergies that you had originally assumed? Or do you see any extra contribution or synergy?

Thank you very much. Again, thank you too for your kind words. Let me answer the first question as on fees and commissions, management fees. We are seeing -- we see -- going forward, it's a flat trend or maximum up 1%, net of performance because you have to factor in the current market conditions. Banking fees instead, we see them growing 6% going forward. And in the insurance business, let me give you a figure. We think we can get to slightly above EUR 60 million at year-end. These are the 3 targets for fees and commissions. As to synergies with CR Cento, we do reconfirm them. And I believe that a better integration with our sales network and the fine-tuning of our policies will enable us to even enjoy greater synergies than what we have so far because it's a very nice geography, also very profitable geography. So we are confident after the first year where we've been starting to work, we will have even better results. That is reassuring and makes us more confident in our policy to grow through acquisitions, for instance, because that will also improve our positioning. As to the capital question, let me turn the conference over to Alessandro Cucchi.

Mr. Cucchi speaking. And as to the guidance we gave you on capital for the coming years, we do not expect any specific changes coming from ARB model update or regulatory heads or tailwinds apart from the known ones. And then also the coming into force of Basel. We have both positive and negative. For instance, we have a lower pondering union of the life insurance. We will -- we have Avvera as well to be taken into account. So we expect an improvement as to the independent capital generation, autonomous capital generation. And then, of course, the dividend -- the decisions on dividend have to be made by our Board of Directors.

Next question comes from the line of Riccardo Rovere with Mediobanca.

2 or 3 questions I have. If I understood correctly, when you talked about LLPs so far, you have 2 scenarios, a baseline scenario and an adverse scenario, if I understood correctly, weighted at 60% and 40% when you work out on losses on low LLPs. What macro assumptions are part of your baseline scenario and also in the adverse scenario? And have you taken into account any possible stop in the cash flows? And then the contribution of your securities portfolio to your NII. You said growing EUR 10 million, EUR 10 million growth. Is it quarter-on-quarter or year-on-year? And after that, how are you assuming your securities portfolio will move over time? Because currently, there's some volatility, adding volatility to that P&L item because, of course, you build the portfolio and then you disassemble it and then you build it again. It's EUR 16 million NII, half of in -- half year, half of it comes from there. And somehow it has a distorting effect. And then the third question is on Euromobiliare private banking. Do you think you can give more visibility to the initiative, maybe simply in your financial reporting? Are you trying to increase the visibility of that part of the business?

I'll answer the last part of the question, and then I'll ask Alessandro Cucchi to answer the first 2 questions. So sure, we have made a decision -- a strategic decision to go this pathway to make sure we can factor in the contribution stemming from that business line. And we do so because when you disclose information to the market, of course, we trigger -- somehow we stimulate the group as a whole to perform better, to do better after we've disclosed the information. But when it comes -- once we get the clearance, we get the necessary IT migration, where we will have the new legal entity, it should be by March next year. So starting from then on, are we going to be able to, of course, the report data coming from the different areas, and that is a very valuable area indeed, and it will give its contribution to have a better appreciation of the value generated by the group as a whole. So it's a strategic goal that has to be checked, monitored and then disclosed about in a transparent way. Alex, would you like to answer the first 2 questions?

And this is Alex Cucchi speaking. The first question you asked on scenarios. It's scenarios that were drawn up by research institute, the adverse scenario includes stop in the gas supply. They have N macroeconomic variables. Let me mention a couple to mention -- to make the difference between the baseline and adverse scenario. Base GDP growing to 9.5 and in the adverse 0.5, that's the GDP growth for the year. And again, a very different, very divergent scenarios also growth-wise, depending on the weighting we have applied, as you reminded us, 60-40 is the weighting between the baseline scenario and the adverse scenario. And the current reference framework is indeed a very conservative one. I hope I answered your question, but if you want more details, we are on other variables so we can get back to them. Also separately, we can get in touch. On the securities portfolio, the contribution is quarter, it's EUR 17 million for the quarter. And last quarter, it was 10. So the actual increase is 7, the contribution to the NII. We see it as flat going forward as our general manager said during the presentation. Please bear in mind that the projection for the increase in net interest income going forward, there should be a contribution of spread. The securities portfolio reacts immediately. And the loan portfolio instead has -- takes longer to react. So there was a very meaningful delta for this 6-year. We don't expect it to be just as big in the coming quarters or half year. Did I answer your question?

No, it's clear. But going back to your first answer. Just to understand, when you calculate expected losses of the 12 months for performing. And then for Stage 2 and Stage 3, so you have a model which highlights 10 basis points cost of risk having a 40% baseline scenario where you assume a stop in the gas supply. Do I understand correctly?

Yes, that's what we -- yes, the weighting is 40%, and we assume a stop in the gas supply. That's right.

Luigi De Bellis from Equita SIM.