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

Good morning. This is the Chorus Call operator. Welcome to Credem's Conference Call presenting H1 2024 Results. [Operator Instructions] Let me now turn the conference over to Angelo Campani, General Manager of Credem. Dr. Campani, you have the floor.

Well, good morning to all of you, and thank you so much for joining our conference call even though we're very close to the summer holidays. Our CFO, Giuliano Cassinadri, is with us; our Head of Planning, Alessandro Cucchi; and our Head of Investor Relations. Let me start by saying that what we are going through now is a scenario that is characterized by uncertainties and rapid changes, and we're almost getting used to it. And despite that, we have managed to keep on enhancing our positioning. As we will see during the presentation, the high level of diversification our business model is showing not only generate excellent performance against this backdrop, but is also proving it's very fast to adapt in order to support organic growth. And that is made possible by the medium to long-term approach we have to generate value in a sustainable way that historically has been characterizing our group from the quality of our asset and our sound capital ratios, not just in Italy, but also in Europe. And we have a constant commitment on the investment side, and we address our investment in a sustainable way so that we provide omnichannel services and we provide better offers and look after the relationships with our clients and also the excellence of our people, first and foremost, who are ready to take opportunities business via external changes and who are characterized in a very strong level of involvement. And year in year out, that enables us to achieve an excellent level of performance. And I would like to really warmly thank them also because -- and I say that with my heart that it's really an enthusiastic challenge we're taking up with our people, looking up ahead of us. Let's look at the 6 month -- first 6-month results, H1 2024 result. We achieved meaningful results. And if we read them overall, they reconfirm our way of engaging in the banking arena and the sustainability of our business model long time. Our profitability levels are at the top of banking so with an ROTE -- annualized ROTE and ROE, respectively, of 20% and 17%, and with a record net profit of EUR 324 million, our best result ever. And asset quality is very good. NPL ratio below 0.9% -- 0.8%, better than the Italian average. And the ratio between total NPLs and total receivables is confirming that we are heading to be a 0 NPL bank. We are organically generating capital, more than EUR 430 million in the first half. And so our capital soundness is stronger and our CET 1 ratio stand at 15.72%. And that implies a buffer of 812 basis point versus the regulatory requirements. As to the size growth, let's move on to Page 3. Allow me to say that these results are particularly to be stressed and emphasized because they really stress that how capable we are in executing our projects and we can grow year-on-year -- year-after-year organically, and our business volumes are also growing and loans are growing on a yearly basis. And this is a reverse trend versus the overall banking industry. And also on direct funding we have over performed. We have outperformed our peer average and we are very happy to show you a production figure, a EUR 2.7 billion between direct funding, asset under management and insurance inflows. And then we have also expanded our customer base now in excess of 1.5 million with a 6% growth over the last 12 months. And this further reconfirms that not only do we attract new customers, but we also provide a service model, human and digital, a model that's really effective and that can really support the rolling out of projects to meet our clients' needs. And just to mention a piece of information that I think is very important. For every private client we have, on average, we have more than 4 products placed. In other words, this is our cross-selling ratio and this page shows you the quality of our results, but also it shows the potential we can tap from our business model can use to support our growth. Let's now move to business diversification. We're on Page 4 of the presentation. During this quarter, we are showing an excellent level of diversification of revenue sources. And let's drill down to a greater level of detail comparing it with experienced growth versus last quarter, not just through an increase of our NII, but also through a stronger contribution of our NIM. If compared with Q2 2023, excellent growth of recurring items, which we called core. And it's almost -- they almost land at EUR 472 million. If we expect rates to decline, this should further help the profitability of our group coming from, for instance, commission fees -- fees and commissions, sorry. And this is a distinctive feature of our bank and of our business model that will sure give us a competitive edge against a rate decreased backdrop. Let's now move on to the different pipelines in our Federation of Businesses, Page 5. Our Federation of Businesses has now been, for a long time, a pillar in our strategy. And you see, having different pipelines within the bank is also something our peers are trying to introduce. As you see, decisive competitive edge, both to provide thorough services to our clients as we have the necessary competencies and skills within group, and also to diversify revenue sources and to be resilient through a cycle. On a yearly basis, we provide you with a table showing a comparison of our average ROE compared to the average European banks to show you our ability to over-perform against any backdrop. Let me go down to a great level of detail for every business. Now, commercial banking NII is doing really well. Commissions are also doing well, and there's no signals of asset quality deterioration. That really leads to a quality of EUR 191 million, accounting for 59% of our consolidated profit. Extended Banking Services show similar features and gives a 12% contribution to our consolidated profit with a net profit of EUR 40 million. And I'm also pleased to enhance the results achieved by our so-called wealth private universe, including wealth management, product factories and Euromobiliare -- Credem Euromobiliare Private Banking. And as I said in the previous calls, we expect a major contribution coming from this business area. In the first half of 2024, the net result stands at EUR 102 million, accounting for about 32% of the group net profit. And we are confident that the results in the coming quarters will still be very positive because these are all businesses that will be more and more focused or to be focused on against the backdrop that expect rates to be lowered. Always thinking of H1. Let's move on from the financial to our stakeholders. We move to Page 6 and we talk about sustainability. We are still focusing on sustainability themes and of course, we want to guide our group towards ESG initiatives. Let me mention a few, by the way. First of all, we are confident that it's of paramount importance to spread the culture of sustainability within our group and involving all of our employees, all the people who are working for our group. That's why we came up with a so-called position called ESG Link. We have figures called ESG Link, who are in charge of synergies, identifying synergies and providing information both on sustainability. Always, as it comes to corporate culture, we have come up with a dedicated portal, a dedicated sustainability and ESG with a number of video pills and training modules. On the product side, let me mention that we are extending our ESG-related range. For instance, green loans to -- mortgage loans to buy green buildings and then sustainability-linked loans, really supporting companies to set sustainability goals. Moreover, during this first half, we got the first IFRS 9 estimates of the impacts resulting from the application of climate, environmental risk factors in our accounting models. We joined the Net-Zero Banking Alliance, and we are setting our decarbonization targets when it comes to power generation, oil and gas, and they will be disclosed by year-end. As we are concerned more directly, we've completed the installation of about 2,000 photovoltaic modules at the Magazzini Generali delle Tagliate, a company of the group that is fully, for instance, specialized in cheese maturing and stocking and it will avoid the emission of approximately 110 tonnes of CO2. And we are also committed to the people in our group, as is testified by the certifications we acquired. And you can see at the bottom of the slide. Let me remind you that we are the only bank in Italy to have 2 certifications for gender quality and for pay parity. These 2 very important awards show and bear witness to our commitment to make our environment more and more inclusive. Let's move on to another very important; stakeholders, customers. And we move on to Page Seven in our presentation, and we give you a brief overview on how we relate to our customers. We think it is essentially important to have a human relationship. But at the same time, we are aware of the benefits we can draw from digital technologies to support our service model. And on this table, you find set of data comments that really confirm our commitment to support a so-called human digital service model, where we leverage on the opportunities of digital technologies to further improve our relationship with customers and their engagement and our engagement with them. You see a number of initiatives on either commercial sales campaign, events that we have organized for -- or offering specific product offerings. And then we get, of course, hints that are generated by our artificial intelligence models that are sent to our managers, who in turn talk to our clients and support them in their specific needs. And the engagement can be fully digital depending on the product to really then trigger specific actions. We are confident that the combination between the human and digital factor strongly improves a client welfare, and it will support now and going forward, the growth of our group in size, I mean. If you look at the right-hand side, we are looking at the digitalization of sales, both in acquisition and sales. So, digital acquisition of new customers and digital sales of products to our customers. Over the last 12 months, we've opened more than 31,000 current accounts online and we are starting to see the first follow-ups on personal loans provided online to prospects. And then let me give you some more figures to crunch. 31% of new current accounts were through self-sales and that goes up to 80% on the corporate side -- corporate current accounts through remote sales. I expect these figures to further grow over the next quarters. But let me underline once again how paramount it is for us to really focus on the relationship we have with our customers. Page 8. This is the focus on people. I'm never tired to underline this. It's the most important strategic factor ever and it's very close to our heart. As a group, we are maybe, again, a counter trend we're showing vis-a-vis the market, we are hiring people. We've hired 167 people in the first half. The average age is 30 years. We have a target for the full year of 2024 of 280 new hires, focusing both on junior profiles, but also more senior profiles with STEM people or with private banker skills. Let me underline a focus we have on young people for both Credito Emiliano branches, but also for Credem Euromobiliare Private Banking. These figures are very important, and they reconfirm our ability to attract talent in an inclusive working environment, focusing on professional developments based on merit criteria. We believe in training all talents with training activities that are not necessarily related to their specific role. Job rotation is very strong. Every 2 years a talent is changing his or her work position and his or her compensation, and then we are redefining our purpose and our corporate value. We started up a growth -- a cultural growth pathway, very much based on the new diffused leadership model, which puts people at the very center, at the very core. And people will always have greater opportunities to make decisions within their job description and within a more agile organization and lean organization. In order to spread the model, we have a multi-layer training program involving all the managers of the group, but also a training program, an engagement program, both in presence and digital for the more than 6,600 people who work for us. And something else that really triggers people is to constantly listen to our colleagues. We have systematic people satisfaction surveys. The last one engaged about more than 80% of the people with the level of satisfaction, higher than 70%. Areas of improvement are very important for us, and they are food for thought looking forward, going forward. And training again, it's very, very important and it's probably going to be 7 days per year, per person. Let's go back to the financials for the first half of this year. So, we move to Page 9 of our presentation. The first 6 months of the year confirm sustainable growth of our revenues. The core income is up year-on-year of 8%, thanks to the excellent performance of both the net interest income and the non-interest income revenues in excess of EUR 1 billion with a growth of 8.7%. And the quarterly performance quarter-on-quarter is affected by non-recurring items, one-off items such as higher performance fees, for instance, that characterized Q1. Cost performance is in line quarter-on-quarter, whilst versus the first half of 2024 is affected by higher cost, thanks to the collective bargaining, labor contract and other items that I mentioned during the previous conference call. And that is to say our commitment to 2024 to constantly improve our service model through a very large number of IT projects that are paramount to boost our organic growth, increasing our volumes and increasing our -- expanding our customer base. Despite operating costs trends, we are still growing our revenues more than costs and that our net operating profit is higher. It's 10% higher and EUR 132 million. There are no deterioration signs. Annualized cost of risk is on the screen again, and we get to a net profit of about EUR 324 million. So net interest income now. Page 10. The NII performance is indeed very positive. In Q2, it's flat versus Q1 2024 and thanks to better average volume. And average rates over the period that are higher than expected, that leads to a slower decline in the range that is down 3 basis points, similar to what is happening in the banking system. And this decline is due to a higher repricing of the direct funding versus loan growth. And our growth is mainly driven by funding or deposits -- time deposits that were very well accepted by customers. And this is a good opportunity to turn that into assets under management and also to attract new customers to further boost volumes going forward. In a nutshell, 2024, the first part of 2024 was indeed -- showed a favorable performance. So, we expect our operating NII to improve going forward and we will have to focus on increasing volumes consistently with our organic growth strategy and to support this revenue flow against the backdrop of decreasing interest rates. Let's now move on to Page 11. The non-interest margin overall contributes for about EUR 220 million, is up 7% versus the same period last year. If we compare it to the first quarter of this year, there are some one-offs that affected or characterized the Q1 '24. Banking commissions show the same growth we have at the beginning of the year. We expect even better performance in the second half, driven mainly by higher business volumes and loans. Commissions are recording a very good result, especially if we consider the limited placement commissions we booked in this quarter, in the second quarter. Placement commissions, which instead had strongly characterized the first quarter, and this confirmed the excellent recovery of our asset management -- asset under management volume that will have an even more positive impact over the coming quarters as well as the insurance. And there was no -- there were some assumptions of redemptions that we have potentially include -- including our CSM models, together with a provision on the fund that is a guarantee on the life insurance. As we said before, we really focus also on assets under management. And last but not least, we took profits in the second half of 2023. So, we will still focus very much on non-interest margin because as we've said several times during the presentation, it will be a main driver against the backdrop of expected loan cuts or loan declines. Let's now move to Page 12, net of inflation on personnel costs, standing from the renewal of the national collective agreement. Our group is characterized by a level of investment and projects that's very dense and very intensive, that we retain even at difficult times. And even more so, we are retaining now in the so-called good years. Let me underline 2 very important items that are consistent with our sustainable growth strategy with projects, with recruitments, with hiring, innovation. We're very much focusing on a service model and a strengthening of our sales network. We think that in the medium-term, competitive scenario, this could be a distinctive [ feature ] in generating value. At a very positive moment in time, we have to invest to be excellent also going forward. As it happened in the past, of course, there are some cost items, discretionary we may call them for admin cost and variable and personnel cost that we can keep at bay, under control at moments of uncertainty and possible weakness of revenues. We can keep that at bay. That happened during the pandemic in 2020. And that really enables us, should there be revenue -- a decline in revenues, that really enables us to be very flexible. Let's move on to the next slide. Slide 13, loans to customers. This is a very positive table because our group reconfirms once again, I should say, a clear outperformance versus the market. A growth of over 1% on a yearly basis, that was already growing sizeably in the previous year, whilst at industry level, there is a shrinking of more than 2% that we are showing. This what we achieved is the result based on the strong synergies we unfolded and the organic growth we achieved. That's another very important factor to be taken into account by preserving our excellent profile of credit quality. Let's stress the outstanding job that was done by our sales network. And again, I would like to congratulate them on a job well done. And then consumer credit is performing well through the Avvera company. And let me remind you that this is going to be the main business levers also going forward when market rates will go back to more limited levels. Other aggregate figures show a very meaningful outstanding result versus market. Residential mortgages and leasing are both growing in excess of 2%. Short-term loans are suffering a bit because customers' companies are taking up a wait-and-see attitude or behavior and then also rate play a role. And most companies also have a very good liquidity position. So at a time of high rates, they think it's much more favorable to use what they have on their accounts to really tackle the short-term need. But the good recovery in Q2 makes us hope for the best. And stripping off the seasonal effects we have in Q1 enable us to be very confident for the further development of this item towards year-end. And then other mortgages are affected by the reduction in loans -- state-guaranteed loans. So if we strip that effect off, we would record a growth also on this item line. If we look ahead to 2024, the market scenario is still very complex and still have a weak loan demand. But we are confident and we want to keep on supporting corporates and households and foster our growth strategy, reconfirming the targets we set at the beginning of the year. Let's now move on to net inflows, Page 14. We are talking about net production and net inflows. And it's EUR 2.7 billion of total net inflows from the beginning of the year. And this is quite consistent with our growth ambitions. Assets under management, as you probably remember, we talked about it in the previous conference call, is back to being positive, thanks to the excellent results we achieved in the last quarter and the high level of return is also, thanks to the customers choices of time deposit or special products. Both assets under custody and assets under management enable us to acquire new customers and to make the most of our potential, meaning leveraging our business model to transfer this product to assets under management, always helping our clients, customers in making decision -- investment decisions. Page 15. Deposits under management and insurance as a stock, there's a sizeable growth, EUR 101 billion. Direct funding is up 4% -- deposits. And assets under management and insurance are growing, not just because of the positive market effect, but also for the production we achieved over the last quarter. Let's focus on asset quality, Page 16. We keep on having no deterioration signals on the asset quality side, on our loan side. So, we keep reducing our total NPL stock, thanks to a few small disposal of EUR 36 million worth of disposals, limited amount, taking the total of our NPL to EUR 667 million. Now the default rate is very limited, 0.49%. And the cost of risk is 5 basis points. On that front too, we are seeing a strong resilience in our customers. And if we think of year-end maybe and advancing [indiscernible] ahead of the curve for your questions, we think we will close at levels that are in line or even lower than last year. But our focus is very much focused -- well, our focus is very much set on asset quality, which is something that's been characterizing our bank forever and also thinking of period 2024 -- 2025, sorry, and 2026, where there might be a worsening of economic conditions and therefore, maybe an increase of default rate. In a nutshell in summary, I can tell you that our asset portfolio, our loan portfolio is of excellent quality. Let's move to NPL coverage. We are on Page 17, 1-7. NPL coverage levels are at the top of the industry. About 59% over the total NPLs, a level that enables us to look to the future, being aware of relying on a competitive edge on our loans, a sizable edge from all perspectives, even in case of worsening of the economic scenario. Let's look at the funding table, Page 18. After the last issuance of covered bond in this last quarter, we completed our funding plan for the year. We just have one more opportunity to recall once we were authorized by the regulator of senior non-preferred, EUR 338 million still outstanding on which we've already have made a pre-funding last year. We have very high MREL buffer versus the requirement that enables us to be very flexible in looking at market opportunities over the next quarter. Let's now move to our liquidity position. We're on Page 19. NSFR levels and LCR levels are definitely high. LCR ratio is close to 190%, a very comfortable value. As you remember, we have fully repaid our exposure to the TLTRO. We move to Page 20, our capital ratios. As I said at the beginning, we have an excellent capital -- organic capital generation. CET1 ratio land at 15.7%, especially thanks to the contribution of the profit for the first 6 months, but also to the quality of our loan portfolio and the reduction of RWAs. This capitalization level enables us to have buffer versus SREP requirements that's very sizeable. We are talking about 812 basis points. And some details before completing our half-year report. Let me tell you something about the future. We are on Page 20. And we can have some thoughts to face the coming years in the best possible way. And we are aware that our strategy is a one of a kind strategy in the national banking scene. We are focused on organic growth and really want to enhance the potential of our Federation of Businesses that will enable us to produce more revenues, assuming -- even assuming rates will be lowered, and we will be investing to ensure excellent results over time. I would like to correct myself. It's Page 21, not 20, says the General Manager. You see our ability to perform over time along 3 elements. Total business, we've doubled our inflows, funding and loans, reaching up to EUR 136 billion of total business customers. We managed to acquire more than 0.5 million clients over the same time frame, so that we have ample room to further increase volumes, but also to focus on cross-selling and really leverage on cross-selling. Last but not least, for the future perspectives through different economic cycles over the last 10 years, we still have increased our non-interest income. And again, this is a distinctive feature we've proven historically. And this revenue item will be of paramount importance when rates are cut, as we expect they will be. On the right hand side, we see some options. We are already -- we've already focused on them and they are -- they can give us a way to support both revenues and volumes. Thinking of revenue, they are on excellent base to use as a leverage -- to leverage on, both on the lending side and also on the non-interest income, using the combo; wealth management and private banking. And the commercial bank, the traditional with retail and corporate combination will provide strong support to both, increase our operating income and also our fees and commissions revenues. Let's close with wrap up with Page 22. This is really a summary of our future positioning because we are confident that even against a macroeconomic backdrop that's still evolving and that's still uncertain, we will be growing, thanks to our ability to execute, that is increasing volumes and increasing our market share. And we will do so through our Federation of Businesses, enabling us to diversify our revenue sources with pipelines that still have a full potential to grow. And moreover, we think that our service model, human plus digital service model will be even more effective and will enable us to walk our customers, both private customers and corporate, through our consultancy services of our relationship management and through digital services to meet their needs for both financing and growth. And this will also improve our commission-related revenues. Let me wrap up by saying that our positioning have all the elements, all the necessary requirements to grow and improve even against the backdrop of declining rates. I think I can wrap up here, and I'm ready for your question.

[Operator Instructions] The first question comes from the line of Giovanni Razzoli with Deutsche Bank.

I have a couple of questions. From my point of view, you have -- the assets under management in the second quarter is definitely back to being positive after 5 quarters of negative results. What led to a [ payment ] trend? And new deposits in Q2 were very, very strong there too. Did you have campaigns or what was the trigger? Was there some risks and therefore, clients and customers have or experienced an acceleration of their current down stocks? And then the impact of Basel 4. Could you elaborate what kind of impacts you expect in 2025 and what are the main drivers? Also, as far as capital reserves, the new CRD, there could be positive surprises for -- between convergence between CET1 above the group and the holding? How about the time line for this for further improvement, which would lead your CET1 at 17% on a like-for-like basis?

Thank you, Giovanni. Thank you for your questions. Very interesting questions indeed. And let me stop on some, on the Basel 4 impacts. Then I'll hand it over to our Head of Planning, Alessandro Cucchi. And let's start from the assets under management. Let me remind you, wealth management, we are very much focusing on -- last year we started strengthening our private bank, Credem Euromobiliare and private banking. And therefore, our main focus on customer investment and on consultancy and therefore, assets under management was very, very strong. And therefore, we managed even against a backdrop that was very much focusing on interest rates characterizing 2023 and the first Q 2024. So despite that, we managed to come up with a sales proposition that our customers accepted, welcomed. And this is a trend, I believe. And I'm saying that after a few not so favorable days, market wise. But the service model we have put in place and the ability to attract talent and skills from the market and our platforms, the platforms we have made available to our bankers and to our promoters and consultants -- advisers and consultants will enable us together with a great decline we expect as the rest of the market in the coming months. We still expect to be performing really well. And let me say that excellent results were not achieved not just by the private bank, but also by the commercial bank. Let me remind you of something. We have a project, a development project in place for accumulation products. Instead of giving a spike straight away, it will provide consistency and continuity going forward on deposits. That's the comment I was making before, sharing with you, also the increase in deposits. We have opportunities to acquire new customers. It's the flexible lever, indeed. But we've tried to focus on it in the last few months. And then let me add, we added quality to it, an ability to acquire new clients and customers not just through digital means, but also through the physical networks. And that really enables the group to have direct funding to growth. Let me say something more about the holding, which is under, of course, a supervisory -- under the supervision of regulators. The Parliament approved the new regulations a few months ago. We are now talking to the regulators, of course, to make the necessary assessments. It's not something that is automatically triggered, but it's a consequence of interactions with the regulator. And one thing we have to assess is the time frame that will lead to the coming into force of this new regulation, because what has to be taken into account is that it has to be enforced. The CRD will have to be enforced in the different national legal systems, and therefore, timing could be shifted forward, could be beginning of 2026, more likely. As soon as we have the updates, we will promptly give them to you. At the time being, this is the information we have. Alessandro, maybe you can give more details on Basel 4.

Giovanni, the overall impact of Basel 4 without considering the output floor effect, it's about 60 basis points. That's our estimate. Of which, 50 basis points, we expect in 2025 and 10 basis points in 2026, depending on -- because apparently the market risk will be extended to 2026. The output floor, it's still early to have an overall assessment, but I don't think, in our case, we'll have sizeable effects before 2030. The values I gave you do not factor in any possible capital management actions that we instead perform on a regular basis. You've seen the effects of some of those on RWAs and the data we disclosed. Therefore, this is the growth of possible improvements that we can make. So, 50 basis points in 2025 is mainly operating risk, combined effect of operating risk and credit risk. In our case, we have a positive effect on the less -- on the weighing of the insurance part, lower weighing of the insurance part.

Next question comes from the line of Luigi Tramontana with Banca Akros.

I have a couple of questions. First of all, on the NII, you talked about volumes and against the backdrop of declining interest rates. I think you're working about the sensitivity. You may have to declining rates. So, what is the contribution you expect to NII stemming from the coverage procedures on core deposits? And what is the sensitivity you have today to tax reduction -- sorry, rate reduction? Second question on capital. As you have a lot of capital and over years and decades, I should say you've proven your ability to keep the credit risk at bay with a superior quality versus the system average, the industry average. I was wondering, your current payout is lower than the system average, than the industry average. And so, do you think you can improve it? Or are you going to retain the sizable amount of capital and to then instead resort to -- to have the necessary means for a possible external growth?

Let me answer the second one. Thank you for your question, because I was expecting it. And then our colleagues will answer on the sensitivity of our NII. Let me remind you that the dividend theme, it's not something that the Board of Directors have to address, but it's something we tackle towards year-end. For 2023, I'm sure you noticed that our Board proved a good awareness on dividend and payout and confirming our balance. The balance we strike between rewarding shareholders and at the same time, retaining a strong capital position to be able to withstand also to somehow confirm our work commitments. I was thinking of loans and to face up and address any evolutions from the regulatory viewpoint. So, this is the balance we want to strike. It's a pillar in our strategic priorities between medium and long term, for sure. And here we expect a sizeable profitability this year too. What I can tell you is that this could lead to possible reasonings on profitability and rewarding shareholders. But the overall dividend level we have seen in 2023 could be the starting point with the opportunity of possible improvement for 2024. However, while I'm thinking about this, I have to remind you again that this is something that is looked into by the Board towards year-end when we have the overall picture of the results that we are building as we move through 2024. Alessandro, you can -- can you add?

Luigi, let me try and give you a broader view on the question you asked on the NII sensitivity. We have a sensitivity to a parallel increase of about 100 basis points of the curve, equal to EUR 112 million, positive EUR 112 million. Should there be a parallel decline of 100 basis points? The sensitivity is down to EUR 65 million roughly, because now we have -- right now we have a management of interest rate risk. We like to do that with natural hedging, with then maybe positions in derivatives. Unlike what we had before, expecting rates to be hiked, we were positioning on direct funding and now on deposit. Now, we are focusing on loans. That's why there's no symmetry between this policy and the increase and decrease of rates. Let's talk about the possible repricing of assets with reference to the first question. We have made an average beta calculated, computed starting from the tax increase of 60% on loans and 40% on deposits. And we have an almost further rate decline now ahead of us, and we expect our loan profitability to stand their ground better with a lower beta, thanks to the production we've generated over the last 12 months to 18 months and our ability to stand our ground looking at the range. As on the funding and deposit, it will very much depend also on the competitive policy we see in the market, especially as far as timed deposits are concerned. We still have assets -- fixed assets with fixed rates that have to be repriced. For 2024, we expect a positive component that will offset the deposit and funding cost on the recent issuances and there should be a positive impact on '25-'26. We have EUR 1.5 billion worth of assets with fixed rate in '26 and EUR 1 billion in 2026. The effect of repricing will be positive despite the possible decline in interest rates.

Next question comes from the line of Noemi Peruch with Mediobanca.

I have a couple of questions also -- always on NII. The results in 2023, you gave us a guidance for 2024 from stable to flat to minus 5% on the NII. After the results of the first 6 months, can you update that guidance? Or are you retaining it? Rate sensitivity, you mentioned the 12-month rate sensitivity. My question is, could you give us some color on the 2-year rate sensitivity, or the one on short term. And then volumes -- volumes and loans. We saw loans recover in Q2. Do you think that this growth is sustainable as most of those were short-term loans? How do you see loan demand evolve in the second half of the year? And in deposits, you are very active from a sales perspective. How is your strategy going to change with lower rates? What is the average maturity of your term deposits? When do you expect you will have fee benefits for change deposits into assets under management?

Very well. Noemi, on the rate sensitivity, I will have our Investor Relations team get back to you. On the NII, I'm sure you'll remember, you were right about the guidance we gave you. And right now, we are more focused on the part going towards flat between 1% and 5%. It's much closer to 0. As to loan volumes, we are confident, as I said during the presentation, because on both private and corporate side, we have a positioning and a completeness of product factories on the one hand. On distribution channels on the other hand, that make us think that we can carry on as we did over the last 10 years, to keep acquiring market shares starting from private customers. Let me remind you about the role of Avvera, talking about loans. And we have an excellent ability to really have a franchise in the lending market, starting from mortgage loans to personal loans, to targeted loans, to salary-backed loans, et cetera. And we have a huge number of distribution channels in addition, of course, to the main ones that are our group sales networks, the branches, financial advisory as the way to further propose products. Within Avvera, we have specialized mandate networks for these products. And so we have market coverage that is really meaningful and a coverage that is fully integrated with the group because the commercial bank also talks to its own customers, together with prospective customers. And these are specialized -- special mandate networks. On mortgage loans, they have the ability to capture, for instance, at a real estate agency, a possible deal. And if we move on to the corporate side, there too, above and beyond the specialized distribution channels that characterize our group, we also have a good coverage when it comes to product factories, thorough complete product factories, starting from leasing products, for investment factoring, for working capital and for the full pipeline-related products. And this is something that going forward will be of paramount importance for the development of our loans and the growth of our loans. But we have specialized services as well. I'm sure you remember Credemtel, which is a digital service company, digital service to corporates. And that enables us to talk to corporates, not just for a typical job, which is issuing loans or providing cash in or collection or lending services. We go from electronic billing to fully digitalizing corporate process to supply chain. We have stakes in companies so that we can offer IoT, Internet of things services to corporates. And I think this way to really have a wrap around, to have an all-around approach to companies will be successful. And it's a challenging backdrop, it's a challenging scenario as you were reminding us. These 2 quarters showed weaker demand. But despite that, we kept growing. And I think that going forward, the next quarters will be more positive outlook wise than now. There'll be greater propensity towards investments that corporates are showing when rates are further cut. And let me add that we, for corporate, we have dedicated growth networks for business and corporates. This is a type of culture that is really characterizing our distribution networks and that will provide positive results. Let's -- I'll give the floor to Alessandro for maturities on time deposits.

Noemi, term deposit and then the good mix between site and term deposits. We have 83% site and 17% term deposit. We were slightly higher than the market and they are flat. However, in our case, maturity -- the average maturity on time deposit is about 5 months. And so we expect the aggregate figures, time or term deposit should decline in the coming months. But we are going to be flexible for the use of time deposit or term deposit [Foreign Language] depending on how markets are moving and the preferences of our customers.

Mr. Campani, for the time being, there are no questions in the queue.

Very well. On behalf of all of us here in attendance, we would like to thank you very much for joining our conference call and have a good summer holidays. Thank you, and talk to you next time.

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