Intesa Sanpaolo S.p.A. (ISP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sanpaolo for the presentation of the 2020 full year results hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Margaret, and I will be your coordinator for today's conference. [Operator Instructions] Today's conference is being recorded. At this time, I would like to hand the call over to Mr. Carlo Messina. Sir, you may begin.

Thank you. Good afternoon, ladies and gentlemen, and welcome to our full Year 2020 results conference call. This is Carlo Messina, Chief Executive; and I'm here with Stefano Del Punta, CFO; and Marco Delfrate and Andrea Tamagnini, Investor Relations Officers. Let me once again express my sorrow for all those affected by the pandemic. Looking at Intesa Sanpaolo, our robust and profitable business model has outdelivered even under stress, exceeding our 2020 net income target of EUR 3 billion. Resilient profitability and best-in-class efficiency were matched by impressive deleveraging and the rock-solid capital position that was further strengthened during the year. In Q4, we completed the allocation of negative goodwill to fully offset the integration charges related to the combination with UBI to improve future efficiency and to speed up our NPL deleveraging. This impressive deleveraging leads to the lowest NPL stock and NPL ratio since 2007. Synergies from the combination with UBI are 50% higher than our original estimate, reaching over EUR 1 billion per year. This significant beat versus the EUR 700 million we expected during the tender offer is the result of an in-depth analysis involving more than 400 people from both ISP and UBI. In 2020, we allocated more than EUR 6 billion pretax as a buffer to succeed in the coming years and further strengthen the sustainability of our results, consolidating our position as a leading bank in Europe. So EUR 6 billion pretax as a buffer. We are one of the most resilient and best positioned European banks to pay high dividends as usual, assuming, of course, the ECB allows it. For 2021, we commit to delivering a net income of over EUR 3.5 billion. I have always called ISP a delivery machine, and this remains true. And we are ready to succeed in the future. Now let's dive into the details. Let's turn to Slide 1. On a stand-alone basis, we delivered a net income of EUR 3.1 billion, EUR 4.5 billion , excluding COVID-related provisions. Adding the 5-month contribution of UBI, net income is EUR 3.5 billion. We had the highest-ever Insurance income with non-motor P&C revenues up at almost EUR 500 million. Commissions had a strong recovery in Q4, the third best quarter ever. Operating costs were down more than 3%. Cost of risk, excluding COVID-related provision, is 50 basis points. We accelerated our NPL deleveraging and overdelivered on our full year business plan target by EUR 6 million, and we did it 1 year ahead of plan. NPL ratios went down significantly, 4.4% gross, 3.7% according to the EBA definition, so 3.7% according to the EBA definition, and 2.3% net when including UBI. We ended the year with a common equity ratio of 15.4%. That reached 15.9%, taking into account the disposal of branches to BPER Banca that will be finalized in the next 2 weeks. So in the next 2 weeks, we will be at 15.9%. More than ever, I want to thank all our people for their hard work in achieving these results in this very difficult environment. Let's now turn to Slide 2. Thanks to our solid fundamentals built over time, we are ready to succeed in the future. The common equity ratio is well above regulatory requirements. We allocated more than EUR 6 billion pretax as a buffer to succeed in the coming years and further strengthen the sustainability of our results. We have deleveraged EUR 44 billion of NPLs. We have distinctive internal capabilities for proactive credit management, coupled with our strategic partnership with the leading industrial players for the [indiscernible] states. We are an efficient wealth management [indiscernible] company with EUR 1.2 trillion in customer financial assets. We can count on over EUR 1 billion in synergies for the future. And we have successfully evolved [indiscernible] distribution model and our clients appreciate our strong digital proposition. Let's now turn to Slide 3. Our solid fundamentals will allow us to continue delivering best-in-class profitability with over EUR 3.5 billion net income into 2021. Many [indiscernible] contributed to our shareholders remains a priority. For 2020, in May, we will pay EUR 700 million of dividend, the maximum amount feasible according to ECB recommendations. Once ECB lifts the restrictions, we will see emission to deliver the equivalent [indiscernible] 2020 grew an additional cash distribution from reserves. So cash distribution from reserves. We remain competent to 70% payout [indiscernible] of 2021, partially distributed to interim dividend this year, so [indiscernible] Slide #4. The current economy remains resilient and can count on strong fundamentals, strong government intervention and significant improved financial support. So GDP is expected to recover this year and in 2022. Let's move to Slide 6. Let's take a look at the point of [Technical Difficulty] Gross EBITDA ratio is down by almost 12% point. In Q4, we rediversified [indiscernible] EUR 3.2 billion [indiscernible] EUR 5.4 billion including UBI or [indiscernible] [ provision ] and ready to restore the next couple months. And a net amount of business profit of this [Technical difficulty] including UBI post [indiscernible] valuation is only EUR 1 billion. We have increased our cost on the capital base, while also paying EUR 15 billion in capital [indiscernible] past years. Overall, we have a very significant business with 61% of our cost income coming from Wealth Management & Protection activities. Let's turn now to Slide #7. In 2020, we allocated more than EUR 6 billion pretax of buffer to succeed in the coming years. In particular...

Sorry, Carlo. We have some technical problems. We are trying to solve it, and we will be back in few minutes. [Technical Difficulty]

Please bear with us. We're just adjusting the audio. Do not disconnect. Please stay connected.

[Foreign Language] So thank you very much. Sorry, for the inconvenience. And let's take a look now to Slide #6. I thought it was the slide that we missed. Let's take a look at the points of strength that we sustain in Intesa Sanpaolo in the future. In recent years, we have reduced the NPL stock by almost 70%. And gross NPL ratio is down by almost 12 percentage points in 5 years. In Q4, we reclassified as discounted operations EUR 3.2 billion of gross nonperforming loans, 5.4 including UBI, but the net amount of this is only EUR 1 billion. We have increased our rock-solid capital base while also paying EUR 15 billion in cash dividends over the past 6 years. Overall, we have a very resilient business model with 61% of our gross income coming from Wealth Management & Protection activities. Slide #7. In 2020, we allocated more than EUR 6 billion pretax on buffer to succeed in the coming years. In particular, EUR 2.2 billion for provision for future COVID impacts, EUR 2.1 billion for additional provision on UBI NPL and performing loans through PPA process, and EUR 2 billion for integration charges allocated in part of the negative goodwill. This allows us to further strengthen the sustainability of our results, consolidating our position as a leading bank in Europe. Slide #8. We are far better equipped than our peers to take on the new environment. We have a best-in-class risk profile, and we have one of the highest capital buffers, and we are one of the cost/income leaders in Europe. Slide #9. Despite the challenging environment, we have delivered resilient profitability. Slide #10. As you know, we immediately responded to the COVID emergency, and we continue to do so with a complete set of actions to care for our people and customers, support the real economy and society and ensure business continuity. Slide #11. I'm also proud to highlight that in 2020, we hired 800 people, more than 1,000, including UBI Banca. Slide #12. In this slide, we can see our long-standing commitment to supporting society and the real economy, helping families and the organization impacted by the COVID emergency. In particular, at the end of December, the stock of loans under moratoria was EUR 33 billion including UBI, and we have granted EUR 9 billion guaranteed by such and EUR 25 billion with a state guarantee when including UBI. Slide #13. As you can see, our strong digital capabilities have been key to guaranteeing business continuity. Slide #14. The COVID emergency has shaped new trends, and we are ready to leverage our competitive advantage. For example, we are set to benefit from the growing demand for health, wealth and business protection by leveraging our leading positioning in insurance as well as in wealth management. Let's move to Slide 16. And the macro context in 2020 was clearly defined by the COVID outbreak. But in this difficult environment, we delivered solid results. And in Slide 17, you can see that we have a strong performance, and let me give you some color on the following pages. Slide '18. In 2020, we continued to improve across all key indicators. In particular, net income was 9% higher than last year when excluding the COVID provisions. And we deleveraged by more than 1/3 the NPL stock, and our common equity ratio improved significantly. Slide 19. The combination with UBI generated EUR 3.2 billion in negative goodwill that in Q4, we used for EUR 1.7 billion pretax loan loss provisions to accelerate UBI NPL deleveraging; EUR 400 million pretax loan loss provisions on UBI performing loans; EUR 2 billion pretax to fully offset integration costs and improved future efficiency, accepting all 7,200 requests for voluntary exits received versus the 5,000 initially estimated; EUR 700 million to partially offset the accounting impact of goodwill related to the Banca dei Territori division. Slide #20. Our solid performance allows us to create sustainable benefits for all our stakeholders. And in Slide 21, we can see that Intesa Sanpaolo has a duty to leave a positive mark on broader society and to support the transition towards social, cultural and environmental growth. In this very challenging moment, we remain committed to being the engine of the real and social economies. You can go through the details on the next page, but for the second time, let's now move to Slide 23. In this slide, you can see that we are the only Italian bank at the top of the main sustainability rankings. Slide 24. In 2020, despite high market volatility and several lockdowns, we delivered solid performance driven by high-quality earnings. Net interest income grew about 1% compared to last year after declining for 5 years in a row. Best-ever insurance income up almost 6% driven by non-motor P&C revenues. We have continued to be very effective at managing costs, down 3.4%. Depreciation is up as we keep investing for growth. Cost of risk, excluding the provision for future COVID impacts, is down to 50 basis points. ISP stand-alone net income, excluding the accounting effect of the impairment of goodwill related to the Banca dei Territori division with no impact on profitability or capital, is EUR 3.1 billion. Slide 25. Q4 has been strong for commissions and insurance income, which increased almost 15% and 60%, respectively, compared to the previous quarter. Operating costs were down 3% compared to the same quarter last year. And since Q3, we had already exceeded the net income target for the full year. In Q4, we were very conservative across the board and, in particular, with respect to loan loss provision to strengthen buffers for the future. Net income pre-goodwill impairment is almost EUR 600 million when excluding provision for future COVID impacts. Slide #26. In this slide, you can see that on a quarterly basis, net interest income decreased due to the financial component, while the commercial component is growing. The financial component in Q4 was affected by the reduction in size of the securities portfolio due to the integrated management of ISP and UBI portfolio and by NPL deleveraging. On a yearly basis, net interest income would have increased by 2.5%, excluding the impact of NPL deleveraging. Net interest income was also affected by a EUR 44 billion increase in retail and corporate deposits, EUR 12 billion in Q4, which impacts net interest income in the short term. We have integrated the management of ISP and UBI securities portfolio, and we will continue to work hard to improve the commercial component while continuing to manage our revenues in an integrated manner and with the aim of delivering a positive EBA strategy. Slide #27. Customer financial assets increased by EUR 28 billion in Q4 and reached EUR 1.2 trillion when including UBI. Assets under management net inflows were positive by more than EUR 8 billion in the past 12 months, with an acceleration in the second half. The increase in corporate deposits shows once more the embedded resilience of Italian companies. Slide 28. We continue to be very effective at managing costs. Administrative costs were the lowest ever. We reduced the count by about 3,000, and we have already agreed and fully provisioned more than 7,200 voluntary exits related to the combination with UBI, with up to 3,500 hires. Slide #29. We are proud to have one of the best cost/income ratio, and this chart illustrates our leading position in Europe. Slide #30. NPL stock has continued to decline sharply, with 21 quarters of continued deleveraging. We recorded the lowest-ever NPL inflow. This slide, in my view, is really our masterpiece. And 3.7% EBA nonperforming loans ratio is now bringing Intesa Sanpaolo in a cluster of very good bank. Slide #31. As you can see in this slide, loan loss provisions declined by 4%, excluding provision for future COVID impacts. Slide 32. Our fully loaded common equity ratio is 15.9%, taking into account the sales of branches to BPER Banca. And our capital buffer versus regulatory requirement is well above our peers. Our fully phased-in common equity ratio is at 14.6%, taking into account the sale of branches. Slide #33. Our best-in-class capital buffer versus regulatory requirements increased by 50 basis points in Q4 despite the impact of the combination with UBI. In the second half of the year, internal capital generation more than offset the impact from the combination with UBI. Slide 34. When it comes to capital strength and leverage, ISP continues to be a European leader. Slide 35. In this slide, you can see the impact of the massive NPL deleveraging because we have a best-in-class risk profile in terms of ratio of capital to financial and liquid assets, so nonperforming loans, Level 2 and Level 3 assets. And ISP also enjoys a strong liquidity position with more than EUR 100 billion in excess of medium-, long-term liquidity. Slide #36. Before moving to the next section, in this slide, you can see the reconciliation between the income statements, including and excluding the accounting effects deriving from the combination with UBI Banca and goodwill impairment. Slide #38. Now we provide you with an update on the combination with UBI. The synergies are 50% higher than the original estimates. UBI commercial performance accelerated in Q4, and people arriving from UBI have been successfully onboarded and are now a valuable part of the group. Slide 39. As I said, we updated the estimates of pretax synergies, which now stand above EUR 1 billion. Let me highlight that the extra synergies versus our original estimates are mainly due on revenues, a joint bottom-up analysis of productivity and commercial performance across all segments run by more than 400 managers moved from ISP and UBI. But on cost, further room to improve efficiency, also thanks to a higher number of voluntary exits already agreed with labor unions and fully provisioned. EUR 2 billion pretax integration charges were fully booked in Q4 and fully covered by the negative goodwill from the transaction. As you can see from this slide, we have already completed a large number of governance and business activities to speed up the integration, and I'm very proud of how this is proceeding. So let's move to Slide 41. And here, you can see that ISP is really a delivery machine. And quarter-after-quarter, we meet our goals and our commitments. So in the next 2 weeks, we will make disposal of branches to BPER Banca, and within the end of April, the merger of UBI into ISP and the completion of the IT integration. Slide 43. In conclusion, let me remind you the key points that demonstrate the sustainable strength of Intesa Sanpaolo. We are one of the most resilient banks in Europe. Net income exceeded the EUR 3 billion target for 2020. Insurance fee income was the highest ever, and commissions accelerated in Q4. We boosted NPL deleveraging, meaning we beat our full year business plan target 1 year early. That is on top of NPL stock that was at the lowest level ever. Our rock-solid capital got even stronger, and we allocated more than EUR 6 billion as a buffer to succeed in the coming years in making the bank even stronger for 2021 and beyond. In May, we will pay the maximum allowable dividend and will ask the ECB to allow us to pay additional cash from reserves to meet the 75% payout ratio envisaged in our business plan. The UBI combination is well on track, and synergies are above our original estimate. So Intesa Sanpaolo is fully equipped to succeed in the future and deliver over EUR 3.5 billion net income in 2021. Now I'm ready for your question, and I'm ready to answer it, probably all the details on these figures that are really very important for our group.

[Operator Instructions] We can now take our first question from Antonio Reale from Morgan Stanley.

It's Anton here. I've got 3 questions, please. The first one is on dividend. We've seen other banks state their intentions. And I mean you had made your intentions very clear, I would say, well before today. But I want to make sure I understand correctly what you intend to pay. So I think you've said you want to pay 3 dividends this year: 2 based on your 2020 fiscal year net profit and 1 being the first half 2021 as an interim. Now if I do the math correctly, you may end up paying a large EUR 0.18 and up to EUR 0.20 EPS this year, depending on so the split over the interim dividend. First, is that a roughly correct assumption? And secondly, if so, what makes you confident you'll be able to pay this? Have you discussed this with ECB? I'm trying to understand how much of this is sort of strategy starting, inflecting the proposal to converge to a lower level with ECB or you've actually already had a conversation with the regulator and you're confident you'll be allowed to pay. So that's my first point. The second question is on your synergy guidance. I mean you've increased it from EUR 700 million to EUR 1 billion. I understand the bulk of it you said is mostly coming from revenues. Can you give us the breakdown of the revenues versus cost? And can you maybe give us a bit more color on the bridge over '21 and 2022, please? That's my second question. And lastly, just on the NII outlook for next year. I would see you have a in Q4. Inevitably, this affected your NII in the quarter. I would like to hear what you expect to see into 2021, also conscious of your sort of changes to the bond portfolio you were mentioning earlier.

So thank you very much. And on dividends, so you know that the attitude of Intesa Sanpaolo and my personal attitude is to pay dividends and cash dividends. That's our priority. The point of giving 3 different series of dividends is the purpose that we have. So we have the intention to pay on May the compulsory amount of dividend, the amount that we can be authorized today from the ECB, that is roughly EUR 700 million. Then in the last part of the year, after the approval of ECB, so the removal of the ban on the dividends, we are ready to pay another, more or less, EUR 1.9 billion for dividends. And then in the last part of the year, we are ready also to pay an interim dividend on the net income of 2021, in this case, subject to the approval of ECB and AGM because we are going to change the bylaws in the next AGM. So that's the intention of the bank. From the side of the supervisor, our -- the formal positive view is on the payment in May of EUR 700 million in dividends. The other 2 points are subject to their approval. I have to tell you that, I think that if there will be a removal of the ban on dividends, it could be easy to be authorized on paying such dividend. But we have not the formal authorization of the ECB today. And in a sense, it could be impossible to have an authorization in a phase in which there is a ban on dividend. I'm really confident that the promises that I'm -- and the commitment that I'm now taking towards the market can be really respected in the first -- in the final part of 2021. I think that the strong capital position of the group, but especially the massive deleveraging that we realized because the very important part of the story of this figure, as I anticipated in November, is the complete cleanup of the only point of weakness of Intesa Sanpaolo in comparison with other peers that was -- that used to be that the amount of nonperforming loans and the NPL ratio. Today, with this figure and with the massive deleveraging and the preparation of the next deleveraging that, as I told some few minutes ago, it could be another net EUR 1 billion or something absolutely negligible in terms of execution task. Now we are at 3.7% EBA gross nonperforming loans. So we are in a cluster of banks that, if you make comparison Intesa Sanpaolo with the other banks and if you look the excess capital that was based on an analysis that considered an NPL ratio of 7%, because the starting point of the balancing between common equity and nonperforming loans until 3 months ago was 7% nonperforming loans and 14% -- 13% of common equity. Today, we are in a completely different situation. So it would be unbelievable not to be authorized to pay dividends if there would be a removal of a ban. So I'm really confident that, subject to the approval of ECB for the removal of the ban and for the interim dividend, also the AGM of the group, we would be in a position to pay significant amount of dividends during 2021. And preparing also the new business plan, in which the future possibility to give back a significant amount of dividends to our shareholders would be, in any case, another priority. Because with this EUR 6 billion of gross income that we decided to allocate for future profitability, we are talking about something that has an immediate impact on economic and net income. Because if you make integration charges, because people are leaving the organization, we will have, for sure, a reduction in cost. You will have reduction in branches. If you have the massive deleveraging of nonperforming loans, we will not have more an impact on provision on the stock. If you make a provision on performing loans, and especially on the loans that can be in a difficult situation in the future, because we made an analysis case by case, you will prevent to have increase in provision in the next year in the future. So I'm preparing also the condition to continue to give really significant dividends for the future, maintaining a strong capital base because it's a prerequisite to have a strong common equity and a very low level of risk. Looking at synergies, the increase in synergies. And believe me, again, we are conservative considering the synergies, especially on the cost base. Because the increase that we can have in amount of synergy can exceed the one that we have considered in these figures because the reduction of people and there is also an amount of reduction, obviously, over the administrative cost. But we have room for further reduction of branches, and this will bring further reduction of cost base, as we demonstrated in the past years in which we were really able to match the reduction of people, the reduction of branches, and so the possibility to have an extra impact on the cost base. Our expectation on the -- on synergies for 2021 can be more or less 20% of the total amount of synergies, and in 2022, would be between 50% and 55% of the total amount of synergies. But we are working hard in order to create room for further cost reduction for the future. Having in mind that, looking at provision, we made all the job in -- the majority of the job in these figures. On NII, we made -- we decided to make not only the complete reassessment of the credit portfolio in this -- with these figures, but also the reassessment of the concentration between Intesa Sanpaolo and UBI of the portfolio, looking at the concentration of sovereign government bonds. So we decide to make a massive reduction of the portfolio in order to be sure that we can manage '22 with the right concentration risk. So this doesn't mean that for the future, we would not have an increase in the dimension of portfolio, but this means that we reallocated the concentration of the portfolio. And now we can move with the combined at the level of concentration risk that we consider the right one that was more or less the one that we had in the first 6 months of 2020. So looking at these figures, 2021, I can tell you to 2020 -- in order to prepare for 2021, I can tell you that we made really a hard job, but I'm completely satisfied of what we realized and what we can generate in terms of future profitability with a strong common equity, a low level of risk and possibility or pay really significant dividends for the future.

We now take our next question from [ Pamela Sulak ] from Crédit Suisse.

I have 2 questions. The first one is last quarter, you were guiding for a minimum of EUR 3.5 billion net income excluding UBI. And this quarter, you're guiding for EUR 3.5 billion next year including UBI. Can you maybe walk us through the bridge of what has happened with this change in guidance? And then the second question is on capital. There are a few pro forma ratios to go through. But just picking the fully full loaded of 15.5% in Q4, can you maybe walk us through the developments of what you expect over the course of 2021, including any potential estimates on regulatory headwinds that you anticipate for this year?

Thank you very much. So looking at the guidance, let me tell you that the 2021, looking at the UBI figures, is a year in which we will have in a couple of weeks a reduction of the dimension of volumes and net income because we will give branches and assets and liabilities, and so net income to BPER Banca. At the same time, the amount of synergies could be 20%. We decided to make -- to put a minimum level because the guidance is that we will deliver more than EUR 3.5 billion, not entering into a specific contribution coming from UBI. I have to tell you that I consider this estimate really conservative, so that the floor is really conservative. Because we did the massive deleveraging that we realized also the guidance of below 70 basis points of cost of risk is something that we can easily achieve and overperform. So we decided to use the over EUR 3.5 billion to leave possibility to have some room of adjustments during 2021. But our commitment is to absolutely overdeliver on this amount. But I'm really confident of this. So the kind of effort that we've made using the economic figures of Intesa Sanpaolo, so putting more than EUR 2 billion for COVID provisions and using the badwill of UBI, putting another gross EUR 4.4 billion in provision and integration charges, lead us in a condition to say that we will absolutely easily overdeliver EUR 3.5 billion net income for 2021. Looking at the ratio, so the fully loaded, starting from 15.4%. We will have, for sure, an increase arriving in 2 weeks from the reduction of branches, the disposal of branches to BPER. That, as I told you, will bring also a reduction of net income, obviously, but at the same time, with a significant benefit in terms of common equity. Because embedded in the 14.4%, you have already the usage of the portion of the negative goodwill. So the badwill related to the disposal of the branches, so the negative, was already embedded in these figures, but we have not the positive, that is the reduction of risk-weighted assets. So this will bring us another a 50 basis points of benefits on the fully loaded. And so today, we are at 15.9%. Then looking at the evolution, we will have, during 2021, the remaining parts of the EBA guidelines negative impact. There should be 35 basis points. That's our estimates, and this could be negative on the common equity. And then the activity, the risk-weighted assets improvement in case of growth not related to government guarantees. So that will be a part of a possible increase. Then we have reduction of risk-weighted assets deriving from the activity that we have used -- that we are making each quarter in terms of increasing collateralization, improvement and cleaning of collateral of risk-weighted assets. So my expectation is that the trend on this ratio could be inertially this. Then paying the remaining portion of the dividends of 2020 at the end of 2021, we will have another 50 basis points reduction in the fully loaded. So looking at the -- just to give you 3 numbers, 60 basis points improvement could be the -- between 50 and 60 basis points that the disposal of branches to BPER. There could be a reduction deriving from the payment of dividend in -- after October, if we'll be authorized by the ECB to reduce our reserves and paying cash dividends. And then we will have a reduction deriving from the EBA guidelines. And at the same time, there could be some positive deriving from a collateral increase and the usage of guarantees that can more than compensate some increase in risk-weighted assets.

Our next question comes from Andrea Filtri from Mediobanca.

The first is on the moratoria. You had a very large expiry this quarter. If you can elaborate a little bit more about what is left and what should we expect from this. And then second question relating the deposits and the evolution of govies. You've had a very large increase in deposits and the drop in government bonds, you elaborated on. Two questions here. The first is if we are then to expect an increase in the deposit guarantee fund contributions, and if so, how much? And secondly, if you have a kind of corridor of minimum and maximum tolerance of exposure of your government bond portfolio along the course of your normal activity now that you have normalized the ratio for the UBI acquisition?

Thank you. So looking at moratoria, we at group level, so considering ISP and UBI, have today EUR 33 billion of stock of moratoria. The default rate is lower than 1%, and only 10% of this is made by clients that are operating in sector with some form of vulnerabilities. And only 1% of this client is -- can be considered high risk. So net-net, I have to tell you that I do not consider this area as an area in which we can have some massive negative surprise not already considered with the increase in provisions that we made on performing loans in this economic account. Looking at deposits. The massive increase of deposits is something that we are trying to manage through actions that can bring positive on assets under management. You know that our target is to work on this area in order to move into wealth management. The amount of the deposits that are workable now reached EUR 90 billion, so with a massive increase during 2020. We think that we can accelerate for 2021 in conversion of a push on a significant portion of this into Wealth Management products, both mutual funds and insurance products. So through these actions to reduce deposits, we do not see significant risk of increase in contribution from -- for the deposit guarantee scheme. We would see in the next months if our actions can be positive. And there could be also a reduction of uncertainty in the country, as in the world, because the situation of increase of savings is typical, not only of Italy. In Italy, it's especially important because the Italian people are, by definition, savers. But with the reduction of uncertainty, there could be also a portion of deposit that can move into consumption. We -- when I'm talking about EUR 90 billion is a portion that we think is in our figures because -- and it's manageable because they have purpose different from just postponing consumption. But we do not see significant risk of any increase in contribution. Looking at government bonds. The reassessment of the portfolio that we made in the last part of 2020 was to reach a concentration that could be close to 40% of the Italian government bonds. Then the maximum amount, the weaker reach according to our risk appetite framework, is 50%. I have to tell you that the expectation is that during 2020, we can have an increase in the total volume of government bond. Then in the corporate investment banking division and in treasury department, we decide how to allocate this portion. In January, we started to increase the dimension of the portfolio -- the combined portfolio in Intesa Sanpaolo and UBI, but, more or less, maintaining this level of concentration. And I think that for 2021, there could be possibility to remain within this range, 40%, 50%.

We can now take our next question from Domenico Santoro from HSBC.

Just a couple of follow-ups on my side. First of all, I mean, the deleverage, the derisk in the quarter is quite impressive. It's almost EUR 15 billion of NPE or EUR 14 billion, if I exclude the disposal branches. Can you walk us through these numbers quarter-on-quarter? I mean apart from the EUR 5 billion GACs that you just finalized at the end of the year, how much you intend to do -- to dispose? In a way, how much is already done? I read the press release of UBI, and I guess there was also GACs involving the NPE of UBI. I know that you are charged already of the losses related to this, but just to give us a bit an idea again that the deadline for everything is end of 2021. Then related to this, how much of NII will be lost because of the disposal? And how much you have already considered in the fourth quarter?

So that's a very, very good and smart question especially related to the reduction of net interest income because there is, in any case, a price in reduction of nonperforming loans. But I want to start from the -- what we have to do in 2021, so just to give you the full point on what we have to realize. In 2021, we have to realize a reduction of EUR 5.4 billion gross and a reduction of EUR 2.1 billion net of combination, ISP and UBI, out of which in 2 weeks' time, we will have a reduction of EUR 1.4 billion gross and EUR 1 billion net. That is the portion that will be moved with the BPER branches, volumes and so on. So the remaining part, so the part that we will have to deliver starting from the next 2 weeks, is EUR 4 billion gross, ISP and UBI, and net EUR 1 billion. So that's the part that we are still to deliver during 2021. We are in advanced conversation for finalizing the disposal of this remaining net EUR 1 billion, and we are really confident that we will easily make this in the next months. So the 3.7% EBA nonperforming loans ratio, I have to tell you, is something delivered. So there's no implication from my side of any kind of risk not to reach the disposal of this reduction of nonperforming loans. In -- the mix is of the 4 gross -- EUR 4 billion gross is EUR 3.1 billion ISP and EUR 900 million of UBI gross. In terms of net, it's more or less 50% of the EUR 1 billion that I told you. So something that I have to tell you, in my view, is easily reachable. Looking at net interest income. It is clear that we made such a transformation of our nonperforming loans base. So if you consider just 3 months ago -- some months ago, we were at 7% gross nonperforming loans that, more or less, would have been 6%, 6.5% EBA. Now we are at 3.7%. So the reduction is all deriving from reduction of loans. The estimates of reduction of net interest income would be above EUR 100 million in 2021, so between EUR 100 million and EUR 150 million. Then we will have more precise figures during the first quarter of 2021. But in any case, reduction is a part of the dynamics of revenues in 2021. Then from the other side, we will have a significant number of positive net interest income that compensate -- will compensate this negative coming from NPL deleveraging. But the benefit that we will have in terms of lower provision is such -- in such an amount that this move can be considered as really strategic for the future of Intesa Sanpaolo.

Can I ask you also whether the purchase of Lombarda Vita, the minorities related to Lombarda Vita and Pramerica, they are already accrued in the capital of this year, please?

Yes. Already accrued, yes.

We can now take our next caller from Britta Schmidt from Autonomous Research.

Just picking up again on the last question on the insurance joint ventures that are in capital. There is a comment on your slides that say that there could be further earnings improvement to come from buying in minorities. Are there -- is there anything else that we should bear in mind? And is there anything that you would flag there for the 2021 CET1 ratio to move as well? And then just a question on NII. What was the TLTRO III impact that you've included in your net interest income? And do you intend to increase the TLTRO drawings to increase the benefit in NII?

So thank you for your question. Looking at the insurance, asset management, we didn't -- we have not considered in the -- into the estimates of synergies the 100% acquisition of these factories that we made in the last part of December. So we have room to improve, so the synergies with no significant impact on capital deriving from this acquisition and missing -- there are only minor impact. So I don't see significant further impact on our capital ratio due to this cleaning of the participation of the UBI Group. Looking at the -- sorry, could you repeat the second question? Sorry.

The second question was just on the TLTRO III, what was included in the net interest income in the quarter and whether you intend to increase the drawings in March in the auction.

Yes, yes, yes. Okay, okay. So we had an increase in contribution from TLTRO in terms of positive in this quarter. That was in the range of EUR 25 million, EUR 30 million improvement in contribution. And we think that during 2021, we can increase the usage of TLTRO. We have -- the total amount today is above EUR 80 billion, considering the UBI Group. We can reach more than EUR 100 billion during the -- 2021, and we will see in 2021 if this amount can be further exceeded. So we can have further contribution during 2021 coming from this increase in usage of the TLTRO III.

We now take our next question from Nicholas Binda from Intermonte. We have lost that caller. We will now go to our next questioner from Alberto Cordara from Bank of America.

So my first question is about capital. You reported a very strong figure. I was expecting it to be down circa 50 bps quarter-on-quarter because on the one side, you have the use of the badwill, which is only partly compensated by the write-back of a portion of the dividend. So can you explain to us -- I mean it's the second quarter in a row where your capital number is incredibly strong, and I'm just wondering what is the -- your ability to generate capital on a running basis. It seems to be particularly high. Maybe there was an issue of software intangible that helped this number, but I just wanted to understand a bit better why you have such a strong figure. And then in general, in -- congratulations. I mean the NPL ratio now is at very low levels, is a sea change. It's completely transformational. You have a lot of capital. So this is going to completely change, I guess, the way you conduct your business. In that respect, does it make sense for Intesa to look at additional acquisitions, maybe European acquisitions? I mean now you have -- by all accounting purposes, you are already one of the best banks in Europe, but now it's difficult to find that comparables. In terms of -- I think a question that was asked to you -- sorry, just another point. What default rate should we expect when the moratoria expire, so from this pool of loans under the moratoria? And which part of the 70 bps cost of risk is covering that? And then finally and I think this is, from my perspective, the most important question, do you think that -- what will be your advice to Draghi? What are the priorities for Italy? And do you think that it will succeed?

Thank you, Alberto, especially for asking me an advice to Draghi. So it's really a question of a real friend. Thank you very much. So starting from...

So that's why...

Thank you very much.

To be honest, let's think about...

Go ahead, Alberto.

There are not so many people that can give him advice. I think you are one of them. So that's why I'm asking you. I think it's difficult to find somebody who can do that.

Thank you. So starting from my favorite job, it is to make the CEO of Intesa Sanpaolo, I will start from capital, NPE, default rate, and then I can elaborate on what Italy can need because Intesa Sanpaolo can have benefit from an improvement of the situation of real and social economy in Italy, so asking and answering to your last question. So looking at capital. It is true we have an ability and the potential to generate improvement of capital quarter-by-quarter. In this quarter, we have been helped by 30 basis points benefit coming from the software. So that's the impact of the benefit of the software. At the same time, we continued in this -- in the action of -- continue to make some cleanup of risk-weighted asset to the action of increasing collateral. Then we had -- also then moving from loans without state guarantee into loans with state guarantee that improve the risk-weighted assets of the portfolio and also improving the quality of our portfolio through an increase of the area that are more related to the investment-grade portfolio. At the same time, we benefited from a reduction of the spread, BTP-Bund. So net-net, from a strategic point of view, what I can tell you is that this action of working on risk-weighted assets can continue also in the next quarters. And so we think that we can improve our work on optimization of risk-weighted assets. Looking at our job on nonperforming exposure. And this is transformational, but this is also something that can improve our ability to reduce in a significant way the cost of risk for the future. Because a significant dimension of the cost of risk in the past of Intesa Sanpaolo was absorbed by the stock on nonperforming loans. So the inflows are -- used to be not significant in the last 2 years, but the stock was, for sure, impacting the amount of provision related to the stock. Now I think that if we look at the remaining portion of the stock that was the one with the lowest vintage with the amount of collateral that is really significant, I can tell you that the most important part of the future dynamic of cost of risk will depend on inflows, so on -- of new inflows. And moving into the third part of the question then I will talk about acquisition. Looking at the default rate, I can tell you that the majority of the future cost of risk of the group will be related to new inflow. Our expectation is not to have such a massive impact coming from the moratoria. As I told to Andrea in the -- in my answer to his question, today, we have below 1% default rate. So if we consider 2%, 3% default rate, in my view, it's already conservative. But in any case, the majority of the cost of risk will be related to inflows and not to stock. Looking at this, in 2021, we have, in any case, already provisioned a portion of what we think can be a deterioration in terms of some forms of performing loans. And we increased the coverage moving into stage 2 through the usage of the forward-looking probability of defaults. So we made the massive work client by client. So we have action plan client by client for all the clients that are in the moratoria and also for the other clients that we think can have some kind of vulnerability in 2021. So the portion of performing loans that we decided to increase in terms of provision is related to the possibility not to have a significant impact in 2021. So I consider conservative our guidance in terms of below 70% of cost of risk for 2021, but what I consider really strategic is for 2022 because we will not have the stock. And at the same time, we will have benefit from a clear exit from this pandemic situation. So we create a condition to have really a massive increase in profitability starting from 2022. Looking at the additional acquisition. Acquisition are positive if you can create synergies. And our deal with UBI, in my view, has been really a fantastic transaction from any kind of perspective, really a good transaction because people in UBI are very strong. So the quality of the people is really super. And at the same time, the possibility through the usage of the badwill to create conditions to improve profitability made the -- created condition to have above EUR 1 billion of gross income coming from a transaction at 0 cost in terms of common equity because we increased also common equity. So improving the risk profile of the group, profitability at 0 cost for shareholders. Sorry, just to make it easy then. In any case, there was a capital increase. But from a common equity perspective, it was really self-financed. If you are able to find some deal that can create synergies, it makes sense to make acquisition for your shareholder. Otherwise, it is really difficult to say that you can enter into a deal just because you can become a bank that can have a much higher dimension. So I think that today, there are no option that can create synergies for Intesa Sanpaolo that can create values for our shareholders. That's my view on this point. Looking at the Italian situation. I have to tell you that I think that President Mattarella made the choice of a real wise and the most important figure that we have in Italy in terms of reputation that is Mario Draghi. So the Mattarella choice and the reputation of Draghi is absolutely top in the world, not only in Italy. What I think we need in Italy is to work in terms of sustainability of growth and inclusive growth and working with significant attention to inclusion, poverty and to the employment. So we have to pay a lot of attention, like in all the other countries, to what is the situation of the poor people in the country. I think that the working poor, the -- as all the other countries in the world, are the absolute priority for the -- any kind of government that we can have in our country and, at the same time, the need to have levers in order to create an engine for growth as in the next generation, you, the most important sources of funding also because we need absolutely to be part of strong Europe because Europe has absolutely to compete with U.S.A. and China. So the most important part of the story is that Europe needs to be at the level of U.S.A., China. And only with Italy strong, Europe can be strong enough to compete with U.S.A. and China. That's my view.

We can now take our next question from Jean-Francois Neuez from Goldman Sachs.

Just wanted to ask as a follow-up to the previous question on merger. So I understand from your questions that you think that from here, it's going to be difficult to find attractive opportunities to redeploy capital inorganically. At the same time, as was highlighted several times before in the call, you have obviously improved your capital buffers way beyond what was originally planned, in particular in the course of the last 2 quarters. So your distance to SREP is extremely, extremely high. In the past, there were years, in particular earlier in the 2014 business plan, et cetera, where you paid more than 70% or 75% payout ratio. I just wanted to understand that from here, even starting from what is already one of the most generous dividend policy in the sector, what you intend to do with the capital buffer that you have currently available at the bank, whether there is any intention to redeploy this further either organically or inorganically or how the capital return policy can evolve.

So thank you for this question because it is really part of the new business plan that we are working on because in reality, all the work that we made at the end of the year has been part of the substantial business plan. Then we will present the formal business plan as soon as we will have a clear exit from the pandemic situation and also the exit from the ban from the ECB on dividends because it is not easy to talk about capital redeployment when you have a situation in which you are in strong attention from the supervisor, looking at a dividend with a limit in terms of payment or dividends. But it is clear that the area of growth, internal or external, so through growth ramp. So growth in terms of opportunity of increasing your current portfolio of business unit or growth looking at acquisition or the other part, redeployment of capital, are a key part of the job in terms of strategic decisions. So looking at the portion of working on our current business unit, we will increase penetration, profitability from our current business unit. From the portion of acquisition, as I told, it is difficult to create synergies. So I do not see significant opportunity of working on acquisition. On the other side, the exercise of making the right level of excess capital -- because again, I want to point out that today, we are -- we have a substantial excess capital that is of much higher quality in comparison to 3 months ago. Because 3 months ago, we had an incredible excess capital with a significant stock, significant in terms of comparison with the best-in-class of nonperforming loans. Today, we have -- and within the end of 2021, we will for sure, making the disposal of the missing EUR 1 billion net nonperforming loans that we have in our IFRS 5. Looking at the substantial excess capital, we have a much higher excess capital because the capital is there in order to face unexpected losses. And if you reduce the amount of nonperforming loans, it is clear that also, the possibility to have unexpected losses could be reduced, so just to give evidence that the part of the story related to what is the real level of excess capital and the kind of usage in order to redeploy capital. Because for 2021, we consider the cash dividends as the real priority for Intesa Sanpaolo and for the shareholders of Intesa Sanpaolo especially because we had this limit not to pay dividend in the last 2 years. And I think that international investors, foundation and retail investors, want to have cash, not buybacks. That's my personal view on the situation. There is, for sure, a preference, if you are able to pay cash, to pay cash. In -- starting from 2022, that is the job of the new business plan, which we enter with an incredible, very low-risk profile and a massive potential increase in terms of net income deriving from a strong reduction of cost due to the exit of people and strong reduction of branches that we will make and massive reduction of provision deriving from massive reduction of stock on nonperforming loans, we will consider all the different opportunities to make our shareholders happy. I'm not a fan of the buybacks for the reason that I told you because I think that in this phase, the majority of our shareholders could prefer cash and if you are in a position you can give cash. For the future, when we will have assessed the excess capital position, looking at our business plan and we have negotiated with the ECB the right level of capital because, in any case, it is clear that we will have to work with them in order to be sure to have the right level of consideration of excess capital, we will consider all the instruments that can be -- that can allow our shareholders to be happy of Intesa Sanpaolo.

We can now take our next question from Benjie Creelan-Sandford from Jefferies.

Just a couple of clarifications from my side, please. I go back to the EUR 15 billion reduction in NPLs this quarter. You called out the EUR 5.4 billion that's been moved to held-for-sale. I was just wondering if you could clarify the rest of the move down this quarter. How much of that was driven by crystallized disposals in the quarter versus write-offs versus recoveries? And the second question was on costs. Just to clarify your earlier comment, I think you said 20% of cost synergies could be achieved in 2021. I just wanted to check if I heard that correctly. And in relation to costs, if we look ex -- the costs were down about 3% year-over-year in 2020. Do you think that trend in the stand-alone business, if that work continues? Or is there any portion of the cost reduction that we saw this year temporary in nature given COVID, et cetera, and whether that might reverse partially in 2021?

Thank you. So I will start from the second question and then I will elaborate more on nonperforming loans because I want all of you to be sure of what we have done on this point because I consider the real transformational deal that we created on nonperforming loans as the final move in order to position Intesa Sanpaolo as really one of the best players in Europe. So looking at cost synergies, when we -- when I -- 20% is related to total amount of synergies, but I have to tell you that the majority is cost synergies because the revenue synergies can be accelerating, started from 2022. So 2020 is majority related to synergies. But let me tell you what is my view on the real situation of the cost side of the bank. 2021 is a year in which we will have a significant number of actions that we will put in place especially in terms of acceleration of reduction of branches. So the -- my experience in the last 2 years has been that if you are able to create condition in order to reduce people and reduce branches -- so if you create the right match between the reduction of branch -- or reduction of buildings, sorry, also reduction of real estate. So if you close buildings, you close branches, you remove the total amount of costs related to inactivity and you use people that you can move or people that exited in order to reduce the cost base, the embedded reduction of cost that we will have in 2021 deriving from cost -- personnel cost will have to be considered, also having in mind that in 2020, 3,000 people -- we had a 3,000-people reduction in 2020. So this will bring a total impact -- full impact during 2021. Then you will have the other portion of reduction that we will start according to the 7,200 people that will start to leave the organization. But in 2021, we will have the impact also, what we have -- what we created in 2020. So the -- 2021 could be probably the year in which we will have not such a significant reduction in comparison with 2022, '23 and '24. Looking at the stand-alone UBI, I have to tell you that the -- I think that looking at the combination of the cost of Intesa Sanpaolo and UBI, we have such room in terms of reduction of any kind of cost especially negotiating with suppliers because with the majority of them, we are now the most important clients by definition. And in the synergy, we have already considered an action of negotiation of pricing with suppliers. But my experience, especially in the case of the other acquisition that we made in Italy, is that the impact can be much higher than the synergies that we can declare to the market. So looking at synergies, I cannot tell you that we will reduce by minus 3% cost in 2021 because this year can be a year of -- in which we will have also to consider some reinforcement of cost. But in any case, the trend would be negative in terms of cost reduction. There would be significant cost reduction starting from 2022 and then moving '23 and '24. In looking at the nonperforming loans disposal and reduction, in the last quarter, the majority of the reduction is related to real disposal on nonperforming loans because we completed [ the gags ] of ISP, of UBI, and there was some write-offs, some collection. But if I have to tell you the real majority, more than 80%, 90% is related to real disposal of nonperforming loans.

And our next question comes from Andrea Vercellone from Exane.

Two questions on my side. One is on the outlook, and the other one is detail on capital headwind. On the outlook, I know it will be subject to the new business plan. But you used to have a EUR 5 billion net income target for 2022, which -- it's no longer mentioned in the press release. I just wanted to know if it's still what you had in mind if it's not yet a formal target or we should not base any thought on that anymore. And also for 2021, the target of EUR 3.5 billion minimum net income, I just wanted to confirm that, that excludes any possible capital gain on the UBI side, for example, since they mentioned up to EUR 350 million in the business plan or DTA write-up if you were going to do some. And in case there were to be some capital gains and/or some DTA write-up, would you treat them as distributable for dividend purposes? Are they part of your 70% payout ratio or not? And then just a detail on capital. You mentioned before the 35 basis point regulatory headwinds that we knew about, linked to EBA guidelines in 2021, will be in the prior guidance and also indicated regulatory headwinds, which I believe were 90, 100 basis points cumulative over the next 3 years. I just want to know if you have done any analysis on that and if we should also expect a little bit of a headwind coming from that. I know it's not very material even if there is one, but I just wanted to know if it's something that you have looked into already.

Okay. So thank you very much. We can start from the first point. On the EUR 5 billion, I can confirm you that EUR 5 billion is what we consider the starting point for 2022 in the next business plan. But due to the fact that I want to work as soon as I have a clear view on the exit from the pandemic and especially from the ban from the dividends from the ECB, it is likely that we will prepare the business plan at the end of 2021, so to be presented on the figures '21, at the beginning of '22. So the formal indication of the target, we start with the year-end 2021. But if you look at the kind of actions that we made with these actions placed in 2020 figures, it is difficult to adopt that -- the acceleration of profitability in case of exit from the pandemic situation. It is clear that it was also the assumption of the EUR 5 billion that we gave to the market when we made the acquisition of UBI. And in a positive GDP environment, the massive reduction of cost -- and we will have 50% of synergies placed in 2022 and the massive impact on the reduction of cost of risk deriving from reduction on nonperforming loans and the recovery of the positive GDP coming in 2022 will bring us in a position to have a significant rebound in terms of net income. We decided not to continue to talk about 2022 because we -- this will be part of the business plan. But my absolute view is that the EUR 5 billion are absolutely achievable and more than achievable through this action that we put in place. It's working on this balance sheet 2020. Looking at the payout ratio. Payout ratio will be on the stated net income. So in EUR 3.5 billion, there are no significant capital gain. But if we realize a capital gain, we will pay dividends also on capital gain. Looking at the regulatory headwinds. I can confirm you that the analysis that we made is at the group level. So we think that we can have 35 basis points. Then if that's 38, we would see. But in any case, this is the amount of negative that we can consider at the group level coming from regulatory headwinds on the best of our -- based on the best of information today.

Next question comes from Ignacio Cerezo from UBS.

Two questions from me as well. Sorry to go back to the NII. I think you made clear that there are some headwinds coming from the NPL income reduction and the ALCO portfolio, treasury portfolio disposals. I think I understood that you see tailwinds compensating that. So I was wondering if basically those tailwinds will compensate the headwinds completely or we need to assume some slippage basically of the run rate in '21 versus the fourth quarter. And then the second question is on the trading. We have had a couple of quarters where the number is lower than in the first half of last year. Obviously, with the yield curve as it is, it might be more difficult basically to generate those trading gains without losing NII. So just best approximation, if you want, in terms of the trading income sustainability into the next couple of years.

So thank you for this question because -- so I will elaborate again on net interest income. I think that the -- that's for sure, as I told and it is in a clear evidence of all of you, that reduction on nonperforming loans will bring negative on net interest income. Looking at the hedge facility so I can give you all my view on the different components. On the hedging facility, my expectation is that we will not have negative contribution or significant negative contribution, so negligible, the variation of the hedging contribution. Moving into the financial contribution, so coming from portfolio. As I told, we are starting in increasing dimension of portfolio, but the real impact on net interest income will be core-related with the trading income, as you rightly have told in your question. And then I will elaborate on this point in connection with trading income. On the commercial portion of the net interest income, our expectation is to have an increase in this area that can more than compensate the impact of the negative coming from deleveraging of nonperforming loans. It is clear that we will have to check quarter-by-quarter because to be sure of the real impact of the leveraging, we will have to monitor quarter-by-quarter. But in the synthesis, I think that commercial activity, especially driven by volume growth, especially the volume related to state guarantees and international activities of the group, can bring a positive contribution to the net interest income. Then the actions that we want to put in place to reduce deposits, switching into a standard management can have also a positive impact on markdown because there could be a movement of deposits that are bringing negative carry on net interest income and we can convert into asset under management or insurance product. TLTRO will bring other positive contribution to our figures in net interest income. And so more or less, I think that there could be compensation between commercial and deleveraging net interest income situation. Then as usual, quarter-by-quarter, I will give you what could be the possible evolution in the future. What I want to focus is trading income. So that's the reason why I thank you for your question because trading income are an area in which through the very good job that -- in our Corporate and Investment Banking division that they made during 2019, 2020 and also in the treasury department, we had positive performance. In this quarter, the -- so in the last quarter, the reduction of portfolio was concentrated in order to work on the concentration risk. So not working in order to -- making maximization of the trading income on ISP economic account, we decided to have trading portfolio -- trading income on the UBI portfolio, so through the reduction of a portion of portfolio in UBI. And so we still remain with a significant amount of capital gain, and the first quarter, in my view, could be a very good first quarter, looking at dynamics for the Corporate and Investment Banking division. But this also has a correlation with the volume of portfolio that you will see during 2021 and the impact on net interest income. So net-net, I think that there could be a positive contribution from portfolio to net interest income and also to trading portfolio. But if in the division they decide to accelerate positive on trading, there could be also some lower contribution in net interest income. We will see during this quarter and then we will make analysis. And I will make a clear disclosure of this point to you in the presentation of the first quarter results.

And our next question comes from Delphine Lee from JPMorgan.

I just have 2 very quick ones. The first one is just on moratoria. So I just wanted to check the maturity of the EUR 33 billion. Is it still around June? Or I mean if you could just give us a bit of split between kind of what we should expect in the next few quarters, that would be quite helpful. And then the second question is on the guidance in terms of 2021. In previous years, I think you did make comments around what you expected on revenues in general. And thanks for the comment on net interest income and trading. That's very helpful. But should we still expect some positive momentum in revenues in 2021? Or has that become more difficult?

Okay. So I was just waiting for your questions so I can elaborate on all the different items of revenues, and then I will focus on moratoria. So -- and it is, I think, useful for all of you to have my view on the trend of the different component of revenues and also cost and provisions in 2021 so you can have the clear view on what I'm working in terms of delivery to be completed in 2021. So net interest income, I already elaborated. So that's, I think, important also on trading income. On commissions, our view is that we can have a good rebound in terms of commissions because we are working in order to accelerate the movement from deposits into asset under management and insurance products, working on asset under administration but especially with a portion of EUR 90 billion of retail deposit that we can consider manageable and workable in terms of conversion during 2021, both in the Private Banking division and Banca dei Territori division. So this is a priority. My people started again with the opportunity to make the conversion and to work in order to move these funds into products of Wealth Management & Protection. But in any case, wealth management, in my view, will be the main driver of increasing revenues in 2021 in combination with insurance income because we delivered very good performance in insurance, especially in property and casualty. And especially in retail, non-motor, property and casualty products, we will continue to deliver very good performance in this area. So this is another area in which we think to have a positive trend for revenues. And so this is -- the combination of revenues in our expectation is something that can bring contribution to our net income in 2021 cost. We expect a reduction with some areas in which we will invest more with some dynamics -- different dynamics. In the personnel cost, you will have strong reduction for exit of people, but you will have also some increase for incentive schemes because there will be an increase of profitability that we will ask to our people, net-net reduction of cost, reduction of administrative expenses with an increase in the trend of reduction in 2022, '23 and other years. Looking at provision. We will have a massive reduction of provision, and this will bring to a net income that, in my view, easily will exceed EUR 3.5 billion of net income.

Great. And on the moratoria?

On the moratoria, sorry. Okay. On the moratoria, our expectation is that the expiry will be June because it is something that was according to law. And our expectation is, as I told in the previous answer that I gave to the question on moratoria, we are working client by client. So we made analysis in the last months on the total amount of portfolio of clients that are under moratoria. So for each client, we are working in terms of actions that can bring to a reduction of risk profile at the expiring time of moratoria. So for June, we will have completed all the action plans for our clients. But also today, I can tell you that we are not worried at all. The default rate is really minimum, and we have absolutely under control the situation of the moratoria and expiring in June of this EUR 33 billion.

There are no further questions at this time. I would now like to turn the call back to Mr. Messina for any closing remarks.

So thank you very much, and really, thank you again for being with us today. And may you and your families stay well. And we will keep in touch during this month to update on our performance. And then we will have the next presentation in occasion of the first quarterly results, first quarter. Thank you very much.

Thank you. That concludes today's conference. Thank you for your participation, ladies and gentlemen. You may now disconnect.