UniCredit S.p.A. (UCG) Earnings Call Transcript & Summary

All right. Thank you, everyone, for coming for this fireside chat. I'm absolutely delighted to host this session with UniCredit CEO, Andrea Orcel. First of all, Andrea, thank you so much for coming.

Thank you, Dalphine.

This is pleasure to have you.

So let's start with strategy. In your last market presentation, you have outlined that 2024 sets the basis for a new phase of Unlock, a phase of sustainable quality growth. Can you maybe walk us through this? And what do you expect for the future?

Okay. So I think if you look at '21 to '24, Unlocked was mostly about unlocking up trapped value into a group. And it was predominantly inwardly focused and putting in order our organization, our processes, our way of working putting to common denominator, what should be a common denominator, empowering where we needed to empower and creating an organization that runs as efficiently and effectively as possible. The -- and we've done that. I think we -- in the quarter and in the 9 months, we had our best results and this runs 15 quarters of successive growth. To be fair, we had one thing working in our favor or against us, which was the macro. Macro in terms of rate, macro in terms of cost of risk. Why do I say in favor, obviously, it's subject to everybody. Against because, in our opinion, it prevented us from clearly showing to the outside world, the degree to which we had progressed. Two things happened during the time that we had a positive macro. One, we took about EUR 1 billion a year below the line every year to prepare for what is coming now, and that's additional investment, additional provisions, acceleration of cost improvement. And that meant that relative to others, our net profit understated where we were progressing. We're not going to do that anymore. The second thing is obviously all those investments, you make them, but it takes a little bit of time to come to bear and they come to bear later. So when we move into 2025, now we have the exact polar opposite situation. We're going to have, you can call it, a negative macro or a normalization of the macro, we can talk about it later, but we are expecting over 2 years to lose 160 basis points of Euribor. We're also expecting to have a relatively flat volumes, especially in '25, and we can discuss why. We are expecting some uncertainty to continue, actually, to be even greater given what's happening in Russia. And therefore, we are moving from a quite positive propelling environment to somebody's coming in your face. If you go back to what we were all thinking when the [indiscernible] started climbing, et cetera, we all felt when rates are going to come down, these banks are going to go down like a stone. Now we're going down like a stone in the market. But actually, we are not going to go down as a stone in terms of net profit and in terms of return on tangible equity. So that's the first thing. Our first challenge for the next 3 years, and we are almost over with our plan is how do we absorb the entire shock in '25 and then grow, notwithstanding, but most of the shot on rates and volume and everything else is going to be concentrated in '25. The second thing is what will emerge in my opinion, is that this group has -- is exposed to very advantageous structural growth, 30% of our net profit comes from Central and Eastern Europe, which is growing 2x to 3x to the rest of Europe and has very limited risk vis-a-vis emerging markets in general that have devaluation and other things like that, we don't have that. The -- we also have spent 3 years to tilt the client mix from large corporate and mass market to SMEs and private and affluent, much faster than I thought we would be capable of until the product mix from undifferentiated loans and mortgages to targeted consumer finance and specialized loans on the other side, and these things are going to really help going forward. In addition to that, we've built lines of defense to protect our results, if I'm wrong, and we've built also accelerators. So if you look at what we will have in '25, '26, '27, it's an acceleration in the asset management capturing of our value chain to reach 85%. It will be an internalization of insurance, which happens midyear next year. It will be some of the advantages of having bought Vodeno. It will be the integration of Romania, which is going really fast. It will be potentially some acquisition, but we do. And all of these things are in there to allow us to build on the best case and to propel that. So if I look at it like that, that's the general, the difficulty is a bit '25.

Okay. Maybe digging into the earnings outlook, looking at '25 and beyond, can you walk us through the expected evolution of the key items in the P&L, in particular in the context of potentially much lower rates, which remains a key concern for investors obviously?

So I think, at least for us, what is important, everybody talks either about NII trend, or you talk about net profit trend. We talk about net profit trend at a minimum return on tangible. And that is very important because I can push my NII like there was no tomorrow just by doing volume and crushing down my margins. If I do that, you'll see what happened to my return on equity. And then you'll see what happened to my distributions. And I can do a lot of things to move those two aggregates by diluting my return on tangible. So for us, it's quality growth. So we need to move the aggregate on net profit, but the return on tangible that we have said needs to remain at about 17% in '25, '26, '27. Not many people have something as daunting as that on the paper. So how do we do that? '25 is the most difficult year. That's why we would like to forget about it because if I were commenting on '26 and '27, it's a lot better. Why is it the most difficult year? Because at least for us, in our assumption, and it's important to compare the assumption that we all take, we assume 130 basis points of compression of Euribor to occur only in 1 year in 2025. By the way, this is average. So the compression, we think we will have an exit rate of 2% on Euribor. So it's 130 basis points average that go through our NII. That's one. The second thing is contrary to, in our opinion, optimistic assumption, growth of lending of volumes is not to occur as fast as the crashing of the rates because, number one, there is a lot of uncertainty out there. Number two, it's not that by turning the rates the next day, the volumes go up. So if you're -- we are assuming flat volumes on average for the year. And by the way, we are assuming flat volume, while our Central and Eastern Europe is growing fast. So you can imagine what we assumed for the most western part of our footprint. So if you have those two things, it is -- those are the two things that I think everybody in Europe is going to be faced with, depending on the mix of our geographies, it may be more or less, but that's what we're facing. What is interesting rate for us is we are also accelerating the compression of Russia, which has a big impact on NII. So if you take those two together, that's the sense of us saying reasonably, we will have a moderate decline in NII during 2025. Actually, you should ask me why only moderate. And the why only moderate is because of a shift in mix of clients and products that we have. It's because of the growth of Central and Eastern Europe it's because of the replication portfolio and a number of other things. Now this moderate decline on a big mass, we think is going to be offset depending the assumption you make in a significant part or in total part by the grossing fees. We are assuming a certain market balance. And then we're assuming on top idiosyncratic that we only have. So the movement on the capturing of the value chain on asset management, that not that many people have seen the integration of insurance in our fee pool, the be bringing to bear the investment we've made in payment, in advisory and capital markets are going to allow our fees to add EUR 1.3 billion over '25, '26. And a significant portion is assuming '25. When you put all of these together, you're looking at a revenue line but improves in quality as it tilts towards fee, which doesn't consume any capital. And our ambition is to take it at 40% of the total but a revenue line but is not growing certainly. Actually, you need to roll a lot to keep it where it is. That's '25. Why do we think we can still maintain a net profit above EUR 9 billion and at a profitability level of 17%? Because as we move down, we have our costs, which are going to be broadly flat or down. We're going to have a cost of risk that we're going to keep within the ZIP code of 20 to 25 basis points, but we can, to an extent, crash further down by releasing overlays earlier. And those 2 things have almost balanced the whole situation. But then, as we have told you at Q3, we have just the integration costs, we are assuming to make EUR 500 million plus this year below the line and some other things, that's why we haven't given a real target, we just said more than EUR 9 billion this year. But that, which can be anywhere between EUR 500 million, EUR 800 million, EUR 900 million is disappearing next year because I'm not doing it anymore, front-loaded by definition. So there is the -- how the operational commercial run rate moves above the line, but there is also the hold of, I don't have EUR 1 billion or EUR 800 million or EUR 700 million down there. So if you put it all together, that's why we say we can hold above EUR 9 billion. And that's why we say we can do it at 17% or above in return on tangible because we're not compromising margins, volumes or whatever to push on the accelerator because we don't have to. As we move away from '25, in '26, we see volume recovering a bit because now we are at the tail end. We see rates going down another 30 basis points for an average of 2% for the year. I know some people think it could go even lower. But for the time being, I think that that's reasonable. That year will be growing. NII will be growing, fees will be growing. Costs will still be broadly flat. Cost of risk will be under control. I won't have a subsidy anymore of releasing all my below the line, but it will remain there. So we think we're going to exceed EUR 9 billion. And if you take the midterm for us and don't ask me if it's '27 or '28, the ambition is that we can lend it at EUR 10 billion. So that's what we will do on the run rate and on the base case. And I think a lot of this is possible because of the mix of the group that we have and because we have front-loaded a lot of investment that we needed.

Understood. Now if we turn to distribution and organic capital generation, UniCredit has delivered much more than the targeted 150 basis points and your CET1 of 16% has never been that high. Assuming no M&A how quickly could we -- could you return your EUR 6.5 billion of excess capital? What total payout should we assume? And what level of organic capital generation can we expect now that other re-optimization is -- will be coming to an end next year?

So firstly, we have guided that our organic capital generation will remain above net profit for '25, for '26 and potentially beyond. It just -- the mix may change a little bit as we get the capital -- the positive capital impact on DTAs. But I do think that we have an environment where everything else being equal, our organic capital generation will remain above net profit for the foreseeable future. Why is that important? It's important because then the real cap to ordinary distribution at least becomes net profit. And therefore, our ability to sustain a high distribution, overall distribution payout, not 1 year, not 2 years, but consistently increases and is high. That's the first point. The second point we said that as our profile changes, we, from next year, will increase the dividend payout to 50% and for the time being, we stay there. That means that, that, if you believe and you should our ability to deliver the net profit guidance, then you already know where your dividend payout and cash dividend payout will be. But now we have 1 thing that I think is I don't know if you want to call it a modulator. We have been very, very clear that no M&A means EUR 6.5 billion of excess capital returning to shareholders by 27%. We haven't said how fast, okay? So do I need to do it this year? Probably not given the profitability. I can fulfilled by promises without using any excess capital, actually, if anything, potentially building some. But as we go forward, if there is number one, base case, whatever I said happens and we've executed flawlessly, but wasn't anything else, okay? We will take in blocks 1 year after the other, and we will return it. That's why we're saying that total distribution will definitely exceed 2024 in '25, in '26 and in '27 because we are returning these blocks on top of the ordinary. And the objective is to land or to converge to a CET1 of about 13%, 13.2%, depending on how you look at that after we absorb Basel IV model adjustments and everything else. So this is one scenario, but there is another scenario where in any 1 year, it is not as simple as it seems, something happens. I mean lately every time we have done a budget by February, it's obsolete. Well, we have EUR 6.5 billion in our pocket to show you that our DPS will be what we said it will be, but our -- that we can sustain the distribution at level because I can do more of that return earlier and less about return later if I need to. So the defensiveness of our ability to distribute is a function both of what I said about P&L, but also but the fact that with the excess capital we can modulate both in share buybacks and in added cash dividend to not expose our investors to temporary movements by integrating with the extraordinary distributions. So we're very confident on that one.

Okay. Now if we could turn to valuation. Why should investors still look at European banks versus U.S. banks and specifically UniCredit. I mean, you've exceeded all your KPIs, how can the stock rerate further from the sticky 6x, 7x be?

I think it's a relative question. So if I take a relative question, it is absolutely true that American banks are now expected to show a much better dynamic of growth in their results than European. That's true. So I understand that. However, because double, double the multiples, double in [ P, ] more than double in price to book and more than, more than double in price to distributions. So I don't know, maybe we will grow less, actually not maybe for sure. But for certain, in a well-balanced portfolio maybe getting a lot of higher yield at a lower price, not discounting or needing a significant amount of growth to justify, most multiple is justified. So that would be the way I would look at that, taking nothing from the other side of the pond. The other thing is in relative to UniCredit. All of those things are more -- even more marked because we're still trading below the sector in terms of P. We're sitting very materially below the sector in terms of distribution, both cash and others. And I do think that the levers that we have to maintain and actually propel the performance going forward, are much greater than everybody. So if you ask me how confident are you on the numbers that you need to deliver? My answer -- my honest answer is we'll do them, but really the amount of rolling that we need to do next year to get everything in the right place. It's a lot. If you ask me on a relative level, I'm absolutely confident, because I know what we have done and what on average the rest of the system has done and I think we will outperform again if you ask about results. If you ask about the market, then the market will decide.

Great. Now turning to M&A. There is a lot of interest in European M&A at the moment. Before discussing specifically about some of your investments, could you talk about what this could mean for Europe for UniCredit and how you approach M&A in general?

So firstly, I run a private company. So what matters to me is what our company does and how we reward our shareholders. That said, if for a second I step aside and I look at Europe, we need much stronger banks. I think everybody says it, very few people mean it, but we need them. If you think about -- and I use this parallel a lot before the great financial crisis, we had the same GDP as the U.S., believe it or not. And we had a population that was to the person the same. 15 years later, we have -- the U.S. have drawn 80%. We have drawn 0. And the -- our population has increased 100 million because of where the EU has gone I don't think that -- I think that, that's tragic. When you look at that is lack of convergence on Europe, it's lack of taking difficult decisions but also not having a pump in terms of financing to support all the projects that we need to support. I don't know how many of our clients say, "I'm going to the U.S. because I can find the money there. I can't find it here." And there are two sources of that. One is capital markets with investors, we don't have them or they are very fragmented and through Brexit even more. And two is banks. And three, is government balance sheets. Now government balance sheets are full. Capital markets I commented without banks propelling. Whatever great plans we have, we won't be able to finance them. So I do think Europe needs bigger banks. The second thing is it's very difficult to have much bigger banks than we have today with our banking union because we are crowding out the single domestic market, and we are concentrating in there. So we have seen it in the reaction probably to the deal that we're looking -- we are looking at completely because of private point of view. But everybody is talking about banking union, cross border, et cetera, et cetera, which shows that a lot of people are talking about that. I do think there is now from a private standpoint, something that gives me confidence that I don't know if everybody, but at least UniCredit in the next 3 years, we'll do M&A. At our principles, and we can go through those again, but we'll do M&A. And that is that because of what we expect in terms of macro change in terms of uncertainty and how different banks are positioned differently. We think that now is the time where there will be striking divergence in performances between winners and losers that are not obfuscated by a macro that lifts everybody, and that will bring M&A. Now if it's in market or cross-border will depend a lot about what the regulatory support and what the political support is. But I think you will see more M&A. And as you know, I've been a little bit skeptical until now with what I see more positive.

Okay. So now turning to Commerzbank. Cross-border mergers are hard to get right. Why do you think you'll succeed where others have failed?

So I would say the following. First of all, let's start with one thing, which for us, and I repeat it because sometimes it gets lost in translation, we will only do an M&A if adjusted for the risk of execution, which we take into consideration, our return on investment is above 15%. Otherwise forget it, I can do much better deal by buying my shares. Secondly -- but it's not only about that. Even if we do M&A, we will keep our payout the same, not everything that we buy has the same payout as us. And secondly, we will strive to keep the dividend per share trajectory equal to what it would have been without the M&A, which means that in the year 1, we're not going to go to investors and say, you're getting diluted by all these massive shares we've issued because we're going to use the excess capital to pitch it in and complement. Then there is one issue that I want to make clear, which is M&A is also a distraction. And as you know, I spent 3.5 years saying there was a lot more value internally than externally and I didn't want to distract. Now it's the right time for us, but at the same time, we have another advantage that our -- what is our disadvantage of getting more efficient, which is one legal entity with one board, one management team, one everything, separate in each market where we are. It's a great advantage for M&A because the operational risk or the operational stretch is limited to where we are. Now moving from that to your question, First of all, this is half an in-market deal and half across border. The half that is an in-market is Germany. We talk a lot about Germany because that's the in-market. So for us, Germany is just putting two banks together in the same market. It just happened that those two banks are carbon copy of each other. And also, while, being carbon copied from each other, they have two things that are really attractive to us. The first one with owned overlap client franchises so that we would strengthen the client franchise not damage it. This is important to create to maintain or improve the revenue line. And the second thing is that while carbon copy, they are performing very, very differently. So we know what can be done because we are doing it stand-alone, a lot of what can be done on another in-market deal in the same market, carbon copy is just to bring to the same levels as we do. And to be very clear, we are not a division in Germany. I am the Chairman of Germany. We are not making results by moving things around in the Group, I would been jail otherwise. It is a legal entity that has what it has and moves as it does. There, we're very confident because of that. On the cross-border leg of the equation, there are number one, we have realized, especially with we deal with Alpha, how much value we can add through the plugging of our factories through the capturing of the cross-border flows in terms of trade plans and payments and through the application of certain very simple rules when we go in a market that has a lot to do with ours. And Poland, has a very, very significant portion of the flows across CE and across Germany, but we would be able to capture with our model. So while we're not -- that's not an integration, so that's easy, that is easy to pull in. The other thing for both banks is they're very -- in our opinion, they are behind in the modernization and convergence of their IT infrastructure, and we are ahead, and what we're doing ahead is just you can take theirs and putting on ours. So more and more, these deals are going to be about technology processes way of working, streamlining organization and center. So we're quite confident. I'll give you one example. Beside the fact that we have done more than 200 mergers on UniCredit, about 80 in Germany alone, we have taken control of Romania, meaning 100% -- 90% control a few weeks ago. We probably are aiming to have regulatory support for a legal entity merger by July, June, July of next year. we're going to be fully integrated before September. This is a bank that on M&A and integration hums, which is what we have done all of us. There are other banks like us. There are also in certain countries and other banks who have had very bad experience with M&A, but we haven't.

Okay. Now see on Commerzbank, you have already a presence in Germany, what is the strategic benefit of going through acquisition? Why not focused on expanding HVB organically?

Well, I think it's -- firstly, we think, obviously, I would say that we, because I'm a minority, I'm not German. We think we know Germany well. HVB has been there for 170 years, 20 years under UniCredit. I think when it joined the group, it was quite weak, notwithstanding the weakness and you will remember the days of real estate and limited capital, et cetera, et cetera, the group absorbed the entire shop and didn't take from government or others. So we think we've seen it through thick and thin. And if you look at the acceleration in the last 4 years, it's there for everybody to see. I've been sharing the Supervisory Board of HVB because I didn't want to do it by remote control from Milan as the CEO for 4 years. And I think I've learned a lot about Germany. And I do think that in terms of banking, different client segments performed differently. So the middle stand is a very attractive client segment because you're in a place where the JPMorgans and the Bank of Americas and the Citis of this world struggle to come in and by way they are coming in, and the local players, many of the local players struggle to be able to provide the same level of services products, connection to bring them across the board than those larger banks can do. If you can connect the two things, there is a lot of value to be created. So just to make it very clear, we're not doing this deal to reduce our exposure to the Mittelstand, but actually to start from where they would be to move forward much faster. The second thing is mass market is, again, very difficult because there is a lot of public sector affluent and private requires certain type of service product, et cetera. we've been very successful in moving our franchise towards that. So we think we have the right client model. We think our integrated channel approach has been very, very effective. And for that reason, it gets us to scale. But let's be very clear. In the segments where we would have the highest market share, we would struggle to be more midway between 10% and 15%. So the market would still be very competitive away. There will be very -- a lot of choice for all the Mittelstand on offers, but we think that in there, we can be even more compelling. And then to be honest, because in addition, when you do M&A, we all talk about synergies, but you need to separate the synergies between synergies, which is what each bank can do better together, but cannot do a long and efficiency, which is what banks can do better just because they can be run with a different philosophy and a different way of pacing. And I think in this deal, the second part is preponderant. I would say, 65%, 70% of the value. And therefore, it adds a lot to the value that can be created while expanding our franchise and rebalancing the Group.

Okay. I guess you touched on this, but 1 last question before we open up to the floor. Can you share with us the key success factors that explain the difference in performance between HVB and Commerzbank. In particular, how can UniCredit make 20% return in a challenged market and 4x the revenue of Commerzbank in the retail client space in terms of what can you add for more value?

So I do think it's a combination of a number of things, not one size fit all. One, the right client strategy, meaning which client segments. Why? Which line products, which products in most client segments, how do you reset your channels, the way we have integrated digital, physical call center using AI is, in my opinion, at the forefront in Germany, and many people are trying to copy it. So it is how you put the client in the middle how you deliver and how you embrace that client and how do you have a superior capacity to give them products at a higher margin because if I buy them all from outside, it's one thing. If I produce them at a low cost, it's another thing. So that's one. The second thing is discipline. There are a lot of difficult things that we have done in terms of completely redesigning the organization, completely redesigning all of our processes, the way of working entering into our IT, converging and cleaning it up. And that makes the organization not only more efficient and allows the last two things. One, your cost to run it even in IT becomes lower because it's less bulk, it's less clunky. And secondly, you can afford to become more efficient as your processes and your automation allow us to have less people doing more. And we have done that by shifting people we had at the center into the network. We -- since, I at least, started, we were very careful not to touch the network, not to touch the end client number and to just push in that direction. But -- and also by focusing on profitability. I think that the connection between clients and an institution is critical. But as I used to say when I was in investment bank, if it's only one way, that is not a partnership, that's slavery. So banks need to earn their cost of capital when they earn with a client. And if a client can get it better elsewhere, I understand it will help them as much as we can, but we have a business to run. And that means that we haven't done volumes that would have diluted our profitability or taken on new risk. That means that we are very disciplined in the way we run things. And I think that, that has been applied in every bank of the Group and has worked in the same way at every bank in the Group.

Okay. Great. Thank you for your insights. I think we are ready for questions. Yes, the mic is on the tables.

Andrea, just a question. You made a comment at the Q3 results on the potential transaction with Commerzbank, maybe taking a bit longer than the market might have anticipated. Could you expand on how you see the time line of that from here?

So -- okay. So there are a number of reasons. Some of them are technical and some of others are judgment. Technical, for those of you who haven't figured it out by now. Germany has a law by which from the time you cross any 5% threshold in buying shares, you have an obligation for 6 months to guarantee in any offer the maximum price you have bought those shares at in cash. So if you look at how the stocks of banks are performing these days, would any of you take a risk on a cash floor on an offer in this environment. And that risk is usually digital. Consider what, EUR 17 billion, EUR 18 billion, you can take whatever you like. If it happens, the buyer needs to do a rights offering of what, EUR 25 billion at discount would be suicidal for anybody, and I think reckless to do anything before you are at the end of that period. And you can make your calculation when that period may lapse. So for one thing, technically, 6 months, we are locked up. We're not locked up. We can move. But if we move, we have a cash floor. If we were in Blue Sky scenario, there was a difference of 50% and everything was going in the right direction. Maybe you take a judgment call, before you don't. The second thing is, notwithstanding what we have been accused of, we've always been very, very -- and we have tried to be very respectful of Germany, it's institution and their government. I do not think it is a good thing for us to take advantage of the period of vacuum elections to launch a bid. I don't think it's the right thing to do. I'm not going to get convinced otherwise. So that's judgment. If you look at election, I don't need to tell you, end of February, then I don't know what will happen, but a lot of people are saying it will take a little bit of time to do a coalition, if that's the outcome. Last time it took 6 months almost. So -- but I think the leadership of the country has a lot of better things to do than to talk to me about the transaction. And therefore, there is an element of patience, winning where it lands, trying to advocate their case, and then if everything goes in a certain direction move. The third thing is there are some -- this is combined with certain period where one can bid or not in Germany, depending when the results are happening, et cetera. And then also, I hope that over time, there is a better dialogue between Commerzbank and UniCredit. For the time being, it has been mostly focused on, let's say, us as a financial investor. But I do think -- I really believe that this is a great opportunity for both banks. And if you talk to the people at Alpha in Romania, they will tell you what it means because that's the way we approach things. And we're very federal and very in the way we do things. So trying to create a background of that as we get to the end game, if we get to the end game because it could also be that we reverse course and a lot of people felt why are you covering your downside today, it feels a lot better to cover your downside then we won't. But I do think this is one of the things where you need to patient. You need to go through the motions. You need to let it happen. And at the other wave when emotions are out of the way, if you get to a deal, it's going to be a lot easier and a lot more value creating than if you try to just run it through. And that's why it's taking more time.

I'll have a -- running out of time. And we can take one quick one.

Can I have two actually? I have one on rates. You're assuming 2% exit rate next year. And then if I'm not wrong, 1.7% at the end of '26. On a day like today, and I realize things can change quickly, but it feels like the market are telling us is going -- potentially going well below that. At what level is your 17% ROT target at risk?

That's a -- what is it? It's either a good question or an impossible question. Look, I think the question if you tend to connect your profitability to the level of rates, et cetera, et cetera, by definition, you're not doing a lot of other things. So I would answer to you that way. There is an element of compression in rates, even beyond the 2% going down, but we can compensate because volumes will be better because that's why I insist, if you move from large corporates or mass market lending and differentiated into consumer finance into SME lending, into all of these things. Your margins are not going up by basis points. they're going up by multiples. Even when you compensate for the cost of risk. But you need to be set up to do that. So you need to hire the people. You need to move them there, you need to train them, you need credit models, you need new products, you need new digital, et cetera, et cetera, et cetera. We have done a lot of that. So we can absorb that. The other thing is the more rates come down, but more fees come up in terms of the mix. And when fees come up in terms of the mix, it's easier for me to keep 17% because I'm not using the capital. The question, is it feasible for me to keep -- to exceed the EUR 10 billion ambition that I have. So the 17% is easier than the EUR 10 billion. The EUR 10 billion and the 17% is the very difficult thing to do. With this macro plus/minus 10, 20 basis points, we get there. But if you start telling me you're going to go to negative rates, no. If you're telling me, ah, do you think you have a shot at doing what you want to do if instead of 2%, you are at 1.75% or 1.5% or whatever, possibly. If you start coming a lot lower, let's not forget that banks are banks, they land. And if this gets crushed there, it starts becoming daunting. I, however, I know everybody is worried about this, but I would add one thing. It's very true that process law is very true, I worry about tariffs. However, does anybody takes into consideration the positive had a back wind or tailwind we're going to get if the war with Ukraine is even suspended. You have no idea how much that is a drag economically. Morally, I don't have to comment. Does anybody take into consideration what happens when Germany has a new elected government fully empowered that is going to run through whatever we need to run through as opposed to waiting for the election and the transition. It's massive. Also, if you read across from the U.S., I understand the decoupling. But how much decoupling can there be if we continue to talk about growth and inflation in the U.S. and rates struggling to come down, and Europe. There is an element where the U.S. rates level is holding the European rates at a certain level as well. So I do think that can we be wrong by 20, 25 basis points, 30 basis points? Yes. I think reasonably today, I don't see how it's 50. I really don't.

My second one is okay? So if you were to succeed in acquiring Commerzbank, it's a very short one, actually. Would you be willing to move the headquarters from Milan to Frankfurt or even Munich?

No. But no, because -- and I will tell you why no, because besides the financial metrics, what needs to be upheld is our ability to execute. And the moment you go into those, they come with a lot of advertise. And then the group can do a lot better without it. The second thing is while we are in Milan, and we're proud of being in Milan, if anybody bothered to come into our tower in Milan, more than 50% of the people are not Italian, and if we were to do a deal like that, the level of Italians would go even lower. Nobody in the Group is talking about Milan anymore. The people who are in Munich, they feel that the center of the world is Munich. The people who are in Zagreb, the same, et cetera. If we make the headquarter a topic, then a lot of other countries are going to come back and say, "Well, hang on a second. And what the next deal, we're moving it to somewhere else. I don't think that that's functional to the culture that we have.

All right. I think we have to stop here. But thank you so much, Andrea.

Thank you very much.

Thank you everyone for attending.