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

Good morning, everyone. Welcome to this fireside chat. I'm joined here on stage today by Mr. Andrea Orcel, CEO of UniCredit. Welcome, Mr. Orcel. Thank you very much for joining us.

Thanks [indiscernible]

There are a lot of things that we want to cover in this discussion, so many things going on for Italian banks and particularly as well, of course, for UniCredit. Before we begin, we're going to ask the audience a question because we want to know what you think. You can see it now on the screen. What inorganic growth option do you think would create the most value for UniCredit? Option 1, acquiring Banco BPM; option 2, launching an offer to acquire Commerzbank; three, acquiring a bank in Eastern Europe; option 4, buying a product factory in asset management or insurance; and option 5, not pursuing M&A and focusing on organic growth. Okay. Option 2 with 38%, launching an offer to acquire Commerzbank, but also option 1, acquiring Banco BPM with 26% follows it. So mixed opinions there. With that in mind, let's begin. We will address that. But let's start talking about UniCredit stand-alone story for now. You presented full year results a few weeks ago, and you gave updated guidance. You talked about the expectations for a moderate decline on NII already in 2025, which you said you don't think the growth in fees will completely offset. Despite that, you do believe that you will maintain resilience on the bottom line, not just in 2025, but also thereafter, thinking as well about an environment of lower rates. What makes you comfortable in thinking that you will achieve that target? Can you walk us through some of the key levers of your strategy?

Okay. So I think the reason what we are obviously confident we can deliver what we said we would deliver, which is to be broadly in line with what we achieved last year, which was at the peak of macro. So about EUR 9.3 billion of bottom line, more importantly, a return on equity on like-for-like capital of 17%, 18% and distribution above EUR 9 billion. And that then trending up to EUR 10 billion of net income and distribution that obviously increased from there, and return on equity, which would stay in the high teens, notwithstanding Basel IV and everything else. So what makes us comfortable? What makes us comfortable is two things. One is our expected operating performance like everybody else. And we worked very hard in the last part of the year to prepare for this year, and we have been discussing about the macro changing for a long time. And so we are already in the 13 banks, and we are executing on a plan to offset that, and I will discuss that later. The second topic is because in the last 3 years and every time we operate, we look at getting the quarterly and the yearly performance in line with what we promised, but also never stopping investing in the future. And for us, that means two things or has meant two things in the last 3 years. One, it has meant that we have boosted our provisions and more importantly and more visibly, EUR 1.7 billion of overlays. And secondly, we have front-loaded investment. Actually, we have cut costs by EUR 1.6 billion. We have redirected in investment EUR 1.2 billion. And we have front-loaded all risk and charges, et cetera. So if you take 2024, below the line, we took EUR 1.3 billion of integration cost and risk and charges. So look at it in another way. We have EUR 3 billion between overlays and integration cost and risk and charges that we are going to gradually release to zero in the next 3 years. Or look at it in another way, I have an average of EUR 1 billion below the line that cannot do and modulate in order to get to the bottom line. So the probability that we get the bottom line, the EUR 9.3 billion, in our opinion, is very high. And therefore, the probability that we get the return on equity is very high, and therefore, the probability that we get the distributions even before we talk about the excess capital return is very high. What counts on us is that we have bought ourselves time in the last 3 years by creating these buffers to continue to improve the operating performance above the line. So revenue minus cost, minus structural cost of risk. And obviously, at a certain level of capital. And so in 2025, depending on how much of an impact we get from rates and the current environment is better than we expected because steepening of the curve is somewhat offsetting the decline in rates. But the decline in rates that we anticipated at the beginning, i.e., going to about 2% exit rate or below, was not going to be fully compensated by the increase in fees. Trading, you never know. Cost, we will be flat in the new perimeter or slightly down. Cost of risk, we have bracketed it, and we are quite confident we'll keep it there. But there is a miss in there if everything goes according to plan in 2025 because we have a moderate NII decrease. Now if the macro is better, then the macro is better. But for the time being, that's what it is. But below the line, I can use as much of those EUR 3 billion to modulate and to get to my target. When you get into '26, the situation is a lot better because the gross in fees of this year plus the gross of fees of next year, plus the tilt in margin will allow us to above the line, be at level or above what we were in '24. And that's where the release of the underlying is further boosting our performance above the EUR 9.3 billion. Then when you're arriving at the end of the 3 years, it expands further that way. But our focus at the moment is, number one, because we have bought ourselves confidence with the release of these, call it buffers, is to move from transforming the bank in terms of emphasis to accelerating the top line and accelerating the operating performance, leveraging on the transformation and investment that we have done. And the whole issue for us is as we're more comfortable because of the buffers we have, putting ourselves in a position that when we are in '27 looking forward, the operating performance without buffer can grow beyond the EUR 10 billion. And so we looked at it in three blocks. The last 3 years, we transformed and we created buffers in a good macro environment. These 3 years, we are accelerating and leverage that transformation, but releasing the buffer to ensure the performance in a declining rate environment and increasing cost of risk. after 3 years, hopefully more normalized, but the business being on its 2 feet capable of exceeding EUR 10 billion bottom line. And we are quite confident on that. If I look at how the year has started, we had identified five key levers for every market we're in, for every segment we're in, for everything we're in. We're ahead on the execution of those levers. And the macro environment with what is happening is more positive than we thought it would be.

That's very clear in terms of the details behind the business and the different P&L lines that you're targeting to achieve that resilience. But you also talked about the capital level, you said at the optimal capital level. How much of your ROTE target would be achieved by distributing the excess capital?

So two things. When we look at the moment at the 17%, 18% is not factoring in leverage. So for me, getting to a certain level of capital by going to 12% is not like-for-like. So when we talk about where we want to be, notwithstanding the fact that we're committed to give back the excess capital to our shareholders, excess capital above 12.5%, 13% by the end of the period, we are not counting on that to get over. That -- if you want to call it that way, it's a buffer. So one thing that I didn't get enough into, but I think it's important to appreciate because it's all about the operating performance is that because we were also focused on transformation, so focused on how can you do on this and on that, we forgot three key things that UniCredit has. Number one, we have an outstanding geographic mix, which given what's happening in Germany at the moment, has just become more outstanding, i.e., we have about 40% by '27 coming from Italy. We have about 35% coming from Germany and Austria, and we have 25% coming from the CEE. Now Italy was always an anchor of capital generation and quality growth. They'll get 50% of revenues in fee by the end of the period. CEE was always our growth engine, and now it's accelerating even further. Germany and Austria were the rating anchors, the strengths, et cetera, et cetera. Now those rating anchors and strengths, the lion's share of it, Germany may have a greater growth than we anticipated because of fiscal policy and potential piece. On those, you overlay a very clear strategy on the segment we target. And everybody talks about volume. But for example, for us, EUR 1 billion more loans, EUR 13 million more revenues, 1 basis points more margin, EUR 40 million to EUR 45 million more revenues, okay? So what does that tell you? That tells you that pursuing volume using capital, is not necessarily a strategy that is going to offset rates. But pursuing the right client segment and the right products, not using capital is a strategy that will play. And that's why we've been discussing SMEs. We've discussed this affluent and private. From those segments, we extract already today 60% of our P&L, 65% of our fees. We're going to move to 75%, 80% of our fees gross in those segments. And if you combine that our strategy on products, which is on NII, there are a lot of people who focus a lot on mortgages because mortgages are low risk. Yes. But mortgages in most of our markets, not in all of them, tend to have a low return on equity. Consumer finance has 5x the return on equity. So if we don't go for volume because we don't emphasize mortgages and we move on consumer, we're going to have a profitability of lending pre-fees, very important, pre-fees, well above the cost of equity after adjustment for risk. If on that, on those smaller segments, you add all the fees from our factories, et cetera, 75% of the increase comes from there, then those segments have a profitability that is very high. So it's right geography, right client segment, right products and the levers that we have to achieve all the things that we want to are oriented to continue that till. So more investment of capital and other investment in CEE, well, now maybe Germany will take more, more investment in all that we're doing on the client segments that we are targeting. and a lot of discipline in terms of which products we sell to which clients in order to support the margin and create what we want after 10. So if we do those things, even at the current capital levels, we are able to hold or increase the profitability that we had in '24 by '27. If you then say you're leveraging that capital level and you're no longer where you are, but you're going down to 13%, that's upside.

When you talk about this, it does remind me of the narrative that you first pushed when you talked about the strategy, UniCredit Unlocked first presented in 2021. With this time around in 2024 full year results, you presented the next stage of UniCredit Unlocked, which you called unlocking acceleration. Is there anything new? What is different versus the previous part of the plan?

I think that the difference is the emphasis. In very simple terms, in the first phase of UniCredit Unlocked, let's say, the management team focused very hard on the transformation. The transformation meant redesign, simplification, streamlining of organization, processes, way of working, the necessary investment and streamlining in technology, the necessary investment to rebuild the factories that would then generate the fees that we need to generate. I don't know if somebody told me the other day, it's -- hopefully, it's like Ferrari, we built the car. And it's a performing car before you couldn't race it because it wasn't a performing car. But at the same time, we were going around the circuit and all our colleagues were driving the business the best they know how with the discipline they know how. As we move now, the emphasis is most of that transformation, the car is built. We still need fine-tuning, so we're not at the end of it. We'll still have a significant improvement in efficiency, in the allocation of capital, all of these things. But these are fine-tuning on something that is running. Most of the emphasis now is really driving with discipline and focus, the tilt into the client segment and the product that we want, really leveraging. So we can have factories. Everybody can have factories, and I come from an investment bank. every time an investment bank needs to sell its products to the asset management side of the equation or to the wealth management side of the equation, it's not directly connected. It's difficult. So now what we need is we have the building blocks. We need these factories and the people providing solution to seamlessly work with the network in order to give them. We need the new channels, distribution channel we've developed. For example, in Italy, our direct sales from the call center, we have 1,300 people out of 18,000 in the network that closed 35% of our sales. So it's a completely new concept. but that is now needs to expand further by expanding that leverage. So it's pulling together the pieces and using them to drive, one, further penetration; and two, keeping people with their eyes on the ball on, we're not just doing a loan or we're not just selling an insurance policy. We're trying to increase our penetration in those segments. We're trying to sell the right loan. We're trying to get the margin to be at the right level. And so it's a lot more focus on that part of the area, which is why we call it acceleration. The first part was more unlocking the potential. This one is more accelerating out using that foundation to move forward.

It's been a very interesting journey. And it seems like you are excited about all of the things that you want to do next, as you say. So it sounds like you're excited about the stand-alone organic growth story, but let's now tackle that question. How then should we think about M&A and the options that you're exploring, particularly if we frame it with regards to the expectations for returns on distribution commitments that you currently have?

So I think I would say two things about that. One, our approach on M&A, maybe believe it or not, but we've always said one thing. M&A is not something that has a purpose on itself. M&A is an accelerator, an improver of what we have as a baseline. If we believe so strongly on this baseline, as we do, if we believe that relative to others, we have buffers that allow us to deliver it above and beyond what anybody else can do and we do, then we're not going to do M&A if we take the perspective of our shareholders unless that M&A is a net positive and further what we're trying to do.

A disciplined approach.

So -- and everybody says that, but then you get many times in my history presentation on, oh, I'm going to dilute you for 3 years, but in 5, it's going to be awesome. Or oh, but I need to do that because it's strategically important, and I need to get to market share. You're not going to hear that from us. You're not. And if we need to walk away because the value is not there, we will walk away. It's just as that. So how do we look at it? Well, we look at it that if we do M&A now, obviously, if we have highlighted, for example, BPM, and I'm restricted on what I can say because we are not in marketing period, it clearly means we believe it has strategic value, it has industrial value, and we can extract a lot of value from them by applying the blueprint in terms of organization, processes, way of working, technology, very important, the way we structured and invested in our network, et cetera, by buying them and flipping them on us. And they accelerate our move in SME, upfront and private is accelerated from them because their mix is more weighted towards that. So it's bang on our strategy. It's an accelerator. However, there's always this small detail that is left on the side is it depends upon that.

Small detail.

Our franchise can absolutely continue to thrive without doing that because although we have 10% market share in Italy in premium segments like consumer, like non-life insurance, like life insurance, unit-linked, you name it, asset management, we're usually between 13% and 16% with peaks of 35%. So we can exist without that. But if we were to buy this franchise at the appropriate valuation, we can accelerate further ahead if it is the right valuation. For us, we've been very, very clear and some investors have asked me to change it for the time being, I'm not changing it. Return on investment needs to exceed 15%. Otherwise, we don't do that. The case with the reasonable phasing of synergies needs to beat our share buyback. So if I buy back shares this year, what is happening in '26 and '27 and '28 on my EPS, my distribution per share, et cetera, et cetera. If instead of buying my own share, I buy the shares effectively of another company, what is happening to those numbers. So we've also went further by saying that because you could argue that the share buyback portion of your distribution has an impact that is delayed. You're going to see it as you crystallize your dividend, as you crystallize the following year. We said, however, we do not want to weigh on our shareholders. And therefore, if we were to do this transaction, the dividend per share would be kept at least equal to what you have in your numbers today. So we would not dilute. We would top it up with the excess capital that we have, if necessary. From '26 onwards, we expect to have net positives on that, okay? Obviously, what we are trying to do is, to a certain extent, we are replacing a return of some of that excess capital, which is a one-off with a perpetuity, which is the increased return distribution, et cetera, et cetera, that we're going to give our shareholders. But for that to work, the value at which we are incorporating new shares needs to work. If it doesn't work, we're diluting. And therefore, we are very, very attentive to that equation, and we will only proceed if that equation works.

So I want to insist precisely on the value. I know you said that you're not going to move the price right now, but the offer when you presented it was 15% to 20% premium on the undisturbed price, as you said, before Banco BPM announced their offer on Anima. But that has, of course, evolved. They already began the tender process on Monday with the approval of shareholders to not only increase the price, but also waiver the Danish compromise -- the approval of the Danish compromise condition. So with all of that in mind, where do you stand now? And do you think that there is any room to move the price?

Well, I would say the following. Well, first of all, you said it when we launched, we felt that based on what we had at the time, relative value because everybody looks at premium. But premium is a good indicator, assuming you start from the right values. If you don't start from the right value, premium is irrelevant. If you look at many of the transactions in Italy at the moment, a very low premium vis-a-vis history because you don't start from the right value. You start from a stock that reflects some speculation of some sort. So for us, some disturbed was, well, you've announced a transaction, the stock rallied 15%, but you haven't done the transaction. So for the time being, we are where we are. We also were quite open to say, because in the same way we don't do something that destroys value, we do something if it does add to value. At the back end of the process, looking at where value is, if you convince us that there is more value, we haven't excluded relaunching. What happened since then? Well, what happened since then, I would say, is on the negative. Obviously, we are tracking up with our performance, the stock of the target because if you just look at the correlation between the two, it's linear, okay? The second thing that has happened is that the target has achieved authorization to increase the price and eventually to do the transaction without Danish compromise. As we have said before, and it's numbers, you can do them themselves. with Danish Compromise, the transaction on Anima has a return on investment of in excess of 50% and consumes very little capital, low hundreds. Without Danish Compromise, return on investment is 11%, and it consumes billions of capital. And so what you're buying is much less capitalized than what you had at the beginning. There, the leverage occurs. And so from our standpoint, if we believe for a second, consensus and guidance from the target, for example, they are at 18% return on equity at the moment, they think they're going to go to 24%. Well, if you're using a significant amount of your own capital at an 11% return, you're diluting. So assuming that happens, it's not a positive, it's a negative. Secondly, so fundamentally, at the moment, where are we? We are that we expect authorization from regulator towards the end of this month, beginning of next. After the authorization, if we get it, usually concept gives you a week, 10 days to issue a prospectus. Depending on this time line, the offer period will run anywhere between first week of June and beginning of July. On the Italian law, you can review the terms. Or thanks to the vote that BPM got from its shareholders on Anima, withdraw the transaction altogether up to 2 days before close. And so there is absolutely -- it would be totally irrational for us to entertain discussion on what we're going to do until we are not necessarily 2 days before close, but very close before close because we will see what percentage of Anima do they buy. Obviously, depending on Danish compromise, the value accreted or distracted is more or less depending how much they buy. Secondly, we will see the real Q1 results, not through release of this or release of that, but really the underlying Q1 results. Thirdly, we will see where the shares goes. And then we will make a determination on is there value at all? If the answer is no, we pull. If the answer is yes, we go. And is there any reason why we should review -- if there is, we will consider and if there is not, we will not. So I think -- and for us, it's -- if it happens at the right terms, great, actually, fantastic. If it doesn't happen because the right terms cannot be achieved, I think it's a much better scenario from our shareholders' standpoint, which at the end of the day is what I care about, than doing the wrong deal. I'll give you one element that I think given that it's public, may help you frame how we are looking at things. If we were to exchange shares based on FactSet consensus, et cetera, et cetera, and exchange our shares with the shares of BPM at the current exchange ratio, shareholders of BPM would improve their distribution per share by '27 by 45%, our shareholders by 10% if with all the synergies in. In terms of earnings per share, they would improve their earnings per share by over 20%, our shareholders less than 8%. So if you look at the sharing of value as opposed to which premium and which have a premium, I do think that my shareholders should complain about how much value is already out there. And unless there is a change, we should not push further.

It's a very disciplined approach, again, what you -- how you're explaining you would approach it and the optionality. So let's talk about the other...

I'm sorry, there is another point that I forgot to mention that what people have not factored in yet is that , and this is again for our shareholders, if we proceed -- if we don't proceed straight after they get EUR 3.6 billion share buyback in full. If we do proceed, the share buyback is going to hit the expanded share base. And therefore, depending on the exchange ratio, call it, 17% of that share ratio of those EUR 3.6 billion end up in the hands of a new shareholder. And that share buyback is not 25. It's still '24 but we got suspended in doing because we're in the transaction. So effectively, just in that, there's a 5% premium in there above and beyond what the exchange ratio indicates. And obviously, nobody talks about that. But I need to consider that this is another 5% transfer of value if the transaction goes ahead as opposed to not.

And if the transaction doesn't go ahead, you still have another option on the table, which we saw the audience thinks could be a good option for UniCredit. It's Commerzbank. What are your thoughts now? And if I may, I remember last year, when you talked about the timing, you said we would love to do both things or have the option to do both things if we think it creates value. And you went on in a lot of detail explaining the timing of how you wanted to do things. Last year, you said we could assess whether we want to pursue an option with Commerzbank after we have visibility on the German elections, the coalition, the macro outlook in general, and we could potentially decide if we want to launch an offer before the end of 2025. You recently said, however, that, that could -- that decision could maybe take longer and move past beyond 2025. How are you thinking?

Look, I think two things. Point number one, yes, we got ECB approval, so everybody understands where we are in the, call it, formal process. We got ECB approval to effectively cross [ 9.9 ] and get to 30%, and we can't do that until we get that approval. So we got that. That, in my opinion, reflect that from a regulatory and capital standpoint, they recognize that we can do that transaction, we behave correctly. So that's a positive. However, there are other approvals and some of which are taking a little bit longer than we anticipated. So for example, antitrust, Financial Competition Authority in Germany, we submitted to them. We thought Europe would apply, but actually, you need to go through Germany as well. And that can take months. So without that approval, we cannot get -- effectively, we -- it doesn't make any sense for us to get physical shares with us. So we remain as we are. So only that in order to close all the authorities of the process, we're going to get into a situation where, I don't know, we're going to reach the summer, one way or the other, summer, early fall. So the -- so this is one element. The second element is we said very clearly that one thing is the 30%. We bought it. We think we bought it fairly. But the other thing is a combination. And given the reaction, we were waiting for a newly formed government to engage and to explain our position and to explain the value added from that. The government is not formed -- it's already operating and quite effectively, but we need to wait for it to be formed and then to engage with them on that. This will take time. I mean it's not formed yet. And it's not like I think with all the things they need to do, we have the first priority. So we will need to wait for the time, engage and see where we land. So these things are taking even longer than we thought we would be. And it's difficult to see how we can be at the other side of these things, everything is possible before September, October, you're already at the back end of the year. So this is one element. The second element is we -- when we bought -- we obviously bought everybody can look at when we bought the 9%. If you calculate from before that when we bought the 5% and then at the price that we bought the other 5%, the bank doubled in value, more or less, okay? So it's a different transaction. And you go back to the small detail of price. So fine. It's not a question if it doubles in value or not. It's a question of is that doubling in value fully deserved or not. And now we have a unique silver lining from the elongation of this project, which is, as a shareholder, we're booking a significant gain on our 30%. As a shareholder, we can potentially, when we get all the authorization, equity consolidate the stake and you can do your numbers, the returns are well above the return on equity on investment of 15%. As someone who could do something strategic if and when we can engage constructively on a positive transaction, we need to see if the base price is deserved. And what does it depend? At the moment, what is driving share price on bank is a re-rating of the cost of equity. Is that something that stays? What's happening in Germany that impacts German banks disproportionately? Thirdly, business plan that people may take up face value, but need to still be executed. By waiting, you see if they're executed and to what extent, although the macro is going to certainly help. And then what we are very interested in seeing is we feel quite strongly that the remaining float in Commerzbank is almost nil. And therefore, a lot of the ramp-up is due by share buyback on a float that is almost nil. So we want to understand if there is a reflection between value and share price. And we're very comfortable into waiting. So if I look at it from a shareholder standpoint, once I equity consolidate and I bring in the distribution, and they're saying they're distributing 100% of our net profit. So from our best price, that's quite a return. I can sit and wait and by the end of the period, which is 2027, determine whether this is good. In the meantime, we have also acquired exposure to Germany and Poland indirectly, or it's not good, we sell executing our put options and we return that capital back to investors. So I think this is how we look at it now. And I do think that at this point, patience is the most important point because we need to execute on our plan, get it done well. If BPM occurs, we'll execute that. We'll let this happen and we see how it goes, and then we'll see how -- what the outcome is. At the moment, as you know, we are consuming 30 basis points or less of capital on that because we're hedged. If we were to equity consolidate, we would consume anywhere between 70 and 100 basis points of capital, do the return on that by bringing in 30% of our net income and distributions. And then you get your numbers and you see why we're comfortable of waiting and seeing what actually is going to happen.

Well, it's very clear and then both of the options are still on the table. And with that in mind, let's open up to questions from the audience. I know there are a lot of questions. So please, this is the opportunity. We have one right here, please.

Just wanted to ask about the Danish Compromise and how are you framing or thinking about it given that this is all know -- we all know that this is a regulatory arbitrage and there is a risk to it. So how do you think about it going forward and in your considerations about BPM?

So I think, as you said, the Danish Compromise is exactly that, a compromise that was accepted in order to pass the finalization of Basel III rules. I always felt, and I think at the moment, this seems to be -- have been the correct feeling that as long as it's not abused, it's okay because it's an agreement. If it gets abused, it becomes less okay. What do I mean by that? If you take the overall capitalization of a financial institution or a bank, and you execute a transaction in insurance or now in cascade from an insurance into asset management. And that -- you're well capitalized and that gives you an arbitrage of 10, 20, 30 basis points, 40 basis points of capital. Given that in my opinion, the regulator looks at your overall capital strength, they may feel, okay, they have that advantage there, but look at the density on their model, look at this, look at this, look at that. When we do the stress test, when we look at the entire capital position and how it will react to shocks, it's okay. So the Danish Compromise is a rule, we accept it. Now take another view. The view is same Danish Compromise and the impact is not 20 or 30 basis points. It's 300. That is not -- if you consider what the Danish Compromise does, it will have a very, very different impact on your capitalization because effectively, what the Danish Compromise does is it allows you not to take the hit from goodwill. And so fundamentally, what it's doing is you're able to lever your capital on insurance and on asset management. As long as you lever by a little bit, no big deal. If you lever it by a lot and something wrong happened or you get shocked or very stressed, that gap somebody needs to put in there. So because we have seen two things in rapid succession. One, the Danish compromise so-called square, so in cascade on an asset manager, it started in France in July. And then there was the second one, the one of BPM, which is again a compromise square, but this time, the magnitude is massively greater because it could be their numbers and ours, almost 300 basis points. So then the EBA and ECB are looking at the situation and saying, okay, this is the rule, but what impact does it have on the "viability, capital strands", blah, blah, blah of the organization. And it's being a difficult decision because there is a rule, but they also have their subjectivity to interpret the rule and interpret the things in order to determine the right outcome for the overseen organization. In my opinion, this is why it's taking so long because on the one hand, there is a very clear cut rule. On the other hand, there is a concern. And so for us, you could argue. But without Danish Compromise, if this transaction considering everything is, let's call it, 70 basis points of capital. If you add to that no Danish compromise, you're adding 50 basis points. So look at the dramatic change. I'm consuming 70 basis points of capital in one situation on the other one, I'm considering 120 just to buy that. So for us, it's absorbable, but is it a good return. For the other organization, if the Danish compromise does not come, in my opinion, is very significant, and you can do your numbers. So I think for us, it's very clear. I don't need to go into what BPM is going to do because their shareholders have decided they are going to do what they're going to do. But for us, if there is no Danish compromise, it's substantially diluting the return of the transaction, 120 basis points versus 70 with bottom line equal. And that is why we -- this was a condition precedent, and we're going to see what it is. Now we can have -- we are going to have one certainty by the time we close the offer, and that is how much of Anima does BPM own. I think we closed the offer before that, we will know how much. Obviously, the value accretion or destruction, depending on Danish compromise or not is dependent on how much they own. If they go to -- I have seen numbers, 45, 50, 55, they already have 24, it's one thing. If they go to 100, it's another thing. So that we will know. What we will -- what I don't know if we will know, and that will have a bearing on our behavior is whether ECB will clarify Danish Compromise and Danish Compromise Square in the specific case, we're not going to have a clarification generic in the specific case or not. If we don't have a clarification, we'll need to take our views on what is the worst-case scenario and what that does to investors. If we have clarification, we'll take a decision knowing exactly where it falls.

Do we have any other questions? Please, right here on the way.

Thank you, Andrea. I'm going to ask you a question, not as a CEO of UniCredit, but one of the greatest bankers we had.

This is a bad question.

Exactly. You know where I'm coming and no offense to the host. So give us your -- and I'm being nice to you. I'm going to ask you, what do you think happens to the financial sector, including banks and insurance in Europe with your all hat?

Look, I would say that -- I would say two things. If you had asked me that question at the end of last year, I would say that the consolidation process would accelerate across Europe. And depending on what -- because all, all banks are observing what's happening on one transaction, on another transaction, et cetera, et cetera, to make their views. If I was at the end of last year, I would have told you, well, people can observe what's happening in Spain. They can observe what's happening in Germany. They are now seeing that Italy is moving. And I think that with banks which are stronger in an environment that is what it was, there will be more consolidation. The question is, is anybody going to dare going cross-border? If a bank like us, who is the quintessential cross-border bank because we are pan-European, is struggling on a domestic deal just because of other reasons, then people who don't even have the synergies of a domestic deal going cross-border without banking union, forget it. But the domestic could continue to drive. And I think if you look at Italy, it's much less consolidated than Spain, for example, or in my opinion, than France, depending on the segments. So more of that would happen. If I look at it today, more difficult still because given the re-rating of banks, given all this positive environment, targets are more reticent to move because they feel more comfortable. Well, look, the environment is better, my share price has gone up a lot. So why should I, which is the question. And buyers are going to -- are also observing how complicated these processes are and how difficult it is to get to the end. So in one that is quite straight, Italy and Italy, for example, for us, 10 months from top to finish. And that's -- you're giving a floor put option on your share price unless somebody takes that put option away, thank God, to the target, 10 months. If you take what's going to happen in Germany from the first 9%, 1 year. These are long times. This is a lot of uncertainty in this environment to be open. And so I do think that, that plus all the noise, and we always talk about the noise here or there. But the noise is everywhere. It is in Spain for a domestic deal. It is in Italy for an Italian deal. It is in Germany for depending how you look at it, a domestic deal or a cross-border deal. So there is a lot of noise. And that, I think, make people say, well, hang on, do I want to open that noise? Do I want to have the uncertainty on my stock and on my performance because look at this audience, if I look at -- I should be discussing 90% what we can do stand-alone, especially people have confidence that we're not going to do a deal unless it's improving on that stand-alone. But inevitably, everybody is worried and I have 90% of a discussion on M&A. That is not positive for any CEO that is out there, they say, you know what, let me stay out and not have all the noise and pressure. So I do think unless as a result of all that is happening with the U.S., with geopolitics, with Europe, we really have very strong messages on banking unions and on the need to have stronger bank and capital markets to fund the transformation of Europe, I'm less positive than I was at the end of last year in terms of people saying, I'm going to do that in size, small things, it's in our story.

Thank you very much, Mr. Andrea. I know we would love to have you for 1 more hour. But unfortunately, we come to the end of the time.

Thank you very much. Thanks everyone.

Thank you, everyone.