Good afternoon. This is the conference call operator. Welcome and thank you for joining the Banco BPM Full Year 2021 Group Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Roberto Peronaglio, IR Manager of Banco BPM. Please go ahead, sir.
Thank you very much, and thank you everybody to be here with us for our 2021 full year presentation results. Before starting with the presentation, let me remind you can find all the slides and the press release on our website in the AR section. Let me ask you to limit only two questions for each analyst to give room to everybody to make a question. Now I give the floor to Mr. Castagna for the presentation. Thank you.
Thank you, Roberto. Thank you, everybody, for being with us. I will start immediately on page five. Let's say that we are very glad to announce maybe the best ever results since the merger for 2021, with an adjusted net profit of over EUR 700 million and a ROTE of 6.9%, which allow us to propose a dividend to our shareholder meetings of 50% as a payout. This is, as you know, well above the strategic plan targets and pave the way to potential further increase over the remuneration under the strategic plan horizon.
Of course, this is possible thanks to the very sound result in every aspect, both in profitability, as I mentioned before, as well as in the further reduction of gross NPE, which are now down to 5.6% to EUR 6.4 billion, 4.3% under EBA definition, with further de-risking in place for the first quarter of 2022. Also, the capital position, even considering the distribution, is very comfortable at 13.4% of common equity, fully phased, and with an MDA buffer of 470 basis points.
That's the reason why, having overcome the guidance of net profit, we have decided to also distribute more than EUR 70 million more than the guidance with the dividend per share, which is up to EUR 0.19 and represent 50% of the payout. On page six, basically, we have over-delivered in all the aspects we mentioned in our guidance, starting from the third quarter of last year. Let's say that, the 2021 total revenues were more than EUR 5.4 billion, with the guidance on EUR 4.5 billion. NII up to almost EUR 2 billion, with the guidance on EUR 1.9 billion.
We already talked about sound capital ratio at 13.4, with the guidance of 13, as well as the cost, both operating cost, EUR 2.5 billion as the guidance, as well as the cost of risk stated, which was 81 basis points, with a guidance between 80 and 90 basis points. Let me remind the core cost of risk without considering extraordinary provisioning to further de-risking was down to 55 basis points. We already spoke about net income. The guidance was EUR 530 million, and the stated net income was close to EUR 470 million, which adjusted is more than EUR 700 million.
On page seven, just a quick reminder of many figures, but just to show how we are well on track towards our target on 2024, as well as we are already better than 2019 results, which were the best results before 2021, previous to the pandemic. As you can see on the left side, the investment product sales went up from EUR 14 billion in 2019 to EUR 18 billion in 2021, with a target in 2024 of EUR 19.6 billion.
The vast majority of the roadmap is already done, as well as for asset under management net inflow, which were negative in 2019 and are now up to EUR 3.4 billion with a target of EUR 4.4 billion 2023 years time. Asset under management stock was up from EUR 58 billion- EUR 65 billion, with a target of EUR 78 billion in the next three years. New lending after the spike of 2020, thanks also to the loans guaranteed by the state, which amounted to EUR 27 billion.
We are now again on top of 2019 results, so up to EUR 22.7 billion, with a target of EUR 26 billion in 2024. The NPE, as I mentioned before, 5.6% vis-a-vis 9% in 2019, and 4.8% in 2024. As well as again, cost of risk and common equity, which I already mentioned before. Also in terms of the main operating figures, it's good to mention that, in the roadmap from 2019 to 2024, we are more on the side of the target rather than the starting point, both considering total revenues where we are at EUR 4.469 billion, with a target of EUR 4.3 billion in 2023, and EUR 4.6 billion in 2024.
The same is for core revenues and operating costs, which are very close to the target we wanted to reach with the business plan. Net income, again, EUR 569 million with adjusted EUR 700 million, and the target in 2023 of EUR 740 million and more above EUR 1 billion in 2024. Also, in terms of asset quality, as we mentioned before, we have now reached EUR 6.4 billion. Let's just remember that five years ago when we had the merger, we were more than EUR 30 billion of NPE, and 2019, EUR 10 billion, 2020, one year ago, EUR 8.6 billion, so EUR 2.2 billion further de-risking during 2021.
The target is EUR 6 billion, but as we will soon see, there is already a further EUR 1 billion of the de-risking which will be executed by the first half of 2022, which should bring the bank below the target of 2024. Also, in terms of coverage, both bad loan, UTP, and NPE coverage are above the figure of 2019. NPE ratios, 5.6% down from 7.5%, with a target of 4.8%. In terms of capital, starting from 11.4 in 2016, we are now with a stable above 13%. We had the target of 13% for this year.
We are now 13.4% with an expected 14.4% in 2024 at the end of our strategic plan. Let's remember that in our outlook, we didn't consider the Basel IV impact of around 80 basis points, but at the same time, we consider this headwind to be progressively offset by the decrease in DTA impacting common equity Tier 1. The SREP requirement is unchanged for 2022, so that we have a comfortable common equity Tier 1, both in terms of versus minimum requirement, 490 basis points, and in terms of MDA buffer, 470 basis points.
Our liquidity position is really comfortable, above 200% in terms of LCR and above 100%, well above 100% as in the NSFR. Let's also mention some of the key point of our business plan and where we stand respect to this important issue, starting from the bancassurance that, you know, is one of our key point of the strategic plan. We have already activated eight work stream supported by industry advisor in order to potentially anticipate the integration of the insurance business, especially with respect to the Banco BPM Vita, in which, as you know, we have the possibility to anticipate from 2023, also in 2022, the integration of this company.
We have also already in place a plan in order to align the product range, the commercial offer of BPM Vita with Vera Vita in order to be ready to integrate both the insurance company by 2023. In terms of SME center, you will remember that we announced that we would have activated many points closer to our client, especially where the presence of the branch of the bank is not that strong.
We can announce that starting from the 1st of February, we opened 135 business points with 67 new responsibles for SME centers, and more than 450 relationship managers dedicated to the development of 75,000 clients. 45,000 which in the range of customers with the turnover from EUR 5 million- EUR 75 million and 30,000 clients below EUR 5 million, but with a strong opportunity and possibility to grow faster. In digital banking, we have launched since announced November of the business plan, the new app dedicated to the SME and business clients. We have more than 400,000 clients enrolled in digital identity.
This means that we can switch in a completely paperless offer with this client once, of course, they are enrolled with this feature. 20% of total sales are already driven by advanced analytics. Digital transactional activity is well above average of the market. I think most important, our app-based transactions are due to overcome in 2022 the branch-driven transactions. When I say app, I mean only app transactions. Of course, as we know, the total remote transactions are already 83% of the total transactions of the bank. It is very much important in my view to underline that app has been developing at a very strong pace, as much as the branch-driven transactions have been reducing 4x in the last two years.
Also in terms of ESG, we have joined the United Nations Global Compact. We became a supporter of the TCFD. We have been included in the ESG Index and the Bloomberg Gender-Equality Index. We have now the lending policy completely integrated with ESG factor for all our sector, as well as we have integrated the risk identification process and the climate risk materiality assessment. On top of that, we have set up two new units in HR, one devoted to inclusion, diversity, and social, the other one to the development of key people and talents. Let's have a look now to some of the main figures of our 2021 results. I would start on the left, the adjusted figures, just to compare with the same figures also in 2020.
We have grown net interest income by 3%, net fees and commission by 15%, core revenues almost 10%, and together with NFR, 7.6% of total revenues. Operating costs have been increasing due in respect to 2020, but like for like, if we exclude from 2020 exceptional items due to the COVID pandemic, we are - 0.9%. Pre-provision income are up 14.7%. Of course, after a much lower impact on the loan loss provision, we end up to profit from continuing operation before tax at EUR 1.2 billion vis-a-vis half these figures in 2020. Net profit is EUR 870 million, which lead us after systemic charge to EUR 700 million of adjusted.
The stated, of course, is EUR 570 million. The main differences are below the pre-provision income, and I would say part of these are related to the de-risking anticipation, upfront in the provision for de-risking, upfront in the valuation on real estate asset, and on the other side, taking advantage from the fiscal impact on some accounting principle in real estate. On page 13, there is the quarter comparison. Let me just stress how consistent are in the last four quarter the core revenues and the total revenues of the bank, which now are not anymore volatile as maybe we used to have during the first year of the merger.
Nowadays, I think there is a strong consistencies, which give us a lot of confidence in increasing this figure quarter by quarter. In terms of balance sheet, we are still continuing to grow in volume, starting from core customer loans, which are up in one year, 1.1%. If we consider the growth since 2019, the category is 4.5%, which is higher of the 3.1% of our business plan 2021-2024. Loans guaranteed by state, also in this respect, we grew, of course, since 2019 from EUR 2.7 billion to more than EUR 18 billion, which EUR 17.7 billion, EUR 16.7 billion are related to COVID measures with an average guarantee of 85% from the state.
Customer deposit continuing to go up until the last quarter of 2021. These first months, we are having some reduction, especially in relation to corporate and enterprise current account in which we are experiencing a reduction of around EUR 2 billion during these first 40 days of 2022.
As you know, our expectation is to further reduce these figures both for the reduction of the current account linked to corporates but also with the conversion into further assets under management, which, as you can see on the bottom right, grew about EUR 5.6 billion during the last year, with a net inflow of EUR 3.4 billion leading to the growth which should bring us to the target of EUR 78 billion in 2024. Net interest income on page 15, year-on-year is up 3%. If we consider the quarter, there is a reduction of 2%, if we exclude the reclassification of a one-off of EUR 5.8 million, the reduction quarter-on-quarter is only 0.9%.
Let's also consider the quarter and quarter. We had EUR 10 million of lower contribution from Italian govies. This was due to important sales that we performed between Q3 and Q4 of EUR 6.2 billion, to which we had to add further disposal for more than EUR 2 billion forward disposal, which will take place during 2022. Let me also stress that in this respect, we think we have done a very good maneuver because basically we have sold at very high level when the yields were lower. Nowadays we have the opportunity with this growing yield to rebuy and restock and reconsider our stock of govies with a good increase which is forecasted in 2022.
The commercial spread has been at a good level with respect to previous quarter, 1.76% as far as the asset spread is related, 1.13%, in terms of commercial spread, driven especially by the further reduction to -57 basis points of the Euribor. Let me anticipate that the sensitivity to a rate increase in Q4 2021 of 100 basis points was about EUR 430 million increase in NII. Page 16, net fees and commissions very strong, not only with respect to 2020, but also with a combined growth of 3.2% starting from 2019.
Year-on-year is almost 15% of growth, 19% related to asset under management, and 11% to commercial banking fees. Also the quarter was very sound with a total amount of EUR 485 million, 2.2% higher than Q3, especially driven by commercial banking commission, notably related to new lending, traditional banking activities, such payments, trade finance, and other related services. The investment product placement started at EUR 1.5 billion in January 2022. We are confident that we can reach our target for 2022, which are slightly higher of the total sales of 2021.
Let me also remind that in the full year of 2021, a very important part of the management of advisory fee growth was due to the running components, which are also the key item for growing to the pace of the strategic plan. In 2021, we grew of EUR 52 million year-on-year in running fees, which is higher of the pace embedded in our plan. At operating cost level, on page 17, as you can see, we have a combined reduction of 1.7% since 2019. Of course, there is a growth vis-a-vis 2020, in which we had a lot of extraordinary components.
Normalizing these components, we still have a reduction of almost 1% YoY. In terms of quarterly or quarter expenses, we have no major change. I would say just a slight increase, especially in general cost, also for the increase of oil and electricity bills. The head count, we are down to 20,400 people. The vast majority of the people involved in the early retirement scheme left the bank by end of the year. Of course, the positive effect of the savings related to this reduction will be due during 2022, in which we will have only due to these people leaving the bank a further reduction of EUR 80 million, partially compensated by increase in salary.
Some one-off that also in 2021 we got for the pandemic. Also the network is leading toward 1,300 branches. We are now at 1,427, and we expect with the growing digital, as I showed before, that we will be ready also for this target. On page 18, we have some focus about loan loss provision. Lots of numbers, I would say on a stated basis, we pass from 122 basis points- 81 basis points of cost of risk, 33% reduction, on an adjusted, we will be down to 63 basis points starting from 99 basis points. Adjusted basis is only related, excluding the provision upfront for the de-risking.
We also would like to communicate the core cost of risk, which is further down to 55 basis points if we do not consider also some non-core elements due to the tightening of stage two criteria and model change related to the increase of stage two, which passed from EUR 6.8 billion- EUR 11.7 billion. The migration rates are good. 1%, slightly below 1% default rate, 9% delinquency rate, and a record 20% workout rate, which include cure cancellation, write off, and recoveries. Some words also on moratoria on the bottom right side of the slide. As you know, since the first of January, moratoria completely expired.
As a matter of fact, we had EUR 2.2 billion still expiring end of January, in the sense that the installments were due by end of January, and we have very positive results, basically almost completely paid also, for this respect. We still have further EUR 1.3 billion, due by March and June, but with a very low default rate up to now, which is 1.5%. Let me also say that the total position still outstanding, which had the advantage to exploit the moratoria, are concentrated in the best rating classes for 83% of the total. On page 19, some figures related to the announced further de-risking. We think we can complete by the presentation of the first quarter, this transaction.
Of course, we don't know if the closing will be done by then, but for sure we will have some final figure. Let's anticipate that the total amount would be around EUR 1 billion, leading for the NPE from EUR 6.4 billion- EUR 5.4 billion, and with an NPE ratio from 5.6%- 4.8%, which occasionally is also the target that we had for 2024. Under EBA definition, with this transaction, we should go down to 3.7%. This also the further disposal, of course, are also considering the possibility to reduce furtherly the impact of calendar provisioning in 2022. On page 20, some consideration about liquidity, govies, and funding.
As you see, of course, the bank is in a very comfortable liquidity position. As I mentioned before, we have sold more than EUR 6.6 billion in the four quarters before the Q4 2021, and EUR 2.5 billion forward sales for 2022. Of course, this allowed us to capitalize some NFR in 2021, and some consistent NFR also in 2022. Most of them was very good timing due to the high spike in yield that we are experiencing during this week. Which will allow us to reinvest a large amount of about EUR 12 billion of govies during 2022. Of course, part of it has already been completed during these days.
Nowadays, we have 81% of the Italian govies portfolio concentrated under AFS, and we are below 50% of Italian govies in respect to the total govies portfolio. Let's also stress that the sensitivity of the basis point value of HTCS Italian govies is EUR 600,000 per basis point. In terms of funding, of course, due to the situation currently going on about the rates, we have not yet decided what we'll do with our TLTRO. Of course, initially, we had the intention to reimburse a good part of it by June this year.
We will carefully consider what to do, taking, you know, of course, trying to exploit all the opportunities to have also without the premium of 50 basis points, which will expire in June this year, the opportunity to a potentially good funding spread in relation to the investment opportunities that we will see in the market. In any case, we don't think that we have a major issue in terms of bonds issuing. We have already done, as you know, a Tier 2 issuance of EUR 400 million. We are left with more or less EUR 1.2 billion of senior unsecured. If we have the opportunity, if we see a good market opportunity also for an AT1 issuance of EUR 300 million.
On page 21, again, what we have done in terms of key achievement of ESG during the Q4 and these first months of 2022, I think I already mentioned all this item before. I leave these slides for you. Finally on page 22, there is the capital generation, the capital walk starting from 2020. As you can see also in 2021, we had to consider 95 basis points of regulatory headwinds, which brought basically our starting point to 12.3.
Thanks to the organic capital generation, both in terms of net profit and RWA reduction, and also considering the dividend distribution and AT1 coupons payment led, after some balance sheet management, to a comfortable 13.4 fully phased, which is 14.7 phased in. As you remember, the target is 14.4 for 2024. Again, we don't think there will be any material impact from Basel IV, thanks to the transformation of the DTA. On page 23, some consideration about shareholder remuneration. We know that is always an important issue for the market. We have presented our business plan beginning of November. We're the first bank to present our strategic plan.
Of course, we had ahead of us the fourth or the fifth wave of the COVID with the new Omicron, with some uncertainty about the pandemic. Now we can say that the confirmation of the positive macro that we are seeing during the last weeks and coupled with the industry trend and on our side, on the achievement of the strategic results which are leading to the target that we have for our plan, we think that all of that together with the consideration that we saw also from our competitors can give us further significant increase in shareholder remuneration.
We made just as a scenario the possibility to reduce for 2024, the Common Equity Tier 1 ratio from 12.5%- 13%, with still a very comfortable buffer from 400 basis points- 450 basis points. This will give us the opportunity to have a cumulative shareholder remuneration for EUR 2 billion with a payout of 70% for our shareholder. Again, this is, for the time being, just a scenario consideration, but we think that what we have already decide for this year can leave us the opportunity to reconsider in the future if we can still perform as well as we have done this year, and continuing exploiting the opportunity leading to the 2024 results. On page 24, just a quick recap.
Very good news, the possibility to have a better remuneration for our shareholder, higher than the guidance, thanks to the strengthening of core operating profitability. Thanks to the further improvement in NPE and the possibility to further de-risk in the bank in 2022. The good and sound capital position, but strengthened by the capital generation, we were able to build up year by year during these last five years. The over-delivering, of course, the guidance also in terms of net profit and EPS at EUR 0.38 versus EUR 0.35 that we announced last year.
Again, all the management team and our network has full confidence in achieving the results of our plan, and we feel these results can give us the opportunity to further increase shareholder remuneration over the plan horizon. Thank you, and I leave to your question.
Excuse me. This is the close for conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please use the handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Antonio Reale with Morgan Stanley. Please go ahead.
Good afternoon, everyone. It's Antonio from Morgan Stanley. A couple of questions from me, please. If I look at your journey, you've delivered large de-risking in NPEs over the years. You've also lowered your sensitivity to the sovereign book, and your capital is at 13.4%, and I don't think it's ever been higher. Today, you're increasing your dividend payouts from 40%-50%, all in cash. My question is how are you thinking about share buybacks from here going forward? I see you've talked about increasing to a 70% payout in a sensitivity scenario. Can you maybe talk about more on the assumptions behind that scenario? How much would rates need to increase for that scenario to materialize?
Just a general update on what we can expect going forward over the plan horizon without rates going up otherwise. That's my first question. My second question is about net interest income. With rates may go up in 2023, and then hopefully we won't need to worry about NII anymore. But until then, how should we think about your outlook for net interest income in 2022? There's lower TLTRO accrual, you've talked about it. It's a relatively large part of your balance sheet. Lower interest income from NPL sales. Can you give us a sense of what this could look like, or what this could do to your NII, this year?
Lastly, just if I may, if I see slide 19, you're showing two years ahead of your targets with respect to de-risking. You're going to be at an NPE ratio of 4.8% for the EUR 1 billion sale, which was your target for 2024. In 2024, you were also assuming a normalized cost of risk of 48 basis points. I'm wondering how should we think about cost of risk for this year? Thank you.
Thank you, Mr. Reale. Basically, again, we think it's a good evidence of the potentiality and possibility of the bank and on the capital strength to give the message of increasing after few months the payout from 40%- 50%. Of course, we live in the real world, so we have seen what the market is happy to expect from other competitors. We want just to make an example in which considering the lending point which in our opinion is acceptable, which is again 12.5%-13% of common equity and above 400 basis points of MDA, and of course, doing and performing our business plan, this could lead to an increase of shareholder remuneration. We didn't say...
Just to make an example, we introduce debt in a payout, but of course, I think somewhere, maybe the note is very well described that, in that case, we have not yet decided how to perform this capital distribution, if in terms of pay higher share payout rather than buyback. These are not yet consideration that we have done. We wanted just to give, I don't know, a comparison of the potentiality of the sensitivity lending to a very consistent and sound capital position. NII, difficult this year to give a guidance, not because I don't want to give, but you are looking at what's happening in the yield markets. For sure we will have a reduction of 50 basis points starting from July of TLTRO.
For sure, the starting point for govies is much lower than we had last year because, as I mentioned before, we have sold an important amount, but this give us also the opportunity to buy at higher yield. Let's say that I would take for sure the reduction of the 50 basis points of TLTRO. All the rest, frankly speaking, is under consideration. Again, also the potential reimbursement of almost half of the TLTRO that we had in program for the first maturity date in June this year is under consideration because we have to understand if there will be a difference between a good opportunity, funding opportunity, and on the other side, some investment opportunity.
Nowadays it's difficult to say how much this will lead in terms of NII. For sure the commercial banking activity will expect an increase in NII, both for a growth in volume, but in my opinion, also for a slight increase in margin. All in all, for sure some reduction vis-a-vis this year is difficult to say how much, depending, of course, on the investment opportunity that we will have. We have hands free. We have a very low position in govies, and we can build up again our portfolio. Last, the de-risking. Yes, we think we will basically be in since 2022 at the level expected in 2024.
This of course will bring to a normalized cost of risk. That's the reason why we were very transparent in announcing also the cost of risk this year in 2021, which was 55 basis points. Let's say that without further de-risking, we think this is the starting point, of course, for cost of risk.
Thank you, sir.
The next question is from Christian Carrese with Intermonte. Please go ahead.
Good morning. Thank you for taking my question. The first one on interest rates. You gave a sensitivity on net interest income. I was wondering what could happen if interest rates goes up in terms of fees, so the placement of investment products. Do you see any risk of lower risk appetite by clients? Should we look at net interest income together with the trading income? Because we saw that you reduced the trading portfolio at the end of the year, but maybe you're gonna rebuild the portfolio. I was wondering what is the size, the weight of Italian govies you could look at because you reduced year after year below 50% on total govies. Are you? You could go up again to 60.
I don't know if you can give us an idea. On cost of risk, you highlighted that you already reached on a pro forma basis 4.8% gross NPL ratio. That was the target for 2024. The EUR 1 billion disposal had been already provisioned, or there could be some, let's say, headwinds, in 2022. On the capital distribution, you set a 50% payout this year, higher than the guidance you gave just in November. We agree because the Common Equity Tier 1 at the end of 2024, the guidance was, at least to me, too high. I was wondering if you were to get the 50% guide payout of this year as a new minimum level for future payout.
In terms of buyback, this could be a 2023 story or maybe it could be. We could start already in 2022. Thank you.
Thank you, Mr. Carrese. A very good answer about the question about the combined effect of NII sensitivity vis-a-vis investment product sales. Of course, in the banking industry, everything is very much linked in the different aspect of revenues. Of course, as we say is a problem of a longer term because of course, if the NII increase is, as you know, 40 basis points, we have more than EUR 150 million and 100 basis points, EUR 430 million. I think we could replace a lower impact in potential investment product.
Again, for us, the important thing is not that much the revenues from investment product sales rather than increasing the stock of asset under management, so the net inflow, and this is our main guidance to increase of another 3.5-4 billion, taking advantage from the deposit. Of course, it will be a bit more difficult to reach the target if interest rate goes up in a sensible way. Again, on the other side, we will have also an advantage in terms of NII, which is not a problem in my view.
Italian govies, yes, we are now 49%, but of course we have always had the guidance between 50% and 60%, so there is room to not only reconstitute the disposal we have done, but also to buy something more, even though in our program, there is always the idea to stay 50/50 on Italian and international govies, European govies, basically. Yes, the EUR 1 billion of further derisking is basically, I would say, materially already provisioned. Of course, the transaction have not yet concluded, otherwise I would have announced it.
Under IFRS 9, we have already provisioned what we think is necessary for the massive disposal we have in mind, for which we have something in the region of EUR 700 million. The rest would be single name disposal that we think can be done in a few months. Normally when we do single names, of course, there is no further need for provisioning. Capital distribution, I would say, is not a change of our business plan, which was only done two months ago, but is, I would say, a sort of guidance in which we want to stress that the opportunity to maintain a sound capital level is now quite clear for us.
If we are able to remain at that level and to increase further the capital through capital generation, both from stability and from capital management, we will be able to perform better in terms of shareholder remuneration. Last one, the buyback. Frankly speaking, we didn't think yet to buy back. We are happy to say that there is more room to increase to increase the shareholder remuneration. We will consider from time to time the situation of capital and decide what we can do in the next months or maybe during the plan horizon, for sure.
Thank you.
Thank you. Roberto Giancarlo Peronaglio speaking. Sorry, before leaving the floor for another question, let me remind you of the importance that we have only two questions first, because we have a lot of analysts that already booked the, we have a long list of analysts. I ask you to have two questions, and maybe if there is room, I will go further at the end of the questions of the other analysts. Thanks.
The next question is from Fabrizio Bernardi with Bestinver. Please go ahead.
Hi, everybody. I just have one very fast question, I think. If I look at the P&L of the full year, but also the one of the fourth quarter, you have at the end, the 11 basis points of cost of risk stated, of which 26 are, let's say, non-core, so probably one-off. There is also a massive fair value adjustment on fixed asset of EUR 140 million. A lot of business, maybe the last one that we see this. In any case, my point is that the 2022 P&L could be extremely rich if we have a focus on core provisions, maybe the lack of this kind of fair value adjustment.
The question is, if you can maybe give us an update about the EPS target that you may consider as correct for 2022. If you're confident about that, obviously. Thank you.
We are confident of course, but as you know, we gave some guidance very precise on 2023 and 2024. We normally don't give immediately beginning of the year some guidance about the year under review. Of course this year is not that difficult. Of course there will be something in between the roadmap that we have toward the 2023 results. As you rightly were mentioning, the vast majority of the gap could be filled through lower provisioning. Which we feel is in our possibility because again, this year was very good in these terms. We started very good also January, beginning of February.
Let's say that the increase in net profit can come from the very regular, growing figure that you see in core revenues and total revenues coupled with some potential benefit coming from the reduction of cost of risk. The greater the reduction, the better the net profit. It is quite straightforward. It is a bit difficult nowadays to give you a more precise guidance. We are optimistic that we are heading toward the results of the plan.
Sorry, if I can ask my second question very, very quickly. Do you have any update, Giuseppe, in terms of M&A call about what can happen in the next few months? We have seen Carige has probably gone to BPER. There is another former cooperative bank that now is a joint stock, so maybe they can be ready for a deal. Is Atlante accelerating or do you think the situation in a sort of a standby mode?
As you know, we were very active on this field one year ago. Nowadays, we are very much more concentrated on our figures, and we are trying to perform a very satisfying, I would say, business plan. This is our real target now. We don't see right now opportunity for other merger for as far as we are concerned, but we are very much concentrated on trying to perform good result and sustain our stock price, which we feel is still underpriced vis-à-vis the results that we are performing.
The next question is from Azzurra Guelfi with Citi. Please go ahead.
Hi, good evening. Two questions from me. One is on your preference for allocating capital. In the past it's been de-risking, and you just said that you are now more focused on your plan than on M&A. The switch towards more favorable capital return is a result of the macro but also the M&A and growth option, and could this revert if stock, if you want to rerate in the future and there is opportunity coming on the M&A? The second one is on cost guidance. Can you give us some sensitivity around the inflation on your cost base? Thank you.
Thank you, Azzurra. I'm not sure I understood the first question, but I think you were mentioning if we have a better price to book, we could consider M&A. Is this the question?
It's basically like you have changed, if you want, your approach to M&A, and now you are talking about more openness about capital return. Are the two things linked? Could they revert if there are opportunity coming up?
Yeah, of course, I think it's very clear that the bank is more rewarding for everybody if things go well. The stock would mean that we will be appreciated, our results and our core forecasts will be in line with market expectation. This of course gives us also more confidence to be in line with a potential better remuneration. We have, in any case, this opportunity because what counts again is the Common Equity Tier 1, not the market cap. Of course, a sounder market cap would give us and I think the market and the stakeholders more confidence about a remuneration policy higher than what we have done up to now. Vis-à-vis the inflation, we have a sensitivity which is very low.
It should be in the region of EUR 6 million for each 1 percentage point raise. So it's not really material. In terms of guidance, again, I mentioned the reduction in personnel cost, which will come from the early retirement scheme. Of course, we have reviewed a bit the general cost because you know that this problem of the energy cost and general expense is growing, which will also in IT investment impact a bit the cost of the bank. But nothing material, frankly speaking. All in all, of course, there will be a reduction in cost.
The next question is from Domenico Santoro with HSBC. Please go ahead.
Hi there. Thank you for the presentation. A couple, one very quick. Is my understanding correct that at the moment you have a positive variance on the NII, given the yields, sovereign yields, the way they move? I mean, to me it looks quite significant. I'm not sure whether you will confirm this, given that you're willing to rebuild a little bit of sovereign. On the other side, a negative instead on the cost, also understanding the answer that you gave to the colleague before. If you can also give a guidance on 2022 costs, it will be great. The second is on the NII sensitivity. I don't remember being so huge, actually, 20% of the NII is quite a surprise, positively of course.
Is it because what has changed compared to the guidance that you gave in the past? Is that because you assume now that also the reserve at ECB will be taxed at a lower rate, or because you don't have any more macro hedging on deposits, or what's the main, you know, strength point? Thank you.
Hello, Mr. Santoro. Yes, as far as the first question about NII, yes, of course, as you know, the sensitivity, which is part of the third question, is very good news for us. There is a considerable increase if interest rates go up. Of course, we are referring to the short terms, the Euro short term rates. In terms of yield on govies, of course, also could be good news because again, we have to invest quite a few because we have sold EUR 8 billion during the last months, so we have the opportunity to rebuild our govies portfolio. The increase in interest rate give us the opportunity to choose the best strategy. I don't think the NII consideration changed a lot.
If I am having a look at the figure that over the last year, and we are at the same level basically since January 2021. In the last year, basically there are EUR 10 million more or less of the figure that we give today. Finally, on cost, I already said that there will be some reduction, I would say EUR 40-50 million in terms of personnel and some top up of EUR 10-15 million in terms of general cost.
Thank you.
The next question is from Giovanni Razzoli with Deutsche Bank. Please ask.
Good afternoon. Two questions and if you can clarify or elaborate, sorry, what you mentioned about the potential for the, you know, theoretical exercise on the capital. I miss your comment there in at the end of the plan. My first question is actually on the Superbonus. Can you share with us what are the volumes that you have acquired as of the end of 2021? Do you think that there could be impacts on the EUR 3.3 billion-EUR 3.5 billion volumes target in 2023 from the stop and go that the government is introducing on this measure?
If I remember correctly, you have an estimate in the plan of EUR 350 million accumulated revenues out of these credits, clearly spread over a 10-year horizon. I was wondering whether this can impact also the 2022, this stop and go by the government. The second question, can you share with us what is the amount of upfront fees that you've booked in the Q4? Thank you.
Good evening, Mr. Razzoli. Starting from the first one, capital return. If you are referring to the slides related to the potential increase of the capital remuneration, which is 23, I was saying that we just exercise some sensitivity leading to a floor of capital, both in terms of Common Equity Tier 1 between 12.5 and 13, and in terms of MDA buffer between 400 and 450 basis points. Having said that, if we are able to perform as we are quite convinced to do, achieve the figure of our business plan, we should be able to generate capital cumulative shareholder remuneration, which is consistently higher than the 40% that we have mentioned in our business plan.
Which of course was leading to a 14.4% of common equity. This would be equal to something like 70% of payout. But we say that it's not given that this will be the payout right now, neither that will be only payout and not a mix of buyback and payout. In terms of upfront fees, Q4 was of course, as I mentioned before, better in running fees rather than upfront. Q4 is always a bit lower than the others, was slightly above EUR 50 million vis-à-vis EUR 64 million in Q3. The Superbonus impact. No, I mean, you want to know mostly how much we have. I think we have engaged...
First of all, let me say that we are quite confident and very comfortable with the engagement we have done, both the one we have already performed and the one we are due to perform. We have only given a temporary stop to the retail acquisition of Superbonus because we had the double process. We had our partner to buy the first time, and then we were buying monthly, month by month, the full amount concerned. Nowadays, it's impossible, as you know, to perform this way, so we are arranging our operation in order to buy directly from the retailer this amount, and we think as of February, we can restart to buy normally as we did up to now.
The engagement that we have are in the region of EUR 3 billion, which already contractualized, already sold, already bought EUR 900 million, a bit lower than EUR 1 billion.
The next question is from Andrea Vercellone with Exane BNP Paribas . Please go ahead.
Good evening. I have the same question that was already asked by Santoro because I agree with what he said that the sensitivity was very different in the annual report of 2020. If I'm not mistaken, and the hit was around EUR 280 million, not EUR 430 million. It had already changed in H1 in current results in H1. You told us it's been the same for a number of months. What we want to understand is what changed versus last year in terms of the assumptions you're making because the assets and liabilities they can't have changed that much in the meantime. I would have the same question. The second question is on your bond portfolio.
Can you share with us, what is the average yield that, your bond portfolio currently carries? Thank you.
I'm sorry that you have a different figure. Frankly speaking, I have all the figures, about month by month, starting from December 2020 right now. Of course, we have also previous figures, but not immediately available here. Maybe the difference is that normally we talk about 40 basis points sensitivity and not 100 basis points. I'm sure this could be what is the major difference that you have. Frankly speaking, I have a consistency month by month on the 40 basis points basis, frankly speaking. The only thing I can imagine can have some impact is that the vast majority of lending is now at fixed rate. Meanwhile, of course, we have floating rates on deposit.
I don't know if this is the that can bring to the difference in your experiences. We will be more precise, if you want, with our IR, but we are available to give you month by month all the historic figures. Just a minute. They are giving me, my colleagues are giving me the yield, the average yield. It's 110 basis points on the covered portfolio.
Thank you.
Thank you.
The next question is from Adele Palama with UBS. Please go ahead.
Hi, good evening. Two questions from me. One is, if you can tell us, which are the various moving parts that are affecting the CET1 capital and the RWA quarter-on-quarter. Then on fees, I mean, in the last four quarters, those greatly beat your guidance of quarterly EUR 750 million fees. I was wondering, what is, like, the guidance, the quarterly guidance for fees that you are expecting in 2022. Thank you.
Let me start from the second one. If I understood, it's the guidance on the fees, we should experience an increase of around 3%, which should be something like EUR 60 million of increase in commission. On the RWA quarter-on-quarter, we are just recovering the data. Just a few seconds. Hi, this is Edoardo Ginevra. Just the key components are synthetic securitization that we performed in the final part of this year led to a reduction of RWA on one hand. On the other hand, we have factored only in the last quarter the increase in the payout in the dividend, which of course matured over the total 12 months, while until the third quarter we have adopted a more conservative assumption.
These are the most important counterbalancing forces.
Okay. Thank you.
The next question is from Luigi De Bellis with Equita. Please go ahead.
Hi, everybody. Just a quick question regarding the reduction in Italian BTP govies. I was wondering, which is the amount of the unrealized gain on Italian BTP after the latest reduction? Thank you.
Of course, the reserves are now in a negative territory. I think it's something like 20 basis points in terms of common equity, making the difference between the positive that we had in December and the current situation. Meanwhile, of course, we have realized that we are going to realize something like EUR 100 million.
In the first month.
Yeah, in the first 40 days, of course.
Okay. Thank you.
The next question is from Marco Nicolai with Jefferies. Please go ahead.
Hi. Thanks for taking my question. The first one is on the insurance. You mentioned before the possibility to anticipate to 2022 the integration of BPM Vita. What's your updated thinking on the early exercise of this option versus your initial targets that were envisaging the buyback of insurance only from beginning 2024? A question on the equity-related line. Can you give us an idea about the underlying trends? I understand that you had a non-recurring item there this quarter, but can you give us some color on the consumer unit, consumer credit unit, and maybe also about the insurance, and any outlook here for 2022? Thank you.
Thank you for the question, Mr. Nicolai. Unfortunately, I think that the insurance aspect of our plan is a bit underconsidered. We are focused very much on realizing as soon as possible this opportunity, because as you would remember from the plan, it will produce a very consistent return for the bank, especially considering that it's not consuming equity capital. We run since the last quarter of 2021 in trying to understand the different aspect, starting from regulatory to operational to commercial.
We have seen that after three or four months of work that there is the opportunity where there is the possibility, of course, and this is only for BPM Vita, for the Covéa business, insurance joint venture, to maybe anticipate the timing that we in the first time postponed to first part of 2023 to 2022. Even maybe the first half of 2022 in terms, of course, of authorization. This is because, of course, we want to be as soon as possible full in place on the driving seat and we are growing in experiencing this bank insurance business very soon.
We are, of course, taking on board new people for this business and the opportunity to anticipate revenues and experience in order to be very ready in 2023 to make the bigger integration with Vera Vita is, in our opinion, a very good opportunity, which doesn't basically needs capital, but give us some potential return before what we expected. This is something that if we will be able to perform all the duties due by the regulation and getting all the authorization will be something that we would like to anticipate. Associates. This was a very good year for many aspects. Both, maybe only the bancassurance was not that good and will be for sure better starting from 2022.
Both Agos and Anima performed very well. As you know, in our balance sheet in the Q4 there is no contribution of Anima Q4. They closed the balance sheet beginning of March, so we will have only the Q1, the results of the Q4 of Anima, which of course, as you can expect, is a very good quarter, we feel because of the performance fee, as much as all the other asset management company. In terms of Agos, from one side, maybe you have seen that we are reducing and having a run out of our previous consumer company. On the other side, 2022 started very aggressively in terms of consumer finance. Agos is performing very well.
Our network is increasing a lot, the sales of consumer finance, so we are very positive, of course, also in Agos. Of course, Agos also had an extraordinary contribution in Q4 2021 for around EUR 40 million due to the realignment of the fiscal value to the accounting value of the goodwill. All in all, we feel that apart from this EUR 40 million, there could be a very good year also for 2022.
Thank you.
Mr. Castagna, there are no more questions registered at this time.
Okay. Thank you, everybody. I think it was a very interesting meeting, and I hope to see you in the next few days for further information about Q4 results and current situation. Thank you and good night.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.