Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Q1 2021 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 *0 on their telephone. At this time, I would like to turn the conference over to Mr. Roberto Peronaglio, Investor Relations Manager of Banco BPM. Please go ahead, sir.
Thank you. Thank you, everybody, to be here this evening with us for the presentation of our results, after a long day of results presented by some other banks. Before leaving the field to Mr. Castagna, let me remind that you can find the presentation on our website in the page Investor Relations, and then the Q&A section is reserved to financial analysts. Now I leave the floor to Mr. Castagna. Thank you.
Thank you, Roberto. Thank you to all of you. I know it's been a long day for most of you, being in the third conference call in the day. I will try to be as quick as possible, even though, frankly speaking, we are very happy to discuss with you and to present to you the excellent performance we have done in Q1 this year. I would say that it was something that we were expecting, of course, considering a pandemic situation, which is luckily enough, going down in terms of economic effect. We think the Q1 this year shows a clear roadmap for our future, in line with what we expected also last year in the presentation of the business plan. Let me go into some detail.
On page 5 , we have highlighted some strong operative performance, both in terms of volumes with 5.6% of growth in net performing loans up to EUR 99.2 billion. Current account up 13% to EUR 101.7 billion. Eventually also asset under management, an increase of 13% up to EUR 61.3 billion, with EUR 1 billion almost in net inflow. Core revenues are up to EUR 968 million, which is +6% year-on-year, and is the best ever result since three years to now. Driven, of course, by an excellent performance of the net commission, up 7% year-on-year. Pre-tax profit to EUR 259 million, which represents 150% higher year-on-year. The net income stands at EUR 100 million, with an adjusted net income to EUR 151 million. This come from another action we have done under the de-risking strategy of the bank.
We have increased the NPE disposal strategy from the EUR 900 million expected end of 2020 to EUR 1.65 billion, which we have front-loaded in Q1 this year. This is the consequence of a new structure we are developing in order to deploy in Q2, a disposal of EUR 1.5 billion of bad loans. We will discuss ahead of this new transaction. After that, the gross NPE ratio will go down to 6.3%, basically 5.3% if we consider the EBA transparency exercise. Also, the common equity Tier 1, which we know would have been impacted by headwind coming from the AIRB model updating, has been better than we expected, standing at 12.7%, well higher of what we expect in our guidance. Also, MDA buffer fully loaded is 377 basis points.
All this not with a strong input coming from the digital evolution of our bank, which allow us not only to close another 300 branch by Q2 this year, which we confirm, which bring the total disposal of branch since the merger to more than 1,000 branch out of 2,500 branch. We will also give you some insight about our ESG strategy, fully integrated in our business model. Some figure on page six, net interest income basically up almost 5% year-on-year, -2% Q&Q. Let's remember that most of this reduction is due to the two days left Q1 2021 versus Q4 2020. Net commission up 7% year-on-year, almost 10% quarter-on-quarter. Total revenues are 18% up year-on-year, 7% up quarter-on-quarter.
Let me say that again, EUR 130 million of the total revenues performance is what we expected when we deployed last year our business plan for 2023. Pre-provision income stands at EUR 484 million, up 51% year-on-year and 7% Q-on-Q. On loan loss provisioning, due to the new transaction we will deploy next quarter, we have increased our provision up to EUR 217 million, with almost EUR 75 million dedicated to increase the IFRS 9 projection due to the global disposal. The pre-tax profit, again, to EUR 259 million, up 150% year-on-year. Let me remind that also cost income went down to 57% versus 64% year-on-year and below 60% full year 2020. Some numbers on page 7 about the volume. Some of that already I mentioned before, I wouldn't expand on that.
Let me say only about the gross NPL ratio. We have been down in one year 250 basis points, leading to 6.3, which is the adjusted after the NPL disposal in Q2. We already talked about the common equity tier 1 ratio being basically at the same level one year ago, only 60 basis points below Q4, notwithstanding 85 basis points of regulatory headwinds. Some detail about this new disposal. We have again front-loaded basically in Q1 the additional provision for almost EUR 75 million in order to accelerate the execution in Q2 of a new project, which we call Project Rockets, of EUR 1.5 billion of bad loans, which will include 3,500 positions for which we have already completed the due diligence.
We are going to finalize in the next days the capital structure with the consequent sale of the portfolio to an SPV, the issuance of senior mezzanine and junior notes, and of course, the disposal of mezzanine and junior to third parties to be completed again by Q2 this year. Of course, we are working with the understanding that the GACS would be extended, but of course, this transaction will go ahead even though there would not be an extension of the GACS, which we think in any case will come very soon. After this transaction, the stock of bad loans will go down to EUR 2.1 billion gross, and the gross bad loan ratio down to 1.8%. Best ever, of course, for our bank. I would say even better that BPM alone before the merger of the two banks.
Some details about the digital banking on page nine, because we can confirm that basically we are going to entail in our business model all the digital banking opportunities, which allow us again to sharpen and to make more efficient our branch network without suffering in terms of revenues, as you have seen with the figure we showed to you. We have done this through new digital customer experience with a new app, a new internet banking, both for individuals and corporate customers.
With the completion of digital identity will be completed by H2 this year, which will allow us to be completely paperless, pushing on remote advisory offering, thanks also to the COVID experience, which allow us to be more confident also vis-à-vis our client in being more able to selling products and to propose investment products to our client.
Of course, utilizing even more advanced analytics in order to implement new digital and omnichannel and sales solution. The results for this year was the increase of the share of active digital users from 44% to 49%. Our target will be to reach 65%, which is even better of the European average. The same for the share of remote transaction, which increased from 80% to 85%, which they aim to reach 90%. The share of active mobile users, which grew 10% from 53% to 63%, and which will lead us to more than 75% in line with average EU.
Some detail on page 10 about our ESG strategic approach. We are developing a fully integrated sustainability in our business model. We have a full deployed action plan with more than 32 projects, with 15 units of the bank involved, more than 50 people working a full day on that.
We are working on different aspects, of course, on governance, where we are strengthening the internal control in this ICR and Sustainability Committee, with a board member as ESG referent, with incentive scheme strengthened with ESG KPIs. Of course, also pushing on integrating climate-related and environmental topics within the risk and the lending processes. We are also offering to our clients, both in the lending side and in the investment side, more and more ESG-compliant products. I will give you some example immediately. Of course, we are committed to further reduce the environmental impact. Starting from this, we are already 100% energy users from renewable sources, and we aim to be carbon neutral by 2023. Let me also share with you some other main initiative we are developing. EUR 5 billion of platform for our corporate clients for ESG investment.
For our retail clients, products for energy efficiencies, like Superbonus, completely digital. Green mortgages started during this period, which allow private individuals to get better rates if they can prove to have an energy efficiency mortgage label. Let's go to some figure. On page 12, you will see the key P&L highlights. Net interest income, again, basically in line with Q4 2020. Let me remember that still we don't have the effect of the drawing of the last EUR 10 billion of TLTRO, which we did the final week of March. That will come to be effective by Q2. Net fees and commission, a strong increase, I have to say sustainable.
Also, April has been on average of the results of the Q1 , the first week of May is doing very well. NFR, very good, in line with what we expected. Already reached half of the result of the full year expectation. Very good revenues also coming from our shareholdings, stakeholders in Agos, bancassurance, and Anima investment. All in all, again, total revenues up to EUR 128 million, very much higher both of Q4 2020 and Q1 2020. Operating cost slightly higher than Q1 2020, which is really the only reference we can have. You know that Q4 was very much impacted by different measure we had due to the COVID.
We will go further to give you some of other details. Leading to pre-provision income of almost EUR 485 million, which is 51% more year- on- year. We already discussed about prudent approach to loan loss provision, uploading some consistent upfront, leading to a pre-tax profit of EUR 259 million, which is 150% more than Q1 2020. Meanwhile, we had a loss in Q4 2020.
After tax systemic charge and fair value liabilities, which Q1 2021 is negative. Q1 2020, you can remember, was positive due to the worst bank cost for consideration for fair value. We have a final result of EUR 100 million, again, with adjusted lead to EUR 551 million. Page 13, we gave some figure in order to see how strong is the impact of this quarter also vis-à-vis the pre-COVID results of the bank. In line as far as the net interest income is concerned, we know that more will come thanks to the TLTRO in the next quarter. There is a strong increase in net fees and commission. You see EUR 471 million vis-à-vis EUR 448 million before COVID.
This comes from a strong performance of our network in investment product placement, which you can remember was the base of our strong increase of our business plan, which in fact led us to more than EUR 5.4 billion of product placement, EUR 2 billion more than pre-COVID experience. Some detail on page 14 about NII. We already said that there is a slight reduction vis-a-vis Q4. There is a 5% increase vis-a-vis Q1. You have the detail of the day effect, which is negative. The commercial banking performance is better. It is in line, but is better EUR 1 million. Of course, there is a small contribution for the last days in which we utilized the EUR 10 million more of TLTRO. Another good news is the capability to keep to 180 basis point.
The commercial spread you see is basically in line with Q4 and Q3 last year, even better than Q2. This is thanks to a very good effort in having a good margin also on the loans granted, having guarantee from the state. Of course, the increase is offset by the negative impact of the liability spread that, due to the Euribor going down, is - 63 in Q1 2021, 22 basis points lower than Q2 2020. On page 15, there is the new lending activity in line with Q1 2020. Basically, it's exactly the same results for corporate and enterprises. Meanwhile, we have almost 80% of increase in terms of residential mortgages, which grew to EUR 1 billion versus EUR 600 million in Q1 2020. The total results is shared basically half and half between COVID-19 measures and ordinary business.
Let me stress that the opportunity of the COVID measures allow us to devote the ordinary business to the best class client. 93% of this business has been granted to the best-rated clients. In terms of spread, again, on the right-hand side of the slide, you see how both in second half of 2020 and also in Q1 2021, we have an increase between the inflow spread of new loans and the outflow of the reimbursed one. The same attitude is going to continue also in Q2. On the left bottom side, you see the evolution of the state guarantee lending.
In December, we stand at EUR 10 billion. We had almost EUR 3 billion, up to EUR 13 billion in Q1. We still have almost EUR 3 billion to be granted, for which we have already requested in place, and for most of them, already approved by our credit department. Let also me add that as far as the TLTRO net lending targets, we have already overcome by EUR 7 billion the first period observation, which ended exactly March 21, up EUR 7 billion what was expected. We have for the second observation period, which will end in December, we have EUR 2 billion more than what is expected.
On page 16, some figure about the moratoria. We started with EUR 16 billion. In March, we were down to EUR 11 billion of outstanding, so down 30%. Out of this reduction, which amount to EUR 4.2 billion, only 0.9% is the default rate. During April, we had another EUR 1 billion expired. The total moratoria now is down to EUR 10.3 billion. Let me say that out of the moratoria, 82% of debt are for low and medium risk client, 11% for mid-high risk, and only 7% for high risk client.
We are continuing our campaigning to understand the situation of our client with a strong early engagement campaign, detecting not only the mid-high risk and the high-risk client, but also the sector more impacted, and also the early warning indicator for all the performing portfolio. After at this stage, of course, is not yet fully completed, but we can confirm that 84% of our moratoria client do not envisage any problem to restart payment. Only 16% asked us some support in terms of new moratoria or new state guarantee loan, and only 0.5% we deem will suffer difficulties to restart payment. Very much in line with the experience we have had up to now. On page 17, net fees and commission. We already gave you the total number.
You can see that the increase is both year-over-year on the management and advisory side, and also on the commercial banking fees, split in EUR 239 for invest management and EUR 232 for the commercial banking. You see that there's also an increasing trend on the right side of the page. Monthly trend is EUR 151 million in January, EUR 147 million in February, EUR 172 million up in March. On the right bottom of the page, you see also the quarterly pace of our investment placement product, up to EUR 5.4 billion vis-à-vis the previous quarter, all in the region of EUR 3- point- something billion, apart from Q2, which was very much impacted by the COVID at EUR 2.4 billion.
I have to say that also April, as I was mentioning before, performed basically in line with the previous months. If we consider two days less, due to the April calendar, and also the extraordinary effort for the placement of EUR 300 million, which are going to be added to the EUR 1.5 billion for the BTP Futura, for which also Banca Akros was a global coordinator. Operating cost. The main aspect I already mentioned in terms of personnel, basically, we are in line with the Q1 2020. The difference is due to the collective labor agreement increase this year versus last year. Of course, you cannot compare to Q4 because of the main reduction we experienced during all 2020. We already gave you some guidance that the total cost, of course, will go up vis-à-vis 2020.
Of course, this number does not take into account the impact that we will start to experience from the second part of this year, which is the consequence of the early retirement scheme that we have already announced for 1,500 people in Q4. We can now say that this amount of people has been increased to 1,600 people, not needing, of course, any further provision. Taking place in what we have already provisioned in Q4, but that will give us some more savings in the years to come. The retirement will affect 1,100 people by June 2021, another 200 people by December 2021, and other 300 people, basically up and up between June and December 2022. One year before the potentiality of the plan, which is extended to 2023.
Just to give you some detail about the economic impact of this retirement scheme, we will benefit from the cost of personnel in 2021 for EUR 42 million, in 2022 for EUR 109 million, and in 2023 for EUR 135 million, due, of course, to the different phasing of the exit of the personnel. On page 19, we have some figure about liquidity and funding. Of course, as you can imagine, we had never such a strong situation in liquidity and funding. LCR more than 200%, NSFR well above 100%, unencumbered eligible securities for EUR 16 billion, now again to almost EUR 19 billion, after utilizing EUR 10 billion more of TLTRO up to EUR 37.5 billion.
As I mentioned, the effect of this EUR 10 billion will be seen in the next three quarter, as far as 2021 is related, and will amount to almost EUR 75 million. The bond outstanding stand at EUR 18 billion. In Q1, we only had the EUR 8,400 million issue. We don't see, of course, any need to rush in other issuing. Everything will be done in the second part of the year, but only with taking in mind regulatory, let's say, rating agency expectation for our bank. Some word about the securities portfolio, which performed very well. We take some EUR 65 million of revenues out of the trading on our Govt portfolio.
Of course, we have also experienced some reduction in the reserve amounting to almost EUR 90 million in HTCS and almost EUR 140 million as far as LTRO maturity. On page 20, some further details on that. We have increased after the drawing of TLTRO, some HTCS investment, both EUR 2 billion in Italian Govt, EUR 2 billion in non-Italian Govt, increasing only of 2.5 year, the bank book duration from two year Q4 2020.
On page 21, the evolution of both stock of NPE and the coverage. As far as the stock is concerned, after the Project Rockets, we are down to EUR 7.2 billion, basically EUR 2 billion of bad loans and almost EUR 5 billion of UTP, down 27% year- on- year and 16% in Q1. We started the merger with more than EUR 30 billion of NPE stock. Migration rates, quite good rates. In default rates, 1.3% down to 1% if we excluded the one-off first time application of the DoD. Danger rate also very much below what was our forecast, 8.2%. Of course, also the cure rate is experiencing some performance lower than the previous year due to the difficulties in having agreement under the moratoria period.
About coverage, we are at the highest level ever, 62% of bad loans, which is 68% if we consider write-off, 43% UTP, and almost 51% total NPE. Of course, these figure include IFRS 9, which again will be utilized for the disposal. If you consider IFRS 9, the percentage I mentioned will go down to 57% for bad loans and to 48% for total NPE. Some detail again about the NPE ratio. We already mentioned, which is going down to 6.3%, 5.3% with EBA definition. We have also some detail on the cost of risk drivers. We have split basically half and half, 40 basis point each. The core drivers, so the normal cost of risk we would have experienced, and increase provision we have done for basically two reason.
One was already explained for the Project Rockets of EUR 1.5 billion disposal. The other one is the change in methodology for Stage 2. We decided to increase the Stage 2 bucket, which grew from EUR 7.2 billion to EUR 9.7 billion, including in Stage 2, basically the measure under moratoria, mid-risk and the risk, as well as for tourism and restaurants, also the mid-risk in moratoria. Basically, we were very cautious and prudent in extending the Stage 2, which amounted for some provision in the region of EUR 45 million. Last page of numbers. Capital adequacy 12.9% Q1 2020, 13.3% last year, to which we have to deduct 85 basis points with an impact both in RWA and NPE shortfall due to the regulatory headwinds. We will come immediately back to that.
On the other side, we have a benefit of 28 basis points coming from the performance, including also some benefit from the shortfall in the performance. The reserves from Govt down 19 basis points, offset by the ordinary RWA gaining for the same 19 basis points, mostly coming from the guarantee scheme. All in all, we ended up with 12.7% and 13.7% phase in. Let me spend just some words about the 85 basis points. This was a figure which was very uncertain, and frankly speaking, we would have expected something better due to the massive de-risking we have done during these three years.
Unfortunately, we had add-on related both to the PD and to the LGD, which, of course, we deem could be revised as soon as we can have a final approval of the remedial action. Up to now, unfortunately, I'm giving us some backward on the common equity Tier 1. In any case, very well offset by the good news we have brought to you. On page 25, just to conclude, very solid, strong operating performance, which we deem is consistent with the next quarter. In particular, within the next quarter, we will benefit of a better NII. We hope that we can be able to perform a consistent fee and commission in line with our expectation.
Of course, this will bring to a very good profitability. In terms, of course, of asset quality, we don't envisage any other massive disposal by this year. We will, of course, work on single asset, especially UTP single asset. The capital position is well above our guidance. Again, we will continue to strengthen the capability of the bank to develop digital banking, fully compliant with the ESG guidance. Thank you. I have terminated. I will leave the floor to your question.
The first question comes from Christian Carrese of Intermonte. Please go ahead, sir.
Hi. Good evening. Thank you for the presentation. I have few question. First of all, on the top line, in particular on net interest income. I was wondering, looking at the growth of the deposits, plus EUR 18 billion year-on-year, I was wondering if you are taking into account the possibility to do some charges to offset the negative carry from that growth of deposits. In terms of loans growth, if you can give us a guidance. We saw on the core loans to customer grew by 5.6% year-on-year. What do you expect for the full year, in particular the second half of the year? Do you expect an acceleration? In terms of overall net interest income, looking also to the financial portfolio. You did some disposal in the quarter.
I see that the commercial banking is giving a positive contribution to net interest income, so I was wondering if you think that you are planning additional disposal of a part of the financial portfolio in the coming quarters as you did the first one. Finally, still on net interest income, just a clarification on the sensitivity you presented in the presentation. I think slide 14. The increase from EUR 100 million to EUR 180 million for each 40 basis points interest rate increase. Why is this increase quarter-on-quarter of the sensitivity?
The second question is on fees. A very good quarter, EUR 5.4 billion placement of new products. Could you give us an idea of what you got in your budget in mind for the full year, I mean, on a quarterly base? The last two question, one on common equity Tier 1, 85 basis points headwinds. If I'm not mistaken, you talked in the past of a potential 100 basis points headwinds on capital. Just to understand if the Q1 impact is the entire impact for the full year or not.
Finally, on M&A. Now the CEO of BPER and UniCredit are in place, so I was wondering if you can give us an update, and how do you judge the move by the government to improve the rule on DTA in terms of amount and also in terms of postponement to June 2022? Thank you.
Thank you. Congratulations for saying that the second question was the fees, because on NII there were many questions, but I will be happy to give you some answers. Yes, on the deposit, we have already launched. Of course, you know that we have done some increase in the current account fees starting from January 2021, which is going to give us a boost of almost EUR 40 million for the full year, the share of which is already in the Q1. Meanwhile, all the measures we have already launched to be deployed in the second part of the year will be related to corporate clients. Let me say two things.
First of all, we are going to charge growing fees related to the deposit increase to our enterprise and corporates in order at least to offset the negative impact on NII. I also give you some answer about loans guidance. I think that in second part of the year, with the possible deployment of the new measure from the government, and of course, also the NextGenerationEU plan, there will be some reduction in deposit. Let me say that out of the increase of current account, almost 60% is out of corporate clients. There is a lot of possibility to see a strong decrease in the second part of the year.
If we don't see this decrease, there is already a maneuver which will charge corporates in the second half. Loans, again, just some more evidence. We think that the pace we have done in the Q1 will be basically the pace for the full year, with some change, of course, more state guarantee loans and ordinary business. In Q2, we still have some reserve.
I mentioned almost EUR 3 billion to come in state guarantee loans. We think that we can repeat the performance of Q2, even though the ordinary business is going slow. Meanwhile, I think that in Q3 and Q4, we could experience an increase in the investment of our client, and so in utilizing more credit line. Financial portfolio, we will be very opportunistic. We think we have done a good results up to now. It's possible to have further disposal in the Q2 and Q3 , with some more capital gain, of course, but not at the level of what we have in the Q1. We will see the situation, how will evolve. NII sensitivity. Basically, I think a lot of the increase from EUR 100 million to EUR 180 million comes from the TLTRO.
Of course, we have a fixed income from the TLTRO. Then, of course, the loans can be at variable rates, so this will make an impact of such a difference. Fees is very much above our expectation. As I mentioned in the slide related to the fees, we had an average of EUR 3- point- something billion in 2020, but the same basically was also in 2019. Meanwhile, we are expecting almost EUR 4 billion for each quarter this year. We are over-performing also our expectation.
Of course, again, April and May are doing very well, and hopefully we can do better than our expectation. 85 basis points. Yes, there is some more tenths of basis points possibly coming from the up-to-date of the statistical series by the year-end as well as the look-through application, which could bring all in all 20-25 basis points.
Last but not least, government measure. Of course, we are happy of the extension of the moratoria. We think that is good for our clients. We think we can start continue to talk with them in order to understand their needs, with six months more, we can be able to adjust the majority of the client, which yet have to start their activity. We know that there are a lot of activity like tourism, like transportation, like restaurant, retail, which having go up and down, we basically never started continuously to reopen. Having six more months up to the end of 2021, I think give them the possibility to recover and to be able to repay the loans.
In terms of the six months more also for the DTA, we are happy also for that, of course, because give us some more room to continue our opportunity to find a good deal, a good merger for our bank. Meanwhile, frankly speaking, we still have to understand exactly what means the increase from 2% to 3% and also the three years time lag to complete the potential merger. This is something that we hope we will see the final version. We will understand better how that can impact on us. Basically, I don't see any impact direct on some potential transaction, but maybe will have some impact on other transaction. Let's wait and see.
Thank you.
The next question is from Giovanni Razzoli of Deutsche Bank. Please go ahead, sir.
Good afternoon. Two questions. The first one, can you share with us if there is any accrual of the dividend in your CET1 ratio? The second one is on the full year 2021. You were quite clear in saying that the NII should progress quite well in the next few quarters. Fees remain strong also in April and May. In the past quarters, you told us that the cost of risk guidance would have been 70 basis points net of the cost of de-risking. You said today that the cost of de-risk is already included in the Q1.
You are more or less giving us the same guidance of the other banks for the operating performance, but you are not giving us an indication of the net income. We have almost all the moving parts. Can you share with us what is the estimate you have for the bottom line at year-end? Thank you.
No surprise. You don't want surprise. You just want to know everything upfront. It's quite difficult for us, of course, to be so precise, but I basically gave you all the items as far as revenues are concerned. As far as your first question, yes, we have already accounted 6 basis point for the dividends and the AT1 coupon. Cost of risk, things are moving. Of course, it's difficult to make some forecast when things are moving in terms of measures. We just spoke about the new government measures. Of course, the extension of the moratoria will give us some relief as far as the default rate, because, of course, we think that the default rate will be very low, likewise last year. Of course, in terms of ordinary cost of risk, we can be quite happy.
Of course, everything will depend if we will go out definitely from the pandemic period, and so we will be able basically to decide how much to upfront for the potential expiring of the moratoria in 2022. Of course, it's a good news for our balance, for our profit and loss. We gave two guidance, 70 basis point ordinary, and up to 40 basis point of extraordinary. We have already split in a different way in the Q1 these two items. Let's hope that we'll try to be in this range, and of course, with the lower level, if things go ahead in a good manner, like we think are going right now.
The fact that also other banks are experiencing a cost of risk and the default rate so low, of course, is encouraging also our projection. We could end up with very good results also in terms of profitability if the level of the provision will be on the low side.
For the time being, shall I take that 70 basis points is confirmed, excluding the disposal that you have already made, right?
Yes. I say that core is now 40. I think that with the moratoria will go more in line with 40 rather than 70 if things go ahead in this way. We hope to stay on the lower side. Again, will depend on how much we would like to upfront if we see that the moratoria, I mentioned all the talks we are having with our clients. Up to now, the results are very encouraging with the default rate, which is very good, both for the expired moratoria, both for the moratoria to come. Let's check if in the second part of the year we'll have the same result.
Thank you.
The next question is from Jean Neuez of Goldman Sachs. Please go ahead, sir.
Hi. I have two questions. The first one is on asset quality, I noticed in your slide that you said that you had the Stage 2 increase, that they went from EUR 7.2 billion to EUR 9.7 billion Q-on-Q. For the banks which have provided this data, they seem to have gone down. Now yours looks to be more of a reclassification nature. I just wanted to understand the following. Do you believe that your classification is now on par with other banks? Because it's hard for us to judge. Essentially my point is trying to understand whether there is more reclass to come, and associated with this, in general, also some provisions that would come, and could be classified also extraordinary, but it essentially still enter the budget.
My second question is on net interest income. It seems to me that compared to many other banks in Italy, but also in Europe, your spread is behaving a bit better. Not only the loan growth, but the spread itself. I just wanted to understand whether there is any change in your mix or any segment that you're prioritizing which explains this, or what do you attribute this difference in spread behavior of your bank versus peers, if you know that? Thank you very much.
Thank you, Mr. Neuez. Stage 2. Now, basically, we were quite confident also. We spoke, I remember, about being on the low part of the banking system as far as Stage 2 was concerned. Frankly speaking, I think also our default rate was confirming our forecast. As you know, there is a sort of level playing field for which we are called every time to be more in line with the average. We decide also due to the COVID situation, the potential deterioration of some asset, to not to detect more Stage 2 asset, because this is not the case, but to enlarge the category of loans going automatically into Stage 2. We have made this effort. We had the opportunity to do that also for the good provisioning, for the good cost of risk we have experienced.
Now, I think we are exactly in line with the average of the banking system. Let's consider that we are very peculiar vis-à-vis other banks because we are a north of Italy banks, which default rate and Stage 2, which of course, are influenced by the geographic footprint of our bank. For the second consideration, thank you, first of all, for saying that we are doing better. Let me say that in this difficult time, I think play a lot two things. First of all, to be very close to all our clients, in particular to SME. Of course, SME are the one who are more worried about the situation.
We are an aggregation of regional local banks with very deep insight into our client, and with very good relation. We were very able to give them quick response. Of course, the size counts. I think if you compare to big banks, maybe they are more exposed to large clients. Both the SME segment and the quickness that we had in giving answer and providing loans and providing granting loans to our client allowed us to emphasize on some better spread.
Just to be clear, no more reclassification from here. You are fully classified, no more books to review later in the year.
Is a one-off situation, again, driven by the global pandemic situation from our willingness to be more in the average of the system.
Okay. Thanks.
The next question is from Noemi Peruch of Mediobanca. Please go ahead.
Good evening. Thank you for taking my questions. I have just three. The first on NII. Can you share with us the NII attached to the EUR 1.6 billion disposal on a yearly basis? What's the liquidity currently parked at ECB? The next one is on capital. Can you give us some color on the 20 to 25 basis points headwinds related to look-through approach, if I understood correctly. Does this increase the headwinds to 120 basis points for the year vis-à-vis the 100 basis points previously announced? My last one is again, on capital. Can you update on the synthetic securitization you plan to do in the year and the disposal of non-core assets you envisage in your business plan? Thank you.
Sorry, I am asking because I didn't understand very well the first one, but let's try to give you a correct answer. The liquidity in ECB is about EUR 16 billion. Was this the question?
Yes. The liquidity part at the ECB. Yes.
Okay. I didn't mention, I think 120 basis points. I don't remember I mentioned 120. If you stay at what I said about headwind, I said 85 already in and 20, 25 still to come by the year-end, due again to the update of historical series and the look-through approach. As you know, it's difficult to make a precise forecast about the right basis point. Let me say that having a few tenth basis point for this year, and again, very few basis point also for next year, we are very confident to be able to build up all the capital need that we should have. In any case, we are well above our threshold. Finally, securitization. Yes. Core asset disposal. We have done, of course, almost EUR 150 million of real estate disposal last year.
We still have our plan to reach EUR 1 billion in three year times. We will continue to dispose real estate asset. Of course, we also have some program, also with European Bank in order to continue our securitization program and to reduce our RWA to this respect. Meanwhile, as far as our stakes in strategic stakes, we are not considering disposal.
If I may just follow up, what's the NII attached to the EUR 1.6 billion NPE disposal? Just to clarify, the overall expected headwinds, capital headwinds for the year, hovers around 105, 110 basis points. Thank you.
Exactly. Sorry for, the first one was? They are bad loans, what we dispose, so there is no impact on NII. Very limited time value. Of course, no material. We had some effect from the previous disposal, the Project Django deal, because they were UTP, so they were contributing NII, but this is not the case for bad loans. Thank you.
Excuse me, sir. The next question is from Luigi Pedone of Equita. Please go ahead.
Hi. Good evening. Two question from my side. First one is on capital clarification. If you could remind us the regulatory headwinds and tailwinds for the next year, 2022. Second one is on NII, and my question is on what could be the action that the banks could do in the next year when there will be a decline in the state guarantee loans, and there will be a reduction of the benefit of the TLTRO. Thanks.
Thank you, Mr. Pedone. I think I said before, both for 2021 and for 2022, we expect very limited headwinds, in the region of 20, 25 basis points. For 2022, basically 20 basis points is our expectation. NII. We have already always had some opportunity from ECB if the situation is going to be at the level we are right now.
We assume that the situation is going to be better, we also hope that there will be some recovery together with the enormous effort of the recovery plan and the private capital that we deployed in order to support the public money, that will give us a lot of opportunity to grow, and again, also in the interest rate, if with the sensitivity I mentioned before, you can imagine how much relief we could have from a normalization of the Euribor.
Basically, because the two things are a bit linked together, TLTRO is in place until the situation will be normalized, we think that we can basically easily substitute with the normal ordinary growth in loans and in NII, not talking about the lower effect of the current account burden on our NII, that will replace completely the TLTRO effect.
Okay, thank you.
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Okay. Thank you everybody. Thank you for staying with us, and we will for sure see each other in the next few days to have some further comment on Q1 results. Thank you.
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