Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Banco BPM Q1 2020 Run Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.
At this time, I would like to turn the conference over to Mr. Roberto Pernagio, Investor Relations Manager of Banco BPM. Please go ahead, sir.
Thank you, and 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. So For 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 and A section is just over 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 3rd conference call in the day. So I will try to be as quick as possible, even though, frankly speaking, we are very happy to discuss with you or 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 situation a pandemic situation, which is Luckily enough, going down in terms of economic effect.
We think that the first Q this year shows a clear road map 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 some highlighted Some strong operating performance, both in terms of volumes with 5.6% of growth in net performing loans, Up to EUR 99,200,000,000. Current account up 13% to EUR 101,700,000,000 And eventually, also assets under management, an increase of 13% up to EUR 61,300,000,000 With EUR 1,000,000,000 almost in net inflow, core revenues are up to EUR 968,000,000, which is plus 6 Sprint year on year, and it's the best ever results since 3 years to now, Driven, of course, by an excellent performance of the net commission, up 7% year on year. Pretax profit to EUR 259,000,000 which represents 150% higher year on year.
The net income is stands at EUR 100,000,000 with an adjusted net income to EUR 151,000,000. This come From another action we have done under the derisking strategy of the bank, We have increased the NPE disposal strategy from the EUR 900,000,000 expected end of 2020 to EUR 1,650,000,000 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 1,500,000,000 of bank 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 exit size.
Also, the common equity Tier 1, which we know would have been impacted by headwind coming From the Air B model updating has been better than we expected, standing at 12.7%, Well higher of the what we expect in our guidance. Also, MDA buffer Fully loaded is 377 basis points. All these 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 6, net interest income basically up almost 5% year on year, Minus 2% Q on Q, but let's remember that most of these reduction is due to the 2 days left Q1 2021 versus Q4 2020.
Net commission up 7% year on year and almost 10% quarter on quarter. Total revenues 18%, up Year on year, 7% up quarter on quarter. Let me say that again EUR 1,130,000 of the total revenues performance is what we expected when we deployed last our business plan for 2023. Pre provision income stands at EUR 484,000,000, Up 51% year on year and 7% Q on Q. Also on loan loss provisioning, Due to the new transaction we will deploy next quarter, we have increased our Provision up to EUR 217,000,000 with almost EUR 75,000,000 dedicated to increase the IFRS 9 projection due to the global disposal.
And the pretax profit again to €259,000,000 up 100 50% year on year. Let me remind that also cost income went down to 57% Some numbers on Page 7 about the volume. Some of that already I mentioned before, so I wouldn't Expand on that. Let me say only about the gross NPE ratio. We have been down in 1 year 250 basis points leading to 6.3%, which is the adjusted after the NPL disposal in Q2.
Also, we already talked about the common equity Tier 1 ratio Being basically at the same level 1 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 75,000,000 in order to accelerate The execution in Q2 of a new project, which we call Project Rockets, of EUR 1,500,000,000 of bad loans, Which will include 3,500 position 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 First of all, you have to NSPB, the issuance of senior Medallion and Junior notes and of course, the disposal of Medallion and Junior 2 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 these transactions, the stock of bad loans will go down to EUR 2,100,000,000 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 2 banks. Some details about the digital banking on Page 9 because we can confirm that we have really 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 the new app and new Internet banking, both for individuals And corporate customer with 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 have to be more confident also vis a vis our client in being more able to sell in products and to propose products investment products to our client. And 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% and the share of active mobile users, Which grew 10% from 53% to 63% and which will lead us To more than 75 percent in line with average EU. Some detail on Page 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 full day on that. We are working on different aspects, of course, on governance, Where we are strengthening the internal control in this committee, which will be which has been renamed in ISR and Sustainability Committee with a board member as ESG referent, with incentive scheme Strengthened with ESG KPIs and 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 complying products.
I will give you some example immediately. And of course, we are committed to further reduce the environmental impact. Starting from this, we are already 100% energy users from renewable sources. We aim to be carbon neutral by 2023. Let me also share with you some other main initiative we are developing, EUR 5,000,000,000 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 Let's go to some figure.
On Page 12, you will see the KEP and 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 10,000,000,000 of TLTRO, Which we did the final week of March, and so that will come to effect to be effective by Q2. Net fees and commission, strong increase, but I have to say, sustainable. Also, April has been On average, the results of the 1st Q and also the 1st week of May is doing very well. NFR, very good, in line with what we expected, already reached half year half of the result of the full year expectation and very good revenues also coming from our shareholdings stakeholders in AgOS, Bancassurance and Anima Investments.
All in all, again, total revenues So up to EUR 128,000,000, 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 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 485,000,000 Which is 51% more year on year. We already discussed about loan loss prudent approach to loan loss provision, uploading some consistent upfront, Leading to a pretax profit of $259,000,000 which is 150% more than Q1 2020. Meanwhile, we had a loss in Q4 2020.
After tax systemic charge And fair value of liabilities, which Q1 2021 is negative. Meanwhile, Q1 2020, you can remember, was Positive due to the worst bank Cost for consideration for fair value. We had a final result of EUR 100,000,000 Again, we've adjusted the lead to EUR 551,000,000. Page 13, we gave some figure in order to see how strong is the impact of this quarter, Also visavis the pre COVID results of the bank, basically in line as As far as the net interest income is concerned, but we know that more will come, thanks to the TLTRO in the Meanwhile, there is a strong increase in net fees and commission. You see EUR 471,000,000 vis a vis EUR 448,000,000 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 5,400,000,000 of Some detail on Page 14 about NII. We already said that there is a slight reduction Vis a vis Q4, meanwhile, there is a 5% increase vis a vis Q1. You have the detail of the day effect, Which is negative. Meanwhile, the Commercial Banking performance is better. It is in line, That is better EUR 1,000,000 and of course, there is a small contribution for the last days in which we utilize the $10,000,000 more of TLTRO.
Another good news is The capability to keep to 180 basis points, 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 our effort in having good margin also on the Loans granted, having guarantee from the state. Of course, the Small reduction is offset the increase is offset by the negative impact of the liability spread That due to the Ureber going down is minus 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 of for Corporate and Enterprises. Meanwhile, we have Almost 70% to 80% of increase in terms of residential mortgages, Which grew to $1,000,000,000 versus $600,000,000 in Q1 2020.
The total results is shared basically half and half between COVID-nineteen measures And ordinary business, but let me stress that the opportunity of the COVID measures Allow us to devote the ordinary business to the best class client, 93% our of this business has been granted to the best rated client. In terms of spread, again, on the right side of the slide, you see how both in second half of twenty twenty. And also in Q1 2021, we have an increase between the inflow spread of new loans and the outflow of the reimbursed one. And 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 In December, we stand at EUR 10,000,000,000. We had almost EUR 3,000,000,000 up to EUR 13,000,000,000 in Q1. We still have almost EUR 3,000,000,000 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 7,000,000,000 the first The period observation, which ended exactly in March 2021, up EUR 7,000,000 of what was expected.
And we have for the 2nd observation period, which will end in December, we have EUR 2,000,000,000 more than what is expected. On Page 16, some figure about the moratoria. We started with EUR 16,000,000,000. In March, we were down to EUR 11,000,000,000 of outstanding, so down 30% Out of this reduction, which amounts to EUR 4,200,000,000, only EUR 0.9 Is the default rate and during April, we had another EUR 1,000,000,000 expired. So the total moratorium now is down to EUR 10,300,000,000.
Let me say that out of the moratoria, 82% of debt For low and medium risk client, 11% for mid high risk and only 7% for high risk We are continuing our campaigning to understand the situation of our client with a strong early warning 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, it's not yet Fully completed, but we can confirm that 90 84% of our Moratoria client do not envisage any problem to restart payment. Only 16% asked us some support in terms of numeratoria our new state guarantee loan and only 0.5% We deem will suffer difficulties to restart payments. So very much in line with the experience We have had up to now. On Page 17, net fees and commission, we already I gave you the total number.
You can see that the increase is both year on year on the management and advisory side and also on the commercial banking fees, split 239 for Investment Management and 232 for the Commercial Banking. You see that there is also an increase in trend On the right side of the page, monthly trend is 151 in January, 147 in February, 172,000,000 up in March. On the bottom on the Right. But on the page, you see also the quarterly pace of our investment placement product, up to EUR 5,400,000,000 visavis the previous quarter in the region all in the region of EUR 3,700,000,000 Apart from Q2, which was very much impacted by the COVID at EUR 2,400,000,000. I have to say that also April, as I was mentioning before, performed basically in line with the previous months.
If we consider 2 days less due to the April calendar and also the extraordinary For the placement of EUR 300,000,000, which are going to be added to the EUR 1,500,000,000 for the BTP Futura, which for which also Bancoagros 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 a vis 2020. But of course, this number does not take into account The impact that we will start to experience from the 2nd part of this year, which is the Sequential of the early retirement scheme that we have already announced for 1500 people in Q4. And we are we can now say that this amount of people has been increased to 1600 people, not needing, of course, any further provision.
So Taking place in what we have already provisioned in Q4, but that will give us some more savings in the years to come. Basically, the retirement will affect To 1500 people by June 2021 and other 200 people by December 2021 And other 300 people, basically up and half between June December 2022. So 1 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 $42,000,000 in 2022 for $109,000,000 and in 2023 for EUR 135,000,000 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 60,000,000,000 now again to almost EUR 90,000,000 After utilizing EUR 10,000,000,000 more of TLTRO up to EUR 37,500,000,000. As I mentioned, the effect of these EUR 10,000,000,000 will be seen in the next three quarter As far as 2021 is related and will amount to almost 75,000,000 Bond outstanding stands at $18,000,000 In Q1, we only had the $81,000,000 $400,000,000 issue. We don't see, of course, any need to cash in other issuing.
Basically, everything will be done In the 2nd part of the year, but only with taking in mind regulatory, let's say, rating agency expectation for our bank. Some words about the securities portfolio, which performed very well. We take Some $65,000,000 of revenues out of the trading on our Gobi's portfolio. Of course, we have also experienced some reduction in the reserve Amounting to almost EUR 90,000,000 in HTS And almost EUR 140,000,000 as far at L2 maturity. On Page 20, some further details on that.
Basically, we have increased after the Drawing of TLTRO some HTCS investment, Both EUR 2,000,000,000 in Italian govies, EUR 2,000,000,000 in non Italian govies, Increasing only of 2.5 here the banking book On Page 21, the evolution of both stock of NPE and the coverage. As far as the stock is concerned, we are down to after the Rockets project, we are down to EUR 7,200,000,000, Basically, EUR 2,000,000,000 of debt loans and almost EUR 5,000,000,000 of UTP, down 27% year on year and 16% in Q1. Let me remember that we started the merger with more than EUR 30,000,000,000 of NPE stock. Migration rates, quite good rates in default rates, 1.3%, down to 1% If we exclude the one off first time application of the DoD, The entry rate also very much below what was our forecast, 8.2%. Of course, also the cure rate is 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 Right off, 43% UTP and almost 51% total NPE. Of course, this figure Include IFRS 9, which again will be utilized for the disposal. So if you consider IFRS 9, the percentage I mentioned will go down to 57% for bad loans and 48% for total NPE. Some detail again about the NPE ratio, we already mentioned, which is going down to 6 0.3%, 5.3% we have by definition. We have also some detail on the cost of risk drivers.
We have split Basically, half and half, forty basis point each, the core drivers, so the normal cost of risk We would have experienced an increased provision we have done for basically two reasons. 1 was already explained for the Rocket project of EUR 1,500,000,000 disposal and the other one is the change in methodology for Stage 2. So we decided to increase the Stage 2 bucket, Which grew from EUR 7,200,000,000 to EUR 9,700,000,000, including in Stage 2 basically the major under moratorium, midarisk and derisk as well as For tourism and restaurants, also the mid risk in moratorium. So basically, we were very cautious and prudent in extending the Stage 2, which amounted for some provision in the region of EUR 45,000,000. Last page of numbers, Capital adequacy, 13,000,000,000 Q1 2020, 13,300,000,000 last year, To which we have to deduct 85 basis points with an impact both in FWA And the 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, we have then the reserves Topgolf is down 19 basis points, offset by the ordinary FWA gaining for The same 19 basis points mostly coming from the guarantee scheme. All in all, so we ended up with 12.7% 13.7% phase in. Let me spend just some words about the 85 basis points. This was a figure which was very uncertain. Frankly speaking, we would have expected something better due to the massive derisking we have done during these 3 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. But up to now, unfortunately, I'm giving us some back 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'll benefit of a better NII.
We hope that we can be able to perform a consistent commission fee and commission in line with our expectation. And 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.
And again, we will continue to strengthen the capability of the bank to develop digital banking fully compliant with the ESG Thank you. I have terminated. I will leave the floor to your question.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session for investors and analysts Please pick up the receiver when asking questions. The first question comes from Christian Carrese of Intermonte. Please go ahead, sir.
Hi, good evening. Thank you for the presentation. I have a few questions on, first of all, on the top line, in particular, on net interest income. I was wondering, looking at the growth in of the deposits, plus EUR 18,000,000,000 in 1 year, I was wondering if you are taking into account the possibility to do some charges to offset the negative carry from debt growth of And in terms of loans growth, if you can give us guidance, we saw on the core loans Customer grew by 5.6% year on year. What do you expect for the Fully, in particular, the second half of the year, do you expect an acceleration?
And 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 I think that you are planning additional disposal of part of the financial portfolio in the coming quarters as you did The first one. And 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 100,000,000 to EUR 180,000,000 for each 40 basis points interest rate Why this increase quarter on quarter or the sensitivity?
The second question is on Seize, a very good quarter, EUR 5,400,000,000 placement of new products. Could you give us an idea of your what you've got in your budget in your mind for the full year, I mean, on a quarterly basis. The final last two questions, 1 on the common equity Tier 1, 85 basis points Headwinds, if I'm not mistaken, you talked in the past of potential 100 basis points headwinds on So just to understand if the Q1 impact is the entire impact for the full year or not. And finally, on M and A, now the CEO of Dieter and Unicrate 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 40,000,000 for the full year, which is already the share of which is already in the Q1. Meanwhile, all the measures we have already launched in for To be deployed in the 2nd part of the year will be related to corporate clients.
Let me say 2 things. First of all, we are going to charge fees growing fees related to the the positive increase to our enterprise and corporates in order at least to offset the negative impact on NII. Secondly, let and so I also give you some answer about the loans guidance. I think that in the 2nd part of the year, with the possible deployment of the new measure from the government. There will be and of course also the Next gen plan, there will be some reduction in deposit.
Let me say that out of The increase of current account, almost 60% is out Corporate clients. So 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 We'll 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 3,000,000,000 to come in the state guarantee loans. So we think that we can repeat the performance of Q2 even though the ordinary business It's 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 good results Up to now, it's possible to have further disposal in the second and And the queue with some more capital gain, of course, but not At the level of what we have in the Q1, and then we will see the situation now will evolve. NII sensitivity, basically, I think a lot of the increase from CHF 100,000,000 to CHF 180,000,000 comes from the TLTRO. Of course, we have a fixed income from the TLTRO and then of course The loans can be at a variable rate, 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 3,700,000,000 in 2020, but The same basically was also in 2019.
Meanwhile, we are expecting almost EUR 4,000,000,000 for each quarter this year. So we are over performing also our expectation. And of course, we all again, April and May I'm doing very well and hopefully we can do better than our expectation. 85 basis Yes, there is some more tens of basis points possibly coming from the up to date of the historical series by the year end as well as the look through application, which could bring all in all 20 to 25 basis points. Last but not least, the government measure.
Of course, we are happy of the extension of the Pretoria, we think that is good for our clients. We think we can start talking continue to talk with them In order to understand their needs and with 6 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 have And we go up and down, but we basically never started continuously to reopen. Having 6 more months up to the end of 2021, I think give them the possibility to recover and to be able to repay Actually, in terms of the 6 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% 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 that maybe will have some impact on other transaction. So 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. And the second one is on the full year 2021. I mean, you are 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 derisking. You said today that the cost of derisk is already included in the Q1. So 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.
So 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 As far as your first question, yes, we have already accounted 6 basis points For the dividends and the AT1 coupon, Cost or risk, things are changed are moving. Of course, it's difficult to make some forecasts when things are moving in terms of measures.
We just spoke about the new government measures. Of course, the extension of the moratorium will give us some relief As far as the default rate, because of course, we think That the full rate will be very low likewise last year. So 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 moratorium in 2022.
But of course, it's a good news for our balance, For our profit and loss, we gave 2 guidance, 70 basis points ordinary and up to 40 basis points Oh, 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 way, 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, and we could end up with a 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 already made, right?
Yes. Again, I say that the core is now 40%. I think that with the moratorium, we'll be we'll go More in line with 40 rather than 70 if things go ahead in this way. We hope to Stay on the lower side, but again, that 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 expiry of the moratorium to come, Let's check if in the 2nd part of the year, we'll be we'll have the same result.
Thank you.
The next question is from Jean Louis of Goldman Sachs. Please go ahead, sir.
Hi. I have two questions. The first one is on asset quality and I noticed in your slide that you said that you had this stage to increase that They went from $7,200,000,000 to $9,700,000,000 Q on Q. And for the banks which have Provided these 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? It's hard for us to judge and essentially my point is trying to understand whether there is more reclass to come and associated with this in general also Some provisions that could come and could be classified also extraordinary, but it's essentially still enter the budget. And 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 It's behaving a bit better, not only the loan growth, but the spread itself. And I just wanted to understand Whether there is any change in your mix or any segment that you're prioritizing, which explains this or why do you 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. Noette. Stage 2, no, basically, we were quite confident also and we spoke, I remember, about being on the low part of the banking system as far as Stage 2 was concerned. And frankly speaking, I think also our The full rate was confirming our forecast. But as you know, there is a sort of 11 play field For which we are called every time to be more in line with the average.
And so 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. So 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 average of the banking system. Let's consider that we have very, very peculiar Vis a 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, Spay allowed 2 things. First of all, to be very close to all our clients, in particular to SME. Of course, SME are the ones 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 a quick response, of course, the size counts.
I think if you compare to big banks, Maybe they are more exposed to large clients. And so both the SME segment and The quickness that we had in giving answer and providing loans and providing grant granting Loans to our client allowed us to emphasize on some better spread.
So just to be clear, no more reclassification from here. You're fully classified, no more books to review later in the year.
It's a one off The situation again driven by the global pandemic situation from the our willingness to be More in the average of the system.
Okay. Thanks.
The next Question is from Naomi Perrouk of Mediobanca. Please go ahead.
Good evening and thank you for taking my questions. I have just 3. So the first on NII. Can you share with us Vienna has touched to the EUR 1,600,000,000 disposal on a yearly basis. And What's the liquidity currently parked at the ECB?
And the next one is on capital. Can you give us some color on the 20 to 25 bps headwinds related to Luxury approach, if I understood And does this increase the headwinds to 120 bps for the year vis a vis the 100 bps previously announced. And my last one is again on capital. Can you update on the synthetic the 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 $16,000,000,000
Was this the question?
Yes, the liquidity part of the ECB, yes. Okay.
I didn't mention, I think, 120 basis points. I don't remember I mentioned 120 basis points. If we If you stay what I said about headwind, I said 85 already in and 2025 Still to come by the year end due again to the update of historical series and the look through approach. Of course, as you know, It's difficult to make precise forecast about the right basis point. Let me say that having A few tens of basis points for this year.
And again, very few basis points also for next year, we are very confident to be able to build up All the capital need that we should have. But in any case, we are well above our threshold. Finally, securitization, yes, core asset disposal, We are we have done, of course, almost EUR 150,000,000 of real estate disposal last year. We still have our plan to reach EUR 1,000,000,000 in 3 years' times, so 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 FWA to this respect.
Meanwhile, as far as our stakes in strategic stakes, We are not considering disposal.
And if I May I just follow-up? What's the NII attached to the EUR 1,600,000,000 NPE disposal? And just to clarify, so the overall expected headwinds, capital headwinds for the year was around 105, 110 bps. Thank you.
Exactly. Sorry for the first one. No, they are bad loans what we Suppose there is no impact on NII. Yes, very limited time value, But of course, no material. We had some effect from the previous disposal, the Jango 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 Question is from Luigi Pedone of Equita. Please go ahead.
Hi, good evening. Two questions from my side. The first one is So if you could remind us the regulatory headwinds and tailwinds for the next year, so 2022? And the second one is on NII. And my question is on the what could be the action that the Bags could do in the next year when there will be an increase in a decline in the state guaranteed loans and there will be a reduction of the benefit of the TLTRO.
Thanks.
Thank you, Mr. Perona. I think I said before, both for 2021 and for 2022, We expect very limited headwinds in the region of 20, 25 basis point. For 2022, basically 20 basis points is our expectation. NII, Basically, we have already always had some opportunity from ECB if the situation It's going to be at the level we are right now.
If we assume that the 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 We give us a lot of opportunity to grow. And again, also in the interest rate, if With the sensitivity I mentioned before, you can expect that you can imagine how much relief we could have from a normalization of the Euribor. So basically, if because the 2 things are a bit linked together, so 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.
Us. Okay. So 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.
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.