Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Banco BPM Full Year 2020 Group Results Presentation. 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 Peronagio, Investor Relations Manager of Banco BPM. Please go ahead, sir.
Thank you very much to be present with us Tonight for the presentation of the full year results, before leaving the floor, Mr. Giuseppe Castagna, let me remind that you can find the presentation on our website in Investor Relations page and the Q and A section is reserved for financial analysts. Thank you very much. I leave the floor to Mr. Castagna.
Thank you, Roberto. Good evening, everybody. Thank you for being with us for this full year 2020 presentation. Let's start immediately on Page 5, where we have summed up some significant performance, Which our bank was able to reach in this very challenging environment of 2020. The first part is related to the asset quality, which we manage through credit management initiative linked to the moratoria, to the state guarantee loans and to an effective monitoring very in deep to our portfolio.
The second is the cost management. We were able to adapt a very flexible business model in order to reduce the cost and The lack of revenues over the 1st part of the year. The third part is the very strong commercial return we registered in the 2nd part of the year in H2 with a very effective commercial activity from our branch network, but also leveraging on digital banking. This produced a very solid rebound In H2, with pre provision income up 43% visavish1. All these results allowed us in a complicated year in which, of course, we expected Some rules to respect also in terms of dividend distribution I encourage us to be very cautious and prudent, both on conservative provisioning policy.
We have in the last quarter, we have done 1.3 disposal between portfolio and single name. We have increased 500 basis points the coverage of NPE. We have upfronting with IFRS 9 further amount in order to foster new disposals starting since 2021. At the same time, we were able to front loading restructuring cost able to foster 1500 early retirement person scheme for 1500 person and a closure by June this year of another 300 branch, which sum up to the 750 we already have closed since the starting of the merger. This allowed us, all in all, to be back to distribute a dividend of EUR 6 per share and overall to be very positive on the outlook of 2021.
On Page 7, we wanted just to give an outlook on the 4 year of our merger In which we think we were very much able to build up a track record in derisking and capital generation. As you know, we have reduced from EUR 30,000,000,000 to EUR 8,600,000,000 the amount of NPE. But at At the same time, we were able to increase common equity Tier 1 from 11.4% to 13.3 percent, which is the result of 2020. Needless to say that in between, We have financed something like 1,000 basis points coming from revenue generation and Asset Management transaction, which allowed us to reduce of EUR 21,000,000,000 the amount of NPE during these years. Starting from the credit profile, let's have some look about the main action of this year.
Of course, the action were Very much linked to the pandemic and to the measures taken by the government. We wanted to reach target in sustaining the economy, and we were able to reach a new record lending, new lending in 2020. After EUR 21,000,000,000 in 2019, we were able to land EUR 27,600,000,000, including EUR 10,200,000,000 assisted by state guarantees. We still had at the beginning of the year almost EUR 4,000,000,000 of loan loans assisted by state guarantees in pipeline, which in January we were able to deploy EUR 1,000,000,000. The second target was to uphold the portfolio quality through the reduction of NPEs, 15% down to EUR 8,600,000,000 and 7.5 NPE ratio.
Thanks to a very favorable migration rate, We had only 1% of default rate to a very low market share in the moratoria, 5% versus 7.3%, which is our natural market share of loans on checking very carefully the quality of the moratoria, Both for the one who already expired in December, which were an amount of EUR 3,000,000,000 with a very marginal default rate of 0.5% and the same rate we are experiencing in the early engagement campaigns for the moratoria, which are coming at expiring in the next few months. We have, as we will check Later on, I reviewed a big amount of this kind of moratoria And we already have some good expectation about the potential repayment. The other Step was, as I mentioned before, to reinforce to massive reinforce the coverage. We have reached for the first time a total of 50 of NPE coverage, particularly we have upgraded UTP coverage to 43.7%, 46 basis year on year. But if we include the Jango disposal, the amount of coverage was even more than that.
All these considering a tough scenario for 2021, of course, related to the COVID and also provisioning further amount to start the risk further derisking since 2021. The last The objective was to contain the capital absorption and we think that we had reached also these results Having 86% of loans assisted by state guarantee at the general risk rating. On Page 8, a focus on the monetary. As I mentioned, we started with EUR 16,000,000,000 of total request. In December, we had EUR 3,000,000,000 of the monetary expiring, with again at a full rate of EUR 0.5 For another €1,000,000,000 more or less, we had some different measures often linked to state guarantee.
The remaining portfolio as of end of the year is EUR 12,200,000,000, of which EUR 10,000,000,000 coming from the government and EUR 2,300,000,000 from the Abi moratoria. This EUR 12,200,000,000 are 80% of these Our client of low medium risk is rating 12% midairisk And only 8% high risk. If we go into the sector more eaten by the with more impact from the COVID, We have a total of EUR 2,700,000,000 EUR 2,800,000,000 of risks under moratorium, of which EUR 2,400,000,000 under the best rating category. In order to check into these A couple of billion we have run, we're still running early engagement campaigns activated on a total portfolio of selected mid eye and high risk clients amounting for EUR 2,200,000,000 out of which only EUR 2,800,000,000 are nowadays in watchlist and only 0.6% are with signals of default. The outstanding monetoria related to our performing loans amounts to only 12%.
On Page 9, we start with some figures, starting from asset quality, again, coming back from 9.1% to 7.5% in gross NPE from 5.2% to 3.9% on net NPE, 39% to 43.7% for UTP coverage and 56% to 59% to bad loan coverage If we include write offs, we reach 65% At the same, I would say, at a very good level, we, of course, have also our liquidity and funding situation. LCR is an IRR of 191%, NSFRI ratio is much higher than 100%. We have EUR 20,000,000,000 of unencumbered securities, and we have reserves both on Most high cost and HTCS, respectively, for EUR 875,000,000 EUR 198,000,000 with a very, very strong capital gain. Coming to capital again, we reached 13.3%, coming from 13% of December 2019 with an increased MDA buffer, thanks to the many issues we had in 2020 and beginning on 2021 of 81 and Tier 2. The total amount passed from 250 basis points to 450 basis points in January this year after the last issue.
Again, we proposed a dividend contribution of $0.06 per sales, which amount to 2.8% of dividend yield on the last quotation, which is above 3% if we consider an average of the 1st month of the year. On Page 10, We have some figure about the operating performance and the commercial performance, Both very encouraging, second half on first half, NII plus 8%, net commission plus 3.7% operating cost minus 5.4%, Pre provision income plus 43%. And this shows also how we really had an impact from the 1st wave of the COVID, but basically we were able to neutralize the negative effect of the 2nd wave with these results. The commercial performance is also very good. Core net performing loans plus 8% year on year.
New lending at a record of more EUR 27,600,000,000 plus 29% year on year deposit EUR 13,000,000,000 plus and assets under management, 2.2% year on year, 3% on the last quarter 2020. Again, cost saving with a number of maneuver, which almost many of them we can consider Extraordinary. We were able to offset the partial lack of revenues, especially from asset under management. We reached further saving of EUR 174,000,000, But the profitability we have generated allowed us also to provision EUR 2 €50,000,000 gross in order to foster the agreement with trade unions already provisioned in 2020 and with an exit forecast of 1500 people and the closure of our 300 branch. This was also facilitated and also the decision on closing further branch is coming also from a renewal activity on digital banking, We strongly supported the commercial activity.
We have some figures in the Page 11, mobile transaction plus 61%, Up users, plus 26 percent to 1,300,000, investment orders executed, plus 21% and so on, with the share of digital transaction up to 83%. On Page 12, there is some specific action we have taken and we're still undertaking in order to increase even more the digital approach. The first one is related to the advanced analytics capabilities we have adopted in order to foster There are more than 20 customer journeys on main commercial areas, which were able to allow more than 10,000,000 remote digital contact with our clients driving over 20% of contribution total retail sales. Another important step was the full digital for serving SMEs and private client in order to finance, the Superbonus and BeggoBONUS initiatives. We have already 3,000 operation in pipeline only after a few weeks.
And this is also completely digital. We enable all our personalization managers and Wealth Manager Advisor to Remote Advisory. Nowadays, all the transaction can be executed from remote. We launched also a new mobile first platform app platform, which was ranked at best level from the main customer ratings and With the digital identity in order to reach the complete paperless relationship with client by this year. On Page 13, also in ESG, we wanted to mention some achievements we have reached.
We have started an ESG committee headed by the CEO to coordinate and control the ESG activities. The Board oversight is allocated to risk control committee. The executive remuneration is linked to ESG KPI. Also on environment clients, people and community, we have started many initiatives, some of them already Quite successful, likewise, the 100 percent of usage of renewable energy with a strong reduction on CO2 emission, the credit platform for clients investing in sustainability, again, the Superbonus digital platform, The asset under management fully compliant with this ESG policy amounting to more than EUR 17,000,000,000. And then, of course, our internal work with our people on the different inclusive program and aimed at valorizing talents.
Also in the community, we were able to distribute more than EUR 6,000,000 of initiatives in order to help our communities during the difficult period of COVID. Let's go to some figure on Page 14. As you will see, we have Put vis a vis the H1 and H2 in order to make you understand better how the reaction of the bank allowed to reach The results we are mentioning on NII, we increased 8% almost in the second half, allowing the bank to reach the same result of 2019. Of course, even though we increased almost 4% fees and commission, this was the results who paid more difference in terms of lower revenues visavis2019. We had something like EUR 120,000,000 of difference visavislastyear.
We recovered something in MFR where we had some one off like the Nexia TNCF transaction, but also a very good return for from the govies and trading activity. All in all, total revenues stand up to EUR 4,152,000,000, Almost EUR 200,000,000 less than last year, but we were able to recover almost EUR 100 EUR 70,000,000 with lower cost, showing how the flexibility we can use on cost can also offset difficult period, of course, coming from not internal reasons, but coming from the general situation, in this case, from the economic effect of the pandemia. All in all, so we were able to have a pre provision income basically at the same level of 2019, only 1 point for lower year on year. Of course, we were very attentive As much as as far as the loan loss provision were concerned, we prefer to be very consistent and very prudent On this side, we not only financed the EUR 1,300,000,000 of disposal, but we decided also to front load some IFRS 9 revision apart from building up more coverage on UTP and bad loans. We will see afterwards how much is the core activity In related to loan loss provision, how much is what we consider 1 off.
Then, of course, we have the restructuring cost, Which I mentioned, the EUR 260,000,000 gross, which are EUR 187,000,000 net, systemic charge for EUR 143,000,000, which lead us to a net income stated of EUR 21,000,000 but an adjusted one of EUR 330,000,000. Let's go back to the revenues on Page 15. We have again some core revenues To split for quarter on the right side and for half year on the left side, we will see So much details in the next page. So on Page 16, we will have NII, which The second half was 8% higher than the first half. This was mainly due to the TLTRO.
As you can see, the 3rd and the 4th quarter, of course, experienced a massive increase visavis the 1st two quarters. The reduction in the 4Q in Q4 of around EUR 10,000,000 comes up from the Reduction of the Urebor, so the liability spread coming down from minus 57 to minus 62 and partially also from noncommercial activity, especially the cost of the liquidity we place from TLTRO. On Page 17, the dynamic of the net fees, This is 3.7% second half on first half. If you compare Q3 and Q4 to Q2, which was, of course, the more affected by the pandemic, we have an increase of 11% 14%, respectively, which is still growing. We are having, as you can see on the right side, Month by month revenue generation is increasing to EUR 150,000,000 in December, But I have to say that also January and the 1st week on February are at a record level of Investment Product Placement.
We can see better on Page 18, Investment program placements, as you can see, after a quite good Q1 of EUR 3,700,000 only partially affected in March By the pandemic, we had a very low Q2 of EUR 2.4 billion, then rebounded to EUR 3.2 billion and EUR 3.7 billion for a total amount of EUR 13,000,000,000 on investment placement. On the right bottom side, you see how The 1st month, the January 2021, was 17% higher than January 2020, which was in turn a very good month for us. And the 1st week of February is already EUR 600,000,000 of production. As far as lending is concerned on Page 19, again, plus 29% year on year, EUR 27,000,000,000 of new loans EUR 24,000,000,000 related to enterprise and corporates EUR 3.3 to private individuals. If we split ordinary business and COVID measures driven business, We have 63% in ordinary business, 37% of state guarantee measures.
On the right side, some indication about the asset spreads in the first half of the year. We still were lending at a lower spread vis a vis the outflows Also before the starting of the COVID measures under EUR 30,000, which, of course, were Being 100% guaranteed, we're the one at a lower spread. But in the second part of the year, we've not only recovered the spread of the new loans to 175 basis points, but also we registered some positive basis point visavis the outflows of second half, which more or less is That's different from the outflows that we will have in 2021. So if we will be able to maintain The same pace of new asset spread, we should have some better figure as for August of 2021. On Page 20, the quality of the portfolio.
1st, On the left side of the slide, you can see the flow of new lending. As you can see, both the ordinary business and the COVID measures are for the best quality of our client, only 5% 2%, 7%, all in all, both on ordinary business and COVID measure are in the medium high And high risk, only 1% in the high risk. Meanwhile, the stock is on the lower part of the slide, Still continue to improve, showing more lending visavislowriskclient and progressively lower lending visavishighandmediumhighriskclient. All in all, in the best As part of our portfolio, we have reached 88.6% of our stock. As far as the further increase of state guarantee loans, on the right side of the slide, you see that We had still a pipeline from 2020 of EUR 3,700,000,000 beginning of the year.
EUR 1,000,000,000 has already been provided to our clients in January, we will consider a potential estimate for up to EUR 5,000,000,000 for 2021. On Page 21 is again the amount of core loans and deposit and assets under manager we already mentioned before. Let's go directly to the operating cost on Page 22. Since the beginning of the merger, we had EUR 630,000,000 of reduction in cost. You will see on the right side of the slide, we Started at EUR 3,060,000 EUR 3,000,000, EUR 0.60 1,000,000 in full year 16,000,000,000 of course, this was excluding the restructuring cost of the merger, and we ended up this year to EUR 2 EUR 1,430,000,000.
Of course, we can see that at least EUR 120,000,000 comes from savings on personnel, which are linked to the pandemia. So and coming from reimbursement had disrespect for people not able to work to lower variable remuneration, which, of course, are not repeated in 2021, but still we have further room to improved normal activity in cost management, thanks to headcount reduction of 1500 people, which will be massively utilized in 2021. We believe that we can have, by the year end, 1300 people, Most of them in the 1st part of the year, which will leave the bank starting to factorize At least EUR 40,000,000 EUR 45,000,000 already in 2021 coming up going up to EUR 109,000,000 in 2022 and the total consideration EUR 125,000,000 in 2023. The same, we will have some further savings on the reduction of the retail network. We consider that even though for this year, they will have only a minimum of EUR 3,000,000, EUR 4,000,000 of cost savings, This will come up to EUR 50,000,000 already from next year, EUR 50,000,000 of savings.
Going back to asset quality on Page 23, some figure about the stock reduction and coverage. We went down EUR 1,500,000,000. On the right side, you can see the reduction. Starting from EUR 10,000,000,000, we had EUR 1,000,000,000 of new inflow the default rate. We had EUR 1,400,000,000 of basically workouts and cure rate and then the disposal of EUR 1,100,000,000 related to Django and Titan.
The total conservation so now amount to EUR 8,600,000,000. The migration rates for 2020 were again 1% default rate, 7.5% down share rate and 3.3% cure rate. Of course, Default rate and the entry rate were better because of the moratorium. Cure rate was worse than last year because of the difficulties in having judiciary composition, agreement with clients in auctions, of course, due to the closure coming from the pandemic. On the right side, we will have the full coverage split into different categories.
Again, we think we have reached a very cautious amount of coverage, especially considering that we have 6% of our secured of our NPE, which are secured. On Page 24, NPE ratios. Again, this is an outlook on the upside of the slide about the massive reduction we had both in gross net NPE and in taxes ratio, starting from the merger and reaching very comfortable 7.5% and 3.9% net and the tax rate of 39%. If we follow by definition, we are down to 6.7% of NPE ratio. Some detail about LLPs, the global amount of EUR 1.3 EUR 37,000,000.
We have split into 2 different categories. 1 is the core drivers, which amounts at almost 70 basis points. And the other one is both the disposal, the effort we had from the disposal and the strengthening of the coverage on UTP and bad loans and also the IFRS 9 impact both on performing loans due to the deterioration of the forecast and also front loading provision for FOSSUS BOLFUTO DELISTI derisking starting from 2021. And this is an amount of more or less 50, 55 basis points. So all in all, we take advantage from the results in order to be very cautious and pave the way to a much better 2021.
On Page 25, some number about balance sheet. I already mentioned the liquidity and funding. Let me say that we have bonds outstanding for EUR 19,000,000. We had a quite active issuing during 2020 and January 2021, you will see the different issuing we have done both in senior nonpreferred AT1 and Tier 2. On Page 26, I would say the Italian Globes are still having a lower impact visavisotal Securities Portfolio And in 2021, due to the reduction of the spread, we will forecast another consistent reduction in the percentage of Italian govies on total securities.
Let me just taking your attention on the very low duration of our portfolio. Finally, Capital adequacy, we are We feel that it's a very solid position, both in terms of capital, in terms of buffers, The capital through this capital walk that you see on Page 27, We started 13%. We ended up to 14.1% in September, where we anticipated The effect of the headwind we expected from the last quarter in almost 50 basis points. End of the day, they were almost 50 basis points. So it's 13.6% the post impact numbers, Building up the performance due to the increasing LLPs and restructuring cost of 2,000 Q4 and some positive effect from regulatory, this coming especially from the treatment of the We reached 13.4% and after the proposed distribution of the dividend, We end up to 13.3%.
Much even better, the MDA buffer, where we started 250 basis points, which we consider also our target level in the midterms. But as a matter of fact, after the issue of the 81, January this year, We are up 40, 49 basis points for common equity fully phased 6 14 basis points for Phase in. As far as the common equity Tier 1 Phase in, we are at 14.6%. So all in all, to have a quick recap, Significantly bound in the second half of all the revenues, which is very encouraging for 2021. Strong and attention and safeguard for the quality of portfolio, both in terms of action in order to detect at first level any possible hint of deterioration and also increasing massively the coverage in order to foster higher reduction in NPE, further reduction in NPE.
Again, the cost efficiency, not only in 2020, but also with the already booked provision for the retirement scheme in order to offset partially the one off cost of 2020. Some outlook on 2021 on Page 29. We think thanks to the TLTRO, which of course will last For the entire year in 2021, and we had also higher capability to draw TLTRO. And in our funding plan, we think we can expand another EUR 10,000,000,000 drawing TLTRO for this year. We think we can reach a very consistent increase in NII as much As we think we can have a very strong recovery in commission, both coming from Investment Products, Thanks to the results I mentioned, and we are already experiencing the beginning of 2021 and also to the commercial activity where we had some maneuver, which should give us some room for increasing the commercial banking fees activity.
Total income is expected to be higher than 2020. On the cost side, of course, I already say that we can only partially offset the massive reduction We registered in 2020, but we are confident that with the The pace of reduction we have done during this year, we can be able to have a PPI slightly better than last Notwithstanding lower R and F results. Cost of risk, Also in this case, let me split in 2 different parts. We think that the normal cost of risk We'll be more or less at the level of what we provisioned under the normal cost of risk, the 70 basis point for the ordinary activity. But of course, we have considered that there will be still a macroeconomic environment, which may entail some additional non core provision, which in any case, we expect to be at a lower level than the one we registered in 2020.
For capital, we confirm that our targets remain MDA buffer 2 50 basis points and combined with Tier 1 at higher than 12%. Thank you for your attention. I leave the way for your question.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session, which is reserved to analysts only. The first question comes from Antonio Reali of Morgan Stanley.
I've got three questions, please. The first one is on NII. And if I look at your eyebrow, it dropped further in Q4. Then you sold some unlikely to pay loans and deposits have been growing quite steadily And these are all drags on interest margins. You've also reduced the sovereign bond portfolio significantly Q on Q.
And so I'm wondering what makes you confident on the NII outlook for 2021. If you could elaborate Sort of all the moving parts, including loan growth, of course, that would be great. The second question is related to the first one, Julien, and I'm curious to understand what was the contribution to NII from TLTRO in 2020? And what would you expect it to be in 2021, please. The second question is on costs.
You've talked about cost inflation next year as the costs related to the Sort of lower activity from the pandemic are expected to come back and as you increase your IT digital investment spending. Can you help us quantify both of these effects? For example, how much of the benefit did you see in terms of cost savings in 2020 related to this. And my last question is on the moratoria loans. And I would like to understand What your core cost of risk estimates, which if I understand right, is at about 70 basis points and you've confirmed it for next year, What does that 70 bps assume in terms of default on this moratorium?
So what percentage of DKK 16,000,000,000 could default and remind us if any provisioning overlay has been set aside to cover for this already.
Thank you. Okay. Thank you. Starting from TLTRO, of course, you have to consider not only the 6 months on top of last year, but also the increase that I mentioned of around EUR 10,000,000,000. So we think that we have a gross effect of the EUR 180,000,000 unfortunately offset from the how we will use the liquidity Because of course, not all the liquidity can be used to positive interest rates.
So the net effect will be Around EUR 100,000,000, EUR 110,000,000. As far as the costs are concerned, We had again something like reduction in Variable remuneration, quite consistent, 45% of what we forecast for this year, which should be around EUR 45,000,000. We had a reduction, of course, in general expenses due to lower cost of personnel. We had some reimbursement also from the government for people who could not attend to work due to COVID. All in all, it's something amounting to EUR 140,000,000, which we think a part of it, of course, can be slightly repeated this year.
That's why I mentioned EUR 120,000,000 as the difference of cost of personnel. Digital is, of course, is not immediately or directly linked. But for instance, we are still imagining cost for fully deployed potential capability of our digital activity, which again will help us in the next year to further make more cost effective our branch network and our people. The last is moratoria. Again, I say that the normal cost of risk is 70% is not what we expect for 2021 Because, of course, we know that there could be some effect, especially in the second part of the year.
The Currently, what we have experienced for the what was expired in December? What is expiring in December? What is expiring in the next few months is a very, very low default rate, again, 0.5%. Of course, we expect this to increase, will depend, of course, from the economic situation. Let's say that we have In our forecast, something a figure which is around 2.5%.
Thank you. Very clear. And on the commercial NII, could you just share a bit more color on the 2021 trends?
Commercial NII, again, we have some basically, we consider it almost flat. This will depend also for this year more From the liability spread, so from Euribor rather than the asset spread. For the asset spread, we think we can keep The pace of the second half this year to continue to land at around 175 basis points If there will be no acceleration in moratoria, we expect that the outflow is at a lower margin. So there could be some increase. We don't expect, on the other hand, a massive lending, likewise, the EUR 27,000,000,000 of last year Because of course, the majority of the clients have already made recourse to the government measures.
So all in all, I would say The same results for the commercial activity.
Many thanks.
The next question is from Jean Louis of Goldman Sachs. Please go ahead, sir.
Hi, good afternoon. Good evening. I just wanted to ask Firstly, on the Stage 2 loans, I read in appendicitis to your presentation, CHF 6,900,000,000 balance at year end, if I'm if I didn't make a mistake. And in comparison to BIPER, which is the mid sized domestic bank that has reported so far, it's a very small much smaller in And I just wondered whether you believe there is more reclassification to be Done there or whether you believe that this is the best presentation that you have so far And the second thing I wanted to ask is with relation to consolidation because you're often quoted in the press, Mr. Castagna, on this.
I wonder to what extent you see this 2021 DTA monetization Something which shouldn't be passed on. So for example, if I look in Pillar 3, I found deduction of EUR 1,000,000,000 of DTA And it's a lot of capital ratio, obviously, also a lot of your market cap, even more. And I just wonder to what extent you believe this is imperative to This opportunity in 2021 to be able to monetize that asset or is it believed that the strategic consideration might not
Thank you, Mr. Noye. Stage 2, we think we have done all the our internal homework in order to classify the best possible way The most prudent way having such an availability of amount to provisioning that frankly speaking, we think that we have A quite good portfolio. I showed the PD and the rating of our clients, how it's increasing towards the best category. Nevertheless, we have provisioned a consistent amount of around EUR 120,000,000 to performing loans in order, of course, to accommodate potential increase in Stage 2.
So we are already protected, but still we are not experiencing a strong increase. We think that due to our territory. As you know, you made a comparison with another bank. If you consider the different geography, maybe you can have some difference in the output of the quality of portfolio. DTA, of course, I think you are mentioning M and A basically, Which is the only way to capitalize the TA.
As you know, we are quite open and outspoken on the possibility to reach some agreement. So far, We are still, I would say, at preliminary internal homework In order to understand which one could be the best and the most possible option in our case, of course, it's one of the main target we would like to reach, but unfortunately, as a difference with Our results, this does not depend only from us, but also from others. So let's we will deploy all our effort in order to try to have a fruitful combination in the interest of both to shareholders of the potential combination, but still we have a very preliminary understanding.
Okay, great. Thanks a lot.
The next question is from Domenico Santoro of HSBC. Team. Please go ahead, sir.
Yes. Hi. Good afternoon. Just a few clarifications, some follow ups. First of all, on capital, how much of regulatory headwinds you expect this year, 2021 and also in 2022, if you can quantify the impact.
And then on the let's put this way, non core part of your guidance on loan loss provision. Can you be more specific which party's model or which party's Additional charges that you might expect from your NPE, the risk, even if my understanding is that you already charged You already booked something in Q4 because my understanding is that this year, the things that don't improve, you might run with More or less the same amount of provision of 2020. Thank you.
Okay. Edwin, I don't have any news respect to what we already anticipated. We are one of the few banks who give you all the details until 2023. I don't respect A lot of difference what already I anticipate to you. I would say that this depends a lot from the Air B model that will come up eventually in the first half of the year And again, I think that the 100 basis points that we put As a total consideration, could accommodate the different headwind for this year.
But of course, it's something that's coming from from ECB. As far as the NPE, now I if I understand what you asked, I don't expect the same amount of this year unless we don't want really to strongly derisk the bank. We have another, I would say, a gap of another $2,000,000,000 $2,000,000,000 and something Not considering the new inflow to reach the 5%. Of course, if there are possibility, We will go also for reducing even more the NPE ratio, but this will depend also from the inflow as you may understand. I think in the 1st part of the year, we will be able to reduce even more the NPE ratio in the 2nd part of the year will depend from the inflow.
And we have a quite prudent assumption about that. All in all, having experienced this year 2020, Let me remember that all everybody was very prudent and maybe extremely prudent When the pandemic came out, hinting of some 180 basis points, 200 basis points End of the year, we have experienced a much lower impact on NPE. So we still think that 70 could be the core risk. Of course, we are prepared to pay some more tens of basis points In order either to reduce the stock from the current stock or to offset the effect of potential inflow, new inflow should this be much higher than we expect.
All right. Thank you.
The next question is from Hugo Cruz from KBW. Please go ahead.
Hi, thank you. So two questions. 1 on the guidance for or the outlook for 2021, if you could give some guidance for the trading income line. It's been quite volatile, so it's very hard forecast, excluding any kind of CVA effects. And then I wonder on the EBI kind of ECB stress test, You might have had the chance to look at the methodology.
I wonder if you have any comments around it, if you expect But it to be very stringent or not. That will be great. Thank you.
On trading income, let's say, First of all, that we don't have any advantage in full year 2020 from DTL because what was EUR 200,000,000 in the Q1 of 2020, then End of the year, it is minus €11,000,000 So we have a loss because of the bettering of our credit profile. Frankly speaking, the same respect for from next year. I think the current also political situation should encourage unfortunately to have some offset in the credit profile. So some better in the rainfall file, which will end up in some impact negative impact on the on fair value. The trading the normal trading income this year, as I mentioned before, we have quite a huge amount of reserves both on AC and HTCS.
It's very probable that we will like To capitalize some of that, we think we can be in the region of more or less EUR 200,000,000 this year. I don't have as much comments, I'm afraid, on the stress test, unfortunately. As we are at a preliminary stage, We will see where we will end up, but I don't have any consideration to give you. Okay.
Thank you very much.
The next question is from Adzuragualsi of Citi. Please go ahead, madam.
Hi, good afternoon. Couple of questions for me. One is on the potential for the creation of a European bad bank. What do you think about it? And also what do you think is essential for this to be successful, especially for the Italian bank?
The second one is looking at your stake in Anima. Do you think this is an asset if the group were to consider any potential banking M and A or its area of, if you want, complexity? Thank you.
Thank you, Ms. Guelfi. BetBank, we have been very happy with what was done in Italy, frankly speaking, Especially with the Gaks transaction, which, in our opinion, were the best way to massively reduce NPE. We hope, frankly speaking, that there will be a renewal of this opportunity in order to still apply this way. Then at the European level, again, it's very difficult.
Maybe there could be some action coordinating Different national bad bank is quite difficult, in my opinion, to have a unique European bad bank because The recovery timing for the different jurisdiction are very different because of the judiciary system and so on. So maybe better to have effective measures that can help in our country and then we will see if there will be some coordination also at European ECB level. Anima is definitely a strong asset for us. That's why we wanted to increase our stake during the year. We are very happy of that.
We think that both Bancassurance and Asset Management are crucial for the banking activity. And so the more we can have of Ownership of these two assets in the better for us, of course. And I think we'll encourage also potential other banks because many of the potential synergy will come also from there.
The next question is from Christian Carreze of Intermonte. Please go ahead.
Yes, good evening. Just two questions on my side. On product factories, as you said, Banco Assurance It's crucial as asset management, if you can give us an update on Catolica and the Covia partnership, so they put to weak catholic and so on. And on NPE internal workout or As you said, the gross NPE ratio, the 5% EBITDA target means just Slightly above €2,000,000,000 NPE that could be reduced. Can you remind us the Between internal workout and disposals, it was in the past, If I remember around €100,000,000 for €1,000,000,000 something like that.
So if you can give us an update, I saw that the coverage ratio went up quarter on quarter, unlikely to pay up. So are you going to focus on UTP rather than NPL? Or if you Can you give us some color on that? You said in the first half twenty twenty one, maybe you could decide to sell some NPS, so if you can clarify on that. Thank you.
Thank you, Mr. Cabeza. We are discussing with everybody as is also known from the newspaper. Of course, we have done some action visavis Catolica because we think that we have some right to buy back the joint venture. But of course, we are partners, so we're open to potential discussion in order to find a solution.
The same applied to Korea. This is not coming from any rights, but just because the Joint venture is coming to an end by September this year. We are discussing to them to with them in order to, Let's say, in a way, put at the same level in terms of timing, both the opportunity in order to make Some consistent decision on the entire bank assurance setup. MP, the old time, I can say, because When we had so many NPEs, of course, we were able to have a massive internal workout. We thought at the beginning of this year that before the pandemia that we didn't need anymore of massive disposal Because the workout was going very well, we had, I think, some EUR 1,200,000,000, EUR 1,300,000,000 per year, of course, on a much larger portfolio.
Once we experienced that the year was doing slowing because, of course, there was no possibility To have extrajudicial or auction and so on, we decided to take the good window we had in September before the 2nd pandemic wave to make a disposal of $1,000,000,000 At the old time, If I remember well, we had the difference, more or less EUR 140,000,000 of cost for disposal Each €1,000,000,000 and something like €20,000,000,000, €30,000,000 in terms of internal workout. Of course, being now a portfolio which is much smaller It's a bit more difficult to make this general consideration. But we are, of course, studying both the opportunity And we think again that in the 1st part of the year, we can get some good results.
Thank you. Thank you.
The next question is from Adele Palama of UBS. Please go ahead.
Yes. Hi. Good evening. Two questions from me. One is in relation to the commercial fees.
I was wondering if you have done any revision of the fees and price charge to the clients in this year. And then the second is on tax. If you can give us a guidance on the tax rate for next year and if you have Any positive effects left from the volume from the NPE disposal?
Can you just repeat the first question? On the commercial fees, What you would like to know better?
If you have done any revision of the fees charged to the client in the year,
Sorry, but I'm not able to understand exactly the question. Let's start from The second one was?
Tax rate.
Tax rate. I think in every budget we do, We consider a tax rate of around 25%. Of course, there are years like this year, which was much lower, was coming in opposite way, but normally we consider 25%. Commercial activity, if I understand this to do well, Again, we had some problems only in the between the 1st and the second quarter. We had some consistent reduction in investment sales, which nowadays are back at a very strong level.
On top of that, we have also some fees coming from Commercial Banking because of the increase in some ordinary fees in current account. So both these actions should lead To a quite consistent increase, I would say, to level of 2019.
Okay. Thanks. The next question is from Noemi Perouche of Mediobanca. Please go ahead.
Good evening. I have two questions, both on cost of risk. Could you please clarify the COVID overlay you charge in the area? Maybe I missed that. And the second one is, is it fair to assume that 2021 cost of risk will over around 70 bps plus NPE inflow the impact of the NPE inflows while the potential disposal are already provisioned 4 in 2020.
Thank you very much.
All right. In 2020, we already provisioned An amount which would allow us to make disposal for €900,000,000,000 1,000,000,000 This is what is already provisioned. In 2020, of course, if we decide to make FAD disposal And once we have utilized the first IFRS provision for This year, we have to make further provisioning, of course. So the current is without the disposal apart from the first EUR 1,000,000,000 which is already paid in.
And if I may, the cover overlay charged in 2020, if you want to disclose it.
No. First of all, let me Complete the answer to your question. Of course, the new inflows are included in our figure. What is not included is, of course, is potential further effects of COVID, which could spread out. I can give you in basis point, more or less, out of 122 basis points of cost of The front loading of for future derisking and update of expected credit loss on performing loans was more or less 20, 22 basis points.
The strengthening of the coverage was 10, 15 basis points and around 20 basis points the disposal.
Thank you.
Mr. Castagna, gentlemen, there are no questions registered at time.
So thank you, everybody, and see you soon on the 1 to 1 meeting. Bye bye.
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.