Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Banco BPM First Half twenty nineteen Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity Ask Questions for analysts and investors only.
At this time, I would like to turn the conference over to Mr. Roberto Toronagio, Investor Relations Manager of Banco BPM. Please go ahead, sir.
Thank you very much and good afternoon. Thanks for the BEE for this presentation. As usual before leaving the feed Mr. Castagna for the presentation, I remind you that you can find the presentation on the website on the Investor Relations section. And after the presentation, there will be a Q and A section reserved to financial analysts.
Now I leave the feed to Mr. Castagna.
Thank you. Good evening everybody. Thank you for being with us. Unfortunately, we are always very late, very close to the holidays. So I hope BTM.
After the presentation, you can enjoy some week of holidays as we will do. I will start immediately On Page 5, I will have a shorter presentation rather than the previous one In which we will be concentrating especially on the quarter on quarter results coming as you very well know our bank from restructuring and de risking, which impacted very much on different figures over last year. So of course, the presentation is complete of all the details last year and this year, but I would rather prefer to be concentrated upon the pattern we are following now, which is which give also the sort of title to the presentation from the risk into profitability. Let's talk about revenues. We have a quite satisfactory 3.1% quarter on quarter of combined NII plus commission.
Commission were up 4.4% Because we have requalified the certificates, which in the Q1 were in the next financial results. If we would have excluded these certificates, the increase of commission would have been 6.9%. Operating costs still continue to be under control. We have reduction of 1.2% like for like excluding extraordinary amortization depreciation, which I will give you some detail further on. More satisfactory is also the volumes growth both in core performing loans Going up 3% year to date and 1.1% in this quarter as well as current account and deposit, which grew 5.6% year to date and 2.7% in this quarter.
I have to say that this growth, this pace of growth is still continuing in July and up to now we have close to another $2,000,000,000 of increase in current account and $500,000,000 in performing loans. The risk profile, finally, as you know, with the Q1 2019, we have basically terminated The extraordinary disposal, so we are going on with ordinary workout And still we are able to reduce the non performing loan ratio, both gross ratio going down from 10 to 9.7 and net NPE ratio going down from 6.1 to 5.9. The tax asset ratio was down also 61% visavis70% almost last quarter. Let's talk about liquidity financial asset. Also in this respect, we think we are going to Put the bank, the balance sheet of the bank in a very safe profile and picture.
Italian gov This represents 56% of the total debt securities. LCR is over 150% as well above 100 percent NSFR. Also the reserves The growth on the portfolio are doing very well. We recovered almost EUR 100,000,000, EUR 96,000,000 up to In the Q2, vis a vis the results of the Q1, we've unrealized gains on HTC growing to $300,000,000 positive. Frankly, as of today, We have registered even better increase in these two reserves.
The CTS up to now is almost EUR 140,000,000 positive. Meanwhile, unrealized gains under HTC Our almost EUR 550,000,000 of positive reserves. The capital position bettering to almost 12% in if you consider also the pro form a Including LA's, the leasing transaction disposal we did in April with the Elimiti, Which of course is concluded completely concluded as a contract, but will be deployed the effect during the year. Considering this, we are 12% without 11.9% stated, but also with a very satisfactory And safe, I would say, phasing at 13.8%. This is, of course, without considering the increase in the reserve I was mentioning before.
The outlook, so it's now finally we can devote all our attention and commitment to commercial action to continuing strict cost control and of course normalizing the cost of risk through further reduction of NPE ratios. The results are on Page 7. The Q2 has almost 2% increase in NII, 4.4% in commission, 3% as core revenues increase. Total income are down 4% For 2 different impact in the Q1, we had the results of EUR 60,000,000 of from the NEXI transaction. And on the other side, in the Q2, we prefer not to realize consistent gain from NFR leaving the reserves in our book.
Operating costs are $5,000,000 more than the Q1, but with the sort of extraordinary one off in depreciation related to some devaluation to in real estate. I will explain later on what we are going to do, but most probably we are going to recover also this effect in the 2nd part of the year. Profit from operation are up to 345,000,000 With the cost of credit of below $200,000,000 $197,000,000 higher than the Q1, As you know, in the Q1, there is always a sort of seasonality. And on top of that, we had also some positive effect from the ACE transaction. Pretax profit growing to 478,000,000 Thanks to the 2 extraordinary transactions that we already know, which of course had the profoundly captive disposal to Agros and the disposal of the NPL platform to the new joint venture with the Fonsec.
After tax, we have a very consistent EUR 442,000,000 visavis €150,000,000 of the Q1. Excluding the extraordinary impact, we have €135,000,000 €65,000,000 of profit net adjusted income profit visavis €155,000,000 including the Nexi transaction. Let's go to the net interest income. As I mentioned, there is an increase, which excluding So, I do know items is 3% quarter on quarter. On the right side of the slides, you see the different addendum to this evolution, EUR 12,000,000 of the increase are related To the commercial banking activity, a slight reduction of EUR 2,200,000 is to be assumed Because of the reduction of the UTP volumes, meanwhile, different items are for the remaining EUR 4,000,000.
All in all, again, 3% increase coming from a good combination of loan growth and lower cost of wholesale funding together with the NAST spread, which is still reducing 3 basis points In particular, because of the long growth we are having with very high return customer and on short term lending. We have already in place a maneuver on short term lending, which should impact positively on the global asset spread. On Page 9, the volumes, I already mentioned the increase Year to date and quarter on quarter, we have year to date a 3% increase in the core customer loans And 5.6% of deposit, as I mentioned before, we are still registering increasing also in the first part Of the Q3. On the production of the new loan on Page 9, bottom left, You see that vis a vis last year, we have 21% of more new granting loan to almost EUR 11,000,000,000 visavis EUR 9,000,000,000 of first half of twenty eighteen. In terms of wholesale bond issued, we basically have done 90% of the total All sales funding maturing in 2019, but still we will have some further emission both senior and Lower Tier 2 in the 2nd part of the year, most probably in the last quarter.
Let's go to net fees and commission. Also in this respect on Page 10, we have an increase which is 4.4% quarter on quarter, 8% on management and advisory fees and 1.2% on commercial banking fees. If we go through the management and the advisory fee on the right side of the slide, you see that we grew 8% Globally, if we exclude the reclassification of the certificates, The growth would have been 13.5% visavis the Q1. You have all the detail on the bottom part of these slides. On the clear blue, light blue of the histogram on the upside of the slide.
You see the upfront fees coming up from 65 EUR 1,000,000 to EUR 72,000,000, both better than the last two quarters of 2018. You can see very clear what I said on Page 11. You see that the quarterly trend of asset under management placement in terms of volumes Grew both in the 1st and second quarter 2019. Meanwhile, in 2018, there was An effect driven by the reorganization of the commercial model and from the spike of the BTP, which didn't allow us to grow in terms of volume of placement in assets under management. On the right side, you can see the blue line is the upfront profitability, which is consistent 2.2 percent on the new product.
Meanwhile, the impact, the percentage of the Upfront fees on total net and commission is recovering in the last two quarters to the level of the Q1 2018. On Page 12, you have the all The stock of the assets under management and assets under custody, there is some slight indication about a slight increase In the volumes, in particularly funds and income, but I have to say that this is what really we want to better a lot in the next quarter. We have, of course, again, back to the good level of placement as shown in the previous slides, but still the increase in asset under management due to the big growth That we are experiencing in deposit is a very consistent ammunition that we have all the intention to exploit since this quarter and for the future quarters. And we think we have a lot of road to do in this respect. Page 13, debt securities portfolio liquidity position.
As I mentioned before, We went down from EUR 27,000,000,000 to EUR 19,000,000,000 of Italian govies out of a portfolio of around EUR 34,000,000,000. The split of this EUR 19,000,000,000 is EUR 6,200,000,000 of HTCS, EUR 11,000,000,000 of HTC and EUR 2,200,000,000 of trading mainly into ACROS trading activity. On the right side, you see the improvement that we have registered in July, Both in terms of reserves on debt security on the upper side and reserves on HTC, So unrealized gains on the lower side, which is really quite consistent all in all almost EUR 700,000,000 visavisbeginning of the Yes. SCR, I already mentioned before, eligible securities. We have plenty we have EUR 22,000,000,000 of eligible securities in order to have set any liquidity needs.
On Page 14, we have operating cost under Strict Control. Of course, we have almost terminated the action that we performed during the merger, but now we are at a very better level than we expected when we started the merger, which consistently can drive our cost base lower than it is. If you see the bottom part of the slides, you can see almost 2% reduction in staff cost, Almost 2% reduction in other administrative costs. And of course, as I mentioned before, this EUR 20,000,000 increase in depreciation due to some depreciation on Tangible asset on real estate mostly. As I was mentioning before, we are changing And adopting our accounting principle, adopting the fair value evaluation for real estate portfolio, which by the year end should bring to a recover also what we have done up to now in terms of depreciation, having a better reflection of the quality and value of our real estate portfolio.
On Page 15, King, as I was mentioning before, there is still a very important reduction even though Only with ongoing and workout, I already mentioned the figures before. I can only say that as far as bad loans, We are down to 3% gross and 1.4% net and also TP are going down. I have to mention that out of the figure of the UTP loans, almost 70% of the global amount of UTP is secured. On Page 16, some numbers, some figure related to the stock. We have Going down from EUR 11,800,000,000 beginning of the year to EUR 10,600,000,000 on June 30, The inflow are also good 7% less of the first half twenty eighteen for inflows in NP and 25% less of inflows in bad loans from UTP.
The coverage is still consistent with the We have done so far including write off, we are above 62%, coverage on UTP is 35% And so on. LLP is already mentioned the increase in cost of credit, which is still In the guidance, we have done to you 65 basis point is the guidance that we also have for the full year. Finally, the capital position, I am very satisfied to show you a very strong capital position both in terms of the phase in. As you see, we are 13.8% of common equity Tier 1 phase in, which is 444 basis points higher than our SREP requirement. Meanwhile, on the Fully faced, we have a very satisfactory 12%, including 4 basis points from LA's FWA transaction, 11.9% stated.
The different elements which allowed us To grow from 10.8%. You already knew of the first one were 100 basis points, 105 basis points of capitalization already announced, but finalized by the 1st part of 2019, AgOS and NPL platform. 20 basis points is the negative effect So the negative TRIM impact of 26 basis points plus some recovering we had with sum related add on. So the global impact was 20 basis points negative. Meanwhile, the performance impact on Q2, Both of the profit and the gain on the reserves, unrealized gain on reserve That brought the Q2 performance to almost 30 basis points.
All in all, 11.9% plus some basis points from LAs, we are to 12% of pro form a fully loaded Check-1. Let's say on Page 18, we are very confident now that we have left to our back all the problems and all the activity which engaged us mostly during the 1st 2 year of the merger. Frankly speaking, I have to say that was there were very hard time, Maybe not yet, not really understood being outside the bank, But we had to perform a massive derisking, some unexpected problem for the bank and the reconstruction of the capital through capital management action. This of course allow us now to be At the best level in terms of NPE ratio and the very good and safe level of common equity, having already sent The new, as I mentioned many times before, we have also Send the pre application for the IRB perimeter to ACB. Do you know that we have still the famous sort of waiver on the massive disposal we have done?
Of course, now we are much more confident having the new rules, the new EU rules about the Article 500, but we also send a new model change in order to include the derisking and the specialized lending into the new number. I already mentioned about the TRIM effect. We still have to factor the SME supporting factor, which will come next year, but moreover, I think that we show we have a lot of significant room For further increase in common equity Tier 1 coming from other disposal of non strategic, but stakeholdings In financial companies, luckily enough, we can show a stable and consistent profitability, which will grow quarter by quarter and also unleash the BTAs in the near future. And as I mentioned before, we can also exploit the potential buffers 1st, in real estate asset and debt securities, which I mentioned before, which should have a consistent buffer in order to offset any potential headwind from regulatory environment. The last page that I want to present to you, of course, leaving all the details on the leaving 20 page of the presentation It's related to the original business plan.
As you know, we will present a new business plan Possibly by year end, the old business plan was done, as you can remember, before The merger of the 2 banks immediately after the announcement, we are very happy to now touch base On the many figure, we have, of course, informed you time by time, but we thought it was very important also to give you Some final flavor of all the effort we have done. So the NPE, the target plan was $23,000,000,000 We are down to EUR 10,700,000,000. The reduction on staff was 1900 people. We have beat above 3,000 people of introduction staff and the branch. We're going to be down from 2,500 to 2,080.
We are down to $1700,000,000 This, of course, helped us to reduce almost $200,000,000 our forecast on costs, Not talking about the massive reduction that we have performed in NPEs. Of course, there were also effects, negative effect on what we forecasted 3 years ago in terms of revenues. We mentioned some objective adverse condition, which impacted on the reduction of revenues. Let's only mention the Euribor, which went which in the plan was 10 basis points positive in 2019 It's now, as you know, 35 basis points below 0. The GDP was expected to be 1% plus now it's 0 and the spread was also perceived as a normalization of the spread visavisabund as you know What we have gone through during this period.
Not to mention the action we performed in order to Have a capital strengthening in order to show the safe 12% of common equity. The other one, Which of course produced some recurrent lower revenues from The private factory. All in all, we feel that now we have a much safer bank in terms of balance sheet, in terms of risks, In terms of also possibility to make profit in the future, having left in our shoulder the problems that we had to phase. So we want to give you this guidance of €0.3 per share as expected EPS. Of course, we think we can do better than 3%.
So we mentioned only major of 0.3%, which by the way is coherent with the majority of the market consensus and with the return on tangible bond equity of around 5%. This is all I wanted to mention. There is also sorry, another aspect when I was mentioning the tailwind of capital. We have also and you will find it on the balance sheet. We have also started the final disposal of the non captive pro family business, which in terms of FWA could release something like EUR 1,000,000,000 of asset once BTM.
The transaction is completed, which means around 20 basis points in terms of potential common equity R1 increase. That's all. I'll leave you the floor for the Q and A.
Excuse me. This is Chorus Call conference operator. We will now begin the question and answer session for analysts and investors only. The first Question comes from Azura Gualsi of Citi. Please go ahead madam.
Hi, good afternoon. A couple of questions on the NII And the UTP, on the NII, can you give us some outlook for the 2019 2020 NII given the move expected in rate by the market and also the fact that I've seen that your spread is still contracting and BTM. Probably there will be the need for some MREL compliant issuance. And the last one is on the sovereign portfolio Because it still represents quite a big chunk of your NII and with the rate environment, if there is any change in that that we can expect in the future. The other one is on the UTP.
Do you still maintain your stance that you want to do all of them organically, Mainly do it organically. And if I can, one other very quick one on the DTA. Can you share with us what you expect to use DTA in this year if possible. Thank you.
Hi, Ms. Guelfi. Good afternoon. NII out, We are quite, of course, encouraged by this result of this quarter. But having said that, we know that, of course, Due to the reduction of your rebar, we will have and the increase also in the stock both of deposit and loans, We will have some mixed effect going on.
We also have some more, as I mentioned before, Some more issuing in terms of senior and lower Tier 2. So we expect a slight reduction of the NII. All in all, in line with our guidance for the full year, But lower than this quarter. In terms of course of issuing, we think we can issue If we can still give some good results also in the next quarter to very favorable condition if the market is still doing As is doing these days, on the other side, we think we can also bettering our customer spread through short term lending activity For which we think we can recover 2, 3 basis points on the stock. UTP, Let's say that having done almost $20,000,000,000 of disposal and reduction, we When we think about disposing $300,000,000 $400,000,000 we don't even mention that.
So for us it's normal to be Engaged in some small transaction related to, I don't know, real estate linked UTP. But if I have to talk about all our UTP portfolio, I think the best guidance I can give is to go through internal workout. Of course, we are monitoring The market, we are looking at what is happening on the market. We have many interaction with potential buyers' interest to UTP. But we have accumulated quite a long experience during this year.
We want to not Continue to lose money just for the sake of selling in Hari. So we will do the best. We have a good plan and we will be even more clear when we will release the new 3 year plan In which we think we can organically go down to the best performing NPE ratio. DPA, no, of course, we will use DTA this year. Sorry, maybe I didn't Sorry, I was asking for some better understanding of your question on DTA.
Of course, we utilized a portion, a small portion of DTA. As you know, we have plenty of potential utilization of DTAs. And so we hope in the future to be much more effective than that.
The next question comes from Giovanni Razzoli of Equita. Please go ahead.
Good afternoon to everybody. Two questions from my side. The first one is on your guidance of adjusted EPS for 2019. I'm puzzled with the comments you have made so far with the target you are giving us because the above the €0.30 Of EPS to me means between €30,000,000 €34,000,000 which leaves me with a net income of €454,000,000 for the full year, while the adjusted performance in the first half, you showed the slide number 405 is €291,000,000 So your guidance would imply significant slowdown in the second half Of the year. But during the call, you have mentioned that you do expect an acceleration of the profitability going forward.
So I would have expected, Given the set of results, a slightly higher guidance in terms of EPS. So what is the missing part In my calculation for the second half also because you are guiding to a reduction in the cost of risk for the second half of the year from 75 to 60 5 basis points, if I'm not mistaken. And related to this question, in the plan, you had the target of dividend payout 40 percent. Shall I apply the same percentage to this $0.30 guidance. So my question is, are you ready to pay dividend this year looking In light of the fact that your capital position has strengthened significantly and your NPE ratio is materially below the target of The business plan.
So that's my first question. The second one is a clarification, if you can share with us What is the amount of the shareholdings that you can consider not a strategic deducted from the CET1 that you may put up for sale. Thank you.
Okay. I thought it was a good guidance to say above $0.30 But of course, the more I say, the more you are keeping ask me. 30.34, I think is a range between 450 to 4.20, which I think is a good guidance. Having said that, of course, as I mentioned before, there will be some different results in the second half. I already mentioned to the first question that in terms of NII, we will have a slight reduction.
Meanwhile, notwithstanding, we are very confident of our capability to generate commission. I have to mention that in the second half, there is August December, which are more difficult months. And also In the first half, there was also the next transaction. So notwithstanding, we frankly speaking, we consider our NFR quite consistent Because we didn't realize any gain from the securities portfolio, we think we have a maneuver to adjust and to increase Also the guidance, but let's say that organic, we stay on the guidance we gave you. In terms of dividend, we never mention Apart from the beginning of the plan that the dividend distribution would have been 40%, of course, we As I explained in the slide of the business plan, we have changed massively The approach to the plan, we have a much better bank now that the bank would have had if we would have followed the plan.
This, of course, had some effect on profitability. We will give much more guidance by the year end, but I think that we can restart also to think about Disregutional Dividend. In terms of stakeholdings, I would say that it would be a figure in the range of EUR 200,000,000 to EUR 240,000,000. Thank you, Andy.
The next question is from Andrea Bertolone of Exane. Please go ahead, sir.
Good evening. Three questions. The first one is on rewarding shareholders. You mentioned in an interview a few months ago that the dividend is not the only way to reward shareholders. So I was thinking whether you were implying that a buyback is theoretically possible for Bami.
Now your core Tier 1 is 12% fully loaded, is 12.2% if you sell pro family. If you meet your guidance, it's 12.75%. If you add the SME supporting factor, it's 13%, Plus the long list of possible positives on Slide 18. Of course, there may be some negatives in another list, which is not here, but you haven't given it to us. So I was wondering whether solvency is strong enough To go and ask for this to the ECB for a one off buyback or you rather not do it because you think you'll be turned down?
In my opinion, doing a buyback rewards shareholders so much better than paying dividends given where your price is. Second question is on the pro family business that is now in IFRS 5. Can you give us some guidance on the contribution that there was In H1 or in Q2, whatever you have, from this business on NII costs And the third question is on provisions. I was just wondering whether in Q2, You have already updated your IFRS 9 parameters for the generic provisions Or you will do that at year end. Thank you.
Okay. Hi, Mr. Bertrallone. No, I was asked about dividends. So that's why I was answering Only about this possibility, as I mentioned many times, but everybody keeps asking me, So I cannot repeat every time, but of course, there are many way and I was not used in the 1st 2 years to think about This because I was trying to give some contribution in terms of better balance sheet.
But of course, because now we can think about that, We will think to everything also to the potential buyback. As you know, regulators are not I'm very happy about buyback, but we will examine the situation and we will try to explore all the opportunities. I am very happy also that frankly speaking finally we talk now only about tailwinds and not anymore about headwinds, Which in any case will come because there will be also some headwinds in the future, not close. We are confident with all the ammunition we have, We can overcome any potential headwind without particular problem, both in terms of profit generation and in terms of further transaction we can do in order to emphasize our common equity. Let's also remember that we have a phase in, which is 13.8%, which allow us to reduce also consistently This number in order to be also compliant with the SREP.
Profamily. Basically, the contribution to the consolidated is very low. It's close to 0 because of the PPA. We of course, when we merged the 2 banks, we included the PPA effect on the pro family assets And nowadays, of course, releasing the asset and the company, this will come with a neutral or even negative effect. So no problem in terms of reduction of profitability.
The only positive effect would be the reduction of almost EUR 1,000,000,000 in FWA. Finally, the IFRS 9 is already included in the number we showed you. Both the historical series and the new scenario, of course, bloomer than the previous one.
Okay. Thank you.
The The next question comes from Christian Carrese of Intermonte. Please go ahead, sir.
Hi, good evening. The first question is on net interest I understand that your guidance of net interest income is slightly down in In the coming quarters, I was wondering what will be the component, it will be the noncommercial banking that The contribution will be lower on our commercial banking. And in terms of deposits, You did a good job. The increasing deposits in the first half still also quarter to date, You said an additional €500,000,000 of additional current account. This could be is currently a negative.
And I would like to understand also your position going into the TLTRO free action starting in September. What is your what are your indication if I'm not mistaken? In the past, you said that maybe you're going to reduce the tick up in the new TLTRO.
Then on capital,
Common equity now for sure more solid than in the past, so back to 12% more than 12%. We are going to you are going to present a new business plan by year end. I understand that you are not giving any Indication maybe, but what kind of capital do you think is the right capital to finance future growth and maybe also to do a further derisking. And again, just Can I commission the level that you shown in the Q2? Do you think that is sustainable also for the coming quarters.
Thank you.
Good evening, Mr. Carrezza. I think I gave you some guidance about NII. Unfortunately, the growth in deposit until we don't switch into Asset under management is very important because it shows the confidence of our clients, but of course is a cost If we are not able to switch into asset under management, which we started to do, as I mentioned, the figure of the upfront we showed you In the first two quarters, but we have to do much, much better than that. So frankly speaking, I hope deposit Can you give us more opportunity not to lose money because of the negative rebar, but to switch into assets under management.
The same, I think, comes from loans. We are frankly speaking very happy to the loan increase we have registered. We are basically now at the level of the best bank in Italy in terms of growth transaction maybe were better than the best competitor. These give us the opportunity to Be much more attentive once we have a new market share, which is very consistent in terms of asset spread. So we already started something on short term deposit, which should bring us some comfort in terms of global commercial spread, but we still think that growing in volumes, we can have good results in terms of commercial banking contribution.
In terms of TLTRO, as you know, we still are waiting because as I mentioned before, we don't have any needs. And also when I give some guidance about the global approach to the new TLTRO, for sure we don't we will not do The same amount we have done in the past. So we are thinking of reducing quite consistently the TLTRO approach. Having said that, I frankly speaking don't know, but I don't think that we immediately in September We'll start utilizing TLTRO also because if we start the new one, we have to reimburse the old one, which maybe is not a good arbitrage, But we will decide. In terms of Checkatuan, but I think your question was more on the guidance of the business plan, which of course I cannot give you yet.
But I don't want Frankly speaking, be worried about Common Equity Tier 1 for the plan. The name of the game for the new plan is profitability. Unfortunately enough, we don't have any more problem in terms of capital, any more problem in terms Of MP stock, I mean relevant problems, so we can go ahead with the figure and the stable reduction Of NP stable, keeping our common level, the level it is, but we We'll be devoted to make the most of our profitability.
Just a clarification on capital. The The numbers you show in the first half, there is any dividend accrual, maybe I missed
Not in the first half, but we have we gave the guidance for the profitability also on the second half.
Okay. Thank you very much.
The next question is from Jean Louis of Goldman Sachs. Please go ahead, sir.
Hi, good afternoon and thanks for the presentation. Because you've been so kind as To have a specific slide as to what capital headwinds and tailwinds can be in the future, I just wanted to understand whether you'd be willing to share your view As to what your risk weighted asset inflation from the total implementation of EBA guideline as well as the finalization of Basel III, often referred as Basel IV, referred as Basel IV would be and also the calendar provisioning full effect, so that we can have a sense of How much headwinds you have versus how much tailwind you can generate as you've done in the past? That would be really good for clarification. And my second question is, it was really nice to give the EPS guidance of $0.3 a share. And I understand that this represents a floor for to develop going forward.
This being said, it's consistent with return on tangible equity of anywhere between 4% 5%. And I guess from there to meet cost of capital in this current environment, we've described yourselves as extremely challenging. Obviously, spreads are still high, GDP growth is low, etcetera, etcetera. As you go into your next business plan, how do you think to You need the doubling of your profitability to meet your cost of capital. So what is the thinking behind Trying to meet cost of capital going forward, what actions can be taken?
Thanks a lot.
Thank you. Most of the questions are on the new plan. Of course, I cannot answer more than I already said. So we know very clearly that the current level of profitability is not satisfactory, not for the market, not even for us. We are satisfied just because together with this level of profitability, we did also a massive restructuring And a positive reshaping of the banks, but now that we are free to be devoted only to the Better profitability, better exploiting all the levers that we have in terms of increasing revenues, Keep under control cost, FUD reduction, exploiting all the digital opportunity.
Of course, this is the core of the new plan and we will give you all the details when we will present to the market. In terms of the same more or less is in terms of the different headwind that you were mentioning. As you know, the vast majority are now postponed to 2022. We, of course, have a lot of Different phase in related to all the aspects that we faced during the year And we are crystal clear in saying that due to our forecast, we can offset old negative potential impact, at least until everything will be more clear starting from 2022. As you know, there are a lot of things still under discussion, not only I think for our bank or for the Italian bank, But for all the European banks, we have a new in short time, we will have a new ECB.
Let's see which kind of approach we can have from now to 2022. But in any case, we are building the ammunition to offset without any pressure all the potential headwind. And the same of course is for the negligible impact We expect in 2020, 2021.
Can I just follow-up on this do you think you can make just Very simply, do you think you can there is any scenario where you can make your cost of capital without doing further external growth at this stage?
We think we can do much better than we do right now. Of course, we proved also that we are very good in managing a very difficult merger, which I think could not have been much difficult or what we experienced due to the market, Due to the regulator, due to different aspects, we find out emerging the 2 banks. So of course, we think that being devoted only to the profitability, we can do much better than we did up to now. Of course, a potential merger in the future, when there will be the condition, when our stock will reprice, When there will be no dilution negative dilution for our shareholders, we will be attentive to any potentiality Because we think we can be able also in that. But now we are concentrated on vectoring our share price, reduce our cost of equity and doing a sustainable profitability Thank you very much.
The next question comes from Domenico Santoro of HSBC. Please go ahead, sir.
Hello. Hi. Good afternoon. Hi. It's Domenico from HSBC.
A couple of questions on my side. First of all, Can we focus a bit on the OT People for you first? Can you give us, first of all, Some data or information about the vintage, because that's not anymore in your financial reports starting from 2018, that will be very useful. The second, if you can give us also the impact on the NPE portfolio from the new definition of defaulted loans from the EBA. Then 3rd, on your participation portfolio.
My understanding from the question from the colleague, you are mentioning that only €240,000,000 might be sold or they might be sellable disposable In the short term, but you have more than €1,000,000,000 reduction to capital at this moment. So I'm just wondering whether in a sort of a worst case scenario, I mean the reduction can be more significant also because ex Argos The contribution to P and L might be material. And then on QTP portfolio, again, I rather prefer You to be much cleaner sooner rather than start to think about the buyback of shares to be very honest. And since we have I saw that you might probably go with the same, especially now that there is Your capital position is much more robust. So my question is, given that there is a calendar provisioning on the stock coming, probably It might be quite painful for you in 2021, 2022.
I'm just wondering whether that's not possible because already you did deal in the non performing loans area and potentially there might be some legal constraint. Any thoughts on that side It will be helpful. Thank you.
Lots of questions, Mr. Santoro. Let's say many of them about again non performing exposure, which I understand is still A concern, but luckily enough for us is much lower than before. Having said that, UTP, the vintage is More or less, I don't have the right figure now, but we can provide you. But more or less, it's 1 third below 2 years, 1 third Between 2 4 years, 1 third more than 5 years.
As far as the EUR 240,000,000 We are referring only to low fluid contributors. Of course, we don't want to make massive sacrifice In terms of contribution to profitability, as we did, frankly speaking, even though at the very good price for the sale of some share of our as, product factory during the 1st 2 years. So we are talking about Sacrificing basically at the level of pro family non captive with very, very small profitability contribution. That's why I mentioned EUR 200,000,000 EUR 240,000,000. The sale of OTP, I didn't see yet I don't see yet massive sale of OTP.
I know there is one competitor that announced the massive sale. Let's see what will be the output. Let's see what will be The final word from everybody about the transaction as we did for the disposal, massive disposal of bad loans, we will be very attentive. Having said that, you have to remember also that we made a lot of sacrifice in terms of economics In order to go down 15 full point of NPE ratio, we want to be a bit more cautious looking at the future being now at a very comfortable 9%. All the other question about the conditional default, current provision, I think I already mentioned to some of you that we are Completely reorganized our CF Lending Officer structure, which will take in account the new change in the definition and the request from ECB coming from the calendar provision.
Basically, we have moved people from the NPE unit, especially for data quality, for data For understanding all the potential effect of the calendar provision in anticipation To anticipate all the management of the UTP and in terms of restructuring, We have people from the commercial activity coming to manage the UTP restructuring in order to Give some more focus on the possibility to put back in bonus this company, which by the way It's the same project that I read on the paper by other competitor. So we don't have exactly The effect that we are ready with the new organization to face also this potential effect, which for us, Frankly speaking, up to now is quite minimum.
Thank you.
The last question is from Ricardo Rotore of Mediobanca. Please go ahead, sir.
Yes. Thanks for taking my question. Just a quick clarification actually. Just to understand 100%, should I understand it correctly, The amount of NPLs in this quarter, which are down from EUR 4,000,000,000 roughly EUR 3,200,000,000, EUR 3,300,000,000 that includes the reclassification of the NPL sold to It is €600,000,000 to discontinue the operational assets held for sale. Is that correct?
Yes, it's correct. We took already out of the NPE, the LACE transaction. The only thing that we perform is the positive effect of these moving out the 600,000,000 with Solti Leontin.
And then another clarification, if I may. You have reclassified also a little bit of a few 1,000,000 of euros of fees related to certificates. Is this going to be the new way you will present fee income from now on? So all the quarters from now on will be affected by that?
Yes. We thought it was better. We saw Because we weren't issuing certificates for the last 2 years. So basically, we were really to understand what was better for The understanding of the market having perceived that our competitors have this reclassification into permission, We now from now on, we will do the same.
Perfect. Perfect.
That is very clear. Thanks.
Mr. Castagna, gentlemen, there are no questions registered at this time. Registered by Mr. Ignacio Cerezo of UBS. Please go ahead, sir.
Yes, hi. Good afternoon. Just a very quick one for me. If you can help us reconcile the fact that the assets under management, including custody, hasn't really grown in the quarter and the stock With the fact that fees seem to have been boosted by increased placement of products and what can we expect basically in the second half of the year If this is just a question basically of market performance eroding most of the placements. Thank you.
I'm not sure I understood the question. You were mentioning assets under custody. So I think you're referring to Page
12, You have AUM plus AUC almost flat quarter on quarter. But then in Page 11, you mentioned a very significant increase The placement of products, which has been materialized and translating into the fee number. So helping us reconcile actually why the stock hasn't gone.
Okay. I understand your question now. Basically, as you know, one thing is The net increase in asset under management, the other thing is to switch product already in asset under manager or in asset under custody to asset under management. What we lack is this kind of conversion of new increase in asset under management. So basically, we are switching a lot of products, but not increasing the net income of asset under management.
So in terms of profitability, you see The commission, you see the increase of profitability and upfront in terms of volumes, You see the new placement, but this is not coming neither from current account or massively from asset under custody. Is this more clear? Yes. Thank you. Okay.
Mr. Castagna, there are no questions registered at this time, sir.
Okay. So if everybody is okay, again, I wish you a good summer holiday And hopefully to see you back again in the next few weeks. Good evening.
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.