Ladies and gentlemen, good afternoon. We are here for the presentation of Banco Popolare Group first half 2016 results. I now hand it over to CEO, Mr. Saviotti.
Good evening, everybody. Let me just be very quick with respect to the first pages of the presentation. They are a snapshot of the first half performance, capital, credit, liquidity, commercial performance. We'll come back to that and get into the details, but let me talk about profitability and operational efficiency. We closed the first half with a loss of EUR 387 million, of which EUR 324 in the first quarter. As you know very well, this loss is due to discontinuity or disruptive elements linked to the first portion of loan loss provisions that were actually set aside to reach the coverage ratios required by the ECB.
Of course, in the first months of the year, we also had to post systemic charges, i.e., the contributions to the Single Resolution Fund and the fee to be paid to be able to retain the right to convert DTAs into tax credits. Now, just a few words on performance. Let's set those aside. Consumer credit grew by 3% on an annual basis. Indirect funding grew by EUR 6 billion, approximately. As to cards, they went up by almost 62,000 in the first half. Online banking, more than 53,000 units. Whereas checking accounts are confirmed at 2.3 million. They remained stable. The growth was really negligible. This means that in this second half of the year, we will have to be more aggressive and take more aggressive actions so as to drive this item up. On page five, the consolidated income statement.
As we said, we closed with a net loss of EUR 380 million, net of the fair value option. It comes in at EUR 387 million, this being the practical management accounting loss. In the first half, net loan loss provisions have been reporting a very strong discontinuity from their normalized course. We said that the cost of credit was averaging between 80 and 100 basis points, this because right from the first quarter, we already started to bring the NPL coverage in line with the target fixed by the ECB for the new combined entity, for the new group, under the merger plan with Banca Popolare di Milano. On page seven, we have non-recurring P&L items and systemic costs. As to non-recurring P&L items, a few things, EUR 2 million for property impairment, EUR 8.8 million for write-downs of AFS securities, and EUR 1.5 million for the closure of BP Luxembourg.
The two main systemic costs are the annual contribution to the Single Resolution Fund and the annual fee to retain the right to convert DTAs into tax credits. With respect to the contributions to be paid to the Single Resolution Fund, they are recognized under other administrative expenses, and they amount to EUR 44.3 million. They have been recorded in Q1, and they represent the total annual contribution or cost for 2016. In 2015, the contribution amounted to EUR 38 million that we had recognized, EUR 23 million of which had been recognized for Q1 under the line item for provisions for risks and charges.
Later on, they had been increased by EUR 15 million, and they had been fully reclassified under the line item, "Other administrative expenses." The fee to convert eligible DTAs into tax credits are recognized in Q2 of this year, and they totaled EUR 40.4 million, include EUR 27 million worth of annual fee for fiscal year 2015. EUR 13.3 million, this being the estimated six-monthly fee for 2016. Financial year 2015 had not been burdened by this charge. On page eight, we talk about net interest income. It went down by 12.4% on a yearly basis and by 3.4% quarter-on-quarter. The main drivers of this drop are various. First of all, the falling EURIBOR rate, minus 27 basis points year-on-year and minus nine basis points quarter-on-quarter.
This being the one-month EURIBOR, minus 24 basis points year-on-year and minus seven basis points quarter-on-quarter with respect to the three-month EURIBOR. The other driver is the declining interest income from securities portfolio, minus 7.6% year-on-year and minus 3.6% quarter-on-quarter. Last but not least, the strong competitive pressure on customer loan pricing, which caused the asset spread at branch network level to go down by 23 basis points year-on-year and by seven basis points quarter-on-quarter. Against this backdrop, worth mentioning is the fact that the liability spread at branch network level could be curbed from 8.7 to 0.84 basis points, despite the falling EURIBOR rates. From EUR 77.4 million to EUR 70.2 million is the decline in the actual amount for wholesale funding.
On page nine, we see net fees and commissions that went down 17.1% year-on-year, while they went up by 1.8% quarter-on-quarter. The annual decline was due to the volatility of financial markets, and this volatility practically influenced customers' propensity to invest. However, we should remember that the yearly comparison is not comparable practically. It is not on a like-to-like basis, because in the first half of 2015, there had been practically an extraordinary circumstance, because we closed with EUR 421 million, whereas the average budget had been EUR 350 million. This was really an outstanding performance. Net of this outstanding performance, the increase would be by 8.5%. Indirect funding went down 5.2% year-on-year and by 3.5% quarter-on-quarter. This decline was driven again by an extraordinary transaction executed by a key customer who sold, and therefore the securities that were sitting with us have been transferred over onto another bank.
There has also been the fact that there was this underperformance and the negative performance of prices on financial markets. Net of the adverse market effect, the asset management business was growing 2% year-on-year and 1% in the first half. The net financial result, EUR 99 million approximately, down by 31% year-on-year. This again reflects the market performance. Banca Aletti's contribution was 12.6% against 44.3% being the contribution in the first half of 2015. This result was affected by the negative market performance and by falling interest rates, which of course influenced customers' investment choices towards plain vanilla products less correlated with markets. Therefore, of course, this reflected also on Banca Aletti's certificates and trading activities.
In any case, we would like to highlight that the quarterly average performance in the first half, EUR 49.4 million, was basically in line with the quarterly average reported in 2015, net of course, of capital gains that had been generated back then by selling the stakes in Istituto Centrale Banche Popolari and Arca. Operating costs and personnel expenses. Personnel expenses went down by 4.9% thanks to the headcount reduction. The average headcount decline was 410 full-time equivalents year-on-year, whereas the end of period figure reports a reduction of 71 full-time equivalents in the half-year period and 289 full-time equivalents year-on-year. On page 13, we see the activities we carried out with respect to personnel and headcounts. These were activities that were started a few years ago in view of how things were evolving. Our business plan had a target for 31st of December 2016.
The target for FTEs was 16,900 employees. Well, we are ahead of this target by 464 FTEs. Back in December 2015, we were ahead by 251 full-time equivalents. At the end of 2016, with 16,417 employees, again, as I said, we are ahead of our business plan target by 464 full-time equivalents. With respect to administrative expenses, they went up by 23.3% year-on-year, this exclusively due to costs that were incurred for the Single Resolution Fund, the contribution being EUR 44.3 million. Again, the annual fee paid to retain the right to convert DTAs into tax credits, both for 2015 and for the first half of 2016. Net of these systemic costs
Administrative expenses would have declined by 2.5% year-on-year. Amortization and depreciation increased by 7.5% year-on-year, with an ordinary growth of 4% entirely attributable to investments carried out within the IT sector. Further contribution to the cost reduction will materialize in the coming months, thanks to the closure of additional 120 branches that have been finalized at the end of May practically. On page 16, we start talking about our capital. Here you can see that direct funding goes up by EUR 1 billion over the quarter, plus 1.2%, EUR 500 million of which in the second quarter.
We can say that the good performance in the first six months of 2016 would make us report only a 0.7% decline over the year, which is essentially due to our choice to reduce the bond and debt segment, which fell by 10.2% year-on-year and 12% over the six-month period. This decline was a choice we made to favor the growth of checking accounts and deposits, and also to grow the repos business. Core deposits, i.e. checking accounts and deposits, reported a 5.7% year-on-year growth, plus a 3.4% over the six-month period. Core deposits become, in relative terms, more important, especially as far as branch captive funding is concerned, passing from 56%-59%. I'd like to stress that this type of direct customer funds, net of corporate funding, which is equal to EUR 6.9 billion, is equal to EUR 34.4 billion.
Even though we exclude time deposits, which is equal to EUR 3.8 billion, we would nonetheless have EUR 31 billion worth of retail deposits, which as you know, is crucial, is fundamental to have an adequate structure for the bank. We'll continue emphasizing this segment for this item to remain at this level or improve. Plus, direct customer deposits do not include the liquidity generated by the sale of certificates, whose stock increased by 28% year-on-year and 8% over the half year period and was equal to EUR 5.7 billion. Let me remind you that certificates cannot be acknowledged or recognized as direct customer deposits, but they are considered financial liabilities in the held-for-trading portfolio. Finally, our exposure with ECB is equal to EUR 12 billion, and it's entirely represented by the new TLTRO II transaction, which with the June 24th auction, replaced the TLTRO I, which was fully repaid.
Let me remind you that as far as our group is concerned, the maximum drawing allowed for TLTRO II is equal to about EUR 15 billion. Further unencumbered eligible assets with the ECB at the end of June, net of haircuts, are equal to EUR 13.9 billion, and they are mainly represented by Italian government bonds. The decline over March is mainly attributable to an increase in repo transactions. Let me tell you that in the first few days of this month, we have closed a few repo transactions, and these eligible assets went up to slightly above EUR 16 billion. Liquidity ratios, they are really appreciable. I would say they are really good. The LCR is in excess of 150%, and also the net stable funding ratio is in excess of 100%, and came in at 103.6%, calculated according to the quantitative impact study rules, i.e.
including the portion of certificates that have a capital protection. Page 18. Here you see the maturity profile. There is nothing to signal as far as the first six months are concerned. We have already repaid about EUR 3 billion, so we have already met all of the wholesale maturities that were expected for the full year. Over the six-year period, we issue EUR 1.5 billion of our bonds with third party networks, EUR 1 billion in first quarter, EUR 500 million in the second quarter. These issues were very well received, and this way we could kind of widen the funding sources as far as the retail market is concerned in the first half. Retail bonds coming due were equal to EUR 3 billion, of which EUR 1.3 billion were calls that we exercised, compared to EUR 3.2 billion. In the current semester, we'll have EUR 900 million more to be called.
We also reduced retail bond issues over the half year. We favored direct deposits and other forms of core deposits because we wanted to limit the cost of fundings. As far as the securities portfolio, government bond portfolio is EUR 18.6 billion, almost all Italian government bonds, +5.3% year-on-year and declining by 1.3% quarter-on-quarter. 45% of them are in the available-for-sale portfolio and 43% in held-to-maturity, while the trading portfolio is still limited to 11 or 12%. The life to maturity is about 3.9 years. At the end of June, our gross AFS reserve on government bonds was equal to EUR 82 million, compared to EUR 152 million in March, while the unrealized capital gain on HTM securities amounted to EUR 325 million versus EUR 350 million in March.
The most recent data is as at August 3rd, i.e., the day before yesterday, that was equal to EUR 116 million for AFS gross reserve on government bonds and EUR 336 million for HTM securities. On page 21, we start talking about loans. We can see that gross loans grew by over EUR 1 billion over the six months, +1.2%, EUR 900 million of which in the second quarter. The yearly decline is equal to 1.7%, that is entirely attributable to non-core elements such as the runoff of the leasing division and the disposal of bad loans, which we made in the second half of 2015 as well as in the second quarter of 2016.
We lent slightly above EUR 5 billion with an increase of 3.4% compared to the first half 2015, EUR 900 million to households, EUR 1.2 billion to small businesses, EUR 2.7 billion to mid corporates, and EUR 300 million were loaned to large corporates. Page 22, loan loss provisions. We can see that the cost of credit in the first half of the year, as I have already repeated, is characterized by a strong discontinuity compared to its normalized course, because even before the capital increase, we had brought in line the coverage of NPL with the targets set by the ECB under the merger plan with the BPM. You know, we have to cover bad loans at 62%. We have to have a coverage for all NPLs equal to 49%.
The increase in the coverage so as to meet the blessed targets set by the ECB can but create a lot of discontinuity in terms of the impact of the various quarters on our income statement, because the higher provisions depend also, and the recognition of these higher provisions, depends on the timing according to which we will make certain disposals of loan portfolios, or also we may decide to change certain estimates, meaning that the valuation process of some loan categories will be modified. Net of these disruptive elements, the cost of credit stood at 93 basis points compared to the end of 2015, which was 94 basis points, with an expected range comprised between 80 and 100 basis points for the entire period.
NPLs, after the EUR 1 billion decline, which we reported in 2015, passing from EUR 21 billion to EUR 20,645 million, the stock of gross NPLs goes down by an additional EUR 495 million, -2.4%, of which slightly less than EUR 500 million in the second quarter, thanks to the sale of bad loans for about EUR 227 million, which we made in June. The annual decrease of gross bad loans, which is equal to 3.7%, once again displays a better performance by Banco compared to the market. In fact, if we look at the statistical analysis conducted by the Bank of Italy, the market is displaying a growth in bad loans of 3.2%, but let me say that the statistical bulletin of the Bank of Italy is updated as at May. That was a +3.2% in May for the market, while we reported a -3.7% in June.
Unlikely-to-pay declined by 5.9% year-on-year, -1.1% in the quarter. Past due to decline by 51% year-on-year, 16.8% in the quarter. Not only growth figures are declining, but net figures as well. In fact, if we see that total net NPLs declined by 4.3% year-on-year and 0.8% quarter-on-quarter, passing from EUR 14,109 million at the end of June 2015 to EUR 13,505 million at the end of June 2016. New NPLs in the first half of the year were equal to EUR 1.1 billion, and they are in line with a normalizing trend that started back in 2015, -4.3% compared to the first half of 2015.
The net flow for the first quarter of 2016, +EUR 813 million, is higher than the first half of 2015, only because there were fewer loans that were reclassified as performing loans, while it's in line with the first half of 2015. We think that this single information, single datum, is influenced by the fact that as certain loans are classified as forborne, and they are actually to be reclassified as performing, but as you know, they cannot be reclassified immediately as such, because according to the ECB, it takes a one-year time for the so-called probation period before these loans can be reclassified as performing. The coverage of group NPLs, we have a solid NPL coverage ratio confirmed at 45.6%, including write-offs for total NPLs, and 59.3% for bad loans alone.
The coverage in Q2 did not increase due to the disposals that were finalized in June, and in particular, we're talking about unsecured bad loans, that, of course, by definition, are highly provisioned against. With respect to bad loans, considering the fact that they are backed by collateral and the coverage of these loans goes from 59.3% to 104%. Whereas with respect to unlikely-to-pay loans, the 24.7% stated coverage goes up to 88.8%. Also past due have a coverage of 19.2%. One of the things we keep on repeating, and therefore, let me restate it once again today, is that Banco has a very high percentage of secured loans out of non-performing loans, i.e., 87%. With respect to this ratio, we are ranking first. The peers average is lower. You know that these figures refer to the end of 2015.
Most the updates come with the publication of the annual report of 2016, we will see whether there are any changes. In any case, the percentage of the secured loans out of impaired loans is 86.9%, again, I repeat. This is why we highlight once again, and we show two charts, chart 25 and 26, where we try and show you how we are fairing with these bad loans and with these unlikely-to-pay loans. On page 25, you see the chart referring to bad loans. Secured bad loans, backed by collateral, are 76.7%. Their stated coverage is 45.1%. The commercial assets backing these bad loans, their value is EUR 10.7 billion, but the portion that is pledged is EUR 6.7 billion, and it covers the net amount of secured bad loans, which is EUR 5.1 billion.
We have EUR 5.1 billion net, and against this net amount, we have collateral for EUR 6.7 billion. We see that there is a 24% difference. Again, with respect to the market value, it's EUR 10.7 billion. This collateral, I mean, sorry, the 69% of the property is in Northern Italy, 21% in Central Italy, and 10% in Southern Italy and Islands. Let me remind you that collateral has this amount of stated coverage
I.e., 45.1%, whereas the unsecured, which is 23.3%, have a stated coverage of 82.7%. Again, this is a highly sizable coverage. Let me repeat this also for unlikely-to-pay loans. They are secured by 75.6%, that is, and a stated coverage of 20.9%, but considering the property backing them, whose market value is EUR 10.1 billion, and the portion linked to the residual loan is EUR 6.2 billion. This tells us that the coverage is in excess of 105%. Practically, we have EUR 6.2 billion worth of collateral limited to the residual loan that have a net coverage of EUR 5,755,000,000. In this case, the difference is 7.5%. Again, the property results are 62% in Northern Italy, 27% in Central Italy, 10% in Southern Italy, and 1% abroad. Unsecured unlikely-to-pay loans are 24.4%, and the stated coverage is 36.4%. Next chart, leasing division.
The downsizing is progressing, and we are satisfied with the progress we are making. You see quarter-by-quarter that this figure goes down. We went from EUR 12.5 million to EUR 5.5 billion, of which EUR 2.6 pertain to Release, where 20% of the portfolio is held by the shareholders, BPER, BPM, and BPS. We see that the outstanding volume goes down, that is the EUR 5.5. In the meantime, also gross NPLs go down, which really makes us very satisfied. We got down to EUR 3.6 with a 5.6% decline year-on-year and a 3.1% quarter-on-quarter. The stated coverage went up to 36%, plus 13 basis points with respect to 2009. The coverage, considering also the valuation of collateral, which by the way, include on average a haircut of 20%, goes up to 105%.
On page 29, we see the group capital ratios, where we reported a steep increase over the quarter, both on a phase-in basis and on a fully loaded basis. The rights issue played the most important role. On a phase-in basis, the rights issue, which was completed in June, led to a 235 basis points increase. The negative result for the quarter eroded nine basis points, but then we have other effects, for example, risk-weighted assets evolution improved this figure by 10 basis points. So at the end of June, we closed with a common equity Tier One of 14.8% and a total capital ratio of 18.1%, again, on a phase-in basis. With respect to a fully loaded basis, the rights issue contributed to 155 basis points.
The quarter's loss have eroded it by 15 basis points, and the other effects led to a contribution of seven basis points. So that at the end of June, the common equity Tier One fully loaded is 14.1%, the Tier One is 14.2%, and total capital is 17.5%. To be fully correct, we have to inform you that these capital ratios do not take into account the additional write-downs that we are going to carry out to bring the NPL coverage to the level the ECB has required under the merger with the BPM. In the following slide, we just talk about stress tests, but you know the results very well. You know that we passed them with flying colors. This is practically what happened already in 2014.
You may remember that the stress test under the adverse scenario saw us ranking third after Intesa Sanpaolo and Credito Emiliano back then. Now we are number one with respect to the baseline scenario, and we are ranking second after Intesa Sanpaolo under the adverse scenario. This is something that really made us very happy. We were really satisfied with this result, and it reflects the solidity and the strength of this group, which had already been shown with the comprehensive assessment and the stress test in 2014 and has been once again confirmed with the 2016 stress test. This led me to the conclusion, and I will be very happy to answer to your questions. Thank you, ladies and gentlemen. If you wish to ask a question, please press
Star one and wait to be introduced. To cancel your question, please press pound. First question from Giovanni Razzoli. Please go ahead.
Good evening, two very quick questions. Yesterday, during the conference call, Mr. Castagna said the plan includes EUR 8 billion disposals, EUR 5 billion unsecured at EUR 0.05, and the remainder will be taken care at the final part of the plan at EUR 0.10. At what price are you selling unsecured bad loans? EUR 230 million was the total amount you mentioned. I'd like to know how much or at what price you sold them. Italease is my second question. They are still losing EUR 25 million every quarter. In the second part of the plan, are you going to figure out something, maybe Monte dei Paschi style, to correct the situation? Otherwise, every year you will open the balance of the year with annualized expected losses of about EUR 80 million.
Let me take your first question first. In the plan, we entered very conservative data. I don't want to specify at what price we have sold because there is a data room up and running right now to sell an additional EUR 700 million-800 million worth of these loans. I don't want to mention prices. The EUR 5 you mentioned is a particularly prudent, particularly conservative price. We have never sold at these very low prices before. As far as secured loans are concerned, we have a limited experience. What we did this quarter is selling secured loans and taking 50%. What we can say is that the quality of the collaterals we have, the already very significant provisions against these loans, provisions that will be increased before the end of the year.
The quality and the quantity of collaterals will allow us to sell these loans at the levels we have reported in our business plan, levels which were really conservative. As far as Italease is concerned, we keep selling something. We sold EUR 50 million recently. A few other assumptions or a few other attempts are underway quarter after quarter. We are improving and enhancing our provisioning. Time will come when we can actually make a more significant sale. Thank you. I was actually talking about a Monte dei Paschi style solution, like for instance, carving out the loss. We haven't actually figured out or we have not imagined we can solve the situation this way, but plans can be modified, can be redesigned. If an opportunity arises, we will be the first to take it into account. Thank you. Next question, Andrea Vercellone.
I have three questions. Can you tell us what the DTA amount for past losses at June 30th is? In Q2, all banks have practically recognized the capital gains. You didn't. Can you tell us the amount and when it is going to be recognized or booked? The third question is out of curiosity. The NPL coverage increase required by the ECB is going to be something that you have to face altogether, or is the Banco Popolare di Milano also going to have part of the burden?
Let me start with the last question. We made an agreement with the ECB to raise the coverage ratio to 62% for bad loans and 49% for NPL loans, for NPLs. On January 1, 2017, when we are going to be combined, in this lock of marriage, we are going to share all this together. We are going to take joint measures. With respect to ECB measures, we are going to keep up with our promises.
Referring to your doubtful loans, you are going to go up to 62% and 49%?
No doubt. We are going to raise it to 62% and to 49%. We're already at 69.3%, 69.4%. When the merger will kick in, also with respect to the disposals we are going to complete, there are going to be coverage ratios, which of course are going to be agreed. In any case, in the business plan, we have already defined them. With respect to Banco Popolare, we have a commitment, and we are going to live up to these commitments. DTAs for tax losses at June 30th are EUR 235 million fully loaded and EUR 140 million on a phase-in basis. With respect to Visa, well, we did not recognize the capital gains for the disposal of the stake in Visa. We will do it in the next quarter, and we're talking about EUR 25 million-EUR 30 million.
If you have a question, you can press star one on your telephone keypad. Press star one if you have a question. Next question from Domenico Santoro. Please, Mr. Santoro.
Good afternoon. I have a few questions. Admin expenses. Excluding the DTAs fees, we have EUR 155 million for this quarter. Is this a kind of very low level, which we can take as a benchmark and as a repeat level for the next few quarters? As far as dividends and equity investments, I'd like to know whether you are making investments in consumer credit, because consumer credit is growing a lot in Italy while we have a limited contribution from this sector. Now I have another question, and I hope this won't anger you, but we have seen Carige raising its coverage to 30% on unlikely-to-pay loans. Write-offs is at 40% or selling at 40%.
There is greater and greater attention by the authority that shifted their attention from bad loans to unlikely to pay. There's a danger there because in the last few days, your stock price plummeted for a reason. There might be the risk that in spite you have already increased the coverage ratios, you are going to be forced under the business plan to raise the coverage ratio. I rule it out entirely. I don't think we can be forced to increase the coverage. Also, when we received a request, we had a common equity ratio, which would have allowed us to marry Banca BPM with no problems whatsoever. We made the capital increase, and we are even healthier and stronger now. There is no possibility whatsoever that the requests we received are revised upward because they are already extremely demanding, and we will meet those requests.
We will satisfy them before we get married with BPM. As far as admin expenses are concerned, I really hope I can lower the level even more. For the time being, I really think we are in a very safe situation. I am talking about admin expenses, net of these new systemic charges, i.e., admin expenses generating by our operations. I really hope that a few more millions will be recouped here so that the second half of the year may close even better. You had another question. Could you please repeat that? The contribution from your equity investments. All right. I have the specific indication concerning Agos. Agos gave a great contribution in the first half. It is slightly above EUR 47 million, while Popolare Vita and Avipop Assicurazioni are lower. Combined, they are equal to EUR 15 million, and the rest is just peanuts.
The three significant levels are Agos, Popolare Vita, and Avipop Assicurazioni. Why your risk-weighted assets decline in the period while in the quarter, while loans volume increased? Most of it is due to cost containment, both under the IRB method. I am talking about operating risks. Both under the IRB and standard methodology. I don't have the numbers here, but a colleague here is saying that we also retouched market risk. I remember very well that the two operational risks, both under the IRB methodology as well as the standard methodology, allowed us to acknowledge a significant reduction. My colleagues are so well organized, they have already provided me with the right numbers. Operational risk is equal to about EUR 1 billion reduction, while the reduction for market risk is about EUR 400 million.
I am sorry, but the line went down when the colleague earlier was talking about the coverage of the EUR 227 million. If you said that, could you please repeat that? No, we did not say anything. We did not say at what price we were selling because there is a data room analysis and due diligence up and running right now, so we cannot mention prices. I just answered Mr. Razzoli's question, saying that we had never sold at levels as low as the ones embedded into our business plan. We have been extremely conservative, but up until now, we have sold at percentage levels that are a lot higher.
There are two questions from the English line. We cannot hear the question, so we are waiting for the question from the English channel. If you can please ask a question. You can hear me? Hello?
Fees, you have reported EUR 322 and I think the guidance for a normal quarter is around EUR 340. The run rate embedded into consensus, the growth you need to have in the second half versus Q2, it is a very high level of growth. Can you give guidance on what could be the right number for the second half of the year? Thank you.
Mr. Cruz, you started speaking while the line was still off. Your question came in truncated. Can you please repeat your question right from the beginning, please? Thank you.
Sure. Thanks. Basically, when I am looking at consensus for NII and fees, I compare to the Q2 level, there has to be lower growth in the second half of the year to meet consensus for this year. I would like to know if you have any guidance on NII and fees for the second half of the year. Thank you.
As regards net interest income, we still have to further analyze the situation. We started to carry out the necessary activities to sort of contain liquidity, which we have in excess, in order to steer part of this liquidity towards investments that can generate partly net interest income. On the other side, there are going to be measures on the net interest income by reducing wholesale bonds upon maturity. These two activities combined over the second half of the year should enable us to improve our net interest income. Of course, we cannot quantify this improvement, but we hope it is going to be satisfactory because, of course, we still do not know exactly the timeline of these initiatives. As to fees and commissions, it is a little bit simpler.
Consider that this quarter we had an increase by only EUR 6 million compared to the first quarter because our branch network was really committed and involved in the rights issue. You may remember that we had to complete a rights issue. Of course, our people at branch level had to carry out a number of customer service initiatives to get in contact with our customers so as to give our customers the most complete information and to tell them how important this rights issue was. Of course, you saw very well how well-informed our customers were and how fully they were involved, and they participated in the rights issue. This effort made by our branch employees to publicize the rights issue, of course, sort of veered a little bit their attention from and/or their focus on the sale of products. Away from the sale of products.
We had practically a lower sale of products. According to May data, we have already seen signs of improvement because May closed with commissions of EUR 115 million and in June we closed with EUR 113 million. Practically they are getting close to the EUR 335 million or EUR 340 million amount on a quarterly basis. That is sort of our guidance. I cannot say I am sure, but I'm quite confident that the activities we are putting in place to increase our commission stream will, at the end, give us the results we are expecting so as to increase the commission stream by a few million. Thank you.
Thank you.
Okay. We are ready for Agia's question. Agia, go ahead. Your line is open.
You can hear me? Hello?
Yes, we can.
Yes. I have two questions. First, is it a coincidence that ECB coverage ratio demanding of 62% is broadly in line with the purchase price by the Atlante fund from Monte? Do you think there is some coincidence here on that the price of Monte will be a benchmark? My second question will be on your strategy for your Italian govies portfolio, as I understand that you have some requirement to decrease this portfolio. We have seen this with Milano, for example. What is the expected impact on your NII?
Well, the ECB did not ask us to cut back on our government bond portfolio. They asked us to increase the bad loan coverage ratio and take it up to 62%. At the same time, they also asked us to make sure that total NPL are covered by 49%. We will have to increase bad loans coverages, and we make sure that NPL will be covered at 49%. No indication whatsoever was given us as to the government bond portfolio. The regulator did not ask us to do anything as far as this portfolio is concerned, and we can manage it as we want. There is no coincidence as far as Monte dei Paschi is concerned.
Okay. Thank you.
Thank you, Mr. Saviotti. There are no other questions. Well, if there are no other questions, before I forget to say this, let me wish a good summer season to all of you who have been so kind as to follow us. The closing remarks is that Banco Popolare is solid, as we saw from the stress test. It has a good liquidity, as we saw from the liquidity profile. We're still suffering a little bit with respect to profitability. We are all focusing on improving our profitability. Our NPL stock is going down, and it's doing so naturally, and we will further help this decline with our daily workout activities and also with our sales.
The combination with Banca Popolare di Milano will speed the whole thing up because we will have an ad hoc NPL hub, so to speak, which is going to be manned by double the employees we are available now. We are quite confident that in October, when the shareholders meeting is going to be held to convert the bank into a joint stock company and the merger with Banca Popolare di Milano, we are going to show good numbers that are going to be bolstered up further in the future. Thank you. The presentation is now closed. We thank you for participating, and you can disconnect. Thank you.