Ladies and gentlemen, good afternoon. We are here for the presentation of Banco Popularis Group First Half twenty sixteen Results. And I now hand it over to CEO, Mr. Saviote.
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 detail. But let me talk about profitability and operational efficiency.
We closed the first half with a loss of EUR $387,000,000, of which EUR $324,000,000 in the first quarter. But 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 ECB. And 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 the DTAs into tax credits. Now just a few words on performance.
Let's set the consumer credit grew by 3% on an annual basis. Indirect funding grew by 6,000,000,000 approximately as to cards, they went up by almost 62,000 in the first half. Online banking, more than 53,000 units. What what was checking accounts are confirmed at two point three million. So they remained stable.
The growth was really negligible. So this means that in this second half of the year, we will have to be more aggressive and to take more aggressive actions so as to drive this item up. On page five, the consolidated income statement. We as we said, we closed with a net loss of $380,000,000 net of the fair value option, it comes in at EUR $387,000,000, 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 100 and between 8,100 basis points. But 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 the Banco Popular de Milano. On page seven, we have nonrecurring p and l items and systemic costs. You know, s two and p l the nonrecurring p l items as few things, 2,000,000 for property impairment and EUR 8,800,000.0 for write downs of AFS securities and EUR 1,500,000.0 for the closure of BP Luxembourg. These two main systemic costs are the annual contribution to the Single Resolution Fund and the annual fee to retain the right to convert the DTAs into tax credits.
Now with respect to the contributions to be paid to the single resolution fund, they are recognized under other administrative expenses and they amounted to EUR44.3 million. They have been recorded in Q1 and they represent the total annual contribution or cost for 2016. In 2015, the contribution amounted to 38,000,000 that we had recognized, EUR23 million of which had been recognized for Q1 under the line item provisions for risks and charges. Then later on, they have had been increased by EUR15 million and they have been fully reclassified under the line item other administrative expenses. Then the fee to convert eligible DTAs into tax credits recognized in Q2 of this year and they totaled EUR 40,400,000.0, include EUR 27,000,000 worth of annual fee for fiscal year 2015.
And EUR 13,300,000.0, 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 up 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 basis and minus nine basis points quarter on quarter. This being the one month Euribor and then minus 24 basis points year on year and minus seven basis points quarter on quarter with respect to the three months 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. And then 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 to 0.87 from 8.7 to 0.84 basis points despite the falling Eurobor rates.
And from EUR77.4 million to EUR70.2 million is the decline in the actual amount for the Wholesale Fund. And 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 practically influenced the 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 2015, there had been practically an extraordinary circumstance because we closed with €421,000,000 whereas the average budget had been €350,000,000 and 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 to on to another bank. And there has always 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.
Net finance the net financial result EUR 99,000,000 approximately, down by 31% year on year. And this again reflects the market performance. Banca elected contribution was 12.6%. Against 44.3% being the contribution in the 2015. And 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.
And therefore, of course, this reflected also on Bancoletti's certificates and trading activities. In any case, we would like to highlight that the quarterly average performance in the first half, 49,400,000.0, 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 Instituto, Centrale, Banteco Polari and Arca. Operating costs and personnel expenses. Personnel expenses went down by 4.9%, thanks to the headcount reduction.
The average headcount decline was four ten full time equivalent year on year, whereas the end of period figure reports a reduction of 71 full time equivalents in the half year period and two eighty nine full time equivalents year on year. On Page 13, we see the activities we carried out with respect to personnel and headcount. These were activities that were started a few years ago in view of how things were evolving. Our business plan had a target for 12/31/2016. And the target for FTEs was 16,900 employees.
Well, we are ahead of this target by 64 FTEs. Back in December 2015, we were ahead by 251 full time equivalents. And in at the 2016 with EUR16 four seventeen employees. Again, as I said, we are ahead of our business plan target by EUR464 full time equivalents. Respect to administrative expenses, they went up by 23.3% year on year, but this exclusively due to costs that were incurred for the single resolution fund, the contribution of being EUR44.3 million.
And again, the annual fee paid to retain the right to convert the DTAs into tax credits both for 2015 and for the 2016. Net of these systemic costs, 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 May practically.
On Page 16, we start talking about our capital. And here, you can see that direct fundings grows up by EUR 1,000,000,000 over the quarter, plus 1.2%, EUR 500,000,000 of which in the second quarter. So we can say that good performance in the 2016 would make us report only a 0.7% decline over the year, which is essentially due to our choice to reduce bond the bond and debt segment, which fell by 10.2% year on year and 12% over the six months period. This decline was a choice we made to favor the growth of checking accounts and deposits and also to grow the repos business. So core deposits, I.
E, checking accounts and deposits reported 5.7% year on year growth plus 3.4% over the six months period. So core deposits become, in relative terms, more important, especially as far as branch captive funding is concerned, passing from 56% to 59%. I'd like to stress that this type of direct customer funds, net of corporate funding, which is equal to EUR6.9 900,000,000.0 is equal to EUR 34,400,000,000.0. Even though we exclude time deposits, which is equal to EUR 3,800,000,000.0, we would nonetheless have a EUR 31,000,000,000 worth of retail deposits, which as you know, is crucial, is fundamental to have an adequate structure for the bank. So 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 5,700,000,000.0. Let me remind you that certificates cannot be acknowledged or recognized as the direct customer deposits, but they are considered assets financial liabilities in the held for trading portfolio. Finally, our exposure with ECB is equal to EUR 12,000,000,000 and it's entirely represented by the new TLTRO II transaction, which on June with the June 24 auction replaced the TLTRO one, was fully repaid. Me remind you that as far as our group is concerned, the maximum drawing allowed for TLTRO two is equal to about EUR 15,000,000,000. Further unencumbered eligible assets with the ECB at the June, net of haircuts, are equal to EUR 13,900,000,000.0 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, have closed a few repo transactions. And so these eligible assets went up to slightly above 16,000,000,000. Liquidity ratios, they are really appreciable. I would say they are really good.
The LCR is in excess of 150 percent. 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 We have already repaid about EUR 3,000,000,000. So we have already met all of the wholesale maturities that were expected for the full year. Over the six year period, we issued 1,500,000,000.0 of our bonds with third party networks, 1,000,000,000 in the first quarter, 500,000,000 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 points coming due were equal to 3,000,000,000 of which 1,300,000,000.0 were call that we calls that we exercised compared to 3,200,000,000.0. So in the current semester, we'll have EUR 900,000,000 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 18,600,000,000.0, almost all Italian government bonds plus 5.3% year on year and declining by 1.3% quarter on quarter.
45% of them are available for 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 three point nine years. At the June, gross AFS reserve on government bonds was equal to EUR 82,000,000 compared to EUR 152,000,000 in March. While the unrealized capital gain on HTM securities amounted to EUR $325,000,000 versus EUR $350,000,000 in March. The most recent data is as at August 3, I.
E, the day before yesterday, and that was equal to EUR 116,000,000 for AFS growth reserve on government bonds and EUR $336,000,000 for HTM securities. On Page 21, we start talking about loans. We can see that gross loans grew by over EUR 1,000,000,000 over the six months, plus 1.2%, EUR 900,000,000 of which in the second quarter. The yearly decline is equal to 1.7, and that is entirely attributable to noncore elements such as the runoff of the leasing division and the disposal of that loans, which we made in the 2015 as well as in the 2016. We lent slightly above 5,000,000,000 with an increase of 3.4% compared to the first half twenty fifteen, 900,000,000 house holds, 1,200,000,000.0 to small businesses, EUR 2,700,000,000.0 to mid corporates and EUR 300,000,000 were loaned to large corporates.
Page 22, loan loss provisions. 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. We have to cover that loans at 62% and 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 depends 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. So net of these disruptive elements, the cost of credit stood at 93 basis points compared to the 2015, which was 94 basis points and with an expected range comprised between 8,100 basis points for the entire period.
NPLs after the EUR 1,000,000,000 decline, which we reported in 2015, passing from €21,000,000,000 to €20,645,000,000 The stock of gross NPLs goes down by an additional €495,000,000 minus point 4%, of which slightly less than EUR 500,000,000 in the second quarter, thanks to the sale of bad loans for about EUR $227,000,000, which we made in June. The annual decrease of gross BEP loans, which is equal to 3.7%, once again displays a better performance by Banco compared to the market. And in fact, if we look at the statistical analysis conducted by the Bank of Italy, the market is displaying a growth in BET loans of 3.2. But let me say that statistical bulletin of the Bank of Italy is updated as at May. So that was a plus 3.2% in May for the market, while we reported a minus 3.7% in June.
Unlikely to pay declined by 5.9 year on year, minus 1.1% in the quarter and past dues to decline by 51% year on year and 16.8% in the quarter. Not only growth figures are declining, but net figures as well. And in fact, if we see that total net NPLs declined by 3.440.3% year on year and 0.8% quarter on quarter, passing from EUR 14,109,000,000.000 at the June 2015 to EUR 13,505 million at the June 2016. NPLs in the first half of the year were equal to EUR 1,000,000,000,100,000,000.0, and they are in line with the normalizing trend that started back in 2015, minus 4.3% compared to the 2015. The net flow for the quarter in 2016 plus EUR $813,000,000 is higher than the 2015 only because there were fewer loans reclassified as performing loans while it's in line with the 2015.
And we think that this single information, single data is influenced by the fact that as a certain loans are classified as for born and they are actually re 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 forty five point six percent, including write off for total NPLs and fifty nine point three percent 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. Then with respect to bad loans, considering the fact that they are backed by collateral and the coverage these loans goes from 59.3% to 104%. But as with respect to unlikely to pay loans, the 24.7 stated coverage goes up to 88.8%.
And also past dues 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 nonperforming 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 2015. The most the updates come with the publication of the annual report of 2016, so we will see whether there are any changes. In any case, the ratio between the percentage of the secured loans out of impaired loans is 86.9% again, I repeat. So this is why we highlight once again and we show two charts, chart 2526, where we try and show you how we are faring 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 10,700,000,000.0, but the portion that is pledged is 6,700,000,000.0, and it covers the net amount of secured debt loans, which is 5,100,000,000.0. So we have 5,100,000,000.0 net. And against this net amount, we have a collateral for 6,700,000,000.0.
So we see that there is a 24% difference. And again, with respect to the market value, it's EUR 10,700,000,000.0. This collateral I mean, sorry, the 69% of the properties in Northern Italy, 21% in Central Italy and 10% in Southern Italy and Ireland. Let me remind you that collateral have this type 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 a end state coverage of 20.9%. But considering the property backing them whose market value is EUR 10,100,000,000.0 and the portion linked to the residual loan is EUR 6,200,000,000.0, this tells us that the coverage is in excess of 105%. Practically, we have 6,200,000,000.0 worth of collateral limited to the residual loan that have a net coverage of $5.7155 5,755,000,000.
In this case, this the difference is 7.5%. Again, the property results are 62% in Northern Italy, 27% in the Center Of Italy, 10 in Southern Italy and 1% abroad. Unsecured unlikely to pay loans are 24.4% and the Fed coverage is 36.4%. Next chart, leasing division. The downsizing is progressing and we are satisfied with the progress that we are making.
You see quarter by quarter that the figure goes down. We went from EUR 12,500,000.0 to EUR 5,500,000,000.0, of which EUR 2,600,000,000.0 pertain to release, where 20% of the portfolio is held by the shareholders, BPM and BPS. Moreover, we see that the outstanding volume goes down, that is the 5.5. But in the meantime, also the gross NPLs go down, which really makes us very satisfied. We got down to 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 02/2009. And coverage considering also the evaluation of collateral, which by the way include on average a haircut of 20% goes up to 105 percent. On Page 29, we see the group capital ratios where we reported a steep increase over the quarter, both with respect to both on a phase in basis and on a fully loaded phases. And of course, the rights issue played the most important role. Within the on a phase in basis, the rights issue, which was completed in June, led to a two thirty five basis points increase.
The negative result for the quarter eroded nine basis points, but then we have other effects, for example, risk weighted asset evolution improved this figure by 10 So at the June, we closed with a common equity Tier one of 14.8% and the total capital ratio of 18.1%, again, on a phase in basis. With respect to fully loaded basis, the rights issue added contributed to two fifty five 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 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, just talk about stress test, but you know the results very well. You know that we entered the stress test with flying we 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 Credit Emiliano back then. And 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
First question from Giovanni Razzoli. Go ahead. Good evening. Two very quick questions. Yesterday during the conference call, Mr.
Cassania said that the plan includes 8,000,000,000 disposals, EUR 5,000,000,000 unsecured at EUR $0.05, and the remainder will be taken care at the final part of the plan at zero one zero. At what price are you selling unsecured bad loans? 230,000,000 was the total amount you mentioned. I'd like to know how much or at what price you sold them. Italy is my second question.
They are still losing €25,000,000 every quarter. In the second part of the plan, are you gonna figure out something maybe Monte Paschi style to correct the situation? Otherwise, every year, you will open the balance of the year with annualized expected losses of about EUR 80,000,000. Okay. Let me take your first question first.
In the plan, entered very conservative data. I don't want to specify at what price we have sold because there is data room up and running right now to sell an additional EUR 700 to EUR 800,000,000 worth of these loans. So I don't want to mention prices. But the EUR 5,000,000 that you mentioned is 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 a secured secured loans and taking 50%. But but we cannot what we can say is that the quality of the collaterals we have, the already very significant provisions against these loans, the provisions that will be increased before the end of the year. So the quality and the quantity of collaterals will allow us to sell these loans at the levels that we have reported in our business plan, levels which were really conservative. So as Italy is concerned, we keep selling something.
We sold EUR 50,000,000 recently. A few other assumptions or a few other attempts are underway. Quarter after quarter, we are improving and enhancing our provisioning. And time will come when we can actually make a more significant sale. Thank you.
I was actually talking about a Montepasqui style solution, like, for instance, carving out the loss, you know. Well, 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 ready 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 talk can you tell us what the DTA amount for past losses at June 30 is? Then in Q2, all banks have practically recognized the capital gains, you didn't.
So can you tell us the amount and when it is going to be recognized or booked? Then 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 Popular de Emirano also going to have part of the burden? Let me start with the second with the last question.
We made an agreement with ECB to raise the coverage ratio to 62 for bad loans and 49% for NPL loans for NPLs. On 01/01/2017, when we are going to be combined and therefore in this lock of marriage, are going to share all this together, and we're going to take joint measures. But with respect to ECB measures, we are going to keep up with our promises. Referring to your doubtful loans, you're going to go up to 69 to 6249%, no doubt. We're going to raise it to 62% and to 49%.
We're already at 59.3, 59.4. So, you know, when then when the merger will kick in, also with respect to the disposals we are going to complete, And there are going to be coverage ratios, which, of course, are going to be agreed. But in any case, in the business plan, we have already defined them. But with respect to Banco Popular, have a commitment and we are going to live up to these commitments. And DTAs for tax losses at June 30 are EUR $235,000,000 fully loaded and 140,000,000 of phase in on a phase in basis.
Then with respect to Visa, well, we did not recognize the capital gains for the disposal of the second visa. We will do it in the next quarter and we're talking about 25,000,000 to 30,000,000.
Next question from Domenico Santoro. Please, Mr. Santoro. Good afternoon. I have a few questions.
Admin expenses, excluding the DTA's fees, have EUR 155,000,000 for this quarter. Is this kind of a very low level which we can take as a benchmark and as a repeat level for the next few quarters? As far as dividends, I'd like to know whether 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. And 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 play pay loans.
Trevil is at 40% or selling at 40%. So there is greater and greater attention by the authority that shifted their attention from bad loans that too unlikely to pay. So there's a danger there because, I mean, in the last few days, your stock price plummeted for a reason. So that might be the risk that in spite of 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. And also, when we received a request, we had a common equity ratio, which would have allowed us to marry 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 that we received are revised upward because they are already extremely demanding, and we will meet those requests. So we will satisfy them before we get married with the BPM.
As far as admin expenses are concerned, I really hope I can lower the level even more. But for the time being, I really think we are in a very safe situation. I'm talking about admin expenses net of these new systemic charges, I e, admin expenses generating by our operations. So I really hope that a few more millions will be recouped here so that the second half of the year may close even better. Then you had another question.
Could you please repeat that? The contribution to from your equity investments. All right. I have the specific indication concerning AGOS. AGOS gave a great contribution in the first half.
It's slightly above 47,000,000 while Popular Evita and Aeropopa Securazione are lower. Combined, they are equal to 15,000,000, and the rest is just peanuts. So the three significant levels are Agos Popularivita and Vipassacorazione. Why did you decline why your risk weighted assets decline in the period while the quarter while loans volume increased? Well, most of it is due to cost containment, both under the IRB method I'm talking about operating risk.
So both under the IRB and standard methodology. I don't have the numbers here, but a colleague here is saying that we also retouched the market risk. But I remember very well that the two operational risks, both under the ARB 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 1,000,000,000 reduction, while the reduction for market risk is about 400,000,000. I'm sorry, but the line went down when the colleague earlier was talking about the coverage, the 227,000,000. Did
if
you said that 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 a data room of analysis and and due diligence up and running right now, so we cannot mention prices. I just answered mister Razzoli's question selling saying that we had never sold at levels as low as the ones embedded into our business plan.
So 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?
You've reported 03/22 and I think the guidance for normal quarter is around three forty. So the run rate embedded into consensus, the growth you need to have in the second half versus Q2 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. So your question came in truncated. Can you please repeat your question right from the beginning please? Thank you.
Sure, thanks. Basically when I'm looking at consensus for NII and fees and I compare it to the Q2 level, there has to be a lower growth in the second half of the year to meet consensus for this year. So I'd like to know if you have any guidance on NII and fees for the second half of the year? Thank you.
With as regards of 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. And on the other side, there are going to be measures on the net interest income by reducing wholesale bonds upon maturity. So 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 don't know exactly the timeline of these initiatives.
As to fees and commissions, it's a little bit simpler. Consider that this quarter, we had an increase by only EUR 6,000,000 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 the rights issue. And 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. And 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. So we had practically lower sale of products. But May, according to May data, we have already seen signs of improvement because May closed with commissions of EUR 115,000,000. And in June, we closed with EUR 113,000,000. So practically, they are getting close to the EUR $335,000,000 or EUR $340,000,000 amount on a quarterly basis.
That is a source of our guidance. So 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 Agya's question. Agia, go ahead. Your line is open.
You can hear me?
Hello? Yes, we can. Yes, we can.
Yes, I have one two questions. First, is it a coincidence that ECB coverage ratio demanding of 62% is broadly in line with the purchase price from by the account based fund from MonTE. Do you think there is some coincidence here on that the price of MonTE will be a benchmark? And 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, This was already we have seen this with Milano, for example.
And what is the expected impact on your NII?
Well, the ECB did not ask us to 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 NPL, total NPL, are covered by 49%. So we will have to increase the bad loans coverages. And we make sure that NPL will be covered at 49%, but 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. So 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-up. And then the closing remarks is that the that Banco Popular is solid as we saw from stress test. It's it has a good liquidity as we saw from the liquidity profile. We're still suffering a little bit with respect to profitability, but 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 sales.
The combination with Banco Popular de Milano will work out activities and also with sales. The combination with Banca Popular de Milano will speed the whole thing up because we will have a ad hoc NPL hub, so to speak, which is going to be manned by double the employees we are available now. So we are quite confident that by 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 Banco de Prada de 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.
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