Good evening, and thank you for attending the conference call to present the results for Banco Popular Full Year Results. You have a chance to ask questions at the end of the conference call. And please remember that today's conference will be recorded. I now hand it over to Banco's Managing Director, Mr. Pierre Francesco Saviote.
You have the floor.
Thank you and good evening everybody. Welcome to Banco's conference call. As usual, with respect to the first slide of the presentation, are going to skip them altogether as we are going to explain them in detail item by item later on. Just a couple of remarks today with respect to our commercial performance. In 2015, we had little less of €9,000,000,000 worth of medium to long term loans, 50% growth in retail, €1,800,000,000 49% growth rate in small business €2,200,000,000 and a little more than €4,000,000,000 in mid corporate plus 52%.
An excellent performance of consumer credit Argos disbursed loans for more than 800,000,000 with growth rate in excess of 22%. Indirect funds increased by 8.3. The payment cards, both credit and debit increased by 225,000 units. And checking accounts increased to $4,848,000 by 500 of which little more than 3,000 are business accounts. On page five talking about the income statement, let me highlight that we closed the year with net income of $430,000,004 27 net of the fair value option.
On page seven, we highlight that the ancillary business units to the side of the core commercial banking activity has made a big contribution to this result. Two seventeen branch network, investment banking and wealth management 144,000,000 and let me remind you it's Neti and GCL and then consumer credit and bank assurance namely Agro, Popularity and Abypop 138,000,000. As to Italy, once again its contribution was a negative one. Rather than Italy, we should talk about the leasing division and again it was 127 negative contribution. This year again the income statement reported a number of non recurring items.
The two most important ones that were positive impact from the disposal of Itizuta Centauri Banque Populari and the disposal of ARCA which resulted in a positive contribution of $224,000,000. Let me then remind you again being a positive impact, Italisa's contribution that has been acquired by Banco and this led to tax asset benefit Since these were the positive P and L impact and now let's take a look at the negative 164,000,000 roughly for the voluntary redundancy fund and other non recurring personnel expenses. 77,000,000 is the non recurring contribution to the National Resolution Fund. 35,000,000 these are tax claims.
In addition to the usual one that had been reported in the first quarter, 17,700,000.0 this referred to a dispute where the court of castration went against us and therefore we have 22,000,000 that has been set aside. This is a provision in order to deal with to fight with preference shares. And then we have the disposal of BP Luxembourg, about 7,000,000 that in our opinion should be formalized after receiving ECB's authorization by the end of this month. And by the way, 27,000,000, I skipped this, it's 27,000,000 referring to real estate impairments of which 39,000,000 gross, 23,000,000 net in the fourth quarter. On page nine, we analyze net interest income.
2015 closed with 0.4% decline. So the net interest income held out in spite of the strong drop in Euribor in the fourth quarter minus six basis points and despite the strong competitive pressure on loan pricing, the average customer spread went from 1.87 in 2014 down to 1.78 in 2015, minus nine basis points, thus standing at 1.7% in Among the elements that have been supporting net interest income, let us highlight the improved liabilities by the branch network level that went from 1.01% in 2014 to 0.85% in 2015 and in Q4 it stood at 0.83. On the upper part of the slide, we pointed out the evolution of wholesale funding cost, which year on year declined by 7.8%. On Page 10, we have the fees and commissions which increased by 3.3.
And again, considering the excellent performance of our branch network with respect to the sale of asset management products and investment products in the first six months, it was very aggressive and then it of slightly slowed down in the second part of the year. And then we have higher contributions from consumer credit which increased by 14.7% contribution from custodian banking services and other guarantees given. On page 11, we see indirect customer funding up by 8.3% driven by assets under management, thanks to the funds and CCAP component went up by 18.7%. In Q4, we also reported an increase of 1.2% despite the negative market performance. Page 12, net financial result which increased by 104%.
Now clearly this growth rate is fully due to the recognition of capital gains attached to the disposal of the stakes held in Instituta Centauri Banque Populari and ARCA amounting to a total gross value of $241,200,000 entirely both in Q4. Net of the above mentioned capital gains, we would have reported net financial result lower by seven percent, that is €200,000,000 more or less. The contribution of Bantaletti which exceeded 90,000,000 accounting to 46% of net financial result. On page 13, we see personnel costs up by point 4% and they include €95,000,000 roughly of nonrecurring charges of which €83,000,000 have been recognized in Q4 against 138 back in 2014. These non recurring charges are tied to the solidarity fund and to the voluntary redundancy scheme as well as to the closure of the London branch, which has already been carried out.
And they also include the charges tied to the exits planned for 2016 and 2017. Net of these non recurring charges, personnel expenses went up by 3.8% which was driven both by the hikes set by the previous national collective agreement and by provisions related to the 2015 incentive scheme that have been partly offset by lower costs coming from the average reduction in headcount, which in 2015 went down by five seventy one full time equivalent employees. On page 14, we see the headcount evolution in 2015. From 17,147 FTEs at the December 2014, we go to 16,731 at the December 2015. Actually we are ahead compared to the planned target by two fifty one full time equivalents.
In the twenty sixteen-twenty seventeen timeframe, we will have 400 exits that have been already expensed in 2015. And these 400 exits will be offset by 180 new recruitments. So that the pro form a FTE headcount will be 16,711. Now other administrative or operating expenses, report a 16.3% increase in this item, which includes 162,000,000 tied to the recurring and non recurring contribution to the National Resolution Fund and to the Deposit Guarantee Scheme which have been recognized in 2015 under other administrative expenses of which 139,000,000 in Q4. 23,000,000 have been reclassified as other administrative expenses in Q4 but they had been recognized in Q1 under the line item provisions for risk and charges.
Other administrative expenses net of what has already been described and excluding the $7,000,000 worth of reduction in liabilities and they refer to disputes that have been settled with a couple of vendors. So net of these contingencies, administrative expenses went down by 1.2%. Amortization and depreciation went down by 13.2% from an accounting point of view. But if we strip out of both years the real estate impairment, 1,400,000.0 in 2015 and sixty eight in 2014, The increase reported is 1.1%. It's a slight increase but still it has been increasing.
Total pro form a non personnel expenses normalized on the basis of the above indicated components decreased by 0.8%. On Page 17, direct customer funds down by 3.6% year on year, 2.8% excluding repos and core deposits have been reporting the slightest decline that is minus 1.4% due to the reduction in time deposits that went from R5.8 billion to R3.9 billion dollars I. E. Minus 32.1%. Including the liquidity generated by the sale of certificates where the stock in 2015 increased by RUB1.6 billion, then the bond based funding is stable.
On a quarterly basis, direct customer funds decreased by 1.6% exclusively due to the reduction in reptiles. And as we will see when talking about liquidity, reptiles, this reduction in REPOS contributes to the increase in assets eligible for refinancing with the ECB. So net of REPOS, direct customer funds grew by 3.1% as compared to September. That's showing satisfactory growth both with respect to core deposits and bonds. The share of wholesale funding amounts to 17%.
So this is still in line with the previous year. It's a stable performance. On page 18 we see the group liquidity. We can certainly define Banco's liquidity as being excellent. Again, 11.9% is the ECB exposure, again represented by TLTRO funds.
Unencumbered eligible assets net of haircuts increased to €16,000,000,000 because of the reasons I described before and they are almost only represented by Italian government bonds and the increase is tied to a number of transactions in terms of repurchase agreements and funding vessels. Liquidity ratios are satisfactory. Liquidity coverage ratio is above 180% whereas the net stable funding ratio comes in at roughly 97% calculated according to the most updated, the most recent rules of the quantitative impact study including certificates which by all means represent a form of medium term funding. The adjusted NSFR exceeds 100%. With respect to the maturity profile both wholesale and retail, in 2016 within the wholesale maturity profile we see a redemption of 1.6, the residual is €2,100,000,000 to be added to the €3,200,000,000 redemption in retail.
We have potential retail calls for 2016 amounting to $2,200,000,000 and we have already carried out calls for $800,000,000 between January and February. And of course, we still have to keep twenty seventeen and twenty eighteen positions under control, 7.8 in twenty nineteen-seventeen, 6.9 in 2018, sorry, 2017 and 2018 respectively. Now of course further bond issues will be evaluated whose timing and mix depend on global market conditions. With respect to the retail market in 2015, we carried out our ordinary distribution activities that is carried out on a daily basis. And to date we really have a great peace of mind with respect to these activities.
700,000,000 of own bonds were distributed through third party branches in Q4. They were warmly accepted by the market. Probably we're going to carry out additional transactions of this size. In 2015 on international markets, we issued a 1,000,000,000 covered bond issue, 1,500,000,000 senior bond issues, we are keeping markets under close, we're keeping them monitored because we are waiting for these irrational times to come to an end and to be back to a more normal and manageable situation. Treasury securities portfolio, million left of September, EUR17.8 billion is the total amount and the average residual life is four years, the time to maturity.
The share of government bonds has been classified held for trading 10%, AFS, the held to maturity has increased which went up to 42%.
Go to Page 22, you see loans and you can see that in 2015 customer loans went down by 2.87% year on year and 1.4% quarter on quarter. But if you exclude from loans, the non core elements such as the runoff of the leasing division and the REPORs, you see that the yearly decline would have been wiped out and the quarter on quarter decline would have been limited to 1%. Let me quickly remind you of something I mentioned at the beginning. That's to say in 2015, we actually lent a little less than EUR 9,000,000,000 and that is 57% more than total loans granted in 2014. It's a steady trend, 4,100,000,000.0 in 2013, 5,700,000,000.0 in 2014, 8,900,000,000.0 in 2015.
It's a steady trend like I was saying. And loans are subdivided and in rating buckets that show a steady improvement in quality. We have increased and almost doubled the amount of rating one loans. Have increased to 10.5% rating two loans. So the top four loan ratings account for 53% of our loans and the following two categories account for 2710% is unrated.
So I would really say that the shift that the change in the mix of loans is already paying off and will continue paying off looking forward because qualitatively the portfolio has remarkably improved since 2012. Cost of risk, 94 basis points. It's in the upper tier of the guidance we provided between 8,100 basis points is still remaining within the band. 94 basis points compared to 106 in $2,022.00 4,000,000. It's still a big amount, you know, but we managed to achieve that level because new NPL's flows declined significantly.
Maybe it's a little too early to say that, but it's a decline that has already taken root in January as well. And apparently, I mean seemingly the decline can be confirmed for the current month as well. In the following page, you see a stock of gross NPLs that go down by 4.7% on a year on year comparison and 4% is the decline in the last quarter, in the fourth quarter. This shrinkage, this decline is due to the fact
that
unsecured NPL were sold, Unsecured debt loans were sold. $210,000,000 were sold in the second quarter and $730,000,000 were instead sold in the fourth quarter. So I would really say that this is a significant sign in any way. Even without this disposal, bad loans would nonetheless have accounted for an amount which is better than the Italian banking industry. So excluding disposals, that loans would have gone up by 8.4% compared to what the Bank of Italy yesterday reported for the whole industry of 9.4% plus the stock of gross bad loans would have gone down, the NPLs would have gone down even though we had not sold these loans and nonetheless the decline would have accounted for about EUR 18,000,000.
So let me say that the risk profile as well has improved as shown by the decline reported in the unlikely to pay and past due loans bucket. SOARIS coverage for NPLs is 43.7% and the decline compared to September 2015 is attributable to a disposal of unsecured debt loans that we made in October being unsecured, the coverage was extremely high. So excluding this phenomenon, the coverage of NPLs would have increased both compared to the 2014 as well as the September 2015. So the coverage of Fed loans is equal to 56.3%. But if you add collaterals or calculate, if you factor in collaterals, the total coverage is 102.6%.
The coverage for unlikely to pay is 25.4%. But if you factor in collaterals, the coverage goes up to 85.8%. The past due loans have a coverage equal to 20.7%. In the following page, you just see an additional explanation of what we have already said. That's to say that loans are secured by collateral by 79.8% and likely to pay our collateralized 80.1% at the level of 80%.
The coverage is 56.3% for bad loans. But if we exclude collaterals, we have a coverage of 45.8%. If we add collaterals, we have a coverage of 114%. Bed loans unsecured by collaterals are equal to 78.5%. But 98% of all collaterals are represented by property, real estate property, 41% of which are residential properties, 70% of which are located in Northern Italy.
The residual 2% is just represented by pledges on securities and the same thing applies unlikely to pay loans with a coverage excluding collaterals of 22.7%. Factoring in collaterals, it would be 98%. Unlikely to pay loans that are not secured by collaterals have a coverage, a stated coverage of 36.5%. You go to page 27, we have a snapshot of the leasing division. Once again, you see we are steadily downsizing.
We are down to €5.8.3100000000.0 euros former Italy, euros 2,700,000,000.0 being released. Released portfolio, 20% of it is in the heads of BIPER, BPM and Popularis Dissondrio shareholders. Here NPLs declined once again from 3,900,000,000.0 to 3,800,000,000.0 and the coverage went from 33% to 35% so it went up. If you consider coverage including collaterals, got to a level of 100.3% In spite of the average haircut on collaterals which compared to true market value is about 20%. On page 29, you see the last slide where you see the snapshot of the group's capital ratios.
Let me tell you these capital ratios are extremely sound. Phase in is equal to 13.2%, fully loaded 12.4% of course after all distributions, after dividends. Elements that were reported as pro form a in the past were correctly reported because we actually disposed of some of these items. And in Q4 we updated the time series concerning the PD and LGD risk parameters from 2010 to 2015. So Q4 results include also some data quality measures on our portfolio which was measured based on the standardized approach.
Am done with my presentation and I can now open it up to your questions. Thank you.
First question, with Sparemo. I have two questions. The first is on asset quality. The NPL stock has gone down. You sold a number of unsecured BAT loans.
Have you said that in any case, without this sale, the NPL stock would have gone down anyway? I would like to know the percentage. And then with respect to the disposed bank loans, what is the discount you had to give? And second question, I would like to know something about the Italian government's scheme to help banks dispose of their nonperforming loans. Much time would it take to set up an SPV and to come to an agreement with counterparties to sell other nonperforming loans and bad loans?
And then in general, what are your growth projections for next year with respect to loans that have been going down this year? Let me try and answer to all your questions. They were quite quick so if I forget something just tell me. The loans that we disposed were bad loans for a nominal value of $1,200,000,000 stated $949,000,000 sorry. Part of the disposals has been carried out in Q1 whereas the last tranche was sold on October 2 and therefore this pertains to the fourth quarter.
Now if we deduct the share of loans referring to the disposal of $149,000,000 from the total NPL stock, you see that in any case NPLs would have been going down anyway. Of course the percentage which would have been smaller but in any case we would have reported a decline in NPLs that would have been from 80 to 100,000,000. Maybe that's not much but it's a first sign after years that NPLs have been growing. Well this time even without disposing of those bad loans that we would have in any case reported a slight decline in NPLs. So this was a benefit.
Now then as far as I could understand and do correct me if I did not understand well, you asked how and how much time and what is the amount we expected to sell. For 2016 we have planned an additional sale of nonperforming of bad loans both secured and unsecured which on average is around EUR 600,000,000 to $650,000,000. We intend formalizing this disposal probably within the first half of the year. And then of course, we have all the workout activities implemented by our department for bed loans and we are active in recovering bed loans. So in addition to the recoveries carried out in 2015 with respect to bad loans, thanks to which we could recover €400,000,000 then we have also the possibility of disposing of a part of these bad loans.
As to the cost of credit, the guidance for this year still lies within the 80 to 100 range. However, this time we believe that it could go towards the lower part of the range and not as last year towards the higher part that is 94. Since it's January, it's a bit too early to come to final conclusions. But given the decline in non performing loans in January after the downward trend in 2015 which accounted for more than 60%, we hope that this first sign in the first month of the year will repeat in future years so that not only will we enjoy a smaller cost of credit but also a decline in non performing loans in general. And securitization of loans, Talking about the securitization of bat loans and the plan that has been that is being put together by the government, I would like to know whether Banco is interested in participating.
Are you talking about bad bank? Yes. Well, if you are referring to the bad bank to date, other clarifications have been put forward other than the press release that has been issued by the Italian Finance Ministry a couple of weeks ago. Well, I don't know whether it will be possible for us to increase the decline in NPLs, to increase even further the decline in NPLs by resorting to that device, let's say. But of course we have to see.
But in any case the disposal of bad loans is guided by price. Since we don't want to sell our loans at like a fire sale and they have to be in line with our carrying amount, there is little I can say other than talking about our budget. We may sell 600 to $650,000,000. They have already been planned and included in the budgeted income statement and it's included especially the cost of credit. So if any more opportunities will emerge from the bad bank and if this is going to prove useful, we're going to take advantage of it.
Loan increase this year. This year we have been planning an increase in the number of loans granted compared to last year. We expect that EUR 10,000,000,000 worth of loans to be granted. So compared to 2015, it's EUR 1,100,000,000.0 more. Since we expect to be heading towards a more positive economic cycle compared to the past, we hope that loans will increase despite the decline in the runoff of Italy because of course Italy is reducing.
And in any case, we hope that in 2016 there will be a positive sign in front of the related figure.
Ricardo Orruhere. Couple of questions. Good evening. And I apologize,
but I connected a few
minutes later, so I did not hear you talk about NII. I'd like to know what actually led the quarter on quarter decline in NII. Also, mister Safiati, you talked about the disposed of that loans. You said 1,200,000,000.0 is the gross amount And normalized, that would be or stated would be EUR $940,000,000 for entire year, while the disposal of the last quarter is EUR €730,000,000 gross. Is that correct?
No, not at all. Let me go over it again in a different way so that maybe I can be clearer. As you know, with bad loans, we have losses and carry forward and also the fund itself. So bad loans are do not take into account these losses that have already reported. So nominal value would be EUR $210,000,000.
When we sold EUR $210,000,000 in the first half, the rest in the second half. So this is the nominal value. What is the stated value is the nominal value minus the losses that have already been incurred. So that would be equal to $940,000,000. $940,000,000 we had already provided for Amply.
So we could close the disposal with no damages to our P and L. Was I clear? Yes.
The quarter on quarter
decline is $950,000,000 at nominal value sold on October 22, and net is EUR $732,000,000. Okay, clear. And what about NII? Well, the reduction in net interest income in the last quarter is essentially attributable to the six basis point decline in the Euribor plus the usual problem, which is represented by cutthroat pricing. If you want to withhold certain positions in the market, you have to apply a certain spread, which is really not profitable for us.
So the cutthroat competition in the market combined with the Euribor decline resulted in a reduction from the EUR387 million in Q3 to EUR369 million in Q4.
Next question, Alberto Cordara. I'd like to hint back to the last issue raised by my colleague, which is sold NPLs. 1.2 was the gross amount, which is 1,250 million and 900 and and 940 is provisions? No. No.
That's not how it is. I mean, if this is your question, I will reply directly. If you have other questions No, I just wanted to understand what is the markdown at which these loans have been sold. Let me clarify this. You know that in Banco and in many other banks, we make use of the so called or write offs.
A defaulting loan is assessed by the loan manager and if it's a 100,000,000 loan they decide to make a 50,000,000 write off. Nominal is 100 but the accounted or the stated amount is 50,000,000 and they are immediately charged to income. Out of 100, 50 are immediately charged to income and the credit is I mean the loan is stated at 50,000,000 and then of course provisions are based on the 50,000,000. The residual $940,000,000 have been provided for And the provisions that were set aside were so high that there was no P and L effect. It was line item with a given amount of provisions.
So you don't want to talk about the price? You don't want to disclose on price? No. We don't want to make any disclosure on price because we still have other bad loans to be sold, it's not useful to talk about price. Fine.
You showed a slide where you showed that the wholesale funding is not greatly positive. We should also consider the trend on the Italian banking sector as a whole. On the slide, you show that net of repos, you have a positive dynamic of funds quarter on quarter, especially with respect to a positive evolution of deposits compared to bonds. Other banks say that people instead of investing in bonds because yields are so low, they just keep them on their checking accounts. Then could a positive effect be DRIP obtained by a good funding mix for next year so you might have less term deposits and more demand deposits and something that can really support net interest income despite a low EuroBor scenario.
What might be the right solution for a good leverage of the funding mix? Well, what we did is that what we call core deposits or core direct funds, 39,900,000,000.0 is the amount shown on the slide, holds on and keeps on being as stable as possible. 30 9.9 is not what really is important to us because within the 39.9 we also have corporate deposits. Of course we are interested in core deposits. We want them.
But they are the more volatile because it takes just 10 basis points or 15 basis points difference, they immediately transfer the checking account somewhere else. Whereas what we are interested in is the net retail core deposits, which is stable. It's the loyal component. It's those millions of checking accounts, millions of checking accounts that by their own nature are stable. Why do we want to grow in terms of number of ordinary checking accounts?
You open a checking account, you deposit €5,000, €3,000, €1,000, well they will stay there forever if you serve them well. This is the real backbone, the strength of banks, not only of banks but all banks who are interested in having a stable customer pool on which to build their business. Our core deposit level is good but a bank such as ours needs to improve it even further. So we intend enjoying an increase in the number of retail checking accounts in addition to corporate checking accounts because they are one of the most important instruments to support the funding, a more stable funding and less volatile. Then of course based on what is printed, I mean, on the press or what media are saying, people might change banks because they want a different product.
Of course we have a certain turn over or a certain churn. But when people have on their checking accounts mortgage loans, credit cards, they have bills and being paid off by on the checking account, they generally are loyal and stable. And we want to increase these type of checking accounts. Since we started actively to view and to follow these checking accounts, we were able to bring home a couple of billions more. We have no liquidity problems, not at all.
If you take a look at the slide on liquidity, we have EUR 11,900,000,000.0 worth of TLTROs. This is the ECB exposure and then 16,000,000 which are unencumbered and eligible net of haircuts and that are by large represented by government bonds and then can be used with the ECB for refinancing any time. Thank you.
Mr. Giovanni Ruxoli has the next question. Good evening. I have three questions. The first one is about the interest income, which in
the fourth
quarter was rather low compared to the previous quarters. So looking forward in 2016, can we project out the fourth quarter results of $370,000,000? So the total for 2016 should be below EUR 1,500,000,000.0, you mentioned, below Euribor rate and the fierce competition as the drivers for this decline. And so I was wondering whether we can take this fourth quarter results and extended it out for the rest of the year to calculate NII. Page nine twenty nine, I'm sorry.
The LGD calculation was updated and it accounted for 86 basis points. I'd like to know whether this was regulatory capital or some kind of filter was applied because the risk weighted assets remained unchanged compared to September. A final question, as far as the market consolidation is concerned, you are a very active player. You've been extremely explicit in the press in describing the options you are considering. So I ask the same questions to other banks.
I'd like to know whether compared to the past when Populari banks emerged, the 10% of the cost basis was the standard level. You belong to the camp of those who think that 10% is no longer realistic? Or considering the current consolidation option and considering it's going to be a major deal, is there more room for cost cutting in excess of 10%? Should you actually team up with another bank, idea of having operating companies could be a way to expedite restructuring and reorganizing the new bank. What do you think?
Well, let me take the first question about NII first. Well, the q four drop, as I said earlier, is due and probably you don't wanna hear me repeat it once again. It's ascribable to the low Euribor rate and the cutthroat competition that is driving prices down. I
do not
know whether competition will be dumped the second part of the year. What we can say is that our interest income in 2016 is going to be, you know, subdued if you wish. And we are only slightly concerned because we know we are going to offset it with via cost, via loan loss provisions, etcetera. So we are reasonably comfortable with this NII. I do not know whether in, over the short term I will think differently about it.
Next time when we get together for the next results presentation, maybe the market has calmed down in the meantime. And maybe in the meantime, know, rates have picked up and we can lend the money more with more peace of mind. As far as the group's capital ratios, as you can see on page 29, I talked to you, I mentioned the data quality interventions we made. Because I just want to describe you one case for you to understand how simple these things are and how important it is to regularly perform these changes and make sure the data quality is accurate. We managed to recover a little less than €600,000,000 this way.
There was a group of French banks that were rated as if they were Italian banks. Their rating was wrong. So the country rating of Italy had been assigned to French banks. As far as pass through items that are, you know, there were a number of these items with waiting assigned to them that was equal to 100, but those items were actually related to Bank of Italy, to the Bank of Italy. So the weighting associated with these pass through items should have been zero.
So we managed to simply save in terms of risk weighted assets about 1,400,000,000.0 and we improved the profile of our weighted assets. Also charges to RWA, to risk weighted assets were made because we had, like I said, to update, our time series for the risk parameters, for the PD and LGD parameters. We, updated the time series from 2010 to 2015. So all this boil down to the Q4 result generating a benefit in terms of our common equity. Then you asked the question about consolidation.
Well, to tell you the truth, I don't know whether the percentage you mentioned can be actually the final way, the final percentage. One way or another, we can say that we are hovering around that number. And as far as operating companies are concerned, they are a significant asset for this group. They were extremely valuable. We leveraged on the important role of operating companies in the negotiation, in the dealings with the well known counterparty we have been talking to.
These are assets that will account for a significant contribution should actually the agreement be reached. Thank you.
Next question, evening. Four questions. The first question refers to Hagor. Can you give us a guidance with respect to the 2016 income, whether the good result of this year is sustainable or improvable? Second question is the nonrecurring real estate impairments both this year and last year.
I'd like to know whether you can give us a bit of color as to what this property is all about. I mean, is it the same real estate, or are these different buildings or real estate? I'm if I'm not wrong, these are former Italy's buildings or real estate. Then can you say something about the expected loss after the disposal of that loans, talking about the capital shortfall. And should you reach an agreement, would you convene the shareholders meeting just once to approve both the neutralization and the merger?
Or do you think that there are going to be two meetings?
Augusta performed very well, but the result they achieved is absolutely repeatable. Augusta is doing is performing well. There are no nonrecurring items that are bolstering their results. And I'm very pleased to say this because after all the distress, after all the troubles we went through, we found a smart way to cooperate with the new CEO. We really work well together.
We are really in sync. 2015 closed with very good results. 2016 will close with similar results because the result is repeatable. I cannot tell you whether we will exactly replicate that result but it's within our reach. As far as the value of real estate properties are concerned, I hope you know that we are mandated to update appraisals or appraised values for our properties.
So these rules were issued by the ECB. So every time a building is reappraised, if the value indicated by the appraiser is different from the previously appraised value, you have to write it up or down depending on difference reported by by the appraiser. And this is what we have reported. So every time building values is reappraised, we keep hoping that the real estate market picks up again and thus the property values will pick up as well. And every time a property is reappraised, we really hope that the values will not be penalized.
But I think that the so so you're talking about properties that are always mean, is it is it always the same real estate portfolio? Yes. Exactly. It's the same properties whose value is simply being adjusted along with the market prices. They are being mark to market, you know.
If the real estate market shared 5%, when you reappraise the value of the building, you find out that the building is worth 1,000,000,002 billion or €5,000,000,000 less than it was previously ascertained. So we have to bring the values of buildings in line. We have updated appraised values dating back to 2013, 'fourteen and 2012. So every time buildings are reappraised, we have to adjust their values. We do not reappraise the entire pool of buildings.
Know, maybe a bunch of buildings are reappraised in 2012, another bunch in 2012 and another bunch in 2013. So three years later you will have to reappraise the various buckets of buildings. So next year, we will have to reappraise the value of those buildings that were appraised in 2013. So looking forward, it is reasonable to expect that these values will increase because even though the market, real estate market does not you know, surge, I don't expect it to drop further. As far as the shortfall is concerned, to fully loaded, the $275,000,000 phase in February.
As to the consolidation, do not know whether we are going to make one or two general meetings. We haven't talked about these aspects yet. What I can tell you is that we made major steps forward So it becomes even more reasonable to expect a positive conclusion, but we haven't yet talked about these aspects. So we'll make that decision when time comes. The regulatory point of view, would you have a problem to just would it be regular to just call a single shareholders meeting to approve both the demutualization and the consolidation?
You are asking me a lawyer's question. I really don't have an answer. I don't know whether there are legal constraints preventing us from doing that. I really don't know. What I'm interested in is the business.
Then, you know, the regulatory details will be taken care of by, you know, presidents, lawyers, etcetera. I am more business oriented. Are things I have to know, but it's not really my major interest.
Next question. Sorry, have a follow-up question. The PD and LGD basis points I see for phase in and fully loaded, this would lead to an additional shortfall with respect to expected losses. It's already included in the $275,000,000 fully loaded. Thank you.
Two very quick questions. With respect to the appraisal of the bank loan collaterals, What is the percentage for the last year? Second question, deposit trend for retail and corporate in the first month of the year. Missus Guerci, I am sorry. You know, I'm aging, and you need to speak up and maybe speak, you know, at a slower pace.
Okay. Let me try and speak closer to the microphone. That loan collaterals, what is the percentage of assets that has undergone an appraisal? And what is the updated value of the collateral? Second is deposits.
Can you give us any indication as to retail and corporate deposit trends in the January? As to the last question, no problems with respect to deposits. Even during the major events that occurred in December, we had no problems. When we analyzed the situation after the panic had spread over the market, we instead had reported an increase. Mr.
Farroni was right telling me that just because we had no problem, we decided to call 2,200,000,000.0 worth of bonds. Had we had any problems on retail or corporate deposits, we would have never had done such a thing. So no problems at that level. With respect to collaterals for securing our nonperforming loans, I don't know how many appraisals back assets with respect to 2014. What I can tell you is that appraisals are updated on an ongoing basis and we also resort to external databases telling us the trend of prices for a given region, for a given type of buildings and what are the changes that have been reported which is not the full appraisal I was talking about before and that has to be carried out in compliance with Bank of Italy and ECB rules every three years for the Bank of Italy.
And for the ECB when we are talking about a given amount, it should be carried out every year. What I'm talking about now is this updates that we have, that we receive and that are uploaded within the loan file and that is made available by Nomiz. Now for six months we have we received this set of updates. This has nothing to do with appraisal. As I said, appraisals are carried out every three years for a given for certain real estate and every year for other type of properties that are from 10,000,000,000 upwards, then for these type of buildings the appraisal will be carried out every year.
Core deposits as of December 31 increased by roughly RUB 1,000,000,000. Next question?
Thanks for taking my call. First on fees, how much of the fees in Q4 were related to upfront asset management fees? If you could give me the euro million number would be great. Second question on risks and charges, I would like to understand apologies if you explained this already, but I would like to understand how you booked a positive number in Q4 despite the one off costs. And three, can you I didn't understand your NII guidance.
Can you repeat what you said on what could be the NII in 2016? Thank you.
Let me take your last question first. Our guidance for net interest income in 2016, we expect a reduction of NII in 2016. We have not quantified the reduction but it will vary as a function of the degree of competition in the market. If competition in the market is equally aggressive, as aggressive as it is today, we will most likely shed a few percentage points in our interest income margin. Hopefully competition will be milder.
The year is over. In the month of December banks engaged in a lot of window dressing activities which continued in January as well. So most likely, we'll go back to working more in the business as usual mode and we'll be better able to continue working with customers that are more profitable for us. As far as fees in Q4 are concerned, they are providing me with data right now because I don't remember upfront fees amount. So it's 16% of all fees in Q4.
So 16% of Q4 fees were upfront fees. Could you kindly repeat the other question you asked about risk and charges, please? Because we could not hear your question properly. Speak slowly please.
Yes. So I just wanted to understand you booked a positive number of $15,000,000 despite having some costs of $4,000,000 plus $22,000,000 for tax disputes. So I would like to understand what was what explained the positive risks and charges?
It is just a reclassification. We have restated things. There was another item, I. E. Administrative expenses were added to this item, administrative expenses.
If you deduct the €23,000,000 you are left with the €14,000,000 Go to Page eight of the presentation, There you can see exactly what I'm telling you. Out of the 38,000,000 national resolution fund, I mean, paid into the national resolution fund, the 23 had already been recognized in Q1 under the line item provision for risks and charges and have been reclassified in Q4 under other administrative expenses.
All right. Perfect. Thank you.
In other words, it's our forced contribution to the resolution fund. It was €38,000,000 We reported an initial charge of 23,000,000 because we saw that the portion of our contribution could have been covered by a commitment. But when the rules were actually passed and enforced, The amount was specified and they told us which was the item under which we had to state this contribution. So we removed it from the risk and charges and included it in the other administrative expenses items.
Perfect, thank you.
Mr. There are no other questions so I hand it back to you. Well, there's little I can add other than saying that I am satisfied with these results. It's the first time we talk to the market with satisfactory results. Unfortunately, they are now being disclosed against a backdrop, against a market which has been washed by great panic and hysteria.
I hope that despite this our results will be satisfactory for the market. In any case I am satisfied because I believe that they represent a very solid foundation for starting 2016 with a better peace of mind because 2016 is not going to be an easy year but we are well prepared. Thank you. The conference call has been completed. Thank you for your participation and you can now disconnect.