Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Group nine months 2026 Results Presentation. As a reminder, all participants are in listen-only mode, and after the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. We kindly ask to limit yourself to two questions only. At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.
Good evening, everyone, and thank you for joining Banco BPM conference call to present the results for nine months 2026, Banco BPM. The presentation will be hosted, as usual, by our CEO, Mr. Castagna, and our Joint General Manager CFO, Mr. Ginevra. Let me remind that all the documentation will be available on our website. It was already available on our website under the Investor Relations section. Now I hand over to Giuseppe.
Thank you, Arne. Good evening, everybody. Thanks for being with us. I am here to present a very good nine months results at the record level for profitability and shareholder remuneration. These are results based on long-term value creation and robust fundamentals, as you will see in few minutes. Let's start from net profit. Let me talk of adjusted pre-tax net profit, because, of course, you know there is some issue about taxation. The first result is that in the nine months 2026, we registered 8% of growth vis-à-vis nine months 2025. If we go back to 2021, we have a 19% CAGR, thanks to improved revenue mix. Of course, you know very well our track record in fee income and product factory, together with a reduced cost income and a very low cost of risk.
The adjusted net income after a tax rate that for this year is 34% vis-à-vis the average 31% of the previous five years, is in any case better than last year, the EUR 1.53 billion compared to EUR 1.49 billion. These results, again, are driven by excellent commercial achievement, both in terms of customer loans, +4% year-on-year, on current account and deposit, again, +4%, and indirect funding, +7%, with a gross NPE ratio below EUR 2 billion, at EUR 1.9 billion, and a net NPE ratio at 1%. The capital, which is still well above 14%, at 14.27%. This bring us to a net income of EUR 1.51 billion, which allow us to confirm both the guidance to above EUR 1.95 billion for 2026.
The interim dividends confirm that EUR 0.50 per share, which amount to EUR 750 million, with an increase of 8.7% vis-à-vis last year interim dividends, which was EUR 0.46. Also, the guidance for this year, we can confirm, is increased to above EUR 1. The total remuneration for our shareholder is increased, as we anticipated in the presentation of six months, from EUR 6 billion to EUR 7 billion, which leave us for the next 18 months to deliver EUR 4 billion of remuneration for our shareholder, which means almost 20% of our current market cap. This, of course, is including the inaugural share buyback, whose amounts will be determined following ECB approval. On page seven, let's check what is making the difference. It's a combination of increase of revenues through diversification, coupled with progress in efficiency in terms of cost income and reduced cost of risk.
On the left part of the slide, you can see how total revenues grew 2% year-on-year, having non-NII revenues growing from 49% - 50%, which amounts to 52% if we consider NII at full funding cost. In the last two years, so following the acquisition of Anima, the non-NII revenues grew 39% and versus last year, 4%. This allowed us to compensate the reduction in NII coming from the reduction of interest rates in the last two years from EUR 2.6 billion- EUR 2.3 billion. The excellent performance in non-NII revenues come for EUR 650 million in the last two years, coming from total non-NII revenues, driven by the increase in product factory from EUR 700 million -EUR 1.19 billion, which means EUR 470 million of increase amount. The cost went down 2% year-on-year.
The total cost income went down from 46%- 44%, and also went down the cost of risk from 34 basis point of last year to 29 basis point of this year. The net NPE ratio, as I was mentioning before, is down to 1%. Let's have a look to the commercial volumes momentum, which is doing very well, not only in core direct funding, where we are experiencing 4% of growth year-on-year, which is quite the natural pace of growth for our bank, coupled with indirect customer funding for 7%, which means EUR 7 billion of net inflows, coupled with only EUR 1.5 billion of market effect due to the volatility of the market.
The good news is the increase and the growth in core performing customer loans, which grew 3.7%, and the new lending for this year in the first nine months amount to EUR 21.3 billion, of which EUR 7.5 billion in third quarter 2026, which is +32% compared with third quarter 2025. Asset quality. Again, it was mentioned the results of going down EUR 2 billion. I have to mention that in the last 22 quarter, we were the only bank to have experienced a reduction in the NPE ratio, a constant reduction quarter by quarter, which is a sort of unique case amongst our competitor, in which the second-best performer was able to reduce for 7x in a row the NPE ratio. This shows our attention to risk, to loan growth, done with a lot of focus on quality, and as we'll see, I add also on profitability.
The net bad loan ratio is down to 0.3%, and if we exclude the NPEs with state guarantees, the net bad loan ratio is before one basis point. This is also thanks to a very good default rate, which is down to 0.71%, together with the reduction also of stage 2 loans, which are down from 8.1% - 7.5%. Capital on page 10. Again, we want to show how in the last 21 months, we were able not only to recover more than 240 basis points of negative impact due to the Anima acquisition, coupled with more than 60 basis points of regulatory headwinds, notwithstanding that. Starting from 12% after these two headwinds, we were able to recover up to 14.27%, calculated assuming inclusion of retained profit based on 80% payout.
As you know, we were asked by ECB to not consider the inclusion of interim profit until they will authorize us to the share buyback capability. So the stated Common Equity Tier 1 is now 13.8%. Let's go to the P&L on page 12. You can see both the quarter-on-quarter, year by year, and the year to date. Basically, both are growing between 1% and 2% in core revenues. Operating costs are -2%, both year-on-year and quarter by quarter. The pre-tax profit are up to 7.5%. Of course, for us, it is quite normal now to talk about pre-tax profit due to the taxation that has been applied in the 2026 and the recent maneuver of 2027, which are not already known exactly in the impact they will do for this year and next year.
Of course, the taxes are increasing of EUR 120 million in nine months, leaving us with a net income stated of EUR 1.513 billion on nine months and EUR 453 million in Q3 compared with EUR 450 million of Q3 2025. Let's have a look at the growth that we had in terms of profit from pre-tax. As you can see, on a yearly basis, we were able to grow EUR 164 million, mainly due to non-NII revenues for EUR 90 million, reduced operating costs for almost EUR 40 million, and total provision reduced for EUR 35 million. The effect of the NII will be much more evident starting, of course, first in this fourth quarter, but especially in 2027. I will go again on this when we will talk about NII.
As you can see, the growth is supported again by a combination of non-NII revenues growth with a cut in cost and lower provision in cost of risk. Let's go at NII on page 13. An increase of 4.6% on a quarterly basis year-on-year, 0.9% in nine months for this year, which comes from an increase of the commercial spread, which is going up from 3.03% to 3.21%, mostly, basically thanks to liability spread. As you can see, the asset spread is going down from 1.43% to 1.41%, but this is not due to a negative repricing of the new loans, as we will see in a minute, but by the early reimbursement of loans with higher spread. The sensitivity is always around EUR 150 million, to say exactly now we are at around EUR 160 million.
This is due to the reduction of replicating portfolio down from 27 billion- 25 billion, and the reduction of the indexed current account, which now amount to 34% versus 37% of December 2025. The contribution to the increase of NII came also from the reduction of the cost of new wholesale bonds issued this year. As you can see on the bottom right side of the page, you can check all the different class of bond issued by the bank, which from covered bond to AT1 experienced always a big reduction, not only in terms of the previous issuing in 2025, but of course, especially if you compare it to the issue done in 2024. Let's have a look to the lending volumes. Year-on-year, again, 3.7%. Year-to-date is 2.5%.
The main contributor to this increase are the non-financial corporates, which are up 4.5%, always with a very low risk profile due both to the footprint of our clients, 72% in north of Italy, and also to the big part of loans secured. As you can see, 46% of our loans are secured, of which 23% with state guarantees. If we go to small business, this 46% increase to 62%. New lending, EUR 7.5 billion in Q3, basically the same amount of Q2, but much higher of the EUR 5.7 billion of Q3 2025. As you can see on the bottom of the histogram, this is also coupled with an increase of spread applied. So we pass from 1.41 of spread in Q3 2025 to 1.52 of spread, the asset spread for the new loans issued this year.
This should bring soon to a recovery also on the total asset spread, also because the increase in Euribor will most possibly not bring to early repayment during 2027. Net fees are up 5.6% year-on-year, as far as investment products fees are concerned, which now represent 51% of total fees. If we go into details, you can see that on a yearly basis, the big contribution was brought by Anima contribution plus EUR 40 million, and by the running fees, which grew EUR 22 million on a yearly basis. Meanwhile, we have a reduced contribution for only EUR 6 million in the upfront fees, which I can anticipate will be fully recovered already in Q4 2026.
The investment product sales was EUR 17.3 billion, slightly higher than EUR 16.9 billion of last year, and this pace has been confirmed also by the October investment sale product, in which we register EUR 2 billion of sales, together with the sales of EUR 1.1 billion of BTP. The same kind of increase and reduction you can see also on a yearly base, quarter-on-quarter. Talking about other fees, we have basically still the final impact of eco bonus, which are phasing out by the end of this year, EUR 30 million lower than last year. Meanwhile, we have a good increase in payment system, plus EUR 16 million, together with good fees in trade finance, which almost offset the reduction in structured finance for lower volumes due to marginal interest rate. Let's have a look to our growth in the total customer financial asset.
This is driven especially by a very good performance of our commercial network, in which we grew 4.9% year-to-date, 2.2%, sorry, year-on-year, and 2.2% year-to-date. On a yearly basis, we were able to grow EUR 11 billion, which are basically mostly represented by net inflows and increase of deposit for almost EUR 5.5 billion. Meanwhile, quarter-on-quarter, we had a very good contribution for net inflows of almost EUR 2 billion, but offset by negative market effect in last quarter for EUR 1.6 billion. If we include Anima total customer financial asset, we grew to EUR 395 billion, of which 208 account for Anima, which register almost EUR 5 billion of reduction, all entirely coming from market effect for EUR 5.7 billion. The contribution of Anima, as I mentioned before, is still very good for the bank.
We have a contribution to total revenues of 14% higher vis-à-vis last year, and 22% in terms of net income. We mentioned the increase of product factories contribution. Let's have a look again of the last two years, basically comparing the acquisition before and after Anima acquisition. As you can see, we have been able to reach almost EUR 1.2 billion of contribution in nine months 2026, which is again EUR 450 million plus vis-à-vis two years ago, and EUR 90 million plus vis-à-vis nine months 2025, and now represent 26% of the total contribution to our revenues. As you can see, the EUR 1.191 billion contribution on these nine months has basically reached the target for 2026. Meanwhile, we have another EUR 90 million-EUR 100 million to increase next year to match our target for 2027. But again, EUR 90 million is the usual pace of growth that we have been registering during 2026.
Let's talk about cost discipline. Very good result, minus 2%, driven by staff cost minus 3%, mainly thanks to positive contribution from voluntary exit schemes. Meanwhile, we have basically an even results in terms of other administrative expenses and D&A, with a reduction in terms of G&A and a small increase in terms of D&A due to the increase in investment for technology investment, IT investment. Page 19, some more detail on the good perform of cost of risk and reducing NPEs. Here you have a bit more of detail about the different gross NPE ratio, net NPE ratio, and on the bottom side, the NPE ratio excluding state guarantee, which amount in terms of net total NPE ratio to 0.5%, and again, net bad loan ratio at 0.09%. So basically, we don't have any more bad loans in terms of net bad loans.
The results driven to a cost of risk, which was reduced from 40 basis points full year 2025 to 29 basis points, thanks to a reduction of default rate from 0.84 to 0.71, and an increase in cure rate from 5.64% to 7.32%. The consistency in continuing to reduce NPE and providing support with provision led us to increase the NPE ratio, coverage ratio at 47.4%, which increase to 58% for NPEs and 80% bad loans in terms of NPEs without considering state guarantees. I leave the floor to Edoardo for the financial results.
Thanks a lot, Giuseppe. Now let's go to the contribution of NFR, net financial result, went from EUR 98 million- EUR 129 million in the nine months of this year. The improvement has been made possible by the reduction in cost of certificates, which now are EUR 91.5 million. A very strong and resilient contribution remains from the remaining, from the other part of net financial results, which were as high in the nine months as EUR 221 million. The level of securities in the banking book remained very constant, very similar to the previous quarters. We are now at EUR 46 billion, 28% represented by fair value of the comprehensive income, 72% represented by amortized cost, with share of Italian govies, as usual in our recent history, below 40%, now at 38.8%. Turbulences in the financial markets have determined a reduction in the fair value of other comprehensive income reserves.
After the improvement we had in the second quarter, we went now below the level we had experienced at the beginning of the year. Now we are at EUR 429 million. We undertook a series of actions to manage the risk of these reserves, reducing the BPV, the basis point value, at EUR 1.64 million end of September, used to be EUR 2.15 million end of June. These negative reserves do not represent a long-term risk for our capital, bearing in mind, taking into account that almost 100% of them are represented by investment-grade bonds. Corporate account for only 6% of the total, 16% is Italian govies, 78% of negative reserves is due to non-Italian and supranational bonds, all of them being investment grade. 60% of this negative level of EUR 121 million is expected to be reabsorbed by 2029, owing to the pull-to-par effect. Liquidity continues to be very solid.
Total cash position is at almost EUR 49 billion, with a reduction that is explained by the context of tightening monetary policy, which made liquidity more expensive. So now we have the level of eligible assets went down to EUR 41.1 billion. Total direct funding has benefited from the positive contribution of current account and deposits, which, as described in the previous slide by Giuseppe, went up to EUR 106.5 billion. SCR, the 12-month average is at 140%, with high-quality liquid asset at EUR 30 billion, and NSFR is stable at 122%. The trading continues to deliver a strong positive momentum for the bank. We received an upgrade by Fitch in May, BBB+. BBB+ has been also assigned by S&P in September with positive outlook. Now, all rating agencies assigned the same rating, issuer and senior ratings to the bank at this level of BBB+. Capital position remains very solid.
So we started the year at 13.58%. In June, we were at 14.40% pro forma, accounting for the attribution of retained earnings to capital. Now, the same pro forma is at 14.27%. Moving parts are represented by earnings, 70 basis points, dividends and AT1 coupon minus 57 basis points. The negative evolution of reserves waits for 24 basis points, on top of which we highlight 14 basis points of fair value of the comprehensive income that again, with the pull-to-par effect, or that are deducted from capital only for the mechanism of threshold, and with the pull-to-par effect, and/or in the unlikely case we realize the negative reserves will be deductible, so will transform in capital in any case. 19 basis points is the creation from DTA, tax loss carryforward, and other types of DTAs. 7 basis points is the remaining impact of a number of second-order elements.
MDA buffer is at 474, or at the stated level, which corresponds to a stated level of CET1 that does not include retained earnings of 13.75. MDA in this case is 426. Excess capital is at extremely high level compared with our plan threshold of 13%. Excess capital is EUR 870 million.
Compared with the SREP overall requirement of 9.53%, is at EUR 3 billion 250 million. As usual, we also disclose the evolution of capital contribution from the elements that are not included in the P&L. In particular, we have this future capital contribution that is now as high as 180 basis points, of which 65 basis points expected to be created by year-end 2027. The drivers of this contribution are DTA and regulatory comprehensive income reserves. Thank you, Edoardo. Let's move on. Sorry, I do not know if you heard what I say because I did not have the microphone. Sorry about that. Let me start again. Very strong nine months results.
I have to thank my colleagues for the result of these last two years, which we were able to obtain notwithstanding external factors, likewise, of course, the geopolitical, but also a couple of OPS that we had to manage during the last, let us say, 19, 20 months. In any case, I think thanks to my colleagues, we are very well-equipped to go forward, continuing to deliver very strong results. To wrap up, more than EUR 1.5 billion in net income, +8% in pre-tax profit, 50% on non-NII revenue share, cost income down from 46% to 44%, increase of volumes, loans and deposit 4%, indirect funding 7%, NPE ratio at a very low level, 1%, organic capital generation confirmed also this year, and interim dividends +9% versus 25.
This allow us to confirm a guidance above EUR 1.95 billion of net income for this year, which you may remember, will be reached considering almost EUR 100 million of increased taxation, which of course was not possible to forecast when we delivered in February 25 the guidance for 26. Basically, a guidance confirmed, but with an implicit EUR 100 million results on top of it. This, of course, allow us to also to increase to more than EUR 1 the dividend per share guidance for this year. Let us have a look on page 25 on the trajectory versus strategic plan. As you know, the plan will be terminated in 2027. Basically, we have reached almost our target one year ahead, apart from non-NII revenues, in which still we have EUR 90 million, EUR 100 million to grow.
But again, is the exact pace of growth that we experienced in the last years, and especially this year. Meanwhile, net interest income is possible to go much ahead, much higher than the target 27 due to the interest rate scenario. We are on top of 27 also for total operating cost and total provision. Very much in line to overcome the initial result pre-tax. Of course, tax is something quite complex to discuss due to the lack of transparency that we have right now in terms of new Budget Law. Let me say that as much as we were able to recover the 2026 Budget Law into our target, we are confident to do the same also for next year.
But of course, we cannot right now give you any kind of comment about the tax coming in 2027 from 2027 Budget Law, which of course will be dealt as soon as we will have higher transparency about the different element. In any case, dealt with the countermeasure that we will adopt in terms to try to offset the total effect by the first part of 2027, thanks to the renewal of our strategic plan 2027, 2030. Last page, of course, on the solid position of the bank in terms of capital, profitability, and gross NPE ratio. Which allow us to confirm the increase of EUR 1 billion in terms of shareholder remuneration. We have already distributed EUR 3 billion in the first two year.
Now, from the 23rd of November, in which we will pay the interim dividend for 2026 and the end of 2027, we will be able to pay EUR 4 billion to our shareholder, which means almost 20% of our current market cap. I think these are very remarkable results, which allow to foresee a strong contribution, strong remuneration for our shareholders, thanks again to the work that we have done and we are delivering in terms of contribution to the strategic plan. Thank you, and I will leave to you the floor for Q&A.
Thank you. This is the Chorus Call conference operator. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to limit yourself to two questions only. First question is from Elena Perini, Intesa Sanpaolo.
Yes. Thank you, and good evening. I have got two questions. The first one is on the positive trend in costs. You explained that it is mainly due to the staff cost component. What is your outlook for the next quarters? Do you have additional levers to action to be able again to deliver such an improvement? The second question is on the NII trend. If you can provide us with the guidance for next year, considering the current market conditions and your healthy growth in volumes. Thank you.
Thank you, Elena. On cost, I do not think we will do anything exceptional for Q4 2026. I think the cost will be almost the same as an average of this first nine months. Of course, we are already trying to understand some maneuver in order to try to reduce the cost for 2027. As you know, there is a potential renewal of the contract for our colleagues. As always, we will try to understand the amount and trying to reduce the cost through some efficiency. In terms of NII, basically, of course, as I mentioned before, we are much ahead of the plan 2027. Maybe it is still too early to know the exact number because we want to know exactly when the couple of increase that everybody expects will come in.
Of course, we have different numbers depending if both of them will come by the end of this year, or only one of it now in the next months, and the other beginning of next year. At any case, it will be a considerable higher of the business plan.
Next question is from Sofie Peterzens, Goldman Sachs.
Yeah. Hi. Here is Sofie from Goldman Sachs. Thanks a lot for taking my question. Maybe just a few more questions on net interest income. You mentioned earlier on the call that we should see NII kind of doing better in the next quarter and also next year. Could you maybe just elaborate a little bit on the previous question? How should we think about the tailwinds from the replicating portfolio? What kind of loan growth do you expect? Do you expect loan growth to accelerate and deposit growth to accelerate from the current levels, or do you think that's a good run rate? How should we think about the impact on net interest income from the eco bonus? That would be my first question. My second question would be around your fee income. How should we think about the growth drivers from here?
Thank you.
Okay. Next quarter will be a very moderate trend in NII. Basically, we have a positive impact of the environment of increasing rates, but this positive impact will be translated into a more interesting and material growth during next year, as mentioned already by Giuseppe in commenting on the trends. We basically are now playing with two scenarios, one where the rates are increased to 275, another one where there is a second hike. Of course, there is a sort of fork between the two scenarios in terms of impact on NII. Volumes are expected positive, so continuing the current trend that we are starting to observe during the last nine to 12 months, especially on the asset side, and also constructive on the liability side.
Eco bonus, which you asked, is expected to decline due to the fact that progressively over the years, the outstanding amount of the asset which generates a positive contribution to NII is reduced into the compensation with the tax liabilities that the bank generates. Of course, this has also some question marks for next year, given the discussions on the Budget Law. But apart from the Budget Law, we expect reduction of around EUR 60 million. This reduction does not take into account the reinvestment of the assets, of the liquidity generated by the compensation of taxes. As far as fee income are concerned, we are confident to generate positive trends from product factories, from growth in corporate investment banking that will be delivered. When I say product factory in general, I extend this also to the wealth management distribution activity of the network.
This to be generated both in the next quarter, where also some seasonalities are removed, and during 2027.
If I may add some color on that. Let's say that we forecast a good growth in asset management driven by running fees, an increase of the other product factory, as Edoardo was mentioning. We are finally well on track with the non-life product factory after that migration, and we have now new products that are already boosting at the end of the year, and we expect a very good 2027. On terms of payment service with our Numia, we have done very well in terms of merchant business. Meanwhile, we are still substituting credit card, and we consider to terminate old job during 2027. So also in this respect, we expect more contribution. Good results already from life insurance. Of course, in a way offset by the increase of govies yield. Of course, depending on the volatility of the market, we can make good results also in non-life.
The only, let's say, small question mark due to the increase of interest rate is for our consumer finance. As you know, when interest rates go up, it's a bit more difficult to grow more. But as you know, now also the competitive environment is very reduced, and we expect not to have any offset from this. So all in all, the target of 2027 plan can be confirmed.
Thank you.
Next question is from Delphine Lee, JP Morgan.
Yes, good afternoon. Thank you for taking my questions. Just wanted to, sorry, to come back on net interest income and costs. On NII, some of your peers are guiding to mid-single digit growth for next year or even higher. The growth that you've seen so far this year has been a little bit more muted. Should we expect also a bit lower sensitivity to rates next year for Banco BPM? On the cost side of it, just to clarify what you, on the earlier question, your answer was you were looking at ways to decrease costs. Is that your objective, is to try to have, in the next coming years, a cost base that goes down in absolute terms year- after- year? Thank you very much.
Thanks for the question, Delphine. I think that I'm proud to be asked a question where analysts ask if we have a lower sensitivity than our competitors. This means we've done a great job in convincing the market we are not too exposed to interest rate risk. I believe that we can expect a mid-single digit growth next year, probably. I mean, we have aspiration to do a little bit better, but I want to be conservative. Depends a lot on the scenario, of course.
With the various components that are consistent with strategic plan, I didn't mention probably before the replicating portfolio, which is expected to stay at the same level as we guided the market for the duration of the plan, so the usual EUR 25 billion, whose contribution will depend on the scenario and on the fact that we have maturities of swaps during this year for some, how this is, EUR 5 billion, so EUR 5 billion-EUR 6 billion at lower rates than the current level of swap rates.
Let's go to the cost. We try to say that our goal is to recover the increase of both cost of labor and the increase of D&A due to the investment that they are going to face for cyber, for technology, and so on. Cost is a part of our job, but we believe that we have a consistent and credible track record since the merger 10 years ago, reducing cost income year by year every time. This is the engagement that we can take, that we will be able to reduce cost income also for the year to come.
Thank you very much.
Next question is from Manuela Meroni, Intesa Sanpaolo.
Good evening. Thank you for taking my questions. The first one is on the capital contribution that you expect from DTA and fair value to the OCI reserve. It has increased since last quarter. I guess that this is due to the impact of the reserve that we have already taken in this quarter, so if you can just confirm that. If you can also share what is the timeframe in which you expect the 180 basis point positive impact, and if the 65 basis point you expect for 2027 is already including the effect of the 2027 Budget Law. The second question is again on capital. Some of your competitors have flagged some model changes. I am wondering if you are expecting something similar also in the fourth quarter of this year, and more generally, if you expect some, let's say, regulatory headwinds going forward. Thank you.
Okay. Capital creation from DTA and fair value comprehensive income reserves increases versus previous communications, mostly because of the increase in negative reserves in the fair value through other comprehensive income book. This is the main driver. As far as the timeframe to recover these 180 basis points, unfortunately, we do not have the crystal ball. We are not able to take into account the effect of the Budget Law, which is still a draft. Before including them, we will need this to be approved. The pace is around 65 basis points in the plan horizon. Then, in the following two years, the current expected pace is of additional 60 basis points, just to give you an idea of the rhythm of this source of capital creation. We are continuously maintaining our models.
We are capturing already some impacts of increases in our RWA, expected increase in RWA in our buffers using Article 3. Traditionally, we have done this, and in the future, expected model changes do not change our capital profile in terms of commitment to stay above 13% and commitment to distribute the EUR 4 billion in the next year and a half or so.
Thank you.
Next question is from Luis Manuel Grillo Pratas, Autonomous Research.
Good evening, everyone. Thank you for taking my questions. My first one is on M&A. As you know, there continues to be a lot of market speculation around the potential combination between Banco BPM and Crédit Agricole Italy, and both parties have acknowledged in the past the potential strategic merits. Could you help us understand what conditions are not yet in place for a transaction to be considered? For example, is the key issue the relative valuation between both banks? Is it more like the political environment, governance, or even like the proposed structure? If those obstacles are resolved at some point, from the Banco BPM perspective, do you think the reverse merger scenario is the preferable outcome, or do you think a direct acquisition by Crédit Agricole with an appropriate premium can be the more attractive option for Banco BPM shareholders?
My second question is on the 2027 business plan profit guidance. The Monte Paschi dividend is around 5% of annual net profits, more or less. Do you see scope to offset this through other earnings levers? Related to this, there is also, of course, the 2027 Budget Law. Are you confident in the net profit target? Thank you.
If I understood correctly, the question is, in general, the level of confidence for our net income on 2027. It is too early to tell in terms of analyzing the impact of the additional taxes that are expected or potentially be introduced should the current text in the current form be approved. We will need to sit down and define what could be the mitigating actions and what could be the final outcome of new taxes and mitigating actions. What we said and confirmed is that the last year's Budget Law has been recovered, so the bank produced a very important, noteworthy effort in ensuring delivery of this year's target, which is confirmed at EUR 1.95 billion. For next year, it will depend actually on the amount of taxes that will be introduced and overall on the scenario. The MPS dividend is not a concern per se.
We believe there are various ways to reinvest in portfolios that may generate a similar level of remuneration.
As far as M&A is concerned, let me say that basically you said everything on yourself because what I can add is that we know the strong value of our bank, the capability to grow on profitability year by year, the capability to increase the shareholder remuneration also on a standalone basis. So, of course, whatever, due to the current environment, which has been changing dramatically after the Monte Paschi transaction, which, as you know, will be split amongst Intesa Sanpaolo and BPER, it's very much possible that a new transaction can happen. But frankly speaking, we are not the one who are doing the move, the first move. We are, of course, examining all the potential opportunity. As I mentioned other times, we have been talking about a potential transaction with Agricole since they entered into our capital with the first 9.9%.
And of course, we cannot not consider that is a possibility now that they have 29.6%. The two things that I think is important to have in mind is, first of all, that there is a very important industrial shareholder with 29.6%, which we respect, which we work very well in terms of the product factory that we have together. We get along very well, but of course, we have also another 70% of shareholder that have to be happy about the transaction. So, as far as the condition of the transaction can be good and satisfactory for our shareholder, this is for sure an opportunity that we'll examine without any problem. But up to now, frankly speaking, we didn't see any kind of proposal, but we appreciate that the declaration from Agricole are always well-tuned vis-à-vis a potential transaction with us. Which kind of transaction? Again, I don't know.
I heard more about this potential reverse merger, but at the end of the day, it is in their hands, having such a stake in our bank, to decide the best way to go ahead if the decision will be to go ahead. Our job is to make this transaction good and satisfactory and convenient for our shareholder.
Next question is from Ignacio Ulargui, BNP Paribas.
Thanks very much for the presentation. I have two questions. One is on credit quality and the good performance that you have delivered over the last years since you are showing in the presentation in terms of NPE performance. I was just wondering on how much you think cost of risk can go down more from the current level. The second one, looking to the performance of the deposits in the quarter and volume, there has been a very good increase in the quarter-on-quarter of current accounts. I just wanted to get a bit of a sense of how you see deposits growing going forward, and how should we think about the index current accounts as a percentage of the total? Should it be around the current level of 34%, or is there a space to reduce that further? Thank you.
Okay, thank you. Yes, as a quality, we are very satisfied about the job that very consistently we have been doing for basically since the merger. Reducing the cost every quarter, and reducing the NPE level every quarter, up to the almost zero net bad loans that we have right now. Cost of risk depends, so basically, only from default rate, because we don't have basically net bad loans that you have to provision anymore. So, depending on the default rate, you know that we have a provision policy that start from 30% since the beginning going up, and due to this ratio, the cost of risk can be very much lower or increase if the default rate will increase in a considerable way. Basically, there is not anymore the management of the stock which absorb further provision. Deposit, we have been growing always.
I would say that in the last years, we have been growing more or less EUR 10 billion per year in terms of the combination of the indirect and direct deposit. Deposit normally are EUR 2 billion-EUR 3 billion per year. This is without increasing cost of acquisition. This is due basically to the increase current account from our clients. Meanwhile, of course, our job is to trying to have a good inflow into indirect funding. We will continue this way. Italy, in this respect, is doing very well. The footprint that we have in Italy is much better than other banks, so we think we can continue to grow in terms also of deposit.
Thank you.
Next question is from Hugo Cruz, KBW.
Hi, thank you for the time. I just have a couple more questions. Given the latest developments with the Intesa offer, what are your latest views on Anima and its listing? On capital, RWA density went down in 3Q. Have you done any SRTs, and what are you planning in terms of further SRTs to come? Thank you.
Sorry, again, I didn't have the microphone. I was saying, you know that we have a contract with Monte Paschi expiring in 2030, so we are not worried about the prosecution of the relationship with the network, or let's say, the current network and the possible new network of Monte Paschi branch. We will have to check, of course, where this branch will end up, but I am sure that we will have all the possibility to deal on a very convenient and friendly way under the legal framework of the contract with both Intesa Sanpaolo and BPER. I am sure that there will be no problem in this respect. I give the floor to Edoardo for the securitization.
Yes, we are regular users of the SRT market, SRT instruments. We have done one transaction in this last quarter. We expect to continue tapping regularly the market during 2027. We are now planning specifically the activities. Expectation is to perform two or max three deals.
Thank you.
Next question is from Andrea Lisi, Equita.
Good evening. Thank you for taking my questions. There are just two. The first one is related to the contribution from the insurance business that we have seen declining a bit versus the run rate of the previous two quarters. Just understand if this is a temporary effect and we should expect the coming back to the levels we've seen in the first half already in the fourth quarter, or if there is some more structural element there, and in case, if you can provide an update on that. The second is if you can give us an indication of what you expect on net financial results at the current level of rates, or at least the impact of certificates also related to the progressive expiry of these certificates. So, which impact we should expect on that at current level of rates for next year? Thank you.
Okay, Andrea, thank you for the question. Yes, basically, we are running in line with the nine months 2025, as you said, a bit below Q2 2026 in terms of insurance. This is not due from performance, but from the govies increase of yield on the CSM. As you know, the calculation of the profit and loss in life insurance is very much affected by the market condition, which you take exactly the last day of the months in which you make your results.
Depending on the curve and what will be the yield of the govies end of the year, we can experience either, let's say, results that can be in line with the current one, or maybe a recover of the contribution if the 10 years govies yield is going a bit lower than what we experienced at end of the September, which, as you may remember, was very high. From maybe for the certificates, Edoardo?
Yeah, the question was about NFR, including cost of certificates. You are correct. These will represent the headwind next year, given the evolution of rates and also the evolution of the average level of the instruments in our liabilities, that during this year has been reduced, but next year will come back to a level consistent with long-term average. Taking this into account, we expect to stay at the double digit for the next year for the contribution of trading income. Of course, bearing in mind that this is a volatile contributor to P&L.
Thank you.
Next question is from Noemi Peruch, Morgan Stanley.
Good evening. Thank you for taking my questions. I have one follow-up on M&A and on Anima. Thinking about the potential deal proposal from Crédit Agricole, what role could Anima have in this context? Then two follow-ups, one on NII. Is it fair to assume that the repricing of the replicating portfolio could add at least EUR 70 million next year on NII? Then on the administrative cost, in the slide, you mentioned a fiscal one-off for Q3. Do you mind quantifying it? Thank you.
I start from M&A, Anima. No, Anima is, as you have seen, and I show in my presentation, a fundamental part of our, let's say, strategic approach to the market. We worked a lot in order to get the possibility to consolidate Anima. We will do all is possible, and I think everything is possible in order to maintain Anima inside our group. I don't see any problem also in a potential combination with the Crédit Agricole, because of course, the Italian activity, I think, will be dealt by this combination that we could do in Italy, if and when this will happen, together with all the other product factory. I don't see any different possibility from that. Maybe Edoardo can give you some-
No, Noemi, on replicating portfolio, unfortunately, we don't expect a positive contribution to NII next year. The rate we pay is expected to be significantly higher versus the historical experience of this year. This will be partially compensated by the fact that we will receive higher rates for what is aspiring, and on average, the receiving rate is expected to increase. But the overall balance between the two is unfortunately not positive. It will represent a negative contributor, our positive elasticity to the rates that, at the end of the day, will determine an increase, a tailwind for our NII during 2027. But in isolation, there is no tailwind from replicating portfolio. The tailwind is from the total structure of the balance sheet.
There is coffee-
Sorry, Noemi, you were asking also of a one-off, tax one-off?
One-off that you mentioned within costs.
Within cost?
Yeah. Fiscal effect. One-off fiscal effect. Page 18.
No, the only fiscal effect is the, as I mentioned, almost EUR 100 million coming from the 2026 Budget Law, which are, of course, into our profit and loss guidance, but were not into when we gave the guidance one and a half years ago. This is the only one-off that we are considering. What are you referring other than that? I don't know.
Administrative costs were particularly low this quarter, and I was wondering if you have any positive one-off.
No, no. The cost is low because we, you know very well because you are following us for years, that we reduce quite consistently our cost base and especially our cost income, which will be the name of the game also for next year.
Thank you.
Next question is from Marco Nicolai, Jefferies.
Hello. Just two quick follow-ups. The first one, trading revenues double digits. That also includes the dividend from Monte dei Paschi, or whatever it will substitute it from 2027. This is just a follow-up. Then another one on the replicating portfolio, because the way I look at it, and I might be wrong, is that basically the replicating portfolio covers a portion of the deposits. The variable leg you pay effectively is netted with the revenue you get from the deposit base. That kind of nets off, and then therefore the benefit comes from rolling over the fixed leg at higher rates. If you look at it this way, the contribution should be positive, I guess, to NII next year. The question basically is, what's the rate that will roll off on the fixed leg?
What's the rate of the maturing portion next year and the year after that you can reinvest at higher rates? Thank you. I hope I was clear.
As I said, for NFR next year, we don't expect apparently a growth. We expect this to come back to two digits and no longer three digits, given especially the evolution of certificates, bearing in mind that we may have alternative investments that could consistently replace the contribution of MPS dividend. Replicating portfolio. Basically, the contribution of the replicating portfolio, the way we normally deal with it in answering to question is the calculation of the difference between the fixed and the variable leg. Whilst deposits generate a cost in accounting terms, a low cost, but a cost, which is the funding cost of retail funding. What happens in 2027? Fixed leg, 25% of replicating portfolio maturing replaced with new swaps.
If we keep, as we assume currently, the level constant, this replacement has a positive impact on 20% of the 25% of the stock, the EUR 25 billion. The actual impact depends on the rate we will find in the market when we replace maturing with new ones. Expectation is that this is a tailwind, positive, because the new rates are expected to be higher than the old ones. Variable leg. Variable leg is driven by average level of the portfolio and variable rates. Variable rates next year will be higher than current year variable rates. So on the total amount of the EUR 25 billion, not on the 25%, one quarter that expires next year, this variable leg will have a negative impact.
The balance between the two is an overall headwind that, as I said, is in a context of a benign interest rate environment for the P&L of the bank because the rest of the balance sheet overcompensate the impact on the replicating portfolio. Per se, the replicating portfolio is just a means to reduce the sensitivity of the overall balance sheet of the bank in case of reduction in rates.
Thank you.
Mr. Riscassi, gentlemen, there are no more questions registered at this time.
Thank you everybody for staying with us in this call, and we will see each other in the next few days in person. Thank you again.