Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the MPS third quarter and nine-month 2026 results presentation. As a reminder, all participants are in listen-only mode. 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. At this time, I would like to turn the conference over to Mr. Luigi Lovaglio, Chief Executive Officer and General Manager. Please go ahead, sir.
Thank you very much. Good morning, and thank you for joining us for the presentation of our third quarter and first nine months 2026 results. Today, we are presenting another strong set of results for Monte dei Paschi, which provide further evidence of the strength and the quality of our franchise and of our ability to execute consistently, including during a period marked by significant strategic developments. I think this is very important. These results also reflect the deep understanding within our management team of this bank, this franchise, its distinctive dynamics, together with the ability to turn that understanding into sustainable value. At the same time, last week, our shareholders expressed their decision on the strategic proposal submitted to the general meeting. We fully respect the decision, and we move forward with the same discipline and sense of responsibility that have always guided us.
Our focus remains clear: delivering results, supporting our clients and our people, and continuing to create value for all our shareholders. With that, let me turn to the results. Let me start with what I believe is the most important message: Monte dei Paschi continues to deliver. Nine-month net profit reached almost EUR 1.7 billion, while the third quarter net profit reached EUR 543 million, increasing by almost 15% compared with the same quarter last year. Beyond the bottom line, what stands out once again is the quality of our performance. Operating income increased by almost 6% in the first nine months, while operating costs remained broadly stable. As a result, gross operating profit reached almost EUR 3.5 billion, increasing by more than 10%, and our cost-income ratio improved to 43%. This is a profitable growth, and importantly, it is increasingly diversified growth.
Net interest income exceeded EUR 3.2 billion, supported by higher lending volumes and effective management of commercial spreads. Fees reached almost EUR 1.9 billion, with growth in wealth management and advisory, demonstrating the increasing contribution of capital-light businesses to our revenue mix. Commercial momentum also remained strong. Customer loans reached EUR 133 billion, increasing almost 7% year- on- year. Indirect funding reached EUR 194 billion, also increasing close to 7% year- on- year. Total financial assets reached EUR 300 billion. At the same time, we maintained strict discipline on risk, costs, and capital. Asset quality remains firmly under control, with a gross NPE ratio of 2.4% and cost of risk of 58 basis points for the first nine months. Our core tier 1 ratio stands at 16.4, confirming the strength and the financial flexibility of the group.
So, if I had to summarize the first nine months in three words, they would be growth, quality, and strength. On the back of this strong performance, we are further upgrading our 2026 profit before tax guidance to above EUR 3.7 billion. This reinforces the earnings trajectory of our group and provides greater visibility on the value that this franchise can generate over time. Now, let's focus on the results achieved. In the first nine months, net profit reached EUR 1,657,000,000 . Per quarter, net profit amounted to EUR 543 million versus last year, we reported an important increase in double digit. Now, let's look at the operating performance that underpins these earnings. Net operating profit exceeded EUR 3 billion in the first nine months, up 11.5% year-on-year.
This reflects the strength of our underlying business model, higher revenues, increasing diversification of income sources, stable cost of risks, despite a more challenging macroeconomic environment. In the third quarter, net operating profit reached EUR 1,024,000,000, up by 18.6% year-on-year. While seasonal patterns in commission and lower trading activity affected quarter-on-quarter evolution performance, our performance overall remained significantly above the level recorded in the third quarter of 2025. Overall, these trends confirm the solid performance of the business, and this brings us naturally to the gross operating profit. Third quarter gross operating profit reached EUR 1,161,000,000 , up 14.8% year-on-year. Operating income increased almost 9% compared with last year, supported by more diversified revenue mix, while operating costs remain under control despite inflationary pressures and the impact of the new labor contract.
As a result, our cost-income ratio improved to 42%, 3 percentage points better than one year ago. Looking beyond the quarter, the year-to-date picture is equally compelling. For the first nine months, the gross operating profit was close to EUR 3.5 billion, increasing 10.2% year-on-year. Operating income grew 5.6%, while operating costs remain essentially stable despite inflation and ongoing investment in the franchise. This operating leverage translated into a cost-income ratio of 43%, an improvement of 2 percentage points versus last year. The data confirms that our business model is becoming increasingly efficient while preserving growth momentum. Let me now discuss the evolution of our core revenues. Net interest income exceeded EUR 3.2 billion in the first nine months, growing 3% year-on-year. The increase was supported by higher lending volumes as well as effective management of commercial spreads.
Third quarter net interest income surpassed EUR 1.1 billion, up 8.4% year-on-year and 4.4% quarter-on-quarter. Lending rates and commercial spreads improved during the period, demonstrating our ability to capture value from disciplined commercial management while supporting client activity. This performance confirms once again the resilience of our core banking franchise. At the same time, diversification continues to strengthen through fee generation. Third quarter fees reached EUR 593 million, remaining on a positive trajectory, up 3.5% year-on-year. As I mentioned, the quarterly comparison reflects the usual third quarter seasonality, particularly in wealth management and advisory. I would like to remind that the second quarter benefited from a particularly strong corporate investment bank contribution at Mediobanca, linked to a major transaction.
For the first nine months, fees reached EUR 1,882 million, up 3.5% year-on-year, delivering a solid performance with positive contribution across our main businesses, confirming the strength and diversification of our revenue generation. Growth was driven primarily by wealth management and advisory activities, reflecting the effectiveness of our network and the increasing contribution of capital-light businesses. This trend is strategically important because it further improves the diversification and quality of our revenue profile. Let me now turn to commercial performance. Commercial momentum remained robust across the whole group. Total financial assets reached EUR 300 billion, growing 4% year-on-year. Wealth management gross inflows reached almost EUR 18 billion. New retail mortgages exceeded EUR 5 billion year- to- date, while consumer finance origination surpassed EUR 8 billion. This is a confirmation of our ability to grow market penetration even in a complex operating environment.
Customer loan reached EUR 133 billion, up 1.4% versus June and 6.8% year-on-year. Results are reflecting our continued commitment to supporting households and businesses and contributing to their growth. Commercial direct savings stood at EUR 106 billion. This reflect the strength of our client relationship and the trust in our franchise, particularly in a highly competitive environment. Indirect funding reached EUR 194 billion, increasing 6.7% year-on-year and 0.4% quarter-on-quarter. Both asset under management and assets under custody contributed positively to the growth, supported by favorable net inflows. Operating cost. The third quarter operating cost amounted to EUR 857 million, down 3.4% quarter-on-quarter and only 1.3% higher year-on-year. Both HR and non-HR costs declined sequentially. Asset quality remains firmly under control.
Gross NPE ratio remains at the level of 2.4%, NPE ratio net 1.2%, and the total stock remains stable around EUR 3.7 billion. Cost of risk was 36 basis points in the third quarter and 38 basis points year- to- date, fully in line with guidance. Overall, also these metrics confirm the quality of our loan book and the effectiveness of our risk management framework. Liquidity remains very strong. Counterbalancing capacity stood at EUR 47 billion at the end of September. The liquidity coverage ratio was close to 150%, while the net stable funding ratio reached 120%. Our core tier 1 ratio reached 16.4%, further strengthening an already very solid capital position. The quarterly improvement was mainly supported by DTA dynamics, despite higher risk-weighted assets reflecting the growth in lending. We therefore continue to operate from a position of significant capital strength. Now, let me turn to Mediobanca.
It's just more than one year since Mediobanca became part of the Montepaschi Group, and I think we can look at the progress achieved with great satisfaction. Mediobanca was at the heart of the strategic project we presented in 2025, based on our strong conviction that its distinctive capabilities, particularly in investment banking and wealth management, could make an important contribution to the strengths, diversification, and value creation potential of our group. Almost one year later, the results provide strong evidence of the quality of that franchise and of the value of the combination with Montepaschi . Mediobanca is delivering earnings and profitability at record levels, while the interaction between the two businesses is progressing very well.
I think it's also worth noting that the strategic relevance we identified in Mediobanca is now being recognized more broadly, even by Standard & Poor's, that has recently described Mediobanca as a potential key pillar for Intesa Sanpaolo value proposition, particularly in investment banking and wealth management. To me, this is a further confirmation that the strategic value of the franchise and the industrial rationale that we identify from the outset was very strong. Let me now take through the key numbers of Mediobanca results. I think these numbers speaks for themselves. Mediobanca delivered more than EUR 1 billion net profit in the first nine months, up 13% year-on-year, and its best level ever, with return on tangible at 15.3%. Revenues increased 9% with a diversified contribution across the businesses. Gross operating profit grew 16% and the cost income ratio improved to 39%.
Commercial momentum also remained strong with loans up 9% year-on-year, almost EUR 58 billion. Total financial assets cross EUR 110 billion, while net new money returned to positive territory. This performance comes with a very solid capital position with CET1 at 15%. So, after one year into the combination, Mediobanca is performing at record levels and making a strong contribution to the quality and earning potential of our group. I believe that this slide, that is the revenue contribution by segment, shows very clear what we wanted to build. The group generated around EUR 6 billion of revenues in the first nine months, with 30% coming from asset gathering and wealth management, a further 9% from private banking. This means that a significant part of our revenues now comes from capital-light, high-multiple businesses. It's not simply a more diversified business mix.
It is a higher value business mix, which over time should support the valuation potential of Montepaschi . Let me now turn briefly to our updated 2026 guidance. On the back of the strong performance delivered in the first nine months and taking into account the short-term effects following the outcome of the extraordinary general meeting, we are further upgrading our 2026 pre-tax profit guidance from above EUR 3.6 billion to above EUR 3.7 billion. On capital, we expect CET1 at around 15.5%, reflecting the absence of the merger benefit and assuming a dividend of EUR 0.86 per share. The potential impact of the 2027 financial law is still under assessment and it is not included in our guidance. Before opening the Q&A section, let me conclude with a few final messages.
First, these results confirm once again the strength of the Montepaschi and our ability to deliver consistently, including in a complex and evolving environment. We have generated more than EUR 1,650,000,000 of net profit in the first nine months, supported by a strong operating performance. It is a confirmation that our journey of growth and value creation remains firmly on track. Second, our business model continues to demonstrate its strength and efficiency. Gross operating profit is up more than 10% year-on-year, revenues are growing, while costs remain broadly flat, loans are expanding, and our funding base remains strong. This performance also demonstrates the strength of our management capabilities and our ability to translate the distinctive characteristic of this franchise into sustainable value. Third, we maintain a very solid capital position with a CET1 ratio of 16.4%, even assuming a 100% payout.
And we now expect 2026 profit before tax to exceed EUR 3.7 billion. Fourth, the strategic context around the bank has clearly changed. Our responsibility now is to manage what comes next with the same discipline and focus that have brought us this far. Following the publication by Intesa Sanpaolo its offer document, the board of director Montepaschi will perform its assessment of the offer. The results we have presented today provide greater visibility on the underlying values of Montepaschi, the potential of this franchise, the strength of its customer relationship, and its earnings capacity. This brings me to my final point. In every long journey, there comes a moment where the road changes. But the change of road doesn't mean a loss of direction. Our direction remains clear. We will continue to deliver results. We will continue to protect value.
And we will continue to manage the next phase with discipline and responsibility. That is what we owe to our clients, our people, our communities, and all our shareholders. The world may have changed. Our compass has not. Thank you. I am now happy to take your questions.
Thank you, sir. This is the 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 touch-tone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Sofie Peterzens of Goldman Sachs.
Yeah. Hi. Here is Sofie from Goldman Sachs. Thanks a lot for taking my question. We can see that your PBT is upgraded, but I was just wondering how we should think about your net interest income outlook for fourth quarter and also 2027. We saw a very strong net interest income print in the quarter, and if you could just talk about how you think about the outlook for 2027. And then my second question would be on the budget law. I recognize there is a lot of uncertainty and maybe difficult to tell, but how should we think about the tax rate for MPS for next year, and what tax rate do you think would be fair to assume? Thank you.
Hi. Hi, good morning. Andrea speaking. I start with the second question, and I leave the first one to Luigi. I mean, on the second question, there are some. I mean, stated that this year our tax rate has proven to be around 32%, so a bit higher than we originally expected. The financial law sets in some cases some mathematical, let's say, increases, so you have a 3% surcharge on corporate income tax, so this is easy to calculate. The rest will have, let's say, an additional negative impact, so that we are currently analyzing to estimate. So I think you can easily do the maths.
Okay, so as far as NII, we believe that we continue a positive trend also in the fourth quarter with expected growing contribution, and we expect also for the next year an increase on NII, supported in particular by commercial loans volume growth and by the progressive development of capability in managing spreads.
The next question, sir, is from Luís Pratas of Autonomous Research.
Hi there. Good morning. Thanks for taking my question. My first one is on loan growth. It is running materially ahead of peers. Could you please discuss the front book pricing and spread dynamics behind this growth and reassure us that volumes are not being pursued at the expense of spreads or risk-adjusted returns? My second question is on the Intesa offer. Following the EGM outcome, how do you assess the likelihood of a successful tendering period at the current Intesa offer terms? Do you believe that this offer is sufficient to drive a strong acceptance, or do you still see scope for a further improvement in the terms? I just have a very quick clarification on the CET1. Would you please disclose the main components of the 20 basis points higher QoQ from other impacts, and also divide the DTA impacts and the Generali stake deduction? Thank you.
Okay. Good morning, Luís. On the first question, and on the loan book pricing, let's say, so far in the third quarter, the net impact has been slightly positive as a, let's say, combination of a slightly lower pricing on retail mortgages compared to back book maturing and slightly higher on corporate loans loan book. That's on the first question. On the third question, common equity tier 1 ratio, actually, yeah, the trend of our common equity tier 1 ratio is even better than expected. Let's say that what I can say is that we had better-than-expected minorities and intangible plus threshold effect impacts, and this is what you can see in the other bar in our capital walk in chart on the bottom right of the relevant slide.
While we had a better, let's say, DTAs versus DTL offset that, let's say, helped us to mitigate the Generali impact and the finalization of the PPA and the relevant impact on the intangibles. On the last and second in your order question, what we can say is that the board will make its considerations that will be published in the issuer's statement according, let's say, to the timetable by law, based on the timetable that will be communicated by Intesa in the offer document.
The next question is from Hugo Cruz of KBW.
Hi, thank you for the time. Just a few, that EUR 28 million of extraordinary charges taken into 3Q, is that just kind of paying for advisors? Is that it, or is there anything else? That's the first question. Second, on the capital, you guided for 15.5% for year-end, with you losing 50 basis points benefit from not delisting Mediobanca. I mean, that's a big decline QoQ from 16.4% - 15.5%. Can you explain what drives that? I imagine there might be some OP risk impact, but if you could give us a few of the moving parts, it would be very helpful. Then a question on the budget law.
You talked about the P&L, but what could it mean for capital if rates, just hypothetically, if the tax rate goes up, what does that do for? Would you have any DTA effect in the P&L on the first quarter? Also, what does it do for the DTA absorption that you have supporting your CET1 ratio going forward? Would that change the guidance for the, I think, around half a billion a year? Would that change in any way? That's my questions. Thank you.
Ciao, Hugo. The answer to your first question is yes, mainly advisors. On capital, let's say the bulk of the impact that would lead to a reduction quarter on quarter, as expected, by the way, is that we are assuming EUR 0.86 per share dividend. We are assuming to distribute this year as already guided during the year more than the relevant net income. This is the bulk. Then we also expect growth in terms of RWAs for business growth. Like I said, the main impact is what I said. With regard to the budget law, the effect in terms of DTA revaluation, et cetera, if any, meaning that if the budget law is confirmed as it is, et cetera, will be most likely booked in the fourth quarter of this year.
All in all, in terms of bottom line, we expect, based on the current preliminary estimates, a sort of neutral effect in 2026 as a net combination of different P&L line impacts. Finally, on the capital guidance for the next year, we do not envisage at the moment material impacts.
Sorry, just to clarify, with paying the dividend, because that is subject to approval from, I imagine, from the board, right? How does it work? Because if you have the Intesa offer, does that constrain your dividend payment? Can you remind us of that?
Can you repeat the question?
It was just to, the EUR 0.86 dividend, can you remind us, given that you are under the passivity rule, do you need AGM approval for that? The payment would come, I guess, in probably April or May, right? Does that actually happen given the Intesa offer?
Yeah. First of all, in terms of dividends, the board will decide on the final distribution to be proposed to the AGM in February. This would be a board decision, first of all. Secondly, in any event, the dividend is subject to the AGM approval. The dividend shall anyway be approved by the AGM, regardless of the passivity rule. Then, of course, there is also passivity rule.
Thank you.
The next question comes from Andrea Lisi of EQUITA.
Good morning. Thank you for taking my questions. The first one is on the NII dynamics. I have heard in the previous answers, but just if you can provide us an update on the sensitivity of NII to rate movements. Based on what you are currently observing in the market, considering also the current situation, if you can provide at the current moment what are your expectation of loan growth for next quarter and next year. The second one is also related to the rate environment. If higher rates, you think could affect the growth in consumer credit that is still proving strong at Compass level. If you expect some, especially on the consumer credit side, some increase in the default rates or deterioration of quality, especially regarding the consumer credit business related to the current environment. Thank you.
Good morning to you as well. On the NII sensitivity, at the moment, based on our models, so static and considering parallel shift of the curve, the NII sensitivity in the first year at group level is around EUR 25 million. In the first year, in the second year, it is around EUR 100, in the third year, EUR 150. The short-term, i.e., the one-year sensitivity shall be taken, shall be considered having in mind that we are carrying out our hedging policy in a dynamic way. For example, in 2026, we anticipated a bit hedging on the asset side, and we delayed a bit hedging on the liability side. We gain out of that. On the business dynamics, I would let Luigi comment.
Yeah. As far as loans and dynamic, we expect to grow in customer loan also in the next quarter. The increase is expected both on corporate customer and on retail customer. Positive trend continuing practically what is the trend that we are reporting from the beginning of the year. For 2027, the overall scenario in terms of market expect to grow loans at the level below 2% with a different trend connected with retail and corporate. Clearly, the sector in which we want to grow, that are mortgage and consumer lending, are the sector where the market is expected to have an higher growth. Mortgage just below 3% and consumer lending between 4.5%.
We are in a growing trend in terms of market share, so I'm expected that this dynamic can continue, so we will outperform the market, keeping outperforming and gaining market share, as practically we gained from the beginning of the year, also year-on-year. Positive trend, overperforming market.
Thank you.
For any further questions, please press star and one on your touch-tone telephone. We have a follow-up question from Luís Pratas of Autonomous Research.
Hi there again. Thank you for taking my follow-up. In terms of this expected MREL issuance in Q4, what is the expected cost and size? I wanted to double-check, if Intesa gains control, does this issuance still need to happen? Thank you.
As mentioned in the slide, we are currently envisaging so-called benchmark issuance, so the final size will be determined at the relevant time. The cost, as regards the cost, you can, let's say, give a look at the spreads on our senior preferred bonds currently outstanding. It is a bit higher than a couple of months ago due to market conditions. Worth mentioning that this would replace a covered bond issuance, so you should take into consideration the delta cost compared to a covered bond. Then, finally, as regard what happens if Intesa gains control, this is, I would say, more a question to Intesa depending on their, let's say, expectations on their MREL capacity.
The next question is from Hugo Cruz of KBW.
Hi. Thanks again for the time. Just a clarification. Apologies if I missed it, but the EUR 3.7 billion guidance for PBT, that includes having less integration charges that are now EUR 150 million less, right? It is an open-ended guidance, so I would think you would be raising your guidance anyway, even if you were not canceling those integration charges. If you could give your thoughts on that, please. Thank you.
Thank you. Let's say that the updated guidance takes into consideration, let's say, all the updated effects of 2026. Yes, also the fact that we would have a lower integration cost for the combination with Mediobanca, but also, let's say, the costs that we have already borne, the extraordinary costs that we have already borne in nine months that, of course, were not envisaged, and the lower cost savings that we will not have because they were related to the integration cost. All in all, let's say, as mentioned, the operating performance has been better than expected, and that would have led us anyway probably to increase the guidance.
Thank you very much.
The next question is from Juan Pablo López of Santander.
Yes. Good morning. Thank you for taking my questions. I got two. First one is on deposits. We see an increase of the cost of deposits quarter-on-quarter is around 7 basis points. Although the balance of direct savings is flat, is slightly down. You mentioned competition in the market. If you could elaborate a bit further on that one, where you see competition coming. Second follow-up is in terms of NII guidance for 2027. We saw some peers guiding to mid-single digit, high single digit for 2027. If you could be a bit more specific on that one. Lastly, a question more about detail. If you could share with us the unrealized losses of the amortized cost portfolio of your sovereign bonds or other bonds. Thank you.
We're just checking to see if your line is on mute.
First, deposit. It's clear that normally starting from the second part of the year, the competition is increasing in the light of closing the year, and all banks and also other competitors are in some way offering a competitive price. That's why we should in some way be competitive as well. But having said that, we believe that increase on cost of deposit is absolutely in line with what was our strategy, having in mind that we consider deposit key for further conversion in product of asset management. That's why we want always to keep, especially on the retail side, confident level of deposit. So we are in some way much more focused on keeping a positive trend on retail, while on corporate deposit, we are using more a tactical approach. So a combination of volumes and prices.
But generally, we pay a lot of attention, and our offer is normally not above the market. So what I want to say that we will keep our policy in defending retail deposit. We don't expect to have for that an increase of cost, particularly significant, and that's why our guidelines about net interest income is expected to be in a positive trend. We have to see what is going to happen in this final month of the year, what will be the exit point, having in mind, as I said, the strong level of competition. But overall, we expect to have an interest income that can be around mid-single digit.
But as I said, we will have a more complete visibility on this trend once that we complete the year and we see how the competition that is ongoing, the trend of interest rate that is growing, will impact the exit point of our net interest margin.
On the last question, on the hidden losses on the securities amortized cost portfolio, on the sovereign bond is slightly above, let's say, the hidden loss of, is slightly above EUR 600 million. If you take into consideration all the securities portfolio, it is slightly above EUR 700 million, including, of course, the EUR 600 + million I mentioned before.
Gentlemen, that was the final question, so back to you for any closing remarks, please.
I guess I conclude. I understand there are no any more questions, so thank you very much, and see you at the next presentation of results.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your devices.