Good morning, everyone. My name is Piero Munari of Arwin & Partners, and I have the honor and the pleasure of being today's moderator. I am pleased to welcome all of you, both in physical presence and online, to BPER's 2024 Capital Markets Day, where top management is going to present BPER's new strategic plan, B:Dynamic Full Value 2027. Before I leave the stage to BPER CEO Gianni Franco Papa, a couple of important notices. Please note that today's slide set and the press release can be found on BPER's corporate website. I would also advise you to take note of the disclaimer on slide one of the presentation document. After the presentation, the CEO, CFO, COO, and CRO will take care of the Q&A session.
Please be advised that Q&As may be asked by the audience in front of us or via Zoom. If you're asking questions via Zoom, either raise your hand online or use the QR code on your Zoom screen. After the Q&A session, lunch will be served, so thank you very much, and without much further ado, I will leave the stage to Mr. Papa, CEO of BPER.
Good morning, everyone. Let me welcome you all to BPER's Capital Markets Day. Today, I will present our new strategy and our path forward. We are already planning to come and see many of you in the coming weeks, because it is very important to us that we have the opportunity to connect with you in person. As many of you know, I played a role in BPER's banking group in recent years as a board member, chairing the risk committee. I was also the Chairman of Banca Carige, overseeing the integration into the BPER's Group. When I became CEO, I decided to spend quite some time listening to our stakeholders: our investors, our clients, our board, our people, and our regulators. All of them gave me a lot of important feedback.
In parallel, I carried out a deep assessment of our strategic starting position, our performance, and our vision before laying out this new plan. I want to start highlighting the key messages of today's presentation. Firstly, our starting point. BPER is a dynamic bank, which has proven to be able to quickly transform itself organically and through M&A into a leading Italian banking and wealth management player with a complete bank, banking offering. We have a solid and distinctive starting point, and yet an enormous potential for value creation. Secondly, I'm confident that on these foundations, our new business plan will create substantial value for all our stakeholders through an acceleration of commissions growth, coupled with important cost savings and a significantly higher and more sustainable shareholders' remuneration, while maintaining a very robust capital and liquidity profile.
Thirdly, we have identified four main priorities: unleashing customer value on commission-intensive products, increasing productivity while reducing administrative costs, improving and modernizing credit risk and capital management, maintaining a very conservative risk profile, and completing the modernization journey of the bank, which we started a few years ago. Finally, the plan is already up and running and will become fully operational as early as the first half of 2025 . This plan is realistic and straightforward, and we're fully confident that we will deliver it. Having said that, let me take a step back and walk you through how we got there. Over the past few years, we've been active in increasing our domestic footprint via organic growth, acquisitions, and strategic partnership to become the third Italian banking player in terms of client revenues and total financial assets.
Since 2017, we have grown revenues by CAGR of 18% and net profit by CAGR of 43%. We have been able to achieve all this while constantly delivering a strong internal capital generation. In the last 3 years, we have brought forward a pervasive integration of the different businesses, and we are now ready for a new cycle of growth and value creation. Let's turn to the next page, where we have summarized our key assets. We are proud to state that we are a leading bank and a very successful wealth management player. In a nutshell, we can leverage a nationwide presence, mostly concentrated in the wealthiest Italian regions. We have a base of around 5 million clients, of which 4.3 million individuals and 700,000 corporates.
And with total customer financial assets of approximately EUR 300 billion , we hold an important franchise. Once again, BPER today is the third Italian bank by number of clients, revenues, and total financial assets, as well as the third largest wealth manager. We are in a position of strength, and we have a substantial potential for further growth, as illustrated in the next page. Our platform for additional growth and value creation is based on three drivers: firstly, the potential to achieve a higher penetration of commission-intensive products. Secondly, further efficiency gains by reaping the benefits of economies of scale. And thirdly, a solid balance sheet that will sustain our growth, and at the same time, allow a higher and more sustainable shareholders remuneration. Let's start from the first driver on the next slide, our significant customer franchise potential.
In Retail, we can leverage our leading presence and proximity to our clients. For example, we will double down on our strategic partnership with Unipol Group, where we have already reached the highest productivity of non-life products. This translates into offering life and health, as well as non-life insurance products to our retail clients. Similarly, we leverage BPER Banca's leadership to very selectively increase our consumer finance lending on BPER's client base. In private and wealth management, we are already working with a new open platform setup in order to capture all the synergies potential. We have equipped ourselves to leverage Banca Cesare Ponti, among other units, in our asset management company, Arca, to provide our clients with value-added products.
In Corporate, we are working to be able to offer a full product suite to our clients, supporting them along the entire value chain and enabling them to have a more robust and sustainable business model, while increasing our share of wallet. In summary, we have the potential to move from good to great. Let's now move to the second driver, our large-scale benefit, yet to be fully captured. As said before, we grew significantly during the last few years, and we were able to achieve a pervasive and flawless integration of different businesses while delivering all the expected synergies. On the other hand, while our scale doubled, our efficiency did not improve at the same pace. Now, we have the resources and capabilities to capture full economies of scale through all the necessary investments and efforts.
Let's now move to the third driver, our conservative risk approach, coupled with the success we have demonstrated in delivering organic capital generation. Our NPE are at historical lows. Thirty basis points of CET1 capital, reaching 15.3% in the first half of 2024, with a conservative risk approach. This all translates in a significant opportunity to sustain growth while enabling a sustainable return to our shareholders. In the following section, I will walk you through our new plan. Let's start with our business plan manifesto. Our plan is simple. Firstly, we strongly believe that there is a significant competitive space that we can occupy, since we are in the unique position to combine the complete offering and innovations of a nationwide bank with the flexibility and client proximity of a well-spread territorial franchise.
Secondly, we are convinced that it's in our hands to move our profitability to best-in-class levels, capturing the full potential of our customer base while extracting value from latent economies of scale. We are aware of the macroeconomic outlook, and for this reason, I would like to start from there. Let's turn to the next slide. Our strategic plan is based on a set of conservative assumptions, which encompass these most updated forecasts. As you can see, GDP projections between 1% and 0.9% in 2027, inflation remaining stable at around 2%, and average short-term rates decreasing to 2.25% already in 2026. In the next page, we summarize our targets for 2027. I would like to draw your attention to revenues.
This will be positively impacted by the effect of commercial volume growth and higher commissions for a total of EUR 550 million, which will more than compensate for under EUR 50 million or lower interest rates, due to lower interest rates and the diminishing impact of the Ecobonus. As a result, commission on total revenues already today aligned to best practices, will further increase from 38%- 42%. Operating costs excluding depreciation and amortization, our operating costs will materially decrease by 7%, despite negative impact of inflation and new collective national labor contract. As a result, the cost income ratio will improve from approximately 52%- 50%. Conservatively, we have targeted a cost of risk below 45 basis points.
On this basis, net income will increase from approximately EUR 1.3 billion to about EUR 1.5 billion, achieving a return on tangible equity at a leading market level above 16%. CET1 ratio will be maintained at above 14.5%, despite a higher dividend payout. Let's move on to the next page, where we show how our volumes will be developing over the plan. On this slide, you have a snapshot of our key volume drivers, both on and off balance sheet, together with our asset quality KPIs. Risk-weighted assets will increase in line with our loan book at approximately 3% per annum. Thanks to our conservative risk approach, asset quality, expressed as net NPE ratio and coverage ratio, is planned to remain stable at 1.4% and above 52% respectively, among the best levels in Italy.
Our total financial assets will be growing at around 3% per annum. Noteworthy, asset under management will increase from EUR 67 billion to approximately EUR 81 billion , equivalent to a growth rate of 7% per annum. Let's move to the next slide, where we focus on our new dividend payout, which will be higher and sustainable. In fact, thanks to the action of the new plan, we anticipate to generate by 2027 cumulative net earnings of approximately EUR 4.3 billion . As a result, and thanks to the solidity of our balance sheet, we anticipate to deliver a sustainable 75% payout ratio, substantially higher than in the past. This translates, subject to the delivery of the planned net profit, into cumulative cash dividends of EUR 3.2 billion between 2025 and 2027, and a dividend yield above 15%.
This is our strong commitment to a higher and sustainable dividend payout policy. Next page, please. In the following section, I will walk you through the set of initiatives which we have already launched, aimed at reaching those targets. The plan is mostly focused on fee and commission income generation throughout our entire customer franchise. This is a plan which envisages important cost savings initiatives while maintaining a solid capital base. Last but not least, this plan is also based on a significant acceleration of the initiatives aimed at modernizing the bank. Our three strategic pillars are summarized here. We will unleash our clients' full value, increasing commissions by 12% to an additional EUR 250 million , more than compensating lower net interest income. Given the interest rate outlook, we believe this is a major achievement.
We will further work on extracting economies of scale, maintaining a strict cost discipline and a great attention to operating efficiency, lowering the operating cost base by 7%, excluding depreciation, and finally, we will make sure to create sufficient organic capital to ensure a very robust capital base at above 14.5%. The modernization will be pervasive across the group and will ensure the successful and flawless execution of our strategic pillars. Firstly, technology, security, and artificial intelligence will be at the forefront for further investments, estimated at EUR 650 million, to support the bank's digitalization and overall transformation. Secondly, ESG and sustainability will be a top priority for the bank. We aim to remain a leader in ESG, creating value for all stakeholders and being credible partners for our clients in their transition path.
Last but not least, we will focus on our organization and our human capital with ad hoc programs for our people and making use of our upskilling factory, which will ensure that approximately 30% of our colleagues will benefit from an upskilling initiatives. As mentioned earlier, our first pillar of the new plan is to unleash our client full value across all three main Customer segments. Let's now focus on how we plan to do that. In particular, in Retail, we can leverage our leading presence and proximity to our client to boost our Bancassurance and Consumer Finance businesses. In Private and Wealth Management, we will fully benefit from the new specialized service model rooted in Banca Privata Cesare Ponti to achieve significant, significant growth. I n Corporate, we aim to capture a fair share of client value, leveraging our new setup and corporate product factory.
This pillar focuses on revenues, where we are fully confident to compensate the expected reduction of net interest income with higher fees and commission income increasing by 12%, equivalent to EUR 250 million. Let's turn to the next page and deep dive into Retail. In Retail, we have a position of clear strength, benefiting from the third-largest retail customer base, amounting to approximately 4.3 million individual clients. Our insurance partner, Unipol Group, is the largest provider of non-life insurance products in Italy, and among other units, we will leverage our growth in Italian customer finance player, Bibanca, in order to increase the share of Consumer Finance of our existing clients. As you can see, we expect to capture an additional EUR 100 million of fee and commission income by increasing the cross-selling index from 25%- 30%.
Let me elaborate on the first level in the next page. We will benefit from our cooperation agreement with Unipol Group, which, as you know, is the leading player in non-life insurance. Our track record is remarkable. Having reported an insurance commission CAGR between 2021 and 2023 of approximately 34%, we are determined to maintain this best-in-class performance. We expect to increase insurance commission by about EUR 90 million reaching approximately EUR 215 million in 2027. We will be able to achieve this important target by increasing product penetration from 15%- 25%. The bank will enhance the distribution of Bancassurance products via digitalized product offerings and by integrating Bancassurance in the group CRM. In addition, Unipol Group itself will support our frontline with ad hoc capability-building programs. Let's move to Consumer Finance.
As far as Consumer Finance is concerned, we will focus on our existing customer base with a very selective approach. The main driver will be Bibanca, one of the fastest-growing players in Italy. As you can see on the slide, we expect Consumer Finance products penetration to increase by 12% and gross disbursement of Consumer Finance products growth by around 30%. As this is the case for Bancassurance, the bank will enhance Consumer Finance offerings by digitalized product selling through streamlined processes via AI and GenAI. Finally, we will ensure selective growth in salary-backed loans through a new branch sales process. Let me now walk you through our customer acquisition strategy. Along the plan, our commercial efforts on client acquisition will ensure that we will grow by above 4% net new customers.
We will leverage our digital channels, and in particular, our new omnichannel service model, via our best-in-class mobile app and our fully fledged remote branches. Our partnership with Unipol Group is expected to play its role in terms of dedicated referrals and pairing Unipol Group agencies with bank branches. Last but not least, we will exploit cross-selling opportunities from our leading position in mortgages, where we are particularly strong in new origination. On the next slide, I will take you through our new omnichannel service model that will be an important enabler of our strategic plan, drive higher revenues, increase productivity, and optimize costs. Our unique model is based on four drivers. First and foremost, we will fully exploit the potential of our wide geographical reach of relationship managers to acquire and properly serve customers, also with the support of best-in-class advisory tools.
Furthermore, we will sustain important technology investments to upgrade all our 1,600 branches with advanced ATMs, and more than 40% of branches will be cashless. Secondly, our mobile app will become the main channel for all the daily transactions and the core gateway for most of the sales and post-sales activities. We plan to reach more than 70% customers' penetration, positioning BPER at Italian markets' best practice level. Thirdly, in line with the growing needs of customers, we will scale up a 24/7 remote branch, able to complete any transaction and sales activity for any client. Finally, a similar approach will be applied to corporates, where we plan to enable remote transactions and sales through a new platform with full integration of treasury, trade finance, and FX services.
Let's now move to illustrate how we plan to unleash our clients' full value in Private and Wealth Management. Private and Wealth Management organization has been recently transformed into a new setup, from which we expect to reap the benefits in a very short time frame. Today, we are the third Italian wealth manager with EUR 300 billion of customer financial assets and with a set of product factories and advisory tools aimed at optimizing returns in line with our client risk profile. Based on that, we are convinced to increase AUMs by around 20% from EUR 67 billion- EUR 81 billion over the plan. Let's see on the following pages how we will achieve this. We are planning a number of targeted actions on our client base in order to optimize their asset allocation.
We have investigated our client risk profile and observed that they may benefit from an optimized risk-return portfolio composition, which will inevitably require tailor-made solutions. To do that, we will also leverage our strategic collaboration with BlackRock to exploit the scale of Aladdin to develop automated and tailored portfolios for our customers. Finally, we will make sure that our private bankers will be up to speed with the technological side of the private banking offering through dedicated trainings. In this way, we aim at optimizing asset returns for our clients and increasing commissions by approximately EUR 100 million over the plan horizon, equivalent to a growth above 15%. Let's move to the next slide and deep dive on how we will boost private bankers' productivity of Banca Cesare Ponti.
In Banca Cesare Ponti, we count more than 50,000 clients, 350 private bankers, and 100 private centers. Thanks to this new setup, we aim to increase materially the AUMs through a number of decisive actions: identifying hidden private clients within our retail universe, exploiting synergies between corporate and private, especially in the context of our client entrepreneurs. Important opportunities may arise, for example, from liquidity events originated in corporate, and last but not least, capturing additional assets managed by third parties. As such, we aim at growing average indirect financial assets per private banker from EUR 88 million-EUR 100 million equivalent to 14% growth. Let's now move on to our Corporate business. Corporate is an area where I believe a significant potential can be unlocked and where, allow me to say, I personally have extensive experience.
We have already set up a new Corporate product factory to serve the entire bank, and we have 700,000 Corporate clients that we are not serving at scale. Our aim is to support our clients along their entire value chain. So as an example, I can say that 50% of our customers are in the top five Italian regions by export. As such, we will aim at offering and securing important global transactions and working capital solutions. In order to complete our offerings, we are already investing in structured finance, investment banking, and capital market units, which have already reached successful results in supporting our existing customers. In this way, we will also increase the share of wallet we have with existing clients, opening the door for further business for BPER along our complete product offering.
Given our current low share of wallet, I'm convinced that thanks to the new organization setup, we will be able to rapidly reach our fair share, hence, our target of increasing the portion of commissions to total revenues from 37%- 42%. Let me now walk you through one of our key initiatives, the growth of global transaction banking and working capital solutions. The growth in global transaction banking solutions is an important source of steady and capital-light commission income. We will announce our export financing offerings, along with partnerships with leading export credit agencies, while expanding our network of correspondent banks worldwide. In this way, we plan to increase fees by about 18% to EUR 220 million .
One of our important tools is the digital corporate banking platform, aimed at boosting payment flows and supply chain financing in order to support the sustainability of the value chain of our clients. Let's now take a look at those initiatives will translate into our top line. Despite a decreasing interest rates environment and slow economic growth, our top line is expected to grow thanks to the positive effect of commercial volumes and commissions that will more than offset lower net interest income. As such, the quality of revenues will increase, as the share of fees on total revenues will grow from 38% - 42%. In the next slide, we will focus on the expected net interest income development, broken down by the different components.
You should be not surprised that to expect an adverse impact from interest rate developments, which will not be compensated by higher loan volumes. Firstly, the impact of rate decrease amounts to around EUR 300 million, thanks to the resilience of our revenues against interest rates decline. Secondly, we expect the diminishing effects of Ecobonus and other factors to have a net negative impact of EUR 150 million. And thirdly, we expect a positive contribution of around EUR 300 million from volumes due to the loan book increase, with direct funding growing by around plus 2% per annum. This was an evolution. Let's now deep dive into commission income development. As I already mentioned, we expect fee and commission income to increase by some EUR 250 million.
It is important, in my view, to underline how Wealth Management volumes will contribute to the increase in fees, driven by the growth in life insurance assets and asset under management. Now, let's move on to the second strategic pillar which focuses on how we will be able to capture our latent economies of scale. Firstly, we aim to significantly increase productivity through an approach that leverages our new omnichannel model and the extensive use of AI and GenAI. This will enable a reduction of our workforce by approximately 10% through voluntary exits and natural turnover. Secondly, we are working hard already and are going to apply a zero-based approach to external cost, targeting a 16% reduction in administrative expenses over the plan. Let's see how we will achieve this on the next slide.
Our new omnichannel service model, that I've already illustrated, will be pervasive across the bank and will allow a significant increase in productivity. First of all, our new model will enable important strategic shift in sales channel mix. As you can see, the importance of non-branch sales will increase threefold along the plan. In fact, we expect that by the end of 2027, about 45% of sales will be non-branch based. Digital will play a key role in this transformation. On the right-hand side of the page, you will appreciate our targets. The proportion of the new client acquisition through digital channels is planned to more than double, increasing from 15%- 35%. Digital sales with personal loans will increase fourfold, and credit card digital sales will increase by two and a half times, reaching 25%.
All in all, according to our internal benchmarking, we expect our digital sales to reach Italian best practice levels. On the next slide, we will focus on the impact of the new omni-channel service model on operating efficiency, with a particular focus on transactions. The second benefit to our new omni-channel service model will allow us to reduce man-hours dedicated to low value-added activities. In this respect, we plan a number of actions: to have advanced ATMs in 100% of our branches, to increase the number of cashless branches fourfold to more than 40%, and to reduce the number of physical transactions by 50%. These efforts, as you can see, will translate into 60% of our colleagues' time being available for commercial activities. Let's now move to process optimization and automation enabled by GenAI.
We are quite advanced already and very serious about the value to be captured from tech and data. Process redesign and automation is clearly one of the key applications. We expect a productivity increase, which will be achieved through a number of initiatives. We are redesigning our processes, including a significant automation of labor-intensive activities. We are right-sizing headquarters and support functions in order to optimize the proportion of front and back office functions, and we started to adopt AI and GenAI tools to streamline labor-intensive activities while improving customer experience. The virtual assistant, when you enter our digital banking platform, is a typical example. As you will appreciate later in the context of our digital strategy, we will achieve significant time savings on non-sales related activities. On this slide, we show the impact of the productivity increase on our workforce, which I just described.
As I mentioned earlier, the group account will decrease by some 10%. Voluntary exits, which have already been agreed, will have an important role, amounting to approximately 1,600 individuals. We expect organic turnover of some 1,500 professionals over the plan. In addition, and most importantly, we will proceed with 1,100 targeted hirings, attracting talents with specialized skills and extensive experience in strategic areas, for example, within the IT product factory. Let me add that in this context, we will also re-internalize activities currently carried out by third parties. Next page, please. I said before, we are already working hard and are going to focus even more on external costs, which we will review with a zero-based approach. This will enable a reduction of approximately 16% over the plan.
On this slide, you can see the major areas affected by our initiatives, which will be pervasive on the entire cost base. Let's move to the next slide, which summarizes the evolution of costs along the plan. All the initiatives I mentioned will translate into overall savings of approximately EUR 270 million. Savings will be partially offset by the impact of inflation and by depreciation linked to investments required to boost productivity and operating efficiency. Considering revenue projections, which will remain basically flat, we expect an improvement of the cost-income ratio landing at approximately 50%. Now, let's move to the third pillar of our strategic plan, which focuses on credit risk management and capital management. Over the plan horizon, we will deploy a new and modernized approach to credit risk management.
We will also address capital optimization strategies in order to best allocate our risk-weighted assets, to be able to increase the remuneration of our shareholders in a sustainable way, maintaining a robust level of CET1 capital ratio. These are key elements, not yet fully leveraged, to sustain a more productive use of capital and to enable a higher and sustainable distribution to shareholders. Let's now move to the next page, please. As you can see, BPER has one of the lowest net NPE ratios in Italy. This is also due to our very conservative provisioning policy, where we report among the highest coverage ratios in the Italian industry. Our goal is to grow our loan book without any deterioration of our key risk indicators. We will focus on the modernization of our credit process.
The implementation of digitalized procedures will enable us to be swifter, increasing automated credit approvals by two and a half times along the plan. On the net NPE side, we will be enhancing the management of credit collection in order to mitigate the risk of potential loan losses. We prevent credit deterioration by early warning mechanism, also thanks to machine learning-driven processes, and in this context, we will leverage the partnership with Gardant to ensure a best-in-class collection. Let's move on to asset quality, which is a key priority for us and where we maintain a conservative approach. Despite a projected loan growth of approximately 3% in terms of CAGR, our conservative risk approach is reflected in flat net NPE and coverage ratio going forward.
As you can appreciate, we expect a stable default rate along the plan of around 1%, with an inflow on new defaulted loans of about EUR 2.8 billion. That said, inflows will be mitigated by the positive effect of our collection activities for about EUR 1.7 billion, and sales of non-performing loans amounting to over EUR 800 million, also thanks to our strategic partnership with Gardant. Let's now move to the next slide, to our capital management strategy. Balance sheet strength depends on a proactive capital management. We will approach this both strategically and tactically.
As you can see, we are planning to mitigate the negative impacts of upcoming regulatory headwinds by generating more than 30 basis points through a proactive capital management approach, make our capital planning even more rigorous, steering our business towards capital-efficient products and Customer segments, improve the quality of our data to have a better picture of the risk profile of our clients, leverage IRB models to better capture the risk profile of some Client segments, and of course, scale up our business model by proactively managing our ALM processes with several tactical strategies, such as originate to distribute, synthetic securitizations, and risk diversifications with partners and institutional investors. Let me now guide you through our CET1 drivers, which are summarized on the next slide.
Thanks to the initiatives we have described, despite the loan growth and the higher dividend payout, we expect to remain steadily above a CET1 ratio of 14.5% throughout the plan. Cumulative net income will increase the CET1 ratio by 770 basis points. Of this, 590 basis points will be utilized for our higher dividend payout and for AT1 coupons. We are planning to consume a mere 170 basis points related to business risk-weighted assets, which will increase from roughly EUR 55 billion -EUR 61 billion , and as already mentioned, regulatory headwinds worth about 70 basis points will be partially mitigated by our proactive capital management exercise, which will bring more than 30 basis points to CET1 ratio.
As such, we expect 2027 to report a CET1 ratio above 14.5%, in line with the end of 2024, despite a much higher payout ratio. Allow me to underline that along the plan, we will create 600 basis points, equivalent to approximately EUR 3.7 billion of organic capital generation. In the next slide, we'll give you an overview of our funding plan. The plan will be funded via growth in direct funding from customers, coupled with EUR 8 billion of new institutional issues. Our Treasury department has worked on a funding plan, which is realistic in terms of mix of size and capital structure, in order to meet liquidity ratios and MREL minimum requirements. Our funding plan more than compensates the maturities of EUR 2.5 billion over the plan horizon, fully satisfying regulatory requirements.
From our three strategic pillars, we are now moving to the enablers of the plan. These are strategies and actions which will have a pervasive effect across the bank. As we mentioned earlier, this is a journey we have already started with significant investments. This journey envisions further investments in technology, security, and AI, ESG leadership, and enhancing BPER's most valuable resource, our human capital. Let me now deep dive into the first enabler: technology, security, and AI. As you have noted through the presentation, our new approach towards a digitalized bank is clearly subject to a very important role of IT. Security and AI enhancement of IT-related CapEx. The aim of this pillar is to increase productivity of the IT factory by 10% along the plan to best sustain the required pace of innovation, while at the same time ensuring security and resilience.
Let's move on to the next page to understand how we will bring this forward. The evolution of our IT factory through the widespread adoption of GenAI, the insourcing of distinctive skills, and the tighter collaboration between IT and business, will allow to increase productivity of our resources, and therefore speed and quality of software releases, have greater control on strategic areas, also thanks to insourcing of engineering activities that will increase IT internal FTEs by around 35%, and ultimately, sustain the digital transformation overall modernization of the bank. While digitalizing our operational model, we need to increase the level of cybersecurity and resilience. As I said, looking forward, BPER will need to protect itself and its customer from cybersecurity threats. This is a high priority for us, and we plan to increase investments in cybersecurity and IT resilience by more than 50% versus the previous plan.
There have been substantial cyberattacks in the banking industry, and we cannot afford such disruptive situations. We are strengthening our security measures through specialized training, and at the same time, we are acquiring new technologies aimed at defending us against cyberattacks. On the other end, we are actively boosting our IT resilience by managing the technological upgrade to align our strategy to best-in-class operators, strengthening our business continuity process and disaster recovery strategies, including cyberattack scenarios, and expanding security and ICT risk management for third parties. In the next slide, we will briefly touch upon the scale-up in the adoption of data and AI. As I mentioned before, we are already quite advanced and very serious about the value to be captured from data and AI. Since 2022, BPER embark on this ambitious journey with the aim of extensively adopting artificial intelligence.
As a matter of fact, we have already deployed over 45 use cases. As an example, our churn prevention model reduced the churn rate by approximately 15%. Looking forward, we envisage to adopt GenAI at scale with over 120 use cases across main group areas, aiming to further enhance the effectiveness of our commercial machine through AI-driven targeting for commercial campaigns and personalized communication to client. As already mentioned, improve productivity through the automation on labor-intensive activities and assistance of our workforce in their daily tasks, and improve productivity and speed of the IT factory. It goes without saying that BPER, to complete its modernization journey, will need to continue to invest to be at the tech forefront. Let's see now how CapEx will evolve.
We plan CapEx to amount to approximately EUR 650 million over the plan horizon, significantly above the steady state, impacting, as you can see, a number of areas. This transformation journey will end by 2027, and then CapEx investments will revert to a steady state of approximately EUR 130 million per annum. In line with the group modernization, in the next slide, we will cover our ambition in ESG. Our goal is to remain a leader in ESG, to continue to create share value for our, for all stakeholders, and be credible partners for our clients in their transition path. As such, the new plan identifies objectives and concrete actions on the key drivers, which you will find on the slide. Among others, we aim at maintaining our leading position in ESG ratings.
We have planned a plafond over EUR 7 billion of ESG lending. We are foreseeing, within our funding program, EUR 1 billion of green bond issuance. Finally, we want to play an important role in supporting our local communities with some EUR 20 million of financial contributions. Last but not least, in order to modernize the bank, it will be fundamental to strengthen our skills and capabilities. I would like to spend now some time on the importance of enhancing our human capital. As far as our initiatives are concerned, the business plan comprises a number of actions. An upskilling and redeployment program aimed at increasing the commercial firepower of the bank. Over 30% of our workforce will be empowered by these activities. A cross-functional approach based on the full IT integration will enable the transformation into a modern organization able to capture new business opportunities.
A new performance management model, including segment reporting, will make our people more accountable with meritocracy at the center, and a new incentive plan, which is fully aligned with the business plan targets. Next slide, please. So here we are, and allow me to reiterate the key components of our plan, a plan on which we are already acting on, positioning BPER's long-term future. Let me recap our priorities in the next page. Our new business plan will create substantial value for all our stakeholders through an acceleration of commission growth and important cost savings. As already mentioned, the complete modernization of the bank will enable the flawless execution of the plan. As a result, we anticipate a significantly higher and more sustainable shareholders' remuneration, while maintaining a very robust capital and liquidity profile.
The plan is already a work in progress and will be fully up to speed and operational by mid-2025. This is a plan that we are convinced we can deliver and whose positive impacts will continue beyond 2027, as illustrated in the next page. We have already commented on our plan targets. Let me focus on our run rate for 2028, which underlines outside the scope of our new plan and is based on projections. 2028 will be positively impacted by the action we are undertaking and that we will carry out in the next three years. As such, we are convinced that the positive trend in the top and bottom line will consolidate itself. We project revenues at above EUR 5.6 billion with a higher proportion of high-quality capital-light fees.
We project an improvement in the cost-to-income ratio to below 50%, and we will maintain our CET1 ratio at above 14.5%. Let me reiterate that 2028 figures are projections and are not part of our plan. Let me finally remind you our planned shareholders' remuneration. As a result of all our actions, we are committed to increase the remuneration of our shareholders. As already stated, the payout ratio will increase to approximately 75%, translating, subject to delivery of the planned net profits, into cumulative cash dividends of EUR 3.2 billion . Let me conclude by reiterating that the bank is in a position of strength, and we are convinced there is a significant value to be captured. The new plan will strengthen the bank's competitive position and generate best-in-class profitability, both increasing high-quality revenues and achieving material cost savings....
We will carry out significant investments to complete the bank's modernization, the impact of which will continue also beyond 2027. Most of the initiatives described are already up and running. We have set up a robust performance management system to secure the flawless execution of the plan. This will also leverage the new divisional database that will be made available within financial year 2024 results. My management team and I are fully confident and totally committed to deliver B:Dynamic Full Value 2027. So thank you very much for your attention. We are very much looking forward now to answering your questions, and would like to invite you to the Q&A session.
Thank you, Mr. Papa. So ladies and gentlemen, we will now start our Q&A session. While Mr. Papa is changing his microphone, I would like to invite Mr. Marcucci, CFO, Mr. Sonnino, COO, and Mr. Cristini, CRO, to join Mr. Papa at the table. As I mentioned earlier, Q&A's may be asked by your audience in front of us and via Zoom. If you're asking questions via Zoom, either raise your hand or use the QR code on your Zoom screen. I would also kindly ask you to limit the questions to two per person, so as to allow everyone to ask their questions.
Rest assured that if we will have sufficient time, we will allow the audience to ask more question. One last point before we kick off with the Q&A's, before asking the questions, we would kindly ask you to state your name and the name of your company. We are now ready to take the first question. Gentleman there on the left. Here.
Hi, this is Marco Nicolai from Jefferies. Got a couple of questions, but first of all, congrats for your planned targets. I think, you know, they are extremely impressive, and it's very good to see that you can deliver flat or even increasing RoTE, despite lower rates. So this gives incredible, very good, refreshing views on your business. First question is on AUM growth. So you plan 7% growth per year in AUM, which is punchy, considering that, you know, in this environment, all your peers and competitors are trying to do the same. So how do you get to this 7%? Do you embed any market effect? And, how shall we think about you growing within your own customer base compared to growing with, you know, towards new customers?
This is the first question. Another question on actually on your 2024 numbers, because there is quite a gap between where you sit now in terms of Common Equity Tier 1 and the number you put in your in this plan for end of 2024. So I'm just wondering what is happening between June and December 2024? Is it like more restructuring costs you're putting through? It doesn't seem so because the net income number is broadly unchanged compared to previous guidance. So is there anything happening in terms of capital impacts over the short term? Thank you.
Thank you very much for your questions. I will take the first one, and the second one will be taken by Simone, our CFO. As I presented, we have a new setup from which we expect to reap the benefits in a very short time frame. We are already, as mentioned, the third largest wealth manager among Italian commercial banks. We have this distinctive setup that is Banca Cesare Ponti that needs to fully deploy the full potential. We just started, as you know. It started in reality a few months ago. We have also our shallow wallet that is well below our potential.
On top of that, and this comes from historical reasons, we have assets that we can recapture, assets that were with banks that have become part of BPER. For instance, I give you an example, Carige. Cesare Ponti was part of Carige. When we acquired Cesare Ponti, a lot of assets were already dispersed with other players because of the problems and the troubles that Carige went through for several years. We believe that we'll be able to recapture part of this business, thanks to our setup and to the quality of our distribution capabilities. Second question for you.
Yes, thank you very much for the question. We have a prudential approach, so we confirm our guidance that we provide in June for the full year 2024, that was above 14.5%. We will have at year-end EUR 1.2 billion of risk-weighted assets optimization for the models. I will then give the words to Mr. Cristini, that is expert on these things. We will have a seasonality effect at year-end, as usual, on cost and other lines, and then there are some element of uncertainty that we are clarifying, some negative, but mostly positive. So with the result of September 2024, we will provide a new guidance that will be for sure above 14.5%. But Emanuele?
Yes, thank you. The impact of about around EUR 1.2 billion of capital requirement related to operational risk is related to the regular update of the calculation that are adopted in the so-called TSA approach. We will include this year, 2024, with higher revenue with respect to 2025, one year. So, as is well known, the capital requirements for operational risks are proportional to revenues, and we will include this year that is characterized with high revenues. So we will have to account an increase of about around EUR 1.2 billion for operational risk due to the regular update of a TSA approach. Thank you.
Thank you. Next question from the audience, please. Gentleman here on the right. No. Here. Thank you.
Good morning to everybody. Giovanni Razzoli from Deutsche Bank. One question on capital, and the second one on your projections on the cost of risk. You have a 14.5% CET1 ratio at year end. You have not mentioned any, you know, options for allocating any excess of capital. I was wondering whether your priorities in case are for organic options or inorganic options, and in case you are considering also inorganic options, what would be your top of mind in terms of businesses? And the second question is on the assumptions in terms of the default rates in 2027.
You have put 1%, and during the presentation, you highlighted that you are quite exposed to very much export-oriented regions. It seems to me that some of the countries neighboring Italy have now some. are expecting some slowdown. So I was wondering whether you can provide us a little bit of sensitivity to your less than 45 basis point cost of risk to different levels of defaults. Thank you.
Thank you, Giovanni, for the question. So, in as much as excess capital, that, I mean, whatever indicated as an excess capital, and the possible utilization of this, well, today we are presenting our plan, strategic plan for the next three years. We believe is a plan that will deliver a lot of value, inner value today in the bank, so we are concentrated on organic growth, and therefore, you know, this is where our capital will be deployed. In as much as the case, the 45 basis points for cost of risk, Emanuele will answer.
Yes. First of all, it's worth highlighting that, at this stage, we haven't detected any deterioration with regard to the credit risk profile of our portfolio, since the default rate are stable and the probability of default of our borrowers are stable, too. Of course, we will constantly monitor the evolution of our credit risk portfolio. It's worth highlighting that, in the projection that we have prepared for the plan, one of the most important pillar for our credit policy is that the new loans will be mainly concentrated on borrowers with high credit worthiness.
So we expect a default rate stable throughout the plan at equal to around 1%. We have, of course, prepared some sensitivity analysis in order to take into consideration some uncertainties related to the macroeconomic scenarios. For example, in the event of a decree, a decrease of 1% in GDP, we will have to account about two additional basis points in cost of risk, that is around 20 million of provision. But, as I have highlighted, at the moment we don't register any deterioration in our credit risk portfolio.
Thank you. So we'll have another question from the audience. We have a lady down there, and after that, we'll pass on to Zoom to give a chance to the next, to the audience online.
Good morning, Paola Sabbioni, Barclays. My first question is about your possible opening to an interim dividend. I wanted to ask, which are the steps to get there, and also timing you have in mind? And then the second question is about possible decline in rates beyond what you expect. It feels your plan embeds buffers to protect your bottom line projection. Which are the levers that you can activate to offset that possible extra pressure from rates? Thank you.
Thank you for the question. In as much as interim dividend is concerned, the bank may consider to distribute interim dividend, verify the fulfillment of the relevant technical and legal requirements. We have to change the bylaws of the bank. As you know, in order to pay an interim dividend, this has to be indicated in the bylaws. This is Article 2433-bis of the Italian Civil Code. We are going to have an extraordinary shareholders meeting, because to change the bylaws, we need an extraordinary shareholders meeting that will take place in December, and therefore, the board will decide to submit to extraordinary shareholders meeting the possibility, through the change of the bylaws, to pay interim dividend. I will pass to Simone for the other question.
Yes. Thank you very much for the questions. As you have seen, we have 2025 and 2026, 2027 as Euribor average rate. Discussing with some of you before the meeting, I see that some of you has even further decreased to 175. For us, the sensitivity 175 is EUR 90 million. For sure, we will react on other lines of the profit and loss in case of this sensitivity. I don't know if Manuel is correct?
Yes, absolutely. I can confirm your figures. An additional decrease of around 50 basis points would imply a decrease of around EUR 80 million-EUR 90 million on our NII. With regard to NII, it's what highlights some important elements. First of all, our deposit base is stickier than other peers, in particular, thanks to the higher share of retail deposit. In addition, our loan-to-deposit ratio will be low through about 80% throughout the plan. So we will have flexibility in managing funding liquidity risk in order to maximize our NII.
Thank you, Mr. Cristini. We will now pass on to Zoom. We have a question from Domenico Santoro of HSBC.
Hi. Thanks for the Zoom option for us, that we can be physically there. So hopefully you can hear me well. I do have two questions, one on the shareholders remuneration. I just want to understand whether I got correctly what I read, and the other one is on cost. In your press release, you mention an average payout ratio of 75%. So my question is whether, you know, this will increase linearly over the plan. I'm not sure, 70%, 75%, and 80%, if this is the case. And, if not, if it is a 75% flat over the plan, what shall we think-- how shall we think about two thousand and twenty-four?
Given that if I'm, if I remember correctly, you accrued EUR 0.30 of dividend, which is EUR 0.60, more or less, annualizing this number, is around 65%. Given that you will have so much capital, even with the regulatory headwinds that you just explained, I wonder if there is some upside risk, you know, to 2024, if this is the case. T he other question, similarly to cost, whether it is -1% CAGR, is something linear in the plan, or whether the cost cutting is backloaded at the end of the plan, given that, you know, the workforce reduction will be sort of gradual? Thank you.
Thank you, Domenico.
Thank you, Domenico, for the question, questions, actually. So in as much as 2024 is concerned, you are right, we have just set aside around 30 pips that are equal to around 60% of the profit that we have made in the first six months. We have to come out with the numbers for the Q3 and year-end, let's see what we can do. But already, I would like to remind that 60% is double than what had been paid based on 2023 results. In as much as the plan is concerned, we are committed to pay 75% across the three years, an average of 75%. So I cannot tell you today if it's a linear one, if it's going to be lower in 2026 and higher in 2027.
Linearly, let's say we have an average of 75%, which we believe is a very good return to our shareholders. In as much as costs are concerned, well, you saw that we indicated also just not part of the plan, let me stress this once again, the 2028 figures, and this is just to show the market that we have a linear progression of the number of our plan. We don't have any hockey stick numbers towards the end of the plan. So we will have-...
If it's a cost, a linear progression in the reduction of costs, which, let me stress, will reach a very large amount of EUR 270 million, the more that will more than compensate the increase driven by the inflation drift and the increase in D&A, that it comes because of the very, very large investments that we made in the past three years and we will be making in the next three years. But let me add one thing: the benefits of these investments will also materialize beyond 2027. By 2028, I indicated that we will go back to steady state investments, which are equal to around EUR 400 million every three years, so EUR 130 million per quarter.
This is not immediately in 2028, but going forward, 2029, 2030, will bring an additional cost savings because there will be a reduction of NPE, and this additional cost saving, we calculated will amount to around 2 percentage points of additional improvement in the cost-to-income ratio.
Next question from the audience. There's a gentleman here on the left.
Thank you. Andrea Lisi from Equita. The first question is on fees, in particular, on the strategy for Arca and how it integrates with your setup in Cesare Ponti, and if you think you can extract higher margins from the products you sell to your clientele. The second question is related to costs, in particular, if during the plan period, should we expect some one-off that are not disclosed during the presentation? And the very last one is on overlays, if should we imagine some use of overlays over the plan and if are this factored into the numbers? Thank you.
Thank you for the questions. The first questions is about Arca. In our strategy to operate as an open platform to offer the best products to our clients, Arca plays a relevant role, and for us is the preferred partner for core asset under management products. Arca is, and we are very happy with Arca, is constantly evolving with a significant efforts on products, people, services, to be aligned to the best market practices. We want to increase our asset management, we have a growth in the asset management segment, what we believe is a very ambitious growth, and therefore, Arca for sure will be, you know, a part of this growth with us.
We are constantly working with Arca in order to increase, wherever possible, the return on the assets that we sell and cross-sell to our customers. In as much as one-offs in costs, no, throughout the plan, we don't have any one-offs. The one-offs that we had been already accounted for in the numbers of 2023 and 2024, related to the actions that we took, both in December last year and in July this year, for the exit of 1,600 colleagues through voluntary scheme, and it cost us around EUR 430 million, already accounted for. So again, it's a linear progression in the reduction of costs. I will put through Emanuele for the third question.
Yes. Please. Yes, the third question is related to overlays. We have roughly EUR 150 million-EUR 200 million of overlays throughout the plan in order to manage the volatility related to macroeconomic scenario. Anyway, we plan to reduce the amount of this overlay by around EUR 50 million-EUR 60 million. Anyway, time to time, we will evaluate the evolution of the macroeconomic scenario. Still today, we have around EUR 200 million of overlay in our provisioning, for which we constantly adopt a conservative approach. Thank you.
Thank you. We will now take another question from the audience, and then we'll go back to Zoom. Here on the left. Thank you.
Noemi Peruch, Mediobanca. I have a question on loan growth and then capital. The loan growth you projected is quite substantial, considering the recent evolution of the Italian market. So I was wondering, what are the drivers of this 3% CAGR? And then on capital, do you see the 14.5% as the minimum common equity you are willing to operate with? And how do you think about excess capital and the criteria for its deployment? Thank you.
Thank you for the questions, Noemi. So, in terms of growth, where the growth in volumes is coming from, the growth is coming both from the Corporate side and the Retail side on a 50/50% basis. As I presented, we have enormous value, and we are not serving at scale our existing customers. We have a very large customer base. We are the number three in Italy in terms of number of customers. 4.3 million clients in the Retail space, and 700,000 Corporate clients. So we want to increase our penetration, for instance, in Retail, in Mortgages, where we have already quite a good market share.
In Consumer Financing, always working and offering our products to existing customers of the bank in order to preserve the asset quality, so we will not go to the open market for these products, and in as much as corporate is concerned. So let me draw on my personal long-lasting experience as a corporate banker, that, you know, is more than forty years, and I can testify that this bank has a great potential for growth, profitability, and a positive risk profile, because we are massively under-penetrated in this sector of the customers. So, the growth is coming from this, from existing customers, good growth, and what is more important, good asset quality. We keep good asset quality.
We believe that 14.5-ish% of our capital is the right size for us, because we want to grow. We have, in any case, a conservative approach. We have a constant changing macroeconomic scenario, driven by dramatic and possibly dramatic changes that may happen in the geopolitical scenario, so we prefer to be on the safe side and to keep this size of capital.
Thank you. So we go back to Zoom for a second. We have a question from Hugo Cruz from KBW.
Hi, thank you for the time, and thank you for the plan as well, which I think is a good plan. I want two questions. So first of all, on Mortgages, you said that you're already one of the leading players in your origination. You know, I hear the bank saying that it's actually not an attractive product in Italy. So can you tell us how you think about the profitability of the Mortgage product, and perhaps it's an element of cross-selling, so yeah. S econd question, more broader on NII, can you describe your interest rate hedging strategy today and how it's expected to change over the plan? Thank you.
Thank you very much for the question, Hugo. I'm very happy to hear that other banks consider Mortgages not be a profitable business, because for us, is profitable. It's a matter of fact that we have around 11% market share in this, and what is good for us is that on average, we cross-sell five products for every Mortgage we sell. So for us, it is a profitable business, and we want to keep on maintaining and we possibly growing our market share, especially also because we believe that this is a hook product that will enable us to drive the growth in the net new customers that we will be pursuing in across the plan. I believe we are happy with that. I will put you through Simone for the replicating portfolio.
Yes, thank you very much. We are confident on our interest margin. We have a prudential approach. Our strategy will be implemented to mitigate the risk concern both the potential negative change in interest margin, but also on hidden loss. We have. We will use, clearly, derivative and financial instruments. We have, at the moment, and we keep, we think to keep constant, EUR 14.5 billion of swap, where we receive fixed and we pay variable, then we have billion of bonds that we keep, think to keep constant during the plan, of which around 13 are Govvies.
Then, above all, related and linked to the previous question, we have to take into account that we have Mortgages around EUR 37 billion, of which EUR 20 billion residential mortgage retail, that are a natural hedging for the interest rate. On this, we don't have practically. We have interest rate hedge close to zero. For this is our, let me say, part of our natural hedging.
Thank you. We'll take other questions from the audience, if any. One question here on the right.
Hi, this is Fabrizio Bernardi from Intermonte. I just want to be sure about the interim dividend, given that it was mentioned in the press release, and you spoke about it when it was asked. We should expect, in case, the interim dividend to be payable on 2025 accounts? Because if the GM is called in December, I guess that
Exactly. Well, yes, I mean, the extraordinary shareholders meeting will take place in December, so obviously we will not be able to pay interim dividend on the... Because then in whatever, April, May, we'll pay the dividend for the bank. So I would say yes, it's verified the fulfillment of all the technical and legal requirements. You know, we will in case if, you know, as we expect, we'll have the right revenues and the right profit to propose to the board to pay an interim dividend next year. So I would say yes.
So we move back to online. We have a question from a Mr. Alberto Bentini of Alebe Brokers: "What is the position of the board regarding possible moves by Unipol Group on MPS Bank?
Look, we don't discuss in the Board news about third parties. So, you know, in the Board, we discuss topics related to the bank, how the bank is performing, what we're doing, what we will do, be doing. We recently, as at yesterday late afternoon, I presented the new business plan, and we had a thorough discussion with the board, but we never discuss about, you know, what other parties would do.
Thank you, Mr. Papa. Any other questions from the audience? A question here from, I think, the gentleman from Equita on the left.
No, the other side.
No, no, the other side.
Oh, that... Well-
Correctly.
We'll make it.
Okay. Thank you. Thanks for the plan as well. Cyril Toutounji from BNP Paribas Exane. I just have two small questions on volume. So first, a follow-up on lending volumes, because you have a 3% target per annum, which is good. But to date, loan volumes are not very high, so I'm just wondering if the target is more back-end loaded and we'll see a pickup in 2026, 2027, or it should start in the next few quarters? And secondly, on deposits, where do you see the most opportunities to grow? Is it more in what you already do, which is a lot of Retail, or do you see more opportunities in the Corporate segments now, given your diversified business model? Thank you.
I will take the second question, and then Simone will answer the first. So in terms of deposit, we have a very resilient deposit base coming from customers, both on the retail side as well as on the corporate side. As a matter of fact, I think that we are a bank with the largest deposit base on current accounts from Retail. Why I'm saying that we are resilient on attracting deposits? I give an example, this year, for instance, our customers bought EUR 2.5 billion of BTPs, so we had, you know, an outflow of deposits from their accounts to buy the BTPs, and then we got back all the liquidity.
And as a matter of fact, today we are in a higher position than we were at the end of last year. The same is for corporates. So, you know, under this point of view, I think, the customer base for us is very important to keep on attracting deposit. Nevertheless, we will have also issuance of financial products as financial instruments, as I indicated in the presentation, in order to meet the requirements of the ECB. Simone?
Yes, regarding to the first part of the question, thank you very much. I don't have here with me. I have only the bulk. Let me say, taking account also the short term, so the answer is not exactly precise, but we can manage later on. We will have around EUR 50 billion of new disbursement. We will leave the EUR 30 million-EUR 40 million, including the short term, so you have to clearly take in account of expiration and some other prepayments. This is more or less the details.
Yes, if I may complement intervention, generally speaking, the growth of loans will be linear throughout the plan.
Thank you. So we'll give a chance to the analyst of Equita here. Please, on the left. Thank you.
Thank you. Just a follow-up, if you can elaborate a bit more on the managerial action you use to optimize the risk-weighted assets, so the 30 basis points around on the CET1. And if you think you have other buffers to optimize risk-weighted asset that are not currently factored in the plan. Thank you.
Thank you for the question. Emanuele will answer.
Yes. First of all, as I lacked in the presentation, we have planned the risking activities, namely synthetic securitization. As I lacked in the presentation, the impact could be around thirty basis points at least. In addition, we constantly monitor the evolution of our RWA, and we constantly perform some technical intervention, for example, recovery of eligibility of guarantees, of collaterals, recovery of external ratings, and so, some other technical intervention. Potential buffer are related, for example, to the extension of our internal rating system to Carige, former Carige exposure. For this, we sent an application to ECB last July for corporate exposure, and we sent another application for retail exposure next year. To get...
We will continue to monitor the evolution of RWA, and we evaluate time by time some technical intervention. But once again, the main put intervention are related to the risking activities, namely, securitization, synthetic securitization. Thank you for the question.
Thank you, Mr. Cristini. Just before we go back to the audience, we'll give a chance to another question on Zoom to Adele Palama from UBS.
Yes. Hi, can you hear me? Hello? Can you hear me?
We hear you loud and clear.
Yes. Okay. Hi, good morning. Yes, some questions on the NII. In the Q2, you mentioned that your sensitivity to 100 basis points of change in rates was around EUR 130 million. Now, I think the sensitivity has changed a little bit, so I just wanted to have some clarity on why it has changed. T hen if you can tell us also the pass-through that you use, the pass-through rate that you use for loans and deposits in the plan. T hen on the hedging, if you can tell us the average maturity, the average duration that that the portfolio has. Thanks.
Thank you, Adele, for the questions. Emanuele will answer the first, and Simone the second.
Yes. The projection around EUR 180 million that we have highlighted is related to 2025. We have updated our projection, taking into consideration the new level of interest rates that are included in the plan. So this is. The changes are related to different repricing, maturities, and mix of our portfolio, and so we have changed our projections that are already included in the plan. With regard to the pass-through, generally speaking, the overall pass-through of our deposits, the so-called beta parameters, is overall around 20%, namely around 7% for Retail deposits and around 23% for Corporate deposits. For sure, the beta parameters is much more interesting and relevant in case of an increase of the interest rate scenario. Anyway, we constantly monitor this parameter. I leave the floor to-
Yes, thank you very much. Regarding the duration, the duration is around 3.2 years.
Thank you, Mr. Marcucci. There were two questions here on the left from the Mediobanca analyst and another analyst. Thank you.
Good morning. This is Luis from Autonomous. I have a quick one on costs. You target EUR 270 million cost savings during the business plan. Could you please give extra color here, and enumerate the most important initiatives and the respective savings per measure?
Thank you. El, you will take the question.
Thank you for the question. About the EUR 270 million in savings, divided in two main category. The around EUR 100 million is HR-related saving, net of labor cost increase, of which 50% related to insourcing. Saving, this saving are thanks to the option, the new omni-channel model, and automation labor-intensive activity, and the intensive use of GenAI. The rest of EUR 170 million of saving are derived from zero-based optimization of external cost and a radically reviewing of internal demand.
We already started with the program to save costs in order to achieve the result in the next year, and we are involved in this program, all areas of our group, in very pragmatic initiatives in all cost categories that will allow us to address our cost base, starting already next, the first 2025.
Thank you, Mr. Sonnino. I think there was another question here. Please, on the left side, the lady.
Um, Mediobanca.
Thank you.
I have another question on capital and MDA. If you're planning to issue other AT1 in the plan, and what if there are more room to also have more synthetic securitization in the plan? And also, how you see the phasing in of the absorption of your tax loss carry forward? Thank you.
Thank you. Simone will answer.
Yes. Probably, as we have seen in the slide before, we plan to issue 181. We plan to work on two synthetic securitization for a total amount of more than EUR 5 billion that will express the maximum effect on the risk-weighted asset in 2025, and then clearly will decrease through the year to arrive at around EUR 1 billion at the end of the plan. Regarding the effect of DTAs, it is one of the topics that I was mentioning before. We are still clarifying, but there should be a positive effect. But still to be clarified, we will manage during the confirmation of our guidelines at the end of September.
With the result of September, there should be an effect positive in 2024 , again in the second half, and then probably in 2025 , but we're still clarifying, let me say.
Thank you. We have a question online from a Mr. Giordano Mauri from Paradigm, Paradigm Capital Partners. Have you assessed the impact of the Basel IV implementation on your risk-weighted assets and your capital position?
Yes. Yes, but for a more technical answer, I'll pass to Emanuele.
... the Basel implementation?
Basel IV.
The Basel.
The Basel.
Ah, yeah.
I haven't understood clearly the question. Yes, we have evaluated the impact coming from the new Basel IV framework. The fully phased impact is of around 70 basis point, of which around 45 basis point related to operational risk, and the other related mainly to credit risk and market risk. More or less, the impact coming from Basel IV fully phased is similar to phase-in, since the impact coming from market risk and other impact coming from credit risk are negligible. So the overall impact fully phased impact coming from Basel IV framework is around 70 basis point.
Thank you. Any other questions from the audience? One question here on the right, from Intermonte.
Hi again. Fabrizio Bernardi from Intermonte. Is there any chance that there can be a delay in the application of operational risk of Basel IV? We are reading on the press a number of articles about U.S. banks that are trying to delay this kind of operational or market risk application, and maybe even the even Europe may- ... be in line in order to not to create, I mean, to have a fair competition.
Yes.
Emanuele?
Yes. Yes, first of all, in the last month, the implementation of the framework, the so-called Fundamental Review of the Trading Book for Market Risk, has been postponed to 2026. We have read of this hypothesis of another postponement for operational risk, but currently, at the moment, no postponement is in place. So in our figures, we have already accounted for the impact coming from operational risk. Probably, this is relevant, more relevant for other banks. Our bank has always adopted the TSA, the Total Standardized Approach, so the impact is not negligible, but is lower with respect to the other banks that currently adopt the advanced approach.
For those banks, the impact is much more higher than us, around more than 100 basis points. And so there are some pressure in order to postpone the implementation of the operational framework for Basel IV. But currently, at the moment, there are no good news about this. Thank you for the question.
Thank you, Mr. Cristini. We have no more questions on Zoom, no more questions on online, but we have a question here on the left from Autonomous.
Yeah. Thank you so much. I understood that you target an average 75% payout ratio throughout the business plan. Are you trying to protect as much as possible the absolute dividend amount in case earnings disappoint?
Well, you know, we are committed to pay... as I mentioned during the presentation, we are committed to pay around 75% dividend across on average across the three year. O bviously, you know, we believe that we'll be able to deliver the plan and to deliver the dividend that we have foreseen. We don't see, you know, endogenous risk in execution of the plan. The only risk we see, we might see, are exogenous risks, such as a big deterioration of, for instance, the geopolitical situation. Then in the case, we will reassess the situation, and we'll take, you know, managerial actions in order to protect as much as possible the numbers that we have shown in the plan.
Are there any more questions? So I think that, you know, we thank you for all your questions, and I will leave the stage back to Mr. Papa for final salutations.
Thank you very much to everybody for being this morning, especially considering the treacherous weather we had early this morning. I don't know if it's too early, but you are invited to an early lunch, if it's ready. Thank you very much to everybody.