Good morning, this is the Cortosco Conference operator. Welcome and thank you for joining the second quarter 2025 BPER Consolidated Results Conference call. 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. Nicola Sponghi, Head of Investor Relations of BPER. Please go ahead, sir.
Thank you and good morning, everyone. I'm pleased to welcome you to our second quarter and first half 2025 earnings conference call. Before I give the floor to our CEO, Gianni Franco Papa, please be reminded that our slide set and press release can be found on our corporate website. I would also advise you to take note of the disclaimer on slide two of the presentation document. That said, after the presentation, our CEO, our CFO, Simone Marcucci, and our Head of Investor Relations, Nicola Sponghi, will take care of the Q&A session. I will reiterate that this is reserved for financial analysts, whom we kindly request to ask a maximum of two questions each, so that everyone will have the opportunity to contribute to today's call. Thank you very much. I will now leave the stage to Mr. Papa, CEO of BPER.
Thank you, Nicola, and good morning to everyone and welcome to our Q2 and first half results presentation. Before I start giving you details of our financial performance, I'm keen to spend a couple of slides on the progress of the business combination with BPSO . We were among the last leading banks to launch an offer, and we are the first bank among tier one banks which has been able to complete the first phase of the transaction with an extremely high level of acceptance above 80%. Such a high acceptance rate will allow us to move rapidly with the full integration of BPSO into BPER. This is a particular area where we can boast a significant track record. Concrete examples are the integration of Banca Carige, UBI branches, Unipol Banca, and Banco di Sardegna.
Needless to say, the financial community has recognized the very strong strategic and business rationale of the transaction. In the same way, investors have deemed the tender offer price to properly reflect the value of the business combination. I would like to highlight that the total consideration paid to BPSO shareholders breaks into a consideration of approximately EUR 528 million of newly issued BPER shares, ordinary shares equivalent to 27.1% of BPER share capital, and a consideration of approximately EUR 364 million in cash. We have already launched a number of internal work streams, and we expect the full integration to be achieved before first half 2026. As you can see on the slide, thanks to the transaction, BPER will strengthen its position as a leading player in the Italian banking sector with a very strong presence in rich northern Italy, particularly in Lombardy.
We have summarized the positioning of BPER in terms of TFAs, loans, deposits, and branches on the left side of the slide. These have been calculated on the basis of aggregated financials as of June 2025. The most important message I would like to pass on to the financial community is that the merger with BPSO acts as an accelerator to our plan, B:Dynamic | Full Value 2027 . On the right side of the slide, you can appreciate our most important targets. From an accounting perspective, the first consolidated financials, including BPSO , will be disclosed to the financial community with our Q3 results in November. While we expect to update the financial community with the progress of our business plan, not later than first half 2026. On this slide, you can see the indicative timeline of the transaction.
Up to now, the transaction has been carried out flawlessly. However, a number of other very important steps have to be completed, and among these, the appointment of the new Board of Directors of BPSO , the approval of the merger plan for of BPSO into BPER , and the submission of the relevant application request to ECB, and finally, the completion of the integration of the two banks, which we expect by first half 2026. As I mentioned earlier, two key dates for the financial community will be Q3 2025 results, when the consolidated include BPSO, and first half 2026, when our B:Dynamic | Full Value 2027 plan will be updated. Ladies and gentlemen, this second quarter has been the best ever quarter of BPER .
Along with the results achieved in Q1, I can proudly say that these have been the best ever six months' results of our group. Before I start giving you details of our financial performance, I'm keen to highlight a number of key features of these remarkable Q2 2025 results, underlining that progress on our B:Dynamic | Full Value 2027 is well on track. First and foremost, first half 2025 was our best ever six-monthly results, with the bottom line standing at EUR 903 million. The outstanding results in Q1 2025 were further strengthened in Q2, despite declining interest rates and geopolitical turmoil. Although six-monthly NII is led by 3.4% compared to the previous year, NII in Q2 was resilient as the bank commercial effort more than compensated the impact of the reduction of interest rates.
In this context, thanks to the relentless dedication of our teams, loan volumes were positively affected by significant new loan origination of EUR 6 billion, + 22.3% on a year-on-year basis. In line with our plan, commissions continue to have a very positive run throughout the year, given the focus on AUM, life insurance, and bancassurance products. We have further strengthened our performance in wealth management, where commissions increased by above 9% compared to the previous half in 2024. Our profitability remained high, with an adjusted return on tangible equity at a robust 20.4%. We maintain a very solid capital position with a CET1 ratio at 16.2%, resulting from an organic capital generation amounting to approximately 200 basis points, equal to EUR 1.1 billion in the last six months. As already mentioned in the past, we will be able to carry out the merger process without capital-related constraints.
Finally, the quality of our loan book continues to stand at the best levels in the Italian banking industry, with a cost of risk of 31 basis points. These exceptional results have been achieved thanks to the hard work of all of us. We have maintained a strong focus on the transformation of BPER into a go-to bank for individuals, families, SMEs, and corporates, an important step from being a pure relationship bank. Let's move on to the net profit drivers on slide number nine. As I mentioned earlier, the combination of the remarkable results in Q1 and Q2 2025 allowed the report to report the best ever half-yearly results. The quality of our revenues remained outstanding. NII has proven to be very resilient in spite of lowering interest rates.
I'm extremely satisfied about the progress of commission income, although these were impacted by an exceptional number of holidays in Q2. That said, progress is solid. Commissions increased by almost 5% versus the first six months of 2024 and increased by 1.2% compared to Q2 2024. Given the current geopolitical turmoil, let me underline that BPER is a bank deeply rooted in Italy, with a low business exposure to global markets. In addition, we are proud to state that we are a commercial bank with a complete banking offering and a focus on asset gathering. In the pages to come, we will provide you with an in-depth review of each and every item. Let's move on to slide number 10. These remarkable results make us very confident to meet our 2025 guidance and allow us to improve it on a number of drivers.
We upgraded our guidance on total revenues from EUR 5.4 billion to EUR 5.5 billion, despite our internal scenario of lower rates, which was reduced from 2% to 1.75%. The continued commercial push makes us more confident on the loans outlook. In the same way, the solid progress of commissions will continue throughout 2025. We improved guidance on cost/income ratios from 51% to 50%, given our focus on operational efficiency. Finally, we revised upwards our guidance on CET1 ratio to above 15.5%, given the bank's progress on internal capital generation. This is particularly important in the context of the with BPSO. Let me add that we expect the CET1 ratio of the combined entity to stand at approximately 15% at the end of December, 2025. A quick glance at the progress of our business plan, which I remind you remains to date standalone.
Firstly, I would like to highlight the remarkable achievements of BPER ranking in first position as the best small and mid-cap bank in Europe by Extel. In this context, I would like to thank all my colleagues for this exceptional result. A couple of additional highlights. New lending in the first half rose better than expected, thanks to our strong commercial actions. Reported new lending in first half 2025 reached EUR 10.4 billion, a 20.7% increase compared to the first six months in 2024. The positive results were achieved across several lines. Residential mortgages grew by 6.1%, consumer credit by 18.6%, and corporate loans increased by almost 30%. Commissions continue to register a remarkable performance. We noted an important contribution of AUM commissions and bancassurance products, both running at double-digit growth rates.
We continue to work rigorously on the progress of our digital and remote channels, now enabling approximately 20% of our new personal loans being fully processed digitally. In addition, we are now in a position to dedicate approximately 50% of the frontline time to value-added commercial activities as a result of the positive impact of operating efficiency initiatives. Our capital ratio remains strong, and our guidance has been revised upwards for 2025. The bank modernization is progressing rapidly. Deployed CapEx, according to plan, reached EUR 200 million in first half 2025 compared to EUR 160 million in Q1. The commitment to ESG is high, reporting further increases in the amount of ESG new lending at EUR 1.5 billion from EUR 700 million in Q1. Finally, over 2,500 employees have already been involved in our dedicated academies. Let's now turn to our financial performance.
The resilience and quality of our revenues were demonstrated by core revenues standing at EUR 2.7 billion in first half 2025, in line with the previous half in 2024. Given the overall scenario characterized by an acceleration of the reduction of interest rates, this is a positive result. Among the main drivers of total revenues, I would highlight the following: resilient NII, higher loan volumes compensating lower rates, and a positive performance in commission income, thanks to the positive contribution in AUM fees, life insurance, and bancassurance products fees. I would like to stress that the NII is almost purely of commercial nature. As such, I would highlight the improving quality of our revenues, where the ratio of net commission income to total revenues rose from 36.8% in first half 2024 to 37.3% in first half 2025.
Finally, I would like to underline the continued solid trend in productivity, with the net revenues of risk-weighted assets ratio, which increased from 8.6% to 9.8% between Q1 2023 and Q2 2025. Let's move on to the next slide, which focuses on net interest income. Given the interest rates environment, the performance of the net interest income line was exceptional in Q2. As you can see, NII in Q2 was slightly higher than in Q1 at EUR 814 million. As you can appreciate in the waterfall chart, the negative effect of rates was more than compensated by increased loan volumes. In this particular business context, commercial actions to increase quality loan volumes have been extremely effective.
As I mentioned in the slide on progress of our business plan, new loans in the first half increased by 20.7%, mainly due to increases in residential mortgages, of which an important component with ESG characteristics, increases on consumer credit limited to our existing clients in order to maintain outstanding quality of our loan book, and important new loan origination on corporate loans, demonstrating that BPER is moving from the status of a relationship bank to a go-to bank for our customers. Such new loan origination has been aimed at high-quality rating classes, the effect of which you will see in a positive trend in risk-weighted assets. Finally, I would like to highlight that our NII sensitivity to 100 basis points movement equaled to approximately EUR 150 million in the quarter versus EUR 165 million in the previous quarter. Now, let's move on to the development of net commission income.
The performance of commission income progresses according to our plan. The bank relentlessly focuses on capital-light, high-quality, non-interest income products. Commission grew by 4.8% in the first semester of 2025 compared to the first six months of 2024. This is an important achievement given that Q2 was negatively affected by an extraordinarily high number of holidays. The most important contributor, which represents more than 50% of commissions, were fees from banking services, which reached EUR 540 million. This demonstrates the growing commercial reach of BPER. Wealth management fees, which increased by over 9% six months on six months, are rapidly playing a more important part as a percentage of our total commissions. These were mainly driven by high-quality AUM and life insurance fees. Fees from bancassurance products continue to register strong growth rates by almost 16% compared to the first half of 2024.
Noteworthy to mention that AUC and AUM running fees increased by 5.4% in the first six months of 2025 compared to the first half of 2024. Let's move to the next slide, which focuses on the progression of total financial assets. Total financial assets, the most important driver of commission income, grew by 4.5% in the last 12 months. In the quarter, total financial assets increased by almost EUR 10 billion due to customer asset dynamics in deposits, AUC, and AUM. This is an important trend as it demonstrates BPER capability in terms of attracting customer liquidity, both on the retail and corporate side, and transforming it into AUMs and AUCs. It also proves that BPER is gradually being perceived as a go-to bank by its customers from a purely relationship bank.
As such, we are now increasing the penetration of liquidity management for both corporate, SMEs, and private clients. I'm keen to underline that such positive progress allows us to have higher firepower to grant new loans. In fact, in Q2 2025, the loan-to-deposit ratio stood at 76.7%, stable quarter-on-quarter, one of the lowest among Italian peers, which will enable us to continue to grow the loan book and to transform client liquidity into AUCs and AUMs. Let's move on to our performance on the cost side. Total costs were down by 4.9% in the first half compared to the first six months of 2024, underlining our relentless focus on operational efficiency. Our actions have reduced the cost/income ratio to 46.6%, and our positive progress enables us to improve our guidance for 2025. The waterfall chart reports the key drivers on HR costs in the quarter.
The reduction was mainly driven by organic turnover, despite lower voluntary exits, which more than compensated the increases related to the National Collective Labor Agreement. As you can see on the slide, at the end of March, headcounts stood at 19,224, a reduction of some 1,200 compared to June 2024, related to actions which are already in place. Non-HR costs were basically flat at about EUR 250 million, in line with the previous quarter. Although we improved our guidance to a lower cost/income ratio for 2025, we expect a pickup in the cost line, especially in Q4 2025, due to seasonality. Let's move to cost of risk. As you can see, asset quality remains very strong. In the 12 months, cost of risk has fallen by 10 basis points to 31 basis points. Our NPE coverage ratio improved to 55.6% and is one of the highest among Italian peers.
This will act as a further buffer against any potential deterioration in asset quality. Our conservative approach is further confirmed as we report a Q1 coverage ratio on performing loans at 0.63%, among the highest in Italy. Total cumulative overlays stood at approximately EUR 214 million, down by almost EUR 14 million versus Q1 2025. Let's move on to asset quality on the left side. As in the previous quarters, the quality of our loan book continues to show a very healthy state. From a stock perspective, gross NPEs were flat in the quarter, approximately EUR 130 million lower year- on- year. Noteworthy, BPER is pursuing an approach where new lending is focused on the best rating classes with a lower risk profile.
As a result of this conservative BPER is characterized by a high-quality loan book, which is further highlighted by the net NPE ratio, which, as you can appreciate, continues to improve and is one of the lowest in the Italian banking sector at 1.1%. Having finished with asset quality, let's move on to the development of the bank's risk-weighted assets. As you can see, in Q2 2025, our total risk-weighted assets decreased from EUR 55.9 billion to EUR 55.6 billion, thanks to higher quality lending and methodological fine-tunings related to model reviews. Without the impact of Basel IV in Q1 2025, mainly related to operational risk, risk-weighted assets would stand at EUR 53.9 billion. I will now turn to organic capital generation on the next BPER continues to generate a very high level of organic capital, totaling EUR 1.1 billion and approximately 200 basis points in the last six months.
As a result, CET1 ratios reached 16.2%, a very comfortable level of BPSO integration. With regards BPER capital profile, let me highlight the outstanding results achieved by the bank in the recent regulatory stress test exercise carried out by the European Banking Authority. The outcomes of the supervisory stress test exercise confirmed the bank's capital strength, showing a very limited capital depletion of 94 basis points, even under a highly adverse scenario. This result reaffirms BPER's position as a highly resilient institution. Moving on to liquidity, let me point out that the bank's liquidity ratio remained high at the end of June. The LCR is equal to 163%, in line with 166% reported at the end of March 2024. The NSFR is equal to 135%, stable compared to the end of March.
In Q2, the loan-to-deposit ratios stood at 76.7%, stable quarter-on-quarter, one of the lowest amongst Italian peers, which will enable us to continue to grow the loan book through increased loan origination and transformation of client liquidity into AUC and AUMs, thanks to our ability to attract customer liquidity. Turning now to the bond portfolio, Italian government bonds amounted to EUR 14.8 billion and accounted for around 49.5% of total bonds. Noteworthy that already in Q3 2024, a tactical and selective increase in exposure to Italian government bonds had been started. As a result of the active portfolio management strategy, in Q2 2024, the bond portfolio duration decreased to 2.1 years from 2.3 years in Q1 2024. The decision to focus purchases on Italian government bonds was driven by the attractive spread level and the opportunity to capitalize on market weaknesses.
A brief look at our latest bond issuance is important. As already mentioned in Q1, BPER successfully placed a EUR 500 million senior non-preferred bond in January. That said, we do not anticipate any major bond issue until of BPSO into BPER. It is also worth noting that Fitch and Moody's have upgraded BPER to a positive outlook, further supporting the bank's strong credit profile. All credit agencies have the BPSO business combination, and as a result, have also increased the of BPSO itself. On slide 27, we report the divisional financials. I would like to draw your attention to the important result achieved on total wealth commission income created across our divisions, which amounts to EUR 466 million in the first half versus EUR 840 million achieved during the 12 months of 2024.
In addition, total indirect deposits in private and wealth management amounted to EUR 191 million, more than 60% of our total group TFAs, which stood at EUR 312 billion, underlining our strong asset gathering generation capacity. Ladies and gentlemen, a brief summary of the most important achievements in Q2 2025. First and foremost, we have completed the of BPSO with an extremely high acceptance rate, which will allow us to carry out a swift integration of the two banks. In this context, we confirm that we have already launched a number of internal work streams. Our plan B:Dynamic | Full Value 2027 is well on track, and the with BPSO will act as an accelerator. In this context, we are planning an update to our plan after the integration of the two banks in the first half 2026.
The transformation BPER from a relationship bank into a go-to bank is remarkable. Given the successful commercial action we have taken, which translated into achieving the best quarter and best half ever reported by BPER. NII was resilient in the quarter, and fees have continued to positively run, with wealth management fees playing an increasingly important role in terms of total commissions. This underlines the increasing commercial strength of BPER. Asset quality remains robust, with all reported ratios being at the best levels in the Italian banking landscape. We continue to register a significant internal capital generation, with a CET1 ratio standing at 16.2%, which allows face BPSO integration in a very comfortable situation. Thank you all, and we will now take your questions.
Thank you. This is the Chorus Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star star one on their touch-tone telephone. To remove yourself from the question queue, please press star star two. Please pick up the receiver when asking questions. Anyone who has a question may press star star one at this time. We will pause for a moment as participants are joining the queue. First question is from Andrea Lisi, Equita.
Hi, everybody. Thank you for taking my questions. The first one is on the CET1 dynamic. In particular, I was wondering why you have set the guidance at above 15.5% while being now 16.2% in the second quarter. Just to understand if there are some trends which could lead to some, in some way, utilization of capital, obviously, considering also the fact that I expect loan growth to continue. Related to that, if you think that there is a possibility that at the end of December, considering the positive dynamic in terms of capital we are observing in BPER, but also in Sondrio, we may land with CET1 that is above the 15% you have indicated. The second question is on the NII dynamic. In particular, I saw that the spread proved very resilient and is proving resilient over time despite decreasing rates.
If you can update us on the actions you are putting in place, both on the asset side but also on the deposit side, and related to that, on a standalone basis, clearly for the moment, what is the evolution in NII should we expect for 2026 versus 2025? Thank you.
Thank you, Andrea. Thank you, Andrea. I'll answer the first question, and then Simone Marcucci, the CFO, will take the second one. As you know, we have a very prudent approach. We ended the first six months at 16.2%, and we indicated in a prudent way a 15.5% guidance for the year-end. Obviously, this is driven mainly by the fact that we will continue our loan growth. You saw that we had a very good dynamic in the growth of loans above the indicated CAGR that was 3% that we indicated in our financial plan presented in October last year, also because we are starting now to work on the integration of BPSO. We prefer to have a conservative approach. Our attitude is in any case always being to be conservative. We'll see what is going to be at year-end.
We stick to the above 15.5%, and we'll see what progressively will happen at year-end. In as much as the NII dynamic, Simone takes the question.
Yes. Thank you very much. Regarding the NII dynamic, as you clearly mentioned, it's driven, let me say, the improvement by the growth of the loan that will continue also during the year, but at a smoother path. Therefore, we see the NII for the next quarter at the same level of this quarter or slightly decreasing as we have indicated in our target.
Sorry, if you can provide us an update on the indication or direction of NII, which you expect coming in the next year. Thank you.
2026, the plan, as Mr. Papa highlighted, will be prepared in the first half of 2026. Standalone, we confirm what we had in the plan. We cannot say at the moment anything in addition.
Okay, thank you.
Next question is from Marco Nicolai, Jefferies.
Good morning. I've got two questions and then one follow-up. First question is on the capitals. If you can give us, let's say, an updated guide on the capital consumption of the Sondrio transaction, and where do you expect the CET1 ratio to want to be in September? Considering the 80% takeout on your offer and the stronger capital BPSO. then a question on the loan growth. I'm just trying to understand, some of your peers highlighted an improved situation in terms of loan growth in Italy. I'm just trying to understand if this is kind of demand-driven. Is it the companies and the retail in Italy that are actually asking for more, need more finance in a way, or is it more like offer-driven? Is it just banks offering better terms? I'm just trying to understand what's the dynamic that is driving this growth.
The follow-up is on the risk-weighted assets of the quarter. It seems you improved the density. What did you do there? Thank you.
Thank you, Marco. I take the first two, and then Mr. Cristini, our CRO , will take the question related to risk-weighted assets. The guidance for the combined entity as at the end of the year in terms of CET1 ratio will be at around 15%. This is our preliminary calculation. In as much as the loan growth is concerned, where the growth is coming from, I have already indicated we have the growth coming from all the sectors where we operate. In fact, as I mentioned, we have a continuous growth in residential mortgages. The growth is of around 6.1%. Consider that if I look at the market share of BPER in terms of residential mortgages, we are above the 10% threshold, whereas if you look at the overall market share of BPER, we are in the market for all the activity, we are at 5.5%.
This is a very strong point of growth for us and indicates also a very strong attention to the needs of the families in as much as their request for residential mortgages. We have a growth also on consumer credit. 18.6% is a steady growth that we have quarter after quarter. Let me reiterate the fact that we lend consumer credit only to existing customers of BPER. We are not in the open market. In this way, we protect the asset quality. This is a strategy and a policy that we have here in the group, in the bank, and we will continue to do so. Finally, corporate loans, we're talking about a growth of 30%. Obviously, here we're talking about long-term and short-term advances.
Also here, if you recall, our strategy indicated at our Capital Market Day was to become a go-to bank also on the corporate side and increase our share of wallet with corporate names. This growth, let me stress, is with good quality customers, and this is demonstrated also by the risk-weighted assets. We have a growth in loans, but risk-weighted assets go down. Mr. Cristini will explain this. We grow without giving up on price. We are not chasing growth for growth. We need to have, and this is a very strong policy that we have within the group, we need to pay for the capital that we allocate to the different sectors of our activity. Therefore, we have a ratio for corporate, which is 3%, at least 3%, and we apply a market rate that pays back the capital that we allocate. Let me put to Mr.
Cristini for your third question. Please, Mr. Cristini.
Yes, thank you for your question. Generally speaking, the group has implemented several initiatives in order to achieve capital efficiencies. In addition, with regard to the evolution of the RWA registered in the second quarter, it's worth highlighting two topics. First of all, the very high quality of new loans, as our CEO has just highlighted, and the new regulatory approach for other assets portfolio. In the last quarter, the newly originated loans were characterized by very high credit quality. The new lending will focus on best rated classes with very low risk profile and risk weights. It's worth highlighting that in line with our conservative credit policy, around 67% of exposure are currently concentrated in the very low or low risk rating classes.
Moreover, in the second quarter, the reduction in RWA is also due to a voluntary reversal to the standardized approach for the other asset portfolio in accordance with Article 494 of CRR that was approved by the regulator by ECB. In particular, in the IRB approach, cash items get a 100% risk weight, while in the standardized approach adopted BPER group starting from the second quarter, they get a lower risk weight, either 20% or even 10%. In summary, the positive evolution of RWA registered in the second quarter is mainly driven by the very high credit quality of the new loans and the new regulatory approach for other asset portfolios. Thank you.
Thank you.
Next question is from Noemi Peruch, Mediobanca.
Good morning, and thank you for taking my question. I have a follow-up on the common equity, on the 15% common equity at the end of the year. Here I was wondering about the moving parts and your assumption there. Are you assuming 100% of ownership of Sondrio? How much of the EUR 800 million of PPA indicated by Sondrio are you considering? Are you considering at all some impacts in terms of PPA from Alba Leasing and maybe also SRTs? That's my first question. The second one is on Alba Leasing itself. I was wondering if you plan to keep Sondrio's 19% stake or if you are in talks to sell it. Thank you very much.
Okay. Thank you very much for the question. As we said, we do expect the year-end at 15%, assuming 81% clearly. We have a PPA. We have taken PPA off half of the PPA that was, let me say, stated from Sondrio. $400 million, that is net of tax around $280 million. Clearly, this is the PPA to 2024. We are starting now the process to assess the new PPA. We have assumed, let me say, only half of the PPA. For Alba Leasing, we have not taken conservatively any effect on the PPA. Noemi, in as much as Alba Leasing is concerned, obviously, we are looking into the matter for the time being. Obviously, we have to consolidate Alba Leasing because the two stakes together bring us above the 50% threshold. We are considering what to do. We'll see in the future once the transaction will go through.
Thank you. If I may follow up, if I'm not mistaken, in your timeline, you mentioned the merger by incorporation by October. Would it make sense to assume 100% by the end of the year in terms of ownership of Sondrio or not yet? Thank you.
The consolidation of Sondrio will happen by April next year. Before the end of the first half of next year, the merger, we believe that by the end of April, we'll be able to achieve it because obviously now we are working on, you know, we have all the work streams. We need to put together also the IT systems and so on and so forth. The merger will happen next year by most probably April.
Thank you.
Next question is from Fabrizio Bernardi, Intermonte .
Hi everybody. I just have a few questions. There is a nice improvement of the asset quality profile of BPER, let's say, standalone with the cost of risk that, if I remember well, is 31 basis points in the first half. Your question is if there is further room to improve this kind of cost of risk. I know that you have been so far very prudent and conservative in the right way, but maybe there is further room to improve. Another question is on Sondrio Swiss. That is a commercial vehicle of Sondrio in Switzerland. I'd like to understand if you have made some assumption about the role that this bank may have in the next future after the consolidation.
The last question is about, let's say, sorry, the last two questions are about the fact that, if I remember well, Sondrio has a bond portfolio which is mostly at variable rates. I guess yours is more in terms of BPER. I would like to ask if you could consider to change your strategy or their strategy in terms of investment bonds. Last but not least, another question about the payout. I would like to understand whether you may establish, set, a new payout policy when both of the banks are, let's say, combined in terms of cash payout, interim dividend, eventually, but I don't think so, buyback. I mean, most of the other banks are targeting a payout of 100% in terms of cash and buyback. You may be changing your strategy going BPSO. thank you.
Okay. Thank you. Fabrizio, take the second, third, and fourth question, and then I will ask Mr. Cristini to answer the first one. In as much as Banca Popolare di Sondrio Swiss is, as far as we know, because obviously we just completed the OPS, we need to really assess what they do. As far as we understand, they are particularly strong in residential mortgages. It is a good bank. It is a profitable one. For us, I think it is a good bank that we will keep because it gives us a foot into the Swiss market. It is an interesting one. Let's see how we can develop further the activity of this vehicle. In as much as the bond portfolio of Sondrio, it is too early to say. We have a policy, which is our policy that we are carrying forward and which is giving very good results.
We will analyze the bond portfolio of Sondrio, and then our specialist, together with our CFO, will decide what to do. Again, it is a bit too early to say. In terms of payout policy, let me say that the banks that are proposing the 100% payout are in a different position than BPER. I stop here to mention which kind of banks are offering the 100% payout. We confirm what we mentioned at our Capital Market Day. It is a 75% payout ratio on our dividend that we believe is an extremely good payout ratio. We confirm, as you know, we have changed our bylaws in order to be able, in case, to pay an interim dividend. Obviously, it will depend on the macroeconomic situation, the scenario, the geopolitical scenario. If things have been equal, we believe that we are going to have an interim dividend probably by November.
I think it is the period of payment of interim payments. We don't do share buyback because this is a decision that the bank made some time ago. We will keep on having a dividend policy payment out. We also said in the past that obviously, being so strong in the creation of organic capital, if we keep on creating capital and generating capital organically in the way that we have been generating it so far, we might consider the possibility of increasing the 75% payout, but it is very early to say. Let's see where we stand at year-end, and then we'll see. Not to forget that we are going through a merger, and therefore, you know, we need to make sure that we have enough firepower to proceed with that. Mr. Cristini?
Yes. Thank you for your question with regard to the evolution of the cost of risk. In general, as I highlighted in the presentation, the credit risk profile of the bank is very positive, with very low growth and net NPE ratio, stable annual default rate, around 1% reduction of per-year default, very high coverage ratios, both for performing and default exposures. In the first quarter, we have registered a slight decrease in the stock of overlays due to the release of high-risk overlay provision corresponding to the performing portfolio, for which a model adjustment has been implemented for the so-called vulnerable sector. Having said that, there is no predefined plan for progressive release or further progressive release of overlays of provisioning. There are still, in fact, a lot of uncertainties and volatilities in the macroeconomic and geopolitical scenarios.
We will evaluate the possibility of further releases of provisioning only in case of positive developments, always keeping a conservative approach. Generally speaking, we prefer to be prudent, as we usually do, regarding credit risk, even if at the moment the trend is positive. This is reflected in our guidance for the evolution of the cost of risk for 2025. Thank you for your question.
Thank you.
Next question is from Giovanni Razzoli, Deutsche Bank.
Good morning to everybody. Three questions on my side. The first one is on the potential Popolare di Sondrio, which yesterday has announced very strong numbers, as yours. There is in particular a P&L item that is the FX trading on behalf of clients, on which Sondrio seems to be very, very well equipped. They generate around, if I'm not mistaken, around EUR 10 million per quarter of commissions on their client base. I was wondering whether this is a revenue line which can accelerate on your client base and what kind of contribution can you assume on your revenue synergy targets from this line item? Second question on Sondrio. When you refer to integration by first half 2026, you mean completion of the migration of the IT system of Sondrio on your system, if I'm not mistaken. If you can please clarify this.
The merger of the legal entity of Sondrio into BPER approved in April by DGM. Is my understanding correct? The last question regarding the process of merging of Sondrio to BPER. You have 80%. To the best of my knowledge, there has never been, at least among banks, a merger with 80% ownership of the capital of the target entity. Usually, that takes place with the squeeze-out of the minorities. I'm wondering whether, given these conditions, do you see a kind of legal risks or some execution risks from the merger of the process of Sondrio into BPER? Thank you.
Okay. Thank you very much, Giovanni. Synergies, we confirm our synergies at EUR 290 million, as indicated from day one of our offering. EUR 100 million related to revenue synergies, EUR 190 million related to cost synergies. As I mentioned earlier, we are just starting the process of analyzing deeply the numbers of Sondrio. Obviously, the merger of the two banks will bring up the best of the two banks. They are particularly strong, we know, on FX trading on behalf of their customers. This is something that we do already, this kind of activity. They are stronger than us. We will bring into, let's say, former BPER, this sort of activity. There might be an improvement under this point of view. For the time being, we confirm the synergies, as indicated, at EUR 290 million.
In as much as the integration is concerned, April has been indicated for us as the day, the moment when we will have the full integration and merger of the two banks. This entails the fact that we will have concluded the migration of the two IT systems. We will take part of the IT systems of Sondrio. Sondrio will take part of the IT systems of BPER. Once again, we just started the workstream in analyzing what would be the best solution for the new bank. Let's put it in this way. We will go for the integration through all the ordinary authorization that we need to receive. The outcome of the offer is, I would say, entirely satisfying for us. The integration will proceed through the merger by the Banca Popolare di Sondrio into BPER.
As I mentioned, the merger must be submitted to the ECB and Bank of Italy for approval and all relevant regulatory authorizations. In this regard, I believe that the competent authorities have already most of the information that they need because we did a lot of paperwork and information set for the merger. From a corporate perspective, we obviously will be compliant to all the requirements of the Italian civil code and regulation that are applicable to this transaction with related parties. This, as I mentioned, will enable us to complete the transaction in time, and I would say quickly. In any case, let me stress this. The resolution, in case you are entailing the fact that somebody could oppose this minority. The minority that did not participate to the exchange offer might oppose this transaction.
We believe that also with the assistance of our legal teams, we do believe that the merger process is considered to be clear and transparent. It should be noted that the resolution may only be challenged by shareholders holding at least 0.1% of the share capital, and only in the event of manifest inconsistency of the exchange ratio, which is a realistic scenario given the fact that we will have a fairness opinion by the advisor of the Board of Directors BPSO. we will have a fairness opinion by the advisor of the Related Parties Committee BPSO, and we will have a favorable opinion. We need a favorable opinion of the Related Parties Committee BPSO, and finally, the positive opinion of the court-appointed expert. Therefore, we don't see clearly any problem with that.
Thank you.
Next question is from Adele Palama, UBS.
Yes. Hi. Sorry, just a follow-up on the NII. I understand that you are going to present a combined business plan next year. Just looking at BPER standalone, it's not very clear to me the guidance on the NII for 2026. If you can give us at least some qualitative guidance direction. On the new lending, I think you mentioned already some information about the pricing. I was just wondering, is the new lending done in the same spread of the backbook? If you can give us some color on the spread that is applied to the new lending. The last, still on NII, the financial asset of BPER standalone. If you can give us some color on the evolution. I've seen that they've grown quarter-on-quarter. What is the strategy on the government bond portfolio there?
Still on NII, what is the contribution from the agent that is into the NII this quarter? Thanks.
Okay. Thank you very much. I start from the guidance 2026, which, as I said, is standalone because combined will provide the plan in 2026. As I said, the NII is performing better than expected in 2025. Therefore, we can only confirm that our plan in net interest income is not at risk, but we can even do something better. I said we will manage during the production of the new plan. Regarding the front-book and back-book, front-book in June was 4.1, and the back-book was 3.3. The evolution of bond, let me say, the evolution of GOV is in the future. Let me say we have reached the limit, and therefore, we will not exceed this amount.
Regarding instead the evolution of quarter over quarter, we have bought in this quarter, we have taken occasion, let me say, to increase the amount, and we have bought mainly BTP if this is the question. Regarding instead the contribution of portfolio in the second quarter, let me say, I have to say that the portfolio, we have clearly an increase deriving mainly by the increase of the volume, while instead the yield decreased around 4 bps, if I answer to your questions.
Okay, thanks.
Next question is from Juan Pablo López Cobo, Santander.
Yes. Good morning. Thank you for taking my question. Just one follow-up. I'm sorry to come back to your capital position. If I understand right as well, your stress test results were quite good with one of the lowest depletions in the first scenario. This together with of BPSO, that I guess in that 15% that you're assuming, the 81% cap, once the merger is concluded, that will imply, if I'm right in my calculations, another 30 bps once the minority symmetries is over. Taking all together, and given your NDA distance that is becoming larger every quarter, could we, I'm sorry to ask again, could we expect also some kind of extraordinary dividend, not only the increase of the payout, but something extraordinary? I don't know if this is something that could. For
discussion for you. You are also saving some powder, munition in case there is any M&A opportunity. Thank you.
Thank you for the question. As I said, we have indicated as a combined entity 15%, around 15% by year-end, which could be seen as conservative, but you know we need to see also the outcome of our loan growth as BPSO loan today, BPSO is part of BPER Group, so it follows our indications, but you know the market is growing. We growing. BPSO itself presented the numbers yesterday as indicated a growth in loans, also on quality loans like us. Therefore, we need really to see where we will stand as a combined entity by year-end on the risk-weighted assets part of the equation. We prefer to have a conservative stance because, you know, in any case, we have to go through the integration of the two banks.
I don't foresee an extraordinary dividend. As I mentioned before, if the position in terms of CET1 ratio and the capability of the new entity to keep on generating organic capital will stay at the level that we have demonstrated so far, we might consider to rise from 75% to slightly above the payout ratio. It's very too early to say.
Next question is from Ignacio Ulargui , BNP Paribas Exane.
Thank you very much for the presentation and for taking my questions. I have two questions and one clarification, if I may. The first one on the ROT target. If I remember correctly, on your strategic plan, you guided for a 16% ROT. Currently, you are delivering 20%, above 20%. How should we think about that in the future? The second question is on deposits. I see that you posted a very healthy growth in deposits during the quarter. If you could elaborate a bit on that 3.4% growth, whether it was more current accounts or it was more bank deposits? One clarification, I think you mentioned in the call that there will be seasonally relevant cost growth in the fourth quarter. Should we expect another relevant depreciation like the one we had in 2024 or not? Thank you.
Okay. Thank you very much, Ignacio. In as much as the target for ROT, yes, today we have a very positive ROT of about 20%. You know we stick to our indication, the one that we presented at our Capital Market Day, of around 15% because you know it's very much it's very early today to say whether we could keep the 20% given also the interest rates movements that might happen from now going forward. We stick to the 15%, hoping to have a better one. In as much as deposit is concerned, we are talking about current account deposits. We are particularly strong in this. As I mentioned during the presentation, we are very strong in attracting deposits from both corporate as well as retail customers. These are deposits, when we talk about corporates, are deposits that are operational deposits.
Deposits on current account that are then utilized for payments and so on and so forth. It creates liquidity and then creates for us commission income because you know the payments and so on and so forth create commission income. The vast majority of these are current account deposits. In terms of cost in the fourth quarter, we are paying a lot of attention and there is a lot of stress on reducing costs. In fact, you saw the numbers that are quite positive at 46%. Considering that two years ago, we were above 62%, I think a lot of room has been made here compared to in a very short period of time. Nevertheless, although we have improved our guidance for year-end from 51% to around 50%, obviously, we always hope to beat this 50%. We do have a stagionality in cost in the fourth quarter of the year.
This is something that repeats itself every year because at the end of the year, you receive all the invoices that you didn't receive during the year and so on and so forth. That's why from the 46%+, we'll go at around 50%. On top of that, as you know, costs are made up of three components. One of these components is about depreciation. You know we might have in the fourth quarter a pickup in the depreciation. That's why we have the famous 50% guidance, the guidance 50% for cost.
Thank you.
Next question is from Luis Pratas, Autonomous Research.
Very good morning, everyone. Thank you for taking my questions. I have one clarification on the merger by incorporation, please. Could you talk through on what would be the fair value paid to of BPSO? is the fair value set by the advisors that you mentioned before, or do you need to actually offer the same you paid for the 80% that already tendered? My second question is on costs. If you could essentially comment on how many cost savings you already had in the first half of this year. If I'm not mistaken, you guided to EUR 280 million in the business plan. How much of this has already been achieved? Thank you.
Yes. Thank you, Luis, for the question. In as much as the minority, you know how they will be treated, the merger will be carried out based on an exchange ratio that is determined in accordance with Article 2501(3) of the Italian Civil Code. This is using standard practice, consistent methodologies, and assumption in the valuation of the companies involved in the merger. As I mentioned before, to proceed with this, we will have to have the fairness opinion of the advisors of the board of BPSO, a fairness opinion by the advisor of the related of BPSO, the favorable opinion of the related of BPSO, and finally, the court-appointed expert opinion. It is a process that takes care according to we don't have any obligation to recognize anything.
There will be an evaluation that will be carried forward, and then we will respect what the decision is going to be. In terms of cost, I'll put through Simone Marcucci.
Yes, sir. In terms of cost, as mentioned before by Mr. Papa, we have to take into account that we're investing a lot in IT. Therefore, the depreciation will grow, as well as the seasonality on non-HR cost. We will have a benefit where we will finish the year slightly in advance compared to our plan, compared to our budget. For sure, the second half of the year will see an increase for the reason that I mentioned before.
Next question is from Hugo Cruz, KBW.
Hi. Thank you for the time. I have two questions on M&A. I think you mentioned that we'll have with BPSO already in 3Q. I just want to be super clear on what that means. Will we have a full quarter of P&L of BPSO consolidated into BPER, or is it just consolidated at the end of 3Q? Just a balance sheet consolidation, but no P&L. What is it to assume in terms of starting to recognize restructuring charges for the merger? If you could give a little bit more clarity there, it would be very helpful. The second question is on, more broadly, sector M&A. You have some other banks already talking about how they might play the so-called second wave of bank consolidation in Italy. What are your thoughts on that second wave? What role would you like to play?
Thank you.
Thank you very much for the question. In terms of consolidation, we will start consolidating the numbers of BPSO from the third quarter. The third and fourth quarter, you will have standalone basis for BPER, consolidated numbers, and BPSO for the third BPSO number. The same in the fourth quarter, you will have standalone numbers for BPER, consolidated numbers for both the banks, and numbers for BPSO. Starting from next year, with the merger, there will be the consolidation, and you'll have only a set of numbers that is the consolidated bank numbers, basically. This is the way we need to proceed also on the accounting principles, basically. In terms of sector M&A, second wave, we are still working on this. We just started working on, let's call it, the first wave.
Therefore, we will be very much concentrated now on of bpso into BPER. You have to consider that for us, this, in reality, in the last four years, five years, is the fourth or fifth wave because we had Unipol Banca consolidation, we had UBI branches consolidation, we had Carige consolidation. Now we on BPSO consolidation. It is the fourth wave for us. We are already bypassed the second wave. I understand your question. For the time being, we look at consolidating BPSO and then let's see what is going to happen. Also, we need to see whether some, you know, one transaction already went through, didn't go through. Let's see what happens with the one that is still in the market. We will consider in case.
Thank you.
Next question is from Manuela Meroni of Sanpaolo.
Good morning. Thank you for taking my questions. The first one is on the NII. You managed to decline your sensitivity of the NII to rates. I'm wondering, what action did you put in place to do that? If we may expect a further reduction going forward. The second question is on dividends. You said that you might consider to increase the payout ratio. Is there any certain level threshold in terms of capital or organic capital generation that might trigger this increase? Thank you.
Thank you, Manuela. I take the second one, and then Mr. Cristini will answer the first one. As I mentioned, we might decide to increase. We don't have any sort of level from which we will decide to do that. Let's see where we stand at the end of the year. Let's see how we are going to progress next year, and then the decision will be made. Always considering the fact that we need to get the approval of the board, we need to get the approval of the ECB, and therefore, you know that we prefer to be conservative. What is granted for now is a 75%, and then let's see what will be in the future. Mr. Cristini, for the first question.
Yes. Thank you for your question. As I allowed in the presentation, the NII sensitivity to a 100 basis point decrease amounts in the second quarter to approximately EUR 150 million in reduction with regard to the sensitivity communicated in the previous quarter that was equal to EUR 165 million. The change on a quarterly basis has been mainly driven by the repricing effect on floating rate assets, mainly the residential mortgages with half-year reinstallments, floating rate bonds CCT around EUR 4 billion, and the growth observed already highlighted in the presentation with regard to side deposits in particular, around EUR 400 million represented by floating rate side deposits. The combination of these effects has led to the reduction of the sensitivity highlighted in the presentation. Thank you.
Next question is a follow-up from Marco Nicolae Jefferies.
Hi, everyone. My follow-up has been asked already, so no further questions from me. Thank you very much.
For any further questions, please press star and one on your telephone. Next question is a follow-up from Adele Palama, UBS.
Yes. Hi. Sorry. Just a follow-up on the restructuring charges. I'm not sure if that question has been answered, but I was just wondering on the timing and if the 15% target for the year-end of the CET1 includes the upfront of all the restructuring charges. Thanks.
Yes. I forgot to answer this, Adele. Restructuring charges, we indicated that it's going to be EUR 400 million, of which 75% is going to be booked this year and 25% next year. EUR 300 million this year. The 50% includes the EUR 300 million that we have indicated as restructuring charges that will be booked this year.
Okay. Thanks.
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Thank you very much to all. For those who go on vacation, have a good vacation. Goodbye. See you next time. Thanks.
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