Good morning. This is the Chorus Call operator. Welcome to Credem's Conference Call Presenting Full Year 2022 Results. Let me remind you that all participants are in listen only mode. After the presentation, a Q&A session will be held. In order to be assisted by an operator during the conference call, press star and 0 on your handsets. Let me now turn the conference over to Credem's General Manager, Mr. Angelo Campani. Mr. Campani, you have the floor.
Thank you very much. Good morning to all of you. Thanks for joining us in this conference call. Let me start by looking at our full year results for 2022. As you know, it was definitely a very intense year and characterized by geopolitical tensions in Ukraine.
Unfortunately, that had an impact and added to the effects generated by COVID in the previous year, thus leading to an even more uncertain scenario characterized by high volatility. Against that backdrop, our group managed to reconfirm its features of being able to rapidly respond and seize opportunities. In 2022, we closed the year with results that were definitely excellent and outstanding, and I'm very pleased to tell you that we closed with the best profit ever. Not considering the positive contribution of the bad will coming or stemming from the merger with Caricento. That proves that our group managed to grow and rapidly adapted itself to the changes brought about by the backdrop, the general backdrop.
That was possible thanks to the quality of our people and their ability to work as a team and to have a strong sense of belonging. I think that is of paramount importance to generate value over time, regardless of the economic cycle. That's why I would like to thank our coworkers warmly. Let's now move on to slide number two. Starting from my position as a new general manager, let me show you some key points and present you with the possible growth forward, going forward, in our group. We start from page three, a few highlights on the results we achieved even in, even well, despite the ending of government measure, our loans went up almost 3 percentage points.
We outperformed the industry, we are around 4% year-over-year, up 4% year-over-year. As we already proved over the last 10 years, we've managed to increase aggregate amount and constantly improving the quality of our assets. Bottom right of the slide, you will see the gross NPL ratio is further down, landing at 2.1%. That is a level of absolute excellence, let me say, if we compare it to the industry average in Italy, but also to the European industry average. Moreover, we are heading towards NPL 0. As you see, net NPL on total loans is around 0.9%. That's a net NPL ratio. Let's move on to page four. That's profitability and capital soundness. We definitely recorded an improvement in our profits.
Net of goodwill is up 23%, reconfirming profitability level at the top of the industry with our ROTE and ROE, respectively, of 11.5 and 9.8%. The group proved to be able to generate capital organically, and that led to a further improvement in our capital soundness. I'm very, very pleased to share with you that ECB gave us a Pillar 2 request that is the lowest in Italy, thus reaffirming our soundness and the soundness of our business model and the way we monitor and manage risks at group level. CET1 ratio lands at 13.7, with a very strong buffer, about 616, buffer on the SREP requirement.
We have a dividend proposal, dividend distribution proposal of EUR 0.33 per share. We are on page 5 of the presentation. Let me show you some slides that go back to the way we are growing strategically. In this slide, you can see the ability our group showed to retain high profitability even, well, during different economic cycles. Over the last 11 years, we've managed to increase our capital position by generating capital organically and retaining ROE levels that are of absolute excellence, let me say, both versus the European, the Italian and European peers. These results are generated to the high diversification that characterizes our business model, and that I am confident will further help us also against this economic backdrop that is characterized by uncertainty, a lot of uncertainty.
We're now on page six, here you see a snapshot of our business model. This is one of the factors that enabled us to provide results in a consistent way. This is our business. You see it's very wide and diversified, very thorough. That's why we decided to further extend our business lines, generating value as single business lines, but also fully embedded in the way we do banking and unrolling, rolling out synergies from a consolidated perspective. We have Credem Banca and its network, and then we complete the service model with extended banking service and consumer finance so that we can meet the needs of both households and corporates from loans to factoring, leasing, et cetera.
We've also strengthened our private banking with our legal entity, Credem Euromobiliare Private Banking, and the Banca Euromobiliare, and the Credem private business unit. This will come on stream on February 18th. Through our network, we will be providing asset under management products thanks to our product factories in the wealth management area. Let's move on to the next slide. Here you can see how we've opened up our different business supply pipelines, so to say. If we look at volumes at the end of 2022, including private Credem Milano business unit that's already embedded in the private banking pole or hub, as you may want to call it, as I hinted at before. You see the aggregate figures are consistently distributed or broken down among the different lines.
Loans are mainly on the commercial bank, extended banking services and consumer credit. Funding is mainly focused on commercial bank and private banking. They will have a very important strategic weight in managing the wealth of private clients, and it will be very satisfactory going forward in generating fees that will benefit our P&L. Commercial bank, asset under management, and insurance to further increase the value we generate. Let's move on to page eight, wrapping up this short overview. Here you see the impacts of diversification on our revenue sources. You see that our strategy is then translated into a high diversification of the different types of income streams.
The first quarters were characterized by an increase in NII thanks to an increase in the interest rate, also fee income is quite high and offsets very well our income sources. That further reconfirms our ability to grow revenues in an income in a sustainable way in the long term and therefore offsetting volatility of economic cycles. Let's move on to page nine in the presentation. Let's look ahead of us, we want to confirm our investment in the way we are resilient and able to adapt to change, especially today in the current economic backdrop.
We want to do so and seize new growth opportunities by strengthening the pathway we have started with a lot of projects in our pipeline. We normally have 38 initiatives running in parallel, and 8%-10% of total revenues are used for these initiatives and span across all the business lines in the group. Just to give you a hint, we will keep on focusing on our offering in asset management and bank assurance. We will focus in 2023, we will focus on the project of Credem Euromobiliare Private Banking. We will keep on offering products and services to corporates with an innovative digital offering or proposition. As we did in 2022, there'll be a strong commitment to consolidate our consumer finance or credit operations with the Avvera company.
Then we will focus on commercial business units to further strengthen our distribution model and also grow in a sustainable way. In addition to these business lines that are vertically oriented, we will have to keep on planning, growing also across the board, so to say, along the different axes of development or growth. Digital transformation is very important, cybersecurity, data analytics, and the use of artificial intelligence, and branding and making people more brand aware, and then of course, focus on sustainability. I will tell you more about in a few minutes. Let me underline that that should not be possible without the very strong ability to change and transform our people show. 400 people are normally involved in these group activities that make it possible for the group to grow and generate value.
Let's move on to slide 10, the next slide. Here we talk about the digital approach, the transformation, digital transformation process, which is of paramount importance for us. Let me show you some figures, share some figures with you that show how committed the group is in evolving our digital platform so as to offer a multi-channel offering that can be distinctive also going forward. Internet banking retail is showing that there are more and more clients using them, up 4%, both private and corporate, with an impact that is around, well, over 70%. 94% of overall transactions take place through digital channels. That really bears witness to the growth we have shown from the digital perspective. We can adapt very promptly to the change in customer or client behavior.
Our proposition includes both benefits stemming from technology, but also benefits that are leveraged on the excellent relationship between clients and the bank. From funding to loans to other services. The next slide, we focus on sustainability. We underwrote the charter for equal opportunities, we try and help the community. For instance, we try and help people who were affected by the Ukrainian War. We do so directly and indirectly. We try and evolve competencies and skills on ESG issues, both for our coworkers and the board of directors. We have specific training programs. Let me tell you also what we are trying to embed the ESG rationale into our credit policy.
In 2022, we updated our credit policies when it comes to credit granting or loan granting and resolutions, and then other financial operations with specific focus on the positioning of our counterparties when it comes to sustainability themes, with a focus on climate and environmental issues. We came up with a short list of indicators that were embedded in our credit issue resolution process, and we applied it to 1,000 corporates where we already are operating. In 2023, we will keep working on the ESG front, and ESG criteria will be applied to the entire corporate network and the entire portfolio, loan portfolio. That means directly involving clients to collect relevant info, relevant data.
Now it's for us, that is critical because corporate do not seem to be ready for it, but we are ready to support them throughout this transition phase. Next slide. Here we get to the nitty-gritty of our full year results. Page 13. In 2022, we had a year with rates that supported our revenues. Of course, instead, commissions were impacted by the negative performance of markets. The group growth stem from the digital innovation and enabling us to show a sustainable growth over time. The revenues increased more than costs. Therefore, we had an operating result growing or up more than 23.4%.
LLPs are limited, and we have not seen a meaningful deterioration of our loan portfolio, thus being placed at the top, both in Italy and abroad and in Europe. EUR 317 million is our adjusted net profit, our best result ever, not embedding, not including the bad will for the acquisition of Caricento. Page 14. Let's have a look at our net interest income. We have a sizable increase over the last two quarters, and that was determined, driven by the strong growth of interest rates following central bank monetary policies. Also, I would like to underline the outstanding work of our network. That managed to further generate extra loan volumes that led to an expansion of our net interest income.
Over the last quarter of 2022, we still benefited from a positive contribution of about EUR 9 million between TLTRO interests and what we had for the mandatory reserve with the central banks. That should end already starting from the first quarter of 2023. Results were mainly focused in the customer spread, bottom right of the slide. As you can see, growing 66 basis points versus an average industry growth of 54 basis points. Let's move on to page 15. We drill down into a greater level of detail in our net interest income. That's the average rate applied to loans and is around 73 basis points versus 64 of the industry average. Still strong is the repricing on depositing around 7 basis points versus the 10 basis points applied by the industry.
If we look at 2023, we will have a lower contribution of in funding. We expect to further grow on the asset side. Let's move on to page 16. We complete the picture of net interest income with our securities portfolio breakdown. Over the last quarter, our breakdown is practically unchanged, always highly diversified. The exposure on the domestic market are all accounted for as held to collect. That enables us to lower volatility on capital. Page 17, non-interest margin.
Recurring margin is EUR 200 million, our core NIM. Consistent with the previous quarters of 2021, despite the market performance we're all very much aware of, banking fees went up more than 9% year-on-year. The total non-interest margin is affected by performance fees that are lower and that have characterized 2021 in a very positive way. We will keep monitoring market performance also in 2023, focusing very much on customer needs and being aware that a recovery may generate room for our revenues, both recurring and performance fees, to further grow in 2023. We are on page 18. Let's look at operating costs in D&A.
Payroll, excluding some non-recurring items in Q4, is consistent with the group growth and is tied in with the high increase in revenue, especially in Q2 of 2022. As to admin expenses in the last quarter, we have a non-recurring IT item, about EUR 5 million for ICT expenses that are tied in with a new private legal entity. At year-end, we are applying some inflation facts that will also be applicable in 2023, but in a very manageable way, and that can be absorbed or taken in thanks to the revenue growth. Next slide is page 19. These are loans to customers.
As I said at the beginning, in 2022, we no longer have the effects of government measures with the end of moratoria, and therefore the keeping up of the D&A effects on our products. Yet we managed to increase our loans to customer 4% year-over-year, and the consumer finance went up more than 25% year-over-year and led mainly by Avvera. Let me stress that both residential mortgages and leasing stood their ground at year-end despite the strong increase in interest rates. Short-term loans also have grown nicely, especially at year-end, whilst we have mortgage, other mortgage or other loans is flat, EUR 3.1 billion of state guarantee loans granted during the COVID emergency. We're now on page 20 of the presentation.
Group customers funding and net inflows breakdown. We have a net production of assets under management and insurance products of EUR 388 million, showing the positive decisions made by the group. Of course, the increase in yields made sure we had an increase in AUC products with positive net inflows in excess of EUR 2 billion over the last quarter. We've had very sizable insurance net inflows. If you consider our business model, that could be really a source of opportunity also to work and channel these masses to the wealth management or investment world, especially if the market conditions were to consolidate or improve. Page 22. Sorry, 21. This is deposits, assets under management, insurance.
Direct deposits have a very meaningful impact, and insurance is around EUR 39 billion, and they are affected by the negative market performance versus 2021. Next slide, we have bond issuances and maturities, again, funding. As to institutional issuances in 2023, we had three issuances. The first Green serial bond, the EUR 600 million genuine covered bond in Q2, and the Social Tier 2 that enabled us to further increase the capital efficiency, our capital efficiency through a mirroring transaction with Credito Emiliano improved our buffer on the MREL requirement. We have no immediate maturities. We're very flexible in 2023 to looking into other possible issuance that may further strengthen our MREL buffer.
Page 2023 here, we briefly look, as you know us very well, we look at the credit quality. We keep on reducing the gross NPL ratio. It was 2.1% as the gross NPL ratio on loans. It stands at EUR 736 million. That is a piece of information of outstanding quality versus the industry average. Coverage, we've always improved our coverage levels. In 2022, we are around 71% on bad loans. Total NPL, we land at 56% coverage. If we look at the capital shortfall and the further additional, the Addendum, and calendar provisioning requirement, coverage stand at more than 61%, which is a very high level compared to the industry average.
The incidence of net bad loans is 0.23 compared to the 0.92 of the industry. 0.9 of the industry, sorry. One last thing, again, the asset quality, as I said at the beginning, we closed 2022 with better results than expected with a cost of risk, which is 11 basis points, and also factors in further updates in IFRS 9 scenarios, and also an update of our depreciation policies, impairment policies on analytics, so that we have coverage levels that are always in line with the ECB requirements, both as far as addendum and calendar provision are concerned. Cost of credit is 11 basis points, so a very limited amount. Let's have a look at assets and liabilities.
You see how loans have grown because of the seasonality effect we have at year-end, and then short-term loans. Then we record a reduction in loans to banks because of the excess liquidity effect with the ECB because of the reimbursement that were made, the TLTRO reimbursement that was made at the end of 2022, EUR 0.6 billion. EUR 1.4 billion with a natural maturity of the tranche we had in December, and then EUR 1.2 billion instead is referred to an early redemption or repayment that we made for March 2023 maturity. So endorsement is slightly more than 30% of the previous exposure and is in line with market performance. We are now on page 27.
Liquidity position, liquidity ratio, despite what I've just mentioned about TLTRO, we retain a high level of LCR, also thanks to the eligible collateral we had after the reimbursements. In 2023, we expect slowing down decline in the ratios because of course there'll be further TLTRO reimbursement maturities. However, let me reassure you that we'll be well above requirements, thanks to the fact that we are very flexible, and we can resort to institutional wholesale funding initiatives that we can run also in the short term. Next slide, we wrap up with growth again, gross NPL ratio. CET1 ratio at both group level and holding level. That is Prudential Perimeter. At banking group level is 15.2% and 13.7% at holding level.
In 2022, the group reconfirmed its strong ability to organically generate capital and managed to offset the negative impact driven by the market on valuation reserves. The increase in loans, the loan growth, especially in Q4, led to a reduction in RWA. Thanks to benefits deriving from TRIM that were already recorded in Q1 2022. The current level of CET1 ratio enables the group to retain, as I said at the beginning of our presentation, a high capital buffer versus SREP 2023 results. That is to say 616 basis points, and a dividend proposal of EUR 0.33 per share. That's it from my part. Thank you very much for your attention. We now open the Q&A session.
This is a Chorus Call operator. We're now starting the Q&A session. If you want to ask a question, please press star and one on your handsets. To be removed from the Q&A queue, please press star and two on your handsets. Please ask your questions using your handsets. If you want to ask a question, please press star and one now on your phone. First question comes from the line of Christian Carrese with Intermonte. Go ahead, sir.
Good morning, everyone. Thank you so much for your presentation. Excellent results. That reconfirms the soundness of your bank. Let me focus on two points. The NII on the one hand. Looking at page 14, if I'm not mistaken, it's clear that Euribor in Q4 is much higher than, of course, it was in the previous year. Let me try and understand the underpinning rationale you have when it comes to 2023.
Lower contribution from the TLTRO, benefits deriving from rates. What do you expect from the competitive scenario around deposits? What are your assumptions as to loan increase? NII maybe should give a contribution to the govies, Italian govies. Another question on slide seven, if I'm not mistaken. The scenario you gave for the single business lines, also the private banking and the project you are rolling out, could you elaborate if we assume revenues as 100, how much is the contribution for coming from the single business lines? Thank you.
Thank you very much for your questions. Let's start from the NII. As you correctly said, the 2022 effects were very, very positive in the second part of the year.
It's an increase in the customer spread and a much faster repricing on the loan side, whilst on the deposit side, we're still, of course, applying it, but in a much, much slower fashion. That impact, of course, will be dragged on to 2023. We expect a much faster repricing because of the competitive scenario we are starting to see. Not so intensely, but we're starting to see them on deposits as well. Just to give you a benchmark or the beta on deposits today is about 5%. Expectations are that in 2023, it'll be around 25%, whilst on loan it will be 45%. The impact on the cost of deposits, the customer deposits will cost will be higher next year.
Well, this year, in 2023. There are other effects we have to factor in when we have to look at the 2023 buffer. As you were saying, that'll be the end of TLTRO. The cost of institutional issuances will be full year and not a partial one as we had in 2022. As a guidance, I could tell you that about an increase of around 21%-22% in our NII for 2023 versus 2022. It's an estimate, of course, because the speed of the repricing on deposits still has to be confirmed and checked, so it might well be even a higher figure.
As to the business lines, I'm very pleased you asked this question because the pathway we started sharing our business model with you and the figures in our business model is very important. Shortly we'll disclose the opening up of the birth of the coming on stream of Credem Euromobiliare Private Banking , because then we'll be able to tell you about the contribution each business line can give you, and it will be tied in with stated figures. I think we'll be giving you more info either within the half year report, the interim report, or the full year 2023.
Thank you.
Next question comes from the line of Giovanni Razzoli with Deutsche Bank.
Good morning to all of you. I have two questions and a clarification. You, in your press release, you said that CET1 was impacted by valuation reserves, probably refer to BTPs. Could you elaborate on it? How much have you recovered to the present day? Dividend policy, you have increased 10, your dividend by payout by 10%, but you're still at the industry minimum. Your direct competitor is around 50%. Others get to 90%, 100%. Given the market scenario, what we see from Italian and European banks, of course, shareholders remuneration is a distinctive feature for banks. Do you think you can be more somehow sensitive to this issue in the medium term? 10% is already a first step, but would you envisage maybe increasing your payout going forward regardless of your dividend per share growth?
A business question. There are a lot of rumors... Impact on business fee, the impact of business fees for the sale of third party products. What could be the impact on your accounts, and what would be the adjustment required for your distribution model or business model to go along with that, should that proposal be rolled out in the coming years?
Thank you very much for your question. I'll start from the trickiest one, the one on dividends. I think you know us very well. You know what our DNA is like, the group's DNA. We want to be consistent, progressive. As I said, consistent, we want our capital to grow. We want to be very sound. As you see, that is recognized by regulators as well, and that is of paramount importance to be able to grow and generate... Well, we need to generate capital to support the business lines I talked about beforehand. The other factor driving us, which has been our distinctive features for a long time, it's our long-term view, a long-term perspective.
Mr. Razzoli, you said that you've seen that last year there was a sizable increase in our dividend. There was a one-off component as well, because somehow it was offsetting what had happened in the year before that. This year, we have reconfirmed it and further increased it, rounded up with a 10% increase. As you know, our board of directors is the one making decisions as to dividend policies. I think that this trend can reconfirm what you said. Indeed, as profitability grows, it's all...
Well, we are gonna be aware and sensitive from that perspective as well, meaning aware. As to the valuation reserve, there's no specific reference to BTPs. It's not an accounting category that has that type of effect. It's instead another type of situation. It's the steepening up of the interest rate curves and the widening of customer spreads. There's no specific issue tied in with BTPs. As you know, our portfolio is very well diversified. As to the last question about capital, I would hand it over to Alessandro Cucchi, who is in charge of planning, to give you more detailed info.
Good morning, Giovanni. The inducement topic is a very important. It's important to both us and the entire inter-industry. We cannot draw a conclusion depending on how the inducement topic or theme will be dealt with. On our side, we are running simulations, and we're trying to see the impact. How we can adapt our business models and going toward consultancy. There are still talks at different levels, so we're still waiting to see how things can evolve. In the meantime, we're trying to ponder upon how we can update our business model accordingly.
Thank you very much.
Next question comes from the line, Manuela Meroni, Intesa Sanpaolo. Go ahead, madam.
Good morning, everyone. Congrats on your excellent results on my behalf, too. First question, one is on the NII. Your guidance, you say it's gonna go 21%-22%. What is the assumption you made for the loan growth? Could you elaborate on the NII sensitivity? Another question on commission. Some banks are reducing commissions on deposits. Do you also expect to have to do the same thing? What's your guidance on commissions on deposits, including commissions on AUM product for 2023? You have EUR 5 million one-off cost for the development of the private banking project. I was wondering, in 2023, what can we expect? Will there be further one-off costs to complete the initiatives you outlined in slide nine and the renewal of the labor contract, salary contract?
Well, I'll start from the non-interest income. We assume a 3% growth on the loan side as aggregate figures, so NII and loan growth. The sensitivity between the interest rate hikes, we're talking about 100 basis points of rate hikes. We assumed an impact on our NII equal to EUR 90 million. As to costs, the estimates that we have factored in are consistent. As you rightly said, they rely on the development and growth of different business line. It's a growth of 3.5%, we assume, and a part of that growth 0.06 is tied in with inflation, as I mentioned before, but that will have an impact that will be definitely felt in a more meaningful way in 2023.
As to commissions, fees and commissions on current accounts, we've already rolled that out. You probably read that in the paper. We've canceled commissions that were tied in with negative rates for the obvious reason that I don't have to explain. That was very important because we want to be very close to our customers. Generally speaking, the expectations we have vis-a-vis fees and commissions for 2023 is that of keeping them flat, stable. That's just to give you a sensitivity, the fees and commissions tied in with negative rates, for instance, they were about EUR 3 million per quarter.
Next question comes from the line of Luigi Tramontana with Banca Akros. Please, sir, go ahead.
Good morning to all of you. I have one question on the NII and the importance, the contribution of TLTRO. You've already reduced your exposure vis-a-vis the ECB in a sizable way at year-end. You still have EUR 5.7 billion worth of exposure. How much of that EUR 5.7 matures in June, has a maturity in June? Throughout the year, what will be the evolution of the NII, maybe more positive in the first half and slower in the second half? The other question is about capital. You have a capital buffer that is indeed very sizable, 616 basis points, and they're still very cautionary, cautious, and prudent. Could that be used for external growth purposes in the commercial bank or maybe on some product factories? Thank you.
Thank you very much for your questions. I'll say that TLTRO is EUR 4.9 billion in 2023, EUR 4.5 billion in March, and the remaining EUR 0.8 billion in March 2024, and EUR 200 million, sorry, in September 2023. That's the maturity profile. We'll stick with the maturities.
To give you an economic sensitivity, I'm picking up the TLT-TLTRO page. The quarterly impact was about EUR 9 million. That is going to be the missing amount from that perspective. When it comes to the capital buffer you mentioned, as I said, for us, in our view, in our long-term view, it is an element of paramount importance. We want to be sound. We want to be able to fund our organic growth of our businesses because some of them are RWA intensive, and therefore it's very important for us to keep on growing our aggregate figures. We are interested, and I'm not saying this for the first time, of course, you know, we are willing to open up to the M&A world.
The M&A world has some fundamental rules for us. In our opinion, it must be a value-generating transaction, a value-creating transaction. It's not, and it should never be a distressed transaction. It should not have put our capital soundness in dire straits, and it should somehow have a geographical fit. The opening up of our business lines would enable us to. We do not rule out seizing opportunities to further enhance or strengthen our individual business lines. I have, however, to say that for the time being, we have no open files, so to say. We are, of course, open to look at, but we are very much focusing on our organic growth for the time being, as you could probably see from the presentation.
Next question comes from the line of Riccardo Rovere with Mediobanca. Go ahead, sir.
Thank you. Thank you very much for allowing me to ask a question. If I may, one question only. As to the cost of risk, you talked about 15 basis points. It's not much. You've updated your models for the new scenario. You've adopted new policies. You have another EUR 40 million shortfall. When it comes to the calendar provisioning and addendum, considering the model update to the new scenario and considering the EUR 40 million, is it reasonable to think that you already played ahead of the curve in 2022? Or is it a wrong reasoning? I would like you to elaborate on what you currently see on your asset quality. Data were not so excellent in December, and you are in geography where the manufacturing industries play a major role, and probably the comment on the negative figures was referred to the manufacturing industries.
Mr. Campani says, "I'm not sure I grasped every part of your question." Cost of risk. You asked about cost of risk. Let me tell you that our perception in the first few months of 2023 is that of a confirmation of our portfolio quality. We are not seeing any different default rate from the very low levels we already saw in 2022, and our default rate is 0.44. That's the default rate for 2022. From that perspective, we are tackling 2023 with a positive attitude.
The guidance as to cost of risk, even though, of course, we started well, we also assumed a possible scenario deterioration, but we would like to reconfirm a limited out cost of risk lower than 25 basis points. When it comes to the different industries, we've looked, we've done stress tests on energy-hungry sectors or industry. We've stressed our portfolio for EBITDA sustainability, of course, given to the increase in cost, interest rates, inflation. Here I'm keeping fingers crossed. But those studies reconfirm that our corporates, our clients, our customers are resilient, and they've managed to overcome quite a few crises and moments of crisis. We are confident that they can also overcome this stage.
I'm gonna answer part of the question, then I'll hand it over to the colleague. We want to be conservative in our assumptions, so we've overweighted the worst case scenario because we deemed it appropriate to tackle a time of uncertainty being very, very cautious. Alessandro, would you like to add something?
Thank you very much, Angelo. Good morning, Ricardo. Your assumption is correct. Your remark is correct. We adopted very cautious policies this year, too. We've increased our coverage on some loans at year-end. As Angelo was saying a few minutes ago, we have IFRS 9 models, where we have a base scenario 60% and 40% an adverse scenario. We're not even assuming an optimistic scenario, so we are being very, very cautious. As Mr. Campani said also when it comes to our expectations for this year. For the 25 basis points we mentioned, 60% base scenario and 40% adverse, the breakdown on those 25 basis points.
Adverse, what does it mean? Just to better understand it.
They are compatible. Are they compatible with the base baseline scenario and adverse? Adverse scenario assumes that GDP down 4.6% and the base scenario 0.4%, 0.45%, inflation slightly lower. Adverse scenario, 3.1% inflation. GDP is still lower also in the coming years in the, for the two 60/40 scenarios.
Thank you.
Next question comes from the line of Luigi De Bellis with Equita.
Good morning to all of you. A follow-up. Something on commissions and fees. What's the stability you expect for 2023? Is it just for banking fees or also for the insurance and management? Well, AUM and insurance fees. And financial advisors, as they were flat or declining in 2022, what kind of objectives you have for 2023? Another more general question. During the introductory speech, you talked about focusing on the commercial bank that will enable you to extract the value. Could you elaborate on that? Could you better state what you are referring to with that piece of information? Strategic priorities in 2023, are you gonna focus on turning a direct deposit into indirect ones? Or what kind of focus are you gonna have? Thank you.
Thank you very much for your question. Maybe I did not write down the first question, but I'll start from the second one. Financial advisors, of course, our objective is to grow also from the point of view of financial advisors. We have a platform. I'm sure you're well aware of it. In the new legal entity, Credem Euromobiliare, we do have a financial advisor platform, and we are going to further develop it, grow it.
I'm sure it's gonna become a very attractive model also so that we can increase the number of our FAs. Here, let me go back to the question asked before on the inducement, on the topic of inducement. We hope it won't have an impact on the industry, but we expect the average portfolio of financial advisors to increase in size. In addition to recruiting new financial advisors, we are going to work along the lines of the so-called pruning should the objectives not be achieved.
As to fees and commissions, now I remember the first question you asked. Commissions and fees, I can confirm that what we said is about all types of fees, be it banking fees or AUM fees and insurance, fees and commissions. I'm not talking about performance fees here because of course it's too early to assume. We will see the market trends, how the market goes. We've seen over the last few weeks, we've seen some positive trends that we hope will continue, and that could have a positive impact on maybe changing the guidance I've just given you.
On the commercial bank, we have a very important project in the pipeline because I must say that one of the benefits that derive from specializing on things is to have a strong focus on each business line, and that indeed, moving from a commercial bank to the new Euromobiliare Private Bank, the new private banking business unit, that was very. Yes, it gave us a lot of stimulus somehow. It was a very stimulating exercise to do. Growth-wise, we are going to complete our digital proposition over the first few months of 2023, and that will give us a boost, both when it comes to acquiring new customers and also, have a cross-selling activity on the existing customers.
As you can imagine, in the commercial bank, we have many different segments, customer, clusters and segments, more affluent or less affluent or smaller clients and customers. The profitability of these clients, for us, it's very important. Generated by this customer is very important. With a much more innovative service model, we hope, we can serve customers better and extract more value revenue-wise. We are completing our digital hub for corporates. For corporates, we have a proposition which is not just assets under management, extended banking services, leasing, Euromobiliare, and then we have factoring operations. We have an approach for the different supply chains, and that is very important to ensure companies their working capital. We have a provider of digital services.
We think that can really further boost our penetration in client portfolios that are of high quality. Then our digital approach for every supply chain will also enable us to improve our customer base on the corporate side. I think that the expectation we have, we, the way we are betting on the commercial bank, this is gonna be very important for us. I hope I answered your questions, and otherwise, let me know.
Thank you very much. Basically, on banking fees, the, those EUR 3 million, lower million per quarter will be offset by an increase in the customer base.
Yes, exactly.
Next question comes from the line of Marco Nicolai. Please go ahead, sir.
Thank you for the presentation. I have a clarification to ask for. As to performance fees, what are your expectations for 2023? On the progress you place, you have high watermark mechanism, hurdle rate mechanisms in place? Could you elaborate what can we expect on the performance fee side in 2023? What would be the run rate for performance fees, if you have a figure also for the coming years?
I hope that in 2023, when we meet again, we'll be able to tackle the topic more in depth. It's very hard to assume or make assumptions or estimates on performance fees. We have a number of products in our wealth management family. There are mechanisms that trigger commissions. In, at this stage and in this market under these market conditions, I don't want to make any forecasts because I think they would not be reliable.
For the time being, we do not have the forecasts available. Alessandro will be just the high watermark mechanism, they are very low for us. Not meaningful anyway. It's the yearly performance of markets what matters to you that explains performance fees.
As you know, don't have any high watermark mechanisms.
Exactly. That's correct.
Thank you.
Next question comes from the line of the English Conference. Iuliana Golub with Goldman Sachs. Go ahead, madam.
Good morning. Congratulations on the results. Two questions, please. First one regarding the replacement of remaining TLTRO. I see your liquidity is excellent, so I was just wondering, will you be looking to replace some of the maturing TLTRO with something else than deposits, for example, covered bond issuance? The second question is on the point of further building your MREL buffer. I know you have flexibility and don't have any imminent needs there, but if you were to do a deal this year, would you have a preference for senior preferred or senior non-preferred? Thank you.
Thank you very much for your question. As I said before, during the presentation, we have an LCR level, which is, well, we are very confident with it. As you, as you rightly said, it's an indicator that is volatile, and indeed it will suffer when it comes to, once we reimburse our TLTRO. That's natural somehow. We think that from that perspective, we can take action with short-term funding through the collateral that be freed up from the TLTRO related transactions. We don't see we are going to have institutional issuances or wholesale agencies. As you could see on the slide devoted to the maturity profile for agencies. For the time being, we have not foreseen any issuance.
We do not rule out, of course, the possibility should there be any opportunities to seize or should the market be confirmed as more positive as we move forward. Not a very, maybe not size, maybe below EUR 500 million.
And as type?
We'll look into the type whether to go for preferred or non-preferred, depending on the positioning at that time, probably.
Thank you.
Mr. Campani, for the time being, there are no more questions in the queue.
Very well. I would like to thank you very much for joining us today and good proceedings, and keep up the good work. Thank you.