Welcome to the conference call presenting Credem's H1 2025 results. Let me remind you that all participants are in listen-only mode. The presentation will be followed by a Q&A to be assisted by an operator during the conference call. Press star and zero at all times. We now turn the conference over to Mr. Stefano Morellini, General Manager of Credem. Mr. Morellini, please go ahead.
Thank you very much. Good morning to all of you. Thanks for joining us today, especially because we are very close to the summer holiday. Next to me, we have Giuliano Cassinadri , who is the Deputy General Manager and CFO of our group, Alessandro Cucchi, who is in charge of Strategic Planning and Capital Management, and Aaron Spadutti, who is in charge of the IR team. The first half of the year was characterized by a certain level of uncertainty at the global level.
In addition to that, of course, there were tariffs adding to the pre-existing political tensions. Unfortunately, even within Credem, we have recently experienced a tragic event and the passing of Angelo Campani, a highly valuable human being, a professional who had vision and high competence in guiding our bank over the last few years. I took over from him, and I have a deep sense of responsibility in doing so, and I do confirm that we will provide consistency when it comes to the group growth pathway ahead. More specifically, our team has been particularly responsive and capable in hard times to produce excellent results, just like the ones I'm about to disclose to you. Let's move on to page two in the presentation.
In H1, in the first half of 2025, where we confirm our strengths, we close the first six months with a net profit of almost EUR 372 million. EUR 278 million normalized net profit, net of the capital gains stemming from selling the merchant acquiring and retaining high profitability, even though normalized is still a double-digit profitability. It's translated in an annualized ROTE of 15.4% and an ROE always annualized of 13.6%. Asset quality is at the top of the banking system, not just in Italy, but also in Europe, with an NPL ratio of 1.6% and a net value for that ratio, net NPL ratio, equal to 0.7%. Our capitalization level is very high, our capital soundness is good, and that enables us to face confidently our growth path. Our CET1 ratio lands at 15.83% with a buffer in excess of 740 basis points.
The requirement also includes the SIRB, the systemic risk buffer component that is coming to force as of June 30. Let's have a look at the size of the results. We are on page three of the presentation. We are very determined in unfolding our strategy, generating overperformance, strong overperformance vis-à-vis the rest of the banking system. That reconfirms our ability in the execution field, regardless of economic cycle. Loans are up, year-on-year are up 0.3% versus a system growth, a banking system growth, which is 0.5%. Direct funding went up 2.6%, more than 1.6 percentage points higher than the average system, Italian banking system average. Our net production level was very meaningful, landing at EUR 1.5 billion, almost entirely driven by new net inflows, both in AUM and insurance.
That's a very important distinctive feature for us, reconfirming our ability, the group's ability to leverage the full potential of a diversified business model that ensures us an excellent support to our revenues in driving our revenues at a stage, in an era where rates are being reduced. That leads to a customer base that has been growing 6% over the last year and lands at 1.6 million. Let's now look at revenues. We are now on page four of the presentation. As expected, our revenue mix is as follows. It witnesses a constant growth of retiring, NIM. Versus 2024, there was a shrinking of NII that, of course, follows and tracks the rate performance.
That really proves how the group can leverage on the federation of business to drive revenues, thanks to the positive performance provided by recurring commissions and core NIM that account for 44% of revenues for this half of the year. Also for the next half of the year, we expect a further reconfiguration of our sources of income. I'm really confident that going forward, synergies being unfolded between our networks and product factories will still deliver strong support to our revenues and income, ensuring excellent performance under different economic scenarios and cycles. Let's now look at the results of individual business lines. We have page five in the presentation. The five-day drop in rates, we retain good profitability both in the commercial banking field. Credem Bank lands at EUR 170.5 million, giving a 42% contribution to net profit.
Also, extended banking services provided or produced EUR 43.4 million, accounting for 12% of our consolidated result for the first six months of the year. That was specifically thanks to an excellent quality of our assets, the way we managed to protect commercial trading spread, and a strong development that I've already mentioned, a strong development of volumes. Let's now talk about wealth and private lines, including both wealth management product factories and Credem Euromobiliare and private banking. The overall result is EUR 75.2 million, accounting for about 20% of the group's net profit. That was thanks to the growth of asset and their management, despite the high volatility affecting the markets in Q2. I am confident that our distinctive positioning in managing savings and wealth management and the experience our networks show will keep providing us a competitive edge, especially now against this backdrop with rates being reduced, being cut.
Page six of the presentation now. As we said before, despite the further cut in rates, our NII is growing despite the last quarter. Core NIM played a contribution and season commissions played over the total revenues is affected. If we compare it to the previous quarter of a lower performance of trading and lower performance fees, the results we achieved are still showing a very meaningful value and are equal to more than EUR 461 million for the quarter and EUR937 million in the first six months of 2025. We can manage costs and expenses very well. At the same time, we retain our commitment in, of course, focusing on projects and IT to support the growth in size in our group. Personnel expenses, as you can see, is very virtuous.
Let me stress that, very virtuous, and down more than 6% versus the previous quarter, while admin expenses are mainly driven by costs tied in with the ICT and project costs. We are a cost of risk, which is quite limited, three basis points, and it's also benefiting from gain stemming from the disposal of some NPLs. The gains is EUR 8.9 million gross in the second half. That's the contribution. We also expense EUR 3.6 million for the charges stemming from systemic funds for life policies. We close H1 2025 with a net profit of EUR 371.8 million, in addition to EUR 278 million net of the capital gain stemming from the disposal of merchant acquiring that was completed in Q1 2025. Let's now move on to individual P&L items, and we are on page seven of the presentation.
As you can see on the slide, we are really defending our NII despite the further decline in rates in Q2. This trend stems from the ability of our networks to buffer the impact on commercial spread, on trading spread, and to benefit from some effects on the hedging strategies that have instead penalized the first three months of the year for Q1. Against the backdrop of declining rates, we'll be able to support our NII. These factors, these elements will further enable us to reduce the volatility of our NII also across the next quarters and thinking of 2026, where we expect rates to be lower than the ones expected for 2025. Let's now move to page eight in the presentation. As I said before, we're really protecting our profitability, commercial profitability, not just in absolute terms, but also if compared to average system data.
Over the last quarter, our average loan rate, lending rate, has been, the cost of spending from customers in the group was 19 basis points and offsets the profitability of commercial loans. We protect the funding from customers for 19 basis points versus a system that instead is focusing on 12 basis points, has an average cost of funding of 12 basis points. That really leads us to have a very stable customer spread versus the 8.8 basis points that are the results of the system banking system average. Let's now move to page nine. In the first half of 2025, we really took some opportunities available in the market to take profits, and we seized some more opportunities during Q2 as well.
Now the goal is to rebuild our portfolio and given the current spread level, we are waiting for the right time to maximize our support to the NII. Currently, we have EUR 11.2 billion worth of securities, the security portfolios are highly diversified. Italian Gobis account for about 37% of the total portfolio, and the position is almost all, 98%, is accounted in HTC. With gains, gross of taxes before taxes equal to EUR 23 million. Let's now talk about commissions. We're on page 10 of the presentation. Non-interest margin is in excess of EUR 221 million and growing versus Q2 2024. I'm very happy to tell you that recurring components, EUR 202 million, are up about 8% versus the same timeframe last year, reconfirming our growth pathway when it comes to NIM. I'm sure it will still drive and support group revenues sizably also going forward.
Management fees, EUR 123.4 million, thanks to the work our networks are putting in. Despite market volatility in Q2, this item is growing, and in value versus Q2 2024, it's outperforming Q2 2024 by 12%. Insurance is doing really well, EUR 22.1 million. Profit-taking was lower on the securities portfolio versus Q1, while still stable is the contribution of banking fees and commissions. Let's now move on to page 11 in the presentation. In addition to the ability to protect our revenue items and to keep on growing sustainably, we managed to keep costs under control without giving up our commitment to support the growth inside of our group with a number of projects. Personnel expenses are down more than 1% versus the same period last year and are further shrinking vis-à-vis Q1 this year. There was a first seasonality effect that was tied in with, for instance, holidays.
We have already expressed our commitment to support our growth. We have operating costs equal to EUR 79 million in the quarter. Now we're on page 12 in the presentation, loans to customers. We reconfirm our ability to increase our market share. As you see, there's a positive trend year on year as far as loans to customers are concerned. That reconfirms the effectiveness of our strategy, focusing on organic growth. That is very important also going forward to support our NII. That was achieved thanks to the strong synergies that were unfolded in our business model and the one-of-a-kind work our commercial networks performed. I would like to congratulate them, considering the performance the banking system gave. Residential mortgages and consumer credit are growing, and they played a very important role in 2025.
With a good pickup in corporate loans, reconfirming our strong consultancy work, consultancy to corporate made by our network. In the first few months of 2025, we have increased our disbursement to corporate by 26% versus the first six months of 2024. That indeed is a new market scenario, a very challenging one, but we are confident that next year too, we still can grow our volumes consistently with our organic growth strategy. Next page, we have group customer funding. We had excellent results in net inflows net of the corporate. We are in the positive by EUR 2.3 billion. Including corporate, it lands at EUR 1.5 billion. You see, the results are very good. We are EUR 1.5 billion worth of net inflows, and we're already at a good point in achieving the EUR 2 billion goal we set at the beginning of the year.
The net inflows are flat, but if we exclude corporates, net inflows would be EUR 119 million. We had more than EUR 200 million of the AUC net inflows. If we move to page 14, we see deposit, assets under management, and insurance year- on- year. It's 2.6% of the increase, whilst this is quite flat from the beginning of the year. Very meaningful is the development of AUM and the insurance reserves growing more than €1 billion versus the end of 2024. Thanks to, as I said before, the excellent net production and performance, more than offsetting a slight negative market effect. Let's now move to the details about our asset quality. Quality is page 15 in the presentation. You see our gross non-performing loans portfolio, and we've managed to collect and sometimes dispose of gross NPLs with a total of disposal amounting to EUR 56 million.
Our NPL ratio is now at 1.6%, and it's lower both to the Italian and European system average. The default rate and cost of risk are at our all-time lows, 0.45% and 3 basis points, confirming that they are at absolute excellence levels, not just for Italian standard, but also for European standard. We expect to hit the targets we had provided guidance on and to stay well below 20 basis points in 2025, more in the 15 basis point area. For 2026, we will very much focus on the global economic scenario. I'm sure we will be able to reconfirm our asset quality also next year. Let's now focus on NPL coverage. We're on page 16 of the presentation. Our coverage is still at very high levels. The coverage of group NPL is 57.8%.
Including the additional coverage stemming from shortfall pillar one and addendum, that leads up to 57.2%. Also, despite these metrics, again, applying these metrics, we are well above Italian and European system average data. That really enables us to further pursue our growth strategy and makes us aware of the fact that we do have a significant sizable competitive edge, as we learned in the past, in case economic cycles change abruptly. We are on page 17 now in the presentation, foundations, and maturities. When it comes to institutional funding, you probably saw us in the market in May with a EUR 200 million issuance, a Tier 2 issuance. We've refinanced our Tier 2, EUR 200 million Tier 2, that we can call back in September, as we've only had clearance by the regulator and/or redeemer.
As to the umbrella margin versus the requirement, we are still at high level and with more than 5% of margin. Let's have a look at liquidity ratios, page 18. The high level of NSFR and LCR enable us to be very flexible when it comes to focusing on funding decisions because we land at 134% and 162%. We are on page 19 now. Capital ratios. Our capital ratios are reconfirmed at very high level, both at Credito Emiliano Group and at Credito Emiliano Holding level, respectively 17% and 15.8%.
They reconfirm our excellent, well, the excellent capital soundness of the group, driving our organic growth strategy and supporting it, just offsetting the RWA expansion because, of course, we increase loans and enables us to soundly take up the impact of market volatility, volatility of external scenarios, and regulatory adjustments, as you witnessed in Q1 after the introduction of phase one. The buffer is 742 basis points, and it's above the minimum requirement. It also factors in the effect of the systemic risk buffer enforced as of end of June. That's it on my part. Thank you very much for joining us. Now it's up to you for questions. Thank you very much. This is the course collaborator. We are starting the Q&A session now. Whoever wishes to ask a question, please press star and one on their phones.
To be removed from the Q&A queue, press star and two on your phone handsets. Please use your handsets to ask your question. If you want to ask a question, press star and one now. Thank you.
The first question comes from the line of Luigi d e Bellis with Equita SIM. Please go ahead, sir.
Good morning. I have three questions. The first one is on the NII. What can we expect going forward? What are the expectations by the end of 2025 and early 2026, given your hedging policies and the actual rate curve? Could you elaborate on the possible growth of loans and deposits in the second half of 2025, and how is the competition behaving in that respect? Then management fees and net inflows from customers. You talked about EUR 2 billion, but you already had EUR 1.6 billion, EUR 0.46 billion in the first year.
How are things faring now in July? Then cost of risk. You mentioned 15 basis points for this year after the three basis points of the first half. Do you expect an impact of tariffs on your subsidiaries and on your asset quality if you look at 2026 or the second half? Or have you just been very conservative despite having well performed in the first half?
Thank you very much. Let's start from the first on the NII, on our NII. In our guidance, we provided the market during the last conference call. It was low double-digit. The Euribor three months was 2.4% on average. We witnessed a much more abrupt decline in rates than expected, yet we managed so far to protect our commercial spread. There were some maneuvers on derivatives in the first quarter that had penalized the first three months of the year.
Now instead, they are providing good support to our NII. As the three-month Euribor on average yearly is expected to be slightly above 2%, we are only just doing a fine-tuning of our guidance on our NII, considering the result of 2025, the overall result of 2025 of about 15% lower than 2024 data. As to the 2026 trends, despite the current rate curve that leads to a further declining Euribor versus 2024, it is expected to be around 1.8% on average. We could therefore be affected by a very flat trend, slightly declining, but flat. It is being reconfirmed in an area that's very close to what we produced in 2025. That's as far as NII is concerned. Whilst as to the loans, we expect to still have a sustainable pace in growth for this item, for loans.
Indeed, the driving force is going to be private customers with residential mortgages and consumer credit that are showing a good performance. Even corporates on the short-term side could see an improvement of demand given the decline of rates I hinted at before. Honestly, still more challenging. Let me focus on another part of your question, increasing midterm volumes on corporates for two reasons. First of all, the strong competition available in the market, but also the investment demand coming from customers. For 2025, we confirm a growth of our loans around 2.5%- 3% roughly. We are very much focusing on having a similar growth also for this item also in 2026. As far as commissions are concerned, management fees, management and brokerage fees, you asked that in your question.
As you were reminding us, the excellent production we achieved from the beginning of the year enabled us to fight market volatilities and the negative effects on the average capital positions. Net of the performance contribution of performance fees contribution, which we do not expect to be as high as last year, management and brokerage fees are still growing above 5%. As to the volume growth, from that perspective, it is true that EUR1 billion is a sizable result, sizable performance. When it comes to production, it was EUR 1.5 billion. We are confident we can further improve the EUR 2 billion we have set as a target at the beginning of the year and to be achieved by the end of 2025. That will also enable us to have a good start for 2026 as well.
As far as the cost of risk question and the impact of tariffs if I remember correctly, it was your third question, if I'm not mistaken. Let me go straight to answering it in a very simple way. Of course, we are very much focusing on our companies and on the clients we have, and that could be affected by tariffs. We are constantly monitoring them. The positioning we have is excellent, by the way, and I can reconfirm that. Therefore, the impact we might have in 2025 and in 2026 has already been factored into our estimates, about 15 basis points that we discounted for 2025. Thank you very much.
The next question comes from the line of Fabrizio Bernandi with Intermonte. Please, sir, go ahead.
Good morning to all of you, and thanks for having this conference call.
Is there a time horizon where your regulatory ratios, capital ratios, would go from the holding to the group? If I'm not mistaken, it's about 120 basis points of difference. The second question, as you underlined, there are many M&A deals that are progressing somehow. Net of organic growth, are you also interested in looking into the option of buying maybe those branches that could be disposed of for reasons of overlapping or whatever reasons? Sorry, but the sound was very poor.
As to the first question, Mr. Cucchi will take the answer.
Good morning to all of you. As to excluding the holding from the regulatory framework or scope, we have to wait for CRD IV to be enforced by the different member states, and that will be at the beginning of 2026. We will have greater clarity on that, on what to do about that.
Maybe possibly then I'll look for the exclusion. It's still an open issue.
As to the question on M&A and branches, generally speaking, I can say that we are a group focusing on growth. We also look into external growth opportunities, M&A opportunities. We are fully flexible, thanks to our business models, to look into opportunities for vertical integration. In this case, it would be deals with a high priority, but they have to be accurate and they have to create value. They should not in any way impair our strengths, that is to the quality of our assets and the soundness of our capital position. The consolidation theme, of course, poses the question of size for banks. We know we can take advantage of these moments in time to acquire market shares that are naturally going to be dispersed through M&A deals.
We think that growth by external lines could be an enabling factor for the future, also to leverage our business model and benefit from the generation of economies of scale to further increase our profitability and our market positioning. Here I come to your second question. The acquisition of branches or business lines is one of the possible ways to increase our total business. Our size, generally speaking, could also be increased through that. Recently we've looked into the UCG one. It could have been an opportunity. Of course, for this type of business unit, we have to consider its scale and size, where these branches are located. As we've said more than once, should there be opportunities, we are there ready to look into them, not just as far as branches are concerned, but other types of deals as well. For us, it's always irremarkable.
Let me reiterate it once again. We do not want to jeopardize our strengths, that is to say asset quality and capital soundness. At the same time, we want to unfold synergies to generate value for our shareholders. Thank you very much.
Another question. In the light of what you told us about capital ratios and your willingness to grow externally as well. When it comes to payout ratio, are we looking at the historical ones, expecting improvement, one-off improvements, or for the current year, or is it, as always, business as usual?
As far as dividends are concerned, we've already said that more than once. Dividends are to be a resolved point by the Board of Directors. Last year, our Board of Directors showed a certain propensity towards resorting to dividend payout.
Even though we did not get the peaks as last year, the profitability this year is going to be sizable. That could lead to a possible taking into account our remuneration that is at least in line with that of 2024. Let me reiterate that this is a matter for the Board to resolve upon. They will deep dive into this at year-end when we will have more details about the results that we will have achieved in 2025.
Thank you so much for your answers. Very well.
Mr. Morellini, there are no more questions in the queue for the time being. I'll give you the floor back for conclusion.
I would like to thank all of you for joining us for the questions that you asked and wish you a very good summer. Thank you very much.
This is the course collaborator. The conference call has come to an end. You may disconnect your phones. Thank you very much.