Good afternoon, ladies and gentlemen, and welcome to the Enteza Sanpaolo Third Quarter 2020 Results Call hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Keith, and I will be your coordinator for today's conference. At the end of the presentation, there will be a Q and A session. Today's conference is being recorded.
At this time, I would like to hand the call over to Mr. Carlo Messina. Sir, you may begin.
Thank you. Good afternoon, ladies and gentlemen, and welcome to our 9 month results conference call. This is Carlo Messina, Chief Executive, and I'm on this call together with Stefano del Punta, CFO Marco Del Frate and Andrea Tamanini, Investor Relations. Today, our team and all of you are joining this call from places that are affected by the 2nd wave of COVID. Before I get into our results, I want to express my sorrow for everyone suffering or who has lost someone because of this virus.
Please stay safe. As a group, we responded quickly to the emergency, and we are continuing to take concrete actions to care for our people and our customers, supporting families and companies, being an engine for sustainable and Inclusive Growth and Ensuring Business Continuity. ISP entered the pandemic in the best possible condition. Our robust and profitable business model is out delivered even under stress from pandemic. We delivered an excellent 1st 9 months with resilient profitability and even greater efficiency.
We further strengthened our balance sheet, improving our rock solid capital position and deleveraging NPLs to the lowest level since 2008. And then NPL inflows were the lowest ever. In just 9 months, we have already exceeded our full year commitment to deliver a net income of at least EUR 3,000,000,000 in 2020. As you know, our rock solid capital position is something that we are very proud of. In Q3, we delivered 100 basis points of internal capital generation, more than offsetting the impact of The integration of UBI.
This means that we are definitely one of the most resilient and best positioned European banks to return to paying dividends, assuming, of course, that ECB allows it. The integration with Dube is well underway, and we have also used this 1st month to explore how we can deliver synergies in the most effective way, increasing and anticipating the EUR 700,000,000 in 2024 that we originally assumed. Total synergies will definitely be higher, also leveraging on the higher than expected negative goodwill. These 1st months have also given us the opportunity to appreciate The high professional quality of UBI's people. I have also and always called ISP, a delivery machine.
This remains true and we are ready to succeed in the future. Now let's dive into our presentation for the details. Slide number 1. Looking at the 1st 9 months, we delivered €3,100,000,000 net income. If you include the estimate EUR 3,300,000,000 of negative goodwill from the combination with UBibanca and €39,000,000 from the 1st 2 months of UBI contribution, stated net income jumps to €6,400,000,000 Let me highlight that in Q4, we will decide How to allocate the negative goodwill to offset integration costs, improve future efficiency and to accelerate NPL deleveraging so that we enter 2021 as an even stronger bank and with a tailwind.
We do not consider UBibanca's contribution affected by the annual We already saw strong improvements in commercial performance in October. Our revenues benefited from strong growth in net interest income and commissions in Q3. Operating costs were down almost 4%, taking cost income to 50.2%, one of the best ratios in Europe. Cost of risk, excluding the EUR 1,300,000,000 in provisions for future COVID impacts is at 44 basis points. We further deleveraged EUR 1,000,000,000 of NPL in Q3 and saw the lowest ever gross NPL inflows coupled with increased coverage that will be further boosted in Q1 using part of the negative Goodwill.
Our fully common equity ratio is 15.2%. When excluding the impact from the combination with UBibanca, common equity ratio improved by 100 basis points in Q3. More than ever, I want to thank our people for their hard work in achieving these excellent results in this very difficult environment. Slide number 2. Thanks to our solid fundamentals built over time, we are fully equipped for a very challenging environment.
The common equity ratio is well above regulatory requirements. We have deleveraged more than €36,000,000,000 of NPLs always at no cost to shareholders. We have distinctive internal capabilities for proactive credit management, coupled with our strategic partnership with leading industrial players for the late stage. We prudently set aside EUR 1,300,000,000 in provisions to face possible future COVID-nineteen impacts. And we are an efficient wealth management and protection company with more than EUR 1,000,000,000,000 in customer financial assets.
We have successfully evolved towards a light distribution model. Our client Appreciate our strong digital proposition. We already have around 6,000,000 clients using our app, recognized as one of the best in Europe and 12,000,000 multichannel clients, including Ubi Banca. Slide number 3. For all this reason, I've just mentioned, INTEZA Sanpaolo is well equipped To succeed in the future, we have solid fundamentals and we are very well positioned to continue delivering best in class profitability, maintain a solid capital position, also taking into account The potential cash distribution from reserves in light of the 2019 Net income allocated to reserves subject to ECB approval and deliver a high Payout ratio.
UBibanca is now an important part of this future and the combination is well underway and we are confident we will achieve significant and higher than expected synergies with no social cost and very low execution risk. We will present the new business plan by the end of 2021 as soon as the macroeconomic scenario becomes clearer. Slide number 4, Italy. The Italian economy remains resilient and can count on strong fundamentals, baked by strong government intervention and significant EU financial support. In particular, the wealth of Italian households stands at €10,700,000,000,000 and the amount of debt held by Italian families remains very low.
Italian companies have stronger financial structures than pre-two 1000 and 8 crisis levels, and they are more profitable and better capitalized as witnessed by the lowest NPL inflows ever. The banking system is by far stronger than in the previous crisis with higher capital, Less NPL stock, higher efficiency and more diversified revenues and a lot of liquidity provided by the ECB at 15% in the 3rd quarter, while industrial production is expected to rebound by as much as 30% versus the previous quarter. Slide 6. Let's take a look at the points of strength that will sustain us in the challenging phase. In recent years, we have more than halved the NPL stock while increasing the coverage ratio that will grow significantly in Q4, thanks to additional provision to accelerate the leveraging using part of the higher than expected negative goodwill.
And let me say that in the coming quarters, we will deliver an impressive additional deleveraging at no cost to shareholders. We have increased our rock solid capital base, and we achieved this through internal capital management, which in just 1 quarter more than offset The impact of the combination with UBibanca, while also paying EUR 13,400,000,000 in cash dividends over the past 6 years. We are very well positioned to pay high and sustainable dividends. Overall, we have a very resilient business model with 56% of our gross income coming from Wealth Management and Protection Activities. Slide number 7.
We are far better equipped than our peers to tackle the new environment because we have a best in class risk profile. We have one of the highest capital buffers in Europe and we are one of the Costincome Leaders in Europe. Slide number 8. We delivered the 2nd best 9 month results of the past 11 years. And despite the challenging environment, we have already achieved our net income target for 2020.
Slide number 9. Leveraging our top performing delivery machine, we immediately responded to the COVID emergency, and we are continuing to do so with a complete set of actions to care for our people and customers, Support the real economy and society and ensure business continuity. Slide 10 is a key priority. We ensured safe working conditions for our people and business continuity for our customers through a large and effective set of actions. I'm also proud to highlight that in the 1st 9 months, we hired close to 600 people and 840 including Ubi Bank.
Slide 11. We doubled down on our long standing commitment to support society and the real economy, helping families and organization impacted by the COVID emergency. In particular, we were the first in Italy to allow The suspension of existing mortgage and loans installment. And so far, we have approved the suspension of payments for EUR 66,000,000,000 of credit, both for families and businesses, including Ubi Banca, This increased to more than €80,000,000,000 As of mid October, the stock of loans under moratorium is €37,000,000,000 so stock is €37,000,000,000 48,000,000 including UBI. At the same time, we were the first in Italy to sign the collaboration protocol with Sache, And we have already granted EUR 8,000,000,000 guaranteed by Sache and EUR 16,000,000,000 with a state guarantee, €19,000,000,000 when including UBI.
Slide 12. As You can see our strong digital capabilities have been key to guaranteeing business continuity. Slide number 13. The COVID emergency is shaping new trends and we are ready to leverage our Competitive advantages. We are set to benefit from the growing demand for health, wealth and business protection by leveraging our leading position in insurance as well in wealth management.
We will take full benefit From our strong internal capabilities for proactive credit management and from our strategic Partnership with leading industrial players for the late stage. The COVID emergency is rapidly shifting customer behavior towards digital channels, and we are very well positioned to serve them, thanks to our best in class IT infrastructure and digital channel value proposition. At the same time, we are fully equipped to accelerate the digitalization of our employees' activities. Furthermore, society will need significant support and we will play our role confirming our commitment in ESG. Slide number 15.
The macro context in the 1st 9 months The year was clearly defined by the COVID outbreak despite a strong recovery in Q3. In this difficult environment, We delivered excellent results. Slide number 16. On this slide, you can see the highlights of our Strong performance in the 1st 9 months despite a 3 month national lockdown. Let me give you some color on the following pages.
Slide 17. In the 1st 9 months, we continue to improve across all key indicators. In particular, net income was 20% higher than last year when excluding the COVID provisions. We deleveraged almost €3,000,000,000 of NPL on a yearly basis and our common equity ratio improved by 170 basis points on a yearly basis after deducting EUR2.3 billion for accrued dividends and by 100 basis points considering the impact of the combination with Ubi Banca. Slide number 18.
Our excellent performance allows us to create sustainable benefits for all our stakeholders. In particular, in the 1st 9 months, Families and businesses received more than €65,000,000,000 in medium long term lending, of which almost EUR 6,000,000,000 in Italy. Slide number 19. Indeed, ISP is strongly committed to its role as an engine for sustainable and inclusive growth. You can go through the details of the next page, But for the sake of time, let's now move to Slide 21.
As a result of our efforts, we are the only Italian bank rated at the top of the main sustainability rankings, And we are very proud of this achievement. Slide 22. Despite a challenging environment in these 9 months with high market volatility in the country in lock Down from March to June, we delivered excellent performance driven by high quality earnings, Achieving our €3,000,000,000 net income target for this year, 1 quarter in advance. Net interest income grew more than 1% compared to last year, insurance income up 9%, driven by solid growth In non motor P and C revenues, up 66% when including the component booked in commissions. We have continued to be very effective at managing costs with personnel expenses down 3.2% and administrative expenses down 7.7%.
Depreciation is up as we keep investing for growth. Cost of risk, excluding the EUR 1,300,000,000 provisions for future COVID impact is down to 44 basis points. We use part of the Nexi capital gain as a buffer to offset provisions for future COVID impacts. Net income is €3,100,000,000 €4,000,000,000 when excluding the provision for future COVID impacts And reaches EUR 4,400,000,000 while also excluding costs concerning the banking industry. Slide number 23.
Q3 has been very strong for net interest income and commission, which increased about 4% and 7%, respectively, compared to the previous quarter. In comparison with the same quarter of last year, net interest were down 5.3 percent with administrative expenses down double digit. Net income is €800,000,000 When excluding the provisions for future COVID impact, it reaches almost EUR 1,000,000,000 when also excluding costs concerning to the banking industry. Slide 24. In this slide, you can see that on a quarterly basis, net interest income increased by 3.9%, mainly due to positive dynamics of spread that benefited from better condition of TLTRO 3.
On a yearly basis, net interest income would have increased by 3%, excluding the impact of Accelerated NPL deleveraging. It's 9 months in retail and corporate deposits, which impacts net interest income in the short term, continue to work hard to improve The aim of delivering a positive EVA strategy. Slide 25. Customer financial assets increased by €20,000,000,000 in Q3 to almost €1,000,000,000,000 Also thanks to a €6,000,000,000 increase in assets under management and reached €1,200,000,000,000 when excluding when including UBE. Assets under management, the net inflows were positive by more than $11,000,000,000 to the past 12 months with an acceleration in Q3.
In these 9 months, Corporate and retail deposits increased by €31,000,000,000 The increase in corporate deposits shows once more the resilience of Italian companies. Slide number 26. We continue to be very effective at managing costs. The main sources of savings were headcount reduction, real estate optimization, Legal entity reduction and the decrease in other administrative costs. We had the lowest ever administrative costs.
We reduced headcount by about 3,000 on a yearly basis with room for further cost reduction. In fact, in September, 3 months ahead of schedule, we signed an agreement with Levo Union for at least 5,000 voluntary exits and up to 2,500 new hires by 2023. On top of what I have just said, the combination with UBI will create further significant cost synergies also leveraging on the higher than expected negative goodwill. Slide number 27. We are proud to have a best Class cost income ratio and this chart illustrates our leading position in Europe.
I also want to highlight that the only 2 players who performed better than us in this ranking have significant operations in geographical areas with high margins that reduce their cost income ratio. Slide 28. NPL stock has continued to decline sharply with 20 quarters of continuous deleveraging. We deleveraged EUR 2,700,000,000 in the 9 months, of which EUR 1,000,000,000 in Q3 And we have almost reached 1 year in advance 100 percent of the target deleveraging of the 20 18, 2021 business plan. So 100% of the target deleveraging of our business plan.
The gross NPL ratio is down by more than 10 percentage points since the peak of September 2015 to 6.9%, equivalent to less than 6% by EBA criteria And the net NPL ratio decreased to 3.3%. We recorded the lowest ever 9 months and quarterly gross In Q4, we will use part of the higher than expected estimate negative goodwill for additional provision to increase coverage and accelerate deleveraging. Adding EUR 1,800,000,000 of additional provisions To the September's figures, the coverage would have increased to more than 57% and NPL net ratio would have decreased to 3%. And we have a further buffer up to BRL1.8 billion, Thanks to the higher negative goodwill. In the coming quarters, you will see further Impressive deleveraging at no cost to shareholders.
Slide 29. As you can see in this slide, loan loss provisions declined by 3.9%, excluding provisions for future COVID impact. As a result, the annualized cost of risk, Excluding provision for future COVID impact is now down to 44 basis points. Slide number 30. Our fully loaded common equity ratio is 15.2 percent equal to EUR 22,000,000,000 of Excess Capital.
In the 3rd quarter, we internally generated 100 basis points that more than offsets the impact from the combination of Ubi Banca. Our capital buffer versus regulatory requirements is 660 basis points, well above our peers and these figures also includes A EUR 2,300,000,000 deduction for the 2020 dividends accrued in the 9 months. Our fully phased in common equity ratio is at 14%. Slide number 31, Our best in class capital buffer versus regulatory requirements increased by 30 basis points in Q3 despite the impact of the combination with UBibanca. Slide 32.
When it comes to capital strengths, ISP continues to be a European leader. In addition, we continue to apply a deliberate Strategy of low leverage with a leverage ratio of 6.6%, the best in Europe. Slide 33. We have a best in class risk profile in terms of ISP also enjoys a strong liquidity position with both the liquidity coverage ratio and the net stable funding ratio well above 100%. More than BRL 100,000,000,000 in excess mix, BRL 208,000,000 in excess of 2 0.8 liquid assets, including U.
Before moving to the next section, here you can see the reconciliation between the income statements, including and excluding the effects from the combination with UBICA. As I've already said, the contribution of UB to the ISP Group over the past 2 months is not considered to be representative of its profitability looking ahead, and it was impacted by the annual contribution to the deposit guarantee scheme. In the following slides, we provide an update on the most positive events of our 9 months, the combination with Ubi Banca. Slide 36. As you can see from this slide, the integration of Ubibanka is well underway with some actions even ahead of schedule.
We have already completed a large number of governance and business So we signed the Labo union agreement 3 months in advance for at least 5,000 voluntary exit and up to 2,500 hires with no social costs. We have almost completed the alignment of UBibanca pricing policies YSP policies for the retail business, and we have almost completed the alignment of the credit policies. And we completed The Ubi Banca Life, Non Life and Health product catalog analysis, including comparison with ISP Products. Slide number 37. We now expect significant synergies From the combination with Ubi Bank, much higher than we could foresee in June.
Our asset ID analysis showed expected pretax synergies of about EUR 700,000,000 per year, of which 662 achievable in 2023. After an initial Joint analysis, we now consider these estimates as a floor both on the revenue and cost side. Once we finalize the analysis and after allocating the negative goodwill to offset integration costs, improve efficiency and to accelerate the leveraging, we will be able to communicate updated figures on synergies. Slide number 38. As you can see from this slide, the integration is well underway.
Missing from this timetable are the opportunities ISP and Dubis people will have for sharing ideas over the coming weeks months. ISP is a delivery machine and quarter after quarter, We meet our goals and our commitment, and we will continue to update you on the timetable for the integration. Slide number 14. We are a leading bank in Europe when it comes to excess capital, Low leverage and strong liquidity. We have already provisioned EUR1.3 billion in the 1st 9 months to tackle We have continued deleveraging NPL to a low stock with robust coverage.
We have a well diversified and resilient business model, and we have one of the best cost income ratios in Europe. We delivered excellent 9 months performance with 2nd best 9 months net income since 2008, Already achieving the €3,000,000,000 minimum net income target for 2020. Strong recovery in net interest income and commissions in Q3, strong cost reduction, Lowest ever 9 months and quarterly gross NPL inflow and significant strengthening of the capital position. For these reasons, we are very well positioned to continue delivering For next year, without considering the combination with Ubi Bank, minimum €5,000,000,000 net income Starting in 2022, including the benefits from the combination with Ubi Banca, Maintain a solid capital position, deliver a payout ratio of 75% in 2020 and 70% in 2021. On top of the cash dividends from 2020 net income, We will seek ECB approval for a cash distribution to shareholders from reserves in light of the 2019 net income allocated to reserves.
Today, we reviewed an outstanding set of results, all the more impressive Considering the COVID backdrop, I can never thank our people enough for making all this Possible. So thank you very much to my people. In Q4, we will use the higher than forecasted negative goodwill to make the bank even stronger for 2021 and the following years. By the end of 2021, we will provide the market with a detailed plan for the new combined group as soon as the macroeconomic scenario becomes clearer. Thank you for your time and attention, and I'm now happy to answer your questions.
And we'll now take our first question from Alberto Cordray from Bank of America. Please go ahead.
Thank you very much. My first question is on the bed wheel. I see that you booked some €3,200,000,000 which is much higher than what I remember. I think Your usual guidance that you gave to the market was around €1,200,000,000 of additional coverage plus €900,000,000 of restructuring cost. So this number is €1,200,000,000 €1,300,000,000 Post tax or pretax, it should be €1,800,000,000 So this is A lot more.
So the question is, how do you plan to use this? Are you planning to increase the coverage even more or Taking additional restructuring charges so that you can boost even more your synergy guidance. My second question is on the Common Equity Tier 1. Stand alone, we saw a very strong jump in your capital. So can you lead us through how did you achieve this result?
We saw this particularly strong boost. And then again with respect to my previous question, the bed will have yet to be allocated, which will have presumably Negative capital impact, but then you're getting rid of €15,000,000,000 of risk weighted asset when you sell the branches to Bip, so net net, what we should expect is a further impact from the Ubi deal On top of the negative 70 bps that we saw in the quarter and which were fully absorbed by your big Jump in capital standalone. And then my final question is Core revenues is a very strong showing in the quarter. However, trading gains as well as insurance income were relatively small if we compare Q3 to Q1 or Q2. So I guess that you have in mind the delivery of the target of €3,000,000,000 that you promised to the market.
And therefore, you didn't need to book Any unrealized capital gain. So I just wanted to know if what I'm saying is correct, If my interpretation is the right one. And in case it is, if you can roughly give us an idea of the amount of unrealized capital gains that you can carry forward into next year. Thank you.
Thank you, Alberto. So a number of questions are really related to bed will and excess capital position because it is true that We are in a unique position. We have this something we can call magic shield in order to be sure to avoid any kind of negative deriving from macroeconomic condition due to second wave of pandemic. And we are in a unique position to reinforce profitability for 2021. We are the unique Bank in Europe that has the opportunities to have another equivalent first time adoption in order to reinforce the profitability for the future.
And having said that, the extra negative Goodwill, in my expectation then, obviously, we will have to check and the final figures at the end of the year. My expectation should be used to, 1st of all, to accelerate deleveraging on nonperforming loans, To realize extra coverage and to allow to accelerate NPL deleveraging in 2021 of this Negative, Ben. We'll then at the same time, if there are possibility to increase also Integration charges related to cost side and in order to improve efficiency For the group, I will do all my best to realize that through the usage of The negative bed will. So this to tell you at the end of the story, The increase in profitability in 2021 could be massive through the usage of a significant portion Of these EUR 1,200,000,000 net and EUR 1,800,000,000 gross of Excess negative goodwill. And we can use this just because The possibility to manage also from one side The reduction of spread has created condition to have 25 basis points Improvement in our common equity ratio.
But at the same time, we decided to manage in the right way The management of the collateral, the accuracy process and also the guarantee scheme deriving That are benefiting from the guarantee from the state and at the same time also high risk company that are benefiting Their attitude is due to the fact that this kind of funding is really Not expensive, they are also embossing some portion of their exposure and these are bringing to a structural shift in terms of risk weighted assets in our portfolio. This is a part of this improvement in the common equity ratio, but the combination of Reduction in spread, public guarantee, accuracy process, increasing collateral, a portion For 10 basis points of some models that we received in terms of approval and the improvement In risk weighted assets related to market risk through optimization of exposure in the different countries can put us in the unique condition to have such an excess capital that we can manage to use The excess net bed will come in from the acquisition of UBI in order to reinforce the profitability for the future. Looking at your third questions on the dynamics Of the impact deriving from the acquisition of UBI, we have now in this quarter bed will and net bed will is also Net of the negative impact coming from the devaluation of net equity related to branch disposal, But at the same time, we have in the risk weighted assets, the risk weighted assets of the branches that will be sold to beeperbancas.
So we have only the negative and not the positive in these figures. At the same time, we have not the usage for the integration charges. So at the end, net net, We can have another 20 basis points of impacts coming from the UBI acquisition. A portion is a positive impact coming from the disposal of branches and the other one is negative coming from the usage of the bed wheel for the integration charges. Timing could be different because at the end of the year, we will have the usage of the integration charges, so it would be negative on the common equity.
And at the end of March, we will have positive the recovery in terms of reduction of risk weighted assets related to the disposal of The beeper of UBI branches to beeper. So this means that today, we are in a range of 7, 60 Basis points, 70 basis points, the impact of the UBI acquisition, then we can increase by another 20 basis points net. That could lead at the end at an impact roughly in the range of 80 basis points. That's for the UBI acquisition. Looking at our For revenues, we have already reached EUR 3,000,000,000.
So It is clear that there was no need to accelerate disposal of portfolio in positive position during September and also In the insurance business, they made such a good job during the 1st semester with Such an incredible growth in terms of insurance business that there was no need to accelerate also In this quarter, the amount of unrealized capital gain is really significant on our portfolio. And Our expectation is in case of need to use in 2021. We will see what
This is brilliant. Many thanks. Thank you very much.
Thank you, Ben. Bye.
And we'll now take our next question from Britta Schmidt of Autonomous Research.
Yes. Hi there. Can you hear me?
Yes.
Hello. I just assume that you can yes, okay, Great.
Yes, I can hear you. Yes.
Okay, perfect. The first one is on the evaluation results in equity. Maybe you can walk us through the positive moves that we've seen there And perhaps also explain to us whether there's been any significant changes in capital deductions in this quarter to address the capital bid. Secondly, on the net interest income, could you tell us what the benefit from TLTRO3 was that you booked this quarter compared to Q2 and how much you accrue. And then thirdly, maybe you can just give us an idea as to what regulatory headwinds, if any, we should expect for the combined Enteza OB entity over the next couple of quarters?
Thank you.
So looking at the reserve, we have no significant Change in the evaluation reserves, apart from The revaluation in terms of reduction of BTP and also a reclassification of The Nexi participation in our book that now is in this portfolio. So there are no significant movement in this area. Looking at TRO, the benefit could be in the range of €80,000,000 in this quarter. And looking at the regulatory headwinds, I have to tell you that I do not See significant movements. There could be some benefit probably in the last quarter, Some minor benefit in the last quarter and some negative Of the EBA absorption, we still have 35 basis points Within the end of 2021, but no significant other impact in our knowledge, the best of knowledge today.
And we will now take our next question from Andrea Vergiculone from Exane.
Good afternoon. I've got three questions. The first one is on the dividendpayout policy For 2020 earnings, I'm aware it's all up in the air. It depends on the ECB. However, you do have a management guidance, Which is a 75% payout ratio.
I just wanted to clarify the base for it. So it used to be 75% of INTEZAS Sanpaolo stand alone Net income or at least that's how I understood the guidance. Now in the call, You mentioned several times that you plan, if at all possible, to post additional, Let's call them one off charges in Q4 to boost profitability in future years, Primarily on the coverage side, on the NPL coverage side. Now this cannot all be On the UB standalone book, it would just be too big, at least that's my opinion. If a portion of these The TRINA charges is assigned to the Intesa book.
From a dividend point
of view, Will you strip those out in terms of how you calculate 75% or not? The second question is on the guidance for 2021 net Profit sorry, 2022 net profit of around 5,000,000,000 Shall we assume that in there, there's no material impact from positive one offs Or implicitly, you have factored in something? And the final question is on the early retirement That has already started. Can you share with us, I don't know if you can, if Enough people have already signed up to be very close or above the 5,000 targets. And if there is a cap above which you would not go even if more people sign up to it?
Thank
you. So I will start from the last one. We have Already exceeded by far the 5,000 people. Then we have to enter into a process of evaluation of real requirements because At the end, you need absolutely to check what are the declared conditions of The people working within the organization, but we are well ahead our 5,000 indication We have time until 9th November to have the final applications. Then we have to check if all of them have the real requirements.
And then also we have to check what is The real implication of a different number that can leave the organization. So I want to maintain In approach of real better understanding of the situation, Also considering the very positive approach that we had with trade unions And I thank you again, trade unions for the very positive approach that they demonstrated during This agreement, but also during all the life of my being CEO of Vintesa Sanpaolo. So we have to look at the absolutely sure to reach So because it is all voluntary and that's also positive news from this side. And then the reason why I can tell you that I'm really positive on the implication of The situation of the possible agreement on these people. Looking at the dividends And the 75% and the usage of Bedwheel, not bedwheel and so on.
I think that there is a possibility to use Do not forget that we have a very good coverage at Itea Sanpaolo because 54% is a very good coverage. We can improve the total coverage at group level Through the usage of net bed will also on the remaining portion of non performing loans of UBI. And then we can also use for generic provisions. So there are a lot of room of usage of bed wheel without affecting the profitability of Intesa Sao Paulo. My expectation is that We will be in a position at the end of reinforcing the profitability for the future and So accelerating the NPL deleveraging process because I'm really Bullish on this point.
So I think that we can do a lot of work in terms of reduction both of Intesa Sanpaolo and UBI non performing loans, but I'm not worried at all at the possibility of giving Very good net income, usable for the payment of dividend and so to maintain my shareholders happy as usual apart from The limitation that I received from I and all the other European banks from the ECB. So believe me, I have clear view on the perspective of shareholders and what could be The real interest of shareholders if ECB will change the attitude on dividend. Looking at the EUR 5,000,000,000 EUR 5,000,000,000 has no Significant one off component. So it is profitability deriving from Intesa Sanpaolo, UBI and Synergies. So that's the majority of the component of this €5,000,000,000 As I told at the beginning of this conference, during 2021, we will work on the business plan And I hope to be in a condition to have a clear view on scenario that can allow me also to give The indication for the future trends of profitability of the group.
But the structural condition of INTesa Sanpaolo, the business model, the fact that we have increasing Wealth management each day in our figures, we have such A very good position in terms of coverage and also these unique conditions of bed wheel Can allow me to tell that I'm pretty confident on the profitability perspectives of the group And at the end also to the possibility to give significant dividends to my shareholders, maintaining A strong excess capital in our organization.
Yes. Thank you very much.
Thank you.
Our next question comes from Domenico Santoro of HSBC. Please go ahead.
Hi, thanks for the presentation. Good afternoon. Actually, many questions Has been already answered, but I have more curiosity. First of all, on the capital, I'm just wondering whether there is any Intention to write up DTAs related to Ubi, which probably, I mean, in a group context now are much smaller, but just wonder whether You can get that capital benefit. 2nd, on the synergies, the realignment of the pricing in retail and also the ATM withdrawal fees.
I'm just wondering, probably this could emerge already as an impact on revenues in Q4 and was wondering whether they are relevant and whether they are positive or negative? 2nd, on cost synergies instead. I see that you will integrate the IT system relatively quicker in 2021. So I just wonder whether you can give us an idea of the phasing of cost synergies and whether at the group level, We should expect cost significantly down already in 2021. And then a question on the dividend.
I know that 2021 is still uncertain, but given now that you have much more capital, I was Just wondering if any preliminary talks have been already had with the regulator regarding to 2019 on which you Seems quite confident. Thank you.
So I will start from the last one because dividend, as you It's my favorite topic. The points of the ECB and SSM is clear. They want to wait for the new scenario of ECB that should be released for the better of my understanding at the beginning of December. So until the mid December, it's difficult to have some inside information Different from the facts that they need to have more time to understand the situation. It is at the end, on the other side, it is true that we have a unique excess capital position.
We have, in my view, a very good risk profile in the combination of all different Risk asset class. So I hope that they can enter into A positive view on our perspective of paying dividends not only for 2020, but also 2019. But for the time being, Their position is absolutely to remain on their point on the dividend band. So there's no opening In any case, from this side, but they want to wait for mid December. At the time, we will have More clarity and then we will have all the possibility to make decision having in mind the constraints coming from the ECB, but I cannot continue to tell that Intesa Sanpaolo is in a unique position and excess capital, Especially if we decide to use a further portion of the bed wheel in order to reduce nonperforming loans, It is absolutely useless for a bank like Intesa Sanpaolo.
So that's my position on dividends. On cost synergies and IT cost synergies, we need to have some more quarters, some more, sorry, months, so at the end of December to have the real split and the impact of synergies the real synergies, not the theoretical that we made in the plan for 2021. So probably in the next conference call, I will be in a position to give you all detail on different Cost in 2021 should absolutely be in the trend of reduction. So I'm not ready to approve a budget that can include an increase in cost for 2021. So it is unbelievable from my side.
So that's for sure a clear indication to hold the top management of the combined group. No possibility to have an increase in the cost base apart from extraordinary items that for the time being I'm not in a position To know to understand, but trends should be in reduction starting from 2021. Synergies The revenues, the October months in which there has been The first point of coordination between Intesa Sanpaolo and UB has been a very positive month. So The team is working both in Itesa Sanpaolo and Ubi in a very good way. So From my perspective, I'm very satisfied.
And also looking at the retail net There is a clear acceleration in terms of performance from the UBI Performance, as I told in different occasion, the management team and the people within UBI Our best in class, so the combination with Intesa Sanpaolo would also lead to very positive results, Especially in a sector like the back of the territory, that is the area in which it is possible to exploit The real synergies through the combination of the 2 groups. But If we look at capital on DTA of UBI, we will have to better understand the position also related to the extra Provisions that we can create through the usage of the bed will play and then the Final view on the total amount of DTA that we will create both Already in the figures of UBI and the other one coming from the Bagri. So also from this point of view, we have to wait.
We'll now take our next question from Antonio Reel from Morgan Stanley. Please go ahead.
Hi, good afternoon. Thank you for taking my questions. I just have one follow-up on dividend and two more questions. The first one on the dividends, I think you've spelled out your intentions quite clearly. But what do you expect you'll be able to pay realistically?
Or in other words, You said Entesa is best positioned to resume dividend payment. What criteria do you think the ECB will use to assess the bank's distribution capacity? And how do you think INTEZA will stack up against those criteria? That's the first question. Secondly, on the NII outlook for next Yes, please.
We've seen the arrival drop further in Q4, and I would like to hear from you the outlook for 2021. Maybe also a good opportunity to update us on how you see the sector copping up in terms of lending spreads and if you've seen any changes in the competitive landscape since You've announced Ubi. And lastly, a question on moratorium notes. I understand, obviously, you're making assumptions when it comes to cost of risk. What do you assume?
What percentage of the €48,000,000,000 moratori you see could default? Or any early evidence you can share on payment behaviors from customers so far?
Okay. So on dividends, my point on the So it is clear that the new the second wave of the pandemic situation Probably created more point of attention from the supervisor side. So It is clear. So it's a job of the supervisor to look at a very conservative scenario and to be sure To have all the banking sector in good shape in order to face possible trends coming from Real economy deriving from the pandemic situation. What It is needed.
It is also a clear understanding on the situation of companies in the different countries. I can talk for the Italian situation. In Italy, The situation of the real economy and especially of the companies Operating in sectors different from tourism sectors that can be affected In a way from in a significant way from the pandemic situation, The shape of the companies is not so negative and the evidence is that the amount of Guaranteed loans and the moratoria has been used as a backup facilities, often reimbursing other source of funding and the other portion Deposited in the deposits with banks. So we had in the quarter an increase of more than €10,000,000,000 giving at the same time a number of guaranteed loans In 6 months of €24,000,000,000 So it is a clear evidence of a situation Companies that are only worried about uncertainty, not about what could be the negative situation deriving From the is a short term situation, not a medium, long term situation. The real point of attention should be in different sectors.
And I'm referring now to your Moratoria question, so I can give you the point of view of Intesa Sanpaolo because we had an amount of expiring moratoria in the last month for an amount of €6,000,000,000 And out of this €6,000,000,000 we had only €200,000,000 in past due, so classified in past due. So we are talking about Numbers that in all analysis that we are doing also in high risk sector that are more or less 10% of The €37,000,000,000 of stock of moratoria that we have, so concentrated in the sector that can be more affected. In any case, in any worst case of the expiring moratorium, we are talking about figures that are Not in such a dimension to say that we can enter into really a dangerous situation for the banking sector, Especially in our view, in Italian situation, also looking at what can happen if The lockdowns will be for what we understood from the next decision from the government. I do not see such a dramatic situation that can happen on the banking sector. So For sure, there will be no performing loans.
We have coverage, we have reserves, we have excess capital, we have ability to manage. So we are not A sector in which we will remain just wait the negative coming from the market. So My perception is that in the right way, they want to better understand what would be the dynamic of the pandemic situation, what Production and construction will remain open in all the different countries. So also the significant impact on real economy, It will not be there. At the end, if you look at the situation in Italy, just the rebound That we had in the Q3 is the clear evidence that if you have a sector coming from companies in which you have A lot of points of strength, rebound is there.
So you can have a negative, but you will have also rebound. So on average, You will lose, but it is not in such a position to say that you cannot pay dividends forever. So probably they will adjust Their position on 2020, 2021, it could be easier. On 2019, it could be difficult. But in any case, we think that maintaining a very safe and sound capital position, we can I'll try to ask also for solution related to dividend 2019.
Then if ECB We'll make a clear statement, no possibility to pay dividends for 2019. And for 20 We will see in the next month, okay, we will remain one of the strongest bank and we will remain in any case the possibility to be one of the strongest banks to pay dividend in the future. Looking at net interest income, our perspective is that on the volume side, we can increase contribution In 2021, on spread, believe me, there is no such competition Today, not so strong to say that you can have some limiting profitability. The real point in the last part of this year is of this year are the benefit coming From TSRO 3 compensating the markdown reduction that we had in increasing deposits. But on the other side, my view on 2021 is positive.
We need to have the budget completed because We will have this information at the end of December. And also, we will have to discuss on a bottom up basis with the management team of the group. So on this point, I will give you more precise information in the next call For the results of December.
Very useful color. Thank you.
Thank you.
We will now take our next question from Adrian Cighi from Credit Suisse.
Hi, there. Thank you for taking my question. Lots of questions have been answered by maybe one remaining question on your Business plan, which you expect to present in late 2021. The current business plan was targeting more than 14% RoTE. And in the current low interest rate environment, do you see an aspirational RoTE for the Antesa sort of group, given the business mix that's more geared towards wealth management and insurance, is the previous 14% still realistic Or is that sort of out of bounds?
Thank
you. So I don't want to enter into specific numbers in terms of RoTE. And I prefer to talk about what could be the different drivers in the different areas in which we can operate. So you I have a view and if you can extrapolate your position. My perception is that we can deliver extraordinary growth in terms of return on tangible equity.
That's my clear perception. So starting point is this. But on Wealth Management and Protection, Making a switch between wealth management and protection for protection, Especially after the acquisition of Airbn, the trend is clear and the acceleration All the branches are ready to work on these new products. And Just looking at figures, we reached EUR 300,000,000 of contribution from commission and protection moved Moving from EUR 170,000,000 in 2019, so the acceleration in this area Not exploiting all the potential of the group is massive. So the delta growth coming from this sector is really impressive.
On Wealth Management, there is a clear and strong correlation in terms of timing. So on the medium term, For sure, there will be a massive growth. In terms of timing, it's also depending on the Psychological situation of the client. So if we are in the second wave of the pandemic, You can probably have some slowdown in terms of conversion of deposits and Asset under administration, if you are in a positive note like in the Q3, you have such A massive and incredible move into wealth management product that it is easily to increase The RoTE target. So the point on 2021 is really something that We have to check also considering the impact of the psychological situation of the Italian families.
If the decision will remain the one that Should be released this evening from the government. My perception is that there could be some limited slowdown in the last part of 2020, but 2021 could be any year in which we can have Another acceleration, so it could be easy to over perform the targets in different areas related to Wealth Management.
Thank you very much.
Thank you.
And we'll now take our next question from Andrea Filtri from Mediobanca. Please go ahead.
Yes. Thank you for taking my questions. I've got 3. The first is on Moratoria to understand better. In Q3, I think that there was €11,500,000,000 moratoria due to expire, and we see a reduction by €9,000,000,000 quarter on quarter, mostly from households.
Can we assume then that 80% of clients are repaying. And what has why do you think there has been such a low usage of government guaranteed loans in Italy versus other countries. On capital, if you could just please walk us through The different components of quarter on quarter swings into CET1 ratio, there's been EUR 10,000,000,000 risk weighted asset reduction In the quarter and fairly sizable moving parts, if you could split it out for us, please. And finally, on macro, you have revised down your GDP forecasts. Are these already embedding the impact of a second lockdown?
And is the reiteration of the 2021 cost of risk guidance of 70 basis points already a reflection of the higher cleanup that you have indicated you will do on the extra bad will generated by UBI in Q4? Thank you.
So I will start from your point Correlation and the need for the usage of extra bed wheel. So the expectation related to a rebound of 5% in 2021 is Considering a limited impact deriving from the lockdown, as We understood is the preparation that should be released this evening. So our expectation is that So in light, let me call it this way, a lockdown in the sense that Lockdown in which production and construction can continue to be the driver of possible engine for growth. There could be room to have a reduction in GDP in the last quarter, but the extra generation of GDP in the 3rd quarter is a mitigant of the negative impact of The GDP reduction and at the end, the rebound in the Q1 could be in such a dimension to allow to have a roughly 5% growth in GDP in 2021. In this situation, the usage of bed will in order to guarantee the 70 basis points to be really limited in excess of what we have considered already in our plan communicated to the market.
If the kind of lockdown Could be probably much stronger than what we understood From the first indication from the government, there could be An impact in the 2nd part of the year that could be much higher. But in any case, the rebound At the beginning, Otivia could be such to leave the GDP growth to be between 3.5 5% on a yearly basis. This means that we will need a limited Usage of dead will in order to reach our target in 2021. This is just to tell you that what we are considering in terms of usage of bad will, it is not only to stabilize the amount of the cost of risk in is so called negative scenario in 2021, but we want to create condition to accelerate structural deleveraging for the group. So not only looking at the figures of dynamics of GDP in 2021.
So our view is that We have a unique opportunity to transform further, transform The quality of credit position of the group and through a massive reduction of non performing loans, we can create condition also to A sustainable reduction in terms of cost of risk. In Coming back on the point of moratoria and why some Italian companies are not so willing to take This or to take guaranteed loans. My perception is that the situation apart from the sectors that are really impacted in a very negative and tough way. So to reason sectors in which For the better of my understanding, now government want to make a quick intervention not only through debt, but also through so called Intervencia Fundo Perduto, so something that can allow them to have cash immediately. Apart from this sector, the majority of the Italian companies are just postponing investment, maintaining Liquidity on the account of bank.
So the majority of this company is going to take money only if They seem to have better condition in terms in comparison with the short term Financing that they have with the banking sector. And on the other side, if they are worried about the future, They are depositing money with the banks, but there is also a limit to deposit money. As I told you, we are in a unique position to be In such an increase of deposits, but the majority is coming from This money granted from the public through moratoria or through guaranteeing. So probably This is an evidence of a very good shape of the sector of companies, mainly Export related, but also related to internal demand in the country. Looking at the common equity Tier 1 ratio, the benefit that we have in this quarter is for a portion related to the reduction of the spread of the BTP Bund.
There is 45 basis points is that related with reduction in credit risk and a significant portion This is deriving from the switch from short term financing without guarantee in which companies are paying used to pay very high interest rate into a financing that is Cheap and so companies are deciding to have access to funding with better condition. Then in this 45 basis points, there is also a process of accuracy, recover of collateral. So there are a lot of job that we are doing from a strategic point of view because our target is to exit from this Situation of crisis with a cleanup of the risk weighting assets that are not Well managed by looking at collateral guarantee, but a significant portion is also related to this switch from short term not guaranteed into guaranteed one. So it's a structural move within the combination of resweighted assets of the group. And in my view, is also Very positive looking at the sustainability of the common equity Tier 1 ratio improvement for the future.
Our last question comes from Benjie Creeland Sanford of Jefferies. Please go ahead.
Yes, good afternoon. Most of my questions have been answered, but perhaps just one follow-up on the bad will creation in Quarter and why it was stronger than expected. I mean, should we assume that that was mainly due to write off of unrealized gains On the HealthCollect portfolio in the UB balance sheet? Or is there anything else that caused that goodwill generation to be larger than expected? Thank you.
So sorry, I didn't I lost you just 2 minutes. So if you can repeat your question, sorry, my friend.
No problem. So just on the bad will creation in the quarter.
Okay. The
reasons Why it was larger than expected? I'm just wondering, is that basically writing up unrealized gains on the Help to Collect Portfolio in the UBI balance sheet or is there any other moving parts there that drove that larger bad will generation?
Okay. Sorry. So the bed wheel A situation that is much better than our expectation is deriving mainly from A net equity that is much higher than the one that we have considered at the beginning of analysis on the net bed will on the transaction and also the reduction in terms of impact coming From the disposal of branches to Biberbank that was realized that Pricing related to the beginning of the starting point of the acquisition is much lower than what we have considered a lot of months ago. So this bring us to a much better position in comparison with the starting point. Then I have to tell you that this bag will be phased also in the process of better understanding the PPA, so the valuation of all the different assets of UBI at the end of the year.
So we didn't make any kind of valuation, positive valuation of asset Mainly deriving from the net equity excess in comparison with the starting point and the possibility of making a disposal to the branches To the beeper that use the fact that the price to book is going down, we have possibility to have a better good reposition. Do not forget that In our figure, we have all the negative coming from the BIPER disposal because we have the devaluation of net equity. And on the other side, we have all the terrizzuited assets within our figures in these figures. So the net net, I think that this bed will, as I told at the beginning of my presentation is really a shield, a magic shield that we have In order to face an environment that could be really tough, but we are really confident that We can deliver extra performance in comparison to our original expectation.
Thank you.
Thank you very much.
Our question and answer session has now concluded. I would now like to hand the call back to Mr. Messina for any final remarks.
So I want just to thank you very much again for being with us today. And my expectation is to be in a position To deliver very good performance also in the last quarter of the year, the usage of bed will be really An engine for accelerate performance of the group in 2021 and the 2022 and 2023. I hope that you and your family stay well and Hope to have conversation with you in the next presentation for the year end results. So thank you very much.