Good afternoon, ladies and gentlemen, and welcome to our Q1 results conference call. This is Carlo Messina, Chief Executive. Normally, I will be sitting in the same room with my colleagues, Stefano de Punta, CFO and Marco del Frata and Andrea I'm in Investor Relations Officer. Today, we are doing this virtually. Before I get into our results, I want to express my sorrow for everyone suffering because of the virus, which has also hit some ISP colleagues, and I feel especially close To their families, we are all personally touched by this pandemic in so many ways, and I hope you and your families are all safe.
Let me add that I'm extremely proud of our quick response to the COVID-nineteen emergency. We immediately started an impressive set of concrete actions to care for our people and our customers, supporting families and companies and ensuring business continuity. We already donated more than EUR 100 €8,000,000 for the sanitary emergency, it will provide additional 125 1,000,000 from our fund for impact to reduce the socioeconomic distress caused by COVID-nineteen. We are entering this extraordinary scenario as a very solid and efficient bank. We delivered An excellent Q1, full in line with our pre COVID outlook.
In fact, we achieved the best Q1 Since 2008, for net income, around €1,400,000,000 when excluding provisions for future COVID impact. It was also the best ever Q1 for operating margin. At the same time, while increasing profitability and efficiency, we further strengthen our balance sheet, improving our rock solid capital position in deleveraging NPLs to the lowest level since 2,009. So it is safe to say that we are well positioned to continue delivering back in class profitability and to maintain a solid Capital position and to potentially distribute the suspended 2019 dividend when the time comes and subject to the ECB recommendation and to deliver a payout ratio of 75% for 2020 and 70% for 2021. And I believe that in the current scenario, the combination with Oomy Barranca can create Even more benefits for all stakeholders.
In fact, all the banks that can leverage Strong economies of scale, high efficiency, a solid capital position and high asset quality We successfully navigate the times ahead. ISP and UB have similar business models and share similar corporate cultures and values. Together, we are stronger, and together, we have a great potential for growth. Let's now go through the presentation, and at the end, I will be glad to take your questions. Let's now turn now to Slide 3.
Thanks to our solid fundamentals built over time, we are fully equipped for a very challenging environment. Our fully loaded common equity ratio is 14.5 percent, equal to around €17,000,000,000 of excess capital. We already deleveraged more than €35,000,000,000 of NPLs at no cost to shareholders. We have distinctive internal capabilities for proactive credit management, coupled with our strategic With leading industrial players, we can rely on €1,500,000,000 of Additional buffers for future COVID impact. And we successfully evolved towards a light distribution model With 1,000 branches rationalized since 2018 and significant room for further branch reduction, We have a strong digital value proposition, very much appreciated by our customers, and we already have around 10,000,000 multi Channel clients and 6,000,000 using our app, recognized as one of the best in Europe.
And we implemented a complete Setover's forces to mitigate the COVID impact on ISP people and clients and to support the economy and society. Slide number 4. Looking at Q1, we delivered excellent performance, €1,200,000,000 reported net income, €1,400,000,000 when excluding the provisions for future COVID That's EUR 2,700,000,000 operating margin, the best Q1 ever and the best Q1 since 2007 for revenues. Our net interest income is resilient and benefiting from increasing a geographically diversified lending volumes. We delivered significant growth in revenues from financial market activities, which naturally edged the impact of market volatility On our fee based businesses, coupled with solid growth in insurance driven by the Property and Casualty Business.
The positive trend is also continuing in April. In Q1, we recorded A €6,000,000,000 increase in household site deposits, €18,000,000,000 in the past 12 months, which will fuel our wealth management engine in the coming quarters. With respect to assets under management, even in a very difficult quarter, We had positive inflows of €500,000,000 and the positive trend is continuing in April with other positive inflows. We confirm our high strategic flexibility in reducing costs that are a point of strength for Ingersoll Power, With operating costs down 2.7%, taking cost income to 44%, the best in Europe, We further deleveraged EUR 1,300,000,000 of NPL with the lowest ever gross NPL inflow. Overall, our performance in Q1 was fully in line with our 2020 pre COVID target.
More than ever, I want to thank all Intel Sanpaolo people for their hard work in helping achieve these excellent results in this very difficult environment. Slide number 5. The Italian economy is resilient Enkem rely on strong fundamentals and strong government intervention. 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 structure than pre-two thousand and eight crisis levels.
They are more profitable and better capitalized, and the export oriented firms have become powerhouses over the past few years. The banking system is by far stronger than pre crisis level, with higher capital and less NPL stock. The Italian government is providing extensive support. In Q1, the Q on Q drop The Italian GDP was smaller compared to other European countries despite a longer lockdown period. Slide number 6.
For all this reason, I just mentioned, Intercontinental is well equipped To face the crisis, we have solid fundamentals, and we are very well positioned to continue delivering best in class profitability with minimum EUR 3,000,000,000 net Income for 2020, assuming a potential increase in cost of risk up to 90 basis points And minimum €3,000,000,000 net income for 2021, assuming a potential increase in cost of risk up to 70 basis points. Maintaining a solid capital position with fully loaded common equity ratio above 13%, that is 12% fully phased in, in line with 2018 2021 business plan estimates, And then deliver a payout ratio of 75% in 2020 and a payout ratio of 70% in 2021. And we have already deducted 75% of the Q1 net income from capital ratios. We believe that the rationale behind our combination with UB Banca is even stronger in the COVID-nineteen context And that significant value creation can be achieved even if we acquire just 50% plus one share. We have always demonstrated our ability to fully deliver on our promises, Activating all available managerial levers, and this is my personal commitment.
Slide number 8. In recent years, we have more than halved the NPL stock, while increasing the coverage ratio. We have increased our rock solid capital base with common equity ratio up 1.5 percentage points in 2015. We achieved this through internal capital management and we also paid EUR 13,400,000,000 in cash dividends over the past 6 years, and we have continued to reduce cost income ratio. Slide number 9.
Now we are far better equipped than our peers to take on the new environment. We have one of the highest capital buffer in Europe. And we have a best in class risk profile, and we are the cost income leader in Europe. Slide number 10. We are also entering this extraordinary environment at full strength with the highest ever Q1 operating margin In the best Q1 net income since 2008 when excluding COVID provisions, And we can count on additional buffers of €1,500,000,000 for future COVID impact.
Slide number 11, leveraging our top performing delivery machine, We immediately responded to the COVID emergency with a complete set of actions to care for our people and customers, supporting the real economy and society and ensuring business continuity. Slide number 12. As a key priority, we immediately ensured safe working conditions For all our people and business continuity for our customers to enlarge an effective set of actions, including quick and efficient Scale up of remote working with 95% of people in central function working from home 95% of branches opened during the lockdown back to 100% since yesterday, with revised opening hours and employees working on the rotation scheme. We assure them business Continuity via the online branch, Internet banking app and ATM cash machines. We also extended free ISP health insurance coverage to include COVID.
Slide 13. We doubled down on our long standing commitment to support society and the real economy, helping families and organizations impacted by the COVID emergency. And I'm very proud that our bank, our employees And our management and Board donated more than €100,000,000 to help fight the COVID sanitary emergency. Moreover, we donated €5,000,000 to recommitiamenciemi project collaborating with the Diocesio Bergamo to financially and And we are also activating and we are also sustaining families and companies with lending support. We made available €50,000,000,000 in new credit in order to sustain companies and protect jobs.
We were the 1st bank in Italy to suspend mortgage and loan installments for family and company, and we did it long before the regulation came into force. At the end of April, we had already received some 430,000 mortgage and loan suspensions for around 38 €1,000,000,000 of value. Out of which, around €24,000,000,000 for corporate and SMEs and €13,000,000,000 for a day clients. We were the 1st bank in Italy to sign the collaboration protocol with Sache to provide support to large corporate and SMEs under the liquidity decree. And at the end of April, we had already received around 100,000 requests from SMEs for loans baked by a state guarantee for around €3,000,000,000 Finally, €125,000,000 from our fund for impact will be used to reduce the social economic distress caused by COVID-nineteen.
So we are convinced that after the sanitary emergency and we donated €100,000,000 We are now in an emergency from a socioeconomic point of view and want to support this in our country with another 125 €1,000,000, the most important support coming from private investors in Europe. In this extraordinary situation, we were able to guarantee, on Slide 14, to guarantee business continuity, thanks to our strong digital capabilities. Specifically, We have around 10,000,000 multi channel clients, a half million increase in Q1 versus the last quarter of 2019, and $6,000,000 of them are now losing our effort. We almost doubled digital sales in Q1 versus last year's quarterly average, and it is worth noting That these numbers reflect just one full month of the COVID impact. Slide number 15.
We are fully aware that the COVID emergency will shape new trends, and we are ready to leverage our competitive advantages. We are ready to benefit from the growing demand for health, wealth and business protection By leveraging our leading position in insurance as well in Wealth Management and in a new risk environment, we will take Full benefit from our strong internal capabilities for proactive credit management and from our Strategic partnership with leading industrial players of the late stage. The COVID emergency is rapidly shifting customer behaviors towards digital channels. And we are well very well positioned to serve them, thanks to our best in class IT Infrastructure and Digital Channel Value Proposition. At the same time, this emergency is pushing towards a change in the approach to working, And we are fully equipped to accelerate the digitalization of our employees' activities as already demonstrated by the number of people's market Finally, in the new environment, society will need significant support, and we will play our role the home providing financial backing and confirming our leadership in ESG.
Slide 16. Italian GDP will be significantly hit, as in Old Europe, by the COVID emergency, And it is forecast to decrease around 8% to 10.5% this year. In 2021, we expect a rebound of 4.5% to 7%. Thanks to the solid fundamentals of the country and government packages to support business and outsource. This means a GDP loss of around 4% in 2 years.
Let's now turn to Slide 18 to enter the analysis of the Q1 results. Q1 was affected by the COVID outbreak, and Italy experienced a strong drop in GP, And market volatility reached all time highs with a large drop in stock and bond performance. The 10 year BTP The BTP Bund Spread Has Widened. And in this difficult environment, we delivered excellent results, and we are fully equipped to successfully navigate the challenges ahead. Slide 19.
On this slide, you can see the highlights of our strong Q1 performance, but let me take you through the following pages to give you some color. Slide 20. In Q1, we continued to improve across all key indicators. In particular, net income was 30% higher than last year when excluding COVID provision, And we have deleveraged more than EUR 6,000,000,000 of NPL on a yearly basis, and our common equity ratio improved by 1 percentage reporting on a yearly basis after deducting €900,000,000 for accrued dividends. Our excellent performance allow us to create sustainable benefits for all our stakeholders.
In particular, in Q1, families and businesses We received nearly €17,000,000,000 new media long term lending, out of which €14,000,000,000 in Italy. And we have more than 3,000 companies to get back on track preserving around 15,000 jobs. Slide 22. Our strength allow us to contribute to the society we belong to. ISP is strongly committed to its role as an engine for sustainable and inclusive growth.
On top of COVID specific Actions, which I described before, internal dialogue is also ready to contribute with loans for €50,000,000,000 to Europe's Green Deal. Slide 23. In this slide that you know well, you can see just a few examples of our work to support Italian society and in particular, the acceleration of our support during the COVID emergency. As I want to highlight that since 2018, We have already delivered almost 10,000,000 meals to people in winter. Slide 24.
As a result, we are the only Italian bank rated at the top of all the main sustainability rankings, and we are very proud of these achievements. Slide 25. Despite the challenging environment in Q1 with negative market performance in all asset class and the country in lockdown in March, We delivered growth in profitability driven by increase in revenues and reduction in costs. Net interest income and commissions have been resilient despite lower interest rate and COVID impact. Profit on trading more than doubled compared to last year, and April has been another good month for realizing traded profit.
Insurance income grew about 7%, driven By solid growth in low motor P and C revenues that more than doubled When including the company's booked in commissions, the positive trend continued again also in April. Operating income was up double digit. We have continued to be very effective at managing costs, With personal expenses down 2.3% and administrative expenses down around 6%. Depreciation is up Slightly as we keep investing for growth, operating margin was up 27%. Cost of risk, excluding the COVID provision, is at 40 basis points.
Net income is at €1,400,000 when Excluding the provision for future common impact, it reaches DKK1.6 billion when excluding costs concerning the banking industry, which largely consists of the full year charges of the Resolution Fund. Considering the Nexic capital gain, We have already achieved more than 50% of 20 nineteen's net income. Slide 26. In this slide, you can see that on a quarterly basis, net interest income has been Stable, increasing by 0.8% when considering the different number of days in the quarter, Thanks to positive dynamics on volumes. On a yearly basis, net interest income would have increased slightly when excluding the impact of accelerating FPL deleveraging of financial components.
Net interest income was also affected by more than €80,000,000,000 yearly growth in household site deposits that impacts Net interest income in the short term that boosts our wealth management engine for the future. We will continue to work hard to improve the commercial components while continuing to manage our revenues in an integrated manner and with the aim of delivering a positive EBA strategy. In the coming quarters, net interest income We also benefit from the increase in loan volumes registered in Q1. Line number 27, assets under management decreased by around $20,000,000,000 in Q1 Due to negative market performance, but in the same period, assets under management net inflow We're positive for €500,000,000 despite the outflows in March, and the net inflows turned positive again in April. So April again positive net inflows.
In Q1, Family site deposit increased by €6,300,000,000 and this so called sleeping money collected so far Around €80,000,000,000 in the past few years, together with the €152,000,000,000 in Asset Under Administration, We hope to be the fuel for our wealth management engine. Slide 28. We continue to be very effective at managing costs. The main sources of savings were headcount reduction, Real estate optimization, legal entities reduction and the decrease in other administrative costs We reduced headcount by more than 2,800 on a yearly basis with room for further cost reduction. We have already agreed and fully provisioned more than 2,000 voluntary exits.
On top of this, we have received 1,000 additional applications to be reviewed. Further branch reduction in the range of at least 1,000 on top of the 1100 embedded in the business plan and almost already done are expected in light of the Bancashimpa network scale up, thanks to the strategic partnership with Zizalpay And in light of the change in customer behavior, Slide 29. We are proud to have a best in class Cost income ratio in this chart illustrate our leading position in Europe, number 1 in Europe. Slide number 13. NPS stock has continued to decline sharply With 18 quarters of continuous deleveraging, we have already achieved 88% of our pre COVID 2021 Business Plan NPL De Leveraging Target.
We deleveraged EUR 1,300,000,000 in Q1, And the gross NPL ratio is down by more than 10 percentage points since the peak of September 2015 to 7.1%, equivalent to about 6% according to EBA criteria, And the net NPL ratio decreased to 3.5%. We recorded the lowest and Q1 gross NPL inflow. ISP has been able to deliver this impressive deleveraging at no cost Chris Shutters. The bottom line is this: we enter the potential COVID related negative credit cycle in the most favorable possible condition. Slide number 32 31, sorry.
Our capital buffer versus regulatory requirement is roughly 600 basis points, well above our peers. And these figures also includes a deduction of €900,000,000 For the 2020, dividends accrued in this quarter. Our fully phasing common equity ratio is at 13.5%. Slide 32. Our best in class capital buffer versus regulatory requirement It's been further strengthened in Q1.
Slide 33. When it comes to capital strength, 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 34. We have a best in class risk profile in terms of the ratio of capital to financial and liquid assets.
And by this, I'm referring to net NPL Level 2 and Level 3 assets. ISP also enjoys a Strong liquidity position with both the liquidity coverage ratio and the net stable funding ratio above 100% with around €200,000,000 in total liquid assets. This situation, strong capital position, so rock solid capital position, sustainable Hitability and the best business model are the reason why in all the EBA stress test, we resulted as the clear winner. And we start also this situation of prices as the potential winner also in this situation. Rock solid capital position and resilient profitability deriving from a clear and Strong Business Model.
Now let me give you an update on how the combination with UB Bank It's proceeding. So let's move to Slide 36. When we announced our offer, we explained the solid Rational underlines the combination with Rubibank. There are clear benefits for all stakeholders. The rationale is even more compelling now as we all face the challenges of the COVID recovery.
At a time when strategic options are very limited, UB Bank shareholders Can choose to join forces with a stronger player in Italy and in Europe, a group that actively works to benefit its people, customers, shareholders and the broader community. And we are determined to move it forward, and we remain absolutely convinced that this is the best option for UBibanca shareholders and for Intesa Sanpaolo shareholders. Slide 37. As you can see from this slide, we are fully on track to close the transaction by August. Slide 38.
The key message of this slide is that there is No change to the transaction terms. The exchange rate the exchange ratio remains 1.7 The shares for each UBibanca share despite the 2019 dividend suspension, This is a 28% premium for UBI shareholders with an increase of 5.5 percentage point Versus the premium announced in February, we will go ahead with the operation even if acceptancy It's just 50% plus one share. We can achieve the vast majority of the identified synergies And derisked will be Banca's balance sheet at no cost to shareholders even under these conditions. Following the completion of the deal, the remaining Bionolek shareholders will not benefit from the premium, which is incorporated in UBS shares price today. Slide number 39.
In simple terms, this deal makes a lot of sense, especially now. In fact, all depends that can leverage Strong economies of scale, high efficiency, solid capital position and high asset quality We will be able to successfully navigate the time signed. In particular, we would generate significant Synergies with no social cost. Negative goodwill from the transaction equal to EUR 3,900,000,000 We'll fully cover integration charges and additional loan loss provisions, meaning we can accelerate the OPIS NPL De Leveraging. As always, we do this only at no cost to shareholders.
We will pay high dividends with a payout ratio of 75% in 2020 70% in 2021. Our solid capital position will remain with the common equity TR ratio above 13%, and net income will be above 5 €1,000,000,000 €5,000,000,000 starting in 2022, so €5,000,000,000, 2022. Our proven track record in merging integrations shows that execution risk is very low. Let me now turn to the next slide, where I would like to take a momentum to review how we provide strong support to UB Banka's Reference Territories. ISP, as always, dedicated a great attention to the local communities.
We are the Banca de Teritovi. Fully Banca's people, customers, shareholders and communities Can expect us to bring the same attention to the territories that matter the most to them. Let me now just a few of let me name just a few of concrete commitments to Ubi Bakr's reference people, clients and authorities. We will create 4 new regional departments in Bergen, Obrussia, Umi and Bali With high lending capacity and management autonomy, and yes, of the such new departments will be appointed from among UB Banka People. We will boost lending by restructuring in the next 3 year period with no reduction in credit trend to mutual customers.
UB Bankers' own social mix that is decoupled, and UB Bankers' people will be able to We remain where they are without a social impact. There will also hire 2,500 young people, half of them from the territories of Bergamo, Brescia, Padilla, Cugyo and Southern Italy. The combination of Itau Sao Paulo and Dubi is The project that strengthened the 2 banks' local routes while offering benefits for our communities and all stakeholders. In conclusion, to sum up, we are well equipped and ready to face this Challenging environment. We are ready to face this challenging environment.
We are a leading bank in Europe When it comes to excess capital, number 1 in Europe Blueleverage, number 1 in Europe and strong liquidity among the best in Europe, We have a well diversified and resilient business model, so a winning business model, leveraging our wealth management and protection with strong ability to deliver also results in financial markets. We have continued deleveraging NPL to a low stock robust coverage at 0 cost for shareholders. We have a limited amount of Level 2 and Level 3 assets are best in class in Europe. We have a high strategic flexibility in managing costs with the best cost income ratio in Europe. And furthermore, we can count on €1,500,000,000 of additional buffers to take future COVID impact while delivering 1 of the best first quarters Edgar.
For this reason, in the future, we are well positioned to continue delivering best in class profitability, With minimum EUR 3,000,000,000 net income for this year, minimum EUR 3,500,000,000 net income for the next year, Maintain a solid capital position with common equity ratio above 13%, delivered a payout ratio of 75% in 2020, With 75% of Q1 net income already deducted from capital ratio and 70% in 2021, and we expect to continue reviewing and fine tuning our outlook in light of the country reopening. Finally, let me remind you that we believe that the rationale behind our combination with UB Bank is even stronger in the context of COVID-nineteen, In fact, significant value can be achieved even if you apply just 50% plus one share. Thank you for your time and attention. And now I'm happy to answer to your questions.
Thank
Thank you. We will now take our first question from Antonio Reale from Morgan Stanley. Please go ahead. Your line is open.
Hi, good afternoon, everyone, and thanks for the presentation. I guess my first question is, it's On the guidance, I guess it's very difficult to have visibility on full year numbers in an environment like this. So my question is, What are the assumptions behind your 90 basis points cost of risk for this year and 70 bps For Nxt, I've seen your GDP range, but perhaps I think it would be helpful to understand some of the assumptions behind these numbers. I'm thinking of government guarantees, moratorium, what you think NPL ratios could peak, etcetera. My second question is, We've obviously seen a number of measures implemented by the government.
Can you give us an update so far on what percentage of your loan book is Currently on moratoria, what are the assumptions of how many of those will end up as NPLs When the grace period ends and on the government guarantees, I think you mentioned SEK 3,000,000,000 as of end of April, What percentage of the loan book would you expect to be ultimately on government guarantee by year end? And very last question on risk weighted assets. I saw the drop in the quarter despite loan growth. Can you just share what's driving this and how do you expect RBLA to move forward?
So thank you very much. Looking at our guidance, we decided to make an analysis that can Give to the market the view of the management and the view of the bank for a clear outlook for the future, Not only talking about the quarter or the implication of 2020, but also looking at 2021 because we are convinced that In analyzing and making the evaluation of the implication of this emergency, you have to consider The delta between the reduction in 2020 and the recovery in 2021. So the majority of the provision will be related to Stage 2. So if you implement the moratorium And the guarantee on the stake on the customers in Italy, the majority of the impact should be on Stage 2. Do not forget that we enter into this crisis with 50% of our stock on our portfolios With a significant number of percentage in terms of investment grade clients in the corporate sector and with A corporate sector in Italy that is comparable to the price that you have in China.
So if you look at the situation of companies in Italy, Their financial structure is comparable with the one in German, and also their Expo related attitude today is probably much better and much stronger than the one that we have in Germany. So structural condition It's good in Italy, looking at this point. So our expectation is that monetoria and the guarantee from the state can cover A significant part of what can happen into the possible migration between performing into nonperforming, this will Avoid a massive move from performing into non performing loans, what will remain is the impact on Stage 2. This impact could be managed through in our expectation, through a maximum amount because We wanted to make a forecast for net income that could be conservative. We decided to post €300,000,000 as Provisions, extra provision in this quarter, but to devote the next capital gain that I can remind you In terms of growth, it's €1,200,000,000 of extra provision to this possible implication coming from deterioration in the market.
We will monitor the situation, but the majority will derive from this impact. We made an analysis on sector on looking on the different implication in different sectors. And at the end, our estimate is that it is likely that we will not exceed This amount of provision and Opry is also below this level of provision, but With our purpose to give also a net income guidance to the market because we want to pay Dividends. And our purpose is to pay dividend with the application of the 75%. In 70%, you can have a clear view on what could be the dividends that you can derive from your investments in Intesa Sanpaolo.
So analysis related to impact of moratoria, Guaranteed sector analysis, Stage 1, Stage 2, the migration and the strength of the starting point of the portfolio of IntelsOn Paulo. That's the most important analysis. There will be a reduction in provision In 2021, because we will be in a positive GDP trend, remaining, in my view, in a conservative Good comparing to our asset quality. That's the most important area of analysis that we made on non performing loans and performing loans impact coming from this emergency. If we look at the Moratoria, today, we reached that €38,000,000,000 of loans that are Related to Muratonia, the amount will increase in the next month, but we do not expect Such a massive number, but in any case, will increase.
On the impact On the so called such and full of the guarantee and impact, we are really at the starting point. We will see what will be The real request from clients in Italy because my understanding is that in reality, This situation could be, in reality, probably better than can appear now looking at the first signs of lockdown. There are sectors like tourism, hotel And so transportation, they can be impacted in massive way. But in my view, there are a significant number of sectors that can rebound also in the second part of the year. So my expectation is that we decided to make a conservative approach posting €300,000,000 and Dedicated another €1,200,000,000 coming from the Nexi capital gain in the next month.
So if you make net net the availability of results that we can use for Vision is really massive and significant, but leading with sustainable and resilient profitability. Looking at risk weighted assets, we had some optimization, accuracy and some recovery of the guarantee In the loan book, so this allow us to mitigate the impact on risk weighted assets on credit. You know that we have a strong work that we, on a quarterly basis, made on in terms of collateral reporting guarantees and this leading condition to have a positive impact on risk weighted asset credit related. Thank you. Thank you, Dimitry.
Thank you. We will take our next question From Andrea Filtri from Mediobanca. Thank you.
Good afternoon. I hope you can hear me. I have three questions. The first is on the lending evolution To the different types of customers, SMEs, corporate, mortgage and consumer, if you could give us your outlook for these different types of lending going forward. And a comment on What types of margins you're expecting to charge visavis before COVID, Including the fact that some of these will be government guaranteed.
The second is on trading. You have posted Fantastic result this quarter. There is a lot more market volatility and higher sovereign spreads. Are you counting on radical changes in the eurozone and EU policies? And if you have any comments on that side.
And finally, if you could provide us the insurance Solvency II ratio at the end of March. Thank you.
So insurance solvency ratio is above 200 3% so it's 103%, the solvency ratio. So significant and very good, Also that we will continue to deliver very good results in this sector that, in my expectation, will be really the Start in terms of all the increasing results due to the property and cash of the business and especially In the health sector, driven by the acquisition of FDM, that starting from June will give us extra Speed in terms of performance, but that's the level of insurance services so very strong. Looking at trading, so I'm moving from the first to the second and then first. Looking at trading, we made for sure very good performance. We took benefit from volatility.
We think that we will remain with a percentage of Italian government bonds more or less in the range which We are today, that is 43%, 40%, 44% of the total amount of government bonds. We think that there could be some reduction in terms of volatility, but we have to monitor The evolution of the agreements between the different EU participant to the Eurozone. Because ECB made a clear effort, Commission is trying to do the best for solution, but they didn't reach a clear and final position on this point. I have to tell you that I'm, in any case, convinced that Italy has a significant Strength in the saving of the Italian families and also Italy can account of the Italian savings in order to manage the future needs for the public debt or to reduce public debt for the future. So I'm not worried about the position, and I think that looking at market volatility, we can continue to have Good performance.
And as I told in the previous statement, April has been another very good month, especially in Banco EMEA. And so I'm pretty confident that with this environment, we can continue to deliver good performance also in this area. Looking at lending, It is clear that we had a trend in the Q1. The trend in the Q1 made us With a good diversification between international loans and domestic loans with good profitability because We made good results looking at net interest income in the Q1, mainly driven by the asset side because liability side made negative impact arising from markdown and the growth of deposit base. Margin for the future will be mainly related to the kind of guarantees that will be applied.
And looking at guarantees and usage of TLTRO. It is clear that you will not have significant margins, But the volume effects could be much higher than what you can Speth. So my expectation is that net net net interest margin could be the real surprise of 2020 due to the fact that we have a stock embedded in the Q1 that is really significant, and We can, in many case, play a significant increase in terms of loans also with the guarantees. But it is clear that the guarantees will have a level of pricing that could be lower than a normal credit, but at the same time, the risk weighted asset embedded will be really, really, really low. So SMEs, corporate, consumer could be an area affected.
Mortgage is also another area that can be affected for some months. So probably the real estate market and the embedded area related to this point could be affected, SMEs and corporate, Depending on what could be the need in order to work for liquidity lack Due to the lockdown, but also due to the fact that some players can decide to accelerate investments in order To be ready for the recovery in the export related demand to be the champion, do not forget that a significant part of companies in Italy can be leader also looking at export related item. And so if you want To be a leader in the future, you have to start investment in this space. And so there could be also demand coming from with this gentleman. We need to have a clear view of on this month, so May, because May could be a month important After the full lockdown, we will maintain the market informed quarter by quarter on the evolution of this component.
We will take our next question from Giovanni Razzoli from Equita.
Good afternoon to everybody. Yes, thank you. Good afternoon to everybody. A couple of questions on my side. The first one, I would like to you to share with us what's your view of the regulators' Activities so far, it seems to me that they granted the banks a lot of flexibility in terms of capital requirement, In terms of IFRS 9 adoption and all those pro cyclicality elements that may impact the CET1, Do you share this point?
Would you expect something more from the regulator? So this is my first question. And the second one, In terms of the government actions here, you have also been pretty much clear in commenting what This is the effect on the Stage 2 of the Sorry, on the new nonperforming flows of the government actions, here in this case, how do you see The government actions, would you expect something more to come? For example, we have seen that they are also considering some guarantees on the UTP. And I guess that these actions have a material impact on the cost of risk component.
So I'd like to have your comments here. And the very last point, sorry, back to the question on the trading performance, that was Quite strong. The headline number may suggest relatively strong volatility, but half of it comes from capital markets. So that seems to me more a kind of client driven activity. So shall we consider this item relatively You know, replicable going forward as it is not so related to the market movements.
Thank you.
So I will start from the last one. So on trading performance, for sure, capital market is also benefiting from client activity. Difficult to say what can happen in the next months, so I can give you reality. So April It's been a very good month. So again, with significant realized profit during the months and a significant activity in terms of capital market.
But we have also to consider that if there will be some recovery in terms So the Wealth Management Proposition, probably there could be a reduction in the component, client driven on Capital Markets. So it is The typical historical evidence, there could be some correlation. Do not ask me why There is this correlation. I can give you some hypotheses, but the evidence is this. So In case of a significant recovery in wealth management activities, so this can happen if The stock market can rebound.
If the spread can be in a trending down evolution, probably You can have a reduction in terms of capital market activity. But for the time being, not for the level that you have In the Q1, but my expectation is that this sector can give us positive results. Then it is, by definition, a key effect that there's some kind of volatility, so it is difficult to make a clear outlook in this area. But April has been a very good month also looking at this in this respect. In terms of government action, I think that our government The like the one that we have in Italy.
So not easy to do something more. Probably, they can work on some intervention, so called On the Perdunt also not giving only guarantee on debt, but also giving money To the companies on OTP, probably they are starting this point. My perception is that It is not easy to say that they can complete this area of analysis, but if they succeed, this could be Absolutely, something very important because OTP are performing loss, performing in the sense that they can They can move in Performing Growth and the purpose of the capitalization should be contained into the Performing areas because there are people working, 1000 and 1000 of people are working into companies that are in UTP. So this would be, in my view, a priority of the government. But I cannot tell you if they can have success in trying to analyze something in this area.
By definition, this area is an area in which if you work hard in order to allow them to come back into bonus, So you can give a significant boost to the GDP growth in the country, but especially to safe employment in a situation in which in the next months, There could be some significant social problematic situation, not only in Italy, but in all Europe, deriving from the reduction of GDP. Looking at the regulators, for sure, they are acting in a very tough way in order to reduce positivity, to give flexibility To banks, so my expectation is that they can continue this very good job that they are doing. My expectation is that, Especially at European level, looking at SSM, ECB, they can continue this very good job that they are doing in order to make stabilization and not to put emphasis on the negative side, but to try to move all the sector into the positive side. So my expectation and my relation with these counterparties is Positive in my perception is that they are fully aware of what can happen into the market if They try to accelerate the procyclical impact of this negative trend, and My expectation is that they will do all the best in order to reduce this impact.
We think that in any case, There will be an impact, and that's the reason why we decide to place €1,500,000,000 On a yearly basis, in order to face this very tough environment with An increase potential increase maximum until 90 basis points for this 2020 year. But due to our strong efficiency, strong ability to have resilient business model, We can remain easily with a net income well above €3,000,000,000 in 2020 and €3,500,000,000 in 2021.
Thank you. Thank you.
Our next question comes from Domenico Santoro from HSBC.
Hi, good afternoon. Thanks for the presentation, and I hope you are all okay and also my colleagues as well. Just a couple of follow ups. First of all, on the target in terms of net profit, does the €3,000,000,000 at least net profit include also an allocation of the Nexi capital gain To potential further provisions for the situation, the economic situation and whether this is already included In the 90 bps, the reason why I'm asking, we have seen, of course, your colleagues, your Spanish colleagues Charging much more in the quarter, more than €1,000,000,000 for the large. So I'm just wondering whether you're going to book An additional part, which is model update, if my understanding is correct, once you have the input from the ECB in the second quarter.
The second question is on capital. Can you please tell us what could be the impact positive from the measures The European Commission has approved last week, especially the SME's supporting factor And the others. And whether you expect in the second part of the year when you have more visibility on the situation, some Risk of the assets inflation because you're going to potentially update your PD, LGD in the portfolio. Can you also mention whether you're going to take up more in terms of TLTRO at the end of June? And what could be the maximum allotment?
Thank you very much.
So I want to start, in this case, from the targets, so to make We are the position on our €3,000,000,000 minimum level. We talk about minimum because we talk about exactly on the allocation of NexSys. So our expectation is that It is useless to be so bullish in the sense of negative. In the Q1, we reached not We had a clear scenario coming from the ECB, and they gave us a clear indication that They will give us in June the implication, the scenario that we've led to use in order to make The provision for the Stage 2 in the Q2, we want to give a clear understanding of the situation because We will have an impact for sure, and we think the €300,000,000 is the right amount that we can place, but we will have another amount in the next month. And we decided that this has to be in our in all our Analysis that we made also stressing some condition, this amount could not exceed the €1,200,000,000 So We decided that we can allocate domestic capital gain in order we face at this point, expressing condition So we can leave us with maximum 90 basis points.
But when we if you remember, when we made The deal on Nexi, we made a clear statement to the market. So we will use only a portion of this Capital gain in order to increase net income because a portion of these will be used in order to increase sustainability of results of the company. And we are perfectly in that situation. So we need to have next capital gain In order to improve sustainability of results of the company, because if we place €1,500,000,000 extra Provisions in 2020, believe me, starting from 2021, there will be another year in which There could be an impact, but mitigated by the positive GDP. In the next years, we will have benefit coming from these extra provisions.
So increasing sustainability for our results. So The allocation of Nexi is included in EUR 3,000,000,000 That's the reason why I'm absolutely I can tell you absolutely that €3,000,000,000 is absolutely conservative. My expectation is that we can do better than this. And on this point, I prefer to stay on the conservative side, giving indication to the market. And again, because through this amount And through the payout ratio, you can also calculate what kind of dividend we expect to give to our shareholders, but the next capital gain for us is a clear journey that we will use During the second and the third quarter, in order to increase provision for an amount that could be maximum €1,200,000,000 deriving from the Nexi capital gain.
So that's a position on Nexi. On On capital position and the implication of the new analysis coming from the As we have new detractors, we will have a benefit on this point. We need to have some more We see in order to make the perfect analysis on this point, and we will make the clear disclosure on this That is positive, and we will have in the second part of 2020. But I think that in our case, it's only another factor that can increase our Already very strong excess capital that will remain very strong and in excess of what All the other European peers have communicated also paying the 2019 dividend. So if you pay 2019, you remain in Intesa Sao Paulo with a position of NDA buffer exceeding the one of all the other European peers.
But in any case, on this point, we will make disclosure in the next the month as soon as we have more analysis in place. And looking at TLTRO, We can reach the amount of €85,000,000,000 €90,000,000,000 and we will decide If we can take more, and this will depend also on the amount of loans with the guarantee We all state that we will receive in terms of demand during the next month.
Thank you very much. Thanks for the answer.
We will take our next question from Benjie Creeland Sanford from Jefferies. Please go ahead, sir.
Yes, good afternoon, everyone. Just looking at the back of the presentation on the sovereign bond holdings, It looks like they are stable quarter on quarter. But if we look at the balance sheet, total financial assets on the banking deck appear to be up about €10,000,000,000 quarter on quarter. So I was just wondering if you could give any more detail on what kind of assets those are, presumably that's Corporate bond exposure that you have increased in the quarter. And then I guess just in terms again going back to the cost The risk outlook and the 90 basis points, you've obviously pointed to the 8.5% to 10.5% GDP decline in Italy this year.
Can you give any sense of the sensitivity to your cost of risk assumptions to any change in the GDP growth outlook, So this year and in terms of the rebound in 2021? Thank you.
So thank you because the point on sensitivity on GDP in my view is very important. And so That's a point in which it is clear that what is very important is the sensitivity On the delta between 2020 2021, so the real point of analysis In our bank, an analysis that we made and we will continue to make in the future because it It's clear that if you have another 2 weeks of the lockdown or another month of lockdown, analysis could be for sure different. If you have sectors That can be impacted in a tough way in the next month. It is clear that you have different So in parts, we made some reserve in the analysis of 90 basis points also considering Some further points on some area of lockdown, but the sensitivity should be applied, in my perception, On the delta basis, deriving from the negative GDP of 2020 and the positive of 2021. So in our case, minus 4 basis points.
If you make some stress on this analysis, You can have in case of positive, you can have a recovery in terms of provisions, especially In 2021, if the rebound is much higher than the one that we have considered, For 2020, my expectation is that with 90 basis points, we are fully covered also from And worst case scenario, apart from a significant further lockdown in the country in the next month. In that case, we will need to make further analysis in order to evaluate what could be the impact, but always related with a possible rebound in 2021. So that's the reason why I'm focusing on the delta basis. On a better basis, if you have from minus 4% into minus 6%, my perception is that There could be limited extra provisions that you can need in terms Of the provision, especially in the 2 years 2020, 2021, you can have an impact, but not so significant. The what can happen is 2022, in which we can have another Amount of provision related to this situation.
But for another 2 percentage points, my expectation is You can have another EUR 100,000,000 EUR 200,000,000 in 2 years' time, but no more than this. If you have a lower impact in terms of 4 percentage points and you stress, you see that at the end, you can go 2 percentage points, again, you can have positive on the provision and much higher positive in 2022. It is also clear that we are making analysis on the model. So we will give you a more clear A view on this sensitivity in the next presentation for the next quarter results, but your point is completely right. Sensitivity is very important, but what we are doing is using the delta on on the 2 forecast, negative and possible rebound in 2021.
But The condition of extra provision due to the fact that we think that we have been really conservative In using €1,500,000,000 extra provisions in our figures, we think that this can be enough. Also because the amount of the state guarantee theoretically is massive. Then again, this is another part To the story, we will check month by month, but the amount of the intervention, 40% of the GDP is really impressive. Again, we have to check if reality is equivalent to the project. That's for the 8 basis points.
On the sovereign bond holding, we had an increase in some sovereign bond, And then we will also increase in some corporate and financial bonds And there could be some increase deriving in this quarter from this holding, But the majority of the impacts that we had on the common equity is deriving from The group is government bound in which there has been also a breach of correlation between The triple A country and double A country like France and the Other, like Italy and Spain, that was another reason. But on financial assets, then If you want all the figures and disclosure, Investor Relations team is at your disposal to I'll give you all the figures that you need to make analysis.
Thank you.
Thank you.
We will take our next question from Alberto Cordara from Bank of America.
Hey, good afternoon. From my side, a couple of questions. The first one are related to efficiency. See, you already have a very good costincome ratio as you detailed in the presentation. Is there more room to improve your cost line?
What is the degree of flexibility that you have in doing that? And how much of a potential further cost line improvement It's included in your current guidance. And I just want to know if you can put Santanderas on top of your current guidance. The second issue relates to your offer on Ubi. I think you explained very well the rationale.
Banks today need more Scale, more efficiency, they are coping with a tough environment from an interest rate standpoint and more importantly from an asset quality standpoint. So all of this is very clear. What is probably less clear, particularly to international observers, is why There is a group of commercial assets, including foundations that are seemingly opposing the deal. So I think it would be helpful if you can explain to us and explain to international investors why this is taking place because, again, From the outside, that may not look immediately something clear and understandable. Thank
you. So thank you, Alberto. We can start From efficiency, that is the easy way in which I can elaborate. Efficiency In Inter Sao Paulo is a clear North Star, so we think that efficiency is the key factor of success of our organization. We have, for sure, more room to accelerate in terms of cost reduction.
And do not forget that last year, we had 2,008 100 people leaving the organization. In this Q1, we had 1,000 people, roughly 1,000 people leading the organization. So embedded In the personal cost of remediation, there is a significant number of possible reduction that we Consider the potential for increasing people in other areas such as insurance, Artificial Intelligence and other sectors that can lead to have a reinforcement, marginal reinforcement because we are talking about minus 4,000 people and the hiring of people could be in the range of 500 people. Today, we are Reducing the hiring of people, we are stopping the turnover. We think that also in view of it will be possible transaction, But in general, also on a stand alone basis, we want to better understand the implication of this new scenario on our activity.
Because I think that at the end, there is one area that gave us A clear indication that digital and remote working and ability to work Reducing the need of real estate building and on the other side, reducing the number of branches because With the Cesarpay agreement, we had already planned of further reduction of branches, but This situation gives us a clear view of 2 business model. 1 is the mass market and the other one It's personal affluent and private. On personal affluent and private, you need to reinforce your activity into the branch. Then you can call branch, private banking branch, personal and Apple branch, but people in Italy I need to have contact with people, and we received a request for meeting also in the Not because in the lockdown period, but because people want to be sure that they are Give you the money to a person that with whom they can have a clear relation, a clear understanding of Charles, to a meeting. On the other side, on the area of bus market, we think that we can really Work on an extra plan of reduction of branches, leveraging our superior ability of Giving digital implication on business, so this will bring us to work on It's one of our business Activity, the cost management sector that you know is in charge of this area is delivering Fantastic results.
We think that we can do more, but not only as Contingency plan that will bring us positive in case of reduction of revenues, but also from a structural point of view. So this is an area which I'm working in order to prepare a new phase of cost reduction for the remainder. Looking at Ruby, believe me, I'm really in a condition to say that it is It's difficult also for me to understand why there is such a Strong opposition because you can have an opposition to a deal because you think that you can have more money. So there could be physiological opposition to deal. In the case of core shareholder, it is a very, very strong opposition, and I have to tell you that I prefer not to give you my idea on this call.
And I think at the end, also, these Shareholders will understand that in this situation, in which the environment is very tough and if in terms of Sao Paulo, We left to consider €1,500,000,000 of extra provision in 2020, and consider also an increase of provision in 2021, reduction In comparison with 2020, but for sure, in Greece, considering the current situation, it is difficult That a 2nd tier in the market can have much better perception than a 1st tier in the market And not intending that the second year is not positive, but I'm talking about dimension, The scalability, profitability, resilience of our figures. So all the banks in Italy will be impacted By this situation, and I think that be together with a strong player can give To the shareholders, some will be a much higher probability to have significant dividends and also Upside in the future. So today, we have a correlation of Ubi shares with the Ingersoll Power shares. I think that The core shareholders can have a benefit in moving into different power And benefiting from a clear trend in terms of profitability and dividend, that's even why we decided to change The dividend policy that we made and disclosed to the market some months ago in which we think that It is not fair to give Messer, the rig and daily, a fixed dividend to the Oompi shareholders.
But now, The guidance that you are giving for the interest of our shareholders is 75%, 70%, And we think that OBSERIO will also benefit from the payment of 2019 Dividends, that it is absolutely my intention to propose for a payment. Then We will see the position of the ECB. We have a great respect of the ECB and SSM, And we absolutely need to have their approval, but my intention also looking to the capital position of the bank and the simulation The impact is that we can be in a position to pay this amount of money at the end of this emergency. But believe me, I have full respect for the core shareholders, all will be, and I will respect their decision if That position will remain negative towards the transaction.
I think this thank you very much. This is a very Because as a matter of fact, when I look at your pre impairment profitability, it's so much higher Then the rest of the sector and particularly with respect to the domestic bank. So forgive me, but I just want to ask you an Additional opinion. So leaving aside this situation of WuBi, do you expect that we are going to see much more Consolidation in Italy because, again, when I look at domestic banks, a higher cost of risk may Make it quite easy for them to report losses in the current environment. So leaving aside this specific case, should we expect the Italian sector to consolidate more in this period or in the next few years.
So let me add that I'm convinced that EBIT Bank is a good medium sized bank With a good management, I have full respect of Victor Masiya and what they are doing in IOPI. But it is clear that if you have a situation in which you have a thunderstorm, Probably, you can be safe in a stronger company, in a stronger situation. It is true also for Yes, there are banks, a medium sized bank in Italy because all the CEOs of the medium sized banks in Italy, in my view, made A very good job because they succeeded in reducing nonperforming growth. They increased the coverage The ratio, especially other banks, increased coverage ratio made very good jobs in terms of business model. But at the end, Dimension is dimensions.
And if you generate, like us, more than €4,000,000,000 In a normal situation, you can remain to generate more than €3,000,000,000 after having posted The €1,500,000,000 of provisions, so with the cost of credit that for our standard is very high, cost of credit, 90 basis points. And other player in the market can have difficult situation And their figures, if the increase is so high, if you look at figures also from our Other players in Italy, they announced EUR 900,000,000 of provision. There is a clear view on the big player in the The medium sized banker can have an impact also then. I hope that They can remain in profitability because at the end, stability of the system is also positive for ITERSA Paolo. There could be some other consolidation mood in the country, possible, but you have not to forget that There has been a lot of talking about consolidation, and the reality is that if you have 2 CEOs, 1, we left to lose the place and the history of Italy, this didn't happen.
And that is why there was We'll merge between 2 medium sized banks in Italy because all the 2 CEOs want to remain CEOs of the company. So at the end, This is a clear point of difficulty in making transaction. And you have also to add another point that if you want consolidation, You need to create condition to reduce non performing growth, and the only point is to make capital increase. So do you think that the market would prefer to have a merger with a big player and also the other shareholders? Because at the end, the other shareholders, We understand that any kind of transaction different from this will means to have a capital increase.
And to have a capital increase, it is not enough 20% of the capital, you need to have 100% of the capital. And so in my view, consolidation could be theoretical away, But it is difficult, especially in this environment in which you will need by definition a capital increase if you want to consolidate medium sized bank.
This is extremely clear. Many, many thanks. Thank you.
Thank you, Tui, operator.
We will take our next question from Brittan Britt from Autonomous Research.
Yes. Hi, there. I've got 3 questions, please. 1, just returning to your comment on TLTR-three, where you said that it depends a little bit
on the loan growth that
you see also under the government guaranteed loan program. What is your expectation for loan growth under the program for 2020? And Given that the terms of the TLTR-three are quite attractive, would you not consider increasing your government bond portfolio On that basis. And the second question I have is on legacy NPLs. Have you seen any impact on your workout trajectory From the lockdowns that we've seen and what should we expect here for 2020 2021?
And lastly, can you give us a little bit of an insight in how fees and insurance income As behaved in April versus, let's say, January February. Thank you.
So looking at fee and income, January February has been the best months ever. So we had 2 very strong months. You probably remember that my guidance has been at the end of the year That we can have an increase in net interest income due to the increase in loan book, and we delivered the increase in loan book and the increase in the commercial part of the net interest income, but also that we expected an increase in fee and commission due to significant conversion. We had the conversion in the month of January February, a negative month in March, but the combination It's been, in any case, a positive on a quarterly basis. April is, again, a positive month.
We think that The insurance product business could be the one that can bring us positive The results in 2020, especially life insurance, apart from property and casualty, that is a clear engine for growth. So No doubt that this will be an engine for growth for the personal panel, but we think that we can have some positive OTA commissions. The real point is that my expectation is that it is difficult to have performance fee, And it is difficult to have a fee coming from more or less €20,000,000,000 of reduction that we have in terms of performance. So the commissions is an area in which we are estimating increase in terms of net inflows, but The amount of commissions coming from the reduction of stock is such that we will have An impact in terms of commissions on a yearly basis if the market will continue at this level. This spread We have trend down below 200 basis points, probably there could be probability that the stock performance The market could be better, and then we can have again some really positive on fee and commissions.
At the same time, We think that we have we need another contributor that is Corporate Investment Banking because we have The positive contribution in terms of net interest income, but looking at commissions, the lack of deal creating Lack of commissions, but we are working also in this area. But my expectation is that fees It cannot be an engine for growth, can be an engine in terms of defense of results. So that is our target today in terms of fee and commissions. Looking at NPL, the impact from lockdown is really limited on NPL because In March, I have to tell you that at the end, the impact is really negligible. My expectation is that So with the combination of moratorium and the combination of the state guarantee, any portion So there will be a fact, it could be hotel, tourism, transportation, something that In Italy, it is important, but it is at the end less than 2% of our loan book.
Then also at European level, oil and gas, but again in our book is 0.4. So the total impact, Excluding public guarantee and monetary, IMMU is really limited. Looking at TLTRO, Here, we will not use for government bonds, for increasing the government bond portfolio. We think we have a dimension that is the right one. So our expectation is that we can have some reach in terms of composition, but dimension should more or less remain the same.
The increase in TLTRO can be devoted only to increasing of loans and especially the one related with the state guarantee.
Thank you. We will take our next question from Ana Pazzalone from Exane.
Good afternoon. Two small questions. The first one is on trading in the quarter. I was just wondering if there's any Contribution in that very good figure from fair value of liabilities. And if there is, if you can disclose how much.
The second is on risk weighted assets. Directionally, going forward, 2021, 2020, later on in the year, Do you believe that the impact of negative procyclicality on your loan book, so PD and LGD worsening, will be bigger Then the positive impact of the government guaranteed loans, which are 0 risk weighted or vice versa? Thank you.
So on this point of risk weighted assets, we think that there could be a compensation. Our negative Simplicity will not be so significant because we have through the cycle PD, so we will not very positive in case of positive dynamics, but not very negative in case of negative dynamics. So my expectation is that we can have more or less a combination of the 2. And so We should not have significant inflation in terms of risk weighted assets. We will monitor the situation, but my understanding today is that it is, in any case, likely that they can be compensated.
So our expectation is that there not should be significant negative impact coming from both of them. Looking at the trading income, there is a component coming from the fair value of liabilities. On the total amount of trade of the on this fair video on liabilities. So the majority of the results is realized Like the one that is the result in April, in which this component of fair value is Still there, in the evidence is our prudent stance, and we increased the realized proportion portion of the portfolio. So we think that these results can be considered as a good Thank you.
Our next question comes from Ignacio Cerezo from UBS.
Hi, good afternoon. Three questions from me. The first one is if you have a ballpark figure in terms Where the NPL ratio can go from the 7% you posted in Q1? The second one is whether you expect any fee contribution from Increased lending under the guarantee. And the third is curiosity of why you haven't changed your loan loss estimate on the UBI deal.
We're still targeting the need for MXN 1,200,000,000 of tax loan losses. And considering the change of environment, I was wondering why you haven't changed that number yet. Thank you.
So we decided to so look, starting from NPL, we want to confirm our NPL plan. So there should not be significant impact in terms of reduction. Our expectation is that we can go at 6% in 2021, and it can be close to 3% in terms of net The non performing loans, we are still making all the analysis because you know that it is not easy, and we think we made probably one of the best job In comparison with all the other European POC making a clear disclosure and giving to the market possibility to make Analysis with us on this point, we are still working on the assumption. We have to see reality of lockdown. We have to see the reality of impact of guarantee because what can happen in Italy is that there is also a majority of all the companies that has a lot of money, so probably they would not need to have It's state guarantee.
So we have to see the evolution, but our perception is that we can continue reduction in terms on stock of nonperforming loans in terms of reduction of nonperforming loans ratio. On fee contribution from state guarantee, there could be, but it could be not so significant. Our Expectation in terms of fee contribution, again, comes from a recovery in the 2nd part of the year from Wealth Management is coming from, for sure, Property and Casualties business and also from Corporate Investment Banking Business, but from state guarantees, not so significant. Then in terms For provision, we decided to start from the analysis that we made on the Implication of the scenario on the different sectors and the implication of the monetoria and guarantee, The implication of the quality of our stock, the amount of nonperforming loans, the possible migration of Different from performing into non performing loans, we made a very significant analysis, especially in the chief lending office area and the chief risk office area. And the results is the amount of Extra provisional, what we need is to have the final point in June from ECB because you know that they will give A scenario that we last today asked not to work from pro physicality.
We asked to make A top down approach, but to the face and with their scenario. So we decided to put €300,000,000 just to give the evidence That a portion is still there, and we are moving in the right direction, and we decided to make an allocation with a clear Board of Director Resolution because today, Board of Directors decided that the allocation of the Nexi Capital gain could be devoted to provision if needed. So if needed, it will be lower. Nexi It can be used for other sustainable items or to be used for net income, but that's the position of the bank. We think that this job is a clear job of best practice of In terms of information with all our shareholders, you know that when I Decide to take a commitment, this is a clear priority for the organization, And I wanted my investors to have a clear framework on what will be the evolution in this Difficult context.
On the other side, also for 2B investors, I think that it is very important to and the future of Intel Sao Paulo and what could be the implication of becoming investors of It is Sao Paulo in this very difficult and tough environment, and I can confirm That also for these shareholders to become Maintainas and Power shareholders could be a unique opportunity.
Our next question comes from Bilhseem Lee from JPMorgan.
Yes, thanks for the presentation. I just have one question actually. It regards capital. When I look at your Slide 91, Just wanted to understand a little bit sort of where the it looks like in your 14.5% CET1, you have This quarter, a slightly bigger benefit from DTAs and also a smaller impact From IFRS 9 transition, transitional adjustments, just wondering, so if you can explain a little bit the difference and the mechanics.
So on the analytics, So you have to tell you that probably it is much better if you enter in touch with the Investor Relations people. I can tell you My view on what's happened on the capital position of the bank this quarter, in which We had a negative component arising from the as all the other European banks coming from the COVID impact On the market dislocation, this has this had also implication on the DTAs, And I don't know if this is a component that can make an explanation to your request. But on this point, Marco, Fred, and Andrea, Cam and Nino can give you all the figures that you need. My point is that for IFRS 9, we add a portion on the Phase in, because you remember that on the fully loaded, you had To consider the impact that you had not in the phasing, but due to the fact that you had another year, You had to reduce the impact on the fully loaded, adding the impact on the phasing. But on this point, as I told you, Marco and Andrea are your complete disposal.
Okay. Thank you.
Thank you.
Our next question comes from Anna Benassi from Kepler Cheuvreux.
Hi, good afternoon. Several questions already asked. I would like to come back to the offer on I think the position looks stronger and stronger, and your commitment looks stronger and stronger too. So I'm trying to understand that if the offer could be changed in any way, not in absolute terms, But maybe in the mix of instruments, I mean, like shares and introducing Some cash. And the other thing is that you write in the presentation that assuming 50 To send a platform share ownership, you will be able to proceed with all the integration Actions.
So, Tisit, the question is, then a large minority component in the bank cannot Interfere with the speed and the overall action you can implement in the integration Blaine, and the other point, you said also several times that we'll need To pay the 2019 suspended dividends. And if we look to that, if we Assuming the full amount, then the OIBIS share is trading at 15% premium to The offer which is, in fact, again, very, very strange, and excluding them is still At 5%. Can you clarify on the dividend side, if you will have to start On French, I mean, you don't start from the $0.92 sorry, the $0.19 You can, in October, propose any type of amount just because I don't know what is So possible or not given the new ECB guidance. And finally, I've been already asked about the contingency plan on Cost, but I'm more curious to understand if the experience, the client experience in these 2 months On the online, and going in the branch by appointment that I think is really big piece of news Italy can bring medium term a sizable cost Savings, so different behaviors will imply of the different organizations.
Thank you.
So on the last question, my understanding and my perception, subject to The analysis is that we can have a sizable reduction in terms of cost, especially for the mass market. So for this area, I think that at the end, there could be A lot of value in reinforcing the digital kind of relation with the clients, Reducing the branches and the real estate embedded into the branches, and this means a clear reduction on cost. At the same time, as I told you, I think that we have to reinforce places, branches in which where you can have meetings with people in order to manage their wealth and their insurance, especially for the health in the houses. So my view is that we can have really for the future in the next plan a strong reduction of cost in terms of business model. Looking at Ubi Bank, we will not change our offer.
So no possibility, 0 possibility is from the first stage that I'm telling to The Ubi shareholders that I'm fully convinced that this is the best option for them. And at the end, I'm the CEO of the Inteasant Power shareholder. So I have to mix between The 2 situation, my expectation is that we will not change our offer. We will deliver 50% plus 1 share. We will Realize the integration of the IT system That is fundamental in order to make the Substantial merger for the company because you can have a substantial and physical and legal entity merger.
If you To realize the IT integration, you can have the possibility to exploit the majority of the synergies, At the same time, making the consolidation, you can use the bed wheel in order to increase Coverage in NICS disposal of nonperforming loans of UBI, you will have the impact on the consolidated And you will have the impact on the individual. So the UB Bank remaining will have All the increase in terms of provisions in order to make disposal of nonperforming loans, The minority shareholders can interfere in the physical merger, But I have to tell you that I'm ready also to maintain the bank The first period in order to make the integration of system making the right job in terms of Appointment of the new Head of Regional Division, give the power to the people, motivate the people And then make evaluation of physical merger. But as soon as you have the IT integration, you can have the majority of the synergies that you can derive. You can have the bed wheel. You can have also the integration charges expensive.
Integration charges already embedded in the figures and also the increase in coverage embedded in figures. So at the end, The majority of the actions will be absolutely available to in terms of power also with 500 Class One Share. Then if minority shareholders want us to reinforce the linkage with the territories with their presence as Minority shareholders renouncing and decide not to have the premium For the shares of renouncing to the premium, we will be happy to maintain them as minority shareholders. On the same time, on 2019 dividend, my intention is to pay dividend, but not because I'm crazy, But because I'm the value creator for my shareholders, adding A clear attitude to make efforts in order to reinforce the community and the country in which I'm operating. And I want to remember you that we were the only one to make such a donation In the country, we were the only company to give money to clients in the company and in the country, but also we have Shareholders like foundation, like retail, that need to add dividends in order to make It's something positive for the country or in order to survive in the situation of difficulty in the country.
Then it is also clear that I can understand the action of SSM, of ECB. And if they decide As not to pay dividend, we will not pay dividend by definition. But my target is to try to pay all the 20 team dividends. And my capital ratio also with the total payment of dividend will remain in excess Below the other European players, so as soon as I'm in a condition of cover the extra risk of COVID, I will try to pay dividend with full respect of SSM and ECB. And so it is clear This is absolutely conditional to their position in the future.
Okay?
So And I will now turn the conference over to Mr. Messina.
So Again, thank you for being with me and with us today, and may you and your families stay healthy. So thank you very much.