Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sanpaolo 2019 Third Quarter Results, hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Diana, 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 call is being recorded.
At this time, I would like to hand the call over to Mr. Carlo Messina. Sir, you may begin.
Good afternoon, ladies and gentlemen, and welcome to our results conference call for the 1st 9 months of the year. This is Carlo Messina, Chief Executive and I'm here with Stefano del Punta, CFO Marco with Frate and Andrea Tamanini, Investor Relations Officer. Before diving into the details, let me say that ISP continues to deliver strong results Low interest rates, while penalizing net interest income, are very favorable for our Wealth Management Business, as is the declining sovereign spread. So our Wealth Management and Protection business is revamping and working at full speed to convert into assets under management part of the €172,000,000,000 of assets under administration and the €65,000,000,000 of household site deposits collected in the past few years. The first positive results were already visible in Q3 and the outlook is even more positive.
Having said that, net income for the 1st 9 months reached €3,300,000,000 While increasing profitability, we have also further strengthened Our balance sheet, improving our already solid capital position, continuing NPL deleveraging and increasing NPL coverage. Fully loaded common equity ratio increased further to a rock solid 14.2 percent and the application of the Danish Compromise has increased our Fully phasing ratio to more than 13% represents an important additional buffer in view of the next EBA stress test. During these past 9 months, we have also triggered new actions that will accelerate business plan execution and further enhance our very resilient and well diversified business model, our high strategic flexibility in managing costs and our excellent de risking capabilities. For all these reasons, we are firmly on track to deliver a 2019 net income higher than the €4,000,000,000 booked last year. We confirm a payout ratio of 80% for here with a very good cash dividend once again.
Let's now go through the presentation and at the end, I will be glad to take your questions. Slide number 1. Let's now look at the key highlights. So the best 9 months net income since 2,008, The best Q3 net income since 2007, the best ever Q3 for commissions, 2.5% decrease in operating costs with costincome down to 49.8 percent among the best in Europe. Decrease of 18% in loan loss provisions driven by a lower NPL stock and by NPL conference.
Driven by a lower NPL stock and by NPL flow at historical lows. We have deleveraged Around €7,000,000,000 of NPL in the past 12 months already achieving 80% of the targeted 2018, 2021 NPL deleveraging at no cost to our shareholders. Our common equity ratio increased to 14.2%. And as always, I want to thank all Intesa Sanpaolo people for their hard work in helping achieve these excellent results. Slide number 2.
I'm even prouder of these results since they were achieved in a challenging operating environment for revenues. The Eurozone and Italy experienced a slowdown in GDP growth with Italian GDP almost flat since the beginning of 2018. The 10 year BTP Bund Spread remained at around 2 50 basis points in the 1st semester and started to decrease only in Q3. Slide number 3. Let me bring your attention once again to the pillars of our top performing delivery machine.
We proved our excellent derisking capabilities. Thanks to the partnership with Prelude, ISP is now focusing its internal capabilities on proactive credit management, mainly the past project, while leveraging a best in class external platform for late stage. We enjoy strategic flexibility in managing costs. We will have 3,300 additional exit by June 2021, And we received 1,000 further applications for voluntary exits. Also the partnership with Cisalpay allows A potential reduction of 1,000 additional branches on top of the 1100 reduction already included in the business plan.
We are a wealth management and protection company with sound and strong financial market activities that we decided to strengthen to both the market opportunities and hedge the impact of volatility on our fee based business. This is one of the reasons for the strong growth in profits from Financial Assets in These 9 Months. Our wealth management machine is working at full speed to convert into assets under management part of the €172,000,000,000 of assets under administration, €65,000,000,000 of household site deposits collected in the past few years, of which €11,000,000,000 in the 1st 9 months. Line number 4. Let's now deep dive into our results.
Net income for the 9 months was our best since 2008, thanks to solid operating performance. And we have already achieved more than 80% of the 2018 net income level. Slide number 5. During the 1st 9 months, we continued to improve across all key indicators. In particular, net income was 10% and the results are higher than last year.
NPL stock and NPL ratios reached the lowest levels in 2,009 And our common equity ratio improved significantly in Q3, and we have a positive buffer of 480 basis points versus regulatory requirements. Slide number 6, shareholders are not the only one benefiting from our strong performance. During the 9 months, employees received €4,200,000,000 in salaries and all our excess capacity of around 5,000 people is in the process of being reskilled, of which around 2,700 have already been redeployed to priority projects. The public sector received €2,200,000,000 in taxes, households and businesses received €39,000,000,000 in medium long term financing. In addition, over the same period, we helped 50,000 company to Quebec on track.
Besides supporting the real economy, we are also a leader in the on social economy. And on the next slide, I will give you a sense of what Intesa Sanpaolo does to support Italian society and promote culture. Slide number 7. As set up in our business plan, Intesa Sanpaolo is committed to becoming a global reference for ESG. In this slide, you can see just a few examples of our work to support Italian society and let me comment on the most recent developments.
Our EUR 5,000,000,000 circular economy credit platform has evaluated more than 2 10 projects, of which Around €50,000,000 have been financed with €750,000,000 already approved. Our partnership with Generation, a global project to reduce youth unemployment is already delivering and around 90 companies are committed to the program and 500 Students were interviewed and around 200 were trained during the 9 months. We are the engine of Italian social economy and in addition and to our direct support to Italian society. The about €700,000,000 in dividends that we paid out in 2018 to the banking foundations that make a part of ISP Shareholding also provides support to social and cultural projects. In fact, these foundations alone contributed more than half of the total charitable funds donated by all Italian banking foundations.
Slide number 8, as a result of these efforts, has been ranked 1st among its peers in 3 of the top ESG International Assessments. On slide number 9, you can see the key highlights of our strong performance in the 9 months. And let me take you to Page 10 and give you some color on the P and L. The 1st 9 months of the year were very strong by the challenging environment for revenues. In this period, we delivered growth in profitability driven by reduction in operating cost and lower on loan loss provisions.
Operating income was up 1.2% when excluding the positive impact in 2018 of the NTV stake disposal and despite the decline in net interest income driven in part by the strong NPL reduction and the reduction in commission affected by less supportive market conditions in the 1st semester of this year. Profits from financial assets were up 24%, confirming that our business model is naturally hedged because our financial market activities Offset the impact of market volatility on our fee based business. We have continued to be very effective at managing costs with personal expenses down by 1.6%, and administrative expenses down by 5.7%. Depreciation is up slightly as we keep investing for growth. Our loan loss provision decreased by 15% on an annual basis and gross income was up 14% when excluding NTV.
Net income comes to more than €3,600,000,000 when excluding costs concerning the banking industry. Slide number 11. This past Q3 was the best Q3 for net income since 2007, and this is the best ever Q3 for commissions. In comparison with the same quarter of last year, operating income was up 6% with commission up 2%. Operating margin was up double digits and loan loss provisions were down 9 Net income was up 25% to more than €1,000,000,000 Slide 12, On a yearly basis, net interest income decreased mainly due to the impact on financial components of accelerating NPL deleveraging.
The effect of hedging and the reimbursement of an acquisition financing loan in September 2018. Net interest income was also affected by strong growth In direct deposits of around EUR 24,000,000,000 in the 1st 9 months, excluding repos, Debt in a low interest rate environment impacts net interest income in the short terms, but boost our wealth management engine for the coming quarters. We will continue to work hard to improve the commercial component, while continuing to manage our revenues in an integrated manner with a positive EVA strategy. The quarterly reduction in net interest income in Q3 is largely due to the impact of the NPL stock reduction and the spread component as a result of the increase in customer deposits. Slide number 13.
Despite this challenging environment, customer financial asset increased by €52,000,000,000 In the 9 months, excluding repos, to more than €950,000,000,000 we are near to the €1,000,000,000,000 mark. Assets under management increased by €21,000,000,000 in the 9 months and in the same period, family site deposit increased by €11,000,000,000 of which EUR 3,000,000,000 in Q3. The so called sleepy money collected in past years together with the EUR 100 and €72,000,000,000 of assets under administration will become the fuel of our wealth management engine and we have seen the first sign of a switch With EUR 2,500,000,000 of assets under management, net inflows in Q3 and our Private Banking division and Bancaideritore division and I'm fully committed to deliver significant growth in Wealth Management and in commission deriving from Wealth Management. Once again, in Q3, all our divisions made a positive contribution to group results. Slide 14.
Almost half of our gross income comes from the Wealth Management and Protection Business, making ISP a clear European leader in Wealth Management. This sits alongside the excellent performance of our Corporate and Investment Banking divisions. On Slide 15. Operating costs declined by 2.5%, while we continue to invest for growth in key areas The main sources of savings were workforce reduction, optimization of real estate, reduction of legal entities, a reduction of other administrative costs. We reduced the discount by 3,500 people on a yearly basis with room for further cost reduction.
We have already agreed and fully provisioned 3,300 additional exit by June 2021. On top of this, we have received 1,000 additional applications for voluntary exits to be reviewed. Further branch Reductions on top of the 1100 embedded in the business plan in the range of 1,000 is expected in light of of the Bancashinco network scale up, thanks to the strategic partnership with Cesar Pay. This clearly demonstrates our high strategic flexibility in managing costs. Slide 16, we are proud to have a best in class cost income ratio and this chart illustrates our leading position in Europe.
We have a cost income ratio about 12.3 percentage points lower than the peer average. And I I want also to highlight that the only 2 players who performed better than us in this ranking have significant operation in geographical areas with high margins that reduced the cost income. Slide 17. As you can see in this slide, loan loss provision declined to the lowest 9 month level since 2008. As a result, the annualized cost of risk The company is now down to 47 basis points, well on track to meet and possibly exceed our business plan target of 41 basis The NPL coverage ratio increased to around 55%, A level that will facilitate future deleveraging and will keep the cost of risk low.
Slide number 18, our NPL Stock is declining sharply, having reached the lowest level since 2009. The gross NPL ratio has decreased by around 10 percentage points since the peak of September 2015 to 7.6% and the net NPL ratio decreased by more than 6 percentage points down to 3.6%, the lowest level since 2009. As you know, ISP has been able to deliver this impressive deleveraging at No cost to shareholders. Slide number 19, in order to reach our targets for 2021, we need to deleverage around $600,000,000 gross NPL and around $200,000,000 net NPL per quarter over the next 9 quarter. This is more than manageable given that in the past 16 quarters, we organically deleveraged 1,200,000,000 gross NPL and €900,000,000 net NPL per quarter with a coverage that was much lower.
Slide number 12, 'twenty. We recorded the lowest ever 9 months gross NPL inflows down 75% versus 7 years ago and down 13% on a yearly basis. These results are remarkable if you consider that In the past 6 months, 200 of our best NPL specialists in the chief lending offer area we're focused on delivering the Prelius deal by supporting the portfolio selection and due diligence activities. These people are now returning to support our organic deleveraging. Slide 21.
In Q3, we strengthened our already solid capital base and we increased the buffer to 480 basis points versus regulatory requirement, well above our peers after having already accrued €2,600,000,000 for dividends in the 1st 9 months of the year. We have one of the highest capital buffers in Europe, equivalent to around €14,000,000,000 The application of Zenix Compromise has increased our fully phased income on equity ratio to more than 13% and represents and important additional buffer in view of the next EEA stress test. Slide 22. When it comes to capital strength, SP continues to be a sector and this clearly support our generous dividend policy. Slide 23.
We have a best in class risk profile in terms of the ratio of capital to financial liquid assets, so net NPL level 2 and level 3. Slide 24. At this point, I would like to share a few consideration regarding the Italian economy. Italian GDP recovered slightly in the 1st 9 months of the year and is projected to recover further in 2020, in line with the Eurozone trend. Some key indicators are supportive.
Unemployment fell below 10% beginning in May for the first time since early 2012. Gross disposable income of households is accelerating the recovery, and the recovery of residential real estate transaction is ongoing since 2015. So the rebound in business confidence In particular, in the manufacturing sector is encouraging. It could be the first sign that improved financial condition are starting to play a role. The recovery is based on the solid fundamentals of the country.
In fact, Italian companies are more profitable and better capitalized than before the 2008 crisis and well positioned to benefit from the expected economic improvement. The mix of persistent low interest rate, declining Italian sovereign spread, GDP recovery and the more than EUR 10,000,000,000,000 Slide 25, as already stated in 2019, we expect further growth in net income with a payout ratio of 80% as set out in our business plan. Slide 26. To sum up, We are very satisfied with our performance in the 1st 9 months and our delivery against the business plan targets. Derisking, we have already achieved around 80% of the 4 year business plan deleveraging target and we increased coverage.
Cost reduction, operating costs are down 2.5 percent with cost income down to 49.8%, while still investing for growth. Revenue growth, operating income is stable despite a challenging environment, and we strengthened our financial market activities to both capture market opportunity and to hedge the impact of volatility on our fee based business. And we are now working at full speed to convert again into asset under management, both assets currently under administration and the so called of Sleepy Money collected in the past few years. We are a sector leader in Europe when it comes to capital strength, which further improved in Q3. 3.
And so we are firmly on track to deliver a higher net income versus 2018 and a very generous cash dividend. So thank you for your time and attention, and I'm now happy to answer your questions.
Thank you. For your mute function is turned off to allow your signal to reach our equipment. We will now take our first question from Andrea Ungerta from Credit Suisse. Please go ahead. Your line is open.
Hi. Thank you for taking my question. I wanted to better understand the strategy here. You bought or the financial assets grew by roughly EUR15 1,000,000,000 in the quarter. I can see the split of the investments by region in one of your slides, but can you talk us through What's the yield?
What's the duration? What are you trying to achieve? And then the contribution of financial assets already accounted for close to 20 percent of NII as of June. How do you see that contribution evolving going forward? Thank you.
So thank you very much. Because I consider much better to have money in financial asset Then in cash deposited to ECB with 0 yield, so that's reality. And so That's the situation of the bank. We are so in excess of liquidity that we have to put money in some areas. And considering that today, we are just serving the demand that we have on the loan book, we are investing in financial assets with A significant degree of diversification because in this quarter, we increased much more the diversification of our portfolio.
So the increase In all the other countries, government bonds has been much higher than the one that we invested in Italian government bonds. And at the end, we are just working on reinvestment of excess liquidity. This will bring us to have Other increase in net interest margin deriving from financial assets, but considering that A portion of this is also in the availability of Banca EME. I cannot tell you the possible
And we will
And we will now take our next question from Adrian Cighi from RBC. Please go ahead. Your line is open.
Hi, there. Two questions from my side, please, staying with net interest income. You have another impact this quarter from lower nonperforming loans. Given your relatively high interest from impaired loans, 13% in the first half of this year, how do you expect the reduction plans for NPLs to impact NII, especially when you're moving towards your 2021 target, what would you envisage this figure will be? And then just maybe one Follow-up on net interest income.
Can you give an outlook on the customer margins, post the introduction of TLTR 3? At the industry level, we see significant margin pressure. Is this what you're seeing on the ground as well? Thank you.
So I have to tell you that we are not seeing significant to Merger Margins on the Ground. So that's reality. Some months ago, I was waiting for a much higher competition. Today, I have to tell you that customer margin from our side are not under significant pressure. On NPL, it is true that NPL reduction is bringing some negative net interest income, but it It's part of the story of deleveraging.
You have less net interest income, much but at the end, a much higher benefit on provision. So net net on an EVA basis, it is positive. So because I'm focusing on generating value for my shareholders and not to increase net interest income for my shareholders. At the end, I think that it is the right way to manage the organization.
Perfect. Thank you.
We will now take our next question from Giovanni Razzoli from Equita. Please go ahead. Your line is open.
Good afternoon to everybody. Two questions. The first one is, in light of what Very strong growth in deposit that you had in the quarter. I would like you to share once and for all with us your view about the Negative deposit rate on customer. We've seen a little bit of noise on the market.
Your Chairman has already stated that you are not about to apply those measures on the customer. So if you can elaborate a bit more on these? And the second question, in the 9 months, you have already accrued €2,600,000,000 of dividends. You are sitting on an extremely comfortable capital position. You've shown us you have top league in in Europe in terms of common equity Tier 1.
And your stock offers a 9% dividend yield. So the market He's quite uncertain about the sustainability of your dividend policy. I was wondering whether the Board or as a CEO, you may Consider proposing to the Board of TobiGM the payment of interim over quarterly dividend, so to further increase the visibility of your dividend policy. Thank you.
So on interim dividends, This is a point that we are trying to analyze in more details. There could be But we are still evaluating. We are not only the strongest bank if you look at capital, But by far, a capital buffer that is very important if you want to analyze our sustainability in terms of payment of strong dividend, obviously, related to growth in net income. But at the end, Our capital position and our ability to generate sustainable net income is so strong that I have to tell you that it is not so difficult each quarter to beat the expectation of of the analysts that are just waiting us not to deliver in terms of possible payment of dividends. And that's one of my preferred to deliver on dividends.
The second point on deposits. Deposits is And so negative interest rates. On deposits, we are looking and we are seeing on our figures A significant growth in deposits that has a component of corporate deposits that is not the majority of The increase, but we have also corporate deposits. These are mainly related to the postponement of investment from the corporate sector in Italy. So That's another evidence of positive trend in the financial conditions of the Italian companies.
On the other side, what for us is much more important is the increase in side deposit from retail. In this area, we are increasing in a significant way the amount of deposits. There is one reason related to This disposable income of the Italian families, but also some switch from other banks into Intesa Sanpaolo. And generally, we are able to work this new money to convert into wealth management. That's the evidence of this quarter.
And we are starting again with all the list of names of clients that Our people in private banking and bank territory division are working in order to convert into wealth management. That is the reason why we are not considering at all to apply negative interest to our clients. All our relationship managers are really committed to work in terms of converting into wealth management. In this environment of spread below 150 basis points and in my view with opportunity, If government will make the right job to be with a spread between the below 100 basis points It's really something that can be and that can result in significant growth in assets under management for my company and saw significant increase in fee and commissions.
Thank you, Zvi. Very clear. Thank you.
We will now take our next question from Christian Carrese from Intermonte. Please go ahead. Your line is open.
Hi, good afternoon. The first question is on TLTRO If you can share with us what do you think could be the take up of the UT LTRO and the impact of the combined action by ECB for your bank. Second question is on business plan target for 2021. You have already done a strong derisk in reaching 80% of business plan targets in terms of NPE reduction, cost of risk below 50 basis points. So we're on track to reach the 40 basis points in 2021.
And you have already beaten your target in terms of employees reduction on a voluntary basis. Unfortunately, we know that interest rates Lower than your projection at the time of the business plan. I was wondering what are the levels According to your thoughts to reach the EUR 6,000,000,000 net profits in 2021, You just said there may be more commission rather than interest income. So if you can give us some color on that. Thank you.
So I'm really concentrating on delivering on all of my promises, short term in medium long term promises. So it is clear that the environment is different from the starting point of our business plan. We are pretty strong in working on contingency plan. And in terms of cost reduction, For sure, we have significant room to continue to reduce cost base. We have significant Opportunity to improve the provisions due to the significant reduction in non performing loans and not only commissions, But also insurance business, because if you look at the insurance, in this quarter, you have the first evidence of what on property casualties we are delivering.
All the growth In this quarter is deriving from growth in property and casualty business. And on a yearly basis, the increase in terms of Revenues from property and casualties is more than €40,000,000 So it is not Such a significant amount in absolute terms, but if you look on a delta basis, this means that we are accelerating in a significant way. So Do not underestimate the fact that with the recovery of Wealth Management, the recovery of insurance business and in amount of profits from trading that we remain much higher than the past trend of Intesa Sanpaolo because we increased The operational activity of Banca EME concentrating all the activity in the hands of Corporate Investment Bank Division, I think that we can continue to look at our business plan as absolutely reachable. Looking at TLTRO, TLTRO, we will take TLTRO For an amount that could be lower than the one that we have already embedded in our figures, that could be more close €50,000,000,000 then to €60,000,000,000 This will be the total amount of TLTRO III that we will take in the next months. And on tiring, we expect benefits during the net twelve
Thank you.
We will now take our next question from Domenico Santoro from HSBC. Please go ahead. Your line is open.
Hello. Good afternoon. Thanks for the presentation. A number of questions from my side. I will be quick.
First of all, on the NII. I was wondering whether there will be more purchase of mortgages portfolio or other kind of portfolio, the one that you similar to the one that you did with Barclays, given that there is no much lending growth in Italy, but you have a solid deposit base. On fees in the Q4. I remember last year, there was some volatility, positive volatility because of investment banking, leasing, bank I was wondering whether we should expect the same also in the Q4. On capital, any regulatory headwinds left EBA guidelines of other.
And I wonder whether you have also an updated guidance for Basel IV and the operational risk in particular. On tax rate, can you help us to understand why your tax rate is so volatile quarter by quarter? This is what It was quite high in this quarter. Is it because of the geography or the business where most of your net profit comes from? And then just a curiosity on risk, how much is due to the Danish Compromise?
How much of the increase in the quarter? Thank you.
So thank you very much for this long list of questions. I will answer line by line. So on net interest income, We are planning to have other acquisition of mortgages portfolios. So yes, We will continue to buy mortgages portfolios. Volatility on the 4th quarter, I have to tell you that My expectation is that the Q4 will be, in any case, a quarter in which we can have some seasonality related to cost, some Seasonality related on provisions, some good performance in terms of commission and performance fee and some Trading continue to have positive on trading.
So net net on the Q4, I do not expect Some trend that could be not in line with the usual 4th quarter trend. On capital, I don't see any kind of threats on our capital base. The impact of The EBA still remaining is in the range of 40 basis points next year. So that's between next year and 2021. On Basel IV, we remain with 80 basis points.
That is our best estimates on Basel IV. On tax rate, It is clear that we have Corporate Investment Banking activity, some geographical activity. And we when there is Less contribution of Corporate MS and Banking, it is probably more significant impact on Italian, but this is The normal trend on risk weighted assets, we have an increase of roughly €15,000,000,000 of risk weighted assets coming from Danish Compromise.
Thank you.
And we will now take our next question from Andrea Filtri from Mediobanca. Please go ahead. Your line is open.
Yes, good afternoon. First question on fees, if you could please detail the contribution in the quarter from upfront and performance fees. Following that, on NII, could you please detail the contribution from the bond portfolio to NII in Q3 and the quarter on quarter comparison. And out of the EUR 14,000,000,000 new purchases this quarter, Would it be possible to detail the circa EUR 2,000,000,000 which do not belong to the bonds category? And finally, just on capital.
Why is the transitional ratio up 40 basis points while the fully loaded is up 80 basis points? Thank you.
So the transitional, the benefit on So Danish Compromise is much lower than in terms of benefit of capital. So The major contribution is on the fully phased in. On the fees income, the performance fee, I think something like €10,000,000 in the quarter and the rest is mainly recurring fees and there is no significant deviation from the trend of the other and conference call. Our net interest income contribution is in this quarter is more or As in line with the other quarters related to financial contributions, because the main driver for Production has been the non performing loans deleveraging. And sorry, on EUR 14,000,000,000 The increase in government bonds, what we want to know?
The component that is not part of the bonds category. I calculate it's around €2,000,000,000
So Del Frate and Tamanini will give you all the information.
Thank you.
And we will now take our next question from Antonio Reali from Morgan Stanley. Please go ahead. Your line is open.
Hi, good afternoon. Thank you for the presentation. I've got 2 quick questions, please. One on fees and the second one on MII trading. The first one, the current market is back on seeing positive inflows in assets under management, And you mentioned €172,000,000,000 of assets under custody and €65,000,000,000 of household side deposits.
What percentage of that you see as being a sleeping money, as you mentioned? How much can you realistically be targeting for conversion in net new money growth. I know you have internal targets for conversions. Any color you can share will be very helpful. Second question on trading gains.
We've seen strong performance from Banco Eimi. I have two points, Please, sir. One, what do you expect to be the NII headwinds, if any, from the lower contribution from the GOVIZ book as you crystallize those gains? And secondly, if you could quantify how much trading gains you could book from your insurance book. I understand that there could be some significant potential from Trading Dans also from the insurance policy.
If you could share the reserves amounts will be also helpful. Thank you.
So on insurance business, we have a solvency ratio that is 2 25 percent With the capital gain unrealized that are more than €7,000,000,000 then a portion, a significant portion is of our clients The portion is of Intelsan Barlow, but it is for true a significant amount. Looking at the Trading gain and the impact on net interest income, I don't see significant variation on this So I have to tell you in my views that it is not significant. On fee income, the percentage Conversion is the real key driver of our increase for 2020 2021. My people are working hard on these areas because we are starting from the list of clients and working on the kind of attitudes of the different clients. I can tell you that the portion that is really that it is Possible to transform into asset under management is really significant.
I cannot tell you that this could be all in 2020, but my expectation is that we can deliver in an environment with spread below 150 basis points, We can deliver a significant performance close to the one that we gave to the investors in
conference call. Thank you. Please signal by pressing star 1. We will now take our next question from Alberto Cordara from Bank of America. Please go ahead.
Your line is
line. Hi, good afternoon. This quarter you posted another good set of results, very good bottom line. So the question to you is, it seems to be quite obvious that you're getting close to reaching your target for the year, which At the beginning of the year, the market was a bit skeptical about that, but I think everybody has to review up all their estimates to take So the second question is, can you push yourself a bit more forward? What about the dividend?
Do you think you can equalize the dividend that you pay also the previous year, I think, the $0.20 Or do you feel that you shouldn't commit to this target at this stage? And then the other question is, if you I mean, we continue to see in the case of Mintesi also a story of KOS Katyn, which is shaping up very well. If you can talk to us about the additional benefit that you can extract from closing branches after your agreement with the CECL and what that could imply in terms of cost cutting benefit. And finally, the very last question. We saw yesterday a negative news about Ilva.
If you can give us your opinion on what's going to in this industrial situation in Italy. Thank you.
So we start from the last one because as you know, in Italy, it is not easy to make Normal think as in other countries. But let me not make comments on what's Because I think that it is very important that in this phase, the Mittel counterpart in the government I can try to reach some form of agreement if they are negotiating on this subject. Related to Intero Sao Paulo, we had in our forecast All the opportunities and threats that today we can understand In what can happen in the future for all the different assets and liabilities for Intesa Sanpaolo. But on the Ilva side, I think that It is much better to wait some days in order to better understand what's happening. On looking at the net income and dividends.
So on net income, it is clear that we will deliver for sure Net income that will exclude the net income of 2018. That's the part of the targets that I'm really committed to deliver. And as you told, there was a very limited number of analysts and investors that was with me in considering this target achievable. Today, I can tell you that I'm pretty sure to deliver this point. On dividend side, you know the rule of 80%.
It is also my favorite job to pay dividends, but let's wait for the last quarter of 2019. On cost cutting, the closure of branches is something that Can bring us really significant advantages because we are able not only in reducing costs that are related to the branches, but also to create the right combination between reduction Branches and Movement of People and Reduction of People. So that It is something that can allow us to reinforce the savings that we can have from the reduction of branches also with savings that are related with the administrative expenses connected with the reduction of people. So For us, the closure of branches is something that can bring really significant advantages and also in a timeframe that is Not so significant. So our expectation is that we can close a further Number of branches and we can derive a significant contribution to reduction of cost also in the next years.
Thank you very much. Thank you.
Please press star 1. We will now take our next question from Ignacio Tereza from UBS. Please go ahead. Your line is open.
Yes. Hi, good afternoon. A couple of questions from me. First one is, if you can give us an update on your funding plans on the wholesale side? And second, if you can share with us actually what you're thinking of doing additional UTP or NPL disposals.
Thank you.
Sorry. Hello. Yes. Sorry, on funding plan, I will leave the floor to Stefano Punta. But on likely to pay, our expectation is starting from Nexportin, in which we will have Again, people working on this area of reduction in connection with Prelius that we can accelerate the reduction organically.
If there could be opportunity to work without impact for our shareholders. So working with no cost to our shareholders, we can consider also to make some other disposal. So I will leave the floor for funding plan to stay.
Yes. On funding plan, I mean, we have done a lot on the Q3. So I mean, we are more or less Okay. For DIA, we will do something more in the Q4, but don't expect too much. As stated in many occasion, no senior, no filed in 2019.
So it will be preferred issuances. 2020, we will see when we The next letter from SRB, but certainly, if we go for similar preferred, it's going to be later in the year. We might be doing something in the area of sustainable bonds because we have a lot of things going on in this area. And if we have enough, we can do something there also in the context of 2019.
Thank you.
It appears there are no further questions at this time. Mr. Messina, I would now I'd like to turn the conference back to you for any additional or closing remarks.
So, no. Thank you very much. And let's look at Last quarter results that will be positive and you will be happy with our results. Thank you very much.
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