Welcome to our first half 2023 results conference call. This is Carlo Messina, Chief Executive Officer, and I'm here with Stefano Del Punta, CFO, Marco Del frate, and Andrea Tamagnini, investor relations officers, and Luca Bocca, Head of Planning and Control. Also with us today are Massimo Proverbio, the Group Chief of our Technology and Data, together with Paola Papanicolaou, Head of Transformation, Stefano Barrese, Head of Banca dei Territori, together with Virginia Borla, Head of the Division Business Governance, and Tommaso Corcos, Head of our Private Banking Division. They are here with us today because I will not only walk you through a very high-quality set of results, but we will also give you a preview of our tech transformation that is moving quickly, thanks to significant investments.
Massimo, Paola, Stefano, Virginia, and Tommaso will help me to answer all your questions on technology and the two important digital business initiatives we launched recently, Isybank and Fideuram Direct. We have just closed the best six months ever, with net income reaching EUR 4.2 billion, of which EUR 2.3 billion in Q2. They were the best six months and the best quarter since 2007 for net income, and they were also the best six months and the best quarter ever for operating income, operating margin, and gross income. Strong results means that we can raise our full year net income guidance to well above EUR 7 billion. Looking ahead, 2024 and 2025 net income will be higher than in 2023. Rewarding shareholders while maintaining a solid capital position is embedded in our DNA.
Our dividend yield is the highest in Europe at 11%, 11%. In the first half, we accrued cash dividends of EUR 3 billion and completed the EUR 1.7 billion buyback. In November, we will pay an interim dividend of at least EUR 2.45 billion to shareholders. We remain committed to a 70% cash payout ratio, and any additional capital distribution will be evaluated year by year. We are highly profitable, liquid, and capital solid. Russia exposure was down even more, close to zero, and we further strengthen our zero NPL status. The common equity ratio is at 14% before the Q2 impact from the voluntary deduction regarding calendar provisioning, that will give us benefits in the future in terms of Pillar II requirements and cost of risk. Considering DTA, common equity stands above 15%.
Taking into account our very low risk profile, it is clear that we have a significant excess capital that can be returned to our shareholders. In Q2, customer financial assets increased by EUR 37 billion to EUR 1.3 trillion, with an increase of EUR 20 billion in direct customer deposits. After this set of excellent results, let's turn to our digital journey. We are going all in our tech transformation and evolving fast. We see a need for speed that is all about building the bank to succeed in the next decade. We have already invested EUR 1.8 billion, EUR 1.8 billion in technology while building Isytech, the tech backbone of our group. Leveraging Isytech, in June, we launched in less than one year, our state-of-the-art digital bank, Isybank, based on cloud technology.
In this case, we demonstrated to be a delivery machine, delivery machine, like in wealth management protection, like in, in NPL, and now in technology. By Q1 next year, we will already have more than 2.5 million Isybank customers. In addition, 2 weeks ago, we launched Direct Advisory as part of our Fideuram Direct digital offering, creating Italy's first network of wealth advisors working exclusively through online channels. We are also investing heavily in artificial intelligence. All these initiatives will generate an additional EUR 500 million gross income in 2025, on top of what is already included in our business plan. These are in addition of what is already included in our business plan.
We are here not only to deliver strong results in the short term, but also to build a bank that can continue to be a leader in the future, the leader in the future. Let me say a few words on the macro situation. The economy is already showing better than expected growth this year, and I remain positive, as inflation is going down, and this will help the Italian economy to continue growing. Of course, we are very sensitive to the fact that many families and businesses are struggling due to inequalities, and we remain committed to supporting them. We are also stepping up our many social and climate initiatives. All our stakeholders, not only shareholders, but also ISP people, the public sectors, households, and businesses, benefit from our excellent performance. I'm proud of our results, and thank our people for their hard work.
Now let me turn to slide one to see the highlights of our first half results. Slide one. In a nutshell, we delivered the best six months for profitability and NPL inflows. Stock and ratio remained at historical lows, driving the cost of risk to just 25 basis points. Capital remained rock solid, despite the impact of the vast majority of the expected regulatory headwinds. Slide number two. In this slide, you can see the positive evolution of net income, up 80% on a yearly basis, and 10-year increase in terms of delivery of profitability and net income. Slide number three. The all-time high results achieved in these six months means that we can comfortably improve our guidance for this year to well above EUR 7 billion. When I say well above, I really mean well above. Slide number four.
Our excellent six months performance confirms the success of our business plan formula, based on a full range of concrete industrial initiatives. More than 80% of these are ahead of schedule. Slide number five, very important. Looking ahead, we expect net income of the next two years to be higher than 2023. 2023 is, can be considered as a floor. Given further growth in net interest and insurance income, coupled with recovery in commissions and profits from trading, cost reduction enabled by technology, already agreed voluntary exits of people, and easing inflation. Low cost of risk, thanks to low NPL stock, existing high quality overlays, and no one of these are related to Russia, because we have zero exposure, just EUR 100 million in the local bank exposure to Russia. Voluntary deduction from common equity of the impact of calendar provisioning.
You can add also lower levies and other charges concerning the banking industry. We have always over-delivered on our promises. Now, let's move to slide seven for the details of the first half results. Slide seven. Very briefly, in the first six months, net interest income was up almost 70% yearly. The total contribution from net interest income, commissions, and insurance was up 28%. Provisions declined significantly, and net income reached EUR 4.4 billion when excluding the final contribution to the Resolution Fund. Slide number eight. In Q2, net interest income increased 10% quarterly. Commissions started to recover, and insurance income was up 16%. Net income was up 16% quarterly, and 74% yearly. Slide number nine. In this slide, you can see the strong acceleration of net interest income.
Net interest income is expected to exceed EUR 13.5 billion this year. Further growth is expected in the next two years. Slide number 10. Net interest income growth was driven by the spread component, which is benefiting from the increase in market rates. Slide number 11. In Q2, commissions were up 4%, and insurance income registered the best quarter ever, with a growing Property and Casualty contribution expected to reach EUR 800 million in 2025. Slide number 13. Costs are down when excluding depreciation for tech investments and the increase in energy prices. In particular, administrative expenses were affected by a EUR 44 million yearly increase in energy costs. Will be down net of these components. With energy prices now well below pre-war level, administrative expenses can revert to the usual downward trend.
Obviously, expenses are also impacted by the strong investments that we are delivering on technology. Slide 14, our cost-income ratio stands among the best in Europe. Please turn to slide 15 to see how Intesa Sanpaolo asset quality continues to be strong. The net NPL ratio is at 1%. Net PL, net NPL inflows remain at historical low, and Stage 2 loans are down 11% quarterly, and more than 30% yearly, reaching only EUR 37 billion. Compare our Stage 2 with the, with the Stage 2 of other peers in the market. Slide 16. NPL stock and ratios are among the best in Europe. Really impressive, the figures of the net NPL stock that we have. Only Nordic banks are better than Intesa Sanpaolo.
Slide number 17, our analyzed cost of risk stood at just 25 basis points, and NPL coverage increased to 49%. We are not seeing signs of asset quality deterioration. Let's move to slide 18 for an update on Russia. In Q2, we further reduced our Russia exposure, which is rapidly approaching zero. Slide number 19. The common equity ratio is at 13.7%, despite absorbing the vast majority of expected regulatory headwinds, and after, and after a 30 basis points impact in Q2 from the voluntary deduction related to calendar provisioning, thus reducing Pillar II requirements and lowering future cost of risk. Considering BPA, the common equity ratio stands above 15%.
As you can see, we clearly have significant excess capital in each year of the business plan, and this excess capital will be evaluated year by year to be redeployed to our shareholders. Slide number 20, we maintained a best-in-class liquidity position. The Liquidity Coverage Ratio and Net Stable Funding Ratio are well above regulatory requirements and our business plan targets. We have a very diversified and sticky deposit base. Let's move to slide 21 for more detail on the liquidity position. Liquid assets and unencumbered eligible assets increased in Q2, and cash with the ECB is significantly higher than the remaining TLTRO. Slide number 22. I'm very proud that our excellent results allow us to support all of our stakeholders in a significant way. Currently, talks with banking sector trade unions are taking place regarding a new national contract.
I fully support paying our people more to compensate the impact of inflation, and technology and efficiency will offset this cost. ISP people truly are our most valuable asset. Let me remind you that we have the highest dividend yield in the industry. An increase in net income and sustainable net income, not short-term net income, and so in cash dividends, sustainable cash dividends, is also favoring an increase in tax revenue for the state. 40% of cash dividends go directly to Italian households and to foundations to support their charitable programs for local communities. Slide number 23. Intesa Sanpaolo has a duty to leave a positive mark on society, and to support the transitions towards social, cultural, and environmental improvement. In this slide, you can see our leading ESG position in the main sustainability indexes and rankings.
We remain committed to being the world's number one impact bank. Some companies are backing down on ESG. We are moving ahead. At the end of this presentation, you can see the slides on our many social and climate initiatives. Let's move to slide 25. I strongly believe that to remain a leader in the next decade, you need two things. The first is a well-diversified and resilient business model, mainly based on wealth management and protection. The second is to best serve customers. Today, this means meeting their demand for digital services, and so we must position the bank to be a tech, a tech leader. ISP is already moving ahead, and we reinvented our I.T. core to lead the market today and tomorrow. That is why I want to spend a few minutes on our digital journey.
This really sets Intesa Sanpaolo apart from our peers. We are on a different planet. Our digital strategy relies on three pillars. First of all, Isytech, which will become the technological backbone of the entire group. Our new digital channels, like Isybank and Fideuram Direct, attracting new clients and better serving our customers. Third, artificial intelligence to further unlock new business opportunity, increase efficiency, and manage risks. This action will generate already in 2025, a benefit of EUR 500 million additional gross income, mainly coming from cost, on top of what is already included in our business plan. I want to leave the floor to Massimo Proverbio, Paola Papanicolaou, Stefano Barrese, and Virginia Borla, and Tommaso Corcos, to walk you through the pillars of our digital strategy, starting from slide 26. Massimo.
Thank you, Carlo, and good afternoon to everybody. Starting from the first pillar, Isytech is our cloud technology backbone that we developed together with Thought Machine, the innovation leader in this space. Leveraging the cloud partnership with Google and TIM that we set a few years ago. Isytech is up and running and is already being successfully deployed for our mass market retail client through the digital bank, Isybank, which Stefano will discuss in a moment. Isytech will be progressively extended to the entire group, across clients, segments, and countries. We have already significantly invested in technology with EUR 1.8 billion already deployed, and more than 1,200 IT specialists hired since the beginning of the business plan. We will keep investing. Please turn to the next page, page 27.
On this slide, you can see why Isytech is a new, unique, and distinctive platform. It is cloud-native with flexible cost, modular with fast time to market, secure and resilient by design, scalable across segment, product, and geography, and real time with instant response. It is important to notice that we are the first leading bank to migrate the entire core banking system to the cloud. As said, Isytech was the foundation for the launch of Isybank, and now I leave the floor to Stefano Barrese for a brief overview of our new digital bank, starting from slide 28.
Thank you, Massimo. Good afternoon from my side. It's a pleasure to be here with you to talk about an initiative which is a landmark from an industrial and strategic point of view. I'm really proud of the launch of Isybank. Our people did an amazing job. Even Thought Machine CEO said he had never seen a digital bank launched so quickly. In less than one year, we were able to develop a top-notch solution, strongly appreciated by the market, with more than 10,000 accounts already open. Opening a new account is very fast and easy, requiring less than three minutes. The user experience is unmatched, and using the app is simple and intuitive. Slide 28, 29.
As you can see on this page, we have not only developed the most innovative banking platform in comparison with our traditional competitors, but we can also proudly say that Isybank stands out among digital challengers, with the most complete and innovative offering on the market. This makes us ready to win against fintechs. They will not have a chance to erode our revenue base, and this is not the case for most of our competitors. This will generate important benefits for our group. By Q1 next year, Isybank will have over 2.5 million customers, and around 5 million in 2025. This is an additional 1 million versus our business plan. Isybank will drive around EUR 200 million additional gross income versus the business plan. Slide 30. On top of its tech leadership, Isybank enjoys a unique service model.
Even without physical branches, we will always give our customers a human touch, with more than 2,000 people dedicated in our digital branch. Thanks to its branch-free service model, coupled with cloud technology, Isybank enjoys best-in-class efficiency, driving cost income below 30%, with serving mass retail customers, a segment that normally has a high cost to serve. It is much lower than the already low 42% cost income that we have at a group level. Let me hand over to Tommaso, who will explain, starting from the next slide, how we are using digital in wealth management.
Thank you, Stefano. Good afternoon to everyone. A couple of weeks ago, right after Isybank, we also launched our sophisticated Fideuram Direct platform for wealth management customers who want to invest online. It's a three-pillar strategy. Fideuram Direct offers: a team of financial advisors working in pool and available online anytime, anywhere, and empowered by BlackRock's Aladdin, the best-in-class robo-advisory platform. Second, the possibility to self-invest in a broad range of ESG products selected by Fideuram Asset Management from among the best funds of international asset manager, and a top-notch platform for heavy traders.
Thanks to Fideuram Direct, we will strengthen the leadership of our private banking division, targeting 150,000 clients by 2025, capturing a new segment of digital investor, representing a potential market of around EUR 150 billion in 2027, and also exploiting the full potential from the existing customer base. This is a significant growth because these new clients represent 20% of the customer base of Fideuram. It is by far the Italian market leader. More than 1,000 private banking customers have already subscribed to the new advanced trading services. The message that I want to convey is that this is a compelling story of future growth in wealth management that combines the strength and competencies within Fideuram and the technological acceleration of Intesa Sanpaolo Group.
I now hand back to Massimo Proverbio for a brief overview on slide 33 of the first pillar of our digital strategy, artificial intelligence.
Thank you, Tommaso. This is a very important topic. On this page, you can see a snapshot of what we are doing on AI. Artificial intelligence has huge potential, and at the same time, its responsible and ethical adoption is critical. That is why we are embedding this responsible approach into all the work that we are doing in artificial intelligence. We are developing our AI program acceleration in-house, and we leverage more than 300 internal specialists that we had and that we have on the market, as well as our research center, CENTAI, and several partnership that we have with selected leader, like Google and academic institution in Italy and abroad.
We have already deployed 35 artificial intelligence use case, and we'll reach 140 use case in the next couple of years, generating EUR 0.5 billion benefit in gross income at present rate, of which EUR 100 million in 2025, on top of our business plan. I now leave the floor to Carlo for the conclusion and outlook, starting from page 35.
Thank you, Massimo. I think it was really important to take some time to look at our tech evolution because this is where the ISP of the future begins. Remember, my people are at your disposal to make any kind of drill down you want on these items that I consider really strategic for the future and the differentiation of the bank, because through these initiatives, we are taking an absolute competitive advantage, moving into cloud and using the best digital bank that you can have, not only working in Italy, but then working outside of Italy. That's really part of the strategic story of the bank, and it is one of the most important lever to reduce costs for the future, not only in Italy, but also working with our international subsidiaries.
We are talking about really one of the most important steps that we are taking in our history. Now, let me say a few words about the Italian economy, which is strong, thanks to solid fundamentals, world-leading household wealth, and very resilient SMEs. Growth for this year will be higher than previously forecast, and lower than expected energy prices will help easy inflationary pressure, and as inflation slows, the economy is set to continue growing. As you can see in this slide, Intesa Sanpaolo is far better equipped than its European peers, thanks to our rock-solid capital base and well-diversified and efficient business model. Slide number 37. This slide recaps how ISP is well equipped to further succeed in the future.
I will not go through all the points, but let me highlight that we remain a wealth management protection and advisory leader with fully owned product factories, 1.2-1.3 trillion in customer financial assets and zero NPL. We are set to succeed in any interest rate environment. Let me emphasize that our management team is strong, longstanding, and cohesive, and today, you had the opportunity to hear from some of them. Slide 38. Just let me add that today, at this table, Luca Bocca, Paola Papanicolaou, and Virginia Borla has an age that is in the range of the 40 years. We are talking about people that can remain in the organization minimum in the next 20 years. This slide recaps how ISP is well-equipped to further succeed in the future.
I will not go through all the points, but let me highlight that we remain a wealth management and protection company. Just to emphasize wealth management and protection company, because I consider this, the most important part of the story of Intesa Sanpaolo, adding now the technology. Wealth management, protection, and technology are the key basis of Intesa Sanpaolo. Slide 38. To finish, let me turn to the outlook. After delivering the best ever six months, we can upgrade our 2023 net income guidance to well above EUR 7 billion, and this is a floor for the coming years. Record net income will enable us to reward, in a significant way, our shareholders.
At the current share price for this year and the next two years, we will deliver a dividend yield of at least 11%, taking into account a payout ratio of 70%, and also taking into account the sustainability of our net income. Today, due to the sustainability of net income, and due to our current market cap, and due to the payout ratio, our dividend yield is, and will remain 11%, apart from strong increase from market cap, that in any case, will leave the dividend, the cash dividend of the bank at the peak of the sector. Additional capital distribution will be evaluated year by year.
Also, on this point, coming at the end of the year and increasing our common equity, and also the portion of capital ratio that is exceeding the minimum level, we are increasing also the feasibility of potential capital distribution at the end of the year. In closing, I want to repeat, we are going all in our tech transformation, while delivering excellent performance. This is what it takes to build a bank that continues to succeed over the next decade. Intesa Sanpaolo is a dividend tech delivery machine. Thank you for your attention, and we are now happy to answer your questions.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone if you have any question, and wait for your name to be announced. You are kindly invited to ask no more than two questions, so as to leave room for other participants. Thank you. We are now going to proceed with our first question. The question comes from the line of Antonio Reale from Bank of America. Please go ahead with your question.
Hi, good afternoon, everyone. It's Antonio from Bank of America. I had two questions, but with, of course, the entire team available, it would be a shame not to ask on, one on Isybank. One on your online bank, one on capital distribution, and, and very quickly, just on the NII outlook, if I may. Don't take it the wrong way, I don't really mean to be provocative on this, but we've seen a myriad of online banks being launched, globally in the last few years. Large pots of investments thrown at some of these platforms with mixed and, and clear returns on some of those investments. My question for you and your team is: what makes Isybank different versus the other online banks we've seen? Why the launch, now?
Is this going to have positive contribution to the group cost-income ratio of Intesa Sanpaolo? That's my first question. The second question is on capital distribution. Your capital ratio is back at 13.7, and that's including regulatory headwinds, fully booked until Basel IV, if I understand correctly. You now have strong organic generation, as you've pointed out in your guidance, and you're gonna continue to grow your excess capital to 15% and above, if we include the DTA absorption. You've stated that you'll assess distribution on an annual basis, which I think suggests you want to continue pay some of the success to your shareholders. My question is: how should we think about your dividend or capital distribution policy going forward?
Do you have a go-to CET1 ratio level in mind, at which you want to run the bank? Lastly, on your NII guidance beyond 2023, you're telling us that NII is going to be above EUR 13.5 billion this year, and that it will continue to grow further in 2024 and 2025. Look, that's, obviously, that's a powerful statement. So can you talk a bit more about the outlook for NII beyond this year, and what you expect the key growing drivers to be? Thank you.
Thank you very much. Just, just a point I will leave the floor, the floor on Isybank, to Stefano Barrese. Just to give the difference between Isybank and, and the other banks, there is a specific slide on, on the support coming from the digital branches. Stefano will, will give you this point. For this part, as I'm explaining, if Massimo want, want to add something, Massimo is free to, to do, to do this, this point. The, the, the real point for, for the strategy of the bank, for, for the technological strategy of the bank is not Isybank, is Isytech. Sorry to, to, to make this point, what we consider really strategic is Isytech.
Working with both machine and cloud, we prepared the system for the future, and we are testing in Isybank. This kind of exercise is not easy, so I have to tell you that absolutely not easy. The very important positive point is that it's working, and it is working in Isybank, that we will have the possibility to test until 4 million-5 million of clients. What we want is to prepare Isytech to be the cloud base for the group. This will reduce all the majority of the, in the medium term, not in the next two year, but of the mainframe, the legacy, the procedure, all the cost that it is difficult to reduce. In this way, we will have the best system for all the segments of the bank.
It is not only a matter of Isybank. The exercise that we are doing through this best-in-class, and it is really similar to only one bank in the world, that is J.P. Morgan, is to work for something that could be the system of the bank. Isytech is the real point of difference in, in the strategy of the bank. Digital bank is fundamental for us, because it's the way in which we are able to defend the revenues of the mass market in Intesa Sanpaolo, and at the same time attacking, because at the end, we will move to, to make the acquisition of clients. In this slide, you see that there is 1 million clients that we are considering as a target, and this will be the way in which we are making the job of the fintech.
This will be also the instrument in which we can tap the different European markets, working in our international subsidiary, but also outside from our comfort zone. This project is really strategic, but moving from Isytech, from the platform. I don't know, Massimo, if you want to add something on this point, and then I will leave on Stefano on the commercial part of the story.
Yes, thank you, Carlo. First of all, Isybank is a new modern design with a user experience, and as Stefano described before, it enables to open an account in less than five minutes. This is pretty much unique. As well as it offer a support, a full-fledged offering. It's fintech-like, but it's much more than fintech. The additional part is that it's designed to be international, not only cloud-native, but also international. This unlocks the potential of Intesa to exit from Italy. Another point, another key point is that enables a full visibility of data. As part of the Isytech platform, we are envisaging a cloud-based, full visible data that will enable also the AI approach that we just described.
I would say, it will support both more digital and more physical clients, and this is also pretty much unique. Please, Stefano.
Before leaving the floor to Stefano, the slide in which we represented the products of the bank is unique because this product will be the product of Intesa Sanpaolo. It is not only the product of Isybank. This must be the product of all the segment of Intesa Sanpaolo. We are creating a bank that, at the end, should be the backbone, the IT system of the group. That is really the most important step that we are creating with these investments. Stefano, if you want to elaborate on...
Thank you. Thank you, Carlo. Just, just summarizing the, the, the points. Clearly, Isybank is something that is considering another layer into the bank, new layer completely, because it's based on this platform that is state-of-art and the best in the market, so clearly cloud-native, and something that is not really typical today in the banking industry, in the size that we are now using in Intesa Sanpaolo. On the other hand, it's clear that in the market, we have lots of possible potential customers that are not clearly the same that we had in the past, so customers that that are comfortable in using principal, the physical channel. So we now are launching, and now it's still in the market, Isybank, that is working with the type of customer that they do not want to use the physical, the physical channel.
We provide them the possibility to have, if they want, the digital branch, so lots of colleagues that are there, ready, ready for not just only information, but only to support their journey, commercial journey. The other point is that, as you, as you, as you listen, that we are leveraging the offering of the group. It's clear that we started with transactional transaction operation, and for the moment, a few type of products on lending, but we have the target to extending the offer, not just only on this product, but also to investments and insurance. We are now building, probably, from my point of view, but it's clear because we are now also collecting lots of positive feedbacks, that the best digital bank commercial in the market.
Not just only as most of the cases that we are now in the market. B ank that are just only transactional, but something that is very broad in terms of the offering. The chance is very big, and as you as you listened, is not just only concentrating in the Italian market, because the engine, so the, the tech, so the Isytech, is a platform that is multi-currency and multinational. Will be also used for the internationalization, starting by, for example, our, our, foreign, foreign banks. Just to, to give this point to you and to give the evidence that through these, technological instruments, we are not creating a threat for the person within the organization, but also opportunity in the bank. That is fundamental if you want to maintain motivated people in an organization of 100 people, like Intesa Sanpaolo.
Coming back on capital distribution and net interest income, that I know that are the, the key point of the, the interest of the analyst, but also of the investors in this moment. Looking at capital distribution, the minimum capital that we are considering remain 12%. 12% has already embedded a portion of excess capital, because our real condition in terms of risk profile is below 12%, but in any case, considering 12%. This is the level, the minimum level of capital that I can confirm Intesa Sanpaolo wants to maintain. This does not means that all the capital in excess of 12% will be given in one solution as redeployment of capital.
Just to have the idea, 12% is the minimum level of capital that an organization like us should maintain in my position, and also according to the rule within the organization, approved by the board of directors. Today, the capital is 13.7, but the expectation in terms of growth, due to the fact that looking at net interest income, so the position, and I will elaborate on the point on net interest income.
Looking at net interest income and dynamics that will remain significant for the group, and also looking at the fact that, in an environment in which, in the next two years, interest rate can have a reduction, then, in my opinion, not a significant reduction, because interest rate will remain at a level that will be between 2.5% and 3%. I do not see a world that can come back to interest rate very low. With this reduction of interest rate, all the areas of asset under administration will become profitable. In the history of Intesa Sanpaolo is to move the gross inflows, not the net inflows. In the gross inflow is embedded a significant portion of portfolio that are positive for our clients.
In this situation, we will start again to make a lot of money in terms of commissions, both in the Banca dei Territori and in Private Banking Division, with some more sophisticated approach from the clients. In any case, the environment in which interest rate can have a potential reduction is the perfect environment for the increase in terms of commissions. We have the profit of trading that intentionally, so giving a specific target not to be increased during this year, because we do not need to have some low-quality revenues this year, but coming in the next years, this will become a source of revenues. The Property and Casualty business.
That is a business that is countercyclical, but will continue to grow because the penetration is accelerating, and we are already at 11%. We have room until 30%, that is the penetration of the mutual funds. The amount of revenues could be really significant, and this is another area in which we can have sustainable revenue generation. That's the reason why we decided to put a floor. 7% is, by definition, a floor, and in my expectation, will be exceeded in a significant way. If you put this with a 70% payout ratio, you have a capital generation embedded that is significant. These are risk with very low risk-weighted asset absorption. This is real excess capital generation.
Just to make a long story short, excess capital is there. We will redeploy excess capital, because I do not see any kind of M&A transaction that could be in a condition to generate value for my shareholders. What we have to need is to wait and follow the formal procedure of the bank that request to ask and to wait for the final figures and for the expectation for the futures in terms of ratio. My view is absolutely positive on this point. Net interest income. Net interest income is something that is correlated with the. I don't want to say the level of the market share, because probably can sound not so positive in a public speech.
It is clear that the evidence and what other players are seeing in the market for us can have 3x the value of, of the, the, the, the, the, the possibility to have positive coming from this area. Our, what you call beta, that is something that it is difficult for me to understand from, from a scientific point of view, but I understood the, the, the, the, the, the easy way of understanding for us is below 10% today, and I don't want to say we're below, but it is below 10%.
This means that, also considering an acceleration, and in our figure, we have considered for 2024, something crazy that is not the top down, the top up, the, the bottom-up approach from the business, because the bottom-up approach is that we can reach 20%-25%, but no more than this. In our forecast, we have considered 40% because other players are talking about 40% for 2024, and remain, in any case, with an increase in net interest income due to the fact that the average in that we will reach in terms of EURIBOR this year, will be much higher than the EURIBOR average of, of 2024. Also, in case of a reduction of interest rate in the last part of 2024.
In 2025, we will have, in which we expect to have a further reduction of interest rate, again, maintaining a level above 2.5%. We will have positive coming from the hedging, so this bringing positive on net interest income. At the same time, this will be the timing in which commissions will have the potential to generate something that you can, you can, you can have the occasion to see in you had the occasion to see in the past. It's, it's the strength of Intesa Sanpaolo to create the model in which commissions are the base for the succession, and also the base for the succession, the base for the diversification of our revenues.
My expectation on the basis of this analysis, and not considering a recession, only if the GDP can become negative, this can change some point of analysis. I'm pretty confident that we can continue to deliver significant net income, significant excess capital generation, and especially if capital market cap remain at this level, a dividend yield of 11%.
Thank you.
We are now going to proceed with the next question, and as a reminder, you are kindly invited to ask no more than two questions to leave room for the other participants. Thank you. We're now going to take our next question. The question comes from the line of Delphine Lee from J.P. Morgan. Please ask your question.
Thank you. Good afternoon. Thanks for taking my question. I, I just wanted to just follow up on the previous question. Just on NII, could you, like, specify your deposit beta assumption for this year? It's 40% in 2024, but also in 2025, and also the rate level. Also maybe if you just, like, quantify the contribution from the replicating portfolio for that. Then, just on returning on, on the excess capital, what prevents you from doing maybe returning capital to shareholders a little bit earlier, given where your capital ratio is? Or is the objective to be at 14% in any case, and, or is that before the additional capital distribution?
Just trying to understand a little bit your thinking here, I mean, there's obviously the interim dividend, if we could see anything else, ahead of your full year results. Thank you very much.
I want to start from, from the second question, and then I will elaborate more on, on net interest income, and then I will leave the floor to Stefano to talk about replicate and edging facility. Stefano Del Punta. Looking at the return to shareholders of excess capital, we are, we have a formal procedure within the organization. As we have a formal procedure that can allow us to give an interim dividend, cash dividend interim, we have a formal procedure that can allow us to evaluate distribution of excess capital at the end of the year.
It is not possible for us to consider, apart forcing the board of directors, but I do not see any kind of need to force the board of directors to take some decision out of the common procedure. We are not in a hurry to demonstrate any kind of acceleration of our market cap. We are a leader, apart from the short-term dynamics of the market cap, and the industrial story that we are presenting today on tech investments is just set to say we are industrial, not financial. Other players play the game or the financial story, we are playing a different story, industrial story, with significant net income generation, but we are an industrial story. Having said that, we want to follow the rule of the game within the organization.
The rule of the game within the organization is that the deployment of excess capital has to be evaluated at the end of the year, in which you have the final figure, you have the projection for the next years, and in that case, you are ready to make any kind of evaluation. Our decision to have the calendar provisions deducted by the common equity is a part of the story that is creating conditions to prepare a proposal for the board of directors that can be in this sense. Preparing all the conditions that can allow to say, from a regulatory purpose, we have no more possibility to have challenge on a portion that only from a regulatory point of view, because from an accounting point of view, is a stupid rule of the game.
From a regulatory point of view, is something that it is considered important. Stupid for an Italian bank that has an average time of recovery that is completely different from a German one. If this is the rule of the game, we respect the rule of the game. Having said that, we decided to maintain a strong capital position, demonstrating that we have strong excess capital, also with a deduction of something that is considered important by the supervisor. At the end of the year, we will present the analysis of excess capital that can be redeployed without any kind of point of weaknesses, also from a supervisory point of view. We are preparing a story, but we need to follow a procedure.
The, the, the organization, we are a best practice in terms of all what we do, because we are not moving according to the fact that we want a short-term consensus from the investors. We want to follow a procedure, and this procedure need to have all the, the, the fundamentals for the board of directors to take this decision. As a CEO, in my position, I can tell you that I see a clear excess capital for this organization, and at the same time, I do not see any kind of target in terms of acquisition that can create value for shareholders. Not because making a share buyback can create more value than making an acquisition, because the value that you can create through a, a, a long-term generation of net income is much higher than a short-term redeployment of capital.
In our case, we cannot create value through this kind of lever. My position is that we have an excess capital. We are ready to make an evaluation of a potential distribution. This evaluation will be done at the end of the year. We are creating conditions through the matching of unexpected negative impact coming from regulatory headwinds, as we made last year. This year, we are generating capital. We are a clear excess capital, and also considering Basel IV and considering the DTA, I don't think that there are a significant number of banks that in three, four years can stay at 15% after deduction of Basel IV and a portion of recovery of DTA.
We are in a unique position to have excess capital, but we are also in a condition not to have in a hurry to generate an increase in market cap through share buyback. We want to say, today, our dividend yield is 11%. Our organization is creating sustainable net income, and with the right provisioning, the right approach in term of sustainability of results, these are our main conditions. In term of excess capital, we will decide at the end of the year. My personal position is that we have excess capital, so it is a right point for the board of directors to make an evaluation of potential distribution of excess capital. We will decide at the end of the year.
For the time being, we are increasing the probability to have real excess capital for the end of the year. I do not see any kind of threats in this analysis. Looking at net interest income, net interest income is something that it is clearly depending on a number of assumptions. Having received the last increase just yesterday, reaching 3.75 in terms of EURIBOR, and our EURIBOR that we have considered and the net interest income increase that we had until June, had not the full impact from the previous increase, because on average, you have another part. These 25 basis points and the beta is really negligible.
It is clear that we will end this year with a super excess in terms of net interest income in comparison to EUR 13.5 billion. Having said that, we will have to consider what kind of average EURIBOR you are considering for 2024. Our consideration of this average EURIBOR is. It is likely that will be similar or much higher than EURIBOR that you had in 2023. In this case, for a bank like us, and I remember you that we have a 30% market share in the areas in which we have deposits, it is likely that this can allow us to have a significant increase in terms of revenues, and especially an increase in terms of net interest income.
In 2025, when interest rate will have, on average, so with the rebound on, on, in, in a nominal point, in a punctual point of view, in, at the end of 2024, and then on average in 2025, you can benefit from the hedging facility in a significant way. We have, and Stefano will elaborate, EUR 160 billion of facility that is hedged. This means that in case of, of a reduction of interest rate, this will give us a contribution that can maintain a strong contribution with a potential increase, depending on the reduction of interest rate of, of our net interest income base. I will leave the floor to Stefano, so he can elaborate.
Yes, I mean, I think you're all familiar with the concept of hedging portfolio, replicating portfolio, how some banks call it. The core deposit for us, EUR 160 billion, which is has to be considered as a fixed-rate liabilities, and therefore you put against it a portfolio of fixed-rate assets. Currently, the portfolio is a duration of about four years. Currently, obviously, the investments of this portfolio has been done in the last years, so very low interest rates. So the average yield on this portfolio today is slightly in excess of 60 basis points, 6 0. Of course, every month, we are reinvesting the maturities, the asset, or the swaps that comes to a maturity, which is about EUR 2.5 billion per month. So this, I think you can make your own calculation.
The contribution, which depends on the future level of interest rate, but today, for an average duration of four years, the level of the interest rate is in the region of 3.7%. It means that next month, we will have EUR 2.5 billion of assets yielding 60 basis points that mature, and we will enter into investments for EUR 2.5 billion at 3.7%. Of course, what will happen in the next months depends on the level of interest rate. Clearly, when we get to 2025, it means that we have rolled over about EUR 60 billion of the portfolio, and therefore the yield is gonna be much, much higher than the 60 basis point we have now.
Of course, the level will depend on where the level of interest rate is gonna be in the next 24 months.
Thank you very much.
We are now going to proceed with our next question. The question come from the line of Christian Carrese from Intermonte. Please go ahead with your question.
Hi, thank you for the presentation. My first question is on, again, the Isytech. I would like to look at it, also take into account the recent speech by Mr. Enria on M&A in Europe, asking European banks to be more, how can I say? To look at potential cross-border deals. The Isytech platform, together with, also the Fideuram, Direct, Direct. Do you think that could be a lever to accelerate or to look also at M&A in Europe? I have clear that today you don't see any kind of deal, and you prefer to pay the excess capital back to shareholders. In few years time, do you think that this could be a good way to look at M&A to exploit synergies?
The second question is on cost of risk and the guidance you gave on 2024 and 2025. You have been managing the bank for several years. It looks quite strange, the evolution of the NPE inflows to me. This create cycle seems to be very different from the previous ones. What is your idea? Why so low inflow of NPE? What do you think for 2024 will be the picture and the assumption you have in mind in terms of cost of risks for 2024? Thank you.
Looking at the, the M&A environment, it is clear that, if you have a strong, platform in terms of backbone for the IT, system, and especially if you move to cloud, you have a, a, a, a point of, of advantage in comparison to other peers. At the same time, you can also consider to enter in different not being goodwill. The, the, the real point, the, the target has to be with, with the goodwill, because through the, the, the, the tech, tech instruments and through digital banking, you can try to tap market, like J.P. Morgan is trying to do, without making something that has an involvement of, million of people, thousand of branches.
The, the, I think that there is the need, in case of working like us on, on something really state-of-the-art in terms of technology, what could be the real advantage in using your own technology or making an acquisition? At the same time, having a very good system, you can create conditions to have synergies in case of an acquisition. There are also another part of the story, that if you are state-of-the-art, and we need probably another couple of years to become state-of-the-art on all the system of Intesa Sanpaolo. We are state-of-the-art on Isybank, on mass market clients, but if, if you want to use on all the different segments of Intesa Sanpaolo, we need to have another couple of years in order to be sure to have, a, a, a complete transformation of our IT system.
For sure, in making evaluation on M&A, there will be the need for the future to add another way of looking at acquisitions. This can be another way in which we have to consider benefit in terms of synergies, possibility to make closure of branches. There are a number of items that can be correlated with this evolution that we are creating within the bank. I have to tell you that for the next year, next year, I will be, and my people will be concentrated in setting the machine in order to be sure that the bank can have a state-of-the-art, Isytech system that can allow us not only to have mass market, but to have affluent, private, corporate, and international banking divisions.
Being part of a unique organization with the potential of creating significant savings in terms of, of costs. This could be a, a possibility. You, you told me that I prefer to pay capital instead to make acquisition. It is true, but provided that making acquisition cannot create value. You know that through the acquisition of UBI, we created significant value for our shareholders. It, it depends on, on the kind of targets. Due to our market share in our country, we are totally prevented to make other deals, but other players in the market can consider other deals. For us, it is true that today, we have, We can create value for shareholders through redeployment of, of capital, if all conditions are positive to make this. Looking at the inflows in, in, in Italy.
Italy is has to be considered, probably also by us, by the Italian people, in a completely different way. We have a country in which GDP is growing more than Germany. In the last two years, the increase in Italy has been 5%, in Germany, has been 1.5%. Look at the Italian condition. We are talking about a country, and if you compare with France, it's 3%. We are talking about a country in which we are number one in Europe. We are not talking about the Italian system, real estate, real economy system with SMEs 10 years ago. We are talking about something that is state-of-the-art.
If you look at the, the financial conditions of the company in Italy, we are talking about companies with, with more than, than, close to EUR 400 billion of deposits. We are talking about companies that are strong, that can use their liquidity to make investments. They can make export-related activities with a significant diversification. We are not talking about the Italy of 10 years ago. We are talking about Italy that is competing with the best players in, in Europe. In terms of inflows, you have the clear evidence that today, Italy is a different story.
It is clear that you can have some specific position, that can have problematic situation, so we will need to have another, 10 basis points, 20 basis points, 30 basis points, because inflows can create, for sure, some position of cost of risk. All the situation in the country, provided that we will not enter into recession and with some block for the export-related companies, I can continue to see an optimistic view on my country. The cost can be between 30 and 40 basis points. We will see, but no more than this. We are talking about a country that is completely different from the past, provided that we remain with positive GDP and with potential of being a counterparty of export-related countries.
Thank you. Very clear.
We are now going to proceed with our next question. The question comes from the line of Andrea Filtri from Mediobanca. Please ask your question.
Good afternoon. One question to complete the picture on the assumptions behind your NII outlook. The other one is on the tech transformation. What deposit beta are you assuming in 2025? What volume growth? This is to feed our NeMo model. On the tech transformation is to understand the return on investment and the net impact to P&L, how much of the EUR 500 million cost savings from the tech transformation could be absorbed by higher salary during the renegotiation process? Will you need to write down any legacy structures? If so, what magnitude, and over what time should that be done? Thank you.
We think that a portion of this amount can be reabsorbed by, by this salary negotiation. The reason why, the reason why we are talking about the, the, the possibility to have extra profit, but we are not talking about putting you in EUR 10 billion net income generation for 2025. There will be a component that can mitigate the impact coming from from this renegotiation. I'm convinced that being an organization that structurally can move between 42%-45% cost-income ratio and accelerating on, on investments, we are talking about a company that is best class, best in class by definition. The, the, the cost base is a value, but it is a value if you are included into something that is a new business model.
In this environment, this, this is something that can allow us to have negative trend of cost base in comparison with 2023, that's for sure. The dimension will be analyzed, looking at the implication on personal cost, but for sure, the benefit will not be the EUR 500 million net on the net income. If you look at the loan book, there could be an increase between 0.5% and 1.5% at 2025. For 2024, could be between 0% and 1%. The beta that we have considered in 2025 is 30%, and in 2024 is 40%. Again, if you look at bottom-up analysis, we are talking about 20%.
We have inserted the amount that we consider, very conservative, in order to be sure to present something that is absolutely achievable. If you want the real position of the people that are dealing with clients, the sensation is that it is possible to exceed by a significant way, this number, and it is the reason why we are generating a significant interest income, much higher than all the expectation by the market.
Thank you. Sorry, could you repeat the 2025 beta assumption?
Is maximum 30%.
Thank you.
After 40% in 2024. Interest rate will be, will be reduced, the assumption are obviously correlated with interest rates. Interest rate- remain high in 2024, but we will have a reduction on average, a point per point, but also on average in 2025. So you will have, by definition, a reduction also in terms of beta.
Thank you. Okay.
We are now going to proceed with our next question. The question come from the line of Britta Schmidt from Autonomous Research. Please go ahead with your question.
Yeah, hi there. Thanks. Two quick questions from me. On the calendar provision impact, the voluntary deduction, is that already at 100% coverage, or could this number still increase? Maybe you can provide a bit more color as to why you decided to do that. It seems to be to convince regulators of your excess capital position. The second one is just a clarification: Are there any other regulatory headwinds left now? Thank you.
We have no more significant point, apart from the model change, in which we have between 20 and 30 basis points still remaining, and we will have in the next two quarters of this year, but will be more than compensated by the retained net income. This calendar provision is related to something that we have more or less between 70% and 80% coverage. If you look at the rules of the game stated by the supervisor, we should reach a level of between 90% and 95%.
That's the reason why we have considered in the business plan to have these, these provisions in economic figures because we wanted to make disposal of these non-performing loans, so we need to reach a significant level in order to make disposal. Now, having considered on calendar provisioning, we will be more relaxed and waiting for the potential recovery that we will have according to our usual time of recovery of this kind of loans. We are talking about, in any case, the total amount of non-performing loans is EUR 5 billion net, so we are talking about a negligible amount.
We are now going to proceed with the next question. The question has come from the line of Hugo Cruz from KBW. Please ask your question.
Hi, thank you very much for your time. Related to NII, I've noticed your deposits, your current account and deposits from slide 26. It's been coming down quite quickly over the last few quarters. I think you are obviously not worried about it, but I think it'd be helpful to have a bit more color here. How much of this decline has been in the wealth management space, when do you expect the decline to stop? Also, you know, are you replacing these deposits with any retail bond issuance? If so, at what yields? That's my first question. My second question is around, you know, your guidance for levies. You know, I think it should be coming down next year, but I wonder if you could give a firm number. That's it. Thank you.
For levies, we, we have, we are just waiting to understand better the DGS, but our expectation is that will be close to zero. That's, that's our expectation. We will see what will be the final position, but that's our expectation. We have considered the lower, zero and lower, just to be sure to have considered all the different implications on this, on this area. In any case, we will remain with a significant access to our floor of EUR 7 billion. If you consider Net interest income, if you look at retail activity, retail deposits, we had a fiscal, a fiscal need for, for the retail clients to pay taxes just at the end of June.
We are talking about EUR 6 billion, at the beginning of June, July, we have already EUR 5 billion increase in the current account. It's something that is really a physiological trend in our figures. At the same time, we had EUR 4.5 billion BTP Futura subscription by our clients that are asset under administration. As I told, is the fuels for the future conversion in terms of wealth management. We are completely happy to have this kind of situation, because in the next six months, as soon as interest rate, we can have a different trend, this will become all potential commissions that we can have in terms of wealth management.
Thank you.
We are now going to proceed with our next question. The question's come from the line of Giovanni Razzoli from Deutsche Bank. Please ask your question. Hello, Giovanni Razzoli, your line is open. We can't hear you. We are now going to take the next question. The question's come from the line of Giovanni Razzoli from Deutsche Bank. Please ask your question. Your line is open. We are now going to take our next question. The next question's come from the line of Chris Hallam from Goldman Sachs. Please go ahead with your question.
Yeah, good afternoon, everyone. Just one question about the tech strategy and how that, what that means for the medium outlook for returns. Clearly, profitability and capital generation are increasing. That's giving you additional capital flexibility, and you're choosing to reinvest some of that upside from rates in Intesa's technology plan. The new disclosure around the Isybank cost-income ratio today is great, and you've talked about sustained net profits across 2023 to 2025. What improvement do you expect to see on the level and predictability of group returns beyond the plan from these tech initiatives and other initiatives, i.e., how is all of this moving longer term through cycle returns, and what's the right medium-term ROTE figure for the future in Intesa?
Thank you for this question, because it's, consider this question very, very, very important for, for, for us. It is, it's something that we are really working on for the next business plan, because it is clear that the target of this business plan is to set the Isytech, Isybank, Direct, all the, the areas in which we are working within 2024, we will have a significant upgrading of our IT system, working on the cloud, working in simplification of our, of our IT system. 2025 could be the year in which we will have other segment moving into the platform, and we will start with international, our international subsidiary. The future of this story is to be considered in the real medium term.
It is not an item of two years' time, but this is really the bulk for the next five years of the organization. Within the next five years, all the kind of procedures, legacy, and no mainframe that is already the one that we are using within the organization, must be completely analyzed in order to be sure what will be the solution moving into the cloud. We are talking about EUR 1 billion of costs that are related with this kind of situation.
I cannot tell you that we will have a saving of EUR 2 billion because it is not serious. I cannot tell you this, but believe me, we are working on different, all the different items that are involved in the current level of our IT system, and the implication that we can have in terms of saving through these significant investments that we are creating. We are talking, in any case, of a significant amount, because the level of the transformation of the organization and the possibility to leave a significant part of the story that is on, what we can be considered from our side. For a bank that is already moving into the cloud, mainframe, legacy procedures, is really massive. For us, this story could become really a transformational story in terms of cost.
It is also related to branches, because it's also the way in which you serve your clients. In the future, we will maintain, for sure, the most part of the private banking branches, so branches in which you need to receive clients that want to look you in the eyes, or giving you a lot of money, they want to be sure that there could be something emotional and relational. The other part of the clients can be really part of a different story on the branch within the organization. Having in mind, this digital branch is the real creation of cross between the physical branch and the digital branch, so you need to be sure to have your people on board when you make this transformation.
Having an head of the physical branch that can become an head of a digital branch, could be a way to maintain dignity, the possibility to maintain the status of people within the organization. We will have a portion of people that will mature their pension scheme, and so possibility to have some exit between the organization. It is clear that the real game that we want to play, it is not this short-term game. It's the real game for the next five years' time, and in the case, we can really work for a reduction of cost that could be minimum EUR 100 million. Could be billion, we will see. Could be EUR 1 billion, we will see what could be the implication for all the organization, but we are talking about really significant cost base.
At the same time, we are defending our revenues. The pool of revenues today, that for the majority of our competitors, could be under attack from potential attack from the fintech, could be in a range of EUR 500 million. We are talking about something not negligible in terms of revenue. The possibility for us to say, just now, that we are defending EUR 500 million, is something that, from a competitive point of view, is really, in my view, impressive, if you really know the situation of the generation of revenues in different clients within the organization, and the clients that are not more entering in your branches, so a clear target for fintech. This amount for us is completely saved, so we can be sure that this amount can remain with us.
We have all the possibility to be ourself a fintech. Why? Because, because why you can have Revolut or Amazon or other being the challenger of the banking system. If we are one of the best fintech, we can become the real challenger, and we can become the one that can create real condition to increase the revenue base. We have a lot of potential coming from this. This should be part of the new business plan, what I wanted that you can have clear, and investors can have clear, that we are the unique bank, that we are already moving with something already deployed, so we are not talking.
It is not a digital bank, is a system, so Isytech, is something that is already within the organization. So this is fundamental for me to, to, to be clear that we are already moving into a fintech approach, so we can be considered a commercial bank, but with a fintech approach. So that, that's fundamental for us. Then it is true that, the next part of the job should be your, your, your, your question. So what could be the implication for the future? This something that, to give you a specific number, we need to prepare a, a specific plan, but believe me, could be really massive, the implication of this, of this transformation within the organization.
Thanks very much.
We are now going to proceed with our next question. The question come from the line of Marco Nicolai from Jefferies. Please ask the question.
Hi, thanks for taking my question. I was wondering, I saw you printed a good number in terms of CIB fees this quarter. Can you give us some color on the quarter as well as some outlook for CIB fees and commissions in Italy? Another question on deposit beta. I understand your assumptions, but I'm wondering why do you think beta is so low in Italy right now? Because on one side, as you mentioned before, we saw the, you know, the demand for BTP Valore was pretty high in Italy, which shows that there is an appetite, obviously, from households for yield. Still, deposit remuneration, remuneration remains pretty low. What's the reason in your view? Thank you.
Thank you for your question. Just starting from the second question, in Intesa Sanpaolo, we decided not to have any negative interest rates, so, and it is for the bank, also a significant portion of Italian banking sector. If you compare the Italian banking sector with other sector, with significant contribution, in any case from net interest income, coming from net interest income, you have to make such a distinction and try to elaborate what would be the differentiality. In a system in which I had all the negative coming from the negative markdown, you now have all the positive coming from the positive markdown.
This means that beta can be an approach that could be considered fair with our client, because if in a condition of negative, I was not having advantages, in a position of positive, we can have the fair approach with our clients. This is typical of the Italian banking system. For Intesa Sanpaolo, you have also something that you have to consider, that is the market share. I know that you consider all Italian the same. You consider us like BPM, like BPER, like UniCredit. If you look at the Italian position of all these peer, so BPM, BPER, UniCredit, we are 3x the dimension of all these peers, that UniCredit has Germany, Austria, all the other.
If you look Italy, you cannot compare Intesa Sanpaolo with a, with a peer that is 3x lower than our in terms of dimension. This means that our correlation with all the activity of the clients is completely different. With clients, you have, and having the, the, the, the ownership of the product factories, you have such a strong correlation with clients. Our depositors is also with us, mutual funds, insurance products, mortgages, pension funds, so all the kind of instruments. The, the correlation that you have with clients is so high that you cannot compare Intesa Sanpaolo with other peers, with, with 7%, 5%, 10% market share in Italy or outside of Italy. That's the reason why we have such strong beta and such strong potential also for the future.
It is not a matter of short term. I, I, I'm afraid that the number of analysts can try to consider this as the peak for our net interest income, but I'm afraid you are making the wrong analysis. For us, this is the starting point of a significant trend of further increase in terms of net interest income. For me, the real value that I want to tap from my client is from wealth management. This is something that can derive from the market, from the action of my people, of the relation that we created with clients during this year, but it is clear that we want to continue to be a strong wealth management company.
Today, being a strong wealth management company means to maintain strong relation also in terms of deposits, and not only in terms of mutual funds, insurance products, pension funds, all the other instruments that are part of the relation with, with our client. Looking at corporate, we are working on, as all the corporate investment banking divisions in a number of deal that are not only loans, but are also M&A, possibility to structure investment banking structure in Italy and outside of Italy. This trend is something that it's depending by the deal, but it is something that is structural for our, for our division. I cannot be sure, EUR 40 million per quarter, but it is clearly, if it is not EUR 40 million, it could be EUR 35 million or EUR 45 million.
I thought we are talking about something that structurally is part of the activity of our corporate investment banking division.
Thank you.
We are now going to proceed with our next question. The question comes from the line of Andrea Lisi from Equita. Please ask your question.
Hi, thank you for taking my question. Just a simple one. You said that the environment in terms of asset quality is proving benign. Just to understand if it is reasonable to imagine a cost of risk below 30 basis points also for the following year, considering also the step ahead you've made on kind of provisioning and the risking you made so far. Connected to this, given that you did not utilize overlays amounting for EUR 900 million, if it is reasonable at one point to imagine they will be released and contribute to the bottom line. Thank you.
... Thank you very much for this question, because I want to, just to elaborate on, on this item of overlays, because there is a lot of, of emphasis, and marketing in my view on, on this, this item of overlays. Overlays are something that you have to compare with the Stage 2 dimension of the portfolio of the different companies. It is not a value, an absolute term of Stage 2, is a value in comparison with the amount of risk that you have within your portfolio. In our case, we have EUR 37 billion of Stage 2, with significant reduction across the different years, quarters. Other banks maintain significant amount of Stage 2.
The, the kind of, of degree of considering this as something that can be usable, depends also on the amount on the Stage 2 portion of your portfolio. At the same time, also, some riskier area that you can have. In our case, 100 million EUR loans in the local bank of Russia. Overlays are not only Italian, are international. In our case, overlays are mainly concentrated in Italy, so the majority of the 900 million EUR are in Italy, zero in Russia, and so this is overlays theoretically usable in the future. The quality of your inflows, the quality of the non-performing loans, there are a number of factors that you can consider. Looking at our overlays, my view is that we have strong quality of these overlays.
We want to use overlays during next months, six months, 100 year, we will see. The figures that we are considering are without usage of overlays. When we talk about the cost of risk within 30 and 40 basis points, a reduction of cost of risk during 2024, 2025, is without using overlays. At the same time, from an accounting point of view, it is unbelievable that you can maintain overlays in your balance sheet. Overlays are something that are not there to remain, because otherwise our reserves are not overlays. There will be a moment in which an analysis should be made, and then should be decided what could be the right allocation of this EUR 900 million.
For the time being, in the kind of information that we are giving to the investors and to the market, there are zero usage of these overlays.
Thank you.
We have no further questions at this time. I will now hand back to Mr. Carlo Messina for closing remarks.
Thank you very much. I'm really happy to have the occasion to have not only a usual, a common presentation, but also a presentation in which we were able to demonstrate what we are doing from an industrial point of view. In my view, there is too much emphasis on financial presentations from a significant number of peers, now we decided to change completely the story. Industrial is fundamental, delivering significant net income, but with a clear view that we are here not for quarters, we are here for years. The next years, we need absolutely to create a bank that, from a technological point of view, can be a clear leader in Europe. That's fundamental for us. Thank you very much, have the occasion to see together the next results in November.