Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sanpaolo for the presentation of the Q1 2026 results hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Razia, and I will be your coordinator for today's conference. At the end of the presentation, there will be a question and answer session. To enter the queue for questions, please press star one one at any time. You will hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again.
You are kindly invited to ask no more than two questions to leave room for other participants. In case of additional questions, the IR team will be at your disposal after the conference call. I will remind you all that today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Carlo Messina, CEO. Sir, you may begin.
Welcome to our Q1 2026 results conference call. This is Carlo Messina, Chief Executive Officer, and I'm here with Luca Bocca, our CFO, and Marco Delfrate and Andrea Tamagnini, Investor Relations Officers. Before we begin, I would like to say that sadly, yesterday night my mother passed away. Today I will open this call with a very brief introduction, and then Luca will go through the presentation of our results. He will help me in making the presentation, while we will manage the question and answer together, and I will be at your disposal for all the strategic question. Let me underline, in any case, that we just delivered our best ever quarterly net income at EUR 2.8 billion with an annualized return on equity of 21% and earnings per share up 8% on a yearly basis.
These are excellent results confirming we are well on track to deliver EUR 10 billion net income this year. In any case, we are not used to change our guidance in the Q1 of any kind of year. In my opinion, to change guidance starting from the Q1 is not the right way to manage an organization. Execution, I will elaborate on what we have as a driver that can allow us to have a very good performance also in the next quarters. Execution of our new business plan is already proceeding at full speed, and we are navigating the current market volatility from a position of strength. Thanks to our top-notch asset quality and our resilient and well-diversified business model. In the first three months, we delivered high quality and increased revenues, supported by record Q1 commissions and best ever insurance income.
Net interest income can be the real surprise for 2026. We reduce costs, and we will continue to reduce costs, and we confirm our strong capital generation capabilities. Intesa Sanpaolo offers one of the highest dividend yields in European banking. This year we will return around EUR 9.4 billion, taking into account the May dividend, the November interim dividend, and the EUR 2.3 billion buyback to be launched in July. I'm proud of our results and thank our people for their excellent contribution. Let me underline that our strong profitability allow us to maintain a world-class position in social impact. I will now hand over to Luca. Thank you for your understanding.
Thank you, Carlo. We are all very sorry for your loss. Now let's start with slide 1 for the key achievements of the quarter. In the first three months, we deliver record high profitability with the lowest ever cost-income ratio, excellent asset quality, rock solid capital position, and high sustainable and increasing value creation and distribution. Please turn to slide 2. In this slide, you can see the impressive and consistent growth in net income that has almost doubled in five years. Slide number 3. In the first three months, we deliver a strong increase in EPS, DPS, and tangible book value per share. In two weeks, we will pay the final dividend for 2025, which is 11% higher than last year. Please turn to slide 4.
As said before, thanks to this excellent start to the year, we are in a comfortable position to deliver EUR 10 billion net income in 2026 despite the market volatility. Slide number 5. Our excellent profitability allows us to benefit all our stakeholders and strongly support the fight against poverty and inequalities. Please turn to slide 6. In February, we presented our new business plan based on three pillars. One, cost reduction, benefiting from tech investments already deployed. Two, conservative revenue growth, thanks to group synergies and additional people to strengthen our wealth management protection and advisory leadership. Three, low cost of risk, driven by our zero NPL bank status with bad loans already reset to near zero. The plan is proceeding at full speed, and in the appendix, you have an update of the most significant initiatives underway.
Let's move to slide 8 for a closer look at our Q1 results. In a nutshell, in Q1, net income was up 6% year-over-year. We delivered the best quarter ever for revenues, operating margin, and gross income. Costs were down, asset quality remained top-notch with increased coverage and stable overlays. Please turn to slide 9. In this slide, you have the detailed P&L for the quarter, showing improved results in almost all the lines on both quarterly and yearly basis. Let me underline that the tax rate is almost 3 percentage points higher than last year, mainly due to Italy's budget law. Slide number 10. In Q1, revenues were up both quarterly and yearly. As usual, we manage our revenues in an integrated manner with higher profits from financial assets that act as a natural hedge against the impact of market volatility.
Please turn to slide 11. This slide provides more detail on net interest income that was up year-on-year, despite the strong reduction in EURIBOR. Net interest income also increased on a quarterly basis when considering the fewer days in Q1. Let me highlight that loans to customer grew 3% yearly and 1% quarterly. Please now turn to slide 12. Our Wealth Management and Protection machine continued to deliver strong results. In fact, this was the best Q1 ever for commissions and the best quarter ever for insurance income. Assets under management gross inflows were up despite the market volatility. Please turn to slide 13. In Q1, commissions were up 3% yearly with 4% growth in Wealth Management and Protection. The quarterly decline was due to performance fees and seasonality in commissions from commercial banking activities.
Our top-notch advisory services are a stabilizer for the impact of market volatility on fees with 13% growth year-on-year in related additional commissions. Our fully owned product factories are a clear competitive advantage. Let me add that April was another good month for assets under management inflows. Slide 14. Non-motor P&C was a driver of insurance income growth, and we still have significant upside potential. Please turn to Slide 15 now. Customer financial assets were up EUR 64 billion on a yearly basis to more than EUR 1.4 trillion. The quarterly decline was due to negative market performance. Please turn to Slide 16. We can count on our matched client advisory network with 19,000 people dedicated to fueling asset under management growth, reaching 22,500 people in three years.
In Q1, we already added about 350 people, and in the past 12 months, we have increased our Global Advisor network by almost 900 people. Slide 17. The contribution from commissions and insurance income to revenue is by far the highest in Europe after UBS. Slide 18. The cost-income ratio was lower than 36% in Q1, also thanks to our tech investment that are clearly paying off. Please turn to slide 19. Operating costs were down 1% compared to last year. In 12 months, we have a head count reduction of over 1,900 people. Now turn to slide 20. We have high flexibility to reduce costs further, thanks to our tax transformation. A significant portion of our workforce is approaching retirement. In Q1, we had 1,400 exits, we hired 500 young people.
By 2029, we will have more than 12,000 exits at no social cost, while hiring more than 6,000 young people in Italy, mostly Global Advisor, with skills aligned to evolving business needs. This will enable EUR 570 million in cost savings at run rate with no impact on revenues. Slide 21. As you can see from this slide, we have a best-in-class cost-income ratio in Europe. Let's move to slide 22 for a look at our top-notch asset quality. Our annualized cost of risk was 16 basis points with a strong increase in coverage and no overlays released, and we see no signs of asset quality deterioration. Turn to slide 23. We have a very low NPL stock with only EUR 3.9 billion net NPL and bad loans reset to near zero.
NPL inflows were at historical lows, and we have a well-diversified loan portfolio with no material exposure to private credit. Let's move to slide 24 for an update on capital. After having accrued EUR 2.6 billion for distribution in Q1, the common equity ratio was above 13%. In Q1, we had an impact of about 15 basis points from the valuation reserves due to market volatility. 10 basis points were already recovered in April. The common equity ratio was 13.9%, including the benefit from DTA absorption. Please turn to slide 25. We have best in class MREL ratio, and the liquidity ratios are well above our business plan targets. Let's now move to slide 27 to see how well-equipped ISP is to succeed in any scenario. Our profitability and capital position remains strong, even under adverse conditions, as shown in the EBA stress test.
We have a very resilient and efficient business model with EUR 5.7 billion investments in tech already deployed. These are a key enabler for further efficiency gains and to win against the Fintechs. Our net NPL stock is very low. We can count on high quality loan origination. We have EUR 900 million in overlays. Last but not least, the management team has a strong track record in delivering results. Please turn to slide 28. Intesa Sanpaolo stands out across key metrics and is better positioned than our peers to face any future challenge. Please turn to slide 29. In this slide, you can appreciate our unique positioning, thanks to our efficient commission-driven business model supported by strong tech investment. Slide 30. As previously said, our NPL stock and ratios are among the best in Europe.
Slide 31. As you can see, we are also very well-positioned in term of stage 2, that further decline in Q1. Please turn to slide 32. Our NPL coverage is also among the best in Europe. Slide 33. Our risk exposure is also close to zero. Please turn now to the next slide for a few words on the macro picture. The Italian economy remain resilient, and we expect Italian GDP to grow this year and next. Please turn now to slide 35. In this slide that you already know but is very important, you can see that Italian companies are now in a stronger position and more resilient to external shocks than in the past. Their debt to equity ratio has increased over time, and their liquidity buffer are at all time highs. Turn now to slide 37.
This slide offers a recap of our best ever quarter and the reason why we are fully equipped to succeed in the future. To finish, please turn to slide 38 for the outlook. For 2026, we are in a comfortable position to deliver a net income of EUR 10 billion. This performance reflects the strength of our business model with strong potential for growth. As always, we will continue to manage our revenues in an integrated matter, maintaining a strong focus on cost, asset quality, and the sustainability of results. We combine high quality revenues, cost control, strong investment for growth, high capital generation, and a very low risk profile, making us one of the most resilient banks in Europe. We remain focused on delivering strong short-term results while continuing to invest for sustainable long-term value creation.
That is why we are delivering one of the highest dividend yields in European banking while maintaining rock solid capital and continuing to lead on value creation and distribution and social impact. Thank you for your attention. We can now open the Q&A session.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. You're kindly invited to ask no more than two questions to leave room for other participants. In case of additional questions, IR team will be at your disposal after your conference call. Once again, please press star one one on your telephone to ask a question and wait for your name to be announced. To withdraw your question, please press star one one again. 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 ask your question.
Hi, good afternoon. It's Antonio Reale from Bank of America. My sincere condolences to Carlo Messina and your entire family. I'm very sorry to hear about the loss. I had a question on strategy, but I'll stick to questions for Luca Bocca, perhaps, so one on NII and one on costs. The first one is on your hedge portfolio. This quarter, you've added another EUR 10 billion or so to your to your hedging book. Every year you have about EUR 30 billion of these maturing, then these are broadly reinvested at a sort of an interest rate on the front side of about 2.8%, 2.9%, which is a big tailwind to NII. You have a relatively low duration, lower than your peers of four years.
My question is, why are we not seeing a little bit more support to your NII? Maybe you can share how much the hedge has contributed this quarter, and more importantly, why you're not increasing your guidance. Are there any other bits of the swap that, you know, is eroding some of this benefit? That would be my first question. My second question is, you're guiding for stable cost, and by all means, that comes with a lot of discipline, when we account for inflation, IT investments. But you've built quite a lot of buffers going into the business plan in the last quarter. I wonder to what extent you'd be able to do sort of better than stable cost. If you can elaborate a little bit more on this point. Thank you.
Thank you. Thank you, Antonio. We'll go to the two questions. On NII, if you look at the trajectory year-over-year of the Q1 result compared to last year, we have more than 60 basis points decline in EURIBOR, the contribution is really positive. The fact that we decrease only by EUR 100 million, the spread component is totally related to the hedge contribution that as we have said at the beginning of the year, and we can confirm, we'll give year-on-year EUR 500 million of positive contribution in 2026.
Due to the increase of the last part of the curve, a positive contribution of EUR 500 also in 2027, and then continue to give EUR 200 million, EUR 300 million contribution positive 2028, 2029. It's clear that we are in a comfortable position to increase NII this year compared to 2025. Remember that our estimate are done with stable EURIBOR. At the moment we are looking at forward rates that are above this level, we have a upside potential. On cost, we said that we want to be very prudent in estimate as usual, saying that the cost can remain stable this year. Of course, the starting point of the year is better than expectation, probably we can do better also.
On cost, it's clear that as Carlo said, we are at the beginning of the year. The scenario is very fluid, so we prefer to not change all the different line of the guidance, but the result of Q on operating point of view are better.
Thank you.
We are now going to proceed with our next question. The question come from the line of Delphine Lee from JPMorgan. Please ask your question.
Yes, thank you for taking my questions. My sincere condolences as well to Carlo and family. I'm really sorry to hear about the loss. The first question is just to understand a little bit, you know, sort of, the trend so far, you know, are you still seeing some impact of the current environment, the macro uncertainties, situation in Middle East in terms of like loan demand, and has that impacted your inflows into wealth management? I mean, fees and commission have grown at a decent pace in Q1, but just wondering how that pace is changing because of that.
My second question is on Generali. Sorry to ask about this, but you know, the press keeps talking about, you know, mentioning Intesa, and I know you've looked at it obviously in the past, but maybe could you just remind the market a little bit, you know, sort of what your thoughts were at the time and right now and, you know, sort of, yeah, your approach to this topic. Thank you very much.
I will answer to these questions because I think that my presence here today is just to talk about Generali. I was sure that you were interested in making this question, so that the reason why I'm here today. The point in Generali is always the same. We have a business model that is based on wealth management and protection, but we have also market share in Italy that can prevent us to make any kind of transaction in the banking sector and insurance sector because we have significant problem from an antitrust situation.
I think that today Generali, in the last two years, a number of shareholders that are always the same, just with some change in the percentage, that voted in the same way in the shareholder meetings because Delphine, UniCredit and Caltagirone had the same approach on the organization that was against the current management team. I think that this point on Generali is a matter that is to be considered by different counterparties, by different from Intesa Sanpaolo. Again, I can just point out that antitrust is a clear point for us that can prevent for make any kind of acquisition.
On the point on impact on macro uncertainty and other trend, one of the points that suggests me that to change the outlook, in the Q1 is something that is not conservative. Also, if you have very good results, is because when you have uncertainty, it's much better to stay at your o riginal forecast than to change just for the sake of increasing your currency because you have to make some extraordinary transactions. My perception is that today the situation in Italy is totally under control.
Also with the kind of implication that we see from the conflict that can reduce the growth of the Italian GDP, but we do not see any kind of significant threats on the asset quality of our group. We made a good job in reducing non-performing loans just last year. We are more than prepared to any kind of negative scenario. Today these are not what we are considering. At the same time, also on fee and commissions, the starting point of the year has been very positive.
Also in April, we continue to have a very positive trend, and also the attitude of the clients to be more in favor of maintaining a good attitude towards wealth management is very positive. I have to add also in any case that we will consider with attention also the trend of the current accounts in the next quarters because the reason why I think that the underlying trend of the organization are much, much better than what we have considered in making the forecast for the outlook in net interest income. As Luca said in the previous answer, the forecast is based on EURIBOR that is below 2%.
I'm pretty sure that will happen, that ECB will have to increase the interest rate, will bring positive to our figures. Within the framework of an increase of 50 basis points, we will continue to have a very positive trend in fee and commissions, but accelerating conversion of assets under administration and maintaining the current accounts, because this will bring us significant markdown contribution. That is what we are considering in the new target that we are giving to the people within the organization.
Thank you very much.
We are now going to proceed with our next question. The question comes from Ignacio Ulargui Lopez from BNP Paribas. Please ask your question.
Thanks very much for the presentation. I'm taking my questions and my sincere condolences to Carlo and all your family. I have two questions. The first one is on loan growth, which we have seen a bit of an acceleration in the quarter. There was a very strong growth in the corporate and investment banking business, but also there was an improvement in territory. Still wanted to get a bit of your thoughts on how to see the acceleration with sectors you are prioritizing and what should we expect going forward in terms of loan growth. The second one is on insurance revenues. It has been on record quarter how should we expect the non motor pattern to kind of the non-life and life business perform into the year. Thank you.
Thank you, Ignacio. I will go through the answer. On loan growth, yes, you are right. We are satisfied of the loan growth, especially because derives from the corporate sector that is the one that lagging behind in the previous quarters. The strongest performance is made by the company that are linked to foreign environment in the Corporate Investment Banking division, in infrastructure, in energy transition, all related to a GDP that is growing above the level of Italy. This is the main contributor. We expect also for the future that this trend can continue, and we can reach the target that we set in the business plan of a loan growth between 3%-4% for the year.
This is our estimate at the moment. For what concerns insurance, you are right again. The performance is led by the property and casualties, even if the performance in life insurance is very solid and is still recovering from the previous quarters. The contribution of insurance can be very solid in mid-single digit for the year. The target for property and casualty, you know that, we have more or less EUR 800 million starting from 2025 as contribution. For sure, we can increase this target with the pace that we have forecasted during the business plan. This is more or less the ambitions that we have.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Marco Nicolai from Jefferies. Please ask your question.
Good afternoon. First of all, I will join the colleagues in extending my condolences to Carlo Messina and his family. I had a couple of questions on today's result. First of all, it's a follow-up on the commission income. This quarter you grew by 3% year-on-year. I think you were guiding for a CAGR of 4% in the business plan. Shall we expect that, you know, the pace is going to pick up again in the following quarters, perhaps after the volatility that we saw in the markets in the first quarter is digested? I have another question on fees. If I look at the commercial banking fees, last year, this pool of commission actually contributed negatively on the year-on-year growth.
InQ4 2025 and the Q1 20 26, we saw a little bit of a pick-up in this. Do you expect this commission pool to actually, you know, bring a positive contribution to the growth this year? Perhaps also a follow-up on NII. Can you just remember us your rate sensitivity? If I'm not wrong, that's usually based on a 12-month horizon. Can you also give us a sensitivity or at least an idea on a 24, 36 month sensitivity to rates, to higher rates? Thank you.
On sensitivity, Luca will give you the answer. On the 1st point on commissions, I want to elaborate because this point is very important for us. We think that we can continue this trend with an acceleration in terms of fee related to wealth management and protection. At the same time, the real driver that, in our expectation, we recover in the next quarters will be the area of commercial banking and commissions related with corporate lending. Still after the growth and the starting point of the growth of the lending book, we are not seeing for the time being evidence of these increasing commissions that will start from the Q2 of this year.
Let me add that on fee commission, just to give you a point on the strategy and the strong correlation with the current account, as I told you, we will monitor also the dynamic of the EURIBOR because we think that in our trend of increase of customer financial assets, we will give also particular attention on the growth of the current account. We think that on net interest income we will have a very positive dynamic and also much higher than the analytical sensitivity that Luca will explain now to you.
Okay. I will start with the sensitivity at 12 months that I remember is a sensitivity made on a static balance sheet according to an increase of the rates versus the rates that are implied in the forward curve. That is EUR 200 million for 50 basis points. If we consider the sensitivity, the managerial sensitivity, so considering the evolution of the balance sheet on real projection, I can say, the sensitivity is EUR 300 million for 50 basis points. This is the sensitivity, of course, that means that if you have a movement on the EURIBOR moving from 2- 2.5, you will account in the net interest income for the quarter.
Looking at a more longer sensitivity is something that can generate more higher level of benefit. At the moment, I can say that if we use a forward rate for the NII at 2029, we can have EUR 500 million more contribution, but is of course something that is theoretical. The important aspect is that in 12 month, based on managerial number, if we have 50 basis points increase, we can have EUR 300 million more contribution in NII.
Luca, sorry, follow-up. The EUR 500 million you mentioned, does it still relate to 50 bps or not?
Yes, 50 basis points, on a long-term perspective, so between 2028 and 2029.
Okay. Thanks a lot. Thank you. Very clear.
We are now going to proceed with our next question. The question's come from the line of Noemi Peruch from Morgan Stanley. Please ask your question.
Good afternoon, and thank you for taking my question and my sincere condolences as well. I have two questions. One is on your market share evolutions in Italy. If I look back in the past two years, this has been going down slightly between one and two percentage points. I was wondering what is behind that. Do you see the market growing perhaps in segment that you don't like the margin or the asset quality of? Do you see this trend stabilizing or inverting perhaps? The second question is on fees.
At the moment in Q1, the growth pace is 3%. Do you expect a more optimistic outlook for the remaining of the year? On this, we have seen asset and growth, AUM inflows are flat Q until end up year-on-year. I was wondering, what do you see in terms of margins and on upfront fees? Thank you.
Okay, Noemi. On market share evolution, the situation is stabilizing. I want to start from this point. Of course, we have already spoken about this in previous meetings. The competition during the last two years was very important, especially in the loan book arena. In this respect, we prefer to maintain the right price on the loan and not enter in a battle for volume. Now the situation is stabilizing also because we think that our competitor are involved in integration and in external operation that permit us to maintain market share stable. On deposit, as Carlo said, it's become a strategic asset for us in the environment.
We continue to maintain a very stable market share in the deposit and current account. That is the most important part for us. We do not follow competition for having a corporate deposit with a margin of 0.01. This is the point. Instead on fee, we have not registered the impact of the declining in the yield that we put in the business plan on medium long term for having prudence on this. In the first quarter, the return on the asset is stable.
Don't forget that during March, we have had a very important impact in the evaluation of asset under management and asset under administration that has been totally recovered at the moment in Already in April and is continuing in May. I can assume that we can recover the trajectory and go in line with our business plan for the rest part of the year.
We are now going to proceed with our next question. The question comes from the line of Sofie Peterzens from Goldman Sachs. Please ask your question.
Yeah. Hi. Here is Sofie from Goldman Sachs. My condolences as well. Very sorry to hear. My first question would be on your provisions. You guide for a significant decrease in provisions. You also have EUR 900 million in overlays. How should we think about this provision really or provision decrease over 2026 and 2027? Would you consider releasing some of the overlays? The second question would be on capital. How should we think about potential SRTs? Do you see any capital headwinds or tailwinds on the horizon? Thank you.
No. On provisions, we are not expecting or release any kind of overlays, not in 2026 and not in 2027. In the guidance, this is an important point, we put our cost of risk in line with the business plan, so between 25 and 30 basis points. We have currently run the bank at 16 basis points. We have room to absorb eventual spike in the next quarter. Of course, overlays will be utilized only in case of a massive deterioration of the scenario. At the moment, also in April, the inflows, net net inflows of NPL are very, very limited, so we are continuing to do very well in the new credit disbursement.
No, SRT, at the moment, we have a benefit in the SRT, in the common equity to 1 ratio that is a 60 basis point stable compared to the last part of 2025. We are working to continue to increase the size of SRT. At the moment, the costs are in line with our expectation and with the previous years. I want only to remember that we have the cost of SRT in commission, that is an accounting treatment. Is important to you to remember that we have this kind of operation, the cost of this kind of operation in commissions.
No, any kind of headwinds in the future, remembering that we have tailwinds of DTAs because with such a profitability high, we can absorb the 80 basis points quite easily that we still have as a deduction of common equity to one ratio.
Thank you.
We are now going to proceed with our next question. The question comes from the line of Pablo de la Torre Cuevas from RBC Capital Markets. Please ask your question.
Thank you. Hi, thank you for taking my questions, and I'm deeply sorry to hear about your loss, Carlo. I just had a couple of follow-ups, the first one being on the hedge. I just wanted to check if you can disclose what are your current expectations for the growth in the size of the hedge going forward to 2029. The second one was just a quick follow-up on cost of risk. It seems like you've reconfirmed that you see the normalized level there at 25- 30 basis points. I just wanted to check if that includes the usual managerial actions at the end of each year, and also it would be useful just to get some sort of sensitivity around what would that level be in a significantly more challenging macro environment, including a recession in Italy. Thank you.
No. At the edge, we are not planning to increase the size of hedging because we maintain in our projection EUR 170 billion. It's clear that increasing the level of deposit, this is a very prudent assumption. As we have done this year, increasing by EUR 10 billion the total volume under the hedge program can be that in the future we can increase. The estimate that we are providing are done with stable EUR 170 billion of deposit hedged. The contribution, just to be very, very clear, is EUR 500 million in 2026 and 2027, more contribution of EUR 1 billion in two years. EUR 300 million in 2028 and EUR 250 million in 2029. These are the number of hedge.
Of course, as I said before, the target for the year is 25- 30 basis point in cost of risk and include possible managerial action because, as I said before, we are running the bank between 16- 20 basis points, so we maintain some room of prudence. According to sensitivity, it's clear that a deeper recession can change the number, but taking into consideration that we have basically zero stock. Compared to the past, it's difficult to imagine a big increase in cost of risk. The important aspect that is at the moment we are looking at GDP growth for Italy between 0.3, 0.4. Even if the situation can deteriorate, we do not expect a recession during 2026. On cost of risk, we are very, very comfortable.
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 questions. First of all, condolences to Carlo for your loss. My question was on trading that provided a stronger contribution in the first quarter. If you can update us on your strategy in the management of the portfolio now, it relates with the evolution of NII. Can we assume that the bulk of trading income in the current, clearly depending on market condition, but assuming conditions stabilizing has been realized in this quarter? The other question were related to capital dynamics. If there is something that If you can update us on the capital evolution, what should we expect for this year? Lastly, if you can give us an indication of the final tax rate should we expect for 2026. Thank you.
Andrea, trading, we manage the revenue in an integrated manner, so it's difficult to give a specific guidance of trading. For sure, we are looking at a normalization on trading compared to the years 2022, 2023. We can increase the level of trading compared to 2025. How much, it will depend also on NII and on the contribution that we can have by an increase on ECB rates that, as Carlo said, is the more probable scenario now that is not included in our numbers. I think that we have started very well the year, so we are in a comfortable position.
We have a government bond portfolio that is higher than last year, so it's giving contribution to NII, and we have some recovery in the fair value of the position in April and in May. It's very solid, the performance in trading also for the next quarter. Again, it's important to look our revenue in an integrated way. Capital dynamic, we have a target about 13% for the business plan, and we can confirm that we will remain above this level and above the level of the presentation, because we have had this impact of 15 basis points that has been recovering in April and is continuing also in this day, in this week.
The level of capital will be above 13% in line with our estimate that we provided with the business plan. Tax rate, the level we have been very clear at the end of 2025, giving the update, the level that we have registered of 2.5 more or less increase in tax rate can be something that can arrive also at the year-end. Of course, we have EUR 1 trillion of assets, so we can try also to find some lever to optimize. At the moment, in the guidance, there is the increase of 2.5% in tax rate.
Thank you.
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.
First of all, Carlo, deep condolences for your loss. I have questions. I'll start with the first on loan growth. Mainly comes from the CIB, the loan growth you're showing in Q1. If you could provide a small granularity on the composition of the loan growth you are seeing, what sectors are accelerating, and your expectations going forward, given Carlo's comment on unexpected pickup from Q2 in corporate lending fees. The second is on the Danish Compromise squared. In case of acquisition of a significant stake in an insurance company, could you confirm you would be able to adopt the Danish Compromise-S quared regulatory treatment to the stake specifically? Finally, on regulation, there is much talk about Europe on the front foot to review and potentially improve the regulatory framework. Are you seeing any potential improvements? Is anything moving from your viewpoint? Thank you.
On loan growth, Andrea, you are right. The Corporate Investment Banking will be the key driver, not only in Q1 but also continuing positively in the Q2 . More or less 50% of the new disbursement are made by international clients. These are the one that can benefit for a more higher growth in terms of GDP in the world compared to Italy. We can continue to have benefit on this side. There is also another important aspect that you do not see increase of stock or big increase of stock in Banca dei Territori as in Corporate Investment Banking.
This is related also a substitution of the previous COVID loans that now are expiring, substituting by normal, I can say normal loans. The stock is remaining stable, but the markup is increasing. In terms of new disbursement of medium, long-term loans, also Banca dei Territori and the SMEs sector specifically is doing a very good job. On commission, of course, it's clear that we have had March that has been impacted by the very difficult situation. Some pipeline has been moved in April and in general in the Q2 . We can expect a pickup in the Q2 structured fee related to loans. I leave to Carlo for consideration on Danish Compromise.
First of all, on regulatory framework, we do not see any kind of improvement. I don't think that we can have some visible improvement in the next quarters, and from my understanding, also in the next years, because there is a clear difference in attitude from politicians and the supervisors. My expectation is that it is difficult that it can be that we can have some improvement like system. Talking about Danish Compromise-S quared, and talking about the insurance business, obviously. If you remain in the insurance business environment, my expectation is that in case of an acquisition of an insurance company, the Danish Compromise can be considered something not difficult to be confirmed by the supervisor.
Just to make it in clear word, if Intesa Sanpaolo should make something in the insurance business, my expectation is that we can have the confirmation of our Danish Compromise. This is based on the fact that we have a significant dimension in our insurance business. At the same time, it is really unbelievable that if you make a significant acquisition in something that can diversify your business model, you can be treated like a non-performing loans. If you consider the complete deduction of a participation in insurance business is equivalent to have a non-performing loans in your asset book. This is crazy, and it is obvious that the most important part of the story is that you should have the governance and the risk control that is able.
To function as a complete group and not obviously maintaining as a separate entity. In my perception also your analysis that I read in different paper on the benefit that can derive from the Danish Compromise are absolutely likely, and are also something that it is reasonable because when you make diversification, it is crazy to consider that you are making an acquisition of non-performing loans. Also with the Danish Compromise, you will remain with a risk weighting that is much higher than a credit. Also in this case, the Danish Compromise, if you make a good acquisition in insurance business, can create significant capital. The real point is that an acquisition from a bank, in comparison with an insurance, is a significant earning per share problem.
If you consider this, you can have benefit in terms of capital, but you can lose in terms of earning per share. Having said that, this is theoretical. I can confirm that we have antitrust problem to make the acquisition of Generali.
Thank you so much.
We are now going to proceed with our next question. The question come from the line of Britta Schmidt from Autonomous Research. Please ask your question.
Hi there. First let me also offer my condolences to Carlo. Just two quick follow-ups. On the valuation movements this quarter, can you give us a little bit of an insight into what caused the movements there, and maybe also update us on some of the sensitivities to credit spreads or valuations? Secondly, what sort of costs for certificates do you expect to book this year, in the trading income, and how should we expect that to move or reprice potentially with changes in rates? Thank you.
Now, the I want to start with the second one. The cost of certificates is in line with the level of 2025 because we are assuming that EURIBOR remains stable. As I said before, in the NII, we have set this prudent approach, and this is the reason why also on cost of certificates remain stable. Of course, if we will have an increase in EURIBOR, we can have a small impact in trading, but a definitely higher impact positive in NII. Net net is positive.
On sensitivity of the impact of valuation reserve, first of all, again, we have an impact of 15 basis points because basically all the government bonds, not only the Italian one, have had an impact on the different, on the credit spread. You can use the actual number to have sensitivity looking what happened in the month of March, and the impact has been 15 basis points. is the best way to have a sensitivity on our number. Just to remember that we have recovered 10 basis points in April. Looking the number of today, we have the other 5 basis points recover. All in all, at the moment, we have reabsorbed all the impact of the valuation reserve.
We are now going to proceed with our next question. The question come from the line of Giovanni Razzoli from Deutsche Bank. Please ask your question.
Good afternoon to everybody. My condolences also to Mr. Messina's family for his loss. On the questions, two very quick one, please. The first one is on the deposits, because it seems to me that Intesa so far is the best performing bank in terms of deposit growth or one of the best one in Italy with 4%. We have seen that most of it was in the corporate segment. You said that your strategy does not envisage clearly to enter into competition for hot money or temporary, you know, deposits. I was wondering if going forward for the rest of the year, we shall assume that this deposit base will be maintained and progressively increased as you also plan to expand your reach in the, into the Banca dei Territori as per the business plan.
That's my first question. The second question, if you can remind us what is the timeline for the 80 basis points of DTA absorption. I would say 20, 30 basis points per year over the next 3, 4 years is a reasonable assumption? Thank you.
Yes. The assumption DTAs is correct. This year we can have 25, 30 basis points. It depends, of course, on the net profitability. For sure we will absorb the 80 basis points during the next three years. This is on capital. On deposit, I can say that the start of the year is very positive on all the different part. Of course, the [audio distortion] part is made by our household current account where the cost is zero. This is the target that we want to achieve.
On the other sector, we will follow the trend of the market, remembering that the Italian quality of the Italian corporate SMEs is increasing, and they are very liquid, as we shown in the presentation. Basically, we can have some benefit also in the trend of deposit for corporate sector without paying too much money for maintaining them. This is the answer.
Thank you.
We are now going to take the last question. The last question comes from line of Ignacio Cerezo from UBS. Please ask your question.
Hi, good afternoon. Obviously, extending my condolences to Carlo and his family as well. On the questions, first one is on NII. I mean, it looks like the kind of messaging from you is reasonably optimistic on things like hedge volumes, but you haven't really changed your NII guidance for the year being higher basically than 2025. Just basically asking if you can be slightly more precise around how much higher basically than last year concerns was a +2. Getting some color beyond actually if you can in terms of how much higher you can have. Related to this, if there is any negative we need to think about actually in terms of the net interest income progression through the year.
The second question is on the EUR 421 million of dealing and placement of securities fees, the upfront components. If you can at least give some color of how that number is split between the different products and how sustainable that number is into coming quarters. Thank you.
On NII, I think that we have given details, but I want to be more clear again. It's clear that we have assumed to have increase in the region that we have said during the business plan, so 2%-3% with stable rates. It's clear that 50 basis points can give us EUR 300 million more. This is the best situation to calculate our NII can be. Of course, during Q2, after six months, we can give update on the guidance for also for NII. For the end of the year, we can say that we can do better than 2025 in a discrete way, so in a very important way. Not more at the moment, but will be higher than our expectation. This is for sure. Can you repeat the second question? Because it's on commission, but I didn't catch-
Yeah
-the specific question.
Yeah. The question was around the upfront component basically of the market fees, the EUR 421 million. I think you call it dealing and placement of securities. If you can split that number between different products, and if you can let us know how sustainable you think that number is. It has grown actually versus Q4, and it has grown as well versus Q1 last year. I think it's the highest number in the series actually.
I think that we can provide detail with our Investor Relations team in a follow-up. The placement I can say that the placement of securities is very positive because as Carlo said, we have been able to maintain our ability to have gross inflows during this quarter. Remember that one month has been a high impact by the situation in Middle East. I think that the placement, the commission deriving from the placement of security is totally sustainable and represent only a portion of our commission base. That part has been impacted instead in the recurring fee during the month of March.
I think that the largest part of our commission base can be higher during Q2 due to the recovery in asset under management and asset administration stock. Generally, in placement of securities, we have certificates, third parties bond, and mutual fund, and so is a typical activity that our Banca dei Territori and wealth management division will continue to do so, are completely sustainable for the future.
This is the end of the question and answer session. I will now hand back to the management team for closing remarks.
First of all, thank you very much for your condolences. I much appreciated your condolences. What I want just to focus at the end of the presentation is just an executive summary of our expectation for 2026, so that you can have the clear lever that we are using within the organization. On NII, our expectation is that macro environment will give us a significant further contribution. For this reason, we are accelerating the work on the current account just in order to be in a position to have growth in terms of markdown. In terms of commissions, we are continuing to have significant gross inflow accelerating in all the different areas of wealth management and protection, but also in terms of lending commissions.
If we look at trading, we will continue to have a good performance. Insurance income will continue to have a good contribution. Looking at property and casualties, that is increasing in terms of penetration. Cost will be the real surprise for 2026 because we will be in a position to exceed, in a significant way, our expectation. If you look at loan loss provisions, the significant reduction in terms of non-performing loans will allow us to have a very good performance, and if needed, to make other and further managerial actions. Net-net, our expectation is to continue to have a good trend for 2026. The condition in Italy is a condition that obviously is affected by the crisis. That's a geopolitical condition that for sure.
I think that the government is making a good job in managing the situation. Both Giorgia Meloni and Giancarlo Giorgetti, in my opinion, have the right approach on managing the situation. If needed, I think that Italy should be in a position to increase also the public expenditure, especially if this will be in connection with a potential further reduction of the public debt through disposal of the real estate assets that are in the end of the government and the public. Net-net, my view is also positive on the country, obviously provided that geopolitical conditions will reduce the growth within the country. Thank you very much, and we will have occasion to see in roadshow or in another occasion. Thank you.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.