Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sanpaolo for the presentation of the third quarter 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 then hear an automated message advising 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 would like to hand the conference over to Mr. Carlo Messina, CEO. Sir, you may begin.
Thank you. Welcome to our nine-month 2026 results conference call. This is Carlo Messina, Chief Executive Officer, and I am here with Luca Bocca, our CFO, and Marco Delfrate and Andrea Tamagnini, Investor Relations Officers. We have just delivered our best nine months ever, with net income of EUR 8.2 billion, including more than EUR 2.6 billion in the third quarter, making it our best third quarter ever. Our return on equity reached 21%, with a return on tangible equity of 26%, while earnings per share increased by 10% year-on-year. These excellent and sustainable results reached despite an almost EUR 1 billion impact from the budget law for 2026, allow us to upgrade our 2026 net income guidance to well above EUR 10 billion. In the first nine months, we delivered record-high revenues, and customer financial assets grew to more than EUR 1.5 trillion, showing continued commercial momentum.
We further reduced costs, and asset quality remains best in class, with no sign of deterioration. We maintain a rock-solid capital position with a common equity Tier 1 ratio of 13.1%. The execution of our business plan continues at full speed, and Italy's economy continues to demonstrate strong resilience and has performed better than expected, with GDP growth forecasts revised upwards. Our offer for Monte dei Paschi di Siena is well on track. We are fully convinced of the strength of our offer, and the outcome of the Monte dei Paschi di Siena AGM reinforces our confidence in the success of our transaction. Our shareholders have also demonstrated their strong support for the transaction, clearly recognizing its industrial and economic value. The acquisition is fully consistent with our disciplined approach to growth and value creation, and it will accelerate the execution of our business plan with zero integration risk.
We have demonstrated our ability to successfully integrate banking groups many times, delivering synergies ahead of schedule while maintaining strong commercial momentum. Intesa Sanpaolo continues to offer one of the highest and sustainable dividend yields in the European banking. This year, we are returning EUR 9.4 billion to shareholders through dividends and buybacks, including the EUR 3.8 billion interim dividend to be paid in a few weeks. I am proud of our results and thank our people for their excellent contribution. Now let us turn to slide one for the key achievements of the first nine months. In the first nine months, we delivered record-high profitability, excellent asset quality, and high sustainable and increasing value creation and distribution. Slide two. In this slide, you can see that net income has more than doubled in five years. Slide number three.
In the first nine months, we delivered a significant increase in earnings per share, dividend per share, and tangible book per share. Our interim dividend per share is up 18% year-on-year. Slide number four. As you can see in this slide, we are on a solid growth path. Loans to customers increased 4% yearly. Customer financial assets are also up, with customer deposits growing 8% year-on-year. Slide number five. Revenues increased more than EUR 1 billion year-on-year, while we managed to reduce costs by over 1%. As a result, the cost/income ratio was down 2.4 percentage points. Slide number six. As already said, thanks to our nine-month performance, we are in a comfortable position to upgrade the 2026 net income guidance to well above EUR 10 billion. Slide number seven. Our excellent performance allows us to benefit all our stakeholders.
Sustain the real economy and strongly support the fight against poverty and inequalities. All this despite a EUR 900 million impact from higher tax due to the budget law for 2026, and considering that at the end, we will pay in nine months EUR 5.2 billion in terms of taxes. Slide number eight. In this slide, you have a recap of the three pillars of our business plan presented in February. The plan is proceeding at full speed with all initiatives launched, and the Monte Paschi di Siena transaction will be a strong accelerator of the plan. In the appendix, you have an update on the progress. Now, let us move to slide 10 for a closer look at our nine-month results. Slide 10. In a nutshell, in the first nine months, net income was up 8%, and we delivered the best-ever operating margin and gross income. Slide 11.
In this slide, you have the detailed P&L for the first 9 months, showing improved results across almost all the lines, despite this year's higher tax rate. Slide number 12. Very briefly, in the third quarter, net interest income was up 6% year-on-year. Revenues were up 4%, supported by core revenues. Cost and loan loss provisions were strongly down, and net income was up 12%. Slide number 13. In the first nine months, revenues grew across all components, thanks to our well-diversified business model. Slide number 14. Net interest income increased more than EUR 250 million compared to last year. Despite the decline in Euribor, it was also up quarter-on-quarter. We expect net interest income at well above EUR 15 billion for this year, with a strong acceleration in Q4 and further growth in 2027. Slide number 15.
This slide provides more details on net interest income, and you can see that the quarter-on-quarter increase is driven by the commercial component. Slide 16. This was the best nine months in Q3 ever for commissions and insurance income. Our fully owned product factories are a clear competitive advantage. Slide 17. In the first nine months, commissions were up 5%, driven by wealth management and protection. Our top-notch advisory services are a stabilizer for the impact of market volatility on fees. Slide 18. Non-motor P&C was a driver of the record-high insurance income, and we still have significant upside potential. Slide 19. Customer financial assets grew EUR 100 billion on a yearly basis, with significant growth in assets under management. In Q3, direct deposits increased by more than EUR 5 billion, of which EUR 3 billion in current accounts. Slide 20.
We can count on our unmatched client advisory network with over 19,300 people dedicated to fueling assets and under management growth. In the first nine months, we added 800 people. Slide 21. The contribution from commissions and insurance income to revenues is by far the highest in Europe after UBS. Please turn to the next slide for a look at costs. Operating costs decreased more than 1% compared to last year. Slide 23. We have high flexibility to further reduce costs, thanks to our tech transformation that will enable significant generational change at no social cost and with no impact on revenues. Slide 24. We have a best-in-class cost/income ratio in Europe. Let's now move to slide 25 for a look at our top-notch asset quality. Annualized cost of risk was 19 basis points, with a significant increase in NPL coverage. Slide 26.
We have a very low NPL stock. NPL ratio and inflows continue to remain at historical lows. We have a very well-diversified loan portfolio, and there is no sign of asset quality deterioration. Let's move to slide 27 for an update on capital. Despite the impact from widening spreads on valuation reserves, the common equity Tier 1 ratio is 13.8%, including the benefit from DTA absorption. Let's move to slide 28 for a look at our liquidity position. We have best-in-class MREL ratios, and liquidity ratios are well above our business plan targets. Let's now move to slide 30 to see how well-equipped ISP is to succeed in any scenario. Slide 30. We have a very profitable, efficient, and resilient business model with top-notch asset quality. Last but not least, the management team is cohesive and has a strong track record in delivering results. Slide 31.
Intesa Sanpaolo stands out across key metrics and is better positioned than our peers to face any future challenge. Slide 32. In this slide, you can appreciate our unique positioning thanks to our efficient, commission-driven business model supported by strong tech investments. Slide 33. NPL stock and ratios are among the best in Europe. Slide 34. As you can see, we are also well-positioned in terms of Stage 2. Slide 35. Our NPL coverage is also among the best in Europe. Slide 36. Our Russia exposure is close to zero. Please turn to the next slide for a few words on the macro picture. The Italian economy remains resilient, and we expect Italian GDP to grow this year and next. Slide 38. Italian companies continue to maintain their strong position and are more resilient to external shocks than in the past.
Let's now move to slide 40 for an update on the Monte dei Paschi di Siena transaction. This slide provides an update on the Monte dei Paschi di Siena transaction. We are in line with the timetable, and we have already received all the approvals from the sector supervisory authorities, including the ECB and IVASS. We updated the terms of the offer by adjusting the change ratio for the interim dividend that will be paid in a few weeks and increasing the cash component to EUR 1.25 per share. As a result, the premium offered to Monte dei Paschi di Siena shareholders is now 15.3%. We have also envisaged additional initiatives in Siena and Tuscany involving higher lending and the creation of a tech hub, sales department, and central structures.
This transaction will generate clear benefits for all stakeholders that will enjoy the reward of increasing and more sustainable value creation and distribution. Delfin has undertaken to tender its entire 70.6% stake in Monte dei Paschi di Siena to our offer, and other significant shareholders have announced their support, confirming the appeal of our offer. We have a strong potential on a standalone basis, but the transaction will enable us to achieve our business plan targets three years in advance. In the next slides, you have more details on the offer, but for the sake of time, let's now move to slide 43. As you can see in this slide, all steps are being delivered as planned.
Let me conclude this chapter by saying that Monte dei Paschi di Siena shareholders have the opportunity to choose to join forces with the strongest player in Italy and one of the leading players in Europe, a group that always works to benefit its shareholders, client, people, and the broader community and the country. The outcome of the Monte dei Paschi di Siena's AGM reinforces our confidence in the success of our transaction. Monte dei Paschi di Siena's shareholders gave a very clear message by strongly voting down the management proposals, including ordinary items. We have never seen anything like this. It shows a strong gap between shareholders and the bank's management. We remain absolutely convinced that our offer is the best option for Monte dei Paschi di Siena, Mediobanca, and Intesa Sanpaolo. Let's now move to slide 45 for the final remarks.
In this slide, you have a recap of our best nine months ever and the reasons why we are fully equipped to succeed in the future. Let's move to the last slide 46. For 2026, we upgrade our net income guidance to well above EUR 10 billion. We are on a strong organic path, but with the Monte dei Paschi di Siena transaction, we'll further accelerate. We remain focused on delivering strong short-term results while continuing to invest for sustainable long-term value creation. That is why we continue to offer one of the highest and most sustainable EPS growth and dividend yields in European banking while maintaining a rock-solid capital position and continuing to lead on social impact. So thank you for your attention, and we are now happy to take your questions.
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. Once again, please press star one one and wait for your name to be announced. To withdraw your question, please press star one one again. For the benefit of all participants on today's call, please kindly limit yourself to two questions. In case of additional questions, the IR team will be at your disposal after the conference call. Thank you. We are now going to proceed with our first question. The questions come from the line of Marco Nicolai from Jefferies. Please ask your question.
Good afternoon. A couple of questions from me. The first one is on NII. I wanted to see if you could give us a bit more color beyond the already helpful comments you made on 2027. Because if I look at the deposit growth, even using the narrow definition, you are growing at 3.5% year-on-year. If we add the upside from the replicating portfolio rate sensitivity, and by the way, the upside from the replicating portfolio, I guess, increased quite a bit given the increase in rates we've seen over the last months. It seems to me that a high single digits NII growth is not an unreasonable assumption for 2027. What are your thoughts on this?
Second question, if you could give us your view on deposit competition, if you are noticing any increase in competition on this front, and what are your expectation on deposit beta? There are a number of initiatives out there that could put pressure to your deposit balances. For example, the savings and investment accounts and the push for the SIU in general, the digital euro, et cetera. What are your thoughts on this front? Thank you.
Related on deposit competition, we start from the second one. I have to tell you that we do not see any kind of significant competition on deposit side, and our expectation is not to have any kind of threats also in the next quarters and year. We think that, like in the previous phase of increase in interest rate, we were in a unique position with our clients that used to stay with us for the wealth management proposition that is a combination of deposits, asset under management, asset under administration, insurance product, and also on mortgages and the loan side. I have to tell you that my expectation for competition for Intesa Sanpaolo is really limited. On the other side, I'm with you for the assumption on the net interest income for 2027.
Our expectation is to have a significant growth in terms of net interest income coming from increase in Euribor, increase in the hedging contribution, increase in volume. All these will bring us to a level that is close to what you have considered.
Thank you very much. Very clear. If you could also update us on the replicating portfolio contribution for 2027 and 2028, that would be very helpful.
Luca Bocca will tell you.
Yes. Of course, as you said, the replicating portfolio is benefiting from the increase in rates, so we can expect an increase between EUR 500 million and EUR 600 million for 2027.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Sofie Peterzens from Goldman Sachs. Please ask your question.
Yeah. Hi. Here is Sofie from Goldman Sachs. Thanks for taking my questions. My first question would be on the Italian budget law. How should we think about the tax impact on Intesa in 2027? My second question would be around these worries around sovereign spreads across Europe and spread widening in Italy. How do you think about that, and do you have any concerns around the Italian sovereign spreads and holding Italian government bonds? Thank you.
We start from the second one that is probably most important in terms of picture, just to give you my view on the dynamic of the spread. I think that looking at Italy, we are in a unique position in terms of stability. The government, Giorgia Meloni and Giorgetti, made a very good job. Then I will elaborate on budget law in which probably I am not so happy. Having said that, being in the view of considering the job for the country, it is true that the country has a good positioning and also looking at sustainability of the public debt. The public debt is sustainable for the future. My expectation is that if there will be some movement in the spread, there will be more something coming from France or U.S.A., but not specific to Italy.
Also, the elections next year, in my opinion, are not such a condition that can create significant negative dynamic on the spread. Also because in Italy, you have a strong position for the family, both in savings and indebtedness. The indebtedness of family is very low, and also the corporate sector is very good in comparison with all the other Europeans. If you look the total indebtedness of the country, looking at family, corporate, and public, we are not in such a negative position. In my view, we are in good position in comparison with the significant number of countries in Europe. Also, the banking sector is strong. All the fundamental of the country are, in my view, really positive.
There could be some dynamics related to the election that is typical for the fighting of the different parties in the country, but it is absolutely manageable also looking from the investor perspective. Coming at the budget law, I made clear statement on this point that we had an agreement last year. We made an agreement for a three-year contribution from the banking sector, and the government didn't respect this agreement because they decided to have another year in which, and probably two years, in which they are considering further taxation for the banking sector. As we demonstrated in our figures, we made these nine months a contribution of EUR 5 billion in terms of taxations, and out of which EUR 900 million is the cash contribution that we gave to the public finance of Italy.
In making an analysis of contribution, probably we have to avoid the populistic approach that taking measure against banks can give electoral consensus, because I think that what you have to consider is the real contribution to the fundamental of the country and also what you are paying already in taxation. Having a look to the budget law, it is difficult today to say what could be the impact because we have to wait until the end of the process. It is clear that if we will have an impact coming from this that we can call the extra profitti squared, because we had already the one that we have agreed, and now they place another one. We are the only sector in the world that has extra profitti squared. It's unbelievable.
In any case, we have to wait for the final results of the process of the budget law. What I can tell you is that we will do our best in order to compensate and working on contingency plans on the cost base and other items in order to allow our people and the shareholders to rely on the strengths of Intesa Sanpaolo.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Pablo de la Torre Cuevas from RBC Capital Markets. Please ask your question.
Thank you for taking my question. My first one was on managerial actions and integration costs next quarter. Back in June, when you were discussing the timing of the EUR 2.1 billion Monte dei Paschi integration charges, you mentioned that you expected to book these in 2026. Given the potential settlement date of the offer could now be in January 2027, I just wanted to check what is your latest expectation in this regard. Also more broadly, it just would be good if you could update us on the size of managerial actions to be taken next quarter. The next question was more of a modeling one on capital. Looking at Q3, I see that most of the quarter-on-quarter decrease in risk-weighted assets was driven by Italian retail banking, even though loans there in that division were flattish.
I just wanted to check if there were any one-off impacts flattering the figure in the quarter. Looking into Q4, and excluding the Monte dei Paschi combination, if you just could update us on expected headwinds or tailwinds in Q4, including operational risk or any valuation reserve and one from this quarter. Thank you.
So on capital, it is with us. I will leave the floor to Luca. Before, I want to talk about the managerial action or integration charges. Obviously, the integration charges related to the Monte dei Paschi di Siena transaction will depend by the end of the settlement of the transaction. If settlement will be in 2027, obviously they will be placed in 2027, not in 2026. in 2026, we will continue to have a very conservative approach, but the guidance of well above EUR 10 billion already include some kind of actions that we will do on the cost base and also on the asset quality and other charges and provisions. We are considering that we can have a very conservative approach also before making the transaction with the Monte dei Paschi di Siena if the transaction will be realized at the beginning of 2027.
On capital, Luca.
Yes, you are right. in the third quarter, we have had some optimization lever, especially in the retail sector, also for updating the model in terms of PD and LGD. This is something that derives from the fact that the risk embedded in our model are improving and, of course, is validated by ECB. On the other side, we have performed new operation on SRT to decrease the risk-weighted asset in the quarter. in the fourth quarter, we do not expect big change from tailwind and headwinds. We will have only EUR 1 billion for operational risk that you know is updated on a yearly basis in the last quarter, but we have already in place some maneuver to compensate, so our risk-weighted asset can remain stable.
We are now going to proceed with our next question. The questions come from the line of Britta Schmidt from Autonomous Research. Please ask your question.
Yeah, thank you very much for taking my questions. You mentioned in your presentation that there are some additional commitments in Siena and Tuscany. Could you maybe comment on whether that has any impact on synergies and cost expectations for the combination? Then secondly, there was a little bit of an increase in Stage 2 loans in this quarter. Are there any specific sectors that you would flag? Then if I may, just a brief follow-up regarding the budget measures. What, in your view, are the main uncertainties regarding the budget impact, and what needs to be clarified for you to give us a more detailed impact assessment? Thank you.
Related to synergies, I do not see any kind of reduction of synergies. The kind of measure that we are considering are to place in Tuscany and in Siena something that we have already considered for other location. We did not decide in which place to put the technological hub and to the reinforcement of our presence in Tuscany, and we decided to place in Siena due to this transaction. We do not see any kind of impact coming on synergies. Just to remember that people that will leave the organization will leave on a voluntary basis and will be replaced by hiring of young people. There is no change in this, and it will be positive for the Tuscany because if people want to leave, they can leave, but at the same time, we will hire people in the same place.
It is absolutely in line with what we have already considered. From economic point of view, there is no implication. Of Stage 2 loans, it is marginal. We are in such a very good shape looking at asset quality that it is impossible to go to zero. Starting from some years ago to be considered one of the worst bank in terms of non-performing loans and non-performing loan ratio, I am very happy that we are so strong today and so smart and clever that just a minimum increase can be considered something to make in further analysis. But it is the physiological dynamics of our loans. Looking at budget law, it is typical in each process for the budget law that it is a starting point, and then there is a final point at the end of the process.
There are items related with some financial impacts or economic impacts that are not completely clear, and so we have to wait and leave the point because you can understand that the financial impacts has no results in terms of reduction of net income, and so we have not to plan any kind of contingency plan. In case the impact is on the economic figures, we will define a plan to reduce the cost base, working obviously on something that will create some negative impact on supplier and other consultants and people that can have contribution from the bank, and then we will decide what we have to do. But for the time being, it is not serious to make any kind of indication.
What I can confirm you and all the investors that we are fully committed to continue to deliver the net income that we promised to the investors in any conditions.
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. Once again, please press star one one to ask a question. We are now going to proceed with our next question. The questions come from the line of Andrea Lisi from Equita. Please ask your question.
Good afternoon. Thank you for taking my questions. Just two. One is on trading on the capital markets component is negative by EUR 144 million, if you can provide a bit more color on that. The other, if you can provide an update on the talks and negotiations with the union on the renewal of the contract with the workforce. Thank you.
Starting from trading, it is obviously related with the mark-to-market valuation coming from the negative dynamic of the spread. It's only valuation of assets, and we hope that as soon as the situation can normalize, this can be recovered. That's on trading. At the same time, I have to tell you that we decided not to push to have a capital gain on the other side, because the net income is in such good shape that we were able to make an increase in our outlook. We didn't need to have further results coming from trading. We decided to reduce the activity and to maintain this negative mark-to-market in the capital markets areas. On the second question, that is on the renewal of the contracts, we are working internally.
First of all, we are defining the position of Intesa Sanpaolo, then we will work with ABI. Intesa Sanpaolo has always had a very positive approach towards people in the organization. We don't want to be in a position to make any kind of negative impact coming to our people from this crazy attitude of the budget law to reduce the net income of the banking sector, but we will have to see what can happen and what is the dimension of the impact. But believe me, our approach is always to take care of our people.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Hugo Cruz from KBW. Please ask your question.
Hi. First, if you could give a little bit more clarity. Let me rephrase that. Fees, can you remind me how much did you book of performance fees last year in Q4, and if you expect any this quarter, even though the markets are a little bit more volatile? That is on performance fees. The other one is on the timeline of the Monte Paschi offer. If you are successful, when would you look to delist Mediobanca? Thank you.
I will answer the second question, and Luca will answer you on fees and performance fees. On the timeline of Monte dei Paschi di Siena, obviously, as I told you, we have still this point of uncertainty by the end of 2026, beginning of 2027. As soon as we complete the settlement, we will make a mandatory offer on Mediobanca, and then as soon as this is completed, we will have the full control of Mediobanca, and we will start to work also to make the integration of Mediobanca. As I told on different occasions, for us, Mediobanca has a lot of value. People working in Mediobanca have a lot of value, and we want to continue to invest in Mediobanca brand and Mediobanca people.
Yes, on performance fee, last year we booked EUR 90 million in the fourth quarter, and it is possible to have a number that is similar in the fourth quarter. Of course, it depends on the market volatility, but this is the dimension that we can have. I want to add that in the first three quarters, we are below EUR 50 million, so you know that the vast majority of performance fee will arrive in the fourth quarter.
Thank you.
We are now going to take one last question. The questions come from the line of Lorenzo Giacometti from Intermonte. Please ask your question.
Yes, good afternoon. Thank you for taking my question. I have just one, which is a clarification on the Monte Paschi transaction, and especially on the Unipol agreement. I mean, if additional remedies were required on top of the 600 branches, would they go to Unipol under the existing agreement, so within the EUR 3 billion-EUR 3.5 billion, or would they be a separate disposal? Thank you.
Just let me make just a brief point on the antitrust situation, because this area and this question is linked with what is happening with antitrust. As I told in different occasions, we are in a position to have total trust in the antitrust institution. We think that the final result should be, from economic point of view, in line with what we have considered in the proposal to the market. But if some further branches should be sold, this will not happen with Unipol, but we will find other buyer. But our expectation is that it is unlikely that this can happen.
Thank you very much.
This concludes the question- and- answer session. I will now hand back to Mr. Carlo Messina for closing remarks.
I want just to thank all the Intesa Sanpaolo shareholders, but also the Monte dei Paschi di Siena shareholders that gave a clear indication in the EGMs of Monte dei Paschi di Siena. I can confirm you that we will all work in order to create value not only for the Intesa Sanpaolo shareholders, but also for the Monte dei Paschi di Siena shareholders. We will continue to deliver results, and we will do our best also to over-deliver in 2027. The commitment of the organization is strong, and my personal commitment is to deliver a very good performance for the future. Thank you very much.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.