Good afternoon. Thank you for joining the call. As a comment, starting with a comment for the 12-year results, we can say that business model efficiency, strong positioning and diversification with no compromise on the development and growth initiative, but also sticking to outstanding asset quality, paved the way for a record year results, and a solid Q4. This was obtained in the context of, as we know, more challenging macro because of the well-known events, in particular in the second half of the year. If we stick to growth, we have had quite an unprecedented expansion of profitable assets driven by strong commercial performance. In particular, EUR 9 billion of net new money, TFA up 12% at EUR 80 billion, and loans up 7% at EUR 52 billion.
This meant an 8% increase in revenue to all-time high of roughly EUR 2.9 billion. Having obtained a larger Wealth Management in terms of size and profitability, record results of Consumer Finance, very robust CIB activity, and a very solid insurance contribution. This meant 5% increase in NII, 14% increase in fees, and led to above EUR 900 million of net profit with an EPS expansion of 15%. This was also coupled with strong quality in terms of cost/income 46%, having invested heavily in distribution, innovation and talent. Cost of risk, which remains below 50 basis points with all the overlays untouched, EUR 300 million. Gross NPLs on gross loans 2%-2.5%, with coverage up to 71%.
ROTE, which is in the region of 10%, with a phase-in CET1 of roughly 16% and a fully loaded of 14.5%. This clearly allowed the better shareholder remuneration with a DPS at EUR 0.75, up 14% year-on-year. We have concluded the 3% buyback launch in December 2021. This led to a total payout of 100%. We have worked heavily on our ESG target, and we have raised our ambition even on this field. If we go to page five, we see basically the reason of all this in terms of commercial push.
EUR 9 billion compared to EUR 3.8 billion of last year, the increase of TFA and the breakdown of the increase of loans among the different business, where we had 9% increase in CIB, but also a very good 6% increase in all the other bucket of credit. This led to the increase of 8% in revenue. This 8% has been confirmed through a very solid Q4, where we have had EUR 2.1 billion of net new money, record of new loans in Consumer Finance, EUR 2 billion, the highest of the year in terms of quarter, EUR 1.5 billion of new loans in CIB. We have seen also in the fourth quarter, quite strong results.
If we go and see the remuneration on page eight, the DPS went up to EUR 0.75. This led to a cumulative EUR 1.5 billion shareholder remuneration. Hence, we are targeting basically the EUR 1.9 billion in cash and EUR 2. something billion in terms of buyback, and I think we are well advanced on this track. This is coupled with a solid capital base. CET1, well above requirements with low sensitivity to risk factors, so EUR 300 million overlays untouched, low IT GOV incidents with 49% of CET1, and a low RWA volatility. On page nine, we show that these results, they are not, you know, one-year results, but if we compare the metric on the last six years, we see that the growth of Mediobanca is remarkable also compared to other players in the sector.
6% revenue CAGR growth in the last six years compared to quasi-zero of other players, and this was broken down into +3% in fees and NII, and 11% in fees. This meant a +8% in PBT, +7% in net loans, and the ROTE, which is systematically in the region of 10%. It's not volatile and stayed at the level of 10%, 9%-10% even during the pandemic. This reverted into an important total shareholder return, 98%, compared to 25/20 of the sector. We think we are on track to reach business plan target of next year. There are areas where we are more advanced and areas we are less advanced.
On average, in TFA, we are very well positioned with EUR 80 billion, as opposed to EUR 83 billion. In AUM, we have a bit of lag with EUR 51 billion-EUR 59 billion. Loans, we are already there with EUR 52 billion to EUR 51 billion. In revenue, we are at EUR 2.9 billion, EUR 2.85 billion. You know, we are targeting EUR 3 billion EPS and ROTE as well. As I said, important efforts have been displayed in ESG. In particular, we are widely exceeding many of the targets, which we set in the three-year business plan. We have devoted this year particular attention to environment, social, and governance aspects of our activity, in particular signing Net-Zero Banking Alliance and Task Force on Climate-related Financial Disclosures with important milestones from here to the next few years.
We have enlarged our ESG green credit product footprint, now material with EUR 3 billion. We became a reference bank for DCM position in ESG space with 21 transactions. We have also invested EUR 1.5 million in a special social project here in Milan, as well as we have launched today an important project at group level in order to match and attract talent attraction and retention with specific KPI for higher gender diversity and inclusion. We have improved our governance with two major decisions on bylaws, on one hand improving bylaws, and appointing a lead independent director. This meant an important and growing appreciation from institutional investor indexes and ratings, which were improved materially.
Now, looking at GOP on page 14, we have had an increase of 14%, and this increase was basically compared to last year and compared to the pre-pandemic. Basically, last year, we went back to pre-pandemic, 2020 to 2019 at EUR 1.1 billion, and this year we have reached EUR 1.3 billion. The NII trajectory has been quite interesting, not only this year, but if you see from 2016, this has been a constant growth trajectory, which is what we like. We don't like to have some sort of, you know, volatile one-off in terms of trajectory. It's more an industrial trajectory, which has restarted after the downturn of the pandemic, because as you remember, we have been forced to halt our consumer loan production.
This meant a small decline last year of NII. This year, we have restarted to grow with a 5% increase. As we commented before, to this increase, basically contributed all kinds of business. We have managed the funding in a way that is actively reduced in terms of cost, so from 65 to 55, and this funding has been increasing by important deposits, as we see here on page 16. The bank now has EUR 29 billion of deposits, so 47% of total funding, which is an important number compared to where we started some years ago. You remember Mediobanca was known to be a wholesale-funded entity, while now is having a direct access to funding and is much more independent.
Another important, you know, summary or element of what we are doing, the important shape of the group we are closing, is basically the page 17, which shows you the trajectory of fees. Just bear in mind that in June 2019, just before the COVID, we were having EUR 611 million of fees, as opposed to EUR 851 million of this year. So 40% increase in the last three years is like if we have had done a sort of M&A, which was not there. Basically, this is organic growth, mainly because there has been some small, very small M&A.
This is the expansion you can see in two categories, mainly in CIB, which is going up from EUR 226 million to EUR 346 million, but also and mainly from wealth management now at EUR 422 million, with a 4% to 26% increase. This is also linked to the TFA, which went up from EUR 61 billion to EUR 80 billion, and gives the sense of the potential of the group in terms of becoming more fee-driven, more wealth management-driven. Just think that, you know, this number in 2016, the component of wealth management was very marginal. In after six years of mainly organic growth is the main engine of the fee.
Cost, of course, reflecting the efforts in investing mainly in Wealth Management, not only in labor cost and in administrative cost because we are investing in a stronger network of distribution, and this means more people, means higher fixed, and means also some increase in variable, taking into consideration the very good performance of the year. Is meaning also an increase in administrative expenses because of higher volume, new project, IT, digital, and even here you see that the first part, the most important part is in Wealth Management. This gives you another sense of the efforts we are doing to develop Wealth Management. Core flat at 46 basis points. No overlay release.
We have in this EUR 48 million we have set aside extra provision in Q2 to facilitate the downsizing of the small credit buckets to basically, which are seen as less strategic leasing and NPLs buying. Basically notwithstanding this, we have achieved 48 basis points cost of risk, and we have maintained overlay. Best ever asset quality in terms of gross NPL on loans. You can see we were at 4.1%, and we are now at 2.5%, so basically we have had a material decrease, while the coverage and in particular on also let's say bond issue has been quite interesting because it went up from 125% to 133%. Capital ratio, you see the evolution in the year and in the quarter.
In the quarter, we have generated 40 basis points of capital through earning generation and insurance release. While in the year, we have had marginal 60 basis points of attrition, which are basically the buyback, you know, because the rest earnings generated and cash payout and RWA basically is compensated. Going to division results. First of all divisions are returning double-digit ROACs with important material increase in Wealth Management from 21% to 28%. Consumer Finance in particular, but also insurance, went up from 14% to 16%. Coming to Wealth Management, we have had a very important increase in revenue, 16%, in particular, 23% in fee income. We will go into details on this.
Basically, this reverted into +43% in GOP risk-adjusted and +34% in net profit. Now, looking at the revenue, you can understand that after some years, Wealth Management became as important as CIB. Basically, it's still smaller in terms of revenue compared to Consumer Finance, but is not that smaller. This is led by the model. We will elaborate on this. But if you see on page 26, we have had this EUR 9 billion of net new money, EUR 6 billion coming from private and EUR 3 billion coming from Premier. We have had every single quarter generating net new money, even during the worst quarter, like the last two. The different source of the net new money can be seen on page 27.
Part is, as we said in the past, linked to the private investment banking model. We are convinced that we have been able to build a private and investment banking model, which is a bit unique in Italy because it's leveraging on a very strong brand, which is a brand that has, you know, a brand identity linked to entrepreneur to serve family-owned business in CIB and hence is very well-positioned also to serve it in wealth management. This is now paying off, and we have had EUR 2.8 billion generated through liquidity events, either generated by CIB or generated by private banking. The rest is a mix of core business Premier or core business private 3.2 , which led to this very important number of EUR 9 billion.
In CheBanca! and Premier, we are fast repositioning the bank towards a higher wealthier client. You see the migration in the slide number 28, both in terms of efficiency in net new money compared to other network, but also the focus on wealth and affluent which was having an increase, a CAGR of 12% in four years. We have been working a lot also in Mediobanca Private Banking in order to do new kind of initiative like the third BlackRock investment. We have also placed a venture capital fund always with best-in-class partner, as well as we have been working in Cairn and Bybrook to print new CLOs and to expand the activity of opportunistic credit of Bybrook.
What is interesting is not only the trajectory of revenue, but also the marginality, no? The marginality is interesting because we started basically in 2019 with 0.82%, and we are now at 0.93% in as a return on asset growth. This is the outcome of repositioning, of using better our product factory, you know, doing better client segmentation, but I would say it is not the end of the journey, is part of the journey. Basically, we are very happy with the Wealth Management progression, and this is the reason why we will keep on investing heavily in this business also in the next quarters. Record year, if we go to Consumer Finance, all-time high in terms of revenue and profitability.
This is the record year of Compass, EUR 370 million. This is basically coming as an outcome of an important industrial trajectory. The industrial trajectory of Compass is based on two main pillars. First of all, invest in efficient proprietary network of distribution. What we did is, as you see, on page 33, we have been investing in the last few years to substitute third-party originated loans through loans which are originated by the different network that in the meantime is much more, I would say, sophisticated and you know, differentiated in Compass. We used to have only branches.
We have more and more agents which are so lighter distribution network associated to Compass, which are different kind of agents, which are the Compass agents, the Quinto agents in salary guaranteed loan, and the Compass Link, which is the newest initiative. It's a door-to-door client kind of network, which we use to cover geographies, which we don't cover through the rest of the network, no? This expansion of proprietary network led to a very interesting development of new loans, even in presence of expected fall or decline of third-party production. On page 32, you see the evolution of this. With EUR 7.7 billion, we have reached the, you know, the maximum level of new loan production, even compared to the pre-COVID, where we were at EUR 7.4 billion.
This can be broken down in a 3.6% of personal loan and a higher component of car and a higher component of purchase loan. If we go and see the direct distribution as opposed to bank and post office, you see that in the pre-COVID, we had 1.7% of banks and post office, and we have been developing this through an important increase of direct distribution. What is important to note also for the future is the second pillar of Compass is based on ability to price the loan on risk-adjusted basis.
Slide 33, you see that the gross marginality of Compass is quite interesting at 7% in terms of NII on average loans, but is also very interesting cost of risk. It stays between 5%-5.5%. Of course, this is the best protection, the first protection to absorb potential shock, potential losses, because we have, as you can see, a strong marginality that can allow this. One note on Buy Now, Pay Later, where we see a great potential for the bank through a truly consumer finance product. We think that Buy Now, Pay Later will have an evolution towards a more regulated consumer finance product, which is the bread and butter of what we do in terms of personal loan.
It may have a very important impact in our number, because we are having through Buy Now, Pay Later, something like 5,000 clients per month of new clients for the cross-selling. Those clients are very interesting because on average, are client of, you know, better risk profile compared to others. For this reason, we have decided to invest massively in Buy Now, Pay Later.
We are becoming already with EUR 70 million of new loan production this year, one of the leader in Italy for sure in the physical, where we have already 4,000 dealers which are now linked to us, but we are investing more and more in solution for e-commerce and I think we will have some important news in the course of the year in terms of development of Buy Now, Pay Later, and the impact that Buy Now, Pay Later may have on Compass in the future. Strong asset quality, the strongest asset quality we ever had, with 138 basis points of cost of risk.
We have basically decreased further the NPL stock at a very low level, 1.3% of net NPLs on stock, and we have raised the coverage of the performing. Imagine that in one year, we have from March 2020 increased by roughly 1 point the performing coverage from 2.84 to 3.75, and the coverage of NPLs to roughly 80%. Going to CIB, we have been working to further strengthen our market positioning through basically two industrial views. One is basically act like, as we said, private investment bank. Second, continue to diversify in terms of revenue stream and invest in senior hires.
This happened through a material contribution of advisory, which reach its peak, and this is also thanks to our French operation and the midcap operation. In the meantime, we have kept our asset quality very strong with no direct exposure to Russia and Ukraine. We have been also investing in new senior hires with Giuseppe Baldelli reaching us as a global co-head of CIB and country head of Italy and António Horta-Osório as our senior advisor for investment banking. This led to a very important also fourth quarter component of advisory, a very good lending, and a very good capital market solution, no?
On the contrary, capital markets, equity capital markets and less DCM, which was flat year-on-year, equity capital markets, of course, had a less important contribution given the market environment. The only difference compared to last year is the fact last year we had material write-backs. This year we had the one-off, as we said that was charged to the NPLs buying activity. We have even improved our leadership. You see on page 37, if we take our 12-month annual period, we were very much high in all the rankings in Italy, in M&A, in ECM and DCM.
Which is more important is that we have diversified our customer base among large deal, midsize deal from Italy to France, from lending to advisory to capital market solution. It's also important to note that in the meantime, the last few years, we managed to have a greater attention to our asset quality. Page 240 shows you the migration of rating, which is, I think, important, in particular, for the future. We had investment grade component of 45% in June 2017. This went up to 70%, nearly. 69% in June 2022. Basically, our portfolio has a better rating and is diversified with limited exposure to sectors which are having the most important headwinds. PI insurance, as we said, very important.
This is also significant to note that a less cyclical business like insurance will help also in the next few quarters, if and when the macro can become even weaker because, of course, the pro-cyclicality of insurance compared to banking is of different nature. Holding function and comfortable funding liquidity position, nothing to note. It's basically the same as the last nine months. On top, as a closing remark, I would say that, you know, we like to build the model in Mediobanca, an industrial model, which is constantly growing and steady, giving above the sector, above average industrial results and profitability, and hence also a distribution return to shareholder, no?
This is basically possible thanks to the fact that we are a specialized group. We have been investing heavily in particular in business where we think that we have for historical reason or for brand reason or for DNA reason an edge, and we can over-deliver in terms of results. This business are also the one that are less, if we can say, impacted by the trend which is affecting commercial banking. We think that in this business we can obtain better return on allocated capital. Also because, at least in Italy, they are exposed to the best counterparties in terms of risk reward. On one end, as we said, large and mid exporter, mid corporate, which are exporter, and on the other end, household.
This growth is a growth that is not only of this year, but is something that is a future growth, remuneration, efficiency of the last six years. We like to be in this a bit boring, but being boring and constant on the high level. For the next year, we expect to deliver the business plan target. This is, of course, based on assumption of inflation, moderate growth and stabilization of the market. In this event, we will be able to continue to grow our profitable assets, AUM on one end and bucket of credit on the other. This will lead to another increase in revenue. We want to continue to invest in terms of hiring and digital, so we will have a flat cost income.
We will have in, under our assumption, a flat core as well, because this is due to our asset quality and the fact that we will have a partial release of overlays. We confirm, finally, quite, I think, a sound remuneration, with a cash payout of 70%. Thank you very much for your patience and is now, your time for your question. Thank you very much.
Thank you. As a reminder, to ask a question, you will need to slowly press star one and then one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. We are going to proceed with the first question. The first question come from the line of Azzurra Guelfi from Citi. Please ask your question.
Hi, good afternoon. I have a couple of questions. One, the first one is on the outlook. You have confirmed the outlook for next year within reach of your business plan target, which you have of course made already progress this year. I was just wondering if you can give us some color on what is the amount of overlays that you are planning to release, and also if you can give us some sensitivity around a scenario where instead of moderate GDP growth, we are actually flowing into a recession scenario, and if the entire overlay release would be enough to keep you on track with the business plan. The second one is looking at the commercial engine, which is working very well, both in consumer and in wealth management.
If we can dwell for a second on consumer credit, what are your expectation next year in terms of volume growth and margin, as well, in terms of like adjusted margin, the net interest income margin and the cost of risk? If you can give us some color on that. Final question on the CIB, which seems to be in the last few quarters, the division that has done less well relative to the other two, at least compared to what were the expectation. You made a new hire, you have invested in this. Could we see some reshaping of the strategy in this division in the coming quarters and maybe strengthening some part of it in order to improve it further and maintain your market leader position? Thank you so much.
Thank you, Azzurra. In terms of overlays, our assumption for the budget is that we can use up to 50% of the overlays. Should we have a worse macro with the recession, may create a more impediment to growth. This basically, you know, if we think about Italy in the past, we didn't have important GDP growth. We have had always plus something or minus something. We are used to grow, and notwithstanding this, Mediobanca continued to grow even in the past. We don't need, you know, an important growth of GDP to grow, as it is more what we do in terms of investment.
It's more important, I would say, that the market is stabilizing and is not too volatile or dislocated and/or that it's an open market in the sense that banks are lending and it's functioning, no? If not, this may cause more attrition in terms of revenue, no? Not in terms of, basically, NII because consumer is more insulated by this. Consumer may be more sensitive to higher unemployment rate. Volume growth, I mean, we see certain expansion of margins, in particular in lending, when it comes to basically, I would say CIB and mortgages. In Compass, we will have a time lag effect, so this is gonna be a time lag of six months from when we have increase of cost of risk and when we have, you know, repricing.
It takes normally four to six months. Of course, our NII will continue to grow because we will have the rest which will grow, in particular also the holding function element. Volume, I think we can have a good volume, maybe not as big as this year. Prudently, we factor a + 3% to 3% in volume. I think we can do better, also because I think margins in lending this year will be more interesting. In CIB, I think we are happy with the results. Why? Because the type of CIB we want to have is less volatile.
If you look at many bigger competitors of Mediobanca, they may have +50%, -50% in fees, depending on some the spark or other. The kind of CIB we want to have has to be less volatile, so returning exceeding cost of equity to staying between 10% and 15% return. This has to be seen net of one-off because, of course, we have had a number of write-backs or some extra. The reality is that net of this it's quite constant, but in the meantime, as we said, we are continuing to invest to give also the possibility to grow the revenue of CIB, no? The thing is that in CIB also you have an increase of cost.
If you see our advisory revenue, they are 2 x what they should have been only five years ago. In the meantime, of course, you need to retain people, you need to hire people, and this is giving at the end some cost, no? The strategy will not change. The strategy is to basically have this kind of return between 10% and 15%, where we have a good, I would say, differentiation of revenue among the different sources. We have a preference, of course, to increase the so-called capital light, so advisory and capital market.
Did that answer the question, Azzurra?
Yes. Thank you.
We are going to proceed to the next question. Please stand by. The next question come from the line of Domenico Santoro from HSBC. Please ask the question.
Yes. Hi, good afternoon. Thanks for the presentation. Three questions, one strategic and another one on NII and one on fees. Strategically, how should we look at use of your capital going forward? I mean, leaving aside Generali for just a moment, I wonder whether, you know, all the asset managers have been significantly derated in the market, multiples are different at this point, and I wonder whether you might have a little bit more, you know, M&A appetite, also in consideration of the possibility of you to leverage a little bit your balance sheet, especially in terms of capital.
I mean, I don't remember you taking any hits, significant hit on capital in the past of any source, so I wonder whether you can, you know, continue your activity also with a little bit of, with a bit of lighter quarter one going forward. Related to this, how should we look at the distribution next year, you know, on top of the 70% cash payout, whether we should include also a buyback? The second is on NII. I mean, the press release says that so you expect NII growing same over recent years. I'm just wondering whether we should expect the same growth that you reported this year. A comment on the consumer and the CIB, where you have NII going down quarter-on-quarter.
I just wonder whether you can comment on this, and how should we look at this division going forward given the expected rates? I'm just wondering whether, you know, the division that might benefit the most in terms of rate hike are the holding function and of course CheBanca!. How the rate hike might play out in your P&L. A guidance on fees. I understand you say in the press release that you have quite a good visibility on the pipeline for the next six months. Of course, both in asset management and investment banking, I guess probably the outlook might be a little bit more challenging. A guidance on fees will be helpful as well. Thank you.
Thank you, Domenico. Yes, I share what you said about strategic, I would say angle. We can also be ready to run a bank at a lower quarter one, should we embark into a transaction which makes the group bigger in terms of Wealth Management. The reality is that notwithstanding multiple derating, as we know there were and there are not clear, you know, possibility or opportunity out there. There are no seller and so for this reason, while we continue to monitor the market and be ready to act, we prefer to push a lot on our organic growth and to do some bolt-on acquisition which are more doable, being always ready, if situation changes.
We know that usually during the tough years or weak macro years, there may be decisions which are different from the past. But I share your review that, you know, we have a bank today of 14.5% CET1, provided that we continue to remunerate with the highest level, among the highest in the market in terms of payout. We should, we could also envisage to run a bank with a lower CET1, in exchange for something which is, you know, quite positive for the industrial trajectory. NII growth, basically. Yes, we see 3%-5% growth next year. Sorry, distribution. You told me about distribution. Yes, 70%.
Buyback, for the time being, we have not set an agenda or a target for buyback. Why? Because we want to see next year in terms of expansion at RWA, because we think that next year it will be interesting in terms of new lending because of different margin, and because of also of tactical M&A we can look at. We will make a point at the end of the second half of next year to see whether our you know RWA and/or our potential M&A, where is it in terms of vis-à-vis our capital ratio, and decide whether we have to do or we like to do another buyback at the end of the year.
In terms of NII, I said between 3% and 5%, if I can elaborate on different bucket, net beneficiary will be holding function and Wealth Management. I do believe that CIB will be a beneficiary because CIB has been, like every major bank, suffering in the last 18 months because of compression of spread and very easy money. That is still a small tail because some transaction that you do today has been approved too or been discussed in the last two months. I think from September, the new lending will incorporate in CIB a better spread for the banks. I think that even CIB will be a net beneficiary at the end of the year.
Consumer has a dynamic, which I explained before, which is the fact that we have a time lag between the increase of cost of funding, the holding function will charge to Consumer Finance activity, and the fact that Consumer Finance will be able to reprice in four to six months. We will have, you know, a time lag, but ultimately, over time, also Consumer Finance will be able to pass this on to the higher cost of funding on clients. Fees, we have assumed a low single-digit 4%-5% increase. Of course, this is challenging, but on one hand, on the other, we know that should we be able to continue to grow the network in Wealth Management is something that we can do.
Thank you very much.
We are going to proceed with the next question. The next question comes from the line of Christian Carrese from Intermonte. Please ask your question.
Thank you. My question has been almost answered. The only one maybe is on cost of risk. You said flat cost of risk next year. Usually, you are quite cautious in uncertain environment as it is today. I was wondering, so you said in a recession scenario, you would release half of the overlays and still keeping cost of risk flat. In which scenario you would see a pick-up in the cost of risk, the total cost of risk? Maybe another question on governance, do you see any need for further changes going forward? Thank you.
Thank you, Antonio. Sorry, Christian. I don't know why I told you. I call you Antonio. Christian. Core flat, this is under our scenario, you know. Our scenario is, you know, inflation, stabilization of the market, and a moderate GDP growth. Should we have recession, I don't think that this is going to be materialized in terms of core next year. Because basically, it's a long. And also in consumer, as I said, is not the recession per se, but it's the tail of important unemployment. Even in this scenario, we don't see major material changes in core, because it would take more time. Normally, we tend to have clients, in particular in CIB, that are, you know, leaders, listed companies.
Basically, maybe we have a bit more, but we don't see even you know in a scenario of you know negative growth in 2023, in June 2023, big changes in core governance. You know, we continue to improve our governance. This is something that every listed company should do. I think we have reached quite a good level in terms of you know the two main modification we have done this year. One, on the bylaw, and the second on the appointment of a lead independent director. Of course, is always a fine-tuning effort. For the time being, we are very you know satisfied with the present situation.
Thank you.
We will take the next question. Please stand by. The next question come from the line of Britta Schmidt from Autonomous. Please ask your question.
Yeah, hi there. Thanks for taking my questions. Two quick ones from me, one on the consumer NPLs. They seem to have increased slightly this quarter from a very low level. Maybe you can give us a bit of color on what's been driving this. The second one will be around the political outlook in Italy and whether you see any impact from a potential swing to a center-right coalition government on the bank. I think there have been in some of the party programs, ring-fencing has been mentioned. Is there anything, any color that you can add to that? Thank you.
Thank you, Britta. In consumer, you know, we continue to provision at a very conservative way compared to the newly deteriorated inflow loans. You have seen in the graph that compared to the start of the year, this index has shown some very slow trend towards normality. To give you the sense, at the start of the year, we were at -30% compared to the pre-COVID. Now we are between 15% and 20%. We still have an important gap to the pre-COVID. We have factored that in our assumption with the partial use overlay that progressively during the course of the year we go towards the pre-COVID.
It appears to be slower than what we expected, and for a matter of prudence, we have factored that we can go there, but we will use also half of the overlays. As for the time being, all the industrial indicator of risk are pretty good. I don't think that we should be worried of the outcome of the election. Why I'm saying this? Based on what happened in the last election, you remember there were a lot of market volatility because of the outcome of election with Five Star and then the government coalition between Five Star and Lega.
What that government did was clearly within the EU framework and within, you know, the discipline of balance sheet, which is somehow imposed by being part of, being under the European Commission, no? Now it's even, you know, the new government, whether it is center right or center left, has even less degree of flexibility. Why? Because basically, you know, two elements which are so important. One is, resiliency fund, next generation fund. And the second is the TPI, you know, the transmission, the last instrument that has been released by ECB to avoid widening of the spread. Those two are having important conditionality.
Basically, the next EU fund is opening the possibility for Italy to receive up to between EUR 250 billion and EUR 300 billion based on the fact that Italy has to do 150 reform, which Draghi started to do very effectively, but it's only the start. What I want to say is that the start has been more qualitative because the plan has been drafted in this way for every member state, but next year it will be rather a milestone to be checked. There will be, you know, quantitative element to be achieved in order to obtain this EU fund. The TPI is also linked to the respect of the condition to be met for the EU fund.
I do expect that whatever the government, the agenda, the Draghi agenda will have to be the new government agenda. They can call it in a different way. They can put some social, you know, intervention, which are basically based on the sensibility of the center right or center left. I do believe that the flexibility they will have, the need to get those money and to be part of the TPI and being under the framework of EU will make that there will be a lot of, maybe, propaganda, but at the end, the outcome will be the same.
Thank you very much.
We are going to take the next question. The next question comes from the line of Luigi De Bellis from Equita.
Yes, good afternoon. I have some question. The first one, a clarification on the industrial cost of risk for 2023. Excluding overlays, what is your assumption for industrial cost of risk for the bank and the consumer in particular, for 2023? The second question on the CET1 risk-weighted asset, do you expect any headwinds or tailwinds in 2023 to take into account? The third question on the consumer, where do you see new production for 2023 in your moderate growth scenario? Always in the consumer, can you give us your feeling about the main differences compared to the past crisis, 2011, 2012, and 2018? Now the positioning of Compass has changed compared to the past and for Mediobanca, generally speaking.
Thank you.
Thank you, Luigi. If I try to give you more detail, because I try to give to you and to the rest of your colleagues, you know, broader target, but then you ask me to break it down, and so let's do it. Net of overlay, it's simple because you take 350. We will be in the region of 70, 75 basis points. When it comes to consumer, it will be in the region 220, roughly. CET1, yes, we will have, like, you know, depends on the timing on validation of model and the Compass IRB. We can have some attrition, but I think we'll be able to absorb a good part of this with the capital generation.
It won't be a net of net with the rest, you know, something that is gonna change. When it comes to new loan production in consumer, I think we will be between EUR 7 billion and EUR 8 billion of new loans. Strategically, I think that Compass is much stronger today because of what I said. Basically, compared to Compass a few years ago, today we have much more performing distribution network, more sophisticated, geared towards new trends where, you know, there are a few entities that are able to intermediate 27%, 30% of loans through digital sales. As well as I think we are quite advanced in Buy Now, Pay Later. Now, as I try to explain, Buy Now, Pay Later is very much important in terms of new customer acquisition.
It's a fantastic way to get new customer where we do repeat business. It's the same as what we have been doing in special purpose loan. The reality is that the underlying client in Buy Now, Pay Later tends to be of better quality compared to the customer that are on special purpose loan. What you do normally, you with special purpose loan, you do also some, I would say, incentive campaign to get new customer, and then you sell personal loan as a repeat business on them. For this reason, we are very much, you know, convinced that investing now and strongly in Buy Now, Pay Later can continue to position Compass, you know, at having a cutting edge in the consumer industry.
Thank you very much.
Thank you, Luigi.
We have no further questions at this time. I will now hand back the conference to Mr. Nagel for closing comments.
Thank you very much for your attendance, and I hope to have you all in the next call, which will be in October for the first quarter results. Thank you very much, and I wish you nice holiday. Thank you.