Earnings Call: Q1 2021

May 6, 2021

Good morning, ladies and gentlemen. Today's conference call will be hosted by UniCredit CEO, Mr. Andrea Orcel, and CFO, Mr. Stefano Porro. At the end of the presentation, there will be a question and answer session. Today's conference call is being recorded. At this time, I would like to hand the call over to Mr. Andrea Orcel. Sir, you may begin. Thank you. Welcome to all participants. As you know, I joined UniCredit as CEO three weeks ago. Given the brevity of my tenure and having not been CEO of the bank for these results, I will make some short remarks before passing over to Stefano to take you through the key features of the first quarter 2021. Firstly, I would like to take this opportunity to thank all my colleagues for the hard work, for the commitment that has delivered these results, and to the resilience that they have demonstrated during this recent transition. This is a strong quarter, driven by excellent fees, buoyant, mostly client-related trading, seasonally low loan loss provisions with write backs, and a good cost discipline. These four factors have more than offset the continued drag on NII, although they may not be able to compensate to the same extent in the coming quarters. The weakness in net interest income is partly due to exogenous factors, but also to the bank's strict risk appetite in 2020. The impact of these factors will continue for some quarters, also relative to our competitors. Reinvigorating net interest income, building our top line, and delivering strong organic capital generation are key priorities for the team. This will be done with strict risk discipline, and hence we need to recognize the time required to achieve it. My focus now, during these first 100 days, is on getting to know my colleagues and the business strengths and weaknesses in order to design a new strategic plan that we will present to the market in the second half of this year. My ambition through this plan is to move UniCredit decisively away from a phase of significant restructuring and retrenchment to one that delivers sustainable returns above the cost of equity across the cycle. We have a strong foundation, capital position, asset quality, and liquidity position, a franchise with a resilient and recognizable brand, and some exceptional talent that can deliver far above the current level once empowered to achieve a common objective. I'm most focused on three themes. Firstly, putting clients at the heart of all we do. Our clients and the communities they are part of, are the reason we exist, and this aim is consistent with our increased success. Secondly, we will make technology central to our business. We will incorporate it in all our decision-making, thought processes, and everything we do, establishing it as part of a UniCredit DNA. Thirdly, we will reduce complexity, empowering colleagues within a clear risk and control framework. We will simplify the way we work together, strengthening our three lines of defense and creating a thriving business. However, any transformation of this kind in an institution the size and complexity of UniCredit will take time. A disciplined process to address this is key. I'm determined to see it happen as soon as possible, such is its significance to both our success and our culture. While these three core themes are guiding our strategic path, there are many other topics that we will address in the new plan. With respect to M&A, it is not a purpose in itself, but I do see it as an accelerator and a potential improver of our strategic outcome, where it is in the best interest of our shareholders and where we have full confidence in our ability to execute. Finally, I would like to take this opportunity to reiterate UniCredit's ongoing support to all of our customers and colleagues as they manage the consequences of the pandemic. I'm truly looking forward to engaging directly with all of you over the coming months. For now, Stefano will take you through our Q1 results. Stefano, the floor is yours. Thank you, Andrea, and good morning, everyone. Let's turn to slide four. In first quarter 2021, UniCredit delivered underlying net profit of EUR 0.9 billion. This strong performance reflected a rebound in revenues, despite the ongoing impact of lockdowns on client activity in the quarter, as well as a lower cost of risk. Our revenue performance up 7.1% year-on-year in the first quarter 2021 is particularly noteworthy. It reflected the highest quarterly fees in over five years and a rebound in trading income, which together more than offset some further weakness in net interest income. Our record fees were, thanks to a very strong performance in investment fees, testament to the strength of our distribution network. Revenues also benefited from a contribution from our recently renewed agreement with SIA. Combined with our continuous strict discipline on cost, which fell 3.1% year-on-year, we delivered significant operating leverage this quarter. This can be clearly seen in the cost-income ratio, which fell 5.4 percentage points year-over-year to 51.5%, the lowest level in more than a decade. Our cost of risk dropped to 15 basis points in Q1 2021, benefiting not only from seasonality, but also some write-backs. The cost of risk for full year 2021 is now expected to be less than 60 basis points on an underlying basis, that is excluding regulatory headwinds. The strength of the balance sheet can be seen in our extremely healthy capital position. We closed the quarter with a fully loaded CET1 ratio of 15.92%, implying an MDA buffer of 689 basis points. This is another record for the bank. Given the strength of our balance sheet, the bank is well-positioned to grow with our customer as the economies in which we operate emerge from lockdowns and fully reopen. At the same time, we are also returning capital to shareholders. Both the AGM and the ECB have now approved the ordinary share buyback of EUR 179 million, which is expected to be completed by the end of the third quarter. Combined with the cash dividend, the ordinary distribution represents a total yield of 2.3%. If we also include the extraordinary shares buyback planned for later in the year, then the total yield increases to about 6%. Let's turn to slide five. To maximize the time available for your questions, we have further streamlined the results presentation this quarter, moving some of the slides from the main section into the annex. As ever, our Investor Relations team is available should you have additional questions after this call. I have already commented on our significant operating leverage, record low cost income ratio, and very low cost of risk in the quarter. Let me highlight two other features impacting the underlying profit this quarter, the details of which can be seen on page 22 of the annex. First, systemic charges. As a reminder, the majority of systemic charges are always booked in the first quarter. This year, they amounted to EUR 620 million, an increase of 15.3% year-on-year. This reflected a higher contribution to the Single Resolution Fund that resulted from the system-wide expansion of customer deposits last year. For the full year, we expect total systemic charges close to EUR 1 billion. Second, profit on investment. In this line, we recorded a loss of EUR 195 million, largely due to EUR 225 million negative mark-to-market adjustment on our remaining 20% stake in Yapi. The gross NPA ratio was 4.8% at the end of the quarter. The quarter-on-quarter increase of 0.3 percentage points was largely due to the introduction of the new Definition of Default this quarter. Our tangible equity reached EUR 15.7 billion, an increase of 2.3% over the prior quarter, mainly thanks to the return earnings as well as a reduction in defined benefit obligation resulting from a higher discount rate. Let's now look at the profit and loss in more detail, starting with group NII on slide seven. Net interest income was down 3.1% quarter-on-quarter. If we adjust for the two fewer days in the quarter and the non-recurring Tier 2 free catch-up payment in the prior quarter, net interest income was down by 1%. This quarter, like the prior one, was characterized by maxi excess liquidity in the system. This impacted our NII in three ways, two negative, one positive. First, lower loan customer rates. Further reduction in key market rates and continued competition contributed to lower customer loan rates in all divisions. Commercial Banking Italy also saw further growth in its guaranteed loan book. Such guaranteed loans are good business given their lower risk and capital consumption. Remember, they are written at lower rates than normal loans of an equivalent maturity. Lower market rates also contributed to lower returns from our investment portfolio. Second, continued weak demand for credit. Average loan volumes fell quarter-on-quarter, albeit a much smaller rate than for Q4 2020. Most of the drop was in Corporate & Investment Banking, where our corporate clients continued to enjoy very liquid balance sheet. All the divisions, bar Corporate & Investment Banking, however, reported growth in their end-of-period balances over the quarter. Of note, Commercial Banking Italy reported the highest end-of-period lending volumes since Q4 2019. Third, and positively, lower term funding costs driven by lower credit spreads and market rates. Faced with excess liquidity in the system, we have continued to work hard on repricing deposit below zero. This includes negotiating excess liquidity fees, where local regulation prevent the charging of negative interest rates. An economic upswing will drive, with some delay, a recovery in the demand for credit, a progressive reduction of the excess liquidity in current accounts and deposit gets spent or invested, as well as an improvement in our lending mix as we normalize our credit risk appetite. However, until the system-wide excess liquidity is drained, customer lending rates are likely to remain under pressure. Looking forward, as we move through the rest of full year 2021, some headwinds could still affect NII until a sustained economic recovery takes hold. Let's turn to slide eight. Fees deliver an extremely strong performance despite the ongoing lockdowns and a tough year-on-year comparison. Remember, first quarter 2020 saw a limited impact from lockdowns and one of the strongest first two months on record. Fees in the first quarter 2021 were up 4.3% year-on-year and up 12.2% quarter-on-quarter, resulting in the highest quarterly fee income in over five years. The continued recovery in fees quarter-on-quarter from the middle of last year, despite ongoing lockdowns, reflects the benefits on our digitalization strategy. Let's look at the component parts of fees in more detail. Investment fees generated all of the year-on-year increase in total fees. Upfront asset under management fees were very strong, thanks to robust sales activity in the network, with Commercial Banking Italy recording its highest gross sales since 2018. Financing fees have continued their recovery from the lows seen in third quarter 2020, and are now only 1.8% below the level of a year ago. Strong activity within Corporate & Investment Banking largely offset continued subdued levels of credit protection insurance, the latter reflecting weak consumer finance activity. Transactional fees remain the weakest of the three fee components relative to pre-pandemic levels. While they've also rebounded quarter-on-quarter, they remain 3.5% lower year-on-year, reflecting a tough year-on-year comparison to a positive one-off a year ago. It also reflects continued subdued client activity in GDP-sensitive subcategories, most notably cards and payments. In terms of outlook, let me some general remarks. Investment fees are expected to continue to benefit from liquidity-rich clients shifting deposit into assets under management, subject to markets remaining buoyant. While for financing and transactional fees, we expect client activity to pick up from second half 2021 onwards, with the pace determined by the rate at which restriction ease and GDP recovers. With the ongoing rollout of mass vaccination programs across our key geographies, we are cautiously optimistic that the worst of the impact of lockdowns on client activity is now behind us. Let's turn to slide nine. Trading income in the first quarter was very strong, at EUR 639 million, up EUR 466 million year-on-year, thanks to our supportive client activity. Client-driven trading was solid, contributing EUR 381 million, up 87.1% year-on-year, excluding the volatile XVA component. This strong performance came mainly from fixed income that recovered from a first quarter of 2020 that was negatively affected by the market turmoil at that time, as well as from gains on fair value valuations. Non-client driven trading income also performed very well, up EUR 109 million year-on-year, mainly thanks to treasury. Trading income excluding XVA in the quarter was well above our quarterly run rate of around EUR 350 million on average per quarter excluding XVA, is expected to normalize for the rest of the year. The higher contribution from dividends, up 9.7% year-on-year, was mainly thanks to other equity and financial investment, but these were only partially offset by a lower YAPI contribution, reflecting the reduction in the stake in the first quarter 2020. Let's turn to slide 10. Our continued focus on cost efficiency resulted in costs falling 3.1% year-on-year and 1.8% quarter-on-quarter. This resulted in a quarterly cost-to-income ratio of 51.5%, our lowest in over a decade. HR costs were 4% lower year-on-year, mainly thanks to faster than expected FTE reduction, with FTEs down 2.3% year-on-year, and lower pension costs in Commercial Banking Austria. Non-HR costs were down 1.7% year-on-year, mainly thanks to lower travel and real estate expenses, partially offset by higher advertising and marketing costs. COVID-19 has had a limited impact on our cost base year to date. In the first quarter of the year, we had EUR 15 million of COVID-19 related costs, mainly for security and real estate expenses. This was EUR 4 million less than in first quarter 2020. For the full year 2021, we confirm our guidance of flat costs relative to full year 2019. Let's turn to slide 11. Our stated cost of risk fell to 15 basis points in Q1 2021, made up of 18 basis points of specific LLPs, less three basis points of release from overlay LLPs. The low cost of risk reflects the usual seasonalities in the first quarter, which is typically well below the average of the year, as well as the proactive classification of files in the last quarter and some write-backs. These write-backs mainly relate to some individual files in the Corporate & Investment Banking division. Nonetheless, recent asset quality experience, including moratoria expirations, suggests that the outturn for the full year cost of risk may be better than our current expectations. Our full year 2021 underlying cost of risk guidance is therefore now expected to be below 60 basis points, equivalent to loss provision of less than EUR 2.7 billion. This guidance includes modest overlay provision through the rest of full year 2021. Let's turn to slide 12. In the first quarter 2021, the group delivered a strong underlying net profit of EUR 883 million. If we look at the profit distribution across the group in the quarter, you can see that our diversified business model underpins our stability at group level, notwithstanding the varied timing of lockdowns across our markets. All the business division, except Commercial Banking Germany, had a double-digit underlying return on allocated capital. All business division were profitable. The contribution of Commercial Banking Italy, CEE, and Corporate & Investment Banking, in particular, stand out this quarter. Commercial Banking Italy deliver a robust performance of fees, despite the impact of COVID-19 on client activity. This resulted in underlying net profit of EUR 385 million in first quarter 2021. The lower LLPs in the quarter also had a positive impact on underlying return allocated capital, which stood at 16.3%. CEE is a resilient contributor to group's profitability. In the first quarter, it delivered an underlying profit of EUR 209 million, up 69.7% year-on-year, underpinned by lower LLPs and continued cost discipline. The Corporate & Investment Banking division benefited from higher revenue growth in the first quarter. This was mainly thanks to the highest quarterly fee income since 2015, and the sound trading performance year-on-year, mainly driven by fixed income and treasury. Combined, this led to an underlying profit of EUR 408 million. Before going to the next slide, let me remind you that the majority of the systemic charges are always booked in the first quarter. This quarter, they amounted to EUR 620 million, reflecting a higher contribution to the Single Resolution Fund that resulted from the system-wide expansion of customer deposits last year. Let's turn to the balance sheet, starting on slide 14. In the first quarter, the gross NPA ratio for the group excluding non-core increased to 4.1%, primarily due to the introduction of the new definition of default as per EBA guidelines. Underlying asset quality is broadly stable. The new definition of default also led to a decrease in the coverage ratio to 54.3%, mainly due to a mechanical effect as the newly included loans had lower coverage ratio owing to their lower riskiness. Our underlying asset quality remains sound, with no material impact from COVID-19 yet. Using the EBA definition, the group NPA ratio excluding non-core, net of the new definition of default, is in line with the average of other European banks. Let's turn to slide 15. We continue to focus on the non-core rundown. The process remains well on track, despite the first quarter being seasonally quiet. Gross NPAs in the non-core were down EUR 0.1 billion, reaching EUR 3.6 billion. The financial impact of the non-core on group performance for full year 2021 is minimal. The net economic risk embedded in the non-core rundown remains close to zero. The CMD 19 profit and loss guidance is confirmed. The overall non-core portfolio is provision to sell. We confirm the full run-off of the non-core by the end of 2021, with the majority of the rundown expected in the second half of the year. Let's turn to slide 16. Our fully loaded CET1 ratio sits at 15.92%. This is 689 basis points over our MDA level, a record for the bank. An increase of 78 basis points over the quarter. The MDA buffer continues to exceed our current market cap. The increase in our MDA buffer across the quarter is a function of both higher CET1 and lower-risk-weighted assets. Points to note. First, retained earnings and a lower defined benefit obligation, the latter thanks to an increase of the discount rate, account for most of the increase in the CET1 capital this quarter. Second, the buyback that forms part of our ordinary distribution in 2020 has now received authorization from both the ECB and AGM, and has therefore been deducted from CET1. This amounts to five basis points. Third, the more than EUR 10 billion decrease in risk-weighted assets over the quarter was driven by several effects, such as the shift to lower-risk-density loans, including guaranteed loans in Italy. See the annex on page 47 for more details. Fourth, regulatory dynamics provided small tailwind for the second quarter earning, with negligible effects coming from PD rating migration. Looking forward, regulatory headwinds are confirmed at less than negative 1.4 percentage point in full-year 2021. This includes TRIM and PD rating migration. Please remember that the rating migration will revert over time as GDP recovers through the cycle. Our MDA buffer in full-year 2021 is expected to remain above 400 basis points. Let's turn to slide 18. Thanks to our very strong balance sheet and the commitment of our team members, we remain well-placed to keep supporting our clients, whatever the environment. As always, the health and safety of our employees and customers comes first. Assuming a progressive economic recovery over the year, the pace of which will be determined by the rate at which massive vaccination programs allow restriction to ease, and subject to continued stability interest rates, full-year 2021 revenues are expected to be broadly in line with the most recent company-compiled consensus. Net interest income will likely face headwinds, while transactional fees and trading will likely benefit from tailwinds. Full-year 2021 costs are expected to be in line with full-year 2019 levels. Our full-year 2021 underlying cost of risk guidance is now expected to be below 60 basis points, equivalent to Loan Loss Provision of less than EUR 2.7 billion. The overlay provisions that we took in full-year 2020 underpin the credibility of our guidance, as some of these overlay provision will be used in full-year 2021, when higher defaults are expected to materialize. Our recent asset quality experience, including moratory expirations, suggest the outcome for the cost of risk may be even better than current expectation. The underlying net profit for full-year 2021 is expected to be broadly in line with the previous guidance. With a rock-solid balance sheet, we can also continue distributing capital to shareholders. Our ordinary distribution policy going forward is confirmed at 50% of underlying net profit, with the cash dividend being accrued at 30%. Both the AGM and the ECB have now approved the ordinary share buyback based on full-year 2020 earnings, which is expected to be completed by the end of the third quarter. Together with the cash dividend, the combined EUR 447 million ordinary distribution for full-year 2020 represent a total yield of 2.3%. If we include the EUR 652 million extraordinary share buyback as well, planned for later in the year and subject to ECB approval, the total yield for 2021 rises to about 6%. As Andrea Orcel confirmed, the bank is developing a new strategic plan. We expect to present it to the market sometime in the second half of the year. With the restructuring of the bank successfully delivered, the focus is now on growth in profitability. The overriding objective is to deliver sustainable returns of above the cost of equity over the cycle. I will hand over to Jörg Pitzner, Head of Group Investor Relations, for the Q&A session. Good morning, everyone. As usual, if you would please be so kind as to limit your questions to a maximum of two each. Also, I'm sure you will all have lots of questions about the bank's new strategic plan, but it would be premature to address these today. Many thanks. Moderator? Thank you, sir. We will now begin the question and answer session. The first question is from Giovanni Razzoli with Erste Bank. Please go ahead. Morning to everyone. I will stick to your guidelines. I'm not interested in the future, but rather in the past of UniCredit. If you can please provide us with an example of what you consider the blockers and obstacle that you have mentioned in the press release that prevented you from adequately serving your customers. I'm just interested in a couple of examples of what were these elements, if you can share with us. The second question, I've seen that you have significantly and further increased your cash balances on a quarter-on-quarter basis to more than EUR 110 billion. That is five times above the average of the last quarters in 2020. I was wondering whether this huge liquidity, I mean, a reduction in this huge amount of liquidity cannot support going forward more the NII vis-a-vis the relative prudent guidance that you have provided us. Thank you. Thank you, Giovanni. Welcome to this call. Maybe on the cash balances, we'll have Stefano answer that. Then just a quick question on the obstacles. Do you mean the obstacles to the NII growth? You said to serve your customers. Can you just specify that? No, I refer to the press release. You mentioned that there are blockers and obstacles that prevented you from adequately serving your clients. Can you share with us what are you referring to, if you can provide some examples? Thank you. Okay. Thank you. Stefano? Yeah. Thank you, Jörg. On cash balance, you are right. Please take in consideration that cash balances has been affected also by the new take-up of the TLTRO III, because we took 12.7 billion more. The total amount of TLTRO III that we have now is EUR 107 billion. As a matter of fact, on top of what we have for de-tiering, we have slightly more than EUR 100 billion deposit to ECB. What we are expecting following the dynamic of the lending on one side, but also the dynamic of the deposit on the other end, is that such cash balance can be reduced over time, especially when we will have a sustained recovery. In relation to blockers and obstacles, we were referring to the fact that currently our main focus for the strategy will be focused on client, technology, and simplification. As we know, we have already invested in technology, and we are also increasing the amount of investment per year. This year, we will arrive to EUR 1.1 billion on investment. This will facilitate the interaction with the client and with the facility interaction through different channels. The other point is simplification. The other focus is simplifying our processes in order to be quicker and more effective in servicing clients. Last but not least, is connected with the normalization of our risk appetite that we have already mentioned before. We applied a very strict underwriting discipline during 2020. With the sustained recovery taking hold, we will normalize our risk appetite framework during the course of 2021. On the details, Giovanni, I'll probably repeat this more often today. We ask for a little bit of patience, and the strategic plan will be in the second half of 2021. Next question, please. Next question is from Antonio Reale with Morgan Stanley. Please go ahead. Hi. Good morning, everyone, and thanks for the presentation. It's Antonio Reale here from Morgan Stanley. First of all, welcome to Andrea Orcel, and best of luck to you and your team going forward. I have a couple of questions and one clarification, if I may. If I look at your over EUR 3 billion underlying net profit guidance for 2021 and compare it to consensus, there's a large gap that needs to be closed. If your guiding for that needs to be in line with consensus costs, you've reiterated your commitment. My question is, where exactly you think the bridge between your underlying net profit and consensus estimates comes from. What are the levers there? That's my first question. The second point is NII. NII has been and continues to be a source of debate. Do you think Q1 2021 is the trough quarter for NII? You think the worst is behind us? How do you expect the contribution from the net interest income to evolve for the rest of the year? It would be great if you could discuss sort of the outlook and the risk appetite that it entails on the new business for your key regions, Italy, Germany, Austria, CIB, CEE. Lastly, the clarification is really on the M&A comments from Andrea on the opening remarks, and you can decide to address it or not. You know exactly that investors are concerned about the risk of value-destroying deals on one hand. On the other, they acknowledge the benefits that come from consolidating fragmented markets. If I understand your opening remarks correctly, you seem to suggest that any M&A deals not only need to show financial discipline, but also have strategic fit, which I think implies an industrial rationale. What can you say further to sort of alleviate concerns here, and reassure worried investors about the risk of our disruptive deals, if any? Thank you. Thank you, Antonio. With regard to M&A, I can just repeat what you said, because we have nothing to add at this point in time, but maybe it's a bit clearer. You said with respect to M&A, it is not a purpose in itself, but I do see it as an accelerator and a potential improver of our strategic outcome, where it is in the best interest of our shareholders, and where we have full confidence in our ability to execute it. I think every word of that obviously was chosen carefully, but we have nothing to add. Again, for more strategic details, we would ask for a little bit of patience. I hope you understand. On the underlying net profit and the gap to consensus, Stefano will answer that, and then for NII, we'll hand over to Wouter. Stefano. Thank you, Jörg. In relation to the gap versus the consensus. We'll start in relation to revenues. We have guided for revenues broadly in line with the company compiled consensus that is slightly above EUR 17.1 billion. What we mean is that level is a midpoint, so we can be slightly up or slightly down for a few hundred million. In general, we are expecting to see still some headwinds on the NII until we will have a sustained economic recovery. The pace of this recovery will be determined at the rate in which the mass vaccination program allow restriction to ease. In relation to the fees dynamic, we are expecting a good dynamic of investment fees, taking in consideration the market situation and the behavior of the clients. We are expecting some tailwinds on transactional fees that will pick up, especially in relation to cards and payment, when we will have the easing of the restriction. Finally, also on the trading side, we're expecting some tailwinds. In relation to the cost of risk, we have already commented before, we are currently having a difference in comparison with the consensus, taking into consideration the amount of provision that we recognized in 2020. The amount and the dynamic of the asset quality that we are seeing nowadays, we are confident that we will be having a below 60 basis point underlying cost of risk for total 2021. Wouter, on NII? Yeah. Thank you. Good morning. On NII, the weakness in net interest income is partially due to exogenous factors, but also the bank's strict risk appetite in the past. I think the impact of those factors will continue for some quarters, but we also know that there's going to be an economic upswing, and that will drive, with some delay, a recovery in demand for credit. Also, a progressive reduction of the excess liquidity in the system as our deposits get spent or invested, as well as an important improvement in our lending mix as we normalize our credit risk appetite. However, until the system-wide excess liquidity is drained, customer lending rates are likely to remain under pressure. Western Europe and Central Eastern Europe, in Western Europe, we will see higher loan volumes and a more profitable business mix thanks to a normalization of our risk appetite, and that will compensate tighter client rates, also because of increased government-guaranteed loans. In Central Eastern Europe, we're expecting constant growth on loan volumes driven by the efforts of new production and more stable commercial spreads. Looking forward, as we move through the rest of the full year 2021, some headwinds could still affect NII until a sustained economic recovery takes hold, the pace of which will be determined by the rate at which vaccination programs allow restrictions to ease. Thank you, Wouter. Next question, please. Thank you. The next question is from Domenico Santoro with HSBC. Please go ahead. Hello. Hi. Good morning, everybody. Thanks for the presentation. Two questions on my side. One is on asset quality, I apologize again, the second is on the NII. I see in the revision database that you released some generic provision. Some of them have been probably switched to increase the coverage of unlikely to pay. Is this swing in terms of generic provision related to a better evolution quarter-on-quarter for the moratoria loans? I see stage 2 loans down, I wonder how much of the COVID overlay set aside the last year have been already used in this quarter, maybe there might be some release going forward to understand a bit your guidance on Loan Loss Provision, which is significantly better compared to before. On the other side, on the NII, your message here, we understand very well what are the moving parts, but it's also a bit more negative compared to the other banks. I remember the last time that you guided for NII to trough in the first quarter, also because of Eastern Europe. Eastern Europe is starting to improve quarter-on-quarter. I just wonder whether there is a specific difference of the loan book of UniCredit compared to the other banks, specifically in Italy, where there is the drag more significant, that potentially might mean that the drag from rates and the repricing is much slower, and that is because of the pressure that we're going to see also over the next quarters. Thank you. Thanks, Domenico. We'll start in reverse order. On the NII and what takes us or what sets us apart potentially from competitors, Stefano will answer that, and then TJ on the asset quality. Stefano? Thank you, Domenico. I would differentiate between CEE and Western Europe, more specifically Italy and Western Europe. As you have correctly pointed out, in CEE, we are already having increase in the NII for around one percentage point, because we closed at EUR 550 million, EUR 10 million up. As a matter of fact, in Central Eastern Europe, we've been able to reprice down the client rates on deposits significantly. Currently, the demand of credit is still subdued in comparison with the potentiality. We are confident that when the economic recovery will be in place, we will go back to higher growth rate on the lending side. In Italy, I think it's important to mention the impact on the client rates deriving from the state-guaranteed loans. If you look at the client rate dynamic in Italy, we have lost, in the last quarter, around seven basis points, because we have moved down from 216 basis points to 209 basis points. This is also due to the contribution of the state-guaranteed loans. This regulation effect will be there for a while. We are seeing a low demand for this type of credit. Having said that, progressively during the year, we will improve the business mix, because we will have the increase of loans in Italy with higher loan rates in comparison with state loan guarantee. To give you the flavor, state loan guarantee rates are around 1%, while the average of the stock is around 200 basis points. This normalization of the risk appetite will clearly also involve the dynamic of consumer financing that will increase during the course of 2021. Thank you. TJ? Thank you, Jo. Domenico, on the asset quality, I think firstly, as already mentioned by Stefano in terms of the cost of risk. For Q1, the seasonality. Remember, we have done very proactive classification in Q4 last year. There are some write-backs. These write-backs have very little to do with the moratoria, because the moratoria, the one only outstanding are in Italy. In Germany and in Austria, the moratoria have expired in Germany, and a little bit, a tiny amount left in Austria. These are the two areas where we have seen basically the write-backs, which we expect to be so-called non-recurring, and there were no specific default at all in Germany or in Austria. Our recent asset quality experience on moratoria has been actually better than what we have forecasted and assumed in our assumptions. We still expect our cost of risk, as mentioned earlier, to be below 60 basis points. Thank you, TJ. Maybe if Stefano wants to add a little bit from the balance sheet side on the staging. Yeah. Domenico, you asked for the movement in Stage 2 loans. As already highlighted by TJ, the Stage 2 loans reduction is primarily deriving from movement of position in Germany, for around EUR 6 billion. Having said that, there is also an important element to be considered in relation to the new Definition of Default. As you remember, in the fourth quarter 2020, we have already recognized the LLPs in relation to the application of the new Definition of Default. These LLPs were allocated to the performing portfolio, while now have been reallocated to the non-performing portfolio. That's the reason why there is also a slight decrease of the coverage of the Stage 2 portfolio. Thank you. Next question, please. Understood. Thank you. The next question is from Jean-Francois Neuez with Goldman Sachs. Please go ahead. Hi, thanks for allowing me to ask some questions. I just wanted to ask on capital. We've had many quarters of very strong capital build. In particular, when you consider the headwinds that UniCredit had described in the past, regulatory headwinds, procyclicality, et cetera. The surprise continues to be meaningfully positive, suggesting that there is also tailwinds as much as headwinds. I just wanted to understand whether you'd be willing to update us with what you think is the capital path from here, the size of the headwinds, and maybe some of the tailwinds that are apparent in your evolution. That would be my first question. My second question is on the comment about re-energizing and essentially restarting the loan engine. I just wanted to understand whether you believe, essentially the sectoral or client breakdown of where you plan to be more active. It is going to be more, let's say, in large ticket corporates or in Germany, in Italy, CEE, or is this consumer finance, mortgages, et cetera. I'm just trying to gauge of the speed and the type of loans that you want to do. Also I would like to understand whether it's with existing clients, where you'd like to have a bigger share of wallet, or whether you'd like to branch out a bit more than you have in the past. Maybe a clarification, I know it's two questions, but just you say you want to target ROE above COE. Could you just tell us what you believe your COE is, please? Thank you. Thank you, Jean-Francois. I'm maybe tempted to count a little bit different. On the two and a half questions, I think the clarification, we shouldn't comment on our cost of equity, but I think you can see what the market implies, and you knew what our old targets were. I think it gives you a directional sense of what we mean by that. Obviously, with the details of the target level, we ask for the patience for the new strategic plan. On the loan engines, again, I'll pass to Stefano for what we can say here. Obviously, also that one has an element of sort of spoiler alerting the strategic plan, which we won't do, but we'll see what we can say on that. On the capital path from here, Wouter will answer that. Stefano. Thank you, Jörg. In relation to loan dynamics, we are expecting to have higher growth and acquisition of market share in consumer financing in all the geographies, especially in relation to Italy and Central Eastern Europe. Currently, also the dynamic of residential mortgages is positive, especially in Italy, where we have reached a market share on new business of around 14%. In relation to corporates, we will maintain our strict underwriting discipline and the attention to originate to clients with a higher return on allocated capital. Having said that, we are remaining supportive on all the geographies, so both Central Eastern Europe and Western Europe. From this perspective, we are expecting to have more an increase of our share of wallet. In general terms, the dynamic of our lending will also be depending on the credit demand from the clients that in some segments and countries for the time being is still weak. In relation to the cost of equity, it has been already commented by Jörg, so we will give also more clarity in the presentation of the Capital Market Day of the plan. Now I leave the word to Wouter in relation to the capital evolution. Thank you, Stefano. Fairly quickly on that, I think there's two main components to be looked at. First of all is the regulatory headwinds. We have been guiding well below 140 basis points for this year. I propose that TJ will detail that in a minute. The other element, and that has been an important driver of our capital relief, is the risk-weighted assets reduction that we have seen basically as a result of our business evolution. We expect that even when the economy picks up again, that we will see that business activity grow again, loan volume being picked up. Also, even when the guarantees programs, especially in Italy, will come to an end, that benefit to our risk-weighted assets will also gradually disappear. My expectation is that some of the gains that we have seen on capital, especially in risk-weighted assets, and for this quarter, that was 52 basis points, that will gradually reverse if and when the business volumes pick up. I hand over to TJ on the regulatory headwinds. Thank you, Wouter. As Wouter mentioned, we confirm our regulatory headwinds guidance to be below 140. Remember, you have to look through 2020 and 2021 to take into contact 140. In the original Team 23 plan, we were expecting about 50 basis points in negative in 2020 and 50 basis points in 2021. Last year, because of the CRR quick fix, we actually registered a positive 20. A lot of these are timing deferral, and clearly there are indeed some true benefit from the so-called CRR quick fix. We won't go through all of the components. From that point of view, in terms of the TRIM effect, we are in line with what has been announced by EBA. Clearly, EBA guideline will be coming through with a lot of model submission, where the regulatory compliance is from January 2022. In terms of tailwind, clearly depending on the economic environment, clearly we're seeing a lot of positive momentum. To the extent that this translate into better economic activities, we can see some of the PD scenario that we're expecting, maybe not as high as we expect, but we expect to start reverting from 2022 only, not the second half of this year. Thank you. Thanks, TJ. Next question, please. Okay. The next question is from Adrian Cighi with Credit Suisse. Please go ahead. Hi there. This is Adrian Cighi from Credit Suisse. Thank you for taking my question. Two clarifications from my side. Can I please confirm that Yapi remains non-core as you're looking to divest before 2022? Apologies, going back to the capital headwinds, I understood the 140 basis points headwinds include the combined 2020 and 2021 headwinds. Is it fair to say that the remaining 2021 headwinds are only 90 basis points? Thank you. Well, thank you, Adrian, because it's clarifications which always challenge my ability to count, I will take these two. The first one, we can confirm Yapi remains non-core, so remains a strategic investment. I think on the reg headwinds, what TJ meant by saying you need to look at this 2020 and 2021 combined is that where we had time shifts for delays in modeling, they were shifted between the two as well as for the PD migration. That is something that is in effect, that is driven by the two years together. No, you shouldn't assume 90 basis points in the rest of the year, but you should expect in the remaining of the year a total of reg headwinds that will, together with the +11 you had in the first quarter, remain below 140. Next question, please. Thank you very much. The next question is from Christian Carrese with Intermonte. Please go ahead. I have two question. The first one is on lending volumes and the mark-up. I understand that net interest income will still be under pressure in the coming quarters. I was wondering in Italy in particular, what could be the impact from the extension of the moratoria to year-end of 2021 in terms of loans and the spread? I think that looking at the capital position now, maybe it's worth to look at higher loans growth to boost revenues rather than capital base. The second question is for Mr. Orcel. I was wondering, what are the areas, both geographically and in terms of business, in which UniCredit needs to strengthen its position in our view? The previous year stressed the desire to create value for shareholders by allocating the excess capital to buybacks rather than acquisition. We saw some regulatory changes, for example, in Italy. I'm referring, for example, to DTA conversion in the event of a merger. These changes could make M&As more appealing than in the past. Thank you. Thank you, Adrian. I think on the second one, unfortunately, as we asked before, we have nothing to add what he said. He basically said that M&A is part of a toolbox where it's in the best interest of the shareholders and where it makes sense financially and strategically, obviously on any more details that we need to defer to the second half of 2021. The first one for sure we can answer. On the impact of moratoria on loan spreads, lending volumes, maybe Stefano wants to take that. Thank you. Yes. Thank you, Jörg. Just to remember, which is the amount of loans under moratoria that we have is EUR 16 billion in Italy. 3 out of 16 are to individuals, and around EUR 13 billion are enterprises. Currently, there is no impact to the NII deriving from this portfolio, because a matter of fact, we are still accruing the interest related to this portfolio. In general, as we were commenting in other situation, we are expecting default rates for the enterprises part around 6%. This is already embedded in our expectation in evolution for the NII. For the remaining portion of the portfolio, the portfolio will remain performing. As a consequence, we are not expecting to have an impact from the dynamic of the NII. The dynamic of the net interest income of Italy, as I was highlighting to you before, will be more impacted by an evolvable increase in the new production of consumer financing, in a reduction of the portion of the lending deriving from state guaranteed loans, that especially in the second part of the year, will be substituted by other typology of loans, both towards small-medium enterprises and corporates that will have a higher client rates in comparison with state guaranteed loans. Thank you, Stefano. Next question, please. Sorry. No answer on M&A, so an additional one on revenues on trading income, et cetera. The first quarter numbers were much higher than the previous quarterly guidance. Can you expect a more proactive approach going forward on this line? Or should the first quarter results be considered as a sort of a one-off? No. Thank you, Adrian. It's, I guess, fair enough if you don't get an answer to one question to get one extra, but maybe Stefano on the trading. Yes. You have allotted the trading dynamic of the first quarter was a really strong one, also in relation to the client-driven part of our trading result. The overall situation, like the one connected for investments fees, is favorable. When we're looking to the dynamic of the markets, we need to bear in mind that our trading activity is fundamentally deriving from the client's activity. In general, we are expecting a normalization of the trading contribution to the revenues that is around EUR 350 million per average. Having said that, considering the general market situation and the pickup of the activity from the client side, we might expect tailwinds also in relation to the trading. Thank you, Stefano. Thank you. Adrian, does that count as an answer or you want another one? No. Next question, please. The next question is from Alberto Cordara with Bank of America. Please go ahead. Hi, good morning. From my side, a clarification on asset quality. When I look at the NPE trend, these were up by 5.5% quarter-on-quarter. I just wanted to know what part of this increase is due to the new definition of default, and also what we should expect as an NPE ratio for the end of the year. The other issue that I noted in asset quality is that your coverage is down, and is down by 160 basis points. Also, if you can help me understanding that. I'm going back to a couple of points just for a clarification of this question that have already been asked to you. The first one is on regulatory headwinds that are less than 140 basis points. We see, particularly this quarter, that guarantee laws can help pushing capital quite a lot. Is it possible to have a net figure, either 140 bps minus the loans that you're going to refinance and you're going to push under the guarantees? What is going to be the impact for the year? Another clarification on, I think there was some confusion because I heard that the trough in Q1, I think you never guided for a trough in Q1. I think your guidance, if I remember correctly, was for NII to be weak in the first part of the year and to recover in the second half. I just wanted to check with you if this is still correct, if we should see some improvement in the second half or a stationary trend, or what we should expect. Thank you. Thank you, Alberto. Just because you call it a clarification, we still count it as a question, but maybe three is the new two. The asset quality and the impact of DoD on the ratios and coverage and NPE, TJ will take, and then I think Stefano on the other two. TJ? Thank you. On asset quality, first of all, when you look at the overall headline of this 4.8, one should really look at the NPE ratio for the group, excluding non-core, because we have stated that non-core will be run off by end of the year. From Q4, the increase to 4.1, as shown in one of the asset quality page, I think it's page 14, this is all primarily due to the DoD. The EUR 1.2 billion, a large part is in DoD. To that extent, given that we are going to run off in the non-core, you can expect clearly that we, as mentioned earlier, our so-called NPE ratio, looking at the group EBA definition like, which today is about 2.8 and 2.7, excluding DoD, is in line with European average. Secondly, the coverage is nothing more than mechanical on the so-called DoD. These are files that are actually reasonably quite good quality, some with high coverage. When you automatically move those into the NPE, the UTP side, you will see the coverage basically be lowered. It's nothing more than a mechanical effect. Remember, among all of our peers, we have one of the highest coverage for the NPE side. Thank you, TJ. Stefano? Yes. In relation to regulatory headwinds and state guarantee loans. As already mentioned before, the amount of regulatory headwinds impact to the capital that we are expecting is less than 140 basis points. Among this impact, we do have the EBA guidelines impact, especially on low-default portfolio, including the TRIM effect, change to the models, and the PD proportionality. As highlighted by TJ before, depending on the overall composition of the portfolio, so the portion secured and unsecured during the year, including the amount in relation to state guarantee loans, we might have tailwind. The overall quality of the composition of the portfolio can impact not only the overall risk density that we are including in our work in the business volume side, but also the impact deriving from what we are calling regulatory headwinds. The final impact that we will have will depend on the evolution of the portfolio during the next months. In relation to the state guarantee loans, currently we are at EUR 19 billion in Italy, EUR 25 billion at group level. We are expecting to be above EUR 20 billion in Italy by the end of June. In relation to NII, you are right. What we are expecting currently are headwinds to the NII deriving fundamentally from the rates development that we were commenting before. Having said that, we were expecting to have a contribution to the NII deriving from volumes that will increase, especially during the second part of the year, following the recovery pace that will accelerate, in our opinion, especially in the second part of 2021. Thank you, Stefano. Thank you very much. Many thanks. Of course, Alberto, you'll be given five extra days compared to the 90 days annualized NII in the first quarter as well. Next question, please. The next question is from Hugo Cruz with KBW. Please go ahead. Hi. Thank you for the time. A quick question on Commercial Banking Italy fees. The growth was very, very impressive. AUM and fees were up 52% year-on-year. I was just wondering if there's any kind of one-off effect in here, perhaps any pricing plans, if you could explain that would be great. Thank you. Maybe Stefano on this one. On fees, you are right. The performance is really strong, especially in investment fees, we are up 21% quarter-on-quarter and 15% year-on-year. The overall amount of gross sales that we had in the group is around EUR 4 billion more what we have in the last quarter 20. We have not, in the quarter, specific one-off. We do have a positive contribution from upfront fees in investment fees side. The general performance is fundamentally depending on the general market situation that is a stable one, the behavior of the clients on the other end, and also the commercial effectiveness of our network. The overall evolution of fees that we are expecting for the full year will be dependent on the stability of the market situation and the behavior of the clients in relation to the management of the asset under management portfolio on one end, but the situation that we are seeing currently is positive, and the dynamic of April is similar to the dynamic that we have seen in the first quarter. The other element to be taken in consideration, as I noted before, is tailwinds on transactions fees that will be fundamentally connected with the dynamic of the easing of the restriction and the connected impact on the client activity on cards and payments. Thank you. Maybe just to add, Hugo, because you mentioned also maybe performance fees or one-offs, that one was only EUR 2 million in the fourth quarter, and that's the only quarter where we have it, so completely immaterial on that performance. Next question please. Next question is from Patrick Lee with Santander. Please go ahead. Hi, good morning, everyone. Thanks for taking my questions. I have one on cost of risk and one on revenues. Firstly, on the 60 basis point cost of risk guidance, notwithstanding the seasonality of the first quarter, as you mentioned, the feeling quite a big deterioration for the rest of the year. Let's say maybe 75 basis points run rate for the rest of the year. Can I ask you if you have implicitly factored in some release from the EUR 2.2 billion taken last year, and how do you think about the mix of specific versus overlay for the rest of the year? Secondly, on revenues. Thanks for confirming the total revenue should be in most consensus. If I look at the NII consensus, I think to make NII consensus will require some sort of improvement in the run rate from the first quarter level. I know there are different moving parts, the margin pressure remains negative so far. I think in the context that UniCredit has in recent quarters said that it is ready to expand into the higher margin consumer finance segment, and you mentioned that a few times today. Is that something that started in first quarter or has it started in second quarter so far? I guess from a broader perspective, how important is this readiness to go up the risk curve in the context of making your revenue target? Thanks. Thank you, Patrick. Just a clarification from my side. I think I'm owed one too. We said revenues are in line with the company-compiled consensus. We didn't say each component of the revenue is in line with company-compiled consensus. It's the 17.1, give or take, that we refer to. Maybe Stefano will answer on the NII component and the business mix. Before we do that, TJ, on the cost of risk guidance and any potential releases from overlays booked in the past. TJ? Yes. Thank you, Jörg. Hi, Patrick. On the cost of risk, clearly, Q1 is, as we already mentioned, seasonally low. Last year, you remember very well, we took a large overlay, the EUR 2.2 billion. As we clearly go through the year, particularly more so in Italy, because moratoria have not yet been fully expired, we expect a lot of the so-called overlay to come in to compensate for position that could flow into default. Hence, we are very comfortable with how this is done. Clearly, there could be some timing differences in terms of when the moratoria might be pushed out by Italy, but we expect this to be fairly limited. We confirm basically the so-called cost of risk to be below EUR 60 for the year. Thank you, TJ. Stefano? The dynamic of the NII during the year is dependent by several factors, because as you know, it will depend from dynamics of volumes and rates on the asset side, commercial loans, the dynamic on the deposit side, not only in terms of volumes, but also in terms of rates, the non-commercial component of the NII. In relation to the non-commercial component of the NII, we are not expecting a significant drag to the NII, because the investment portfolio contribution will be lower, but will be compensated by a lower cost of funding. The driver will be on the liability side, the continual repricing of the current accounts. We are doing well, especially in Germany and Central and Eastern Europe. This trend will continue. In relation to the lending side, consumer financing is important, but it's not decisive. We will increase our market share in Commercial Banking Italy and in Central and Eastern Europe. In countries like Germany or fundamentally CIB, that are contributing to NII of the group in an important way, that dynamic is an unimportant one. It's more important the dynamic of the loans in terms of volumes and pricing towards corporate. In relation to Italy, out of around EUR 130 billion of commercial loans, bear in mind that the consumer financing are around EUR 10 billion. Fair to be said that the rate is around 600 basis points, and we are reacquiring market share, but it's not the only decisive element for the dynamics of the NII. Having said that, within that, we will have a higher contribution from the NII deriving from volumes, and as highlighted before, the point of attention that can create headwinds even more of the average customer rates, especially on the corporate side. Thank you. Next question, please. The next question is from Andrea Lisi with Equita. Please go ahead. Hi. Thank you for the call. Just a quick one. Wondering to understand better if your guidance of cost of risk at below 60 basis points already includes the potential postponement of deadline for the moratoria in Italy to the end of the year, or if it is considering the current situation. Thank you. Hi, Andrea. Sorry again for the quick glitch that we had on the call. Please bear with us. This one is for T.J. Okay. Thank you, Jörg Krämer. Andrea, just a quick reply to you. Our cost of risk, clearly, as I mentioned in one of the earlier comment, the moratoria extension, we think will have limited impact, because this will be an up in so-called, that's what we expect. And then we will specifically look at the so-called UTP and forbearance to classify some of those into the right category. There'll be some timing shift, but we do not expect it to be anything significant. We still confirm our cost of risk below 60. Thank you. Thank you, TJ. Next question, please. The next question is from Andrea Filtri with Mediobanca. Please go ahead. Thank you. A question on fees and one on cost of risk. On fees, you touched on that before, but if you could please make explicit the contribution of upfront fees and performance fees in Q1, and how much tailwinds do you expect from these for the rest of the year? On cost of risk, is your cost of risk guidance including any use of the overlays, and if so, how much? It seems like banks are guiding cost of risk down, seeing not a quality deterioration and even having write-backs, while ECB is commanding prudence on future NPLs and governments are extending support measures and moratoria. Can you just explain us how you square the circle? Thank you. Thank you, Andrea. We'll start Stefano on the fees and tailwinds from upfront fees, and then TJ on cost of risk. Yes. Thank you, Andrea. On upfront fees, the contribution of upfront fees to the overall fees was just above EUR 300 million during the fourth quarter 2021. That was connected with the EUR 17 billion gross sales of assets under management product I was highlighting to you before. The average gross sales that we have in fourth quarter 2020 was around EUR 13 billion. The overall dynamic of upfront fees will be dependent on the dynamic of the gross sales. Currently, in April, as I was highlighting before, the performance is a similar one. Having said that, we do see a bit of decline that can change over the course of the year, but the overall market situation and liquidity situation is favorable from this perspective. There is no meaningful impact from a performance fee perspective as already highlighted by Jörg before. Thank you, Stefano. TJ, on the cost of risk? Thank you, Jörg. Hi, Andrea. On the cost of risk, clearly, the overlay that we took in full year 2020, it underpins our credibility in terms of the guidance we have given. In fact, to the extent that the higher default will materialize, some of this overlay sort of will be used. We already factor a lot of proactive classification. What the ECB is looking for is to make sure that despite any extension of moratoria, that we look through the so-called underlying client, because they could have other so-called influence, where either forbearance or so-called the EBA classification, we will probably have to classify into the regulatory UTP. Not the normal UTP, but regulatory as an intermediate stage to the UTP. This one, we are fairly comfortable in how this dynamic sort of works. Between the overlay we took and what we expect this year, really we are doing what ECB expect out of us. Yes, but sorry. I wanted to understand how much of the 2020 overlay do you expect to draw out in the 2021 guidance of below 60 basis points? Well, we don't give this breakdown. Clearly, some part of this will come overlay to the macro releases that we'll have in the stage 2 to stage 1, that we will also see. Not all of the EUR 2.2 will be used for this year. The below 60 are obviously net of any. Yes of such potential releases. Yes. Before we go to the next question, could I please ask Patrick Lee from Santander to tell us, because he was the original victim of our cut in the technology, if there was parts of the answer that we still owe you because you couldn't hear us, Patrick? I was going to say, I actually missed a bit on the revenue bit in terms of the margin. I think you mentioned a few times about consumer finance being a key product that you would think about when the economic environment improves. I think I asked the question, how important is the readiness to go up this curve in making the revenue target? Yes. Maybe if Stefano can quickly repeat that. Again, sorry for the technical inconvenience. Yes, absolutely. I was commenting to the fact that the overall dynamic of the NII is dependent from the commercial dynamic on the asset side, loan rates, where also consumer financing play a role, the dynamic on the deposit side and the connected client rates and the non-commercial component. The non-commercial component is expected to, let's say, not have a significant contribution to NII as a delta, because we will have a lower contribution from the investment portfolio that will be compensated by a lower cost of funding. We will keep on working in order to reprice on the liability sides, on the deposit side. On the asset side, it will be a function of volumes. We are expecting an increase of the volumes in all the geographies and division, especially in the second part of the year when the economic recovery will be sustained. In relation to consumer financing, we are expecting to have a higher market share, and as a consequence, a higher contribution, especially in Commercial Banking Italy and Central and Eastern Europe. Having said that, important to consider that in Italy, Commercial Banking Italy is having an average amount of loans of slightly above 130 billion, and the contribution of consumer financing to this stock is around EUR 10 billion. We will increase our market share. The consumer financing rate is 6%, will positively contribute, but is not the main contributor to the dynamic on the NII. Also, the volumes towards corporates will play an important role in this, taking consideration the exposure towards corporate SME, medium and large corporate that were in different division of the group. From this perspective, the demand is still subdued, that we are seeing many geographies, and as a consequence of that, will be one of the main point of attention to be looked at in the next quarters. Thank you, Stefano. Again, Patrick, apologies. It won't happen again. Thanks for coming back to me. Thanks. Next question, please. The next question is from Delphine Lee with J.P. Morgan. Please go ahead. Thank you for taking my questions. I've got two. My first one is to come back on capital. Your CET1 ratio is now close to 16%. Just wanted to understand, are you still sticking to medium term 200, 250 basis points, or is that going to stay meaningfully above that level in coming years? Is there any chance that we could see more buybacks, post-September, beyond the EUR 652 million, which you have already announced, to basically reduce a little bit the gap versus your long-term target? My second question is for Andrea. Just wanted to ask about remuneration. I understand that you have two payments. I just wanted to understand the timing of those two payments of shares, and also ask whether you intend to buy UniCredit stocks using your own money. Thank you. Hi, Delphine. Andrea's actually not here, so he can't answer that question, but we can take that one offline. On capital, maybe Wouter? Yeah. Very quickly that on capital, we confirmed actually our CET1 MDA buffer target range that continues to be in the range of 200-250 basis points. No change in that guidance. As to additional buybacks post-September, there is no decision whatsoever. You have seen that we have obtained the approvals for our buybacks in the AGM, the ordinary one of EUR 179 million that will be completed by the end of Q3. The extraordinary one, the capital distribution of EUR 652 million to which you refer, that's fully in share buybacks. For that one, we have obtained AGM approval, but obviously the other steps have all to be seen after the ECB's decision in September. No additional decisions from our side on that. Thank you. Okay, thanks. Next question. The next question is from Ignacio Cerezo with UBS. Please go ahead. Yeah. Hi, good morning. Thank you for the presentation. One on cost of risk and one on the net interest income. On the cost of risk, if you can elaborate actually whether you think we're shifting a little bit of the loss recognition into 2022 from this year, given the extension, especially of moratoria schemes, et cetera, or if the macro develops the way people are expecting, we can actually enter a phase where cost of risk can be below or could be a normalized level. That's the first question. The second one, more on detail, if you can remind us on the government bond holding maturities you have this year, next year, and the deals on those maturities. Thank you. Thank you. The first one will be answered by TJ and then Stefano on the bond portfolio. TJ? Thank you. On the cost of risk in terms of the extension on the moratoria side, we are clearly already very proactive even from last year, and this year will continue even if the Italian moratoria get extended, particularly to the up end only on the capital side. We will be looking to expect a guideline by ECB and EBA, in terms of using whether this so-called UTP test or measurement, the forbearance, and to make sure that as much as possible where it makes sense to classify them as regulatory UTP. In that context, we think the spillover into next year would be fairly limited. Your second part of the question in terms of growth, clearly we expect normalization of the world economy, including in Europe, to gather momentum. We can expect we did build in this scenario, in terms of cost of risk next year. Clearly it depends on how fast the European economy recover to the pre-pandemic level, which today is still uncertain. Thank you. Stefano? Yes. In relation to the investment portfolio, the size of the investment portfolio group level is around EUR 140 billion. The average rate of the portfolio is slightly above 45 basis points in terms of rate. The which of the Italian exposure, it's around EUR 45 billion. Of this EUR 45 billion, I think that we will have a rollover and so maturity of this portfolio of around 10% during the next year and around 40% in the next three years. As a consequence of that, we need to reinvest around 40% of the investment portfolio in Italy in the next three years. Thank you, Stefano. If I understand correctly, at the moment, we don't have additionally registered questions. If someone wants to ask another question, please register. If not, we'll wait a little while and then wish you a beautiful day. As a reminder, if you wish to register for a question, you may press Star and One on your keypad. We'll take the deafening silence as the sign that there are no more additional questions. Thank you very much for your interest and have a beautiful day. Thank you. Bye-bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.