Good morning, ladies and gentlemen. Before I hand over to Ms. Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded. Madam, you may begin.
Good morning, and welcome to UniCredit's third quarter and nine-month 2025 results conference call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. As always, please limit yourself to two questions. With that, I hand over to Andrea.
Good morning, and thank you for joining us. Today, I am proud to present our record third quarter that completes the best nine months in our history. These outstanding results have been delivered thanks to our people. Their professionalism, ownership, passion, determination, and search for excellence are the foundation of everything you will hear today. Our message is simple. UniCredit is about sustainable, best-in-class performance today while steadily building for tomorrow, all supporting best-in-class sustainable shareholder remuneration. We remain proud of what we have achieved and confident in our future trajectory because our strategy works and our execution is unparalleled. This is true across every region and business we operate in. These results mark our 19th consecutive quarter of quality, profitable growth, and a clear beat across net revenue and all its core components: cost, capital, net profit, and return on tangible equity.
It is a quarter that defines great performance, great prospects, and great returns for our shareholders today and over time. We have reinforced our double-digit growth trajectory in EPS, in DPS, in tangible book per share, while maintaining a return on tangible equity above 20%. We confirm our dividend and share buyback guidance. We continue to grow in a quality way. Net revenues are up in the quarter and broadly stable over the nine months. This is remarkable given the challenging macro environment in which we are operating. It shows that UniCredit is capable of growing through the cycle, supported by an increasingly diversified top line that remains highly resilient and will quickly pick up as soon as the impact of a rates decline is absorbed. Costs continue their downward trajectory, supporting a best-in-class cost-to-income ratio. Capital efficiency remains excellent, with a top-tier net revenue to RWAs.
Net profit is up 4.7% in the quarter and 12.9% in the nine months, all at a 22% average return on tangible equity. All our asset quality metrics remain solid and stable. Net NP decreasing, cost of risk contained, with no signs of credit deterioration. Overlays intact at €1.7 billion, or 40 basis points of yearly cost of risk. A further defense against any future deterioration of our strong asset quality. CET1 ratio remains well above our target range and among the strongest in Europe. Liquidity remains sound, with LCR above 140%. Net profit guidance for 2025 remains at €10.5 billion, although we are now considering management actions to be expensed in Q4 to further propel our future result, mostly from 2027 onward. These actions are focused on investment for growth rather than investment on efficiencies as they were in the past.
The early deployment of €6.5 billion of our excess capital and absorption of related upfront costs will add €1 billion of net revenues and net profit by 2027, growing from there at a fixed capital consumption and largely protected by put options. Residual 2024 share buyback of €1.8 billion will start by the end of October and as early as the end of this week. €9.5 billion in dividends and share buyback for 2025 are confirmed, with an interim dividend of €2.2 billion paid on 26th of November. Ordinary distribution policy from 2026 onward of 80% of net profit is confirmed. This is practically equivalent to the 90% of previous net profit that did not include the impact from investment. Such ordinary distribution may be complemented by excess capital return evaluated yearly, as we did in the past. The Italian government has released a draft bank levy.
It is premature to assess its impact as it is still under discussion. UniCredit will dilute any hit thanks to our geographic diversification. As always, we will do our best to minimize its impact on UniCredit, our shareholders, our people, and our clients. We will release more detail once this is finalized. Our performance this quarter further strengthens our unique equity story, one of the most compelling in European banking. We're delivering beyond what we promised. We have further strengthened our earnings and dividend and capital deployment trajectory as we accelerate the execution of our winning strategy, building even greater confidence in the sustainability of our performance. Our equity story is rooted in our DNA of excellence, something that sets us apart from our competitors. It enables us to deliver consistently in the short term while building long-term sustainable value for our shareholders.
This performance gives us a foundation and the confidence to outperform in phase two of our strategy, accelerating growth, driving efficiency further, and innovating to meet the challenge of fintechs. Our capital allocation decisions are a core element of our equity story and remain measured, disciplined, and entirely aligned with the objective of long-term value creation. This year, we have deployed €6.5 billion of excess capital, well ahead of our plan, in a way that enhances our standalone trajectory and grants strategic optionality. The equity consolidation of our stakes in Commerzbank and Alpha Bank, following the internalization of Life Insurance in Italy, the combination with Alpha Bank in Romania, and the acquisition of Vodeno Ion delivers significant immediate value and improves our geographic and client mix.
This capital has been deployed at an approximate 20% return on investment, roughly twice the current return on our share buyback and around 2.5 x the implied return of purchasing Commerzbank or Alpha Bank shares at current market prices. We're securing structurally higher net profit through the cycle, propelling sustainable higher dividends and share buybacks, with per share and return on tangible equity trajectory at the top of the peer group. We confirm 2027 guidance for net profit to well above €11 billion. We have combined preparation with opportunity and seize the right moment to maximize shareholder value. Distribution can reach shareholders in two ways: directly through dividends and indirectly through capital deployment that in turn enhances future earnings and dividend per share. Dividends remain sacrosanct. Real cash returned directly to our shareholders, generating an attractive dividend yield.
Capital deployment, putting aside business growth and M&A, can take two complementary forms: share buybacks and share buyouts. Strategic. Both create value, increasing earnings and dividend per share. The difference lies in how they do it. Share buybacks reduce the denominator; share buyouts enhance the numerator. If we compare the position before and after our €6.5 billion share buyout, we have significantly increased the total value created for shareholders, above and beyond what was expected and would have been possible with share buybacks. Above and beyond the significant improvement in the underlying performance, the equity consolidation of our stakes has further strengthened our outlook for 2026, 2027, and beyond.
Based on Commerzbank and Alpha Bank earnings, consensus, and net of hedging cost, we expect around €1 billion contribution of fully distributable net profit by 2027, thereby significantly improving our net profit, return on tangible equity, EPS, DPS, tangible book value per share, vis-à-vis what was previously expected. Our change in distribution policy is a natural evolution in our journey. Previously, we guided on total distributions, including excess capital, at equal or above 90%. From 2026 onward, with excess capital now aligned to our best, strongest peers, we're guiding to ordinary distribution at 80% of net profit, with excess capital return to be evaluated yearly. This change enhances value for shareholders. The 80% ordinary payout applied to a CERC at 10% higher earnings and organic capital generation. Hence, it is practically equivalent to the 90% before. Any excess capital return or deployment is on top.
Shareholders now gain greater quality, clarity, and predictability and greater dividend versus share buybacks, with future distribution more underpinned by sustainable profitability rather than extraordinary return of excess capital through share buybacks. Our DNA truly sets us apart. It defines who we are, how we perform, and the attraction of our differentiated model. It is built on three essential elements that together make UniCredit unique in Europe. We are the pan-European leader, uniting 13 banks plus one, leading in their markets. Institutions that in most of our markets are not only leaders but often synonymous with banking itself, and more than 20 million clients to whom we offer best-in-class solutions and a single gateway to Europe.
We have harnessed this unique pan-European model, maximizing local empowerment while leveraging our combined scale in strategic partnership, in talent, in technology, in data, in AI, in product factories, in procurement, thereby making the group much more valuable than the sum of its parts. In doing so, we have achieved our ambition for UniCredit's model to become the benchmark for banking in Europe, redefining what best-in-class across profitable growth, operational and capital efficiency, distribution, and strengths look like. We innovate, striving to anticipate market trends, continuously investing in people, in technology, data and AI, products and distribution channels, aiming to lead in the future while delivering short-term results. These three elements: pan-European leadership, benchmark for banking, and innovation form our DNA. They are the foundation on which we deliver today and build for tomorrow.
Together, they are what makes our outstanding performance sustainable and what provides us unmatched ability to create value to other banks that wish to join our group. The first strand of our DNA, the one that makes us truly unique, is our pan-European nature. Our strength lies in our ability to bring together more than 20 million high-quality, loyal clients through our 13 plus one leading commercial bank, with commanding market share in the most profitable and value-accretive segments in each market. We do this through a common vision and strategy, supported by shared product factories, increasingly shared technology and data platform, shared procurement, and the strengths of a combined balance sheet. We have created a scale advantage for all our banks, enabling them to leverage the group.
At the same time, they use our pan-European network to offer unique products and services, from trade finance to cross-border flows, on a level that few can match. This combination of scale, connectivity, and client quality makes UniCredit the partner of choice across Europe, a competitive edge that is difficult to replicate. That advantage translates directly into irreplicable and resilient revenues, quality and AIN fees, and a strong foundation for future growth. Because of our success in truly leveraging our European network, the second interconnected strand of our DNA is that we are and strive to continue to be a benchmark for banking. Over the past few years, we have identified and executed a transformation blueprint that many thought impossible and now many are trying to replicate.
We have shown that a large multi-country, complex institution can be simplified, can be empowered, can be brought together, and made more efficient and more profitable than others. In the first phase of our transformation, we unified the group under one purpose, one vision, and one set of values. We empowered our banks and our people, simplified our structure, and strengthened our ownership. We rebuilt the trust and passion critical to making the impossible possible. We increasingly leveraged our scale by integrating partnership, digital and data capabilities, procurement, and product factories under one common model. We invested in our people, in our technology, data and AI, product factories, and distribution channels, building the capabilities and infrastructure needed for long-term success. This transformation worked and is still ongoing.
We delivered sector-leading efficiency both in how we operate and reward capital, while securing top-tier net revenue growth and moving our return on tangible equity from the bottom of the pack to the top. Our shareholder returns have been among the best in Europe. Such was the success of phase one that we were now able to seamlessly move to phase two, continuing to execute our multi-year transformation blueprint. Phase two further emphasizes the focus on the front line, on the top line, accelerating our profitable commercial growth in a targeted fashion while continuing to improve our operating model. We're moving forward with a clear set of initiatives, all designed to drive quality, scale, and long-term value. Our focus is sharper, our execution is faster, and our ambition is higher.
We're directing capital and resources towards the most attractive opportunities, the right geographies, the right client segment, and the right product areas, ensuring every euro we invest delivers the highest possible return. We're expanding our product factories, deepening integration between them and our commercial banks, and capturing more of the value chain. We're accelerating in SMEs and private and affluent, where our franchise is strongest and our potential greatest. At the same time, we're transforming how we serve clients, moving decisively towards an omnichannel model that seamlessly combines physical and digital, giving every client the best experience UniCredit can offer. As always, our people remain at the heart of everything we do. We continue to increase the level of empowerment of our talent, the building of new skills, and the creation of an environment where innovation, ownership, and collaboration drive results.
Phase two is about turning a proven blueprint into a compounding engine of growth, maintaining the efficiency, discipline, and strengths that define UniCredit today. The third strand of our DNA, the one that defines our future, is innovation. We're not only building the future of UniCredit, we're helping to shape the future of banking in Europe through our 13 markets. Innovation for us is not an add-on. It is a mindset, part of how we work every day, seeking to extract value from it. We have invested in a proprietary cloud-native core banking platform through our acquisition of Vodeno, bringing together best-in-class technology and AI, with scale to create a modern, agile foundation for the bank of tomorrow. We have brought in more than 200 outstanding engineers acting as an internal sandbox to support the modernization of our entire group.
We are investing in data and AI at scale, using them to transform how we serve clients, how we manage risk, and how we operate, with over 140 use cases currently alive and many more in development. We continue to innovate in the way we serve clients, letting them choose among our omnichannel. As an example, Buddy, our digital branch in Italy, onboarded 300,000 new clients in the nine months, reaching almost 800,000 clients. We're also carefully but actively shaping the future of digital assets in Europe, combining prudence and responsibility with innovation as we explore new frontiers in tokenization, payments, and secure digital value. Our innovation is not limited to technology.
In an environment of accelerated change, we're innovating in how we develop and reposition our people, our talent, in how we work and lead, empowering our people, promoting collaboration across borders, and creating an environment where ideas thrive and execution accelerates. Innovation is how we build the future for our clients, for our people, and for our bank. Crucially, this innovation is self-financed, made possible by the efficiencies and the profitability we have already achieved. The success of our strategy and our unique DNA are clearly reflected in today's results. We mark the 19th consecutive quarter of profitable growth, underpinning the best nine months in our history. It is proof that UniCredit has fundamentally transformed into a stronger, more resilient bank. We have outperformed across all key metrics, demonstrating consistent execution and the power of our model. Net revenues remain resilient, driven by better-than-expected NII, net of loan loss provision.
We look at it that way, as NII cannot be separated from loan loss provisions. Robust fees, now including the internalization of Life Insurance in Italy, stronger contribution from investments that become a further core engine of our future net revenue growth. Trading, while temporarily affected by negative one-offs, still shows good underlying client-driven dynamic. These results underline the quality and increasing diversification of our top line. Operational excellence remains one of UniCredit's key differentiators. Cost fell again in the quarter and were broadly flat over the nine months, a remarkable achievement given the integration of new perimeters and continued investment in technology, people, and growth. Our cost-to-income ratio remains among the very best in Europe. Capital strength is confirmed, not only as an absolute number but also given our superior organic capital generation, now in line with net profit. Net revenues on RWAs remain strong.
As a result, UniCredit's profitable growth remains best-in-class. Our top line remains resilient, with each one of its drivers performing better than expected. For the first nine months, net revenue stood at €18.5 billion, broadly stable despite headwind from lower rates. In the third quarter alone, net revenue reached €6.1 billion, up 1.2%. NII, net of LLPs, declined 4% in the nine months and 4.2% in the quarter, with cost of risk remaining benign at 10 basis points and gross NII performing better than anticipated at the beginning of the year. Margins were stable and loans grew circa 2% versus Q3 2024, end of period, partly offsetting the rates decline. Net NP and default rate both improved to 1.4% and 1.1%, respectively, confirming sound asset quality and coverage. We kept overlays unchanged at around €1.7 billion. NII ROIC at 19.2% remains best-in-class.
Fees and insurance income, which benefited from the internalization of Life Insurance and strong investment product performance, continues to grow, reaching €6.6 billion for the nine months, up 4.9%, and €2.1 billion in the quarter, up 7.6%. Investment contributed €693 million for the nine months, up 84%, and €248 million in the quarter, up 64%, mainly from the equity consolidation of Commerzbank. While 25% of the contribution of investment is offset by negative trading costs hitting the trading line, from 2026 onward, they will significantly propel our top line. Together, all this reinforces the sustainability of our earnings mix with fees and insurance income representing a top-tier share of revenues. Trading performance of €1.3 billion for the nine months, down 10%, was negatively affected by one-offs from the mentioned equity consolidation. Trading was up 4% in the quarter. Underlying trading remains solid and client-driven.
This diversified revenue base across products, geographies, and client segments ensures that UniCredit remains well-positioned to deliver quality growth even in a challenging environment. Our operational efficiency continues to set the benchmark. Costs were broadly flat over the nine months and in the quarter, fully absorbing the integration of Vodeno Ion, Life Insurance in Italy, and Alpha Bank Romania, as well as inflationary headwinds. Our cost-to-income ratio remains among the lowest in Europe at 36.8% in the nine months and 37.1% in the quarter. This reflects our ability to simplify, streamline, and automate while supporting rather than hindering our top-line growth. Our continued efficiency also allows us to invest wisely in people, in technology, in products and channels to make us ready for the future.
This is a tested blueprint, streamlining where it matters, investing where it counts, and delivering operational excellence while laying the foundation for long-term growth without hindering present results. Our capital and capital efficiency remain best-in-class. Net revenue to RWA was broadly flat at 8.6% in the nine months and 8.4% in the quarter, notwithstanding the significant impact on NII from rates. Organic capital generation continues to be a key strength. We generated €7.9 billion, 283 basis points, allowing us to accrue 100% of distributable net profit as dividend and share buyback, most importantly, without denting our overall capital position. Our CET1 ratio stands at 14.8%, down 120 basis points due to the equity consolidation of Commerzbank. The regulatory impact of 14 basis points was almost entirely offset by other drivers.
On a pro forma basis, our CET1 is down to 14.6% due to the equity consolidation of the 26.6% of Alpha Bank stake, partly offset by the Danish compromise impact related to the internalization of Life Insurance in Italy. We continue to deliver quality, profitable growth underpinned by strong operating performance, complemented by one-offs, with net revenue, cost, and capital all better than our expectations. We're not just growing. We are growing with discipline. Our model continues to prove its strengths, delivering growth, profitability, efficiency, and capital strengths, and outsized distributions all at once. Italy continues to be our quality earnings powerhouse, accounting for 44% of group net profit. Net revenues are down 1.7% to €8.1 billion. NII, net of LLPs, declined 5.1%, primarily reflecting rate normalization, only partially mitigated by discipline pass-through management and benign cost of risk at 22 basis points.
Asset quality remains robust, with stable coverage and decreasing default rate. Gross and net NPE ratios were broadly stable at 2.7% and 1.5%, respectively. Adjusting for state guarantees and considering Italian overlays, the net NPE ratio of Italy drops to zero. NII ROIC remains strong at 23.2%, thanks to our focus on margin over volume and targeted origination. Fees and insurance income grew 4.7%, reaching a top-tier 42% of revenues, driven by investment products up 7%, the contribution of Life Insurance internalization, and benefiting from one-off incentive scheme effect on payments. Costs were down 1.7% to €2.9 billion in Italy, bringing our cost-to-income ratio to 34.1%, the best in the country. Net revenue on RWAs remained broadly flat at 10.4%, also the best in Italy. Profit before tax, excluding one-off, rose 2.4% to €5.1 billion, with ROIC stable at above 32%, reinforcing our market leadership.
Italy exemplifies our strategy in action, focusing on quality, efficiency, and disciplined growth. Its performance underlines the strengths of our model and its ability to deliver across cycles. Germany continues to be a resilient anchor, accounting for 22% of group net profit. Net revenues are up 2.4% to €4 billion. NII net of LLPs grew 1%, thanks to discipline pass-through, the anticipated effect of trading normalization, and a decline in cost of risk at 14 basis points. Asset quality remains solid, with overlays broadly intact. Net NPE ratio is down to 1.4%, with stable coverage and default rate decreased. We keep strong attention to single file, given the corporate nature of our bank. NII ROIC remains strong at 21%, reflecting our focus on margin over volume and selective origination.
Fees and insurance income grew 0.9%, reaching 31% of revenue, driven by investment products up 11%, partly offset by weaker financing activity. Costs were down 2.8%, bringing our cost-to-income ratio to 37.6%, the best in Germany. Net revenue on RWAs at 8% confirms strong capital efficiency. Profit before tax at €2.4 billion is up 7.2%, with ROIC at 23.4%, reinforcing our market leadership. Germany is a clear example of our ability to consistently deliver through disciplined execution. Its performance highlights the strengths of our diversified model, with resilience, efficiency, and capital discipline driving record profitability and reinforcing our quality leadership in the market. Austria continues to be a resilient anchor, accounting for 12% of group net profit. Net revenues are down 1.4% to €2 billion. NII net of LLPs declined 5.7%, only partially mitigated by loan growth at 1.3% at stable margin. Asset quality remains solid, with overlays intact.
Net NPE ratio is down to 2%, with stable coverage and default rate further decreased. NII ROIC at 14% confirms disciplined origination. Fees and insurance income grew 5.2%, 8.2% excluding card complete disposal, reaching 31% of revenue, supported by advisory and financing and strong investment products up 10%. Costs were broadly flat, bringing our cost-to-income ratio to 38.9%. Net revenue on RWAs at 6.7% confirms strong capital efficiency. Profit before tax at € 1.2 billion, down 3.8%, broadly flat excluding the new bank levy, with ROIC at 22.8%, reinforcing our profitability leadership in Austria. Austria showcases the power of our focused strategy, combining profitability, efficiency, and prudent risk management. Its performance confirms our ability to lead in corporate lending while maintaining exceptional asset quality and strong return. Central and Eastern Europe continues to be our growth engine, accounting for 22% of group net profits.
Its role as a key profitable growth driver will fully emerge once its cost of risk fully normalizes. Net revenues are up 1.7% to € 3.5 billion. NII net of LLPs declined 4%, the strong loan growth of 13.5%, including the contribution from Alpha Bank Romania, 8.5% without, was able to only partially mitigate the expected rates decline and Central and Eastern Europe cost of risk increase at 5 basis points from minus 25 basis points as it gradually normalizes. Asset quality remains solid, with net NPE ratio stable at 0.9%, growing coverage ratio at above 64%, and default rate stable. NII ROIC remains strong at 24%, confirming disciplined margin management. Fees and insurance income grew 13.3%, reaching around 29% of revenues, supported by broad-based contribution across countries, with particularly strong performance in advisory and investment products up 24%.
Costs increased 12.4%, 2.7% on a constant perimeter, so excluding Alpha Bank Romania, bringing our cost-to-income ratio to 33.8%. Net revenue on RWAs at 8.5% confirms strong capital efficiency. Profit before tax at € 2.1 billion, down 1.8%, with ROIC at almost 30%. CEE continues to demonstrate the success of our growth strategy, with broad-based momentum across countries and products. Its performance underlines our ability to scale profitably, diversify earnings, and deliver sustainable value across the region. Our Russian bank is now a highly focused franchise. Local loans and deposits account both less than 0.5% of group. Cross-border payments focused on now euro and U.S. dollar account for less than 2% of group. No cross-border lending exposure remains, and a positive liquidity contribution from Russia to the rest of the group still exists.
We have achieved this significant reduction at minimum cost, both in the interest of our shareholders and in adherence to the spirit and law of sanctions. Our Russian bank is ring-fenced and operates strictly within all legal and regulatory requirements. This franchise is managed in a controlled and disciplined way, ensuring stability and compliance while minimizing risk. The exposure on CET1 from extreme loss scenario has declined from circa 130 basis points to circa 80 basis points, mainly connected to retained earnings. Client solution remains a cornerstone of leveraging group scale. Product factories that support our banks and our partners in delivering capital-light, fee-driven growth while also accelerating their NII from specialty areas. Net revenues reach €9 billion, up 7%, and fees €6 billion, up 4%, confirming the strengths and diversification of our product portfolio.
Investment products delivered record performance, with fees up 9% to €1.9 billion and AUM and AUA up 14% to €186 billion. Our one-market funds reached €28 billion, up 68% year-over-year, supporting the internalization of almost 80% of our value chain still going. Insurance has become a major growth pillar, with fees and insurance result up 12% to €700 million. Following the internalization of Life Insurance, we are now the fourth largest player in Italy, with €46 billion in reserves. Payment fees were up 2%, also benefiting from timing of yearly incentive paid in Q3. In a segment affected by headwind, such as new regulation on instant payment, this is a great result. We are top three in four European markets in issuing and acquiring, and we're awarded Best Cash Management Bank in seven countries by Euromoney.
Advisory and financing maintains a top three position in bonds and loans by fees in Italy and in Germany. Client risk management was up 13% and reached a return on allocated capital of 43%, driven by high-quality client-centric activities. Trade and correspondent banking remains a leader, with top three position in every country in which we operate and a cross-border market share five times higher than any domestic one. These factories are client-centric and scalable, a key driver of our unlocking acceleration strategy, enabling us to retain more of a value chain. In conclusion, we have delivered another record quarter, completing the best nine months in UniCredit history. This marks our 19th consecutive quarter of quality, profitable growth, and a clear beat across all our KPIs. Our strategy is working.
We're leveraging our unique DNA as a pan-European leader, serving a high-quality client base through 13 leading banks and one partner, demonstrating the validity and the strengths of our unique model, as we also stand as a benchmark for banking. We're sustainably accelerating growth, well ahead to what we expected at the beginning of the year, relentlessly executing while continuing to invest and innovate for the future. We have reinforced our double-digit growth trajectory in EPS and DPS, intangible book per share, maintaining a return on tangible equity greater than 20%. This places us in a leading position now and in the future. We have reinforced our expected distribution with higher dividend and ordinary share buybacks, placing us again at the top of the peer group for the 2025-2027 period and beyond.
UniCredit continues to create superior value for all stakeholders, delivering this quarter a great performance with great prospects and great present and future shareholders' returns, and it's today stronger, more resilient, and better positioned than ever. Thank you, and we will now open to questions.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Anyone who has a question may press star and one at this time. In the interest of time, we ask that you please limit yourself to two questions and one quick clarification point per caller. The first question is from Ignacio Ulargui, at BNP Paribas. Please go ahead.
Thanks very much for the presentation and for taking my questions. I have two questions. The first one is focusing on loan growth and the kind of expectation of acceleration of growth that you see when you get a bit of a sense of how that trend is going in Germany and Italy particularly. The second question is on the potential measures that you might take for improving the P&L in 2026 and 2027. You could give us a bit of a sense of the magnitude of it and the focus because, if I understood correctly, you said during the call that it may not be that focused on cost, more on investments. I just wanted to get a bit of color about that.
If I can make a final clarification on the distribution and share buyback, if I just look to consensus, consensus has around €13 billion of share buyback. Currently, if I just look to your numbers, you get €11.5 billion. Could that be breached through extraordinary distributions? Thank you.
Okay. Let me start on loan growth. As we said, probably conservatively from the very beginning, to see significant loan growth at stable or improving margins, you need to see economic development, investment, and actual people wanting loans. If you push loan growth against the wall, you're going to reduce your margins. As we said many times, margins trump volume three to one. It may look quite good on the top line, but honestly, over time, you're denting profitability and it's difficult to recover. With that caveat and applying that discipline to how we grow, we're seeing significant progress in loan growth in Italy, and we believe that such progress is going to accelerate markedly in 2026 and beyond. Why that? For mainly two reasons.
The main reason is that, like the rest of the group, we have almost completed all the actions to bring our loan portfolio to the profitability it has today, with a very marginal amount of loans still below EVA. Why is that important? Because in order to do that, we delivered what we delivered in the past, but we had a drag as we purged off positions that were not meeting our benchmark. We no longer have to do that. Look at what that means now. Secondly, post the withdrawal of our offer of BPM, we have gone back to the drawing board and re-examined the plan we were about to launch last year within the acceleration phase that we put on hold because of the acquisition or possible acquisition.
That plan has been boosted, and we actually believe, and watch for space, that we will be profitably gaining market share next year in the country. That will drive a significant portion of Italy's results. On Germany, I would just say the usual same thing, but different. We have a bank that is focused. Obviously, there was no M&A situation there, and that is now well set after all the changes we've done in the business, in the operating machine, and in other places to grow profitably. We still see some headwinds from some competitors, if I may, damping on to achieve volume. We will not be drawn in that, but we believe that we can grow even without that, and we will demonstrate that that is possible.
I am positive on that as well, and I am positive that in the target segment of Mittelstand, affluent, and private, we will be gaining growth or market share. In terms of potential measures to improve, first of all, why do we have these potential measures? We have potential measures because once we announced our phase two of UniCredit Unlocked acceleration, there were a few things that were different. Number one, our view on macro was more negative than it is now, having not on macro itself, but how we navigate macro. Number two, we did not have the extra boost that we believe we're going to have primarily in Italy, but also in the rest of the group. Number three, and most important of all, we had not witnessed what this franchise can do.
If you go back to my comments, we were ahead of expectation in our acceleration in Q1. I repeated the same in Q2. I'm repeating the same in Q3. That gives me a lot of confidence that our acceleration can go further. As we go further in our acceleration, like in any acceleration, our businesses in the process of preparing the new multi-year plan, which is not approved yet, so I'm not anticipating anything, are requesting further investment in order to underpin that acceleration. There's only so much you can do with gains in efficiency, which, by the way, we will continue to make. To harness the acceleration we want, we need positive investment. How does it change? It changed that if you look at the past, most of our investment was targeted to efficiency, and we let the network, the client franchise run, and they did an excellent job.
The action we are now considering for the rolling of a new MYP is much more targeted than before on top-line acceleration. It means you're going to look at hiring. Italy will hire in spades. Training. Italy will train in spades, so will Germany and the other countries. Digitalization of our omnichannel to make sure clients feel a seamless experience if they go to the branch, to mobile first, internet, Buddy bank, and I can continue, rather than pigeonholing them into a segment we think that that is the future. That requires continued investment. As you know, we've invested about € 1 billion group-wide in modernizing our physical presence. We've invested another bunch in mobile first, in technology, etc. for our network. We will accelerate that.
There are also some other levers that we can pull to further insulate group results from either adverse effect or accelerate them and that we are considering now. With the MYP of, at that point, 2026-2028, we will be reviewing and hopefully upgrading our ambition. In order to support that greater ambition, we will take on a year that honestly has some unknowns in it, some of that sunshine to further propel our future. We don't have an amount yet. We are taking from bottom up from every business and area what they would wish, and the commitment that they're making is still premature to discuss. It was correct to raise that possibility because now it is a possibility. On distributions, I would like to make the following comments because maybe I look at them in a different way than everybody looks at them.
There is only one distribution that ends up in the pocket of our shareholders. That is called dividend. It's a cash payment that hits your account. When I do share buybacks, by reducing the share count on the same earnings, we are obviously accelerating the EPS and accelerating the DPS, again dividend, and accelerating my tangible book per share. It's an indirect effect on what gets in the pocket of my shareholder. When we have decided to take the moment and invest €6.5 billion today in the stake consolidation, we have done a few things that I think were not considered enough. Number one, our shareholders had a lot of uncertainty as to the timing of deploying our excess capital. Between now and the end of 2027, it could mean tomorrow, and it could mean December 31, 2027. Now, €6.5 billion are deployed, and that's it.
We are going to start pumping from 2026 onward. Second topic, when you do share buybacks, as you know very well, you cannot anticipate at which price you're doing the share buybacks. As of today, it's 11% return on investment. Over time, nobody has any idea. It depends on where the share price is when we will execute it. However, by deploying €6.5 billion of our excess capital at a 20% return on investment, we give exact clarity on what the impact will be, and there is no going around it. Incidentally, that 20% is almost double what we would have gotten by doing the same amount of share buyback on our own shares, and it's 2.5 x higher than what anyone who wanted to replicate what we have just done would extract from consolidating the same amount of shares in Commerzbank and Alpha Bank.
We view the second leg called capital deployment as deployment, and I can deploy it in share buybacks, I can deploy it organically in the business, I can deploy it in M&A, or I can deploy it. Obviously, this is not recurrent, and we had an opportunity that we grabbed into strategic stakes that also give me strategic optionality that no other bank in Europe has. When I put it all together, what are the facts? The facts are that versus consensus of what we would have paid in dividend to our shareholders before we deployed in the 2025-2027 period, we are going to pay €1 billion more, and our dividend per share has increased its growth dramatically versus before. From a dividend standpoint, our shareholders are massively better.
If I look at share buybacks, you are correct, they are going to be lower than what they were before, or at least consensus is saying that. They're saying that because €11.5 billion that consensus is giving plus €6.5 billion is almost €19 billion, not €13 billion. In effect, what we're saying is that we've generated so much capital that we could distribute or employ €6.5 billion at great returns and still give you close to the same amount of share buybacks you were going to have before. If you add the dividend amount and the share buyback amount, the before and after is very similar. Now we have €1 billion more revenues and €1 billion more net profit because of our investment. To finalize my answer to your question, could there be extraordinary distribution? Absolutely. We had a 16%+ CET1 before.
We were on another galaxy to all the other banks. Incidentally, many believed that all that excess capital could not be returned this fast, hence the consensus. Now we are, let's take it to the end of a year, somewhere between the 14.5% area or slightly lower depending on the number of actions. We are still very high, but at the level of best-in-class competitors. We're no longer an outlier. We are at these levels. Our target CET1 is not 14%+. It is 12.5% -1 3%. Depending on how the business performs, how we see the deployment of further opportunity into our organic growth, which in turn will drive dividend and earnings. In terms of all of that, we will continue to trend down to 12.5%-13%, and you can do your calculation on what excess capital is that.
If we don't find ways to deploy profitably in our organic growth, it will come back to you. We will tell you how much it is at the end of every year when we take a line on how well we have done and what our future prospects are. Last thing I would say is that if you look at the practice we had when we launched UniCredit Unlocked, it's identical. We said these are the dividends, they're sacrosanct. We will tell you how much of the excess capital we give you back at the end of every year. We changed. Sometimes you need to go back to where you were because it was better, and I think it is better.
Thank you.
The next question is from Antonio Reale, Bank of America. Please go ahead.
Hi, good morning. It's Antonio from Bank of America. Two questions for me, please. The first one is on NII in Italy. We've seen a leg down this quarter given the outlook on rates. My question is, do you think we've seen the trough in your Italian NII this quarter? I've seen a good uptick in deposits, and you've talked about growth. Do you think that NII in Italy can be the sort of swing factor for the group given the performance we're seeing elsewhere? That's my first question. My second question is a follow-up on your profit ambition for 2027. You're targeting well above 11. If I look at your slide two, you're looking to add €1 billion by 2027 from strategic investments, which at least on my number seems somewhat conservative.
If I add that up to your underlying profits this year plus some of the growth you've talked about, you're really going to be closer to €12 billion more than 11. What am I missing? Is it you're building buffers on buffers? The third and last clarification, if I may, I think you've talked about a new multi-year plan. Did I understand correctly that you're looking to present a new strategy update sometime next year? If so, could we have any visibility as to when you would expect that to be? Thank you.
Okay, so let me start with NII. Let me be broader. I don't think NII in Italy has troughed yet. I think it has a little bit more to go. I would say that if I take a group-wide view in our Executive Committee, the word troughing on NII is more and more used. I think that like with the plan, the right time to discuss about trough or no trough and what are the expectations is probably with the year-end result. As we will be sitting on the year-end result, see what would have happened around January and the prospects, we will be able to guide you without speculating. I would say that we are troughing in the group. We just need confirmation that this is sustainable.
With respect to net profit ambition, I think I would like Antonio not to make the same mistake as we probably I made on distributions before. We will return €30 billion or more than €30 billion. We spent €6.5 billion and it becomes €36.5 billion. Now, it just became €33.5 billion, but not €36.5 billion and everybody's disappointed. I would say the following. Because of the further acceleration that we see in our underlying business, which is really the exciting story in our results of this year, unfortunately, because of all the noise, the consolidation of stake, the this and the that, it is kind of hidden.
Because of the acceleration of our commercial results that we see this year and that we confirm three quarters in a row, and I hope, and it's critical, we will be confirming in the fourth quarter, we're more optimistic than what we were when we designed our phase two of UniCredit Unlocked 2025-2027. As every year, we update that by losing the looking back and adding a year. I think at the moment, if the trends are confirmed, we will be looking to upgrade our expectation for profitability. At the moment, you only have 2027. You will look at 2027. We will add 2028 and we will clarify 2026. For that reason, we're making the investment. In terms of your reconstruction, I would say this.
We were going to make circa, and you know that circa can be up or can be down, €10 billion in 2027 before we made these investments or before we consolidated this investment. If you mechanically take € 10 billion and you add €1 billion net from this investment, and you're right, the €1 billion is dependent on two factors: the consensus on Commerzbank and Alpha Bank being right, and that I'm not going to get into; and secondly, our hedging cost, which I'm deducting from the total numbers being the ones that you're estimating to be, but we're going to give you an update with the year-end numbers. If you mechanically add circa €10 billion to circa €11 billion, you don't get to well above €11 billion. You get to circa €11 billion. Okay? Why are we telling you well above €11 billion?
Because the underlying franchise is doing better than we anticipated at the beginning of the year. How much well above €11 billion, I'm not going to comment because we're finalizing our plan. We're getting the feedback from everybody. We want to be realistic on what we say, and most importantly, our board needs to approve it. Let's put it this way, I'm optimistic about 2027, which is the only number out there. For us internally, we are also positive on what we can do on 2026 because of all these factors, because it's not only one year that gets pulled up. 2026 and 2028 will be affected as well. With one caveat or one caution. The caution is that the new investment that we're doing on accelerating is going to impact 2026, but not fully. They need to be rolled in.
The years where our investment, new investment, is going to impact the most, and I'm answering your question again, is in 2027 and 2028. In 2026, although we have started this investment, they will impact for only a fragment of a year. 2026 is going to remain just what, which is not little, what our acceleration can deliver without a lot of impact from those investments because they will arrive a little bit later in the time and affect more of the second half of a year than the first half of a year. I hope that that's clear. With respect to Strategy
Unless somebody demonstrates otherwise, I personally do not like investor days. I like updating everybody, all of our stakeholders, every quarter. I don't think many banks maybe bore you or interest you with an update on their strategy and where they are going as an integral part of their result presentation four quarters a year. Once a year, once we roll our plan, we review our guidance with a lot more granular detail. I think that is more continuous and better. Should you expect that with the full year 2025 results, we will give you significant detail on the next three-year plans as we roll? You should. Is that an investor day? No, it's not. The date is very clear, it is when Magda will tell you we will have the year-end results, sometimes in February.
Very clear, thank you.
The next question is from Delphine Lee, J.P. Morgan. Please go ahead. Ms. Lee, we cannot hear you. Maybe the line is on mute.
Yes, apologies. Hi, thank you for taking my questions. My first one is on Commerzbank. Just to understand a little bit where we are now on the derivatives that are still in place, on the hedging costs, just to understand a little bit, you know, how to read a little bit, you know, the effect it's taken this year, but also kind of what we should expect in the coming years. My second question is on the Italian bank tax. I mean, I saw you said it was a bit early, but I don't know if you could just share any color about just, you know, what do you think is a likely scenario? Thank you.
Okay, so Commerzbank, where we are now on the hedging cost. I would say that it's fair to say that we're now completely aligned on the upside with Commerzbank as we have at, I would say, significant costs this year. That's why you see the impact I was talking about. We have practically eliminated all call options that we had sold on the stock when we colored it or on part of the stock when we colored it. If you look at it from a long standpoint on the upside, we're one to one. However, as for everything else we do, and it's not personal or anything, we remain always cautious as we have overlays on our asset quality while we are very strong on it and we are very optimistic on it. We have something called put option on the stake just in case.
If the performance is positive and ahead of expectation, we are one-on-one aligned. If the performance is not just negative, but significantly negative, we make money. Okay, that's where we are. Now, those hedges cost money and they are netted from the profitability of a stake. They cost money in two ways. One, the cost of the stakes, which is several hundred million. We will update on exactly where we are because we continue to do action to reduce it with the end-of-year results. The second thing is funding because we're funding the participation, obviously. The two of them are significant, but as we have taken cost upfront already, we continue to look at ways to reduce that combined cost to give you more and more a clean impact on the net income we bring in from the stakes because we think it's cleaner and clearer for all of you.
We will do that, but as we are conservative, we will maintain our put option to protect on the downside. For one, rating agencies approve of that. Italian bank tax, and what do you think is a likely scenario? I think I never know what the likely scenario is with anything that is politically related, and I don't try to speculate. I don't know. I would just say that it is premature to assess the full impact. I would say that depending on the rumor, the full impact is more or less high. I would say that for UniCredit specifically, the combination of the fact that we are, in inverted commas, only 40% in Italy and 40% profitability in Italy, and so on and so forth, the impact is obviously diluted on the 100%.
Secondly, by having all of the cautionary, call them buffers, that we have across, we are going to try to neutralize as much of the impact, whatever the impact is, as we can. At the moment, we expect an impact, obviously, but it's premature to tell you how much. We will see in the next few days or weeks where we're going to land.
Great, thank you very much.
The next question is from Giovanni Razzoli, Deutsche Bank. Please go ahead.
Good morning. Two questions at my end. One is on Russia. You confirmed that you are going to exit the country by 1st of 2026. Shall we assume that the contribution to the bottom line will also basically go to zero, or do you have ways to move some of the revenue or businesses elsewhere to keep the contribution of that contribution to some extent at some point? The second question is on your stake in Assicurazioni Generali. In the last conference call, you anticipated that you would have reduced your stake below 2%. Based on the last report on consult, you are still above 5%. I was wondering how shall we treat it in terms of contribution to your P&L or whether you have changed your views on these stakes. Thank you.
On Russia, we never said we would exit by the first half of 2026. Let me be clear. What we expect to close, if you want to call it exit, and maybe that's where the misunderstanding lies, is that we will close our retail operation, which has already declined very significantly by the first half of 2026. We stand by that at the moment. The state of the franchise going forward is, as I said, we have about €700 million in local lending. For €700 million, we haven't granted any new loan since the war started. The rate of decline of those loans is dependent on which loan they are. If I have a mortgage, it's a long tail. That's why banks are different than other industries. If you are multi-year, they are multi-year. We believe that we will gradually trendline to about €500 million over time.
There is very little we can do to go above and beyond that because if we have a loan outstanding and we're not giving you one, you trendline as the loans decay, and that is what varies. As we said, on deposit, the local deposits are just below €1 billion. We are a very cash-rich bank. We are viewed to be a safe haven to a certain extent, one, because we are international, and two, because of our strong capitalization. Obviously, by not having done any new loan, we are not exposed to any worsening of a credit cycle or anything else. We're just, I don't know, call it a safe deposit box, maybe it's not the right word. Those are there. Under Russian law, we cannot turn away deposits. They are what they are.
We don't see any particular trend up or down at the moment, but they are what they are, and they are probably going to stay around that level. On payments, we used to be multi-currency, if I remember correctly, on 16 different currencies. We're now focused on two. Some we have discontinued, some we have effectively rendered marginal or close to zero. Those two are U.S. dollar and euro, as you have seen heard very broadly in Italy, and as said, we are providing a service to international Western companies that are still in the country and to the Western world that requires to execute payments directly and not through other economic blocks for energy and commodities that continue to be purchased by all of our countries from Russia. Therefore, that's what they are there for, and they stay there.
They are less than 2% of the total payment that we do, about €6-7 billion. We don't see very material change from that, but they could evaluate. You asked your question about the contribution. I think because of how Russian and Russia rates are and because we are super covered in Russia, every time a loan is repaid, we get significant write-backs. As an example, this quarter, one large multinational or one large company in Russia repaid a cross-border loan, the last cross-border loan of substance that we had. As they repaid, they were covered at 40%. We released a significant amount of provision. From the beginning of the war, we've had that trend again and again. I can't stop that. If they repay and they're painful, I'm booking the release of provisions. I do think that the Russia trend line will continue as is.
The Russia contribution to our profitability will significantly decline in 2026. In 2027, as we said, the contribution was going to trend down to, let's call it, marginal. When you look at our numbers, and I have made this point before, but maybe it's missed, try to look at our numbers and after 2027, eliminate the fact that we're absorbing a €600 to €700 million compression of bottom line and much greater on NII from the compression of Russia because at that point, my delta, I will have troughed and my delta goes up. What we're telling you is that the performance, the commercial performance of the rest of our franchise is running a lot faster than you think it's running because it's also absorbing that. Staking Generali reducing, etc.
Our net exposure to Generali has been reduced, or our net stake in Generali has been reduced significantly, dramatically, I would say below 5%. I wouldn't say it is below 5%. Furthermore, what remains is hedged on the downside. Why has it been done in a way we have done it? We didn't want to weigh on the company, and that's what we have done. Is it strategic? No, it's not. Have we changed stance? For the time being, we have not changed stance. We are where we are. We have reduced the exposure. It is not something that is considered tactically important at the moment. We have reduced our net exposure, and potentially we will reduce more. At the moment, you should think that between the net number and the hedge that we are, it's well below 2%. The net exposure, I want to be very clear.
Thank you.
The next question is from Britta Schmidt, Autonomous Research. Please go ahead.
Good morning. Thank you for taking my questions. A follow-up on Commerzbank. The performance of the CET1 guidance of 14.6% does not mention the increase in the stake to 29%, but the net profit indications for 2027 still do. Is this just a matter of timing, and what will be the impact of an additional 3%? With regards to NII, you said it'll pick up once rates are fully priced, and you sound more optimistic on longer than Italy. Can you confirm the 2027 NII indication that you previously provided to be slightly above 2024? Thank you.
Yes, we are talking about 2027, and it is expected that by that time, in my opinion, much earlier than that, the remaining physical portion of the stake between 2026 and circa 2029 will be, let's say, consolidated. At the moment, we don't need it. It has an impact on capital. We don't need the contribution, and for the time being, it is better to do that because it squares with a long position with some of a short position, and it reduces the volatility of our P&L, which at the end of the day is what all of you want. I would say if you fast forward to 2027, but probably much earlier, we will be at circa 2029, plus minus.
The timing to do that is linked to minimizing the impact on capital and ensuring that the volatility and the impact on our P&L quarter after quarter still gets reduced over time, so you don't need to go and estimate that, etc. That is the point. With respect to the NII indication, I think for the time being, we're just confirming. As we review our rolling three-year plan, we will update you on that, and depending on how much more growth we see vis-à-vis the time where we had that, we may be updating it on the upside.
The next question is from Sofie Peterzens, Goldman Sachs. Please go ahead.
Yes, thank you for taking my question. This is Sophie from Goldman Sachs. My first question would be, you have the 29% stake in Commerzbank and 26% in Alpha Bank. In five years' time, how should we think about the probability of UniCredit owning 100%, potentially having unchanged ownership, or not owning anything in these two banks? If you could comment on how we should think about the ownership. My second question would be around the costs. I know you will have the strategic update with the fourth quarter results next year, but how should we think about cost growth in 2026? Should we expect any restructuring costs? Very long term, do you think that there is potential for UniCredit and European banks to become much more efficient than what we are today?
You have one of the best cost-to-income ratios in the sector at 37% in the first nine months, but could that potentially go down to 30% or even lower in the very long term? Thank you.
Okay, so I think for the time being, we are quite committed to remaining at a level of participation that is below the level of a full offer for very different reasons in Alpha and in Commerzbank. With respect to Alpha, one of the reasons why, or the main reason why we have increased our stakes, 9.9%, then we went to 20%, then we went to 26%, is very simple. We have an outstanding relationship with the bank, number one, and the bank asked us and considered it a positive development for them. That is a good reason when you have a partner.
The second good reason, because you always need to have the financial meeting, is Alpha has effectively allowed us to demonstrate to ourselves first and then to the market that the setup that UniCredit now has with centralized product factories, with centralized procurement, with increasingly aligned technology data platform, with, let's call it, put at the center all the scalable services that a group like ours can give to 13 disparate banks, allowing those disparate banks to be not only the best they can be in the market, but surpass their competitors by leveraging what UniCredit putting at scale at the center can offer them. We discussed it many times. There were countries in Central and Eastern Europe who could not distribute investment products because the large asset managers would not go there and support that growth. They were not relevant enough. Through us, they can.
If they did that one by one, they couldn't. We have demonstrated not only that, but we have demonstrated with Alpha that in a bank that is absolutely not part of a group, the level of value we can generate for them and for us by leveraging those common platform products, etc., at scale is much greater than it was. If you wish, it demonstrates that even without banking union for a group like us, we can demonstrate significantly above zero value creation across border just because we're set up how we're set up. We also work with them.
They provide ideas, and we are providing ideas, and we believe that we have a blueprint in the way we run our network in retail, a blueprint on our contact centers, a blueprint in our digital first, and vice versa, where we can extract a lot of efficiencies even if we're separate. If you believe that, you want to increase your participation to not only benefit from that through your part of the equation, but to gain more exposure through their part of the equation. That's why we are where we are. We will not do things in Alpha that are not in the interest of everybody, and we are very, very committed to the partnership, and we believe that Greece and Alpha are a great addition, although on a partnership basis to what the group is.
Commerzbank is different, and I'm not going to comment on all the differences, but again, we are committed to stay below the full bid % for the moment. We have, through the put options, protection on the downside. We are now aligned one to one if there are positive developments. The two of them together give not only €1 billion of net profit, but also €1 billion of revenues, but also €1 billion of net profit, which is fully distributable to our shareholders. Today, if I were to take that off and replace it by share buyback, I would have significant dilution. It is an engine, a further engine to propel my net revenue. It is a further engine to support distribution and net profit growth. For the time being, we're very happy to stay where we are, and I would think about now keeping that for the foreseeable future.
Obviously, we observe the situation, and we will judge what to do if and when the situation changes. For the time being, it's not changing. How should we think about cost growth in 2026 and restructuring costs, etc., etc.? Okay, I think this is a good question because it allows us to touch on a point. From 2021, we have been pounding the table that cost growth, absolute cost growth, above and beyond cost-to-income ratio is critical to the success of the bank. A lot of people were saying, "But why do you focus so much on cost growth with rates and this and this and that? What do you care? It's €100 million here and there." I would say to those people, "Go now tell me the same thing with rates going down." Why is cost growth such a critical point for our group?
Our competition is no longer just legacy banks. Our competition is fintechs. You just need to see how much new clients, some of our competitors, the names that come to your mind, are aggregating in every country. The only way we're going to be successful in pushing them off is twofold. One, improving our client experience. Hence, all the investment we're doing in the network, in the omnichannel, etc., etc. Two, having a break-even point that is substantially below them because it allows us to have flexibility and to be able to release some of that ability on the margin if we want to push back if a situation becomes necessary. The second reason is, as I touched on, if you are very efficient and you constantly find new ways to reduce your cost, you will be able to finance investment.
Whatever anybody tells us, if you go to the market with results every quarter, if your costs are a problem, you're not investing because it would become a compounded problem. Therefore, as you don't have control on cost, to contain that appearance of no control of cost, you're investing less. In our case, we can invest more because we have control on cost. I don't have a number to give you for full year 2026, 2027, or 2028. We did commit to keep our cost broadly flat from 2024 to 2027 before, and there is no way I'm going to back down from that commitment. This year, the costs are broadly flat, are going to go close to being broadly flat, not only as they appear, but absorbing all the new perimeter of consolidation that, if I don't remember wrongly, was adding about €100 million of cost to ours.
When we tell you we're broadly flat, it means we absorbed €100 million while investing. I don't think any bank is able to do that today. We are determined to continue to go because we find inefficiencies every day. Restructuring cost. I have already said that on the €10.5 billion of this year, which may or may not be greater, we will potentially, probably, possibly, it's a decision for my board, deduct some upfronting of cost in investment or some below-the-line things to further accelerate, not so much 2026, but 2027 and 2028. Okay? In our plan this year, when we started 2025, we did not have any such cost because we took them before. Indeed, the impact of these things is not having an impact on 2026. They're having an impact on 2027 and 2028. Why then have we changed our position?
We have changed our position for two reasons. One, we can afford it. It's the famous quote from a famous American president, "You build your roof while the sun is shining." We have a roof. I think at the moment, we're just making improvements to the entire house. The second thing is because, due to witnessing true acceleration of top line from all of our businesses and all of our countries, we feel more confident that we can spend on certain things and accelerate that growth further. Those costs or investment or restructuring, call it whatever you want to call it, are directed at showing you that we are upgrading certain numbers because we are going to track it and we are going to give more impact.
As of now, I can't tell you what we will do in 2026, but what I can tell you is we don't need to do anything in 2026, and we don't need to do anything in 2027. If we will do something in 2026 in addition to 2025 or in 2027, it will be because the sun is shining, we're doing much better than we anticipated, and we see better opportunities to further accelerate going forward. Otherwise, we're very happy and we're set for probably up to 2028. You have a baseline. If we can beat that baseline investing more, then we can talk about it again. Once we give you the baseline at the beginning of 2026, we will hold and we will only talk about doing anything else if we beat it. Is there a potential for UniCredit and EU banks to become more efficient than today?
My personal view, absolutely. Absolutely. Every time we go to the end of a year, we say, "Don't look at incremental. Put everything back on a blank piece of paper and ask yourself, if you were building the business from the ground up today, would you build it like that?" The answer is always, "No. We would never do this, we would never do that, we would never do that." In many cases, you can't change everything at the same time because we're flying while we're doing this. Every time that we do an inch forward, we find a lot more opportunity to do another inch and then another inch. I think for too long, our sector has said, "Oh, we cannot be more efficient than that," etc., etc.
I will ask everybody how many of all of us would have thought that European banks could be not only at now much below 40, but even significantly below 50% cost-to-income ratio five years ago. You can say it's rates. I can respond, "Really? Because rates have just gone down 150 basis points and we're still holding." It's exactly the same on return on tangible equity. "Oh, it's rates." Really, we're still holding at 20% and we're committed to hold or improve both on cost, on cost-to-income ratio, and on return on tangible while growing. We will demonstrate that in the next few years.
Thank you.
The next question is from Andrea Filtri, Mediobanca. Please go ahead.
Thank you for taking my questions. I think you just inspired my first question, which is, when do you think you can scale a Buddy platform up to roll it out to the rest of the group, and where do you see cost-to-income trending once the new tech is rolled out? The second question is, what would banks need from the European Commission to move ahead with real mergers in Europe? The third, just a clarification, how much longer can you keep your overlays unchanged? Thank you.
Okay, so I'm going to start from number three because it's an important question. My overlays, this is a debate I have with many people, my overlays will remain where they are until I am absolutely convinced that I'm in summer and the sun is shining for the next two or three years. Until then, I am not going to let go. There is no point in shaving my cost of risk to look good in the short term, and then we get some issues with macro development, some issues with credit development, some issues with something and say, "Oh, and now my cost of risk needs to quadruple." I didn't say it quadrupled, I'm just giving an example. The overlays are as what they are. I think one country where I spent a lot of time in the past, called Spain, used to call them anticyclical provision.
For me, it's an anticyclical provision. When the sun shines, you create overlays and extra provision. When it rains, you release overlays and extra provision to buffer the peaks and troughs of our sector. I think that is the conservative way of looking at it. We haven't released them yet because if you ask anybody, has there been anybody who will tell you, "We're fine. The cycle of risk is fine and there are no issues, and for the next three to five years, it's all fine"? Nobody's saying that, so why should I release? Accounting-wise, we release when some of the overlays are driven by drivers. The drivers are linked to areas of risk. Sometimes the areas of risk that we identify finish, and therefore the overlays are released.
We always, unfortunately or fortunately, find new areas of worry that drive the replenishing of the overlays at exactly the same level they were before. We will do that until when they release, we look out and we say, "Wow, there is really nothing else. There is no point in maintaining them." Hopefully, we will do that without having had to use them to contain our cost of risk, but we don't know. Nobody knows. That's the point. For us, overlays are an insurance policy, but one that will pay up and propel our net income if it doesn't need to be used because we are all wrong and the cycle of risk is benign and will remain benign for the foreseeable future, which everybody doubts. The first question, Vodeno and the growth and etc.
We did a step that no other bank had done, which is instead of experimenting with external providers on modernizing our core banking system, modernizing our data platform using AI, by lack of opportunity relationships, we found what we believe, after diligence, to be one of the best, if not the best, core banking system platform of external providers out there. Why do I think it's one of the best? Number one, the break-even point of that platform is two-thirds to 70% below ours today. By the way, it's not because ours is not good, but because ours is legacy and theirs is not. It's all cloud native. Second reason, it is flexible. A lot of this platform, you can do transaction and payments. You cannot do multiple products. With Vodeno platform, you can. Because of that, we bought it. I think we bought it at an attractive price.
I think that it allows us to bring in 200 engineers that we can use on the side of a group as a sandbox to experiment on things. A lot more exciting job than our continued rationalization of what we have. They're there. As they're there, we are doing a number of initiatives with them. One is the new entry into Poland. People look at it as the new entry into Poland. I don't look at it as the new entry into Poland. I look at it as Vodeno with this break-even point at that level, with a digital-first bank, which also relies on branches because we will have 40 branches in Poland. Can it get in from the ground up and make money?
I'm not going to tell you how many clients we're going to get on the platform, and I'm not even going to tell you how many products I'm selling. I am going to tell you, can we make money at 20% return on equity? If we can, that's the proof of the pudding, and therefore it's replicable in other places. Initiative number one. Initiative number two, Vodeno comes with an already functioning, and I believe unparalleled embedded finance platform. We're going to leverage it to the entire group, and it's an area of growth for our landing. Initiative number three, Vodeno allows us, when our internal technology and Vodeno look at our legacy system, to look at the possibility of migrating on the Vodeno platform. Incidentally, Vodeno is the only platform that has done it. We call it Vodeno Ion, but what is Ion?
Ion is the ex-Monte dei Paschi di Siena, Belgium. It had a legacy platform like all of us. It was migrated in full to Vodeno in under a year. Not the scale of UniCredit, not the scale of our unique banks, but it worked. It is premature to tell you when, how is it possible, but certainly in the trajectory of looking at what we can do to continue to modernize and migrate, that is considered, as it is considered every time we have a new initiative that is completely new to the group, moving to the cloud, do this, do that. They are help, contribution to our own team to be able to accelerate that because we have capacity, engineering capacity to accelerate it. For me, Vodeno is an outstanding sandbox and an acceleration leverage for us that we are experimenting with, and I'm very, very happy to have.
If you look at what will take for the EC, the European community, to allow banks to move with real mergers in Europe, I think you can look at it in two ways. Way number one, we need a banking union to do cross-border merger. How long is a piece of string? You need to ask them. Everybody says we need it, nobody wants to do it. You can look at it in another way. Regardless of a banking union, can we do cross-border merger and extract value? UniCredit can. I don't think anybody else can. That may be arrogant from our standpoint, but I think we can because of the setup that we have with 13 plus 1 banks, common factories, increasingly common technology platform, data platform, procurement, strategy, vision, purpose, talent, university, etc.
It's just a container that accelerates and extracts more value than we could individually from every bank that chooses to partner with us. In addition to that, we believe that our blueprint from running transformation and banking can extract value from a number of banks even if we're not doing an in-market merger. Most importantly, we are in 13 markets. We're not hostage of any one market, and we can always look. Having said that, if you ask me what the time of everybody at UniCredit has been dedicated to across the board, and even more so in the last six months or three months or four months, it is providing you with an underlying performance that accelerates and the new plan that you will see from 2026 onward.
It is not thinking that M&A is the only solution for us to buffer growth, which is what people who cannot grow anymore have to think. We will look at M&A if it accelerates, and we're very happy not to look at it if it doesn't. In the same way, we were very fast to take the opportunity on the stakes, and we will not do anyone because we're moving in a direction without needing anything more. If there are opportunities, we move fast. If there are not, the core is UniCredit at its foundation.
We will now take the last question from Manuela Meroni in Intesa Sanpaolo. Please go ahead.
Yes, thank you for taking my question. The first one is on the revision of the taxation of the dividend paid on the EU subsidiaries. I'm wondering if you expect any refund following such a revision. The second question is on your strategy in Italy. It's clear that now you are focusing on the organic growth, but I'm wondering if you could be still open to inorganic growth, and in that case, what would be the area and the business in which you may potentially be interested in? Thank you.
Okay, so, answer to your question, without wanting to speculate as things are constantly moving in our countries and in the rest of Europe, I would be positive on the answer to question number one. Do we expect any refund following the revision of the taxation of dividends paid by EU subsidiaries because it's supported by a clear deliberal decision. Strategy initially would be, would you be open to inorganic growth? If so, in what areas? We're always open. We're always open, but if you ask me, it's almost like I said to someone, what is the possibility that you go on Mars? It's possible. It's not probable in the short term. It's not probable because of all the reasons you know very well, and most importantly, because yet again, I got confirmation that when you do M&A, you slow down your own franchise significantly.
I think that the revived momentum that Italy is experiencing now and the commitment they are making to themselves to gain market share creates a ton more value than being in a situation where, because of now the lens of regulatory and political approval, we are all in a swamp for a year before being able to move anywhere. There are a lot of considerations that are not value creation or certainly not value creation for the shareholder of a UniCredit cloud judgment. For us, we look, if there are good opportunities, we're there. If people are interested in creating value, we will run. We think that we can achieve a lot organically, and we will demonstrate it through 2026 to 2028. That's where the focus is, I would say, mostly, if not exclusively.
If something comes up, as we have demonstrated, we're always very quick to move, but we do not expect that something will come up.
Okay, gentlemen, that was the last question. Thank you.
Thank you very much.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect.