Earnings call transcript: Banco BPM Q1 2025 sees net income rise 38%

Banco BPM, with a market capitalization of $16.7 billion, reported a strong financial performance for the first quarter of 2025, with net income reaching €511 million, a 38% increase year-over-year. Total revenues also grew by 2.9% to €1,476 million. Despite a slight decline in net interest income, the bank’s strategic focus on diversifying revenue streams and cost optimization contributed to these positive results. According to InvestingPro analysis, the stock is currently fairly valued, trading at an attractive P/E ratio of 7.73x. The stock saw a minor decline of 0.62%, closing at €2.571.

Key Takeaways

• Net income surged 38% year-over-year to €511 million.
• Total revenues increased by 2.9% to €1,476 million.
• Operating costs were reduced by 3.5%, aiding profitability.
• Banco BPM completed the acquisition of ANIMA, boosting investment product placements.
• The bank raised its net income guidance for 2025 to €1,950 million.

Company Performance

Banco BPM demonstrated robust performance in Q1 2025, with significant growth in net income and total revenues. The bank’s strategy to increase its non-interest income, particularly through investment products, has been successful, reflected in its impressive revenue growth of 18.94% over the last twelve months. The acquisition of ANIMA has further strengthened its market position, allowing for greater diversification and reduced reliance on traditional banking activities. The Italian banking sector remains competitive, but Banco BPM’s focus on wealth management and a broader product range is positioning it well for future growth, supported by a strong Financial Health Score of 2.86 (GOOD) from InvestingPro.

Financial Highlights

• Net income: €511 million (+38% YoY)
• Total revenues: €1,476 million (+2.9% YoY)
• Net interest income: Down 5.5% YoY
• Fees and commissions: Up 6% YoY
• Cost income ratio: Improved to 44% from 47%
• Cost of risk: Reduced to 30 basis points

Outlook & Guidance

Banco BPM has raised its net income guidance for 2025 from €1,700 million to €1,950 million, reflecting confidence in its strategic initiatives. The bank’s momentum is evident in its impressive 51.77% price return over the past six months and 26.04% year-to-date. The bank anticipates a mid-single-digit reduction in net interest income but expects strong growth in commissions. Notably, the stock offers an attractive dividend yield of 10.16%. Continued cost optimization is also expected to support profitability. Banco BPM remains on track to achieve its 2027 strategic plan targets, focusing on diversifying revenue sources and enhancing operational efficiency.

Executive Commentary

CEO Giuseppe emphasized the strategic shift in the bank’s revenue model, stating, "We are transforming a bank which was two-thirds led by commercial activity to a bank which will be led 50% by commission coming from product factory." This highlights Banco BPM’s commitment to reducing its dependency on traditional banking and enhancing its focus on wealth management and investment products. Finance Executive Eduardo added, "The real name of the game is the usual deposit beta," underscoring the importance of managing interest rate sensitivity.

Risks and Challenges

• Interest Rate Fluctuations: Changes in interest rates could impact net interest income and overall profitability.
• Economic Uncertainty: Macroeconomic pressures in Italy and Europe could affect loan growth and asset quality.
• Competition: Intense competition in the banking sector may challenge market share and pricing power.
• Regulatory Changes: New banking regulations could require adjustments in operations and strategy.
• Integration Risks: The successful integration of ANIMA is crucial for realizing anticipated benefits.

Banco BPM’s Q1 2025 results reflect a strong start to the year, driven by strategic initiatives and cost management. The bank’s focus on diversifying its revenue streams and enhancing its competitive position in the Italian banking sector will be key to sustaining growth amid potential economic and regulatory challenges. For deeper insights into Banco BPM’s performance and outlook, InvestingPro subscribers can access comprehensive financial analysis, including over 30 additional financial metrics and expert ProTips. The platform’s detailed Pro Research Report provides actionable intelligence for smarter investment decisions.

Full transcript - Banco Bpm SpA (BAMI) Q1 2025:

Giuseppe, Senior Executive/CEO, Banco BPM: From q two having concluded acquisition in April. The RoTE and the ROI stand at 16.722.1% with the full consolidation of ANIMA. Let’s say that we are ahead of the planned trajectory. Noninterest revenues pro form a, including ANIMA, already represent 49% of total revenues versus our target of 50% by 02/1927. So almost there.

The same, I would say that if we include pro form a of ANIMA Q1, the net income of the group would stand 2% above the average quarter of 2027. So with a big anticipation over the plan. Profit from continuing operation pretax are higher than, again, the average quarter twenty seven, which is $7.88. This quarter, including animal, we are at 827,000,000. These results have been, driven by a very strong commercial results across the board despite Euribor decline.

Let me remind that year on year, the the Euribor declined 1.36 points, but notwithstanding that total revenues went up to 1,476,000,000 vis a vis 1,434,000,000 in q one twenty four. Customer loans went up 2.5% quarter on quarter. Investment product year on year are up 15%. We also managed to reduce general cost and provision with the cost income which went down from 47% to 44 and the cost of risk down from 32 basis point to 30 basis point. All these results allow us to anticipate that we are already changing our guidance for 2025, which will be increased by 1,700,000,000.0 to 1,950,000,000, which, by the way, is the results we expected for 2026.

On Page seven, the fast execution of the plan has been the drivers for such performance and the possibility to reach targets in 02/1927. Net income, again, up 38% year on year. Including animal, we are 2% higher than the quarterly target of 02/1927. Strong volume growth, 2,400,000,000.0 in q one vis a vis the forecast of 1.7% which we had for the entire 2025. So the increase is 2.5% vis a vis 1.7%, but 2.5% is related only to the first quarter.

The same is for investment products, 15% year on year, up up to 6,700,000,000.0 vis a vis 5,800,000,000.0 of ’24, which was already a a record number. Let’s consider that the average target for 02/1927 would be 5,300,000,000.0 per quarter. Good improvement in asset quality down from 3,600,000,000.0 to 2,800,000,000.0. And, again, cost of risk reduced to 30 basis point with a target of 40 basis point. Also happy to confirm that the annual acquisition has been anticipated of one quarter having been affected by April 25.

The contribution from noninterest revenues, which was one of the main input of the our business plan is already starting to give very good results together with a good control on cost. Total revenues, again, were up 2.9%, notwithstanding a lower NII for around 50,000,000 year on year, and the total contribution of q one in terms of total revenues is already higher than the average of 02/1927 forecast. The same is for the contribution of non non interest income on total revenues. The target with ANIMA was 50%. We are including ANIMA pro form a 49%, and the same 1% is without considering animal in this quarter neither in, average quarter in 02/1927.

So almost there also for that. Operating costs, very good, down 3.5% with, let’s say, cost of staff yet to, take full advantage for the early retirement scheme, which will impact mostly in the second part of the year. And the cost income record at 44% vis a vis 45% of the target plan. Total provision went down 30% with cost of risk two basis point lower than last year or the ’1 last year and with an advantage of 10 basis point vis a vis the target of 02/1927. The volume growth is confirming our capability to generate shareholder value through continuing support to to the Italian economy.

Basically, all the increasing customer loans is related to nonfinancial corporates, almost 2,000,000,000 in this regard, preserving also the high quality of the stock, which still is secured for more than 50% half and half basically state guaranteed and collateralized. And this figure became 64% of secured if we consider SME companies. Moreover, we were was very good at the trend in new lending. We passed from 5,000,000,000 on the first quarter twenty four, to 6,000,000,000.2 in the last quarter of twenty four to 8,200,000,000.0 in the first quarter twenty five. I can anticipate that we overcome 10,000,000,000 by April this year.

The difference quarter on quarter is more than 30% and with good results also in terms of ESG related medium term financing, which stood at 2,400,000,000.0 in q one, versus a target, of the year of 6,000,000,000. So very well ahead. Total customer financial asset year on year up 3.4%. Basically, the same figure that we registered in December 24 despite 1,000,000,000 on negative market effect which we experienced during q one twenty five. The this growth was supported by a good net flow both of asset under custody and asset under management for a total consideration of 2,000,000,000.

Some words about Anima. I already said that we will consolidate Anima by q two twenty five. Basically, we reached total customer financial asset together with the bank and Anima to the level of 377,000,000,000, and the key figure of Anima standalone will be asset under management of 200,000,000,000, net income of 72,000,000 in Q1 twenty five, ’30 million which will be compensate in the integration, consolidation with our figures. Let me remember that Anima has, apart from the relationship with us, is the most important, something like 100 are distributors, one million non client, and more than 300 investment professional. The contribution to the group coming from Anima is an EPS accretion of more than 10%, a return on investment of 13%, the possibility to reach 50%, as I mentioned before, in terms of noninterest income of total revenues and the contribution coming from to net income from wealth management, asset management protection in the region of 35% of the total net profit.

One of the most ambitious target of the plan with the wider gap to fill when we presented the plan was the revenues coming from key product factory. In Q1 twenty four, we had $222,000,000 coming from this activity. But with the completion of ANIMA, we reached already in Q1, euros ’3 ’90 million versus a target of the plan of €430,000,000 which is a 5% growth in terms of CAGR. And let’s consider that without ANIMA, because it’s not consolidated in Q1, we already had a growth in the other product factories, Q1 twenty five to Q1 twenty four of more than 20% year on year. Let me remind also that the insurance and payment business will go at full speed only from 02/1926.

Further improvement also in asset quality, apart from the reduction I already mentioned of 800,000,000 in terms of gross NPEs, which comes from a very good and solid default rate below 1%, reduced cost of risk to 30 basis point. The capability of the bank to process already out of 1,000,000,000 of disposal, which were in the fore against of the business plan, we already reached 800,000,000 of disposal. The remaining 200,000,000 will be completed by this year. But let me say on the right part of slide 12 that if we exclude the state guarantee loans, MPs, of course, we are net MP below 1%, zero point eight %. Just some quick word about capital.

We confirm that we can stay above 13% in terms of target after ANIMA also without the not not Danish compromise. Then

Executive, Banco BPM: mister Geneva will go through the details of this figure with MDA buff, including already, of course, the Basel three impact, which allowed us to close the Q1 at 15.3% and with an anticipation of the not any Shannima impact of 53 basis point coming from the capital increase we provided to BPMVita in order to, complete the acquisition of Anima. The MDA buffer stood at, 459 basis point. And also in this respect, we can confirm that, throughout the plan, will be above 350 basis point.

Giuseppe, Senior Executive/CEO, Banco BPM: Very comfortable also at Sierra and Sphere and MREL. Let’s go to some of number in details. Q1 net income again, 511,000,000 coming from a good tenure in terms of net interest income, minus 5.5%. But if we consider full funding cost including certificates, the gap is reduced to 2.9% year on year. Fees and commission up 6%.

A very good results also from insurance, which grew from 5,000,000 on q one twenty four to 26,000,000 in this quarter together with a very good net financial results, which was boosted not only from the lower cost of certificates, but good performance in the trading. Total revenues, again, 3% higher than last year, notwithstanding 50,000,000 less in NII. Operating cost down 3.5%, provision down 30%, which lead to a pretax profit of 15% higher than last year and a net profit, again, of 38% higher than last year. I have been told by my colleague that we should be around 70,000,000 above the consensus for this quarter. In terms of consistency of our growth pace, on the right side, you will see in the last two years some of the most important figure characterizing the results.

Net fees and commission went up 12%. Revenues up 18%. Cost income down seven full point, a reduction of 45% in current LLPs. And, again, net profit from continuing operation up 58%. Let’s go through some of this figure.

NII already mentioned that 5.5% lower year on year will be 2.9% full funding cost. This also considering that we were able during q one to reduce further the NII sensitivity, which started in ’24 at 300,000,000 per 400 basis point, then went down to $250,000,000 in q four. Now it’s down to €200,000,000 and €150,000,000 if we consider also the contribution of certificates. On the right side, you see the asset spread and liability spread, which the asset spread basically was quite consistent. We if we consider the good growth that we registered in loan growth, liability spread was much better than the reduced the reduction was much better than the reduction of Euribor.

As you can see, year on year, the Euribor was down 136 basis point. We went down in liability spread only 100 basis point, and the same proportion is more or less for q four twenty four versus q one twenty five. How we were able to maintain a good net interest income because to the figure of ’20 of q one twenty four, if we would have applied the full predicted sensitivity, we had gone down 93,000,000. But, through managerial action and some other volume effect and other, we were able to, register, basically half of the predicted reduction. The managerial action itself will count for mostly half of this figure, around 20,000,000.

Let me remind that is the same experience that we had basically in each quarter of last year and that throughout the business plan, we have forecast a total of 100,000,000 of positive effect in of managerial action throughout the completion of the business plan. So in the last in the next eleven quarter, we have another 80,000,000 to optimize. So we are in a good on the good road also in this situation. What are the managerial action? You know very well.

The replicating portfolio is up from 22,000,000,000 to 25 with an average yield of 2.1%. So very solid and the duration of two point eight years. We further slightly increased the the share of indexed current account from 34% to 36%, and we are also experiencing a continuous reduction of spread in, the newly issued wholesale bonds, which allow us to take advantage up to now of each new issue vis a vis the previous previous issuance. Net fees and commission, up 12% on last quarter twenty four, ’6 percent year on year, but is almost 10% if we if we consider that we don’t have basically any more contribution for from fiscal credits and instant payments, which amount for the first quarter twenty four at around 50,000,000. And, of course, notwithstanding that, the commercial banking fees, the commercial the the other fees apart from investment product fix fees are still slightly slightly higher than q one twenty four.

So they would have been much higher if we would have considered the fiscal credit commission. Let’s spend some word about investment product fees. As I mentioned before, we had a big increase in placement of investment product, plus 15% year on year. But we were able to manage the best products in terms of commission with an upfront which grew 29% year on year to 106,000,000 versus 82,000,000 in ’24 and a slight increase of 5% also on running fees. Let me also stress that another quality of fees that we emphasized during the business plan presentation, which are the fees coming from specialized activities, corporate investment bank, structural finance, traders for finance, and so on went up from 61,000,000 of q one twenty four to almost 80,000,000 of q one twenty five.

Cost income, a very good results with the cost income down to 44%, a reduction in cost of more than 3%. Again, we are not yet experienced the reduction of the staff, which we mostly made during the q one, let only consider that we had almost 750 people out in q one through the early retirement scheme and the early retirement, with the new hiring for a bit low or up 300 people. So this, of course, will make a very strong effect in the region of some 30 to 40,000,000 in the next in the remaining part of the year. So we will experience further reduction also in cost

Executive, Banco BPM: of

Giuseppe, Senior Executive/CEO, Banco BPM: personnel. DNA and other administrative expenses also in this field, we were able to manage very carefully all our expenses. For sure, I don’t think we can stay at this level for the next quarter, But vis a vis the business plan figure, we are, much below the target. Asset quality, I already mentioned the reduction of cost of risk and the NPEs. Let me just mention default rate below the figure of last year, 10 basis point.

The cure rate, 1.5% better than the figure of ’24. And also a very strong support in terms of coverage where at 57% in terms of bad loans, 36% in terms of OTP. But, again, if we don’t consider the state guarantee, which, of course, are not covered at the same level of the other MPs, we for the other MPs, we have a coverage of 74% for bad loans, 42% for UTP. So very solid and consistent. Let me give the floor to Eduardo for the finance part of the presentation.

Eduardo, Finance Executive, Banco BPM: Thank you very much, Josep. Very quickly on page 20 to highlight that we have increased the level of the size of the banking book while preserving to to 46,700,000,000.0 while preserving the split between the two components, amortized cost and per value of the comprehensive income with the amortized cost remaining at a stable 69% of the total of the banking book. Similarly, also the the share of Italian bonds on the total of the banking book or total govies and supranational bonds is in the area between 3540% historically maintained, historically maintained and, to be precise, at 38.2%. The nongovernment bonds are stable at slightly above 88,000,000. Page 21 shows the impact of the the financial part on capital and on p and a.

So capital reserves had been slightly improved in the first quarter from $5.00 9 to $4.09 8,000,000. And as a matter of fact, they have more significant improve in the first month of the second quarter. Now the position is 455,000,000. The increase in the the basic point value of the comprehensive income portfolio is consistent with increase in size, and it’s also related to the from 1,000,000 to 2,000,000. And it’s also related to the intention to preserve a net interest margin in a scenario of declining rates.

Turning to the trading contribution, these went up from 9,000,000 1 year ago to 46,000,000, but the increase is clearly to be split into two components. So the component related to cost of certificates is continuing to benefit from the trend reduction in interest rate, mitigating the overall sensitivity of our p and l that had been showed shown in the slide on NII. From 75 to 50,000,000, this is a gain of around one third. The rest of the trading component the trading result is based on other NFR component, in terms of the global market activities or structuring of the release products or certificate products that is then sold through our network and on top of positive results in general from training. This part of the p and l is not currently taking the advantage of dividends to be paid by Monte Basque.

The participation in Monte Basque will further provide food for this component of the p and l in the second quarter for a total that is quite close to 200,000,000. Next page on liquidity and funding. Very quickly, the highlights have been already presented by Giuseppe. The liquidity position is 49 mil billion. Direct funding stable at around hundred and 32,000,000.

Positive news from rating agencies with DBRS positioning the bank in a triple b high and Standard and Poor’s improving the outlook to positive market conducive to sustain insurance activity also in this quarter. And as already mentioned, an activity that allow the bank to reduce the overall spread on the issue bonds. On the s LCR and SFR, nothing relevant to comment. Maybe interesting to mention that the market buffer has observed very very easily the impact of Basel four, Basel three plus remaining at an amount well above nine percentage point. And talking about Basel four or three plus, the next page, page 23, provides the details on the evolution of capital during the quarter.

So let’s go step by step. We started the quarter at 15 o five. We have received a contribution from performance, so the net profit from PNL, which is 92 bps and a distribution including 81 coupon of 77 bps. Meaning that PNL create, despite the despite the strong level of payout of 80% created still 15 basis points of capital organic capital generation in one quarter. On top, organic capital generation coming from sources different from p and l is given by the DTA, 16 basis points, and for value of the comprehensive income reserves.

Here, we have future potential capital that amounts to more than 300, three hundred and 20 five basis points, of which worth noting that 75 basis points is to be transformed into real capital by the end of twenty seven, so during our plan horizon, providing further comfort to our capital position overall. As anticipated to the market in the previous quarter, we have produced important effort to optimize the capital position in the participation area and in other managerial actions. So participations leading to 17 basis points of additional capital and the managerial actions, including synthetic securitization for 46 basis points. Capital reduction coming from regulatory headwinds, including Basel III plus and RWA increase. So volume increase has been contained in 76 basis points, so leading to a total preannima transaction of 15.3.

Then the value of the fully phased position in March is 14.76 with 53 basis points that is the impact of the capital increase in Banco BPMvita to fund the Anima transaction and which is an anticipation of the overall impact of the acquisition of Anima in the scenario of where the Danish compromise is not granted. What I mean by that is that of the overall impact of 20 268 basis points of ANIMA, fifty three basis points that we anticipate to the market three months ago. Fifty three fifty three basis points has been already anticipated with this capital increase. On top, before coming to the final potential impact, we need to consider also that the participation in ANIMA is 90% instead of the % which was used to calculate the 268 basis points leading to a saving of the other managed of around 30 basis points as anticipated in previous presentations to the market. So with this in mind, I think it’s clear that we are very close to maintain the 15%, which will be transformed into a delivery of the target to take into account the contribution from recurring capital generation in the next quarter.

MDA buffer is 50 559 basis points. RWA at 65,000,000,000 after Basel Three plus impact. Now, again, if I can turn leave leave the word to Giuseppe the final conclusion, please. Yes.

Giuseppe, Senior Executive/CEO, Banco BPM: I think on page 25 would be, I think, very useful for you because I was mixing during the presentation with Anima, without Anima. So let me make a quick remind over the figure of the actual figure of Roq one twenty five without Anima. The pro form a full consolidation of ANIMA of the same figure of q one compared on the right side of this slide with the average quarter of twenty seven, the final year of the plan, of course, Anima contribution. So you can see that the total revenues in terms of pro form a including Anima are already higher than, the average of 02/1927. The core revenues are at the same level.

$11,561,000,000 is the same level of the foregas for ’27. Still the 40,000,000 missing, you remember, from the from the factory, but, we are going at a speed and a pace that will allow us in net in the next, eleven quarter to easily reach and overcome the target to ’27. And, in doing so, in completing the 50% of non interest income, coming, from from product factory and non interest income on total revenues. Operating costs are already at the level of the, twenty seven quarter, ’7 hundred ’3 million vis a vis 697,000,000, as is shown by the cost income ratio, which is 44% at the same level of ’27, and the cost of risk, is still lower than the target 30 basis point vis a vis 40 basis point. Net income, all in all, as I mentioned before, is 2% higher than the average quarter of the target in 02/1927.

Also, in terms of business mix, I think we have done a lot of road during this first quarter, and especially if we consider the pro form a consolidation of ANIMA, you can see that in terms of breakdown of net income by business mix, we have been reduced to 60%, the commercial banking activity. We are at 10% in terms of specialty banking solution, but we grew already to 30% coming from wealth and asset management plus protection. So we have still this 5% of increase, vis a vis the plan target, which will come, by the development of the many product factor we started in ’24 and the contribution coming from integration of Anima. This is very important for us because it’s not only, the evidence of the results that we can easily reach in ’27, but also the give the idea of the transformational pattern that we have done during this year in transforming a bank which was two third lead by commercial activity to a bank which will be lead 50% by commission coming from product factory. This means that with the results which will be much more replicable, the bank will be more capital light with a lower risk profile.

All in all, we feel that also the multiple at which our stock will be considered should increase thanks to this better positioning. On page 26, why we are so confident to reach our the results of the target? First of all, because we are confident in increasing our guidance, but the fast execution and the proven track record of delivery give us full confidence and full commitment from our management to reach the targets. Let we we made the the the first two the last two plan that we an example with the last two plan we presented on the left side of the slide in ’21 and ’23. In both cases, we delivered in advance, one year in advance and two year in advance for the last plan.

As you can see, we had the target of 740,000,000 20 3 and 1,050,000,000 in ’24. Basically, after one year, we were already higher than the target in ’23 with the actual ’22. And in ’23, we overcome the ’24 target. And this came with this start fast start, but not as faster as the one we have done this year. The second example is for the plan that we have recently reviewed in February.

This was the plan presented in December 23. As you may remember, in one year, we were already 300,000,000 ahead of the forecast. The guidance was one point 1,360,000,000. The target ’26 was 1,500,000,000. After, one year in ’24, we were already adjusted at 1,700,000,000.0.

In this case, we had a fast start, 370,000,000 in q one twenty four, which was higher than the guidance for ’24 and slightly below the guidance of the last year of the plan. So let’s go to the current plan on the right side. The current start confirm the capability to execute very fastly our projection. As you may remember, the target for 02/1926 of the current plan is 1,950,000,000, and for ’27 is 2,150,000,000. We have had the first quarter including the ANIMA consolidation, which stands in 550,000,000, which is 13% higher than the foregas in ’26 and two percent higher than the foregas of the average quarter of ’27.

If you exclude ANIMA on the last on the bottom line, you see that the advantage that we kept is almost at the same level, even a bit higher vis a vis the results done in q one and average of ’27. So, again, fast start proven track record track record commitment to delivery allow us to present this very good set of results confirming not only the capability to reach the plan, but also the strength of our capital tenure. And this has encouraged us to present the new guidance on net income from 1,700,000,000.0 to 1,950,000,000. This will come notwithstanding we are considering Euribor thirty, forty basis points lower than we considered in February at the presentation of the guidance. So NII at full funding cost will be mid single digit lower than ’24.

Net fees and commission, of course, will experience a strong growth. Thanks also to the Anima contribution, double digit growth and a good single digit reduction also in cost income and in provision, which lead, of course, to this 1,950,000,000. Q1 results, so we feel are already in line with expectation that we have for the plan target in ’27. And we feel really that the reference point this would be the reference point for any standalone valuation of the bank. So again, I give you the floor for any Q and A, which I will be happy to answer with Eduardo.

Conference Operator: Thank you. This is the Corusco conference operator. We will now begin the question and answer session. The first question is from Antonio Reale of Bank of America. Please go ahead.

Executive, Banco BPM: Hi, good afternoon. It’s Antonio from Bank of America. I have two questions, please. My first one is on loan growth. You’re clearly in the wealthiest part of the country, and that might explain part of the strong activity levels when it comes to volumes.

But you’ve been gaining market share, growing performing loans this quarter. Can you talk a little bit more about what you’re seeing both from your clients network and from your competitors? And to what extent the market share gains can come without compromising price discipline? That’s my first question. My second question is on organic capital generation, please.

But if I may, before I jump onto that, a quick clarification on your capital ratio pro form a after including Anima at 90%. Because if I’m not mistaken, you would be at around 12.9% CET1 this quarter. I wonder if that’s correct. And then with organic capital generation, you’ll be above 13% from the next quarter. Now that’s a quick clarification, hopefully.

And then I come to my second question, which is I’d like to dig a little bit deeper into the drivers of organic capital generation. You just posted a very strong net profit. I think it’s your record high quarter with strong core revenues and very low default rates. But then if I look at your Slide 23, after dividends paid, your organic generation deriving purely from earnings stands at around 15 basis points, while the majority of the capital growth also going forward, I think, is expected to come from DTAs and fair value reserves. And I see there’s also strong managerial effort, which will ensure requires a lot of work.

So can you just give us a little bit more color on the quality of this organic capital generation going forward? And how much more of this can be sustained? You.

Giuseppe, Senior Executive/CEO, Banco BPM: On your loan growth, yes, a very good experience this quarter because also we come from as all the market from a couple of years of reduction of growth because of the interest rate waiting the interest rate to going down because of the uncertainty that we experience in the geopolitical situation because of the tariffs situation. Notwithstanding that, the reduction of interest rate that we experienced in q one was a boost, I feel, for our client to start to, make more demand for credit. Part of this, of course, is also switch from old loan to new loan. As I mentioned, we reached 8,000,000,000 of new loan in q one. So this is part of the growth of 2,500,000,000.0, which is not something that we think we can experience all over the the year.

This is already more than we expected for 02/2025. So now we can stay very attentive to not concede any potential advantage in terms of interest rate. The the discipline has been very solid. If we are slightly reducing one or two basis point, that’s spread because we take care of the quality of the client and of the guarantee scheme that we have made now an habit to have for SMEs. So very happy of these results.

Not yet full request for new loans from all the market, but, of course, I think our geography helped a lot in terms of growing. Together, let me say also with the willingness of our people and our client to support and to show some interest in the offer of the bank. Yes. The for the second question, organic capital generation, of course, you anticipate to q one, the ANIMA effect, of course, would be 12.9. But because ANIMA will come in the second quarter, we will be able to generate more capital.

Let me give the floor to Eduardo for giving some color on this.

Eduardo, Finance Executive, Banco BPM: No. But I would what I would say on Anima is, first of all, your math is correct, Antonio. But if I simply kind of stop the clock at 30, then I have also 14 basis point additional basis points of reserve from fair value other comprehensive income, which is not accounted for in as a at the date of March 30. So it’s, of course, a dynamic that is generated, I would say, day by day, taking into account organic capital generation that you mentioned. Yes, the impact of ANNA without Danish Compromise is to be taken into account, but also the other parts of the capital generation are part of the equation.

So we are we continue to be fully confident in maintaining these 13% that was mentioned since the presentation of the plan. On the organic capital generation, yes, fifteen fifteen basis points is what we achieved this year. And, of course, it’s not 92 basis points because we think it’s worth paying a significant part of the capital we generate or the net profit we generate to our shareholders, and that’s the explanation of the 80% payout ratio. So 15 basis points is, of course, despite the 80% payout ratio, which we continue to be committed to to to pay to our to our shareholders. On the rest of capital generation, you’re right.

It’s based on DTAs and the comprehensive income. I already say that that this is out of a total remaining total, the date of end March over 325 basis points, a 75 basis points by year end ’27. If you ask for more color, I would say that 50 basis points or 50 something, fifty fifty plus basis points of this 75 are to be transformed into capital other things equal by end of twenty five with the remaining part split of 40 basis points split more or less similarly between 26 with 70 basis points and 27 with 50 basis points. Sorry. The remaining part 02/2020 basis points.

I said a 40. So we are really comfortable because now that the bank is producing strong organic capital generation and p and l in this period is not only in in this scenario, this not only drives direct increase in capital, but also generates DTA recoveries, which has been for long remained trapped into the previous asset situation of the bank.

Executive, Banco BPM: That’s great. Very clear. Thank you.

Conference Operator: The next question is from Noemi Peruk of Mediobanca. Please go ahead.

Noemi Peruk, Analyst, Mediobanca: Good evening. I have one clarification and two questions, if I may. The clarification is on net profit guidance. Did the EUR 1,700,000,000.0 included the EUR 160,000,000 capital gain from Anima? Or is it only now included in the EUR 1,950,000,000.00?

And then my first question on common equity. Could you please update us on the additional benefit from reallocating some of the ANIMA intangibles like between banking insurance business post consolidation? And did you consider the transitional Basel IV risk weight for the insurance business as of now? And if so, could you please comment on the impact on common equity with two fifty percent? My second question is on M and A.

On the press, I think you mentioned that BAMI would remain part of the consolidation process in Italy even if UniCredit walks away. Are you potentially open to assess all scenarios, including takeovers, agreed deals or stake building perhaps? Thank you very much.

Eduardo, Finance Executive, Banco BPM: So I start with your first questions, question which are three questions, if I understood correctly. Guidance includes the capital gain of Anima currently. Of course, when we issued the previous guidance, we had a high level estimate of the same parameter, which was included as well. Let me say that overall, this guidance has some margin of conservatism that we now no longer adopting given the positive start of the year. And, of course, given also the opportunity provided by the fact that ANIMA itself will contribute to our p and l for three quarters instead of two, which was the original assumption.

Animal intangibles, good point. I forgot to mention it in in replying to the So currently, we didn’t use any smoothing assumption on the scenario from reallocation of animal intangibles from animal to Banco BPM beta. It’s an option that we are studying. It’s a possibility that we have and that, of course, may contribute to further to further improve the capital position of the bank.

On insurance, we are applying % risk weight, and we are expected to to continue to apply this risk weight based on article, if I’m not mistaken, 499.2 of CRR, which allows these treatment based on the existing position at the date of, I think, mid twenty four, if I’m not mistaken. But at the end of the day, we are confident to continue in this fashion. So not 150 for us. On M and A, I believe this is a question for Josep.

Giuseppe, Senior Executive/CEO, Banco BPM: Yes. Even though I would avoid the first part of your question because, of course, we are under a public offer. So I wouldn’t talk about retiring everybody. We will see what happen. Until then, of course, we are on this stand alone pattern, which is very satisfactory for us.

In the future, we will see. I already mentioned in the past that, of course, we consider ourselves an important part of the potential consolidation in Italy. I think the completion of the product factory make us as a unique kind of bank with 50% coming from commission and product factory. For sure there would be room for make other potential to explore other potential opportunity. But let us be very much concentrated on our stand alone situation right now on looking at what will happen on the offer.

You know what we think about the offer. It’s not yet an offer. Basically, it’s still a discount. We are expecting for something from UniCredit. And then we will make our decision, which will, of course, will be as a leader of the Italian banking system.

Noemi Peruk, Analyst, Mediobanca: Thank you. And just one follow-up on the 250%. Am I understanding correctly that you given your structure, you would never apply 250% on a fully loaded basis of Basel? Thank you.

Eduardo, Finance Executive, Banco BPM: Yes. Sorry, I had a problem with the mic. Yes, this our stance given CRR rule contained in Article 4.9, 4.9.2. Sorry. You.

For 95.2, sorry, for 95.2.

Noemi Peruk, Analyst, Mediobanca: Thank you.

Conference Operator: The next question is from Giovanni Razzoli of Deutsche Bank. Please go ahead.

Giovanni Razzoli, Analyst, Deutsche Bank: Good afternoon, everybody. Follow-up questions on the CET1. You said that you expect after the consolidation of ANIMA to be above 13%, but the comments that you made bring me to think that you will be well above 13%. You do have the cash flow generation for the next quarter, including ANIMA. You mentioned the improvement in the other comprehensive income reserve.

There is the DTA. Then if I’m not mistaken, you mentioned in the past also some significant risk transfer actions, the possibility to move the goodwill to BPM data, and you are already at 13%, let’s say, point 9%. So my understanding is that this is an extremely conservative guidance. Where I can be wrong, there could be acceleration of risk weighted assets or what could be the other, let’s say, offsetting elements to these, in my view, strong achievement, potential strong achievement? And the second question is on the commercial performance in terms of placement on investment products, which has been very, very strong.

You reached €7,000,000,000 I would say that probably this performance was also impacted by some noise around UniCredit offer, which could have an impact on your network. So I was wondering whether you can give us some color also from the month of April if this positive trend is also confirmed given the turbulence we had in April. Thank you.

Giuseppe, Senior Executive/CEO, Banco BPM: Thank you, Giovanni. Let me take the occasion to answer to your question on common equity. I think you have made some very good observation and comments. Unfortunately, we are stuck to this 13% because the market was influenced by some rumors thus going below 12%. We want to just to show that since Q1, we are almost there.

We are higher than there. And even with the contribution of animal impact of animal will be there. So, of course, we have generated, again, track record. If you look at our eight years of story, I think we have generated 2,000 basis point of common equity tier one all in all in order to derisk 30,000,000,000 of assets in order to make all the capital management action we have done to build up our network, our product factory and so on. So now, unfortunately, I don’t know why the market is stuck on this 13%.

It may be we were so, let’s say, naive to still stay on this 13%. Let me say that we are we the only justification, we also added 350 basis point of MDA buffer, which is the higher amongst the most important player in the Italian market. So although somebody would have expected some reduction in capital, we are still there and we will be stronger even after. Placement, good question. Also, this is one of the only credit impact.

What can I say? Of course, we would prefer to work without distraction and without distraction for our network. It’s not that easy, especially at the beginning when something happened like that. But as you were mentioning, then you cannot be able to transform problem and opportunities. Maybe this was the case also for our network.

We have experienced a lot of commitment from everybody, from the 1,300 branch, from the 15,000 people in the in the network, from all the people working from the bank. We are so committed and so certain of our strength standalone, and maybe the results of this quarter testify the capability of the bank. Sometime you need a kick to perform better, and this was a good occasion. April, let me say that was still very good considering the many, unfortunately, bridge that we had during the month, Easter twenty five away, May and so on. And you know that in terms of commission, this costs a lot because you cannot perform the day by day transaction.

But I think we were around €1,700,000,000 in terms of investment product, much higher than April. The same this I think I mentioned was in terms of loan production. We are are above 10,000,000,000 to by the April. So we will continue very steadily to perform well.

Giovanni Razzoli, Analyst, Deutsche Bank: Thank you.

Conference Operator: The next question is from Manuela Meroni of Intesa Sanpaolo. Please go ahead.

Noemi Peruk, Analyst, Mediobanca: Yes, thank you for taking my questions. The first one is on your net income guidance for 2025. It has improved. So you already mentioned some changes in the capital gain on Anima. I’m wondering if you can share with us what do you expect to be better compared with what you were expecting in February when you released the first guidance?

And we are talking about better volumes, revenues, lower cost or provision or anything that you can share with us? And the second question is again on the common equity Tier one. You already generated 46 basis point from a managerial action. I’m wondering if you still have further room for other managerial action that you want to put in place in the next quarters. And if these managerial actions are going to have any impact on your revenues?

Thank you.

Giuseppe, Senior Executive/CEO, Banco BPM: Thank you, Manuela. I think on Page 27, we gave you some, let’s say, indication about the bettering the many bettering, would say, of the forecast of the guidance for ’25. Basically, we are confirming that NII is kept at a very solid level of one mid mid single digit reduction vis a vis ’24. And on the opposite, we have a strong increase in commission, very good performance in cost income and in cost generally, and a lot of room in terms of guidance in provision. So all of these together with the annual anticipation of one quarter should give us the results that we presented today.

For managerial Ash, I don’t know if you do have the one

Eduardo, Finance Executive, Banco BPM: to Yes. Yes. Can you repeat the question? Do you understand if you talk about capital or an AI? Sorry.

Noemi Peruk, Analyst, Mediobanca: I was talking about capital. 46 basis point

Eduardo, Finance Executive, Banco BPM: Yes. Already in this quarter. Yes. So what we have done is we originated this capital mostly from synthetic civilizations. We performed two transactions in March and from, how to say it, from the credit portfolio by reducing the capital absorption with maneuvers that you can imagine on our lending on our credit risk and capital absorbed on credit risk.

So we can continue. We don’t currently expect to perform synthetic securitization in the second quarter. We are considering currently additional transaction potentially if needed either in the third or in the fourth quarter. And of course, we will continue to optimize the credit portfolio.

Conference Operator: The next question is from Delphine Lee of JPMorgan. Please go ahead.

Delphine Lee, Analyst, JPMorgan: Yes, good evening. Thank you for taking my questions. I just wanted to ask you on NII and the interest rate sensitivity, which is reduced to €200,000,000 If you could just if you don’t mind elaborating a little bit on this. And it seems to me that part of the difference in terms of consensus and revenues that you target is also not just core revenues, but trading and associates and insurance. So just wanted to see on trading, like if you could give us a little bit of indication, I mean, Q1 was clearly very strong, but in terms of the run rate that you would expect and the trend on that?

Thank you very much.

Eduardo, Finance Executive, Banco BPM: Okay. So on NII sensitivity, basically this is the result reduction of NII sensitivity. This is the result of the progressive implementation of all the actions that we are producing to decrease the the sensitivity of our balance sheet in a scenario of declining rates. If I may summarize the concept, the real name of the game is the usual deposit beta. So one year ago, the contribution to sensitivity of total deposit of improvement in cost of deposits, taking into account the replicating portfolio.

One year ago, 400 basis points was 360,000,000. Now is 480,000,000. So this means that, especially taking into account the increase in the replicating portfolio, I don’t have in on top of my mind the amount one year ago, but it was probably below 20 mill 20,000,000,000. And now we are at above 25,000,000,000, plus the restructuring of the deposit portfolio itself, which is now indexed at a share of 36%, leads to this improvement because we have a natural share of deposit repricing in a scenario declining interest rate or repricing through the swaps in the scenario declining interest rates that contributes to this reduction in sensitivity. Then, of course, there are some moving parts in the rest of the balance sheet, but overall, they tend to compensate each other throughout the period that that we are considering.

On NFR on NFR, what we have and that contributed to the improvement in the guidance is, of course, consolidation of the results of this month. And on top of the fact that given that we have two quarters of ANIMA, part of the contribution of Anima is in an effort for the improvement sorry, for the contribution of the dividend from NPS, which is in the order of magnitude of additional 40,000,000. So this explains the fact that we are confident to close with an effort which will will be in the area of, let’s say, slightly below hundred million.

Andre Alisi, Analyst, Equita: On

Eduardo, Finance Executive, Banco BPM: part of this contribution, it comes as well from, again, the reduction in rates because with the current level of rates, we clearly have an advantage in certificates that is shown on page 21. Last quarter last year, we paid 64,000,000 on certificates. Now in a quarter, we paid 50,000,000. 1 year ago, we paid 75,000,000. So this is a contribution to the overall target that I mentioned.

Noemi Peruk, Analyst, Mediobanca: Thank you very much.

Conference Operator: The next question is from Marco Nicolai of Jefferies. Please go ahead.

Marco Nicolai, Analyst, Jefferies: Hello, thanks for the presentation. So on the commercial performance and on commission, so fees were very strong this quarter. If I compare how much the commission income grew compared to the stock, let’s say AUM were up 3% year on year, but running fees are up 5% and also placements are up 15%, but upfront fees are up 30%. So there has been also, let’s say, effect on top of the volume effect. Can you give us some indications what is driving it and if you think it can be sustainable for the future?

And also on asset quality, so still pretty solid and overlays increased compared to the previous quarter. But let’s say so if you are in a scenario where GDP growth is lower than expected, can you provide us with some sensitivities on your cost of risk? And just a clarification, is the cost of risk guidance embedded in the 2025 net income guidance 30 basis points? Thank you.

Giuseppe, Senior Executive/CEO, Banco BPM: Okay. Thank you for the question. Very interesting. Let me talk about this is very important, the fee increase in terms of yield of each investment product sold. This is the difference of having a product factory on yourself and just distributing product from other product factory.

When you have the full range of product factory, you can choose time by time in the best interest of the client the most convenient product in your range of the many factors. Let me give an example. Last year, first quarter was very good. We didn’t have any life insurance product because Generali and Veravita were not providing us any new product. We were obliged to sell other products that mostly had maybe a lower yield for us.

Now, including also Anima, of course, we have a wide range of product which come from the most simple current account to the most sophisticated provided by Sika or funds from Anima. And we can, depending on the capability of the client to be risk averse or risk premium to give them the best product. We always have a solution for them. And this allow us to have a much higher yield in terms of each product that we can sell. So I think that frankly speaking, maybe the volume is not so I’m not so sure that we can continue to grow to 6,500,000,000.0, 7 billion per quarter.

But for sure, the yield of these sales will be even higher than the one we presented because now we have all the ammunition to give the most important the best product for the client and for the bank. So I think it’s sustainable. And the first quarter results shown very clearly this assumption. Asset quality sensitivity,

Marco Nicolai, Analyst, Jefferies: we, of

Giuseppe, Senior Executive/CEO, Banco BPM: course, have done sensitivity also for 02/2025 considering a default rate much higher depending also on potential decrease in GDP. And I think we have 10 to 15 basis point of increase from the current situation. Yeah. 10% for a zero GDP. Sensitivity on cost of risk is the one that you asked.

It’s the same question, I think, asset quality. Our 30 basis point is not to the guidance for ’25. The guidance is higher. As I mentioned before, we have a default rate which is higher, prudentially, of course.

Conference Operator: The next question is from Ignacio Ulargi of BNP Paribas Exelon. Please go ahead.

Ignacio Ulargi, Analyst, BNP Paribas Exelon: Thanks my questions. I just have two, one on costs and the other one on commercial spread. So starting with costs, I mean, the performance has been very strong, much stronger than what we expected at least. And that has been largely driven by admin expenses, which are down 16% in the quarter, although they are flat year on year, sorry, quarter on quarter. How should we think about admin expenses going forward?

What kind of investments are you planning to have into 2025? And the second one is on the commercial spread. I mean, how should we think about the performance of the commercial spread? It’s kind of largely done provided that your average stays at current level. So we should expect some further decline in the coming quarter.

Thank you.

Eduardo, Finance Executive, Banco BPM: Thank you. Thanks for congratulating on the evolution of the bank. Finally, on staff costs or in general, on operational costs, I would say, we are very, I mean, optimistic on the evolution of this component of the p and l. As correct yourself, the staff costs sorry. Other administrative expenses have improved significantly versus q one twenty four are more or less aligned, broadly aligned with the level of last quarter of last year.

We prefer to be more prudent in the overall evolution fully of this part by inserting some additional expenses. But frankly speaking, this is an area where we believe we can continue to achieve significant savings and deliver important performance. On whilst as far as the amortization, the depreciation and amortization, here, you see it’s more or less a constant trend, and we have room to sustain an additional investment activities activity. While we talk about cost, let me also clarify that the cost of personnel is still in progress of improving during the rest of this year because starting from second quarter, we will have the positive impact of the redundancy schemes that have been agreed in December and started only to a limited extent to produce the benefits during the first quarter. So this is another area where we believe we can continue to deliver an improvement in performance in the performance for the rest of the year.

Giuseppe, Senior Executive/CEO, Banco BPM: Coming to the commercial spread, let me talk. I didn’t understand if you want to talk about deposit or asset spread. So let me talk about commercial spread in general. If you see our page 16, you will see that our commercial spread has increased much higher than the reduction of the Uribor over the quarter. For instance, q one twenty four, we had an advantage in the commercial spread vis a vis the URIBOR average of the quarter of 37 basis points.

Thanks to the maneuver that we are doing on the liability spread and the capability to keep a very good asset spread also in a growing environment, we have increased the commercial spread in the last quarter of twenty four to 58 basis points from 37. And in q one twenty five to 69 basis point. So that means that our capability and view to reduce the the the possibility to increase NII in an environment in which interest was growing and starting to produce a sort of defense line in order to offset the potential reduction of Euribor is working very well. So now the liability spread reduce is reducing much at a lower speed vis a vis the reduction in Euribor and having the capability to keep the asset spread at the same level, we have a potential increase in commercial spread. Meanwhile, the Euribor goes down.

Ignacio Ulargi, Analyst, BNP Paribas Exelon: Thank you.

Giuseppe, Senior Executive/CEO, Banco BPM: Thank you.

Conference Operator: The next question is from Hugo Cruz of KBW. Please go ahead.

Executive, Banco BPM0: Hi. Thank you for the time. Just two quick questions. One is, I noticed you didn’t show any loan growth in household loans. I wonder if there’s any if this have anything to do with the pricing conditions in that part of the market, if you could please discuss those?

And the second question on the replicating portfolio. Do you still see any room to grow the size of the portfolio further? And the duration, two point eight years, seems a bit low. Why are you not pursuing a longer duration? That’s it.

Thank you.

Eduardo, Finance Executive, Banco BPM: No. On replicating portfolio, we are fine with the level that we reached, which was announced back in the previous strategic plan and confirmed So we believe that taking into account the share of index deposits, which do not need a repricating portfolio to improve price sensitivity. Overall, we are at around now 60% of total deposits that are hedged either through replicating portfolio or through the contract itself of indexation. And strategically, we are fine with that.

Bear in mind that still the the yield curve remains negative slope negatively slope or slight only slightly positive slope for the relevant levels. On the 2% 2.1% rate, I believe this is we are despite with that, of course, we can improve once the your curve will normalize by simply replacing the back book with a new transactions more or less leaving unchanged, the the current volumes. We observe in the market that other institutions have a lower level of yield and a higher duration, meaning that it might be slower for other players, the improvement of the overall profile of the same replicating portfolio.

Giuseppe, Senior Executive/CEO, Banco BPM: On the loan growth pricing condition, maybe I didn’t get very clearly the question. Is how we have managed the the loan growth keeping

Executive, Banco BPM0: good pricing? Sorry. You were just on household loans. You didn’t show any growth in household loans. And I was wondering if that’s because of pricing in that market.

Giuseppe, Senior Executive/CEO, Banco BPM: Basically, the vast majority of the group was with corporates and SMEs. So we are, of course, growing in terms of residential mortgages, but with a very slow start in January improving in February, very good in March. So let’s keep an eye on the next quarter to understand if March will be the average for the next quarter. For sure, there is an improvement. Meanwhile, the interest rate go down, but still not at that speed that we could have expected with such interest rate.

Let’s see the next this quarter what happened. The

Conference Operator: next question is from Andre Alisi of Equita.

Andre Alisi, Analyst, Equita: The first one is just a follow-up on the G and A expenses. You said that, yes, it is can be seen that are closer to the one of the previous quarter. But if I understood well during the call, you have said that it is unlikely that on a standalone perimeter, they will remain at this level. So what could be imagined as a reasonable average quarterly level for these expenses? Regarding the evolution of the second question is on the NII.

In particular, if you can provide us the indication of the on lending, the front book versus the back book. And so if there is still a positive substitution effect on this side. And the very last one, obviously, it is quite difficult to quantify. But clearly, in lower interest rate environment, there is room for higher capital gains. And so if it is reasonable or in some way, yes, can be a reasonable hypothesis to assume an average trading level that is closer to the one that we observed this quarter.

Okay.

Eduardo, Finance Executive, Banco BPM: Thanks a lot for allowing me to clarify, especially taking into consideration the position of equity in this current overall environment. It’s interesting. It’s helpful to be able to clarify. On the general expenses, I wanted to mean that we are very satisfied of the current level of the general expenses, which is consistent with the last quarter. In our guidance, p and l, we prefer to stay a little bit more on the safe side so that if needed, we will have room.

But again, this is an area where we can compress the overall level of expenses, so generating additional buffer and additional delivery to improve our overall performance. So overall, we are kind of guiding for a slight increase, but we have room to compress this item if needed. On NII effect from substitution, well, of course, it depends on the various products and on the various segments. So at a constant mix, I believe that we can say that the back book is replaced by an equivalent level of spreads from the front book then product if the mix changes, it depends on products inside. For example, mortgages, of course, would have a lower spread compared to SME and small business lending.

On the rates, I believe that the current level of rates gives probably more opportunities to further push and improve in commissions because in investments in for investment portfolios of our clients, capital gains tend to materialize helping for additional commercial activity from the network. Trading, we don’t have expectations to translate capital gains in the portfolio into trading because, of course, these capital gains are in the parts of the portfolio that generate higher levels of NII and we are fine with the long term contribution of such parts of the portfolio.

Executive, Banco BPM: Very clear. Thank you.

Conference Operator: Mr. Riscasi, gentlemen, there are no more questions registered at this time.

Giuseppe, Senior Executive/CEO, Banco BPM: Okay. So thank you very much to all of you, and I hope to see you in the next days for some other clarification. Thank you very much.

Conference Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.

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