Street Calls of the Week
Banco BPM, with a market capitalization of $13.9 billion, reported robust financial results for the fourth quarter of 2026, highlighting significant growth in net income and strategic advancements. The bank, which has achieved an impressive 13.24% revenue growth in the last twelve months, continues to demonstrate strong momentum. Despite a slight decline in stock price, the company remains optimistic about its future performance and strategic initiatives. According to InvestingPro, the bank maintains a GREAT financial health score of 3.17, indicating solid operational fundamentals.
Key Takeaways
- Net income reached 1.9 billion euros, with an adjusted net income of 1.7 billion euros.
- The company distributed 1.5 billion euros in dividends.
- Core revenues increased by 5.4%, surpassing the 2026 target.
- Banco BPM is expanding its digital banking and AI investments.
Company Performance
Banco BPM demonstrated strong performance in Q4 2026, with net income amounting to 1.9 billion euros. The bank’s adjusted net income was 1.7 billion euros, reflecting its solid financial health. A key driver of this performance was the 5.4% increase in core revenues, exceeding the company’s target for the year. Additionally, Banco BPM’s cost-income ratio improved, reducing to 47%, showcasing effective cost management.
Financial Highlights
- Net Income: 1.9 billion euros
- Adjusted Net Income: 1.7 billion euros
- Dividends: 1.5 billion euros distributed
- Core Revenue Growth: 5.4% above 2026 target
- Cost-Income Ratio: Reduced to 47%
Market Reaction
Banco BPM’s stock experienced a slight decline, with a 0.62% drop in price, closing at 2.571 euros. Despite recent fluctuations, the stock has delivered an exceptional 95.19% return over the past year, significantly outperforming many peers. Trading at a P/E ratio of 6.7x and offering a substantial dividend yield of 10.77%, the stock appears attractively valued according to InvestingPro’s Fair Value analysis. For investors seeking deeper insights, InvestingPro offers comprehensive valuation metrics and expert analysis through its Pro Research Report, available for over 1,400 US equities.
Outlook & Guidance
Looking ahead, Banco BPM has set ambitious targets, aiming for a net income of 2.15 billion euros by 2027. The bank plans to maintain a dividend payout ratio of 80% and is considering an additional distribution of 1 billion euros, contingent on regulatory conditions. With its current strong financial health metrics and growth trajectory, InvestingPro subscribers can access detailed analysis of the bank’s growth potential and dividend sustainability through exclusive ProTips and comprehensive financial metrics. The company projects moderate loan growth of 1.7% annually and aims to achieve a return on tangible equity (ROTE) of 24% by 2027.
Executive Commentary
CEO Giuseppe Castagna emphasized the bank’s strategic direction, stating, "We want to write the new roadmap towards 24% of ROT." He highlighted the bank’s transformation efforts, saying, "We have done an impressive work over the last three years to develop a new transformation in the bank."
Risks and Challenges
- Macroeconomic Conditions: The bank is operating under conservative assumptions with Italian GDP growth at 0.7% in 2026 and 0.4% in 2027.
- Regulatory Hurdles: Potential challenges related to acquisitions and capital optimization.
- Market Sensitivity: Despite having the lowest net interest income sensitivity among peers, market fluctuations could impact performance.
Q&A
During the earnings call, analysts inquired about the details of the ANIMA acquisition and the bank’s strategies for managing net interest income sensitivity. Banco BPM clarified its approach to capital optimization and addressed regulatory considerations related to its acquisition plans.
Banco BPM’s Q4 2026 results underscore its strong financial position and strategic focus on innovation and growth. While the stock market reacted cautiously, the bank’s forward-looking guidance and strategic initiatives position it well for future success.
Full transcript - Banco Bpm SpA (BAMI) Q4 2024:
Conference Operator, Chorus Call: Good morning. This is the Chorus Call conference operator. Welcome and thank you for joining the Full Year 2024 Banco BPM Group Results and Business Plan 2024 through 2027 Update Presentation. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.
At this time, I would like to turn the conference over to Mr. Arne Riscasse, Investor Relations Manager of Banco BPM. Please go ahead, sir.
Arne Riscasse, Investor Relations Manager, Banco BPM: Good morning, everybody. Thanks for joining the call. Let me just remind you that on the website, you can find all the material presentation for this conference call that, as you know, will present the full year results and the update of strategic plan. And now I leave the floor to Mr. Castagna.
Thank you.
Giuseppe Castagna, CEO, Banco BPM: Good morning, everybody. Thank you for being with us. Because we want to show with this plan how the last eight years was characterized by commitment from our side and delivery. Not a single year below expectation, now we are at the final step of transformation of a solid commercial bank into a well diversified integrated conglomerate with strong support from commission and product factory up to 50% of our net profit. So Banco BPM for us is the place to be and we want to write the new roadmap towards 24% of ROT.
Let’s start from ’24 results. All time high for our bank. Net income stated at 1,900,000,000.0 with 1,500,000,000.0 of dividends distributed. Let me remember the the former target of net profit for the plan was the same amount we will, which will will remunerate our shareholder. One point five billion was the target of net profit for 02/1926.
Net income adjusted to 1,700,000,000.0 and ROT adjusted at 16%, well above market consensus and 2026 targets. Costing come down in two years seven point five point full point. Gross NPE ratio already below the target of 26%, down to 2.8% and net bad loans close to 0%. How we were able to manage the bank in this way, we are leveraging on a strong business model in the Italian banking landscape, focusing on, the most dynamic regions at European level, not only Italian, unparalleled distribution franchise with best in class product factory models build up in the last few years, lowest NII sensitivity across peers based on historical observation with the new transaction of ANIMA to further improve non interest income contributing from 40% to 50% of our total revenues. The new target, the target for the updated plan, will be outstanding.
We will deliver in 2027 net income for 2,150,000,000, which are realistic, highly feasible, and we will show you in the next page how we will reach this target. ANIMA adds 200,000,000 of this net income. Let’s consider also that we were, of course, more conservative vis a vis the previous plan, with the Euribor scenario down to 2% vis a vis 3.1% over the last plan. All other P and L growth drivers are strictly in line with 2023, ’20 ’20 ’6 plan and mostly conservative if compared to the trajectory we were able to realize during 2024. So we are not pushing the results we reach in 2024 up to ’27.
We want to be most at most of our credibility to show you the same trajectory of the plan presented in ’23. The ROTI in
Eduardo Ginebra, CFO, Banco BPM: ’27,
Giuseppe Castagna, CEO, Banco BPM: we have a concrete perspective to reach to overcome 24% of ROT with improved business mix, high value business at 45, 50 percent of new net income vis a vis 35%, which is the current contribution. And of course, the management is happy to commit to top notch shareholder remuneration with a minimum of SEK6 billion cumulative distribution over the plan plus 1,000,000,000 of additional distribution upon obtainment of positive feedback of Danish Compromise application. All that with still a rock solid capital with a Czech one above 14 also considering the 7,000,000,000 of distribution. Let’s pass to the results of 2024. We accelerated profitability and increased remuneration at an unprecedented level.
We reached 1,700,000,000.0 adjusted. The top up is done from the combination of income coming from the Numiya transaction and the funding of the early retirement scheme, which we signed in December 2024. Net income adjusted 1,700,000,000.0 means 16% of ROTI versus 12.9% of guidance. And the same net income is NOK330 million above 2024 guidance, which means 24 above the guidance and is already NOK190 million above 2026 target, 13% higher. If you look at the figure on the left, you will see that we started from 2023 with an EPS of $0.83 We committed at a guidance of 90¢ for 2024, increased during the year at 95¢.
We conclude the year with €1.121.12 of APS adjusted, €1.27 or APS stated. Already above the €1, which was the target of APS in 2026 and now is the DPS for this year and going forward. About distribution this year, we will increase our distribution of dividends to 1,500,000,000.0 with increasing also the payout to almost 80% coming from 67%, again with the DPS at €1 and the dividend yield also at the current price above 11%. In the first two years of the plan, we realized the cumulative dividends of 2,350,000,000.00, which is 500,000,000 above our guidance of one year ago. The total cumulative dividend is up from 1,850,000,000.00 to 2,350,000,000, which means 27% increase.
And all of this, with the common equity Tier one increased to 15% starting from 14.2% of last year 23, well above the landing point of the ’26 plan at 14%. And all of these will still further profitability coming from the product factory that has yet to emerge because of the recent start of many of these activities. So why update? Because as is very clear from page eight, we are above ’26 basically for all most important figures comparing 2024 results and 2026 emissions. As you can see, we are up 5.4% in core revenues, 4.4% vis a vis the target twenty six percent pre provision income up more than 10%, both vis a vis ’23 and the target of ’26 cost income down at 47% with a target of 50% or below 50% in ’26 and cost risk already below the ’26 target of 3% at 2.8% and this is why we are updating our business plan.
Let’s go to some figure of ’24. Net income adjusted again to 1.7%, eighteen % year on year. Net income stayed at 52% higher than 23%. As you can see, basically all the core revenues went up as well as we had a reduction in loan loss provision and other expenses and we reached the profit from continuing operation at 22% higher than last year and after an increase in of 30% of the tax paid, we landed up in net profit from continuing operation up 19% vis a vis last year. On page 10, let’s go some of the main figure of these results.
Let’s start from NII. NII, the only figure which is underperforming but much better than the majority of the competitor is the reduction of 2% in gross performing customer loans, even though we were able to manage new lending for 21,500,000,000.0, which is 10% higher year on year compared with ’23. Many, the vast majority of our competitor did much lower figure in this respect. Deposit went up 1.4% as well as certificates and other debt security at fair value up 12%. Let’s have a look to the Euribor compared with the commercial spread that we were able to reach.
Bay basically, we performed better than the decrease of the Euribor because the commercial spread, both quarter on quarter and year on year, was ended up with better figure vis a vis the reduction of Euribor. In one year, the Euribor went down 94 basis point. We went our commercial spread was down to 81. So bettering the reduction of Euribor. The same was in quarter on quarter.
Euribor was down 55 basis point. We went down 40 basis point. How we did that? The trend of net interest income was supported by managerial action that added on positive NII contribution, both in an increasing and in a declining interest rate scenario. Let’s start with the, increasing scenario, which is the comparison year on year.
You will see that we went up 150,000,000 compared to 23,000,000 even though the sensitivity would have given us only 48,000,000. We were able to adding up more than 100,000,000 through managerial action, in which we will explain immediately after. The same was with the scenario in the last quarter of Eurobord down. As you can see in the last quarter, comparing last quarter, ’23 and last quarter, ’24, the Euribor went down 94 basis point. Per quarter.
This mean, a predicted sensitivity of minus 70,000,000. We were able to mitigate this impact, to 12,000,000, all in all, with a contribution from the managerial action of almost 60,000,000 in positive. On top of that, this figure were done with the sensitivity of the end of twenty three. Let me say that end of twenty twenty four we have a full funding cost sensitivity which is 200,000,000, reducing 50,000,000 year on year. Net interest income again, and that is some further explanation about both sensitivity and managerial action.
If you compare the trend of Euribor in the last three years starting from first Q twenty twenty two to last Q twenty twenty four, you see the curve of Euribor. But comparing the increasing rate scenario coming from the beginning twenty two to last quarter twenty three because then the the Uribour starting to decline, we have been the bank which the lower growth in NII, and also compared to the peer to the average of the peer, we are at 70% contribution coming from the NII’s growth scenario vis a vis a contribution 97% of our competitor. This is explained by, the cautious managerial action we’ve proven during that phase of increasing Euribor, which now is paying off and allowing us to reduce the sensitivity effect and give support to our NII. The same is, impact that you can see of the more limited contribution of NII vis a vis total revenues that our bank has been performing over these two years, vis a vis the other bank. So, the fact that very often, we are considered as a bank very much subject to sensitivity, I think that we have completely overcome this understanding through the action we were able to took in place during these last two years.
And these are mainly on the right side of the slide. You see that we have increased from 15,000,000,000 to 22,000,000,000, the replicating portfolio. But if you add on, the increase to 34% of our index at the current account, basically, we are covered for half of the deposit base vis a vis more than the more than 50% of our deposit base. And, of course, thanks to the index, the current account, we have experienced the reduction, an immediate reduction of, of the impact on NII vis a vis the Uruguay. The Uruguay went down 98 basis point in the during ’24, and we had 94 basis point, and we had a positive impact, a less penalizing impact on 98 basis point, thanks to this maneuver.
On top of that, I remember that we have also some direct effect on cost of funding. First one is the share of time deposit vis a vis the original plan, which is one third of the original plan for the first year. We have a 1.4% of 10 deposit, which, of course, are much costly vis a vis 4.5%, which was the fourth expected for 2024 and nine percent, which was expected for ’26 and of course is now not anymore needed because of the reduction of Euribor. On top of that, we have the decreasing cost of new wholesale bonds. As you can see, the issuing made in ’24 and ’25 after the attainment of the investment grade and the positive outlook from all the investment rating company allow us to have a reduction in the wholesale cost of funds, which come goes from 60 basis point of the senior preferred to the 200 basis point more than 200 basis point of 81.
Let’s have a look on page 12 on the total net fees and commission. We have an all time high also in this figure, a 6.5 or 6.4% normalized with a strong impact both from the commission from investment product fees and the commercial activity. Let’s have a look at the investment products. We went up 10% in terms of contribution of commission. The vast majority coming from running fees as a consequence of the improvement of 22% of the investment product placement performed in 02/2024 vis a vis 2023.
Let’s say that we have started the ’25 even better with the same pace in January, which is almost 20% higher than January, which was a record month for 2024. And also in terms of commission generation, we are applying a policy in our investment product placement, which allow us to increase the average commission for our products. This improvement in investment product placement helped us to increase the stock in the funding from, 62,000,000,000 to 66,000,000,000 in asset under management and from 44,000,000,000 to 50,000,000,000 in asset under custody. First month of the year, we are NOK 2,000,000,000 up this figure. Very strong performance also in the commercial activity with a particular improvement of 18% coming from the specialized activities, across structured finance, trade finance and so on.
On the right side of the slide, there is also some comparison between the results of ’24 coming from the new structure of our product factory, built up very recently in which in the first year of the plan, we are already above the growth, the pace of growth, forecasted in the plan 2326. The plan forecasted 11% growth aggregate and we are in the first year already at 12%, even though many of these product factories started only in September 2024. A look on page 13 to our cost income ratio reduced to 47% without the positive contribution of the solidarity fund, which is only starting in 2025. So we will have the concentration, 150,000,000 of positive contribution, not anymore distributed on three years of the plan, but in the next two year, twenty five and ’26, allowing us to recover more than 75,000,000 out of the fee that you have shown today. Let’s also mention that, also in other administrative expenses, we have a reduction of 5%.
Meanwhile, we have an increase in D and A because of the massive investment we are performing in IT, AI, and all the digital banking activity. Let’s go to the cost of risk. This is really a solid success story. You know where we started from. We are now another 17.4% reduction of cost to risk at 46 basis point, still at the eye of our competitor, also with what I called before becoming a net zero bad loans bank.
We were able to manage our gross NPE down 24%, net NPE is down 15%. Let’s say that out of 1,600,000,000.0, below 1,600,000,000.0 of net NPE, if you exclude the state guaranteed loans, we are below SEK 1,000,000,000. And in terms of bad loans, we have only SEK 200,000,000 of exposure. We experienced a solid, I would say, default rate. Until November, the same rate of last year, below 1%.
Then we already switched into nonperforming loans, some, big asset, and this brought the total slightly above one percent. The coverage is still very solid as well as the vintage has been reduced by one year vis a vis ’23. Also, the Stage two loans went down to SEK 9,000,000,000. Just have a look to the capital liquidity and funding position. We have been proving to be able to build up further capital year by year, even considering the massive distribution and higher distribution to shareholder increased with this presentation.
Of course, this is our proposal to our general assembly. So we started from slightly above 14% and we ended up with the dividend at 67% to 15.4% of common equity tier one if we consider 39% bps 39 bps, sorry, no percent of dividend payout increased to 80%, we remain above 15% even after the increase in distribution with a very solid MDR buffer, almost 600 basis point. LCR and SAFIRE, you see the figure, really confident. And, I think that with this very solid set of results, again, 300 more than 300,000,000 ahead of our plan, we can update the plan and continue to improve the forecast that we have for our bank. Where we stand today versus competitor?
I would say that we have in a highly attractive competitive position, both because of the strong franchise rooted in the best region of our country, I would say also of Europe, with 75 of our asset loans in the North Of Italy, but also because of our capability to build up in the recent years a new model of bank starting passing from a pure commercial bank and introducing the a complete full range of product factories. If you compare with our peers, we are now, the best in class. We have for all the five principle product factories, our direct presence as shareholders, many sometimes as only shareholders, sometimes through joint venture with best in class partner. And you can see that starting from asset management with Animal, life insurance with the two insurance company that we own 100%, and as well Animal, we will own 100%. Non life insurance and consumer finance with our partnership with Credit Agricole (OTC:CRARY) and the recent partnership with FSA and ICREA in the payment system with Numiya started in September 24, we now have the best position amongst all the main banks reaching, let’s say, the bank which is normally considered best in class as far as our direct presence in product factory and increasing the gap vis a vis the less structure bank in terms of product factory or I would say the more NII dependent bank vis a vis our situation.
What have we done during these years to be rightly considered as a management team with an undisputable track record of growth and accomplishments? Let’s have a look at the results of the last four years. We have always over performed our trajectory, as you can see, both net income adjusted as stated for the last four years, as well as with a massive increase from 500,000,000 to almost 2,000,000,000 in terms of stated and from 700,000,000 to 1,700,000,000.0 in terms of adjusted as well as the reduction from 5.8% on gross and PE to 2.8% and the increase, notwithstanding the massive distribution to shareholder, from 13% to 15%. But we have also exceeded our own commitments always. As you can see, in the last two years, we had a target in our plan 2021, ’20 ’20 ’4 of $740,000,000 for 2023, and we ended up with basically the double of these results.
As well as last year, we gave a guidance of 1,300,000,000.0 of 24 results net profit, and we ended up with almost $330,000,000 up our guidance. The same is for NPEs, the same is for common equity, even considering the increase of distribution of dividends. And of course, all these results show you not only the need but also our ambition to present an updated plan which take into account the big results, the consistent results and the new confirmation of our bank. Let’s also say on page 19 that we not only exceeded our expectation, but I would say we always exceeded the expectation of the brokers. You can see year by year, of course, starting with the big gap in ’21 was our first year after the COVID, of course, lack of confidence toward the banking system in general, and we had the gap of 190 between consensus and the actual end of the year net income.
But this gap has always been present with an average of almost 40%. Also, in the last year, with 18% gap between, consensus and actual results of the bank. This has been, of course, paying off through a very important total shareholder return above 1000% if we start after the COVID period, in May 2020. And our stock went up not only in the after the recent OPS on us, but was already 800% on the November 25, so before the OPS. And let’s say that after the the OPS, we grow to 27% vis a vis 23% of the ingots.
So I would say that this 1000% is undisturbed. Also in terms of dividend yield at European level, we are the second bank in terms of dividend yield. We are above 11% and you see all the other peers below. I believe that with this full set of results, we deserve credibility for our commitments. So let’s go more in details to show you the key message and the key figure for our updating plan.
The key message are, based on we have a more conservative Euribos scenario. We were three ten basis point. We are now 200 basis point and 26. The new starting point is, of course, the 24 performance adjusted, which, as we mentioned many times, is a hydro plan for more than 300,000,000 and allow us to increase the new targets. But the key pillars, the action, the driver, the growth that we presented in 2023, ’20 ’20 ’6 plan are all confirmed, adding on only the integration of animals starting from the second part of twenty twenty five.
So the growth are not pushed because of the situation, but are the same growth that we forecast one year ago, starting from a better starting point. And, of course, we improved to ’27 because it does make sense to have a plan which is not at least three year of horizon. Let’s go to the performance. We are able to confirm you again with a prudent plan assumption that net income will go up from 1,500,000,000.0 to 1,950,000,000.00 in 2026 and 2,000,000,000 1 hundred and 50 million in 2027 with a contribution of ANIM above 200,000,000. The four year cumulative shareholder remuneration passed from 4,000,000,000 to up to 7,000,000,000, but 6,000,000,000 assured that in any case, obtaining without or with the obtainment of the Danish Compromise.
If we obtain the Danish Compromise, of course, we will have more capital. We will be able to give further 1,000,000,000 of distribution. The ROTI is going from 13% to more than 24% in ’27 and higher than 20% in ’26. And, the landing point of a common equity tier one, again, is not the target, but is a landing point, will be above 14%. And even in a situation which is not foreseen of no Danish compromise, we will be above 13% with the same distribution we explained before.
Let me give the word to the floor to Eduardo Ginebra for the detail of the plan.
Eduardo Ginebra, CFO, Banco BPM: Thank you, Giuseppe, and good morning, everyone. So let’s start with the scenario. We have been adopting, assumptions that on the macro perspective are very similar to the previous plan. GDP in Italy growing 0.7% in ’26 and zero point four in ’27, inflation rate, at around 2%, both in ’27 in ’26. We were much more prudent in the area of interest rates where we’ve been below the assumptions of the previous plan for more than a hundred basis points.
Now we are at 2% both in ’26 and in ’27. These assumptions lead to the bridge between the current level of profitability and the future level of profitability, which is shown on page 22. So allow me to go step by step. We started last year from an adjusted basis on P and L, an adjusted basis of $1,100,000,000.0430000000. Today, we are at 1.69.
And the guidance we gave one year ago when we announced the plan was $0.9 which is 1.36. So we are ahead of the previous plan, the previous announcements, $330,000,000 on an adjusted basis. The increase between, like for like between last year and this year is 18%. The, the overall average growth rate embedded in the plan from now to ’27, it is 7.5%, which if we exclude Anima, is a much more prudent 4.9% from 1.69 to 1.95. How do we achieve this level?
First of all, reduction in NII, 300,000,000, and we’ll come to describe all of these pieces more in detail in the following part of the presentation, of course. We have non interest income increasing of 150,000,000. 2 80 million is commission, SEK 80,000,000 is net financial results, and 90,000,000 is income from associates, life insurance and other net operating income. Then we have a contribution of SEK 60,000,000 from the reduction of both the operating costs and LRP or other provisions, a contribution of 70,000,000 from the removal of systemic charges, and a tax effect which drags something like 40,000,000. This leads to 1.95, and we believe this can be very easily explained on a piece by piece basis, then the addition of ANIMA is 200,000,000 on top.
And again, this also on ANIMA, this 200,000,000 is simply consensus plus some very conservative additional assumptions. Let’s go piece by piece. First of all, nothing new compared to the previous plan. Page 23 says that simply we have exactly the same assumptions in terms of growth of loans, growth of net fees and commission, growth of volumes in indirect funding, stability of operating costs and the cost of risk that were used in the previous plan with some natural evolution in some areas. And nothing new also from the viewpoint of the pillars that are needed, the initiatives that are needed to complete the plan.
The same seven pillars that we used to have, leadership in SME and corporate, reinforced wealth management and life insurance distribution, capture value from our product factories, partnerships in PNC and payments, develop further our omnichannel approach to our clients, improve the level of innovation, continue investment pace with more than 200,000,000 per year during the plan, consolidate our balance sheet, improving further the asset quality and empower people and community. We had, in addition to this seven initiative, ANIMA, a new pillar of which we will provide some detail in a moment, and we preserve the approach to sustainability that is completely integrated in the various pillars throughout the plan. Anima, the page 24, is, coming from February, the current level of profitability, 50,000,000 of which is part of our p and l, given our 22% stake to 260,000,000. 60 million is like for like the current stake. 200,000,000 is the addition.
How we arrived there? First of all, we took consensus for 2026. Then we extended consensus to the following years, twenty years, sorry, 2027 with an inertial and conservative approach. Then we added the conservative assumptions, conservative assumptions on synergies. Anima is yearly year by year is amortizing its intangibles at consolidated levels, which is something that after our p and a PPA, sorry, will be removed from from our p and l, then we have a limited amount of synergies on the cost side.
A new LTIP will be aligned to the Bank of VPN policies, some central function synergies, and really very conservative on the revenue side. Just to give you an idea, we are talking about 10,000,000 of revenue synergies, in terms of contribution to net profit and given by additional, increase of penetration of an oil product in our grain bases or fully under our control. Give you an idea of the prudent approach. This gives me also the opportunity to briefly illustrate what we are doing on Anima. As you probably have read in the press release, we are calling for a general assembly, and we received the commitments from, shareholders of Anima.
So now we have already secured 43.3% of Anima Capital. And, the general assembly is planned for February 28 in a little bit more than two weeks to approve the new offer price of €7 and to grant the board the authority to decide on waivers for the condition precedent that we included in the offer, we launched on November 6. And because of the passivity rule introduced after we had been subject to the tender offer from Munich radar now, need now an approval from the general assembly. This condition precedent include minimum acceptance, may include the Danish Compromise. Important to bear in mind, we are not giving up to such conditions with the approved general assembly approval.
We are simply, delegating the board decisions about future management of the offer process perfectly in accordance with the Testonian Goelof Finance. On commitments that we received, we received a letter and we are grateful for that from both Post and FSC FSI, sorry. Post owned about, owns about 12%, FSI owns about 10%, then there is the dilution for RTIP leading to 21.3 of Anima share capital on top of our 22% fully diluted stake becomes, as I said, 43.3. These are subject to the general semi approval concerning the authorization to amend the terms and conditions. As I said, the earlier price and the other conditions, on top, one point worth noting is role of management.
They are entitled to receive some 4.7% of share capital following the acceleration of the IP. These shares are either to be tendered or subject to twelve months log up, excluding the sell to cover portion for tax reasons. So we are confident that we can have a positive contribution to the offer also from such shares. The metrics that we used for the Anima deal are fully confirmed. Financially, EPS accretion is 10%.
RWA impact is an addition of 59 basis points. From a strategic perspective, as also Giuseppe was mentioning before, contribution of non interest income will go as high as 50% of total revenue. So half of this bank will generate revenues on the noninterest part at the end of the plan. And 35% of our net profit base will be generated by wealth and asset management and protection, leading to a very strong diversification of the business model. Page 27.
Now let’s go to the sec to the details section. In this page, we show, the comparison between ’23, ’20 ’4, the previous plan, landing point or targets, sorry, at ’26, and then the updated plan, including Animal. Total (EPA:TTEF) revenues, 5,700,000,000.0, the current starting point, 6.07 in ’26 instead of 5.4, and 6.36 in 2027. This is due to the, as I said earlier, reduction in NII conservative interest rate scenario, as I want to confirm again, and increase in net fees and commission thanks to Anima contribution and thanks to the improvement of our fee generation through the various business, both product factories and traditional banking. We will have a total level of core revenues, which goes from 5.69 to 6.24.
Contribution of pro factory, this is very important. Target (NYSE:TGT) was to go from $8.60 to a little bit less than 1,200,000,000.0. This was the existing plan. Now we are already at almost 1,000,000,000, so we are full speed compared to the plan. And, we target 1.72, thanks to the contribution of Anima.
We will see details on these in a second. Operating cost, basically, stable or slightly reducing, thanks to the agreement with the trade unions and to cost discipline. Then we will add only ANIMA or cost cost base on top for the cost income, which will go down as 44% at the end of the plan. And let me remind you that the previous target was 50% below 50%. Cost of risk, naturally, going in the low forties until arriving to 40 basis points in ’27.
And finally, sorry, if I reiterate net income, net income goes from 1,500,000,000, which is the previous target and more or less is the current consensus. So you as you all know, to $2,200,000,000.0150000000, an increase of $650,000,000. And again, I have in mind that other banks announced an increase of the same order of money should the best starting from an order of magnitude of around 9,000,000,000 or things like that. Return on tangible equity, this year we generated an already excellent 16%. In ’26, we target 20%, above 20%.
And in 27%, we target above 24%. We’ll come back to this 24% in a second. Volumes, loan growth is moderate, is expected to be moderate at 1.7% per year, also facilitated by the new interest rate scenario. The assumptions on growth are very conservative and similar to what we did in the previous plan. Customer deposit deposits are flat, but with an important remix compared to the previous assumption in the plan because we will not need to push that much on 10 deposits in a reduced rate environment.
So we conservatively estimated to go from the current level 1.5 to a final level of 2,400,000,000.0, but we probably won’t need such a high size. In the refunding, we grew in two years of almost 13%. We will grow in the next three year of only half of debt or less than half of debt, 5.7% with a remix between assets under custody and asset man under management in the in favor of the second one. So NII. For NII, the part the page 29, the left part of this slide simply summarizes the analysis that Giuseppe showed in the previous, in the first part, commenting the results.
Simply, we are not that, rate sensitive. The the simple truth is that we our net interest in the period of rate increase grew of only 70% compared to 97% of our peers. And, now the portion of total revenues, which is represented in the last quarter by the increased NII is 24% for our peer. The same ratio gives 28%. So on less than one quarter of our total revenues is the impact of this increase in rates.
How to explain then the dynamics of net interest income going forward? This year, we went from 3.29 to 3.44, and, Junep, explained very well that this is the result of not only sensitivity, but also additional managerial actions. And surprise, surprise, this is the same that we will do from ’24 to ’27. Three hundred and ’90 of reduction, which is led by sensitivity. This is simply arithmetic from the initial to final level of your arrival.
But we are able to mitigate this impact hundred, 400,000,000. And let me reiterate that this is this hundred million is, in three years, is the same amount that we generated in only one year in 2024. So looks like, it’s achievable and, incredible. On top, same rate dynamics will drive the improvement in cost of certificates that you see in the bottom of this page on the right, from 280 to hundred and 70. For, net fees and commissions, page 30 gives the dynamics of the various components.
So we grew this year of 4.4%, which is a normalized 6.4% after neutralizing for increased, in cost of synthetic utilizations, which we’re not expecting for the future and for current account excess liquidity commissions. So the real growth was 6.4%. The future growth is growth is 4.4% per year. And of these hundred and 10,000,000 are attributable to investment product fees, 40,000,000 to commercial banking, 70,000,000 to strategic partnerships. Again, we reiterate that this is an area where the full potential is still to be attained given that Numiya started only in September and the agriculture partnership in P and C started one year ago in January.
Finally, the fee the fees from specialized activity will contribute for additional 60,000,000. Anima, with a consolidation of its fee base, provides an additional contribution of 500,000,000. On product factories, we wanted to provide on page 31 the same detail that we comment quarter by quarter and we which we start giving to the market one year ago with the plan. So basically, as I said earlier, we grew 110,000,000 this year from $8.60 to 170. We will grow 100,000,000 per year with so growth rate, which is below because last year, it was 12%.
It will be 11% 10. Anima will lead to four forty. Just a quick note, technical note to say it’s different from the 500 on the previous slide because here, we remove the duplication in created by the fact that currently we account for the net profit share within the associates p and l line, but it’s the same amount that you see in the previous page. The total is 1.72. Easily on operating costs, this is an area where we have already secured a reduction in a share by 60,000,000.
Basically, we have the defect of the trade union agreement is overall hundred million and defect of the final tranche of the new contract will be in the two in the three years of 40,000,000. The part related to administration, spends and amortization is increasing 30,000,000, but simply because we start amortizing the new investments which we are producing because this is a bank that, invests every year in technology, in digital, in cybersecurity, and in people, by the way. So, we arrived to 2.62, which is lower than the stand alone base of 2.66, Anima adds hundred and 70,000,000 for a total of 279 270 $22,000,000,007 hundred and 90. Asset quality. So, we used to be a 24% NP bank.
We are now expected to be a 24% return on tangible equity bank. 24% is the starting point of our journey end of 2016. And, if there is a success this management achieved, is to be credible every year in curbing the cost of risk, now at 46 basis points and expected to be at 40 basis points in ’27. We adopted a very prudent stance in projecting the level of stocks, so from 2.8 to 3%, so that the stock of MP is around 3,000,000,000 constant. We already say that net balance are close to zero after you con you you consider the part that is guaranteed by the state.
The full trade and work out activity are consistent with our track record and within this market dynamics respectively at 1% or below 0.9 in ’27 and in the area between 27%, around 27% for the workout in the same years. So page 34 explains the difference between our numbers and the numbers in the nonsense consensus. The numbers in the consensus, which are reflect the stand alone position of the bank, lead to a total net profit in ’27 of 1,500,000,000.0 whilst we project 1.95. And on top, we had 200,000,000 for Anima. So let’s break piece by pieces this difference, stand alone versus stand alone.
So first of all, these are net numbers. Let me, allow me to switch to gross numbers pre tax. So $4.50 becomes some $6.50. Then let’s go line by line and and break down the difference piece by piece. NII NII, we are at 3.44.
Target is 3.15. Consent is is 100,000,000, below. The difference is simply the managerial actions that we expect to deploy in three years. We did 100,000,000 of managerial elections in one year in 2024. This is three years.
Net fees and commissions, we are at 2,000,000,000. We want to go to we we expect to go the target is 2.28. Consensus is again 100,000,000 below, with a growth rate on average of 3%. This is the consensus. We grew last year on a normalized basis of 6%.
And we still have, as I said, we will to achieve this number, we will need to grow 4.4%. And we still have to deploy the full potential of the product factories, which will contribute further to the development of commissions. Other revenues, other revenues is another contributor of the p and l that needs to be, clearly, identified. This includes not only trading, but also contribution for certificates, includes insurance, includes the associates, a significant part of core revenues for us come from there. We start from $260,000,000 this year.
We, aspire to achieve $4.50. Consensus is so sort of halfway between the 02/2020. Why do we believe that we can achieve our target of hundred and fifty? First, benefit from certificates more than hundred million, because of the reduction in rates, which reduced the cost of funding coming from these instruments. Second, MPS dividend.
Of course, in ’24, we didn’t have these, wise, these stats contribute starting from 2025. We have a 5% of Montebasque. Montebasque pays an order of magnitude of 1,000,000,000, so 5% is an order of magnitude of 50,000,000. Then there are product factories. Product factories here, as I mentioned, include not only associates, but also the insurance line.
And, here, we expect a hundred million split into between these these two. And for associates, of course, we expect an increasing contribution by from our gem venture like, Agos, like Numiya, like the P and C Veracigoration. Let’s go to operating costs. For operating costs, we arrived to 2.62. Again, stand alone, not anime is not included in this scheme, this breakdown.
Consensus, here really difficult to understand why, but say it’s 2.73. So another advantage of 10, for HR, I think that there is nothing more to say apart from the fact that we signed account an agreement with the reunions. And so it’s just about implementing this agreement. For the other courts, we have a history that Gregor speaks for us for in terms of cost discipline actions implementation. We have a tradition of being a very rigorous and disciplined in acting on each and every single cost lever.
We expect to do the same, if not better, in the next few years. The final part is LLP and other provisions where we have a total starting point of four forty, and market consensus, leads to six ten whilst we expect to land at four twenty. The difference is probably to be better explained by dividing between LPs, a 20, and other provisions. For LPs, we target our target is highly consistent with the improvement trajectory that we have historically experienced and with the trend reported by peers. Or the other provisions, basically here, real estate cover the lion’s share in our history.
The portfolio real estate, invest the investment portfolio real estate is now drastically reduced to below 480,000,000. Used to be 1,100,000,000.0 at beginning of twenty twenty three. So reduction in the portfolio, initiatives such as Square project, and also the future environment of reducing interest rate will explain the improvement of this line of the p and l. Let me go to capital. Capital is from 14.2 to 15%, and we go to 14.4%.
How we get there? Retaining the earnings, 46 basis points. And here you have the details of the components from net profit and from the distributions at 80% payout, then ordinary RWA will be a reduction of a little bit higher than hundred basis points, taking into account our ability to continue to implement the synthetic securitizations by replacing the current existing ones with new ones, so without material without additional impact on the p Regard Red wins here, this is Basel four Basel three plus accounting for 94 basis points. So here we have updated our previous guidance after some optimizations, initiatives that we started to implement in our portfolio. And, Anima, leading to a contribution, WA, of 79 basis points.
Then
Conference Operator, Chorus Call: we
Eduardo Ginebra, CFO, Banco BPM: have a positive expected contribution both from DTAs, which will be recovered, thanks to the profit capacity generated during the three years and from, for the comprehensive income reserves with usual assumptions of pull to par participations after the reduction in the portfolio will lead in, to an improvement of 30 basis, 31 basis points, then this leads to 16%. In case after we obtain the approval for the NASH compromise, we’ll be able to distribute 1 additional billion to our shareholders, and this will lead to 114.4%. Important to bear in mind, that, first of all, this final level doesn’t take into account the future potential capital, which might be created by further recoveries in DTAs and in negative reserves on fair value comprehensive income beyond 2027. Second point is that even in the scenario which we don’t think is likely of the of a Northernish compromise treatment of annual acquisition, still, we expect to have a CET1 ratio above 13% at the end of the each year, during the plan horizon. And, I think that, Giuseppe may conclude the presentation.
Yes.
Giuseppe Castagna, CEO, Banco BPM: Sorry for keeping you so long, but I think we had many piece of news, very important, and for us is really important that you can understand in deep each number of this presentation. Let’s let’s terminate with the, our commitment. Of course, we’re committed as a management team to perform, let’s say, as usual on deposit to the solid track record of delivering, which we never miss any year and will bring us to a cumulative net income of almost 8,000,000,000, 7 point 7 billion vis a vis 6,000,000,000 of the plan, a cumulative shareholder remuneration from 4,000,000,000 to up to 7,000,000,000 with a minimum of 6,000,000,000 to a return on tangible equity end of plan, which was 13%, is now 24%. And as Eduardo said, this number for us has some meaning because it was our NPE ratio when nobody believed that without any share issue, we would be able to reduce basically to zero this amount of NPE. Shareholder remuneration, basically, we stand to more than 50% of our current market cap.
This doesn’t change from the previous plan, but what changed is the price of our stock. We went up from €5 to €9 This means that we are delivering the double of what we were committed one year ago. The formal remuneration will be reassessed periodically. The interim dividend is confirmed. Quick note about guidance 25 net income higher than adjusted 24%, total revenues positive, NII at full funding cost in middle digit, single digit reduction, net fees and commission double digit type with animal contribution for six months, cost income at the same level of this year and provision a bit lower than this year.
Let’s terminate with the final slide that we want really to make clear. It’s not only a matter of numbers. We I think we present a number which are really unexpected, which are very surprising. Meanwhile, we think are very credible and very feasible, the number of the plan. But now we don’t want to conclude on number.
We want to conclude on the business model we have created during this year. We have done an impressive work over the last three years to develop a new transformation in the bank in order to come from a commercial bank, pure commercial bank activity through a specialty banking solution to a wealth and asset management plus protection bank. This will constitute 35% of the revenues and the profit of the bank together with the specialty banking solution will go up to 50% of non interest income. This changed completely the profile of risk of the bank. We will have a bank which is much less risky, more resilient and repeatable in terms of profitability, less capital intensive and so allowing us to be even more generous with our shareholders.
On the right side, you see the what we have done during this year. We have taken advantage of higher interest rate not only to perform the TSR that we mentioned before, which is outstanding, but also to devote part of the profit to build up the new bank. A new bank which not only, as a tribal of net profit, but this net profit will come for half of them from the activity we developed day by day in the last year. Somebody say that can change banks in six months. This is a dream or maybe can be transformed in the nightmare.
You have to be consistent when you do this kind of a job. We now have a bank that through the joint venture with Agricole, the reinsourcing of LifeBank Assurance, the joint venture from the payment system and newly announced acquisition of Anima will transform completely the risk profile of the bank, enhancing also our multiple in terms of value creation. So let’s me make a small joke. Somebody says that he has an unlocked plan. I would say this is a plan locked in in terms of results.
Thank you very much. We are ready for your questions.
Conference Operator, Chorus Call: Thank you, sir. This is the Chorus Call conference operator.
Conference Operator, Chorus Call: We will now begin the question and answer session. The first question is from Pamela Zlugo of Morgan Stanley (NYSE:MS).
Pamela Zlugo, Analyst, Morgan Stanley: Hello, good morning. Thank you very much. The first question that I have is specifically on your Q4 results for insurance income. There was a sharp decline. Can you give us some color around what were the moving pieces for insurance income in the quarter?
And what are the main drivers that you expect for this line to grow moving forward? And the other one is a follow-up on your distribution targets. I understand that you will assess the distribution mix for the 80% accrual. But what about the potential additional $1,000,000,000 distribution? Are you open to it being distributed via buybacks?
Thank you.
Eduardo Ginebra, CFO, Banco BPM: So Pamela, insurance income in Q4 has been clearly satisfactory even if not at full steam. So in Q3, we have been benefiting from the reversal of some of the lost component booked in the previous quarter. In this Q4 was a sort of a more normal type of evolution, but still below the potential. In terms of driver for growth, we continued to be very effective in pushing for products, for two areas of products. The most important being, Veravita traditional products and also with the the mixed the hybrid product that we sell through the Irish based factory.
Going forward in this rate environment, we believe this will be very conducive to further improvement in the insurance results. And this will make us confident that this line of profit will create additional contribution during the plan, as I said, in commenting the projections. Let me leave the word to Giuseppe for the distribution.
Giuseppe Castagna, CEO, Banco BPM: Sorry. Very easy. This is a subject, as we mentioned, to the getting the final word about the Danish Compromise. We, of course, feel that this is something that has to come by this year and this will be distributed most probably as a share buyback.
Pamela Zlugo, Analyst, Morgan Stanley: Very clear. Thank you.
Conference Operator, Chorus Call: The next question is from Ignacio Urlarko of BNP Paribas (OTC:BNPQY).
Ignacio Urlarko, Analyst, BNP Paribas: Thanks very much for the presentation and all the details. Just wanted to get a bit of your thoughts on when I just look to the NII of 2026 that you provide in the press release of the plan, it looks like there is an incremental decline in 2026 versus 2025. So just wanted to get a bit of your thoughts on what are the moving parts on that decline in NII. And the second question that I just wanted is how relevant volumes can be in improving the performance of the top line in 2025 and 2026? Have you seen any kind of acceleration of lending growth, some signs that provide some comfort on our recovery of volumes?
Thank you.
Eduardo Ginebra, CFO, Banco BPM: Yes. Thanks a lot for the question, Ignacio. So what happens in 2026 is that we have the full impact of the reduction in rates, which already go down to 200 basis points on average in this year. Basically, the cycle of rate reduction is fully completed during 2025 and then we have a certain of a constant level of Euribor for ’26 and ’27. So this leads to the need to allow for some time for the deployment of the, of part of these the managerial actions that will be, will create most of the impact in 2025 in 2027.
Sorry. So at the end of the day, what happens in ’26 is simply if I can simplify maximum the the moving parts, the effect of the pure sensitivity. So if you look at the chart that we showed on census on ’27, ’20 ’6 will not have a material impact of the managerial actions that you see fully deployed in ’27. On, volumes, very good question. Basically, if I think to the balance sheet of the bank, the point is mostly in NII, the point is mostly about constant level of deposits of stable level of deposits.
Then, of course, the more we can do on loans, the more we are happy in financing the economy, creating side business with our clients, improving our franchise. We are very happy to deploy capital instead of leaning in it idle. But still, if volumes are not growing, if you put the same amount into bonds and security, at the end of the day, you get a very similar type of contribution to the p and l in terms of NII. So NII wise, volumes are really not that important, not that critical for the achievement of the target results.
Giuseppe Castagna, CEO, Banco BPM: If I may add, Eduardo was very clear on loans, and, of course, we can be sure that if there is a recovery, we will be the first bank to see this recovery because of our geographical position. If you compare the small loss of volumes that we had during this last two year and you compare with bank which are not present as we are in the North Of Italy, you will see figure massively below 7% of decrease. But talking about the other aspects, so basically deposit and indirect funding, we are already growing in 2025 at the same pace of 2024. As I mentioned before, we were really 2,000,000,000 of increase in indirect funding volumes that are 20% higher in terms of investment products. So we are very confident that comparing this growth with the really small and prudent approach of the plan that I remember only figure 6% of growth in a three year CAGR, we are very much above.
Ignacio Urlarko, Analyst, BNP Paribas: Thank you.
Conference Operator, Chorus Call: The next question is from Noemi Peruk of Mediobanca (OTC:MDIBY).
Noemi Peruk, Analyst, Mediobanca: Good morning. Thank you for taking my questions. I have a few on the Danish Compromise. And I would like to know the day one impact of the acquisition of Anima without the Danish Compromise. And if this would not impact the 80% payout on earnings in 2025.
And I was wondering if you could give us a little bit of color on this decision, whether it is a matter of timing, considering the tender offer ongoing or if it is a matter of skepticism, maybe you sensed from the supervisor. And then on NII guidance, I think you mentioned mid single digit down for 2025. I was just wondering if this is at full funding cost or is it NII as it is? And if you could give us the difference between the two in terms of year on year evolution? Thank you very much.
Eduardo Ginebra, CFO, Banco BPM: Okay. Naomi, I believe that what counts is the sum because at the end of the day, the gross profit is in the gross profit, they go both. But, I mean, we are in a mid single digit, including full funding cost, high single digit not including funding cost in the trend of NII in 2025. On Danish Compromise, what I can say is, first of all, payout is confirmed every year 80%, whatever is regulatory treatment of Anima acquisition. Without any compromise, like, I would say, before any optimization actions, the acquisition for of Anima costs as around two forty to two fifty basis points, would cost.
We believe that at the end of the day, what we are doing with the Animal offer if general assembly approved is simply going back to the position at the beginning of the offer because when we introduced the offer, we wanted maximum clarity and certainty, so we introduced the condition precedent on ECB. Now we understand that this condition precedent is difficult to be fulfilled with the pronunciation from ECB before the end of the offer period. We are very committed to proceed with the offer with ANIME. So the removal of the condition precedent is all in order to make sure that the offer can be implemented in the right timing. Then, for, concerning the regulatory outlook, we are fully convinced that, what is written in the EBA question in the EBA Q and A that says that the Danish Compromise is applicable to the goodwill that you obtain after acquisitions through the insurance arm of a financial conglomerate is a clear outlook for our acquisition of Arnie.
Noemi Peruk, Analyst, Mediobanca: Thank you.
Conference Operator, Chorus Call: The next question is from Adele Palama of UBS.
Adele Palama, Analyst, UBS: Yes. Hi. I have few questions on the fee and the IUM growth. So in the plan, so can you tell us a little bit about the how you see the fee margin evolution? And which type of market performance you are embedding in your fee forecast and in the forecast of the IUM?
And then, sorry, can you repeat the impact of the Danish of the, if you don’t apply the Danish Compromise to Anima, it’s around 200 basis points, you said. Then, I would like to know then I would like to know if you have any DTA of balance sheet. I mean, you probably have if you can tell us the amount. And then one general question more around M and A. I mean, how do you think about inorganic growth opportunity for Bami at this point?
Thanks.
Eduardo Ginebra, CFO, Banco BPM: Well, let me repeat, Danish Compromise. No Danish Compromise on ANIMA is around two fifty basis points if no optimizations are involved. So thanks for giving me the opportunity to restate that we don’t believe this could would be the end of the story. We believe there could be room for optimization. Then, interesting question on DTAs.
I’ve been in this bank for ten years, so we never had DTAs off balance sheet. So just to correct that we have the opportunity to provide clarity in case it is needed that this is we probably kept our DTA in the balance sheet. So the only point of DTA is capital discussion and not a P and L discussion. On AUM and fees, you asked probably for market effect. Correct?
Which is
Adele Palama, Analyst, UBS: Above it on market performance expected into the forecast and on the margin on the management fee margin evolution.
Eduardo Ginebra, CFO, Banco BPM: Okay. No management fee margin evolution is stable over the plan. And for the market effect is 2.5% on average to the plan.
Giuseppe Castagna, CEO, Banco BPM: Let me add something about M and A. Let me remember that we were both in 2017 and in 2024 the first bank to move into M and A. First with the deal with between BPM and Banco and recently the November 6 with only cash offer present in the market on Animal. After us, a lot happened. Of course, we have now to be consistent with what we did because we didn’t want only to be bigger.
We want to be better. And in order to be better, we have to perform the business model that I tried to explain in detail during the presentation. Then we have another offer, Third, if we go out also from that, of course, I think we are the best positioned bank for further M and A. Again, no need to explain our performance. No need to explain our geography, no need to explain our business model, the most complete.
So whoever don’t want to have an M and A with Banco, I don’t know. We will see in the future which opportunity we will have in the interest of our shareholder or our people or our client or our territory. We want to ensure our shareholder that they don’t run useless risk and stay on the best place.
Adele Palama, Analyst, UBS: Okay. Thanks.
Conference Operator, Chorus Call: The next question is from Andre Alisi of Equita.
Andre Alisi, Analyst, Equita: Hi. Thank you for taking my question. The first one is if you can provide us an indication of upfront fees in the fourth quarter twenty twenty four and in general over the full year? And what is the level of upfront fees that you are assuming in the plan, obviously, for the Banco BPM standalone and combined with ANIMA? And in Slide 31, you have pointed out that we did an $80,000,000 increase in revenues from associates.
Can you provide some detail on that? And really just a clarification on the evolution of the NII. Can I have I understood correctly that the increase of 5% of NII 2027 versus 2026 is not driven by volumes or by marginal part by volumes and mostly by managerial actions that you are planning to put in place and which are these? If you can provide some further details on these managerial actions. Thank you.
Eduardo Ginebra, CFO, Banco BPM: Okay. Thanks, Andrea. Upfront fees, sorry, I had in front of me in 2024, which I believe had been given in the presentation but we are a little bit above $250,000,000 and this is a level which will be consistently maintained during the course of the plan. So as an order of magnitude, we are stable on upfront fees thanks to level same level of intensity of selling activities by our branches. On associates, let me go back to the slide.
It’s the product factory contribution to income from associates once I have removed the Anima. And the detail of this is so so first of all, Anima has a strange impact because here it’s accounted for in associates for, not removed. In associates and they’re removed in the effect from Anima consolidation. So that’s why you’re funding this there. We have also an increase in August Ducato, which will provide which will contribute for a little bit less than half of this 80,000,000 and Numiya Group, which will contribute for more than one quarter of this 80,000,000.
The rest is Zeta AIMA and is Verasiglacion as well.
Giuseppe Castagna, CEO, Banco BPM: Let me just add, just to the clarity of what I also said before, that meanwhile we adopt this conservative measure in terms of fees that Eduardo was mentioning, which are the same that we forecast in the previous plan ’23, ’20 ’6. The current experience of upfront fees, both in end of the year but especially beginning of the year is massively increasingly. So I think you would see some figure which is consistently higher than the forecast we adopted for the plan. Let me say that the average quarter of last year could be reached between the first forty five, fifty days of the year this year.
Eduardo Ginebra, CFO, Banco BPM: On NII in ’27, in general, we say that the NOK 100,000,000 are the impact of both volumes that are developed throughout the plan, including the last year. So part of it will be obtained in ’27 and managing elections. Managing elections are represented by reduction in spreads on funding that we pay on issued bonds and on certificates, remix all the funding sources in a way to optimize the contribution to the net interest income and replacement of replicating portfolio, the part that is going to mature during the next one and two years, which are typically at low rates with higher rates comparable with the current shape and with the expected shape of the yield curve, which will contribute more in towards the end of the plan than in the beginning.
Andre Alisi, Analyst, Equita: Thank you.
Conference Operator, Chorus Call: The next question is from Delfin Lee of JPMorgan.
Pamela Zlugo, Analyst, Morgan Stanley: Hi, good morning. Thank you for taking my questions. Just a very few quick clarification. Just on NII, follow-up on what you’ve just said. Is your assumption on the replicating portfolio to still increase that eventually towards 25,000,000,000 or 30,000,000,000?
And would it be possible to have the sort of rate of the of what is maturing on your replicating portfolio? You think slower rates just to kind of assess how much of an uplift we can get during your plan? And then on buybacks, would you start just about the timing of that, would you start that I would assume after the ANIMA offer? Would you ask the authorization for that as soon as you get the Danish Compromise? And also maybe just when do you think you get clarity on the Danish Compromise?
Is that March or could that be later? Thank you.
Eduardo Ginebra, CFO, Banco BPM: Let me comment on the replicating portfolio. You gave me the opportunity to provide a few pieces of data, which we started giving to the market in the last quarters. We have a duration of the replicating portfolio of two years and a quarter, and we have an average yield on this replicating portfolio of 2.1%. So given the current shape of the yield curve and having the opportunity to play a little bit with maturities, we are able, over time, to increase the overall yield of the portfolio, the receiving part, I mean, whilst we will pay less because of decline in your labor. On the other hand, we don’t foresee an increase in volumes.
We are happy with the current level of 22,000,000,000. We didn’t account for the forward start in this level, which we will use to continuously replace maturities that we have. So I don’t know. It will be ’22 to ’23, but we don’t expect that they need to arrive in the current setting to 30.
Giuseppe Castagna, CEO, Banco BPM: Let me say about share buyback. Of course, we have to wait for ECB authorization. Otherwise, we cannot decide the timing. Once we will have the time, we will propose to our assembly a further distribution of 1,000,000,000 that the management is committed to perform. And in that case, a rebate is yet to come.
We don’t know the date, but most probably will be a share buyback.
Pamela Zlugo, Analyst, Morgan Stanley: And the Danish compromises March, shall we, you would say, or could be later?
Giuseppe Castagna, CEO, Banco BPM: I can answer to a question that depends on ECB, not on us. So I don’t know how can give you some guidance about that. We were, we make a decision to anticipate ANIMA offer without waiting for the Danish Compromise approval just because strategically it’s much more important to take on board in our conglomerate the ANIMA contribution, and then wait very quietly for what we think should arrive. When this will arrive, we will have further capital in order to have a further share of the distribution.
Pamela Zlugo, Analyst, Morgan Stanley: Great. Thank you very much.
Conference Operator, Chorus Call: The next question is from Manuela Meroni, Aventesa San Paolo.
Arne Riscasse, Investor Relations Manager, Banco BPM0: Good morning. Thank you for taking my questions. The first one is on the loan evolution. I’m wondering if you can comment on the trend of loans in the fourth quarter and what do you expect in 2025? The second question is on the regulatory headwinds at Page 35, 90 four basis points.
This is just related to the Basel IV or are there some other 11 you should take we should take into consideration and what is the phasing that you have assumed in your business plan? Third question on the sensitivity to rates, I’m wondering if you have further room to reduce this sensitivity, I imagine that you have. And finally on the DTA, what are the DTA that are remaining in your balance sheet after 2027? Thank you.
Giuseppe Castagna, CEO, Banco BPM: Loan evolution has been flat during the fourth quarter, even though we experienced a big increase in loan granting. As I mentioned during the presentation, it was 10% higher than last year and the vast majority of this increase was in the last quarter, in the last two quarters basically from September on. This year, again, as Eduardo mentioned, we are keeping the 1.7% growth over the plan horizon, this year a bit slightly above the growth of the plan. Up to now, we are having good loan granting, but of course we are not already experiencing growth because we think this will come with the interest rate reduction.
Eduardo Ginebra, CFO, Banco BPM: On headwinds, Manuela, it’s Basel IV. It’s deployment of the Basel four rules that has a phasing of seven basis points per year, which in our simulations, of course, which will continue for additional three years after the the end of the plan. And on DTAs, sorry, we mentioned a 30 basis points of additional potential capital, 50% of that is this DTAs. So after ’27, we have 130 basis points of potential additional capital represented half of it by DTAs and half of it by negative results on fair value of the comprehensive income.
Conference Operator, Chorus Call: The next question is from Hugo Cruz of KBW.
Ignacio Urlarko, Analyst, BNP Paribas: Hi. Thank you for the time. It’s related to that DTA effect and OCI effect in your capital waterfall. It’s quite big numbers. I was wondering if you could clarify a bit the timing of those positive impacts?
Thank you. Like in each year.
Eduardo Ginebra, CFO, Banco BPM: Yes. I can. But allow me a few seconds to go through the material. Okay. In In ’25, I have 44% 44 basis points of DTA’s tax loss carry forward and some 50 in total considering also the fair value of other comprehensive income.
Similar pace in ’26 against 50 basis points and then much less in ’27 because we start exhausting the potential. In we’re about in the ’27, we are in the area between twenty, twenty five basis points, something like that.
Ignacio Urlarko, Analyst, BNP Paribas: Thank you. Very helpful.
Conference Operator, Chorus Call: The next question is from Marco Nicolai of Jefferies.
Conference Operator, Chorus Call: Hi. Thanks for taking my question. So my understanding is that the amendment of the Anima offer consideration allows also UniCredit to terminate their offer on Banco BPM. I don’t know if you want to if you have any color on this or any reason to give the UniCredit instead would not exercise this condition. Thank you.
Giuseppe Castagna, CEO, Banco BPM: Thank you, Marco. Very interesting question. Of course, the behavior has been a bit random in the next few weeks with many intervention in the credit in financial activities. So really we don’t know what they want to do also vis a vis our decision to go ahead in ANIMA. It’s very difficult to say.
In my opinion it’s not only the Anima thoughts that they have to have but also some much better understanding of our plan, our potentiality, how much they should spend in order to get successful their potential offer that again now is not an offer.
Conference Operator, Chorus Call: Thank you.
Conference Operator, Chorus Call: The next question is from Luis Pratas of Autonomous.
Arne Riscasse, Investor Relations Manager, Banco BPM1: Thank you very much for taking my questions. I have the first one on the Nenish Compromise again, sorry. Could you please give any color regarding your interactions with regulators on this on this subject? You seem to be a bit more cautious regarding the timing. So I’m basically trying to assess what is the risk of not receiving the Danish Compromise altogether.
And secondly, could you also provide a bit more color on the cost development throughout the business plan? How much you expect for cost, for instance, next year? And do the 100,000,000 benefits from exit that this come equally throughout the years or is going to be more front quarters next year or like more closer to the end of the business plan? Thank you.
Eduardo Ginebra, CFO, Banco BPM: Okay. Interactions with regulators simply reflected in our statement on the fact that we want to make sure to close the deal Anima as soon as possible, and we prefer not to wait for the pronunciation of the regulator. So simply that we don’t want, we we don’t have a clear certainty on timing when they will provide confirmation or potentially give indications that diverge from what currently the EBA gave to the whole European system. On operational costs, we are going for decline already next year in ’25 compared to ’26 to ’24 and then marginally improve going forward. So I’m talking about stand alone without considering the contribution of Anima, which is on top.
But what we will do is that we will achieve an improvement in costs next year. Then going forward, it will be balancing between further reduction in cost of personnel for additional deployment of the agreement with the unions and some marginal increase in, depreciations, amortization and depreciations.
Arne Riscasse, Investor Relations Manager, Banco BPM1: Thank you.
Conference Operator, Chorus Call: Gentlemen, Mr. Riscasse, there are no more questions registered at this time. Would you like I’d like to hand it back
Conference Operator, Chorus Call: to you for any closing remarks.
Giuseppe Castagna, CEO, Banco BPM: Okay. Thank you very much. Sorry again for this very long conference call, but I think it was worth to attend to discuss. Of course, we will be on roadshow since this afternoon. We will be very happy and keen to give you all the further information you need in order to better understand the many figures that we presented today.
Thank you for your attention. See you soon. Bye.
Conference Operator, Chorus Call: Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.
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