Earnings call transcript: Intesa Sanpaolo Q1 2025 reports record net income

Intesa Sanpaolo, with a market capitalization of €4.82 billion, reported a record net income of €2.6 billion for the first quarter of 2025, achieving a 20% annualized return on equity. Despite meeting earnings per share (EPS) expectations of €0.14, the bank’s revenue of €6.79 billion fell short of forecasts, leading to a 2.8% drop in stock price during open market trading. According to InvestingPro analysis, the bank maintains a robust financial health score of 1.8, indicating fair overall stability.

Key Takeaways

• Record net income of €2.6 billion for Q1 2025.
• EPS met expectations, but revenue fell short of forecasts.
• Stock price decreased by 2.8% following earnings release.
• Strong performance in digital banking and cost efficiency.
• Confirmed full-year net income guidance of over €9 billion.

Company Performance

Intesa Sanpaolo demonstrated robust performance in the first quarter of 2025, highlighted by a record net income of €2.6 billion. The bank reported an impressive 20% annualized return on equity, benefiting from strong commission growth and a historically low cost-to-income ratio of 38%. These results underscore the bank’s strategic focus on enhancing operational efficiency and digital transformation.

Financial Highlights

• Revenue: €6.79 billion, below forecast of €6.89 billion.
• Earnings per share: €0.14, meeting forecasts.
• Cost-to-income ratio: 38%, lowest on record.
• Net income: €2.6 billion, a record for Q1.

Earnings vs. Forecast

Intesa Sanpaolo’s first-quarter earnings per share of €0.14 met analyst expectations. However, the revenue of €6.79 billion was below the forecasted €6.89 billion, marking a shortfall that contributed to the decline in stock price. The revenue miss, while minor, was enough to influence investor sentiment negatively.

Market Reaction

Following the earnings announcement, Intesa Sanpaolo’s stock price fell by 2.8%, closing at €4.67. This movement contrasts with the bank’s impressive YTD price return of 275%, as reported by InvestingPro. The stock remains within its 52-week range, with a high of €4.999 and a low of €3.23, reflecting broader market stability. InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value. For more insights on market valuations, visit our most overvalued stocks list.

Outlook & Guidance

Intesa Sanpaolo reaffirmed its full-year net income guidance of over €9 billion. The bank anticipates that net interest income will surpass 2023 levels, with double-digit growth expected in wealth management commissions. Additionally, a recovery in the loan book is projected for the second half of 2025, with potential capital distribution at year-end.

Executive Commentary

CEO Carlo Messina emphasized the bank’s sustainable performance and its ability to generate strong internal synergies without acquisitions. "Our excellent and sustainable performance allows us to benefit all stakeholders," Messina stated, highlighting the resilience of the Italian economy and the bank’s strategic investments in digital transformation.

Risks and Challenges

• Potential revenue fluctuations due to economic uncertainties.
• Execution risks in ongoing digital transformation and workforce modernization.
• Competitive pressures in the European banking sector.
• Regulatory changes impacting capital distribution.
• Macroeconomic factors such as interest rate changes affecting net interest income.

Q&A

During the earnings call, analysts inquired about the expected rebound in loan growth, which is anticipated in Q3 and Q4 of 2025. The bank maintained a conservative approach to pricing, with strong performances noted in asset management and insurance sectors. Trading income is expected to remain robust, with the cost of risk projected between 20-30 basis points.

Full transcript - Intesa Sanpaolo SpA (ISP) Q1 2025:

Razia, Conference Coordinator: Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sanpaolo for the presentation of the First Quarter twenty twenty five Results, hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Razia, and I will be your coordinator for today’s conference. At the end of the presentation, there will be a question and answer session. You.

You are kindly invited to ask no more than two questions to leave room for the other participants. In case of additional questions, the IR team will be at your disposal after the conference call. I remind you all that today’s conference is being recorded. At this time, I would like to hand the conference over to Mr. Carlo Messina, CEO.

Sir, you may begin.

Carlo Messina, CEO, Intesa Sanpaolo: Welcome to our first quarter twenty twenty call. This is Carlo Messina, Executive Officer. I’m here with Luca Cabo, our CFO and Marco Del Fratt and Andrea Tamagneri, Investor Relations Officers. We just delivered our best ever net income at more than €2,600,000,000 that means an annualized return on equity of 20%. This is an outstanding start to the year and we confirm our net income guidance for 2025 of well above €9,000,000,000 We are navigating the current market volatility from a position of strength, thanks to our resilient, efficient and well balanced business model.

I want to stress that the Italian economy continued to show strong resilience. Italian SMEs are much stronger than in the past and public and EU driven investments are supporting growth. Intesa Sanpaolo offers one of the highest dividend yields in European banking. And this year, we will return at least €8,200,000,000 taking into account the May dividend, the June buyback and the interim dividend in November. Additional capital distribution will be quantified at the end of the year.

In Q1, we increased our common equity Tier one ratio by 45 basis points, confirming strong capital generation capabilities. On the tech side, our digital business bank now has 1,000,000 clients with a strong acceleration in Q1. Our tech investments are also enabling the generational change of our workforce and significant efficiency gains. We are delivering strong internal synergies without the need for acquisitions, avoiding related risks. I’m proud of our results and thank our people for their excellent contribution.

Let me underline that our strong profitability allow us to continue holding a world class position in social impact. Now let’s turn to Slide one for the key achievements of the quarter. Slide one. In Q1, we delivered record high net income with strong growth in commissions, the lowest ever cost to income ratio, NPL ratios at historical lows, significant increase in common equity ratio and high levels of value creation. Slide number two.

In this slide, you can see the strong and consistent growth in net income. Slide number three. We delivered a 20% annualized return on equity and a significant increase in earning per share, dividend per share and tangible book value per share. Slide number four. As already said, we confirm our full year net income guidance of well above €9,000,000,000 Slide number five.

Our excellent and sustainable performance allow us to benefit all our stakeholders and strongly support the fight against poverty and inequalities. Let’s now move to Slide seven for a closer look at Q1 results. Slide seven. In a nutshell, in Q1, net income was up 14% year on year. We accrued 1.3% guidance.

We delivered the best Q1 ever for revenues. Costs were down and asset quality remained excellent. Slide number eight. In this slide, you have the detailed P and L for the quarter, showing good results across nearly all items. Slide number nine.

In Q1, revenues were up both quarterly and yearly driven by commissions. Slide number 10. The quarter on quarter decline in net interest income was more than offset by higher profits from financial assets that act as a natural hedge against the impact of lower rates. As usual, we managed revenues in an integrated manner. Slide 11.

This slide provides more detail on the net interest income evolution. In Q1, decline was due to the reduction in Euribor, fewer days in the quarter and seasonality in NPL. We confirm our 2025 guidance at a level higher than 2023. Slide number 12. Customer financial assets were up $45,000,000,000 on a yearly basis.

In Q1, we had $3,000,000,000 in gross assets under management inflow, and we can count on our unmatched client advisory network with 17,000 people dedicated to fueling asset under management growth, reaching 20,000 people in three years. Dollars nine hundred billion in direct assets indirect deposits and assets under administration will fuel our wealth management protection and advisory businesses. Let’s now move to Slide 13. In Q1, commissions were up 7% yearly with an 11% growth in Work Management and Protection. Our top notch advisory services are a stabilizer for the impact of market volatility on fees with 38% growth year on year in related additional commissions.

And our fully owned product factories are a clear competitive advantage. April was another good month for growth for gross asset under management inflow. Slide 14. Non motor P and C contribution was the main driver for insurance income growth, and we still have significant upside potential. Slide number 15.

The contribution from commissions and insurance income to revenues is by far the highest in Europe after UBS. Please turn to Slide 16. The costincome ratio was the best ever at 38, thanks to both revenue growth and decreasing costs. Please turn to Slide 17 for a closer look at costs. Slide 17.

Operating costs were down 2.7% when excluding the impact of the national labor contract renewal and depreciation linked to tech investments. Administrative costs decreased by 1.1%. Last but not least, we achieved almost 3,000 headcount reduction in Q1. Slide number 18. We have high flexibility to reduce costs further, thanks to our tech transformation.

In three years, we will have 9,000 exits at no social cost and with savings of €500,000,000 Let me highlight that 9,000 exits are equal to the ones we saw with the UBI merger. Slide number 19. We already have a best in class costincome ratio in Europe. Let’s move to Slide 20 for a look at our asset quality. Slide 20.

Gross NPL stock decreased €200,000,000 on a yearly basis, and the net NPL inflows remained at historical lows. Also Stage two loans decreased 8%. Slide 21. Our NPL stock and ratios are among the best in Europe. Slide 22.

As you can see, we are also very well positioned in terms of Stage two. Slide 23. Our annualized cost of risk was only 21 basis points with increased coverage and no overlays released. We see no signs of asset quality deterioration. Slide 24.

Quarter after quarter, we keep reducing our Russia exposure, down to less than 0.1% of the group’s total loan with local loans close to zero. Let’s move to Slide 25 for an update on capital. Slide 25. In Q1, the common equity ratio increased by 45 basis points to 13.3 and will further increase in the coming quarters. We clearly have significant excess capital giving us great flexibility for additional distribution.

In the next three slides, you have the usual updates on our sound liquidity position and ESG actions, with additional slides on our leading ESG position in the appendix. Let’s move to Slide 30 to see how SP is fully equipped to succeed in any scenario. Slide 30. Our profitability and capital position remains strong even under adverse conditions. We have a very resilient business model with a low cost income ratio, and we have already deployed €4,400,000,000 in tech investments, a key enabler for further efficiency gains.

Our net NPL stock is just $5,000,000,000 and we can count on $900,000,000 in overlays. Last but not least, the management team has a strong track record in delivering results. Slide 31. Intesa Sanpaolo stands out across key metrics and is better positioned than peers to face any future challenge. Slide 32.

In this slide, you can appreciate our unique positioning, thanks to our commissions driven and efficient business model supported by strong tech investments. Let’s move to Slide 33 for a few words on the strength of the Italian economy. The Italian economy remains resilient, supported by export oriented, resilient and highly diversified companies, a strong banking system, high household wealth and low private debt, unemployment at the lowest level in the over forty years and continued EU public investments and also stability in the government. We expect Italian GDP to grow this year and next. In this slide, you can see that Italian companies are in a stronger position and more resilient to external shocks today compared to the past.

Their debt to equity ratio has decreased over time and their liquidity buffers are at all time highs. Please turn to Slide 36. This slide offers a recap of our best ever quarter and the reason why we are fully equipped to succeed in the future. To finish, please turn to Slide 37 for the outlook. For 2025, we confirm our net income guidance of well above €9,000,000,000 a level we consider fully sustainable in the years ahead.

As always, we will continue to manage revenues in an integrated manner, maintaining a strong focus on cost efficiency and asset quality. We are delivering one of the highest dividend yields in European banking, while maintaining rock solid capital and continue to lead on social impact. Additional capital distribution will be determined at the year end. Thank you for your attention, and we are now happy to take your questions.

Razia, Conference Coordinator: Thank you, sir. You. You are kindly invited to ask no more than two questions to leave room for the other participants. In case of additional questions, the IR team will be at your disposal after your conference call. Thank you.

We are now going to proceed with our first question. The questions come from the line of Antonio Reali from Bank of America. Please ask your question.

Antonio Reali, Analyst, Bank of America: Hi, good afternoon. It’s Antonio from Bank of America. Just a couple of questions for me, please. One on the outlook for loan growth and one on fees. Starting with the first one, while lack of growth in Italy remains a drag on banks’ operating performance.

So I’m wondering what will it take in your view for a bank like yours to be able to divert the current trend and start showing some loan growth going forward? That’s my first question. And secondly, you’ve had a strong start of the year in fees. We’ve seen strong inflows driving placements up quarter on quarter. Now markets are always difficult to predict, we’ve seen the tide turn somewhat at the April.

So I’m wondering to what extent you can share additional color versus how much of the Q1 performance in fees you think can be sustained going forward? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: So, thank you, Antonio. For the loan growth, we have just to start talking about the financial conditions of the Italian companies, because Italian companies, as we have in a slide in a presentation, a significant amount of deposits placed with the banking system. So in conditions of uncertainty, they prefer to reimburse loans using their deposits. So there’s no significant evidence that there could be a reduction for the futures in terms of investments. In my opinion, Italian companies are starting again to make investments.

The medium long term loans are growing. And the acceleration could be part of a story for the next quarters and especially in the second part of the year in which we will have the acceleration of the usage of the next generation EU funds. So my perception is that there will be a rebound in the second part of the year. For this first quarter, there is also, in my opinion, for the short term lending, some especially in Intesa Sanpaolo, some point of attention that we decided to place on the pricing embedded in transaction in the markets because a lot of players that are involved into M and A transactions decided to increase the size of their balance sheet, and it is obvious in conditions in which you are fighting for having positive results in an M and A transaction. But in my way, in my understanding and what we decided to do is not to follow mispricing in the market.

So for Intesa Sanpaolo, there’s also a technical reason that produced also some impact on the net interest income in our first quarter. We decided not to follow the market when the market is moving in mispricing approach in the first quarter. But looking at the trend, my expectation is that in the second part of the year, we can have a clear recovery in terms of loan growth. I’m talking corporate. If you look families, mortgages are running in a good way.

And with the reduction of interest rate, there could be also an acceleration in the second part of the year. So net net, our expectation is to have a recovery in term of loan in the second part of the year. And you have also an evidence of this in a potential growth that we have considered in our risk weighted assets in the last part of the year because in our outlook for the common equity for the end of the year, we decided to be very conservative in terms of risk weighted assets because we expect to have a potential growth in the second part of the year in terms of the loan book. Looking at fee and commission. Fee and commissions, obviously, for us are a component that is strategic in the medium long term.

We started in this quarter with an action not to put so much emphasis on a portion of deposits that could be considered just placed in the deposits on a temporary basis. So we decided to accelerate conversion of this portion. And that’s the reason why we had an acceleration in terms of reduction of deposits and increase in terms of asset under management and asset under administration. We are accelerating in terms of gross inflows that are the inflows in which we generate a commission. But in the month of April, that has been obviously a month with a lot of uncertainty, we maintain the trend of the first three quarters.

That is the evidence that our delivery machine is absolutely able to perform in any kind of condition of scenarios. And our expectation is to continue to have this very good trend in terms of growth of fee and commission correlated with the wealth management and protection business. At the same time, in the second part of the year, we will have also an acceleration in terms of commercial commissions because with the reduction of the loan book, we received minor contribution this quarter, but this will accelerate in the second part of the year. And also commission related with transaction banking and corporate investment banking will accelerate in starting from next quarter. So our expectation from fee and commission fee income remain very positive.

And for the area of wealth management and protection, we expect to have a minimum double digit growth in terms of fee and commissions.

Antonio Reali, Analyst, Bank of America: Thank you.

Razia, Conference Coordinator: Thank you. We are now going to proceed with our next question. The next questions come from the line of Delphine Lee from JPMorgan. Please ask your question.

Delphine Lee, Analyst, JPMorgan: Good afternoon. Thank you for taking my questions. My first one is just to go back to net interest income. So just wanted to double check-in terms of assumptions for this year, what kind of expectations you have for deposit costs in terms of decline and also the contribution from the replicating portfolio or your core deposit hedging portfolio? Because it seems to me that the acceleration for now that you’re expecting for NII in the next few quarters seem to be mostly loan volume driven.

Just wanted to confirm these different moving parts. And my second question is on fees and commissions. Is your assumption for 25% when you talk about net profit above 9% still mid single digit growth for fees? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: Thank you, Odelfin. So looking at the first question on net interest income, I will give you not only a trend for the next quarters, but also I want to make some explanation of what happened in the first quarter, just so to give you the full picture on what we are managing, what how we are managing the net interest income in this quarter and what we expect for the next quarter. Because we decided looking at the very good performance that we had at the starting point of the quarter on the trading income, we decided not to push on areas of net interest income that, as I told in the previous answer, are in a mispricing conditions looking the market in Italy. So I’m referring on the incremental loan book that is affected by this condition of fighting between different banks in the country. So we decided to wait and see and wait for the next quarters in order to accelerate also in the short term lending.

At the same time, the kind of attitudes of some banks trying to pay deposits in a much higher way because, again, being under M and A deal, they want to increase the size. We decided to accelerate some conversion of retail deposits offering asset under management and asset under administration product. It was something that was planned for the second quarter of the year, but we decided to accelerate in the first quarter. So this created some condition of having a lower level of net interest income in comparison with our original expectation for the first quarter. At the same time, the paid to profit, so the ability of our people to realize trading profit means that we reduced for some months an amount of government bonds that were producing good net interest income.

So the first quarter, we had some like a transitory quarter in terms of preparation for the next quarters. Now at the end of the quarter, we increased the amount of the security portfolio, so reaching an increase of €15,000,000,000 in comparison to the end of the year. So we start the second quarter of the year in a very good condition looking at the financial portfolio. At the same time, the area of retail deposits that could be under some threats to be part of acquisition from other banks are now placed in asset under management and asset under administration. So we can manage in the usual way the deposit part of our portfolio that will have a reduction.

Reduction. At the same time, just let me add, during this quarter, we had some expiring wholesale funding that will be not replaced. So during 2025, we will have some more than €10,000,000,000 of wholesale funding that will be not replaced. So just to give you the idea that in terms of trend from the next quarters, we will have a clear negative that will be marked down because for the reduction of Euribor. But at the same time, we will have all positive coming from the wholesale funding cost medium term.

This will be positive in the expectation for the next quarters. We will have a clear recovery in terms of loan book. We will have a positive contribution from the security portfolios. We will not have the negative impact coming from NPL. And at the same time, the repetitive portfolio, so the hedging facility will gain momentum and will bring an increase on an annual basis of more than 600,000,000 contribution to our net interest income.

So our forecast is to have a net interest income that can exceed the twenty twenty three levels. The final point, obviously, will depend also on the security portfolio and the linkage that we have with the trading income. But our expectation is that now all the moving parts apart markdown could be positive in the trend for the net interest income. This is that’s the reason why we decided to put emphasis on the confirmation that we will be above twenty twenty three level of net income. And our expectation is that if we can accelerate in some areas, we can give the performance also quarter by quarter.

Also, if we have Euribor trending on an average of 2% for 2025. And also in case this net Euribor can trend also below 2%. So that’s our expectation. At the same time, on fee and commissions, our expectation is to have a clear double digit growth in all wealth management and insurance commissions. The other commission will be low mid single digit growth.

Net net, our expectation is to be in the middle between the trend of wealth management and all the other commissions. So to have a good performance in terms of fee and commission. And at the same time, sorry, to add also this point on trading profit, our expectation is to continue to have a very good performance. That’s the reason why we think that revenue increase could be absolutely achievable in 2025 in comparison with 2024.

Delphine Lee, Analyst, JPMorgan: Great. Thank you very much.

Razia, Conference Coordinator: Thank you. We are now going to proceed with our next question. Our next questions come from the line of Andrea Fintri from Mediobanca. Please ask your question.

Andrea Fintri, Analyst, Mediobanca: Thank you for taking my question. Could you please update us on the NII sensitivity from this quarter onwards? And if you could please give us some color on the NII trends in the divisions. I noticed, for instance, a very strong quarterly NII in the Bancari territory versus a very weak number in the corporate center. I don’t know if there has been some sort of reclassification or if you can explain us the drivers behind these performances?

Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: Yes, Andrea. I will start from divisions because it is something that it is correlated with the planning and control system because in we use the TEET, the Uribor in just to evaluate the different business unit and the Bancari territory has a positive contribution because they have an advantage coming from the internal transfer pricing. The reality is that in both divisions, so in Banquet territory and the Corporate Investment Banking divisions, you have a reduction. So the reduction is not in a substantial part in the corporate center. The Banca de territory is obviously linked with the markdown situation.

The corporate investment banking is linked with the loan book because the majority of this mispricing is happening, as I mentioned at the beginning of call. So the fact that we decided to stay away from some in the first part of the year is mainly concentrated in the corporate investment banking division. Looking at the sensitivity, the sensitivity today is, obviously, we are talking about the mathematical. So the risk management sensitivity, we are talking about for each 50 basis points a reduction of €12,000,000 So it is really negligible. In reality, this figure are, in my opinion, probably optimistic because the real conditions considering not only the theoretical movement could be much higher than this.

But from the figures is

Razia, Conference Coordinator: We are now going to proceed with our next question. The next questions come from the line of Pamela Ziolaga from Morgan Stanley. Please ask your question.

Pamela Ziolaga, Analyst, Morgan Stanley: Hello. Thank you very much. You’ve shown a recovery in insurance income driven mostly by P and C growth. Could you also share with us please how the Life business is performing and how you expect it to evolve? I was thinking that most of the policies in TESSA rights are related to the Life business.

So I was wondering if you’ve seen persisting headwinds maybe on the Life segment that have encouraged you to prioritize P and C? And then the second question is, could you give us some color on the specific trends you’re observing in the Asset Management business? More specifically, last quarter you mentioned that you were implementing commercial actions to boost inflows. What have you been able to implement so far and how is it impacting margins? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: So looking at the Property and Casualty business, in this quarter, we had a positive trend both on Property and Casualty and on Life Insurance. Life Insurance is recovering from a portion of 2024 in which they had not such a very good performance. Our expectation, Property and Casualty, obviously, is mainly linked with the acceleration in terms of penetration of clients. And this is creating condition to have a very positive trend also for the next quarters. Life insurance is also mainly related with the other mutual funds products.

So there’s also a decision to push on mutual funds or insurance business depending on market conditions. What is very important is that in life insurance, only 20% of the results are coming from financial activities and on Property and Casualty is only 15%. So we are talking about commissions and profit that are running and obviously not coming from financial conditions. So it’s really something that I consider positive and strategic for the future. The engine for growth, in my opinion, will remain, in any case, the non motor life the non motor property and specialties business.

Looking at the inflows in asset under management business, the acceleration that we had is mainly concentrated in our retail network and also in the private banking divisions. I want just to give you some colors in terms not only of quantity of what we are moving between the different components of our current level of deposit, asset management, industrial administration, but just to give you some figures what we are creating in terms of work with other players, we hired 151 private bankers from other competitors during this first quarter with an increase of €1,500,000,000 in terms of net worth coming from other banks. This is the evidence of our strategy that is not only to work on our significant and unique current base volumes, but also to move in this situation in which obviously, there are a lot of uncertainty in a number of players to accelerate also hiring of private banker with portfolios that can create condition to have an increase in our volumes coming from our reputation and the ability to hire people from other players.

Pamela Ziolaga, Analyst, Morgan Stanley: Thank you very much.

Razia, Conference Coordinator: We are now going to proceed with our next question. The next questions come from the line of Marco Nicolas from Jefferies. Please ask your question.

Marco Nicolas, Analyst, Jefferies: Hello. Thanks for taking my question. First one on asset quality. So the net inflows of NPLs improved in this quarter after a bit of a spike we saw in the previous quarter. So during your commentary, you mentioned that it’s on the asset quality front, it’s still everything is still on track.

So could you expand a little bit on that and also confirm that the trends, say, in April didn’t change with respect of what you disclosed for the first quarter? And then a question on your cost of risk sensitivity. So can you give us some sensitivities towards lower GDP growth levels? I don’t know, for example, if GDP growth in Italy is zero in 2025, What will be your cost of risk? And then a quick one on NII.

Do you still expect 26% above 25% despite the fact that your LIBOR curve came down a little bit compared to where we were at the beginning of the year? Thank you very much.

Carlo Messina, CEO, Intesa Sanpaolo: So starting from the last one, yes, we think that in 2026, provided that the loan book can move in positive trend, the combination of loan book and hedging facility can create condition to have a positive trend and increase in 2026 in comparison with 2025. Looking at the asset quality and the NPL trend, our expectation is that we can continue to have very good performance. The quality of our portfolio today is absolutely very good. So there’s no significant threats embedded in our figures. The level of net inflow is obviously at the minimum, but we think that we can continue to have a very good performance and with the correlation with the second question.

So looking at the cost of risk, our cost of risk for the time being is the expectation for 2025 is really close to 30 basis points and not 35 basis points or 40 basis points that was what we have considered. If we remain talking about 35 is because we think that if needed, we can be in a condition to extra cover in order to make disposal of further disposal of nonperforming loans. But the run rate for the time being of the net inflows is positioned between twenty and thirty basis points. So that’s the level of the run rate. Then obviously, it is much better to be conservative and to maintain a buffer in order to make extra provision.

All this without using the overlays. To go to zero, if GDP go to zero, our expectation is that due to the fact that the run rate in reality is between twenty and thirty, we think that we can remain between 30 basis points and 40 basis points in terms of cost of risk for 2025.

Marco Nicolas, Analyst, Jefferies: Thank you very much. Thank you very much.

Carlo Messina, CEO, Intesa Sanpaolo: Thank you.

Razia, Conference Coordinator: We are now going to proceed with our next question. And the questions come from the line of Giovanni Razzoli from Deutsche Bank. Please ask your question.

Giovanni Razzoli, Analyst, Deutsche Bank: Good afternoon to everybody. I’ve seen that on the cost of risk, there has been some write backs in the CIB. If you can share with us whether this is related to some big tickets or to more spread over the portfolio? And the second question is about the consolidation in Italy. In the last conference call, when we asked about this and in particular about the possibility that you could be interested into a theoretical acquiring in minority stakes, you were pretty clear in saying that this is not consistent with your strategy.

I was wondering whether these approaches still applies also today given the several moving parts that we have seen since the beginning of the year? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: So I will start from cost of risk, then I will elaborate on consolidation. So cost of risk, there are some positive impact coming from the reduction of net loans. So this will bring positive on the generic reserve and at the same time, some improvements in terms of rating from counterparties, especially in the Corporate and Investment Banking divisions. So coming back on consolidation. So if you remember, I decided to talk about confusion.

Grit Casino, I told you then, know that it is not the super fair approach. But I can just tell you that what we are seeing is an increasing confusions in the market. So I’m really confirmed in my opinion that it is absolutely much better to remain focused in delivering results for shareholders because I think that there is a lot of potential that I can give to my shareholders working hard on the optimization of net interest income, the acceleration on fee and commissions, the balancing between net interest income and trading profit, the acceleration in insurance income and something that we have not talked about during this call, but it is the cost side because in cost, we are creating a new plan for strong reduction in terms of cost and the evidence is also in this quarter. But with the reduction of 2,900 people in this quarter already agreed that are part of the 9,000, we are in a unique position to be able to over deliver if needed in terms of cost reduction. So this means that the CEO must be concentrated in managing the organization and not in considering theoretical participation to something that, in my view, is already crowded, and there’s no need that another player can contribute to create confusion in the market.

Hugo Cruz, Analyst, KBW: Thank you very much. Very clear.

Razia, Conference Coordinator: Thank you. We are now going to proceed with our next question. And the questions come from the line of Britta Schmidt from Autonomous Research. Please go ahead with your question.

Britta Schmidt, Analyst, Autonomous Research: Yes. Hi there. Thank you for taking my questions. Two from me, please. Coming back to the trading income, it looks like the driver this quarter was capital markets where we’ve seen good performance also for other banks.

Could you give a bit more color on this and also where you think future trading profits will be sourced from? Is there also an opportunity for you, for example, to lower the funding cost on certificates? And maybe also give us a little bit of a glimpse into 2026 with regards to trading income. And the second question will be, would you be able to tell us what your current lending yield and deposit costs are on the front book and also what they were on the back book in the first quarter? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: So looking at the trading income, just a point on this, sorry, because the extraordinary year was the 2024, in which we were in such a good shape in terms of net interest income that we absolutely decided not to push on trading income. But the level of €250,000,000 2 hundred million euros per quarter was the usual trend of Intesa Sanpaolo in the years before 2024. So it is clear that there is a strategy because we decided to make to allow the Corporate Investor Banking division and the treasury to accelerate in some disposal of government bonds. But in my view, the trend is clear, and indeed, that’s the reason why we decided to change from growth in trading, strong growth in terms of trading income in comparison to 2024. The evidence is clear.

The volatility, the uncertainty that that’s something that is creating condition for my people to create trading income. And at the same time, also the reduction of interest rate is creating condition to have a capital gain on a portion of portfolio, and this will bring trading income for the future. So my expectation, if condition will remain more or less at this level, that we can continue to have a very good trend. Then we talked about doubling the 2024 level. Probably we could move in three times this level.

We will see next quarter, but for sure, this could be positive in terms of contribution to the income. In terms of interest rate, if I understood correctly, we have an interest rate on the asset side that is above 4% and the level on the liability side, so on deposit that is total liability that is below 1%.

Razia, Conference Coordinator: Questions. Thank you. We are now going to proceed with our next question. And the questions come from the line of Ignacio Ulargi from BNP Paribas. Please ask your question.

Carlo Messina, CEO, Intesa Sanpaolo0: Thanks for the presentation and for taking my questions. I have two questions, if I may. The first one coming back a bit on costs. I mean, just wanted to get a bit of a sense how do you think cost will evolve over the coming quarters, especially looking to the seasonality that you have in the fourth quarter, whether that should come down a bit this year? And the second one, it’s on capital.

I just look to your expectation of accelerating growth in lending in the second half, how should we think about the buildup of capital in the second half after the very good performance that we have seen in 1Q? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: So on cost, we will add seasonality on cost, but not so significant like last year. Last year, we had a significant extra cost deriving from the incentive scheme because we really over delivered on our plan. I have to tell you that with the plan, with the budget that is well above €9,000,000,000 it will be not so easy, I hope so, but I think that it will be not so easy to over deliver in a significant way. So my expectation is that just in comparison, then I elaborate on trend in the different line, but this area will not be part of a seasonality significant seasonality in the last quarter. There will be seasonality, but not so significant.

Looking on the cost side, we start with a very positive position because the reduction of 2,900 people in the first quarter will give benefit starting from the second quarter and moving in the other quarters of the year. At the same time, the reduction of branches, the IT system that we had worked on using the artificial intelligence, the tech investments will bring positive during 2025. At the same time, we will make investments to complete the €5,000,000,000 plan on IT investments. But net net, this will bring the cost down in comparison to 2024 with some reserve, some contingency plan that we can use in case of need. So we are absolutely relaxed on cost side, and we will work in order to reduce in some way some part of the seasonality for the last quarter.

Looking at capital, capital is, in my view, a very positive trend. Also remembering that for the next years, we will have all the recovery of the DTA. So we are talking about 100 basis points. That is a capital increase. So the level that we can count on for the next years will benefit also.

And if you look at the slide in which we talk about also having this positive impact embedded in figures, that could be much higher than 14.5%. So we are talking that a trend that can move in including the DTA between 14.515% for the future. Looking at a fully loaded without the DTA, our expectation is that without the strong increase in risk weighted assets that we choose to have in the second part of the year, we can be really more in an area that could be between 13.814%. With the acceleration, it is with an asset that is likely that we can have, due to the trend of the loan book, we remain above 13.7%, and we will inform the market on the evolution of risk weighted assets that we can think can be realized during the second part of the year. This will be part of the next presentation in July or August, and we will give the clear trend for the risk weighted assets for the year.

But it is absolutely there that we have a significant ability to generate because do not forget that in the figure that you have for this quarter, we have already considered €1,800,000,000 of dividends. So the real dynamic is that you have the difference between net income and dividend, but the amount of ability to generate new capital quarter by quarter is really significant. And at the same time, we will have actions to mitigate the growth of risk weighted assets and the recovery of a portion of DTA during 2025 in the second part of the year. So I’m pretty optimistic on the dynamic of capital for 2025 and much more optimistic moving from 2026.

Razia, Conference Coordinator: Thank you. We are now going to proceed with our next question. The questions come from the line of Hugo Cruz from KBW. Please ask your question.

Hugo Cruz, Analyst, KBW: Hi, thank you for the time. A couple of questions. First on the replicating portfolio, can you remind us what is the latest back book yield on that portfolio and the duration of the portfolio? And if that is expected to change the duration in the future? And second question on the OpEx and the tech investments.

Can you remind us how much of that those $4,400,000,000 of tech investments, how much of that is flowing through the P and L? And can we see when the investments stop or materially go down materially, can we see a step change in OpEx due to that stop? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: So in terms of replicating portfolio, you have all the information in Slide 11. So it’s €160,000,000,000 duration full year and €1,600,000,000 the yield of the facility. Looking at the €4,400,000,000 on average, because obviously, it depends year by year on the amount of consulting on other items that can be capitalized, but on average could be €1,000,000,000 per year. So that’s more or less the level that you can consider as an impact this year and in the next years for coming from these investments. Then obviously, you have to consider that we will not stop investment with the €5,000,000,000 So the more or less €1,000,000,000 per year could be considered a normal level for a bank that want to be a leader also in technological approach.

Hugo Cruz, Analyst, KBW: Thank you.

Razia, Conference Coordinator: Thank you. We have no further questions at this time. I would now hand back to you, Mr. Messina, for any closing remarks.

Carlo Messina, CEO, Intesa Sanpaolo: So I want just to stress the sustainability of our results because I think that the different components of our revenues are managed in a real, very sustainable way, so with an approach that is not only to optimize revenues for a quarter, but to create conditions to have an increasing contribution quarter by quarter. And as I told in the different answer, I’m really convinced that our net interest income will start recovering from the second quarter, notwithstanding the reduction of Euribor. That is something that I think can happen absolutely. Our fee and commissions will continue to give us very good results because this is an area in which we have decided to create specific plan giving to our people a list of clients and areas in which they can reaccelerate revenues for the group and giving positive satisfaction also for our clients that are benefiting from reduction of interest rate. And so this can create capital gain position in a significant portion of their portfolio.

At the same time, the insurance business is absolutely a clear priority for us and it is an engine for growth in terms of sustainability for the future. Trading income will continue to give positive contribution. Cost will give us much better satisfaction than our expectation because we are accelerating with new plans of reduction. And the cost of risk is totally under control. So the quality is due to the bank, but it is due also on the very good job that the companies made in this year because the segment of SMEs made a fantastic job.

And this, in combination with the family wealth, so the real AAA part of Italy, that is the savings of the Italian family, can give us a very positive trend for the future, especially for a company like us that is a wealth management and protection company. Capital is giving very good condition. But also, let me add again that in Italy, we are also in a unique condition looking at stability and the ability in which the government, so the Giorgetti and Meloni, are managing the public debt and the reputation of the country. So I think that Intesa Sanpaolo is really in a very good condition to give satisfaction to shareholders. So thank you very much, and see you in London.

Razia, Conference Coordinator: This concludes today’s conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

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