Earnings call transcript: Intesa Sanpaolo reports record Q1 2025 income

Intesa Sanpaolo, one of Europe’s leading banks with a market capitalization of €2.91 billion, reported a record high net income of €2.6 billion for the first quarter of 2025, marking a 14% increase year-over-year. The bank’s robust performance was bolstered by strong commission-driven revenues and effective cost management. According to InvestingPro analysis, the bank trades at an attractive P/E ratio relative to its near-term earnings growth potential and offers significant dividends to shareholders. Despite a slight dip in stock price, the bank confirmed its full-year net income guidance of over €9 billion.

Key Takeaways

• Record Q1 net income of €2.6 billion, up 14% from last year.
• Revenues increased, driven by commissions.
• Cost income ratio reached a record low of 38%.
• Stock price fell 0.87% following the earnings report.
• Full-year net income guidance remains above €9 billion.

Company Performance

Intesa Sanpaolo demonstrated strong financial health in Q1 2025, achieving a net income of €2.6 billion, a 14% increase compared to the same period last year. The bank’s strategic focus on commission-driven revenue and cost efficiency has paid off, as evidenced by a record low cost income ratio of 38%. With an overall Financial Health Score of 1.8 (rated as "FAIR" by InvestingPro), the bank continues to lead in wealth management and insurance sectors, reinforcing its competitive stance in the European market. Discover 8 more exclusive insights about Intesa Sanpaolo’s financial health with an InvestingPro subscription.

Financial Highlights

• Net Income: €2.6 billion, up 14% year-on-year.
• Revenue: Growth driven by commissions.
• Cost Income Ratio: 38%, the best ever recorded by the bank.
• Common Equity Tier One Ratio: Increased by 45 basis points to 13.3%.

Market Reaction

Following the earnings announcement, Intesa Sanpaolo’s stock experienced a slight decline of 0.87%, closing at €4.805. This movement comes despite the bank’s strong financial performance and impressive 233% price return over the past six months, as reported by InvestingPro. The current price movement possibly reflects broader market trends or investor caution regarding future economic conditions. Get access to comprehensive valuation analysis and 10+ additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Intesa Sanpaolo reaffirmed its full-year net income guidance of over €9 billion for 2025. The bank anticipates double-digit growth in wealth management commissions and expects a recovery in its loan book in the latter half of the year. Cost efficiency and asset quality remain key areas of focus, with potential net interest income exceeding 2023 levels.

Executive Commentary

CEO Carlo Messina remarked, "We are navigating the current market volatility from a position of strength," emphasizing the bank’s resilience. He also highlighted, "Our profitability and capital position remain strong even under adverse conditions," pointing to the bank’s robust financial health.

Risks and Challenges

• Economic Volatility: Potential impacts from fluctuating market conditions.
• Loan Book Recovery: Dependence on economic stability for projected recovery.
• Regulatory Changes: Possible impacts from evolving financial regulations.
• Competition: Sustaining competitive advantage in a dynamic market.
• Technological Investments: Ensuring ROI from significant tech investments.

Q&A

During the earnings call, analysts inquired about the expected rebound in loan growth, which is anticipated in Q3 and Q4 2025. Questions also focused on the bank’s low net interest income sensitivity and its strategy to maintain strong trading income. CEO Carlo Messina assured that the bank’s internal synergies are driving performance without the need for acquisitions.

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

Carlo Messina, CEO, Intesa Sanpaolo: 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 mister 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. To enter the queue for questions, please press 11 at any time. You will then hand a donated message advising your hand is raised.

To withdraw your question, please press 11 again. 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 mister Carlo Messina, CEO.

Sir, you may begin. First quarter in twenty twenty conference call. This is Carlo Messina, executive of Informia with Taco Bell, our CFO, Marco Del Frata and Andrea Tamanier, investor relations officers. We just delivered our best ever net income. It’s 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 continues 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. In this year, we will return at least 8,200,000,000.0, taking into account the main dividend, the June buyback, and the interim dividend in November. Additional capital distribution will be quantified at the end of the year. In q one, we increased our common equity tier one ratio by 45 basis points, confirming strong capital generation capabilities. On the tech side, our digital bank now has 1,000,000 clients with a strong acceleration in q one.

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 q one, we delivered record high net income with strong growth in commissions, lowest ever cost income ratio, NPL ratios at historical lows, significant increase in common equity ratio, and high level financial appreciation. 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 q one results. Slide seven. In a nutshell, in q one, net income was up 14% year on year. We accrued one 3.6% dividends. We delivered the best q one ever for revenue.

Costs were down and asset quality remained excellent. Slide number eight. In this slide, you have the detailed p and l for the for Turkish, showing good results across nearly all items. Slide number nine. In q one, 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 manage revenues in an integrated manner. Slide 11. This slide provides more detail on the net interest income evolution.

In q one, 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 q one, we had three thirty three billion 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.

Nine hundred billion in direct assets in direct deposits and assets under administration will fuel our wealth management protection and advisory businesses. Let’s now move to slide 13. In q one, commissions were up 7% yearly with an 11% growth in what kind of melt 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 growth asset under management inflow. Slide 14. No 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 cost income ratio was the best ever at 38%, thanks to both revenue growth and increasing 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 q one. Slide number 18. We have high flexibility to reduce cost 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 cost income 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 q one, the common equity ratio increased by 45 basis points to 13.3 and with 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 update on our sound liquidity position and ESG actions with additional slides on our leading ESG position in the appendix. Let’s move to slide 13 to see how SP is fully equipped to succeed in any scenario. Slide 13. 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 the 4,400,000,000.0 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 commission 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, and employ 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 right 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 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 banks 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. Thank you, sir.

As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Once again, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. 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 Reale from Bank of America. Please ask your question.

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 and one on fees.

Starting with the first one, well, lack of growth in Italy remains a drag on on banks operating performance. So I’m wondering what will it take in your view for for a bank like yours to be able to divert the current trend and and start showing some loan growth going forward? That’s my first question. Secondly, you got 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, and and we’ve seen the tide turn somewhat at the April. So I’m wondering to ask if you could share additional color versus how much of the Q1 performance in fees you think can be sustained going forward? Thank you. So thank you, Antonio. For the for the loan growth, we have just to to to start talking about the financial conditions of the Italian companies.

Because Italian companies, as 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 fusions in terms of investments. In my opinion, Italian companies are starting again to make investments. The medium long term loans are growing.

And the the 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 Southern Power, some point of attention that that we decided to place on on the pricing embedded in transaction in the market because a lot of players that are involved into m and a transactions decided to increase the size of their their balance sheet, and it is obvious in conditions in which you are fighting for for having a 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 that it 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 all in a mispricing approach in in the first quarter. But looking at the trend, my expectation is that in the second part of the year, we can have a a clear recovery in terms of loan growth. I’m talking about 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 retail assets in the last part of the year because in our outlook for the 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 in the second part of the year in terms of the loan book. Looking at and see a commission. See a commission, obviously, for us are a a component that 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. So it’s more important 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 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 a 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 of double digit growth in terms of fee and commissions. Thank you. Thank you.

We are now going to proceed with our next question. The next question comes from the line of Delphine Lee from JPMorgan. Please ask your question.

Conference Coordinator: Good afternoon. Thank you for taking my questions.

Carlo Messina, CEO, Intesa Sanpaolo: My first one is just to go back

Delphine Lee, Analyst, JPMorgan: 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 cost 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

Carlo Messina, CEO, Intesa Sanpaolo: next few quarters seem to be mostly loan volume driven.

Delphine Lee, Analyst, JPMorgan: Just wanted to confirm these different moving parts. And my second question is on fees fee fees and commissions. Is your assumption for ’25 when you talk about net profit above nine still mid mid single digit growth for fee? Thank you.

Carlo Messina, CEO, Intesa Sanpaolo: Thank you, Ondelson. So looking at the the the first question on net interest income, I will give you not only a a trend for for the for the next quarter, but also I want to 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 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 the market in Italy. So I’m I’m referring on on the incremental loan loan book that is affected by this condition of fighting between different banks in the country. So we decided to wait and see and and wait for for the next quarters in order to accelerate also in the short term lending.

At the same time, the the kind of attitude of of some banks are 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 the the the the paid to profit, so the ability of our people to realize trading profit means that we reduced for for some months an amount of government bonds that were producing good net interest income.

So in in the first quarter, we had some, like, a transitory it’s in a transitory quarter in terms of preparation for the next quarter. So now at the end of the quarter, we’ve increased the amount of the the security portfolio, so reaching an increase of $5,015,000,000,000 euros 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 the the the financial portfolio. At the same time, the the the 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, in asset under administration so we can manage in the usual way the deposit part of our of our portfolio debt will have a reduction. At the same time, just let me add, this quarter, we add some expiring wholesale funding that will be not replaced.

So during 02/2025, 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 from the next quarters, we will have a clear negative that will be marked down because for the reduction of your eyeball. But at the same time, we will have all positive coming from the wholesale funding cost medium term. This will be positive in the in the situation 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 2,023 levels. The the final point, obviously, will depend also on on the the security portfolio and the linkages we have with the trading income.

But our expectation is is that now all the moving parts apart to markdown could be positive in the trend for the net interest income. This is that that’s the reason why we decided to to put the emphasis on the confirmation that we will be above the 2023 level of net interest income. And our expectation is that if we can accelerate in some areas, we can be to give the important months also quarter by quarter. Also, if we have you’re right. We’re trending on an average by 2% for 02/2025.

And also in case this net this Euribor can trend also below 2%. So that’s our expectation. At the same time, on on fee and commissions, expectation is to have a clear double digit growth in all wealth management and insurance commissions. The other commission would be low mid single digit growth. Net net, our expectation is to be in in the middle between the trend of wealth management.

There will be other commissions, so to have a 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 02/2025 in comparison with 02/2024.

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

Carlo Messina, CEO, Intesa Sanpaolo: you. We are now going to proceed with our next question. Our next question comes from the line of Andrea Fintley from Mediobanca. Please ask your question. 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 Banco de 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 the drivers behind these these performances? Thank you.

Yes, Andrea. I will start from from divisions because it is it is something that it is correlated with the training and control system. Because in we use the the the teeth to the the Euribor in in just to to to evaluate the different business unit. And the bank territory is a positive contribution because they have an advantage coming from the internal transfer pricing. The the reality is that in in both divisions so in the bankary territory and in corporate investment banking divisions, you have a a reduction.

So the reduction is not in in in a substantial part in the corporate center. The the the the bank of the territory is obviously linked with the with the markdown situation. The the corporate investment banking is linked with the the loan book because the majority of this mispricing is happening as as I mentioned at the beginning of the of the call. So the fact that we we decided to stay away from some the first part of the year is mainly concentrated in the corporate investment banking business issue. Looking at the sensitivity the sensitivity today is obviously, we are talking about the mathematical.

So there is 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 this figure are, in my opinion, probably optimistic because the the real conditions considering not only the theoretical movement could be much higher than this. But from the the figures is We are now going to proceed with our next question.

The next question comes from the line of Pamela Zielaga from Morgan Stanley. Please ask

Conference Coordinator: your question. 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

Carlo Messina, CEO, Intesa Sanpaolo: the policies and death rates are related to

Conference Coordinator: the life business. So I was wondering if you see the 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 the profit and casualty business in in this quarter, we had a positive trend both on profit and casualty and on life insurance. Life insurance is is recovering from a portion of 2,024 in which they had not such such a very good performance. Our expectation, property and casualty, obviously, is is mainly linked with 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 that there’s also a decision to to push on mutual funds or insurance business depending on on market conditions.

What is very important is that in in life insurance, only 20% of the results are coming from financial activities and on property and case of this, only 15%. So we are talking about commissions and profit that are running and, obviously, not coming from financial conditions. So it’s it’s really something that I consider positive and strategic for for the future. The engine for growth, in my opinion, will remain, in any case, the no motor life the no motor property in in specialties business. Looking at the inflows in assets under management business, the acceleration that we had is mainly concentrated in our retail network and also in the in the in the private banking divisions.

I want just to to to to to give you some some color in terms of not only of quantity of what we are moving between the the different components of our current level of deposit, asset management, industrial administration, but just to give you some figures on on what we are creating in terms of work with with other player, we hired 151 private bankers from other competitors during this first quarter with an increase of €1,500,000,000 in terms of of net worth coming from other banks. Just 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 we we pleased made in our reputation and the ability to hire people from other players.

Conference Coordinator: Thank you very much.

Carlo Messina, CEO, Intesa Sanpaolo: We are now going to proceed with our next question. The next question comes from the line of Marco Nicolai from Jefferies. Please ask your question. 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 the 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 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 ’25, what what will be your cost of risk? And then a quick one on NII. Do you still expect ’26 NII 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. So starting from the last one, yes, we’ve seen that in 02/1926, provided that the loan book can move in a positive trend, the combination of loan book and hedging facility can create condition to have a positive trend and increase in 02/1926 in comparison with 02/2025. Looking at the asset quality and and the the the NPL trend, expectation is that we can continue to have a very good performance. The quality of our portfolio today is absolutely very good. So there’s no significant press 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 twenty and twenty five is really close to 30 basis points and not 35 basis points or 40 basis points that that was what we have considered. If we remain talking about 35, if if 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 of the the 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 provisioning. Obviously, all this without using the overlays. To to 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 02/2025. Thank you very much. Thank you very much.

Thank you. 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 the question. Good afternoon to everybody.

I’ve seen that on the cost of risk that there has been some write backs in the in the CIB. If you can share with us whether this is related to some big ticket or to more spread over the the portfolio. And the second question is about the, you know, 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 states who 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. So I will start from cost of risk, and then I will elaborate on on consolidation. So cost of risk, are some positive impact coming from 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 in the corporate and the banking divisions. So coming back on consolidation, so if you remember, I I decided to talk about confusion.

Agree I told you that I I know that it is not the the the the super fair approach, but I can just tell you that what we are seeing is an increasing confusion in the market. So I’m 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 optimization of net interest income, the acceleration on fee and commissions, the the balancing between the net interest income and trading profit, the acceleration in insurance income, and something that we have not talked about during this this call, but it is the cost side. Because in cost, we are creating a new plan for strong reduction in terms of of cost and the evidence is also in this in this quarter. But with the reduction of 2,100 people in this quarter already agreed that they are just part 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.

Thank you very much, very clear. Thank you. We are now going to proceed with our next question. And the question comes from the line of Britta Smith from Potenumas Research. Please go ahead with your question.

Yeah. Hello. Thank you for taking my questions. Two for me, please. Coming back to the trading income, it looks like the driver this quarter was capital markets where we’re seeing good performance also for other banks.

Can you give a bit more color on this and also where you think future trading profits will be sourced from?

Conference Coordinator: Is there

Carlo Messina, CEO, Intesa Sanpaolo: also an opportunity for you, for example, to lower the funding cost on 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 years and deposit costs are on the front book and also what they were on the back book in the first quarter. Thank you. So looking at the trading income, just just a point on this, sorry, because the the extraordinary year was the the 02/2024, which we were in such a a good shape in terms of net interest income that we absolutely decided not to push on on trading income, but the the level of of €250,000,000 2 hundred million euros per quarter was the usual trend of Intesa Sanpaolo in in the years before 2,024. So it is clear that there is a strategy because we decided to make to to allow the the the the the corporate investment banking division and the treasury to to accelerate in some disposal of government bonds.

But in my view, the trend is clear, and that is why we decided to to change from growth in trading in strong growth in terms of trading income in comparison to 02/2024. The the evidence is clear. The the the volatility, the uncertainty that that that’s something that is creating condition for for my people to create trading income. And 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 is condition will remain more or less at this level, that we can continue to have a very good trend.

Then we we talk about doubling the the 02/2024 level. Probably, we could we could move in three times with this level. We will see next quarter, but for sure, this could be positive in terms of contribution to the to the the the income. In terms of of interest rate, if I understood correctly, we we have a a a a an interest rate on the on the asset side that is above 4%. And the level on the on the on the liability side, so on deposit, that is total liability that that is below 1%.

As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please kindly ask no more than two questions to leave room for the other participants. Thank you. We are now going to proceed with our next question.

And the questions come from the line of Ignacio Ilagi from BNP Paribas. Please ask your question. 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 build the build up of capital in the second half after the very good performance that we have seen in 1Q? Thank you.

So on cost, we will add the 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 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 in the different line.

But this this area will not be part of a seasonality, significant seasonality in in the last quarter. There will be seasonality, but not so significant. Looking on the cost side, we start with 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 02/2025. 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 02/2024 with some reserve, some contingency plan that we can use in case of need. So we are absolutely relaxed on on the 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, in in 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 the level that we can count on for for the next few years will benefit also. And if you look at the the slide in which we talk about also having these positive impact embedded in figures, that could be much higher than 14.5%. So we are talking that a a trend that can move in including the DTA between 14.515% for the future. Looking at fully loaded without the DTA, our expectation is that without the 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 in in in in an area that could be between 13.814%.

With the acceleration, it is weighted asset that is likely that we can have due to the trend of the loan book will remain above 13.7, and we will inform the market on the evolution of this with the vast asset that we can think can be realized during the second part of the year. This will be part of of the next presentation in in July or August, and we will leave the clear trend for the the risk weighted assets for for the year. But but it is absolutely there that we have a significant ability to generate because do not forget that in in the figure that you have for this quarter, we have already considered the 1,800,000,000 of dividends. So the the the real dynamic is that you have the difference between the 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 the DTA during 02/2025 in the second part of the year.

So I’m pretty optimistic on the dynamic of capital for 02/2025 and and much more optimistic moving from 02/1926. Thank you. We are now going to proceed with our next question. The question comes from the line of Hugo Cruz from KBW. Please ask your question.

Alright. Thank you for the time. 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 and second question on the OpEx and the tech investments. You know, 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 when does the investments stop or or materially go down materially, can we see a step change in the in the OpEx due to the to that stop? Thank you. So in in terms of of replicating portfolio, you have all the information in slide 11.

So it’s €160,000,000,000 duration full year and one point six three years of of the of the the facility. Looking at the the 4,400,000,000 on average, because, obviously, it depends year by year on the amount of consulting on on other items that can be capitalized. But on average, it could be €1,000,000,000 per year. So that that’s more or less the level that you can consider as an impact this year and in the the next year for 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 the the more or less €1,000,000,000 per year could be considered a a normal level for a bank that want to be a leader also in technological approach. Thank you. Thank you. We have no further questions at this time. I will now hand back to you, mister Messina, for any closing remarks.

So I want just to to stress the the sustainability of our results because I think that the the the the the different components of our revenues are managed in in a real, very sustainable way. So with an approach that is not only to optimize revenues for the 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’s 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 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 with the family wealth, so the real triple A part of Italy, that is the savings of 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 Georgetti 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. This concludes today’s conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

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