Earnings call transcript: Monte dei Paschi reports strong Q2 2025 with profit growth

Monte dei Paschi di Siena SpA (MPS) reported robust financial results for the second quarter of 2025, showcasing a significant increase in net profit and operational efficiency. The Italian bank's net profit reached €479 million, marking a 15% rise from the previous quarter. The earnings call highlighted strong product inflows and strategic initiatives, contributing to the company's positive outlook. With a market capitalization of €11.25 billion and trading at a P/E ratio of 4.68, InvestingPro analysis suggests the stock is currently fairly valued based on its proprietary Fair Value model.

Key Takeaways

• Net profit for Q2 2025 increased by 15% quarter-on-quarter to €479 million.
• First half net profit rose 21.4% year-on-year to €892 million.
• The cost-income ratio improved to 45% from 47% in the previous quarter.
• MPS raised its full-year pre-tax profit guidance to over €1.5 billion.

Company Performance

Monte dei Paschi demonstrated strong financial performance in Q2 2025, driven by improved net interest income and a reduction in non-performing loans. The bank's first half of the year net profit saw a year-on-year growth of 21.4%, underscoring its resilience in a competitive banking sector. MPS maintained its market position in lending and achieved a 3% quarter-on-quarter growth in retail deposits. The stock has delivered impressive returns, with a year-to-date gain of 23.07% and a remarkable one-year return of 77.65%. InvestingPro data shows the bank maintains a healthy dividend yield of 11.49% and has received a GOOD Financial Health score of 2.84.

Financial Highlights

• Net profit: €479 million (+15% quarter-on-quarter)
• First half net profit: €892 million (+21.4% year-on-year)
• Gross operating profit: €576 million (+7.6% quarter-on-quarter)
• Net interest income: €551 million (+1.5% quarter-on-quarter)
• Cost of risk: 43 basis points

Outlook & Guidance

The bank has raised its full-year pre-tax profit guidance to exceed €1.5 billion and plans to increase its payout ratio to 100%. MPS is pursuing a strategic acquisition of Mediobanca, which is expected to yield €700 million in pre-tax synergies. The bank is also exploring the potential for an interim dividend policy, reflecting its confidence in sustained fee income growth. According to InvestingPro data, analysts maintain a neutral to buy consensus with a rating of 2.25, while the company's revenue growth stands at 7.36%.

Executive Commentary

Luigi Lovaglio, CEO of MPS, stated, "We present spectacular results with a quarterly profit of €479 million," emphasizing the bank's strong performance. He highlighted the company's advantage in maintaining deep client relationships and its strategic focus on generating significant synergies from the Mediobanca acquisition.

Risks and Challenges

• Potential regulatory hurdles in the Mediobanca acquisition.
• Macroeconomic uncertainties affecting interest rate stabilization.
• Competitive pressures in the Italian banking sector.
• Maintaining low levels of non-performing loans amid economic fluctuations.

Monte dei Paschi's Q2 2025 results reflect its strategic focus on operational efficiency and market expansion, with a positive outlook for the remainder of the year. The bank's commitment to enhancing shareholder value and its strategic initiatives, such as the Mediobanca acquisition, position it well for future growth. For deeper insights into MPS's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which provides detailed analysis of over 1,400 top stocks through intuitive visuals and expert insights.

Full transcript - Banca Monte dei Paschi di Siena SpA (BMPS) Q2 2025:

Conference Operator, Chorus Call: Good morning. This is the Chorus Call conference operator. Welcome and thank you for joining the MPS Group Second Quarter and First Half twenty twenty five Results Presentation. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.

At this time, I would like to turn the conference over to Mr. Luigi Lovaglio, Chief Executive Officer and General Manager. Please go ahead, sir.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: Thank you very much. Good morning, Thank you for joining us today for the presentation of our second quarter and first half twenty twenty five financial results. Today, we present spectacular results with a quarterly profit of $479,000,000 and nearly $900,000,000 in the first half of the year. These numbers show our tangible capability to deliver growth, high profitability and strategic clarity. This clarity of purpose is really paying off for customers, employees and increasingly for shareholders.

Our advantage lies in our deep client relationship developed by a unique and very powerful distribution network that delivers high quality revenues and rising fees contribution. Building on the strong results of the first half, we continue to lead with a strong core Tier one ratio of 19.6, a position that further validated by recent stress tests. Even under adverse scenario, our bank ranks at the top of the sector in Italy and Europe. We have built what they call a Fortesa, a robust balance sheet capable of protecting Monte Paschi and creating opportunity for decades to come. Our profitability is accelerating to strong commercial activity.

With this solid foundation and on the back of excellent first half performance, we have raised the bar for full year 2025 and now expect pretax profit to well exceed 1,500,000,000 This is a clear sign that Monte PASC is delivering a real and growing value. With this awareness, we confirm our determination to create a new leading competitive force in the Italian banking system through our offer for Mediobanca, which is now live in the market. Through this extraordinary combination with Mediobanca, we will generate a superior sustainable value over the long term, offering certain returns to both sets of shareholders. The know how and distinctive skills of Mediobanca will perfectly complement those of Monte Paschi. This commitment is supported by Monte Paschi shareholders endorsement and the confidence we have that the tangible, immediate and sustainable value of our offer will be appreciated by Mediobanca shareholders.

Now, let's dive into today's results that showcase our ability to deliver on our promises. First, some key highlights. Net profit for the second quarter hit $479,000,000 up by more than 15% on the previous quarter, bringing the results over six months nearly to $100,000,000 plus 21.4% on the previous year. The key driver was the strong operating performance visible in the net operating profit dynamic. Gross operating profit reached $576,000,000 up by 6.7% quarter on quarter, thanks to growing income and flat cost dynamics.

After six months, total revenues reached over $2,000,000,000 allowing us to more than offset an increase in operating cost and keep the overall level of gross operating profit higher than the previous year. We saw strong commercial performance in key strategic areas. Wealth management gross inflow in the six months were close to 9,000,000,000 up 20% year on year. We granted mortgage worth $3,500,000,000 in the first half, double last year volumes, helping Italian families achieve home ownership while building a high quality loan portfolio. And the new consumer loans show a 20% increase compared to the same period last year.

These are all tangible signs of a bank deeply connected to its client in the real economy. Further improvement in asset quality was achieved with the overall reduction of 500,000,000 in non performing loans stock, for which over $300,000,000 was through the sale of a portfolio that was just finalized with economics already included in our results. Our cost of risk dropped to 43 basis points from 53 last year and it is tracking in line with our guidance. Our liquidity position remains sound and our core Tier one ratio at record level of 19.6 provide a significant buffer above requirements. Multipasc stands among the strongest bank in Italy and Europe, a position that creates strategic flexibility and competitive advantage.

Now, let's move to more details of our results. As I've just mentioned, the profit of the first half of the year reached €892,000,000 up by 21.4% year on year excluding the positive net tax in both periods. Results are sustained by a strong commercial activity, which confirm the solidity of our business model and Monte Paschi strength. The results were supported by excellent second quarter with net profit of €479,000,000 with an almost plus 16 growth versus the first quarter twenty twenty four if we exclude net taxes. Now, moving on to the next slide, where we are presenting the net operating profit, which after six months amounted to €956,000,000 showing a positive trend growing plus 4.3% year on year, thanks to higher revenues with increased net fee income contribution, thanks to the strong commercial effectiveness of our franchise.

The net operating profit amounted to EUR $488,000,000 in the second quarter, growing by 9.1% quarter on quarter, thanks to increased revenues, effective cost management and lower cost of risk. Now, let's move to gross operating profit, which reached $576,000,000 in this quarter, increasing by 7.6% quarter on quarter. It was driven by almost 4% revenues grow in the quarter and affecting management operating cost. Cost income ratio has improved to 45% compared to 47% in the first quarter. For the 2025, gross operating profit crossed more than 1,100,000,000.0 up compared to the previous years, thanks to the growing revenues driven by net income.

This grow allow us to more than offsetting the increased cost impacted by lower contract renewal and higher variable remuneration pool. This again demonstrates our disciplined approach to both cost and revenue generation ensuring steady performance even in a competitive context. For the 2025, we maintain the costincome ratio that underlines our focus on operational discipline. The solid metrics support our strategy to deliver sustainable profitability over the medium to long term. As I mentioned, all the financial results have been achieved thanks to the commercial activity of our network focused on key strategic areas and delivering results in a very sustainable manner.

Just to comment on some KPIs. Total commercial savings crossed 171,000,000,000 and were higher by approximately €4,000,000,000 since December 2024. Well management gross inflow amounted to almost $9,000,000,000 in six months, up by 18% year on year. New retail mortgages granted in six months reached EUR 3,500,000,000.0, 2.5 times compared to the 2024. New consumer finance flows amounted to almost $690,000,000 with a 20% year on year dynamic.

This achievement are another confirmation of solidity and validity of the multi task network. I would like to say thank you to our colleagues for the excellent results achieved. Now, let's have a look to the net interest income evolution. The net interest income on the second quarter amounted to €551,000,000 and was up by 1.5% quarter on quarter, thanks to lending volume expansion and further optimization of cost of funding, allowing it to compensate negative impact on rates reduction on loans. In the 2025, net interest income reached $1,094,000,000 with the yearly trend of in line with the guidance given to the market at the beginning of the year.

Now, at the volumes, let's start with loans. We are reporting again very strong net loans dynamic in the quarter with the growing retail, a small business component by €1,500,000,000 which gives plus 2.4 dynamic quarter on quarter with almost 5% growth since the beginning of the year. Such a growth was possible thanks to the strong commercial activity in key strategic segment and this part of our strategic approach to mitigate the impact of decreasing rates on net interest income trend. We were also able to increase market share since the beginning of the year. Now, moving on commercial savings.

The total commercial savings in June exceeded the level of $171,000,000 are up by more than $4,000,000,000 in the second quarter, supporting the performance year on year and the performance year to date. The growth is reported across all components including also deposit which is confirming the solid funding base and effective approach in managing the trade off between volumes and prices. Looking at our portfolio of Italian govies, I can say that practically we are consistent with our approach. The portfolio is almost flat, showing that we are using this portfolio as a support to our liquidity. Now, let's move on to fees and commission income.

Total fees after six months are quite impressive in Test and Dynamic. If we look at the quarter, we reported in the second quarter an amount of $4.00 $5,000,000 total fees up by 1.7% with a significant contribution that came on commercial banking fees. Wealth management fees in some way were affected by a significant component in the first quarter connected with the sale of some institutional bonds. If we look at the performance after six months we see the total fee reached a level of $8.00 $3,000,000 and were higher by 9.1% year on year thanks to the strong performance in well management and advisory fees, which increased by almost 14% year on year, with a positive dynamic cost in commercial banking fees increasing by 4.4%, thanks to the excellence of commercial network and the strong focus on key areas of our business. Now let's move quickly on to costs starting with the quarterly evolution.

Regarding in the second quarter, costs amounted to EUR $471,000,000 and were marginally lower quarter on quarter with practically stable quarter on quarter HR and non HR components. Overall, the level of cost is reflecting the continuous focus on non HR cost management optimization, effect of which are even more visible when we turn to the early evolution. Total operating cost in six months amounted to $943,000,000 and were higher by 2% year on year with the growth driven by the HR component, which is up by 5.3% year on year, reflecting the impact of the renewal of the labor contract and the variable remuneration pool increase. The increase is partially offset by the effects of efficient cost governance approach in non HR costs that allowed to reduce this component by 4.4% compared with the 2024. Now, let's move on gross NPE stock.

The quality of our portfolio remain under control and this positively impacted by the sale. We completed in the quarter of $300,000,000 of portfolio that enabling us to decrease the total stock by $500,000,000 in the quarter. Gross NPE ratio pro form a at 3.7% and the net NPE ratio pro form a at 2%. Cost of risk was at 42 basis points in the second quarter and then cumulative terms after six months amounts to 43 bps 53 bips reported for the whole year 2024. As I mentioned at the beginning, we are completely in line with our guideline, and we are confident that we will keep this pace up to the end of the year.

NP coverage performance stands at 46.7% after the $300,000,000 disposal with a bed loan coverage pro form a reduced to 61.6 and with the coverage likely to pay and past due above the level of December 2024. Now, funding liquidity, you can see from the slide that the solid liquidity position of the bank. Even in the quarter, we have an encumbered counterbalance capacity at 31,000,000,000 We are reducing ECB funding share at the level of 6%. And we have a significant improvement in the coverage ratio that reached 169% and net stable funding ratio at the level of 132%. Both indicators are reflecting the solidity of our funding structure.

We successfully also completed in the first half the issuance of $1,700,000,000 bonds in line with our funding plan. Now, a couple of words on capital. Our consistent and strong capital position is reflected in the common equity Tier one that is reported at the level of 18.6%. It's important to mention that we kept this level of capital despite an increase of risk weighted assets connected with the strong activity of the second quarter. The buffer is really impressive at the level of eight forty bps compared to the requirement.

A few words on EBA stress test results. We achieved the best ever results in 2025 stress test with a fully loaded CORTIER-one ratio of 16.83 in the adverse scenario in 2027, significantly above both in the European average and in the Italian average. I think this is a further confirmation of the capability of the group to generate capital in a very sustainable way with our quality of revenues that give us the strength to look forward with a lot of confidence about the potential we have by using the capital that we have at our disposal. Now, let's move on to the Mediobanca exchange offer. So, our timeline remains on track.

The consideration involves 2.533 newly issued ordinary shares for every Mediobanca share 1,000. Our goal is to acquire at least 66.67 of Mediobanca's share capital. This transaction represents a unique growth and value creation opportunity with a compelling financial proposition. We will generate approximately $700,000,000 per annum in pre tax synergies. We will accelerate the activation of DTAs of around 500,000,000 per annum for six years.

We expect double digit accretion on adjusted earnings per share. And our organic capital generation enables 100% dividend payout with accretive dividend per share of around 20% compared to the Mediobanca standalone proposition. The dividend yield is definitely in the range of 11% to 12% among the highest in the European banking sector. The pro form a core Tier one remains strong at the level of approximately 16% throughout the plan even with full payout providing significant excess capital for strategic flexibility to capture other inorganic opportunities or enhance shareholder remuneration. Mediobanca shareholders by tendering their shares would also benefit from a significant side potential of Monte Paschi stock re rating.

The industrial logic of combining Montepasque plus Mediobanca is crystal clear. The deal will position us as Italy's lending player with a balance sheet ready to capture future opportunities. The combination will be a more resilient and diversified banking group with a fully fledged offering of products and capabilities for a full range of small business, corporate, families and institutional clients and with a strong capacity to invest in new technologies. The transaction will support the development of Corporate Investment Bank and wealth management division, which are currently facing competitive pressure. It will open new horizons for consumer finance and provide a state of the art digital platform through Banco Udiba to fully exploit Mediobanca Premier's potential.

It will deliver benefits to the Italian real economy as well. In conclusion, our second quarter and first half twenty twenty five financial results highlight our strong performance, commercial strength and efficient business model. With a quarterly profit of €179,000,000 and nearly €900,000,000 in the first half, we have demonstrated our ability to deliver a sustainable growth and high profitability. So, on 18.6% reinforce our financial strength and our risk profile further significantly improved. For full 2025 year, as I said, we raised the bar of over €1,500,000,000 driven by our strategic initiatives and strong commercial performance.

Now, let me address Medivanka shareholders directly. I would like to take the opportunity to be clear and clear on the advantages of our combination. Our model with multi PASI plus Mediobanca is broader and more diversified, which makes earnings more resilient. We offer a stable growing platform with clear prospects. This from the day one.

And from day one, we always reaffirmed our value proposition because we firmly believe it will generate superior growth and value on diversity. Mediobanca side instead moving bank at four, what we observe is an increasingly erratic strategic approach, position that shift without clear rationale, condition that changed suddenly and defensive posture that prioritize protection over value creation. This stands in stark contrast to our consistent, transparent and value focused approach throughout this entire process. Our offer is not about replacing Mediobanca's strength. We respect what these talent people have built over the past eight years.

This is about unlocking their potential by combining them with Monte Paschi scale, balance sheet strength, and retail reach to create something neither institution can achieve independently. We have a track record to deliver on our promises that I believe is the basis of the trust and why endorsement we gained from our shareholder. And thanks to them, we are moving forward. But the real reward is the future. Following this business combination, we will multiple value creation levers at our disposal, accelerated on organic growth, strategic opportunities from additional growth from a position of strength, and we will have the flexibility for additional shareholder distribution as we optimize our combined platform.

Looking ahead in the changing banking scenario to tender Mediobanca share to Monte Paschi means becoming part of a future where we build a stronger, resilient, more competitive and prosperous banking institution together. Thank you for the attention and I look forward to your question.

Conference Operator, Chorus Call: Thank you, sir. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. To remove yourself from the question queue, please press star and 2.

Please pick up the receiver when asking questions. The first question comes from Ignacio Urlagui of BNP Paribas.

Ignacio Urlagui, Analyst, BNP Paribas: Thanks very much for the presentation. I have three questions, if I may. I mean, the first one is on the operational performance, which was quite strong in the quarter. Just wanted to get a bit of a sense of the strategy on deposits I have seen. Current accounts growing 3% quarter on quarter, there has been a very solid performance on that side.

Well, that that is kind of the driver to go in terms of improving funding cost and trying to reduce or to balance out a bit the decline in in rates? And how should we think about NII? We have seen the bottom in this first half. Should we expect NII stabilizing here or growing from here? The second question is on Mediobanca and Banca Generali.

I just wanted to get a bit of a sense of how do you see that deal and what would be the implications for you? And finally, one very quick comment on on capital. I mean, why you are not upgrading further the payout ratio of of the bank given the 18.6% CET1 ratio? Thank you.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: So let's start from deposits, right? So as I mentioned during the previous quarter, it's clear that we have a tactical and strategic approach on the side of deposit. Having in mind that for us, it's quite important to grow and to have a positive trend in retail deposit because our strategic for our future growth, and particularly on the side of potential conversion on asset management products. But clearly, we want to leverage on that in order also to further improve our net interest income dynamic. So we pay a lot of attention to price, particularly on the side of proper deposit where the trade off has been managed quite actively in the second half of the year.

So going forward, we think that we can keep growing in market share as we are doing from the beginning of the year, but again, particularly focused on retail. Despite this intention, we feel comfortable to confirm the guidance regarding the net interest income for the end of the year. So we were mentioning high single digit decrease and this is something that we confirm. Hopefully, we can do also slightly better. It's clear that for the next quarters we expect a further growing average lending volume with a substantial stabilization commercial spread in the fourth quarter.

Thanks to that and based on what we are observing on the market, we believe that this trend will further find the stabilization in 2026, so that we are fully in line with what we were mentioning at the beginning of the year and also in the first quarter. So the situation is really progressing according to what were our expectation. So, the deal Mediobanca and Banca Generali, honestly, I would like not to comment on that now, considering that today, a Board has probably just started and the company expected to issue a press release later. And as Mediobanca mentioned, the outcome is crucial for eventual next steps on the transaction on Banca Generali. So about the payout ratio, it's clear that in the plan, in the combination with Mediobanca, we were already committed our committing ourselves to get to increase both payout ratio that originally was 70 fiveseventy, then Mediobanca changed.

But anyway, we said as I mentioned, we committed to increase payout ratio to the level of 100%. It's clear that looking at the results, we are reporting in the strong capital position, we are considering to anticipate this increase of payout ratio also for the current year.

Ignacio Urlagui, Analyst, BNP Paribas: Thank you very much.

Conference Operator, Chorus Call: The next question, sir, is from Luis Bratas of Autonomous Research.

Luis Bratas, Analyst, Autonomous Research: Good morning, everyone. Thank you for taking my questions. My first one is on the 2025 guidance, please. So you essentially raised the pretax profit guidance to higher than EUR 1,500,000,000.0. However, if I look at the first half twenty twenty five run rate, the pretax profit is already at EUR 1,700,000,000.0, so annualized.

So I wanted to understand a bit better the trajectory in the second half of this year, In which areas do you expect a decrease in the P and L? And maybe if you could provide a more specific 2025 guidance across the main P and L lines, I'm thinking about fees, costs, cost of risk, it will be very helpful for us. And then, my second question is on M and A as well. I just heard your comments that you prefer to wait the general communication. But given that this combination with Mediobanca is involved with so much hostility and if we look at the Italian banking market right now with Banco BPM now free, I just wanted to be direct and ask you if you could consider refocusing on your M and A ambitions and maybe walk away from this Mediobanca deal and actually target Banco BPM?

Thank you.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: Okay, so I think normally as I was mentioning last time, no, the third quarter we have August and fees and commission have some seasonality as usually we are seeing. As well, we were mentioning that net interest income will have a single high digit. So it's clear that, as I mentioned, stabilization in the fourth quarter, but still in the second half of the year net interest income is expected slightly to decrease. And then when we mention the overall landscape, it's clear that it's not proper to double the results of the first half historically. And normally, when you make this kind of forecast.

And anyway, we were clearly stating well above 1,500,000,000.0. I'm not sure I understood well your question regarding the intention for us to give up the transaction on Mediobanca, I'm not sure because there was a bad hearing, right? So we are a serious institution. Particularly focus in building up the third competitive force in the Italian landscape. And as I was mentioning, we are quite determined.

And from the beginning of the year, all the organization, all the management team, all the board of director is completely focused in getting this result. And we are fully convinced, motivated, and committed to achieve it. But probably I didn't understand well your question. Anyway, this is the answer according to what I heard.

Conference Operator, Chorus Call: The next question, sir, is from Hugo Cruz of KBW.

Hugo Cruz, Analyst, KBW: Hi. Thank you for the time. Hope you can hear me. I have four questions. First question on NII.

Can you remind us what are you doing in terms of hedging? And what is the yield of the bond portfolio? Second question on fees, a very strong beat in 2Q. Although it looks to me like it might have been from repricing of commercial banking fees. So I was just wondering if this fee growth was kind of a step up from the repricing and we shouldn't expect such growth going forward or is there something else that I missed?

Third question on you mentioned that you could anticipate the 100% payout already this year from dividends. I was wondering, is that dependent on the outcome of the Mediobanca offer or will happen regardless? And when can you actually confirm any

Ignacio Urlagui, Analyst, BNP Paribas: increase in

Hugo Cruz, Analyst, KBW: the payout? And finally, on the Mediobanca offer, if you could remind me what synergies do you expect if you end up controlling less than 50% of Medivanka? Thank you.

Unidentified Speaker, Monte dei Paschi: Hello. Hi, good morning to everybody. As regards the first question on hedging, actually, what we're doing, we are, let's say, putting in place hedging strategies to manage both NII sensitivity in the short term and EV sensitivity in the longer term, managing the trade off between the two. Particular, as you know, our hedging strategy is mainly based on natural hedges. And so we are supporting this respect by the strong flows of mortgages since the vast majority or almost all, like 99% of the new flows of retail mortgages is at fixed rate, and this help us to manage NII sensitivity in the short term.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: Okay. So I will answer about the fees and commission trend. It's clear that we were saying from the very beginning that the fees and commission are part of our focus and strategic driver also in the business plan we presented last year. We strongly believe that we have to keep this pace and we have the possibility to do it because it's result of some investment we put in place in terms of way how we deal with customers also on remote way. That's why we are quite confident we can keep the pace, having in mind only that, as we mentioned, there are some seasonality connected with the fees and commission.

Anyway, we expect to keep the pace achieved in the first half. As I said, with this one or two weeks where necessary in August we are going to have this seasonal approach. But I believe that by maintaining the focus on lending activity both in consumer lending and corporate as well concentrating on the growth on wealth management products, we are confident we can keep a very good level of fees and commission in the second part of the year. I think it's worth to mention that the results are not connected with any repricing action. I think in the last two years we didn't do any even massive change of tariffs.

It's just because we have a very strong commercial activity. We have a team that is particularly focused in improving further developing relation with our valuable customers. So fees and commission is our focus and we will keep the pace going forward. So regarding the payout, we were just mentioning that it's something which we are clearly thinking is normal to see how we'll evolve the second part of the year in terms of performance. But we are confident that we can anticipate the payout ratio to 100% in 2025 already.

Then regarding the threshold, right, we were saying that our goal is to achieve at least 66.67%. And clearly, are going in this direction because we believe that this the outcome of our offer will be very positive. But just as information, if even below 50%, we will get synergies despite would take a bit longer period of time. But as we were very conservative in fixing $700,000,000 I believe that by entering and having a better view from the inside of Mediobanca, we can review also this amount of synergies and practically even getting the same amount in the first three years with a level that is even below 50%.

What the only thing is changing is the DTAs because in order to get the acceleration, we need to be above 50% in order to have the consolidated balance sheet. But even below 50%, the synergies will accelerate compared to Monte Paschi's stand alone situation. So only positive message on the side of the deal. I forgot to answer to the question

Unidentified Speaker, Monte dei Paschi: on the yield of the banking book securities. Our value and cost portfolio of the banking group of around EUR 9,000,000,000 has an yield an average yield of 3%.

Conference Operator, Chorus Call: The next question is from Andrea Lizzi of Equita.

Andrea Lizzi, Analyst, Equita: Hi, thank you. Just a couple of questions from my side. The first one, if you can update if you can provide us the amount of inflows that you reported in the quarter and if you can update on the upfront fee component on the

Luis Bratas, Analyst, Autonomous Research: investment

Andrea Lizzi, Analyst, Equita: fee side? The second is if you can provide any update, if any, regarding the bank assurance agreement with AXA if there are news on this side? Thank you.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: Okay. So the upfront fees the upfront fee are practically at the same level of the previous quarter, more or less. We are discussing about a level of 40%. On AXA, we can just confirm what we were saying in the previous quarter. We have a very good partnership with them.

We are keeping growing in the inflow of Bancassurance product. It was quite positive in this quarter. The contract isn't going to expire in 2027. And then we will have a constructive approach in order to understand what we are going to do for the time. So, I mean, it's early now.

Clearly, have a lot of flexibility that is coming from the strong position of capital, our strong network and capability and the historical skills in order to place this kind of product. Moreover, if you're going to have also this deal up and running with Mediobanca, we can have also a further optionality that is coming from Generali provided that Generali will have the intention to set up a partnership also with us. So, and I think I mentioned already the total inflow of well measured products in the first half was EUR 9,000,000,000 almost. It's a very I think I don't like to say record, but it's an impressive achievement. And as we want to keep growing, we are not using this expression because the potential of this network is really limited.

And so we don't want to set even to us any bar in terms of results. Thank you.

Conference Operator, Chorus Call: Mr. Lovaglio, there are no more questions at this time, sir. Back to you for any closing remarks. Excuse me, sir. There is a question from Manuela Meroni of Intesa Sanpaolo.

Yes. Sorry, just to clarify, could you please repeat the amount of upfront fees in this quarter and compare with the last year, please?

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: So as I mentioned, the percentage is the same, it's 40%. If I remember well, last year was around in the second quarter was around EUR 50,000,000 on 130,000,000 of total fee. And this time, I think, is around EUR 70,000,000 on the total EUR 148,000,000, 49,000,000. So the percentage is the same.

Conference Operator, Chorus Call: Thank you. And we have another question from Fabrizio Bernardi of Intermonte.

Fabrizio Bernardi, Analyst, Intermonte: Hi, everybody. Just one a couple of very small questions. The first one is that you closed your balance sheet in December, while Mediobanca in June. So I would try to ask whether Mediobanca could change its, let's say, accounting strategy in order to check the one of Monte Dei Paschi. And then the second part is that you said that the payout policy is going to be 100% in the very short future.

But I'm also saying that Mediobanca is paying an interim dividend. So I would like to understand if you want to couple also with this kind of situation.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: No, it's clear from accounting point of view, we have 25 to date of the balance sheet. So it's something on which we are analyzing and preparing work for doing it. And okay, so as I was mentioning, it's clear the payout is one of the aspect on which we are now considering. And clearly, wouldn't like to be in a position less positive for shareholders compared to what shareholders and Medivanc are today. So I believe that also we can think looking forward 2026 also to the approach adopted by Medibanco of interim dividend policy as well.

Fabrizio Bernardi, Analyst, Intermonte: Okay. Thank you. One more question about the cost of risk. We have seen in this quarter that the cost of risk is better than before or than ever for the Monster de Paschi di Ciena. I was wondering whether maybe I missed previous questions, but I was wondering whether you can drive us through the cost of risk in the next coming quarters.

I think that the asset quality profile is extremely good at Monte dei Paschi. But maybe you can try to guide us, giving us some colors about the cost of risk.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: No, I think I was mentioning that the profile of the bank is continuously improving. Our risk profile of bank is continuously improving. Then we sold we reduced EUR 500,000,000,000 NPE portfolio. We have intention to further decrease the stock. The signs are coming from the current stock portfolio performing quite positive, encouraging and the new lending, especially on mortgages, extremely positive.

So we want to keep the trend of continuing decreasing the cost of risk. But as I mentioned, we believe that below a certain level is not prudent to go. And it's better to put some additional buffer in the balance sheet, having in mind that we want to keep a strong position looking forward in the coming years. But the quality is really improving and the current cost of risk and what we plan has a significant buffer, for phasing more difficult period of time.

Fabrizio Bernardi, Analyst, Intermonte: Okay, thank you very much.

Conference Operator, Chorus Call: Mr. Lovaglio, at this time there are no questions registered, sir.

Luigi Lovaglio, Chief Executive Officer and General Manager, Monte dei Paschi: Okay, so thank you very much. Looking forward to see you as soon as we can. And thank you and have a good period of holiday. Thank you.

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

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