Banco BPM S.p.A. (BAMI) Earnings Call Transcript

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Group 9 Months 2026 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.

Good evening, everyone, and thank you for joining Banco BPM conference call to present the results for 9 months 2026. Banco BPM, the presentation will be hosted as usual from -- by our CEO, Mr. Castagna, and our Joint General Manager and CFO, Mr. Ginevra. Let me remind that the documentation will be available on our website, still -- available on our website under the Investor Relations section. I'll now hand over to Giuseppe.

Thank you, Arne. Good evening, everybody. Thanks for being with us. Happy to present a very good 9 months results at a record level for profitability and shareholder remuneration. These are results based on long-term value creation on robust fundamentals, as you see in a few minutes. Let's start from net profit. Let me talk of adjusted pretax net profit because, of course, you know there is some issue about [indiscernible]. So the first result is that in the 9 months '26, we registered 80% of growth vis-a-vis 9 months '25. And if we go back to '21, we have a 19% CAGR, thanks to improved revenue mix. Of course, you know very well our track record in fee income and product factory together with a reduced cost income and a very low cost of risk. The adjusted net income after a tax rate that for this year is 34% vis-a-vis the average 31% of the previous 5 years, is, in any case, better than last year, the EUR 1.53 billion, compared to EUR 1.49 billion. These results, again, are driven by excellent commercial achievement, both in terms of customer loans, plus 4% year-on-year on current account and deposit, again, plus 4% and indirect funding, plus 7% with a gross NPE ratio below EUR 2 billion at EUR 1.9 billion and a net NPE ratio to 1%. And the capital, which is still well above 14%, 14.27%. This brings us to a net income of EUR 1.5 billion, which allow us to confirm about the guidance to above EUR 1.95 billion for '26. The guide -- the interim dividends confirm that EUR 0.50 per share, which amount to EUR 750 million with an increase of 8.7% vis-a-vis last year interim dividends, which was EUR 0.46. Also the guidance for this year, we can confirm this increase to above EUR 1. The total remuneration for our shareholder is increased as we anticipated in the presentation of 6 months to -- from EUR 6 million to EUR 7 million, which leaves us for the next 18 months to deliver EUR 4 billion of remuneration for our shareholders, which means almost 20% of our current market cap. This, of course, is including the inaugural share buyback, which those amounts will be determined following ECB approval. On Page 7, let's check what is making the difference is a combination of increase of revenues through diversification coupled with progress in efficiency, in terms of cost income and reduced cost of risk. On the left part of the slide, you can see our total revenues grew 2% year-on-year having non-NII revenues growing from 49% to 50%, which amounts to [ 52% ] if we consider NII at full funding cost. In the last two years, so following the acquisition of [ Anima, ] the non-NII revenues grew 39% versus last year, 4%. This allowed us to compensate the reduction in NII coming from the reduction of inter rates in the last two years from EUR 2.6 billion to EUR 2.3 billion. The excellent performance in non-NII revenues come from EUR 650 million in the last two years coming from total NII -- non-NII revenues, driven by the increase in product factory from EUR 700 million to EUR 1.19 billion, which means EUR 470 million of increased amount. The cost went down 2% year-on-year. The total cost income went down from 46% to 44%, and also -- and on the cost of risk from 34 basis points of last year to 29 basis points of this year. The net NPE ratio, I was mentioning before, is down to 1%. Let's have a look to the commercial volumes momentum, which is doing very well, not only in core dairy funding where we are experiencing 4% of growth year-on-year, which is quite the natural growth -- pace of growth for our bank, coupled with inter-customer funding for 7%, which means [ EUR 7 million ] of net inflows, coupled with only EUR 1.5 billion of market effect due to the market -- to the volatility of the market. But the good news is the increase in the growth in core performing customer loans, which grew 3.7%, and the new lending for this year in the first 9 months amount to EUR 21.3 billion, of which EUR 7.5 billion in the third quarter '26, which is plus 32% compared with third quarter '25. Asset quality, again, it was mentioned the results of going down EUR 2 billion. To mention that in the last 22 quarters, we were the only bank to have experienced a reduction in the NPE ratio, constant reduction quarter-by-quarter which is a sort of a unique case amongst our competitors in which the second best performer was able to reduce for 7 times in a row the NPE ratio. This shows our attention to risk, to loan growth done with a lot of focus on quality and as we'll see, I had also on profitability. The net bad loan ratio is down to 0.3%. And if we exclude the NPEs with state guarantees, the net by the loan ratios is before 1 basis point. This is also thanks to a very good default rate, which is down to 0.71% together with a reduction also Stage 2 loans, which are down from 8.1% to 7.5%. Capital on Page 10. Again, we want to show how in the last 21 months, we were able only to recover more than 240 basis points of negative impact due to the [ Anima ] acquisition coupled with more than 60 basis points of regulatory headwinds, notwithstanding that. And so starting from 12% after the headwinds were able to recover up to 14.27% calculating assuming inclusion of retaining profit based on 80% payout. As you know, we were asked the base to consider -- to not consider the inclusion of interim profit until they will authorize us to the share buyback capability. So the stated common equity Tier 1 is now 13.8%. Let's go to the profit and loss on Page 12. You can see both the quarter-on-quarter year-by-year. And the year-to-date, basically, both are growing between 1% and 2% in core revenues, operating costs are minus 2% both year-on-year and quarter-by-quarter. The profit -- pretax profit are up to 7.5%. And of course, for us, is quite normal now to talk about pretax profit due to the taxation that has been applied in '26 and recent maneuver of '27, which are not already known exactly in the impact they will do for this year and next year. Of course, the taxes are increasing of EUR 120 million in 9 months, leaving us with net income stated of [ EUR 1.513 billion ] on 9 months and EUR 453 million in Q3 compared with EUR 450 million of Q3 '25. Let's have a look from -- at the growth that we had in terms of profit from pretax. As you can see, on a yearly basis, we were able to grow EUR 164 million, mainly due to non-NII revenues for EUR 90 million, reduced operating cost for almost EUR 40 million and total provision reduced for EUR 35 million. The effect of the NII is -- will be much more evident, starting, of course, first in this fourth quarter, but especially in 2027. And I will go again on this when we'll talk about NII. As you can see, the growth is supported again by a combination of non-NII revenues growth with a cut in cost and lower provision in cost of risk. Let's go at NII on Page 13, an increase of 4.6% on a quarterly basis year-on-year. 0.9% in 9 months for this year, which comes from an increase of the commercial spread, which is going up from 3.03% to 3.21%, mostly -- basically, thanks to liability spread. As you can see, the asset spread is going down from 1.43 to 1.41. But this is not due to a negative repricing or the new loans as we will see in a minute but by the early reimbursement of the loans with higher spread. The sensitivity is always around EUR 150 million to say exactly now we are at around EUR 160 million. This is due to the reducing of replicating portfolio, down from EUR 27 billion to EUR 25 billion and reduction of the index current account which now amount to 34% versus 37% of December '25. The contribution to reduction of NII to the -- sorry, to the increase of NII came also from the reduction of the cost of new wholesale bonds issued this year. As you can see on the bottom right side of the page, you can check all the different class of bond issued by the bank, which from covered bond to [ 81, ] experience always a big reduction, not only in terms of the previous issuing in '25, but of course, especially if you compare it to the issue down in '24. Let's have a look to the lending volumes. Year-on-year, again, 3.7% year-to-date is 2.5%. The main contributor to this increase are the nonfinancial corporates, which are up 4.5%. Always with a very low risk profile due both to the footprint of our clients, 72% in North of Italy, and also to the big part of loans secured, as you can see, 46% of our loans are secured, of which 23% with state guarantees. If we go to small business, this 46% increased to 62%. New lending, EUR 7.5 billion in Q3, basically the same amount but much higher of the EUR 5.7 billion of Q3 '25. And as you can see on the bottom of the [ Instagram, ] this is also coupled with an increase of spread applied. So we passed from 1.41% of spread in Q3 '25 to 1.52% of spread, the asset spread for the new loans issued this year. This should bring soon to a recovery also on the total asset spread also because the the increase in [ Euribor ] will most possibly not bring to early requirement during 2027. Net fees up 5.6% year-on-year as far as investment product fees are concerned, which now represents 51% of total fees. If we go into details, you can see that on a yearly basis, the big contribution was brought by animal contribution plus EUR 40 million and by the running fees, which grew EUR 22 million on a yearly basis. Meanwhile, we have a reduced contribution for only EUR 6 million in the upfront fees, which I can anticipate will be fully recovered already in Q4 '26. The investment product sales was EUR 17.3 billion, slightly higher than 16.9% of last year. And this pace has been confirmed also by the October investment sales product in which we registered EUR 2 billion our sales, together with sales of EUR 1.1 billion of BTP. The same kind of increase and reduction, you can see also on a yearly base quarter-on-quarter. Talking about other fees, we have basically still the final impact of Ecobonus, which are phasing out by the end of this year, EUR 130 million lower than last year. Meanwhile, we have a good increase in payment system, plus [ EUR 16 million, ] together with good fees in trade finance which almost offset the reduction in structural filing for lower volumes due to marginal interest rate. Let's have a look to our growth in the total customer financial assets. This is driven especially by a very good performance of our commercial network in which we grew 4.9% year-to-date at 2.2 -- sorry, year-on-year and 2.2% year-to-date. On a yearly basis, we're able to grow EUR 11 billion, which are basically mostly represented by net inflows and increase of deposit for almost EUR 5.5 billion. Meanwhile, Q-on-Q, we had a very good contribution for net inflows of almost EUR 2 billion, but offset by a negative market effect in last quarter for EUR 1.6 billion. If we include [ Anima ] total customer financial assets, we grew to EUR 395 billion, of which EUR 208 billion are account for [ Anima, ] which register almost EUR 5 billion of reduction, all entirely coming from market effect for EUR 5.7 billion. The contribution of [ Anima, ] as I mentioned before, is still very good for the bank. We have a contribution to total revenues of 14% higher vis-a-vis last year and 22% in terms of net income. We mentioned the increase of product factories contribution. Let's have a look again over the last 2 years basically comparing the acquisition before and after any acquisition, as you can see, we have been able to reach almost EUR 1.2 billion of contribution in 9 months '26, which is, again, EUR 450 million plus vis-a-vis 2 years ago and EUR 90 million plus vis-a-vis 9 months '25 and now represent 26% of the total contribution to to our revenues. As you see -- you can see the [ EUR 1.191 billion ] contribution. These 9 months is basically has basically reached the target for '26. Meanwhile, we have another EUR 90 million, EUR 100 million to increase next year to match our target for '27. But again, EUR 90 million is the usual pace of growth that we have been registering during '26. Let's talk about cost discipline. A very good result, minus 2%, driven by staff costs, minus 3%, mainly thanks to positive contribution from voluntary exit schemes. Meanwhile, we have basically an even results in terms of other administrative expenses and D&A with reduction in terms of -- as and a small increase in terms of D&A due to the increase in investment for technology investment, IT investment. Page 19, some more detail on the good performance of cost of risk and reducing NPEs. Here, you have a bit more of detail about the different gross NPE ratio, net NPE ratio. And on the bottom side, the NPE ratio, excluding state guarantee, which amount in terms of net total NPE ratio to 0.5%. And again, net bad loan ratio at 0.09%. So basically, we don't have any more bad loans in terms of net bad loans. The results driven to cost of risk, which was reduced from 40 basis points full year '25 to 29 basis points, thanks to a reduction of default rate from 0.84 to 0.71 and an increase in cure rate from 5.64% to 7.32%. The consistency in continuing to reduce NPE and providing support with provision led us to increase the NPE ratio coverage ratio at 47.4%, which increased to 58% for NPEs and 80% bad loans in terms of NPEs without considering state guarantees. I leave the floor to Edoardo for the financial results.

Thanks a lot, Giuseppe. Now let's go to the contribution of NFR, net financial result went from 98 to 129 in the 9 months of this year. The improvement has been made possible by the reduction in cost of certificates, which now are EUR 91.5 million, a very strong resilient contribution remains from the remaining -- from the other part of the net financial results, which were as high in the 9 months, is EUR 221 million. The level of securities in the banking book remained very constant, very similar to the previous quarters. We are now at EUR 46 billion, 28% represented by February comprehensive income, 72% represented by amortized cost with share of Italian govies as in -- as usual, in our recent history, below 40%, now at 38.8%. Turbulences in the financial markets have determined a reduction in the fair value of other comprehensive income reserves after the improvement we have in the second quarter, we were now below level we had. We experienced in the beginning of the year and now we're at EUR 429 million. We undertook a series of actions to manage the risk of these reserves, reducing the BPB the basis point value at EUR 1.64 million. End of September used to be EUR 2.50 million end of June. These reserves -- these negative results do not represent long-term risk of our capital, bearing in mind taking into account that almost 100% of them are represented by investment-grade bonds, corporate account for only 6% of the total, 16% is Italian govies, 78% of negative reserves is due to non-Italian and supernational bonds, all of them have been investing way. The 60% of this negative level of EUR 121 million is expected to be reabsorbed by 2029 owing to the pull-to-par effect. Liquidity is -- continues to be very solid. Total cash position is at almost EUR 49 billion with a reduction that is explained by the context of tightening Monterey policy which made liquidity more expensive. So now we have the level of eligible assets is -- went down to EUR 41.1 billion, told that there funding has benefited from the contribution -- positive contribution of current accounts and deposits, which I described in the previous slide by, as you said, went up to 106.5. SCR, the 12 months average is at 140% with quality liquid asset at EUR 30 billion, and SFR is stable at 142%. Rating continues to deliver strong positive momentum for the bank. We received an upgrade by Fitch in May, BBB -- BBB+. BBB+ has been also signed by S&P in September with a positive outlook. Now all rating agencies assigned the same rating insurance senior lettings to the bank this level that would be [indiscernible]. Capital position remains very solid. So we started the year at 13.58. We -- in June, we were at 14.4 pro forma accounting for the attribution of [indiscernible] to capital. Now with the same pro forma, is up -- is at 14.27. Moving parts represented by earnings, 70 bps, dividends and 81 minus 57 bps and the negative evolution of reserves waits for 24 bps on top of which we highlight 14 bps of per value of the comprehensive income that gain with a pull-to-par effect or that are deducted from capital only for the mechanism of threshold and will put top and/or in the unlikely case, we realized the negative results will be deductible. So we're transforming capital in any case. 19 basis points is the creation from DTA, the tax loss carryforward and other types of DTAs, 7 bps is the remaining impact of a number of second order elements. MDA buffer is at 474 or at a state level, which corresponds to a steady level of CET1 that does not include with earnings of 13.75. MBI, in this case, is 426. Excess capital is at extremely high level compared with our planned threshold of 13%, excess capital is EUR 870 million. Compared with the SREP overall requirement of 9.53% is at EUR 3.250 billion. As usual, we also disclosed the evolution of capital contribution from the elements that are not including in the P&L in particular, we have this future capital contribution that is now as high as 180 basis points, of which 65 basis points expected to be created by year-end 2027. The drivers of this contribution are DTA and a comprehensive income reserves. Sorry, I don't know if you are -- what I say because I didn't have the microphone. So let me start again, very strong 9 months results. I have to thank my colleagues for the results of this couple -- of these last two years, which we were able to obtain notwithstanding external factors likewise, of course, the geopolitical, but also a couple of OPS that we had to manage during the last, let's say, 19, 20 months. And in any case, I think tanks to my colleagues, we are very well equipped to go forward, continuing to deliver very strong results. So to wrap up, more than EUR 1.5 billion in net income, plus 8% in pretax profit, 50% non-NII revenue share, cost income down from 46% to 44%, increase of volumes, loans and deposits, 4%; in the refining 7%. NPE ratio at a very low level, 1%. Organic capital generation confirmed also this year and interim dividends plus 9% versus '25. This allow us to confirm a guidance above EUR 1.95 billion of net income for this year, which we may remember, will be reached considering almost EUR 100 million of increased taxation, which, of course, was not possible to forecast when we delivered in February '25, the guidance for '27 -- '26. So basically, a guidance confirmed, but with an implicit EUR 100 million results on top of it. And this, of course, allows us also to increase to more than EUR 1 dividend per share guidance for this year. Let's have a look on Page 25 on the trajectory versus strategy plan. As you know, the plan will be terminated in 2027. Basically, we have reached almost our target 1 year ahead, apart from non-NII revenues, which still we have EUR 90 million, EUR 100 million to grow. But again, it's the exact pace of growth that we experienced in the last year and especially this year, Meanwhile, net interest income is possible to go much ahead, much higher than the target '27 due to the interest rate scenario. We are on top of '27 also for total operating cost and total provisions. So very much in line to overcome the initial result of course, tax is something quite complex to discuss due to the lack of transparency that we have right now in terms of new budget law. Let me say that as much as we were able to recover the '26 budget low into our target. We will -- we are confident to do the same also for next year. But of course, we cannot right now give you some -- any kind of comment about the tax coming in '27 from '27 budget low, which, of course, will be helped as soon as we will have higher transparency about the different elements. And in any case, dealt with the countermeasures that we will adopt in terms to try to offset the total effect by the first part of '27, thanks to the review -- to the renewal of our strategic plan, '27, 2030. Last page, of course, on the solid position of the bank in terms of capital, profitability and gross NPE ratio, which allow us to confirm the increase of EUR 1 billion in terms of shareholder remuneration. We have already distributed EUR 3 billion in the first 2 years now from the 23rd of November, in which we will pay the interim dividend for '26 and the end of '27, we'll be able to pay EUR 4 billion to our shareholders, which means almost 20% of our current market cap. I think these are very remarkable results, which allow to foresee a strong contribution, stronger moderation for our shareholders. Thanks again to the work that we have done, and we are delivering in terms of contribution to the strategic plan. Thank you, and I'll leave to you the floor for Q&A.

[Operator Instructions] First question is from Elena Perini in this of San Paulo.

Yes. I've got two questions. The first one is on the positive trend in costs you explained that it is mainly due to the staff cost component. What is your outlook for the next quarters do you have additional levers to action to be able again to deliver such an improvement. And the second question is on the NII trend. If you can provide us with the guidance for next year considering the current market conditions and your healthy growth in volumes.

Thank you, Elena. Let's say, on cost, I don't think we will do anything exceptional for Q4 '26. I think the the contribution -- the cost will be almost the same of -- as an average of the first 9 months. And of course, we are already trying to understand some maneuver in order to try to reduce the cost for [Audio gap] colleagues. And so as always, we will try to understand the amount and trying to reduce the cost through some efficiency. In terms of NII, basically, of course, as I mentioned before, we are much ahead of the plan '27. Maybe it's still too early to know the exact number because we would not know exactly when the couple of increase that everybody expects will come in. Of course, we have different numbers depending if both of them will come by the end of this year of only one of it now in the next months and the other beginning of next year. [indiscernible] will be considerable heir of the business plan.

Next question is from Sofie Peterzens, Goldman Sachs.

Sofie from Goldman Sachs. So maybe just a few more questions on net interest income. So you mentioned earlier on the call that we should see NII kind of doing better in the next quarter and also next year. Could you maybe just elaborate a little bit on the previous question, like how should we think about the tailwinds from the replicating portfolio. What kind of loan growth do expect do you expect loan growth do you accelerate deposit growth to accelerate from the current levels? Or do you think that's a good run rate? How should we think about the impact on net interest income from the ACO bonds? That would be my first question. And then my second question would be around your fee income. How should we think about the growth drivers from here?

Okay. So next quarter will be a very moderate trend in NII. Basically, we have a positive impact of environment of increasing rates. And -- but this is -- this positive impact will be translated into an interesting material growth during next year. as mentioned already by Jose and commenting on the trends. We basically have now playing with the two scenarios when where the rates are increased to [ 75%, ] another one where the there is a second hike. And of course, there is a sort of force between the two scenarios in terms of impact on NII. Volumes are expected positive. So continuing the current trend that we are starting to observe during the last 9 to 12 months, especially on the asset side and also constructive of [ scalability ] side. [indiscernible], which you asked is expected to decline due to the fact that progressively, over the years, the amount of the outstanding amount of the asset, which generates a positive contribution from to NII is reduced into the compensation with the tax [indiscernible] that the bank generates. Of course, this is also some question marks for next year given the discussions on the budget law, but apart from the budget. So we expect a reduction of around [ EUR 60 million. ] This reduction does not take into account the reinvestment of the assets generate of the liquidity generated by the compensation of taxes. For -- as far as fee income are concerned, we are confident -- okay, we are confident to generate positive trends from product factories from growth in corporate investment banking that will be delivered when I say product factor in general, I extend this also to the wealth management distribution activity of the network needs to be generated both in the next quarter where also some seasonalities are removed and during 2027.

If may I add some color on that. Let's say that we forecast a good growth in asset management, driven by running fees, an increase of the other product factory, Edoardo was mentioning. We are finally well on track with the non-life factory after the migration. And we have now new products that are already boosting at the end of the year, and we expect a very good '27. In terms of payment service with our NOI, we have done very well in terms of merchant business. Meanwhile, we are still substituting credit card, and we consider to terminate all the job during '27. So also in this respect, we expect more contribution good results already from life insurance, of course, in a way, offset by the increase of go is healed. And of course, depending on the volatility of the market, we can make good results also in non-life. The only, let's say, a small question mark due to the increase of interest rate is for our consumer finance. As you know, when interest rates go up, it's a bit more difficult to grow more. But as you know, now also the competitive environment is very reduced, and we expect not to have any offset from this. So all in all, the target of '27 plan can be confirmed.

Next question is from Delphine Lee, JPMorgan.

So I just wanted to -- sorry, to come back on net interest and costs. On NII, some of your peers are guiding to sort of mid-single-digit growth for next year or even higher. The growth that you've seen so far this year has been a little bit more muted. Should we expect also a bit lower sensitivity to rates next year for Banco BPM. And then on the cost side of it, just to clarify what you -- on the earlier question, your answer was you were looking at ways to decrease costs. Is that your objective is to try to have in the next coming years, cost base that goes down in absolute terms year after year.

Thanks for the question, Delphine. I think that I'm proud to be asked the question where analysts ask if we have lower sensitivity than our competitors. This means we have done a great job in convincing the market we are not too exposed to interstate risk. I believe that we can expect a mid-single-digit growth next year, probably -- I mean, we have aspiration to do a little bit better, but I want to be conservative, depends a lot on the scenario, of course, with the various components that are consistent with strategic plan. I didn't mention probably before the replicating portfolio, which is expected to stay at the same level as we guided the market for the duration of the plan, so the usual EUR 25 billion, which whose contribution will depend on the scenario and on the fact that we have maturities of swaps during this year for some EUR 5 billion, so -- EUR 5 billion to EUR 6 billion at lower rates than the current level of [indiscernible].

Let's go to the cost. Of course, we try to let's say, our goal is to recover the increase of both cost of labor and the increase of D&A due to the investment that they are going to phase for cyber, for technology and so on. So of course, cost is a part of our job, but we believe that we have a consistent, incredible track record since the merger 10 years ago, reducing cost income year-by-year every time. So this is the engagement that we can take that we will be able to reduce cost to income also for the year to come.

Next question is from Manuela Meroni, Intesa Sanpaolo.

The first one is on the capital contribution that you expect from DTA and fair value to the OCI reserve it has increased since the last quarter. I guess that this is due to the impact of the reserve that we have already taken in this quarter. So if you can just confirm that. And if you can also share what is the time frame in which you expect the 180 basis point positive impact. And if the 65 basis points you expect for 2027 is already including the effect of the 2027 budget law. The second question is again on capital. Some of your competitors have flagged some model changes. So I'm wondering if you expect something similar also in the fourth quarter of this year? And more generally, if you expect some, let's say, regulatory headwinds going forward?[

Okay. So yes, capital creation from DTA and comprehensive income reserves increases versus previous communications, because mostly because of the increase in negative results in the value of the comprehensive income book. So this is the main driver. As far as the time frame to recover the this 180 basis points, it's -- importantly, we don't have the crystal ball. We are not able to take into account the effect of the budget law, which is still a draft. So before including them will need this to be approved. The pace is around 65 basis points in the plan horizon than in one addition in the following two years, the current expected pace is of additional 60 basis points, just to give you an idea of the reason of this source of capital creation. We are continuously maintaining our models we are capturing already some impacts of increases in our WA, expected increase in WA in our buffers using Article 3. Traditionally, we have done this and in the future expected model changes do not change our profile, our capital profile in terms of commitment to stay above 13% and commitment to distribute the EUR 4 billion in next 1.5 years also.

Next question is from Luis Manuel Grillo Pratas, Autonomous Research.

My first one is on M&A. As you know, there continues to be a lot of market speculation around the potential combination between Banco BPM and Agricole Italy. And both parties have acknowledged in the past the potential strategic merits. So could you help us understand what conditions are not yet in place for a transaction to be considered. For example, is the key issue, the relative valuation between both banks, is it more like the political environment, governance or even like the proposed structure, if those upcycles are resolved at some point, from the Banco BPM perspective? Do you think the reverse merger scenario is the preferable outcome? Or do you think a direct acquisition by [indiscernible] Agricole with an appropriate premium can be the more attractive option for Banco BPM shareholders? And then my second question is on the 2027 business plan profit guidance. The Monte Paschi dividend is around 5% of annual net profits more or less. Do you see scope to offset these through other earnings levers? And related to this -- there is also, of course, the 2027 budget law. Are you confident in the net profit target?

So if I understood correctly, your question is in general level of confidence for our net income on 2027. We -- it's too early to tell in terms of analyzing the impact of the additional taxes that are that are expected or potentially be introduced should the current text in the current form, be approved. So we will need to sit down and define what could be the ticketing actions, and what could be the final outcome of new taxes in actions. What we said and confirm is that last year's budget law has been recovered. So the bank will use a very important not worth the effort in ensuring delivery of this year's target, which is confirmed at EUR 1.95 billion for next year. It will depend actually on the amount of taxes that will be introduced and overall on the scenario. The dividend -- [ MBS ] dividend is not a concern per se. We believe there are various ways to reinvest in portfolios that may generate a similar level of remuneration.

As far as M&A is concerned, let me say that basically, you say everything yourself because what I can add is that we know the strong value of our bank the capability to grow profitability year-by-year, the capability to increase shareholder remuneration also on a stand-alone basis. So of course, whatever due to the current environment, which has been changing dramatically after the Monte basket transaction, which, as you know, will be split amongst Intesa Sanpaolo and BPM. It's very much possible that a new transaction can happen. But frankly speaking, we are not the one who are doing the move the first move. So we are, of course, examining all the potential opportunity as I mentioned in other times, we have been talking about the potential transaction with Agricole since they entered into our capital with the first 9.9%. And of course, we cannot not consider that there is a possibility now that they have 29.6%. The two things that I think is important to have in mind is, first of all, that there is a very important industrial shareholder with 29.6%, which we respect, which we work very well in terms of the product factory that we add together. We get along very well. But of course, we have also another 70% of shareholders that have to be happy about the transaction. So as far as the condition of the transaction can be good and satisfactory for our shareholder, this is, for sure, an opportunity that will examine without any problem. But up to now, we -- frankly speaking, we didn't see any kind of proposal, but we appreciate that the declaration from Agricole are always well tuned vis-a-vis a potential transaction with us, which kind of transaction, again, I don't know, hired the more about this potential reverse merger, but at the end of the day is in the [indiscernible], having such a stake in our bank to decide the best way to go ahead if the decision will be to go ahead. Our job is to make this transaction good and satisfactory and convenient for our shareholders.

Next question is from Ignacio Ulargui, BNP Paribas.

I have two questions. One is on credit quality and the good performance that you have delivered over the last year since you are showing in the presentation in terms of NPE performance. Just was wondering on how much you think cost of risk can go down more from the current level? And the second one looking to the performance of the deposits in the quarter and volume there has been a very good increase in the quarter-on-quarter of current accounts. I just wanted to get a bit of a sense of how do you see deposits growing going forward? And how should we think about the ex current accounts as a percentage of the total -- should it be around the current level of 34, or there is a space to reduce that further?

Okay. Thank you. Yes, asset quality, we are very satisfied about the job that very consistently we have been doing for basically since the merger reducing the cost every quarter and reducing the NPE level every quarter up to the almost zero net bad loans that we have right now. Cost of risk depends, so basically only from default trade because we don't have basically net bad loans that you have to provision anymore. So depending on the default rate, you know that we have a provision policy that start from 30% since the beginning, going up, and due to this ratio, the cost of risk can be very much lower or increase if the default rate will increase in a considerable way. Basically, there is not anymore the management of the stock, which has absorbed a further provision. Deposit, we have been growing always. I would say that in the last years, we have been growing more or less [ EUR 10 billion ] per year in terms the combination of the indirect and direct deposit. Deposit normally are EUR 2 billion to EUR 3 billion per year. This is without increasing cost of acquisition. This is due basically to increase current account from our clients. Meanwhile, of course, our job is to try to have a good inflow into indirect funding. We will continue this way. The Italy in this respect is doing very well. The footprint that we have in Italy is much better than other banks. So we think we can continue to grow in terms or of deposits.