Good morning. This is Chorus Call operator. Welcome to Credem's Conference Call Presenting 2021 Half Year Results. Let me remind you that all participants are in listen-only mode. After the presentation, a Q&A will be held. To be assisted by an operator during the conference call, press star and zero on your phone keypad. Let me turn the conference over to the General Manager of Credem, Mr. Nazzareno Gregori. Mr. Gregori, you have the floor. Thank you very much, and good morning to all of you. Thank you for logging in on this Friday in August that is just before your holidays. Let me stress, first of all, the strategic role the banking industry has played and is still playing in providing support to households and companies, after or during the COVID, after the uncertainty that characterized 2020. As a group, we took up the commitment to work towards that, and we did so not just during the pandemic, but also during the recovery phase. We're helping the companies starting again, and we are protecting the savings of households and supporting them while they roll out their projects. I am very proud also of the work we have been performing in-house, and that we will continue going forward to have a working environment that takes care of the well-being of our team, and that enabled us to achieve results that I satisfactorily define as of absolute excellence. Before talking about the results, let me give a warm welcome to all the colleagues from the Cassa di Risparmio di Cento. For two weeks now, they've been part of our group. They've come on board, I would like to thank them very much for the commitment they took up and for the hard work they did over the last few months. We are inheriting a strong legacy. They have a long-standing tradition, over 100 years old, it's very much appreciated by the geographies where they are located, services to both households and companies. I'm confident that we will be both successful and will be creating value. We are creating value through the results, the outstanding results we have been generating, stressing the effectiveness and resilience of our business model in the way we do banking. These are our main strengths. Let's start with loans growing about 9% year-on-year, are still growing at a higher pace than the banking system, despite the strong competition. Following that, the quality of our assets, we are among the top banks in Italy, and we are in line with the European average. I'm sure we will retain this status of excellence also when it will come to manage impact when the state grants or help will be discontinued. Profitability is also very high, and it's constant, and they do not depend on the different stages of the economic cycle, and at the same time, they grant a very strong capital soundness, not just in Italy, but also in Europe. All that, let me reiterate, is the result of clear strategic goals we've given ourselves and the promptness with which our human capital, our employees, respond to the external challenges, turning them into opportunities and constantly generating value over time. One last confirmation of our strong capital soundness comes from the results of the recent stress test performed by the ECB. We are among the banks that have the lowest impact for CET1 ratio depletion. We have less than 300 basis points impact. That means that in case of economic shock, we would have a very strong capital buffer in excess of 350 basis points. If we look at the Italian banking system, only Credem got that result. We are among the top five banks after the exercise conducted by ECB. Among the best 16 banks if we consider the 101 European credit institutions that were considered by both EBA and the ECB. We are very, very happy and very satisfied, and we built a very sound capital position over the years, thanks to a careful risk control and the ability to generate capital in an organic and sustainable way, rewarding our shareholders in a very consistent way. At the same time, we have moved on in our digital pathway. We have tried to adapt to the constant changes in the customer needs. It's true the pandemic sped up that process, but I think that now this is a structural change we have faced, and it's of paramount importance in the banking industry. Within this pathway we've been following as a group, not only we've been raising awareness among our clients to use online channels, but we want to provide them with a complete range of services. So that they can take advantage of technology, and at the same time, they can still benefit from the human relationship between the bank and client when it comes to investments, when it comes to funding, and when it comes to protection. The growing figures you see on this table are the outcome, the result of investments the group has been making over the years with a lot of conviction. I do confirm that we will still keep on supporting these figures by walking our customers through this digital transformation process, and we will release further technology products over the year. I would like to thank our people for that, because it's thanks to their attitude towards innovation that the group achieved two very important awards, the ABI Lab award for the innovation in banking services. 2021 was also under the sign of consistency when it comes to sustainability. In 2021, we released our non-financial reports, and we listed a number of objectives that we wish to achieve in the coming years as a group. We want to achieve carbon neutrality by 2025 from the environmental viewpoint by reducing excess emissions and offsetting the residual ones by buying carbon certificates. We want to adapt our organization to the needs that are stressed by the ESG issues. We want to be more effective and govern the evolution of the risk control when it comes to these objectives. We are very enthusiastic about them, we will involve our employees and stakeholders and our clients, of course. With all of them, we want to improve the way we support them, and we support ESG issues as well, that are of utmost importance. Let's now move on to our income statement. Our operating income is still growing sizably, thanks to the NII performance and also thanks to commissions and fees. This is not depending on one-off as performance fees and trading fees. As you can see on the core margin profit, that is almost up 9% versus the first quarter of 2020. Costs are down versus the previous quarter. The growth versus last year bears witness to the fact that we achieved non-recurring savings during lockdown, and we took action to somehow offset the impact of COVID in 2020. Despite that, our net operating result is growing in excess of 13 percentage points, thus reconfirming the sustainable development or growth of our revenues. Also our LLPs performed really well. After the improvement in the economic conditions, they showed signs of progress, and they show no signs of deterioration in our credit or in our loan portfolio. We closed the quarter with a very good performance and with a net profit growing 75%, landing at more than EUR 36 million. If we drill down into a greater level of detail, you see our NII improved, thanks to our securities portfolio, increase in loans to customer, and the good performance of customer spread versus the previous quarter, despite the fact there are more interest payables to the ECB that are tied in with the positive dynamic flow of direct funding. We want to reduce excess liquidity, especially when the economic recovery will lead the way and will affect consumer behaviors and customer behavior. We expect to have an improvement in our margin, NIM, in the coming months. As you can see, customer spread is flat versus the previous quarter, and the banking system went down three basis points instead. Despite the low level of interest rates and despite the liquidity injections the ECB made that are further increasing competition, I don't expect this phenomenon to change over the short term, especially for the level of rates that is affecting new loans. This is only a partial view that helps you better understand the dynamics from the customer perspective and does not include institutional fundings that enables us to have inflows at negative rates with a positive impact on our aggregate figures. Let's move on to the securities portfolio. You see we have new positions being added, especially in foreign govies, and that led to an increase of the average rating, a better diversification, and at the same time, a reduction in the weight of Italian govies. The exposure to Italian govies is 93% in HTC. Thus further reducing with comparison to the past, the impact on valuation reserves should there be an increase in volatility in the BTP Bund spread. Let's now move on to non-interest margin. I would like to stress the fact that our recurring components are growing, net of the results of performance fees and non-interest fees. So year- on- year, it's growing 13.9%, further reconfirming how essential it is in the current situation to have a business model that, of course, focuses on diversifying income sources. We are diversifying both volumes and the profitability of assets under management, thanks to our product factories, and I would like to congratulate our product factories. Trading and management fees are in excess of EUR 100 million, and they have a performance up 21.3%, thanks to new placements in the last quarter. As you can see from the slide, we have excellent results from the perspective of banking fees versus Q2 2020. We had an impact of lockdown characterizing that time, and so we see a recovery of traditional activities. Last but not least, let me highlight the insurance income, after a major performance in the last quarter, is recording results in line with the expectations we had for 2021. We think we have to really support our clients to cover all of their needs. The performance we showed stresses the focus of our group on bancassurance business. This is very important at this stage, in this critical stage, health stage, I mean, because of the pandemic. I'm very confident versus the second half of this year, we will focus on markets, and we will keep on improving and protecting the savings and assets of our clients. That will enable us to further increase our performance on those revenue items. Let's now move on to costs. What you see on the slide bears evidence to the fact that our group can be very flexible when it comes to managing costs based on how revenues are going. In the worst part of the pandemic, we were very efficient in cutting costs and adapting them to the uncertain revenues that were characterizing that time. As of this year, we've proven that we can grow fast, and that dynamic is also reflected in our expenses. Personnel costs are in line with pre-pandemic levels, and admin costs and expenses have been flat for about four quarters now. As you can see from the slide, in this quarter, we are expensing another part of the integration expenses after the acquisition of Caricento. Going back to growth, let me reiterate that it is necessary to keep on investing, having a clear investment policy, and focusing on innovation and digital solutions, so that we can be more and more efficient in-house, and at the same time to provide our clients with more innovative product. As you can see, D&As show that our group is committed to the topics I've just mentioned, and also using, in a very creative way, data flows and information we have available. We have to keep on investing well. Let's now move on to loan to customers. As I was telling you before, our loans are still growing, thanks to moratoria and state-backed loans, but also thanks to the work of our sales network. Residential mortgages and leasing went up respectively 15.2% and 7.9%. They are not tied in with state-backed loans. They are a telltale fact that our salespeople are very close to our clients when it comes to helping them implement their projects. We are still supporting the local economy by issuing state-guaranteed loans in excess of EUR 3 billion at the end of this last quarter. Let me highlight that moratoria stocks are decreasing, also because of the increased maturities in the last quarter. That doesn't have an impact on cost of risk, thanks to the excellent financial profile our corporate customers have, and they have not asked for renewal in the staying of payments. The excellent increase in loan delivery enabled us to have an over-performance vis-à-vis the banking system, almost seven percentage points over-performed. We also achieved almost 2% market share. Let's now look at funding. You can see the excellent job our group did in net inflows for assets under management, in excess of EUR 1.6 billion. Our customer really trust us. Our assets under management. We still have positive direct inflows, direct funding inflows. Sometimes we also had funding going to investments, and therefore also having a very good impact on the income statement of the group, as I showed you in the previous slides. The positive inflows, with the market not having changed, increased our, as I said, direct deposits and then direct funding. We could also improve our management and trading fees. We encouraged our clients to move towards investing in assets under management, and that will lead to a further growth. Let's now move on to bond issuances. You've recently seen us with a covered bond issuance that will be replaced, the ones that will come due in the last quarter of 2021. We could have an early callback of subordinated loans. We will also look into new issuances based on how the funding will perform, and also depending on the new MREL requirements. Let's have a look at the credit quality. We haven't seen any new impaired loan flows, thanks to the resilience of our loan portfolio, and also thanks to the government measures that will be extended until year-end. The non-performing loan stock is therefore further reduced. We disposed of unsecured loans, and that had a neutral impact on our income statement. As I said before, we keep on reducing, having a lower impact on gross NPLs. That is now in line with the European average, at the lowest level for the Italian banking system. As a matter of fact, we also reduced our net exposure at the end of the first half. The total impact on net loans is 1.6%. This ratio is down to 0.37%, if we look at NPLs, with a system figure that is 1.04%. That's the reduction in net bad loans. When it comes to coverage, we have a coverage of 72.4%. If we look at the total of impaired loans, the coverage is 52.4%. If we look at the further coverage levels represented by shortfalls, overall levels are at the top of the banking system, 61.0% on total and 87.8% if we consider bad loans only. You know that retaining a very high level in the value of our assets, it's one of the pillars in our strategy. Last quarter, we got to an all-time low for cost of risk. End of June, we achieved a result that was really best in class, also considering the health situation generated by the COVID pandemic in 2020. Provisions made in 2020 enabled us to recover, to pick up on performing loans. That effect, combined with the lack of further impairment in our loan portfolio, enabled us to have a cost of risk in the negative for the first time, -10 basis points. Even if we don't consider the positive effect on the write-backs, cost of risk is at the lowest level for the system, equal to nine basis points. A cost of risk in the negative cannot be considered as an expectation of what, or a guidance of the year-end levels, but it helps us better control our asset quality also going forward. That is to say, in the coming months, and revise our expectations for 2021 at a lower level than the pre-pandemic levels. Let's now have a look at the assets and liability. You see loans, our loan portfolio, after the disposals we made in Q1. Loan to banks, we have ECB deposits that are used as a guarantee for that, and we have direct funding, and deposits is unchanged. You cannot yet see the increase in institutional fixed income, but you'll see, starting from July 7th, the impact of our new bond issuance, and also our capital is increased. The shareholders' equity is increased thanks to the profit we had in the last quarter. We still have very good levels, even similar to those we had before 2020. We have stability granted. Before I leave room for questions, let me talk about our capital and capital ratios. Let me underline that the recent stress tests confirmed the high soundness of our capital ratios. In an adverse scenario, we are in the bracket that would have the lowest impact on our CET1 ratio. We increased our supervisory ratios, our capital adequacy ratios, despite the increase of RWAs. The inclusion of a dividend of EUR 0.28 per share. We are very happy about the current capital position that enables us to have a very strong buffer versus the minimum regulatory requirements. It helps us both supporting growth and taking in, starting from next quarter, the merger with Caricento. To still show very sound figures. This is it from my side. Now we are open to questions. This is the Chorus Call operator, and let's now open the Q&A session. First question comes from the line of Luigi De Bellis with Equita SIM. Please, sir, go ahead. Good morning to all of you. I have four questions. The first one is could you elaborate on your trend for the NII, and the banking and insurance fees you're going to get for the next quarter? Then cost of risk, could you give us a guidance for full- year net of the Caricento impact? On the M&A topic, what's your strategy, looking at the consolidation process that is ongoing in the banking system? Would you be interested in Carige, for instance? The net funding, do you think this positive trend will further carry on in July, August, and September? Thank you. Thank you very much. When it comes to the first question, trends for the non-interest income insurance income, we have a positive trend on non-interest income and interest income. The insurance income will be in line with last year. We think we will hit the objectives this year, and we will do so in a better way than we did last year, especially on the insurance income. As to cost of risk, as we hinted at, cost of risk this year is very low. We hope our cost of risk will be below 10 basis points. M&A strategy and Carige. Let me answer right away. Carige, we cannot provide any information as we signed an NDA, sorry, says Mr. Gregori, with our interlocutors. We've looked at things, but we signed an NDA. It is a very complex situation indeed, and once our interlocutors will decide, they will say what our position is. As to our M&A strategy overall, the recent acquisition of Caricento surely is an evidence that we want to move along those lines. As I've always said during these conference calls, if you want to do good business, it must be a win-win situation. Growing would imply further enhancing our business model, and therefore we set ourselves an objective for organic growth because that's very useful. If there will be opportunities, we will look after them. We will sound them. We're not looking at emergency opportunities. We want to look at value accretive transactions rather than emergency related transactions. Of course, we will be active in the market from that perspective. As to direct funding, we expect an increase, a growth. However, we have to also consider how consumer behavior will change. Well, consumers might start spending more, and therefore, also direct funding balances might decrease. For 2021, we have around EUR 32 billion as stock of direct funding. In the insurance business, we are improving versus 2020 with the trends I mentioned before. Thank you very much. The next question comes from the line of Nicholas Silva with Intermonte. Good morning. Thank you very much for accepting our questions. First of all, on Caricento, could you elaborate on the expected contribution you have from Caricento after consolidation? Then on Caricento again, you gave a guidance of EUR 35 million integration costs. You've already expensed half of them. Can we expect the other half in the second part of the year or part of it also in 2022 on capital? 14.4% is starting point at the end of Q2. What is the guidance you can give for the second part of the year? A follow-up on the guidance you've just given on cost of risk, lower than 10 basis points. Net of possible extra provision for Caricento, could you still give us a guidance for cost of risk? Well, let me start from the last one. Cost of risk is regardless or independent of Caricento, of what we said about Caricento. Caricento, let me talk about cost. Integration costs will be about EUR 25 million, of which almost EUR 17 million were already expensed in H1. We should not have any further integration cost, but that would still be included in the balance I just mentioned. I don't know how much we will expense in H2, or it's going to be a very residual or very limited amount. As to cost of capital or capital, we do not have any changes versus what we already given as guidance. Caricento, we will have an impact on CET1 of about 50, 55 basis points at year-end because of Caricento. Thank you very much. Next question comes from the line of Fabrizio Bernardi. Please, sir. Good morning to all of you. Maybe I didn't hear well. You talked about a EUR 0.28 dividend. Maybe I was mistaken. That would be a sizable increase versus your historical data. You've always been very careful, very prudential with your dividend policy. We've always asked you, during the conference call, we've always asked you some guidance on your dividend policy. Is it changing? Could you elaborate on it? Is it more consumer-friendly, or was I wrong? Did I misunderstand before? This is Mr. Morlini answering the question, Daniele Morlini. Capital-wise, the decision will be made by the board of directors. They will resolve upon the dividend at year-end, once we've also see the impact of Caricento, and once we see how the income statement evolves in the second part of the year. The accrual we are seeing now, it's a regulatory accrual, meaning that it's the accrual that was foreseen, expected by the supervisory bodies based on the historical payout, based on higher net income. It's a technical accrual so far that will then be better defined by the board of directors at year-end. Okay, I understand. Of course, thanks to 2021 bottom line, if you pay EUR 0.28, I cannot see Credem maybe paying EUR 0.28 in 2021 and maybe paying less in 2022. I can't see Credem paying a lower dividend in 2022 than 2021. The dividend payout was EUR 0.20 in April. That is the maximum allowed by the ECB regulations. This is an accrual on the profit for this timeframe, for this period. It's not included. We have not yet made a decision. The decision will be made by the board at a later stage, at year-end. If we compare that to the dividend paid in April, EUR 0.20, that's a technical accrual, EUR 0.28, and then it will depend whether or not the board will confirm it. Thank you. Next question comes from the line of Riccardo Rovere with Mediobanca. Please, sir, go ahead. Thank you very much. Good morning to all of you. Two questions, if I may. As to the cost of risk, you clearly said that in this quarter, you released the general data you'd uploaded in or accounted for in 2020. Did you release everything, or do you still have to release more? Securities portfolio. In Q1, correct me if I'm wrong, it was partly disassembled, and it was reduced. Maybe I was wrong in the way I understood it at the time, but I thought that was a temporary action. The portfolio would have been put together again over time. In this quarter it's practically unchanged. What's going to happen to those assets? Will there be an impact on NII as well, on the interest income? Well, Mr. Gregori speaking. When it comes to still being able to work on internal models, we have not yet fully exploited the potential as to the securities portfolio. We've shown in the slide our securities portfolio is EUR 10.249 billion. I did not grasp, I did not understand your question. Could you maybe say that again, or explain better? Can you hear us, sir? Mr. Rovere? Sorry, I was on mute, Mr. Rovere is saying. Looking at the presentation, if I'm not mistaken, I'm looking for the page. I'm looking for the slide. Page nine, 4.5. I know it went from eight to 10, the one with the highest returns is still 4.5. Talking about that trend, by year-end, it was EUR 5 billion something. Is this the new policy? Daniele Morlini speaking. From a general viewpoint, it depends on market conditions. So far, we're not going to increase the impact of Italy on our overall securities portfolio, because we've made a decision to diversify our portfolio. We will make decisions at a later stage concerning the overall size of the portfolio and a balancing of the portfolio components, but so far, we do not envisage to increase our percentage exposure to Italy. Looking at the slide always, if I understand correctly what you were doing, you're working on something that's not Italy. I don't know what countries we're talking about. You're limiting duration. Do you end up with the same net impact? I work with less risky securities, but the net effect is the same. We've actually purchased securities, U.S. govies, for instance, or foreign govies, non-Italian govies. They somehow contribute some carry, and therefore, they are purchases. We did purchase securities, but not Italian securities. If I may, Mr. Gregori, may I ask another question? With the previous question, you said we have not yet completed. No, in the second half, I said. Next question comes from the line of Luigi Tramontana with Banca Akros. Please, sir, go ahead. A technical question, again, on the Caricento impact on your P&L. Your PPA has only just started, the purchase price allocation has just started. Could you talk about the individual gains you will be accounting for in Q3? The capital gain is about EUR 50 million. Once up and running and the synergies are unfolded, we'll have EUR 9 million revenue synergy, and cost reduction EUR 13, positive impact on net profit EUR 15 million. 15. Next question comes from the line of Manuela Meroni with Intesa Sanpaolo. Thank you for the presentation. I have two questions. One is on the interest income, which is flat versus the previous H1 2021. Do you expect a further growth of interest income in the coming months because of volume growth? Or maybe a growth in the securities portfolio. Upfront fees, what are the upfront fees accounted for in Q2? Placements are about EUR 15 million for the whole half year. That's what we accounted for. As to the interest income, I think it will pick up, it will recover, and it will go on growing thanks to the increase in loans volumes. The same applies to customer spread, as we were saying before. Something else will be moving. It's consumer credit, which is growing. If consumption will pick up again and economy will recover, this will give a positive contribution to our interest income. Let me remind you that if you wish to ask a question, you may press star and one on your phone keypad. Next question is a follow-up from Luigi De Bellis, EQUITA SIM. Thank you very much. A quick follow-up on costs. Could you elaborate on the expected trend for the next two quarters? Thank you. As to costs, as to DNAs, in 2021, we will keep on investing. We will keep them at the same level. The DNAs will be at the same level as to OPEX. We will have increases. They will be aligned. Well, personal costs will be aligned. We will have an increase of other admin expenses. We will be able to keep them at bay, so to say. Bear in mind that on personnel costs this year, we have made provisions also for the performance bonuses that will depend on the timeframe. Last year, we'd been prudential in the first part of the year, so we didn't have that. Thank you. Let me remind you that if you wish to ask a question, you may press star and one on your phone keypad. For further questions, press star and one on your phone keypad. Mr. Gregori, there are no more questions in the queue. If there are no more questions, I would like to thank you again for joining this conference call and have a nice holiday, given the time we are going through. See you soon.