Good afternoon, ladies and gentlemen, and welcome to the conference call of Intesa Sanpaolo for the presentation of the third quarter 2022 results, hosted today by Mr. Carlo Messina, Chief Executive Officer. My name is Razia Azlet, and I will be your coordinator for today's conference. At the end of the presentation, there will be a question-and-answer session. To enter the queue for questions, please slowly press star one and then one on your telephone at any time. You are kindly invited to ask no more than two questions so as to leave room for other participants. I'll remind you that today's conference is being recorded. At this time, I would like to hand over the call to Mr. Carlo Messina, CEO. Sir, you may begin. Thank you. Welcome to our nine-month result conference call. This is Carlo Messina, Chief Executive Officer, and I'm here with Stefano Del Punta, CFO, and Marco Delfrate and Andrea Tamagnini, Investor Relations Officers. Today, I'm going to walk you through a high-quality set of results. Let me start by saying that in Q3, we delivered a 65% reduction of our exposure to Russia. That now is just 0.2% of group exposure loss. We can already be considered a zero Russia exposure bank, and we will continue to work to reduce the limited remaining exposure. Whenever we see a problem emerging, we face it immediately and put robust solutions into action. Whenever possible, we rapidly remove the problem from our balance sheet, so remove from our balance sheet. We did this with NPLs, we did this with the pandemic, and now we have done this with Russia. This is our managerial approach, and it is one of our secrets to delivering high and sustainable profitability and not short-term profitability. Nine-month net income was EUR 4.4 billion when excluding provisions for Russia de-risking. The best nine months since 2008. This is fully in line with the 2022 business plan net income target of more than EUR 5 billion. We are upgrading our net income guidance for this year to more than EUR 4 billion. This is thanks to the strong Q3 operating performance coupled with massive Russia de-risking and despite the deterioration of energy supplies and the provision for Russia de-risking, both in Q3. We have already accrued EUR 2.3 billion in dividends, and in a few weeks, we will distribute EUR 1.4 billion as an interim dividend. Our commitment to a 70% cash payout remains unchanged. A few weeks ago, we concluded the first tranche of our share buyback, repurchasing around 5% of shares. We will decide about the second tranche of the buyback by the time the full year 2022 results are approved, also because we will pay the interim dividend just in some weeks, and so we think that investors can be already happy with our dividend distribution policy. Rewarding our shareholders remains our and my priority, and we remain committed to the value distribution embedded in the business plan. Thanks to the strong tailwind from interest rate increases and our resilience as zero NPL bank and zero Russia exposure bank, the EUR 6.5 billion net income target in 2025 will be exceeded. In the first nine months, we worked along two dimensions. First, delivering high-quality results in the short term, and second, building a strong bank for the next 10 years by continuing to execute our business plan. All the key industrial initiatives are well underway. In particular, our technology evolution is moving quickly with significant investments. The rollout of Isybank, our new digital bank, is accelerating with around 300 specialists hired. I'm just waiting for the end of the focus on Russia and de-risking to be ready to make with you a clear explanation of the potential that we can have in this sector and in improvement of the technological base of the group. That will happen in 2023. I'm proud of our results and thank all our people for their work. I think that our people are the key factor of success of Intesa Sanpaolo. Let me also say a few words on the overall macro situation. I remain positive, and my confidence is based on facts, even if there are elements of concern like inflation and war. First of all, the Italian economy is much stronger than it was during the previous crisis, thanks to solid fundamentals. Even if in 2023 there is a slowdown in economic growth or a light recession, the Italian economy will quickly recover already in 2024. Secondly, our bank is fully equipped to face challenging environments for multiple reasons. We are delivering excellent performance with growing revenues driven by strong net interest income acceleration and the top-notch cost income. We enjoy a best-in-class risk profile with an NPL stock that is a fraction of what it was in the past, and a far stronger capital position. I'm also sensitive to the fact that many people are suffering from the increases in energy and living costs. This deepening social inequality should concern all of us. As ISP, we are providing EUR 400 billion in lending to real economy. We have already allocated EUR 30 billion to help families and businesses face high energy costs, not to mention our main social and climate initiatives, which we are stepping up. To support our own people, we provided a one-off contribution of nearly EUR 50 million to mitigate the impact of inflation. Now let me provide the highlights of our nine-month results. Slide number one. In the first nine months, we delivered high quality earnings with net income of EUR 4.4 billion when excluding Russia de-risking. We massively reduced our exposure to Russia, and we achieved the best ever nine month revenues and operating margin. Net interest income is gaining momentum. Insurance income was the best ever. We reduced costs, and we reached one of the lowest NPL stock ratios in Europe. ISP's zero NPL bank status is driving a very low underlying cost of risk. Slide number two. In this slide, you can see the evolution of net income. Overall, when excluding Russia de-risking, we delivered the best nine months since 2008, fully in line with our EUR 5 billion business plan net income target for this year. Slide number three. While delivering this excellent net income performance, in just three months we achieved an impressive Russia de-risking, thanks to the sale of EUR 2.5 billion in cross-border loans. Such exposure is now very limited and high quality. While the local loans to customers are just EUR 300 million. Let me take you to slide five to give you some color on the P&L. Slide number five. We delivered the best ever nine months for revenues and operating margin. Net interest income grew more than 8%. Commissions were resilient, and the decline is due to negative market performance. Insurance income reached a record high, also thanks to strong growth in non-motor P&C revenues. Profits on trading were solid, and operating costs decreased by almost 2% despite inflation. We have been conservative in provisioning, and net income was EUR 4.9 billion, when excluding costs concerning the banking industry and provisions for Russia and Ukraine. Slide six. In Q3, we delivered high quality operating performance. Net interest income was up 14% quarterly despite the lower benefit from TLTRO, more than compensating for lower commissions, in part due to the usual summer slowdown. Insurance income was the best Q3 ever. Overall, the total contribution from net interest income, commissions, and insurance income was up over 6% on a yearly basis and more than 3% quarterly, demonstrating the resilience of our business model. In light of the strong core revenue performance, we didn't push on profit from financial assets and at the same time reducing the total amount of government bonds that we have in our portfolio. We have reduced the size of the bond portfolio to avoid an impact from volatility, and that action impacted trading profits in the quarter. As I have always said, we manage revenues in an integrated manner, and we are entering stronger and stronger in 2023 without Russia exposure and with limited exposure to the US portfolio. Operating costs decreased quarter-on-quarter on a yearly basis. Provisions were down despite further provision for Russia and Ukraine, and net income was EUR 1.4 billion when excluding costs concerning the banking industry and provisions for Russia and Ukraine. Slide seven. In this slide, you can see the strong acceleration of net interest income, up EUR 300 million in one quarter. Rate increases are a strong upside for us. Net interest income will grow by EUR 2 billion, assuming one-month Euribor reaching an average of 2%. This is the area in which I think we will elaborate in question and answer, but believe me, this is the real engine for growth for the next years, and we will have billion and billion of increase in terms of net interest income in the next years. Slide number eight. In this slide, you can see that the net interest income growth on a quarterly and yearly basis was driven by the commercial component, despite the impact from NPL stock reduction on a yearly basis and from the lower contribution of TLTRO in Q3. Slide number nine. Customer financial assets were around EUR 1.3 trillion. Short-term desired deposits increased EUR 12 billion on a yearly basis. This is a valuable asset in the new interest rate scenario, and remains fuel for our wealth management engine. The decrease in assets under management and assets under administration was due to negative market performance. In the first nine months, Valore Insieme, our advanced advisory service for affluent and less risky clients, had EUR 11 billion in customer financial assets inflow. Please turn to slide 10 to have a look at costs. We continue to be very effective at managing costs, down almost 2% despite inflation. Depreciation is up as we keep investing for growth, especially in technology. Slide number 11. We continue to have one of the best cost-income ratio, and this slide illustrates our leading position in Europe. Slide number 12. Thanks to massive deleveraging, the net NPL ratio is the lowest ever at 1%, already achieving the business plan targets. We reduced NPL stock by almost EUR 7 billion on a yearly basis. Moratoria has expired, and we had the lowest ever nine-month NPL inflows, even lower than pre-Lehman crisis levels. Slide number 13. Our underlying cost of risk stood at 27 basis points. Loan loss provisions were down sharply compared to last year when excluding Russia derivatives. Slide number 14. This quarter, we had the lowest ever Q3 gross NPL inflow, and NPL coverage was up two percentage points compared to the last quarter. Slide number 15. NPL stock reduction was EUR 4 billion in the first nine months of the year and EUR 53 billion since the peak of September 2015. Net NPL stock is at just EUR 6 billion, with 28 quarters of continuous reduction. Slide number 16. As a result of this impressive deleveraging, NPL stock and ratios are now among the best in Europe, and our underlying cost of risk is in line with being a zero NPL bank. Slide 17. ISP fully phased Common Equity Tier 1 ratio is 12.4%. This already includes EUR 2.3 billion of accrued dividends and 50 basis points impact from the second tranche of buyback authorized by the ECB. It also does not include the 110 basis points of additional benefit from DTA. Believe me, DTA is something that will be recovered by [SHU] and in the short term, 40 basis points just in the next three years' time. Our real fully phasing is much higher, and is really the one that we call the fully loaded Basel III common equity tier one ratio. Slide number 18. Contributing to society has always been a key part of our DNA, and our excellent performance allow us to create sustainable benefits for all stakeholders. I know that we show this slide to you each quarter, but it really does show what we are and how sustainable our business is year after year. Slide number 20. In addition to delivering excellent results driven by high-quality earnings, the business plan is proceeding at full speed. The people of Intesa Sanpaolo are working across all the industrial initiatives of our business plan to build a strong bank for the future. You can go through the details of the ongoing initiatives in the next 11 slides. In slide 29, you can see our leading ESG position in the main sustainability indexes and rankings. For the sake of time, let's move to slide 34 to see how ISP is well equipped to succeed in a challenging environment. Slide 34. If we compare our current position to where we were at the beginning of the last downturn, we are better equipped for multiple reasons. Our capital position is much stronger, and our NPL stock is only a fraction of what it was in the past. Slide 35. Our business model is more resilient and efficient, with commissions exceeding 60% of our revenues and a strong net interest income tailwind from rate increase. Slide 36. At the same time, when compared to our peers, we are far better equipped. We have a best-in-class risk profile, we have a solid capital position, and we are one of the cost-income leaders in Europe. Slide number 37. We are a best-in-class model of resilience across all dimensions, from the financial to the technological ones. We already have a top-notch digital proposition with nearly all clients already multichannel. Our technology evolution is still moving very quickly, and the setup of our new digital bank is well underway. Slide 38. Finally, let me remind you that Italian economy is stronger than in the past. The national debt is much more sustainable. Italian corporates are more resilient, and the banking system is more solid. Slide number 39. Thanks to solid fundamentals, world-leading household wealth, and resilient SMEs, even if there is a GDP slowdown or mild recession in 2023, we expect a quick recovery in 2024, backed by the continuation of strong government intervention and significant EU financial support. Let me also highlight that taking into account the Q3 growth of GDP recently announced, the 2022 growth should be higher than the 3.3% previously expected. Now, let's move to slide 41 for the final remarks. Slide 41. Let me now recap the key points that demonstrate the sustainable strength of Intesa Sanpaolo. Our resilient and profitable business model over-delivered even in the nine months. We achieved the highest ever operating income and operating margin, with net interest income gaining momentum. Costs are down nearly 2% year-on-year, and cost income is best in class. NPL stock ratios are at record lows, and ISP is now a zero NPL bank with a low underlying cost of risk. We reduced our exposure to Russia by 65%, bringing it down to 0.3% of our customer loans. We maintain a very solid capital position with low leverage. Slide 42. To finish, let me turn to the outlook. As you may remember, we said in July that year-end guidance was supposed to be fine-tuned based on the resolution of the Russia-Ukraine conflict. In Q3, we delivered a massive reduction of Russia exposure, coupled with strong operating performance with clear tailwinds to net interest income. Thanks to this achievement, we can now upgrade our 2022 net income guidance to more than EUR 4 billion, even taking into account the worsening of energy supplies and the provisions on Russia-Ukraine booked in Q3. This upgrade is even more valuable when considering that our exposure to Russia is now close to zero. Slide number 43. Our net income outlook for this year also means that we can continue to generously reward our shareholders, always a priority for ISP and me personally. We have already accrued dividends of EUR 2.3 billion this year, and we will pay a EUR 1.4 billion interim dividend later this month. We recently returned EUR 1.7 billion through the first tranche of the buyback, equal to around 5% of shares. We will decide about the second tranche by the time the full-year results are approved. The key point I want to make is that our commitment to be a strong and sustainable value creation and distribution does not change. We remain fully committed to the value distribution embedded in the business plan. Our resilience as a zero NPL bank and as a zero Russia exposure bank, and the tailwinds deriving from the interest rate increases means I can say this with confidence. Thanks to the strong tailwind from interest rate increase and our resilience as zero NPL bank and zero Russia exposure bank, the EUR 6.5 billion net income target in 2025 will be exceeded. We remain committed to a 70% cash dividend payout in each year of the plan, with a common equity ratio higher than 12%. As proven again and again, Intesa Sanpaolo is an unstoppable delivery machine. This is thanks to all our people. Thank you for your attention, and I'm now happy to answer your questions. Thank you. As a reminder, to ask a question, you will need to slowly press star one and then one on your telephone and wait for your name to be announced. Once again, it's star one and then one on your telephone and wait for your name to be announced. You are kindly invited to ask no more than two questions, so to leave room for the other participants. Thank you. We are now going to proceed with our first question. It's from the line of Christian Caris from Intermonte. Please ask your question. Your line is opened. Hi. Good afternoon, everybody. Thank you for the presentation. My first question is on net interest income together with cost of risk, because I think that we have to look at net interest income together with cost of risk for a zero NPL bank as you are. I was wondering, take into account a mild recession in 2023, what do you think is a reasonable level of cost of risk, taking into account that you didn't release the EUR 400 million overlays? And on net interest income, looking at the guidance, you gave the sensitivity, I suppose, Euribor one month by the end of the year could be near to the 2% you provided as a guidance. What does it mean in terms of net interest income? Should we look at that item higher than EUR 10 billion for 2023? I don't know if you can provide guidance on that. The second question on the buyback program. Your capital is flat, still solid. I was wondering if you are planning to anticipate the execution of the second tranche before the full-year results or not. Thank you. Thank you for your question. I will start from the 2023, because as you had the occasion to look at our presentation, we prepared in this quarter the 2023 strong acceleration in our results. My point is that during 2022, I had to eliminate all the potential risk that we can have in 2023, and remaining with the stock of exposure to Russia, this can be considered in any case a potential risk in terms of increasing of cost of risk. Not only zero NPL bank, but zero Russia exposure in terms of impact to our figures. If I have the opportunity, I will continue to reduce and bring it to zero the exposure towards Russia. This level we do not expect to have impact, significant impact on economic figures also in 2023. That the reason why we are talking about zero Russia exposure. We enter into something like this. What will be the dynamics of net interest income and cost of risk, because you rightly have considered these two point as the key drivers for the results in 2023. I will start from net interest income, so just to give you the idea, and I don't want to enter in any kind of discussion on sensitivity on net interest income, because I will give you the figures that we are working on with our people within the organization, so the real world and not the theoretical impact of sensitivity. We think that at Euribor 2% we have already embedded in our figure an increase of EUR 2 billion of net interest income in comparison to the end of 2022. Our expectation is to have in 2023 a net interest income that can be well above EUR 11 billion. That's our expectation working with our people. I will confirm in occasion of the presentation of the final results for 2022, where we will have the budget figure. For sure now we are receiving back what we had in negative in the last years. If you compare the position of the net interest income of Intesa Sanpaolo in the year in which interest rates were 2%, 3%, 4%, you will have the evidence that it is absolutely achievable. Also, the impact that we have in this quarter is the result of this strong attitude of the bank of increasing net interest income in case of increase of Euribor. D o not forget that we had such negative markdown impact during the last year that we are now coming to a position of recovering the negative markdown. Strong tailwind during 2023 coming from net interest income. Looking at figures on cost of risk, I have to say starting from what we can consider a level of cost of risk is between 25 basis points and 30 basis points. In case of a not significant recession during 2023, the increase in cost of risk should be not so significant. What we can consider in the course of 2023 is to make further potential disposal of non-performing loans. In that case, we can have some more 10 basis points increase in the cost of risk. For this guidance, I will wait to have the budget figures negotiated with my people. In any case, our expectation on 2023 is to have a cost of risk that could have an increase in comparison with the Italian and ex-Russia cost of risk. An increase in comparison to the 27 basis points, but not so significant in case of a dynamic of GDP, flattish or slight negative. We will have such a strong contribution from net interest income. For us, 2023 can be a year of significant growth in terms of net income. Looking at share buyback, share buyback is something that we, when we decided to make EUR 3.4 billion of share buyback, we worked also on the number of shares that we can buy through the share buyback. The reduction in terms of the pricing of Intesa Sanpaolo now has put us in a position to with the EUR 1.7 billion to have already completed 5% of the share reduction in the market. At the same time, deciding to give an interim dividend of EUR 1.4 billion at the end of November, I think that it is absolutely the right position to move quarter by quarter in giving a return to our shareholders. That's the reason why we will wait for the final results of the group in order to give the positive view on the share buyback. That's my view. In any case, also the considerations on the potential recession now in my view are moving into a positive world and not in a negative world. In any case, we will have enough time in two or three months in order to understand if there could be a block in terms of imports from Russia. That is not what all the most important institutional research are considering in their scenario. If the scenario will be the one that is likely, we will take our decision within the period of the approval of the figures for the end of 2022. We are now going to proceed with the next question. The next question come from Azzurra Guelfi from Citi. Please ask your question. Hi, good afternoon. Two questions from me. One is on the banking tax. Do you have any view that you can share with us on the potential introduction of banking tax also in Italy? The second one is going back on your buyback, if I can. Just to understand better, what is the ultimate data point that will drive your decision on the execution of this buyback? Is it the total amount of net profit? Is it the absolute amount of capital? Because you sound very confident on the profitability for next year, given the upside from rate. I just wanted to understand a little bit better what is the constraint that we should look at as the main driver for that. Thank you. Thank you, Azzurra. I will start from the point of the share buyback just to be completely clear with all investors. I think that in making my job, as the CEO of a very important European institution, you have to consider what is the right way to manage an organization. In strong recession, it is not the right solution to give back capital, but the only point is to give significant dividends on the cash flows. What I want to be sure is not to have a significant recession. The worst-case scenario that just a limited part of the institutional counterparties are considered likely. As I told you, my expectation is absolutely that this is not the case. Due to the fact that we already paid, we will pay in November an interim dividend, there's no hurry to, no need to take decision today. We have already performed a significant portion of the share buyback. What I want is to be sure not to have a significant recession during 2023, but not because we will not have enough capital, because all our estimates, looking at capital position, we will remain well above 12% after the share buyback, also in the case of a recession. That just to give you the clear position of Intesa Sanpaolo. I don't think that it is the right approach for a CEO that want to look at sustainable results in case of a significant recession, so the worst-case scenario in which we can enter in 2023 to give back capital. In that case, we will move in six months, nine months, 12 months in giving back again the capital because all the estimates also in case of a severe recession with a rebound in 2024 are bringing us, due to the net interest income contribution, to a significant cash flow. What will happen will be to have significant dividend, cash dividend on the side of cash dividend for 2023 and 2024, 2025, and a possible postponement in case of a severe recession of the share buyback to the end of 2023. That's my position. I'm really convinced that we will be able at the beginning of 2023 to give green light on the share buyback because recession, in my view, will not be severe, will be only a technical probably reduction during the first quarter of 2023, and that will be all what can happen. That's the position on the share buyback. We are now going to proceed with our next question. The banking tax or the other part of your question. I have no evidence that in Italy the government is studying a banking tax. That's what today I'm in a position to tell you. If you compare the taxation in Italy with all the other European countries, there's no. It is clear that we have such an excess of taxation in comparison with all the other European banking system, that there is enough space to say that we have already a significant taxation. As it is our power, we think that it is a duty of a bank to move into the support to the social needs and to the inequalities, and we are doing this through significant actions that we are delivering for the people in need, and also for working poor, and also for family that need some assistance. We decided to give a plafond of EUR 30 billion in order to support companies and families that can need to have some support. We are doing the best of our job as bank. The decision on tax is in the hands of the government, and obviously we will fully respect any kind of decision coming from the government. Thank you. We are now going to proceed with our next question from the line of Delphine Lee from JP Morgan. Please ask your question. Yes, good afternoon. Thank you for taking my questions. My first one is sorry to come back on NII. On your guidance, that EUR 2 billion additional, just to clarify, this is EUR 2 billion additional compared to 2022. Can you just maybe just reconcile this with your interest rate sensitivity that you have given before? And also, you know, what kind of deposit beta assumption are you taking now? Just trying to understand a little bit the different moving parts within NII to get to, you know, your new above EUR 11 billion guidance. My second question is on provisions. Have you done any kind of assessment, just to understand a bit better, if the recession is not mild, is it a bit more severe and you get maybe not just a slight decline in GDP in 2023, but something more significant? Where your cost of risk could go to, and do your overlays largely cover the additional loan losses or not? Thank you very much. I can tell you that, starting from the net interest income, just to give you what I consider important. Now we are entering not in the sensitivity world, but in the real world. The sensitivity is very important. If you are in an environment of negative interest rate, if you have no evidence of what happened in case of rebound of interest rate, we are already in an environment of increasing interest rates. Just the last quarter you have the evidence of the real increase, not the theoretical coming from sensitivity. What could be important is what you call beta, so the portion of deposits that can be repriced and in this respect, all our analysis are considering the historical situation of the bank and working client by client, what could be the different action coming from the bank. We are moving between 35%-40% of beta in case of the Euribor 2%. If I can give you some more figures, some more color on our net interest income, our estimates are in this sense with the people in the field that have real relations with clients. That's what's really important in order to understand what could be the impact on net interest income. In case of a 2% Euribor, that is already embedded because we are already there, at the end of the year we will be there. We will have an increase of EUR 2 billion in terms of net interest income with beta 35%-40%. If interest rate will be 2.5%, we can have EUR 2.5 billion increase in comparison to the end of 2020. Two billion for 2%, EUR 2.5 billion for 2.5% Euribor, the level, and EUR 3 billion for 3% Euribor. That's our estimates and working with our people with the beta increasing, in terms of moving into 40% or 45% as soon as you have an increase in terms of Euribor. Just to make a summary, 2% Euribor with 35%, 40% beta increase in terms of net interest income EUR 2 billion. 2.5 Euribor, beta 40% increase in terms of net interest income, EUR 2.5 billion. 3% Euribor, beta above 40% and increase in terms of net interest income, EUR 3 billion. That's all for net interest income. Please do not enter into something different from this indication of the level we gave. The clear disclosure and sensitivity is not the way in which you can understand the dynamic of our net interest income dynamics. Looking at provisions, in case of a severe recession. The real point on a severe recession and a rebound in 2024, sorry, because the real way in which you have to look and what can happen in the future, also in a worst-case scenario, also looking at the worst scenario, you will have a rebound in any case in 2024. That's fundamental in order to understand the real dynamics of the increase in terms of potential provision. We will have an increase in terms of provisions. Overlays, in my view, are not so significant in this scenario because the overlays are related mainly with Stage 2. We have not such a significant concentration of clients in Stage 2, so we have a good quality within our portfolio. We think that we will have an increase in terms of cost of risk. The expectation is that in any case will not be so significant as in previous crisis. Because the majority of the cost of risk increase in case of a recession is mainly related to the stock of non-performing loans. In our case, the impact coming from the stock of non-performing loans will be close to zero. The dynamics will be only related with inflow. On inflow, you will have to consider the rebound in 2024. It is not mathematical that you have a recession, and you will have a significant increase in terms of cost of risk. At the same time, we will benefit from significant net interest income increase. That's the reason why I can tell you that in any scenario, we are just looking for very good results in terms of net income. Thank you. We are now going to proceed with our next question. It's from Ignacio Cerezo from UBS. Please ask your question. Yeah. Hi, good afternoon. Thank you for the presentation. I have one question on TLTRO and the other one on Russia. On the TLTRO, if you can clarify three things, how you have accounted for the cost in Q3, what is the guidance in terms of contribution in Q4, and what are you planning in terms of repayment? And on Russia, if you can give us a little bit more color on why and how the exposure, especially the cross-border, has declined so much in the quarter without cost. What action basically have you taken there? Thank you. I will give you the answer on Russia, and then I will leave the floor to Stefano Del Punta in order to give you all the clarification on TLTRO. On Russia, we decided to accelerate. The first point in all the dynamics of this quarter, as usual, you know that our attitude is that in the second part of each year, we prepare the sustainable results for the future. We started from the consideration that we had such a positive tailwind coming from net interest income, that we can deal with two significant points that we want to assess with obviously different dimension. One is the Russia exposure, the other one is the government bond exposure in the different countries in which we decided to invest. For the first part on Russia, we decided to accelerate some negotiation that we started at the beginning of the crisis with counterparties that can be ready to buy our loans. Our loans used to be of good quality, but we decided that could be better to have zero exposure to, through de-risking and avoiding having on the balance sheet the figure. That is why when we gave the slide on the outlook, we gave also the exposure embedded in the different outlook that we gave to the market. If you remember, when we talk about giving about EUR 4 billion guidance, the implication was to have no critical changes to commodity energy supplies. A net exposure to Russia of EUR 3.6 billion. This means entering into 2023 with an exposure to Russia of EUR 3.6 billion. In the other scenario, with well above EUR 3 billion net income, we have considered to have a 40% coverage, so with a net exposure of EUR 2.7 billion. This means entering in 2023 with EUR 2.7 billion of Russia exposure. Believe me, when you have all credit cross-border, all credit in the local bank, because you know that it is practically impossible to make a clear disposal of the bank without the authorization of the number one in Russia, you will have a significant exposure to Russia, and each 10% increase in terms of coverage, you can have a massive impact on your figures. We decided to accelerate the negotiation to have with the right coverage on our exposure to Russia. Now we are at a level of below EUR 1.3 billion net exposure. Entering with this exposure in 2023 will be in a clear, strong position because also in worst case scenario, what will we need due to the quality of these loans will be to have marginal increase. When I'm talking about marginal increasing, I'm talking about EUR 100 million, EUR 200 million. No more something that can change the figures of sustainability of our results. Reduction of stock has been considered very important to enter into 2023 in order to be sure to assess all the potential coming from net interest income or the need to be sure to have the right limited increase in cost of risk, maintaining significant increase in terms of net income in 2023. Also, the concentration in government bond has been considered a priority process also because we had significant revenues. We decided to reduce a concentration and to move into a proxy of equivalent dimension between Italy and Spain and the triple A, double A, single A portfolio, other government bonds in portfolio, reducing the stock of the exposure to government bonds. Just to tell you this because we had enough room to make a clear derisking of the position. I think from my experience, looking at non-performing loan or each kind of risk, that it is absolutely the best solution to remove the risk from the balance sheet and not to maintain the risk. In any case, I add also the equation to see some recovery or some positive components in economic figures coming from this risky situation. I think that it is not a way in which Intesa Sanpaolo want to proceed looking at exposure into risky country. That's the position related to Russia, and that's the reason why we accelerated. I can tell you that if we will have occasion to reduce, to further reduce our exposure, we will continue to reduce the exposure until zero. Then TLTRO for Stefano. Yes. On TLTRO, we have a very standard way of accounting for TLTRO. We account the benefit, on a current basis, so not on an amortized cost as other banks do. There's not gonna be any significant impact from going forward from TLTRO, meaning, since the realignment of the funding cost on TLTRO, so the pricing condition of TLTRO and the deposit facility rate of ECB, basically the TLTRO will become completely neutral. From December onwards, there's not gonna be neither any benefit nor any disadvantage from keeping or repaying TLTRO. Of course, all the numbers that Mr. Messina gave on the sensitivity of interest rates, in the next 12 months, in 2023, of course are already discounting no benefit, zero benefit from TLTRO. The strategy at this point, I mean, we are not in a hurry to repay. There's no reason to keep TLTRO after December. But of course, you're not gonna substitute TLTRO with more expensive funding. We will keep the TLTRO that we need to avoid issuing covered bond or issuing senior non-preferred or senior preferred. The fact that we have no benefit doesn't mean that we instantly will repay entire TLTRO. The liquidity position of the bank is very strong. I think that we will repay in a relatively short period of time. But in any case, I mean, we don't have defined. It depends also on the volumes of new loans that we. We are now in the budget exercise. Depending on the volumes of loans and the volumes of deposit evolution, et cetera, we will repay TLTRO in a way that of course we don't have to go to the market to replace TLTRO with covered bonds or other non-eligible bonds. Thank you very much. We are now going to proceed with our next question. The question comes from the line of Andrea Filtri from Mediobanca. Please ask your question. Your line is open. Thank you for taking my questions. I have two, and just one clarification following Matteo Ramenghi's one. I'll start with the clarification. I just didn't understand what indications you have given on the quarter-over-quarter impact in Q4 2022 from TLTRO, i.e., the distribution contribution Q3 versus Q4. My two questions. First is on fees, if you can give an indication as you have given on NII on fees, whether they can actually grow in absolute terms in 2023. And second question is on capital. If you're seeing any deterioration of regulatory headwinds and/or a harsher stance by the supervisor, and if you can just remind us of the pending regulatory burdens from here. Thank you. On TLTRO, Stefano, if you want to give Well, I mean, of course, the contribution of TLTRO depends on the average rate that you pay on TLTRO, which is indexed to the deposit facility rate. As long as the deposit facility rate was going up, the benefit of TLTRO was going down, considering that we used TLTRO to fund loans to customers. Of course, when the funding for these loans, the loans remain the same, the funding costs go up. The contribution of TLTRO to net interest margin in Q4 was about EUR 200 million and lower than it was in previous quarters when TLTRO was priced at a floor of -4.5%. I mean, I... This is becoming irrelevant going forward because, of course, of the new pricing rules that unilaterally ECB has changed. On fees, there is a clear correlation between the inflows coming to assets under management through conversion of retail deposits for the future. The decision that we have to take in terms of commercial indication to the people within the organization is to reinforce the action in terms of conversion of retail deposit into assets under management product, obviously respecting the position of the clients. Today, it is clear that we can receive much more contribution maintaining the money into retail deposits than converting into assets under management products. That's from a strategic point of view, for the next two years, these are some points of attention related to the potential conversion of retail deposits. Different story is for the assets under administration and different story is what we are in a position to work in terms of new money coming from other banks. We will accelerate the potential conversion of assets under administration and the new money that we can receive from the other players into the market. We are reinforcing the private bankers within the private banking divisions because we are experimenting significant new inflow of money that can be used for the reinforcement of wealth management proposition. Net-net, looking at the figures today, the majority of the impact is clear deriving from the performance effect. Performance effect as to impact, one is performance fee and the other one is the dimension of the stock that is a dimension in which you receive a lower amount of fees. Looking at our expectation also in adverse scenario, more or less fees will remain at this level. My expectation is that fees can only accelerate in the next quarters. The dimension of the acceleration will depend obviously by the market attitude and by the attitudes of clients that today prefer to remain with retail deposits, and we are happy to maintain clients with retail deposits. Looking at capital, we remain with more or less 45 basis points of impact coming from headwinds from a regulatory point of view. We have already prepared actions in order to compensate this impact. We are already in 2022, ready to have the compensation in case of any impact in this quarter or any impact coming in the first quarter of 2023. I have to tell you that from this point of view, we are able to prepare a clear hedging strategy in case of an impact coming from a regulatory headwinds. I'm not worried at all from this point of view. Thank you. Thank you. We are now going to take our next question. It's from the line of Benjie Creelan-Sandford from Jefferies. Please go ahead. Yeah. Hi, it's Chris Hallam here from Goldman Sachs. Just one question from me. The move higher in rates is clearly a very large tailwind to your revenue performance, as you've outlined on the call today. I wondered whether it's also leading to any changes in strategic thinking. You already mentioned, you know, discussed this topic, the conversion of retail deposits into wealth products and how that might be slowed. I wondered, or I wanted to check, let's say, whether there would also be any changes to either the pace or the scale of the Isybank rollouts, because I think initially that was focused on 4 million, you know, relatively unprofitable customers whose profitability has probably now improved. This is a good point because it is related with our business model. We are in a unique position in the European landscape because we can call wealth management products today also the retail deposits. Let me say in other words, we manage all the money of our clients in the interest of our clients, but then there is a clear implication also on our figures. When we discuss it in different occasion, the potential that we have in commissions, we used to have at the beginning of our business plan some years ago, if you remember, we used to talk about conversion of assets under administration. Due to the fact that there was an attitude from the Italian families to maintain a very conservative approach and using, especially during the COVID-19, their attitude to place into retail deposits, we started to talk about conversion of retail deposits into assets under management product. Today, if I have to tell you from a medium term perspective, I remain convinced that we need to move into a conversion for sure for assets under administration. I want to remember that we remain with more than EUR 200 billion of assets under administration, out of which EUR 100 billion can be a workable portion in order to be converted into assets under management product. We have between EUR 50 billion and EUR 80 billion of retail deposits that we need to check with the clients what kind of allocation they can prefer. If they want to remain in retail deposits or they want to subscribe bonds of Intesa Sanpaolo, or if they want to move into assets under management product. Another very important lever for us is the property and casualty business. That would be another part of the story in terms of commissions. It is likely that if we will not have a significant conversion in terms of retail deposits, we will have an acceleration in any case in the property and casualty business that is counter-cyclical, so that there's for sure an opportunity to accelerate in this area. The clear point for us is that today we think to be at the real minimum level of the fee and commission. As soon as the performance will move into a positive attitude, we will have, again, an increase in terms of stock of asset under management product. The combination between the wealth management of a retail deposit and asset under management will bring us such an increase during the next years that we are really in a position to upgrade our figures for the business plan, and we will work in order to be sure to give the right figures to the market in the next quarters. Thanks very much. We are now going to proceed with our next question. It's from the line of Benjie Creelan-Sandford from Jefferies. Please go ahead. Yes, good afternoon, and thanks for taking the questions. My first question was on net interest income. I mean, thank you for the guidance. You've been very clear on that. I was just wondering if you could give us a bit more color on the moving parts this quarter. So just looking at slide 8, I wondered if you could break out in a bit more detail that spread component. I mean, how much of that related to loan yields? Did anything happen with deposit costs in the quarter? And also, what was the hedging contribution? How did that move as well? I guess just to follow up on the other, could you just tell us what the euro amount contribution from the other was in the third quarter? My second question, again, just a bit of a follow-up, really, just on capital. Did you take any regulatory impacts this quarter in the capital ratio? Also perhaps you can tell us what the CET1 sensitivity is to the move in BTP spreads going forward now that you have reduced the exposure. Thank you very much. I want to start from the capital ratio. We had no impact coming from regulatory in this quarter. As I told, our expectation is to have in the last quarter and more likely in the first quarter of 2023. As I told, we have already prepared the contingency in terms of reduction of these weighted assets to manage the impact. Looking at the sensitivity now, we have a sensitivity of 15 basis points impact for 100 basis points movement in terms of the BTP-Bund spread. That's our position. We consider this a fair position. We are confident to enter into 2023 with a very limited exposure also to this potential risk during 2023. Looking at the dynamic of the net interest income during the third quarter in comparison with the second quarter, we had a clear and significant markdown positive that more than compensated the negative hedging. We started to have a negative in terms of delta contribution of the hedging facility. In reality, the markdown was really accelerating and more than compensated a reduction in terms of contribution from the hedging facility. We had a slight new contribution from markdown, and so the majority benefit in terms of medium-term cost of funding, and that's the most important part of the story. If you want to look, the fundamental part of the story is markdown. It is the clear evidence that we have an increase in terms of net income that is really impressive during the rebound of the interest rate in the market. On TLTRO. Yeah. I mean, it depends how you look at the benefit of TLTRO. The benefit in terms of what we've always given to you in as numbers is the difference between basically how much we were paying on TLTRO and how much we were getting from the clients with the loans that we have used when we have taken TLTRO to do loans. This of course, this advantage was progressively going down because TLTRO was being repriced following the repricing of the increased interest rates by ECB. Of course, instead the loans that we did to the customers remained at the same conditions. In terms of the commercial benefit from TLTRO, it was basically disappearing, okay? Because ECB was bringing up the price of TLTRO. There was another advantage, which is basically the excess liquidity advantage. That is the reason why in the end ECB decided to change the pricing mechanism. Because of course, a bank with excess liquidity were at the possibility to redeposit some money with ECB at a higher interest rates and continue to pay on TLTRO an interest rate which was lower than the. This is in a sense different because the money is fungible, so the excess liquidity can come from many sources. I would say, as I answered to Andrea Filtri before, the difference in terms of benefit from TLTRO, the real benefits of the one coming from the use of TLTRO to make loans to clients in Q3 was already down or about more than EUR 200 million with the Q2, and was progressively disappearing. This is what I can tell you. Otherwise, I mean, the money that we are depositing at ECB doesn't come from TLTRO. It comes from the overall management of our liquidity. When I deposit money with the ECB, I don't know if I'm depositing TLTRO money or I'm depositing deposits from customers or from corporates. I don't have an answer for on top of what I gave to you. Yeah. The benefit from TLTRO, from the real use of TLTRO in Q3 was already disappearing. No, sorry. I sort of asked the question the wrong way. I mean, basically, what I wanted to know was what was the cost of the TLTRO in the third quarter, i.e., what did you accrue it at in terms of the cost, not like kind of the net, in terms of the reinvestment potential? According to the old contractual rules, well, depends of course, with TLTRO have been taken, but the cost was definitely negative. It was, I don't have that number with me. Maybe we can, you can refer to our, to Marco Delfrate or Andrea Tamagnini, who have that number. I don't have that in mind. Certainly it was negative. Perfect. Thank you very much. Thank you. We are now going to proceed with our next question. The next question come from the line of Andrea Lisi from Equita. Please ask your question. Hi. Thank you for taking my question. The first one is on what are you observing in terms of operating costs going on? If also the target you have for operating cost is confirmed given the high inflationary environment and the measures you have taken on them. The second question is specifically on Banca dei Territori. I saw that in the third quarter the NII was lower than the second quarter. Was it entirely due to TLTRO effect, slightly lower volumes, or are other effects in place? Just to understand that. Thank you. Looking at that point on Banca dei Territori, I'm happy that you have asked because also I saw it in another report, this point on the allocation of the growth in terms of net interest income. You have to consider that in order not to penalize the Banca dei Territori division, that is the clear engine for the liquidity, for the relation with clients, with the wealth management, with all the clients that are not private in our group. It is for sure an engine in terms of sustainability of our results. In periods of very negative interest rates, we use to use within the intra-group fixed Euribor, a zero Euribor for the Banca dei Territori division. Also in the period in which you had a significant reduction in terms of Euribor, all the negative is in place in the corporate center. Today for 2022, we will maintain for all 2022 just for the budget proposition, the same approach for also in the divisional disclosure of our figures. Starting from 2023, you will find all the positive coming from Euribor into the Banca dei Territori. That's to put emphasis on the fact that this will be the division that will be in charge in terms of responsibility to allow the acceleration in terms of net interest income. That the reason why you have this evidence into the divisional figures of the group. In terms of real dynamics, it's all placed in the Banca dei Territori. That was for sure the division that from a substantial point of view suffered much with the negative interest rate. Looking at operating costs, we have a clear track record of managing the cost base of the group. For sure there will be a component of the group could be 10%, 20% of our cost base that can have an impact coming from inflation. We are working in order to mitigate and compensate this impact. What I consider strategic for sure are the cost for the technological improvement of the group. We have already said that, I want to be sure to enter into 2023 in a position not to talk about the rising cost of risk sensitivity, but talk about what is the real future of this group, that is technological improvement. The agreement with Thought Machine, Isybank, what we can do for the real bank for the next 10 years. Operating costs will increase for the technological improvement of the group, but will be reduced in all the other areas that we have within the group. My expectation is we will be able to manage cost in order to move into a negative side also during next years. If in some quarters we can have some spike deriving from inflation, we will see. In any case, we will find areas in which we can compensate. Cost control and cost reduction are and will remain a top priority for Intesa Sanpaolo. Thank you. We are now going to proceed with our next question. From the line of Giovanni Razzoli from Deutsche Bank. Please ask your question. Good afternoon to everybody. A quick clarification on the cost of risk, because you've been pretty clear in saying that your base scenario incorporates, you know, a mild recession in the, at the beginning of next year with a rebound, afterwards. In the previous conference you've mentioned that instead in a severe recession, you would have expected your cost of risk to have exceeded, you know, even in the severe recession, 60 basis points. Would you stick to that level or shall we assume that in light of, you know, a slightly better evolution of the, macro in Italy so far, this guidance could be, you know, a worst case? Thank you. Sorry, could you repeat the figures? Because I lost you when you were talking about the- Y-y-yes the amount of basis points. Yes, in the previous conference call you mentioned that in extreme scenarios you wouldn't have expected the cost of risk to reach 60 basis point, even in extreme scenarios. Yes. If I'm not mistaken. I understood 16, so I was just. No, 16 it would have been really. A little bit too low, right? Okay. I can confirm. If you look at our. Let's make it easy, sorry. Because if you look at the figures that we have today, with a massive de-risking that, believe me, was considered mission impossible to reduce, risk exposure in the dimension in which we realized during this last quarter. The cost of risk for the group today is 54 basis points. You can move if you decide to move to have some further reduction, you can have a slight increase or slight reduction. To consider that in a severe recession, you can have EUR 1.3 billion, because you have a recession in a country with a zero NPL like us. Because I want to repeat again, in all the different recessions, more than 50% of the cost of risk was deriving from the stock of non-performing loans. We enter into 2023 with practically zero NPL in terms of impact that you can have. The cost of risk embedded also in case of recession due only to new inflow. Due to the fact that only today the position of companies in Italy is really unbelievable in terms of comparison with all the other countries. In Italy you have a system of corporate clients that are really in a strong position. There are a portion limited to small SMEs, to families that can suffer from the crisis, but we are not talking about something that can change the dimension. My expectation is that in any case, we can remain below 60 basis points. No possibility to have a cost of risk on the basis of what we are seeing today that can exceed 60 basis points also in very negative scenario. That are not scenario that we are today looking for. Believe me, I think that once again, I see in the market an attitude to create this worst case scenario, the end of the world. You have to consider that there will be a stop of everything in the world. In Italy today, you cannot find a place in a hotel. That is why you have a GDP that is positive. Our expectation is that also in this last quarter, you can have some positive news coming from the tourism and other components of GDP in the country. Because we are full of USA tourists coming in our country, international tourists. There's a boom in Italy in this situation. To enter in something that could be is structurally problematic, I have to tell you, it's something that it is difficult for me to consider. The cost of risk will be for sure below the 60 basis points. Okay, thank you. The 16 was not a lapse, you know. Thank you. Thank you. We can try to work for 16 in case of positive GDP dynamics also in 2023. This could be a clear challenge. We are now going to proceed with our next question. It's from the line of Andrea Filtri from Exane. Please ask your question. Just one question left. IFRS 17, some banks have now given guidance as to what they expect, the impact being next year on capital, if any. Are you in that position or not? Can you tell us something? If there's any impact on revenues, it'd be interesting to know as well. Thank you. No, we do not expect significant impact. It could be 5 basis points. There could be an impact, okay, but it is negligible in any case for our figures. We used to have non-traditional products that are the products that can have significant volatility in terms of impact. Our expectation is not to have impact coming from IFRS 17. Thank you. We are now going to proceed with our next question. It's from the line of Domenico Santoro from HSBC. Please go ahead. Thank you. You already answered all of my questions. Thanks. Okay. We are now going to take our next question. It comes from the line of Anna-Maria Benassi from Kepler Cheuvreux. Please ask your question. Yeah. Good afternoon, all. My question has been answered. Just a couple of comments. You were giving the sensitivity of capital ratios to the t-Bund spread. Actually, we have seen a large movement in all the govies, all the bonds. Can you tell us how much in Q3 was the impact of all the positions on your capital? I was buying the UK, so you had diversify your portfolio to escape a bit the entire volatility, but that then materialize elsewhere. The other point is, if you can provide the deposit beta split between retail and corporate, just to have a view on the next trends. Finally, just a small remark. I see now that I have EUR 5.7 billion net profit estimate already for 2023. Consensus is EUR 5.1 billion. I'm discovering a bit live that maybe I've been too optimistic for 2023. Now I hear you saying that the EUR 6.5 billion for 2025 could be subdued compared to what you can achieve. What should I do? Thank you. In the third quarter it's been 11 basis points, the impact coming in all our portfolio. Deposit split, the majority of our deposits are related with retail. Only EUR 50 billion is related with corporate clients. That's more or less the dimension of the level of the deposit base. On the net income, I have to tell you that, the acceleration coming from this Euribor will bring us such a positive that we remain in a unique position in comparison with the original business plan. Having realized in the first part of 2022 the risking of the non-performing loans exposure. Now the clear position in terms of risk coming from non-performing loans is close to zero. We will have a clear acceleration in terms of net income. On the specific figure, I would prefer to discuss on the occasion of the presentation of the final and the figures for 2022, because at that time I will have also the budget approved. Also some revised position on the business plan, also agreed with all the managers of the bank. It is clear that you can do your calculation. The trend of the bank is to generate, apart from the Russia exposure in which we will not have more impact in the future, the run rate is more than EUR 5 billion. With negative interest rates. In considering that in 2023, we will have more than EUR 2 billion in excess contribution. Looking at commissions, we think that we can continue to have a good contribution, not a reduction from commissions. You will have your own calculation on the inertial net income that we can generate. You can add some provision if you want, having in mind that we are at zero NPL and zero Russia exposure. At the end, I'm really confident that we can give good satisfaction to our shareholders in terms of net income generation, and so in terms of cash dividend that we can give to our shareholders. That's the reason why I think that the original business plan can be absolutely over-performed. At the end, maintaining 70% payout ratio, we can continue to be probably the best cash dividend provider in the markets. Thank you. We have no further questions at this time. I'll hand the conference back to Mr. Carlo Messina for closing remarks. Thank you very much. I want just to confirm you that I'm really satisfied from these results. As you understood, we decided to use this quarter in order to prepare 2023 results through a clear reduction to zero of the risk that we can have during 2023. Any eventual reduction in terms of GDP dynamics will be absolutely more than compensated by this acceleration in terms of net interest income. That will be the clear engine for growth and for over-delivering on our promises on the original business plan. Thank you very much. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.