Good day, thank you for standing by. Welcome to Mediobanca first quarter 2022/2023 results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to slowly press star one, and then one on your telephone. You will then hear an automated message advising that your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand over the conference to Mr. Alberto Nagel, CEO. Please go ahead, sir. Good afternoon to everybody, and thank you for joining the call. In commenting this first quarter, I would say that this quarter has been featured by growth, profitability, innovation and sustainability. Growth and profitability, because notwithstanding the tough scenario, we were able to have a robust growth in profitable assets, so loans up 7% year-on-year. This led a growth of the revenue at the all-time high with EUR 760 million, up 7%, with an NII which was surprisingly better than what we have thought at EUR 400 million, up 11%, and fees up as well at 4% at EUR 210 million. We have kept absolute quality in the assets with a core stable and overlay untouched. This led at the end to the profitability of a ROTE of 12% on strong capital ratio. Innovation, this quarter we have done the acquisition of two fintech, 100% Soisy, and the second, a minority investment in HeidiPay. These are instrumental to enhance our Buy Now Pay Later business, which is key to get new customers or customer acquisition capability, strengthen direct distribution, and start to internationalize the business. Sustainability, because we have, for the first time, issued our Task Force on Climate-related Financial Disclosures, where we had given wide disclosure, given wide disclosure on ESG heat map to incorporate transition risk. We have started to quantify the emissions generated by our lending and investment portfolio, and we have set targets to stay within the targets of Net-Zero Banking Alliance, seeing that we will have to do something in automotive and power generation, but we are very well-positioned, and those kind of adjustments are manageable without impacting our business model. Strong group KPI. In particular, EPS was up 5%, revenue 7% as we said, loans 7%, TFA +8%, cost/income remains in the region of 42%, and leverage ratio was 8.4%. If we break this out into the different business unit, we have registered sound performance across the board. Basically in wealth management, we have raised our ROAC, the ROAC of the division to 38% on the basis of a very good net new money, EUR 1.1 billion entirely managed assets. This is, as we will see, you know, an industry leader performance, type of performance. Revenue above EUR 200 million, in the region of 200, and net profit at EUR 45 million, showing a double-digit growth. In consumer finance, all-time high bottom line, so EUR 100 million profit, which is all-time high. This is despite concern about consumer lending demand and also cost of risk. EUR 1.9 billion of net new loans. Repricing of the loan faster than expected. Core at the same level of last year, and, as I said, ongoing, this investment in direct distribution innovation. CIB produce very good revenue in terms of absolute level and also diversification. In this, of course, lending advisory solution business did the most part. Notwithstanding the macro and some market concern, the bank was able to generate profitable assets. If we look at slide seven, CIB trajectory of corporate book is quite interesting in the sense that we have had an increase of 8% year-on-year. If you see the trajectory, this is a stable trajectory of growth since already some years. The same we can say with in consumer finance, with exception of the COVID, where we were halted in the production, and hence we had you know 15 months, so more than one year in terms of inability to grow the loan book because we need to cope with the maturity of the existing book. This has changed, and since already one year, we keep on growing our book. It was EUR 13.1 billion a year ago. It is EUR 13.9 billion now with a 6% increase year-on-year. In wealth management, EUR 1.1 billion of net new money, this is comparable to basically the number of the previous quarter. I would say that the quality of this quarter is better because, as I said, it's all managed assets, while in the past we had a mix of deposits and managed assets. Also, Wealth Management loans are having a very good trajectory, and we have a 9% growth year-on-year, which is a mix between mortgage done out of premier segment and Lombard lending done out of private banking. The trend of revenue overall is on the rise, and you can see it on page eight, where we had this year a 7% and 15% of last year, which also filled the gap at the ramp up because of what happened during the COVID. The breakdown of revenues is 52% NII, 30% fees, trading, and insurance. You see that after only a few years of our activity in Wealth Management, we are at EUR 200 million of run rate. This EUR 200 million compares very well with the rest of the bank because the most important revenue producer is still Consumer Finance with EUR 276 million, and the CIB is in the region of EUR 200 million -EUR 280 million. Basically, already Wealth Management became a substantial business for the bank in terms of revenue. NII benefited from a 11% increase year-on-year and 6% quarter-on-quarter. The reason of this increase, which was stronger than expected, are related to stronger volume growth coupled with beneficial interest rate increase on floating exposure. Basically what happened is that the interest rate increase was steeper and bigger in a shorter period of time than expected. We have actually an asset side of the bank, which is having a shorter maturity and is mainly variable. This is enjoying, of course, a higher level of interest. Of course, the volume we see, we say here, EUR 3.5 billion of additional loan with an increased yield. Banking book also grew because we were very liquid, and we used a bit of this liquidity to enter into good yield, you know, asset. Of course, the management of the funding has been important. We kept basically the funding at low cost and, you know, comparable to the previous year. Fees are having another good trajectory, more than 200. You see that this is, you know, a constant numbers in the last few quarters. Of course, we have always in each quarter some, I would say, more recurrent or less recurrent, and also the definition of recurrent and non-recurrent is variable because basically this year we have had a lot of upfront, which is coherent with the demand of clients of a structured product. Overall, management fee, wealth management fee are on the rise. We have added EUR 112 million of fees. You know, we were coming from quite a high level between the first quarter and second quarter of last year because we had the BlackRock transaction, which we were able to offset with a new kind of source of fees. The fees in also in consumer and in CIB were pretty high, and hence we were able to print above 200 basis points. Industrial cost of risk. You remember that we gave a guidance of basically an unchanged cost of risk, but using half of overlay. This would have reverted into something like 70-75 basis points. For the time being, this is not happening in the sense that we stick to the 45-50 basis points, but without overlay. This is true across the board. We see quite a good asset quality and core in each of the business. Consumer banking well below still pre-COVID, CIB, and wealth management. Overlay is still untouched and possible use in the next few quarter, if needed. Asset quality, we still are at 2.5%, stage three gross NPE on gross loan. Of course, negligible if it is considered net, because it's 0.7%. We have increased the coverage of stage three to 72.4%. We have increased also the coverage of stage two, and we have lowered the incidence to 6.3%. Overall, the performing loan coverage stays at the level of 1.33%, with a very important level in consumer at 3.75%. I would note that this decrease in NPEs is mainly driven by some bucket. I would say consumer finance, because you know that Compass regularly sells the NPE. We don't have at any point of time in the year important warehouse of NPEs because we constantly devalue them to 10% book value, and then we sell it. Every year we have this level of EUR 200 million, EUR 210 million, EUR 150 million. Now we are going down to EUR 175 million. Another good news, piece of news is coming from leasing, because leasing, as you know, is subject to trimming and adjusting since many years because we want to have a smaller bucket of leasing, and we have also managed to reduce substantially in one-year time the NPE exposure, and we are now down to EUR 55 million gross and EUR 11 million net. Capital ratio. We still enjoy very good capital ratio. This is on the back of generated earnings, setting aside 70% cash payout. Small absorption of insurance, you know, this is temporary because when we receive the dividend from Generali, we will, you know, trim this kind of RWA inflation, RWA organic growth and regulation. Here we have been revalidated one book of lending, in particular corporate book, and we have had a manageable impact of 45 basis points. We think that this is not going to last because we expect this to be reversed within the introduction of Basel IV in January 2025. As I said, the ESG pathway is basically making important step ahead in terms of scope three, understanding how much we have, understanding how much we should trim, understanding how we can meet the deadlines and the targets we have signed up. It's all manageable, and I think we are very well-placed. We have also affirmed as a bank in terms of ESG DCM activity, and we have increased our green ESG credit product now at EUR 3.3 billion of stock. Going to divisional results, I would of course highlight that this quarter was all but easy, in particular in wealth management, because with the volatility of the market, as you can see on slide 19, the market was contracting in terms of net new money. You know, in general, the mood was, you know, not favorable, because also negative market performance since the start of the year. I think our group outperform a bit the players, and this is linked to the consolidation of our institutional footprint in private investment banking and in premier segment. This led to EUR 1.1 billion of net new money, basically equally divided between premier and private. In private, we are sticking to a firm Mediobanca as a strong player in private markets, and we have completed some important transaction that, you know, give a connotation to the bank of this kind with some important real estate trophy assets, new investment within the Mediobanca BlackRock initiative. All this kind of investment, you may understand, will create stable management fee because they are going to last more than the liquid. A very important element of the private market is that when you do this and you continue to offer this kind of opportunity, you have a lock in clients for longer and with bigger visibility in terms of management fee. Premier as well raised EUR 700 million of net new money in managed assets, and this was done on the back of also new product offerings like the one done with our SGR and Nordea and or some new life insurance product developed with Generali. Consumer finance, as I said, best ever quarter in terms of net profit. Here again, we had an important test of not only the resiliency of Compass, but the ability to print new loan at very good risk return level. The new loan were all-time high for the quarter, EUR 1.9 billion, and this is backed by a continuing effort in enhancing the distribution network. Basically, between the additional agency that we have promoted, the one of Compass, the one of Compass Link, which is the door-to-door selling, new kind of distribution network we have launched a year ago, the fintech that we have acquired and the digital push we are doing in distributing our loan through a digital enhancement. The output of this is that we retain most of the marginality because we don't pay fee to distribute our loans, and hence we internalize more margin. This was true, in particular, notwithstanding some inflation in cost because the digital push and the acquisition and the Buy Now Pay Later is generating, of course, extra cost. The jewel of Compass is so well-placed that basically with this increase of revenue +7% in revenue, +8%, +9% in cost, we had with the similar cost of risk +11% in GOP, in short, gross operating profit. Spend only a few words on Buy Now Pay Later. Why we think that is very important for the future of our group and particularly in Compass, because we do see a bigger penetration of this product in particular for a younger generation. We think that Italy is a laggard for the time being in e-commerce and in Buy Now Pay Later, and there will be a bigger you know bigger proportion of clients which will go Buy Now Pay Later. Now, Compass has already developed a very important offer on the physical Buy Now Pay Later. When you go into a shop and you do any purchase, already 7,000 merchants have signed an agreement to distribute PagoLight, which is the product of Compass. What these two acquisition were aimed at, in particular, have a partner between us and the merchant e-commerce, so on the e-commerce. What we are going to do is, through the help of those two partner, becoming a stronger player for the e-commerce in Buy Now Pay Later. The importance of Buy Now Pay Later in terms of customer acquisition can be seen on slide 24. Think about just a year ago, we were producing basically like today we produce a bit more, between EUR 200 million and EUR 300 million every quarter of purpose loan. What we say in Italy, finalizzato, no? A year ago, the customer generated in personal loan in purpose loan through Buy Now Pay Later was only 1%. Now it's 11%. This means that through Buy Now Pay Later, as we say here, we are achieving in our database basically a number of customer that is quite sizable. We say 15,000 a month, with 66% of never before Compass. As Compass is a very important company in Italy, many clients that do purpose loan, they may be already clients of Compass. There, of course, the cross-selling is more limited. What we have seen is that in Buy Now Pay Later, the quality of clients and the category of clients is totally complementary to the one of the personal purpose loan, and hence is strategically very important. We plan to be at 20,000 customer per month by June 2023. If we go into asset quality, we see still that the early deterioration index, as we call it on page 25, is still below the pre-COVID. So we still enjoy a very positive moment, where 146 basis points were more than enough to cover the deteriorated loan, and this reverted into EUR 51 million of provision. With a further decrease, as we said, in deteriorated NPL stock and an increase in NPL coverage to 80%. CIB very strong start of the year with +8% in total income, enjoying very good advisory, very good lending and strong start of markets driven by high volume in solution business, equity and fixed income. Of course, the weak part was more in ECM and in DCM. DCM is now basically slowly returning to normality. ECM needs more quarters to go back to normality. Basically, I think that again here the fact that we are not dependent on a single product or we are not reliant on in particular DCM or ECM has not created you know a bad comparison with last year. That even without important writebacks we are able to print a 15% return on allocated capital, no? Working well in many transactions, you see, I would note, of course, as a matter of pride, the advisory for Porsche, which was an iconic transaction. On insurance contribution, again, it's important to note that, the contribution of insurance, for a bank is more and more important because of, in particular in the moment and in the, in conjunction where we are and where we can go, basically because of many, aspects. First of all, decorrelation with the typical macro that, may affect the bank, different risk weighting and, capital generation. Basically, even this quarter, this proved to be right with the ROIC of 20%. Holding function, nothing to comment in particular. I would say that, it's important to, you know, to draw the attention on the refinancing and on the funding cost on page 31. Basically, bond stock stable at EUR 19 billion, with two billion of issuance at 115 basis points, which is even more competitive than the maturity, because we had, this year we will have a maturity of 3.2. We have already raised EUR 2 billion at a better cost. Basically, as you see, we have LTRO a smooth trajectory on page 31. As you see, we are not having any support of TLTRO this year. On the contrary, we factored, even before the latest news of ECB, that TLTRO would have impacted in a negative way as it is doing. Last part is on updating you on how we see, I mean, the trends and the macro and, you know, address some market concern. Basically, when we did the budget, it was May because we approved the budget in June, and then we have the full year approval in July. As you know, basically the GDP growth, inflation, BTP spread were different, were more favorable, I would say for us and for banks. On the contrary, Euribor was totally different. Basically, it was 0.1% estimate in 2023. It is basically now 1.8%. Basically, we had some negative and some positive. To address the market concern, you know, Mediobanca is seen having less sensitivity compared to commercial bank to rates. This is true, but is only part of the story. Because on the other hand, we are having a more favorable MREL position. We tend to privilege a prudent time approach where swing in negative and in positive of NII is going to be more contained, and this proved to be supportive of NII in the past, but it will be also supportive of NII as we have seen in the future. We have a clear NII growth driver ahead, low volume growth, sensitivity gradually materializing. You know that basically what we did is to start, you know, to alter a bit the hedging on the deposits of our wealth management. This started in February, March, and is going to be more material in the future. Of course, maintaining an effective funding, an effective cost of funding is, as well, important. The second possible concern was on consumer. Mediobanca exposed to consumer will mean basically lower NII because of difficulty to transfer to clients increase of rates and higher cost, no? Here again, Compass proved to be very able and faster to reverse higher cost of funding to clients. We think that basically our guidance in terms of cost of Compass was prudent compared to what we see for different reason. Basically, part of the so-called energy bill for family is going to be at least in part paid publicly supported or subsidized. Basically, the ability of Italian household to repay personal debt over our long experience has been always and is going to be still very strong, also for one specific reason that, of course, no one wants to lose the good payer status, no? Hence not having access to further credit. Of course, the strong Compass risk management, NPL collection capability. Again, Compass, even in this period, will be a great producer of revenue and a great producer of net profit. Last part of, I would say, concern would be on CIB. Less fee and a deteriorated macro will make a bigger core in CIB. Now, this is only partly true because you have basically some product that are still very much pushed. M&A, in particular mid-size M&A is the one where we are more focused, is still, you know, very much pushed. Markets revenue and the so-called activity that normally tends to be, you know, evergreen in any downturn. Restructuring activity is clearly picking up. We have a marginal exposure to leveraged finance, and this is not impacting revenue because we never relied and is not impacting as well core. I think that we are entering this downturn with a model of private investment banking we didn't have in the past. We are, I think, more solid from an industrial footprint. If we go to final remark, what we think is that when you look at an investment case for a bank in this moment, revenue are important, NII is important. We will have an important increase in NII. For us, what matters more is having a stronger gross operating profit risk-adjusted, because this is the only way to understand the real profitability after all cost and after all risk. Having entered in this phase or navigate this phase, starting with very strong asset quality and very strong capital position. To be in a position to offer quite a sound shareholder remuneration. Now, what we forecast for the next few quarters, we think that our model will play positively, even in the next few quarters, delivering industrial growth, not only driven by rates increase. For this reason, we expect that maintaining our focus on growth, innovation, sustainability and profitability, with cost discipline and risk control, we are able to deliver on the most important part of our business plan, which was frankly, you know, unthinkable, because in the meantime, we have had basically COVID, we have had energy crisis, Ukrainian war. We stick to our EPS 2023 at EUR 1.1, and we stick to our shareholder remuneration of 70% cash out. Thank you for your patience, and it's now time for 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. Please stand by while we compile the Q&A roster. This will take a few moments. We are going to now proceed with the first question. The questions come from the line of Azzurra Guelfi from Citi. Please ask your question. Your line is open. Hi, good afternoon. Two questions from me. One is on your NII, and in terms of if you can share with us some color on your outlook for 2023, given the movement in volume that remains still very strong, your commercial momentum is there in the various division. Sorry, my voice is terrible. Apologies. So if you can share with us some color on the NII outlook. The second one is for opportunity to grow in Wealth Management. We have seen headlines and news flow about potential deal to materialize. I wanted to pick your brain on what could be some criteria that you need to fulfill to see a deal happening, potential on the financing. In the past, you talked about divestment for reinvestment, and if you have any color that you can share on this. Thank you. Thank you, Azzurra. On NII outlook, I think we need to revise our guidance and bring it aligned or closer to what we have shown in this quarter. Basically, our NII will grow at 9%-11%. Let's say, let's put 10% as you know target. This is on the back of what we said, basically. Faster repricing, faster increase of interest rates, bigger volume and shorter maturity of asset side. Now we have less than three years of maturity of the asset side, so we have a repricing. Of course, we need to look at also the cost of funding. One point of attention would be to maintain and increase our funding at competitive cost. For the time being, we were able and for this reason, I say that, the new guidance is, similar to what we have delivered this quarter. In terms of wealth management, you know, the numbers, I want to stick to the numbers of this quarter. Now, you've seen that, you follow us since many years, I was not a believer on the fact that after only a few years, wealth management would have produced, comparable revenue to the other two business, no? A much faster growth, which is linked to the effectiveness of these two platform: private and investment banking on one side and premier segment on the other. In a downturn moment or in a moment of difficulty like this one, I think we need to stick primarily on consolidating those two platforms. Now, everybody knows that we have interest in looking at also acquisition, and that we have financial gain and flexibility to cope also with large transaction. Given the fact that the assets are well-known, they are having clear ownership, it's not up to us to act rather than be available if called to look at those opportunities, you know. Right now, we are very much focused on consolidating our organic growth. We are now going to proceed with the next question. Please stand by. The next question comes from the line of Britta Schmidt from Autonomous. Please ask your question. Your line is open. Britta, are you there? We can't hear you. Hello, Britta. Your line is open. Yeah. We hear you. Good afternoon. Hello, Britta Schmidt. Your line is open. You may ask your question. We're going now to proceed to the next question. Please stand by. Yes. I think, we will wait for Britta after, and then, we can go to Giovanni Razzoli. Okay. Britta is not speaking at the moment, so we are just going to proceed with the next question from Giovanni Razzoli from Deutsche Bank. Please ask your question. Good afternoon to everybody. A couple of questions. The first one is just a real-time question. We've seen right now the ECB changing the terms of the TLTRO, whereby they are now applying a cost that is based on a forward evolution of the DFR rather than the backward average. I was wondering, what are your plans in terms of repayment schedule of the TLTRO in light of this real-time change? The second question is on the evolution of the business generation in the Wealth Management. You reported a very, very strong growth in the retail mortgages in the Wealth Management that are up by 2 times on a year-on-year basis. I was wondering how shall we pencil this in the context of rising rates and potentially downward demand of mortgages going forward. Related to this, how do you see the consumer credit business volumes in the next couple of months? Because my question is, I'm not concerned with the cost of risk of the consumer credit. During the COVID crisis, you've demonstrated to be able to even improve the risk profile of the consumer credit book while we've seen the volume suffering because of slowdown in the demand. I'm more, my question is more on the evolution of the volumes there rather than the cost. The very last question, more broadly, it's six months down the road that we are in the crisis in terms of conflict, cost of inflation, so on and so forth. We are still seeing a very, very good asset quality, not just for you. I mean, you have a very strong asset quality. If I look at the numbers of the banks, the default rates are really, really stable, still below 1%. Isn't that a little bit counterintuitive in your opinion, given also the negative outlook that we have in the press, on the closure activities, risk of the small business? What's your thinking there? Thank you. Thank you, Giovanni. In terms of TLTRO, first of all, I want to say that we have done first sensitivity take into consideration that that the news is out since one hour, and we came to the conclusion that this kind of trend of NII is including the cost of risk, the cost of TLTRO, additional cost of TLTRO. This is something that I think is important for you. The second is that compared to the, you know, repayment profile we have outlined on the slide 31, we may accelerate a bit, but, you know, may not dramatically change, no. So we won't have an early repayment of 50% or 75%. Raising rates in mortgage. You know, for the time being, we are not seeing this level of rates as that can prevent a new loan production, no? Of course, if those rates goes very much higher, this can change. The actual level of rates, which is higher than in the past, but is not, you know, we are not having interest rates applied to mortgage of 7%-8%. No, we are in a different category. For the time being is not basically preventing a new mortgage generation. We need to see more, basically. Mortgage demand is also driven by the general context. If we have a further deterioration, you may have a decision to buy a house in Italy postponed because of other things, not because of interest rates. We go to consumer credit volume, no? Which is partly related to this. For the time being, as you know, as we all know, we don't see crisis. On the contrary, we see households in Italy, not only in Italy, which are spending and keen to spend what was not put on the table during the COVID. We see still people making plans about house, about personal life and asking for volume. Even in October, we are seeing quite a good volume. Now, we need to see if this is going to be trimmed a bit in 2023. You have to think that when the situation gets worse, it is not always true that consumer demand goes down. Certain consumer demand, in particular on car loan or purpose loan may go down, but personal loan may go up. Why? Because people tend to maintain the standard of life also through the course of personal loan. For the time being, we are not seeing any decline in volume, on the contrary. In terms of asset quality, there may be one element of time lag. Normally when you have a crisis, it takes one year, one and half year before you see some impact in your asset quality. You know, we need to be conscious that asset quality for banks can deteriorate further down in 2023. Maybe also if there is no inversion of GDP trend and on the macro can be even further down in 2023 second half. I would not be surprised to see still very good asset quality up until December, March, and then see a deterioration. For this reason, it's very important to enter in this situation with very good asset quality and very good coverage and very good rating of the portfolio. In our case, we have also overlays. Thank you. We are now going to proceed with the next question. The next question comes from the line of Domenico Santoro from HSBC. Please ask your question. Your line is open. Hello. Hi, good afternoon. Thanks for the presentation. Just a couple of questions to understand whether I got correctly. Looking at page 31, the slide on the TLTRO contribution. If that's, now you're charging, basically, now you're accruing zero, and even if it flips to a contribution from November. You're still basically confident on the 10% average NII increase. This is what you just told us. The second question is whether there was any change in the NII sensitivity, given also the change in the asset liability. Again, on this matter, I just wonder whether at a point we could see an increase in the cost of funding the CheBanca!. If you have basically to give back a little bit. In terms of repricing to deposit of customers, given the rates increase that we have seen recently, that could probably undermine a little bit your NII sensitivity. A question on M&A, if I can. I'm not asking you to comment any rumors, but I just want to understand what is the trade-off between EPS accretion and capital in case of an M&A deal. I mean, in order to protect EPS, would you be willing, you know, to go below the 14% that you have at the moment, or an M&A, if that happens, needs to be at least EPS neutral or accretive, but at the same point, capital neutral? Just to understand a little bit the metrics that you have in mind. Thank you. Thank you, Domenico. The first question was on NII impact of TLTRO cost, additional cost. Yes. The answer is yes. This nine to 11 guidance is taking into consideration also, of course, we need to see the details. Even the last, the today's measure on TLTRO issued by ECB. The first answer is yes. The second answer is no, in the sense that we haven't changed the NII sensitivity. It can be better and bigger sensitivity over the next few quarters, going on with not hedging the deposits. For the time being, we are still having the same sensitivity. What we did is that we've seen that we have repriced sooner. We have had better volume. We have had a bigger banking book. All this included made the 11% increase. Cost of funding. In the NII, we have trajectory, we have factor, a small increase in cost of funding of CheBanca!. If it goes beyond this, we need to be ready to pass it to customer in order to maintain the 10% increase. Fourth question on M&A. For us, M&A has to be having first a strong industrial rationale. If we do an M&A, in particular, if it is big, you know, because I mean I understand what you mean. If we do a transaction EUR 100, EUR 200, EUR 300, you know, we don't expect this to be, of course, a game changer in terms of industrial profile. If we do something bigger, we need to be very well convinced that industrially, the bank is gonna be stronger, not only in the single business, but as a profile, no? Industrial profile. If we are convinced about this, and in particular, if it is a transaction that is related or touching wealth management, we are ready to have lower capital ratio, provided that we stick to 70% dividend policy. Also, we, you know, we know that we can have a distinction between cash earnings and non-cash earnings. So basically, cash earnings has to go up. Earnings that are even non-cash, with synergies, should go up, but I think we have even there a sort of flexibility, you know? Basically, when we think about this, hey, how stronger are we with or without this? Where is our capital level lower than 14%, but always in a territory that will allow us to pay 70% or a very nice dividend policy, and basically an EPS that should have a trajectory of growth over the period of basically the synergies delivery. I mean, these are all basically theoretical exercise because, as you know, today we are fully focused on our internal growth. Thank you. We are now going to proceed with the next question. The next question comes from Britta Schmidt from Autonomous. Please ask your question. Your line is opened. Hello, Britta, your line is open. You may ask your question. We will now proceed with the next question. Please stand by. The next question comes from the line of Marco Nicolai from Jefferies. Please ask your question. Your line is opened. Hi, thanks for taking my questions. The first one is on net new money. This quarter, the inflows into AUM and AUA were pretty solid, also considering market volatility and also seasonality, I guess. Can you share some color on the drivers here? I've seen that there was actually an outflows in terms of deposits. Should we read anything into this Q-on-Q move? I've got another questions on the risk-weighted asset. This quarter, you booked the effect of this LGD add-on on the corporate lending. I've seen also there is another internal modeling investigation on CheBanca! mortgage loans. Obviously this is much smaller, but do you think that something could come up also from this? Yeah, these are my two questions. Thank you. Thank you. In terms of net new money, I think we have to break it up into the different components, no? They have an equal weight, but basically the origin is totally different. In private banking, the main driver of net new money is money motion events, so the ability of our model of private investment banking to capture this money motion event. Basically, as long as we have, I shouldn't say big M&A, but mid-size M&A in Italy, I think we will enjoy this kind of trend because we are now, I think, a clear market leader in this respect. The second driver is the premier segment. This is more linked to the ability to increase portfolio to gain new customer and gain, I would say, new relationship manager and IFA. Of course there are quarter where this is easier and quarter where, you know, in terms of arrival of new professionalities and/or ability to campaign on certain product we are less effective. These are the two drivers. Outflows in deposits are a function of part. Part is the fact that we are placing fixed income product and hence part of the deposits is going to this. I think for the time being, we don't have outflow related to cost, so customer wants to be remunerated more and they go elsewhere, no? It's more linked to the fact that in the meantime we have placed some managed product, and there's been a switch between deposits and them. RWA, yes, you are right. There are other buckets of possible revalidation. I think what we have to expect is few beeps, if any, in this bucket. It's still something that is always very difficult to predict, the final ECB revalidation decision, but we do expect to be, I shouldn't say a non-event, but very, very marginal. What I suspect is that this is not for us but for the system, is that this revalidation is something that will be a bit of a system kind of, I shouldn't say issue, but news of 2022, 2023. Thank you. We are now going to proceed with the next question. The next question comes from the line of Luigi De Bellis from Equita. Please ask your question. Your line is opened. Yes. Good afternoon to everybody. I have three questions. The first one is on the investment banking, so very resilient performance. Can you give us any color into pipelines, how they stood as of today? And as you are going to the next quarter, what you are seeing in terms of different segment of CIB and how do you see the evolution of the revenues in the next quarter? The second question is on the PagoLight, Buy Now Pay Later. Looking at the early data that you have on this business, what kind of profitability and cost of risk do you expect for this type of business compared to the average of Compass? The last question on the funding. Can you elaborate on your expectation for the evolution of cost of funding for the next 12 months? Generally speaking, do you expect more competition on deposits going forward? How do you feel comfortable on the possibility going forward to reprice the spread in order to offset a higher cost of funding? Thank you. Thank you, Luigi. In investment banking, what we see is a bit of a shift in terms of pipeline in the sense that we see quite a good trend in mid-corporate M&A, mid-size M&A. We see a very good trend in acquisition finance related to this kind of size. Large deals are more difficult as long as banks are still loaded with old facility and syndication that is still hammering in terms of P&L. We do expect this to take one or two quarters. I think from the start of maybe after the first quarter of 2023, we'll see banks more active in doing large acquisition finance. This can restart. In the meantime, I think mid-size M&A acquisition finance linked to this kind of team, restart of DCM markets, structured products are going to sustain basically the fee level of investment banking. PagoLight. PagoLight is you know a quite new kind of product. So basically, it's too soon to say basically the ordinary cost of risk because you do a lot of let's say experimentation, and you build your scorecard, scoring grids over time. So you change channel, you change product, you put some product, you avoid some product depending on basically not the real cost of risk because in Buy Now Pay Later, cost of risk is not that important. It's important more the risk of fraud because it's a, you know, something that, depending on the channel, depending on the product, you are in a position to avoid and to minimize. Now, the kind of normal maturity of this, of these loans means that I cannot be more precise with you because it's still something we are detecting, is that basically the profitability is very high. Often it is more in terms of fees rather than in terms of NII. You know, today we have basically some million of production, so let's update when we have more experience on this. Marginality can be very high. Funding. Funding, yes, of course, we do expect to have a higher cost of funding. We have thought about basically 10, 15 basis points of extra cost. The positive of our funding mix is this one, you know. Basically, today, we are very much in demand of Mediobanca bond through retail third party network. Now you see that on slide 31, basically, we have refinanced EUR 2 billion out of EUR 3.2 billion of maturity of bonds. This is done at a lower spread than, of course, absolute cost is higher because the interest rates are higher. But that to say, in deposits, we can have different data between private and Premier. Higher in private, lower in Premier, so we need to factor a bit of increase in cost of funding. What we have seen in terms of mortgages and consumer, also in CIB, is that we will be able, with maybe one quarter, one month, two months of delay, to reverse it onto customer. Thank you very much. Britta couldn't, you know, speak, but we got her question. Basically, the question of Britta were on fees, how sustainable are the upfront fees in wealth management to make up for potential management fee weakness? How sustainable is advisory making up for weaker capital market fees in CIB? Overall, how sustainable is the fee line overall with the current market outlook? Basically, I think that in fees, we need to take into consideration that there are products that are complementary in general to the normal trend, you know. In wealth management, we think that there will be other quarters where structured products will be in high demand because the macro is still there, and we have not basically done all the job in one quarter. In CIB, we think that restructuring and capital markets for restructuring can be a driver to support at least the next quarter. Of course, we need to see also the visibility on the full year. Consumer Finance fees are stable, so this is another element of stability. Basically, the fees, as you have, you know, already seen are on the rise. Of course, maybe we will not have the same trajectory as anticipated in the guidance of last July, so we said +5%. Today, even if we are doing well, prudently we say, while on NII, we think we're gonna be 10% higher in fees, you know, a downturn scenario can be same fees as last year. Cost/income, we have a cost/income guidance of 45%-46%. Full year. I think that these were the question of Britta Schmidt, but I don't know if there is maybe Adele Palama still. We are now going to proceed with the next question. Please stand by. The next question comes from the line of Adele Palama from UBS. Please ask your question. Your line is open. Hi, good afternoon. Two quick questions from me. I don't know if you actually have already given a guidance on the cost of risk for 2023, and, I mean, in general, for the group and in particular for, Consumer Finance. Then a clarification on the cost, overall outlook, it seems that I read that, the guidance for administrative costs or the inflation impact for administrative costs is around the 3%-4%. But you had a 6% year-on-year increase in administrative cost, this quarter. Which is the year-on-year guidance of growth for administrative costs? Thank you. Yes. Good afternoon, Adele. In terms of core, we stick to the guidance of last July. We said, we're gonna stay in the region of 45-50 basis points, but this is, I would say not the industrial cost of risk, because we said, given the macro, we do expect to be at 75, but to use EUR 150 million of overlays. Basically, EUR 100 million in consumer and EUR 50 million in CIB. Now, we don't have visibility today to use them, but I think we better be prudent and stick to this. Of course, if we don't have to use them, would be better because basically we will keep them if there is a delay in this deterioration, and we will be ready. We stick to the guidance of July. As we stick in terms of cost inflation, basically, we have several element of inflation of cost. One is, first of all, that we continue to recruit people in every business, so we are not in any trimming exercise. On the contrary. We have basically digitalization. All this project of becoming more digital in Wealth Management, becoming a stronger player in Buy Now Pay Later is basically generating extra cost. We have a cost which is even less under our control, which is the fact that info provider and dollar-denominated cost have a natural inflation component. All this element put together makes that, if I do remember well, we have a guidance of 5%-6% increase in cost, and we stick to this. Okay, thank you. In consumer, just to elaborate a bit more on consumer cost of risk, we were and we are at 140, now 145. The 100 basis, the EUR 100 million used in terms of overlay would have meant basically pre-overlay going to 220, but we are still at 145. Maybe it's only a delay in this, and so we need to be cautious and keep this kind of guidance. We have no further questions at this time. I will now hand the conference back to the CEO, Mr. Nagel, for closing remarks. Please go ahead. Thank you very much for attending this call and asking question and following us. Thank you very much. Bye. This does conclude today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.