Banco BPM SpA

MIL:BAMI

Earnings Call Transcript 2019-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Q1 2019 Results Presentation. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Roberto Peronaglio, IR Manager of Banco BPM. Please go ahead, sir.

[Roberto Peronaglio, executive]

Thank you very much, everybody, to be with us for the presentation of the first quarter result '19 of Banco BPM Group. As usual, before leaving the fill, Giuseppe Castagna, our CEO, for the presentation, let me remind the Q&A section is reserved only to the analyst -- financial analysts, and you can find the presentation on our website under Investor Relations page.

Now I leave the word to Mr. Castagna. Thank you.

[Giuseppe Castagna, executive]

Good evening, everybody. This is Giuseppe Castagna speaking. Thanks for being with us for the Q1 results. Let me say that, basically, we can say that with this balance sheet, we have basically reached most of the target that we had in mind when we started this merger. I would say that we have completed a dramatic reduction of NPE reaching a very satisfying ratio below 10%.

We have build up a solid capital position growing quarter-on-quarter. We are building a balance sheet, which is growing in volume both in asset and in liabilities, especially in loans and current account. And also, we're able to reach a good profitability in this first quarter, in line I would say with the expectation and consensus, notwithstanding a slow start in commercial activities, but thanks to good cost control, a lower provision.

Starting from derisking on Page 7. Here we have only the last year reduction. In terms of NPA ratios, we went down from 20% to 9.9%, including the lease ACE transition that we have concluded during this -- the first quarter. On the bad loan ratio is even better. We started from 13%. We are now to 3.1%, only 1.4% net. And UTP without any specific disposal but only with workout was -- we were able to reduce from 7.5% to 6.7% gross and 4.6% net.

The [ taxes ] ratio went down to 71%. The capital position is increasing. Also this quarter, we are experiencing the growth of 30 basis point in our pro forma fully loaded. As you know, we are still waiting for some accounting related to the AGOS transaction and platform, but the comparison with 11.5% last quarter is 11.8% this quarter notwithstanding 12 basis point reduction due to IFRS 16 accounting principle. Also, the phased-in ratio was up from 13.5% to 13.7%.

On Page 9, you can see some highlights of the performing of the balance sheet in which we can see how the risk profile of the group is better during these 2 years, not only in terms of reduction of NPE, but also again in loan growth, in current account and deposit growth almost 6% in reduction of the Italian Govies portfolio, EUR 3 billion in one year, and in very strongly liquidity position, which account now to total eligible securities for more than EUR 53 billion.

As I said before, notwithstanding a lower start in terms of commercial activity, as you know, our bank has experienced some problem during the first quarter due to the many things happening in our bank. But notwithstanding that, we were able to cost reduction and finally reaching a very satisfactory cost of risk. We were able to target the EUR 150 million, which were our potential target for the first quarter, in line with our budget and consensus.

The EUR 150 million, of course, has to compare with the first quarter EUR 223 million, but I have to remind that in the first quarter there was almost EUR 180 million related to the bancassurance [ SRF ] transaction. And inside the EUR 150 million, there is a contribution of almost EUR 6 million from the Nexi transaction, but also a negative contribution to Single Resolution Fund for EUR 41 million.

Let's go a bit more through the different items. Net interest income down. We were expecting, of course, the reduction due especially to the PPA and IFRS 9. As you can see in the bottom right side of the Slide 12, our guidance that we gave you of a reduction EUR 160 million, once we got the final perimeter of the last ACE disposal, we can recalculate the difference for increasing from EUR 160 million to EUR 185 million.

Only in the first quarter, there is a difference of more than EUR 80 million like-for-like, which reduce the difference between the first quarter and -- of 2018 and this quarter to 1.9%. In terms of q-on-q, we have a reduction of 5%. If you exclude the calendar effect, we go down to 2.8% of difference. In terms of spread on Page 13, finally, we can see a rebound in the spread, thanks to keeping the asset spread to 1.9% and with a small reduction of 1 basis point of the cost of funding.

The real for us and satisfactory, the results, is net fees and commission, again, related also to peculiar situation of the bank that the bank experienced during the first quarter and also, of course, to market condition. I have to say that especially the first 2 months were particularly difficult for our commercial network. Starting from March, we are experiencing again results in line with our budget expectation. In April, we had more than EUR 1 billion -- EUR 1,100 million of sales, which is in line with our expectation, and also my -- is again on track for reaching what we feel could be the right result for us.

Just going through the different number. The reduction from the first quarter '18 is basically all in -- almost all in upfront fees for replacement of investment products. Meanwhile, comparing to last quarter, the main difference rather than in management advisory is in credit. This is notwithstanding credit raise, the issue of new loans, to EUR 5 billion compared to the EUR 3.8 billion in the first quarter '18. But we experienced a quite normal seasonable reduction of the structured finance and syndicated loans issued which were down from EUR 1.7 billion over the last quarter, quite normal such increase in the final part of the year, compared to EUR 900 million in the first quarter of 2019.

Let's say that these EUR 190 million is to breed also in the light of issuing of EUR 500 million of certificates, which, of course, are not computed under net fees and commission. That goes to net financial results, and this would have brought the commission result to something more than EUR 200 million in the first quarter.

On Page 15, net financial results. As I said before, with the positive contribution of Nexi, which is the main aspect related to this item. Let's go to cost on Page 16. Operating cost, very good. We are still keeping a good pace, which we started since the beginning. Like-for-like is around 5% of reduction.

The quarter-on-quarter comparison, of course, has to bear in mind that in the last quarter 2018, we have some extraordinary savings. Personnel expenses are going down almost 4% year-on-year. Again, on the Q4 '18, we had some reversal over the incentive scheme reduced for the entire '18, but the pace is still very good. And notwithstanding, we are terminating the incentive scheme for retirement, December '18. We are still experiencing reduction in personnel. That account are going down since the beginning of the year almost 70 people bringing the total headcount to 22,175. A reminder, when we started, we were almost 25,000 people.

In administrative expenses, there is the consequent reduction both year-on-year and quarter-on-quarter. Of course, it's better to read the reduction in the gray bubble, 8.9% year-on-year and 6.3% quarter-on-quarter because the 21% take in account also the new effect -- the new adoption -- the effect of the adoption of IFRS 16, which, as you know, account in a different way the leasing hold by the bank. And this difference is going into amortization and depreciation and is around EUR 25 million. The effect of -- "the net effect is 0", but we have EUR 25 million less of administrative expenses, EUR 25 million more of amortization.

Let's go to cost of credit. Finally, we are reaching the normality, I would say. We have seen very consistent reduction not comparable, of course, with last year's when we had all the forced disposal in order to get to the current NPL ratio. Finally, we reached 57 basis point, which is, as you can see on Page 20, is supported by the 3 key drivers that determine the reduction of cost of risk. First of all, of course, the big reduction in the stock going down 52% from EUR 25 billion to EUR 11 billion after the Project Ace. The good decrease in default rate, which is going down to -- the net inflows, the default rate is going down 1.2%, 36% year-on-year. And the flow from UTP to bad loans, the danger rate, lower 34% versus last year.

Let's talk about the balance sheet. As I mentioned before very big increase in current account and sight deposit, 8% year-on-year and 3.3% q-on-q. I have to say that we are still reducing during April and beginning in May a further increase in current account, which shows how the bank now has clients that want to be liquid and driving for protection and secure investment. This, of course, gives us some problem in terms, again, of building up commission. But I am sure that we can be able -- and already from April, we started to convert part of these volumes of current account into asset management.

On Page 23, we don't have any more retail bond in the next 3 years. Meanwhile, only EUR 2 billion for year of starting from 2020 of institutional bond maturities, which is more or less equivalent to the issue we -- [ following us ] to do in 2020 and 2021. As I mentioned before, a very strong liquidity position. We are growing quarter-on-quarter. We have reached now EUR 54 billion of eligible securities, of which unencumbered liquid securities we were almost EUR 22 billion in March. Again, in April, we have reached almost EUR 27 billion of liquid security and unencumbered.

Of course, this bring to the TLTRO. We will be waiting as other banks in order to understand which will be terms and condition for the next TLTRO before deciding the new strategy on funding. Securities portfolio is not changing too much. Basically, the small increase that you see under Italian Govies is all related to trading activities, very short terms. The spread sensitivity is still EUR 1.6 million, down again from EUR 3.5 million last year. The duration is 2.6 year versus 2.7 at the end of last year. The non-Italian Govies grew to EUR 9.3 billion, and HTCS reserve bettering EUR 130 million, having now a negative contribution of EUR 60 million.

On Page 26 is the effect I was talking before, not big growth, still not big growth in asset under management, only 2.4%, mainly due to market. We are -- again, have started already with -- also with the reorganization of our marketing and commercial activity, a new strategy on old range of different products, bancassurance, asset under management, funds of funds, and we are sure again that we can take profit of the growing of volumes in current account.

On Page 28 talking about loans. This is the global loans, performing and nonperforming. Of course, we have the massive reduction on nonperforming I was mentioning before. If we consider only performing loans, we are growing 5.3% year-on-year and 2.7% quarter-on-quarter.

On Page 29, you can have a better understanding of this growth related to the core customer loans, which also not considering the leasing and runoff, the GACS and the repos is growing 4.6% year-on-year and almost 2% quarter-on-quarter. As I was mentioning before, in the first quarter 2019, we registered a record new granting -- loan granting for EUR 5.2 billion.

Going back to nonperforming exposure on Page 30. You can see on the upside of the slide the reduction of the gross NPE. We were already talking about that almost EUR 13.5 billion of reduction in the last one year from March '18 to March '19. And also in terms of net NPE, we went down EUR 5 billion from EUR 11.3 billion to EUR 6.4 billion.

On Page 31, you have, I would say, an interesting but down, a lower NPE portfolio, which I would say is completely different from the other Italian banking system. Being nowadays composed for -- of bad loans -- gross bad loans are only 31% of the total NPE, and net bad loans are only 23% of the net total NPE. So a very comfortable situation vis-à-vis an Italian average, which is more or less 54%.

In terms of secured/unsecured, also in this respect, we have 64% of gross NPE exposure secured and 72% of gross -- of net NPE exposure secured, much higher than the Italian average. This is important also in light of understanding the coverage levels. Of course, if you go through the single items, bad loans, UTP, we are still growing in coverage year-on-year. Of course, we are decreasing in the total coverage of NPE because of this completely different composition, which now see the 3-quarter basically of the NPE composed by UTP.

I would go directly to the capital on Page 35. As you can see, there is -- here you can find the capital composition. Basically, we started 10%, as stated, Common Equity Tier 1 fully loaded in December, which was 11.5% pro forma. Through the increase, we went through to 10.9%, without the IFRS 6 (sic) [ IFRS 16 ] became 10.8% to which we are still to add the 2 pro forma that we will perform during the second quarter, which are related to the joint venture of the NPL platform accounting for 24 basis point and the agreement with Crédit Agricole and AGOS accounting to 80 basis point. So all in all, we are 11.8% of pro forma fully loaded compared to 11.5% of last quarter. The same apply also to the full -- to the phased-in, which is growing to 13.7% compared to 13.5%.

Basically, once we have devoted 2 years of our activity to restructuring and bettering our balance sheet, now we feel, as we mentioned many times, that it's time to become more profitable. We are moderately satisfied of the results we reached, but very committed on bettering the results through bettering revenues and still keeping under strict control operating cost and cost of credit.

This is all for me. I think we have half an hour for the Q&A section.

[Operator]

[Operator Instructions] The first question is from Jean Neuez of Goldman Sachs.

[Jean-Francois Neuez, analyst]

Jean-Francois Neuez from Goldman Sachs. The first question I would like to ask you is about NII. I was looking in the mix of your loan book. There has been very strong growth in mortgages, but then there has been relatively marked declines in all other categories of loans. I guess part of that is responsible for the margin erosion year-over-year. The question I wanted to ask you, do you believe that this mix has further to shift? And are you -- do you think that the other portion of the loan book continues to shrink when the rest continues to grow? And do you believe that there continues to be -- do you see continuing erosion of margin on a product-by-product basis? So for example, your competitor, UBI, today was showing good margin evolutions, but than they have shrunk down loan book. So this is -- you get obviously margin erosion but strong growth. That is why I am trying to compare and contrast. The second thing I wanted to ask is, could you please remind us of your capital headwinds to come in terms of EBA guideline and other TRIM or anything that might have to come in the next 2 to 3 years? And where you believe your steady-state Common Equity Tier 1 ratio has to be? Where you want to run the bank?

[Giuseppe Castagna, executive]

Okay. So for NII, I think we were quite steady in terms of asset spread. Of course, I saw the announcement of other banks. Basically was -- at the beginning of year, it was a bit easier before the TLTRO announcement to increase interest rate. Now we are having some more resistance. And having, of course, the commercial led to a very much -- devoted to loan growth. Of course, maybe we are paying something more. But again, it's the first time we don't have any reduction in the asset spread, so we are keeping very well.

As you can imagine, the spread that were maturing most of time comes from high spread. So I would say that I am quite convinced that we can have also an NII increasing during the year because we are building up on comfortable spread. Of course there is also retail mortgage portion, which is -- which there is quite a competition in the market. We have raised from 25 to 30 basis point the interest margin. We are having some good results. But of course, the global spread of mortgage is lower than for corporate.

[Jean-Francois Neuez, analyst]

Do you think the mix effect is still going to be penalizing going forward or not?

[Giuseppe Castagna, executive]

I don't think so because, again, if we can keep the spread -- the asset spread and the rebound we had, encourage me to say that we can still have some good result in this respect, with also increasing volume should have some increasing in NII. For TRIM, you are talking about 2, 3 years. It's quite difficult to give you a precise answer because there are many things that are coming. Basically, I can give you a guidance for this year. I've always said that we will be in the region between 11.5% and 12%. We are already 11.8%. So we hope that with profitability we can generate -- to the end of the year we can easily offset the TRIM effect that could come.

[Jean-Francois Neuez, analyst]

EBA, can you remind us?

[Giuseppe Castagna, executive]

The EBA, basically, there is only the IMA effect -- sorry, just a minute. Yes, 25 basis. I'd say, again, inside what we expect to generate as profitability this year.

[Jean-Francois Neuez, analyst]

But the total EBA that you expect based of the regulation over time is how much?

[Giuseppe Castagna, executive]

Totally in this year or in the next 3 years, I don't understand what...

[Jean-Francois Neuez, analyst]

The total impact -- the cumulative total impact of EBA guideline.

[Giuseppe Castagna, executive]

No, I don't have any other guidance rather than the one we know. That is 25, 30 basis point.

[Operator]

The next question is from Andrea Vercellone of Exane.

[Andrea Vercellone, analyst]

4 questions. First one is on commission income where I share your view that is quite disappointing. Can you quantify the amount of upfront fees that you have in this quarter, those that were in Q4 and those that were in Q1 last year? Second one is on funding. Can you share with us the average yield on the maturing medium- and long-term bonds for 2020 and 2021? Third is on cost of risk, actually quite good level in the quarter. Given that you are not selling anything anymore or you are not planning to sell anything anymore, not that you have anything anymore to sell, if inflows remain at the current level, how optimistic would be to just annualize Q1 in terms of provisioning level? And finally, just a detail. The PPA turned negative in the quarter. Is that what we should expect going forward, i.e. a negative contribution to the P&L rather than a positive?

[Giuseppe Castagna, executive]

So let me start from the last one. For the PPA, the impact is still slightly positive, as you can see on Page 12. Of course, there is a big reduction in...

[Andrea Vercellone, analyst]

I mean at net income level, not at NII level.

[Giuseppe Castagna, executive]

At net income level should be negative for EUR 3 million, but that's all. Cost of risk 57 basis point. I would say that is below what we expected because you know that we had a guidance of 65 to 75 basis point. But I just mentioned to you the 3 driver that we think are determining the cost of risk. And currently, all the 3 of them are very encouraging. So let's say that we have some founded hope that we can be better than the guidance. The funding average yield is 2.5%. So we still were -- with the recent funding that we had, we can be inside this average cost. And the commission is exactly the difference that you have, the EUR 50 million difference. Basically we had EUR 50 million this quarter, EUR 50 million last quarter and EUR 100 million in the first quarter '18. Out of these, as I was mentioning before, around EUR 10 million comes from the certificates that we have under NFR.

[Operator]

The next question is from Alberto Cordara of Bank of America.

[Alberto Cordara, analyst]

I have 3 questions. The first one is related to the fees. When I look at the past, there is always a positive seasonality, particularly for bank, maybe more than for the old BPM. In Q1 where the network is placing a lot of products, so you do a lot of placing fees. So you're missing this quarter, which reflect probably also some of the external market condition that you cannot control. So my question is will we see this year a seasonality similar to what we've seen in previous years? So a strong Q1 then a weaker Q2, Q3 and well Q4 is always a bit of a question mark? Or this product placing will take place over the next few quarters? Then another question is related -- I do apologize but -- for the question, but, again, this is something people talk about. In relation to this [ diamond misselling ], you took a strong provision in Q4 last year. The question is, if you feel comfortable that, that is the end of it or if there is a risk that more may be needed in the course of the year? And finally the last question is, if you can remind us the sensitivity of your capital to an increase of 100 bps in sovereign spread?

[Giuseppe Castagna, executive]

Okay. Mr. Cordara for the fees. No, likely enough, I already told this -- on the Q4 presentation that this year we would expect a completely different curve, starting very low in the first quarter and gaining quarter-by-quarter. This is why, as you know, we have completely changed our strategy in advisory with our client now what is we're going more on recurring fees rather than upfront. As you were mentioning before that was peculiar in 1 of the 2 bank to have a very strong upfront in the first quarter. We completely changed this attitude also to be MiFID compliant. So I would rather expect as I can already anticipating that compared to the first 3 months, already April, at the beginning of May are 30% better than what we registered in the first quarter.

So basically, we are growing. We are building up again volumes in order to make -- to convert into asset under management. We needed some help also from the market because, in our strategy, our advisory portfolio, there is -- there are more opportunity for our network to sell when the market goes a bit better because we have more opportunity to propose a swap of investment to our client. Meanwhile, when the market grow down, it's more difficult to make this kind of a transaction. So now we're experience very good condition. Hopefully as you would say, there are also external condition that can help or not this approach.

But of course, we're also issuing new product which are more compliant with the need of security, adversity to risk and willingness to believe that our client are showing in the last month. Because you were also mentioning the [ diamond ] I have to say that as you know in the first quarter, there was also some new related to debt, which impacted on our top management, many commercial manager. And of course, this also may be contributed to have a slowdown in the commercial activity, which, again, as I was mentioning before, already seen is performing much better. The third, the sensitivity to the spread, the 100 basis point of spread -- increase of spread in BTP have an effect in our Common Equity Tier 1 of about 23 basis point.

[Operator]

The next question is from Giovanni Razzoli of Equita.

[Giovanni Razzoli, analyst]

I have 2 questions if I may. One is a clarification on the Slide #12 that is the NII trend. So if I look the headline number, EUR 555 million in the Q4 and EUR 505 million in the Q1, the decrease seems significant. But if my understanding is that there are a couple of components that impacted this trend. The decrease -- the EUR 25 million -- sorry, the EUR 23 million decrease in other component reflects the lower contribution from the PPA as a result of the sale of NPLs. Is this understanding correct? And on the remaining decrease, there is a EUR 12 million related to the calendar effect. And so that's my understanding of the trend in NII. Because if I look at the spread, the spread is flat quarter-on-quarter. The volumes are there. I mean the spread also incorporated a mix effect. So there is nothing really particular in such a big headline decrease that one may see from, again, the headline number. So that's my first question. The second one, you've mentioned that the government bond portfolio has increased also because of the activities of bad growth. I was wondering whether this reflect the market making activity on government bonds, and so shall we consider this increase as temporary going forward?

[Giuseppe Castagna, executive]

I agree. So on NII trend, you were right. We have EUR 25 million coming down from -- sorry, yes, EUR 25 million coming down -- EUR 29 million coming down from the PPA effect, EUR 12 million for the calendar, and the rest is almost EUR 40 million. We had, as we mentioned in 4Q, some capitalization of single asset interest originally due for the full year, which was released in the Q4 for around EUR 8 million. So I would say that all like-for-like is almost the same performance. As far as the AGOS portfolio, AGOS is only engaged in trading activity. They are not banking book in the traditional way. So basically quarter-on-quarter you would see some different exposure in the trading of AGOS. That is only temporary.

[Operator]

The next question is from Riccardo Rovere of Mediobanca.

[Riccardo Rovere, analyst]

Just one question for me. May you please break down the impact of the various elements that drove the increase in Common Equity Tier 1 ratio from 10% to 10.8%, which looks fairly remarkable?

[Giuseppe Castagna, executive]

Thank you. Just a minute, getting all the figures. Starting from fully loaded, we have 20 basis point from dividend payout from AGOS, 4 basis points -- sorry, 26 basis point from the ACE and the GACS, 25 basis point from the HTCS bettering our reserve for EUR 130 million, 11 basis point for Nexi, and, of course, reducing 12 basis point for the IFRS 16 effect. That is clear?

[Operator]

The next question comes from Hugo Cruz of KBW.

[Hugo Cruz, analyst]

Could you just -- you said you have a new business plan. I mean could you just give a bit of an indication what should be the focus of the new business plan? What you think you can flex in the next 2 to 3 years? Basically that was it.

[Giuseppe Castagna, executive]

Of course, we a split -- again, as I was mentioning before, there is the portion of residential mortgages, which are in the range of 150 basis point. Meanwhile, of course the...

[Hugo Cruz, analyst]

Sorry, I'm not sure if you -- perhaps you can't hear me well. I was asking about the new business plan -- the strategic plan that you expect to approve by the end of the year. I was just wondering what would be the focus of that plan in order to improve profitability. What key levers you think you can flex to improve the ROE of the bank?

[Giuseppe Castagna, executive]

Of course, for the new business plan, you have to wait until the presentation of third quarter results. But it's not because we don't want to give you information. It's just because as I was mentioning before, we are really experiencing for this first year, I would say, a normal year without extraordinary transaction, without devoting energies to derisking, to rebuilding balance sheet and so on. So basically, we are trying to devote all our interest to the growth of the commercial activity.

We have to understand also for us, of course, our -- which kind of market and opportunity we can have during the year -- and I don't know, we will give you, of course, all the detail with the presentation on the business plan. For sure, we have just mentioned something that it comes quite easily to mind -- to my mind is that we have to rebuild a proportion in direct funding and indirect funding, in which we have at least EUR 10 billion to be utilized in order to foster the growth of asset under management already in our balance sheet. And of course, we have the 2 specialized bank, AGOS and Aletti, which basically started this new year in their new activity. And we will have some more clue about their opportunity going forward.

[Operator]

The next question is from Ignacio Cerezo of UBS.

[Ignacio Cerezo Olmos, analyst]

A quick couple of questions from me. First one is on asset quality. If you can repeat because I think I understood 1.2% default rate in the quarter. If you can clarify whether that number is in gross and you can give us Q1 last year and Q4 last year? And the second one is asking whether the 4% year-on-year decline of the cost base you have booked this quarter is sustainable into the rest of the year?

[Giuseppe Castagna, executive]

Starting from the cost, I think, we have shown during these last 2 years that we are keeping to a strict control of cost. Of course, with 2018, the majority of maneuver we had to implement for the business plan were done, but still we have to get some improvement from operating cost and personnel cost. So I think that our target is definitely to stay on this pace of cost cutting. In terms of default rate, as I mentioned before, the current ratio is 1.2% and down from 1.9%.

[Operator]

The next question comes from Domenico Santoro of HSBC.

[Domenico Santoro, analyst]

Couple of follow-ups from my side. First of all, on the 26 bps that you accrued in the quarter as a result of the deconsolidation of risk-weighted assets related to transaction. This is regardless of the use of the GACS. So just wondering, what could be the Plan B differently? You already hinted something in the last call. Then on the LGD waiver, any update on this, given that the -- all the final details now are out in the banking package? And I remember in the last call you gave some indication about the recurrent profit for this year in terms of gross operating profit. Just wonder whether you can give us an update on this qualitatively or numerically, just understand where we could land in 2019.

[Giuseppe Castagna, executive]

If I understood well, Mr. Santoro, for the completion of the total GACS, what is remaining is only 24 basis point coming from the disposal of the platform, having already factorized the guarantee of the GACS on the RWA. Was that, Dom, the question?

[Domenico Santoro, analyst]

So you already basically included the risk-weighted assets, right, for the deconsolidation, I mean.

[Giuseppe Castagna, executive]

Yes, of course. These are already done. What we still have to put into the Common Equity Tier 1 is the disposal of the [indiscernible]. The second one, a bit difficult to give guidance. But again, we think we are going through what we announced the last year. In terms of NII, I can confirm that we feel that with this increase in volumes, we can reach the target we told in the last quarter, which was more or less in line with last year. Of course, reducing the staggering effect deriving from derisking. For commission, we think we can be able to recover the slight decrease we have registered in the first quarter. And so, I would say that the consensus, I think, is in line with our expectation.

[Operator]

The next question is from Christian Carrese of Intermonte.

[Christian Carrese, analyst]

Just a clarification on the outlook you gave at the end of the presentation. You are expecting an increase in profitability in the coming quarters. The EUR 150 million net profit had 2 different oneoff, one positive, one negative, the one -- Nexi on the positive side and the Single Resolution Fund on the negative side. I was wondering, you are expecting something similar for the coming quarters in terms of net profit. And if you can remind us what is the impact of the DGS in the coming quarter? The second question is on the distribution agreement -- the new distribution agreement with Cattolica and Anima. It was an old one. Can you give us an update on how is going the process of the new agreement in terms of new productions zone?

[Giuseppe Castagna, executive]

Sorry, I'm getting all the different -- so the contribution is EUR 41 million net negative for the Single Resolution Funds and positive EUR 54 million from Nexi. And of course, as you know, Single Resolution Funds apply basically only in the first and the third quarter.

[Christian Carrese, analyst]

And DGS?

[Giuseppe Castagna, executive]

You are asking last year how much it was?

[Christian Carrese, analyst]

Yes. And this year, what are your expectation for DGS in the third quarter maybe?

[Giuseppe Castagna, executive]

Previous was EUR 32 million. I don't know really how much could be this year yet, but more or less the same. This year, we have some saving in the first -- in this first contribution. Jeremy (sic) [ Christian ], you were asking about the different activity with the assets management or bancassurance?

[Christian Carrese, analyst]

Both.

[Giuseppe Castagna, executive]

Okay. No, basically again, also, if I mentioned, we have a slow start in both the activities, not in the bancassurance non-life in which we are growing very well, but in life production, of course. We have obtained some new product from our joint venture. So during this last week, we are placing very well new production, also [ Remotab ]. So we are recovering having what our clients asked, which is protection, safe product and possibility to have opportunity to invest in asset, which are not very leveraged. So again, the start was not as we expected, but we are already recovering since April.

[Christian Carrese, analyst]

So on the overall profitability, you would expect something similar to the first quarter maybe at bottom line?

[Giuseppe Castagna, executive]

As a guidance you mean?

[Christian Carrese, analyst]

Yes.

[Giuseppe Castagna, executive]

Basically, we have -- we see what we read on the consensus. We think we can have this EUR 550 million per quarter, which is something sustainable for us.

[Operator]

Gentlemen, there are no more questions registered at this time. Gentlemen, at this time, there are no...

[Giuseppe Castagna, executive]

So thank you very much for your question. Of course, our people is at your disposal for any further clarification. Thank you very much. Good evening.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.