Banca Monte dei Paschi di Siena SpA
MIL:BMPS
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Banca Monte dei Paschi di Siena SpA
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Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the MPS Second Quarter 2019 Results Conference Call. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Marco Morelli, Chief Executive Officer. Please go ahead, sir.
Good morning, everybody, and thanks for attending our Half 1 results. I'm here, with our Deputy COO and CFO, Andrea Rovellini. We'll take you through a few slides. And then we are, as usual, open for questions. Before we step into numbers and strategies on the key items of our P&L and balance sheet, let me make a few introductory remarks in order to give you a broad picture of our trajectory vis-à-vis of the restructuring plan and the commercial activity of MPS.
First of all, consistently to what I stated a number of times during Q presentations and during AGM that the gist of our ongoing management of the company is to make sure we do sail towards a sustainable reaching of the various objectives, sustainable from a profit and loss point of view, sustainable from a balance sheet point of view, sustainable in terms of the care we provide to our thousands of employees and to our clients, sustainable in terms of asset quality, sustainable in terms of making sure that in spite of very stringent commitments imposed by the restructuring plan and nonrecurring items that we need to post on a quarterly basis, the overall performance of the bank and the trajectory of recovery is, as I said, stable, sound and continues on an ongoing basis.
There are 4 main -- 4 key features of our Half 1 results. Number one, the acceleration of our nonperforming exposure reduction. As you might recall, at the end of 2016, the overall exposure was in excess of EUR 40 billion. And it was pretty much beyond 1/3 of our overall credit exposure. We are now at the stage where we do aim to reach by year-end 2019, 12.8% of overall gross exposure, which is the target of year-end 2021. Therefore, in light of the fact that there are now conditions -- and we'll take you through that -- to revise our NPE strategy and accelerate it further, the target, as I said, is to make sure we get to the stage where we anticipate the target -- we anticipate the number and the ratio initially provided for by the restructuring plan we signed with the Italian government and the European Commission back in April 2017.
In spite of the downsizing of our retail network and the reduction of our workforce -- again, in order to comply with the requirements of the restructuring plan -- and a macro environment, which, as you all know, is pretty different compared to 12 months ago, let alone 2 years ago when we did project forward the macro underlying assumptions of our restructuring plan, we have resilient revenues. Which, as far as the net interest income do reflect the fact that they have stringent boundaries we need to meet and respect in terms of new credit flows and pricing of new credit flows. And on the other hand, we want to make sure our commission line pretty much reflects what I just mentioned, i.e., to preserve a sustainable trajectory without any unneeded push on our commercial network.
Capital ratios and liquidity ratios are pretty much as you might expect, at the top of our agenda. So at the end of the day, we need to balance the reduction of our NPE exposure, the preservation of our credit quality, and I'll get to that -- and I'll dwell up on that in a sec. And the push of our commercial new credit flows with strong capital ratios, strong liquidity ratios. And last but not least, positive indications arising out of the fact that after a few months -- as far as the senior bond after, I think, 5 years, Monte dei Paschi was back into the institutional funding market, with a senior and a Tier 2 a few weeks ago.
Page 3 is pretty much the summary of key numbers. Pre-provision profit of EUR 169 million, which excludes EUR 49 million of the cost for the unwinding of the Juliet -- servicing agreement with Juliet. And again, we'll give you full details of the impact of such a transaction later. Cost of risk at 57 basis points. This is impacted by the release of provisions following the unwinding of Juliet and the cost we already posted and anticipated in order to make sure we can implement the strategy of increasing the reduction of nonperforming loans beyond the initial targets set forth by the end of 2019.
Guidance for the cost of credit is as we mentioned, when we presented to you Q1 results, is [ 60 ] basis points area for 2019 altogether. Net income of EUR 65 million for the quarter against EUR 28 million for Q1. As I mentioned, the EUR 65 million is net of a nonrecurring contribution to the systemic funds and additional provisions we made during the quarter for extraordinary items, and again, more details to follow.
Gross NPE, including the impact of the disposal related to IFRS 5, it's gross 14.6%. And as I said, target for year-end is 12.7%, which is below the 12.9% set forth by the restructuring plan for year-end 2021. Core Tier 1 ratio and total capital ratios are 11.9% on a fully loaded basis and 13.9% on a fully loaded basis, respectively. And there is a slide which will give you a full picture of how we get to those numbers. And same comment can be made as far as the liquidity ratios, 200 -- 201% for LCR and 113% net stable funding and that results in an unencumbered counterbalancing capacity, which is above the level of Q1, close to EUR 23 billion.
Page 4, revenue snapshots. As you can see, this is the trajectory of the last 4 quarters. So we are pretty much sailing at the same pace in spite of the fact that, as I mentioned, the macro environment and the overall environment is very different, very blurred vis-à-vis all of the first 6 months of last year. Few -- well, a number of downward items, as far as our P&L is concerned: downsizing of branches and headcount; macro GDP forecast, the revised the consensus is now to a flat, no growth for 2019. But in spite of this, we managed to propel forward as far as the partnership with AXA on the insurance-related business. That is both on the -- our 2 JVs. And on the overall health-related business altogether. And we managed to have additional new flows of mortgage of EUR 2.4 billion, which is pretty much in line to Half 1 last year. And current accounts and time deposits, EUR 1.5 billion, up with the same level of, [ of course ], no increase in terms of P&L.
Page 5 is the evolution of our nonperforming exposure, EUR 16.8 billion gross year-end 2018, which resulted in a gross NPE ratio of 17.3%. But now at EUR 13.9 billion gross, which results in a 14.6% ratio, right-hand side of the page, and that includes the very recent announcement we made today and yesterday on the EUR 1.1 billion additional disposals we finalized in the last few weeks. The -- we aim to add additional EUR 2 billion of nonperforming bad loans to be finalized in the consolidated -- by year-end, with no additional impact on our P&L since as it was realized [ into second ], we posted -- or we took care of the potential impact already in Half 1.
As far as UTP altogether is concerned, the target for 2019 as you might recall, is EUR 2 billion, EUR 1.6 billion of which have already been [indiscernible] and posted in Half 1 numbers. And that, as said, will allow us to reach 2021 targets with no additional P&L impact. And as I stated earlier, the fact that the bank is moving at a faster pace than expected on the NPE reduction is for all of us a very encouraging message. You might remember when I presented the plan back in April -- back in July 2017, we were at a level of overall NPEs which was in the region of EUR 40 billion. We are now at a much lower level and the work the bank managed to deploy in this respect is, in my humble opinion, very, very meaningful and relevant.
Page #6 is a snapshot which compares results achieved vis-à-vis the restructuring plan, on the target of NPE disposals completed vis-à-vis of the business plan.
Page 7, capital position trajectory. So we are now above those red targets, also on a fully loaded basis. And that includes positive contribution of Q1 earnings; cancellation of an indemnity related to the Fresh and some reserves related to our govies portfolio. RWAs are down quarter-on-quarter, EUR 1.3 billion, mainly driven by credit risk, i.e., EUR 1 billion less from the deconsolidation of MPS Belgio, which has been finalized in the last few weeks.
MPS is not participating. That was actually one of the questions we got in the last few weeks; MPS is not part of the EBA 2020 wide stress test exercise.
I now pass on to Andrea Rovellini, and then I'll come back to you with a few closing remarks after your questions.
Okay. Thank you, Marco. Good morning, everybody. So the [ factor ] of our presentation is quite stable. So we concentrate only on a few slide, which you -- explain in greater detail the main changes that took place in the quarter.
So Page 9, we have the trend of our P&L, quarterly P&L. We have included in the other expenses -- so inside the total amount of revenues in the quarter -- EUR 49 million for the cost of the unwinding of the Juliet agreement. Without considering these nonrecurring negative effect, the total amount of our pre-provision profit could be considering in line with the average of the first -- previous five quarters. And if we generate a pro forma information also for the net operating results, in this case, the level of the net operating result is in line with the average of the first 3 quarters last year.
Page 10, the trend of our net interest income. Here, we have a pressure on the interest margin in spite of the repricing of the new mortgages with respect to the 2 previous semester. Unfortunately, the maturity still has a slightly higher condition than the ones of the mortgages. However, on the upside, we can consider that there is a continuous improvement in the quality of our loan book. Cost of funding remained stable, with a negative gap towards with the market that is in the area of 15, 16 basis points. This is something in which we want to work on to align our market condition -- our condition to the market in the next quarter.
Page 11, net fee and commission income. Here, I wish to emphasize the contribution of the partnership with AXA, which accounts now for 15% of the net fees and commission. If we consider also the dividend contribution, AXA represent at the moment around 10% of our total revenues. And this is increasing quarter-by-quarter. So also considering the last -- the first half last year.
Page 12, the financial revenues. So here, we have the performance of capital -- Monte Paschi Capital Services customer-driven and the risk-taking activity that was very positive in the quarter. We had a limited contribution for the disposal of financial assets. Whereas the net result from financial asset at the fair value through profit and loss is completely attributable to a value adjustment of credit today that [ are ] positioned, that are classified in this kind of line.
On the side of the operating cost, we have a kind of seasonality on the other expenses. But we can now work with a stable decrease for the personnel expenses. Here, we have the benefits from the reduction of the employees, 750 employees headcount reduction that took place at the beginning of the quarter, early retirement plans that was fully funded at the end of last year. Now we have decreased quarter-over-quarter the fees, 3% on the personnel expenses, that we can maintain [ for ] the next quarter.
If we move directly to the area of the credit quality, Page 15, we have the trend of the main rate that can be used in order to analyze the quality of the portfolio. So the default rate is decreasing in comparison with the full year last year. Danger rate is decreasing. So we have also an improvement in terms of migration from unlikely-to-pay to bad loans. We have improved the recovery rate on the bad loans from 2.9% to 4.5% in the quarter. We are presenting a cure rate of the likely-to-pay lower a bit -- the same or lower than the results that we reached last year. And this is due to the reduced perimeter of the NPEs to be cured because of all the activity on the UTP disposal.
The cost of credit, Page 16, is a result of a number of different components. We have a positive contribution of around EUR 200 million in the quarter for the release of the provision following the unwinding of the Juliet servicing, and this is offset by the NPE strategy revision.
Page 34 of the presentation, we have the full detail of all of the components that affect the cost of credit in the first and the second quarter of this year. We can say that at the end, the cost of credit is in the area of a little less than 60 basis points. But in the quarter, we were able to increase the coverage for all of the categories of the nonperforming. Mainly, I want to consider the increase in the coverage for the unlikely-to-pay considering the level that we had at the end of last year.
Page 17, here, we have, we can say, a new picture of our -- of the distribution of our loan book. We are considering the different stage coming from IFRS 9 principles. You can see that the stage 1 in terms of percentage of distribution as it moved last time in the last 12 months. So we moved from 72% to around 80% at the end of the second quarter '19. We are improving also the flow from the different stage in terms of decreasing the movement from stage 1 to stage 2 and also improving the movement from stage 2 to stage 1. And it is also important there to understand that the level of the provision for the stage 3 that is increasing in the quarter, is presenting year-on-year a decrease, but this is linked to the disposal of the bad loans, the small ticket unsecured and the leasing bad loans that we complete at the end of last year.
Moving to the other slide, so to the other element of our results. I think that it is important to analyze our situation, Page 19. In terms of capability to maintain stable and the top amount of our direct funding. We have an increase in the commercial direct funding for around 2% quarter-on-quarter, but this is mainly on the retail customer. As Marco said, we are now working with a good level in terms of liquidity ratio, the level of the NSFR, that is at the end of the quarter was around that 11 -- 113% on a pro forma basis, so considering the EUR 500 million of the senior and the EUR 300 million of Tier 2 can be considered around 114%.
And the final slide that we can comment, on which we have, you could say, important improvement or improvement that we consider very important. Page 23, we have a focus on the Italian govies, here you can see that we are decreasing the total amount of exposure. We have a decrease in terms of fair value through P&L portfolio, and this is due to the cyclic nature of capital service activity as a primary dealer. We have decreased the credit spread sensitivity for that portfolio. Now with EUR 0.1 million for 1 basis point change. We have decreased also the sensitivity. And this is in line with our strategy for the fair value through OCI. So the other comprehensive income. We are remaining on a total amount of around EUR 8 billion, but we have decreased the sensitivity to EUR 2.4 million per year per basis point of credit spread change. We are moving ahead with this kind of strategy. And we can consider to reach a level in the area of EUR 2 million [ or so ] less for the end of this year. And then we have some...
Yes, let me step back for a few final comments, Page 24, you find a list of key events, which were actually part of our ongoing and daily activity of the last quarter. The reason why we decided to list them and put them down in chronological order is simply to recall, which is something that I believe it is very much appropriate when we all talk about Monte dei Paschi, put everything we are doing in the context of where the bank was at the end of 2016, which was our capital, liquidity and regulatory situation, which was the feeling amongst thousands of employees and thousands of clients which was the market perception and the overall perception vis-à-vis of the bank.
I think everything we are doing should be gauged in effect bearing in mind that T0 for us was the end of 2016 and the beginning of 2017. Then can we do a number of things better? Yes, of course. Can we get to the stage where the pace of our top line -- the top line of our P&L can further improve? Yes. But again, don't forget, where we started. Don't forget what a huge number of people in Monte dei Paschi did in the last 2.5 years. And again, everything should be analyzed in this very context.
Just one interesting remark. You see that, I mean, you show the news flow that we launched a few weeks ago the 12th July, a competitive procedure for the disposal of our real estate portfolio. We had a sort of preliminary deadline, the 30th of July to receive interest. We received 60, 6-0 interest approaches for the overall portfolio and an additional 20 for selected pieces of our real estate portfolio. In this respect, we're going to have an additional round of nonbinding interest with the numbers attached to it by mid-September, the 16th of September, and after that stage, we will then select the final round of potential buyers in order to speed up completion of something which, as you might recall, is in itself part of the commitment of the restructuring plan. We are now open for questions.
[Operator Instructions] The first question is from Giovanni Razzoli with Equita.
The first one is on the early termination of the servicing contract with Juliet, can you give us an idea of what's your strategy now? So whether you are considering to adopt a make or buy strategy out of it, if you have -- and if you can share with us what would be a deadline for the final decision on it?
And secondly, I've seen that in Slide #34, that the early termination of the agreement has resulted into a EUR 457 million positive impact in terms of provisions. If you can please help us clarify why there was such a major impact in terms of provisions.
And related to this, if you can help us pencil down what would be the cost of risk in the second quarter, the underlying cost of risk in the second quarter of the year, excluding those extraordinary element. So that's my first question.
And then a couple of clarifications. Again, in the last conference call, you've mentioned that over the second half of the year or beginning of the next year, your core Tier 1 would have suffered some pressure because of some risk-weighted asset inflation. Can you remind us what is the degree of this risk-weighted asset inflation and the impact in terms of CET1.
And the final question, what is going to be the impact on the NII from the accelerated NPE sales? Because we have learned that banks that accelerated the NPE strategy also suffered a little bit of NII compression. I remember that you have compared with other banks, a limited contribution of the NPE to the NII, but if you can share with us what would be on a pro forma basis, the run rate of the NII.
Your next question is from Corinne Cunningham with Autonomous.
First one, just on -- can you give us a bit of a flavor for why you chose to issue senior and Tier 2 ahead of these results? I think the capital improvement is probably seen by credit analysts as quite positive. So it's a bit of a puzzle to me why you issued ahead of this?
Second question is, you mentioned an RWA release linked to...
Sorry. Sorry Corinne. Sorry to interrupt you. Ahead of what? Because we can barely hear you.
Ahead of the results, ahead of today's results. So why did you choose to issue ahead of results. And second question, you mentioned RWA releases because of something to do with Fresh. Could you explain that to us, please?
And then the last question is on government schemes or government support, is there anything on the back burner with relation to an NPL or UTP sales with government entities or schemes?
Right. Let me start from the first question of Giovanni, the Juliet strategy. I mean, our strategy well, first of all, the framework upon which we did analyze on a sort of quasi-permanent basis the NPE strategy of the bank in the last 12 months was affected by 2 major environmental changes. A, a calendar provisioning set forth by the ECB, which was not in the picture when we finalized the restructuring plan back in June, July, 2 years ago; and B, a pretty clear [indiscernible] to make sure you get to an overall level of nonperforming loans which is below 10% as soon as possible.
Now as far as we are concerned, we could have stuck to the initial target, which, by the way, was approved and sealed by DG Comp and ECB, i.e., 12.9 at year-end 2021. But on the other hand, we strongly believe, as a management team, and that is pretty much backed by -- fully backed by our board, that the key topic to make sure the bank lands in a sort of sound, stable and sustainable position vis-à-vis of the growth of the business altogether, is to make sure we get to a level of nonperforming, which is pretty much in line with the rest of the pack, at least as far as Italian standards are concerned. Therefore, we did anticipate a potential -- we did anticipate and we put in place an acceleration of the nonperforming disposal also by unwinding the Juliet contract. And Andrea will dwell upon the EUR 248 million of additional charges we posted and why we did that and how we are going to use in the second half of the year this provision.
The strategy going forward is not to do anything in terms of externalize the platform. We are going to on-board back people and the activity currently performed by Juliet by the first half, fully by the first half of next year. In the light of the very positive results, the bank achieved in the last 2 years on the UTP disposal and on the UTP reduction, we strongly believe that recovery rates can be further improved, also on the bad loans portfolio.
Now I'll pass on to Andrea for the other questions made by Giovanni and by Corinne.
So the positive effect of EUR 450 million in terms of cost of credit comes from the unwinding of the Juliet agreement -- referring to Page 34 of the presentation -- derives upon the fact that we have considered the cost of the walk out coming from the agreement that we have with Juliet, analyzing the potential cost of a recovery for all our loans.
So considering the fact that with the Juliet agreement that we had the commitment to move towards Juliet the walk out of 80% of our new [ bad ] loans that each year, we could generate. We consider also the probability for the unlikely-to-pay to move into bad loans, but also the probability of our performing loans to move into bad loans in the next future. This is the reason why we have accounted this kind of cost of recovery connected to the agreement with the unwinding of this agreement, we have immediately the release of all the provision we had referring to this kind of technical effect.
You asked also the level of the cost for the quarter without the Juliet unwinding. So we weren't in the possibility to modify the NPE strategy, also considering the fact that we had this kind of [ release ]. So it's quite difficult to identify exactly what could be the cost of the quarter or the cost of credit of the quarter, but we can imagine that the cost of the quarter without the Juliet unwinding was not -- could not be too far from the cost of quarter that we had in the first quarter. So -- and this is, we can say, in line with the target of 60 basis points that was announced before -- for the full year.
The other question on the impact of the rate shift in the treatment of the expiring of depressed indemnity on the capital. This is directly an effect on the capital -- the level of capital. So we have a negative filter so a filter in terms of the determination of the capital, the level of capital linked to this indemnity with expiring of these indemnity for the maturity of the period in which it is -- it was related toward 10 years from the first restructuring of the Fresh, we have no more reason to have this kind of negative filter. That is -- that was EUR 75 million and then adding also the movement on the threshold, we have a positive effect around EUR 100 million.
And so then we can say, we speak about the -- our assets to the institutional market for the senior and the Tier 2. So we have the goal and the target to restart our presence on this kind of market. We, together with the investment bank that was supporting us in that period, we analyze all the market windows, and we decided to go directly to the market when the specific condition that which we were able to realize was in line with our expectations. This is the reason why we had the opportunity to complete the issue in the first part of July.
Then there is -- I think the last question -- the last question was that the government approach on the nonperforming exposure of MPS, if I gather correctly?
Yes. There was another question on the possible capital pressure on the capital ratio. As we said also in the last conference call, we are forecasting for next year an increase of our risk-weighted assets around EUR 4 billion. That is an amount that represents our amount that is in the area of 70, 75 basis points. This is an increase that was already accounted in our Restructuring Plan. And this is linked to the target of the ratio that we have announced also to the market when we present the Restructuring Plan in the past. The application in order to update the [ IRB ] models is already submitted to ECB. And the analysis of -- both on the off-site and on-site inspection will be started after the summer.
Then there was, if I recall, the question on -- if I understood correctly on the government approach on the NPL, NPE overall exposure. I think we work as a management along the lines we just described. For us, is of paramount importance to make sure we anticipate targets as much as we can. We keep our institutional counterparty and our main shareholder posted on every single kind of initiatives, actually, they have a seat in the board, so they are pretty much fully, fully aware of what is going on and what we do. I think, in the context of the fact that the Italian Treasury is bound to present the exit strategy by year-end 2019, the numbers and the targets we actually hit will clearly be factored in the exercise of the exit strategy of the Italian Treasury.
There was another question on the impact of -- on the net interest income for the acceleration of the NPE disposal. We can say that due to the huge work we completed in the last year in order to redefine the right condition for all the position with a level of risk higher than the average. Now we can say that the interest rate on the nonperforming loans that are on the unlikely-to-pay is more or less in line with the average interest rates of the performing loans. So we are expecting a reduction pressure for the disposal of these nonperforming, but the pressure will be driven by the decrease of the volumes, not specifically for different conditions that the bad loans at the moment represent. So we can sustain the trend of the net interest income with the increasing volumes of a new position.
Your next question is from Riccardo Rovere with Mediobanca.
Sorry to get back one second on the risk cost on the quarter. It's not clear to me what is the impact of Juliet and the acceleration of the NPE strategy. The numbers in -- that you mentioned in the presentation, talk about EUR 200 million roughly. On the slide, I think it's slide -- let me have a quick check. But you talked about EUR 200 million when the press release says EUR 450 million from Juliet. So I'm a bit confused about, yes, the Slide 16 talks about EUR 209 million, the press release talks about EUR 457 million. And then you say increase of provisions for the NPE studies, can you just a bit clarify what's going on? Because it's not clear to me what you -- what the numbers are here.
Okay, I'll try to explain exactly all the different components of our cost of credit for the quarter. Starting from Page 16, we have put together the positive effect coming from the unwinding of the Juliet agreement with the cost that we provide for financing the new strategy for disposing bad loans. So the new strategy for disposing bad loans that account of EUR 2 billion that we won't complete by year-end is now -- if our forecast in terms of price, are correct, is now completely funded by the cost of credit that we had in the second quarter. So EUR 450 million positive coming from the unwinding, and that's the reason I said before, and then we could consider as offsetting of this positive results, EUR 250 million in order to finance the acceleration of the strategy of disposal of the bad loans. And these are the main movement, so the main component of the cost of credit for the quarter.
And I think that the Page 34 is fully explaining all the trend and all the movement in all the component. With, we can say, with the benefits coming from this unwinding and the limited in terms of amount, the provision to finance the disposal, we were in the condition also to increase the level of coverage of the other nonperforming. And we have increased the coverage ratio for all the nonperforming loans for all the categories, and this is something that could help us in order to complete the disposal strategy for the next year.
Any additional clarification needed on this very point?
Sorry, just to finish on this, EUR 209 million that I find in the presentation is just a net number, the net of the two numbers I find in the press release, right?
Right.
Okay. And then the other clarification, in Q1, you were maybe the only one or one of the few at least to have registered some credit losses related to IFRS 9 and models update. And now you talk about an additional EUR 100 million and EUR 106 million. What is referring to? What kind of models update are we talking about here? Because that should have already somehow happened last quarter.
Last quarter, the main -- so the main component that influenced the level of our cost of credit was linked to the different macroeconomic scenario that we consider in order to analyze the trend of possible deterioration of our loan book. As you say, under IFRS 9, we have also to consider the forecast in terms of the main driver that can affect the level of the probability of default and the level of the LGD that are connected with the evaluation of the credit.
Now so in the second quarter, the update of the LGD models is linked to the shift of the historical series. So we are considering that for the probability of default, the danger rate and the LGD on the accounting point of view, we have to consider also our historical experience. The shift of the historical series that we use take in account a huge amount of -- so the level of the losses we have cost -- we have recorded in 2018, that was a little higher than the average that we had in the historical series that we consider for the LGD, penalized the total amount of the LGD. And we have considered this penalization on the accounting view for the impairment of all our nonperforming and performing loans. But this is something that is [ a yearly ] activity that we -- so we decide to anticipate in the second quarter this year. And this was linked to also some opportunity in terms of release of provision coming from other activity.
We can consider that for this quarter, we don't have additional adjustments in terms of trend of the macroeconomic scenario. Because we are considering not only the level of the GDP for the -- this year, but also we have to consider the next 2 years. And at the moment, the trend of the GDP growth for the Italian economy are also updating the forecast on the last -- with the utilization of the last provider is not relevant in comparison with the macroeconomic scenario we used at the end of the first quarter.
In any case, we can consider to have to maintain a very conservative approach in the evaluation of all of our credit position.
Your next question is from Hugo Cruz with KBW.
So three questions. One, can you give guidance on the cost of risk for the second half? I assume it's around 60 basis points, given what you said in the call, but I just want to make sure, 60 basis points annualized.
Second, on -- can you disclose the amount of DTA reassessment in Q2? And any guidance for the rest of the year?
And third, just if you could talk a bit more about the real estate deal, what kind of deal is it? Is it to book capital gains? Or is it to lead to lower OpEx? What kind of impact should we be thinking about?
Let me tackle the last one on the real estate. As I mentioned, we did receive preliminary interest with no numbers attached to them. And therefore, it's very premature to make assumptions in terms of potential impact on our numbers. As I said, this is one of the commitments we need to comply with by year-end 2021. And we hope to be in a position to sort of get to this target earlier than expected. But again, we'll keep you posted on a quarterly basis on progress on the real estate disposal.
So for the cost of credit in the first half, the cost of credit in terms of basis points was 57 basis points, that is the average between 73 basis points we had in the first quarter and around 40 basis points in the second one. This 57 basis points is in line with the expectation we have for the full year, that is a full cost of credit in the 60 basis points area.
In terms of reassessment of DTA, in the second quarter, we have a movement, also considering our capability to recover with the profit in the next year. And I think that if we maintain this kind of trend in terms of pretax profit generation, also considering the fact that we can confirm our internal expectation for the next year, we can maintain a positive reassessment of DTA in the area of EUR 30 million, EUR 40 million per quarter.
Gentlemen, there are no more questions registered at this time. Gentlemen, there are no more questions registered.
Okay. Thanks very much for attending, and we'll talk to you again with Q3 results. We will be on roadshow in the first half of September. Therefore, any additional clarification can be taken care of during our meetings and presentation in the next few weeks. Thank you very much.
Ladies and gentlemen, please. The conference is now over. You may disconnect your telephones. Thank you.