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 evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the MPS Group Full Year 2021 Results Presentation. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Giuseppe Sica, CFO of MPS. Please go ahead, sir.
Good afternoon, everybody. I'm here today to present MPS Group 2021 full year results. Before going into the presentation, let me make a few opening remarks on methods which are not part of our 2021 performance.
Discussions with European authorities do progress in a collaborative manner and we will update the market as concrete steps are achieved. As you have seen on the 3rd of February, ECB has confirmed P2R requirements for the bank, also in light of the approach taken to calendar provisioning. We will not take any questions concerning CEO as an ad hoc press release has been published.
Before going through the numbers, let me give you an overview of the priorities that have driven the bank's performance in 2021. During the year, the bank has focused on number one, consolidating its commercial performance; and number two, the risk in its balance sheets, creating upside from capital strengthening.
With regards to the first point, commercial performance, let us look at Slide #2. The bank has recorded a good performance not only versus 2020, but also versus 2021 public targets while creating levers for strong potential upside. First, with a focus on net interest income, the bank continues on lending optimization despite a capital-constrained scenario and is working on commercial deposits rates.
This has led to a reduction of the commercial spread gap versus the market from 16 basis points in January to 6 basis points in November. We have recorded a quarter-by-quarter increase of net interest income, 3.1% versus third quarter and 3.6% versus fourth quarter 2020 or 9.4% adjusted for the Hydra transactions.
Second, MPS has further enhanced its fee-oriented business model, a testament of strong distribution capabilities and solid partnerships. Wealth management gross flows are up 27% year-on-year and well above pre-COVID level. Fees increased 3.8% year-on-year or 5.6% adjusted for the cost of synthetic securitization. Fees to represent 57% of core revenues, including AXA MPS contribution. I will spend some time on areas for upside later.
Finally, this commercial strength has been achieved while always keeping costs and expenses under control. We have reduced operating costs 3.6% year-on-year; administrative expenses are down over EUR 90 million or almost 12%; operating costs are 2.3% below public targets without any benefits for planned staff reduction and solidarity days that were included in the target. Clearly, on costs, we have much more to do, thanks to well-planned initiatives.
Having talked about strong commercial performance, we can now move to Slide #3, showing how this commercial performance has been achieved while derisking our balance sheet and creating strong benefits from a future capital strengthening process. First, on asset quality. Gross NPE stock is stable versus 2020 despite the impact of the new definition of default and no meaningful disposal. At the same time, moratoria are down 98% versus peak and close to 0. We see no signs of concern here also thanks to our proactive approach to reclassification into nonperforming exposure. I will elaborate more on this.
The active management of the portfolio led to a reduction of gross stage 2 loans by EUR 2.7 billion year-on-year with a weight on performing loans that is now back to pre-COVID levels. In addition, the adoption of a conservative approach led to a methodological refinement on UTP provisioning, also resulting in lower deduction from capital due to calendar provisioning.
Second, on legal risk. Derisking product has continued with EUR 4.6 billion of claims settled in the last 5 quarters with no negative impact on P&L, proving the adequate level of provisioning. The petitum related to financial disclosure has been reduced 70% year-on-year.
Finally, our capital ratios. CET1 fully loaded increased 110 basis points during the year despite 30 basis points of regulatory headwinds. That means that the bank has been able to generate 140 basis points of capital, thanks to both commercial performance and capital management actions. We have higher capital ratios than 2021 public targets, which were based on a EUR 2 billion capital increase.
Before discussing all these matters in detail, on Slide 4, a few numerical highlights. 2021 closed with a pre-provision profit of EUR 874 million with an increase of 15.3% year-on-year or 33.5% adjusted for the Hydra transaction closed in December 2020. Revenues are up 1.3% or 5% adjusted for Hydra. And cost record a further 3.6% reduction. Cost of risk is 31 basis points, in line with the 2020 normalized level net of COVID- and Hydra-related provisions. Excluding the impact of model updates, positive and negative booked in the year, cost of risk stands at 21 basis points.
Net operating result is positive for EUR 629 million. We closed the year with a profit of EUR 310 million despite EUR 170 million contribution to systemic funds expected hopefully to go down over time.
Moving to balance sheet. Gross NPE stock is stable, notwithstanding no disposal during the year. The effect of the new definition of default and the proactive reclassification of moratoria. Fully loaded CET1 at 11% versus 9.9% in 2020. Transitional CET1 at 12.5% plus 40 basis points versus December 2020 after the impact of IFRS9 phasing, close to 100 basis points. On liquidity, all indicators remain strong with counterbalancing capacity at EUR 25 billion or 18% of total assets.
Lastly, I would like to highlight the important efforts done to reduce nonprofitable assets, which lead to a reduction of our balance sheet from EUR 150 billion to EUR 138 billion in 12 months. Now let us go in detail through the bank's commercial and derisking dynamics first introduced on Slides 2 and 3.
Slide 5. The bank is taking decisive actions on deposits and lending. Time deposit stock is down EUR 2.4 billion since December 2020. As a result, the cost of deposits is now 9 basis points lower than a year ago. Our time deposit market share continues to go down.
The chart at the bottom of the slide shows the evolution of net lending over the last 2 years. Despite capital constraints and therefore, required focus on secured lending, our lending stock is up before the impact of the launch of consumer finance. Rates on new medium, long-term loans had increased 26 basis points year-on-year and are once again above back book rates.
Top right chart, spread versus market went from 16 basis points in January to 6 basis points in November and keeps going down. [ Now ] focusing on the business machine on Slide 6. Contrary to what we sometimes read, we clearly have a fee-oriented business model leveraging on the group distribution skills and on well-run partnerships.
Just a few figures. Gross wealth management inflows reached EUR 14.3 billion, significantly above also pre-COVID levels. Total indirect funding stands at EUR 104 billion, of which EUR 65 million from assets under management. Assets under management have grown from 58% to 63% of indirect funding in 2 years. You can see the consequent strong increase of fees contribution to core revenues fees represent 55% of core revenues or 57%, including income from the AXA-MPS JVs.
Slide 7 show some details on the ongoing cost reduction. Operating expenses are down 3.6% year-on-year and 8% over the last 2 years. The reduction is mainly driven by other operating costs, with minus 12% year-on-year with more than EUR 90 million of savings in 2021 and EUR 180 million of savings since 2019. Personnel costs would be slightly down year-on-year, taking into account savings related to solidarity days in 2020, which MPS would not implement this year.
Let us deep dive on balance sheet derisking and asset quality management. Slide 8. Looking at the performing portfolio. Gross stage 2 loans are down EUR 2.7 billion year-on-year and now represents 16% of total performing loans, 3 percentage points below December 2020 and at the same level of the pre-COVID era.
The moratoria portfolio, which was 15.5 billion in June 2020 is now around EUR 300 million. Following a deep analysis, we have potentially reclassified as nonperforming exposure, 3.7% of the expired moratoria portfolio. Of that, however, only 1.1% is showing delays in payments. Looking at the nonperforming portfolio. Gross NPE stable remained stable year-on-year, excluding the impact of the new definition of default.
Moving quickly to Slide #9 on our management of legal risks. First, it is important to highlight that on claims settled over the last 5 years. Provisions were above amount disbursed, proving the adequate level of coverage. Petitum related to financial disclosure is down from EUR 5.7 billion to EUR 1.7 billion. And the EUR 1.7 billion is the gross number before provisions we do not disclose. During the year, we reached an agreement with Fondazione MPS for a total claim of EUR 3.8 billion and further 0.2 billion legal claims were settled in the fourth quarter.
On to Slide 10 to discuss capital generation. Fully loaded CET1 has increased from 9.9% to 11% despite RWA regulatory inflation that cost 30 basis points of capital. In a year, therefore, the bank has organically generated 140 basis points of capital. We have done a very important job in derisking. We have now close to EUR 48 billion or RWA, a EUR 3 billion reduction in a year, only partially offset by regulatory headwinds.
Of course, should we not implement any capital actions or complete capital increase or do further securitization, in 2023, the bank may have a small shortfall driven by IFRS 9 phase-in and potential RWA inflation due to regulatory headwinds up to EUR 5.9 billion, which may occur towards the end of 2022. I will say more on this later, but our capital position is stronger today than it was forecast in our public targets for 2021, which did, however, include a EUR 2 billion capital increase.
Now on Slide 11, let me spend just a few words on the results achieved versus public targets. Total revenues beat the targets with an overperformance of fees for 3.2%. Operating cost reduction has been higher than planned despite the postponement of headcount reduction and the nonrenewal of labor contracts with trade unions. On net operating results, we generated EUR 600 million more than expected. Gross NPE ratio at the end of 2021 has been better than expected, thanks to better macro scenario and possibly conservative estimates.
On capital ratios, we have no capital shortfall against EUR 1.5 billion prudentially budgeted. You can see CET1 ratio fully loaded at 11%, in line with 10.9% target, which included a EUR 2 billion capital increase. In other words, new capital will be for the further relaunch of the bank. RWAs continue to go down. And even after EUR 5.9 billion of remaining regulatory headwinds, we would be well below expectations.
Before giving more detail on financial performance, in the 2 following slides, I will discuss very briefly 2 important matters for the bank, ESG and Widiba.
Slide 12. As you have also seen in our press release dated 3rd of February, the bank has a clear commitment to further strengthen its long-standing partnership and ESG focus, which is embedded in the bank's name and make it one of its pillars for future growth.
Since the new ESG function has been created under the CFO at the end of last year, the bank has announced its new transformation journey. You'll see on the slide a few concrete examples. On the third of February, Standard Ethics has upgraded the bank's rating from adequate to strong. On the 27th of January, the bank has joined the Net-Zero Banking Alliance as one of the 2 funding signatories bank in Italy of the UNEP Association.
And to give some figures, in 2021, 100% of our mutual fund inflows have been ESG compliant, and we intend to drive our customers more and more towards this kind of investment. 66% of our press releases have been around ESG teams, largely reflecting ESG lending and our focus on the matter.
Let us now quickly move to Slide 13 on Banca Widiba. A few highlights. Growth continues to be strong in all areas, including digital banking and FA network. Investments in technology remain at the forefront of the banking industry. Widiba is fully increasing the new focus on a gradual switch from deposits, including time deposits, into wealth management, as proven by a 35% increase in wealth management inflows and 29 basis points reduction in commercial funding rates.
Now Slide 15. In the table, you can find the stated figures for 2020 and the pro forma figures adjusted for the Hydra transaction impact. I've already said a lot on 2021 performance, let me just stress that positive taxes do not reflect expected future profitability targets, which would lead to circa EUR 500 million reassessment of which EUR 200 million as common equity Tier 1. Return on tangible equity is at 5.3%. Keep in mind, that systemic charges reduced our return on tangible equity by around 3 percentage points and are expected to go down over time.
Now very quickly on net interest income on Slide 16. Top left, net interest income is 3.6% higher than 4Q 2020, or an encouraging 9.4% adjusting for Hydra. It has recorded positive progression all year long. Top right, funding rate is down 9 basis points and commercial spread up 4 basis points with average front book rate higher than back book rates. In the near future, apart from the level of interest rates and commercial actions, we see low-hanging fruits coming from the expiring of time deposits with an expected benefit of EUR 90 million by 2024, and interest income from in-house consumer credits. We have estimated EUR 120 million by 2024, and this assumes our current partner maintains an important share of new production.
Moving on to fees on Slide 17. Let me stress once again that fees are our key source of revenues. On a yearly basis, fees have grown 3.8% or 5.6%, excluding the cost of synthetic securitization, driven by delayed capital increase. Very importantly, wealth management fees are up 17%, also on a much higher AUM base. Traditional banking fees are down 2% year-on-year, mainly due to capital constraints. They are encouragingly up 7.6% quarter-on-quarter. I don't need to go here in more detail, but higher AUM basis, more capital, lower securitization and negotiation of commercial agreements are going to drive future growth.
Slide 18. As already underlined, thanks to our strong partnership with AXA, share of income is stable and growing. We see this part in our core revenues with areas for upside and low volatility. As to revenues on financial assets, 4Q shows the usual weakness as MPS Capital Services reduces its risk taking. We closed the quarter flat versus minus EUR 6 million last year. The year has been positive overall.
Looking at Slide 19 on operating costs. The bank confirms its strong execution track record. Total operating costs are down 3.6% year-on-year and 8.2% in 4Q '21 versus 4Q '20. Cost control policy has paid off, especially on administrative expenses that had a sharp decrease of 11.9% year-on-year, meaning that we were able to save EUR 90 million last year, for total savings of EUR 180 million since 2019. Let me remind you that our press release dated 17 December 2021, points to further EUR 130 million reduction for strong IT investments and restructuring.
And personnel expenses in 2020, agreements on labor contracts brought savings for EUR 20 million, which we could not replicate in 2021 pending business plan approval. On an adjusted basis, personnel costs will be down.
Let us now move to cost of risk on Slide 20. The slide is full of details. Let me give you some key highlights. Left part of the slide on yearly figures. Yearly cost of risk is 31 basis points. This will be 21 basis points if we adjust for the impact of model changes, which includes inter alia changing methodology to increase UTP coverage, which anticipates the impact of calendar provisioning and an update of GDP projections, which remain, however, well below consensus. Last year, cost of risk, excluding Hydra and COVID-related provision was 36 basis points. Finally, cost of risk in the second half has overall been lower than cost of risk in H1.
Now right part of the slide on quarterly figures. Cost of risk for the quarter is slightly above EUR 220 million. Of this, we have provisions of around EUR 100 million, largely related to our proactive reclassification of moratoria. 3.7% of expired moratoria are classified as nonperforming, with only 1.1% with delays on payments.
Introduction of the floor on UTP coverage as a one-off cost of around EUR 60 million with corresponding lower capital deduction from calendar provisioning. The rest is related to write-off on securitization loans. For instance, we have written off to 0 our junior tax notes, which I believe is quite conservative in an Italian context.
Having discussed cost of risk, let us move to asset quality more broadly on Slide 21. Top left, gross NPE stock is stable or down adjusting for the small impact of the new definition of default. Top right, very important. During the year, regular dynamics on NPE stock, such as cured loans, cash recovery and write-offs have offset new defaults, keeping NPE stocks stable.
Concerning new defaults, let me stress that only 5% have delays in payment, half are related to forborne loans, the remainder is largely related to the proactive reclassification of moratoria I have already discussed.
Looking now to coverage. Coverage is up 2 percentage points year-on-year or 4 percentage points, including the deductions to capital related to calendar provisioning. This is despite, in 4Q, the release of provisions for 2 well-covered big UTP tickets that were back to performing, the classification of 3.7% of expired moratoria as nonperforming with obviously low vintage.
The update on models I have discussed previously, has, however, led to a significant increase of coverage on existing positions. For instance, as you can read bottom right, coverage of UTP on balance sheet on the 30th of June is up 9 percentage points in 6 months.
Now on to Slide 22 on nonoperating items. Let me only stress that 2/3 of our 2021 nonoperating items are related to DTA fees and systemic funds contributions. On an ongoing basis, DTA will allow the bank to generate capital in an amount close to PBC. Systemic funds, on which the bank has spent over EUR 0.7 billion since entering into restructuring plan is expected to go down over time, as you know.
Let me go through the capital ratio and compare full year 2021 with the end of 2020. On a phase-in basis, starting from a phased-in CET1 of 12.1%, the ratio increased 4 basis points, thanks to positive net income, capital management actions such as the sale of own shares or securitization, RWA dynamics driven by commercial performance. All these positive contributions more than offset regulatory headwinds that weighed 130 basis points. Let me stress that RWA are down despite regulatory headwinds.
Last year, we were expecting to be at around EUR 60 billion RWA at 2021 year-end and are now at EUR 48 billion with less than EUR 6 billion headwinds left. We were forecasting in November 2020, EUR 1.5 billion capital shortfall, and we set up EUR 0.8 billion excess capital.
Slide 24. I have already discussed achievements versus the public targets for 2021. Now before opening to Q&A, let me give you a summary of 2021 versus 2020. On commercial performance, net interest income is up year-on-year with a positive progression. Fee income is above pre-COVID levels. Net operating result stands at EUR 629 million.
On derisking, there are claims related to financial disclosure, decreased from EUR 5.7 billion gross to EUR 1.7 billion gross. Gross NPE is stable despite no disposal and fully loaded CET1 ratio up 110 basis points, despite 30 basis points regulatory headwinds.
Now let me open to Q&A.
[Operator Instructions] The first question is from Giovanni Razzoli with Deutsche Bank.
A couple of questions. Can you update us on the sensitivity to a 50 basis points increase in rising rates? And also 100 basis points, please?
The second question is a clarification. If I'm not mistaken, you mentioned that the regulatory inflation of risk-weighted assets is going to be EUR 6 billion instead of EUR 7.8 billion, that was provided as a guidance also in the -- on the previous quarters. I was wondering whether this understanding is correct or not?
If the time line is confirmed at the end of [ 2002 ], and I was wondering whether there is a way to waive this increase? Or it can be this part of the negotiation with the digi comp? Or not if this is related to the CRD IV, we know that is TRIM new definition of default by guidelines. So it seems to me that apart from managing your action, we should take this [indiscernible]. So just want to understand whether we should factor this in going forward.
And the very last clarification, if you can share with us what is the impact of Basel IV that is embedded in your business plan? And the CET1 at the end of the quarter, excluding the fair value on other comprehensive income and what would have been today or at the end of January given the increase in the sovereign spreads?
Thank you, Giovanni. I will try to be as comprehensive as possible. On net interest income sensitivity clearly depends on the horizon you evaluate. On a 3-year horizon, 100 basis points, weight on average, 150 basis -- EUR 150 million increase in net interest income on 2 years is EUR 120 million average. Clearly, this assumes a static balance sheet. And as you know, there will be areas for upside and there may be areas for downside.
On RWA increase, the understanding is correct. We now have EUR 5.9 billion of headwinds left. On the timing, you know that we try to take a conservative stance when talking about capital and it is possible that they will come before year-end. It will depend overall on discussions with the authorities. They are mainly related to an update on models, which have an impact on LGDs.
On Basel IV, we cannot guide you right now to a number. I think it's going to be relatively negligible. And as you know, there are also areas for upside in certain categories for us.
The next question is from [ Alexei Lougovtsov ] with Bank of America.
In your presentation, you discussed the reduction in BTP portfolio. So in the light of the latest spread widening in a high yield, do you think bank can consider increasing exposure to the talent over into get more net interest income. And by the way, what constraints do you have in terms of increasing your [ participation ]?
Thank you for your question. I think, first of all, thank you for suggesting that we do not have as many BTPs as some people believe. We think the current level is adequate given the capital base of the bank.
In general, we welcome an increase of interest rates as the sustainable impact on net interest income is more than offset the negative impact on realized capital gains. We do not have constraints on increasing at the moment because our sensitivities that you find on Page 31 are at very low historical level. But again, we think the adequate -- the current level of BTPs is adequate for our risk profile.
I see. And why is it adequate? It is so much lower than it used to be. And as you say, it gives you net interest income sometimes allows you to crystallize capital gains and via your working capital sensitivity is so favorable. Now what would you make increased exposure because maybe it is a good thing to do given yields at more attractive levels.
I think we have to have a view on sustainable level of revenues. In 2019, we had EUR 15.4 billion of BTPs and we were criticized because this level was too high. We are now at EUR 12 billion, which is marginally lower. You're right. If we compare these numbers to other Italian peers, we would have room to grow, but we try to have a conservative approach in asset allocation as we do on lending.
The next question is from Antonio Reale with Morgan Stanley.
I've got 3, please. The first one, I'm just wondering how you prepare a bank like Monte Paschi to an increasing interest rate environment? I've heard your sensitivity. However, I missed if you've answered what the sensitivity to BTP-Bund spread widening is to your capital base, if you could share any numbers, that will be very helpful.
Secondly, can we have an update on your legal risk? How do you feel about your level of provisions against these claims? I see that the amount has dropped by another EUR 0.2 billion this quarter. What is the total amount of legal risk now? And how should we think about this going forward?
Slightly -- lastly, sorry, on Slide 10, on the capital. Could you talk about the levers you flagged on the upside, particularly on DTAs, op risk and Anima? If you could help us quantify how much you estimate this could potentially increase your capital base?
Thank you, Antonio. On the sensitivities, Page 31 should give you a feeling of where we are now. Of course, you know that part of the reserve on the comprehensive income is offset towards capital. So that is the impact on capital is, I would say, almost negligible.
On legal risks, we always give the facts. We have done a good job on these legal risks to try to continue and do a good job over the next few quarters. That said, the level is now manageable from many points of view, also in light of the coverage, which I try to convey is adequate based on the history, last 5-year history of the bank.
On Page 10, there are things which we can disclose because we know them, things which we cannot disclose because we don't know them yet or we need to negotiate. On the DTA, I mentioned around EUR 200 million assessment once the business plan is approved also from all the relevant authorities, in particular from by DG Competition. By the way, this EUR 200 million was not embedded in the figures we provided to the market on the 17th of December.
Nor was a possible renegotiation from the Anima partnership, there will be changes in the future, there may be changes in the future. The reason why this is reported here is because there was a press release in July on the mandate to negotiate, but we do not have an update.
And operational risk is a meaningful potential reduction in RWA because we base operational as every bank in Europe on 10-year shift, so some of the events that have affected the bank in terms of financial disclosure are going out of the historical series. So this will offset part of the regulatory RWA increase over time.
The next question is from Nandana Shenoy with BTIG.
I have 2 quick questions. The first one is regarding your SREP. Given your Pillar 2 requirement was unchanged year-on-year, how was this last year's stress test factored into your Pillar 2 guidance? And what is the time frame you have to rectify any capital shortfall stemming from the Pillar 2 guidance? And what is the mechanism for that spilling over to the Pillar 2 requirement?
Aside from that, can you speak to your Stage 2 loan balance? On the presentation, you say the Stage 2 loans decreased by EUR 2.7 billion year-over-year. But as of the third quarter, it looked like it was EUR 3.4 billion. So did your Stage 2 go up by EUR 700 million in the fourth quarter? And what are the provisions you're holding against that? And what is the guidance from the ECB as far as where they want that provision to set? That's all for me. Thank you.
Thank you for your questions. On the SREP, first of all, I'm glad you noticed that the P2R was left unchanged and you know that other banks saw this going up, so it was a good result. The impact of the stress test is taken into account by the P2G. You know that there is almost a mechanical P2G definition depending on the impact of the stress test.
And so I would say we are in the lower part of the range, we will disclose it, of course, once we have the full approval of the business plan. But to reassure you, that number was included in the capital projections for our 2022-2026 business plan.
On the Stage 2, the marginal decrease was mainly driven by some of the 2021 annual reports of some corporates coming through. Unfortunately, SMEs sometimes are a bit slow in providing the annual reports. The coverage is around 3% of Stage 2 loans.
The next question is from Hugo Cruz with KBW.
I have, I think, 4 questions. First of all, can you tell us if you have a deadline or time frame for the discussions with the authorities to be finalized? Second, you've mentioned that the management overlays for loan provisions haven't changed. Can you remind us what is the amount of provisions that you have for that?
Third, you mentioned just a few questions ago around the operational risk that could contribute to the CET1 ratio in a positive way. The number that you gave us on regulatory headwinds, is that net of that operational risk effect? Or it would be in addition, the operational risk could be an additional positive effect?
And then the final question, if you could give us some sort of guidance for the business going into 2022, I'm particularly interested NII on fees or costs and obviously, the cost of risk as well.
Thank you, Hugo. On the deadline, I'm not aware of specific deadlines. Of course, as I said on previous calls, the bank is keen to move quickly. Obviously, the improved capital position also gives us more leeway in the discussions with all the authorities that, as I said, are progressive in a constructive or in collaborative, that's the [ semi use ] manner.
On the managerial overlays we are around EUR 130 million, given idea that would mean that even if all the EUR 300 million expired moratoria became suddenly nonperforming, we could cover them as we cover our DP. So it's a meaningful number.
On operational risk, the regulatory headwind is -- that I get is gross. So any reduction in operational risk would be a net benefit.
Yes. And can you give any guidance?
On 2022, i.e., obviously, we have to be careful at this point in time. I think, obviously, you see the progression in net interest income, which, however, in the second half of the year, we stopped benefiting from the special reference period of the TLTRO. Any increase as we are seeing on the market of the short-term and long-term rates, there is a positive impact on the number.
On the fees, I talked about the higher base for AUM, which is going to be a net benefit. The rest of the business will really depend on when we completed the capital increase. And on cost, as you have seen, we have done a lot in the course of 2021 and 2020. We can do more, but we will need investments to do the numbers we disclosed to the market.
On the cost of risk, we do not provide a short-term guidance. We have provided a number in our press release of the 17th of December. I don't think we should expect big volatility in that number.
The next question is from Azzurra Guelfi with Citi.
I have a question on the stock of Stage 2 loans. If the interest rate environment will become more positive, so increase of rate, what are the area of your Stage 2 that you consider at risk of becoming Stage 3 for difficulties in repayment or servicing the debt? And if you can give us some color on the vulnerability on that side of your especially SME book?
The second one, can you give us some color on the timing on the cost saving in the plan? I guess it will be more back-end loaded, but just to have some color.
And then a very quick number question. What's the amount of time deposits that expire in 2022?
Thank you, Azzurra. On the time deposits, we have around EUR 800 million, EUR 900 million time deposits expiring in the course of 2022. There will also be some meaningful bilateral repos that will expire in 2022, so that will also support our net interest income. On the timing of the cost savings, I don't think it's now the right point to discuss more details -- on the Stage 2, I'll put you on mute for a moment.
Azzurra, I think -- sorry for putting you on mute, but obviously, we had to discuss this very detailed question. Within a reasonable increase in base and medium-term rates, it's going to be negligible. Obviously, we talk about [indiscernible] of the answer would change. But within reasonable levels, it should be not meaningful.
The next question is from Giovanni Razzoli with Deutsche Bank.
Yes. Sorry, a quick follow-up about the legal risk. You mentioned that the gross legal risk and financial information. I was wondering whether we shall look at the -- if I look at the presentation of the last quarter, you had, if I'm not mistaken, EUR 1 billion of stock of provisions. If I look at the slide of the last presentation, I was wondering whether this stock -- I mean, this figure, first of all, is correct or not, and whether this figure has increased in the Q4? And is it correct to look also to the other legal risks that the bank has on that are in the region of EUR 4.2 billion as the previous reporting that you've made? And apologies if my interpretation is completely mistaken, sorry.
No, no, I'd say it's an important question, but we do not disclose the provisions on financial disclosure per [ region ]. So that EUR 1 billion is the number that was on the uncertain part of the ordinary claims on banking activity, which we have removed from the core presentation because it's in line with what other Italian banks have. We do not disclose the provisions on claims for financial disclosure also because it's a relatively concentrated portfolio, so we prefer to have that number very close to our chest for when we negotiate.
Giovanni, maybe you had a second question, which we could not hear in the...
No, no, no. It was this one. So what you said is that you have the EUR 1 billion of the previous presentation is only ordinary claims that are EUR 4.2 billion, right? Or something like that?
Yes. Yes.
And then on the EUR 1.7 billion that you are still outstanding financial litigation risk, you have other provisions that you do not disclose, right? If my understanding is correct?
Correct. Yes.
Mr. Sica, there are no more questions registered at this time. The floor is yours for the closing remarks.
I thank everybody for their time, and we will speak soon in the context of the first quarter results presentation for 2022. Thanks again.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.